-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T9Ce8JRp5wPkPZJkBlkQCqW4D6/knwk5MlIp1fbkrq25lrE8ENiKm2QSYTsVCcz0 SOG89JlzKKRaUPbJt5/yrQ== 0000950152-00-002541.txt : 20000331 0000950152-00-002541.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950152-00-002541 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAYTON SUPERIOR CORP CENTRAL INDEX KEY: 0000854709 STANDARD INDUSTRIAL CLASSIFICATION: STEEL PIPE & TUBES [3317] IRS NUMBER: 310676346 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11781 FILM NUMBER: 587284 BUSINESS ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 BUSINESS PHONE: 9374287172 MAIL ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 10-K 1 DAYTON SUPERIOR CORPORATION FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-11781 DAYTON SUPERIOR CORPORATION (Exact name of registrant as specified in its charter) Ohio 31-0676346 (State of incorporation) (I.R.S. Employer Identification No.) 7777 Washington Village Dr. Suite 130 Dayton, Ohio 45459 (Address of principal executive office) Registrant's telephone number, including area code: (937) 428-6360 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Class A Common Shares, without par value New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of the close of business on March 20, 2000, the aggregate market value of voting shares held by non-affiliates of the registrant (determined by multiplying the highest selling price of a Class A Common Share on the New York Stock Exchange on such date by the total number of Class A Common Shares outstanding not beneficially owned by directors or officers of the registrant) was $135,453,297. Number of Class A Common Shares, outstanding on March 20, 2000 5,946,233 2 PART I In this Annual Report on Form 10-K, unless otherwise noted, the terms "Dayton Superior," "we," "us" and "our" refer to Dayton Superior Corporation and its subsidiaries. ITEM 1. BUSINESS. GENERAL We believe that Dayton Superior Corporation is the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. In many of our product lines, we believe we are the market leader and lowest cost manufacturer competing primarily with smaller, regional suppliers with more limited product offerings. Our products are used primarily in two segments of the construction industry: infrastructure construction, such as highways, bridges, utilities, water and waste treatment facilities and airport runways, and non-residential buildings, such as schools, stadiums, prisons, retail sites, commercial offices and manufacturing facilities. Our revenue is comprised of a profitable mix of sales of consumable products and the sale and rental of engineered equipment. We believe that the breadth of our product offering and national distribution network allow us to maintain a large customer base that prefers a "one-stop" supplier. We manufacture the substantial majority of our 18,000 products, which we sell under a number of well-established brand names. Our national distribution system, which we believe is the largest in our industry, allows us to efficiently cross-sell and distribute newly developed and acquired product lines on a nationwide basis. Through our network of 62 service/distribution centers, we serve over 6,000 customers, comprised of independent distributors, and a broad array of precast concrete manufacturers, general contractors, subcontractors and metal fabricators. This nationwide customer base provides us with a geographically diversified sales mix and reduces our dependence on the economic cycles of any one region. On January 19, 2000, we entered into an agreement and plan of merger with Stone Acquisition Corp., an affiliate of Odyssey Investment Partners, LLC, the manager of a New York based private equity investment fund, for $27.00 per share in cash, for a total transaction value (debt and equity) of approximately $315 million. Holders of the Company-obligated mandatorily redeemable convertible trust preferred securities will have the right to receive cash in the amount of $22.00, plus accrued dividends, per preferred security upon consummation of the merger. The recapitalization merger is conditioned on shareholder approval, receipt of financing, government regulatory approvals and other customary conditions. The closing is currently anticipated to occur in the second quarter of 2000. We currently have four principal business units, which are organized around the following product lines: Concrete Accessories (Dayton/Richmond(R)). We believe we are the leading North American manufacturer of concrete accessories which are used in connecting forms for poured-in-place concrete walls, anchoring or bracing for walls and floors, supporting bridge framework and positioning steel reinforcing bars. For the fiscal year ended December 31, 1999, our concrete 2 3 accessories business unit had net sales to external customers of $139.8 million, or 43%, of our total net sales. Concrete Forming Systems (Symons(R)). We believe we are the leading North American manufacturer of concrete forming systems which are comprised of reusable, engineered forms and related accessories used in the construction of concrete walls, columns and bridge supports to hold liquid concrete in place while it hardens. For the fiscal year ended December 31, 1999, our concrete forming systems business unit had net sales to external customers of $117.6 million, or 37%, of our total net sales. Paving Products (American Highway Technology(R)). We believe we are the leading North American manufacturer of welded dowel assemblies and dowel baskets, which are paving products used in the construction and rehabilitation of roads, highways and airport runways to extend the life of the pavement. These consumable products are used to transfer dynamic loads between adjacent slabs of concrete roadway. For the fiscal year ended December 31, 1999, our paving products business unit had net sales to external customers of $36.5 million, or 11%, of our total net sales. Masonry Products (Dur-O-Wal(R)). We believe we are the leading North American manufacturer of masonry products that are placed between layers of brick and concrete blocks and covered with mortar to provide additional strength to walls. Masonry products also include engineered products used to repair or restore brick and stone buildings. For the fiscal year ended December 31, 1999, our masonry products business unit had net sales of $28.3 million, or 9%, of our total net sales. PRODUCTS Although almost all of our products are used in concrete or masonry construction, the function and nature of the products differ widely. Most of our products are consumable, providing us with a source of recurring revenue. In addition, while our products represent a relatively small portion of a construction project's total cost, our products assist in ensuring the on-time, quality completion of those projects. We continually attempt to increase the number of products we offer by using engineers and product development teams to introduce new products and refine existing products. CONCRETE ACCESSORIES. Our concrete accessories business unit manufactures and sells concrete accessories primarily under the Dayton/Richmond(R) brand name. Net sales of our concrete accessories business unit to external customers accounted for $139.8 million, or 43%, of our total 1999 net sales. Concrete accessories include: - WALL-FORMING PRODUCTS. Wall-forming products include shaped metal ties and accessories that are used with modular forms to hold concrete in place when walls are poured at a construction site or are prefabricated off site. These products, which generally are not reusable, are made of wire or plastic 3 4 or a combination of both materials. We generally manufacture these products on customized high-speed automatic equipment. - BRIDGE DECK PRODUCTS. Bridge deck products are metal assemblies of varying designs used to support the formwork used by contractors in the construction and rehabilitation of bridges. - BAR SUPPORTS. Bar supports are non-structural metal or plastic supports used to position rebar within a horizontal slab or form to be filled with concrete. Bar supports are often plastic or epoxy coated, galvanized or equipped with plastic tips to prevent creating a conduit for corrosion of the embedded rebar. - PRECAST AND PRESTRESSED CONCRETE CONSTRUCTION PRODUCTS. Precast and prestressed concrete construction products are metal assemblies of varying designs used in the manufacture of precast concrete panels and prestressed concrete beams and structural members. Precast concrete panels and prestressed concrete beams are fabricated away from the construction site and transported to the site. Precast concrete panels are used in the construction of prisons, freeway sound barrier walls, external building facades and other similar applications. Prestressed concrete beams use multiple strands of steel under tension embedded in concrete beams to provide rigidity and bearing strength, and often are used in the construction of bridges, parking garages and other applications where long, unsupported spans are required. - TILT-UP CONSTRUCTION PRODUCTS. Tilt-up construction products include a complete line of inserts, lifting hardware and adjustable beams used in the tilt-up method of construction, in which the concrete floor slab is used as part of a form for casting the walls of a building. After the cast walls have hardened on the floor slab, a crane is used to "tilt-up" the walls, which then are braced in place until they are secured to the rest of the structure. Tilt-up construction generally is considered to be a faster method of constructing low-rise buildings than conventional poured-in-place concrete construction. Some of our tilt-up construction products can be rented as well as sold. - FORMLINER PRODUCTS. Formliner products include plastic and elastomeric products that adhere to the inside face of forms to provide shape to the surface of the concrete. - CHEMICAL PRODUCTS. Chemical products sold by our concrete accessories business unit include a broad spectrum of chemicals for use in concrete construction, including form release agents, bond breakers, curing compounds, liquid hardeners, sealers, water repellents, bonding agents, grouts and epoxies, and other chemicals used in the pouring and placement of concrete. CONCRETE FORMING SYSTEMS. Our concrete forming systems business unit manufactures, sells and rents reusable modular concrete forming systems primarily under the Symons(R) name. These products include standard and specialty concrete forming systems, shoring systems and accessory products. To capitalize on the durability and relatively high 4 5 unit cost of prefabricated forming equipment, we also rent forming products. Net sales of our concrete forming systems business unit to external customers accounted for $117.6 million, or 37%, of our total 1999 net sales. Our concrete forming system products include: - CONCRETE FORMING SYSTEMS. Concrete forming systems are reusable, engineered modular forms which hold liquid concrete in place on concrete construction jobs while it cures. Standard forming systems are made of steel and plywood and are used in the creation of concrete walls and columns. Specialty forming systems consist primarily of steel forms that are designed to meet architects' specific needs for concrete placements. Both standard and specialty forming systems and related accessories are sold and rented for use. - SHORING SYSTEMS. Shoring systems, including aluminum beams and joists, post shores and shoring frames used to support deck and other raised forms while concrete is being poured. - CONSTRUCTION CHEMICALS. Construction chemicals sold by the concrete forming systems business unit include form release agents, sealers, water repellents, grouts and epoxies and other chemicals used in the pouring, stamping and placement of concrete. PAVING PRODUCTS. Our paving products business unit sells products, primarily consisting of welded dowel assemblies and dowel baskets, used in the construction and rehabilitation of roads, highways and airport runways to extend the life of the pavement. This business unit sells paving products primarily under the American Highway Technology(R) name, but we also offer some paving products under the Dayton/Richmond(R) name. We manufacture welded dowel assemblies primarily using automated and semi-automated equipment. Net sales of paving products accounted for $36.5 million, or 11%, of our total 1999 net sales. Paving products include: - WELDED DOWEL ASSEMBLIES AND DOWEL BASKETS. Welded dowel assemblies and dowel baskets are used to transfer dynamic loads between two adjacent slabs of concrete roadway. Metal dowels are part of a dowel basket design that is imbedded in two adjacent slabs to transfer the weight of vehicles as they move over a road. - CORROSIVE-PREVENTING EPOXY COATINGS. Corrosive-preventing epoxy coatings are used for infrastructure construction products and a wide range of industrial and construction uses. - CONSTRUCTION CHEMICALS. Construction chemicals sold by our paving products business unit include curing compounds used in concrete road construction. 5 6 MASONRY PRODUCTS. Our masonry products business unit manufactures and sells masonry products under the Dur-O-Wal(R) name. Our masonry product line consists primarily of masonry wall reinforcement products, masonry anchors, engineered products and other accessories used in masonry construction and restoration to reinforce brick and concrete walls, anchor inner to outer walls and provide avenues for water to escape. Net sales of masonry products accounted for $28.3 million, or 9%, of our total 1999 net sales. Masonry products are wire products that improve the performance and longevity of masonry walls by providing crack control, greater elasticity and higher strength to withstand seismic shocks and better resistance to rain penetration. We have the in-house ability to produce hot-dipped zinc galvanized finishes on masonry wall reinforcement products. Hot-dipped galvanized finishes are considered to provide superior protection against corrosion compared to alternative finishes. In recent years, model building codes in a number of regions of the country in which masonry construction is used have been amended to require use of hot-dipped galvanized masonry wall reinforcement products. We also sell other masonry products which connect one form of masonry to another or masonry to a building structure. Masonry products are used in the restoration of existing masonry construction, for seismic retrofitting of existing brick veneer surfaces to strengthen the surfaces against earthquake damage and for moisture control applications. MANUFACTURING We manufacture the substantial majority of the products we sell. Most of our concrete accessories, paving products and masonry products are manufactured at eighteen principal facilities in the United States, although some of our service/distribution facilities also can produce smaller lots of some products. Our production volumes enable us to design and build or custom modify much of the equipment we use to manufacture these products, using a team of experienced manufacturing engineers and tool and die makers. By developing our own automatic high-speed manufacturing equipment, we believe we generally have achieved significantly greater productivity, lower capital equipment costs, lower scrap rates, higher product quality, faster changeover times, and lower inventory levels than most of our competitors. In addition, our masonry products business unit's ability to "hot-dip" galvanize products provides it with an advantage over many competitors' manufacturing masonry wall reinforcement products, which lack this internal capability. We also have a flexible manufacturing setup and can make the same products at several locations using short and discrete manufacturing lines. We manufacture our concrete forming systems at two facilities in the United States. These facilities incorporate semi-automated and automated production lines, heavy metal presses, forging equipment, stamping equipment, robotic welding machines, drills, punches, and other heavy machinery typical for this type of manufacturing operation. We generally operate our manufacturing facilities two shifts per day, five days per week (six days per week during peak months and, in some instances, three shifts), with the 6 7 number of employees increasing or decreasing as necessary to satisfy demand on a seasonal basis. DISTRIBUTION We distribute our products through over 3,000 independent distributors, and our own network of 62 service/distribution centers located in the United States and Canada. Eighteen of the service/distribution centers are associated with our manufacturing plants. Of these 62 locations, 24 are dedicated principally to the distribution of concrete accessories, 30 are dedicated principally to the distribution of forming systems, 3 are dedicated primarily to the distribution of paving products, 5 are dedicated principally to the distribution of masonry products and some locations carry more than one of our product lines. We ship most of our products to our service/distribution centers from our manufacturing plants; however, a majority of our centers also are able to produce smaller batches of some products on an as-needed basis to fill rush orders. We have an on-line inventory tracking system for the concrete accessories, paving products and construction chemicals businesses, which enables our customer service representatives to identify, reserve and ship inventory quickly from any of our locations in response to telephone orders. Our system provides us with a competitive advantage since our service representatives are able to answer customer questions about availability and shipping dates while still on the telephone. We primarily use third-party common carriers to ship our products. We also use our distribution system to sell products which are manufactured by others. These products usually are sold under our brand names and often are produced for us on an exclusive basis. Sales of these products allow us to utilize our distribution network to increase sales without making significant capital investments. We believe there is an increasing trend among our distributors to consolidate into larger entities, which could result in increased price competition. SALES AND MARKETING We employ approximately 400 sales and marketing personnel, of whom approximately one-half are field sales people and one-half are customer service representatives. Sales and marketing personnel are located in all of our locations. We produce product catalogs and promotional materials that illustrate certain construction techniques in which our products can be used to solve typical construction problems. We promote our products through seminars and other customer education efforts and work directly with architects and engineers to secure the use of our products whenever possible. We consider our engineers to be an integral part of the sales and marketing effort. Our engineers have developed proprietary software applications to conduct extensive pre-testing on both new products and construction projects. 7 8 CUSTOMERS We have over 6,000 customers, over 50% of which purchase our products for resale. Our customer base is geographically diverse, with no customer accounting for more than 4% of net sales in 1999. Our ten largest customers accounted for less than 15% of our net sales in 1999. Customers who purchase our products for resale generally do not sell our products exclusively. CONCRETE ACCESSORIES. Our concrete accessories business unit has approximately 1,800 customers, consisting of distributors, rebar fabricators and precast and prestressed concrete manufacturers. We estimate that approximately 80% of the customers of this business unit purchase our products for resale. The largest customer of the business unit accounted for approximately 3% of the business unit's 1999 net sales. The business unit's top ten customers accounted for approximately 20% of its 1999 net sales. Our concrete accessories business unit has instituted a certified dealer program for those dealers who handle our tilt-up construction products. This program was established to educate dealers in the proper use of our tilt-up products and to assist them in providing engineering assistance to their customers. Certified dealers are not permitted to carry other manufacturers' tilt-up products, which we believe are incompatible with ours and, for that reason, could be unsafe if used with our products. The business unit currently has 109 certified tilt-up construction product dealers. CONCRETE FORMING SYSTEMS. Our concrete forming systems business unit has approximately 3,000 customers, consisting of distributors, precast and prestressed concrete manufacturers, general contractors and subcontractors. We estimate that approximately 90% of the customers of this business unit are the end-users of its products, while approximately 10% of those customers purchase its products for resale or re-rent. This business unit's largest customer accounted for approximately 6% of the business unit's 1999 net sales and its ten largest customers accounted for approximately 25% of its 1999 net sales. PAVING PRODUCTS. Our paving products business unit has approximately 200 customers, consisting primarily of distributors of construction supplies and, to a lesser extent, general contractors and subcontractors. This business unit's largest customer accounted for approximately 16% of the business unit's 1999 net sales and its ten largest customers accounted for approximately 70% of its 1999 net sales. MASONRY PRODUCTS. Our masonry products business unit has approximately 1,750 customers consisting of distributors, brick and concrete block manufacturers, general contractors and sub-contractors. We estimate that approximately 90% of the business unit's customers purchase its products for resale. This business unit's largest customer accounted for approximately 4% of its 1999 net sales and its ten largest customers accounted for approximately 20% of its 1999 net sales. RAW MATERIALS Our principal raw materials are steel wire rod, steel hot rolled bar, metal stampings and flat steel, aluminum sheets and extrusions, plywood, cement and cementitious 8 9 ingredients, liquid chemicals, zinc and injection-molded plastic parts. Steel, in its various forms, constitutes approximately 30-35% of our cost of sales. We currently purchase materials from over 300 vendors and are not dependent on any single vendor or small group of vendors for any significant portion of our raw material purchases. COMPETITION Our industry is highly competitive in most product categories and geographic regions. We compete with a relatively small number of full-line national manufacturers of concrete accessories, concrete forming systems, masonry products and paving products, and a much larger number of regional manufacturers and manufacturers with limited product lines. We believe competition in our industry is largely based on, among other things, price, quality, breadth of product lines, distribution capabilities (including quick delivery times) and customer service. Due primarily to factors such as freight rates, quick delivery times and customer preference for local suppliers, some local or regional manufacturers and suppliers may have a competitive advantage over us in a given region. We believe the size, breadth and quality of our product lines provide us with advantages of scale in both distribution and production relative to our competitors. TRADEMARKS AND PATENTS We sell most products under the registered trade names Dayton Superior(R), Dayton/Richmond(R), Symons(R), Dur-O-Wal(R) and American Highway Technology(R), which we believe are widely recognized in the construction industry and, therefore, are important to our business. Although some of our products (and components of some products) are protected by patents, we do not believe these patents are material to our business. We have approximately 120 trademarks and 90 patents. EMPLOYEES As of December 31, 1999, we employed approximately 800 salaried and 1,450 hourly personnel, of whom approximately 1,000 of the hourly personnel and six of the salaried personnel are represented by labor unions. Employees at our Miamisburg, Ohio; Parsons, Kansas; Des Plaines, Illinois; New Braunfels, Texas; Tremont, Pennsylvania; St. Joseph, Missouri; Aurora, Illinois and Kankakee, Illinois manufacturing/distribution plants and our service/distribution centers in Baltimore, Maryland; Atlanta, Georgia and Santa Fe Springs, California are covered by collective bargaining agreements. We believe we have good employee and labor relations. SEASONALITY Our operations are seasonal in nature, with approximately 60% of our sales historically occurring in the second and third quarters. Working capital and borrowings fluctuate with sales volume. Historically, more than 50% of our cash flow from operations is generated in the fourth quarter. BACKLOG We typically ship most of our products, other than paving products and some specialty forming systems, within one week and often within 24 hours after we receive the 9 10 order. Other product lines, including paving products and specialty forming systems, may be shipped up to six months after we receive the order, depending on our customer's needs. Accordingly, we do not maintain significant backlog, and backlog as of any particular date is not representative of our actual sales for any succeeding period. ITEM 2. PROPERTIES. Our corporate headquarters are located in leased facilities in Dayton, Ohio. We believe our facilities provide adequate manufacturing and distribution capacity for our needs. We also believe all of the leases were entered into on market terms. Our other principal facilities are located throughout North America, as follows:
Leased/ Size Location Use Principal Business Unit Owned (Sq. Ft.) - --------------------------- ---------------------------------- ---------------------------- --------- --------- Des Plaines, Illinois Manufacturing/Distribution and Symons Headquarters Concrete Forming Systems Owned 171,650 Miamisburg, Ohio Manufacturing/Distribution and Dayton/Richmond Headquarters Concrete Accessories Owned 126,000 Aurora, Illinois Manufacturing/Distribution and Dur-O-Wal Headquarters Masonry Products Owned 109,000 Kankakee, Illinois Manufacturing/Distribution and American Highway Technology Headquarters Paving Products Leased 107,900 Tremont, Pennsylvania Manufacturing/Distribution Concrete Accessories Owned 102,650 Parsons, Kansas Manufacturing/Distribution Paving Products Owned 98,250 New Braunfels, Texas Manufacturing/Distribution Concrete Forming Systems Owned 89,600 Atlanta, Georgia Service/Distribution Concrete Accessories Leased 74,090 Parker, Arizona Manufacturing/Distribution Concrete Accessories Leased 60,000 Birmingham, Alabama Manufacturing/Distribution Concrete Accessories Leased 55,000 Centralia, Illinois Manufacturing/Distribution Concrete Accessories Owned 53,500 St. Joseph, Missouri Manufacturing/Distribution Concrete Accessories Owned 53,342 Grand Prairie, Texas Service/Distribution Concrete Accessories Leased 45,000 Seattle, Washington Service/Distribution Concrete Accessories Leased 42,825 Santa Fe Springs, California Service/Distribution Concrete Accessories Leased 40,000 Toronto, Ontario Service/Distribution Concrete Accessories Leased 40,000 Oregon, Illinois Manufacturing/Distribution Concrete Accessories Owned 39,000 Helena, Alabama Manufacturing/Distribution Paving Products Leased 32,000 Folcroft, Pennsylvania Service/Distribution Concrete Accessories Owned 32,000 Baltimore, Maryland Service/Distribution Masonry Products Owned 30,000
ITEM 3. LEGAL PROCEEDINGS. Our Symons business unit currently is a defendant involved in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of its business, in 1996 in the United States District Court for the Southern District of Iowa (Case No. 4-96-CV-80552). EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14 million were awarded against Symons in January 1999. In a ruling on post-trial motions in April 1999, the district court judge dismissed EFCO's claim of intentional interference with contractual relations but increased the damages awarded to EFCO by $100,000. Briefs were filed and oral argument heard before 10 11 the United States Court of Appeals for the Eighth Circuit on March 13, 2000. We are awaiting the decision of the Court. We believe Symons has grounds for a successful appeal and we remain committed to vigorously pursuing our appellate rights. A successful appeal could overturn the judgment against Symons or result in a new trial. Symons' liability, if any, cannot finally be determined until all rights of the parties have been exhausted or have expired by lapse of time. We consider the outcome of this litigation to be not estimable and, accordingly, we have not recorded any liability for the resolution of this suit. In the event Symons is unsuccessful in its appeal, we could be required to pay the full amount of the judgment plus interest or a potentially higher amount. An unsuccessful appeal could have a material adverse effect on us. Our 1997 purchase agreement to acquire Symons provided for a post-closing purchase price adjustment. We are currently in a dispute with the former stockholders of Symons regarding this purchase price adjustment. The dispute includes a lawsuit brought by the former stockholders in Delaware and an arbitration proceeding which began in July 1999. We have demanded a number of adjustments that would reduce the purchase price, while the former stockholders have demanded adjustments that would increase the purchase price by approximately $5 million if all of their adjustments were made and none of our adjustments were made. We are unable to determine the final amount of the adjustment, if any, that will be made to the purchase price. A final decision by the arbiter is pending. If the former stockholders of Symons prevail in this dispute, we may be required to make an additional purchase price payment to them. We would expect to record any such payment as additional goodwill with respect to the acquisition. A significant payment would adversely affect our financial condition and results of operations and could reduce our liquidity and the funds available to us to implement our business strategy. We and all of our directors and one officer are defendants in a purported shareholder class action civil suit brought in January 2000 in the Court of Common Pleas in Montgomery County, Ohio (Case No. 2000 CV 00415). The plaintiff alleges that we and the other defendants have engaged in self dealing and breached our fiduciary duties to shareholders with respect to the recapitalization merger. We believe this suit is without merit and are committed to vigorously defending ourselves and the other defendants. We have filed with the court a motion to dismiss the complaint. In the event we are unsuccessful in our defense, we could be materially and adversely affected. During the ordinary course of our business, we are from time to time threatened with, or may become a party to, legal actions and other proceedings. While we are currently involved in certain other legal proceedings, management believes the results of these proceedings will not have a material effect on our results of operations, in part due to certain indemnification arrangements. We believe that our potential exposure to such legal actions is adequately covered by product and general liability insurance. ENVIRONMENTAL MATTERS Our businesses are subject to regulation under various and changing federal, state and local laws and regulations relating to the environment and to employee safety and health. 11 12 These environmental laws and regulations govern the generation, storage, transportation, disposal and emission of various substances. Permits are required for operation of our businesses (particularly air emission permits), and these permits are subject to renewal, modification and, in certain circumstances, revocation. We believe we are in substantial compliance with these laws and permitting requirements. Our businesses also are subject to regulation under various and changing federal, state and local laws and regulations which allow regulatory authorities to compel (or seek reimbursement for) cleanup of environmental contamination at our own sites and at facilities where our waste is or has been disposed. We expect to incur ongoing capital and operating costs to maintain compliance with currently applicable environmental laws and regulations; however, we do not expect those costs, in the aggregate, to be material. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Our common shares are traded on the New York Stock Exchange under the symbol "DSD." The following table shows the high and low closing prices for our common shares for the periods indicated. HIGH LOW ------- ------- FISCAL YEAR 1998 First Quarter................ $20.375 $15.875 Second Quarter............... 22.125 16.500 Third Quarter................ 21.375 16.625 Fourth Quarter............... 20.875 14.375 FISCAL YEAR 1999 First Quarter................ $23.500 $17.313 Second Quarter............... 20.125 16.750 Third Quarter................ 20.750 16.500 Fourth Quarter............... 19.688 11.750 As of March 1, 2000, there were 67 holders of record of common shares, as shown on our transfer agent's records. The Company has paid no dividends on its Common Shares. The Company currently intends to retain its future earnings, if any, to fund the development and growth of its business and, therefore, does not anticipate declaring or paying cash dividends on the common shares in the near term. The decision whether to apply legally available funds to the payment of dividends on common shares will be made by the Board of Directors of the 12 13 Company from time to time in the exercise of its business judgment, taking into account, among other things, the Company's results of operations and financial condition, any then existing or proposed commitments for the use by the Company of available funds and the Company's obligations with respect to any then outstanding class or series of its preferred shares. The Company is restricted by the terms of its credit agreements from paying cash dividends on the Common Shares and may in the future enter into loan or other agreements or issue debt securities or preferred shares that restrict the payment of cash dividends on the Common Shares. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." 13 14 ITEM 6. SELECTED FINANCIAL DATA. (All dollar amounts in thousands, except share data) The earnings statement data and the balance sheet data presented below have been derived from the Company's consolidated financial statements and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto, included elsewhere herein.
Year Ended December 31, ---------------------------------------------------------------------------- 1995 1996 1997 1998 1999 ---------- ---------- ---------- ---------- ---------- EARNINGS STATEMENT DATA: Net sales $ 92,802 $ 124,486 $ 167,412 $ 282,849 $ 322,170 Cost of sales 63,990 86,021 111,044 177,094 199,464 ---------- ---------- ---------- ---------- ---------- Gross profit 28,812 38,465 56,368 105,755 122,706 Selling, general and administrative expenses 18,698 23,637 36,761 73,721 81,800 Amortization of goodwill and intangibles 1,491 1,749 1,885 2,213 2,369 ---------- ---------- ---------- ---------- ---------- Income from operations 8,623 13,079 17,722 29,821 38,537 Interest expense, net 4,231 4,829 5,556 11,703 11,661 Other expense (income), net (3) 96 (64) (202) 230 Provision for income taxes (1) 690 3,538 5,277 8,244 11,991 ---------- ---------- ---------- ---------- ---------- Income before extraordinary item 3,705 4,616 6,953 10,076 14,655 Extraordinary item, net of tax - (2,314)(2) - - - ---------- ---------- ---------- ---------- ---------- Net income $ 3,705 $ 2,302 $ 6,953 $ 10,076 $ 14,655 ========== ========== ========== ========== ========== Net income available to common shareholders $ 71 $ 2,302 $ 6,953 $ 10,076 $ 14,335 ========== ========== ========== ========== ========== Basic income per share before extraordinary item $ 0.02 $ 1.02 $ 1.22 $ 1.72 $ 2.41 Basic net income per share $ 0.02 $ 0.51 $ 1.22 $ 1.72 $ 2.41 Basic weighted average common shares outstanding (3) 2,990,847 4,547,527 5,703,601 5,867,338 5,944,667 Diluted income (loss) per share before extraordinary item $ 0.02 $ 0.94 $ 1.17 $ 1.65 $ 2.30 Diluted net income per share $ 0.02 $ 0.47 $ 1.17 $ 1.65 $ 2.30 Diluted weighted average common and common share equivalents outstanding (3) 3,558,908 4,925,464 5,933,244 6,098,205 6,376,935 As of December 31, ---------------------------------------------------------------------------- BALANCE SHEET: Total assets $ 103,860 $ 107,835 $ 226,930 $ 253,620 $ 278,679 Long-term debt (including current portion) 53,012 34,769 120,236 118,205 105,173 Shareholders' equity 27,485 52,872 60,529 74,588 88,772
(1) In 1995, the provision for income taxes was reduced to reflect the utilization of net operating losses. (2) During June 1996, the Company prepaid its $40,000 unsecured senior promissory notes. In conjunction therewith, the Company paid a prepayment premium of $2,400 and expensed unamortized financing costs and debt discount of $795 and $538, respectively. The Company recorded an extraordinary loss of $2,314, net of an income 14 15 tax effect of $1,419. The Company funded this repayment with $23,041 in proceeds from its public stock offering and $19,359 from its credit facility. (3) Basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted net income per share is computed by dividing net income by the weighted average number of common and common share equivalents outstanding during the year. Common share equivalents include, if dilutive, the number of common shares issuable upon the conversion of the Company-obligated mandatorily redeemable convertible trust preferred securities. Common share equivalents also include the number of shares issuable upon the exercise of outstanding options and warrants, less the shares that could be purchased with the proceeds from the exercise of the options and warrants, based on the Company's average trading price for 1999, 1998, 1997, and 1996 and the initial public offering price of $13.00 per share for 1995. 15 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW We believe we are the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. Although almost all of our products are used in concrete or masonry construction, the function and nature of the products differ widely. We have four principal business units, which are organized around the following product lines: - Concrete Accessories (Dayton/Richmond(R)); - Concrete Forming Systems (Symons(R)); - Paving Products (American Highway Technology(R)); and - Masonry Products (Dur-O-Wal(R)). Through our business units, we design, manufacture and distribute metal accessories and forms to independent distributors for resale to contractors, brokers and other manufacturers. In some of our product lines, we also may sell directly to end users and may provide equipment for rental. When our business was started in 1924, it consisted primarily of the concrete accessories business and operated primarily in the eastern United States. In 1982, we acquired Superior Concrete Accessories, Inc., which expanded our geographic reach to include the rest of the continental United States and doubled the size of our company. In 1995, we acquired our masonry products business unit through the acquisition of Dur-O-Wal, which we believe is the leading North American manufacturer of masonry wall reinforcement products and other metal masonry accessories. In 1996, we created a separate paving products business unit to operate a business that was previously a part of our concrete accessories business unit. In 1997, we again almost doubled our size when we acquired our concrete forming systems business unit and added to our concrete accessories business unit through the acquisition of Symons Corporation. With the addition of Symons, we also approximately doubled the number of our distribution and manufacturing locations. We believe that Symons is the leading North American manufacturer of concrete forming systems. We also have expanded some of our business units through additional smaller acquisitions. In June 1998, The Transportation Equity Act for the 21st Century, known as "TEA-21" was enacted. TEA-21 authorizes $218 billion in federal spending on highway and infrastructure projects through the year 2003 and represents a 44% increase over the 1991 Intermodal Surface Transportation Act, the previous six-year federal program. At a minimum, $162 billion of the $218 billion has been allocated to highway and bridge programs. Our paving products business unit began to benefit from TEA-21 during the second half of 1999. Unless otherwise indicated, the discussion of our results of operations that follows includes information for Symons, Dur-O-Wal and the other acquisitions only from the dates that we acquired each of those companies. 16 17 CONCRETE ACCESSORIES (DAYTON/RICHMOND(R)) Our concrete accessories business unit derives its revenues from the sale of products primarily to independent distributors. We also provide some equipment on a rental basis. Our concrete accessories business unit manufactures substantially all of the products it sells, which are shipped to customers based on orders. We design and manufacture or customize most of the machines we use to produce concrete accessories, and these proprietary designs allow for quick changeover of machine set-ups. This flexibility, together with our extensive distribution system, enable this business unit to deliver many of its products within 24 hours of a customer order. Therefore, product inventories are maintained at relatively low levels. Cost of sales for our concrete accessories business unit consists primarily of purchased steel and other raw materials, as well as the costs associated with manufacturing, assembly, testing, internal shipping and associated overhead. CONCRETE FORMING SYSTEMS (SYMONS(R)) Our concrete forming systems business unit derives its revenues from the sale and rental of engineered, reusable modular systems and related accessories to independent distributors and contractors. Sales of concrete forming systems and specific consumables generally represent approximately two-thirds of the revenues of this business unit, and rentals represent the remaining one-third. Sales of concrete forming systems generally are more sensitive to economic cycles than rentals. Rental equipment also can be sold as used equipment. The business unit's products include systems with steel frames and a plywood face, also known as Steel-Ply(R), and systems that use steel in both the frame and face. All-steel forming systems are characterized by larger, project-driven orders, which increases backlog relative to the Steel-Ply(R) forms which are held in inventory for rental and sale. Our concrete forming systems business unit manufactures and assembles Steel-Ply(R) forms and outsources some of the manufacturing involved in all-steel forms. This outsourcing strategy allows us to fulfill larger orders without increased overhead. Cost of sales for our concrete forming systems business unit consists primarily of purchased steel, specialty plywood, and other raw materials; depreciation and maintenance of rental equipment, and the costs associated with manufacturing, assembly and overhead. PAVING PRODUCTS (AMERICAN HIGHWAY TECHNOLOGY(R)) Our paving products business unit derives its revenues from sales to independent distributors and contractors. Orders from customers are affected by state and local governmental infrastructure expenditures and their related bid processes. This is our business unit most affected by the demand expected to be generated as a consequence of TEA-21. Due to the project-oriented nature of paving jobs, these products generally are made to order. This serves to keep inventories low but increases the importance of backlog in this business unit. Our paving products division manufactures nearly all of its products. Cost of sales for our paving products business unit consists primarily of steel, as well as the costs associated with manufacturing and overhead. MASONRY PRODUCTS (DUR-O-WAL(R)) Our masonry products business unit derives its revenues from sales to independent distributors and brick and concrete block manufacturers who package our products with other products for resale to customers. Our masonry products business unit sells two 17 18 principal categories of products: new construction products and restoration and repair products. New construction products are used to strengthen masonry walls or the connection between masonry and other portions of the wall at the time a building is constructed. Restoration and repair products are used to refurbish masonry and brick buildings and strengthen connections between masonry and the interior portions of the wall and are more engineered and generally generate higher margins than new construction products. The masonry products business unit manufactures and assembles the majority of its products before shipping to customers based on orders. Cost of sales for the masonry products business unit consists primarily of steel, as well as costs associated with manufacturing and overhead. ACQUISITIONS We have completed 9 acquisitions since the beginning of 1997. These are summarized in the following table:
Purchase Price Date Business Acquired Business Unit (in millions) ---- ----------------- ------------- ------------- February 1997 Ironco Paving Products $1.5 September 1997 Baron Steel Concrete Accessories 0.3 September 1997 Symons Concrete Forming Systems 85.0* Richmond Screw Anchor Concrete Accessories May 1998 Symons Concrete Forms Concrete Forming Systems 6.7 May 1998 Northwoods Concrete Forming Systems 0.8 June 1998 Secure Paving Products 0.6 January 1999 Cempro Concrete Accessories 5.4 October 1999 Southern Construction Products Masonry Products and 8.3 Concrete Accessories February 2000 Polytite Masonry Products 1.5
* Subject to arbitration adjustment. 18 19 RESULTS OF OPERATIONS The following table summarizes the Company's results of operations as a percentage of net sales for the periods indicated.
1999 1998 1997 ----- ----- ----- Net sales 100.0% 100.0% 100.0% Cost of goods sold 61.9 62.6 66.3 ----- ----- ----- Gross profit 38.1 37.4 33.7 Selling, general and administrative expenses 25.4 26.1 22.0 Amortization of goodwill and intangibles 0.7 0.8 1.1 ----- ----- ----- Total selling, general and administrative expenses 26.1 26.9 23.1 ----- ----- ----- Income from operations 12.0 10.5 10.6 Interest expense, net 3.6 4.1 3.3 Other expense (income), net 0.1 (0.1) -- ----- ----- ----- Income before income taxes and extraordinary item 8.3 6.5 7.3 Provision for income taxes 3.8 2.9 3.1 ----- ----- ----- Net income 4.5 3.6 4.2 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit 0.1 -- -- ----- ----- ----- Net income available to common shareholders 4.4% 3.6% 4.2% ===== ===== =====
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998 Net Sales Our 1999 net sales reached $322.2 million, a 13.9% increase from $282.8 million in 1998. The following table summarizes our net sales by segment for the periods indicated:
YEARS ENDED DECEMBER 31, ------------------------------------------------- 1999 1998 ---------------------- ---------------------- (IN THOUSANDS) NET NET % SALES % SALES % CHANGE --------- ----- --------- ------ ------ Concrete accessories .... $ 144,722 44.9% $ 131,467 46.5% 10.1% Concrete forming systems 122,720 38.1 104,711 37.0 17.2 Paving products ......... 36,695 11.4 30,967 10.9 18.5 Masonry products ........ 28,265 8.8 24,292 8.6 16.4 Intersegment eliminations (10,232) (3.2) (8,588) (3.0) 19.1 --------- ----- --------- ------ Net sales ...... $ 322,170 100.0% $ 282,849 100.0% 13.9% ========= ===== ========= ======
19 20 Net sales of concrete accessories increased by 10.1% to $144.7 million in 1999 from $131.5 million in 1998, due primarily to increases in volume, new product initiatives, and the contribution of the acquired Cempro business. Net sales of concrete forming systems increased by 17.2% to $122.7 million in 1999 from $104.7 million in 1998 due to a full year's sales from the 1998 acquisitions of Symons Concrete Forms and Northwoods and the expansion and introduction of new products, including exclusive distribution rights to two European forming systems. Net sales of paving products increased by 18.5% to $36.7 million in 1999 from $31.0 million in 1998 due to an increase in volume as a result of TEA-21 and marketing initiatives. Net sales of masonry products increased by 16.4% to $28.3 million in 1999 from $24.3 million in 1998, due to the acquisition of Southern Construction Products, higher existing volume, and strategic pricing initiatives. Gross Profit Gross profit for 1999 was $122.7 million, a 16.0% increase over $105.8 million for 1998. Gross margin was 38.1% in 1999 compared to 37.4% in 1998. Gross margin increased primarily due to higher volume absorbing fixed costs in all business units, and a better mix of higher gross margin rental revenue in the concrete forming systems business. This more than offset the effects of the lower gross margin Cempro and Southern Construction Products businesses. Selling, General and Administrative Expenses Our selling, general, and administrative expenses, including the amortization of goodwill and intangibles ("SG&A expenses") increased to $84.2 million in 1999 from $75.9 million in 1998. The increase is due to the effect of 1998 and 1999 acquisitions, higher distribution costs associated with the higher net sales volume, increases in new product development and sales personnel, and legal fees to defend ourselves in the EFCO litigation. These were partially offset by a $0.7 million non-recurring pension plan termination gain in the second quarter of 1999. SG&A expenses were lower as a percent of sales to 26.1% in 1999 from 26.9% in 1998, due to the effect of higher net sales on fixed costs. Interest Expense Interest expense remained flat at $11.7 million in 1999 and 1998. Interest expense initially increased due to higher debt from the acquisition of Cempro. However, this was offset by the lower debt as a result of increased operating cash flow and the fourth quarter issuance of our mandatorily redeemable convertible preferred trust securities. Income Before Income Taxes Income before income taxes in 1999 increased 45.4% to a record $26.6 million from $18.3 million in 1998, and was comprised of the following: YEARS ENDED DECEMBER 31, ---------------------- 1999 1998 -------- -------- (IN THOUSANDS) Concrete accessories ........... $ 22,964 $ 19,387 Concrete forming systems ....... 10,876 6,133 Paving products ................ 1,569 1,677 Masonry products ............... 1,058 487 Intersegment eliminations ...... (4,903) (4,153) Corporate ...................... (4,918) (5,211) -------- -------- Income before income taxes $ 26,646 $ 18,320 ======== ======== 20 21 Concrete accessories income before income taxes of $23.0 million, or 15.9% of net sales, in 1999 increased from $19.4 million, or 14.7% of net sales, in 1998, due primarily to the increase in net sales of concrete accessories. Concrete forming systems income before income taxes of $10.9 million, or 8.9% of net sales, in 1999 increased from $6.1 million, or 5.9% of net sales, in 1998, due primarily to the full year effect of the 1998 acquisition of Symons Concrete Forms, and increased sales from the existing business. Income before income taxes from paving products decreased to $1.6 million, or 4.3% of net sales, in 1999 from $1.7 million, or 5.4% of net sales, in 1998, due to personnel increases made in anticipation of the growth of the business as a result of TEA-21. Income before income taxes from masonry products increased to $1.1 million, or 3.7% of net sales, in 1999 from $0.5 million, or 2.0% of net sales, in 1998, due to the acquisition of Southern Construction Products and a shift to higher margin engineered products. Corporate expenses decreased to $4.9 million from $5.2 million due to the non-recurring pension gain which was offset by the addition of personnel in 1998 and 1999. Elimination of gross profit on intersegment sales increased to $4.9 million in 1999 from $4.2 million in 1998 due to higher intersegment sales. Net Income Our effective tax rate was 45.0% in both 1999 and 1998. Net income increased $4.6 million to $14.7 million in 1999 from $10.1 million in 1998 due to the factors described above. COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997 Net Sales Our 1998 net sales reached a record $282.8 million, a 69.0% increase from $167.4 million in 1997 and a 12.1% increase from pro forma 1997 sales of $252.3 million as if Symons had been acquired on January 1, 1997. The following table summarizes our net sales by segment for the periods indicated:
YEARS ENDED DECEMBER 31, ------------------------------------------------ 1998 1997 ---------------------- --------------------- (IN THOUSANDS) NET NET % SALES % SALES % CHANGE --------- ---- --------- ---- ------ Concrete accessories .... $ 131,467 46.5% $ 92,251 55.1% 42.5% Concrete forming systems 104,711 37.0 21,066 12.6 397.1 Paving products ......... 30,967 10.9 29,177 17.4 6.1 Masonry products ........ 24,292 8.6 24,918 14.9 (2.5) Intersegment eliminations (8,588) (3.0) -- -- -- --------- ----- --------- ----- Net sales ...... $ 282,849 100.0% $ 167,412 100.0% 69.0% ========= ===== ========= =====
21 22 Net sales of concrete accessories increased by 42.5% from $92.2 million in 1997 to $131.5 million in 1998, due primarily to a full year's net sales from the Richmond Screw Anchor division of Symons that was acquired in September 1997. Net sales of concrete forming systems increased from $21.1 million in 1997 to $104.7 million in 1998 due to a full year's net sales resulting from the acquisition of Symons. Net sales of paving products increased by 6.1% to $31.0 million in 1998 from $29.2 million in 1997 due to increased market share and sales volume. Net sales of masonry products decreased to $24.3 million in 1998 from $24.9 million in 1997, due to a high level of competition in the hot dipped and mill galvanized masonry wall reinforcement product markets, which was somewhat offset by a shift to higher margin, lower volume engineered products. Gross Profit Gross profit for 1998 was $105.8 million, an 87.6% increase over $56.4 million for 1997. Gross margin was 37.4% in 1998 compared to 33.7% in 1997. Gross margin increased primarily due to the inclusion of the Symons business for a full year as concrete forming systems have higher gross margins, primarily due to rental revenues, than our other product lines. Selling, General, and Administrative Expenses Our SG&A expenses increased from $38.6 million in 1997 to $75.9 million in 1998. The increase is due to the inclusion of a full year of expenses resulting from the acquisition of Symons. SG&A expenses increased as a percent of sales from 23.1% in 1997 to 26.9% in 1998, due to concrete forming systems having a higher percentage of SG&A expenses to net sales than our other operating segments. This reflects the additional distribution costs associated with the management of the rental equipment fleet. Interest Expense Interest expense increased to $11.7 million in 1998 from $5.6 million in 1997 due primarily to the full year effect of higher debt resulting from the Symons acquisition, and to a lesser extent, higher capital expenditures. Income Before Income Taxes Income before income taxes in 1998 increased 49.8% to $18.3 million from $12.2 million in 1997, and was comprised of the following: YEARS ENDED DECEMBER 31, ---------------------- 1998 1997 -------- -------- (IN THOUSANDS) Concrete accessories .......... $ 19,387 $ 13,723 Concrete forming systems ...... 6,133 364 Paving products ............... 1,677 1,377 Masonry products .............. 487 5 Intersegment eliminations ..... (4,153) - -------- -------- Corporate ..................... (5,211) (3,239) -------- -------- Income before income taxes $ 18,320 $ 12,230 ======== ======== 22 23 Concrete accessories income before income taxes of $19.4 million, or 14.7% of net sales, in 1998 increased 41.3% from $13.7 million, or 14.9% of net sales, due primarily to the full year effect of the 1997 acquisition of Richmond Screw Anchor. Concrete forming systems income before income taxes of $6.1 million, or 5.9% of net sales, in 1998 increased from $0.4 million, or 1.7% of net sales, in 1997 due primarily to the full year effect of the acquisition of Symons. Income before income taxes from paving products increased to $1.7 million, or 5.4% of net sales, in 1998 from $1.4 million, or 4.7% of net sales, in 1997 due to higher net sales. Income before income taxes from masonry products was $0.5 million in 1998 compared to virtually breakeven in 1997, despite the decrease in net sales, due to a shift to higher margin, lower volume engineered products. Corporate expenses increased to $5.2 million from $3.2 million primarily due to the addition of personnel in the finance, treasury, tax, purchasing, logistics and corporate development functions. Elimination of profit on intersegment sales was $4.2 million in 1998. Net Income Our effective tax rate in 1998 was 45.0%, or $8.2 million, compared to a rate of 43.1%, or $5.3 million, in 1997. Nondeductible goodwill amortization and state and local taxes caused our effective tax rate to exceed federal statutory levels. Net income increased $3.2 million to $10.1 million in 1998 from $6.9 million in 1997 due to the factors described above. LIQUIDITY AND CAPITAL RESOURCES Our key statistics for measuring liquidity and capital resources are net cash provided by operating activities, capital expenditures, debt to total capitalization ratio, amounts available under our revolving credit facility, and cash gap. We define cash gap as the number of days our accounts receivable are outstanding plus the number of days of inventory we have, less the number of days our accounts payable are outstanding. Our capital requirements relate primarily to capital expenditures, debt service and the cost of acquisitions. Historically, our primary sources of financing have been cash generated from operations, borrowings under our revolving credit facility and the issuance of long-term debt and equity. Net cash provided by operating activities for 1999 was $23.6 million. Sources of operating cash flow for 1999 were comprised of: - $14.7 million in net income, and - $11.8 million in non-cash reductions of net income, less - ($2.9) million of working capital changes. 23 24 This cash was used for: - net capital expenditures of $11.5 million, and - acquisitions of $14.1 million. The $19.6 million net proceeds from the Company-obligated mandatorily redeemable convertible trust preferred securities offering were used for $13.0 million of long-term debt repayment, a cash increase of $4.0 million, and net cash used in operating, investing, and other financing activities of $2.6 million. Capital expenditures in 1999 included net additions to the rental equipment fleet of $4.1 million to support the growth of our concrete forming systems business unit as well as property, plant, and equipment additions of $7.7 million as we continued to focus on cost improvement programs. We anticipate that our net capital expenditures in each of 2000 and 2001 will be comparable to 1999. At December 31, 1999, working capital was $50.5 million, compared to $39.7 million at December 31, 1998. The growth in our working capital is due to higher cash from having no outstanding balance on the revolving credit facility as a result of the convertible trust preferred securities offering, as well as higher accounts receivable and inventories from our overall growth. At December 31, 1999, all of our $50.0 million of the revolving credit facility was available, none of which was outstanding. The aggregate outstanding amount of the term loans under our credit agreement at December 31, 1999 was $100.0 million. We also had other long-term debt, consisting of a $5.0 million note we owed to one of the former stockholders of Symons and $0.2 million we owed to the city of Parsons, Kansas. At December 31, 1999, we had a total of $105.2 million of long-term debt outstanding, of which $5.0 million was current. Our net long-term debt to total capitalization ratio decreased to 48.2% as of December 31, 1999 from 61.2% as of December 31, 1998 due primarily to the issuance of the mandatorily redeemable convertible trust preferred securities. In the fourth quarter of 1999, we completed an underwritten public offering of 1,062,500 Company-obligated mandatorily redeemable convertible trust preferred securities at a price of $20 per security, generating $19.6 million in net proceeds. The securities were issued by a limited purpose Delaware trust which used the proceeds to purchase from us the same principal amount of our convertible junior subordinated debentures. The securities are guaranteed by us on a subordinated basis. Dividends are payable on the convertible trust preferred securities at the rate of 10% per year and the securities are convertible into our Class A Common Shares at the rate of 0.80 common shares for each preferred security, which equates to a conversion price of $25 per common share, a 47% premium on the closing price on the date of issuance. For 1999, our average net cash gap days were 70, as compared to 79 for 1998, due to an effective cash gap program. We define cash gap as the number of days our accounts receivable are outstanding plus the number of days of inventory we have, less the number of days our accounts payable are outstanding. 24 25 We believe our liquidity, capital resources and cash flows from operations are sufficient, in the absence of additional acquisitions, to fund the capital expenditures we have planned and our working capital and debt service requirements. We intend to fund future acquisitions with cash, securities or a combination of cash and securities. To the extent we use cash for all or part of any future acquisitions, we expect to raise the cash primarily from our business operations, from borrowings under our credit agreement or, if feasible and attractive, by issuing long-term debt or selling additional common shares. SEASONALITY Our operations are seasonal, with approximately 60% of sales historically occurring in the second and third quarters of the year. Our working capital and borrowings fluctuate with the volume of our sales. In 1999 and 1998, 68% and 57% of our annual cash flow from operations was generated in the fourth quarter. INFLATION We do not believe inflation has had a significant impact on our operations over the past two years. In the past, we have been able to pass along to our customers all or a portion of increases in the price of steel (our principal raw material). We may not be able to pass on steel price increases in the future. YEAR 2000 Certain software and hardware systems are date sensitive. Older date sensitive systems often use a two digit dating convention ("00" rather than "2000") that could have resulted in system failure and disruption of operations. This is referred to as the "Year 2000" issue. We have not experienced any significant disruptions to our businesses as a result of the Year 2000 issue. To date, we have incurred approximately $0.9 million in costs, of which approximately $0.8 million was capitalized and approximately $0.1 million was expensed. These costs were to replace existing hardware and third party software and professional fees for external assistance. We estimate that our future cost to resolve remaining Year 2000 issues is not significant. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires companies to recognize all derivative contracts at their fair values, as either assets or liabilities on the balance sheet. Our only derivatives are our interest rate swap agreements. Changes in the fair value of the swaps would be recorded each period as an adjustment to interest expense. We do not expect the adoption of SFAS No. 133 to have a material impact on the consolidated statements of income. In June 1999, the FASB issued Statement No. 137, which amended SFAS No. 133 25 26 such that the effective date of adoption will be for all fiscal quarters beginning after June 15, 2000. We do not intend to adopt SFAS No. 133 prior to its effective date. FORWARD-LOOKING STATEMENTS This Form 10-K includes, and future filings by us on Form 10-K, Form 10-Q, and Form 8-K, and future oral and written statements by us and our management may include, certain forward-looking statements, including (without limitation) statements with respect to anticipated future operating and financial performance, growth opportunities and growth rates, acquisition and divestitive opportunities and other similar forecasts and statements of expectation. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements by us and our management are based on estimates, projections, beliefs and assumptions of our management and are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by us and our management as the result of a number of important factors. Representative examples of these factors include (without limitation) the cyclical nature of nonresidential building and infrastructure construction activity, which can be affected by factors outside our control such as weakness in the general economy, a decrease in governmental spending, interest rate increases, and changes in banking and tax laws; an unsuccessful outcome in our legal proceedings and disputes; our ability to successfully identify, finance, complete and integrate acquisitions; increases in the price of steel (the principal raw material in our products) and our ability to pass along such price increases to our customers; the effects of weather and seasonality on the construction industry; increasing consolidation of our customers; the mix of products we sell; the competitive nature of our industry; and the amount of debt we must service. This list of factors is not intended to be exhaustive, and additional information concerning relative risk factors can be found in our Registration Statement on Form S-3 (Reg. No. 333-84613) filed with the Securities and Exchange Commission. In addition to these factors, actual future performance, outcomes and results may differ materially because of other, more general, factors including (without limitation) general industry and market conditions and growth rates, domestic economic conditions, governmental and public policy changes and the continued availability of financing in the amounts, at the terms and on the conditions necessary to support our future business. 26 27 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As of December 31, 1999, we had financial instruments which were sensitive to changes in interest rates. These financial instruments consist of: - $50.0 million revolving credit facility, none of which was outstanding; - $100.0 million term loan; - $5.2 million in other fixed-rate, long-term debt; and - variable-to-fixed interest rate swaps on $50.0 million on the term loan. Our revolving credit facility terminates in 2002 and has several interest rate options which re-price on a short-term basis. Our $100.0 million term loan is due in 2005. The term loan permits us to choose from various interest rate options which re-price on a short-term basis. Accordingly, the fair value of the term loan as of December 31, 1999 approximated its face value. The term loan has a weighted average interest rate of 8.93% at December 31, 1999. Our other long-term debt at December 31, 1999 consisted of a $5.0 million, 10.5% note payable due in 2004 with an estimated fair value of $5.3 million and a $0.2 million, 7% loan due in installments of $31,500 per year with an estimated fair value as of December 31, 1999 of $0.2 million. We have two interest rate swap agreements on a total of $50.0 million of our term loan that fixed the LIBOR-based component of the interest rate formula (as required by our credit agreement). The swaps have a fixed 90-day LIBOR component of 6.30% and 6.33% and expire on November 1, 2000. The 90-day LIBOR as of December 31, 1999 was 6.18%. These swaps are contracts to exchange floating rate for fixed rate interest payments without the exchange of underlying amounts. The estimated fair value of the interest rate swaps as of December 31, 1999 was a liability of $16,000. In the ordinary course of our business, we also are exposed to price changes in raw materials (particularly steel rod and steel bar) and products purchased for resale. The prices of these items can change significantly due to changes in the markets in which our suppliers operate. We generally do not, however, use financial instruments to manage our domestic or international exposure to changes in commodity prices. 27 28 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Report Of Independent Public Accountants To the Shareholders of Dayton Superior Corporation: We have audited the accompanying consolidated balance sheets of Dayton Superior Corporation (an Ohio corporation) and Subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, shareholders' equity, cash flows and comprehensive income for each of the three years in the period ended December 31, 1999. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dayton Superior Corporation and Subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed under Part IV, Item 14(a)(2) is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Dayton, Ohio February 4, 2000 28 29 Dayton Superior Corporation And Subsidiaries Consolidated Balance Sheets As of December 31 (Amounts in thousands, except share and per share amounts)
ASSETS (Note 4) 1999 1998 Current assets: --------- --------- Cash $ 4,553 $ 560 Accounts receivable, net of allowances for doubtful accounts and sales returns and allowances of $5,589 and $4,432 45,085 42,996 Inventories (Note 3) 39,340 36,058 Prepaid expenses and other current assets 5,551 4,396 Prepaid income taxes 1,038 828 Future income tax benefits (Notes 3 and 8) 3,998 3,521 --------- --------- Total current assets 99,565 88,359 --------- --------- Rental equipment, net (Note 3) 58,748 52,586 --------- --------- Property, plant and equipment (Note 3) Land and improvements 4,553 5,481 Building and improvements 22,478 20,030 Machinery and equipment 46,620 38,339 --------- --------- 73,651 63,850 Less accumulated depreciation (29,741) (22,069) --------- --------- Net property, plant and equipment 43,910 41,781 Goodwill and intangible assets, net of accumulated amortization (Note 3) 75,522 70,130 Other assets 934 764 --------- --------- Total assets $ 278,679 $ 253,620 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt (Note 4) $ 5,032 $ 5,032 Accounts payable 22,802 20,749 Accrued compensation and benefits 11,302 12,443 Other accrued liabilities 9,960 10,408 --------- --------- Total current liabilities 49,096 48,632 Long-term debt (Note 4) 100,141 113,173 Deferred income taxes (Notes 3 and 8) 16,566 11,544 Other long-term liabilities (Note 7) 4,548 5,683 --------- --------- Total liabilities 170,351 179,032 --------- --------- Company-obligated mandatorily redeemable convertible trust preferred securities of Dayton Superior Capital Trust which holds solely debentures, $20 liquidation value per security; 1,062,500 and 0 securities authorized, issued and outstanding (Note 5) 19,556 - --------- --------- Shareholders' equity (Note 6) Class A common shares; no par value; 20,539,500 shares authorized; 5,962,200 and 5,200,372 shares issued and 5,943,183 and 5,193,174 shares 47,417 42,316 outstanding; 1 vote per share Class B common shares; no par value; 0 and 757,569 shares authorized, issued, and outstanding; 10 votes per share -- 5,037 Class A treasury shares, at cost, 19,017 and 7,298 shares (387) (145) Cumulative other comprehensive income (254) (281) Retained earnings 41,996 27,661 --------- --------- Total shareholders' equity 88,772 74,588 --------- --------- Total liabilities and shareholders' equity $ 278,679 $ 253,620 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. 29 30 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Income Years Ended December 31 (Amounts in thousands, except share and per share amounts)
1999 1998 1997 ----------- ----------- ----------- Net sales (Note 3) $ 322,170 $ 282,849 $ 167,412 Cost of sales 199,464 177,094 111,044 ----------- ----------- ----------- Gross profit 122,706 105,755 56,368 Selling, general and administrative expenses 81,800 73,721 36,761 Amortization of goodwill and intangibles 2,369 2,213 1,885 ----------- ----------- ----------- Income from operations 38,537 29,821 17,722 Other expenses Interest expense, net 11,661 11,703 5,556 Other expense (income), net 230 (202) (64) ----------- ----------- ----------- Income before income taxes 26,646 18,320 12,230 Provision for income taxes (Note 8) 11,991 8,244 5,277 ----------- ----------- ----------- Net income 14,655 10,076 6,953 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit 320 -- -- ----------- ----------- ----------- Net income available to common shareholders $ 14,335 $ 10,076 $ 6,953 =========== =========== =========== Basic net income per share $ 2.41 $ 1.72 $ 1.22 =========== =========== =========== Weighted average common shares outstanding 5,944,667 5,867,338 5,703,601 =========== =========== =========== Diluted net income per share $ 2.30 $ 1.65 $ 1.17 =========== =========== =========== Weighted average common and common share equivalents Outstanding 6,376,935 6,098,205 5,933,244 =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 30 31 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Shareholders' Equity Years Ended December 31, 1999, 1998, and 1997 (Amounts in thousands, except share amounts)
Cumulative Class A Class B Class A Foreign Common Shares Common Shares Treasury Shares Currency --------------------- ----------------------- ------------------- Translation Shares Amount Shares Amount Shares Amount Adjustment --------- -------- --------- ------- ------ ------ ----------- Balances at December 31, 1996 4,199,200 $ 32,636 1,466,350 $ 9,749 - $ - (145) Net income Foreign currency translation adjustment (46) Issuance of Class A common stock in lieu of directors' fees 8,258 104 Issuance of Class A common shares in conjunction with acquisition (Note 2) 26,254 346 Exercise of stock options, net 28,094 300 --------- -------- --------- ------- ------ ------ ------ Balances at December 31, 1997 4,261,806 33,386 1,466,350 9,749 - - (191) Net income Foreign currency translation adjustment (75) Excess pension liability adjustment Issuance of Class A common stock in lieu of directors' fees 6,363 124 Issuance of Class A common shares in conjunction with acquisition (Note 2) 222,396 4,078 Exercise of stock options, net 1,026 16 Conversion of Class B common shares into Class A common shares 708,781 4,712 (708,781) (4,712) Purchase of Class A treasury shares 7,298 (145) --------- -------- --------- ------- ------ ------ ------ Balances at December 31, 1998 5,200,372 42,316 757,569 5,037 7,298 (145) (266) Net income Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities Foreign currency translation adjustment 12 Excess pension liability adjustment Issuance of Class A common stock in lieu of directors' fees 7,731 153 Return of Class A common shares in conjunction with acquisition (Note 2) (6,456) (117) Exercise of stock options, net 2,984 28 Conversion of Class B common shares into Class A common shares 757,569 5,037 (757,569) (5,037) Purchase of Class A treasury shares 11,719 (242) --------- -------- --------- ------- ------ ------ ------ Balances at December 31, 1999 5,962,200 $ 47,417 - $ - 19,017 $ (387) $ (254) ========= ======== ========= ======= ====== ====== ======
Excess Pension Retained Liability Earnings Total --------- --------- -------- Balances at December 31, 1996 $ - $ 10,632 $ 52,872 Net income 6,953 6,953 Foreign currency translation adjustment (46) Issuance of Class A common stock in lieu of directors' fees 104 Issuance of Class A common shares in conjunction with acquisition (Note 2) 346 Exercise of stock options, net 300 ----- --------- -------- Balances at December 31, 1997 - 17,585 60,529 Net income 10,076 10,076 Foreign currency translation adjustment (75) Excess pension liability adjustment (15) (15) Issuance of Class A common stock in lieu of directors' fees 124 Issuance of Class A common shares in conjunction with acquisition (Note 2) 4,078 Exercise of stock options, net 16 Conversion of Class B common shares into Class A common shares - Purchase of Class A treasury shares (145) ----- --------- -------- Balances at December 31, 1998 (15) 27,661 74,588 Net income 14,655 14,655 Dividends on Company-obligated mandatorily redeemable convertible (320) (320) trust preferred securities Foreign currency translation adjustment 12 Excess pension liability adjustment 15 15 Issuance of Class A common stock in lieu of directors' fees 153 Return of Class A common shares in conjunction with acquisition (Note 2) (117) Exercise of stock options, net 28 Conversion of Class B common shares into Class A common shares - Purchase of Class A treasury shares (242) ----- --------- -------- Balances at December 31, 1999 $ - $ 41,996 $ 88,772 ===== ========= ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 31 32 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31 (Amounts in thousands)
1999 1998 1997 Cash Flows From Operating Activities: --------- --------- --------- Net income $ 14,655 $ 10,076 $ 6,953 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 11,717 10,076 5,131 Amortization of goodwill and intangibles 2,369 2,213 1,885 Deferred income taxes 3,801 1,792 1,017 Amortization of deferred financing costs and issuance costs on Company-obligated mandatorily redeemable convertible trust preferred securities 848 821 565 Gain on sales of rental equipment and property, plant and equipment (6,904) (8,236) (2,871) Change in assets and liabilities, net of effects of acquisitions: Accounts receivable 37 (4,830) 3,111 Inventories (1,701) (2,110) 527 Prepaid expenses and other current assets (826) (1,332) (165) Prepaid income taxes (343) 1,259 (865) Accounts payable 1,435 3,991 (2,136) Accrued liabilities and other long-term liabilities (897) 5,487 (2,690) Other, net (623) 518 9 --------- --------- --------- Net cash provided by operating activities 23,568 19,725 10,471 --------- --------- --------- Cash Flows From Investing Activities: Property, plant and equipment additions (7,728) (7,215) (4,410) Proceeds from sale of fixed assets 259 1,097 -- Rental equipment additions (16,029) (18,081) (4,875) Proceeds from sales of rental equipment 11,977 11,298 3,628 Acquisitions, net of cash acquired (Note 2) (13,734) (1,784) (33,467) Other investing activities (320) -- (15) --------- --------- --------- Net cash used in investing activities (25,575) (14,685) (39,139) --------- --------- --------- Cash Flows From Financing Activities: Repayments of long-term debt (13,032) (4,276) (67,203) Issuance of long-term debt -- -- 100,000 Issuance of Class A common shares 28 16 300 Financing costs and fees -- -- (4,586) Purchase of treasury shares (242) (145) -- Issuance of Company-obligated mandatorily redeemable convertible trust preferred securities, net of issuance costs 19,554 -- -- Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit (320) -- -- --------- --------- --------- Net cash provided by (used in) financing activities 5,988 (4,405) 28,511 --------- --------- --------- Effect of Exchange Rate Changes on Cash 12 (75) (46) --------- --------- --------- Net increase (decrease) in cash 3,993 560 (203) Cash, beginning of year 560 -- 203 --------- --------- --------- Cash, end of year $ 4,553 $ 560 $ -- ========= ========= ========= Supplemental Disclosures: Cash paid for income taxes $ 8,146 $ 5,055 $ 4,919 Cash paid for interest 9,833 10,763 4,736 Issuance of long-term debt to seller in conjunction with acquisition -- -- 5,000 Issuance of Class A common shares in conjunction with acquisitions (117) 4,078 346 Issuance of Class A common shares in lieu of directors' fees 153 124 104
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 32 33 Dayton Superior Corporation and Subsidiaries Consolidated Statements of Comprehensive Income Years Ended December 31 (Amounts in thousands)
1999 1998 1997 -------- -------- -------- Net income $ 14,655 $ 10,076 $ 6,953 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities (320) -- -- Other comprehensive income Foreign currency translation adjustment 12 (75) (46) Excess pension liability adjustment 15 (15) -- -------- -------- -------- Comprehensive income $ 14,362 $ 9,986 $ 6,907 ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. 33 34 Dayton Superior Corporation and Subsidiaries Notes to Consolidated Financial Statements December 31, 1999, 1998 and 1997 (Dollar amounts in thousands, except share and per share amounts) (1) The Company The accompanying consolidated financial statements include the accounts of Dayton Superior Corporation and its wholly owned subsidiaries, Dayton Superior Canada Ltd., Dur-O-Wal, Inc., Dur-O-Wal, Ltd., and commencing September 29, 1997, Symons Corporation ("Symons") (collectively referred to as the "Company"). All significant intercompany transactions have been eliminated. The Company is the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. As of December 31, 1999, the Company has a distribution network consisting of 18 manufacturing/distribution plants and 44 service/distribution centers in the United States and Canada. The Company employs approximately 800 salaried and 1,450 hourly personnel, of whom approximately 1,000 of the hourly personnel and six of the salaried personnel are represented by labor unions. There are six collective bargaining agreements expiring in 2000. The agreements cover 430 employees at the St. Joseph's, MO; Santa Fe Springs, CA; Atlanta, GA; Parson, KS; Los Angeles, CA; and Des Plaines, IL facilities. On January 19, 2000, the Company signed a definitive merger agreement with an affiliate of Odyssey Investment Partners, LLC, the manager of a New York based private equity investment fund, for $27.00 per share in cash, for a total transaction value (debt and equity) of approximately $315 million. Holders of the Company-obligated mandatorily redeemable convertible trust preferred securities will have the right to receive cash in the amount of $22.00, plus accrued dividends, per preferred security upon consummation of the recapitalization merger. The recapitalization merger is conditioned on Company shareholder approval, receipt of financing, government regulatory approvals and other customary conditions. The closing is currently anticipated to occur in the second quarter of 2000. (2) Acquisitions (a) SYMONS CORPORATION - On September 29, 1997, the Company purchased the stock of Symons Corporation ("Symons"). The purchase agreement between the Company and the former stockholders of Symons ("the Former Stockholders") relating to the Acquisition ("the Purchase Agreement") provides for an adjustment to the purchase price under certain circumstances. The Company has advised the Former Stockholders that it believes it is entitled to a purchase price adjustment in its favor, and the Former Stockholders similarly advised the Company that they believe they are entitled to a purchase price adjustment in their favor. The dispute has been referred to a mutually satisfactory accounting firm, which is expected to resolve such differences in accordance with the Purchase Agreement. 34 35 On June 12, 1998, the Former Stockholders filed a lawsuit in Delaware Chancery Court seeking a determination with respect to a limited number of issues involved in the dispute, which the Company believes can be resolved only through arbitration. On October 28, 1998, the court granted the Company's motion to dismiss with respect to certain of these issues (as to which the Company intends to proceed with arbitration) and retained jurisdiction with respect to the remainder of the issues. On December 28, 1998, the Court stayed the proceeding with respect to the issues as to which it had retained jurisdiction, pending the outcome of arbitration commenced by the parties with respect to the purchase price adjustment. Either party may seek to reopen the proceedings following the arbitration. At this time, the Company can make no determination as to the amount of the adjustment, if any, which will be made to the purchase price. The Company intends to vigorously pursue its rights under the Purchase Agreement. (b) SOUTHERN CONSTRUCTION PRODUCTS, INC. -- Effective October 4, 1999, the Company acquired substantially all of the assets and assumed certain of the liabilities of Southern Construction Products, Inc. ("Southern") for approximately $8,300 in cash, including acquisition costs, and net of a purchase price reduction of approximately $300 received in January 2000. The business is being operated as part of the Company's masonry products and concrete accessories businesses. The acquisition has been accounted for as a purchase, and the results of Southern have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed. Certain appraisals and evaluations are preliminary and may change. Pro forma financial information is not required. (c) CEMPRO, INC. -- Effective January 1, 1999, the Company acquired substantially all of the assets and assumed certain of the liabilities of Cempro, Inc. ("Cempro") for approximately $5,400 in cash, including acquisition costs of approximately $100. The business is being operated as a part of the Company's concrete accessories business. The acquisition has been accounted for as a purchase, and the results of Cempro have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed. Pro forma financial information is not required. (d) SECURE, INC. -- In June 1998, the Company purchased substantially all of the assets of Secure, Inc. ("Secure"), a subsidiary of The Lofland Company, for approximately $700 in cash, including acquisition costs of approximately $100. This business is being operated as a part of the Company's paving products division. The acquisition has been accounted for as a purchase, and the results of Secure have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired. Pro forma financial information is not required. 35 36 (e) SYMONS CONCRETE FORMS, INC. -- In May 1998, the Company purchased the stock of Symons Concrete Forms, Inc. (formerly known as CAI). The purchase price was approximately $6,600, including acquisition costs of approximately $200, and was paid in cash of approximately $400, assumption of long-term debt of approximately $2,200, and delivery of 215,940 Class A Common Shares valued at approximately $4,000, which is net of a purchase price reduction of approximately $100 (6,456 Class A Common Shares) in 1999 related primarily to uncollected accounts receivable. The business is being operated as a part of the Company's concrete forming systems division. The acquisition has been accounted for as a purchase, and the results of Symons Concrete Forms have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed. Pro forma financial information is not required. (f) NORTHWOODS -- In May 1998, the Company purchased the assets of the Northwoods branches of Concrete Forming, Inc. ("Northwoods") for approximately $800 in cash. The Northwoods branches are being operated as a part of the Company's concrete forming systems division. The acquisition has been accounted for as a purchase, and the results of the Northwoods branches have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the estimated fair values of the assets acquired. Pro forma financial information is not required. (g) IRONCO MANUFACTURING CO., INC. -- In February 1997, the Company acquired certain of the assets and assumed certain of the liabilities of Ironco Manufacturing Co., Inc. and Birmingham Bar Coating, Inc. The purchase price, including acquisition costs, was approximately $1,500 and was paid in cash of approximately $1,200 and 26,254 Class A Common Shares valued at approximately $300. The acquisition was accounted for as a purchase and the results of the companies have been included in the accompanying consolidated financial statements since the date of acquisition. The purchase price has been allocated based on the fair value of the assets acquired and liabilities assumed. Pro forma financial information is not required. (3) Summary of Significant Accounting Policies (a) Inventories -- Substantially all inventories of the domestic concrete accessories, paving products and masonry products operations are stated at the lower of last-in, first-out ("LIFO") cost (which approximates current cost) or market. All other inventories of the Company are stated at the lower of first-in, first-out ("FIFO") cost or market. The Company provides net realizable value reserves which reflect the Company's best estimate of the excess of the cost of potential obsolete and slow moving inventory over the expected net realizable value. The Company had no LIFO reserve as of December 31, 1999 and 1998. Following is a summary of the components of inventories as of 36 37 December 31, 1999 and December 31,1998: December 31, December 31, 1999 1998 -------- -------- Raw materials $ 8,787 $ 7,659 Finished goods and work in progress 32,920 30,022 -------- -------- 41,707 37,681 Net realizable value reserve (2,367) (1,623) -------- -------- $ 39,340 $ 36,058 ======== ======== (b) Rental Equipment -- Rental equipment is manufactured by the Company for resale and for rent to others on a short-term basis. Rental equipment is recorded at the lower of FIFO cost or market and is depreciated over the estimated useful life of the equipment, twelve to fifteen years, on a straight-line method. The balances as of December 31, 1999 and 1998 are net of accumulated depreciation of $9,855 and $6,796, respectively. Rental revenues and cost of sales associated with rental revenue are as follows:
For the year ending --------------------------------------------- December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ Rental revenue $51,079 $44,242 $11,336 Cost of sales 8,402 7,114 1,991
(c) Property, Plant and Equipment -- Property, plant and equipment are valued at cost and depreciated using straight-line and accelerated methods over their estimated useful lives of 10-30 years for buildings and improvements and 3-10 years for machinery and equipment. Leasehold improvements are amortized over the lesser of the term of the lease or the estimated useful life of the improvement. Improvements and replacements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. (d) Goodwill and Intangible Assets -- Goodwill and intangible assets are recorded at the date of acquisition at their allocated cost. Amortization is provided over the estimated useful lives of 40 years for goodwill, the term of the loan (5 to 8 years) for deferred financing costs and the term of the agreement (3 to 10 years) for non-compete agreements. In accordance with Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), the carrying value of goodwill and other long-lived assets is assessed for recoverability by management when changes in circumstances indicate that the carrying amount may not be recoverable, based on an analysis of undiscounted future expected cash flows from the use and ultimate disposition of the asset. Management believes there has been no impairment of the carrying values of the Company's long-lived assets as of December 31, 1999 and 1998. 37 38 (e) Income Taxes -- Deferred income taxes are determined by applying current statutory tax rates to the cumulative temporary differences between the carrying value of assets and liabilities for financial reporting and tax purposes. (f) Environmental Remediation Liabilities -- The Company accounts for environmental remediation liabilities in accordance with the American Institute of Certified Public Accountants issued Statement of Position 96-1, "Environmental Remediation Liabilities," ("SOP 96-1"). The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. (g) Foreign Currency Translation Adjustment -- The financial statements of foreign subsidiaries and branches are maintained in their functional currency (Canadian dollars) and are then translated into U.S. dollars. The balance sheets are translated at end of year rates while revenues, expenses and cash flows are translated at weighted average rates throughout the year. Translation adjustments, which result from changes in exchange rates from period to period, are accumulated in a separate component of shareholders' equity. Transactions in foreign currencies are translated into U.S. dollars at the rate in effect on the date of the transaction. Changes in foreign exchange rates from the date of the transaction to the date of the settlement of the asset or liability is recorded as income or expense. (h) Net Income Per Share -- Basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted net income per share is computed by dividing net income by the weighted average number of common and common share equivalents outstanding during the year. Common share equivalents include, if dilutive, the number of common shares issuable upon the conversion of the Company-obligated mandatorily redeemable convertible trust preferred securities. Common share equivalents also include the number of shares issuable upon the exercise of outstanding options, less the shares that could be purchased with the proceeds from the exercise of the options, based on the Company's average trading price.
1999 1998 1997 ---------- ---------- --------- Net income $ 14,655 $ 10,076 $ 6,953 Dividends on Company-obligated mandatorily redeemable convertible trust preferred securities, net of income tax benefit 320 -- -- ---------- ---------- --------- Net income available to common shareholders $ 14,335 $ 10,076 $ 6,953 ========== ========== ========= Weighted average number of Class A and Class B common shares outstanding 5,944,667 5,867,338 5,703,601 Dilutive effect of stock options (Note 6a) 220,350 230,867 229,643 Dilutive effect of Company-obligated mandatorily redeemable convertible trust preferred securities, assuming conversion 211,918 -- -- ---------- ---------- --------- Diluted shares outstanding 6,376,935 6,098,205 5,933,244 ========== ========== ========= Basic net income per share $ 2.41 $ 1.72 $ 1.22 ========== ========== ========= Diluted net income per share $ 2.30 $ 1.65 $ 1.17 ========== ========== =========
38 39 (i) Financial Instruments -- The Company uses interest rate swaps to manage interest rate risk associated with its floating rate borrowings. The swap agreements are contracts to exchange floating rate for fixed rate interest payments periodically over the life of the agreements without the exchange of the underlying amounts. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense. (j) Revenue Recognition -- The Company recognizes revenue on product and rental equipment sales on the date of shipment. Rental revenues are recognized ratably over the terms of the rental agreements. (k) Use of Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Examples of accounts in which estimates are used include the reserve for excess and obsolete inventory, the allowance for doubtful accounts and sales returns and allowances, the accrual for self-insured employee medical claims, the self-insured product and general liability accrual, the self-insured workers' compensation accrual, accruals for litigation losses, the valuation allowance for deferred tax assets, actuarial assumptions used in determining pension benefits, and actuarial assumptions used in determining other post-retirement benefits. (l) Reclassifications -- Certain reclassifications have been made to prior years' amounts to conform to their 1999 classification. (4) Credit Arrangements The Company has a Credit Agreement to provide for a term loan and revolving credit facility, each of which is secured by substantially all of the assets of the Company. The $100,000 Term Loan requires quarterly interest payments, with principal amount due in 2005. The Term Loan permits the Company to choose from various interest rate options and has a weighted average interest rate of 8.93% at December 31, 1999. Amounts available under the Revolving Credit Facility are equal to the lesser of (i) $50,000 or (ii) the sum of (x) 85% of eligible accounts receivable, and (y) 60% of eligible inventories. The 39 40 amount available under the Revolving Credit Facility was $50,000 at December 31, 1999. The Revolving Credit Facility will terminate in 2002, and has interest options based on (a) Bank One, Dayton, NA's prime rate (8.50% at December 31, 1999) plus an amount between 0% and 1% depending on the level of certain financial ratios (0.25% at December 31, 1999), or (b) LIBOR plus an amount between 0.75% and 2.00% depending on the level of certain financial ratios (1.25% at December 31, 1999). A commitment fee of between 0.125% and 0.400% per annum will be payable on the average unused amount depending on the level of certain financial ratios (0.175% at December 31, 1999). The Company used the proceeds of the Credit Agreement to fund the acquisition of all outstanding shares of Symons and to repay all amounts outstanding on the existing term and revolving loans of both the Company and Symons. As a result, deferred financing costs of $255 related to the Company's term and revolving loans were expensed and reflected as interest expense in the accompanying 1997 statement of income. The average borrowings, maximum borrowings, and weighted average interest rate for the periods indicated are as follows: For the year ended ---------------------------------------- December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ Average borrowings $22,027 $19,679 $25,266 Maximum borrowings 37,140 26,620 32,403 Weighted average interest rate 7.0% 7.7% 7.6% To manage its interest rate risk, the Company entered into two interest rate swap agreements on a total of $50,000 of long-term debt that fixed the LIBOR-based component of the interest rate formula. The swaps have a fixed ninety-day LIBOR component of 6.30% and 6.33%, and expire on November 1, 2000. The ninety-day LIBOR as of December 31, 1999 was 6.18%. All fluctuations in rate resulting from the swaps are accounted for as interest expense. These swaps are required by the Company's Credit Agreement and are contracts to exchange floating rate for fixed rate interest payments without the exchange of underlying amounts. The Credit Agreement contains certain restrictive covenants, which require that, among other things, the Company not exceed a certain leverage ratio, maintain a minimum fixed charge coverage ratio and limit its ability to pay dividends on Common Shares. The Company was in compliance with its loan covenants as of December 31, 1999. In conjunction with the acquisition of Symons, the Company issued a $5,000, seven-year unsecured note to one of the Former Stockholders. The note requires monthly interest payments, with principal due in September 2004. The note bears interest at a fixed rate of 10.5%. The Former Stockholder has the right to put the note to the Company at any time prior to its maturity. Accordingly, this note is classified as a current liability. The Company has an Economic Development Loan from the city of Parsons, Kansas. The loan bears interest at 7.0% and is payable in quarterly installments of $8 through July 2005. The loan is secured by real estate in Parsons. 40 41 Following is a summary of the Company's long-term debt as of December 31, 1999 and 1998:
1999 1998 --------- --------- Revolving lines of credit $ -- $ 13,000 Term Loan 100,000 100,000 Note payable to one of the Former Stockholders 5,000 5,000 City of Parsons, Kansas Economic Development Loan 173 205 --------- --------- Total long-term debt 105,173 118,205 Less current portion (5,032) (5,032) --------- --------- Long-term portion $ 100,141 $ 113,173 ========= =========
Scheduled maturities of long-term debt are: Year Amount ---- -------- 2000 $ 5,032 2001 32 2002 32 2003 32 2004 32 Thereafter 100,013 -------- $105,173 ======== The fair market value of the Company's fixed rate long-term debt is estimated using discounted cash flow analyses based on current incremental borrowing rates for similar types of borrowing arrangements. At December 31, 1999, the estimated fair value of the Note payable to the Former Stockholder of Symons is $5,345. The estimated fair value of the City of Parsons, Kansas Economic Development Loan is $165. The estimated fair value of the Term Loan approximates, its face value, as these facilities have variable interest rates tied to market rates. The estimated fair value of the interest rate swap agreements is a liability of $16. (5) Company-obligated Mandatorily Redeemable Convertible Trust Preferred Securities In October 1999, the Company completed an underwritten public offering of 1,062,500 Company-obligated mandatorily redeemable convertible trust preferred securities at a price of $20 per security. Net proceeds to the Company after issuance costs were $19,554. The securities were issued by a limited purpose Delaware trust which used the proceeds to purchase from the Company the same principal amount of convertible junior subordinated debentures. The securities are guaranteed by the Company on a subordinated basis. Dividends are payable on the preferred securities at the rate of 10% per year and the securities are convertible into Class A Common Shares at the rate of 0.80 common shares for each preferred security, which equates to a conversion price of $25 per common share. (6) Common Shares (a) Stock Option Plans- The Company has five stock option plans, the 1994 Stock Option Plan ("the 1994 Plan"), the 1995 Stock Option Plan ("the 1995 Plan"), the 1996 Stock 41 42 Option Plan ("the 1996 Plan"), the 1997 Stock Option and Restricted Stock Plan ("the 1997 Restricted Plan") and the 1997 Non-employee Director Stock Option Plan ("the 1997 Director Plan"). Under all Plans, the option exercise price equals the stock's market price on date of grant. The Company accounts for these plans under APB Opinion No. 25, under which no compensation costs have been recognized. Had compensation cost for these plans been determined consistent with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
1999 1998 1997 ------- ------- ------ Net income available to common shareholders: As Reported $14,335 $10,076 $6,953 Pro Forma 13,933 9,835 6,857 Basic net income per share: As Reported 2.41 1.72 1.22 Pro Forma 2.34 1.68 1.20 Diluted net income per share: As Reported 2.30 1.65 1.17 Pro Forma 2.25 1.62 1.16
Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. As of December 31, 1999, the Company may grant options for up to 152,766 and 12,667 shares under the 1997 Restricted Plan and the 1997 Director Plan, respectively. No further options may be granted under the 1994, 1995 and 1996 Plans. The Company granted 92,600 options during 1999, of which 12,000 vested immediately, and the other 80,600 vest ratably over three years. All options expire ten years after the date of grant. All options will immediately vest upon completion of the merger discussed in Note 1. A summary of the status of the Company's stock option plans at December 31, 1999, 1998, and 1997, and changes during the years then ended is presented in the table and narrative below:
Number of Weighted Average Exercise Shares Price Per Share --------- ------------------------- Outstanding at December 31, 1996 297,750 $ 3.11 Granted at a weighted average fair value of $5.25 31,000 12.52 Exercised (40,000) 4.17 Canceled (12,500) 10.38 --------- ------------------------- Outstanding at December 31, 1997 276,250 3.57 Granted at a weighted average fair value of $6.83 83,833 17.11 Exercised (2,050) 2.46 --------- ------------------------- Outstanding at December 31, 1998 358,033 6.75 Granted at a weighted average fair value of $8.27 92,600 19.44 Exercised (2,984) 4.80 Canceled (5,366) 18.04 --------- ------------------------- Outstanding at December 31, 1999 442,283 $ 9.28 ========= =========================
42 43 Price ranges and other information for stock options outstanding at December 31, 1999 are as follows:
Outstanding Exercisable ------------------------------- --------------------- Weighted Weighted Weighted Average Average Average Exercise Remaining Exercise Range of Exercise Prices Shares Price Life Shares Price ------------------------ ------- -------- ---------- ------- -------- $ 1.96 - $ 4.00 240,650 $2.44 4.7 years 240,650 $ 2.44 $12.50 - $12.63 31,000 12.52 7.5 31,000 12.52 $16.81 - $19.91 170,633 18.35 8.7 46,166 18.06 ------- ----- --------- ------- ------ 442,283 $9.28 6.5 years 317,816 $ 5.69 ======= ===== ========= ======= ======
The fair value of each option grant is estimated on the date of grant using the Black Scholes options pricing model with the following weighted average assumptions used for grants in 1999, 1998, and 1997, respectively:
1999 1998 1997 ------- -------------- -------------- Risk-free interest rates 4.68% 5.67% to 5.70% 6.17% to 6.56% Expected dividend yield 0% 0% 0% Expected lives 6 years 6 years 6 years Expected volatility 34.10% 27.87% 28.50%
(b) Treasury Shares - The Company agreed to repurchase Class A Common Shares issued to the former shareholders of Symons Concrete Forms. During the period December 1, 1998 through May 22, 1999, under certain circumstances, the former shareholders could require the Company to purchase Class A Common Shares at the previous day's closing price per share. As of December 31, 1999, 19,017 Class A Common Shares had been repurchased for $387 under such agreement. (7) Retirement Plans (a) Company-Sponsored Pension Plans - During 1999, the Company completed its process of merging and terminating certain of its pension plans. As a result, the Company recorded a $797 non-recurring pension gain related to the termination of its pension plan for salaried employees. As of December 31, 1999, only one pension plan remained, which covers virtually all salaried and hourly employees not covered by multi-employer pension plans and provides benefits of stated amounts for each year of credited service. The Company funds such plans at a rate that meets or exceeds the minimum amounts required by applicable regulations. The plans' assets are primarily invested in mutual funds comprised primarily of common stocks and corporate and U.S. government obligations. 43 44 Postretirement Benefits - The Company provides postretirement health care benefits on a contributory basis and life insurance benefits for Symons salaried and hourly employees that retired prior to May 1, 1995.
PENSION PENSION OTHER OTHER BENEFITS BENEFITS BENEFITS BENEFITS 1999 1998 1999 1998 -------- -------- -------- -------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 30,481 $ 29,169 $ 875 $ 681 Service cost 378 619 - - Interest cost 412 1,630 57 71 Amendments (360) (360) -- 312 Actuarial loss (gain) 557 135 (8) (128) Benefits paid (23,023) (712) (61) (61) Terminated plan (2,976) - - - -------- -------- -------- -------- Benefit obligation at end of year $ 5,469 $ 30,481 $ 863 $ 875 ======== ======== ======== ======== CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year $ 29,155 $ 27,249 $ - $ - Actual return on plan assets 438 2,402 - - Employer contribution 194 216 61 61 Transfer to other Company-sponsored defined contribution plan (984) - - - Benefits paid (23,023) (712) (61) (61) -------- -------- -------- -------- Fair value of plan assets at end of year $ 5,780 $ 29,155 $ - $ - ======== ======== ======== ======== FUNDED STATUS $ 311 $ (1,326) $ (863) $ (875) Unrecognized prior service cost (152) (155) 264 288 Unrecognized net gain (470) (759) (130) (124) -------- -------- -------- -------- Net amount recognized $ (311) $ (2,240) $ (729) $ (711) ======== ======== ======== ======== AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION CONSIST OF: Accrued benefit liability $ (311) $ (2,440) $ (863) $ (875) Intangible asset - 185 134 164 Accumulated other comprehensive income - 15 - - -------- -------- -------- -------- Net amount recognized $ (311) $ (2,240) $ (729) $ (711) ======== ======== ======== ======== ASSUMPTIONS AS OF DECEMBER 31 Discount rate 6.75% 6.75% 7.0% 6.75% Expected return on plan assets 8% 8% N/A N/A Rate of compensation increase N/A 4% N/A N/A COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $ 378 $ 619 $ - $ - Interest cost 412 1,630 57 70 Expected return on plan assets (396) (1,655) (3) (4) Amortization of prior service cost (3) (3) 24 24 Recognized actuarial gain - (3) - - -------- -------- -------- -------- Recurring net periodic pension cost 391 588 78 90 Termination gain (797) - - - -------- -------- -------- -------- Total net pension cost $ (406) $ 588 $ 78 $ 90 ======== ======== ======== ========
As of December 31, 1999, the plan's accumulated benefit obligation did not exceed its plan assets. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $2,893, $2,855, and $2,692, respectively, as of December 31, 1998. 44 45 The weighted average assumed rate of increase in the per capita cost of covered benefits is 6.5% for 1999 and subsequent years. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one percentage point change in assumed health care cost trend rates would have the following effects:
1 Percentage 1 Percentage Point Increase Point Decrease -------------- -------------- Effect on total of service and interest $ 3 $ (3) cost components Effect on the postretirement benefit 46 (42) obligation
(b) Multi-Employer Pension Plan- Approximately 10% of the Company's employees are currently covered by collectively bargained, multi-employer pension plans. Contributions are determined in accordance with the provisions of negotiated union contracts and generally are based on the number of hours worked. The Company does not have the information available to determine its share of the accumulated plan benefits or net assets available for benefits under the multi-employer pension plans. The aggregate amount charged to expense under these plans was $330, $287, and $157, for the years ended December 31, 1999, 1998, and 1997, respectively. (c) 401(k) Savings Plan- Most employees are eligible to participate in Company sponsored 401(k) savings plans. Company matching contributions vary from 0% to 50% (on the first 2%) according to terms of the individual plans and collective bargaining agreements. The aggregate amount charged to expense under these plans was $724, $531, and $345, for the years ended December 31, 1999, 1998, and 1997, respectively. (d) Retirement Contribution Account- During 1998, the Company implemented a defined contribution plan for substantially all salaried employees to replace the terminated defined benefit plan discussed in Note 7a. No contributions are permitted by the employees, and the Company contributes 1.5% to 6.0% of eligible compensation, depending on the age of the employee. The amount expensed for the years ended December 31, 1999 and 1998 was $1,393 and $1,167, respectively. (8) Income Taxes The following is a summary of the components of the Company's income tax provision for the years ended December 31, 1999, 1998, and 1997: 1999 1998 1997 ------- ------- ------- Currently payable: Federal $ 8,014 $ 5,312 $ 3,521 State and local 1,444 1,398 704 Deferred 2,533 1,534 1,052 ------- ------- ------- Total provision $11,991 $ 8,244 $ 5,277 ======= ======= ======= 45 46
The effective income tax rate differs from the statutory federal income tax rate for the years ended December 31, 1999, 1998, and 1997 for the following reasons: 1999 1998 1997 ---- ---- ---- Statutory income tax rate 35.0% 35.0% 34.0% State income taxes (net of federal 3.9 4.8 4.0 tax benefit) Nondeductible goodwill amortization and other permanent differences 3.7 5.2 5.1 Other, net 2.4 - - ---- ---- ---- Effective income tax rate 45.0% 45.0% 43.1% ==== ==== =====
The components of the Company's future income tax benefits and deferred tax liabilities as of December 31, 1999 and 1998 are as follows: 1999 1998 Current deferred taxes: Inventory reserves $ 432 $ 50 Accounts receivable reserves 1,138 1,712 Accrued liabilities 2,406 2,280 Other 22 (521) Total 3,998 3,521 Long-term deferred taxes: Accelerated depreciation (16,261) (13,034) Other long-term liabilities 1,828 2,428 Other (2,133) (938) Total (16,566) (11,544) Net deferred taxes $(12,568) $ (8,023) (9) Segment Reporting The Company operates in four segments, each with a general manager: concrete accessories (Dayton/Richmond(R)), concrete forming systems (Symons(R)), paving products (American Highway Technology(R)) and masonry products (Dur-O-Wal(R)). The segments are differentiated by their products and services, all of which serve the construction industry. Sales between segments for the years ended December 31, 1999 and December 31, 1998 are recorded at normal selling price by the selling division and at cost for the buying division, with the profit recorded as an intersegment elimination. For the year ended December 31, 1997 intersegment sales were not significant. Segment assets include accounts receivable; inventories; property, plant, and equipment; rental equipment; and an allocation of goodwill. Corporate and unallocated assets include cash, prepaid income taxes, future tax benefits, and financing costs. Export sales and sales by non-U.S. affiliates are not significant. 46 47
Information about the profit (loss) of each segment and the reconciliations to the consolidated amounts for the years ended December 31, 1999, 1998, and 1997 is as follows: 1999 1998 1997 --------- --------- --------- Concrete Accessories $ 139,844 $ 128,119 $ 92,251 Concrete Forming Systems 117,555 99,471 21,066 Paving Products 36,506 30,967 29,177 Masonry Products 28,265 24,292 24,918 --------- --------- --------- Net sales to external customers $ 322,170 $ 282,849 $ 167,412 ========= ========= ========= Concrete Accessories $ 4,878 $ 3,348 $ -- Concrete Forming Systems 5,165 5,240 -- Paving Products 189 -- -- --------- --------- --------- Net sales to other segments $ 10,232 $ 8,588 $ -- ========= ========= ========= Concrete Accessories $ 3,587 $ 4,053 $ 2,744 Concrete Forming Systems 6,899 6,543 1,903 Paving Products 629 567 466 Masonry Products 546 540 443 --------- --------- --------- Interest expense $ 11,661 $ 11,703 $ 5,556 ========= ========= ========= Concrete Accessories $ 22,964 $ 19,387 $ 13,723 Concrete Forming Systems 10,876 6,133 364 Paving Products 1,569 1,677 1,377 Masonry Products 1,058 487 5 Intersegment Eliminations (4,903) (4,153) -- Corporate (4,918) (5,211) (3,239) --------- --------- --------- Income before income taxes $ 26,646 $ 18,320 $ 12,230 ========= ========= ========= Concrete Accessories $ 3,755 $ 3,383 $ 2,618 Concrete Forming Systems 5,735 4,992 891 Paving Products 839 379 311 Masonry Products 1,333 1,279 1,264 Corporate 55 43 47 --------- --------- --------- Depreciation $ 11,717 $ 10,076 $ 5,131 ========= ========= ========= Concrete Accessories $ 1,437 $ 1,265 $ 1,225 Concrete Forming Systems 298 341 24 Paving Products 170 177 206 Masonry Products 464 430 430 --------- --------- --------- Amortization of goodwill and intangibles $ 2,369 $ 2,213 $ 1,885 ========= ========= =========
47 48 Information regarding each segment's assets and the reconciliation to the consolidated amounts as of December 31, 1999 and 1998 is as follows: 1999 1998 -------- -------- Concrete Accessories $ 97,360 $ 89,985 Concrete Forming Systems 121,836 116,064 Paving Products 14,085 13,358 Masonry Products 33,350 26,115 Corporate and Unallocated 12,048 8,098 -------- -------- Total Assets $278,679 $253,620 ======== ======== Information regarding capital expenditures by segment and the reconciliation to the consolidated amounts for the years ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997 ------- ------- ------- Concrete Accessories $ 3,033 $ 3,348 $ 2,449 Concrete Forming Systems 2,199 2,044 1,231 Paving Products 2,035 1,200 401 Masonry Products 397 439 320 Corporate 64 184 9 ------- ------- ------- Property, Plant, and Equipment Additions $ 7,728 $ 7,215 $ 4,410 ======= ======= ======= Concrete Accessories $ 1,457 $ 2,860 $ 1,966 Concrete Forming Systems 14,449 15,221 2,909 Masonry Products 123 -- -- ------- ------- ------- Rental Equipment Additions $16,029 $18,081 $ 4,875 ======= ======= =======
(10) Commitments and Contingencies (a) Operating Leases - Rental expense for property, plant and equipment (principally office and warehouse facilities and office equipment) was $4,608, $4,233, and $2,758, for the years ended December 31, 1999, 1998 and 1997, respectively. Lease terms generally range from one to ten years and some contain renewal options. Aggregate minimum annual rental commitments under non-cancelable operating leases are as follows: Year Amount ---- ------- 2000 $ 3,687 2001 2,496 2002 2,016 2003 1,352 2004 978 Thereafter 1,019 ------- Total $11,548 ======= (b) Litigation - (i) Symons currently is a defendant in a civil suit brought by EFCO Corp., a competitor of Symons in one portion of its business, in 1996 in the United States District 48 49 Court for the Southern District of Iowa (Case No. 4-96-DV-80552). EFCO Corp. alleged that Symons engaged in false advertising, misappropriation of trade secrets, intentional interference with contractual relations, and certain other activities. After a jury trial, preliminary damages of approximately $14,000 were awarded against Symons in January 1999. In ruling on post-trial motions in April 1999, the Judge dismissed EFCO's claim of intentional interference with contractual relations but increased the damages awarded to EFCO by $100. This case is currently on appeal before the United States Court of Appeals for the Eighth Circuit. Symons and EFCO have filed their briefs with the Court and have presented oral arguments. The Company is awaiting the decision of the Court. The Company believes that Symons has grounds for a successful appeal and remains committed to vigorously pursuing its appellate rights. A successful appeal could overturn the judgment against Symons or result in a new trial. Symons' liability, if any, cannot finally be determined until such time as all rights of the parties have been exhausted or have expired by lapse of time. The Company considers the outcome of this litigation to be not estimable and, accordingly, the Company has not recorded any liability for the resolution of this suit. In the event the Company is unsuccessful in its appeals, we could be required to pay the full amount of the judgment plus interest or a potentially higher amount. An unsuccessful appeal may have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows. (ii) The Company, all of its directors and one officer are defendants in a purported shareholder class action civil suit brought in January 2000 in the Court of Common Pleas in Montgomery County, Ohio (Case No. 2000 CV 00415). The plaintiff alleges that the Company and the other defendants have engaged in self dealing and breached their fiduciary duties to shareholders with respect to the recapitalization merger discussed in Note 1. The Company believes this suit is without merit and is committed to vigorously defending itself and the other defendants. The Company has filed a motion to dismiss the complaint with the Court. In the event the Company is unsuccessful in its defense, it may have a material adverse effect on its consolidated financial position, results of operations, or cash flows. (c) Self-Insurance - The Company is self-insured for certain of its group medical, workers' compensation and product and general liability claims. The Company has stop loss insurance coverage at various per occurrence and per annum levels depending on type of claim. The Company consults with third party administrators to estimate the reserves required for these claims. No material revisions were made to the estimates for the years ended December 31, 1999, 1998 and 1997. The Company has reserved $3,844 and $4,737 as of December 31, 1999 and 1998, respectively. (11) Related Party Transactions On February 17, 1999, Ripplewood informed the Company that it was converting all 757,569 Class B Common Shares held by it into an equal number of Class A Common Shares and sold those Class A Common Shares. As a result of the conversion, no Class B Common Shares remain outstanding. 49 50 During 1997, the Company paid Ripplewood a fee of $400 for financial advisory services in connection with the acquisition of Symons Corporation and related financing transactions. (12) Quarterly Financial Information (Unaudited)
1999 ----------------------------------------------------------- First Second Third Fourth Full Quarterly Operating Data Quarter Quarter Quarter Quarter Year ------------------------- --------- -------- -------- -------- --------- Net sales $ 68,196 $ 88,636 $ 93,729 $ 71,609 $ 322,170 Gross profit 23,425 32,883 37,872 28,526 122,706 Net income (loss) (355) 5,271 7,501 1,918 14,335 Basic net income (loss) per share (a) $ (0.06) $ 0.89 $ 1.26 $ 0.32 $ 2.41 Diluted net income (loss) per share (a) $ (0.06) $ 0.85 $ 1.22 $ 0.31 $ 2.30 Stock Price: High $ 23.500 $ 20.125 $ 20.750 $ 19.688 $ 23.500 Low $ 17.313 $ 16.750 $ 16.500 $ 11.750 $ 11.750
1998 ----------------------------------------------------------- First Second Third Fourth Full Quarterly Operating Data Quarter Quarter Quarter Quarter Year ------------------------- --------- -------- -------- -------- --------- Net sales $ 59,227 $ 76,754 $ 82,809 $ 64,059 $ 282,849 Gross profit 19,717 27,783 33,297 24,958 105,755 Net income (loss) (1,009) 3,731 6,226 1,128 10,076 Basic net income (loss) per share (a) $ (0.18) $ 0.64 $ 1.05 $ 0.19 $ 1.72 Diluted net income (loss) per share (a) $ (0.18) $ 0.61 $ 1.01 $ 0.18 $ 1.65 Stock Price: High $ 20.375 $ 22.125 $ 21.375 $ 20.875 $ 22.125 Low $ 15.875 $ 16.500 $ 16.625 $ 14.375 $ 14.375
(a) The total of the quarterly income (loss) per share does not equal the annual income per share due to the timing of the issuance of the Company's common shares and common share equivalents and the omission of common share equivalents in quarters with net losses. 50 51 Dayton Superior Corporation and Subsidiaries Schedule II - Valuation and Qualifying Accounts Years Ended December 31, 1999, 1998 and 1997 (Amounts in thousands)
Additions Deductions ----------------------- ----------------------- Charges for Which Balance at Charged to Reserves Balance Beginning Costs and Other Were at End of Year Expenses Additions Created Other of Year ---------- ---------- --------- ---------- ----- -------- Allowances for Doubtful Accounts and Sales Returns and Allowances For the year ended December 31, 1999 $4,432 3,420 - (2,263) - $5,589 For the year ended December 31, 1998 $5,015 3,086 - (2,422) (1,247)(2) $4,432 For the year ended December 31, 1997 $ 449 27 4,788(1) (249) - $5,015
(1) Acquisition of Symons Corporation (2) Reduction of amount from acquisition of Symons Corporation 51 52 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Our directors and executive officers and their ages as of March 21, 2000, positions and principal occupation during the past five years (unless otherwise stated, their positions are with us) are as follows:
Name Age Position - ------------------------- ------- --------------------------------------------------------------- John A. Ciccarelli 60 President, Chief Executive Officer and Director Raymond E. Bartholomae 53 Vice President and General Manager, Symons Michael C. Deis, Sr. 49 Vice President and General Manager, Dayton/Richmond James W. Fennessy 56 Vice President and General Manager, Dayton Superior Canada Ltd. Mark K. Kaler 42 Vice President and General Manager, American Highway Technology Alan F. McIlroy 49 Vice President and Chief Financial Officer William C. Mongole 50 Vice President and General Manager, Dur-O-Wal John R. Paine, Jr. 57 Vice President, Sales and Marketing, Dayton/Richmond Thomas W. Roehrig 34 Corporate Controller John M. Rutherford 39 Treasurer and Assistant Secretary James C. Stewart 52 Vice President, Corporate Development Jaime Taronji, Jr. 55 Vice President, General Counsel and Secretary William F. Andrews 68 Director Matthew O. Diggs, Jr. 67 Director and non-executive Chairman of the Board Daniel W. Duval 63 Director Matthew M. Guerreiro 43 Director Robert B. Holmes 68 Director
- ----------- John A. Ciccarelli has been President since 1989 and has been Chief Executive Officer and a director since 1994. Raymond E. Bartholomae has been Vice President and General Manager, Symons, since February 1998, and was Executive Vice President and General Manager of Symons from 1986 to February 1998. Michael C. Deis, Sr. has been Vice President and General Manager, Dayton/Richmond since February 1998. From 1987 to February 1998, Mr. Deis was Vice President, Eastern Division of Dayton/Richmond (formerly, Concrete Accessories). James W. Fennessy has been Vice President and General Manager, Dayton Superior Canada, Ltd. since 1988. Mark K. Kaler has been Vice President and General Manager, American Highway Technology since April 1996. From 1990 to April 1996, Mr. Kaler was Vice President, Engineering and Product Manager, Paving Division. 52 53 Alan F. McIlroy has been Vice President and Chief Financial Officer since July 1997. From January 1994 until July 1997, Mr. McIlroy was President of The Greenock Group, a private operational investment company. William C. Mongole has been Vice President and General Manager, Dur-O-Wal since May 1999. From 1987 until May 1999, he was a Vice President of our Dur-O-Wal business unit. John R. Paine, Jr. has been Vice President, Sales and Marketing of Dayton/Richmond (formerly, Concrete Accessories) since 1984. Thomas W. Roehrig has been Corporate Controller since April 1998. From 1987 until March 1998, Mr. Roehrig was employed by Arthur Andersen LLP, an international public accounting firm, most recently as a Manager in the Assurance and Business Advisory division. John M. Rutherford has been Treasurer and Assistant Secretary since February 1998. From January 1993 until January 1998, Mr. Rutherford was Director of Treasury and Risk Management for Gibson Greetings, Inc., a greeting card manufacturer. James C. Stewart has been Vice President, Corporate Development since February 1998. From 1984 to February 1998, Mr. Stewart was Vice President, Western Division of Dayton/Richmond (formerly Concrete Accessories). Jaime Taronji, Jr. joined us in August 1999 and was elected Vice President, General Counsel and Secretary in October 1999. From 1996 to 1999, Mr. Taronji was Law Vice President of NCR Corporation. From 1988 to 1995, Mr. Taronji was Vice President, General Counsel and Assistant Secretary of Packaging Corporation of America, a subsidiary of Tenneco, Inc. William F. Andrews has been a director since February 1997. He has been Chairman of the Board of Scovill Fasteners Inc., a manufacturer of apparel and industrial fasteners, since 1995 and has been Chairman of the Board of Northwestern Steel and Wire Company, a producer of structural steel products and rod and wire products, since November 1998. Mr. Andrews was Chairman of the Board of Schrader-Bridgeport International, Inc., a manufacturer of tire valves and automotive accessories, from 1995 to 1998 and was Chairman, President and Chief Executive Officer of Amdura Corporation (formerly American Hoist & Derrick Co.), a specialty manufacturer, from 1993 until 1995. Mr. Andrews also is a director of Black Box Corp., Johnson Controls, Inc., Katy Industries, Navistar International Corporation, and Trex Company. Matthew O. Diggs, Jr. has been a director since October 1995 and non-executive Chairman of the Board of Directors since December 1995. Mr. Diggs has been Chief Executive Officer of The Diggs Group, a private investment firm, since 1990. Mr. Diggs also has been the non-executive Chairman of Ripplewood Holdings L.L.C. since its inception in October 1995 until June 1999. Mr. Diggs also is a director of Helix Technologies Corporation and Price Brothers Co. Daniel W. Duval has been a director since May 1999. Until December 1999, Mr. Duval was Vice Chairman of the Board of Directors of Robbins & Myers, Inc., an international manufacturer and marketer of fluids management products and systems, and was President and Chief Executive Officer from 1986 until 1998. Mr. Duval also serves on the Board of Directors of Arrow Electronics, Inc., ABC-NACO Inc., and several privately-held companies. 53 54 Matthew M. Guerreiro has been a director since February 1994. Mr. Guerreiro has been a private investor since June 1999. From September 1997 until June 1999, Mr. Guerreiro was a Managing Director of Salomon Smith Barney, Inc., an investment banking firm. From October 1995 until September 1997, Mr. Guerreiro was a principal of Ripplewood Holdings L.L.C., a private holding company, and from August 1992 to October 1995, he was a principal in the New York office of Onex Investment Corp. (New York). Robert B. Holmes has been a director since March 1996. Mr. Holmes is a director of Mitsubishi International Corporation, an advisory director of Ripplewood Holdings L.L.C., a private holding company, and a principal of the Lens Fund, a private investment company. We currently have six directors. Each director is elected to serve until the next annual meeting of shareholders or until a successor is elected. Our executive officers are elected by the directors to serve at the pleasure of the directors. There are no family relationships between any of our directors or executive officers. Our Board of Directors has three committees: An Executive Committee (Messrs. Ciccarelli (Chair) and Diggs), which may exercise any of the Board's authority between meetings of the Board. An Audit Committee (Messrs. Andrews, Diggs, Duval and Holmes (Chair)), which: - recommends the engagement of the independent public accountants; - reviews the professional services provided by, and the fees charged by, the independent public accounts; - reviews the scope of the internal and external audit; and - reviews the financial statements and matters relating to the audit. A Compensation and Benefits Committee (Messrs. Andrews, Diggs (Chair) and Guerreiro), which is responsible for assuring that officers and other key management are effectively compensated and that compensation is internally equitable and externally competitive. We do not have a Nominating Committee. DIRECTOR COMPENSATION Directors who are not employees receive for their service an annual retainer of $20,000 plus an additional $2,000 for each committee of which the director serves as chairman (a total of $50,000, in the case of the Chairman of the Board) payable in common shares and an annual grant of an option to purchase 2,000 common shares at an exercise price per share equal to the fair market value of a common share on the grant date. The nonemployee directors also receive a $500 cash fee for each meeting of the Board of Directors or committee they attend. Directors who are employed by us receive no additional compensation for serving as directors. 54 55 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and owners of more than 10% of the outstanding common shares to file an initial ownership report with the Securities and Exchange Commission and the New York Stock Exchange and a monthly or annual report listing any subsequent change in their ownership of common shares. Copies of these reports also must be furnished to us. Based solely upon our review of copies of the forms filed under Section 16(a) and furnished to us and written representations to us from reporting persons, we believe that all filing requirements applicable to such reporting persons with respect to 1999 were complied with, except that Timothy C. Collins, formerly one of our directors, filed late a Form 4 for the month of February 1999 reporting the conversion of 757,569 of our Class B common shares into an equal number of our common shares and the sale of those shares. Mr. Collins also filed late a Form 5 reporting the exempt grant to him, for his services as a director, of 1,046 common shares and options to purchase 2,000 common shares. ITEM 11. EXECUTIVE COMPENSATION. The following table summarizes the 1999, 1998, and 1997 compensation for our chief executive officer and each of the other four most highly compensated executive officers who was serving as an executive officer at December 31, 1999.
SUMMARY COMPENSATION TABLE LONG TERM COMPENSATION ------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS ------------------------------------ ---------------- -------------- OTHER ANNUAL SHARES LONG TERM ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING INCENTIVE COMPENSATION POSITION YEAR ($) ($) ($) OPTIONS (#) PAYOUTS ($) ($)(1) - ------------------------------ ----- ---------- ----------- ------------- ---------------- -------------- ------------- John A. Ciccarelli 1999 $310,961 $315,000 $ 0 15,000(2) $0 $12,800 President and Chief 1998 293,077 275,000 0 15,000(2) 0 12,800 Executive Officer 1997 227,692 160,000 0 0 0 3,000 Alan F. McIlroy 1999 $197,423 $150,000 $10,000(4) 8,000(2) $0 $10,400 Vice President and 1998 191,154 148,000 16,202(4) 6,000(2) 0 10,400 Chief Financial Officer (3) 1997 65,856 37,000 39,617(4) 25,000(5) 0 0 Raymond E. Bartholomae 1999 $185,000 $120,000 $ 0 6,000(2) $0 $10,400 Vice President and 1998 173,000 126,000 0 6,000(2) 0 9,515 General Manager, Symons (6) Michael C. Deis, Sr. 1999 $151,500 $120,000 $ 0 8,000(2) $0 $10,400 Vice President and 1998 146,154 129,000 0 6,000(2) 0 10,400 General Manager, 1997 105,231 60,000 0 0 0 3,166 Dayton/Richmond James C. Stewart 1999 $151,500 $101,787 $ 0 7,000(2) $0 $10,400 Vice President, 1998 146,231 110,000 0 6,000(2) 0 10,400 Corporate Development 1997 107,538 60,000 1,600(4) 0 0 3,166
- ------------- (1) For 1999 and 1998, consists of (a) our retirement account contributions to our Savings Plan in the amount of $9,600 for Mr. Ciccarelli and $7,200 for each of the other named executive officers and 55 56 (b) our matching section 401(k) contributions to the Savings Plan in the amount of $3,200 and $2,315, respectively, for Mr. Bartholomae and $3,200 in both years for each of the other named executive officers. For 1997, consists only of Company matching section 401(k) contributions to the Savings Plan. (2) Options to purchase common shares were granted under our stock option plans at an exercise price of $19.44 per share (in the case of options granted in 1999), and $16.81 per share (in the case of options granted in 1998), the average of the high and low prices on the date of the grant. The options have a term of ten years and become exercisable in three equal annual installments, commencing on the first anniversary of the date of grant; however, the options will become fully exercisable upon completion of our proposed recapitalization merger with Stone Acquisition Corp. (3) Mr. McIlroy was elected an executive officer on July 17, 1997. (4) Relocation expense paid by us. (5) Options to purchase 25,000 common shares were granted to Mr. McIlroy in July 1997 under our 1996 Stock Option Plan in connection with Mr. McIlroy's employment by us. The options have an exercise price of $12.5625 per share, the average of the high and low prices on the date of the grant, and a term of ten years. The options were exercisable on the date of grant with respect to 12,500 shares and become exercisable with respect to an additional 6,250 shares on the first and second anniversaries of the date of grant. (6) Mr. Bartholomae was elected an executive officer on February 26, 1998 following the acquisition of Symons Corporation by us in September 1997. FISCAL 1999 STOCK OPTION GRANTS The stock options granted in 1999 to each of the executive officers named in the Summary Compensation Table are shown in the following table. The table also shows the hypothetical gains that would exist for the options at the end of their ten year terms, assuming compound rates of stock appreciation of 5% and 10%, respectively. The actual future value of the options will depend on the market value of the common shares.
OPTION GRANTS IN LAST FISCAL YEAR ----------------------------------------------------------- INDIVIDUAL GRANTS (1) POTENTIAL REALIZABLE ----------------------------------------------------------- VALUE AT ASSUMED NUMBER % OF TOTAL ANNUAL RATES OF OF SHARES OPTIONS STOCK PRICE UNDERLYING GRANTED APPRECIATION FOR OPTIONS TO EXERCISE OPTION TERM(3) GRANTED EMPLOYEES PRICE EXPIRATION ------------------------- NAME (#) IN 1999 ($/SH)(2) DATE 5%($) 10%($) - ---- ------------- --------------- -------------- -------------- ------------------------- John A. Ciccarelli 15,000 18.6% $19.44 2/1/09 $183,362 $464,676 Alan F. McIlroy 8,000 9.9 19.44 2/1/09 97,793 247,827 Raymond E. Bartholomae 6,000 7.4 19.44 2/1/09 73,345 185,870 Michael C. Deis, Sr. 8,000 9.9 19.44 2/1/09 97,793 247,827 James C. Stewart 7,000 8.7 19.44 2/1/09 85,569 216,849
- --------------- 56 57 (1) The options become exercisable in three equal annual installments, commencing on February 1, 2000. In the event of a change in control (as defined in the Company's option plans), the options will become exercisable in full. (2) The average of the high and low sale prices on the date the option was granted. (3) These amounts are calculated in accordance with rules adopted by the Securities and Exchange Commission assuming annual compounding at the specified rates over the term of the options and are not intended to forecast future appreciation of the price of the common shares. FISCAL YEAR-END OPTION VALUES The number and value of all unexercised options held by each of the executive officers named in the Summary Compensation Table at December 31, 1999 are shown in the following table. No options were exercised by any of the named executive officers in 1999. FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS 12/31/99 (#) AT 12/31/99 ($)(1) ------------------------- ------------------------- NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ---- ------------------------- ------------------------- John A. Ciccarelli ......... 149,000/25,000 $1,976,160/$0 Alan F. McIlroy ............ 27,000/12,000 92,188/ 0 Raymond E. Bartholomae...... 2,000/10,000 0/ 0 Michael C. Deis, Sr ........ 20,600/12,000 259,674/ 0 James C. Stewart ........... 20,600/11,000 259,674/ 0
(1) Represents the excess of the aggregate closing price on December 31, 1999 of the common shares subject to the options over the aggregate option exercise price. We have entered into employment agreements with each of the executive officers named in the Summary Compensation Table which become effective only if the proposed recapitalization merger between Stone Acquisition Corp. and is completed. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. DIRECTORS AND EXECUTIVE OFFICERS The following table shows the common shares beneficially owned by each director, each executive officer and all directors and executive officers as a group as of March 3, 2000:
NUMBER OF COMMON SHARES BENEFICIALLY OWNED AS OF % OF COMMON INDIVIDUAL OR GROUP MARCH 3, 2000(1) SHARES(1) - ------------------- ------------------- ----------- William F. Andrews(2) ..................................... 16,834 * Raymond E. Bartholomae(3) ................................. 14,800 * John A. Ciccarelli(4) ..................................... 211,500 3.5% Michael C. Deis, Sr.(5) ................................... 38,950 * Matthew O. Diggs, Jr.(6) .................................. 139,260 2.3% Daniel W. Duval(7) ........................................ 5,013 * James W. Fennessy(8) ...................................... 14,650 * Matthew M. Guerreiro(9) ................................... 8,095 * Robert B. Holmes(10) ...................................... 14,437 * Mark K. Kaler(11) ......................................... 30,900 * Alan F. McIlroy(12) ....................................... 40,400 * William C. Mongole(13) .................................... 30,300 * John R. Paine, Jr.(14) .................................... 24,400 * Thomas W. Roehrig(15) ..................................... 3,800 * John M. Rutherford(16) .................................... 3,050 * James C. Stewart(17) ...................................... 37,950 * Jaime Taronji, Jr ......................................... - - Directors and Executive Officers As a Group (17 persons)(18) 634,339 10.0%
- ------------------------- * Signifies less than 1%. 57 58 (1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes sole or shared voting or investment power with respect to the shares. Includes the number of common shares subject to all outstanding options, including those that will become exercisable as a result of the proposed recapitalization merger with Stone Acquisition Corp. and those that are to be cashed out in the proposed recapitalization merger. Unless otherwise indicated, voting and investment power are exercised solely by each individual and/or a member of his household. Based on a total of 5,946,233 common shares outstanding on March 3, 2000. (2) Includes 6,000 common shares which may be acquired upon the exercise of stock options. (3) Includes 12,000 common shares which may be acquired upon the exercise of stock options. (4) Includes 174,000 common shares which may be acquired upon the exercise of stock options. (5) Includes 32,600 common shares which may be acquired upon the exercise of stock options. (6) Includes 125,000 common shares owned by EJJM, an Ohio limited partnership, a family limited partnership of which Mr. Diggs is a general partner. Also includes 6,000 common shares which may be acquired upon the exercise of stock options. (7) Includes 2,000 common shares which may be acquired upon the exercise of stock options. (8) Includes 11,700 common shares which may be acquired upon the exercise of stock options. (9) Includes 5,333 common shares which may be acquired upon the exercise of stock options. (10) Includes 6,000 common shares which may be acquired upon the exercise of stock options. (11) Includes 26,900 common shares which may be acquired upon the exercise of stock options. 58 59 (12) Includes 39,000 common shares which may be acquired upon the exercise of stock options. (13) Includes 2,800 common shares which may be acquired upon the exercise of stock options. (14) Consists only of common shares which may be acquired upon the exercise of stock options. (15) Includes 2,800 common shares which may be acquired upon the exercise of stock options. (16) Includes 2,800 common shares which may be acquired upon the exercise of stock options. (17) Includes 31,600 common shares which may be acquired upon the exercise of stock options. (18) Includes 385,933 common shares which may be acquired by directors and executive officers upon the exercise of stock options. PRINCIPAL SHAREHOLDERS The following table shows information about the only shareholders known by us to be the beneficial owner of more than 5% of the outstanding common shares:
NUMBER OF COMMON SHARES NAME AND ADDRESS BENEFICIALLY OWNED % OF COMMON SHARES(1) - ---------------- ------------------ --------------------- Brinson Partners, Inc.(2) ................... 511,628 8.6% UBS AG 209 South LaSalle Chicago, Illinois 60604-1295 David L. Babson and Company Incorporated(3).. 449,600 7.6% One Memorial Drive Cambridge, Massachusetts 02142-1300 Fleet Boston Corporation (4) ................ 435,000 7.3% One Federal Street Boston, Massachusetts 02110 Skyline Asset Management, L.P.(5) ........... 383,600 6.5% 311 South Wacker Drive Suite 4500 Chicago, Illinois 60606 Dimensional Fund Advisors, Inc.(6) .......... 374,000 6.3% 1299 Ocean Ave., 11th Floor Santa Monica, California 90401 Dalton, Greiner, Hartman, Maher & Co.(7) .... 325,600 5.5% 1100 Fifth Ave. South, Suite 301 Naples, Florida 34102
- ------------------- (1) Based on a total of 5,943,183 common shares outstanding on December 31, 1999. (2) As reported in Amendment No. 3 to Schedule 13G dated February 4, 2000 filed with the SEC jointly by Brinson Partners, Inc. and UBS AG (Bahnhofstrasse 45, 8021, Zurich, Switzerland) with respect to 511,628 common shares held by Brinson Partners, Inc., a registered investment 59 60 advisor. Brinson Partners, Inc. is an indirect wholly-owned subsidiary of UBS AG, a bank. They reported shared voting and dispositive power with respect to all 511,628 common shares. (3) As reported in Schedule 13G dated February 9, 2000 filed with the SEC by David L. Babson and Company Incorporated, a registered investment adviser, with respect to common shares held by its clients. David L. Babson and Company Incorporated reported sole voting and dispositive power with respect to all 449,600 common shares. (4) As reported in Schedule 13G dated February 14, 2000 filed with the SEC by Fleet Boston Corporation, a parent holding company of Fleet National Bank, Fleet Trust & Investment Services Company and Fleet Investment Advisors. Fleet Boston Corporation reported sole voting power with respect to 293,800 common shares beneficially owned by its subsidiaries and sole dispositive power with respect to 435,000 common shares beneficially owned by its subsidiaries. (5) As reported in an Amendment to Schedule 13G dated February 16, 2000 filed with the SEC by Skyline Asset Management, L.P., a registered investment adviser, with respect to common shares held by its clients. Skyline Asset Management, L.P. reported shared voting and dispositive power with respect to 383,600 common shares. (6) As reported in Schedule 13G dated February 4, 2000 filed with the SEC by Dimensional Fund Advisors, Inc., a registered investment advisor, with respect to common shares held by investment companies, commingled group trusts and separate accounts. In this role, Dimensional Fund Advisors, Inc. reported sole voting and dispositive power with respect to all 374,000 common shares. (7) As reported in Amendment No. 1 to Scheduled 13G dated February 10, 2000 filed with the SEC by Dalton, Greiner, Hartman, Maher & Co., a registered investment adviser. It reported sole voting and dispositive power with respect to all 325,600 common shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. In connection with the proposed recapitalization merger of Stone Acquisition Corp. into us, we have entered into employment and other "rollover" agreements with John A. Ciccarelli, Raymond E. Bartholomae, Michael C. Deis, Sr., James W. Fennessy, Mark K. Kaler, Alan F. McIlroy, William C. Mongole, James C. Stewart, and Jaime Taronji, Jr., each of whom is an executive officer. These agreements become effective only if the recapitalization merger is completed. Generally, the "rollover" agreements require each executive officer to retain common shares and, in most cases, stock options, with a specified aggregate value following the recapitalization merger. In some cases, the executive officer has agreed to exercise stock options in order to obtain some of the common shares which he has agreed to retain following the merger. These agreements provide that: - The executive officer is required to vote his common shares in favor of the merger. - Stock options which are not to be exercised or retained by the executive following the merger will be cancelled at the time of the merger in exchange for a cash payment equal to the spread between $27.00 per share and the exercise price of the option. 60 61 - If the executive officer must exercise stock options in order to obtain some of the common shares he is required to retain and he so requests, we will make a non-interest bearing, recourse loan to him in a maximum amount equal to the exercise price of the options plus the estimated federal and state income tax liability he will incur in connection with the exercise. These loans will be secured by a pledge of the shares issued upon exercise of the options. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) Financial Statements The following consolidated financial statements of the Company and subsidiaries are incorporated by reference as part of this Report under Item 8. Report of Independent Public Accountants Consolidated Balance Sheets as of December 31, 1999 and 1998. Consolidated Statements of Income for the years ended December 31, 1999, 1998, and 1997. Consolidated Statements of Shareholders' Equity for the years ended December 31, 1999, 1998, and 1997. Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998, and 1997. Consolidated Statements of Comprehensive Income for the years ended December 31, 1999, 1998, and 1997. Notes to Consolidated Financial Statements. (a)(2) FINANCIAL STATEMENT SCHEDULE Schedule II - Valuation and Qualifying Accounts (at Item 8 of this Report) All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. (a)(3) Exhibits. See Index to Exhibits following the signature pages to this Report for a list of exhibits. (b) Reports on Form 8-K. During the quarter ended December 31, 1999, the Company did not file any Current Reports on Form 8-K. 61 62 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Dayton Superior Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DAYTON SUPERIOR CORPORATION March 29, 2000 /s/ John A. Ciccarelli By_______________________________ John A. Ciccarelli President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Dayton Superior Corporation and in the capacities and on the dates indicated. NAME TITLE DATE /s/ John A. Ciccarelli _______________________ Director, President and March 29, 2000 John A. Ciccarelli Chief Executive Officer /s/ Alan F. McIlroy _______________________ Vice President and Chief Financial March 28, 2000 Alan F. McIlroy Officer (Principal Financial Officer) /s/ Thomas W. Roehrig _______________________ Corporate Controller March 29, 2000 Thomas W. Roehrig (Principal Accounting Officer) /s/ Matthew O. Diggs, Jr. _______________________ Non-Executive Chairman of the Board March 29, 2000 Matthew O. Diggs, Jr. /s/ William F. Andrews _______________________ Director March 28, 2000 William F. Andrews /s/ Daniel W. Duval _______________________ Director March 27, 2000 Daniel W. Duval /s/ Matthew M. Guerreiro _______________________ Director March 28, 2000 Matthew M. Guerreiro /s/ Robert B. Holmes _______________________ Director March 25, 2000 Robert B. Holmes 62 63 INDEX OF EXHIBITS ----------------- Exhibit No. Description (3) ARTICLES OF INCORPORATION AND BY-LAWS 3.1 Amended Articles of Incorporation of the Company [Incorporated herein by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-3 (Reg. No. 333-84613)] + 3.2 Code of Regulations of the Company (as amended) [Incorporated herein by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-1 (Reg. No. 333-2974)] + (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES 4.1 Senior Unsubordinated Redeemable Note of the Company in the principal amount of $5,000,000 [Incorporated herein by reference to Exhibit A to the Agreement set forth as Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 2, 1997] + 4.2 Credit Agreement dated as of September 29, 1997 among the Company and the other parties thereto [Incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated October 13, 1997] + 4.2.1 First Amendment to Credit Agreement dated as of October 23, 1997 [Incorporated herein by reference to Exhibit 4.2.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998] + 4.2.2 Second Amendment to Credit Agreement dated as of June 26, 1998 [Incorporated herein by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended April 2, 1999] + 4.2.3 Third Amendment to Credit Agreement dated as of May 14, 1999 [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 4.2.4 Form of Fourth Amendment to Credit Agreement dated as of September 3, 1999 [Incorporated by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 4.4 Certificate of Trust of Dayton Superior Capital Trust.[Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 63 64 4.5 Form of Amended and Restated Trust Agreement of Dayton Superior Capital Trust among Dayton Superior Corporation, as depositor, Firstar Bank, N.A., as Property Trustee, Mark A. Ferrucci, as Delaware Trustee, and the Administrative Trustees named therein [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 4.6 Form of Junior Convertible Subordinated Indenture between Dayton Superior Corporation and Firstar Bank, N.A., as Indenture Trustee [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 4.6.1 First Supplemental Indenture dated January 17, 2000 between Dayton Superior Corporation and Firstar Bank, N.A., as Trustee ** 4.7 Form of Preferred Security (included as Exhibit D to Exhibit 4.5) [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 4.8 Form of Junior Convertible Subordinated Debenture (included as Sections 2.2 and 2.3 to Exhibit 4.6) [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + 4.9 Form of Guarantee Agreement between Dayton Superior Corporation, as Guarantor, and Firstar Bank, N.A. as Guarantee Trustee, with respect to the Preferred Securities of the Dayton Superior Capital Trust [Incorporated herein by reference to Exhibit 4.2.3 to the Company's Registration Statement on Form S-3 (Reg. 333-84613)] + (10) MATERIAL CONTRACTS 10.1 1994 Stock Option Plan [Incorporated herein by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1 (Reg. No. 333-2974)] + * 10.1.1 First Amendment to 1994 Stock Option Plan [Incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended September 26, 1997] + * 10.2 1995 Stock Option Plan [Incorporated herein by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1 (Reg. No. 333-2974)] + * 10.2.1 First Amendment to 1995 Stock Option Plan [Incorporated herein reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the Quarter ended September 26, 1997] + * 64 65 10.3 1996 Stock Option Plan [Incorporated herein by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-1 (Reg. No. 333-2974)] + * 10.4 1997 Stock Option and Restricted Stock Plan [Incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended June 27, 1997] + * 10.5 1997 Nonemployee Director Stock Option Plan [Incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the Quarter ended June 27, 1997] + * 10.6 Nonemployee Directors Compensation Program [Incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended July 3, 1998] + * 10.7 Management Incentive Plan [Incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998] + * 10.8 Agreement dated as of May 9, 1997 by and among Symons Corporation, the stockholders of Symons Corporation and the Company [Incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated June 2, 1997] + 10.9 Agreement and Plan of Merger dated January 19, 2000 by and between the Company and Stone Acquisition Corp. [Incorporated herein by reference to Appendix A to the Company's preliminary proxy statement filed with the Securities and Exchange Commission on February 18, 2000] + 10.10 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and John A. Ciccarelli * ** 10.11 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and Alan F. McIlroy * ** 10.12 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and Raymond E. Bartholomae * ** 10.13 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and Michael C. Deis, Sr. * ** 10.14 Employment Agreement dated January 19, 2000 by and between Dayton Superior Corporation and James C. Stewart * ** 65 66 10.15 Form of Option Exercise, Cancellation and Equity Rollover Agreement dated January 19, 2000 by and among Stone Acquisition, Dayton Superior Corporation and each of John A. Ciccarelli, Alan F. McIlroy, Raymond E. Bartholomae, Michael C. Deis, Sr., and James C. Stewart * ** (21) SUBSIDIARIES OF THE REGISTRANT 21.1 Subsidiaries of the Company ** (23) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 23.1 Consent of Arthur Andersen LLP ** (27) FINANCIAL DATA SCHEDULE 27.1 Financial Data Schedule ** - ---------------------------- * Compensatory plan, contract or arrangement in which one or more directors or named executive officers participates. ** Filed herewith + Previously filed 66 EX-4.6.1 2 EXHIBIT 4.6.1 1 Exhibit 4.6.1 FIRST SUPPLEMENTAL INDENTURE This First Supplemental Indenture, dated as of January 17, 2000, is between DAYTON SUPERIOR CORPORATION, an Ohio corporation (the "Company"), and FIRSTAR BANK, N.A., as trustee (the "Trustee"). WITNESSETH: WHEREAS, the Company and the Trustee entered into a Junior Convertible Subordinated Indenture dated as of October 5, 1999 (the "Indenture"), authorizing the issuance of the Company's 10% Convertible Subordinated Debentures due September 30, 2029 (the "Debentures"); WHEREAS, Section 9.1 of the Indenture permits the Company and the Trustee to enter into one or more indentures supplemental to the Indenture for the purpose of curing any ambiguity, correcting or supplementing any provision in the Indenture that may be inconsistent with any other provision in the Indenture, or making any other provisions with respect to matters or questions arising under the Indenture, so long as any such action does not materially adversely affect the interest of the holders of the Debentures and, for so long as any of the preferred securities of Dayton Superior Capital Trust are outstanding, the holders of such preferred securities; and WHEREAS, the Company desires to clarify the provisions of the Indenture relating to the conversion features of the Debentures in the event of certain merger, reclassifications and other transactions involving the Company, and such clarifying language does not materially adversely affect the interest of the holders of the Debentures or the holders of the preferred securities of Dayton Superior Capital Trust; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained and contained in the Indenture, the Company and the Trustee agree as follows: SECTION 1. Section 13.5(a) of the Indenture is hereby amended in its entirety to read as follows: "(a) In the event that the Company is a party to any transaction (including, without limitation, a merger other than a merger that does not result in a reclassification, conversion, exchange or cancellation of Common Stock), consolidation, sale of all or substantially all of the assets of the Company, recapitalization or reclassification of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination of Common Stock) or any compulsory share exchange (each of the foregoing being referred to as a "TRANSACTION"), in each case, as a result of which shares of Common Stock shall be 2 converted into the right to receive, or shall be exchanged for, (i) in the case of any Transaction other than a Transaction involving a Common Stock Fundamental Change (and subject to funds being legally available for such purpose under applicable law and the time of such conversion), securities, cash or other property, each Debenture shall thereafter be convertible into the kind and amount of securities, cash and other property receivable upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which a Debenture was convertible immediately prior to such Transaction, or (ii) in the case of a Transaction involving a Common Stock Fundamental Change, common stock, each Debenture shall thereafter be convertible (in the manner described herein) into common stock of the kind received by holders of Common Stock (but in each case after giving effect to any adjustment discussed in paragraphs (b) and (c) relating to a Fundamental Change if such Transaction constitutes a Fundamental Change). The holders of Debentures or Preferred Securities will have no voting rights with respect to any Transaction." SECTION 2. This First Supplemental Indenture shall become effective on the date first set forth above. SECTION 3. Except as specifically amended hereby, all of the terms and conditions of the Indenture shall remain in full force and effect and unamended hereby. No reference to this First Supplemental Indenture need be made in any instrument or document at any time referring to the Indenture, a reference to the Indenture in any of such to be deemed to be reference to the Indenture as amended hereby. This First Supplemental Indenture may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective seals to be hereunder affixed and attested, all as of the day and year first written above. DAYTON SUPERIOR CORPORATION (SEAL) By /s/ ALAN F. MCILROY Attest: Name: Alan F. McIlroy Title: Vice President and Chief /s/ Jaime Taronji, Jr. Financial Officer Secretary FIRSTAR BANK, N.A., as Trustee (SEAL) By: /s/ KEITH A MAURMEIER Attest: Name: Keith A. Maurmeier Title: Vice President and Trust Officer -2- EX-10.10 3 EXHIBIT 10.10 1 Exhibit 10.10 EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT, dated as of January 19, 2000 and effective as of the Effective Date (as hereinafter defined), is made by and between Dayton Superior Corporation, an Ohio corporation (the "Company"), and John A. Ciccarelli (the "Executive"). RECITALS: WHEREAS, the Executive has heretofore been employed by the Company as Chief Executive Officer; and WHEREAS, it is the desire of the Company to assure itself of the continuity of the management services of the Executive following the consummation of the merger contemplated by the Agreement and Plan of Merger by and between the Company and Stone Acquisition Corp. dated as of January 19, 2000 (the "Merger Agreement"); and WHEREAS, the Company and the Executive intend this Agreement to be effective as of the consummation of the merger contemplated in the Merger Agreement (the "Effective Date"); and WHEREAS, the Company and the Executive intend that if the merger contemplated in the Merger Agreement is not consummated, this Employment Agreement shall be of no force or effect; NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) "ANNUAL BASE SALARY" shall have the meaning set forth in Section 4(a). (b) "BOARD" shall mean the Board of Directors of the Company. (c) The Company shall have "CAUSE" to terminate the Executive's employment and/or service as non-executive Chairman hereunder upon the Executive's: (i) willful or gross misconduct or material failure in the performance of his duties and responsibilities hereunder, other than any such failure resulting from the Executive's Disability, which misconduct or failure continues beyond 14 days after the company notifies the Executive, in writing, of the Company's finding of such misconduct or failure; or 2 (ii) conviction of or plea of guilty or nolo contendre to, a felony, or a crime involving moral turpitude; or (iii) fraud or personal dishonesty involving the Company's assets. (d) "CHANGE IN CONTROL" shall mean a change in ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries, a Principal Stockholder or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company's securities outstanding immediately after such acquisition. (e) "COMMON STOCK" shall mean the common shares of the Company, without par value. (f) "COMPANY" shall have the meaning set forth in the preamble hereto. (g) "COMPENSATION COMMITTEE" shall mean the Compensation Committee of the Board whose members shall be appointed by the Board from time to time and shall initially include William Hopkins, as Chairman, Muzzafar Mirza and Douglas Rotatori. (h) "DATE OF TERMINATION" shall mean (i) if the Executive's employment is terminated by reason of his death, the date of his death, and (ii) if the Executive's employment is terminated pursuant to Sections 5(a)(ii) - (viii), the date specified in the Notice of Termination; PROVIDED, HOWEVER, that, as set forth in Section 4(k)(i)(A), for purposes of the Management Stockholders' Agreement, the Executive shall not be deemed to have incurred a termination of employment upon the commencement of the Non-Executive Term, if any, and PROVIDED, FURTHER, that as set forth in Section 4(k)(i)(B) the date of termination of employment for purposes of the Management Stockholders' Agreement shall be the date of termination of the Non-Executive Term, if any. (i) "DISABILITY" shall mean the inability of the Executive to perform his duties and responsibilities as an officer or employee of the Company or any of its subsidiaries on a full-time basis for more than six months within any 12-month period because of a physical, mental or emotional incapacity resulting from injury, sickness or disease. 2 3 (j) "EBITDA" with respect to any period of determination shall mean the sum of the following (without duplication): (i) consolidated net income (or loss) of the Company and, if applicable, its subsidiaries for such period (exclusive of the effect of extraordinary items), as determined by the Company's independent certified public accountants in accordance with generally accepted accounting principles consistently applied, as such principles are in effect at the date hereof, plus (ii) amounts deducted from net revenues in determining such net income (or loss) on account of (w) depreciation and amortization, (x) interest expense (net of interest income), (y) all taxes on income and (z) any management or acquisition fee charged to the Company by the Principal Stockholder. (k) "EFFECTIVE DATE" shall have the meaning set forth in the recitals hereto. (l) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. (m) "EXECUTIVE" shall have the meaning set forth in the preamble hereto. (n) "EXERCISABLE OPTIONS" as of any date of determination, shall mean those Options (or portions thereof) held by the Executive that are then vested and exercisable. (o) "FAIR MARKET VALUE" shall have the meaning ascribed to such term under the Management Stockholders' Agreement. (p) "GOOD REASON" shall mean the occurrence of any of the following: (i) a material diminution in the Executive's title, duties or responsibilities, without his prior written consent, (ii) a reduction of the Executive's aggregate cash compensation (including bonus opportunities), benefits or perquisites, without his prior written consent or (iii) the occurrence of a Change in Control. (q) "MANAGEMENT STOCKHOLDERS' AGREEMENT" shall mean that certain Management Stockholders' Agreement to be entered into by and among the Company, Odyssey Investment Partners Fund, LP, the Executive and the other employee stockholders party thereto, effective as of the Effective Date, the terms of which have previously been accepted by the Executive pursuant to that certain letter agreement and Management Compensation and Equity Term Sheet dated as of the date hereof. (r) "MERGER AGREEMENT" shall have the meaning set forth in the recitals hereto. (s) "NOTICE OF TERMINATION" shall have the meaning set forth in Section 5(b). (t) "NON-EXECUTIVE TERM" shall have the meaning set forth in Section 2(b). (u) "OPTION AGREEMENTS" shall mean the written agreements between the Company and the Executive pursuant to which the Executive holds or is granted options to purchase 3 4 Common Stock, including, without limitation, agreements evidencing options granted under the Option Plan and agreements governing the terms of "Roll-Over Options" (as defined in the Management Stockholders' Agreement). (v) "OPTION PLAN" shall mean the 2000 Stock Option Plan of Dayton Superior Corporation, as amended from time to time. (w) "OPTIONS" as of any date of determination shall mean options held by the Executive as of such date to purchase Common Stock of the Company. (x) "PRINCIPAL STOCKHOLDER" shall mean Odyssey Investment Partners Fund, LP and any of its Permitted Assignees (as such term is defined in the Management Stockholders' Agreement). (y) "PROHIBITED COMPETITION" shall have the meaning set forth in Section 8(b). (z) "RETIREMENT" shall mean the voluntary termination of the Executive's services with the Company as a result of his retirement from active service as the President and Chief Executive Officer of the Company upon or after the third anniversary of the Effective Date; PROVIDED, HOWEVER, that as set forth in Section 4(k)(i)(A), for purposes of the Management Stockholders' Agreement, the Executive shall not be deemed to have incurred a "Retirement" upon the commencement of the Non-Executive Term, if any, and PROVIDED, FURTHER, that as set forth in Section 4(k)(i)(C), for purposes of the Management Stockholders' Agreement, the last day of the Non-Executive Term, if any, shall be deemed the date of the Executive's termination of employment either by reason of "Retirement" or "Termination by the Company for Cause" as the case may be. (aa) "TERM" shall have the meaning set forth in Section 2(a). 2. EMPLOYMENT. (a) The Company shall continue to employ the Executive and the Executive shall remain in the employ of the Company, for the period set forth in this Section 2, in the positions set forth in Section 3 and upon the other terms and conditions herein provided. The initial term of employment under this Agreement (the "Initial Term") shall be for the period beginning on the Effective Date and ending on the third anniversary thereof unless earlier terminated as provided in Section 5; PROVIDED, HOWEVER, that unless so earlier terminated or unless the Executive or the Company shall give written notice to the other of his or its intention not to renew this Agreement no less than sixty days prior to the scheduled expiration thereof, upon the third anniversary of the Effective Date, this Agreement shall automatically be renewed for an additional two year period (the "Extension Term" and collectively with the Initial Term, the "Term"). 4 5 (b) At any time prior to the scheduled expiration of the Initial Term (or of the Extension Term, if any), the Company and the Executive may mutually agree that effective as of such scheduled expiration date the Executive shall resign as the President and Chief Executive Officer of the Company but continue to provide services to the Company as a non-executive Chairman, in which case the Executive shall be entitled to compensation for his services commensurate with his duties and responsibilities to the Company, as mutually agreed to by the Company and the Executive at such time. The period of time, if any, during which the Executive serves as non-executive Chairman shall be referred to as the "Non-Executive Term." The Non-Executive Term shall terminate upon the date the Executive ceases to serve as non-executive Chairman for any reason, including but not by way of limitation, a termination by resignation, removal, failure to be elected or appointed, death or retirement. 3. POSITION AND DUTIES. (a) During the Term, the Executive shall serve as the Chairman of the Board, President and Chief Executive Officer of the Company with such customary responsibilities, duties and authority as may from time to time be assigned to the Executive by the Board. During the period of the Executive's active employment as President and Chief Executive Officer, the Executive shall devote substantially all his working time and efforts to the business and affairs of the Company; PROVIDED, that it shall not be considered a violation of the foregoing for the Executive to (i) with the prior consent of the Board (which consent shall not unreasonably be withheld), serve on corporate, industry, civic or charitable boards or committees and (ii) manage his personal investments, so long as none of such activities significantly interferes with the Executive's duties hereunder. (b) The Executive shall serve as the Chairman of the Board during the Term and during the Non-Executive Term, if any. During the Term, the Board shall propose the Executive for re-election to the Board and the Principal Stockholders shall vote all of their shares of Common Stock in favor of such re-election. If elected or appointed thereto, and only for the duration of such elected term or appointment, the Executive shall also serve as a director of any of the Company's subsidiaries and/or in one or more executive offices of any entities owned by the Company. 4. COMPENSATION AND RELATED MATTERS. (a) ANNUAL BASE SALARY. During the Term, the Executive shall receive a base salary at a rate that is no less than $350,000 per annum (the "Annual Base Salary"), payable in accordance with the Company's normal payroll practices. The rate of the Annual Base Salary shall be reviewed by the Compensation Committee on or prior to each anniversary of the Effective Date during the Term and may be increased, but not decreased, upon such review. (b) BONUS. For each fiscal year during the Term, the Executive shall be eligible to participate in the Company's annual cash bonus plan in accordance with terms and provisions 5 6 which shall be consistent with the Company's executive bonus policy in effect as of the Effective Date. (c) LONG TERM INCENTIVE COMPENSATION. During the Term, the Executive shall be entitled to participate in the Option Plan or any successor plan thereto. (d) BENEFITS. During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company in effect as of the date hereof (or, to the extent determined by the Board or Compensation Committee, in effect hereafter) which are applicable to the senior officers of the Company generally, subject to and on a basis consistent with the terms, conditions and overall administration thereof. Furthermore, during the first 12 months of the Term following the Effective Date, the benefits provided under such employee benefit plans, programs and arrangements (other than any stock option, restricted stock or other equity based plan) shall, in the aggregate, be substantially equivalent to the benefits provided by the Company as of the Effective Date (other than pursuant to any stock option, restricted stock or other equity based plan). (e) EXPENSES. Pursuant to the Company's customary policies in force at the time of payment, the Executive shall be reimbursed for all expenses properly incurred by the Executive on the Company's behalf in the performance of the Executive's duties hereunder. (f) VACATION. During the Term, the Executive shall be entitled to an amount of annual vacation days, and to compensation in respect of earned but unused vacation days in accordance with the Company's vacation policy as in effect as of the Effective Date. The Executive shall also be entitled to paid holidays in accordance with the Company's practices with respect to same as in effect as of the Effective Date. (g) AUTOMOBILE. During the Term, the Company shall provide the Executive with an annual automobile allowance at a rate not less than that in effect as of the Effective Date. (h) CLUB MEMBERSHIP. During the Term, the Company shall pay on behalf of the Executive, or reimburse the Executive for, annual membership fees payable in connection with the Executive's membership in two country, alumni, or social clubs of the Executive's choice. (i) TAX AND FINANCIAL PLANNING ASSISTANCE. During the Term, the Company shall, upon submission of proper documentation, pay on behalf of the Executive, or reimburse the Executive for, reasonable expenses incurred for professional assistance in planning and preparing his tax returns and managing his financial affairs, consistent with the Company's practices as in effect on the date of execution of this Agreement. (j) LOAN TO PURCHASE SHARES OF COMMON STOCK. In the event that during the Term or the Non-Executive Term, if any, the Executive elects to purchase shares of Common Stock pursuant to the Management Stockholders' Agreement, the Company shall, or shall cause one of 6 7 its affiliates to, lend to the Executive up to $500,000 in the aggregate (or such greater amount as determined by the Compensation Committee in its discretion) as payment for such shares pursuant to the terms of a secured, recourse promissory note or notes bearing interest of the lowest rate specified pursuant to Section 1274 of the Internal Revenue Code so as to avoid imputed interest, and the parties shall enter into security agreement(s) under which the Executive shall pledge such shares to the Company (or affiliate thereof, as applicable) as security for repayment of such loan(s). Any interest due on such loan shall be converted into principal and shall not be payable currently as it is accrued, but rather shall be payable when the underlying shares are sold. Any such note and security agreement shall have terms consistent with the forgoing and shall be in a form acceptable to the Company's (or its affiliate's) lenders under the terms of the Financing Documents (as such term is defined in the Management Stockholders' Agreement). (k) RIGHT OF THE EXECUTIVE TO SELL COMMON STOCK TO THE COMPANY. (i) For purposes of the Management Stockholders' Agreement, (A) if the Company and the Executive mutually agree to permit the Executive to resign as President and Chief Executive Officer but to continue to provide services to the Company as non-executive Chairman pursuant to Section 2(b), such resignation shall not constitute a resignation, "Retirement" or other termination of employment thereunder; (B) the date on which the Executive ceases to serve as non-executive Chairman shall be deemed to be the date of his termination of employment for purposes of the Management Stockholders' Agreement and (C) (I) unless he shall have been removed from such position for Cause, for purposes of the Management Stockholders' Agreement, the Executive shall be deemed to have terminated employment by reason of "Retirement" and (II) if he shall have been removed from such position for Cause, for purposes of the Management Stockholders' Agreement, the Executive shall be deemed to have terminated employment by reason of termination by the Company for Cause. (ii) If the Executive remains employed by the Company through the scheduled expiration of the Initial Term, then subject to the Management Stockholders' Agreement, for the two-year period following such date (the "Put Period"), the Executive shall have the right to sell to the Company, and the Company shall have the obligation to purchase from the Executive, at the Fair Market Value per share, that number of shares of Common Stock not to exceed in the aggregate 80% of the sum of (A) the number of shares of Common Stock held by the Executive as of the third anniversary of the Effective Date and (B) the number of shares of Common Stock that could be acquired by the Executive upon the exercise of Exercisable Options as of such date (the "Aggregate Stock"), in accordance with the provisions of this Section 4(k)(ii) (the "Executive Put"). The Executive shall have the right to exercise the Executive Put at any time during the Put Period as of which EBITDA for the fiscal year ending December 31, 2002 or for any four consecutive fiscal quarters thereafter equals or exceeds $72.4 million (excluding the 7 8 effect of acquisitions completed after the execution date of this Agreement); PROVIDED, HOWEVER, that (x) the Executive may not exercise the Executive Put within six months following a prior exercise of the Executive Put; (y) the Executive Put may not be exercised for less than 10% of the Aggregate Stock and (z) the Executive Put may only be exercised with respect to shares which the Executive has held for at least six months. If the Executive desires to exercise the Executive Put pursuant to this Section 4(k)(ii), he shall notify the Company in writing, specifying the number of shares to be sold pursuant to the exercise of the Executive Put hereunder. Subject to the Management Stockholders' Agreement, payment for shares of Common Stock sold by the Executive pursuant to this Section 4(k)(ii) shall be made on or prior to the date 60 days (or the first business day thereafter if the 60th day is not a business day) following the date of the receipt by the Company of the Executive's notice described herein; PROVIDED, HOWEVER, that if such payment is being made on or after the first day of the seventh month of any fiscal year, then such payment shall be made on or prior to the date that is 60 days (or the first business day thereafter if the 60th day is not a business day) following the date of the determination of Fair Market Value in a manner consistent with the provisions of the Management Stockholders' Agreement. (iii) If the Executive holds Exercisable Options as of the date he notifies the Company of the exercise of the Executive Put pursuant to Section 4(k)(ii) and together with such notice notifies the Company that he desires to exercise a specified portion of such Exercisable Options (the "Specified Options"), the Company shall, or shall cause an affiliate of the Company to, lend to the Executive within 30 days after the Company's receipt of such notice from the Executive an amount equal to the aggregate exercise price payable with respect to the Specified Options and the aggregate federal, state and local income tax liability, including any alternative minimum tax obligations, that will actually be incurred by the Executive as a result of his exercise of the Specified Options in accordance with such notice. Any such loan pursuant to this Section 4(k)(iii) shall be pursuant to the terms of a secured, recourse promissory note or notes which (i) shall be payable in full no later than the earliest of (A) the date on which the Executive receives any payment from the Company for the repurchase of the shares acquired upon exercise of the Specified Options, (B) the date on which the Executive transfers any such shares and (C) the first date following the expiration of the Put Period, (ii) shall bear interest at the applicable federal mid-term rate determined pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as amended, (iii) shall provide that any interest due on such loan shall be converted into principal and shall not be payable currently as it is accrued, but rather shall be payable when the principal amount is due and (iv) shall be in a form acceptable to the Company's (or its affiliate's) lenders under the terms of the Financing Documents. The parties hereto agree that to the extent any of the foregoing provisions of this Section 4(k)(iii) result in adverse accounting consequences to the Company, such provisions shall be modified in a manner mutually acceptable to the parties hereto. 8 9 5. TERMINATION. (a) The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances and in accordance with subsection (b): (i) DEATH. The Executive's employment hereunder shall terminate upon his death. (ii) DISABILITY. If the Company determines in good faith that the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such Notice of Termination by the Executive, provided that within such 30 day period the Executive shall not have returned to full-time performance of his duties. (iii) TERMINATION FOR CAUSE. The Company may terminate the Executive's employment hereunder for Cause. (iv) RESIGNATION FOR GOOD REASON. The Executive may terminate his employment hereunder for Good Reason. (v) TERMINATION WITHOUT CAUSE. The Company may terminate the Executive's employment hereunder without Cause. (vi) RESIGNATION WITHOUT GOOD REASON. The Executive may resign his employment hereunder without Good Reason. (vii) RETIREMENT. The Executive may elect to terminate his employment by reason of retirement effective no earlier than the third anniversary of the Effective Date. (b) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive under this Section 5 (other than termination pursuant to subsection (a)(i)) shall be communicated by a written notice from the Board or the Executive to the other, indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and specifying a Date of Termination (a "Notice of Termination"). For purposes of this Agreement, the "Date of Termination" shall be (i) with respect to any termination by reason of the Executive's Disability, 30 days following the receipt of the notice described in Section 5(a)(ii); (ii) with respect to the Executive's termination for Cause, the date of the Notice of Termination, and (iii) with respect to the Executive's termination of employment for any other reason, at least 30 days following the date of the Notice of Termination. The Executive shall continue to receive his Annual Base Salary, annual bonus 9 10 and all other compensation and perquisites referenced in Section 4 through the Date of Termination. 6. SEVERANCE PAYMENTS. (a) TERMINATION FOR ANY REASON. In the event the Executive's employment with the Company is terminated for any reason, the Company shall pay the Executive (or his beneficiary in the event of his death) any unpaid Annual Base Salary that has accrued as of the Date of Termination, any unreimbursed expenses due to the Executive and an amount for accrued but unused sick days and vacation days. The Executive shall also be entitled to accrued, vested benefits under the Company's benefit plans and programs as provided therein. The Executive shall be entitled to the additional payments and benefits described below only as set forth herein. (b) TERMINATION WITHOUT CAUSE, RESIGNATION FOR GOOD REASON OR TERMINATION BY REASON OF DEATH OR DISABILITY. In the event of the Executive's Termination without Cause (pursuant to Section 5(a)(v)), Resignation for Good Reason (pursuant to Section 5(a)(iv)) or termination by reason of Death or Disability (pursuant to Section 5(a)(i) or (ii), respectively), the Company shall pay to the Executive the amounts described in subsection (a), and: (i) subject to the Executive's compliance with Sections 8 and 9, pay to the Executive, for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, his Annual Base Salary as in effect on the Date of Termination; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time; and (iii) continue for one year the Executive's coverage under the Company medical and dental plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination (or, if the Company amends, replaces or terminates any such plan or program following such Date of Termination, the Company medical and dental plans provided to employees similarly situated to Executive), as if the Executive were an active employee during such time, subject to standard employee contributions by the Executive as are required under such plans, and further subject to the Executive's election of "COBRA" continuation coverage during such period. All post-employment coverage under such plans shall be co-extensive with COBRA continuation coverage required by federal (and where applicable by state) law, and shall cease if the Executive becomes eligible for coverage under another employer's plans. 10 11 7. OTHER TERMINATION PROVISIONS. Notwithstanding any provision of this Agreement or the Management Stockholders' Agreement to the contrary, in the event that as a consequence of a termination of the Executive's employment for any reason, the Executive is compelled to exercise any Options in order to prevent such Options from expiring in accordance with their terms and the Company is unable to repurchase the Executive's stock at such time, the Company shall either (i) provide the Executive with an interest-free recourse loan equal to the actual aggregate federal, state and local income tax liability (including alternative minimum tax obligations) incurred as a consequence of the Option exercise, which loan shall (A) be secured by a pledge of the shares acquired upon exercise of such Options, (B) be payable in full, with respect to each Option (or portion) so exercised, upon the earliest of (I) the tenth anniversary of the date of grant of such Option, (II) five days after the date on which the Executive sells, transfers or otherwise disposes or conveys for consideration the shares acquired upon exercise of such Option, and (III) the date specified in the Management Stockholders' Agreement for the expiration of certain provisions thereof, (ii) permit the Executive to extend the post-termination exercise period of such Options (but not beyond the tenth anniversary of the date of Option grant) until such time as the Company is able to repurchase the underlying shares of Common Stock, or (iii) devise such other method that is reasonably acceptable to the Executive so as to prevent the Executive from incurring tax liability upon Option exercise at a time when he is not able to receive payment from the Company (or a third party) for the shares acquired upon such exercise. 8. COMPETITION. (a) The Executive shall not engage in any Prohibited Competition (as defined below in Section 8(b)) at any time during the Term or the Non-Executive Term, if any, and for a period of two years after the later to end of the Term and the Non-Executive Term. (b) For purposes of this Agreement, the Executive shall be considered to engage in prohibited competition ("Prohibited Competition") if the Executive shall: directly or indirectly, engage in or own, manage, join, operate or control, or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, or permit his name to be used by or in connection with, any business or organization which produces, designs, conducts research on, provides, sells, leases, distributes or markets accessories, chemicals, forming and related products used in concrete and masonry construction (the "Business") which, directly or indirectly, competes with the Business conducted by Company and its subsidiaries in North America, South America and Europe, it being understood that the foregoing shall not limit the Executive from making passive investments of less than 5% of the outstanding equity securities in any entity listed for trading on a national stock exchange or quoted on any recognized automatic quotation system. 11 12 (c) In the event any of the terms of this Section 8 shall be determined by any court of competent jurisdiction to be unenforceable by reason of extending for too great a period of time or over too great a geographical area or by reason of being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. 9. NONDISCLOSURE OF PROPRIETARY INFORMATION. (a) Except as required in the faithful performance of the Executive's duties hereunder or pursuant to subsection (c), the Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets, and any other information that would be protected under the Uniform Trade Secrets Act in Ohio, of or relating to the Company, including, without limitation, information with respect to the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment, or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. The parties hereby stipulate and agree that as between them the foregoing matters are important, material and confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the Company (and any successor or assignee of the Company). The parties hereto agree that "confidential or proprietary information" shall not include information that (i) is a matter of public knowledge (other than by act of the Executive in violation hereof); (ii) was provided to the Executive (without breach of any obligation of confidence owed to the Company) by a third party which is not an affiliate of the Company or (iii) is required to be disclosed by law or judicial or administrative process. (b) Upon termination of the Executive's employment with Company for any reason and upon the Company's request, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning, without limitation, the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment and/or which contain proprietary information or trade secrets. 12 13 (c) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process. 10. INJUNCTIVE RELIEF. It is recognized and acknowledged by the Executive that a breach of the covenants contained in Sections 8 and 9 will cause irreparable damage to the Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Sections 8 and 9, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief. 11. SURVIVAL. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto which shall have accrued hereunder prior to such expiration. 12. BINDING ON SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. 13. GOVERNING LAW. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Ohio. 14. VALIDITY. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 15. NOTICES. Any notice, request, claim, demand, document or other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows: 13 14 (a) If to the Company, to: Dayton Superior Corporation 7777 Washington Village Drive, Suite 130 Dayton, OH 45459 Attention: Corporate Secretary Phone: (937) 428-6360 Fax: (937) 428-9115 with copies to: Odyssey Investment Partners Fund, LP 280 Park Avenue West Tower, 38th Floor New York, New York 10017 Attention: William Hopkins Phone: (212) 351-7900 Fax: (212) 351-7925 and Latham & Watkins 885 Third Avenue New York, New York 10022 Attention: Maureen A. Riley, Esq. Phone: (212) 906-1200 Fax: (212) 751-4864 (b) If to the Executive, to him at the address set forth below under his signature, with a copy to: Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, OH 44144-1304 Attention: Mary Ann Jorgenson Phone: (216) 479-8654 Fax: (216) 479-8776 or at any other address as any party shall have specified by notice in writing to the other party in accordance with this Section 15. 14 15 16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement. 17. ENTIRE AGREEMENT. The terms of this Agreement, together with the Management Stockholders' Agreement, the Option Plan and the Option Agreements, are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement, and the aforementioned contemporaneous documents, shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. Notwithstanding any of the foregoing to the contrary, in the event of a conflict between the terms of this Agreement and the Management Stockholders' Agreement, the terms of this Agreement shall govern. 18. AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the Chairman of the Compensation Committee. By an instrument in writing similarly executed, the Executive or the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform; PROVIDED, HOWEVER, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy or power hereunder shall preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity. 19. NO INCONSISTENT ACTIONS. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement. 20. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; PROVIDED, HOWEVER, that the Company shall be entitled to seek a restraining order or injunction in any court 15 16 of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 8 or 9 of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without the necessity of the Company's posting any bond; and PROVIDED FURTHER, that the Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. Each of the parties hereto shall bear its share of the fees and expenses of any arbitration hereunder. 21. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES. During the Term and so long as the Executive has not breached any of his obligations set forth in Sections 8 and 9, the Company shall indemnify the Executive to the fullest extent permitted by the laws of the State of Delaware, as in effect at the time of the subject act or omission, and shall advance to the Executive reasonable attorneys' fees and expenses as such fees and expenses are incurred (subject to an undertaking from the Executive to repay such advances if it shall be finally determined by a judicial decision which is not subject to further appeal that the Executive was not entitled to the reimbursement of such fees and expenses) and he shall be entitled to the protection of any insurance policies the Company shall elect to maintain generally for the benefit of its directors and officers ("Directors and Officers Insurance") against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer or employee of the Company or any of its subsidiaries or his serving or having served any other enterprise as a director, officer or employee at the request of the Company (other than any dispute, claim or controversy arising under or relating to this Agreement). The Company covenants to maintain during the Term for the benefit of the Executive (in his capacity as an officer and director of the Company) Directors and Officers Insurance providing customary benefits to the Executive. [signature page follows] 16 17 IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. DAYTON SUPERIOR CORPORATION By: /s/ Alan F. McIlroy ------------------- Name: Alan F. McIlroy Title: Chief Financial Officer EXECUTIVE /s/ John A Ciccarelli --------------------- John A. Ciccarelli President and Chief Executive Officer 2626 Indian Wells Trail Xenia, Ohio 45385 Upon the Effective Date, accepted and agreed to for purposes of Section 3(b) ODYSSEY INVESTMENT PARTNERS FUND, LP By: ODYSSEY CAPITAL PARTNERS, LLC, its general partner By: ------------------------------- Name: Title: Date: ------------------------------- 17 EX-10.11 4 EXHIBIT 10.11 1 Exhibit 10.11 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement dated as of January 19, 2000 and effective as of the Effective Date (as defined below), is made by and between Dayton Superior Corporation, an Ohio corporation (together with any successor thereto, the "Company"), and Alan F. McIlroy (the "Executive"). RECITALS -------- WHEREAS, the Executive has prior to the date hereof been employed by the Company (or one of its subsidiaries) as Vice President and Chief Financial Officer; and WHEREAS, it is the desire of the Company to assure itself of the continuity of the management services of the Executive following the consummation of the merger contemplated by the Agreement and Plan of Merger by and between the Company and Stone Acquisition Corp. dated as of January 19, 2000 (the "Merger Agreement"); and WHEREAS, it is the desire of the Company to assure itself of the services of the Executive by engaging the Executive to perform such services under the terms hereof, and the Executive desires to commit himself to serve the Company on the terms herein provided; and WHEREAS, the Company and the Executive intend this Agreement to be effective as of the consummation of the merger contemplated in the Merger Agreement (the "Effective Date"); and WHEREAS, the Company and the Executive intend that if the merger contemplated in the Merger Agreement is not consummated, this Employment Agreement shall be of no force or effect. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) "Annual Base Salary" shall have the meaning set forth in SECTION 4. (b) "Board" shall mean the Board of Directors of the Company. (c) The Company shall have "Cause" to terminate the Executive's employment hereunder upon the Executive's: 2 (i) willful or gross misconduct or material failure in the performance of his duties and responsibilities hereunder, other than any such failure resulting from the Executive's Disability, which misconduct or failure continues beyond 14 days after the Company notifies the Executive, in writing, of the Company's finding of such misconduct or failure; or (ii) conviction of or plea of guilty or nolo contendre to, a felony, or a crime involving moral turpitude; or (iii) fraud or personal dishonesty involving the Company's assets. (d) "Common Stock" shall mean the common stock of the Company, $0.01 par value per share. (e) "Company" shall have the meaning set forth in the preamble hereto. (f) "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, or, (ii) if the Executive's employment is terminated pursuant to SECTION 5(a)(II) - (v), the date specified in the Notice of Termination. (g) "Disability" shall mean the absence of the Executive from the Executive's duties to the Company on a full-time basis for a total of 180 days during any twelve month period as a result of physical, mental or emotional incapacity due to illness, injury or disease. (h) "Effective Date" shall have the meaning set forth in the recitals hereto. (i) "Executive" shall have the meaning set forth in the preamble hereto. (j) "Management Stockholders' Agreement" shall mean that certain Management Stockholders' Agreement to be entered into by and among the Company, Odyssey Investment Partners Fund, LP, the Executive and the other stockholders party thereto effective as of the Effective Date, the terms of which have previously been accepted by Executive pursuant to that certain letter agreement and Management Compensation and Equity Term Sheet dated as of the date hereof and attached hereto. (k) "Merger Agreement" shall have the meaning set forth in the recitals hereto. (l) "Notice of Termination" shall have the meaning set forth in SECTION 5(b). (m) "Option Agreements" shall mean the written agreements between the Company and the Executive pursuant to which the Executive holds or is granted options to purchase Common Stock, including, without limitation, agreements evidencing options granted under the Option Plan and agreements governing the terms of "Roll-Over Options" (as defined in the Management Stockholders' Agreement). (n) "Option Plan" shall mean the 2000 Stock Option Plan of Dayton Superior Corporation, as amended from time to time. 2 3 (o) "Options" as of any date of determination shall mean options held by the Executive as of such date to purchase Common Stock of the Company. (p) "Stock Option Agreement" shall have the meaning set forth in SECTION 4(c). (q) "Prohibited Competition" shall have the meaning set forth in SECTION 9(b). (r) "Term" shall have the meaning set forth in SECTION 2(b). 2. EMPLOYMENT. (a) The Company shall employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in this SECTION 2, in the positions set forth in SECTION 3 and upon the other terms and conditions herein provided. The initial term of employment under this Agreement (the "Initial Term") shall be for the period of 3 years beginning on the Effective Date, unless earlier terminated as provided in SECTION 5. (b) The employment term hereunder shall automatically be extended for successive one (1) year periods ("Extension Terms" and, collectively with the Initial Term, the "Term") unless either party gives notice of non-extension to the other no later than 90 days prior to the expiration of the then-applicable Term. 3. POSITION AND DUTIES. The Executive shall serve as Vice President and Chief Financial Officer of the Company with such responsibilities, duties and authority as are customary for someone serving in such position at companies similar in size to the Company, together with such other duties and responsibilities as may from time to time be assigned to the Executive by the Board and the Chief Executive Officer of the Company, consistent with his position. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company; provided that it shall not be considered a violation of the foregoing for the Executive to (i) with the prior consent of the Board (which consent shall not unreasonably be withheld), serve on corporate, industry, civic or charitable boards or committees, and (ii) manage his personal investments, so long as none of such activities significantly interferes with the Executive's duties hereunder. 4. COMPENSATION AND RELATED MATTERS. (a) ANNUAL BASE SALARY. During the Term, the Executive shall receive a base salary at a rate of $225,000 per annum ("Annual Base Salary"), payable in accordance with the Company's standard payroll procedures. The rate of Annual Base Salary shall be subject to increase as determined by the Board in its discretion. (b) BONUS. During the Term, the Executive shall be eligible to participate in the Company's executive annual bonus plan as in effect from time to time. (c) STOCK OPTIONS. Effective as of the Effective Date, the Executive shall be awarded options to purchase shares of Common Stock pursuant to the Option Plan and one or more 3 4 written Stock Option Agreements to be entered into by and between the Company and the Executive. (d) BENEFITS. During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company (including vacation) in effect as of the date hereof (or, to the extent determined by the Board, in effect hereafter) which are applicable to the senior officers of the Company, subject to and on a basis consistent with the terms, conditions and overall administration generally thereof. Furthermore, during the first 12 months of the Term following the Effective Date, the benefits provided under such employee benefit plans, programs and arrangements (other than any stock option, restricted stock or other equity based plan) shall, in the aggregate, be substantially equivalent to the benefits provided by the Company as of the Effective Date (other than any stock option, restricted stock or other equity based plan). (e) EXPENSES. The Company shall reimburse the Executive for all reasonable travel and other business expenses properly incurred by him in the performance of his duties to the Company, in accordance with the Company's documentation and other policies with respect thereto. 5. TERMINATION. The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances: (a) CIRCUMSTANCES. (i) DEATH. The Executive's employment hereunder shall terminate upon his death. (ii) DISABILITY. If the Company determines in good faith that the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties. The Executive shall continue to receive his Annual Base Salary until the Date of Termination. (iii) TERMINATION FOR CAUSE. The Company may terminate the Executive's employment hereunder for Cause at any time. (iv) TERMINATION WITHOUT CAUSE. The Company may terminate the Executive's employment hereunder without Cause at any time. (v) RESIGNATION. The Executive may resign his employment upon 30 days written notice to the Company. 4 5 (b) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive under this SECTION 5 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and specifying a Date of Termination (a "Notice of Termination"). For purposes of this Agreement, the "Date of Termination" shall be (i) with respect to any termination by reason of Executive's Disability, 30 days following the receipt of the notice described in SECTION 5(A)(II), (ii) with respect to Executive's termination for Cause, the date of the Notice of Termination, and (iii) with respect to the Executive's termination for any other reason, at least 30 days following the date of the Notice of Termination. 6. SEVERANCE PAYMENTS. (a) TERMINATION FOR ANY REASON. In the event the Executive's employment with the Company is terminated for any reason, the Company shall pay the Executive (or his beneficiary in the event of his death) any unpaid Annual Base Salary that has accrued as of the Date of Termination, any unreimbursed expenses due to the Executive and an amount for accrued but unused sick days and vacation days. The Executive shall also be entitled to accrued, vested benefits under the Company's applicable employee benefit plans, programs and arrangements as provided therein. The Executive shall be entitled to the additional payments and benefits described below only as set forth herein. (b) TERMINATION WITHOUT CAUSE. If the Executive's employment shall terminate without Cause (pursuant to SECTION 5(a)(iv)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive, for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, his Annual Base Salary as in effect on the Date of Termination; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time; and (iii) continue for one year the Executive's coverage under the Company medical and dental plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination (or, if the Company amends, replaces or terminates any such plan or program following such Date of Termination, the Company medical and dental plans provided to employees similarly situated to Executive), as if the Executive were an active employee during such time, subject to standard employee contributions by the Executive as are required under such plans, and further subject to the Executive's election of "COBRA" continuation coverage during such period. All post-employment coverage under such plans shall be co-extensive with COBRA continuation coverage required by federal (and where applicable by state) law, and shall cease if the Executive becomes eligible for coverage under another employer's plans. 5 6 (c) TERMINATION BY REASON OF DEATH OR DISABILITY. If the Executive's employment shall terminate by reason of his death or Disability (pursuant to SECTION 5(a)(i) or (ii)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive (or to his estate or beneficiaries in the event of his death), for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, the excess of his Annual Base Salary as in effect on the Date of Termination over the aggregate amount of any payments made to or on behalf of the Executive during such 24-month period under any life insurance, disability insurance or death benefit program maintained by the Company; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time. 7. SURVIVAL. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto which shall have accrued hereunder prior to such expiration. 8. Intentionally Left Blank 9. COMPETITION. (a) The Executive shall not engage in any Prohibited Competition (as defined below in SECTION 9(b)) at any time during the Term and for a period of two years thereafter. (b) For purposes of this Agreement, the Executive shall be considered to engage in prohibited competition ("Prohibited Competition") if the Executive shall: directly or indirectly, engage in or own, manage, join, operate or control, or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, or permit his name to be used by or in connection with, any business or organization which produces, designs, conducts research on, provides, sells, leases, distributes or markets accessories, chemicals, forming and related products used in concrete and masonry construction (the "Business") which, directly or indirectly, competes with the Business conducted by Company and its subsidiaries in North America, South America and Europe, it being understood that the foregoing shall not limit the Executive from making passive investments of less than 5% of the outstanding equity securities in any entity listed for trading on a national stock exchange or quoted on any recognized automatic quotation system. (c) In the event any the terms of this SECTION 9 shall be determined by any court of competent jurisdiction to be unenforceable by reason of extending for too great a period of time or over too great a geographical area or by reason of being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. 6 7 10. NONDISCLOSURE OF PROPRIETARY INFORMATION. (a) Except as required in the faithful performance of the Executive's duties hereunder or pursuant to subsection (c), the Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets, and any other information that would be protected under the Uniform Trade Secrets Act in Ohio, of or relating to the Company, including, without limitation, information with respect to the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment, or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. The parties hereby stipulate and agree that as between them the foregoing matters are important, material and confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the Company (and any successor or assignee of the Company). The parties hereto agree that "confidential or proprietary information" shall not include information that (i) is a matter of public knowledge (other than by act of the Executive in violation hereof); (ii) was provided to the Executive (without breach of any obligation of confidence owed to the Company) by a third party which is not an affiliate of the Company or (iii) is required to be disclosed by law or judicial or administrative process. (b) Upon termination of the Executive's employment with Company for any reason and upon the Company's request, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning, without limitation, the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment and/or which contain proprietary information or trade secrets. (c) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process. 11. INJUNCTIVE RELIEF. It is recognized and acknowledged by the Executive that a breach of the covenants contained in SECTIONS 9 AND 10 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in SECTIONS 9 AND 10, in addition to any 7 8 other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief. 12. BINDING ON SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. 13. GOVERNING LAW. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Ohio. 14. VALIDITY. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 15. NOTICES. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows: (a) If to the Company: Dayton Superior Corporation 7777 Washington Village Dr., Suite 130 Dayton, OH 45459 Attn: General Counsel Phone: (937) 428-6360 Fax: (937) 428-9115 With copies to: Odyssey Investment Partners Fund, LP 280 Park Avenue West Tower, 38th Floor New York, New York 10017 Attn: William Hopkins Phone: (212) 351-7900 Fax: (212) 351-7925 and Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attn: Maureen A. Riley Phone: (212) 906-1200 8 9 Fax: (212) 751-4864 (b) If to the Executive, to him at the address set forth below under his signature; with a copy to: Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, OH 44144-1304 Attn: Mary Ann Jorgenson Phone: (216) 479-8654 Fax: (216) 479-8776 or at any other address as any party shall have specified by notice in writing to the other parties. 16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 17. ENTIRE AGREEMENT. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. 18. AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the Chairman of the Board. By an instrument in writing similarly executed, the Executive or the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity. 19. NO INCONSISTENT ACTIONS. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement. 20. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio in accordance with the rules of the American Arbitration 9 10 Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of SECTIONS 9 OR 10 of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without the necessity of the Company's posting any bond. Each of the parties hereto shall bear its share of the fees and expenses of any arbitration hereunder. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. THE COMPANY ----------- DAYTON SUPERIOR CORPORATION By: /s/ John A. Ciccarelli ---------------------- Name: John A. Ciccarelli Title: President and Chief Executive Officer THE EXECUTIVE ------------- /s/ Alan F. McIlroy -------------------- Alan F. McIlroy Address: 9668 Preserve Place Centerville, OH 45458 10 EX-10.12 5 EXHIBIT 10.12 1 Exhibit 10.12 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement dated as of January 19, 2000 and effective as of the Effective Date (as defined below), is made by and between Dayton Superior Corporation, an Ohio corporation (together with any successor thereto, the "Company"), and Raymond E. Bartholomae (the "Executive"). RECITALS -------- WHEREAS, the Executive has prior to the date hereof been employed by the Company (or one of its subsidiaries) as Vice President and General Manager, Symons; and WHEREAS, it is the desire of the Company to assure itself of the continuity of the management services of the Executive following the consummation of the merger contemplated by the Agreement and Plan of Merger by and between the Company and Stone Acquisition Corp. dated as of January 19, 2000 (the "Merger Agreement"); and WHEREAS, it is the desire of the Company to assure itself of the services of the Executive by engaging the Executive to perform such services under the terms hereof, and the Executive desires to commit himself to serve the Company on the terms herein provided; and WHEREAS, the Company and the Executive intend this Agreement to be effective as of the consummation of the merger contemplated in the Merger Agreement (the "Effective Date"); and WHEREAS, the Company and the Executive intend that if the merger contemplated in the Merger Agreement is not consummated, this Employment Agreement shall be of no force or effect. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) "Annual Base Salary" shall have the meaning set forth in SECTION 4. (b) "Board" shall mean the Board of Directors of the Company. (c) The Company shall have "Cause" to terminate the Executive's employment hereunder upon the Executive's: 2 (i) willful or gross misconduct or material failure in the performance of his duties and responsibilities hereunder, other than any such failure resulting from the Executive's Disability, which misconduct or failure continues beyond 14 days after the Company notifies the Executive, in writing, of the Company's finding of such misconduct or failure; or (ii) conviction of or plea of guilty or nolo contendre to, a felony, or a crime involving moral turpitude; or (iii) fraud or personal dishonesty involving the Company's assets. (d) "Common Stock" shall mean the common stock of the Company, $0.01 par value per share. (e) "Company" shall have the meaning set forth in the preamble hereto. (f) "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, or, (ii) if the Executive's employment is terminated pursuant to SECTION 5(a)(ii) - (v), the date specified in the Notice of Termination. (g) "Disability" shall mean the absence of the Executive from the Executive's duties to the Company on a full-time basis for a total of 180 days during any twelve month period as a result of physical, mental or emotional incapacity due to illness, injury or disease. (h) "Effective Date" shall have the meaning set forth in the recitals hereto. (i) "Executive" shall have the meaning set forth in the preamble hereto. (j) "Management Stockholders' Agreement" shall mean that certain Management Stockholders' Agreement to be entered into by and among the Company, Odyssey Investment Partners Fund, LP, the Executive and the other stockholders party thereto effective as of the Effective Date, the terms of which have previously been accepted by Executive pursuant to that certain letter agreement and Management Compensation and Equity Term Sheet dated as of the date hereof and attached hereto. (k) "Merger Agreement" shall have the meaning set forth in the recitals hereto. (l) "Notice of Termination" shall have the meaning set forth in SECTION 5(b). (m) "Option Agreements" shall mean the written agreements between the Company and the Executive pursuant to which the Executive holds or is granted options to purchase Common Stock, including, without limitation, agreements evidencing options granted under the Option Plan and agreements governing the terms of "Roll-Over Options" (as defined in the Management Stockholders' Agreement). (n) "Option Plan" shall mean the 2000 Stock Option Plan of Dayton Superior Corporation, as amended from time to time. 2 3 (o) "Options" as of any date of determination shall mean options held by the Executive as of such date to purchase Common Stock of the Company. (p) "Stock Option Agreement" shall have the meaning set forth in SECTION 4(c). (q) "Prohibited Competition" shall have the meaning set forth in SECTION 9(b). (r) "Term" shall have the meaning set forth in SECTION 2(b). 2. EMPLOYMENT. (a) The Company shall employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in this SECTION 2, in the positions set forth in SECTION 3 and upon the other terms and conditions herein provided. The initial term of employment under this Agreement (the "Initial Term") shall be for the period of 3 years beginning on the Effective Date, unless earlier terminated as provided in SECTION 5. (b) The employment term hereunder shall automatically be extended for successive one (1) year periods ("Extension Terms" and, collectively with the Initial Term, the "Term") unless either party gives notice of non-extension to the other no later than 90 days prior to the expiration of the then-applicable Term. 3. POSITION AND DUTIES. The Executive shall serve as Vice President and General Manager, Symons with such responsibilities, duties and authority as are customary for someone serving in such position at companies similar in size to the Company, together with such other duties and responsibilities as may from time to time be assigned to the Executive by the Board and the Chief Executive Officer of the Company, consistent with his position. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company; provided that it shall not be considered a violation of the foregoing for the Executive to (i) with the prior consent of the Board (which consent shall not unreasonably be withheld), serve on corporate, industry, civic or charitable boards or committees, and (ii) manage his personal investments, so long as none of such activities significantly interferes with the Executive's duties hereunder. 4. COMPENSATION AND RELATED MATTERS. (a) ANNUAL BASE SALARY. During the Term, the Executive shall receive a base salary at a rate of $197,000 per annum ("Annual Base Salary"), payable in accordance with the Company's standard payroll procedures. The rate of Annual Base Salary shall be subject to increase as determined by the Board in its discretion. (b) BONUS. During the Term, the Executive shall be eligible to participate in the Company's executive annual bonus plan as in effect from time to time. (c) STOCK OPTIONS. Effective as of the Effective Date, the Executive shall be awarded options to purchase shares of Common Stock pursuant to the Option Plan and one or more 3 4 written Stock Option Agreements to be entered into by and between the Company and the Executive. (d) BENEFITS. During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company (including vacation) in effect as of the date hereof (or, to the extent determined by the Board, in effect hereafter) which are applicable to the senior officers of the Company, subject to and on a basis consistent with the terms, conditions and overall administration generally thereof. Furthermore, during the first 12 months of the Term following the Effective Date, the benefits provided under such employee benefit plans, programs and arrangements (other than any stock option, restricted stock or other equity based plan) shall, in the aggregate, be substantially equivalent to the benefits provided by the Company as of the Effective Date (other than any stock option, restricted stock or other equity based plan). (e) EXPENSES. The Company shall reimburse the Executive for all reasonable travel and other business expenses properly incurred by him in the performance of his duties to the Company, in accordance with the Company's documentation and other policies with respect thereto. 5. TERMINATION. The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances: (a) CIRCUMSTANCES. (i) DEATH. The Executive's employment hereunder shall terminate upon his death. (ii) DISABILITY. If the Company determines in good faith that the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties. The Executive shall continue to receive his Annual Base Salary until the Date of Termination. (iii) TERMINATION FOR CAUSE. The Company may terminate the Executive's employment hereunder for Cause at any time. (iv) TERMINATION WITHOUT CAUSE. The Company may terminate the Executive's employment hereunder without Cause at any time. (v) RESIGNATION. The Executive may resign his employment upon 30 days written notice to the Company. 4 5 (b) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive under this SECTION 5 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and specifying a Date of Termination (a "Notice of Termination"). For purposes of this Agreement, the "Date of Termination" shall be (i) with respect to any termination by reason of Executive's Disability, 30 days following the receipt of the notice described in SECTION 5(a)(ii), (ii) with respect to Executive's termination for Cause, the date of the Notice of Termination, and (iii) with respect to the Executive's termination for any other reason, at least 30 days following the date of the Notice of Termination. 6. SEVERANCE PAYMENTS. (a) TERMINATION FOR ANY REASON. In the event the Executive's employment with the Company is terminated for any reason, the Company shall pay the Executive (or his beneficiary in the event of his death) any unpaid Annual Base Salary that has accrued as of the Date of Termination, any unreimbursed expenses due to the Executive and an amount for accrued but unused sick days and vacation days. The Executive shall also be entitled to accrued, vested benefits under the Company's applicable employee benefit plans, programs and arrangements as provided therein. The Executive shall be entitled to the additional payments and benefits described below only as set forth herein. (b) TERMINATION WITHOUT CAUSE. If the Executive's employment shall terminate without Cause (pursuant to SECTION 5(a)(iv)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive, for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, his Annual Base Salary as in effect on the Date of Termination; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time; and (iii) continue for one year the Executive's coverage under the Company medical and dental plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination (or, if the Company amends, replaces or terminates any such plan or program following such Date of Termination, the Company medical and dental plans provided to employees similarly situated to Executive), as if the Executive were an active employee during such time, subject to standard employee contributions by the Executive as are required under such plans, and further subject to the Executive's election of "COBRA" continuation coverage during such period. All post-employment coverage under such plans shall be co-extensive with COBRA continuation coverage required by federal (and where applicable by state) law, and shall cease if the Executive becomes eligible for coverage under another employer's plans. 5 6 (c) TERMINATION BY REASON OF DEATH OR DISABILITY. If the Executive's employment shall terminate by reason of his death or Disability (pursuant to SECTION 5(a)(i) or (ii)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive (or to his estate or beneficiaries in the event of his death), for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, the excess of his Annual Base Salary as in effect on the Date of Termination over the aggregate amount of any payments made to or on behalf of the Executive during such 24-month period under any life insurance, disability insurance or death benefit program maintained by the Company; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time. 7. SURVIVAL. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto which shall have accrued hereunder prior to such expiration. 8. Intentionally Left Blank 9. COMPETITION. (a) The Executive shall not engage in any Prohibited Competition (as defined below in SECTION 9(b)) at any time during the Term and for a period of two years thereafter. (b) For purposes of this Agreement, the Executive shall be considered to engage in prohibited competition ("Prohibited Competition") if the Executive shall: directly or indirectly, engage in or own, manage, join, operate or control, or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, or permit his name to be used by or in connection with, any business or organization which produces, designs, conducts research on, provides, sells, leases, distributes or markets accessories, chemicals, forming and related products used in concrete and masonry construction (the "Business") which, directly or indirectly, competes with the Business conducted by Company and its subsidiaries in North America, South America and Europe, it being understood that the foregoing shall not limit the Executive from making passive investments of less than 5% of the outstanding equity securities in any entity listed for trading on a national stock exchange or quoted on any recognized automatic quotation system. (c) In the event any the terms of this SECTION 9 shall be determined by any court of competent jurisdiction to be unenforceable by reason of extending for too great a period of time or over too great a geographical area or by reason of being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. 6 7 10. NONDISCLOSURE OF PROPRIETARY INFORMATION. (a) Except as required in the faithful performance of the Executive's duties hereunder or pursuant to subsection (c), the Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets, and any other information that would be protected under the Uniform Trade Secrets Act in Ohio, of or relating to the Company, including, without limitation, information with respect to the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment, or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. The parties hereby stipulate and agree that as between them the foregoing matters are important, material and confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the Company (and any successor or assignee of the Company). The parties hereto agree that "confidential or proprietary information" shall not include information that (i) is a matter of public knowledge (other than by act of the Executive in violation hereof); (ii) was provided to the Executive (without breach of any obligation of confidence owed to the Company) by a third party which is not an affiliate of the Company or (iii) is required to be disclosed by law or judicial or administrative process. (b) Upon termination of the Executive's employment with Company for any reason and upon the Company's request, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning, without limitation, the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment and/or which contain proprietary information or trade secrets. (c) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process. 11. INJUNCTIVE RELIEF. It is recognized and acknowledged by the Executive that a breach of the covenants contained in SECTIONS 9 AND 10 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in SECTIONS 9 AND 10, in addition to any 7 8 other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief. 12. BINDING ON SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. 13. GOVERNING LAW. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Ohio. 14. VALIDITY. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 15. NOTICES. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows: (a) If to the Company: Dayton Superior Corporation 7777 Washington Village Dr., Suite 130 Dayton, OH 45459 Attn: General Counsel Phone: (937) 428-6360 Fax: (937) 428-9115 With copies to: Odyssey Investment Partners Fund, LP 280 Park Avenue West Tower, 38th Floor New York, New York 10017 Attn: William Hopkins Phone: (212) 351-7900 Fax: (212) 351-7925 and Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attn: Maureen A. Riley Phone: (212) 906-1200 8 9 Fax: (212) 751-4864 (b) If to the Executive, to him at the address set forth below under his signature; with a copy to: Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, OH 44144-1304 Attn: Mary Ann Jorgenson Phone: (216) 479-8654 Fax: (216) 479-8776 or at any other address as any party shall have specified by notice in writing to the other parties. 16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 17. ENTIRE AGREEMENT. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. 18. AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the Chairman of the Board. By an instrument in writing similarly executed, the Executive or the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity. 19. NO INCONSISTENT ACTIONS. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement. 20. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio in accordance with the rules of the American Arbitration 9 10 Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of SECTIONS 9 OR 10 of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without the necessity of the Company's posting any bond. Each of the parties hereto shall bear its share of the fees and expenses of any arbitration hereunder. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. THE COMPANY ----------- DAYTON SUPERIOR CORPORATION By: /s/ John A. Ciccarelli ---------------------- Name: John A. Ciccarelli Title: President and Chief Executive Officer THE EXECUTIVE ------------- /s/ Raymond E. Bartholomae -------------------------- Raymond E. Bartholomae Address: 28223 Graybarn Ln. Lake Barrington, IL 60010 10 EX-10.13 6 EXHIBIT 10.13 1 Exhibit 10.13 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement dated as of January 19, 2000 and effective as of the Effective Date (as defined below), is made by and between Dayton Superior Corporation, an Ohio corporation (together with any successor thereto, the "Company"), and Michael C. Deis, Sr. (the "Executive"). RECITALS -------- WHEREAS, the Executive has prior to the date hereof been employed by the Company (or one of its subsidiaries) as Vice President and General Manager, Dayton/Richmond; and WHEREAS, it is the desire of the Company to assure itself of the continuity of the management services of the Executive following the consummation of the merger contemplated by the Agreement and Plan of Merger by and between the Company and Stone Acquisition Corp. dated as of January 19, 2000 (the "Merger Agreement"); and WHEREAS, it is the desire of the Company to assure itself of the services of the Executive by engaging the Executive to perform such services under the terms hereof, and the Executive desires to commit himself to serve the Company on the terms herein provided; and WHEREAS, the Company and the Executive intend this Agreement to be effective as of the consummation of the merger contemplated in the Merger Agreement (the "Effective Date"); and WHEREAS, the Company and the Executive intend that if the merger contemplated in the Merger Agreement is not consummated, this Employment Agreement shall be of no force or effect. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) "Annual Base Salary" shall have the meaning set forth in SECTION 4. (b) "Board" shall mean the Board of Directors of the Company. (c) The Company shall have "Cause" to terminate the Executive's employment hereunder upon the Executive's: 2 (i) willful or gross misconduct or material failure in the performance of his duties and responsibilities hereunder, other than any such failure resulting from the Executive's Disability, which misconduct or failure continues beyond 14 days after the Company notifies the Executive, in writing, of the Company's finding of such misconduct or failure; or (ii) conviction of or plea of guilty or nolo contendre to, a felony, or a crime involving moral turpitude; or (iii) fraud or personal dishonesty involving the Company's assets. (d) "Common Stock" shall mean the common stock of the Company, $0.01 par value per share. (e) "Company" shall have the meaning set forth in the preamble hereto. (f) "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, or, (ii) if the Executive's employment is terminated pursuant to SECTION 5(a)(ii) - (v), the date specified in the Notice of Termination. (g) "Disability" shall mean the absence of the Executive from the Executive's duties to the Company on a full-time basis for a total of 180 days during any twelve month period as a result of physical, mental or emotional incapacity due to illness, injury or disease. (h) "Effective Date" shall have the meaning set forth in the recitals hereto. (i) "Executive" shall have the meaning set forth in the preamble hereto. (j) "Management Stockholders' Agreement" shall mean that certain Management Stockholders' Agreement to be entered into by and among the Company, Odyssey Investment Partners Fund, LP, the Executive and the other stockholders party thereto effective as of the Effective Date, the terms of which have previously been accepted by Executive pursuant to that certain letter agreement and Management Compensation and Equity Term Sheet dated as of the date hereof and attached hereto. (k) "Merger Agreement" shall have the meaning set forth in the recitals hereto. (l) "Notice of Termination" shall have the meaning set forth in SECTION 5(b). (m) "Option Agreements" shall mean the written agreements between the Company and the Executive pursuant to which the Executive holds or is granted options to purchase Common Stock, including, without limitation, agreements evidencing options granted under the Option Plan and agreements governing the terms of "Roll-Over Options" (as defined in the Management Stockholders' Agreement). (n) "Option Plan" shall mean the 2000 Stock Option Plan of Dayton Superior Corporation, as amended from time to time. 2 3 (o) "Options" as of any date of determination shall mean options held by the Executive as of such date to purchase Common Stock of the Company. (p) "Stock Option Agreement" shall have the meaning set forth in SECTION 4(c). (q) "Prohibited Competition" shall have the meaning set forth in SECTION 9(b). (r) "Term" shall have the meaning set forth in SECTION 2(b). 2. EMPLOYMENT. (a) The Company shall employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in this SECTION 2, in the positions set forth in SECTION 3 and upon the other terms and conditions herein provided. The initial term of employment under this Agreement (the "Initial Term") shall be for the period of 3 years beginning on the Effective Date, unless earlier terminated as provided in SECTION 5. (b) The employment term hereunder shall automatically be extended for successive one (1) year periods ("Extension Terms" and, collectively with the Initial Term, the "Term") unless either party gives notice of non-extension to the other no later than 90 days prior to the expiration of the then-applicable Term. 3. POSITION AND DUTIES. The Executive shall serve as Vice President and General Manager, Dayton/Richmond with such responsibilities, duties and authority as are customary for someone serving in such position at companies similar in size to the Company, together with such other duties and responsibilities as may from time to time be assigned to the Executive by the Board and the Chief Executive Officer of the Company, consistent with his position. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company; provided that it shall not be considered a violation of the foregoing for the Executive to (i) with the prior consent of the Board (which consent shall not unreasonably be withheld), serve on corporate, industry, civic or charitable boards or committees, and (ii) manage his personal investments, so long as none of such activities significantly interferes with the Executive's duties hereunder. 4. Compensation and Related Matters. (a) ANNUAL BASE SALARY. During the Term, the Executive shall receive a base salary at a rate of $190,000 per annum ("Annual Base Salary"), payable in accordance with the Company's standard payroll procedures. The rate of Annual Base Salary shall be subject to increase as determined by the Board in its discretion. (b) BONUS. During the Term, the Executive shall be eligible to participate in the Company's executive annual bonus plan as in effect from time to time. (c) STOCK OPTIONS. Effective as of the Effective Date, the Executive shall be awarded options to purchase shares of Common Stock pursuant to the Option Plan and one or more 3 4 written Stock Option Agreements to be entered into by and between the Company and the Executive. (d) BENEFITS. During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company (including vacation) in effect as of the date hereof (or, to the extent determined by the Board, in effect hereafter) which are applicable to the senior officers of the Company, subject to and on a basis consistent with the terms, conditions and overall administration generally thereof. Furthermore, during the first 12 months of the Term following the Effective Date, the benefits provided under such employee benefit plans, programs and arrangements (other than any stock option, restricted stock or other equity based plan) shall, in the aggregate, be substantially equivalent to the benefits provided by the Company as of the Effective Date (other than any stock option, restricted stock or other equity based plan). (e) EXPENSES. The Company shall reimburse the Executive for all reasonable travel and other business expenses properly incurred by him in the performance of his duties to the Company, in accordance with the Company's documentation and other policies with respect thereto. 5. TERMINATION. The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances: (a) CIRCUMSTANCES. (i) DEATH. The Executive's employment hereunder shall terminate upon his death. (ii) DISABILITY. If the Company determines in good faith that the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties. The Executive shall continue to receive his Annual Base Salary until the Date of Termination. (iii) TERMINATION FOR CAUSE. The Company may terminate the Executive's employment hereunder for Cause at any time. (iv) TERMINATION WITHOUT CAUSE. The Company may terminate the Executive's employment hereunder without Cause at any time. (v) RESIGNATION. The Executive may resign his employment upon 30 days written notice to the Company. 4 5 (b) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive under this SECTION 5 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and specifying a Date of Termination (a "Notice of Termination"). For purposes of this Agreement, the "Date of Termination" shall be (i) with respect to any termination by reason of Executive's Disability, 30 days following the receipt of the notice described in SECTION 5(a)(ii), (ii) with respect to Executive's termination for Cause, the date of the Notice of Termination, and (iii) with respect to the Executive's termination for any other reason, at least 30 days following the date of the Notice of Termination. 6. SEVERANCE PAYMENTS. (a) TERMINATION FOR ANY REASON. In the event the Executive's employment with the Company is terminated for any reason, the Company shall pay the Executive (or his beneficiary in the event of his death) any unpaid Annual Base Salary that has accrued as of the Date of Termination, any unreimbursed expenses due to the Executive and an amount for accrued but unused sick days and vacation days. The Executive shall also be entitled to accrued, vested benefits under the Company's applicable employee benefit plans, programs and arrangements as provided therein. The Executive shall be entitled to the additional payments and benefits described below only as set forth herein. (b) TERMINATION WITHOUT CAUSE. If the Executive's employment shall terminate without Cause (pursuant to SECTION 5(a)(iv)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive, for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, his Annual Base Salary as in effect on the Date of Termination; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time; and (iii) continue for one year the Executive's coverage under the Company medical and dental plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination (or, if the Company amends, replaces or terminates any such plan or program following such Date of Termination, the Company medical and dental plans provided to employees similarly situated to Executive), as if the Executive were an active employee during such time, subject to standard employee contributions by the Executive as are required under such plans, and further subject to the Executive's election of "COBRA" continuation coverage during such period. All post-employment coverage under such plans shall be co-extensive with COBRA continuation coverage required by federal (and where applicable by state) law, and shall cease if the Executive becomes eligible for coverage under another employer's plans. 5 6 (c) TERMINATION BY REASON OF DEATH OR DISABILITY. If the Executive's employment shall terminate by reason of his death or Disability (pursuant to SECTION 5(a)(i) or (ii)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive (or to his estate or beneficiaries in the event of his death), for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, the excess of his Annual Base Salary as in effect on the Date of Termination over the aggregate amount of any payments made to or on behalf of the Executive during such 24-month period under any life insurance, disability insurance or death benefit program maintained by the Company; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time. 7. SURVIVAL. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto which shall have accrued hereunder prior to such expiration. 8. Intentionally Left Blank 9. COMPETITION. (a) The Executive shall not engage in any Prohibited Competition (as defined below in SECTION 9(b)) at any time during the Term and for a period of two years thereafter. (b) For purposes of this Agreement, the Executive shall be considered to engage in prohibited competition ("Prohibited Competition") if the Executive shall: directly or indirectly, engage in or own, manage, join, operate or control, or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, or permit his name to be used by or in connection with, any business or organization which produces, designs, conducts research on, provides, sells, leases, distributes or markets accessories, chemicals, forming and related products used in concrete and masonry construction (the "Business") which, directly or indirectly, competes with the Business conducted by Company and its subsidiaries in North America, South America and Europe, it being understood that the foregoing shall not limit the Executive from making passive investments of less than 5% of the outstanding equity securities in any entity listed for trading on a national stock exchange or quoted on any recognized automatic quotation system. (c) In the event any the terms of this SECTION 9 shall be determined by any court of competent jurisdiction to be unenforceable by reason of extending for too great a period of time or over too great a geographical area or by reason of being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. 6 7 10. NONDISCLOSURE OF PROPRIETARY INFORMATION. (a) Except as required in the faithful performance of the Executive's duties hereunder or pursuant to subsection (c), the Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets, and any other information that would be protected under the Uniform Trade Secrets Act in Ohio, of or relating to the Company, including, without limitation, information with respect to the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment, or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. The parties hereby stipulate and agree that as between them the foregoing matters are important, material and confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the Company (and any successor or assignee of the Company). The parties hereto agree that "confidential or proprietary information" shall not include information that (i) is a matter of public knowledge (other than by act of the Executive in violation hereof); (ii) was provided to the Executive (without breach of any obligation of confidence owed to the Company) by a third party which is not an affiliate of the Company or (iii) is required to be disclosed by law or judicial or administrative process. (b) Upon termination of the Executive's employment with Company for any reason and upon the Company's request, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning, without limitation, the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment and/or which contain proprietary information or trade secrets. (c) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process. 11. INJUNCTIVE RELIEF. It is recognized and acknowledged by the Executive that a breach of the covenants contained in SECTIONS 9 AND 10 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in SECTIONS 9 AND 10, in addition to any 7 8 other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief. 12. BINDING ON SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. 13. GOVERNING LAW. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Ohio. 14. VALIDITY. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 15. NOTICES. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows: (a) If to the Company: Dayton Superior Corporation 7777 Washington Village Dr., Suite 130 Dayton, OH 45459 Attn: General Counsel Phone: (937) 428-6360 Fax: (937) 428-9115 With copies to: Odyssey Investment Partners Fund, LP 280 Park Avenue West Tower, 38th Floor New York, New York 10017 Attn: William Hopkins Phone: (212) 351-7900 Fax: (212) 351-7925 and Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attn: Maureen A. Riley Phone: (212) 906-1200 8 9 Fax: (212) 751-4864 (b) If to the Executive, to him at the address set forth below under his signature; with a copy to: Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, OH 44144-1304 Attn: Mary Ann Jorgenson Phone: (216) 479-8654 Fax: (216) 479-8776 or at any other address as any party shall have specified by notice in writing to the other parties. 16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 17. ENTIRE AGREEMENT. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. 18. AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the Chairman of the Board. By an instrument in writing similarly executed, the Executive or the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity. 19. NO INCONSISTENT ACTIONS. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement. 20. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; 9 10 provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of SECTIONS 9 OR 10 of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without the necessity of the Company's posting any bond. Each of the parties hereto shall bear its share of the fees and expenses of any arbitration hereunder. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. THE COMPANY ----------- DAYTON SUPERIOR CORPORATION By: /s/ John A. Ciccarelli ---------------------- Name: John A. Ciccarelli Title: President and Chief Executive Officer THE EXECUTIVE ------------- /s/ Michael C. Deis, SR. ------------------------ Michael C. Deis, Sr. Address: Home: 1253 Oakleaf Dr. Beavercreek, Ohio 45434 Office: 721 Richard St. Miamisburg, Ohio 45342 EX-10.14 7 EXHIBIT 10.14 1 Exhibit 10.14 EMPLOYMENT AGREEMENT -------------------- This Employment Agreement dated as of January 19, 2000 and effective as of the Effective Date (as defined below), is made by and between Dayton Superior Corporation, an Ohio corporation (together with any successor thereto, the "Company"), and James C. Stewart (the "Executive"). RECITALS -------- WHEREAS, the Executive has prior to the date hereof been employed by the Company (or one of its subsidiaries) as Vice President, Corporate Development; and WHEREAS, it is the desire of the Company to assure itself of the continuity of the management services of the Executive following the consummation of the merger contemplated by the Agreement and Plan of Merger by and between the Company and Stone Acquisition Corp. dated as of January 19, 2000 (the "Merger Agreement"); and WHEREAS, it is the desire of the Company to assure itself of the services of the Executive by engaging the Executive to perform such services under the terms hereof, and the Executive desires to commit himself to serve the Company on the terms herein provided; and WHEREAS, the Company and the Executive intend this Agreement to be effective as of the consummation of the merger contemplated in the Merger Agreement (the "Effective Date"); and WHEREAS, the Company and the Executive intend that if the merger contemplated in the Merger Agreement is not consummated, this Employment Agreement shall be of no force or effect. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) "Annual Base Salary" shall have the meaning set forth in SECTION 4. (b) "Board" shall mean the Board of Directors of the Company. (c) The Company shall have "Cause" to terminate the Executive's employment hereunder upon the Executive's: 2 (i) willful or gross misconduct or material failure in the performance of his duties and responsibilities hereunder, other than any such failure resulting from the Executive's Disability, which misconduct or failure continues beyond 14 days after the Company notifies the Executive, in writing, of the Company's finding of such misconduct or failure; or (ii) conviction of or plea of guilty or nolo contendre to, a felony, or a crime involving moral turpitude; or (iii) fraud or personal dishonesty involving the Company's assets. (d) "Common Stock" shall mean the common stock of the Company, $0.01 par value per share. (e) "Company" shall have the meaning set forth in the preamble hereto. (f) "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, or, (ii) if the Executive's employment is terminated pursuant to SECTION 5(a)(ii) - (v), the date specified in the Notice of Termination. (g) "Disability" shall mean the absence of the Executive from the Executive's duties to the Company on a full-time basis for a total of 180 days during any twelve month period as a result of physical, mental or emotional incapacity due to illness, injury or disease. (h) "Effective Date" shall have the meaning set forth in the recitals hereto. (i) "Executive" shall have the meaning set forth in the preamble hereto. (j) "Management Stockholders' Agreement" shall mean that certain Management Stockholders' Agreement to be entered into by and among the Company, Odyssey Investment Partners Fund, LP, the Executive and the other stockholders party thereto effective as of the Effective Date, the terms of which have previously been accepted by Executive pursuant to that certain letter agreement and Management Compensation and Equity Term Sheet dated as of the date hereof and attached hereto. (k) "Merger Agreement" shall have the meaning set forth in the recitals hereto. (l) "Notice of Termination" shall have the meaning set forth in SECTION 5(b). (m) "Option Agreements" shall mean the written agreements between the Company and the Executive pursuant to which the Executive holds or is granted options to purchase Common Stock, including, without limitation, agreements evidencing options granted under the Option Plan and agreements governing the terms of "Roll-Over Options" (as defined in the Management Stockholders' Agreement). (n) "Option Plan" shall mean the 2000 Stock Option Plan of Dayton Superior Corporation, as amended from time to time. 2 3 (o) "Options" as of any date of determination shall mean options held by the Executive as of such date to purchase Common Stock of the Company. (p) "Stock Option Agreement" shall have the meaning set forth in SECTION 4(c). (q) "Prohibited Competition" shall have the meaning set forth in SECTION 9(b). (r) "Term" shall have the meaning set forth in SECTION 2(b). 2. EMPLOYMENT. (a) The Company shall employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in this SECTION 2, in the positions set forth in SECTION 3 and upon the other terms and conditions herein provided. The initial term of employment under this Agreement (the "Initial Term") shall be for the period of 3 years beginning on the Effective Date, unless earlier terminated as provided in SECTION 5. (b) The employment term hereunder shall automatically be extended for successive one (1) year periods ("Extension Terms" and, collectively with the Initial Term, the "Term") unless either party gives notice of non-extension to the other no later than 90 days prior to the expiration of the then-applicable Term. 3. POSITION AND DUTIES. The Executive shall serve as Vice President, Corporate Development of the Company with such responsibilities, duties and authority as are customary for someone serving in such position at companies similar in size to the Company, together with such other duties and responsibilities as may from time to time be assigned to the Executive by the Board and the Chief Executive Officer of the Company, consistent with his position. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company; provided that it shall not be considered a violation of the foregoing for the Executive to (i) with the prior consent of the Board (which consent shall not unreasonably be withheld), serve on corporate, industry, civic or charitable boards or committees, and (ii) manage his personal investments, so long as none of such activities significantly interferes with the Executive's duties hereunder. 4. COMPENSATION AND RELATED MATTERS. (a) ANNUAL BASE SALARY. During the Term, the Executive shall receive a base salary at a rate of $175,000 per annum ("Annual Base Salary"), payable in accordance with the Company's standard payroll procedures. The rate of Annual Base Salary shall be subject to increase as determined by the Board in its discretion. (b) BONUS. During the Term, the Executive shall be eligible to participate in the Company's executive annual bonus plan as in effect from time to time. (c) STOCK OPTIONS. Effective as of the Effective Date, the Executive shall be awarded options to purchase shares of Common Stock pursuant to the Option Plan and one or more 3 4 written Stock Option Agreements to be entered into by and between the Company and the Executive. (d) BENEFITS. During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company (including vacation) in effect as of the date hereof (or, to the extent determined by the Board, in effect hereafter) which are applicable to the senior officers of the Company, subject to and on a basis consistent with the terms, conditions and overall administration generally thereof. Furthermore, during the first 12 months of the Term following the Effective Date, the benefits provided under such employee benefit plans, programs and arrangements (other than any stock option, restricted stock or other equity based plan) shall, in the aggregate, be substantially equivalent to the benefits provided by the Company as of the Effective Date (other than any stock option, restricted stock or other equity based plan). (e) EXPENSES. The Company shall reimburse the Executive for all reasonable travel and other business expenses properly incurred by him in the performance of his duties to the Company, in accordance with the Company's documentation and other policies with respect thereto. 5. TERMINATION. The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances: (a) CIRCUMSTANCES. (i) DEATH. The Executive's employment hereunder shall terminate upon his death. (ii) DISABILITY. If the Company determines in good faith that the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties. The Executive shall continue to receive his Annual Base Salary until the Date of Termination. (iii) TERMINATION FOR CAUSE. The Company may terminate the Executive's employment hereunder for Cause at any time. (iv) TERMINATION WITHOUT CAUSE. The Company may terminate the Executive's employment hereunder without Cause at any time. (v) RESIGNATION. The Executive may resign his employment upon 30 days written notice to the Company. 4 5 (b) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive under this SECTION 5 (other than termination pursuant to paragraph (a)(i)) shall be communicated by a written notice to the other party hereto indicating the specific termination provision in this Agreement relied upon, setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and specifying a Date of Termination (a "Notice of Termination"). For purposes of this Agreement, the "Date of Termination" shall be (i) with respect to any termination by reason of Executive's Disability, 30 days following the receipt of the notice described in SECTION 5(a)(II), (ii) with respect to Executive's termination for Cause, the date of the Notice of Termination, and (iii) with respect to the Executive's termination for any other reason, at least 30 days following the date of the Notice of Termination. 6. SEVERANCE PAYMENTS. (a) TERMINATION FOR ANY REASON. In the event the Executive's employment with the Company is terminated for any reason, the Company shall pay the Executive (or his beneficiary in the event of his death) any unpaid Annual Base Salary that has accrued as of the Date of Termination, any unreimbursed expenses due to the Executive and an amount for accrued but unused sick days and vacation days. The Executive shall also be entitled to accrued, vested benefits under the Company's applicable employee benefit plans, programs and arrangements as provided therein. The Executive shall be entitled to the additional payments and benefits described below only as set forth herein. (b) TERMINATION WITHOUT CAUSE. If the Executive's employment shall terminate without Cause (pursuant to SECTION 5(a)(iv)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive, for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, his Annual Base Salary as in effect on the Date of Termination; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time; and (iii) continue for one year the Executive's coverage under the Company medical and dental plans and programs in which the Executive was entitled to participate immediately prior to the Date of Termination (or, if the Company amends, replaces or terminates any such plan or program following such Date of Termination, the Company medical and dental plans provided to employees similarly situated to Executive), as if the Executive were an active employee during such time, subject to standard employee contributions by the Executive as are required under such plans, and further subject to the Executive's election of "COBRA" continuation coverage during such period. All post-employment coverage under such plans shall be co-extensive with COBRA continuation coverage required by federal (and where applicable by state) law, and shall cease if the Executive becomes eligible for coverage under another employer's plans. 5 6 (c) TERMINATION BY REASON OF DEATH OR DISABILITY. If the Executive's employment shall terminate by reason of his death or Disability (pursuant to SECTION 5(a)(i) or (ii)), the Company shall: (i) subject to the Executive's compliance with SECTIONS 9 AND 10, pay to the Executive (or to his estate or beneficiaries in the event of his death), for the twenty-four month period following the Date of Termination, in accordance with its regular payroll practice, the excess of his Annual Base Salary as in effect on the Date of Termination over the aggregate amount of any payments made to or on behalf of the Executive during such 24-month period under any life insurance, disability insurance or death benefit program maintained by the Company; and (ii) for the year in which the termination occurs, pay to the Executive a pro-rated amount of bonus based on the Company's executive annual bonus plan as in effect at that time. 7. SURVIVAL. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto which shall have accrued hereunder prior to such expiration. 8. Intentionally Left Blank 9. COMPETITION. (a) The Executive shall not engage in any Prohibited Competition (as defined below in SECTION 9(b)) at any time during the Term and for a period of two years thereafter. (b) For purposes of this Agreement, the Executive shall be considered to engage in prohibited competition ("Prohibited Competition") if the Executive shall: directly or indirectly, engage in or own, manage, join, operate or control, or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with, or permit his name to be used by or in connection with, any business or organization which produces, designs, conducts research on, provides, sells, leases, distributes or markets accessories, chemicals, forming and related products used in concrete and masonry construction (the "Business") which, directly or indirectly, competes with the Business conducted by Company and its subsidiaries in North America, South America and Europe, it being understood that the foregoing shall not limit the Executive from making passive investments of less than 5% of the outstanding equity securities in any entity listed for trading on a national stock exchange or quoted on any recognized automatic quotation system. (c) In the event any the terms of this SECTION 9 shall be determined by any court of competent jurisdiction to be unenforceable by reason of extending for too great a period of time or over too great a geographical area or by reason of being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. 6 7 10. NONDISCLOSURE OF PROPRIETARY INFORMATION. (a) Except as required in the faithful performance of the Executive's duties hereunder or pursuant to subsection (c), the Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information or trade secrets, and any other information that would be protected under the Uniform Trade Secrets Act in Ohio, of or relating to the Company, including, without limitation, information with respect to the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment, or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such confidential or proprietary information or trade secrets. The parties hereby stipulate and agree that as between them the foregoing matters are important, material and confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the Company (and any successor or assignee of the Company). The parties hereto agree that "confidential or proprietary information" shall not include information that (i) is a matter of public knowledge (other than by act of the Executive in violation hereof); (ii) was provided to the Executive (without breach of any obligation of confidence owed to the Company) by a third party which is not an affiliate of the Company or (iii) is required to be disclosed by law or judicial or administrative process. (b) Upon termination of the Executive's employment with Company for any reason and upon the Company's request, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning, without limitation, the Company's operations, processes, products, inventions, business practices, business strategy, business development, finances, principals, vendors, distributors, suppliers, customers, potential customers, manufacturing methods, sales methods, marketing methods, costs, prices, contractual relationships, information systems, regulatory status, compensation paid to employees or other terms of employment and/or which contain proprietary information or trade secrets. (c) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process. 11. INJUNCTIVE RELIEF. It is recognized and acknowledged by the Executive that a breach of the covenants contained in SECTIONS 9 AND 10 will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in SECTIONS 9 AND 10, in addition to any 7 8 other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief. 12. BINDING ON SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. 13. GOVERNING LAW. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Ohio. 14. VALIDITY. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 15. NOTICES. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows: (a) If to the Company: Dayton Superior Corporation 7777 Washington Village Dr., Suite 130 Dayton, OH 45459 Attn: General Counsel Phone: (937) 428-6360 Fax: (937) 428-9115 With copies to: Odyssey Investment Partners Fund, LP 280 Park Avenue West Tower, 38th Floor New York, New York 10017 Attn: William Hopkins Phone: (212) 351-7900 Fax: (212) 351-7925 and Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attn: Maureen A. Riley Phone: (212) 906-1200 8 9 Fax: (212) 751-4864 (b) If to the Executive, to him at the address set forth below under his signature; with a copy to: Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, OH 44144-1304 Attn: Mary Ann Jorgenson Phone: (216) 479-8654 Fax: (216) 479-8776 or at any other address as any party shall have specified by notice in writing to the other parties. 16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 17. ENTIRE AGREEMENT. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. 18. AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the Chairman of the Board. By an instrument in writing similarly executed, the Executive or the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity. 19. NO INCONSISTENT ACTIONS. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement. 20. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Cleveland, Ohio in accordance with the rules of the American Arbitration 9 10 Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of SECTIONS 9 OR 10 of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without the necessity of the Company's posting any bond. Each of the parties hereto shall bear its share of the fees and expenses of any arbitration hereunder. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. THE COMPANY ----------- DAYTON SUPERIOR CORPORATION By: /s/ John A. Ciccarelli ---------------------- Name: John A. Ciccarelli Title: President and Chief Executive Officer THE EXECUTIVE ------------- /s/ James C. Stewart -------------------- James C. Stewart Address: 1183 Walnut Valley Lane Centerville, OH 45458 10 EX-10.15 8 EXHIBIT 10.15 1 Exhibit 10.15 FORM OF ------- OPTION EXERCISE, CANCELLATION AND EQUITY ROLLOVER AGREEMENT ----------------------------------------------------------- AGREEMENT, dated as of January 19, 2000, by and among Stone Acquisition Corp., an Ohio Corporation ("Sub"), Dayton Superior Corporation, an Ohio Corporation (the "Company"), and the person identified on the signature page hereto (the "Employee"). Whereas, Sub and the Company have entered into that certain Agreement and Plan of Merger dated as of January 19, 2000, (as such agreement may be amended from time to time, the "Merger Agreement"; capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement) pursuant to which (and subject to the terms and conditions specified therein) Sub will be merged with and into the Company (the "Merger"). NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: The Employee hereby affirms and represents and warrants that as of the date hereof he or she (i) is the record and beneficial owner of that number of shares of Class A common shares of the Company, without par value (the "Common Stock"), as specified on Exhibit A attached hereto under the heading "Cash Buyout," (the "Buyout Shares"), and that number of shares specified under the heading "Equity Rollover" on Exhibit A (the "Rollover Shares" and collectively with the Buyout Shares, the "Prior Shares"), and he or she is the holder of the options to purchase shares of Common Stock (the "Options") of the type (ISO or NQSO), and for the number of shares and exercise price as specified on Exhibit A, (ii) owns or holds no other Equity Securities of the Company or any of its Subsidiaries and (iii) has sole power of disposition with respect to the Prior Shares and the Options and will have sole power of disposition with respect to the shares of Common Stock acquired upon the exercise of the Exercised Options (as hereinafter defined) (the "Acquired Shares") and the Series A Shares. The Employee hereby consents, covenants and agrees that (i) prior to the Effective Time, he or she will exercise those Options, if any, identified on Exhibit A under the heading "Required Option Exercise" and will exercise such additional Options as may after the date hereof be identified by Sub (collectively, the "Exercised Options"); (ii) he or she will vote all Prior Shares, all Acquired Shares, all shares of Common Stock hereafter acquired by any means (including, without limitation, by exercise of Options) (the "Additional Acquired Shares") and all Series A Shares (to the extent the vote of the Series A Shares is necessary to approve the Merger and the adoption of the Merger Agreement) in favor of, and raise no objections to, the Merger and the adoption of the Merger Agreement and the other transactions contemplated by the Merger Agreement and waive any rights of appraisal; (iii) prior to the Effective Time, all Prior Shares (other than those, if any, specified under the heading "Cash Buyout" on Exhibit A) and all Acquired Shares will be exchanged for a like number of shares of Series A Shares as contemplated by Section 6.12 of the Merger Agreement and at the Effective Time, by virtue of the Merger and without any action on the part of the Employee, each Series A Share outstanding 2 immediately prior to the Effective Time shall automatically be converted into the right to receive one Surviving Corporation Common Share. The Employee further consents, covenants and agrees that (i) certain Options (other than Exercised Options) that remain outstanding as of the Effective Time (the "Non-Exercised Options") may be eligible to be cancelled on the Effective Time in exchange for payment as described in the Merger Agreement; [(ii) the Employee and Sub will mutually identify prior to the Effective Time those Non-Exercised Options that will not be cancelled (the "Retained Options"); provided, however, that unless otherwise approved in writing by Sub prior to the Effective Time, the aggregate "Net Value" (as hereinafter defined) of the Retained Options PLUS the Net Value of the Rollover Shares and the Net Value of the Acquired Shares will not be less than the amount set forth on Exhibit A as the aggregate "Net Value Rolled" (for purposes of this Agreement, "Net Value" with respect to an Option means the excess of (x) the product of $27.00 and the number of shares of Common Stock covered by such Option over (y) the aggregate exercise price of such Option; with respect to a Rollover Share means $27; and with respect to an Acquired Share means $27 MINUS the exercise price thereof) [(it being understood that the retention of the Retained Options is a condition to the Employee's receipt of any amount pursuant to Section 3.3 of the Merger Agreement)]; (iii) Retained Options will either remain outstanding following the Effective Time or be replaced with options to purchase shares of Surviving Corporation Common Shares intended to provide the Employee with benefits and economic value comparable to the Retained Options] and (iv) he or she will execute such other documents and take such actions as may be requested by Sub in order to carry out the terms of this Agreement and will not take any actions or authorize any Person to take any actions which would be inconsistent with the terms of this Agreement. Notwithstanding anything to the contrary herein, the Employee further consents, covenants and agrees that all Prior Shares (other than those exchanged for Cash Merger Consideration in accordance with this Agreement and Section 3.4 of the Merger Agreement), all Acquired Shares, and all Retained Options (and the shares of Common Stock or Surviving Corporation Common Shares subject to purchase upon exercise thereof) will be subject to the [Management] Stockholders Agreement, which will contain provisions regarding transfer restrictions, tag-along all drag-along rights, and put and call features applicable to shares, as well as other customary terms and provisions. The Employee understands and agrees that this agreement shall be binding upon the Employee, his or her successors, assigns, heirs, administrators and executors without regard to whether the Employee is employed by the Company (or any of its Subsidiaries) as of the Effective Time. This agreement shall become void if the Merger Agreement is terminated. The Employee further agrees that a breach by him or her of his covenants hereunder will cause irreparable injury to the Sub, that the Sub has no adequate remedy at law with respect to such breach and, as a consequence, the Employee agrees that each such covenant shall be specifically enforceable against the Employee, and the Employee hereby waives and agrees not to assert any defenses against an action for specific performance. The Company hereby consents and agrees (i) if requested by the Employee, concurrently with the exercise of the Exercised Options the Company will lend to the Employee in the form of 2 3 a [non-interest bearing], recourse promissory note payable by the Employee to the Company and secured by a pledge to the Company of the Acquired Shares the principal amount requested by the Employee which shall not be greater than [the sum of] the aggregate exercise price of the Exercised Options [and the aggregate estimated federal and state income tax liabilities payable by the Employee upon such exercise as set forth on Exhibit A]; and (ii) to take such actions as are necessary to carry out the terms of this Agreement. [signature page follows] 3 4 IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. Stone Acquisition Corp. By: --------------------------- Name: Title: Dayton Superior Corporation By: --------------------------- Name: Title: Employee Name: ------------------------- Signature: -------------------- Title: ------------------------ Address: ---------------------- [EXHIBIT A omitted] 4 EX-21.1 9 EXHIBIT 21.1 1 Exhibit 21.1 Subsidiaries of Dayton Superior Corporation ------------------------------------------- Jurisdiction of Incorporation ----------------------------- Name or Organization ---- ----------------------------- Symons Concrete Forms, Inc. North Carolina Dayton Superior Canada Ltd. Ontario Dur-O-Wal, Inc. Delaware Symons Corporation Delaware Dayton Superior Capital Trust Delaware Dayton Superior FSC Corp. Barbados 67 EX-23.1 10 EXHIBIT 23.1 1 Exhibit 23.1 Consent of Independent Public Accountants ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our report, included in this Form 10-K, into the Company's previously filed Registration Statement File No. 333-25155, File No. 333-28057, File No. 333-28059 and File No. 333-28061. ARTHUR ANDERSEN LLP Dayton, Ohio March 30, 2000 68 EX-27.1 11 EXHIBIT 27.1
5 0000854709 DAYTON SUPERIOR CORPORATION 1,000 U.S. DOLLARS 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1 4,533 0 50,674 (5,589) 39,340 99,565 73,651 (29,741) 278,679 49,096 100,141 19,556 0 47,030 41,742 278,679 322,170 322,170 199,464 199,464 84,169 0 11,661 26,646 11,991 14,655 0 0 0 14,655 2.41 2.30
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