SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Rule 14a-6(e)(2))
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[ ] Definitive Additional Materials
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GARDNER DENVER, INC.
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(Name of Registrant as Specified In Its Charter)
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[GARDNER DENVER LOGO]
March 15, 2005
TO OUR STOCKHOLDERS:
You are cordially invited to attend the 2005 Annual Meeting of
Stockholders on Tuesday, May 3, 2005 at 1:30 p.m., at the Quincy
Country Club, 2410 State Street, Quincy, Illinois.
The attached Notice and Proxy Statement describe the business of
the meeting. After the transaction of formal business, a question
and answer period will follow.
We look forward to a significant vote of the Common Stock,
either in person or by proxy. This year, we are offering three
convenient ways to vote your proxy. If you are a stockholder of
record, you may use the toll-free telephone number on the proxy card
to vote your shares or you may vote your shares via the Internet by
following the simple instructions on the proxy card. If you prefer
to vote your shares by mail, simply complete, date, sign and return
your proxy card in the enclosed stamped and addressed envelope.
Regardless of your method of voting, you may revoke your proxy and
vote in person if you decide to attend the Annual Meeting.
We are now offering you the opportunity to access future
stockholder communications (e.g., annual reports, proxy statements,
related proxy materials) over the Internet instead of receiving such
communications in print. Participation is completely voluntary. If you
give your consent, in the future, when our material is available over
the Internet, the package you receive containing your proxy voting
card will contain the Internet location where the material is
available (http:// www.gardnerdenver.com). There is no cost to you for
this service other than any charges you may incur from your Internet
provider, telephone and/or cable company. Once you give your consent,
it will remain in effect until revoked, which you may do at any time
by writing to us or our transfer agent, National City Bank. In
addition, you may also request paper copies of any such communications
at any time by writing to us or our transfer agent.
Your support is appreciated, and we hope that you will be able
to join us at the May 3rd meeting.
Cordially,
/s/ Ross J. Centanni
Ross J. Centanni
Chairman, President and
Chief Executive Officer
GARDNER DENVER, INC.
1800 GARDNER EXPRESSWAY
QUINCY, ILLINOIS 62305
NOTICE OF 2005 ANNUAL MEETING OF STOCKHOLDERS
The 2005 Annual Meeting of Stockholders of Gardner Denver, Inc.
(the "Company") will be held at the Quincy Country Club, 2410 State
Street, Quincy, Illinois on Tuesday, May 3, 2005 at 1:30 p.m., for
the following purposes:
1. To elect three directors to serve for a three-year term each;
2. To approve the Company's Executive Annual Bonus Plan; and
3. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 4, 2005
are entitled to notice of, and to vote at, the meeting. Stockholders
of record may vote their proxy by completing the enclosed proxy
card, calling the toll-free number indicated on the proxy card, or
accessing the Internet website specified in the instructions
included on the proxy card. A stockholder may revoke a proxy at any
time before it is voted at the meeting by following the procedures
described in the attached Proxy Statement.
FOR THE BOARD OF DIRECTORS
Tracy D. Pagliara
Vice President, Administration,
General Counsel and Secretary
Quincy, Illinois
March 15, 2005
RETURN OF PROXIES REQUESTED
==================================================
TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE (1) SIGN, DATE AND PROMPTLY MAIL THE
ENCLOSED PROXY CARD, FOR WHICH A RETURN ENVELOPE
IS PROVIDED; (2) CALL THE TOLL-FREE NUMBER
INDICATED ON THE ENCLOSED PROXY CARD; OR (3)
ACCESS THE INTERNET WEBSITE SPECIFIED IN THE
INSTRUCTIONS ON THE PROXY CARD.
==================================================
GARDNER DENVER, INC.
1800 GARDNER EXPRESSWAY
QUINCY, ILLINOIS 62305
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Gardner
Denver, Inc. (the "Company" or "Gardner Denver") and will be voted in
accordance with the instructions given (either in a signed proxy card or
voted through the toll-free telephone or Internet procedures described
below) and not revoked. A stockholder may revoke a proxy at any time before
it is voted by (1) giving notice to the Company in writing, (2) submitting
another proxy that is properly signed and later dated, or (3) voting in
person at the meeting. Attendance at the meeting will not in and of itself
revoke a proxy.
This Proxy Statement and the enclosed proxy card were first mailed to
stockholders on or about March 23, 2005. The record date for determining the
stockholders entitled to vote at the meeting was the close of business on
March 4, 2005 (the "Record Date"). On that date, the outstanding voting
securities of the Company were 20,056,178 shares of Common Stock, par value
$0.01 ("Common Stock"). Each share of Common Stock is entitled to one vote.
A majority of the outstanding shares of Common Stock is required to
establish a quorum. Abstentions and "broker non-votes" (as described below)
will be considered present at the meeting for purposes of determining a
quorum with respect to items brought before the meeting.
Brokers holding shares for beneficial owners must vote these shares
according to specific instructions received from the owner. If specific
instructions are not received, brokers may vote these shares in their
discretion on certain routine matters, such as the election of directors.
However, the New York Stock Exchange rules preclude brokers from exercising
their voting discretion on certain proposals. In these cases, if they have
not received specific instructions from the beneficial owner, brokers may
not vote on the proposals, resulting in what is known as a "broker
non-vote."
The affirmative vote of a majority of the outstanding shares of Common
Stock having voting power present at the meeting, in person or by proxy and
voting thereon, is required to elect each of the nominees as a director of
the Company (Item 1 on the proxy card). For these purposes, abstentions and
"broker non-votes" will not be counted as voting for or against the proposal
to which it relates.
The affirmative vote of a majority of the outstanding shares of Common
Stock having voting power present at the meeting, in person or by proxy and
voting thereon, is required to approve the Executive Annual Bonus Plan (Item
2 on the proxy card). For these purposes, abstentions and "broker non-votes"
will not be counted as voting for or against the proposal to which they
relate.
The Company is not aware of any matter that will be presented to the
meeting for action on the part of the stockholders other than that stated in
the notice. If any other matter is properly brought before the meeting, it
is the intention of the persons named in the accompanying proxy to vote the
shares to which the proxy relates in accordance with their best judgment.
Stockholders of record may vote using the toll-free number listed on the
proxy card or via the Internet or they may complete, sign, date and mail the
enclosed proxy card in the postage-paid envelope provided. The telephone and
Internet voting procedures are designed to authenticate stockholders'
identities. The procedures allow stockholders to give their voting
instructions and confirm that their instructions have been properly
recorded. Specific instructions to be followed by any stockholder of record
interested in voting by telephone or the Internet are set forth on the
enclosed proxy card.
Stockholders may vote by telephone or through the Internet 24 hours a
day, 7 days a week. Telephone or Internet votes must be received by 11:59
p.m. Eastern Time on May 2, 2005 for all shares of Common Stock
1
other than shares held in the Gardner Denver, Inc. Savings Plan and the
Gardner Denver, Inc. Retirement Savings Plan, including the Gardner Denver,
Inc. Supplemental Excess Defined Contribution Plan (together, the "Savings
Plans").
Shares of Common Stock held in the Savings Plans will be voted by
Wachovia Bank, N.A. ("Wachovia"), as trustee of the Savings Plans. The
enclosed proxy card includes the number of equivalent shares credited to
your account. Voting instructions to Wachovia regarding your Savings Plans
shares must be received by 11:59 p.m. Eastern Time on April 28, 2005. Such
voting instructions can be made in the same manner as other shares of Common
Stock are voted by proxy (i.e., by returning the proxy card by mail or
voting by telephone or through the Internet as described above). A vote by
telephone or through the Internet authorizes Wachovia and the proxies named
on the enclosed proxy card to vote your shares in the same manner as if you
marked, signed and returned your proxy card. Therefore, if you vote by
telephone or Internet, there is no need to return the proxy card.
After April 28, 2005, all shares of Common Stock held in the
Savings Plans for which voting instructions have not been received,
and all shares not yet allocated to participants' accounts, will be
voted by Wachovia, as trustee, as directed by the Company, in the same
proportion (for or against) as the shares for which instructions are
received from participants in the Savings Plans. If you fail to return
a proxy properly signed or fail to cast your votes by telephone or via
the Internet by April 28, 2005, the equivalent shares of Common Stock
credited to your Savings Plans account will be voted by Wachovia, as
trustee, as directed by the Company, in the same proportion as the
shares for which instructions were received from other participants in
the Savings Plans.
The cost of soliciting proxies will be paid by the Company. The Company
will, upon request, reimburse brokerage houses, custodians, nominees and
others for their out-of-pocket and reasonable clerical expenses incurred in
connection with such solicitation. For the purpose of obtaining broad
representation at the meeting, Georgeson Shareholder Communications Inc. has
been retained by the Company to assist in the solicitation of proxies at an
anticipated cost of approximately $10,000 plus reimbursement of reasonable
expenses. Officers and employees of the Company, without being additionally
compensated, may also make requests for the return of proxies by letter,
telephone or other means or in person.
If you are a registered holder of shares, you have the option to access
future stockholder communications (e.g., annual reports, proxy statements
and related proxy materials) over the Internet instead of receiving those
documents in print. Participation is completely voluntary. If you give your
consent to receive such material electronically, in the future, when our
material is available over the Internet, the package you receive containing
your proxy voting card will contain the Internet location where such
stockholder communications are available (www.gardnerdenver.com). The
material will be presented in PDF format. There is no cost to you for this
service other than any charges you may incur from your Internet provider,
telephone and/or cable company. Once you give your consent, it will remain
in effect until you inform the Company otherwise. You may revoke your
consent at any time and/or request paper copies of any of these stockholder
communications by writing the Company's transfer agent, National City Bank,
Corporate Trust Operations, Department 5352, P.O. Box 92301, Cleveland, Ohio
44193-0900, or by writing the Company.
To give your consent to receive such material electronically, follow the
prompts when you vote by telephone or over the Internet or check the
appropriate box located at the bottom of your proxy card when you vote by
mail.
2
PROPOSAL I--ELECTION OF DIRECTORS
The authorized number of directors of the Company is presently fixed at
eight. In July 2004, the number of directors was increased from seven to
eight by decision of the Company's Board of Directors in accordance with the
Bylaws of the Company. The directors are divided into three classes, with
two classes having three members each and one class having two members.
Directors in each class are elected for three-year terms so that the term of
office of one class of directors expires at each annual meeting.
For election as directors at the Annual Meeting of Stockholders to
be held on May 3, 2005, the Board of Directors has approved the
nominations of Donald G. Barger, Jr., Raymond R. Hipp, and David D.
Petratis, who are currently directors, to serve for three-year terms
expiring in 2008. THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF
THESE NOMINEES WILL BE IN THE BEST INTERESTS OF THE STOCKHOLDERS AND,
ACCORDINGLY, RECOMMENDS A VOTE FOR ELECTION OF THESE NOMINEES, WHICH
IS ITEM 1 ON THE PROXY CARD. Proxies received in response to the
Board's solicitation will be voted FOR election of these nominees for
director if no specific instructions are included for Item 1, except
for shares held in Savings Plans which shall be voted as set forth in
the accompanying proxy. See also "General Information."
If any one of the nominees becomes unavailable or unwilling for good
reason to stand for election, the accompanying proxy will be voted for the
election of such person, if any, as shall be recommended by the Board of
Directors, or will be voted in favor of holding a vacancy to be filled by
the directors. The Company has no reason to believe that any nominee will be
unavailable or unwilling to stand for election.
The following information is provided regarding the nominees for
election as a director and each of the other directors who will continue in
office after the meeting.
NOMINEES FOR ELECTION
[PHOTO] DONALD G. BARGER, JR., age 62, has been a director of
Gardner Denver since its spin-off from Cooper Industries,
Inc. ("Cooper") in April 1994. Mr. Barger is the Senior Vice
President and Chief Financial Officer of Yellow Roadway
Corporation, a publicly held company specializing in the
transportation of goods and materials. He joined the
predecessor company, Yellow Corporation ("Yellow") in
December 2000 in the same capacity. Prior to joining Yellow,
he served as Vice President and Chief Financial Officer of
Hillenbrand Industries Inc. ("Hillenbrand"), a publicly held
company serving healthcare and funeral services, from March
1998 until December 2000. Mr. Barger was also Vice
President, Chief Financial Officer of Worthington
Industries, Inc., a publicly held manufacturer of metal and
plastic products and processed steel products, from
September 1993 until joining Hillenbrand. Mr. Barger has a
B.S. degree from the United States Naval Academy and an
M.B.A. from the University of Pennsylvania, Wharton School
of Business. Mr. Barger is a director of the Quanex
Corporation.
[PHOTO] RAYMOND R. HIPP, age 62, has been a director of Gardner
Denver since November 1998. Since July 2002, Mr. Hipp has
served as a strategic alternative and merger and acquisition
consultant. Mr. Hipp served as Chairman, President and CEO
and a Director of Alternative Resources Corporation, a
provider of information technology staffing and component
outsourcing, a position he held from July 1998 until his
retirement in June 2002. From August 1996 until May 1998,
Mr. Hipp was the Chief Executive Officer of ITI Marketing
Services, a provider of telemarketing services. Mr. Hipp has
a B.S. degree from Southeast Missouri State University.
3
[PHOTO] DAVID D. PETRATIS, age 47, was appointed a director of
Gardner Denver in July 2004. Mr. Petratis has been the
President and Chief Executive Officer of the North American
Operating Division of Schneider Electric, located in
Palatine, Illinois, since January 2004. Schneider Electric
is headquartered in Paris, France and provides a
market-leading brand of electrical distribution and
industrial control products, systems and services. Mr.
Petratis previously served as the President and Chief
Operating Officer of the North American Division of
Schneider Electric from December 2002 until his promotion.
He was President of MGE Americas, a privately held
manufacturer of power supplies, from 1996 through 2002. Mr.
Petratis earned a B.A. degree in Industrial Management from
the University of Northern Iowa and an M.B.A. from
Pepperdine University. He has held positions on the Board of
Directors of the University of California, Irvine Graduate
School of Management, the California State (Fullerton)
Quality Advisory Board and Project Independence, a community
agency in Costa Mesa, California for the developmentally
disabled. Mr. Petratis also serves on the Board of Governors
of National Electrical Manufacturers Association (NEMA).
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
TERMS EXPIRING AT THE 2006 ANNUAL MEETING OF STOCKHOLDERS
[PHOTO] ROSS J. CENTANNI, age 59, has been President and Chief
Executive Officer and a director of Gardner Denver since its
incorporation in November 1993. He has been Chairman of
Gardner Denver's Board of Directors since November 1998.
Prior to Gardner Denver's spin-off from Cooper in April
1994, he was Vice President and General Manager of Gardner
Denver's predecessor, the Gardner-Denver Industrial
Machinery Division, where he also served as Director of
Marketing from August 1985 to June 1990. He has a B.S.
degree in industrial technology and an M.B.A. degree from
Louisiana State University. Mr. Centanni is a director of
Esterline Technologies, a publicly held manufacturer of
components for avionics, propulsion and guidance systems,
and Denman Services, Inc., a privately held supplier of
medical products. He is also a member of the Petroleum
Equipment Suppliers Association Board of Directors and a
member of the Executive Committee of the International
Compressed Air and Allied Machinery Committee.
[PHOTO] RICHARD L. THOMPSON, age 65, has been a director of Gardner
Denver since November 1998. Mr. Thompson served as a Group
President and Executive Office Member of Caterpillar Inc.
("Caterpillar"), a publicly held manufacturer of
construction machinery and equipment, from 1995 until his
retirement in June 2004. He earned a B.S. in electrical
engineering and an M.B.A. from Stanford University and
completed the Caterpillar Advanced Management Program. Mr.
Thompson serves as Vice Chairman of the Board of Directors
of Lennox International, Inc., a publicly held manufacturer
of HVAC and refrigeration equipment, and as a director of
NiSource Inc., a publicly held electric and gas utility.
4
TERMS EXPIRING AT THE 2007 ANNUAL MEETING OF STOCKHOLDERS
[PHOTO] FRANK J. HANSEN, age 63, has been a director of Gardner
Denver since June 1997. Mr. Hansen was the President and
Chief Executive Officer of IDEX Corporation, a publicly held
manufacturer of proprietary fluid handling and industrial
products, from April 1999 until his retirement in April
2000. He was President and Chief Operating Officer from
January 1998 to April 1999 and Senior Vice President and
Chief Operating Officer from July 1994 until January 1998.
Mr. Hansen has a B.S. degree in business administration from
Portland State University.
[PHOTO] THOMAS M. MCKENNA, age 67, has been a director of Gardner
Denver since its spin-off from Cooper in April 1994. Mr.
McKenna served as the President of United Sugars
Corporation, a marketing cooperative which is one of the
nation's largest sugar marketers to both the industrial and
retail markets, from December 1998 until his retirement in
December 2002. He was President and Chief Executive Officer
of Moorman Manufacturing Company, a privately held
manufacturer of agricultural supplies, from August 1993
until January 1998. Mr. McKenna has a B.A. degree from St.
Mary's College and an M.B.A. from Loyola University.
[PHOTO] DIANE K. SCHUMACHER, age 51, has been a director of Gardner
Denver since August 2000. Ms. Schumacher has served as
Senior Vice President, General Counsel and Secretary of
Cooper from 1995 to 2003 and presently serves as Senior Vice
President, General Counsel and Chief Compliance Officer. Ms.
Schumacher holds a B.A. degree in economics from Southern
Illinois University and a J.D. degree from DePaul University
College of Law. She also completed the Harvard Advanced
Management Program and serves as a director of the American
Arbitration Association and is a member of the Executive
Committee.
BOARD OF DIRECTOR RESPONSIBILITIES, COMPENSATION AND RELATIONSHIPS
The Company's Board of Directors (the "Board") held four regular
meetings and no special meetings during 2004. Each director, other than Mr.
Petratis, attended the Company's annual stockholder meeting and all of the
Board meetings and meetings of Committees of which he or she was a member.
Mr. Petratis, who was appointed as a director on July 26, 2004, attended all
of the Board meetings held after his appointment and all meetings of Committees
of which he was a member.
The Board has adopted categorical standards of independence for its
members, a copy of which is attached hereto as Appendix A. In accordance
with New York Stock Exchange and Securities and Exchange Commission ("SEC")
rules and guidelines, the Board assesses the independence of its members
from time to time. As part of this assessment, the following steps are
taken:
* The Board reviews the standards of independence in relation to
each director's response to a detailed questionnaire which
addressed the director's background, activities and relationships.
* The Board reviews the commercial and other relationships, if any,
between the Company and each director.
* The Board determines whether or not any director has a material
relationship with the Company, either directly or indirectly as a
partner, stockholder or officer of an organization that has a
relationship with the Company. In making this determination, the
Board broadly considers all relevant facts and circumstances,
including (a) the nature of the relationship, (b) the significance
of the relationship to the Company, the other organization and the
individual director, (c) whether or not the relationship is solely
5
a business relationship in the ordinary course of the Company's and
the other organization's businesses and does not afford the director
any special benefits, (d) any commercial, banking, consulting,
legal, accounting, charitable and familial relationships, and (e)
whether a director's affiliated company and the Company engaged in
transactions which involved an aggregate amount of payments for
products or services greater than two percent of the annual
consolidated gross revenues of the affiliated company.
The Board has reviewed the commercial and other relationships between the
Company and its present directors (including all of the nominees presently
standing for election). After taking into account all relevant facts and
circumstances, the Board determined that there were no material
relationships, whether industrial, banking, consulting, legal, accounting,
charitable or familial, which would impair the independence of any of the
directors or nominees.
On the basis of this assessment and the standards for independence
adopted by the New York Stock Exchange and the SEC, the Board determined
that all of its members (including all of the nominees presently standing
for election) other than Mr. Centanni, its Chairman, President and Chief
Executive Officer, are independent. Mr. Centanni is not independent because
he is an employee of the Company.
BOARD OF DIRECTORS COMMITTEES
The Board has a standing Audit and Finance Committee, a standing
Management Development and Compensation Committee and a standing Nominating
and Corporate Governance Committee, each composed exclusively of independent
nonemployee directors. The Board has adopted written charters for each of
the Audit and Finance Committee, the Management Development and Compensation
Committee and the Nominating and Corporate Governance Committee, copies of
which are available on the Company's website at www.gardnerdenver.com.
Copies of each such charter are also available in print to any stockholder
upon request in writing to the Corporate Secretary at 1800 Gardner
Expressway, Quincy, Illinois 62305 or by telephone to 217-222-5400.
The Audit and Finance Committee. The Audit and Finance Committee,
currently composed of Donald G. Barger, Jr., Chairperson, Thomas M. McKenna,
Raymond R. Hipp and David D. Petratis, held four meetings during 2004. In
addition, the Pricing Committee of the Board, which was comprised of all of
the members of the Audit and Finance Committee, held one special meeting, at
which all members were in attendance, in connection with the Company's
public offering in March 2004. The Board has determined that all members of
the Audit and Finance Committee are independent, pursuant to New York Stock
Exchange listing standards and SEC guidelines. The Board has also determined
that Donald G. Barger, Jr. is an Audit Committee Financial Expert, as that
term is defined in Item 401(h)(2) of Regulation S-K.
The purpose of the Audit and Finance Committee is to assist the Board in
fulfilling its oversight responsibilities with respect to:
* The integrity of the Company's financial statements and financial
information provided to stockholders and others;
* The adequacy and effectiveness of the Company's disclosure
controls and procedures and its internal control over financial
reporting;
* The adequacy and effectiveness of the Company's financial
reporting principles and policies;
* The adequacy and effectiveness of the Company's internal and
external audit processes;
* The adherence to the Company's regulatory compliance policies and
procedures;
* The Company's compliance with legal and regulatory requirements;
and
* The Company's independent registered public accounting firm's
(independent auditors') qualifications and independence.
6
The specific functions of the Audit and Finance Committee include, among
other things:
* Appointment, retention, discharge, oversight and compensation of the
Company's independent auditors, including resolution of any
disagreements between management and the Company's independent
auditors regarding financial reporting;
* Review of the planned scope and results of the internal auditors'
and independent auditors' respective audits and examinations of the
Company's financial results;
* Approve in advance all non-audit services to be provided by, and
estimated fees of, the Company's independent auditors, subject to
certain exceptions;
* Receive and review, at least annually, reports from the Company's
independent auditors with respect to: (i) critical accounting
policies and practices used by the Company in the preparation of its
financial statements, (ii) alternative treatments of financial
information within GAAP, including the ramifications of the use of
any alternative disclosures and treatments, and (iii) any other
material written communications between the independent auditors and
management;
* Review with the independent auditors any problems or difficulties
with the audit, including, among other things, significant
disagreements with management, any "management" or "internal
control" letter issued or proposed to be issued, responsibilities,
budget and staff issues and management's response;
* At least annually, obtain and review a report by the independent
auditors describing the independent auditors' independence and
internal quality control procedures, and make a determination
regarding the independent auditors' independence;
* Receive the annual report from the independent auditors regarding
the Company's internal control over financial reporting and review
such report with the Company's management;
* Review and discuss with management, the internal audit department
and the independent auditors the Company's financial statements,
including, among other things, (i) any significant changes in the
Company's selection or application of accounting principles, and
major issues as to the adequacy of the Company's internal controls
and any special audit steps adopted in light of material control
deficiencies; and (ii) the effect of regulatory and accounting
initiatives on the financial statements;
* Establish procedures for the receipt, retention, treatment and
handling of complaints regarding accounting, internal accounting
controls or auditing matters, including procedures for the
confidential, anonymous submission by employees of concerns and
complaints regarding questionable accounting, internal controls and
procedures for financial reporting or auditing matters;
* Oversight of the Company's benefits committee in its establishment
of investment objectives, policies and performance criteria for the
management of the Company's retirement and benefit plan assets;
* Monitor compliance with the Company's Code of Ethics and Business
Conduct Policy;
* Review information concerning environmental, legal and other matters
which may represent material financial exposure or risk to the Company;
* Establish clear hiring policies for employees or former employees of
the Company's independent auditor; and
* Report regularly to the Board and review with the Board any issues
that arise with respect to the quality or integrity of the Company's
financial statements, the Company's compliance with legal and
regulatory requirements, the performance and independence of the
Company's independent auditors, or the performance of the internal
audit function.
The Audit and Finance Committee has authority to retain outside financial
and legal advisors to assist it in meeting any of the above obligations, as
necessary and appropriate, and to ensure that the Company provides
appropriate funding to pay the fees and expenses of the Company's
independent auditors and the Audit and Finance Committee's other outside
advisors.
7
The Management Development and Compensation Committee. The Management
Development and Compensation Committee, currently composed of Richard L.
Thompson, Chairperson, Frank J. Hansen, Thomas M. McKenna and Diane K.
Schumacher, held three regular meetings and one special meeting during 2004.
The Board has determined that all members of the Management Development and
Compensation Committee are independent, pursuant to New York Stock Exchange
listing standards and SEC guidelines.
The purpose of the Management Development and Compensation Committee is
to assist the Board in discharging its responsibilities relating to
executive selection, retention and compensation and succession planning. The
specific functions of the Management Development and Compensation Committee
include, among other things:
* Review and consult with the Chief Executive Officer concerning
selection of officers, management succession planning, executive
performance, organizational structure and matters related thereto
and assist the Chief Executive Officer in developing recommendations
concerning the same from time to time for Board consideration;
* Recommend to the Board one or more candidates for Chief Executive
Officer in the event the position becomes vacant;
* Establish from time to time reasonable short-term and long-term
compensation for services to the Company by executive officers (the
Chief Executive Officer, President, all corporate Vice Presidents,
and the Secretary), which shall include the following tasks: (a) to
establish compensation, incentive compensation and bonuses, deferred
compensation, pensions, insurance, death benefits and other
benefits; (b) to administer stock and compensation plans of the
Company as adopted by the Board, and to amend or restate any such
plan to the extent deemed appropriate for incorporating therein
non-substantive points or substantive matters expressly mandated by
law; and (c) to review and approve corporate goals relevant to
executive officer compensation, including that of the Chief
Executive Officer;
* Evaluate executive officer performance, including the Chief
Executive Officer, and set their compensation in light of the
achievement of such goals and such other factors and requirements as
the Committee shall deem relevant or appropriate;
* Review and assess the Company's employee benefit plans and programs
from time to time; and
* Report to the Board on the results of reviews and conferences and
submit to the Board any recommendations the Committee may have from
time to time.
The Management Development and Compensation Committee has authority to
retain executive compensation consulting firms and other consultants,
including outside financial and legal advisors, to assist it in meeting any
of the above obligations, as necessary and appropriate, and to ensure that
the Company provides appropriate funding to pay the fees and expenses of
such advisors.
The Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee, currently composed of Diane K. Schumacher,
Chairperson, Frank J. Hansen and Richard L. Thompson, held two meetings
during 2004. The Board has determined that all members of the Nominating and
Corporate Governance Committee are independent, pursuant to New York Stock
Exchange listing standards and SEC guidelines.
The purpose of the Nominating and Corporate Governance Committee is to
make recommendations to the Board on director nominees, Board practices and
corporate governance practices and principles. The specific functions of the
Nominating and Corporate Governance Committee include, among other things:
* Review with management and evaluate the overall effectiveness of the
organization of the Board, including its incumbent members, lead
independent nonemployee director, size and composition, and the
conduct of its business, and make appropriate recommendations to the
Board with regard thereto;
* At least annually, review the Chairpersons and membership of the
various Board committees and make recommendations with regard
thereto;
8
* Develop, maintain and review on an annual basis criteria and
procedures for the identification and recruitment of candidates for
election to serve as directors of the Company, and make appropriate
recommendations with regard thereto to the Board and, as
appropriate, to the stockholders of the Company;
* Identify individuals qualified to become Board members, consistent
with the criteria approved by the Board;
* Recommend to the Board new candidates for election to the Board and
the director nominees for the next annual meeting of stockholders;
* Review the appropriateness and adequacy of information supplied to
directors prior to and during Board meetings;
* Consider from time to time the overall relationship of, and oversee
the evaluation of, directors and management;
* Review from time to time compensation (including benefits) for
services to the Company by its directors, and make recommendations
with regard thereto to the Board;
* Develop and recommend to the Board a set of corporate governance
principles applicable to the Company;
* Review and assess changes, if any, in any of the director's
relationships, affiliations, employment or other board or public
service and the corresponding impact on the independence of such
director; and
* Develop an orientation program for new directors and a continuing
education program for all Board members.
The Nominating and Corporate Governance Committee has authority to retain
independent third-party search firms and outside financial and legal
advisors to assist it in meeting any of the above obligations, as necessary
and appropriate, and to ensure that the Company provides appropriate funding
to pay the fees and expenses of such advisors.
The Nominating and Corporate Governance Committee must review with the
Board, on at least an annual basis, the requisite qualifications,
independence, skills and characteristics of Board candidates, members and
the Board as a whole. When assessing potential new directors, the Nominating
and Corporate Governance Committee considers individuals from various and
diverse backgrounds. While the selection of qualified directors is a complex
and subjective process that requires consideration of many intangible
factors, the Nominating and Corporate Governance Committee believes that
candidates generally should, at a minimum, meet the following criteria:
* Candidates should possess broad training, experience and a
successful track record at senior policy-making levels in business,
government, education, technology, accounting, law and/or
administration;
* Candidates should also possess the highest personal and professional
ethics, integrity and values, and be committed to representing the
long-term interests of all stockholders;
* Candidates should have an inquisitive and objective perspective,
strength of character and the mature judgment essential to effective
decision-making;
* Candidates should possess expertise that is useful to the Company
and complementary to the background and experience of other Board
members; and
* Candidates must be willing and free to commit necessary time to
serve effectively as a Board member, including attendance at
committee meetings.
The Nominating and Corporate Governance Committee will consider such
candidates if a vacancy arises or if the Board decides to expand its
membership, and at such other times as the Nominating and Corporate
Governance Committee deems necessary or appropriate. The Nominating and
Corporate Governance Committee will consider stockholder recommendations for
candidates for the Board. Any stockholder wishing to
9
submit a candidate for consideration should send the following information
to the Corporate Secretary, Gardner Denver, Inc., 1800 Gardner Expressway,
Quincy, Illinois 62305:
* Stockholder's name, number of shares of Company Common Stock owned,
length of period held, and proof of ownership;
* Name, age and address of candidate;
* A detailed resume describing, among other things, the candidate's
educational background, occupation, employment history, and material
outside commitments (e.g., memberships on other boards and
committees, charitable foundations, etc.);
* A supporting statement which describes the candidate's reasons for
seeking election to the Board, and which documents his/her ability
to satisfy the director qualifications described above;
* Any information relating to the candidate that is required by the
rules and regulations of the SEC and the New York Stock Exchange to
be disclosed in the solicitation of proxies for election of
directors;
* A description of any arrangements or understandings between the
stockholder and the director; and
* A signed statement from the candidate, confirming his/her
willingness to serve on the Board.
The Corporate Secretary will promptly forward such materials to the
Chairperson of the Nominating and Corporate Governance Committee and to the
Chairman of the Board. The Corporate Secretary will also maintain copies of
such materials for future reference by the Nominating and Corporate
Governance Committee when filling Board positions. The same criteria applies
with respect to the Nominating and Corporate Governance Committee's
evaluation of all candidates for membership to the Board, including
candidates recommended by stockholders. However, separate procedures will
apply, as provided in the Bylaws, if a stockholder wishes to submit at an
annual meeting a director candidate who is not approved by the Committee or
Board.
COMPENSATION OF DIRECTORS
For 2004, the Company's nonemployee directors each received an annual
retainer of $28,000. Additionally, nonemployee directors received meeting
attendance fees of $1,250 per meeting for Board meetings and $1,000 per
meeting for committee meetings. Directors were also reimbursed for
reasonable expenses incurred in connection with attending Board and
committee meetings.
The Gardner Denver, Inc. Phantom Stock Plan for Outside Directors (the
"Phantom Stock Plan") has been established to more closely align the
interests of the nonemployee directors and the Company's stockholders by
increasing each nonemployee director's proprietary interest in the Company
in the form of "phantom stock units."
Under the Phantom Stock Plan, which is an unfunded plan, the Company
credits the equivalent of $7,000 annually, in equal monthly amounts, to the
phantom stock unit account of each nonemployee director. Phantom stock units
are credited based upon the previous month's average closing price per share
for the Company's Common Stock. Each nonemployee director may also elect to
defer all or some portion of his or her annual director's fees under the
Phantom Stock Plan and have such amount credited on a monthly basis as
phantom stock units, based on the previous month's average closing price per
share for the Company's Common Stock. If the Company were to pay dividends,
dividend equivalents would be credited to each nonemployee director's
account on the dividend record date.
The fair market value of a director's account will be distributed as a
cash payment to the director (or his or her beneficiary) on the first day of
the month following the month in which the director ceases to be a director
of the Company for any reason. Alternatively, a director may elect to have
the fair market value of his or her account distributed in twelve or fewer
equal monthly installments, or in a single payment on a predetermined date
within one year after he or she ceases to be a director, but without interest
on the deferred payments. The fair market value of a director's account is
determined by reference to the average closing price per share for the
Company's Common Stock during the thirty trading days immediately preceding
the date the director ceases to
10
be a director. The following table summarizes the number of phantom stock
units credited to each nonemployee director as of March 4, 2005.
PHANTOM STOCK
NAME UNITS
---- -------------
Donald G. Barger, Jr.................... 4,990
Frank J. Hansen......................... 2,262
Raymond R. Hipp......................... 3,625
Thomas M. McKenna....................... 14,864
David D. Petratis....................... 1,022
Diane K. Schumacher..................... 1,423
Richard L. Thompson..................... 6,641
------
Total............................... 34,827
======
Pursuant to the Gardner Denver, Inc. Long-Term Incentive Plan (the
"Incentive Plan"), for 2004, the Board granted each nonemployee director an
option to purchase 4,500 shares of the Company's Common Stock, on the date
following the 2004 Annual Stockholders Meeting. Nonemployee director stock
options become exercisable on the first anniversary of the date of grant and
terminate upon the expiration of five years from such date. If a person
ceases to be a nonemployee director by virtue of disability or retirement
(after having completed at least one three-year term), outstanding options
generally remain exercisable for a period of five years (but not later than
the expiration date of the options). If a person ceases to be a nonemployee
director by virtue of death (or dies during the five-year exercise period
after disability or retirement described above), outstanding options
generally remain exercisable for a period of one year (but not later than
the expiration date of the options). If a nonemployee director's service
terminates for any other reason, options not then exercisable are canceled
and options that are exercisable may be exercised at any time within ninety
days after such termination (but not later than the expiration date of the
options). Additionally, upon the occurrence of a change of control, as
defined in the plan, these options will be canceled in exchange for a cash
payment equal to the appreciation in value of the options over the exercise
price as set forth in the plan. The exercise price of these options is the
fair market value of the Common Stock on the date of grant.
STOCKHOLDER COMMUNICATION WITH DIRECTORS
The Board has adopted the following procedures for stockholders to send
communications to the Board, individual directors and/or Committee chairs.
Stockholders and other interested persons seeking to communicate with
the Board or any individual director should submit their written comments to
the Corporate Secretary, Gardner Denver, Inc., 1800 Gardner Expressway,
Quincy, Illinois 62305. Such persons who prefer to communicate by e-mail
should send their comments to CorporateSecretary@gardnerdenver.com. The
Corporate Secretary will then forward all such communications (excluding
routine advertisements and business solicitations) to each member of the
Board, or the applicable individual director(s) and/or Committee Chair(s).
Subject to the following paragraph, the Chairman of the Board will receive
copies of all stockholder communications, including those addressed to
individual directors and/or Committee Chairs, unless such communications
address allegations of misconduct or mismanagement on the part of the
Chairman. In such event, the Corporate Secretary will first consult with and
receive the approval of the Audit and Finance Committee Chair before
disclosing or otherwise discussing the communication with the Chairman of
the Board.
If a stockholder communication is addressed exclusively to the Company's
non-management directors, the Corporate Secretary will first consult with
and receive the approval of the Chairperson of the Nominating and Corporate
Governance Committee before disclosing or otherwise discussing the
communication with directors who are members of management.
The Company reserves the right to screen materials sent to its directors
for potential security risks and/or harassment purposes.
11
Stockholders also have an opportunity to communicate with the Board of
Directors at the Company's Annual Meeting of Stockholders. Pursuant to Board
policy, each director is expected to attend the Annual Meeting in person and
be available to address questions or concerns raised by stockholders,
subject to occasional excused absences due to illness or unavoidable
conflicts. All members of the Board of Directors attended the 2004 Annual
Meeting of Stockholders, other than Mr. Petratis, who was not appointed to
the Board until after the Annual Meeting.
CORPORATE GOVERNANCE
The Board has adopted a policy regarding Corporate Governance, which is
available on the Company's website at www.gardnerdenver.com. A copy of such
policy is available in print to any stockholder upon request in writing to
the Corporate Secretary at 1800 Gardner Expressway, Quincy, Illinois 62305
or by telephone to 217-222-5400. The objective of this policy is to ensure
that the Board maintains its independence, objectivity and effectiveness in
fulfilling its responsibilities to the Company's stockholders. The policy
establishes: the criteria and requirements for selection and retention of
directors; the procedures and practices governing the operation and
compensation of the Board; and the principles under which management shall
direct and operate the business of the Company and its subsidiaries. The
policy provides that the majority of the Board should be independent based
on the independence standards of the New York Stock Exchange, with varied
and complementary backgrounds, and interlocking directorships are
prohibited. Directors may serve on the boards of directors of no more than
four for-profit organizations, including the Company, and members of the
Audit and Finance Committee may serve on the audit committees of no more
than three for-profit organizations, including the Company. The policy
specifies that a nonemployee director will retire at the next regular
meeting of the Board following the date he or she attains 70 years of age,
and that, at any one time, no less than 50% of the number of nonemployee
directors shall be actively employed.
On November 12, 2002, the Board appointed Mr. Frank Hansen to serve as
its Lead Nonemployee Director. In this capacity, Mr. Hansen fulfills the
duties of the Chairman of the Board at Board meetings as president pro tem
when the Chairman is unavailable, and leads the discussion of independent
nonemployee directors during executive sessions of the independent
nonemployee directors.
The Company has adopted a Code of Ethics and Business Conduct Policy,
which is available on the Company's website at www.gardnerdenver.com, that
applies to all members of the Board and all executive officers and employees
of the Company. In addition, under the charter of the Company's Audit and
Finance Committee, the Chief Executive Officer and Chief Financial Officer,
among others, are required to certify annually their adherance to a Code of
Ethics, which is attached to the Audit and Finance Committee Charter
available on the Company's website. The Company intends to satisfy the
disclosure requirement under Item 5.05 of Form 8-K regarding amendments to
or waivers of the Code of Ethics and Business Conduct Policy and/or the Code
of Ethics mandated by the Audit and Finance Committee by posting such
information on its website at www.gardnerdenver.com. A copy of the Code of
Ethics and Business Conduct Policy and the Audit and Finance Committee
Charter (including the Code of Ethics attached thereto) are available in
print to any stockholder upon request in writing to the Corporate Secretary
at 1800 Gardner Expressway, Quincy, Illinois 62305 or by telephone to
217-222-5400.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The Company maintains stock ownership requirements for its nonemployee
directors, executive officers and other key employees. Under these
requirements, each nonemployee director is expected to maintain an equity
interest in the Company equal to three times his or her annual cash
compensation (including compensation for Board and Committee meeting
attendance, but not including stock options or amounts contributed on behalf
of such director to the Phantom Stock Plan). These requirements also require
that the CEO maintain an equity interest equal to five times his annual base
salary and each executive officer maintain an equity interest in the Company
equal to three times his or her annual base salary. These ownership
requirements are to be achieved by the fifth anniversary of each
individual's appointment as a director or executive officer, as appropriate.
Common Stock held directly by the director or executive officer or their
respective immediate
12
family members, and indirectly for the benefit of the director or executive
officer in an IRA account, family trust, the Savings Plans and/or the
related Supplemental Excess Defined Contribution Plan (the "Excess
Contribution Plan"), are considered in determining compliance with these
requirements.
The following table sets forth information, as of March 4, 2005, with
respect to the beneficial ownership of the Company's Common Stock by (a)
each director, (b) the Company's Chief Executive Officer, (c) each of the
other "named executive officers" (as defined in Item 402(a)(3) of Regulation
S-K) of the Company and (d) all directors and named executive officers as a
group. Mr. Roth resigned as Vice President, Finance, and Chief Financial
Officer effective as of August 16, 2004.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-----------------------------------------------------
DIRECT EMPLOYEE PERCENT
NAME OF BENEFICIAL OWNERS OWNERSHIP(1)(2) PLANS(3) OF CLASS
------------------------- --------------- -------- --------
DIRECTORS
Donald G. Barger, Jr.................................... 24,760(2) *
Ross J. Centanni (Chairman, President and CEO).......... 598,574(2),(4),(5) 26,498 2.95%
Frank J. Hansen......................................... 18,880(2),(6) *
Raymond R. Hipp......................................... 19,048(2) *
Thomas M. McKenna....................................... 23,966(2) *
David D. Petratis....................................... 0(2) *
Diane K. Schumacher..................................... 14,438(2) *
Richard L. Thompson..................................... 24,200(2) *
NAMED EXECUTIVE OFFICERS (NOT DIRECTORS)
Michael S. Carney....................................... 25,299(2) 2,025 *
Helen W. Cornell........................................ 112,535(2),(7) 7,120 *
Tracy D. Pagliara....................................... 40,610(2) 2,654 *
Richard C. Steber....................................... 23,833(2) 1,646 *
Philip R. Roth (8)...................................... 5,983(2) 40 *
All directors and executive officers as a group......... 932,126(2),(3),(4),(5),(6),(7),(8) 39,983 4.59%
--------
* Less than 1%
(1) Each beneficial owner has sole voting and investment power with
respect to all shares, except as indicated below.
(2) Includes shares that could be acquired by the exercise of stock
options granted under the Incentive Plan that are currently
exercisable or exercisable within 60 days after March 4, 2005, as
follows: 398,635 shares for Mr. Centanni; 12,000 shares for Mr.
Barger; 9,000 shares for Mr. Hansen; 15,000 shares for Mr. Hipp;
15,000 shares for Mr. McKenna; 0 shares for Mr. Petratis; 6,000
shares for Ms. Schumacher; 15,000 shares for Mr. Thompson; 23,768
shares for Mr. Carney; 75,367 shares for Ms. Cornell; 37,367 shares
for Mr. Pagliara; 14,467 shares for Mr. Steber; 5,240 shares for Mr.
Roth; and 626,844 shares for the group.
(3) Each beneficial owner has sole voting power, but limited investment
power with respect to all shares held in the Savings Plans, which
are 401(k) plans, and the related Excess Contribution Plan.
(4) Includes 4,050 shares owned by Mr. Centanni's wife, as to which Mr.
Centanni shares voting and investment power pursuant to a trust
arrangement.
(5) Includes 18,000 restricted shares, as to which Mr. Centanni has the
right to vote and to receive dividends. Mr. Centanni must remain
employed by the Company until February 23, 2006 as a condition to
the vesting of these shares and the removal of their restrictions on
transferability.
(6) All shares owned by Mr. Hansen are held in a trust, as to which Mr.
Hansen shares voting and investment power.
(7) Includes 36,636 shares owned by Ms. Cornell and held in a trust, as
to which Ms. Cornell has sole voting and investment power.
13
(8) Mr. Roth resigned as Vice President, Finance, and Chief Financial
Officer of the Company effective as of August 16, 2004. Pursuant to
a Salary Continuation Agreement, dated August 16, 2004, between the
Company and Mr. Roth, all stock options granted to Mr. Roth prior to
his resignation remain exercisable until August 31, 2007.
The following table sets forth each person or group known by the Company
to be the beneficial owner of more than 5% of the Company's outstanding
Common Stock as of March 4, 2005 (except as otherwise indicated).
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Wells Fargo & Company..................... 1,350,724(1) 6.4%(2)
420 Montgomery Street
San Francisco, CA 94104
Wells Capital Management Incorporated..... 1,216,944(1) 5.8%(2)
525 Market Street
San Francisco, CA 94105
FMR Corporation........................... 1,289,725(3) 6.1%
82 Devonshire Street
Boston, MA 02109
--------
(1) Based on Schedule 13G, dated as of January 21, 2005, made by Wells
Fargo & Company ("Wells Fargo") and Wells Capital Management
Incorporated ("WCMI"). In addition to Wells Fargo and WCMI, the
filing was made on behalf of Wells Fargo Bank, National Association
and Wells Fargo Funds Management, LLC. Of the 1,350,724 shares of
Common Stock beneficially owned by Wells Fargo, Wells Fargo reported
that it has sole voting power with respect to 1,082,524 shares, sole
dispositive power with respect to 1,271,544 shares and shared
dispositive power with respect to 23,300 shares. Of the 1,216,944
shares of Common Stock beneficially owned by WCMI, WCMI reported
that it has sole voting power with respect to 738,300 shares and
sole dispositive power with respect to all 1,216,944 shares.
(2) The shares beneficially owned by Wells Fargo include all shares
beneficially owned by WCMI, and therefore, the combined beneficial
share ownership of Wells Fargo and WCMI is approximately 6.4%.
(3) Based on Schedule 13G, dated as of February 14, 2005, made by FMR
Corp., Edward C. Johnson 3rd and Abigail P. Johnson. FMR Corp.
disclosed that Fidelity Management & Research Company ("Fidelity"),
a wholly-owned subsidiary of FMR Corp., is the beneficial owner of
1,165,025 shares of the Common Stock as a result of acting as
investment advisor to various investment companies. FMR Corp.
reports sole voting power with respect to 125,000 shares and sole
dispositive power with respect to all shares of Common Stock
beneficially owned by FMR Corp. Edward C. Johnson 3rd, FMR Corp.,
through its control of Fidelity, and the funds report sole
investment power with respect to all shares beneficially owned.
However, they report that voting power resides with the trustees of
the funds, and that Fidelity carries out the voting under written
guidelines from such trustees. Through their ownership of
approximately 49% of the voting power of FMR Corp. and the execution
of a shareholders' voting agreement, members of the Johnson family,
including Edward C. Johnson 3rd and Abigail P. Johnson, may be
deemed to form a control group with respect to FMR Corporation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers,
and persons who own more than 10% of a registered class of the Company's
equity securities to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of the Company. These insiders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file, including
Forms 3, 4 and 5. The Company believes that all reports required to be filed
by insiders during the fiscal year ended December 31, 2004 were filed in a
timely manner.
14
EXECUTIVE MANAGEMENT COMPENSATION
The following tables present compensation earned by the Chief Executive
Officer and the other named executive officers of the Company for the years
indicated, and information regarding stock option transactions by each
officer in 2004. Mr. Roth resigned as Vice President, Finance, and Chief
Financial Officer effective as of August 16, 2004.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-----------------------------------
AWARDS PAYOUTS
ANNUAL ------------------------ --------
COMPENSATION(1) RESTRICTED SECURITIES LTIP ALL OTHER
-------------------- STOCK UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARD(S)($) OPTIONS(#) ($)(2) ($)(3)
--------------------------- ---- --------- -------- ----------- ---------- ------- ------------
Ross J. Centanni................ 2004 $643,333 $910,000 -- 50,000 $828,750 $ 57,075
Chairman, President 2003 604,167 625,000 $314,280(4) 48,700 -- 41,677
& CEO 2002 566,667 322,000 -- 34,500 -- 48,675
Michael S. Carney............... 2004 $245,667 $250,000 -- 10,300 $180,000 $ 15,555
Vice President & 2003 235,833 100,000 -- 12,500 -- 15,563
General Manager, 2002 226,667 110,000 -- -- -- 11,100
Blower Division
Helen W. Cornell (5)............ 2004 $217,458 $240,000 -- 7,400 $190,000 $ 15,458
Vice President, 2003 185,417 125,000 -- 9,600 -- 13,519
Finance & CFO 2002 175,000 115,000 -- 7,000 -- 11,025
Tracy D. Pagliara............... 2004 $235,000 $225,000 -- 8,600 $200,000 $ 16,875
Vice President, 2003 193,333 140,000 -- 10,500 -- 14,775
Administration, 2002 177,500 135,000 -- 7,000 -- 12,803
General Counsel & Secretary
Richard C. Steber............... 2004 $221,958 $250,000 -- 9,000 $190,000 $ 13,208
Vice President & 2003 210,000 70,000 -- 11,200 -- 13,950
General Manager, 2002 192,050 100,000 -- 12,000 -- 8,267
Liquid Ring Pump Division
Philip R. Roth (6).............. 2004 $169,208 $309,100 -- 12,000 $210,750 $126,731
Vice President, 2003 258,333 200,000 -- 13,300 -- 20,625
Finance & CFO 2002 242,500 200,000 -- 9,700 -- 18,338
--------
(1) No named executive officer received perquisites in value greater
than the lesser of (i) $50,000 and (ii) 10% of such named executive
officer's total annual salary plus bonus.
(2) Long-term incentive payouts in 2004 were long-term cash bonus
payments made pursuant to the award opportunities granted under the
Incentive Plan in 2002.
(3) Amounts under "All Other Compensation" reflect the Company's
matching contributions on behalf of each of the named executive
officers to the Savings Plans and the related Excess Contribution
Plan, broken down as follows: Mr. Centanni ($7,200--Savings Plans
and $49,875--Excess Contribution Plan); Mr. Carney ($9,225--Savings
Plans and $6,330--Excess Contribution Plan); Ms. Cornell
($5,850--Savings Plans and $9,608--Excess Contribution Plan); Mr.
Pagliara ($5,850--Savings Plans and $11,025--Excess Contribution
Plan); Mr. Steber ($7,200--Savings Plans and $6,008--Excess
Contribution Plan); and Mr. Roth ($9,225--Savings Plans and
$12,131--Excess Contribution Plan).
(4) On February 24, 2003, the Management Development and Compensation
Committee awarded Mr. Centanni a grant of 18,000 shares of Company
restricted common stock having a fair market value on such date of
$17.46 per share, or $314,280 in the aggregate. Mr. Centanni has the
right to vote and to receive dividends with respect to these shares,
but must remain employed by the Company until February 23, 2006 as a
condition to the vesting of these shares and the removal of their
restrictions on transferability. The value of these shares of
Company restricted common stock at December 31, 2004 was $658,080.
15
(5) Ms. Cornell was appointed to succeed Mr. Roth as Vice President,
Finance and Chief Financial Officer of the Company effective as of
August 16, 2004. Prior to that time, Ms. Cornell served as Vice
President and General Manager, Fluid Transfer Division and
Operations Support.
(6) Mr. Roth resigned as Vice President, Finance, and Chief Financial
Officer of the Company effective as of August 16, 2004. Pursuant to
a Salary Continuation Agreement, dated August 16, 2004, between the
Company and Mr. Roth (a copy of which is attached as Exhibit 10.1 to
the Company's Form 10-Q filed with the SEC on November 9, 2004), Mr.
Roth continues to receive his monthly salary and certain benefits
through August 31, 2005, and thereafter up to an additional six
months or the date on which Mr. Roth secures new employment,
whichever is sooner (the "Salary Continuance Period"). $105,375 of
the amount listed as "All Other Compensation" for 2004 represents
the salary paid to Mr. Roth from August 16, 2004 through December
31, 2004. $4,742 of the amount listed in Note 2 above as the
Company's matching contributions to Mr. Roth's Excess Contribution
Plan represent matching contributions made from August 16, 2004
through December 31, 2004. $4,089 of the amount listed as "All Other
Compensation" for 2004 represents the value of group insurance
coverage provided to Mr. Roth from August 16, 2004 through December
31, 2004. Under the Salary Continuation Agreement, Mr. Roth will
receive salary, matching contributions, and group insurance coverage
in the amount of $23,417, $1,054 and $901 per month from January 1,
2005 through the end of the Salary Continuance Period.
OPTION GRANTS IN 2004
INDIVIDUAL GRANTS
------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED(#)(1) IN 2004 ($/SH)(1) DATE(2) PRESENT VALUE(3)
---- ------------- ---------- --------- ---------- ----------------
Ross J. Centanni.................. 50,000 21.2% 29.02 2/23/2011 $482,590
Michael S. Carney................. 10,300 4.4% 29.02 2/23/2011 $ 99,414
Helen W. Cornell.................. 7,400 3.1% 29.02 2/23/2011 $ 71,423
Tracy D. Pagliara................. 8,600 3.7% 29.02 2/23/2011 $ 83,005
Richard C. Steber................. 9,000 3.8% 29.02 2/23/2011 $ 86,866
Philip R. Roth (4)................ 12,000 5.1% 29.02 2/23/2011 $115,822
--------
(1) The exercise price is equal to the average of the high and low sales
price of the Company's Common Stock on the date of grant and shall
be payable in cash, shares of Common Stock, or stock appreciation
rights or by a combination of the foregoing.
(2) These options have a seven-year term from the date of grant and vest
in increments of one-third each on the first, second and third
anniversary dates following the date of grant. In the event of a
change in control (as defined in the Incentive Plan), holders may
receive a cash payment equal to the fair value, as determined in
accordance with the Incentive Plan, of that portion of any option
that is not fully exercisable.
(3) The Black-Scholes option pricing model was used assuming a dividend
yield of 0%, a risk-free interest rate of 3.0%, an expected stock
price volatility based on historical experience of 34.20% and an
expected option life based on historical experience of 4.5 years.
While the assumptions are believed to be reasonable, the reader is
cautioned not to infer a forecast of value either from the model's
use or from the values adopted for the model's assumptions. Any
future values realized will ultimately depend upon the excess of the
stock price on the date the option is exercised over the exercise
price.
(4) Mr. Roth resigned as Vice President, Finance, and Chief Financial
Officer of the Company effective as of August 16, 2004. Pursuant to
a Salary Continuation Agreement, dated August 16, 2004, between the
Company and Mr. Roth, all stock options granted to Mr. Roth prior to
his resignation remain exercisable until August 31, 2007.
16
AGGREGATED OPTION EXERCISES IN 2004
AND DECEMBER 31, 2004 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 2004(#) AT DECEMBER 31, 2004($)(2)
SHARES ---------------------- ---------------------------
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------------- ------------------------- ---------------------------
Ross J. Centanni....... 0 0 354,235 93,966 $7,272,113 $1,180,811
Michael S. Carney...... 0 0 16,167 18,633 $ 265,072 $ 234,947
Helen W. Cornell....... 0 0 67,367 16,133 $1,370,190 $ 215,347
Tracy D. Pagliara...... 1,000 11,161 28,667 17,933 $ 555,481 $ 235,720
Richard C. Steber...... 8,000 49,120 3,734 20,466 $ 70,479 $ 275,221
Philip R. Roth (3)..... 81,470 1,085,479 0 24,099 0 $ 311,526
--------
(1) The value realized for shares acquired on exercise in 2004 is
calculated using the difference between the fair market value of the
Company's Common Stock, as indicated by the average of the high and
low sales price of the Common Stock on the exercise date, and the
applicable option exercise price.
(2) The value of the unexercised in-the-money options at December 31,
2004 is calculated using the difference between the fair market
value of the Company's Common Stock, as indicated by the average
high and low sales price of the Common Stock on December 31, 2004
($36.56), and the applicable option exercise price.
(3) Mr. Roth resigned as Vice President, Finance, and Chief Financial
Officer of the Company effective as of August 16, 2004. Pursuant to
a Salary Continuation Agreement, dated August 16, 2004, between the
Company and Mr. Roth, all stock options granted to Mr. Roth prior to
his resignation remain exercisable until August 31, 2007.
LONG-TERM CASH BONUS AWARDS IN 2004
The following table shows the long-term cash bonus awards that were
granted under the Incentive Plan for 2004 to each of the named executive
officers.
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE-BASED PLANS
SHARES, UNITS OR OTHER PERIOD -------------------------------------
OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME & TITLE (#)(1) OR PAYOUT(2) ($ OR #)(2) ($ OR #)(2) ($ OR #)(2)
------------ ---------------- ---------------- ----------- ----------- -----------
Ross J. Centanni............... 87.5% 2004-2006 50% 100% 150%
Chairman, President & CEO
Michael S. Carney.............. 55% 2004-2006 50% 100% 150%
Vice President & General
Manager, Blower Division
Helen W. Cornell............... 55% 2004-2006 50% 100% 150%
Vice President, Finance & CFO
Tracy D. Pagliara.............. 55% 2004-2006 50% 100% 150%
Vice President,
Administration, General
Counsel & Secretary
Richard C. Steber.............. 55% 2004-2006 50% 100% 150%
Vice President & General
Manager, Liquid Ring Pump
Division
Philip R. Roth (3)............. 55% 2004-2006 50% 100% 100%
Vice President, Finance & CFO
--------
(1) Represents the percentage of the participant's base salary at the
end of 2006 that shall be eligible for calculation of the long-term
cash bonus (the "Bonus Eligible Salary").
17
(2) The long-term cash bonus percentage will be tied to the compound
growth rate of earnings before taxes ("EBT") for the Company's
industrial businesses (i.e., excluding petroleum products) during
the period January 1, 2004 through December 31, 2006. The
utilization of the threshold, target or maximum percentages will
depend upon the achievement of certain levels of compound growth
rate of EBT during this period, subject to adjustment as provided
under the Incentive Plan. These percentages will be applied to the
Bonus Eligible Salary to determine the long-term cash bonus for the
period.
(3) Due to Mr. Roth's resignation as Vice President, Finance, and Chief
Financial Officer of the Company effective as of August 16, 2004, he
will not be eligible to receive payments under the long-term cash
bonus awards granted in 2004.
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The goal of the Management Development and Compensation Committee (the
"Committee") is to compensate the executive officers of Gardner Denver based
on the scope of their responsibilities, the achievement of specific annual
objectives and the Company's annual and longer term performance. Annually,
the Committee reviews and establishes the compensation and benefits of the
executives, including base salaries, annual bonus opportunities and awards
under the Incentive Plan. These elements are intended to provide competitive
pay, reward achievement of financial and strategic objectives and align the
interests of the Company's executives with those of the Company's
stockholders.
None of the members of the Committee is or has been an officer or
employee of the Company or any of its subsidiaries. In addition, except for
Mr. Hansen, none of the members of the Committee has or had any
relationships with the Company or any other entity that require disclosure
under the proxy rules and regulations promulgated by the SEC. See Certain
Relationships and Related Transactions.
EXECUTIVE COMPENSATION REPORT
The Company maintains a compensation plan for executive officers that
consists of (i) base salary, (ii) annual incentive compensation through cash
bonus opportunities, and (iii) long-term incentives in the form of stock
option grants and long-term cash bonuses. At the Committee's direction, the
Company hired William M. Mercer, now known as Mercer Human Resource
Consulting ("Mercer"), in 2003 to perform a comprehensive review of the
Company's executive officer and board of director compensation and retention
practices, including annual compensation, long-term incentives and
management continuity arrangements, for competitiveness with other publicly
held manufacturing companies with annual revenues of $560 million to $1.7
billion, which are believed to be generally comparable to the Company (the
"Peer Companies"). Information from proxy data and national surveys was used
to calculate competitive market data, to benchmark the compensation
practices of the Company and to develop compensation projections and
recommendations for each of the Company executive officers for 2004.
The Company's compensation strategy is that: (a) the target annual cash
compensation (base salary and annual bonus) of the Company's executive
officers be based on the 60th percentile of the competitive market,
including the Peer Companies; and (b) the total compensation opportunity for
such officers be based on the 70th percentile of the competitive market.
At the Committee's direction, the Company retained Hewitt Associates LLC
in 2005 to perform a review of the Company's executive officer base salary
compensation.
The Committee has reviewed all components of the compensation for the
Company's Chief Executive Officer and the other named executive officers,
including annual cash compensation and bonuses, long-term cash and equity
incentive compensation, perquisites and other compensation, as well as
payouts under various severance or change of control scenarios. Based on
this review, the Committee finds the total compensation to the Company's
Chief Executive Officer and the other named executive officers (including
payouts in the case of severance and/or change of control scenarios) in the
aggregate to be reasonable.
18
ANNUAL CASH COMPENSATION
The following is a summary of the components of executive annual cash
compensation.
Base Salary. In February 2004, the Committee established a base salary
target for each executive officer at approximately the 60th percentile of
market levels based on the competitive market data. The goal in establishing
the base salaries was to position the Company for future growth, to make the
compensation program more competitive and to increase the Company's ability
to attract and to retain executives. The Committee took into account market
competitiveness as reported in the Mercer study, and the individual's
responsibilities, experience, actual performance and impact on the business
when setting each executive officer's actual base salary.
Annual Incentive Compensation. An annual cash bonus opportunity is
awarded by the Committee pursuant to the Gardner Denver, Inc. Management
Annual Incentive Plan, which, subject to the approval of the stockholders as
described in this Proxy Statement, will in the future be known as the
Gardner Denver, Inc. Executive Annual Bonus Plan (the "Annual Bonus Plan").
The Annual Bonus Plan furthers the Board's goal of linking executive
compensation to the Company's performance and stockholders' interests as a
whole.
Pursuant to the Annual Bonus Plan, the Committee is required to
establish, no later than ninety days after the beginning of each year,
performance goals for such year based upon one or more of the following
performance measures: return on equity, assets, capital or investment;
pre-tax or after-tax profit levels expressed in absolute dollars or earnings
per share; and operating cash flow or cash flow from operating activities.
Performance goals may be identical for all participants or may be different
to reflect more appropriate measures of individual performance. Performance
goals must include a threshold level below which no award will be payable
and a maximum award opportunity for each participant. The Committee is
authorized to adjust the method of calculating attainment of performance
goals in recognition of (i) extraordinary or nonrecurring items, (ii)
changes in tax laws, (iii) changes in generally accepted accounting
principles or changes in accounting policies, (iv) charges related to
restructured or discontinued operations, (v) restatement of prior period
financial results, and (vi) any other unusual, nonrecurring gain or loss
that is separately identified and quantified in the Company's financial
statements. In addition, notwithstanding the attainment of the performance
goals, annual incentive awards for participants may be denied or adjusted by
the Committee, in its sole judgment, based on its assessment of the
participant's performance. However, no upward adjustment may be made to an
award for a participant if Section 162(m) of the Code would limit the
deduction the Company may claim for that participant's compensation.
In February 2004, the Committee established the performance goals and
maximum bonus opportunities for the Annual Bonus Plan participants for 2004.
Except for the Division General Managers, the performance goals were based
on a weighted average of net income (weighted at 60%) and the level of
operating cash flow (weighted at 40%) generated by the Company in 2004. For
Division General Managers, the measures were based on a weighted average of
the respective division's earnings before taxes (weighted at 60%) and net
income and operating cash flow of the Company (weighted at 24% and 16%,
respectively). The target bonus percentage range was 40-70% of participant
base salaries for 2004, and was subject to increase to a maximum range of
80-140%, depending on the level of performance goal achievement. Bonus
payments increase as performance levels increase. The maximum bonus payment
is 200% of the target bonus opportunity.
As noted above, except for the Division General Managers, the measures
of corporate performance were based on net income and the level of cash flow
generated by the Company in 2004. Net income was included in the benchmark
to reflect the effect of management's performance on stockholder return.
Operating cash flow was utilized in the benchmark due to the continued
importance of cash flow in providing funds to pursue the Company's growth
strategies. Operating cash flow was defined as the Company's net cash flow
provided by operating activities, excluding any cash activity related to
acquisitions completed in 2004. Division performance for each General
Manager was assessed based on the respective Division's earnings before
taxes.
Considering the 2004 performance goals under the Annual Bonus Plan, the
Company had to generate net income of $28.44 million and $55.1 million of
operating cash flow in 2004 for the maximum payout for these objectives; no
payout for the net income objective would result if net income were less
than $23.26 million and no payout for the cash flow objective would result
if cash flow were less than $45.1 million. In February 2005, the
19
Committee evaluated and determined the degree to which the Annual Bonus Plan
criteria for 2004 had been met, as well as the performance of individual
Annual Bonus Plan participants. Based on this analysis, the Committee
awarded cash bonus payments on average at approximately the maximum levels.
The actual bonus payments for each of the named executive officers are shown
on the Summary Compensation Table.
LONG-TERM INCENTIVES
Under the Gardner Denver, Inc. Long-Term Incentive Plan (the "Incentive
Plan"), designated employees are eligible from time to time to receive
awards in the form of stock options, stock appreciation rights, restricted
stock grants or performance shares or long-term cash bonuses, as determined
by the Committee. The purpose of these awards is to promote the long-term
financial interests of the Company by encouraging employees to acquire an
ownership position in the Company and to provide incentives for specific
employee performance. In selecting the recipients and size of the awards,
the Committee considers each recipient's opportunity for significant
contribution to the Company's future growth and profitability, without
regard to his or her existing stock ownership. In 2004, the Committee
granted long-term incentive awards between the median and the 75th
percentile of the competitive market.
Stock Options. The Committee currently utilizes stock options to provide
the named executive officers and other key employees with incentives that
are related to the long-term performance of the Company. The specific number
of stock options granted to an executive is determined by the Committee,
with the advice and counsel of Mr. Centanni and Mercer, based upon the
individual's level of responsibility and a subjective judgment by the
Committee of the executive's contribution to the financial performance of
the Company. In 2004, stock options made up 50% of the executive's long-term
incentive opportunity. Options are granted at the average market price for
the Common Stock on the date of grant and have value only if the market
price of the underlying Common Stock appreciates. In 2004, the Committee
granted options with seven-year terms. Furthermore, since options become
exercisable in cumulative increments of one-third each year over a three-
year period, the Committee believes options provide an appropriate long-term
incentive for those receiving grants, as well as stability in the work
force.
Long-Term Bonuses. As noted above, under the Incentive Plan, the
Committee may also grant long-term cash bonus awards to the Chairman, Chief
Executive Officer, President, any Executive Vice President, any Senior Vice
President, any senior officer reporting directly to the Chief Executive
Officer and any other Vice President or senior executive or officer
designated by the Chief Executive Officer. Eligibility to receive a long-
term cash bonus is tied to the achievement of certain Company performance
targets over a pre-determined performance period. In 2004, long-term bonuses
made up 50% of the executive's long-term incentive opportunity.
The Committee is responsible for (i) determining the duration of each
performance period, (ii) selecting which executive officers of the Company
will be eligible to receive a long-term cash bonus for the performance
period, (iii) selecting the business criteria to be applicable to the
performance period from among those authorized, (iv) establishing Company
performance targets relative to the business criteria selected, (v) setting
a base salary factor for each executive officer eligible to receive a
long-term cash bonus for the performance period, and (vi) at the end of the
performance period, determining the extent to which the performance targets
have been achieved and the long-term cash bonuses payable to each eligible
executive officer. The Company performance targets may be based on any one,
or a combination, of the business criteria available for performance share
awards, as described above. Concurrently with the selection of performance
targets, the Committee must establish an objective formula or standard for
calculating the maximum long-term cash bonus payable to each participating
executive officer. All long-term cash bonuses are to be denominated in cash
or restricted stock awards, as determined by the Committee and subject to
the remaining provisions of the Incentive Plan. Except as otherwise
determined by the Committee, in its discretion, each executive selected by
the Committee as eligible to receive a long-term cash bonus with respect to
a particular performance period must continue to be employed by the Company
on the last day of such performance period to continue to be eligible to
receive the long-term cash bonus.
In February 2004, the Committee granted a long-term cash bonus award
opportunity to certain executives. The long-term cash bonus percentage for
the 2004 awards is tied to the compound growth rate of earnings
20
before taxes (EBT) for the Company's industrial businesses during the period
January 1, 2004 through December 31, 2006. The utilization of threshold,
target or maximum percentages will depend upon the achievement of certain
compound growth rates of EBT during this period, subject to adjustment as
provided under the Plan. These percentages will be applied to participants'
base salaries at the end of 2006 to determine the long-term cash bonus for
the period, if any.
In February 2005, the Committee evaluated and determined the degree to
which the criteria for long-term cash bonus award opportunities granted in
2002 to certain executives under the Incentive Plan (the "2002 L-T Bonus
Opportunity Plan") had been met. The criteria for bonus payouts under the
2002 L-T Bonus Opportunity Plan was tied to the compound growth rate of the
EBT for the Company's industrial business (i.e., excluding petroleum
products) during the period January 1, 2002 through December 31, 2004. Based
on its analysis of the Company's achievement of the relevant criteria, the
Committee awarded bonus payments in February 2005 to participating
executives under the 2002 L-T Bonus Opportunity Plan on average at
approximately the maximum levels. The actual long-term cash bonus payments
for each of the named executive officers are shown on the Summary
Compensation Table.
COMPENSATION OF CEO
Mr. Centanni's base salary, annual bonus and long-term incentive awards
for 2004 were determined in the manner described above. In addition, the
Committee also considered Mr. Centanni's individual performance for purposes
of the annual bonus. Individual goals agreed upon between the Committee and
Mr. Centanni included: achieving annual budget targets; acquisition and
integration of complementary companies; establish a packaging operation in
China; implementation of enhanced MIS systems deployment plan; achievement
of material and other cost reductions; improvement of underperforming
businesses; and improvement in corporate safety incident rate. The Committee
exercised its discretion, in light of these factors, and in view of
compensation objectives, to determine the overall compensation for Mr.
Centanni rather than assign weights or apply any formula to these factors.
The Company's net income for 2004 was $37.1 million, and the Company's
operating cash flow for 2004 was $76.8 million (200% of the respective
target levels), which, when adjusted by the Committee after consideration of
Mr. Centanni's individual performance, resulted in a cash bonus to Mr.
Centanni under the Annual Bonus Plan for 2004 of $910,000.
OTHER
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the deductibility by public corporations of non-performance
based compensation paid to specified executive officers. The Company
endeavors to maximize deductibility of compensation by qualifying certain
compensation as performance-based under Section 162(m) to the extent
practicable while maintaining competitive compensation. All compensation for
2004 paid to the Company's executive officers, including the compensation
element of shares received under the Company's Incentive Plan, qualified for
deduction under the Code.
March 15, 2005
Richard L. Thompson, Chairperson
Frank J. Hansen
Thomas M. McKenna
Diane K. Schumacher
The information above in the Report of the Management Development and
Compensation Committee of the Board of Directors on Executive Compensation
and the following Stock Performance Graph shall not be deemed to be
"soliciting material" or to be "filed" with the SEC or subject to Regulation
14A or 14C or to the liabilities of Section 18 of the Exchange Act, nor
shall it be deemed to be incorporated by reference into any filing under the
Securities Act of 1933 or the Exchange Act, except to the extent that the
Company specifically
21
requests that the information be treated as soliciting material or
specifically incorporates the information by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Management Development and Compensation
Committee is or has been an officer or employee of the Company or any of its
subsidiaries. In addition, none of the members of the Management Development
and Compensation Committee has or had any relationships with the Company or
any other entity which would require disclosure under the proxy rules and
regulations promulgated by the SEC.
STOCK PERFORMANCE GRAPH
The following table compares the cumulative total stockholder return for
the Company's Common Stock on an annual basis from December 31, 1999 through
December 31, 2004 to the cumulative total returns for the same periods of
the: (a) Standard & Poor's 500 Stock Index; (b) Standard and Poor's 600
Index for Industrial Machinery, a pre-established industry index believed by
the Company to have a peer group relationship with the Company; and (c)
Standard & Poor's SmallCap 600, an industry index which includes the
Company's Common Stock. All information presented assumes the reinvestment
of dividends. These indices are included for comparative purposes only and
do not necessarily reflect management's opinion that such indices are an
appropriate measure of the relative performance of the stock involved, and
are not intended to forecast or be indicative of possible future performance
of the Company's Common Stock.
[GRAPH]
------------------------------------------------------------
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
---------------------------------------------------------------------------------------
Gardner Denver 100 128 134 122 143 217
S&P 500 Index 100 91 80 62 80 89
S&P SmallCap 600 Index 100 112 119 102 141 173
S&P 600 Ind. Machy. 100 97 104 99 135 173
---------------------------------------------------------------------------------------
EMPLOYEE AND EXECUTIVE BENEFIT PLANS
In addition to the Incentive Plan, the Savings Plans and group health,
hospitalization and life insurance plans generally available to all
employees, the Company also provides other benefit plans for employees and
executive officers, some of which are described below.
RETIREMENT PLANS
The Company maintains the Gardner Denver, Inc. Pension Plan (the
"Pension Plan") and the Gardner Denver, Inc. Supplemental Excess Defined
Benefit Plan (the "Excess Benefit Plan") for the benefit of certain
employees as defined in the Pension Plan. The Company also maintains certain
other pension plans.
22
Under the Pension Plan, the Company credits 4% of total compensation
paid, up to the Social Security wage base for the year, plus 8% of total
compensation paid in excess of the Social Security wage base, annually to
each individual's account. For purposes of the Pension Plan, total
compensation is cash remuneration paid during the year by the Company to or
for the benefit of a participant, including base salary for the current year
and annual cash bonus earned during the prior year but paid in the current
year for the executives named in the Summary Compensation Table.
Benefits at retirement are payable, as the participant elects, in the
form of a level annuity with or without survivorship or a lump-sum payment.
The Company intends to maintain the status of the plan as a qualified
defined benefit plan through sufficient contributions to a trust fund to
meet the minimum requirements under the Code.
The Company also maintains the Excess Defined Benefit Plan. The Excess
Defined Benefit Plan is a nonqualified plan providing certain employees,
including those named in the Summary Compensation Table, Pension Plan
benefits that cannot be paid from a qualified, defined benefit plan due to
provisions of the Code. Under the Excess Defined Benefit Plan, for 2004, the
Company credited 12% of the amount of annual compensation in excess of the
$205,000 IRS annual compensation limit to the individual accounts of the
participating employees, including those named in the Summary Compensation
Table. The Excess Defined Benefit Plan is funded through contributions by
the Company to a Rabbi Trust.
For each of the individuals shown in the Summary Compensation Table, the
following table shows current credited years of service, the year each
attains age 65, and the projected annual pension benefit (including amounts
payable under the Excess Benefit Plan) at age 65. The projected annual
pension benefit assumes that benefits will be paid on a straight-life
annuity basis, compensation for each executive officer continues at December
31, 2004 base salary levels plus an annual cash bonus equal to the average
cash bonus received by each officer in 2004 and 2003, and an interest rate
of 4.86% after December 31, 2004.
YEARS OF
CREDITED YEAR
SERVICE AS OF INDIVIDUAL ESTIMATED ANNUAL
MARCH 4, 2005 REACHES AGE 65 BENEFIT AT AGE 65
------------- -------------- -----------------
Ross J. Centanni............... 25 2010 $236,805
Michael S. Carney.............. 3 2022 95,985
Helen W. Cornell............... 16 2024 144,968
Tracy D. Pagliara.............. 4 2028 158,955
Richard C. Steber.............. 3 2015 45,705
Philip R. Roth................. 8 2016 113,106
STOCK REPURCHASE PROGRAM FOR EXECUTIVE OFFICERS
The Company has granted stock options under the Incentive Plan to
promote the Company's long-term interests, and executive officers have
exercised a portion of such stock options in accordance with the Incentive
Plan and applicable stock option agreements. The cumulative increase in the
market price of the Company's Common Stock since the grant of some of these
stock options resulted in the imposition of significant alternative minimum
taxes on these employees. Therefore, the Company has established a Stock
Repurchase Program for its executive officers, to provide a means for them
to sell Company Common Stock and obtain sufficient funds to meet tax
obligations which arise from the exercise or vesting of incentive stock
options, restricted stock or performance shares. The program is intended to
mitigate any potential disruption to an orderly trading market in the
Company's Common Stock, which could result if the executives' trades were
effected through securities brokers, in the context of the Company's
relatively small average trading volume. The sales price under this program
is the average of the high and low sales prices of the Company's Common
Stock on the composite tape of the New York Stock Exchange on the date of
the repurchase. The determination to sell shares under this program is final
and must be submitted either on the day of the sale or no later than prior
to the initiation of trading the following day. There were no share
repurchases under the Plan from January 1, 2004 through March 4, 2005.
23
CHANGE IN CONTROL AGREEMENTS
The Company is party to Change in Control Agreements ("CIC Agreements")
with each of the individuals (other than Mr. Roth) named in the Summary
Compensation Table. The purpose of the CIC Agreements is to encourage each
of the executive officers to continue to carry out the officer's duties in
the event of a possible change in control of the Company. The CIC Agreements
address adverse changes that may occur with respect to the executive's terms
and conditions of employment, including position, location, compensation and
benefits, following a change of control. If, during the 24-month period
following a change in control, the Company terminates the executive
officer's employment other than for cause (as defined in the applicable CIC
Agreement) or the executive officer terminates for good reason (as defined
in the applicable CIC Agreement), the executive officer is generally
entitled to receive: (i) accrued but unpaid compensation; (ii) cash equal to
the amount of the highest annual bonus during the three preceding years;
(iii) a lump sum payment of two times (a) the executive officer's annual
base salary and (b) the highest annual bonus during the three preceding
years; (iv) a lump sum payment of all compensation previously deferred by
the executive officer and all interest and earnings accrued thereon; (v)
continued welfare benefits for two years; and (vi) the acceleration of
vesting and continued accrual of benefits under any defined benefit
retirement plans for three years. The CIC Agreements also prohibit the
executive officer from disclosing confidential information and from
soliciting the Company's employees, customers or clients.
The Chief Executive Officer also has a CIC Agreement. His benefits are
the same as those described above except that his lump sum payment is equal
to three times his annual base salary and highest annual bonus during the
three preceding years and his welfare benefits continue for a period of
three years.
For purposes of the CIC Agreements, a "change in control" means the
occurrence of any of the following events: (i) any person or group acquires
beneficial ownership of 20% of the voting power of the Company; (ii) there
is a change in the composition of a majority of the Board of Directors
within any two-year period which change is not approved by certain of the
directors who were directors at the beginning of such two-year period; (iii)
the stockholders of the Company approve and the Company consummates a merger
that results in a change in a majority of the combined voting power of the
Company or the surviving entity; or (iv) the stockholders of the Company
approve and the Company consummates a plan of complete liquidation or
dissolution of the Company, or a sale of all or substantially all of the
assets of the Company.
The foregoing summary is qualified in its entirety by reference to the
complete copy of the form of CIC Agreements included as Exhibits 10.13 and
10.14 to the Company's Form 10-Q for the quarter ended June 30, 2002, which
was filed with the SEC.
AUDIT COMMITTEE MATTERS
REPORT OF THE AUDIT AND FINANCE COMMITTEE
Management of the Company is responsible for the Company's internal
controls and the financial reporting process. KPMG LLP ("KPMG"), the
Company's independent registered public accounting firm, is responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and issuing a report thereon. The Audit and
Finance Committee's responsibility is to monitor and oversee these
processes. The Audit and Finance Committee's function is more fully
described in its charter, which has been approved by the Board and is
available at the Company's website at www.gardnerdenver.com. The Audit and
Finance Committee reviews its charter on an annual basis.
In this context, the Audit and Finance Committee has met and held
discussions with management and KPMG. Management represented to the Audit
and Finance Committee that the Company's consolidated financial statements
for the fiscal year ended December 31, 2004 were prepared in accordance with
U.S. generally accepted accounting principles. The Audit and Finance
Committee has reviewed and discussed the consolidated financial statements
with management and with KPMG. The Audit and Finance Committee specifically
addressed with KPMG matters required to be discussed by Statement on
Auditing Standards No. 61, as modified or supplemented, and SEC Regulation
S-X, Rule 2-07.
24
KPMG also provided to the Audit and Finance Committee the written
disclosures and letter required by the New York Stock Exchange listing
standards. As part of its review of the financial statements and the
auditors' disclosures and report, the members of the Audit and Finance
Committee also discussed with KPMG its independence.
The members of the Audit and Finance Committee are not professionally
engaged in the practice of auditing or accounting and are not experts with
respect to auditor independence. Members of the Audit and Finance Committee
rely on the information provided to them and on the representations made by
management and the independent registered public accounting firm.
Accordingly, the Audit and Finance Committee's considerations and
discussions referred to above do not assure that the audit of the Company's
financial statements has been carried out in accordance with U.S. generally
accepted auditing standards, that the financial statements are presented in
accordance with U.S. generally accepted accounting principles or that the
Company's auditors are in fact "independent."
Based on its discussions with the Company's management and the Company's
independent registered public accounting firm, and subject to the
limitations on the role and responsibilities of the Audit and Finance
Committee referred to above and in its charter, the Audit and Finance
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the period ended
December 31, 2004 for filing with the SEC.
March 15, 2005
Donald G. Barger, Jr., Chairperson
Raymond R. Hipp
Thomas M. McKenna
David D. Petratis
The information above in the Report of the Audit and Finance Committee
of the Board of Directors shall not be deemed to be "soliciting material" or
to be "filed" with the SEC or subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, nor shall it be deemed to be
incorporated by reference into any filing under the Securities Act of 1933
or the Exchange Act, except to the extent that the Company specifically
requests that the information be treated as soliciting material or
specifically incorporates the information by reference.
ACCOUNTING FEES
The following summarizes the aggregate fees KPMG billed the Company for
services relating to the years ended December 31, 2004 and December 31,
2003.
Audit Fees. $1,686,000 (for the fiscal year ended December 31, 2004) and
$391,500 (for the fiscal year ended December 31, 2003) for professional
services rendered for the audit of the Company's annual financial statements
and review of financial statements included in the Company's Forms 10-Q or
services that are normally provided in connection with statutory and
regulatory filings or engagements for those fiscal years, including
attestation of management's report on internal control over financial
reporting.
Audit-Related Fees. $136,000 (for the fiscal year ended December 31,
2004) and $86,500 (for the fiscal year ended December 31, 2003) for
acquisition due diligence, employee benefit plan reviews, and other
assurance and related services that are reasonably related to the
performance of the audit or review of the Company's financial statements,
but which are not included under "Audit Fees" above.
Tax Fees. $704,000 (for the fiscal year ended December 31, 2004) and
$410,000 (for the fiscal year ended December 31, 2003) for tax compliance,
tax advice and tax planning services.
25
All Other Fees. $16,000 (for the fiscal year ended December 31, 2004)
and $52,500 (for the fiscal year ended December 31, 2003) for all products
and services provided by KPMG other than those described above, including
Sarbanes-Oxley Section 404 compliance assistance in 2003.
The Audit and Finance Committee has developed pre-approval policies and
procedures for audit and non-audit services, which are attached as Appendix B.
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In accordance with its charter, the Audit and Finance Committee selected
KPMG to audit the Company's consolidated financial statements for fiscal
2004. The Audit and Finance Committee has selected KPMG to serve as the
Company's independent registered public accounting firm for fiscal 2005. A
member of KPMG will be present at the meeting with the opportunity to make a
statement and/or respond to appropriate questions from stockholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2004, the Company paid Frank J. Hansen, one of the Company's current
directors, $3,000 under a consulting agreement between the Company and Mr.
Hansen for consulting services relating to certain corporate transactions.
See Footnote 4 to the Summary Compensation Table with respect to the
Company's severance arrangement with Mr. Roth, who resigned as Vice
President, Finance, and Chief Financial Officer of the Company effective as
of August 16, 2004.
PROPOSAL II--APPROVAL OF THE COMPANY'S EXECUTIVE ANNUAL BONUS PLAN
The Company's Management Annual Incentive Plan, approved by the
Company's stockholders on May 1, 2001, will expire December 31, 2005.
Subject to the approval of the stockholders, the Board has renamed such plan
the Gardner Denver, Inc. Executive Annual Bonus Plan (the "Annual Bonus
Plan") and has renewed such plan without material change, effective January
1, 2006, with a new expiration date of December 31, 2010. The Board has
authorized the submission of the Annual Bonus Plan as this Proposal II. A
copy of the Annual Bonus Plan is included in this Proxy Statement as
Appendix C.
SUMMARY OF PLAN
It is proposed that the stockholders renew the Annual Bonus Plan, which
is intended to formalize the existing practices of awarding annual cash
bonuses to senior executives based on the Company's performance. The Annual
Bonus Plan is designed so that payments to senior executives will constitute
performance-based compensation under Section 162(m) of the Code, and will be
tax deductible by the Company. The Annual Bonus Plan furthers the Board's
policy of linking executive compensation to the Company's performance and
stockholders' interests as a whole. A summary of the essential features of
the Annual Bonus Plan is provided below but is qualified in its entirety by
reference to the full text of the Annual Bonus Plan.
PLAN ADMINISTRATION
The Annual Bonus Plan will be administered by the Management Development
and Compensation Committee, which will certify in writing as to the
achievement of performance criteria prior to payment of any awards. The
Committee retains the discretion to reduce in whole or in part the amount of
any award that would otherwise be payable to a participant based upon its
assessment of that participant's performance.
PARTICIPANTS
Participation in the Annual Bonus Plan will be limited to the Chairman,
Chief Executive Officer, President, any Executive Vice President, any Senior
Vice President, any senior officer reporting directly to the Chief Executive
Officer and any other Vice President or senior executive or officer
designated by the Chief Executive Officer. Participants will be selected for
participation annually by the Committee, not later than 90 days after
26
the commencement of the relevant performance period. There are six (6)
persons currently eligible to participate in the Annual Bonus Plan.
AWARDS, PERFORMANCE GOALS AND MEASURES
Awards under the Annual Bonus Plan will be paid in cash. The Committee
will establish, no later than ninety (90) days after the beginning of each
year, performance goals for such year based upon one or more of the
following performance measures: return on equity, assets, capital or
investment; pre-tax or after-tax profit levels expressed in absolute dollars
or earnings per share; and operating cash flow or cash flow from operating
activities. Performance goals may be identical for all participants or may
be different to reflect more appropriate measures of individual performance.
Performance goals will include a threshold level below which no award will
be payable and a maximum award opportunity for each participant. The
Committee is authorized to adjust the method of calculating attainment of
performance goals in recognition of (i) extraordinary or nonrecurring items,
(ii) changes in tax laws, (iii) changes in generally accepted accounting
principles or changes in accounting policies, (iv) charges related to
restructured or discontinued operations, (v) restatement of prior period
financial results, and (vi) any other unusual, non-recurring gain or loss
that is separately identified and quantified in the Company's financial
statements.
Payment of awards to participants under the Annual Bonus Plan will occur
only after the Committee has certified in writing that the applicable
performance goals have been achieved for the relevant performance period.
Notwithstanding the attainment of the performance goals, annual bonus awards
for participants may be denied or adjusted by the Committee, in its sole
judgment, based on its assessment of the participant's performance. However,
no upward adjustment may be made to an award for a participant if Section
162(m) of the Code would limit the deduction the Company may claim for that
participant's compensation. The maximum annual bonus award that may be
granted to a participant under the Annual Bonus Plan for any performance
period may not exceed $3,000,000 or, if less, three times the participant's
base salary as of the last day of the performance period.
The Company and its subsidiaries have expressly reserved the right under
the Annual Bonus Plan, at any time, to terminate the employment of any
participant free from any liability under the Annual Bonus Plan; except that
a participant who was actively employed as of the last day of the applicable
performance period shall be eligible to receive payment of his or her award,
even though the participant is no longer an active employee of the Company
at the time the Committee actually pays awards under the Annual Bonus Plan
for the applicable performance period. The Committee also has the discretion
to grant eligibility to a participant to receive an award notwithstanding
the fact that such participant is no longer an active employee of the
Company at the end of the relevant performance period.
CHANGE IN CONTROL
Immediately upon a Change in Control (as defined in the Annual Bonus
Plan), all outstanding awards will be deemed earned at the maximum
performance goal level, and the Company shall make a payment of such awards
in cash within 10 days after the effective date of the Change in Control. A
"Change in Control," for purposes of, and as more fully defined in, the
Annual Bonus Plan, shall have occurred if (i) the Company merges with,
consolidates into, or sells all or substantially all of its assets to,
another entity or person and the Company's stockholders immediately prior to
such transaction own less than a majority of the combined voting stock after
such transaction; (ii) another person or entity files a report with the SEC
indicating that such person beneficially owns 20% or more of the voting
stock of the Company; (iii) the Company files a report with the SEC
indicating that a change in control has taken or will take place; or (iv)
with respect to any two-year period, the directors in office at the
beginning of such two-year period (and any directors elected by two-thirds
of the directors in office at the beginning of such period) do not
constitute a majority of the directors in office at the end of such period.
DEFERRALS
The Committee may permit participants to defer receipt of all or a
portion of an award.
27
AMENDMENT, SUSPENSION AND TERMINATION
The Board may amend, suspend or terminate the Annual Bonus Plan at any
time except that no amendment will be effective prior to approval by the
Company's stockholders to the extent such approval is required by law or
pursuant to Section 162(m) of the Code. Further, no amendment will be
effective without stockholder approval that would (i) increase the maximum
amount that can be paid to a participant under the Annual Bonus Plan, (ii)
change the performance criterion set forth in the Annual Bonus Plan, or
(iii) modify the eligibility requirements of participants. Subject to
earlier termination pursuant to the above, the Annual Bonus Plan will
terminate December 31, 2010. After that date, no future awards may be
granted.
2005 BONUS FORMULA
In February 2005, the Committee established the performance goals and
maximum bonus opportunities for the Annual Bonus Plan participants for 2005.
Except for the Division General Managers, the performance goals are based on
a weighted average of net income and operating cash flow generated by the
Company in 2005. For Division General Managers, the measures are based on a
weighted average of the respective division's earnings before taxes and net
income and operating cash flow of the Company. The target bonus percentage
range is 40-100% of participants' base salaries for 2005, and can be
increased to a maximum range of 80-200%, depending on the level of
performance goal achievement. These bonus percentage ranges are also subject
to further adjustment in the Committee's discretion, as provided under the
terms of the Annual Bonus Plan.
The following table shows the target and maximum amounts payable to
eligible participants under the Annual Bonus Plan for the fiscal year ending
December 31, 2005:
EXECUTIVE ANNUAL BONUS PLAN BENEFITS
% OF
% OF SALARY DOLLAR VALUE SALARY DOLLAR VALUE
NAME & POSITION (TARGET) (TARGET) (MAXIMUM) (MAXIMUM)
--------------- ----------- ------------ --------- ------------
Ross J. Centanni........................... 100% $ 700,000 200% $1,400,000
Chairman, President & CEO
Michael S. Carney.......................... 40% $ 105,200 80% $ 210,400
Vice President & General Manager,
Blower Division
Helen W. Cornell........................... 60% $ 168,000 120% $ 336,000
Vice President, Finance & CFO
Tracy D. Pagliara.......................... 60% $ 165,000 120% $ 330,000
Vice President, Administration,
General Counsel & Secretary
Richard C. Steber.......................... 40% $ 106,000 80% $ 212,000
Vice President & General Manager,
Liquid Ring Pump Division
All Executive Officers as a Group.......... $1,350,200 $2,700,400
All Non-Executive Directors as a Group..... N/A N/A
All Non-Executive Officer Employees as a
Group.................................... N/A N/A
APPROVAL OF ANNUAL BONUS PLAN
Approval of the Annual Bonus Plan requires the affirmative vote of a
majority of the Common Stock having voting power present at the meeting, in
person or by proxy.
28
THE BOARD OF DIRECTORS BELIEVES THAT ADOPTION OF THE ANNUAL BONUS PLAN
WILL BE IN THE BEST INTERESTS OF THE STOCKHOLDERS AND, ACCORDINGLY,
RECOMMENDS A VOTE FOR THIS PROPOSAL, WHICH IS ITEM 2 ON THE PROXY CARD.
---
Proxies received in response to the Board's solicitation will be voted
for approval of the Annual Bonus Plan if no specific instructions are
included for Item 2, except for shares held in Savings Plans which
shall be voted as set forth in the accompanying proxy. See also
"General Information."
STOCKHOLDERS' PROPOSALS FOR 2005 ANNUAL MEETING
Stockholders' proposals intended to be presented at the 2006 Annual
Meeting must be received by the Company at its principal executive offices
(Attention: Corporate Secretary) on or before November 15, 2005 for
inclusion in the Company's proxy materials for that meeting. Upon receipt of
any proposal, the Company will determine whether or not to include such
proposal in the proxy statement in accordance with the regulations governing
the solicitation of proxies.
Any stockholder proposal or nomination for director submitted for
inclusion in the Company's proxy materials for that meeting must ordinarily
be received by the Company at its principal executive offices (Attention:
Corporate Secretary) no later than 90 days or more than 120 days prior to
the anniversary date of the annual stockholder meeting the preceding year
(i.e., stockholder proposals or nominations for director for inclusion in
2006 Annual Meeting must be received between January 3, 2006 and February 2,
2006), or such proposal will be considered untimely. However, if the Company
changes the date of the meeting by more than 30 days from the date of the
previous year's meeting, then such notice must be received within 10 days
after notice of the meeting is mailed or other public disclosure of the
meeting is made. The stockholder filing the notice of proposal or nomination
must describe various matters regarding the proposal or nominee, including,
but not limited to, name, address, shares held, a description of the
proposal or information regarding the nominee and other specified matters.
These requirements are separate from and in addition to the requirements a
stockholder must meet to have a proposal included in the Company's proxy
statement. The foregoing time limits also apply in determining whether
notice is timely for purposes of rules adopted by the SEC relating to the
exercise of discretionary voting authority.
Any stockholder desiring a copy of the Company's Bylaws will be
furnished one without charge upon written request to the Corporate Secretary
at 1800 Gardner Expressway, Quincy, Illinois 62305.
HOUSEHOLDING OF PROXIES
The SEC has adopted rules that permit companies and intermediaries such
as brokers to satisfy delivery requirements for annual reports and proxy
statements with respect to two or more stockholders sharing the same address
by delivering a single annual report and/or proxy statement addressed to
those stockholders. This process, which is commonly referred to as
"householding," potentially provides extra convenience for stockholders and
cost savings for companies. The Company and some brokers household annual
reports and proxy materials, delivering a single annual report and/or proxy
statement to multiple stockholders sharing an address unless contrary
instructions have been received from one or more of the affected
stockholders.
Once you have received notice from your broker or the Company that your
broker or the Company will be householding materials to your address,
householding will continue until you are notified otherwise or until you
revoke your consent. If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate annual report and/or
proxy statement in the future, please notify your broker if your shares are
held in a brokerage account or the Company if you hold registered shares.
If, at any time, you and another stockholder sharing the same address wish
to participate in householding and prefer to receive a single copy of the
Company's annual report and/or proxy statement, please notify your broker if
your shares are held in a brokerage account or the Company if you hold
registered shares.
You may request to receive at any time a separate copy of our annual
report or proxy statement, or notify the Company that you do or do not wish
to participate in householding by sending a written request to the Corporate
Secretary at 1800 Gardner Expressway, Quincy, Illinois, 62305 or by
telephoning 217-222-5400.
29
ELECTRONIC ACCESS TO PROXY STATEMENT AND ANNUAL REPORT
This Proxy Statement and our 2004 annual report may be viewed online at
www.gardnerdenver.com. If you are a stockholder of record, you can elect to
receive future annual reports and proxy statements electronically by marking
the appropriate box on your proxy form or by following the instructions
provided if you vote by telephone or via the Internet. If you choose this
option, you will receive a proxy form in mid-March listing the website
locations and your choice will remain in effect until you notify us by mail
that you wish to resume mail delivery of these documents. If you hold your
Company Common Stock through a bank, broker or another holder of record,
refer to the information provided by that entity for instructions on how to
elect this option.
ADDITIONAL FILINGS
The Company's Forms 10-K, 10-Q, 8-K and all amendments to those reports
are available without charge through the Company's website on the Internet
as soon as reasonably practicable after they are electronically filed with,
or furnished to, the SEC. They may be accessed at www.gardnerdenver.com.
GARDNER DENVER, INC.
/s/ Tracy D. Pagliara
Tracy D. Pagliara
Vice President, Administration,
General Counsel and Secretary
March 15, 2005
30
APPENDIX A
GARDNER DENVER, INC.
DIRECTOR INDEPENDENCE STANDARDS
In order to be considered independent under the rules of the New York
Stock Exchange ("NYSE"), the Board must determine that a director does not
have any direct or indirect material relationship with Gardner Denver. The
Board has established the following guidelines to assist it in determining
director independence under the NYSE rules. Any director who meets the
following standards will be deemed independent by the Board:
1. The director was not employed by Gardner Denver, and no immediate family
member of the director was employed by Gardner Denver as an executive
officer, within the preceding three years.
2. The director was not affiliated with or employed by, and no immediate
family member of the director was affiliated with or employed in a
professional capacity by, Gardner Denver's present or former independent
auditor, within the preceding three years.
3. The director was not employed as an executive officer by, and no
immediate family member of the director was employed as an executive
officer by, any company for which any present Gardner Denver executive
officer served as a member of such company's compensation committee
within the preceding three years.
4. The director did not receive, and no member of the director's immediate
family received, direct compensation in excess of $100,000 per year from
Gardner Denver during any of the last three years (other than director
and committee fees, pension or other deferred payments that are not in
any way contingent on continued service to Gardner Denver, and
compensation received by any immediate family member for service as a
non-executive officer of Gardner Denver).
5. If the director is an executive officer or an employee of, or if any
immediate family member is an executive officer of, another company that
does or has done business with Gardner Denver, the annual payments to, or
payments received from, Gardner Denver for property or services by such
company in each of the last three fiscal years were less than the greater
of $1 million or two percent of the annual consolidated gross revenues of
such company.
6. If the director is a member of Gardner Denver's Audit Committee, the
director has not, other than in his or her capacity as a director,
accepted directly or indirectly any consulting, advisory, or other
compensatory fee from Gardner Denver or any of its subsidiaries.
"Compensatory fees" do not include the receipt of fixed amounts of
compensation under a retirement plan (including deferred compensation)
for prior service with Gardner Denver, provided that such compensation is
not contingent on future service.
7. If the director serves as an executive officer, director or trustee of a
charitable organization to which Gardner Denver makes contributions,
other than the United Way, Gardner Denver's discretionary annual
contributions to such organization are less than the greater of $1
million or two percent of such organization's total annual charitable
receipts.
8. The director's ownership, direct or indirect, of Gardner Denver common
shares is less than 5% of the total outstanding Gardner Denver common
shares.
If any relationship exists between Gardner Denver and any director that
is not addressed by the standards set forth above, the directors meeting
these standards shall determine whether such relationship impairs the
independence of such director.
A-1
APPENDIX B
AUDIT AND FINANCE COMMITTEE
SERVICES APPROVAL POLICY
STATEMENT OF PRINCIPLES
The Audit and Finance Committee (the "Audit Committee") of the Board of
Directors of Gardner Denver, Inc. (the "Company") is required to approve the
audit and non-audit services performed by the Company's independent auditor
in order to assure that the provision of such services do not impair the
auditor's independence. Unless a type of service to be provided by the
independent auditor has received pre-approval, it will require specific
approval by the Audit Committee. Any proposed services exceeding
pre-approved cost levels will require specific approval by the Audit
Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All
Other services that have the pre-approval of the Audit Committee. The term
of any pre-approval is twelve (12) months from the date of pre-approval,
unless the Audit Committee specifically provides for a different period. The
Audit Committee will periodically revise the list of pre-approved services,
based on subsequent determinations. Pre-approval fee levels for all services
to be performed by the Company's independent auditor will be established
periodically by the Audit Committee.
The Company's independent auditor has reviewed this Policy and believes that
implementation of the Policy will not adversely affect the auditor's
independence.
DELEGATION
The Audit Committee does not delegate its responsibilities to approve
services performed by the independent auditor to management. However, it may
delegate pre-approval authority to one or more of its members. The member or
members to whom such authority is delegated shall report any pre-approval
decisions to the Audit Committee at its next scheduled meeting.
The Audit Committee does not need to pre-approve non-audit services under
the following conditions: (i) the aggregate amount of all such non-audit
services provided to the Company constitutes not more than five percent (5%)
of the total amount of revenues paid by the Company to the accounting firm
during the fiscal year in which the non-audit services are provided, (ii)
such services were not recognized by the Company at the time of the
engagement to be non-audit services, and (iii) such services are promptly
brought to the Committee's attention and approved prior to the completion of
the audit by the Audit Committee or by one or more members of the Committee
who are members of the Board to whom authority to grant such approvals has
been delegated by the Committee.
AUDIT SERVICES
The annual Audit services engagement terms and fees will be subject to the
specific approval of the Audit Committee. The Audit Committee will approve,
if necessary, any changes in terms, conditions and fees resulting from
changes in audit scope, Company structure or other matters.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant pre-approval for other Audit
services, which are those services that only the independent auditor
reasonably can provide. The Audit Committee may pre-approve the Audit
services listed in Appendix B-A periodically. All Audit services not listed
------------
in Appendix B-A must be separately approved by the Audit Committee.
------------
AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the
Company's financial statements and that are traditionally performed by the
independent auditor. The Audit Committee believes that the provision of
Audit-related services does not impair the
B-1
independence of the auditor, and may pre-approve the Audit-related services
listed in Appendix B-B periodically. All Audit-related services not listed
------------
in Appendix B-B must be separately approved by the Audit Committee.
------------
TAX SERVICES
The Audit Committee believes that the independent auditor can provide Tax
services to the Company such as tax compliance, tax planning and tax advice
without impairing the auditor's independence. However, the Audit Committee
will not permit the retention of the independent auditor in connection with
a transaction initially recommended by the independent auditor, the purpose
of which may be tax avoidance and the tax treatment of which may not be
supported in the Internal Revenue Code and related regulations. The Audit
Committee may pre-approve the Tax services listed in Appendix B-C
------------
periodically. All Tax services not listed in Appendix B-C must be separately
------------
approved by the Audit Committee.
ALL OTHER SERVICES
The Audit Committee may grant pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, and would not impair the independence of the auditor.
The Audit Committee may pre-approve the All Other services listed in
Appendix B-D periodically. Permissible All Other services not listed in
------------
Appendix B-D must be separately approved by the Audit Committee.
------------
A list of the SEC's prohibited non-audit services is attached to this policy
as Exhibit B-1. The SEC's rules and relevant guidance should be consulted to
-----------
determine the precise definitions of these services and the applicability of
exceptions to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all services to be provided by the independent
auditor will be established periodically by the Audit Committee. Any
proposed services exceeding these levels will require separate approval by
the Audit Committee.
APPROVAL PROCEDURES
All requests or applications to provide services that do not require
separate pre-approval by the Audit Committee will be submitted to the Chief
Financial Officer and must include a detailed description of the services to
be rendered. The Chief Financial Officer will determine whether such
services are included within the list of services that have received the
prior pre-approval of the Audit Committee and whether the fees for such
services fall within the range of fees approved by the Audit Committee for
such services. The Audit Committee will be informed on a timely basis of any
such services rendered by the independent auditor.
If, subsequent to the pre-approval of scheduled services by the Audit
Committee, the Company would like to engage the independent auditor to
perform a service not included on the existing pre-approval schedule, a
request should be submitted to the General Counsel and Chief Financial
Officer. If they determine that the service can be performed without
impairing the independence of the auditor, then a discussion and approval of
the service will be included on the agenda for the next regularly scheduled
Audit Committee meeting. If the timing for the service needs to commence
before the next Audit Committee meeting, the Audit Committee Chair, or any
other member of the Audit Committee designated by the Audit Committee, can
provide separate pre-approval.
Requests or applications to provide services that require separate approval
by the Audit Committee will be submitted to the Audit Committee, or the
designated member(s), by both the independent auditor and the Chief
Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence. With respect to each such request or application, the
independent auditor will also provide back-up documentation, which will be
provided to the Audit Committee, or the designated member(s), regarding the
specific services to be performed.
B-2
MONITORING RESPONSIBILITY
The Committee hereby designates the head of the Company's internal audit
function to monitor the performance of all services provided by the
independent auditor and to determine whether such services are in compliance
with this policy. The head of the Company's internal audit function will
report to the Committee on a periodic basis, but not less frequently than
quarterly, on the results of its monitoring. Both the head of the Company's
internal audit function and the Company's Chief Financial Officer will
immediately report to the Chairman of the Committee any breach of this
policy that comes to their attention or the attention of any member of the
Company's management.
B-3
APPENDIX B-A
PRE-APPROVED AUDIT SERVICES
Dated:
--------------
---------------------------------------------------------------------------------------------------------------
AUDIT SERVICES RANGE OF FEES
---------------------------------------------------------------------------------------------------------------
Statutory audits or financial audits for subsidiaries or affiliates of the Company
---------------------------------------------------------------------------------------------------------------
Services associated with SEC registration statements, periodic reports and other documents
filed with the SEC or other documents issued in connection with securities offerings (e.g.,
comfort letters, consents), and assistance in responding to SEC comment letters
---------------------------------------------------------------------------------------------------------------
Attestation of management reports on internal control over financial reporting
---------------------------------------------------------------------------------------------------------------
Consultations by the Company's management as to the accounting or disclosure treatment of
transactions or events and/or the actual or potential impact of final or proposed rules,
standards or interpretations by the SEC, FASB, or other regulatory or standard setting
bodies (Note: Under SEC rules, some consultations may be "audit-related" services rather
than "audit" services)
---------------------------------------------------------------------------------------------------------------
B-4
APPENDIX B-B
PRE-APPROVED AUDIT-RELATED SERVICES
Dated:
--------------
---------------------------------------------------------------------------------------------------------------
AUDIT-RELATED SERVICES RANGE OF FEES
---------------------------------------------------------------------------------------------------------------
Due diligence services pertaining to potential business acquisitions/dispositions
---------------------------------------------------------------------------------------------------------------
Financial statement audits of employee benefit plans
---------------------------------------------------------------------------------------------------------------
Agreed-upon or expanded audit procedures related to accounting and/or billing records
required to respond to or comply with financial, accounting or regulatory reporting matters
---------------------------------------------------------------------------------------------------------------
Internal control reviews and assistance with internal control reporting requirements
---------------------------------------------------------------------------------------------------------------
Consultations by the Company's management as to the accounting or disclosure treatment of
transactions or events and/or the actual or potential impact of final or proposed rules,
standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies
(Note: Under SEC rules, some consultations may be "audit" services rather than "audit-
related" services)
---------------------------------------------------------------------------------------------------------------
Attest services not required by statute or regulation
---------------------------------------------------------------------------------------------------------------
General assistance with implementation of the requirements of SEC rules or listing standards
promulgated pursuant to the Sarbanes-Oxley Act of 2002
---------------------------------------------------------------------------------------------------------------
Audits of opening balance sheets of acquired companies and accounting consultations as to
the accounting or disclosure treatment of transactions and proposed transactions
---------------------------------------------------------------------------------------------------------------
Services related to procedures used to support the calculation of the gain or loss from
dispositions and discontinued operations
---------------------------------------------------------------------------------------------------------------
Compliance letters, agreed upon procedures, reviews and similar reports related to audited
financial statements and/or internal controls
---------------------------------------------------------------------------------------------------------------
Audits of financial statements and transactions included in consolidated financial statements
that are used by lenders, filed with government and regulatory bodies and similar reports
---------------------------------------------------------------------------------------------------------------
Services that result from the role of independent auditor such as reviews of SEC filings,
consents, letters to underwriters and other services related to financings that include
audited financial statements
---------------------------------------------------------------------------------------------------------------
Assist the Company with the review of the design of its internal control over financial
reporting in connection with the Company's preparedness for Section 404 of Sarbanes-Oxley
---------------------------------------------------------------------------------------------------------------
Financial statement audits of employee benefit plans
---------------------------------------------------------------------------------------------------------------
Assist the Company with tax accounting related issues, including tax accounting for
transactions and proposed transactions
---------------------------------------------------------------------------------------------------------------
Assist the Company with accounting issues and audits of carve-out financial statements
---------------------------------------------------------------------------------------------------------------
Assist the Company with responding to SEC comment letters or other inquiries by
regulators related to financial accounting and disclosure matters
---------------------------------------------------------------------------------------------------------------
Preparation of accounting preferability letters for changes in accounting
---------------------------------------------------------------------------------------------------------------
B-5
APPENDIX B-C
PRE-APPROVED TAX SERVICES
Dated:
--------------
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TAX SERVICES RANGE OF FEES
---------------------------------------------------------------------------------------------------------------
Worldwide tax compliance
---------------------------------------------------------------------------------------------------------------
Worldwide tax planning and advice (includes worldwide acquisition related tax planning/
restructuring)
---------------------------------------------------------------------------------------------------------------
Worldwide tax related due diligence services pertaining to potential business acquisitions/
dispositions
---------------------------------------------------------------------------------------------------------------
Tax controversy services in connection with the examination of U.S. federal, state, local and
non-U.S. tax returns through the administrative appellate level
---------------------------------------------------------------------------------------------------------------
The above tax services do not include tax services relating to transactions
initially recommended by the independent auditor, the purpose of which may
be tax avoidance and the tax treatment of which may not be supported in the
Internal Revenue Code and related regulations.
B-6
APPENDIX B-D
PRE-APPROVED ALL OTHER SERVICES
Dated:
--------------
-------------------------------------------------------------------------------
SERVICE RANGE OF FEES
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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B-7
EXHIBIT B-1
PROHIBITED NON-AUDIT SERVICES
1. Bookkeeping or other services related to the accounting records or
financial statements of the audit client*
2. Financial information systems design and implementation*
3. Appraisal or valuation services, fairness opinions or
contribution-in-kind reports*
4. Actuarial services*
5. Internal audit outsourcing services*
6. Management functions
7. Human resources
8. Broker-dealer, investment adviser or investment banking services
9. Legal services
10. Expert services unrelated to the audit
In addition to the non-audit services specifically listed above, the SEC has
articulated three general principles in connection with services provided by
the independent auditor which, if violated, could impair the independence of
the auditor. The independent auditor cannot: (1) function in the role of
management; (2) audit its own work; or (3) serve in an advocacy role for the
Company.
* Provision of these non-audit services is permitted if it is reasonable to
conclude that the results of these services will not be subject to audit
procedures. Materiality is not an appropriate basis upon which to overcome
the rebuttable presumption that prohibited services will be subject to audit
procedures because determining materiality is itself a matter of audit
judgment.
B-8
APPENDIX C
GARDNER DENVER, INC.
EXECUTIVE ANNUAL BONUS PLAN
JANUARY 1, 2006
I. PURPOSE OF THE PLAN
The Gardner Denver, Inc. Executive Annual Bonus Plan (the "Plan") is
intended to provide Gardner Denver, Inc. (the "Company") a means by which it
can engender and sustain a sense of personal commitment on the part of its
senior executives in the continued growth, development and financial success
of the Company and encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of
the Company and its shareholders. Accordingly, the Company may award to
senior executives annual incentive compensation on the terms and conditions
established herein.
II. DEFINITIONS
2.1 "Annual Incentive Award" or "Award" means the compensation payable
in cash granted under the Plan to a Participant by the Committee pursuant to
such terms, conditions, restrictions and limitations established by the
Committee and the Plan.
2.2 "Board" means the Board of Directors of the Company.
2.3 For all purposes of the Plan, a "Change in Control" shall have
occurred if any of the following events shall occur:
(a) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and immediately after such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in the
aggregate by the holders of Voting Stock of the Company immediately
prior to such transaction;
(b) The Company sells all or substantially all of its assets to any
other corporation or other legal person, and less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale are held in the
aggregate by the holders of Voting Stock of the Company immediately
prior to such sale;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Exchange Act, disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner" is defined
under Rule 13(d)(3) or any successor rule or regulation promulgated
under the Exchange Act) of securities representing 20% or more of the
Voting Stock;
(d) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in Response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a Change in Control of
the Company has or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction; or
(e) If during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors of the
Company cease for any reason to constitute at least a majority thereof,
provided, however, that for purposes of this Section 2.3(e), each
Director who is first elected, or first nominated for election by the
Company's stockholders, by a vote of at least two-thirds of the
Directors of the Company (or a committee thereof) then still in office
who were Directors of the Company at the beginning of any such period
will be deemed to have been a Director of the Company at the beginning
of such period.
C-1
Notwithstanding the foregoing provisions of Section 2.3(c) or 2.3(d)
hereof, unless otherwise determined in a specific case by majority vote of
the Board, a Change in Control shall not be deemed to have occurred for
purposes of the Plan solely because (i) the Company, (ii) an entity in which
the Company directly or indirectly beneficially own a 50% or more of the
Voting Stock, or (iii) any employee stock ownership plan or any other
employee benefit plan sponsored by the Company, either files or becomes
obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock, whether in excess of
20% or otherwise, or because the Company reports that a change in control of
the Company has or may have occurred or will or may occur in the future by
reason of such beneficial ownership.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.5 "Commission" means the Securities and Exchange Commission.
2.6 "Committee" means the Management Development and Compensation
Committee of the Board, or such other committee designated by the Board to
administer the Plan, provided that the Committee shall consist of three or
more persons, each of whom is an "outside director" within the meaning of
Section 162(m) and a "disinterested person" within the meaning of Rule 16b-3
under the Exchange Act.
2.7 "Employee" means an employee of the Company or any of its
subsidiaries or affiliates.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.9 "Participant" means a Senior Executive Officer of the Company who is
selected by the Committee to participate in the Plan.
2.10 "Plan" means the Gardner Denver, Inc. Management Annual Incentive
Plan dated January 1, 2001.
2.11 "Performance Goals" shall be defined as the performance criterion
or criteria established by the Committee, pursuant to Section V hereof, for
the purpose of determining Awards under the Plan.
2.12 "Performance Period" means the consecutive 12 month period that
constitutes the Company's fiscal year.
2.13 "Section 162(m)" means Section 162(m) of the Code and the
regulations promulgated thereunder.
2.14 "Senior Executive Officer" means the Chairman, Chief Executive
Officer, President, any Executive Vice President, any Senior Vice President,
any senior officer reporting directly to the Chief Executive Officer and any
other Vice President or senior executive or officer designated by the Chief
Executive Officer.
2.15 "Voting Stock" means securities entitled to vote in an election of
Directors of the Company.
III. ADMINISTRATION
3.1 The overall administration of the Plan, including the final
determination of Awards to each Participant, is vested in the Committee.
3.2 Determinations of the Committee in administering the Plan shall be
final and binding upon all Participants.
IV. ELIGIBILITY
Participation in the Plan shall be limited to Senior Executive Officers.
Participants will be selected for participation annually by the Committee
not later than 90 days after the commencement of the Performance Period. The
Committee may withdraw its approval for participation in the Plan for a
Participant at any time. In the event of such withdrawal, such Participant
shall cease to be a Participant as of the date designated by the Committee
and the Employee shall be notified of such withdrawal as soon as practicable
following such action. Further, such Employee shall cease to have any right
to an Award for the Performance Period in which such withdrawal is
effective; provided, however, that the Committee may, in its sole
discretion, authorize a prorated award based on the number of full months of
participation prior to the effective date of such withdrawal and the
Company's performance during such period.
C-2
V. PERFORMANCE GOALS AND MEASURES
5.1. Performance Goals shall be established by the Committee not later
than 90 days after commencement of the Performance Period relating to a
specific Award. The Performance Goals may be identical for all Participants
or, at the discretion of the Committee, may be different to reflect more
appropriate measures of individual performance. The criterion or criteria
used in establishing Performance Goals may, at the discretion of the
Committee, include one or any combination of the following: (i) the
Company's return on equity, assets, capital or investment; (ii) pre-tax or
after-tax profit levels expressed in absolute dollars or earnings per share
of the Company; or (iii) operating cash flow or cash flow from operating
activities. The Performance Goals established by the Committee shall include
a threshold level of performance below which no Award will be payable and a
maximum Award opportunity for each Senior Executive Officer. The
determination of attainment of the Performance Goals shall be determined in
accordance with generally accepted accounting principles and certified in
writing by the Committee.
5.2 The Committee shall be authorized to make adjustments in the method
of calculating attainment of Performance Goals in recognition of: (i)
extraordinary or non-recurring items; (ii) changes in tax laws; (iii)
changes in generally accepted accounting principles or changes in accounting
policies; (iv) charges related to restructured or discontinued operations;
(v) restatement of prior period financial results; and (vi) any other
unusual, non-recurring gain or loss that is separately identified and
quantified in the Company's financial statements.
VI. AWARDS
6.1 Awards under the Plan shall be paid in cash.
6.2 At the first meeting of the Committee after the expiration of the
Performance Period, the Committee shall review the prior year's performance
in relation to the Performance Goals and determine the level of achievement
of the Performance Goals. Payment of Annual Incentive Awards to Participants
under the Plan shall occur only after the Committee has certified in writing
that the Performance Goals have been achieved for the relevant Performance
Period. Notwithstanding the attainment of Performance Goals for the Company
as a whole, Awards for Individual Participants under the Plan may be denied
or adjusted by the Committee, in its sole judgment, based on its assessment
of the Participant's performance. However, no upward adjustment may be made
to an Annual Incentive Award for a Participant if Section 162(m) would limit
the deduction the Company may claim for that Participant's compensation. The
maximum Annual Incentive Award that may be granted to a Senior Executive
Officer under the Plan for any Performance Period may not exceed $3,000,000
or, if less, three times the Senior Executive Officer's base salary as of
the last day of the Performance Period.
VII. DEFERRALS AND SETTLEMENTS
The Committee may permit Participants to elect to defer receipt of all
or a portion of the Annual Incentive Award under administrative policies
established by the Company from time to time, which shall be in compliance
with Section 162(m).
VIII. WITHHOLDING TAXES
The Company shall have the right to deduct from any payment to be made
pursuant to the Plan the amount of any taxes required by law.
IX. NO RIGHT TO CONTINUED EMPLOYMENT OR AWARDS
No person shall have any claim or right to be granted an Award, and the
granting of an Award shall not be construed as giving a Participant the
right to be retained in the employ of the Company or any of its
subsidiaries. Further, the Company and its subsidiaries expressly reserve
the right at any time to terminate the employment of any Participant free
from any liability under the Plan; except that a Participant who was
actively employed as of the last day of the applicable Performance Period
shall be eligible to receive payment of his Award, as determined pursuant to
Section 6.2 hereof, even though the Participant is no longer an active
employee of the Company at the time the Committee actually pays Awards under
the Plan for the applicable Performance Period. The Committee shall also
have the discretion to grant eligibility to a Participant to receive payment of
C-3
an Award, notwithstanding the fact that the Participant is not employed by
the Company at the end of the Performance Period.
X. CHANGE IN CONTROL
Immediately upon a Change in Control, all outstanding Awards shall be
deemed earned at the maximum Performance Goal level and the Company shall
make a payment in cash to each Participant within ten (10) days after the
effective date of the Change in Control in the amount of such maximum Award.
The granting of Awards under the Plan shall in no way affect the right of
the Company to adjust, reclassify, reorganize, or otherwise change its
capital or business structure, or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any portion of its business or assets.
XI. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION
The Board may amend, modify, suspend or terminate this Plan for any
purpose except that no amendment or alteration shall be effective prior to
approval by the Company's shareholders to the extent such approval is then
required pursuant to Section 162(m) or otherwise required as a matter of
law. Further, no amendment to the Plan shall be effective that would: (i)
increase the maximum amount that can be paid to a Participant under the
Plan; (ii) change the performance criterion or criteria set forth in Section
V hereof for payment of Awards; or (iii) modify the eligibility requirements
for Participants in the Plan unless first approved by the Company's
shareholders.
XII. GOVERNING LAW
The validity, construction and effect of the Plan and any actions taken
or relating to the Plan shall be determined in accordance with the laws of
the State of Delaware and applicable federal law.
XIII. OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise specifically provided to the contrary in the relevant
plan, program or practice, Awards received by Participants under the Plan
shall not be deemed a part of a Participant's regular, recurring
compensation for purposes of calculating payments or benefits under any
other Company benefit plan, program or practice or any severance policy of
the Company. Further, the Company may adopt other compensation programs,
plans or arrangements for employees below the level of Senior Executive
Officer as it deems necessary and appropriate.
XIV. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a
Participant, including, without limitation, the estate of such Participant
and the executor, administrator or trustee of such estate, or any receiver
or trustee in bankruptcy or representative of the Participant's creditors.
XV. EFFECTIVE DATE
This Plan shall be effective as of January 1, 2006. Notwithstanding the
foregoing, the adoption of this Plan is expressly conditioned upon the
approval by the Company's shareholders at the annual meeting of the
Company's shareholders held in May 2005. If the shareholders of the Company
shall fail to approve this Plan prior to such date, this Plan shall
terminate and cease to be of any further force or effect. Subject to earlier
termination pursuant to Section XI, the Plan shall terminate effective
December 31, 2010. After termination of the Plan, no future awards may be
granted under the Plan.
XVI. INTERPRETATION
The Plan is designed to comply with Section 162(m) of the Code, and all
provisions hereof shall be construed in a manner consistent with that
intent.
C-4
----------------------------------------
V O T E B Y T E L E P H O N E
[Gardner Denver logo] ----------------------------------------
c/o National City Bank Have your proxy/voting instruction card
Corporate Trust Operations available when you call the TOLL-FREE
Locator 5352 NUMBER 1-800-542-1160 using a
P. O. Box 92301 touch-tone telephone and follow the
Cleveland, OH 44101-4301 simple instructions to record your vote.
----------------------------------------
V O T E B Y I N T E R N E T
----------------------------------------
Have your proxy/voting instruction card
available when you access the website
http://www.votefast.com and follow the
simple instructions to record your vote.
----------------------------------------
V O T E B Y M A I L
----------------------------------------
Please mark, sign and date your proxy/
voting instruction card and return it
in the POSTAGE-PAID ENVELOPE provided or
return it to: National City Bank,
P.O. Box 535600, Pittsburgh, PA
15253-9931.
---------------------- ----------------------- -----------------------------
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the Website and Return your proxy/instruction
touch-tone telephone: cast your vote: card in the postage-paid
1-800-542-1160 http://www.votefast.com envelope provided.
---------------------- ----------------------- -----------------------------
VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
YOUR TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY 11:59 P.M. EASTERN TIME ON
MONDAY, MAY 2, 2005 TO BE COUNTED IN THE FINAL TABULATION.
IF YOU HOLD SHARES IN THE SAVINGS PLANS, YOUR TELEPHONE OR INTERNET VOTE
MUST BE RECEIVED BY 11:59 P.M. EASTERN TIME ON APRIL 28, 2005.
===========================
===========================
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
------------------------------------------------------------------------------
[GARDNER
DENVER LOGO] PROXY/VOTING INSTRUCTIONS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 3, 2005.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED "FOR" ALL NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSAL 2, EXCEPT AS
OTHERWISE SET FORTH IN THIS PROXY.
PROPOSAL 1.
Election of Directors
Nominees:
(01) Donald G. Barger, Jr. / / FOR ALL
(02) Raymond R. Hipp / / WITHHOLD ALL
(03) David D. Petratis / / FOR ALL EXCEPT
TO WITHHOLD AN INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT"
AND WRITE THE NOMINEE'S NAME ON THE LINE BELOW.
-------------------------------------------------
PROPOSAL 2. To approve the Company's Executive Annual Bonus Plan.
/ / FOR / / AGAINST / / ABSTAIN
/ / By checking the box to the left, I consent to future access to
stockholder communications (e.g., annual reports, proxy statements,
related proxy materials) electronically via the Internet, as described
in the accompanying notice. I understand the Company may no longer
distribute printed materials to me for any future stockholders meeting
until such consent is revoked. I understand I may revoke my consent at
any time by writing the Company's transfer agent, National City Bank,
or the Company and that costs normally associated with electronic
access, such as usage and telephone charges, will be my responsibility.
/ / I plan to attend the Annual Meeting.
------------------------------------------------------------------------------
Signature(s) Date
Please sign exactly as name(s) appear hereon. When shares are held by joint
tenants, both should sign. When signing as attorney-in-fact, executor,
administrator, personal representative, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
GARDNER DENVER, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 3, 2005, 1:30 P.M.
QUINCY COUNTRY CLUB
2410 STATE STREET
QUINCY, ILLINOIS 62301
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT. IT IS IMPORTANT THAT YOUR SHARES
ARE REPRESENTED AT THIS MEETING, WHETHER OR NOT YOU ATTEND THE MEETING IN
PERSON. TO MAKE SURE YOUR SHARES ARE REPRESENTED, WE URGE YOU TO COMPLETE
AND MAIL YOUR PROXY CARD OR VOTE BY TELEPHONE OR VIA THE INTERNET.
ELECTRONIC ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE
If you are a registered holder of shares, you have the option to access
future stockholder communications (e.g., annual reports, proxy statements
and related proxy materials) over the Internet instead of receiving those
documents in print. Participation is completely voluntary. If you give your
consent, in the future, when our stockholder communication is available over
the Internet, the package you receive by mail containing your proxy voting
card will contain the Internet location where such material is available
(http://www.gardnerdenver.com). Our material will be presented in PDF
format. There is no cost to you for this service other than any charges you
may incur from your Internet provider, telephone and/or cable company. Once
you give your consent, it will remain in effect until you inform us
otherwise. You may revoke your consent at any time and/or request paper
copies of any stockholder communications by notifying the Company's transfer
agent, National City Bank, or the Company in writing at the addresses below.
To give your consent to receive such materials electronically, follow the
prompts when you vote by telephone or over the Internet, or check the
appropriate box located on the reverse side of the attached proxy/voting
instruction card when you vote by mail.
STOCKHOLDER INFORMATION
CORPORATE OFFICES TRANSFER AGENT AND REGISTRAR
Gardner Denver, Inc. National City Bank, Dept. 5352
1800 Gardner Expressway Corporate Trust Operations
Quincy, IL 62305-9364 P.O. Box 92301
Telephone: (217) 222-5400 Cleveland, OH 44193-0900
E-mail address: Toll-free Telephone: (800) 622-6757
CorporateSecretary@gardnerdenver.com E-mail address:
shareholder.inquiries@nationalcity.com
NEWS RELEASES
News releases, including quarterly earnings releases, are available by
visiting our website at http://www.gardnerdenver.com.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
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The undersigned, having received the Notice and Proxy Statement for the
Annual Meeting of Stockholders, hereby appoints each of Helen W. Cornell and
Tracy D. Pagliara as the true and lawful attorneys-in-fact, agents and
proxies (with full power of substitution) to represent the undersigned and
to vote at the Annual Meeting of Stockholders of the Company, to be held at
the Quincy Country Club, 2410 State Street, Quincy, Illinois on Tuesday,
May 3, 2005 at 1:30 p.m., local time, and any and all adjournments of the
Meeting, in the manner specified, with respect to all shares of Common Stock
of Gardner Denver, Inc. which the undersigned is entitled to vote. The
undersigned also hereby directs Wachovia Bank, N.A., as trustee
("Wachovia"), to represent the undersigned and to vote at such Meeting, and
any and all adjournments of the Meeting, in the manner specified, with
respect to all shares of Common Stock to which the undersigned, as a
participant in the Gardner Denver, Inc. Retirement Savings Plan (and the
Gardner Denver Supplemental Excess Defined Contribution Plan) and/or the
Gardner Denver, Inc. Savings Plan (the "Savings Plans"), is entitled to
direct the voting. Such representation and voting shall be according to the
number of votes which the undersigned would possess if personally present,
for the purposes of considering and taking action upon the matters set forth
on the front page of this proxy/voting instruction card, as more fully
described in the Notice and Proxy Statement.
Should any other matter requiring a vote of the stockholders arise, the
proxies named above are authorized to vote in accordance with their
discretion. The Board of Directors is not aware of any matter which is to be
presented for action at the meeting, other than as set forth on this card.
THIS PROXY/VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED
AND DEEMED AN INSTRUCTION TO WACHOVIA TO VOTE IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO INSTRUCTION IS MADE, THIS PROXY/VOTING INSTRUCTION
CARD WILL BE VOTED BY WACHOVIA, AS TRUSTEE, AS DIRECTED BY THE COMPANY, IN
THE SAME PROPORTION (FOR OR AGAINST) AS THE SHARES HELD IN THE SAVINGS PLANS
FOR WHICH INSTRUCTIONS ARE RECEIVED.
Shares of Common Stock held in the Savings Plans will be voted by Wachovia
as trustee of the Savings Plan. Voting instructions to Wachovia regarding
your Savings Plans shares must be received by 11:59 p.m. Eastern Time on
April 28, 2005. Such voting instructions can be made in the same manner as
other shares of Common Stock are voted by proxy (i.e., by returning the
proxy card by mail or voting by telephone or via the Internet). After April
28, 2005, all Savings Plans shares for which voting instructions have not
been received will be voted by Wachovia, as trustee, as directed by the
Company, in the same proportion (for or against) as the shares held in the
Savings Plans for which instructions are received.
APPENDIX
Page 22 of the proxy statement contains a Stock Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.