COMMERCIAL VEHICLE GROUP, INC.
6530 West Campus Oval
New Albany, Ohio 43054
Telephone: (614) 289-5360

 

April 24, 2007

 

Dear Stockholder:

 

You are cordially invited to attend our 2007 Annual Meeting of Stockholders, which will be held on Tuesday, May 22, 2007, at 1:00 p.m. (Eastern Time) at New Albany Country Club, One Club Lane, New Albany, OH 43054. With this letter, we have enclosed a copy of our 2006 Annual Report on Form 10-K, notice of annual meeting of stockholders, proxy statement and proxy card. These materials provide further information concerning the annual meeting. If you would like another copy of the 2006 Annual Report, please contact Chad M. Utrup, Chief Financial Officer, and one will be mailed to you.

 

At this year’s annual meeting, the agenda includes the election of certain directors, approval of our Second Amended and Restated Equity Incentive Plan and a proposal to ratify the appointment of our independent registered public accounting firm. The Board of Directors recommends that you vote FOR election of the slate of nominees for directors, FOR our Second Amended and Restated Equity Incentive Plan and FOR ratification of appointment of the independent registered public accounting firm. We will also report on current business conditions and our recent developments. Members of the Board of Directors and our executive officers will be present to discuss the affairs of the Company and to answer any questions you may have.

 

It is important that your shares be represented and voted at the annual meeting, regardless of the size of your holdings. Accordingly, please complete, sign and date the enclosed proxy card and return it promptly in the enclosed envelope to ensure your shares will be represented. If you do attend the annual meeting, you may, of course, withdraw your proxy should you wish to vote in person.

 

We look forward to seeing you at the annual meeting.

 

Sincerely,

 

 

Mervin Dunn
President and Chief Executive Officer

 

COMMERCIAL VEHICLE GROUP, INC.
6530 West Campus Oval
New Albany, Ohio 43054
Telephone: (614) 289-5360

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 22, 2007
1:00 p.m. Eastern Time

 

The 2007 Annual Meeting of Stockholders of Commercial Vehicle Group, Inc. will be held on Tuesday, May 22, 2007, at 1:00 p.m. (Eastern Time), at New Albany Country Club, One Club Lane, New Albany, OH 43054.

 

The annual meeting is being held for the following purposes:

 

 

These items are fully discussed in the following pages, which are made part of this notice. Only stockholders of record at the close of business on March 30, 2007, will be entitled to vote at the annual meeting.

 

Enclosed with this Notice of Annual Meeting of Stockholders is a proxy statement, related proxy card with a return envelope and our 2006 Annual Report on Form 10-K. The 2006 Annual Report on Form 10-K contains financial and other information that is not incorporated into the proxy statement and is not deemed to be a part of the proxy soliciting material.

 

By Order of the Board of Directors

 

Chad M. Utrup

Chief Financial Officer

 

April 24, 2007

 

 

COMMERCIAL VEHICLE GROUP, INC.

 

TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS ABOUT VOTING

Q:		Why did you send me this proxy statement?
A:		This proxy statement is being sent to you because our Board of Directors is soliciting your proxy to vote at the 2007 Annual Meeting of Stockholders. This proxy statement includes information required to be disclosed to you in connection with our solicitation of proxies in connection with the annual meeting. Stockholders of record as of the close of business on March 30, 2007 are entitled to vote. This proxy statement and the related proxy card are first being sent on or about April 24, 2007 to those persons who are entitled to vote at the annual meeting.

Q:		How many votes do I have?

A:		Each share of our common stock that you own entitles you to one vote.

Q:		How do I vote?

A:		You can vote on matters presented at the annual meeting in three ways:
		1. You can vote by filling out, signing and dating your proxy card and returning it in the enclosed envelope, OR
		2. You can vote over the internet or by telephone, OR
		3. You can attend the annual meeting and vote in person.

Q:		How do I vote by proxy?

A:		If you properly fill out your proxy card and send it to us in time to vote, your shares will be voted as you have directed. If you do not specify a choice on your proxy card, the shares represented by your proxy card will be voted for the election of all nominees, for our Second Amended and Restated Equity Incentive Plan and for the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the 2007 fiscal year.
		Whether or not you plan to attend the annual meeting, we urge you to complete, sign, date and return your proxy card in the enclosed envelope. Returning the proxy card will not affect your right to attend the annual meeting and vote in person.

Q:		How do I vote in person?

A:		If you attend the annual meeting, we will give you a ballot when you arrive.

Q:		If my shares are held in “street name” by my broker, will my broker vote my shares for me?

A:		Your broker will vote your shares only if you provide instructions on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares.

Q:		Can I change my vote or revoke my proxy after I have mailed my proxy card?

A:		You can change your vote at any time before your proxy is voted at the annual meeting. You can do this in one of three ways. First, you can send a written notice to the Chief Financial Officer at our headquarters stating that you would like to revoke your proxy. Second, you can complete and submit a new proxy card. Third, you can attend the annual meeting and vote in person. Simply attending a meeting, however, will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow the directions you received from your broker to change your vote.

Q:		Will there be any matters voted upon at the annual meeting other than those specified in the Notice of Annual Meeting?

A:		Our management does not know of any matters other than those discussed in this proxy statement that will be presented at the annual meeting. If other matters are properly brought before the meeting and we do not have notice of these matters within a reasonable time prior to the annual meeting, all proxies will be voted in accordance with the recommendations of management.

Q:		How are votes counted?

A:		Stockholders of record of our common stock as of the close of business on March 30, 2007 are entitled to vote at the annual meeting. As of March 30, 2007, there were 21,715,503 shares of common stock outstanding. The presence in person or by proxy of a majority of the outstanding shares of common stock will constitute a quorum for the transaction of business. Each share of common stock is entitled to one vote on each matter to come before the annual meeting.
		Under Delaware law, if you have returned a valid proxy or attend the meeting in person, but abstain from voting, your stock will nevertheless be treated as present and entitled to vote. Your stock, therefore, will be counted in determining the existence of a quorum and, even though you have abstained from voting, will have the effect of a vote against any matter requiring the affirmative vote of a majority of the shares present and entitled to vote at the annual meeting, such as the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the 2007 fiscal year.
		Under Delaware law, “broker non-votes” are also counted for purposes of determining whether a quorum is present, but are not counted in determining whether a matter requiring a majority of the shares present and entitled to vote has been approved or whether a plurality of the vote of the shares present and entitled to vote has been cast.
Q:		How are proxies being solicited and who pays for the solicitation of proxies?
A:		Initially, we will solicit proxies by mail. Our directors, officers and employees may also solicit proxies in person or by telephone without additional compensation. We will pay all expenses of solicitation of proxies.

 

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors (the “Board”) of Commercial Vehicle Group, Inc., a Delaware corporation (“CVG”), of proxies for use in voting at the Annual Meeting of Stockholders scheduled to be held on May 22, 2007 and at any postponement or adjournment thereof. This Proxy Statement and the related proxy card are being mailed to holders of our common stock, commencing on or about April 24, 2007. References in this Proxy Statement to “Company,” “we,” “our” or “us” refer to CVG, unless otherwise noted.

 

When proxies are properly dated, executed and returned, the shares they represent will be voted as directed by the stockholder on all matters properly coming before the annual meeting.

 

Where specific choices are not indicated on a valid proxy, the shares represented by such proxies received will be voted:

 

 

In addition, if other matters come before the annual meeting, the persons named in the accompanying form of proxy will vote in accordance with their best judgment with respect to such matters.

 

Returning your completed proxy will not prevent you from voting in person at the annual meeting should you be present and desire to do so. In addition, the proxy may be revoked at any time prior to its exercise either by giving written notice to our Chief Financial Officer prior to the annual meeting or by submission of a later-dated proxy.

 

At the annual meeting, inspectors of election shall determine the presence of a quorum and shall tabulate the results of the stockholders’ voting. The presence of a quorum is required to transact the business proposed to be transacted at the annual meeting. The presence in person or by proxy of holders of a majority of the outstanding shares of common stock entitled to vote will constitute the necessary quorum for any business to be transacted at the annual meeting. In accordance with the General Corporation Law of the State of Delaware (the “DGCL”), properly executed proxies marked “abstain” as well as proxies held in street name by brokers that are not voted on all proposals to come before the annual meeting (“broker non-votes”), will be considered “present” for the purposes of determining whether a quorum has been achieved at the annual meeting.

 

The three nominees for director receiving the greatest number of votes cast at the annual meeting in person or by proxy shall be elected. Consequently, any shares of common stock present in person or by proxy at the annual meeting but not voted for any reason have no impact in the election of directors, except to the extent that the failure to vote for an individual may result in another individual receiving a larger number of votes. All other matters to be considered at the annual meeting require the favorable vote of a majority of the shares entitled to vote at the meeting either in person or by proxy. Stockholders have no right to cumulative voting as to any matter, including the election of directors. If any proposal at the annual meeting must receive a specific percentage of favorable votes for approval, abstentions in respect of such proposal are treated as present and entitled to vote under the DGCL and, therefore, have the effect of a vote against such proposal. Broker non-votes in respect to any proposal are not counted for purposes of determining whether such proposal has received the requisite approval under the DGCL.

 

Only stockholders of record of the common stock on our books at the close of business on March 30, 2007 will be entitled to vote at the annual meeting. On that date, we had 21,715,503 shares of common stock

outstanding. A list of our stockholders will be open to the examination of any stockholders, for any purpose germane to the meeting, at our headquarters for a period of ten (10) days prior to the meeting. Each share of common stock entitles the holder thereof to one vote on all matters submitted to stockholders.

 

The Board currently consists of seven directors and is divided into three classes and the term of each class expires in a different year. At the annual meeting, three directors are to be elected as members of Class III to serve until the annual meeting in 2010 and until their successors are elected and qualified or until their earlier removal or resignation. The Board has nominated three nominees set forth below, each of whom has agreed to serve as a director if elected and each of whom has been nominated by the Nominating and Corporate Governance Committee. Each nominee currently serves as a director of CVG. In the event any nominee is unable or unwilling to serve as a director at the time of the annual meeting (which events are not anticipated), the persons named on the enclosed proxy card may substitute another person as a nominee or may add or reduce the number of nominees to such extent as they shall deem advisable.

 

Subject to rights of holders of any series of preferred stock to fill newly created directorships or vacancies, any newly created directorships resulting from an increase in the authorized number of directors or any vacancies on the Board resulting from death, resignation, disqualification or removal for cause shall be filled by the Board provided that a quorum is then in office and present, or by a majority of the directors then in office, if less than a quorum is then in office, or by the sole remaining director.

 

Information regarding our director nominees and our directors not subject to reelection at the annual meeting is set forth below:

 

 

 

 

There are no family relationships between or among any of our directors or executive officers. Stock ownership information is shown under the heading “Security Ownership of Certain Beneficial Owners and Management” and is based upon information furnished by the respective individuals.

 

Scott C. Arves has served as a Director since July 2005. Since January 2007, Mr. Arves has served as President and Chief Executive Officer of Transport America, a truckload, intermodal and logistics provider. Prior to joining Transport America, Mr. Arves was President of Transportation for Schneider National, Inc., a provider of transportation, logistics and related services, from May 2000 to July 2006.

 

Robert C. Griffin has served as a Director since July 2005. Mr. Griffin has held numerous positions of responsibility in the financial sector, including Head of Investment Banking, Americas and Management Committee Member for Barclay’s Capital from 2000 to 2002, and prior to that as the Global Head of Financial Sponsor Coverage for Bank of America Securities from 1998 to 2000 and Group Executive Vice President of

Bank of America from 1997 to 1998. Mr. Griffin also currently serves as a Director of Builders FirstSource, Inc.

 

Richard A. Snell has served as a Director since August 2004. Mr. Snell has served as Chairman and Chief Executive Officer of Qualitor, Inc. since May 2005 and as an Operating Partner at Thayer Capital Partners since 2003. Prior to joining Thayer Capital Partners, Mr. Snell was a consultant from 2000 to 2003 and prior thereto, served as Chairman and Chief Executive Officer of Federal-Mogul Corporation, an automotive parts manufacturer, from 1996 to 2000. In October 2001, when Mr. Snell was no longer affiliated with that company, Federal Mogul-Corporation filed a voluntary petition for reorganization under the federal bankruptcy laws. Prior to joining Federal-Mogul Corporation, Mr. Snell served as Chief Executive Officer at Tenneco Automotive, also an automotive parts manufacturer. Mr. Snell also currently serves as a Director of Schneider National, Inc.

 

David R. Bovee has served as a Director since October 2004. Mr. Bovee served as Vice President and Chief Financial Officer of Dura Automotive Systems, Inc. (“Dura”) from January 2001 to March 2005 and from November 1990 to May 1997. In October 2006, when Mr. Bovee was no longer affiliated with that company, Dura filed a voluntary petition for reorganization under the federal bankruptcy laws. From May 1997 until January 2001, Mr. Bovee served as Vice President of Business Development. Mr. Bovee also served as Assistant Secretary for Dura. Prior to joining Dura, Mr. Bovee served as Vice President at Wickes in its Automotive Group from 1987 to 1990.

 

Scott D. Rued has served as a Director since February 2001 and Chairman since April 2002. Since August 2003, Mr. Rued has served as a Managing Partner of Thayer Capital Partners (“Thayer”). Prior to joining Thayer, Mr. Rued served as President and Chief Executive Officer of Hidden Creek Industries (“Hidden Creek”) from May 2000 to August 2003. From January 1994 through April 2000, Mr. Rued served as Executive Vice President and Chief Financial Officer of Hidden Creek. Mr. Rued also serves as a Director of Suntron Corporation.

 

The terms of Messrs. Bovee and Rued expire at the 2008 Annual Meeting.

 

Mervin Dunn has served as a Director since August 2004 and as our President and Chief Executive Officer since June 2002, and prior thereto served as the President of Trim Systems, commencing upon his joining us in October 1999. From 1998 to 1999, Mr. Dunn served as the President and Chief Executive Officer of Bliss Technologies, a heavy metal stamping company. From 1988 to 1998, Mr. Dunn served in a number of key leadership roles at Arvin Industries, including Vice President of Operating Systems (Arvin North America), Vice President of Quality, and President of Arvin Ride Control. From 1985 to 1988, Mr. Dunn held several key management positions in engineering and quality assurance at Johnson Controls Automotive Group, an automotive trim company, including Division Quality Manager. From 1980 to 1985, Mr. Dunn served in a number of management positions for engineering and quality departments of Hyster Corporation, a manufacturer of heavy lift trucks.

 

S.A. (“Tony”) Johnson has served as a Director since September 2000. Mr. Johnson is currently a Managing Partner of OG Partners, a private industrial management company, and has served in that capacity since 2004. Mr. Johnson served as the Chairman of Hidden Creek from May 2001 to May 2004 and from 1989 to May 2001 was its Chief Executive Officer and President. Prior to forming Hidden Creek, Mr. Johnson served from 1985 to 1989 as Chief Operating Officer of Pentair, Inc., a diversified industrial company. Mr. Johnson also currently serves as Chairman and a Director of Tower Automotive, Inc. and Cooper-Standard Automotive, Inc.

 

The terms of Messrs. Dunn and Johnson expire at the 2009 Annual Meeting.

 

Independence of Directors

 

The Board of Directors has determined that Messrs. Arves, Bovee, Griffin, Rued and Snell are “independent” directors, as independence is defined in Rule 4200(a)(15) of the NASDAQ Stock Market LLC (NASDAQ) marketplace rules. The Board has not adopted categorical standards in making its determination of independence and instead relies on standards set forth in the NASDAQ marketplace rules. Each member of the Audit Committee of the Board meets the heightened independence standards required for audit committee members under the NASDAQ marketplace rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

 

Meetings of the Board and its Committees.  The Board held four meetings during fiscal 2006. The Board currently has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each director is expected to attend each meeting of the Board and those committees on which he serves. In addition to meetings, the Board and its committees review and act upon matters through written consent procedures. Each of the directors attended 75% or more of the total number of meetings of the Board and those committees on which he served during the last fiscal year (during the periods that he served).

 

Audit Committee.  Our Audit Committee is comprised of Messrs. Arves, Bovee (Chairman) and Griffin, of whom all are independent under the heightened independence standard required for audit committee members by the NASDAQ marketplace rules and Rule 10A-3 under the Exchange Act. Mr. Bovee has been named as our “audit committee financial expert” as such term is defined in Item 401(h) of Regulation S-K. The Audit Committee is responsible for: (1) the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm engaged for the purpose of preparing and issuing an audit report; (2) reviewing the independence of the independent registered public accounting firm and taking, or recommending that our Board of Directors take, appropriate action to oversee their independence; (3) approving, in advance, all audit and non-audit services to be performed by the independent registered public accounting firm; (4) overseeing our accounting and financial reporting processes and the audits of our financial statements; (5) establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal control or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; (6) engaging independent counsel and other advisors as the Audit Committee deems necessary; (7) determining compensation of the independent registered public accounting firm, compensation of advisors hired by the Audit Committee and ordinary administrative expenses; (8) reviewing and assessing the adequacy of our formal written charter on an annual basis; and (9) handling such other matters that are specifically delegated to the audit committee by our Board of Directors from time to time. Our Board of Directors adopted a written charter for our Audit Committee, which is posted on our web site at www.cvgrp.com. Deloitte & Touche LLP currently serves as our independent registered public accounting firm. The Audit Committee met eight times during fiscal 2006.

 

Compensation Committee.  Our Compensation Committee is comprised of Messrs. Arves, Griffin and Snell (Chairman), of whom, all are independent, as independence is defined by Rule 4200(a)(15) of the NASDAQ marketplace rules. The Compensation Committee is responsible for: (1) determining, or recommending to our Board of Directors for determination, the compensation and benefits of all of our executive officers; (2) reviewing our compensation and benefit plans to ensure that they meet corporate objectives; (3) administering our stock plans and other incentive compensation plans; and (4) such other matters that are specifically delegated to the Compensation Committee by our Board of Directors from time to time. Our Board of Directors adopted a written charter for our Compensation Committee, which is posted on our web site at www.cvgrp.com. The Compensation Committee met six times during fiscal 2006.

 

Compensation Committee Interaction with Compensation Consultants.  The Compensation Committee retained the Hay Group in the first part of 2006 to provide input to decisions regarding executive compensation programs for our named executive officers. During 2006, the Compensation Committee engaged Pearl Meyer & Partners (“PM&P”) to assist with its review of the compensation programs for our executive officers and the

preparation of various aspects of this proxy statement. Both consultants worked for the Compensation Committee during 2006, with PM&P replacing the Hay Group in October 2006.

 

Although the Compensation Committee retains PM&P, PM&P interacts with our executive officers when necessary and appropriate. In addition, PM&P seeks input and feedback from the executive officers regarding its consulting work product prior to presentation to the Compensation Committee, in order to confirm consistency with our business strategy and performance goals.

 

Compensation Committee Interaction With Management.  Certain of our executive officers, including the Chief Executive Officer, Chief Financial Officer and Vice President of Human Resources, may from time to time attend Compensation Committee meetings when executive compensation, company performance, team performance and individual performance are discussed and evaluated by Compensation Committee members. The executive officers are asked for their insights, ideas and recommendations on executive compensation matters during these meetings or at other times, and also provide updates on financial performance, mergers and acquisitions, industry status and other factors that may impact executive compensation. The Compensation Committee Chairman, together with the Board Chairman, met with the Chief Executive Officer in early 2007 to review his performance for 2006, based on a performance appraisal completed by all of the Board members. In addition, the Compensation Committee Chairman met with the Chief Executive Officer in 2006 to discuss his compensation package. However, only independent Compensation Committee members make decisions on executive compensation and vote on compensation matters for executive officers.

 

Nominating and Corporate Governance Committee.  Our Nominating and Corporate Governance Committee consists of Messrs. Bovee, Griffin (Chairman) and Snell, of whom, all are independent, as independence is defined by Rule 4200(a)(15) of the NASDAQ marketplace rules. The Nominating and Corporate Governance Committee is responsible for: (1) selecting, or recommending to our Board of Directors for selection, nominees for election to our Board of Directors; (2) making recommendations to our Board of Directors regarding the size and composition of the Board, committee structure and makeup and retirement procedures affecting Board members; (3) monitoring our performance in meeting our obligations of fairness in internal and external matters and our principles of corporate governance; and (4) such other matters that are specifically delegated to the Nominating and Corporate Governance Committee by our Board of Directors from time to time. Our Board of Directors adopted a written charter for our Nominating and Corporate Governance Committee, which is posted on our web site at www.cvgrp.com. The Nominating and Corporate Governance Committee met two times during fiscal 2006.

 

The Nominating and Corporate Governance Committee will consider as potential nominees individuals properly recommended by stockholders. Recommendations concerning individuals proposed for consideration by the Nominating and Corporate Governance Committee should be addressed to Chad M. Utrup, Chief Financial Officer, Commercial Vehicle Group, Inc., 6530 West Campus Oval, New Albany, Ohio 43054. Each recommendation should include a personal biography of the suggested nominee, an indication of the background or experience that qualifies the person for consideration, and a statement that the person has agreed to serve if nominated and elected. Stockholders who themselves wish to effectively nominate a person for election to the Board of Directors, as contrasted with recommending a potential nominee to the Nominating and Corporate Governance Committee for its consideration, are required to comply with the advance notice and other requirements set forth in our by-laws.

 

The Nominating and Corporate Governance Committee has used, to date, an informal process to identify potential candidates for nomination as directors. Candidates for nomination have been recommended by an executive officer or director, and considered by the Nominating and Corporate Governance Committee and the Board of Directors. Generally, candidates have significant industry experience and have been known to one or more of the Board members. As noted above, the Nominating and Corporate Governance Committee considers properly submitted stockholder recommendations for candidates for the Board. The Nominating and Corporate Governance Committee has established criteria that identify desirable experience for prospective Board members, including experience as a senior officer in a public or substantial private company, breadth of knowledge about issues affecting CVG or its industry and expertise in finance, logistics, manufacturing or marketing. Desired personal attributes for prospective Board members include integrity and sound ethical

character, absence of legal or regulatory impediments, absence of conflicts of interest, demonstrated track record of achievement, ability to act in an oversight capacity, appreciation for the issues confronting a public company, adequate time to devote to the Board and its committees and willingness to assume broad/fiduciary responsibilities on behalf of all stockholders. The Nominating and Corporate Governance Committee does not evaluate potential nominees for director differently based on whether they are recommended to the Nominating and Corporate Governance Committee by officers or directors of CVG or by a stockholder.

 

Stockholders and other interested parties may communicate with the Board of Directors, including the independent directors, by sending written communications to the directors c/o Chad M. Utrup, Chief Financial Officer, Commercial Vehicle Group, Inc., 6530 West Campus Oval, New Albany, Ohio 43054. All such communications will be forwarded to the directors.

 

The Board of Directors has a policy of expecting members of the Board of Directors to attend the annual meetings of stockholders. All of the directors attended the 2006 Annual Meeting of Stockholders.

 

Company Code of Ethics.  The Board has adopted a Code of Ethics that applies to the Company’s directors, officers and employees. A copy of the Code of Ethics is posted on our web site at www.cvgrp.com. If we waive any provision of our Code of Ethics or change the Code of Ethics, we will disclose that fact on our website within four business days.

 

Insider Trading Policy.  In connection with our initial public offering, we adopted a corporate policy regarding insider trading and Section 16 reporting that applies to our directors, executive officers and employees. This policy prohibits trading in our common stock under certain circumstances, including while in possession of material, non-public information about us.

 

THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED ABOVE.

 

Vote Required

 

The three persons receiving the highest number of FOR votes represented by shares present in person or represented by proxy at the annual meeting will be elected.

 

The Board has approved for submission to a vote of our stockholders our Second Amended and Restated Equity Incentive Plan, reflecting amendments to our Amended and Restated Equity Incentive Plan. Initially, an aggregate of 1,000,000 shares of our common stock were reserved for issuance under the Amended and Restated Equity Incentive Plan. We are now seeking stockholder approval to further amend the plan to increase the number of shares of common stock that may be issued under the plan from 1,000,000 shares to 2,000,000 shares, as well as certain other amendments to the plan.

 

In addition to the increase in shares available for awards under the plan, there are several additional amendments reflected in the Second Amended and Restated Equity Incentive Plan, including:

 

 

 

These amendments are reflected in the Second Amended and Restated Equity Incentive Plan attached as Appendix A to this proxy statement.

 

As of March 30, 2007, options to purchase an aggregate of 515,850 shares of common stock, at an exercise price of $15.84 per share, were outstanding under the Amended and Restated Equity Incentive Plan. As of March 30, 2007, 396,400 shares of common stock had been granted as restricted stock awards under the Amended and Restated Equity Incentive Plan. As of March 30, 2007, 84,549 shares remained available for issuance under the Amended and Restated Equity Incentive Plan. If stockholders approve the Second Amended and Restated Equity Incentive Plan, the number of shares of common stock remaining available for issuance under the plan would increase to 1,084,549 shares.

 

The Board believes that it is in our and our stockholders’ interests to approve the Second Amended and Restated Equity Incentive Plan because it would provide sufficient shares remaining for issuance under the plan to allow the Compensation Committee to continue to award equity-based incentive compensation for our current and future employees. The Board and the Compensation Committee believe that eliminating the opportunity to receive reload stock options and prohibiting the repricing of stock options better aligns the interest of our management with our interests and the interests of our stockholders.

 

The following is a summary of the Second Amended and Restated Equity Incentive Plan. This summary is qualified in its entirety by reference to the Second Amended and Restated Equity Incentive Plan, a copy of which is attached to this proxy statement as Appendix A.

 

In connection with our initial public offering, we adopted our Equity Incentive Plan, which was designed to enable us to attract, retain and motivate our directors, officers, employees and consultants, and to further align their interests with those of our stockholders, by providing for or increasing their ownership interests in our Company. Effective April 27, 2005, we amended and restated our Equity Incentive Plan (the “Amended and Restated Equity Incentive Plan”) to make certain technical amendments to make the plan compliant with Rule 409A of the Internal Revenue Code. Effective March 8, 2007, our Compensation Committee recommended and our Board approved, subject to stockholder approval, additional amendments to the plan (as amended, the “Second Amended and Restated Equity Incentive Plan”).

 

Administration.  The Second Amended and Restated Equity Incentive Plan is administered by the Compensation Committee. Our Board may, however, at any time resolve to administer the Second Amended and Restated Equity Incentive Plan. Subject to the specific provisions of the Second Amended and Restated Equity Incentive Plan, the Compensation Committee is authorized to select persons to participate in the Second Amended and Restated Equity Incentive Plan, determine the form and substance of grants made under the Second Amended and Restated Equity Incentive Plan to each participant, and otherwise make all determinations for the administration of the Second Amended and Restated Equity Incentive Plan.

 

Participation.  Individuals who are eligible to participate in the Second Amended and Restated Equity Incentive Plan are our directors (including non-employee directors), officers (including non-employee officers) and employees and other individuals performing services for, or to whom an offer of employment has been extended by us, or our subsidiaries.

 

Type of Awards.  The Second Amended and Restated Equity Incentive Plan provides for the issuance of stock options, stock appreciation rights, or SARs, restricted stock units, deferred stock units, dividend equivalents, other stock-based awards and performance awards. Performance awards may be based on the achievement of certain business or personal criteria or goals, as determined by the Compensation Committee.

 

Available Shares.  An aggregate of 2,000,000 shares of our common stock will be reserved for issuance under the Second Amended and Restated Equity Incentive Plan, subject to certain adjustments reflecting changes in our capitalization. If any grant under the Second Amended and Restated Equity Incentive Plan

expires or terminates unexercised, becomes unexercisable or is forfeited as to any shares, or is tendered or withheld as to any shares in payment of the exercise price of the grant or the taxes payable with respect to the exercise, then such unpurchased, forfeited, tendered or withheld shares will thereafter be available for further grants under the Second Amended and Restated Equity Incentive Plan. The Second Amended and Restated Equity Incentive Plan provides that the Compensation Committee shall not grant, in any one calendar year, to any one participant awards to purchase or acquire a number of shares of common stock in excess of 20% of the total number of shares authorized for issuance under the Second Amended and Restated Equity Incentive Plan.

 

Option Grants.  Options granted under the Second Amended and Restated Equity Incentive Plan may be either incentive stock options within the meaning of Section 422 of the Internal Revenue Code or non-qualified stock options, as the Compensation Committee may determine. The exercise price per share for each option is established by the Compensation Committee, except that the exercise price may not be less than 100% of the fair market value of a share of common stock as of the date of grant of the option. In the case of the grant of any incentive stock option to an employee who, at the time of the grant, owns more than 10% of the total combined voting power of all of our classes of stock then outstanding, the exercise price may not be less than 110% of the fair market value of a share of common stock as of the date of grant of the option.

 

Terms of Options.  The term during which each option may be exercised is determined by the Compensation Committee, but if required by the Internal Revenue Code and except as otherwise provided in the Second Amended and Restated Equity Incentive Plan, no option will be exercisable in whole or in part more than ten years from the date it is granted, and no incentive stock option granted to an employee who at the time of the grant owns more than 10% of the total combined voting power of all of our classes of stock will be exercisable more than five years from the date it is granted.

 

All rights to purchase shares pursuant to an option will, unless sooner terminated, expire at the date designated by the Compensation Committee. The Compensation Committee determines the date on which each option will become exercisable and may provide that an option will become exercisable in installments. The shares constituting each installment may be purchased in whole or in part at any time after such installment becomes exercisable, subject to such minimum exercise requirements as may be designated by the Compensation Committee. Prior to the exercise of an option and delivery of the shares represented thereby, the optionee will have no rights as a stockholder, including any dividend or voting rights, with respect to any shares covered by such outstanding option. If required by the Internal Revenue Code, the aggregate fair market value, determined as of the grant date, of shares for which an incentive stock option is exercisable for the first time during any calendar year under our plans may not exceed $100,000.

 

Stock Appreciation Rights.  SARs entitle a participant to receive the amount by which the fair market value of a share of our common stock on the date of exercise exceeds the grant price of the SAR. The grant price and the term of a SAR will be determined by the Compensation Committee, except that the price of a SAR may never be less than the fair market value of the shares of our common stock subject to the SAR on the date the SAR is granted.

 

Termination of Options and SARs.  Unless otherwise determined by the Compensation Committee, and subject to certain exemptions and conditions, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for us for any reason other than death, disability, retirement or termination for cause, all of the participant’s options and SARs that were exercisable on the date of such cessation will remain exercisable for, and will otherwise terminate at the end of, a period of 90 days after the date of such cessation. In the case of death or disability, all of the participant’s options and SARs that were exercisable on the date of such death or disability will remain so for a period of 180 days from the date of such death or disability. In the case of retirement, all of the participant’s options and SARs that were exercisable on the date of retirement will remain exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of retirement. In the case of a termination for cause, or if a participant does not become a director, officer or employee of, or does not begin performing other services for us for any reason, all of the participant’s options and SARs will expire and be forfeited immediately upon such cessation or non-commencement, whether or not then exercisable.

 

Restricted Stock.  Restricted stock is a grant of shares of our common stock that may not be sold or disposed of, and that may be forfeited in the event of certain terminations of employment, prior to the end of a restricted period set by the Compensation Committee. A participant granted restricted stock generally has all of the rights of a stockholder, unless the Compensation Committee determines otherwise.

 

Restricted Stock Units and Deferred Stock Units.  The Compensation Committee is authorized to grant restricted stock units. Each grant shall specify the applicable restrictions on such units and the duration of such restrictions. Restricted stock units are subject to forfeiture in the event of certain terminations of employment prior to the end of the restricted period. A participant may elect, under certain circumstances, to defer the receipt of all or a portion of the shares due with respect to the vesting of restricted stock units, and upon such deferral, the restricted stock units will be converted to deferred stock units. Deferral periods shall be no less than one year after the vesting date of the applicable restricted stock units. Deferred stock units are subject to forfeiture in the event of certain terminations of employment prior to the end of the deferral period. A holder of restricted stock units or deferred stock units does not have any rights as a stockholder except that the participant has the right to receive accumulated dividends or distributions with respect to the shares underlying such restricted stock units or deferred stock units.

 

Dividend Equivalents.  Dividend equivalents confer the right to receive, currently or on a deferred basis, cash, shares of our common stock, other awards or other property equal in value to dividends paid on a specific number of shares of our common stock. Dividend equivalents may be granted alone or in connection with another award, and may be paid currently or on a deferred basis. If deferred, dividend equivalents may be deemed to have been reinvested in additional shares of our common stock.

 

Other Stock-Based Awards.  The Compensation Committee is authorized to grant other awards that are denominated or payable in, valued by reference to, or otherwise based on or related to shares of our common stock, under the Second Amended and Restated Equity Incentive Plan. These awards may include convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of common stock, purchase rights for shares of common stock, awards with value and payment contingent upon our performance as a company or any other factors designated by the Compensation Committee. The Compensation Committee will determine the terms and conditions of these awards.

 

Performance Awards.  The Compensation Committee may subject a participant’s right to exercise or receive a grant or settlement of an award, and the timing of the grant or settlement, to performance conditions specified by the Compensation Committee. Performance awards may be granted under the Second Amended and Restated Equity Incentive Plan in a manner that results in their qualifying as performance-based compensation exempt from the limitation on tax deductibility under Section 162(m) of the Internal Revenue Code for compensation in excess of $1,000,000 paid to our chief executive officer and our four highest compensated officers. The Compensation Committee will determine performance award terms, including the required levels of performance with respect to particular business criteria, the corresponding amounts payable upon achievement of those levels of performance, termination and forfeiture provisions and the form of settlement. In granting performance awards, the Compensation Committee may establish unfunded award “pools,” the amounts of which will be based upon the achievement of a performance goal or goals based on one or more business criteria. Business criteria might include, for example, total stockholder return, net income, pre-tax earnings, EBITDA, earnings per share, or return on investment. A performance award will be paid no later than two and one-half months after the last day of the tax year in which a performance period is completed.

 

Amendment of Outstanding Awards and Amendment/Termination of Plan.  The Board of Directors or the Compensation Committee generally have the power and authority to amend or terminate the Second Amended and Restated Equity Incentive Plan at any time without approval from our stockholders. The Compensation Committee generally has the authority to amend the terms of any outstanding award under the plan, including, without limitation, to accelerate the dates on which awards become exercisable or vest, at any time without approval from our stockholders. No amendment will become effective without the prior approval of our stockholders if stockholder approval would be required by applicable law or regulations, including if required for continued compliance with the performance-based compensation exception of Section 162(m) of the

Internal Revenue Code, under provisions of Section 422 of the Internal Revenue Code or by any listing requirement of the principal stock exchange on which our common stock is then listed. Neither the Board nor the Compensation Committee may amend the terms of any outstanding option award under the Second Amended and Restated Equity Incentive Plan to reduce the exercise price of outstanding options without prior stockholder approval. Unless previously terminated by the Board or the Compensation Committee, the Second Amended and Restated Equity Incentive Plan will terminate on the tenth anniversary of its adoption. No termination of the Second Amended and Restated Equity Incentive Plan will materially and adversely affect any of the rights or obligations of any person, without his or her written consent, under any grant of options or other incentives theretofore granted under the Second Amended and Restated Equity Incentive Plan.

 

Benefits to be received by our executive officers, directors and employees as a result of the proposed Second Amended and Restated Equity Incentive Plan are not determinable, since the amount of grants of options and restricted stock made under the proposed Second Amended and Restated Equity Incentive Plan is discretionary.

 

THE BOARD RECOMMENDS A VOTE FOR THE SECOND AMENDED AND RESTATED EQUITY INCENTIVE PLAN.

 

Vote Required

 

Approval of our Second Amended and Restated Equity Incentive Plan requires the affirmative vote of a majority of the shares present in person or represented by proxy at the annual meeting.

 

The Audit Committee has reappointed Deloitte & Touche LLP as the independent registered public accounting firm to audit our financial statements for the fiscal year ending December 31, 2007. In making the decision to reappoint the independent registered public accounting firm, the Audit Committee has considered whether the provision of the non-audit services rendered by Deloitte & Touche LLP is incompatible with maintaining that firm’s independence.

 

Stockholder ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm is not required by our by-laws or other applicable legal requirement. However, the Board is submitting the selection of Deloitte & Touche LLP to the stockholders for ratification as a matter of good corporate practice. It is expected that a representative of Deloitte & Touche LLP will be present at the annual meeting, with the opportunity to make a statement if he so desires, and will be available to answer appropriate questions.

 

Approval of the proposal to ratify the appointment of Deloitte & Touche LLP requires the affirmative vote of a majority of the shares present and entitled to vote at the annual meeting.

 

For fiscal years 2006 and 2005, the following fees were billed to us for the indicated services:

 

 

Audit Fees.  Consist of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Deloitte & Touche LLP in connection with statutory and regulatory filings or engagements.

 

Audit-Related Fees.  Consist of fees billed for services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits and due diligence in connection with acquisitions, attest services that are not required by statute or regulation and accounting consultations on proposed transactions.

 

Tax Fees.  Consist of fees billed for professional services for tax compliance, tax consultation and tax planning. These services include assistance regarding federal, state and international tax compliance, customs and duties, mergers and acquisitions and international tax planning.

 

All Other Fees.  Consist of fees for products and services other than the services reported above.

 

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

 

During fiscal 2006, all services by Deloitte & Touche LLP were pre-approved by the Audit Committee in accordance with this policy.

 

THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007.

 

Vote Requirement

 

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2007 requires the affirmative vote of a majority of the shares present in person or represented by proxy at the annual meeting.

 

Except as otherwise noted, the following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 30, 2007 by: (1) each of the named executive officers in the Summary Compensation Table; (2) each of our directors and director nominees; (3) all directors and executive officers as a group; and (4) each person or entity known to us to be the beneficial owner of more than five percent of our outstanding shares of common stock. All information with respect to beneficial ownership has been furnished to us by the respective director, director nominee, executive officer or five percent beneficial owner, as the case may be. Unless otherwise indicated, each person or entity named below has sole voting and investment power with respect to the number of shares set forth opposite his or its name.

 

The following table lists the number of shares and percentage of shares beneficially owned based on 21,715,503 shares of common stock outstanding as of March 30, 2007, and a total of 454,684 common stock options currently exercisable or exercisable by our directors and executive officers as a group within 60 days of March 30, 2007. Beneficial ownership of the common stock listed in the table has been determined in accordance with the applicable rules and regulations promulgated under the Exchange Act. Shares of common stock subject to options currently exercisable or exercisable within 60 days of March 30, 2007 are deemed outstanding and beneficially owned by the person holding such options for the purpose of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person.

 

 

 

 

Compensation Philosophy, Objectives and Process

 

Compensation Philosophy and Objectives

 

Our executive compensation program is designed to align total compensation with our overall performance, while at the same time serving to attract and retain key executive officers who have a significant strategic impact on our success. Each executive officer has a significant portion of total compensation which is at-risk in any given year. In addition, each executive officer receives equity grants which serve to align their interests with those of stockholders.

 

The specific objectives of our executive compensation program are to:

 

 

Our Compensation Committee (for purposes of this Compensation Discussion and Analysis, the “Committee”) has structured executive compensation based on these objectives. Our executive compensation program includes annual and long-term incentive programs and provides for both cash and equity-based awards, as well as salary and benefit programs that are competitive within our industry.

 

We set performance targets under our annual cash incentive compensation program so that executive officers receive their targeted annual compensation if our pre-determined performance targets are achieved. When performance exceeds the pre-determined performance targets, then total executive compensation will be above this targeted compensation, and when performance is below the pre-determined performance targets, then total executive compensation will be below the targeted compensation.

 

Compensation Process

 

The Committee is responsible for:

 

 

The Committee considers the following factors, listed in order of importance, as part of the process by which it makes executive compensation determinations:

 

 

 

Compensation Structure

 

Compensation Levels and Benchmarking

 

The Committee reviewed and assessed an analysis of data on similar positions in similarly sized durable goods manufacturing companies, as published in executive compensation surveys. Both the Hay Group and PM&P provided survey information to the Committee which was carefully examined and compared to current named executive officer compensation levels. The Committee compared executive officers’ salaries to PM&P data which contained three to five surveys, each of which included several hundred companies. The Committee set 2006 compensation for our executive officers generally between the 50th and 75th percentile of overall compensation paid to similarly situated executive officers of companies included in the surveys.

 

Compensation Elements — Overview

 

We provide three principal compensation components to our named executive officers, including:

 

 

In addition, certain executive officers are party to Change-in-Control & Non-Competition Agreements that provide payments to executives upon certain termination events. We have provided these agreements for certain executive officers to encourage retention and to afford continuity in the event of a Change-in-Control. We also have a program of executive perquisites, described in the accompanying tables and narrative disclosures to this Compensation Discussion and Analysis and retirement benefits discussed below.

 

Compensation Mix

 

We use the principal components of compensation described above to provide retention value, at-risk compensation and an equity interest to match stockholder interests. Our policy for allocating between fixed and incentive compensation and between cash and equity-based awards is based on the following factors:

 

 

Our executive officers’ compensation is generally weighted more heavily towards incentive compensation programs that provide for compensation based on our annual and long-term performance.

 

For 2006, the target compensation mix for each named executive officer was as follows:

 

 

Note: The above table takes into account target bonuses payable under our annual cash incentive program and not actual payments made under that program. Equity-based award percentages are based on the actual grant date fair value of the shares of restricted stock granted on November 6, 2006.

 

The relationship of base salary to annual incentive compensation to long-term incentive compensation to the overall compensation program can vary depending upon each executive officer’s prior experience and time in the industry. In addition, Mr. Boyd’s annual incentive target is relatively low compared to other executives, because his salary which is set forth in his pre-existing employment agreement is relatively high.

 

Compensation Elements — Programs

 

Salary

 

We provide a salary to our executive officers to compensate them for their services during the year. Salaries are designed primarily to promote retention of existing executive officers, and in the case of a new hire, to attract new executive talent. The Committee sets salaries based on the executive officer’s roles and responsibilities, experience, expertise and individual performance during their tenure. Salaries are reviewed annually by the Committee and adjustments are based on the factors noted above as well as input from the Chief Executive Officer. However, there is no specific formula applied to the factors noted above and new salaries are set based on the Committee’s discretion and judgment.

 

At its meeting in October 2006, the Committee increased each named executive officer’s salary by 4%, based on its assessment of market salary movements and overall performance. As a result, base salaries are consistent with the median of salaries paid to similarly situated executive officers in the competitive market in the aggregate, in accordance with our compensation philosophy. The increased salaries, which became effective as of January 1, 2007, for each of the named executive officers are:

 

 

Annual Incentive Compensation

 

Annual incentive compensation is designed to reward executive officers for our annual financial performance and for achieving certain team performance goals. Annual target incentive payments are determined initially as a percentage of each executive officer’s salary for the fiscal year, and the payment of target incentive amounts depends on the achievement of a pre-determined performance target and team

performance goals. Individual performance goals may, from time to time, at the Committee’s discretion, have an impact on incentive payments, based on input from the Chief Executive Officer.

 

At its meeting on March 23, 2006, the Committee approved the CVG 2006 Bonus Plan (“2006 Plan”) and net income target for 2006 based on our business plan. The Committee determined that net income was an important performance measure because achievement of net income targets was believed to lead to the creation of stockholder value.

 

Pursuant to the 2006 Plan, annual incentive payments for each named executive officer were determined by the following formula:

 

“2006 Salary” * “BF1” * “BF2” * “BF3” = Annual Incentive Payment

 

Where:

 

 

In 2006, the Company Factor for all named executive officers was 107.6%, which represented an achievement of 103.8% of the net income target and interpolation between the target and upper end of the incentive payout percentages shown in the 2006 Plan.

 

 

In 2006, the Team Factor for our named executive officers was based on achievement of team performance goals, including:

 

 

In 2006, the Team Factor was 100% for Messrs. Dunn, Utrup, Armstrong and Williams and 70% for Mr. Boyd.

 

The Committee retains the discretion to increase or decrease 2006 Plan payouts based on significant differences in our performance or team performance with respect to all executive officers. At its meeting on January 30, 2007, the Committee approved incentive payments based on the achieved targets for the 2006

Plan. At its meeting on March 7, 2007, the Committee approved the CVG 2007 Bonus Plan (“2007 Plan”) and net income targets for 2007 based on our business plan.

 

Long-Term Incentives

 

The Equity Plan is designed to focus and reward executive officers’ efforts towards the long-term growth and future success of the Company. The Equity Plan permits grants of various types of equity-based awards, including stock options, stock-settled stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other equity-based and cash awards, at the discretion of the Committee. The range of equity awards provides the Committee flexibility to grant an appropriate type of award under different circumstances, depending on our needs and the relative importance of compensation objectives as they change year after year.

 

Historically, we awarded stock options to executive officers as our sole form of equity compensation. However, with the implementation of SFAS No. 123(r), which mandated expense for stock options beginning January 1, 2006, we reconsidered our equity-based compensation program, and in 2005 and 2006, we granted equity-based awards in the form of time-based restricted stock, vesting ratably over three years. This change reduced the level of dilution incurred by us as a result of granting only stock options. The Committee deemed restricted stock to be the most appropriate form of equity compensation for 2006 because it serves as a retention incentive for the current management team during a time of continued growth.

 

The Committee believes granting restricted stock also further aligns the executive officers’ interests with those of stockholders, as the executive officers will realize greater value if the stock price has increased at the end of the vesting period.

 

In November 2006, the Committee awarded restricted stock to the named executive officers in amounts within our overall philosophy.

 

The Committee expects to reconsider the objectives it desires to achieve with long-term incentive compensation on an annual basis. Such reconsideration may result in a continuation of restricted stock grants in future years, or the use of other forms of equity incentives, such as stock options, stock appreciation rights or performance shares among others.

 

Conclusion

 

Total compensation for 2006 was slightly above targeted compensation positioning at the midpoint between the median and 75th percentile of compensation paid to similarly situated executive officers in our competitive market in the aggregate. The result was deemed appropriate by the Committee in the context of our financial and stockholder performance for 2006.

 

Pay opportunities for specific executive officers can vary based on a number of factors such as scope of duties, tenure, experience and expertise in a particular functional area. Actual total compensation in a given year may vary above or below targeted total compensation based primarily on the attainment of an annual financial performance target.

 

Compensation levels and compensation mix are considered within the context of performance and objective market compensation data in the competitive marketplace, as well as the subjective factors discussed above. The Committee believes the compensation programs for the named executive officers are consistent with our compensation philosophy and objectives.

 

Timing of Equity Grants

 

We did not grant any stock options or stock appreciation rights during 2006. We do not have a program in place at this point related to the timing and pricing of stock options in coordination with the release of material non-public information.

 

The Committee approved grants of restricted stock by written consent on November 6, 2006. Our Chief Executive Officer and the other executive officers did not play a role in the Committee’s decision on the timing of the 2006 restricted stock grants. Following Committee approval of the grants, our Human Resources and Finance Departments administered the grants made under the Equity Plan.

 

Adjustment or Recovery of Awards

 

We do not maintain any specific plans or policies that provide for the adjustment or recovery of awards if certain performance levels are restated.

 

Consideration of Prior Amounts Realized

 

The Committee does not consider prior compensation outcomes, including stock compensation gains, in setting future compensation levels. The Committee believes this outcome works to further our philosophy of providing future opportunities to executive officers in exchange for our future financial performance.

 

Post-Termination Payments

 

Change-in-Control and Severance Payments

 

Each of the named executive officers, with the exception of Mr. Boyd, is party to a Change-in-Control & Non-Competition Agreement (a “Change-in-Control Agreement”), executed on April 5, 2006, which specifies severance payments in the event of certain terminations both before and following a Change-in-Control of the Company. The Change-in-Control Agreements generally provide the following:

 

Mr. Dunn

 

 

Messrs. Armstrong, Utrup and Williams

 

 

As defined in the Change-in-Control Agreements,

 

“Cause” generally means (1) dishonesty in carrying out company business; (2) engaging in acts injurious to us; (3) willful failure to follow Board directives; (4) illegal conduct or gross misconduct; (5) breach of the Change-in-Control Agreement; (6) violation of code of business ethics; or (7) a felony or certain misdemeanors.

 

“Good Reason” means (1) a material change in duties and responsibilities; (2) reduction in base salary or failure to increase salary following a change-in-control; (3) relocation outside the Columbus, Ohio metropolitan area; (4) material reduction of incentive opportunities; (5) failure to provide substantially similar benefits following a Change-in-Control; (6) failure of successor to assume the Agreement; (7) request that executive engage in illegal conduct; or (8) breach of Agreement.

 

“Change-in-Control” means (1) change in more than 50% of beneficial ownership of the Company; (2) change in more than a majority of voting shares following any transaction; (3) change in more than half of the Board of Directors over a two-year period; or (4) sale of substantially all of our assets.

 

The amounts that result from these various events are set forth below in the section entitled “Potential Payments upon Termination or Change-in-Control.” The Committee believes the provisions of the Change-in-Control Agreements are comparable to standard provisions of such agreements for executive officers in the competitive market, based primarily on their experiences at similar companies.

 

Mr. Boyd entered into a Service Agreement with Motor Panels (Coventry) PLC on March 1, 1993. This agreement, which was amended on January 7, 2002 to provide for Mr. Boyd’s relocation from the United Kingdom to the United States, was assumed by us in connection with the Mayflower acquisition. The Service Agreement provides a base salary, subject to annual review by the Committee, and an annual incentive payment. Mr. Boyd’s employment may be terminated at any time by either party by giving to the other no less than 12-months notice. This agreement also contains customary non-competition and non-solicitation provisions.

 

Retirement Payments

 

We sponsor a number of tax-qualified employee savings and retirement plans, (collectively the “401(k) Plan”) that cover most employees who satisfy certain eligibility requirements relating to minimum age and length of service. Under the 401(k) Plan, eligible employees, including all of the named executive officers with the exception of Mr. Boyd, who is located in the United Kingdom, may elect to contribute a minimum of 1% of their annual compensation, up to a maximum amount equal to the lower of 6% of their annual compensation or a statutorily prescribed annual limit. We may elect to make a matching contribution to the 401(k) Plan in an amount equal to a discretionary percentage of the employee contributions, also subject to certain statutory limitations. The matches received by the named executive officers, other than Mr. Boyd, in 2006 are set forth below in the “All Other Compensation” column of the “Summary Compensation Table.” The 401(k) Plan and the non-qualified Deferred Compensation Plan represent the only sources of retirement available income for the named executive officers other than Mr. Boyd.

 

Mr. Boyd was a participant in two pension plans during 2006. These plans include the Commercial Vehicle Group, Inc. Pension Plan for Mayflower Vehicle Systems Salaried Employees (the “Mayflower Plan”), which was frozen as of March 31, 2006. The Mayflower Plan is a defined-benefit plan from which Mr. Boyd is not eligible for payments until July 1, 2012. Such payments will be made based on compensation and years of service.

 

In addition, Mr. Boyd enrolled in the KAB Seating 2003 Group Personal Pension Plan (the “KAB Seating Plan”) on April 1, 2006. The KAB Seating Plan is a defined-contribution plan in which Mr. Boyd will become eligible for payouts at the normal retirement age of 65 (June 21, 2012). He is also eligible for early retirement payouts from age 50 although the benefits, which are determined by the amount of money accumulated in the participant’s fund, will be significantly lower on early retirement.

 

Detailed present value amounts under each of the above named pension plans in which Mr. Boyd participates are set forth below in the “Pension Benefits Table,” with changes in year-end lump sum values carried forward to the “Summary Compensation Table.”

 

Deferred Compensation Plan

 

We implemented the Deferred Compensation Plan (the “Deferred Plan”) in 2006 for certain executive officers. The Deferred Plan allows for pre-tax deferrals of compensation and provides for the assets to accumulate on a tax-deferred basis for the purpose of supplementing retirement income. Eligible participants may defer up to 80% of their base salary and/or up to 100% of their eligible bonus as well as amounts equal to any refund they receive from the tax-qualified 401(k) Plan due to discrimination testing. Election deferrals must be made annually and before the compensation is earned. Participants make elections on the length of the deferral period at the same time they make the deferral election. Participants make investment choices from a selection of investment options similar to the 401(k) Plan. We match deferrals at the rate of 50% on the first 6% of the participant’s total cash compensation. Our match vests based on years of service with 33% vesting after one year, 66% after two years, and 100% after three years. Distributions may be made as a lump sum or annual installments over periods of up to 15 years as determined at the time of deferral by the participant. Additional distribution events are termination of employment, disability, death, unforeseeable emergency, or a change-in-control.

 

Stock Ownership Guidelines and Hedging Policies

 

We do not currently have formal executive share ownership guidelines in place, but encourage executive officers to own shares by providing significant annual equity opportunities as described above.

 

We maintain a policy that prohibits executive officers from holding our securities in a margin account or pledging our securities as collateral for a loan. An executive officer may seek prior approval from us to pledge securities as collateral for a loan (but not for margin accounts) if the executive officer can demonstrate the financial capacity to repay the loan without resorting to the pledged securities.

 

Impact of Tax and Accounting Considerations

 

In general, the Committee takes into account the various tax and accounting implications of the components of our compensation program.

 

Section 162(m) of the Internal Revenue Code generally prohibits any publicly held corporation from taking a federal income tax deduction for compensation paid in excess of $1 million in any taxable year to the chief executive officer and the next four highest compensated officers. Exceptions are made for qualified performance-based compensation, among other things. It is the Committee’s policy to maximize the effectiveness of our executive compensation plans in this regard.

 

The components of compensation, including salaries, annual incentives, stock options exercised and restricted stock vested are tax deductible to the extent that they are less than $1 million for each named executive officer in a given year. Compensation associated with exercising of the 2004 stock options issued is excluded from this limitation since these options were issued pursuant to a compensation plan that existed prior to CVG being publicly held. Except for the stock options noted here, CVG did not receive a tax deduction for compensation amounts that totaled more than $1 million per officer in 2006 because none of the instruments met the requirements to be excluded from the $1 million limitation.

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s 2006 Annual Report on Form 10-K and this Proxy Statement.

 

 

 

Scott C. Arves
Robert C. Griffin
Richard A. Snell (Chairman)

 

 

The following table summarizes the compensation of the named executive officers for the year ending December 31, 2006. The named executive officers are the Company’s chief executive officer, chief financial officer and three other most highly compensated officers ranked by their total compensation in the table below:

 

 

 

 

The following table provides information regarding the value of other compensation, benefits and perquisites provided to named executive officers in 2006.

 

2006 All Other Compensation Table

 

 

 

 

The following table provides information regarding estimated possible payouts under the Commercial Vehicle Group 2006 Bonus Plan and restricted stock awards granted under the Amended and Restated Equity Incentive Plan.

 

 

 

 

 

The following table shows the number of shares covered by exercisable and unexercisable stock options and unvested restricted stock held by the named executive officers on December 31, 2006:

 

 

 

 

 

 

The table below shows the number of shares of CVG’s common stock acquired by the named executive officers upon the exercise of options and the vesting of restricted stock during 2006.

 

 

 

 

The table below quantifies the benefits expected to be paid to Mr. Boyd from the Commercial Vehicle Group, Inc. Pension Plan for Mayflower Vehicle Systems Salaried Employees (the “Mayflower Plan”) and the KAB Seating 2003 Group Personal Pension Plan (“KAB Seating Plan”). No other named executive officer receives a pension benefit.

 

 

 

 

The Mayflower Plan was frozen on March 31, 2006 for new participants and future benefit accruals. Mr. Boyd had met the conditions of eligibility of one year of service and attaining age 21. The vesting requirement is five years of service. Mr. Boyd became 100% vested in the benefit when the Mayflower Plan was frozen on March 31, 2006 even though he did not yet meet the vesting requirement, per federal regulations.

 

Mr. Boyd’s monthly retirement benefit is based on his frozen accrued benefit. The retirement benefit formula is equal to the sum of:

 

 

Periods of service are calculated to the nearest 1/10th of a year and shall not exceed 30 years. Normal retirement date is the first of the month after the participant turns age 65. A participant may elect an early retirement but the benefit will be actuarially reduced. The retirement benefit calculated above is converted to a current present value for the purposes of the Pension Benefit Table.

 

We make annual contributions to the Mayflower Plan to fund the cost as required by federal regulations. We are required to make certain actuarial assumptions to calculate the obligations and expenses of the Mayflower Plan, including assumptions on the discount rate and expected long-term rate of return on plan assets. The assumptions are summarized in Note 14 in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The assumptions are determined based on current market conditions, historical information, and consultation with and input from our actuaries.

 

Mr. Boyd joined the KAB Seating Plan on April 1, 2006. Mr. Boyd contributes 4% of his monthly salary into this plan and this is matched, up to 4% by us. There are no vesting requirements in this plan and Mr. Boyd can take early retirement under the rules of the plan from age 50, using the money contained in his fund to purchase a pension at the time of his retirement. Normal retirement age for this plan is at age 65.

 

The following table shows the executive contributions, Company matching contributions, earnings and account balances for the named executive officers in the Commercial Vehicle Group, Inc. Deferred Compensation Plan (the “Deferred Plan”), an unfunded, unsecured deferred compensation plan. In 2006, the plan was offered for a partial year, resulting in 22 weeks worth of salary deferral as opposed to a full plan year of 52 weeks. Under the plan, the Company matches 50% of the first six percent of both salary and earned bonus. Please refer to “Retirement Payments” in the “Compensation Discussion and Analysis” for a detailed description of the Deferred Plan.

 

 

 

 

The tables below show the compensation payable to each named executive officer upon voluntary termination, retirement, involuntary not-for-cause termination, involuntary for cause termination, termination following a change-of-control and in the event of disability or death. The amounts shown assume that such termination was effective as of December 31, 2006, includes amounts earned through such time and are estimates of the amounts which would be paid out to the named executive officers upon their termination. The actual amounts to be paid to each named executive officer can only be determined at the time of such person’s separation.

 

 

MERVIN DUNN

 

 

 

 

CHAD M. UTRUP

 

 

 

 

GERALD L. ARMSTRONG