SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
DENTSPLY INTERNATIONAL INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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(Dentsply Logo)
DENTSPLY INTERNATIONAL
World Headquarters
Susquehanna Commerce Center
221 W. Philadelphia Street
York, PA 17405-0872
(717) 845-7511
Fax (717) 854-2343
April 11, 2005
Dear DENTSPLY Stockholder:
You are cordially invited to attend the 2005 Annual Meeting of Stockholders
to be held on Wednesday, May 11, 2005, at 9:30 a.m., at the Company's Employee
Meeting Room at 570 West College Avenue, in York, Pennsylvania.
The Annual Meeting will include voting on the matters described in the
accompanying Notice of Annual Meeting and Proxy Statement, a report on Company
operations and discussion.
Whether or not you plan to attend, you can ensure that your shares are
represented at the Annual Meeting by voting your proxy. You have three ways to
vote your proxy. You may vote by mail by promptly completing, signing, dating
and returning the enclosed proxy card in the envelope provided, you may vote by
telephone by calling 1-800-690-6903 and following the instructions, or you may
vote by internet by following the instructions on the proxy card or going to the
internet at www.proxyvote.com and following the instructions on that site. Your
vote is important. Please take a moment to vote through one of the above
methods.
Sincerely,
/s/ John C. Miles II
John C. Miles II
Chairman of the Board
DENTSPLY INTERNATIONAL INC.
SUSQUEHANNA COMMERCE CENTER
221 WEST PHILADELPHIA STREET
YORK, PENNSYLVANIA 17405-0872
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MAY 11, 2005
---------------------
The Annual Meeting of Stockholders (the "Annual Meeting") of DENTSPLY
International Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 11, 2005, at 9:30 a.m., local time, at the Company's Employee
Meeting Room, 570 West College Avenue, York, Pennsylvania, for the following
purposes:
1. To elect four Class I directors to serve for a term of three years
and until their respective successors are duly elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP,
independent registered public accounting firm, to audit the books and
accounts of the Company for the year ending December 31, 2005;
3. To approve the Amended and Restated Dentsply International Inc.
2002 Equity Incentive Plan; and
4. To transact such other business as may properly come before the
Annual Meeting and any and all adjournments and postponements thereof.
The Board of Directors fixed the close of business on March 24, 2005 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the Annual Meeting.
A complete list of the stockholders entitled to vote at the Annual Meeting
will be available during ordinary business hours for examination by any
stockholder, for any purpose germane to the Annual Meeting, for a period of at
least ten days prior to the Annual Meeting, at the office of the Company's
Secretary, Susquehanna Commerce Center, 221 West Philadelphia Street, York,
Pennsylvania.
THE BOARD OF DIRECTORS URGES YOU TO VOTE YOUR PROXY EITHER BY MAIL OR
THROUGH THE INTERNET. YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. THE VOTING OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE YOUR PROXY
OR TO VOTE IN PERSON IF YOU DO ATTEND THE ANNUAL MEETING.
By Order of the Board of Directors,
BRIAN M. ADDISON
Vice President, Secretary and
General Counsel
York, Pennsylvania
April 11, 2005
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES YOU
OWNED ON THE RECORD DATE.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND
SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. OR, IF YOU
WISH, YOU MAY PROVIDE YOUR PROXY INSTRUCTION USING THE INTERNET BY FOLLOWING THE
INSTRUCTIONS ON THE ENCLOSED PROXY CARD. IN ORDER TO AVOID THE ADDITIONAL
EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN
VOTING YOUR PROXY PROMPTLY.
DENTSPLY INTERNATIONAL INC.
SUSQUEHANNA COMMERCE CENTER
221 WEST PHILADELPHIA STREET
YORK, PENNSYLVANIA 17405-0872
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PROXY STATEMENT
---------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of DENTSPLY International Inc., a Delaware
corporation ("DENTSPLY" or the "Company"), for use at the Company's 2005 Annual
Meeting of Stockholders (together with any and all adjournments and
postponements thereof, the "Annual Meeting") to be held on Wednesday May 11,
2005, at 9:30 a.m., local time, at the Company's Employee Meeting Room, 570 West
College Avenue, York, Pennsylvania, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement,
together with the foregoing Notice and the enclosed proxy card, are first being
sent to stockholders on or about April 11, 2005.
The Board of Directors fixed the close of business on March 24, 2005 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting. On the record date, there were 80,581,511 shares of
Common Stock of the Company, par value $.01 per share ("Common Stock"),
outstanding and entitled to vote. Each share of Common Stock is entitled to one
vote per share on each matter properly brought before the Annual Meeting. Shares
can be voted at the Annual Meeting only if the stockholder is present in person
or is represented by proxy. The presence, in person or by proxy, at the Annual
Meeting of shares of Common Stock representing at least a majority of the total
number of shares of Common Stock outstanding on the record date will constitute
a quorum for purposes of the Annual Meeting.
Whether or not you are able to attend the Annual Meeting, you are urged to
vote your proxy, either by mail, telephone or the internet, which is solicited
by the Company's Board of Directors and which will be voted as you direct. In
the absence of instructions, shares represented by properly provided proxies
will be voted as recommended by the Board of Directors.
Any proxy may be revoked at any time prior to its exercise by attending the
Annual Meeting and voting in person, by notifying the Secretary of the Company
of such revocation in writing or by delivering a duly executed proxy bearing a
later date, provided that such notice or proxy is actually received by the
Company prior to the taking of any vote at the Annual Meeting.
The cost of solicitation of proxies for use at the Annual Meeting will be
borne by the Company. Solicitations will be made primarily by mail, facsimile or
through the internet, and employees or agents of the Company may solicit proxies
personally or by telephone.
Brokers, banks and other nominee holders will be requested to obtain voting
instructions of beneficial owners of stock registered in their names. The
Company will reimburse these record holders for their reasonable out-of-pocket
expenses incurred in doing so. Shares represented by a duly completed proxy
submitted by a nominee holder on behalf of beneficial owners will be counted for
quorum purposes, and will be voted to the extent instructed by the nominee
holder on the proxy card or through the internet. The rules applicable to a
nominee holder may preclude it from voting the shares that it holds on certain
kinds of proposals unless it receives voting instructions from the beneficial
owners of the shares (sometimes referred to as "broker non-votes").
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation and the by-laws of the Company
provide that the number of directors (which is to be not less than three) is to
be determined from time to time by resolution of the Board of Directors. The
Board is currently comprised of ten persons.
Pursuant to the Company's Restated Certificate of Incorporation, the
members of the Board of Directors are divided into three classes. Each class is
to consist, as nearly as may be possible, of one-third of the whole number of
members of the Board. The term of the Class I directors expires at the Annual
Meeting. The terms of the Class II and Class III directors will expire at the
2006 and 2007 Annual Meetings of Stockholders, respectively. At each Annual
Meeting, the directors elected to succeed those whose terms expire are of the
same class as the directors they succeed and are elected for a term to expire at
the third Annual Meeting of Stockholders after their election and until their
successors are duly elected and qualified. A director elected to fill a vacancy
is elected to the same class as the director he/she succeeds, and a director
elected to fill a newly created directorship holds office until the next
election of the class to which such director is elected.
The three incumbent Class I directors and a new director nominee, Mr.
Francis J. Lunger, are nominees for election to the Board this year for a
three-year term expiring at the 2008 Annual Meeting of Stockholders. In the
election, the four persons who receive the highest number of votes actually cast
will be elected. The proxy named in the proxy card and on the internet voting
site intends to vote for the election of the three Class I nominees listed below
unless otherwise instructed. If a holder does not wish his or her shares to be
voted for a particular nominee, the holder must identify the exception in the
appropriate space provided on the proxy card or on the internet site, in which
event the shares will be voted for the other listed nominees. If any nominee
becomes unable to serve, the proxy may vote for another person designated by the
Board of Directors or the Board may reduce the number of directors. The Company
has no reason to believe that any nominee will be unable to serve.
The Company's by-laws require that stockholders seeking to nominate persons
for election to the Board, or to propose other business to be brought before an
Annual Meeting of Stockholders, comply with certain procedures. See "Stockholder
Proposals for Proxy Statement and Nominations" in this Proxy Statement.
Set forth below is certain information with regard to each of the nominees
for election as Class I directors and each continuing Class II and Class III
director.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
------------ --------------------------------------
Dr. Michael C. Alfano..................... Dr. Alfano has been the Dean and Professor of
Age 57 Periodontics and Biological Sciences at the College of
Dentistry, New York University since 1998. From 1982
until 1998 he held a number of positions with Block
Drug Company, including Senior Vice President for
Research & Technology and President of Block
Professional Dental Products Company. He served on the
Board of Directors of Block Drug Company, Inc. from
1988 to 1998. He serves as a member of or consultant to
various public health organizations, including the
Editorial Board of the American Journal of Dentistry
since 1987, and has served on the Board of Overseers
for the School of Dental Medicine at the University of
Pennsylvania from 1992 to 2004. In addition, Dr. Alfano
is a consultant to the Consumer Healthcare Product
Association, and has been appointed as the industry
representative to the Non-Prescription Drugs Advisory
Committee of the FDA. He is a founding director and
serves on the Executive Committee of the Friends of the
National Institute for Dental and Craniofacial
Research, and he is a founding director of the
not-for-profit Santa Fe Group. He is also a Trustee of
the New York State Dental Foundation. Dr. Alfano was
appointed to the DENTSPLY Board of Directors in
February, 2001.
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NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
------------ --------------------------------------
Eric K. Brandt............................ Mr. Brandt is the Executive Vice President, Finance,
Age 42 Strategy and Corporate Development and Chief Financial
Officer of Allergan, Inc. Mr. Brandt joined Allergan in
May 1999, and served as President of its Consumer Eye
Care Business during 2001. Prior to joining Allergan,
he was Vice President and Partner at Boston Consulting
Group, and a senior member of the BCG Health Care and
Operations practices. He currently serves on the Board
of Vertex Pharmaceuticals, Inc. Mr. Brandt was
appointed to the DENTSPLY Board of Directors in
November 2004.
William F. Hecht.......................... Mr. Hecht is Chairman, President and Chief Executive
Age 62 Officer of PPL Corporation, a diversified utility and
energy services company. He was elected President and
Chief Operating Officer in 1991 and has served in his
present position since 1993. In addition to PPL
Corporation, he serves on the Boards of PPL Electric
Utilities Corporation and PPL Energy Supply, LLC,
subsidiaries of PPL Corporation, and is a director of
the Federal Reserve Bank of Philadelphia and
RenaissanceRe Holdings Ltd. He also serves on the Board
of a number of civic and charitable organizations. Mr.
Hecht was appointed to the DENTSPLY Board of Directors
in March 2001.
Francis J. Lunger......................... Mr. Lunger served on the Board of Millipore Corporation
Age 59 from 2001 until March 2005, including serving as
Chairman from April 2002 until April 2004. Mr. Lunger
joined Millipore in 1997 as Senior Vice President and
Chief Financial Officer and held several executive
management positions, which included serving as
Executive Vice President and Chief Operating Officer
from 2000 until 2001, and President and Chief Executive
Officer from August 2001 until January 2005. Prior to
joining Millipore, Mr. Lunger held executive management
positions at Oak Industries, Inc., Nashua Corporation,
and Raychem Corporation. He also serves on the Landmark
School Board of Trustees.
DIRECTORS CONTINUING AS CLASS II
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
------------ --------------------------------------
Leslie A. Jones........................... Mr. Jones served as Chairman of the Board of the
Age 65 Company from May 1996 to May 1998. From January 1991 to
January 1992, he was a Senior Vice President and
Special Assistant to the President of DENTSPLY
International Inc. ("Old Dentsply") prior to its merger
with Gendex Corporation ("Gendex") on June 11, 1993
("the "Merger"). Prior to that time, Mr. Jones served
as Old DENTSPLY's Senior Vice President of North
American Operations. Mr. Jones has served as a director
of the Company since the Merger and prior thereto
served as a director of Old DENTSPLY.
Gary K. Kunkle, Jr........................ Mr. Kunkle was appointed as Vice Chairman of the Board
Age 58 and Chief Executive Officer of DENTSPLY in January
2004. Prior to that, he had been the President and
Chief Operating Officer of the Company since January
1997. From January 1992 to January 1997, he served as
President of Johnson & Johnson's Vistakon division. Mr.
Kunkle chaired the Marketing Data Committee for the
American Dental Trade Association until December 2003
and joined the Board of Directors of The Perrigo
Company in October 2002. He was appointed to the
DENTSPLY Board of Directors in March 2002.
3
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
------------ --------------------------------------
Edgar H. Schollmaier...................... Mr. Schollmaier held the position of President of Alcon
Age 71 Laboratories, Inc. of Fort Worth, Texas, which is owned
in part by Nestle S.A., from 1972 to 1997. He was
Alcon's Chief Executive for the last twenty years of
that term. He is a trustee of Texas Christian
University. Mr. Schollmaier has served as a director of
the Company since June 1996.
DIRECTORS CONTINUING AS CLASS III DIRECTORS
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
------------ --------------------------------------
Paula H. Cholmondeley..................... Ms. Cholmondeley is the Chief Executive Officer of the
Age 57 Sorrel Group, a strategic planning and consulting firm.
She served as the Vice President and General Manager of
Specialty Products for Sappi Fine Paper, a subsidiary
of Sappi Limited from April 2000 until January 2004,
and prior to that from January 1998 until April 2000,
she was a private consultant on strategic planning and
Mergers and Acquisitions. From 1992 until January 1998,
Ms. Cholmondeley held various management positions with
Owens Corning, including General Manager of Residential
Insulation. Ms. Cholmondeley served as a White House
Fellow and a Special Assistant to the U.S. Trade
Representative for several countries in the Far East
from 1982 to 1983. She has also held a number of
significant positions with other companies including
managerial positions with Westinghouse Elevator
Company, and as Chief Financial Officer and Senior Vice
President for Blue Cross of Greater Philadelphia. She
is an independent trustee of Gartmore Capital Mutual
Fund. She also serves on the Boards of Terex
Corporation, Ultralife Batteries, Albany International
and Minerals Technologies, Inc. Ms. Cholmondeley was
appointed to the DENTSPLY Board of Directors in
September 2001.
Michael J. Coleman........................ Mr. Coleman is the President of Cape Publications and
Age 61 Publisher of FLORIDA TODAY, Melbourne, Florida. He has
been President of the Gannett Co., Inc., South
Newspaper Group since 1991. From July 1986 to May 1991,
Mr. Coleman was President and Publisher of the Rockford
(Illinois) Register Star. Mr. Coleman is a member of
the National Newspaper Association and the American
Society of Newspaper Editors. He is Chairman of Cool
Media Consultants Co. of Florida and serves as a
director of Ron Jon Surf Shops. Mr. Coleman has served
as a director of the Company since the merger of
DENTSPLY International Inc. ("Old DENTSPLY") and Gendex
Corporation ("Gendex") on June 11, 1993 (the "Merger"),
and prior thereto as a director of Gendex.
John C. Miles II.......................... Mr. Miles has served as Chairman of the Board since May
Age 63 20, 1998. In January 2004, he retired from his position
as Chief Executive Officer, a position which he held
since January 1, 1996. Mr. Miles served as Vice
Chairman of the Board since January 1, 1997. Prior to
January 1, 1996, he had been President and Chief
Operating Officer since the Merger, and served as
President and Chief Operating Officer of Old DENTSPLY
commencing January 1990. Mr. Miles has been a director
of the Company since the Merger and was a director of
Old DENTSPLY commencing January 1990. Mr. Miles is
currently serving as a director of Respironics, Inc.
and Inamed Corporation.
4
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
------------ --------------------------------------
W. Keith Smith............................ Keith Smith served as Senior Vice Chairman of Mellon
Age 70 Financial Corporation and Mellon Bank, N.A., as well as
a member of the Board of Directors from 1987 until
1998. In his capacity as head of Mellon Trust, he
served as Chairman and Chief Executive Officer of The
Boston Company and Boston Safe Deposit Company, as well
as Chairman of The Dreyfus Corporation and Buck
Consultants Inc. Mr. Smith joined Mellon in 1987 as
Vice Chairman and Chief Financial Officer of Mellon
Bank Corporation and Mellon Bank, N.A., and served in
that capacity until 1990. Mr. Smith is a Chartered
Accountant and a member of the Financial Executives
Institute. He serves on the Boards of Directors of PPL
Corporation, Baytree National Bank & Trust Co., Baytree
Bancorp, Invesmart Inc., West Penn Allegheny Health
System and Allegeheny General Hospital. He also serves
as a Director for the River City Brass Band Endowment,
Robert Morris University, and the Greater Pittsburgh
Council of the Boy Scouts of America. Mr. Smith has
served as a director of the Company since the Merger
and prior thereto served as a director of Old DENTSPLY.
VOTES REQUIRED
The Class I directors will be elected by a plurality of the votes of shares
present and entitled to vote. Accordingly, the four nominees for election as
directors who receive the highest number of votes actually cast will be elected.
Broker non-votes will be treated as shares that neither are capable of being
voted nor have been voted and, accordingly, will have no effect on the outcome
of the election of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES FOR
ELECTION AS CLASS I DIRECTORS.
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held six meetings during 2004, one of
which was a telephone meeting. The Board of Directors has determined that the
following directors are "independent" under the listing standards of The Nasdaq
Stock Market, Inc. (the "Listing Standards"): Michael C. Alfano, Eric K. Brandt,
Paula H. Cholmondeley, Michael J. Coleman, William F. Hecht, Leslie A. Jones,
Edgar H. Schollmaier, and W. Keith Smith. Betty Jane Scheihing resigned from the
Board June 1, 2004. The Board has an Executive Committee, an Audit and
Information Technology Committee ("Audit Committee"), a Corporate Governance and
Nominating Committee ("Governance Committee") and a Human Resources Committee.
No directors attended fewer than 75% of the total number of meetings of the
Board and the meetings of any committee of the Board on which a director served
during the year ended December 31, 2004. The current composition and activities
of the Committees are described below.
EXECUTIVE COMMITTEE
The Executive Committee acts for the Board and provides guidance to the
executive officers of the Company between meetings of the Board. The members of
the Executive Committee are Messrs. Miles (Chairman), Jones, and Smith. The
Executive Committee held no meetings during 2004.
AUDIT COMMITTEE
The Audit Committee is responsible for selecting and retaining the
independent registered public accounting firm, setting the independent
registered public accounting firm's compensation, pre-approving all auditing and
permitted non-audit services by the independent registered public accounting
firm, reviewing with the independent registered public accounting firm the scope
and results of the audit, reviewing the adequacy and effectiveness
5
of the Company's system of internal control and performing the other duties set
forth in the Audit Committee Charter (a copy of the Audit Committee Charter is
attached to this Proxy Statement as Appendix B).
The members of the Audit Committee are Messrs. Schollmaier (Chairman),
Brandt, Hecht, and Jones, and Ms. Cholmondeley, all of whom are independent as
defined in the Listing Standards. The Board has determined that Messrs.
Schollmaier and Brandt, and Ms. Cholmondeley are Audit Committee Financial
Experts under the rules and regulations of the Securities and Exchange
Commission. The Audit Committee held six meetings during 2004, two of which were
telephone meetings.
GOVERNANCE COMMITTEE
The Governance Committee is responsible for identifying and recommending
individuals as nominees to serve on the Board, reviewing and recommending Board
policies and governance practices and appraising the performance of the Board
and performing the other duties set forth in the Governance Committee Charter (a
copy of the Governance Committee Charter is attached to this Proxy Statement as
Appendix C). The members of the Committee are Messrs. Jones (Chairman) and Smith
and Dr. Alfano, all of whom are independent as defined in the Listing Standards.
It is the policy of the Governance Committee to consider any candidates for
nomination to the Board who are recommended and submitted by security holders in
accordance with the Company's by-laws (see Stockholder Proposals for Proxy
Statement and Nominations in this Proxy Statement). No such candidates were
submitted to the Company for consideration. The Governance Committee's policy is
to evaluate any proposed candidates under the criteria utilized by the
Governance Committee to evaluate all potential nominees, including, at a
minimum, the following attributes:
- the proven ability and experience to bring informed, thoughtful and
well-considered opinions to corporate management and the Board;
- the competence, maturity and integrity to monitor and evaluate the
Company's management, performance and policies;
- the willingness and ability to devote the necessary time and effort
required for service on the Board;
- the capacity to provide additional strength, diversity of view and new
perceptions to the Board and its activities;
- the necessary measure of self-confidence and articulateness to ensure
ease of participation in Board discussion; and
- who hold or have held a senior position with a significant business
corporation or a position of senior leadership in an educational,
medical, religious, or other non-profit institution or foundation of
significance.
When the Governance Committee engages in a process to identify director
candidates, other than directors standing for re-election, the Governance
Committee polls the existing directors for recommendations and sometimes
utilizes the service of a search firm to identify potential candidates. All
potential candidates are screened relative to their qualifications and go
through an interview process with the Governance Committee and, if desired, by
other members of the Board. When the Governance Committee uses a search firm, a
fee is paid for such services. The Corporate Governance Committee held four
meetings during 2004; three of which were telephone meetings.
HUMAN RESOURCES COMMITTEE
The Human Resources Committee is responsible for evaluating and
administering compensation levels for all officers of the Company, reviewing and
evaluating employee compensation generally, and employee benefit plans and other
activities as set forth in the Human Resources Committee Charter (a copy of the
Human Resources Committee Charter is attached to this Proxy Statement as
Appendix D). Its current members are Messrs. Coleman (Chairman) and Smith and
Dr. Alfano, all of whom are independent as defined in the Listing
6
Standards. Ms. Scheihing served on the committee until her resignation from the
Board in June 2004. The Human Resources Committee met four times during 2004,
one of which was a telephone meeting.
ATTENDANCE AT ANNUAL MEETINGS
The Company has no policy regarding the attendance of Board members at the
Company's Annual Stockholders Meeting. In 2004, all Board members attended the
Annual Meeting of Stockholders.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee appointed PricewaterhouseCoopers LLP ("PwC"),
independent registered public accounting firm, to audit the financial statements
of the Company and to audit the Company's internal control over financial
reporting for the year ending December 31, 2005.
In connection with the audit of the Company's financial statements, it is
expected that PwC will also audit the books and accounts of certain subsidiaries
of the Company at the close of their current fiscal years. A representative of
PwC will be present at the Annual Meeting and will have the opportunity to make
a statement, if such person desires to do so, and to respond to appropriate
questions.
The proposal to ratify the appointment of PwC will be approved by the
stockholders if it receives the affirmative vote of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the proposal. If there is an abstention noted on the proxy card for this
proposal, the abstention will have the effect of a vote against the proposal
even though the shares represented thereby will not be counted as having been
voted for or against the proposal. Broker non-votes will be treated as shares
not capable of being voted on the proposal and, accordingly, will have no effect
on the outcome of voting on the proposal.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR RATIFICATION
OF THE SELECTION OF PWC AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
COMPANY.
APPROVAL OF THE DENTSPLY INTERNATIONAL INC.
2002 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
The Human Resources Committee ("HR Committee") of the Board, which has
principal responsibility for the Company's compensation plans, has re-evaluated
the long-term incentive compensation program of the Company. The HR Committee
continues to believe that equity compensation is a very important part of the
Company's compensation plan. As a result of the re-evaluation, the HR Committee
determined it would be appropriate to increase the flexibility of the Company's
equity incentive compensation plan to allow for the granting of forms of equity
compensation, other than stock options. On March 22, 2005, with the
recommendation of the HR Committee, the Board approved an amendment and
restatement of the DENTSPLY International Inc. 2002 Stock Option Plan (the "2002
Plan"). The amendment and restatement of the 2002 Plan changes the name of the
2002 Plan to the "DENTSPLY International Inc. 2002 Amended and Restated Equity
Incentive Plan" (the "Equity Incentive Plan") and amends the 2002 Plan in the
manner described below. The Board determined to submit the Equity Incentive Plan
to the stockholders for approval at the Annual Meeting. The stockholders are
being asked to approve the Equity Incentive Plan in the form attached hereto as
Appendix A. If the Equity Incentive Plan is not approved by stockholders, the
2002 Plan will continue in effect in accordance with its terms.
The amendments to the 2002 Plan do not increase the number of shares of
common stock which can be granted under the Equity Incentive Plan from the
number that was authorized for issuance under the 2002 Plan. The purpose of the
amendments to the 2002 Plan is to provide more flexibility with respect to the
types of equity incentive compensation that can be granted to key employees and
other participants in the Plan. In addition, the HR Committee determined that
the Plan should be amended to extend to one year the period during which certain
awards may be exercised following a grantee's death or disability, and to
provide for change of control
7
acceleration if a grantee's employment is terminated in certain circumstances
following a reorganization, merger or other business combination.
The following is a summary of the principal features of the Equity
Incentive Plan. The summary, however, does not purport to be a complete
description of all of the provisions of the Equity Incentive Plan. The summary
is qualified in its entirety by reference to the full text of the Equity
Incentive Plan, a copy of which is attached hereto as Appendix A.
GENERAL PROVISIONS
Types of Award. Stock options ("Options"), stock which is subject to
certain forfeiture risks and restrictions ("Restricted Stock"), stock delivered
upon vesting of units ("Restricted Stock Units") and stock appreciation rights
("Stock Appreciation Rights") may be awarded under the Equity Incentive Plan
(collectively, "Awards").
Administration. The Equity Incentive Plan is administered by the Human
Resources Committee, or a Subcommittee thereof (the "Committee"), of the Board.
The Committee is comprised of two or more members of the Board, each of whom
qualifies as a "Non-Employee Director" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or any successor
rule or regulation, "independent directors" as defined in Section 4200(15) of
the Marketplace Rules of The Nasdaq Stock Market and "outside directors" as
defined in Section 162(m) or any successor provision of the Code and applicable
Treasury regulations thereunder, if such qualification is deemed necessary in
order for the grant or the exercise of Options under the Equity Incentive Plan
to qualify for any tax or other material benefit to participants or the Company
under applicable law. Subject to the express provisions of the Equity Incentive
Plan, the Committee will have sole discretion concerning all matters relating to
the Equity Incentive Plan and Awards, including, without limitation, those
persons to whom Awards will be granted, the number of shares subject to each
Award and the vesting schedule and expiration date of such Award.
Eligibility. The Committee will select those officers and other key
employees of the Company, including members of the Board who are also employees
("Employee Directors") and consultants and advisors to the Company to
participate in the Equity Incentive Plan on the basis of the importance of their
services in the management, development and operations of the Company. Officers,
other key employees and Employee Directors are collectively referred to as "Key
Employees." Members of the Board who are not employees of the Company ("Outside
Directors") may participate in the Equity Incentive Plan in accordance with the
provisions described below.
Shares Available. Awards with respect to an aggregate of seven million
(7,000,000) shares of Common Stock (plus any shares of Common Stock covered by
any unexercised portion of canceled or terminated stock options granted under
the DENTSPLY International Inc. 1993 Stock Option Plan or 1998 Stock Option
Plan), may be granted under the Equity Incentive Plan (the "Maximum Number").
Since Awards have already been made under the 2002 Plan, subject to the
adjustment described below, the current number of shares available for issuance
under the Equity Incentive Plan is 5,157,752. The Maximum Number will be
increased on January 1 of each calendar year during the term of the Equity
Incentive Plan to equal seven percent (7%) of the outstanding shares of Common
Stock on such date, in the event that 7,000,000 shares is less than seven
percent (7%) of the outstanding shares of Common Stock on such date, prior to
such increase, provided that notwithstanding any such adjustment in the Maximum
Number, all Awards granted under the Plan, subject to forfeitures or
cancellations, shall be counted against the Maximum Number. Notwithstanding the
foregoing, and subject to adjustment as provided below, (i) Options with respect
to no more than one million (1,000,000) shares of Common Stock may be granted as
ISOs under the Plan, (ii) no more than two million (2,000,000) shares may be
awarded as Restricted Stock or Restricted Stock Units under the Plan, and (iii)
in any calendar year no Key Employee may be granted Options or Stock
Appreciation Rights with respect to more than five hundred thousand (500,000)
shares of Common Stock or Restricted Stock and Restricted Stock Units in excess
of 150,000 shares of Common Stock. Any shares of Common Stock reserved for
issuance upon exercise of Options or Stock Appreciation Rights which expire,
terminate or are cancelled, and any shares of Common Stock subject to any grant
of Restricted Stock or Restricted Stock Units which are forfeited, may again be
subject to new Awards under the Plan.
8
Adjustments. The number of shares of Common Stock subject to the Equity
Incentive Plan, the exercise price of Awards and the number of shares available
for Awards subsequently granted under the Equity Incentive Plan will be
appropriately adjusted to reflect any stock dividend, stock split or combination
of shares. In the event of any merger, consolidation or reorganization of the
Company, there will be substituted on an equitable basis for each share of
Common Stock then subject to the Equity Incentive Plan and for each share of
Common Stock then subject to an Award granted under the Equity Incentive Plan,
the number and kind of shares of stock, other securities, cash or other property
to which the holders of Common Stock of the Company are entitled pursuant to
such transaction.
OPTIONS
Subject to the terms of the Equity Incentive Plan, the Committee may from
time to time grant Options which are incentive stock options ("ISOs") meeting
the requirements of Section 422 of the Code, or options which do not meet such
requirements ("Nonqualified Options" or "NSOs"), to Key Employees of the
Company; provided, however: (a) the exercise price per share of each ISO will be
the fair market value of a share of Common Stock on the date such ISO is
granted; (b) the aggregate fair market value (determined with respect to each
ISO at the time such Option is granted) of the shares of Common Stock with
respect to which ISOs are exercisable for the first time by an Optionee during
any calendar year (under all incentive stock option plans of the Company) will
not exceed $100,000; and (c) if an ISO is granted to an individual who owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, (i) the exercise price of each ISO will
not be less than one hundred ten percent (110%) of the fair market value of a
share of Common Stock on the date the ISO is granted, and (ii) the ISO will
expire and all rights to purchase shares thereunder will cease no later than the
fifth anniversary of the date the ISO was granted. NSOs granted to Key Employees
will be in such form and subject to such restrictions and other terms and
conditions as the Committee may determine, provided, however, that the exercise
price per share of each NSO will not be less than the fair market value of a
share of Common Stock on the date the NSO is granted. Each Option will vest in
three equal annual installments commencing on the first anniversary of the date
of grant, provided, however, that the Committee, in its sole discretion, will
have the authority to shorten or lengthen the exercise period with respect to
any or all Options, or any part thereof, granted to Key Employees.
STOCK APPRECIATION RIGHTS
The Committee may award Stock Appreciation Rights in tandem with another
Award, in addition to another Award, or freestanding and unrelated to another
Award. The Committee will determine the number of shares of Common Stock to be
issued pursuant to a Stock Appreciation Right Award, the grant price and the
conditions and limitations applicable to the exercise. A Stock Appreciation
Right entitles the recipient to receive, upon exercise, an amount equal to the
product of (a) the excess of the fair market value of a share of Common Stock on
the date of exercise over the grant price and (b) the number of shares of Common
Stock as to which the Stock Appreciation Right is being exercised. Payment will
be made by the Company solely in shares of Common Stock, provided that, the
Stock Appreciation Rights which are settled shall be counted in full against the
number of shares available for award under the Plan, regardless of the number of
shares of Common Stock issued upon settlement of the Stock Appreciation Right.
Stock Appreciation Rights will vest with respect to one-third of the total
number of shares of Common Stock subject to the Stock Appreciation Right on the
first anniversary following the date of grant, and with respect to an additional
one-third of the total number of shares of Common Stock subject to the Stock
Appreciation Right, on each of the second and third anniversaries. The
Committee, in its sole discretion, may shorten or lengthen the vesting schedule.
Notwithstanding the foregoing, a tandem stock appreciation right will be
exercisable at such time or times and only to the extent that the related Award
is exercisable.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The Committee may award shares of Restricted Stock and/or Restricted Stock
Units on such terms as it deems advisable. Restrictions on shares of Restricted
Stock and/or Restricted Stock Units will lapse over a period of time or
according to such other criteria (including performance-based criteria) as the
Committee deems
9
appropriate (the "Restricted Period"). During the Restricted Period, the
recipient may not sell or otherwise dispose of the shares of Restricted Stock or
Restricted Stock Units. During the Restricted Period, the recipient will have
the right to vote shares of Restricted Stock and to receive any dividends or
other distributions paid on such shares of Restricted Stock, subject to any
restrictions deemed appropriate by the Committee. All restrictions imposed on
Restricted Stock and/or Restricted Stock Units will lapse upon the expiration of
the applicable Restricted Period and the satisfaction of all conditions imposed
by the Committee. Upon the lapse of restrictions with respect to any Restricted
Stock Units, the value of such Restricted Stock Units will be paid to the
recipient in shares of Common Stock (determined as of the date on which
restrictions with respect to such Restricted Stock Units lapse).
GRANTS TO OUTSIDE DIRECTORS
All grants of Awards to Outside Directors will be automatic and
non-discretionary. Each individual who becomes an Outside Director (other than
an Outside Director who was previously an Employee Director) will be granted a
NSO to purchase nine thousand (9,000) shares of Common Stock on the date he or
she becomes an Outside Director. Each individual who is an Employee Director and
who thereafter becomes an Outside Director will be granted automatically a NSO
to purchase nine thousand (9,000) shares of Common Stock on the third
anniversary of the date such Employee Director was last granted an Option.
Thereafter, each Outside Director who is re-elected to the Board will be granted
an additional NSO to purchase nine thousand (9,000) shares of Common Stock on
the third anniversary of the date such Outside Director was last granted an
Option. The exercise price of each NSO granted to an Outside Director will be
the fair market value of the Common Stock subject to the Option on the date on
which the Option is granted. Each such NSO will vest in three equal annual
installments commencing on the first anniversary of the date of grant. The Board
of Directors may determine that, in lieu of being granted NSOs, an Outside
Director may be granted an Award of shares of Restricted Stock, Restricted Stock
Units and/or Stock Appreciation Rights. In any such event, the restrictions as
to such Award of Restricted Stock and/or Restricted Stock Units shall lapse, and
any such Award of Stock Appreciation Rights shall vest, in accordance with the
vesting schedule set forth above.
EFFECT OF TERMINATION OF EMPLOYMENT
Except in the event of death, disability, retirement or a "Change in
Control" or as otherwise determined by the Committee, the right to exercise any
Option or Stock Appreciation Right held by a participant whose employment with
the Company or service on the Board is terminated for any reason other than
"Cause" (as defined in the Equity Incentive Plan) will terminate 90 days
following the date of termination of employment or service on the Board. The
right to exercise any Option or Stock Appreciation Right held by a recipient
whose employment with the Company is terminated for "Cause" will terminate on
the date of termination of employment. Unless otherwise provided in the Equity
Incentive Plan or determined by the Committee, vesting of Options and Stock
Appreciation Rights ceases upon termination of a recipient's employment or
relationship with the Company.
If a recipient who has received Restricted Stock and/or Restricted Stock
Units ceases to be employed by the Company during the Restricted Period, or if
other specified conditions are not met, the Restricted Stock and/or Restricted
Stock Units will terminate as to all shares covered by the Award as to which the
restrictions have not lapsed, and, in the case of Restricted Stock, those shares
of Common Stock shall be canceled in exchange for the purchase price, if any,
paid by the recipient for such shares. The Committee may provide, however, for
complete or partial exceptions to this requirement as it deems appropriate.
In the event of the death or Disability (as defined in the Equity Incentive
Plan) of a recipient during employment with the Company or service on the Board,
all Options and Stock Appreciation Rights held by the recipient will become
fully exercisable on such date of death or Disability, all restrictions and
conditions on all Restricted Stock and/or Restricted Stock Units held by the
recipient will lapse on such date of death or Disability and the recipient
(estate in the case of death) will have one (1) year from the date of death or
disability to exercise any NSOs and Stock Appreciation Rights.
10
If a recipient who is not a director of the Company retires at or after age
65 or at or after age 60 with a minimum of 15 years of service with the Company,
(a) the Options and Stock Appreciation Rights held by such recipient will become
fully exercisable as of the date of such retirement and expire on the earlier of
the fifth anniversary of the date of such retirement or the date that they
expire in accordance with their terms and (b) all restrictions and conditions on
all Restricted Stock and/or Restricted Stock Units held by such Key Employee
shall lapse on the date of such retirement. If the service of an Outside
Director is terminated in accordance with the Company's retirement policy for
directors, (a) all Options held by such director shall become fully exercisable
on the date of such retirement and expire on the earlier of the fifth
anniversary of the date of such retirement or the date that they expire in
accordance with their terms and (b) all restrictions and conditions on all
Restricted Stock and/or Restricted Stock Units held by such Outside Director
shall lapse on the date of such retirement. If a Key Employee who is an Employee
Director terminates employment with the Company at or after age 65 or at or
after age 60 with a minimum of 15 years of service with the Company and
continues to serve as a director, then upon the retirement of such director from
the board (a) all Options held by such director shall become fully exercisable
on the date of such retirement and each of the Options held by such director
shall expire on the earlier of the fifth anniversary of the date of such
retirement or the date that they expire in accordance with their terms and (b)
all restrictions and conditions on all Restricted Stock and/or Restricted Stock
Units held by such director shall lapse on the date of such retirement.
EXERCISE OF OPTIONS
Except as otherwise provided in the Equity Incentive Plan or in any Option
agreement or grant certificate, the Optionee will pay the full exercise price of
each Option upon the date of exercise of such Option (a) in cash, (b) pursuant
to a cashless exercise arrangement with a broker on such terms as the Committee
may determine, (c) by delivering shares of Common Stock held by the Optionee for
at least six (6) months and having an aggregate fair market value on the date of
exercise equal to the Option exercise price, (d) in the case of a Key Employee,
by such other medium of payment as the Committee, in its sole discretion, will
authorize, or (e) by any combination of (a), (b), (c), and (d).
WITHHOLDING OBLIGATIONS
The Company has the right to withhold from any Award, from any payment due
or transfer made under any Award or under the Equity Incentive Plan or from any
compensation or other amount owing to a participant the amount (in cash, shares
or other property) of any applicable withholding or other taxes in respect of an
Award, its exercise, or any payment or transfer under an Award or under the
Equity Incentive Plan and to take such other action as may be necessary in the
opinion of the Committee to satisfy all obligations for the payment of such
taxes.
CHANGE IN CONTROL
Immediately upon a "Change in Control" (as defined in the Equity Incentive
Plan), all outstanding Options and Stock Appreciation Rights, whether or not
otherwise exercisable as of the date of such Change in Control, will become
fully exercisable and all restrictions thereon will terminate in order that
optionees may fully realize the benefits thereunder, and all restrictions and
conditions on all Restricted Stock and Restricted Stock Units granted to Key
Employees or Outside Directors shall lapse upon the effective date of the Change
of Control. The Committee may determine in its discretion (but shall not be
obligated to do so) that any or all holders of outstanding Options and Stock
Appreciation Right Awards which are exercisable immediately prior to a Change of
Control (including those that become exercisable upon the Change in Control)
will be required to surrender them in exchange for a payment, in cash or Common
Stock as determined by the Committee, equal to the value of such Options and
Stock Appreciation Rights (as determined by the Committee in its discretion),
with such payment to take place as of the date of the Change in Control or such
other date as the Committee may prescribe. The acceleration described above also
applies if following a reorganization, merger or combination in which new
shareholders comprise at least forty-five percent (45%) of the ownership of the
Common Stock or voting power in the Company, a Key Employee grantee's employment
is terminated other than for Cause (as defined in the Plan) or if a Key Employee
grantee voluntarily terminates his or her employment in certain circumstances.
11
TERMINATION, AMENDMENT AND TERM OF THE EQUITY INCENTIVE PLAN
The Board or the Committee may terminate, suspend, or amend the Equity
Incentive Plan, in whole or in part, from time to time, without the approval of
the stockholders of the Company provided, however, that no amendment will be
effective until approved by the stockholders of the Company if such stockholder
approval is required in order for the Equity Incentive Plan to continue to
satisfy the requirements of applicable tax or other laws. No amendment or
termination of the Equity Incentive Plan will adversely affect any Option
theretofore granted without the consent of the Optionee. Unless earlier
terminated in accordance herewith, the Equity Incentive Plan will terminate on
March 22, 2012. Termination of the Equity Incentive Plan will not affect Awards
previously granted thereunder.
NEW EQUITY INCENTIVE PLAN BENEFITS
As described above, the Key Employees of the Company who receive Awards
under the Equity Incentive Plan are to be determined by the Committee in its
discretion. Accordingly, it is not possible to predict the amounts that will be
received by or allocated to particular Key Employees or groups of Key Employees
under the Equity Incentive Plan. Pursuant to the terms of the Equity Incentive
Plan, each Outside Director receives an automatic grant of an NSO to purchase
9,000 shares of Common Stock on the date he or she becomes an Outside Director.
Each individual who is an Employee Director and who thereafter becomes an
Outside Director will be granted automatically a NSO to purchase 9,000 shares of
Common Stock on the third anniversary of the date such Employee Director was
last granted an Option. Thereafter, each Outside Director who is re-elected to
the Board will be granted an additional NSO to purchase 9,000 shares of Common
Stock on the third anniversary of the date such Outside Director was last
granted an Option. If the Equity Incentive Plan is approved, Outside Directors
will continue to receive grants of NSOs under the same guidelines described
above. No dollar value is assigned to the NSOs because their exercise price will
be the fair market value of the Company's Common Stock on the date of grant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax consequences of
awards under the Plan based upon current federal income tax laws. The summary is
not intended to be comprehensive and, among other things, does not describe
state, local or foreign tax consequences.
The award of an ISO will have no immediate tax consequences to the Company
or the optionee. However, in the year of exercise, the difference between the
fair market value of the shares at the time of exercise and the exercise price
of the Option is an item of tax preference subject to the possible application
of the alternative minimum tax. If an optionee does not dispose of shares
received upon exercise of an ISO for at least two years after the date of the
ISO award and for at least one year from the date of exercise (a "disqualifying
disposition"), gain or loss on a subsequent sale or exchange of the shares will
be a capital gain or loss in the amount of the difference between the amount
realized on the sale or exchange and the exercise price (or the recipient's
other tax basis in the shares) at a tax rate which will depend on the length of
time the shares were held and other factors. If there is a disqualifying
disposition, the optionee generally will recognize compensation income equal to
the lesser of (i) the excess of the fair market value of the shares on the
exercise date over the exercise price, or (ii) the excess of the amount realized
on disposition over the exercise price. Any additional gain will be taxable as a
capital gain, and any loss will be treated as a capital loss. Upon any such
disqualifying disposition by an optionee, the Company will be entitled to a
deduction in the amount of compensation income realized by the optionee.
The award of an NSO will have no immediate tax consequences to the Company
or the optionee. Upon exercise of a NSO, an optionee will recognize ordinary
income in an amount equal to the difference between the exercise price of the
NSO and the fair market value of the shares on the date of exercise. The Company
will be entitled to a corresponding tax deduction at the time of exercise.
The award of a stock appreciation right will have no immediate tax
consequences to the Company or the recipient. Upon exercise of the Stock
Appreciation Right, the recipient will recognize ordinary income in an amount
equal to the difference between the grant price of the Stock Appreciation Right
and the fair market value of the shares received.
12
The grant of Restricted Stock normally will not result in the recognition
of taxable income if the stock is not transferable and is subject to a
substantial risk of forfeiture for federal tax purposes. When the stock is
either transferable or is no longer subject to a substantial risk of forfeiture,
the recipient will have taxable income in an amount equal to the fair market
value of the shares (less any amount paid for the shares) at that time and the
Company will have a corresponding deduction. Alternatively, the recipient of
Restricted Stock may elect to recognize taxable income when Restricted Stock is
granted. This election is referred to as a "section 83(b) election." The amount
of the taxable income will be an amount equal to the fair market value of the
shares (less any amount paid for the shares) on the date of grant. Any gain or
loss recognized by the recipient upon a later sale of the shares will be capital
gain or loss. If a recipient chooses to make a section 83(b) election at the
time of an award of Restricted Stock and then forfeits the shares (for example,
by terminating employment during the Restriction Period), the recipient will not
be entitled to any tax deduction or tax refund with respect to the tax
previously paid.
The grant of a Restricted Stock Unit will not result in the recognition of
taxable income. Taxation is deferred until shares are actually delivered upon
vesting of the Restricted Stock Unit. The Company is entitled to a tax deduction
upon inclusion in the recipient's income of the value of the shares delivered.
Restricted Stock Units do not qualify for the 83(b) election, because the
Restricted Stock Unit does not represent actual property, like a share of stock,
but is simply a promise by the Company to issue fully-vested shares in the
future if the recipient completes the requisite service period.
VOTE REQUIRED
The proposal to approve the Equity Incentive Plan will be approved by the
stockholders if it receives the affirmative vote of a majority of the shares
present and entitled to vote on the proposal. If a proxy card is specifically
marked as abstaining from voting on the proposal to approve the Equity Incentive
Plan, the abstention will have the effect of a vote against the proposal, even
though the shares represented thereby will not be counted as having been voted
against the proposal. Broker non-votes will be treated as shares not capable of
being voted on the proposal and, accordingly, will have no effect on the outcome
of voting on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE AMENDED AND RESTATED EQUITY INCENTIVE PLAN
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information at December 31, 2004 regarding
compensation plans and arrangements under which equity securities of DENTSPLY
are authorized for issuance.
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
NUMBER OF SECURITIES UNDER EQUITY
TO BE ISSUED UPON WEIGHTED AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED IN COLUMN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS (A))
------------- -------------------- -------------------- ---------------------
Equity compensation plans approved by
security holders (1)................. 6,934,955 34.76 5,249,382 (2)
Other equity compensation plans not
approved by security holders(3)...... 117,468 n/a n/a
---------
Total.................................. 7,052,423
1) Consists of the DENTSPLY International Inc. 1993 Stock Option Plan, 1998
Stock Option Plan and 2002 Stock Option Plan.
2) The maximum number of shares available for issuance under the 2002 Stock
Option Plan is 7,000,000 shares of common stock (plus any shares of common
stock covered by any unexercised portion of canceled or terminated stock
options granted under the 1993 Stock Option Plan or 1998 Stock Option Plan)
(the
13
"Maximum Number"). The Maximum Number (which includes shares already granted
as options under the plan which are not forfeited) may be increased on
January 1 of each calendar year during the term of the 2002 Stock Option Plan
to equal 7% of the outstanding shares of common stock on such date, prior to
such increase if greater than 7,000,000.
3) See below for a description of the Directors' Deferred Compensation Plan and
the Supplemental Executive Retirement Plan pursuant to which shares of common
stock may be issued to outside directors and certain management employees.
DIRECTORS DEFERRED COMPENSATION PLAN
Effective January 1, 1997, the Company established a Directors' Deferred
Compensation Plan (the "Deferred Plan"). The Deferred Plan permits non-employee
directors to elect to defer receipt of directors fees or other compensation for
their services as directors. Non-employee directors can elect to have their
deferred payments administered as a cash with interest account or a stock unit
account, with stock units being distributed in the form of Common stock at the
time of distribution. Distributions to a director under the Deferred Plan will
not be made to any non-employee director until the non-employee director ceases
to be a member of the Board of Directors. Upon ceasing to be a member of the
Board of Directors, the deferred non-employee director fees are paid based on an
earlier election to have their accounts distributed immediately or in annual
installments for up to ten (10) years.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective January 1, 1999, the Board of Directors of the Company adopted a
Supplemental Executive Retirement Plan (the "Plan"). The purpose of the Plan is
to provide additional retirement benefits for a limited group of management
employees whom the Board concluded were not receiving competitive retirement
benefits. No actual benefits are put aside for participants and the participants
are general creditors of the Company for payment of the benefits upon retirement
or termination from the Company. Participants can elect to have these benefits
administered as a cash with interest or stock unit account, with stock units
being distributed in the form of Common stock at the time of distribution. Upon
retirement/termination, the participant is paid the benefits in their account
based on an earlier election to have their accounts distributed immediately or
in annual installments for up to five (5) years.
14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the compensation earned by the Company's
chief executive officer and the four other highest-paid executive officers of
the Company whose salary and bonus for the year ended December 31, 2004 were in
excess of $100,000 (collectively, the "named executive officers") for each of
the last three fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- ----------------------------------------------
AWARDS PAYOUTS
--------------------- ----------------------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
--------------------------- ---- ------- ------- ------------ ---------- -------- ------- ------------
Gerald K. Kunkle, Jr. .... 2004 640,000 567,700 -- -- 133,117 -- 103,675 (2)
Vice Chairman of the 2003 512,000 340,800 -- -- 198,300 -- 92,971 (2)
Board and Chief Executive 2002 460,000 362,400 -- -- 106,400 -- 75,451 (2)
Officer (1)
Thomas L. Whiting......... 2004 450,000 324,300 -- -- 76,067 -- 74,471 (2)
President and Chief 2003 370,000 213,900 -- -- 97,400 -- 63,168 (2)
Operating Officer (3) 2002 325,000 235,200 -- -- 65,500 -- 48,771 (2)
Rudolph Lehner............ 2004 428,385 312,748 -- -- 20,918 -- 101,348 (5)
Senior Vice President (4) 2003 384,733 276,331 -- -- 29,800 -- 70,629 (5)
2002 310,283 230,868 -- -- 34,500 -- 41,766 (5)
Bret W. Wise.............. 2004 341,000 208,000 -- -- 30,427 -- 47,594 (2)
Executive Vice President 2003 325,000 183,000 -- -- 29,800 -- 52,074 (2)
(6) 2002 25,025 250,000 -- -- 54,500 -- 2,942 (2)
J. Henrik Roos............ 2004 291,000 186,800 -- -- 20,918 -- 25,575 (2)
Senior Vice President (7) 2003 281,000 39,600 -- -- 29,800 -- 32,764 (2)
2002 269,000 139,800 -- -- 34,500 -- 32,814 (2)
(1) Mr. Kunkle was appointed Vice Chairman of the Board and Chief Executive
Officer effective January 1, 2004.
(2) Consists of amounts contributed to The DENTSPLY International Inc. Employee
Stock Ownership Plan (the "Company ESOP") and allocations to the Company's
Supplemental Executive Retirement Plan ("SERP"). Under the Internal Revenue
Code (the "Code"), the maximum amount that can be contributed annually to
the Company ESOP in respect of any employee is generally an amount equal to
the lesser of $41,000 or 25% of such employee's covered compensation.
Employee interests in the Company ESOP and SERP are subject to vesting in
accordance with the respective plans.
(3) Mr. Whiting was appointed President and Chief Operating Officer effective
January 1, 2004.
(4) Mr. Lehner has been an employee of the Company since October 1, 2001. His
compensation is paid in Euros. The exchange rates used to determine the U.S.
dollar equivalents for 2004, 2003 and 2002 were 1.3557, 1.2532 and 1.0494,
respectively.
(5) Includes allocations to the Company's SERP and compensation for the tax
effect of a company car which is treated as a benefit in kind.
(6) Mr. Wise was appointed Executive Vice President effective January 10, 2005.
(7) Mr. Roos has been an employee of the Company since August 1, 1993.
15
The following table sets forth certain information with respect to grants
of options during the year ended December 31, 2004 and their potential
realizable values.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE VALUE ($)(1)
---- ----------- ------------ --------- ---------- ------------
Gerald K. Kunkle, Jr. ............... 133,117 11.80 54.90 12/13/2014 1,836,123
Thomas L. Whiting.................... 76,067 6.74 54.90 12/13/2014 1,049,215
Rudolf Lehner........................ 20,918 1.85 54.90 12/13/2014 288,528
Bret W. Wise......................... 30,427 2.70 54.90 12/13/2014 419,689
J. Henrik Roos....................... 20,918 1.85 54.90 12/13/2014 288,528
(1) Determined using the Black-Scholes option-pricing model with the following
assumptions: expected dividend yield 0.44%, risk-free interest rate 3.62%,
expected volatility 20%, and expected life 5.5 years.
The following table sets forth certain information with respect to the
exercise of options during the year ended December 31, 2004 and the value of
options held at that date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END ($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
Gerald K. Kunkle, Jr. ... -- -- 675,983 300,784 20,627,845 2,430,907
Thomas L. Whiting........ 59,100 1,729,057 288,834 162,833 8,659,267 1,292,737
Rudolf Lehner............ -- -- 72,084 52,284 1,540,628 485,141
Bret W. Wise............. -- -- 46,267 68,460 817,097 625,709
J. Henrik Roos........... 48,100 1,375,535 170,234 52,284 4,973,594 485,141
(1) Represents the difference between the last reported sale price of the Common
Stock as reported on the NASDAQ National Market on December 31, 2004
($56.20) and the exercise price of the options, multiplied by the number of
shares of Common Stock issuable upon exercise of the options.
EMPLOYMENT AGREEMENTS
The Company is party to employment agreements with all of the named
executive officers. Each of these employment agreements provides that, upon
termination of such individual's employment with the Company as a result of the
employee's death, the Company is obligated to pay the employee's estate the then
current base compensation of the employee for a period of one year following the
date of the employee's death, together with the employee's pro rata share of any
incentive or bonus payments for the period prior to the employee's death in the
year of such death. Each of the employment agreements also provides that, in the
event that the employee's employment is terminated by the Company (without
"cause," as defined in the employment agreements) or by the employee with "good
reason" (as described in the employment agreements), (i) the Company will be
obligated to pay the employee for a period of two years subsequent to
termination of employment at the rate paid to the employee during the prior 12
month period, and (ii) the employee will be entitled to receive the benefits
that would have been accrued by him during the two year period following
termination of employment under employee benefit plans, programs or other
arrangements of the Company or any of its affiliates in which the employee
participated before the termination of his employment. In the event that such
termination of employment is made by the Company without cause or by the
employee with good reason after a "change in
16
control" (as defined in the employment agreements), the employee may require the
Company to pay to the employee, within five days after the employee's request
for such payment, the present value of the amounts that would have been payable
to him under the employment agreement during the two year period following such
termination of employment.
The Company has also entered into employment agreements with certain other
members of senior management having terms substantially similar to those
described above.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company
("Outside Directors") received an annual fee in 2004 of $35,000 ($40,000 for
Outside Directors who are chairpersons of the Human Resources and Governance
Committees and $45,000 for the chairperson of the Audit Committee) and an
additional fee of $1,000 for each Board and committee meeting attended in 2004.
In 2005, these fees remain $35,000, $40,000 and $45,000, respectively. Mr. Miles
will receive an annual fee of $27,778 in 2005 for service as Chairman of the
Board. Each Outside Director elected since 1993 received, at the time of such
Outside Director's appointment or election to the Board, a non-discretionary
grant of options to purchase 9,000 shares of Common Stock. Each Outside Director
will automatically receive an additional grant of 9,000 options on every third
anniversary of the date of the initial grant of options to such Outside
Director. Directors are reimbursed for travel and other expenses relating to
attendance at Board and Committee meetings.
Effective January 1, 1997, the Company established a Directors' Deferred
Compensation Plan (the "Deferred Plan"). The Deferred Plan permits Outside
Directors to elect to defer receipt of directors fees or other compensation for
their services as directors. Outside Directors can elect to have their deferred
payments administered as a cash with interest account or a stock unit account.
Distributions to a Director under the Deferred Plan will not be made to any
Outside Director until the Outside Director ceases to be a Board member.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the current members of the Human Resources Committee has ever been
an officer or employee of DENTSPLY. None of our executive officers served as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving on our Board of Directors or Human
Resources Committee.
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 23, 2005 held by (i) each
person who is known by the Company to have been the beneficial owner of more
than five percent of the Company's Common Stock on such date, (ii) each director
and nominee for director, (iii) the Company's chief executive officer and the
other named executive officers, and (iv) all directors and executive officers of
the Company as a group (based on 80,573,827 shares of Common Stock outstanding
as of such date).
SHARES OWNED
BENEFICIALLY
DIRECTORS, EXECUTIVE OFFICERS ------------------------
AND FIVE PERCENT STOCKHOLDERS NUMBER PERCENT
----------------------------- ------------- -------
FMR Corp. .................................................. 8,906,934 (1) 11.1
82 Devonshire Street
Boston, MA 02109
The DENTSPLY International Inc. ............................ 5,784,435 (2) 7.2
Employee Stock Ownership Plan Trust
c/o T. Rowe Price
P. O. Box 17349
Baltimore, MD 21297-1349
Gerald K. Kunkle, Jr. ...................................... 643,719 (3) *
Thomas L. Whiting........................................... 199,925 (4) *
Rudolf Lehner............................................... 36,608 (5) *
Bret W. Wise................................................ 51,265 (6) *
J Henrik Roos............................................... 177,675 (7) *
Dr. Michael C. Alfano....................................... 5,912 (8) *
Eric K. Brandt.............................................. 194 (9) *
Paula H. Cholmondeley....................................... 12,490 (10) *
Michael J. Coleman.......................................... 33,173 (11) *
William F. Hecht............................................ 15,982 (12) *
Leslie A. Jones............................................. 123,930 (13) *
John C. Miles II............................................ 40,277 (14) *
Edgar H. Schollmaier........................................ 68,412 (15) *
W. Keith Smith.............................................. 62,507 (16) *
All directors and executive officers as a group (19
persons).................................................. 2,130,039 (17) 2.6
* Less than 1%
(1) Based on information contained in the Amended Schedule 13G filed by FMR
Corp. on February 14, 2005.
(2) Participants in the Company ESOP have the right to direct the trustee of
the Company ESOP as to the voting of shares allocated to such participants'
accounts on all matters submitted to a vote of the stockholders of the
Company, including the election of directors. Unallocated shares and shares
as to which no directions are received by the trustee of the Company ESOP
are voted as directed by the Company ESOP Committee, which consists of
certain employees of the Company. As of March 23, 2005, 5,784,435 of the
shares held by the trust holding the assets of the Company ESOP were
allocated to participant accounts and no shares remained unallocated. Each
Company ESOP participant who is fully vested is entitled to receive a
distribution of all of the shares of common stock allocated to his or her
account as soon as practicable after such participant's employment with the
Company terminates. In general, except for certain participants who are age
55 or older and have been participants in the Company ESOP for at least 10
years, or who have vested balances that exceed six times their previous
year's salary, participants are not entitled to sell shares allocated to
their accounts until their employment has terminated and the shares
allocated to such participants' accounts are distributed to them.
18
(3) Includes 6,101 shares allocated to the Company ESOP account of Mr. Kunkle,
7,500 shares held in Mr. Kunkle's individual retirement account, 602,783
shares which could be acquired pursuant to the exercise of options
exercisable within 60 days of March 23, 2005 and 12,335 shares which could
be acquired pursuant to the SERP upon retirement or termination from the
Company.
(4) Includes 30,799 shares allocated to the Company ESOP account of Mr.
Whiting, 165,834 shares which could be acquired pursuant to exercise of
options exercisable within 60 days of March 23, 2005 and 3,292 shares which
could be acquired pursuant to the SERP upon retirement or termination from
the Company.
(5) Includes 32,934 shares which could be acquired pursuant to exercise of
options exercisable within 60 days of March 23, 2005 and 3,674 shares which
could be acquired pursuant to the SERP upon retirement or termination from
the Company.
(6) Includes 250 shares held by Mr. Wise's spouse, 850 shares allocated to the
Company ESOP account of Mr. Wise, 46,267 shares which could be acquired
pursuant to the exercise of options exercisable within 60 days of March 23,
2005 and 1,398 shares which could be acquired pursuant to the SERP upon
retirement or termination from the Company.
(7) Includes 1,214 shares held in Mr. Roos' 401(k) account, 7,975 shares
allocated to the Company ESOP account of Mr. Roos, 163,784 shares which
could be acquired pursuant to the exercise of options exercisable within 60
days of March 23, 2005 and 4,702 shares which could be acquired pursuant to
the SERP upon retirement or termination from the Company.
(8) Consists of 3,000 shares which could be acquired pursuant to the exercise
of options exercisable within 60 days of March 23, 2005.
(9) Consists of 194 shares which could be acquired pursuant to the Deferred
Plan when Mr. Brandt ceases to be a Board member.
(10) Consists of 9,000 shares which could be acquired pursuant to the exercise
of options exercisable within 60 days of March 23, 2005 and 3,490 shares
which could be acquired pursuant to the Deferred Plan when Ms. Cholmondeley
ceases to be a Board member.
(11) Includes 6,300 shares held by Mr. Coleman's spouse, 15,000 shares which
could be acquired pursuant to exercise of options exercisable within 60
days of March 23, 2005 and 8,873 shares which could be acquired pursuant to
the Deferred Plan when Mr. Coleman ceases to be a Board member.
(12) Consists of 12,000 shares which could be acquired pursuant to the exercise
of options exercisable within 60 days of March 23, 2005 and 3,982 shares
which could be acquired pursuant to the Deferred Plan when Mr. Hecht ceases
to be a Board member.
(13) Includes 24,000 shares which could be acquired pursuant to exercise of
stock options exercisable within 60 days of March 23, 2005 and 4,901 shares
which could be acquired pursuant to the Deferred Plan when Mr. Jones ceases
to be a Board member.
(14) Includes 277 shares allocated to the Company ESOP account of Mr. Miles.
(15) Includes 7,500 shares owned by a Foundation of which Mr. Schollmaier is an
officer, 24,000 shares which could be acquired pursuant to the exercise of
options exercisable within 60 days of March 23, 2005 and 11,912 shares
which could be acquired pursuant to the Deferred Plan when Mr. Schollmaier
ceases to be a Board member.
(16) Includes 24,000 shares which could be acquired pursuant to exercise of
stock options exercisable within 60 days of March 23, 2005 and 10,652
shares which could be acquired pursuant to the Deferred Plan when Mr. Smith
ceases to be a Board member.
(17) Includes 15,550 shares held by or for the benefit of others, 7,500 shares
held in individual retirement accounts, 1,214 shares held in 401(k)
accounts, 117,222 shares allocated to employees' ESOP accounts, 1,686,605
shares which could be acquired pursuant to the exercise of options
exercisable within 60 days of March 23, 2005, 44,004 shares which could be
acquired pursuant to the Deferred Plan when directors cease to be Board
members and 39,318 shares which could be acquired pursuant to the SERP upon
retirement or termination of executive officers from the Company.
19
The Board of Directors established stock ownership guidelines effective
March 2, 1999, to encourage accumulation and retention of Common Stock by
executives of the Company, including the named executive officers. The
guidelines are stated as a multiple of annual base salary as follows: three
times annual base salary for the chief executive officer; two times annual base
salary for the chief operating officer; one times annual base salary for senior
vice presidents; .75 times base salary for vice presidents and other officers;
and .50 times base salary for general managers. The recommended time period for
reaching the guidelines is five years. Common Stock allocated to officers in
their Company ESOP account and individual retirement plans will be included but
stock options will not be counted in determining ownership levels.
20
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee is comprised of three directors, all of whom
are independent under the Listing Standards and operates under a written charter
(a copy of the Human Resources Committee Charter is attached to this Proxy
Statement as Appendix D). The Committee is pleased to present its report on
executive compensation. This report describes the components of the Company's
executive officer compensation programs and the basis on which compensation
determinations are made with respect to the executive officers of the Company.
COMPENSATION PHILOSOPHY
It is the philosophy of the Company that a significant portion of executive
compensation be directly linked to the Company's success in meeting profit,
growth and corporate performance goals, as well as increases in stockholder
value. The Human Resources Committee utilizes the following objectives as
guidelines for compensation decisions:
- Provide a competitive total compensation package that enables the Company
to attract and retain key personnel.
- Provide a broad-based compensation package that recognizes the
contributions of all management personnel.
- Provide variable compensation opportunities, primarily on an annual
basis, that are directly linked to corporate performance goals.
- Provide long-term compensation opportunities, through stock options, that
align executive compensation with value received by stockholders.
Section 162(m) of the Internal Revenue Code ("Code") disallows a Federal
income tax deduction to publicly held companies for compensation paid to the
chief executive officer and the other named executive officers, to the extent
that compensation exceeds $1 million for such officer in any fiscal year. This
limitation does not apply to compensation that is "performance-based" in
accordance with certain specific requirements. The Company's 1998 and 2002 stock
option plans have been structured so that options granted under the plans
qualify as "performance-based compensation" and are exempt from the limitations
on deduction. Compensation paid to Mr. Kunkle, the Company's chief executive
officer, that was not "performance-based compensation" in accordance with
Section 162(m) exceeded the $1 million limit. The Committee believes that the
chief executive officer and the other named executive officers are being
appropriately compensated in a manner that relates to performance and is in the
long-term interests of the stockholders. The Committee is not taking action at
this time to limit the Company's discretion to pay "non-performance-based
compensation" to the chief executive officer and the other named executive
officers.
COMPENSATION PROGRAM COMPONENTS
The Human Resources Committee periodically reviews the Company's
compensation programs to ensure that pay levels and incentive opportunities are
competitive and reflect the performance of the Company. In November 2003, the
Committee retained Towers Perrin to study and report on the Company's executive
compensation practices and to do competitive evaluations of the total
compensation for fifteen of the Company's corporate officer and executive
positions. The Human Resources Committee reviewed the findings of these studies
and made its recommendations regarding compensation to the Board of Directors of
the Company at meetings held in December 2003. The compensation program for
executive officers is comprised of the following components: base salary, annual
incentive compensation and stock options. Each of these components is summarized
below.
Base Salary. In December 2003, the Committee set Mr. Kunkle's and Mr.
Whiting's base salaries at $640,000 and $450,000, respectively. The base
salaries of Messrs. Lehner, Wise and Roos were set by the Committee at Euro
316,000, $341,000 and $291,000, respectively.
21
Among the factors that the Human Resources Committee considered in setting
base salaries for executive officers were its interpretation of the Towers
Perrin report regarding salary levels of executive officers of other
manufacturing companies of similar size, and evaluation of the performance of
the Company and the executive officers. While the Committee believes that it
will be appropriate to attempt to maintain base salaries in line with perceived
industry averages for comparable companies, the amount of any particular salary
increase will also depend upon the individual's job performance. In addition to
the Towers Perrin report, the chief executive officer's recommendations were
taken into account in setting the base salaries of executive officers other than
the chief executive officer.
Annual Incentive Compensation. Annual bonuses represent payments for the
achievement of short-term objectives and recognize both the overall performance
of the Company and individual performance in a given year. In December 2003, the
Human Resources Committee approved a bonus program for senior executives in
2004.
Under this bonus program, during 2004, certain target award opportunities
were established for the Company's chief executive officer ("CEO"), president
and chief operating officer ("COO"), senior vice presidents and other management
employees. For the CEO, COO and the chief financial officer ("CFO"), the target
consisted of the budgeted level of corporate net income adjusted for sales
growth. For the senior vice presidents other than the CFO, the targets consisted
of: (i) the budgeted level of corporate net income adjusted for sales growth;
and (ii) the budgeted operating income level adjusted for sales growth of the
business group applicable to each such senior vice president. For Mr. Kunkle and
Mr. Whiting, the bonus award for 100% of targeted performance was set at 80% and
65%, respectively, of their base salaries. For Messrs. Lehner, Wise and Roos,
the bonus awards for 100% of targeted performance were set at 55% of their
respective base salaries. Messrs. Kunkle, Whiting, Lehner, Wise and Roos
exceeded targeted performance and received bonus awards for 2004 of 88.7%,
72.1%, 73.0%, 61.0%, and 64.2%, respectively, of their base salaries.
The named executive officers also participate in the Supplemental Executive
Retirement Plan ("SERP"). The SERP is an unfunded "top-hat" plan for the
purposes of providing additional retirement benefits for highly compensated
employees of the Company to make the Company's executive retirement benefits
more competitive
STOCK AWARDS
The Company's stock option and equity incentive plans are intended to
motivate key employees to put forth maximum efforts toward the continued growth,
profitability and success of the Company by providing incentives through the
ownership and performance of the Company's Common Stock. The plans are designed
to provide benefits to key management only to the extent that stockholders enjoy
increases in value.
In 2004, 367,686 stock options were granted to the Company's executive
officers under the 1998 and 2002 stock option plans. The Human Resources
Committee considered the respective stock and option holdings of the executive
officers of the Company in comparison with stock and option holdings of
executive management of companies of similar size and growth records, based upon
the information set forth in the Towers Perrin report, and made option awards
during 2004 that were consistent with the compensation philosophy of the Human
Resources Committee, as described above, and that were intended to be
competitive with industry averages for comparable companies.
The Committee granted Mr. Kunkle an award of 133,117 options. The Committee
compared Mr. Kunkle's base salary, bonus and past stock option grants to the
compensation practices of corporations with revenues of $1-2 billion in Towers
Perrin's Executive Compensation Data Base. The grant made to Mr. Kunkle placed a
greater emphasis on the long term portion of his total direct compensation
(direct compensation is comprised of base salary, annual bonus and the Black
Scholes value of DENTSPLY option grants) while still positioning his total
direct compensation between the 50th and 75th percentiles of competitive
practice.
HUMAN RESOURCES COMMITTEE
MICHAEL J. COLEMAN MICHAEL C. ALFANO W. KEITH SMITH
22
AUDIT COMMITTEE DISCLOSURE
AUDIT COMMITTEE REPORT
The Audit Committee consists of five directors, all of whom are independent
as defined by the Listing Standards. In addition, Messrs. Schollmaier, Brandt
and Ms. Cholmondeley have been designated as "audit committee financial experts"
under applicable rules and regulations of the Securities and Exchange
Commission. The Audit Committee operates under a written charter adopted by the
Board of Directors. This charter is reviewed at least annually by the Committee
and the Board and amended as determined appropriate (a copy of this charter is
attached to this Proxy Statement as Appendix B).
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board. In addition, the Committee approves and retains the
Company's independent registered public accounting firm.
Management is responsible for the Company's internal controls, including
internal control over financial reporting, and the financial reporting process.
The independent registered public accounting firm is responsible for performing
an audit of the Company's financial statements in accordance with generally
accepted auditing standards and an audit of the Company's internal control over
financial reporting; and to issue a report thereon. The Committee's
responsibility is to oversee these processes.
In this context, the Committee has met and held discussions with management
and PwC, the Company's independent registered public accounting firm. Management
represented to the Committee that the Company's financial statements were
prepared in accordance with generally accepted accounting principles, and the
Committee has reviewed and discussed the audited financial statements with
management and PwC. The Committee discussed with PwC the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended, (Communication
with Audit Committees).
In addition, the Committee has discussed with PwC the firm's independence
from the Company and its management and has received the written disclosures and
the letter from PwC required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as it has been modified or
supplemented.
The Committee discussed with PwC the overall scope and plans for their
audits. The Committee meets with PwC, with and without management present, to
discuss the results of their examinations, the evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
Based upon the Committee's discussions with management and PwC and the
Committee's review of the representations of management and the report of PwC to
the Committee, the Committee recommended that the Board include the audited
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004 filed with the Securities and Exchange Commission.
AUDIT AND INFORMATION TECHNOLOGY COMMITTEE
EDGAR H. SCHOLLMAIER ERIC K. BRANDT PAULA H. CHOLMONDELEY
WILLIAM F. HECHT LESLIE A. JONES
23
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Aggregate fees for professional services rendered for the Company by PwC
for the years ended December 31, 2004 and 2003 were as follows:
2004 2003
---------- ----------
Audit................................................ $3,127,393 $1,544,715
Audit related........................................ 84,008 165,058
Tax.................................................. 95,474 265,305
Other................................................ -- 188,272
---------- ----------
$3,306,875 $2,163,350
========== ==========
The audit fees for the years ended December 31, 2004 and 2003,
respectively, were for professional services rendered for each of the indicated
fiscal years in connection with the audits of the Company's consolidated
financial statements included in Form 10-K and review of financial statements
included in Form 10-Qs, or for services that are normally provided by the
accountants in connection with statutory and regulatory filings or engagements.
In addition, for the year ended December 31, 2004, audit fees included
professional services related to the audit of the Company's internal control
over financial reporting as required by the Sarbanes-Oxley Act of 2002.
The audit related fees for the years ended December 31, 2004 and 2003,
respectively, were for assurance and related services that are reasonably
related to the performance of the audit or review of the Company's Financial
Statements. Such services include due diligence for acquisitions, assistance in
applying financial accounting and reporting standards and certain attestation
services.
Tax fees for the years ended December 31, 2004 and 2003, respectively, were
for services related to tax compliance, tax advice, and tax planning in each of
the indicated fiscal years.
Other fees for the years ended December 31, 2003 primarily included fees
related to actuarial services, which are no longer being performed starting in
2004.
The Audit Committee reviews summaries of the services provided by PwC and
the related fees and has considered whether the provision of non-audit services
is compatible with maintaining the independence of PwC.
The Audit Committee has adopted procedures for pre-approval of services
provided by PwC. Under these procedures, all services to be provided by PwC must
be pre-approved by the Audit Committee, or can be pre-approved by the Chairman
of the Audit Committee subject to ratification by the Committee at its next
meeting. Management makes a presentation to the Committee (or the Chairman of
the Committee, as applicable) describing the types of services to be performed
and the projected budget for such services. Following this presentation, the
Committee advises Management of the services that are approved and the projected
level of expenditure for such services.
24
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph shows the cumulative total stockholder return on the
Company's Common Stock over the last five fiscal years as compared to the
returns of the NASDAQ U.S. Index and the Standard & Poor Health Care Composite
Index. The graph assumes that $100 was invested on December 31, 1999 in the
Company's Common Stock and in the NASDAQ U.S. Index and the Standard & Poor
Health Care Composite Index and assumes reinvestment of dividends.
(PERFORMANCE GRAPH)
-----------------------------------------------------------------------------------------
Year Ended December 31, 1999 2000 2001 2002 2003 2004
-----------------------------------------------------------------------------------------
DENTSPLY International
Inc. 100 166.91 215.17 240.38 293.28 366.04
S&P Health Care
Composite Index 100 137.05 120.68 97.96 112.71 114.60
NASDAQ U.S. Index 100 60.82 48.18 33.13 49.95 54.53
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's directors, certain officers,
and persons holding more than 10% of the Common Stock of the Company are
required to report, within specified due dates, their initial ownership and any
subsequent changes in ownership of the Company's securities to the Securities
and Exchange Commission. The required reporting periods were significantly
reduced in August 2002 for most reports to two business days. The Company is
required to describe in this proxy statement whether it has knowledge that any
person required to file such report may have failed to do so in a timely manner.
Based upon reports furnished to the Company and written representations and
information provided to the Company by the persons, the Company believes that
during fiscal 2004, all such persons complied with all applicable filing
requirements, except that, in connection with the grant of stock options in
December 2004, one late report was filed for each of the following persons:
Messrs. Brian M. Addison, Christopher T. Clark, William R. Jellison, Gary K.
Kunkle, Jr., Rudolf Lehner, James G. Mosch, J. Henrik Roos, Timothy S. Warady,
Thomas L. Whiting and Bret W. Wise; and one late report was filed for each of
the following persons in connection with the allocation of shares to their
25
Directors Deferred Compensation accounts: Messrs. Eric K. Brandt, Michael J.
Coleman, William F. Hecht, Leslie H. Jones, Edgar H. Schollmaier and W. Keith
Smith, and Ms. Paula H. Cholmondeley.
PROXY DELIVERY STATEMENT
As permitted by law, one copy of the Company's Proxy Statement and Annual
Report is delivered to stockholders residing at the same address, unless such
stockholders have notified the Company of their desire to receive multiple
copies of the Proxy Statement and Annual Report. We believe this "Householding"
approach provides greater convenience for our stockholders, as well as cost
savings for us by reducing the number of duplicate documents that are sent to
the same address.
The Company will promptly deliver, upon oral or written request, a separate
copy of the Proxy Statement and Annual Report to any stockholders residing at an
address to which only one copy was delivered. Requests for additional copies
should be directed to ADP, either by calling toll-free (800) 542-1061, or by
writing to ADP, Householding Department, 51 Mercedes Way, Edgewood, New York,
11717.
Stockholders residing at the same address and currently receiving multiple
copies of the Proxy Statement may also contact ADP, as noted above, to request
that only a single copy of such document be mailed in the future.
We strongly encourage your participation in the Householding program, and
believe that it will benefit both you and the Company. Not only will it reduce
the volume of duplicate information that you receive in your household, but it
will also reduce our printing and mailing costs.
STOCKHOLDER COMMUNICATIONS STATEMENT
The Board of Directors has no specific formal process for security holders
to send communications to the Board. The Board does not believe a specific
process is necessary in the event security holders wish to direct communications
to a Board member. All Board members, including their Committee assignments, are
identified each year in the Company's Proxy Statement. Communications which are
intended for Board members can be sent to the Company for delivery to individual
Board members. All mail received will be opened and screened for security
purposes and mail determined to be appropriate and within the purview of the
Board will be delivered to the respective Board member to which the
communication is addressed. Mail addressed to "Outside Directors" or
"Non-Management Directors" will be forwarded or delivered to the Chairman of the
Corporate Governance and Nominating Committee. Mail addressed to the "Board of
Directors" will be forwarded or delivered to the Chairman of the Board.
STOCKHOLDER PROPOSALS FOR PROXY STATEMENT AND NOMINATIONS
Stockholder proposals that are intended to be presented at the Company's
Annual Meeting of Stockholders to be held in 2006 must be received by the
Company no later than December 12, 2005, and must otherwise comply with Rule
14a-8 under the Securities Exchange Act, as amended., in order to be included in
the proxy statement and proxy relating to that meeting.
The Company's by-laws provide that advance notice of stockholder-proposed
business to be brought before an Annual Meeting of Stockholders must be given to
the secretary of the Company not less than 60 days in advance of the date of the
mailing of materials regarding the prior year's Annual Meeting, which mailing
date is identified on the Chairman's letter at the front of the proxy statement.
To propose business for an Annual Meeting, a stockholder must specify in writing
the business desired to be brought before the Annual Meeting and the reasons for
conducting such business at the Annual Meeting, the proposing stockholder's name
and address, the class and number of shares beneficially owned by the
stockholder, and any material interest of the stockholder in such business. In
order to be brought before the 2006 Annual Meeting, stockholders must notify the
Company in writing, in accordance with the procedures set forth above, of any
stockholder-proposed business no later than February 10, 2006.
26
The Company's by-laws also provide that a stockholder may request that
persons be nominated for election as directors by submitting such request,
together with the written consent of the persons proposed to be nominated, to
the secretary of the Company not less than 60 days prior to the date of the
Annual Meeting. To be in proper form, the nominating stockholder must set forth
in writing, as to each proposed nominee, the nominee's age, business address,
residence address, principal occupation or employment, number of shares of
Common Stock of the Company beneficially owned by such person and such other
information related to such person as is required to be disclosed by applicable
law, and, as to the stockholder submitting the request, such stockholder's name
and address as they appear on the Company's books and the number of shares of
Common Stock of the Company owned beneficially by such person.
FORM 10-K
STOCKHOLDERS MAY OBTAIN AN ADDITIONAL COPY (WITHOUT EXHIBITS) OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004 AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE BY WRITING TO:
INVESTOR RELATIONS DEPARTMENT, DENTSPLY INTERNATIONAL INC., SUSQUEHANNA COMMERCE
CENTER, 221 WEST PHILADELPHIA STREET, YORK, PENNSYLVANIA 17405-0872.
CORPORATE GOVERNANCE GUIDELINES
During 2004, the Board of Directors revised its Corporate Governance
Guidelines and Policies. A copy of such Guidelines and Policies we set forth as
Appendix E to the Proxy Statement.
OTHER MATTERS
The Board of Directors knows of no matters which are to be brought before
the Annual Meeting other than those set forth in the this Proxy Statement. If
any other matters properly come before the Annual Meeting, the person named in
the enclosed proxy card, or his duly appointed substitute acting at the Annual
Meeting, will be authorized to vote or otherwise act thereon in accordance with
his judgment on such matters.
27
APPENDIX A
DENTSPLY INTERNATIONAL INC.
2002 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
SECTION 1 PURPOSE
The purpose of the DENTSPLY International Inc. 2002 Amended and Restated
Equity Incentive Plan (originally named the "DENTSPLY International Inc. 2002
Stock Option Plan") (the "Plan") is to benefit DENTSPLY International Inc.
("DENTSPLY") and its "Subsidiaries," as defined below (hereinafter referred to,
either individually or collectively, as the "Company") by recognizing the
contributions made to the Company by officers and other key employees,
consultants and advisers, to provide such persons with an additional incentive
to devote themselves to the future success of the Company, and to improve the
ability of the Company to attract, retain and motivate such persons. The Plan is
also intended as an additional incentive to members of the Board of Directors of
DENTSPLY (the "Board") who are not employees of the Company ("Outside
Directors") to serve on the Board and to devote themselves to the future success
of the Company. "Subsidiaries," as used in the Plan, has the definition set
forth in Section 424 (f) of the Internal Revenue Code of 1986, as amended (the
"Code"). The original effective date of the Plan was March 22, 2002 ("Effective
Date"). An amendment and restatement of the Plan was approved by the Board as of
March 22, 2005, to change the name of the Plan to the "2002 Amended and Restated
Equity Incentive Plan", to provide for the grant of restricted stock, restricted
stock units and stock appreciation rights to eligible participants and to make
conforming changes in other provisions.
Stock options which constitute "incentive stock options" within the meaning
of Section 422 of the Code ("ISOs"), stock options which do not constitute ISOs
("NSOs"), stock which is subject to certain forfeiture risks and restrictions
("Restricted Stock"), stock delivered upon vesting of units ("Restricted Stock
Units") and stock appreciation rights ("Stock Appreciation Rights") may be
awarded under the Plan. ISOs and NSOs are collectively referred to as "Options."
Options, Restricted Stock, Restricted Stock Units and Stock Appreciation Rights
are collectively referred to as "Awards." The persons to whom Options are
granted under the Plan are hereinafter referred to as "Optionees." The persons
to whom Restricted Stock, Restricted Stock Units and/or Stock Appreciation
Rights are granted under the Plan are hereinafter referred as to "Grantees."
SECTION 2 ELIGIBILITY
Outside Directors shall participate in the Plan only in accordance with the
provisions of Section 5. The Committee (as defined in Section 3) shall
initially, and from time to time thereafter, select those officers and other key
employees of the Company, including members of the Board who are also employees
("Employee Directors"), and consultants and advisers to the Company, to
participate in the Plan on the basis of the importance of their services in the
management, development and operations of the Company. Officers, other key
employees and Employee Directors are collectively referred to as "Key
Employees."
SECTION 3 ADMINISTRATION
3.1 The Committee
The Plan shall be administered by the Human Resources Committee of the
Board or a subcommittee thereof ("Committee"). The Committee shall be
comprised of two (2) or more members of the Board. All members of the
Committee shall qualify as "Non-Employee Directors" as defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "1934
Act"), or any successor rule or regulation, "independent directors" as
defined in Section 4200(15) of the Marketplace Rules of The Nasdaq Stock
Market and "outside directors" as defined in Section 162(m) or any
successor provision of the Code and applicable Treasury regulations
thereunder, if such qualification is deemed necessary in order for the
grant or the exercise of Options under the Plan to qualify for any tax or
other material benefit to Optionees or the Company under applicable law.
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3.2 Authority of the Committee
Subject to the express provisions of the Plan, the Committee shall
have sole discretion concerning all matters relating to the Plan and Awards
granted hereunder. The Committee, in its sole discretion, shall determine
the Key Employees, consultants and advisors to whom, and the time or times
at which, Awards will be granted, the number of shares to be subject to
each Award, the expiration date of each Award, the time or times within
which the Option may be exercised or forfeiture restrictions lapse, the
cancellation or termination of the Award and the other terms and conditions
of the grant of the Award. The terms and conditions of Awards need not be
the same with respect to each Optionee and/or Grantee or with respect to
each Award.
The Committee may, subject to the provisions of the Plan, establish
such rules and regulations as it deems necessary or advisable for the
proper administration of the Plan, and may make determinations and may take
such other actions in connection with or in relation to the Plan as it
deems necessary or advisable. Each determination or other action made or
taken pursuant to the Plan, including interpretation of the Plan and the
specific terms and conditions of the Award granted hereunder by the
Committee, shall be final, binding and conclusive for all purposes and upon
all persons.
3.3 Award Agreement
Each Award shall be evidenced by a written agreement or grant
certificate specifying the type of Award granted, the number of shares of
Common Stock, par value $.01 per share ("Common Stock") to be subject to
such Award and, as applicable, the vesting schedule, the exercise or grant
price, the terms for payment of the exercise price, the expiration date of
the Option, the restrictions imposed upon the Restricted Stock and/or
Restricted Stock Units and such other terms and conditions established by
the Committee, in its sole discretion, which are not inconsistent with the
Plan.
SECTION 4 SHARES OF COMMON STOCK SUBJECT TO THE PLAN
4.1 Subject to adjustment as provided in Sections 4.1 and 4.2, Options,
Restricted Stock, Restricted Stock Units and Stock Appreciation Rights with
respect to an aggregate of seven million (7,000,000) shares of common
stock, par value $.01 per share of DENTSPLY (the "Common Stock") (plus any
shares of Common Stock covered by any unexercised portion of canceled or
terminated stock options granted under the DENTSPLY International Inc. 1993
Stock Option Plan or 1998 Stock Option Plan), may be granted under the Plan
(the "Maximum Number"). The Maximum Number shall be increased on January 1
of each calendar year during the term of the Plan (as set forth in Section
16) to equal seven percent (7%) of the outstanding shares of Common Stock
on such date, in the event that seven million (7,000,000) shares is less
than seven percent (7%) of the outstanding shares of Common Stock on such
date, prior to such increase. Notwithstanding the foregoing, and subject to
adjustment as provided in Section 4.2, (i) Options with respect to no more
than one million (1,000,000) shares of Common Stock may be granted as ISOs
under the Plan, (ii) no more than two million (2,000,000) shares may be
awarded as Restricted Stock or Restricted Stock Units under the Plan, and
(iii) in any calendar year no Key Employee shall be granted Options or
Stock Appreciation Rights with respect to more than five hundred thousand
(500,000) shares of Common Stock or Restricted Stock and Restricted Stock
Units in excess of 150,000 shares of Common Stock. Any shares of Common
Stock reserved for issuance upon exercise of Options or Stock Appreciation
Rights which expire, terminate or are cancelled, and any shares of Common
Stock subject to any grant of Restricted Stock or Restricted Stock Units
which are forfeited, may again be subject to new Awards under the Plan. For
the avoidance of doubt, the amendment and restatement of the Plan does not
increase the Maximum Number and notwithstanding any adjustment in the
Maximum Number, as provided above, all Awards granted under the Plan on or
following the Effective Date, subject to forfeitures or cancellation, shall
be counted towards the Maximum Number.
4.2 The number of shares of Common Stock subject to the Plan and to Awards
granted under the Plan shall be adjusted as follows: (a) in the event that
the number of outstanding shares of Common Stock is changed by any stock
dividend, stock split or combination of shares, the number of shares
subject to the Plan and to Awards previously granted thereunder shall be
proportionately adjusted, (b) in the event of any merger,
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consolidation or reorganization of the Company with any other corporation
or corporations, there shall be substituted on an equitable basis as
determined by the Board of Directors, in its sole discretion, for each
share of Common Stock then subject to the Plan and for each share of Common
Stock then subject to an Award granted under the Plan, the number and kind
of shares of stock, other securities, cash or other property to which the
holders of Common Stock of the Company are entitled pursuant to the
transaction, and (c) in the event of any other changes in the
capitalization of the Company, the Committee, in its sole discretion, shall
provide for an equitable adjustment in the number of shares of Common Stock
then subject to the Plan and to each share of Common Stock then subject to
Award granted under the Plan. In the event of any such adjustment, the
exercise price per share of any Options or Stock Appreciation Rights shall
be proportionately adjusted.
SECTION 5 GRANT OF OPTIONS TO OUTSIDE DIRECTORS
5.1 Grants
All grants of Options to Outside Directors shall be automatic and
non-discretionary. Each individual who becomes an Outside Director (other
than an Outside Director who was previously an Employee Director) shall be
granted a NSO to purchase nine thousand (9,000) shares of Common Stock on
the date he or she becomes an Outside Director. Each individual who is an
Employee Director and who thereafter becomes an Outside Director shall be
granted automatically a NSO to purchase nine thousand (9,000) shares of
Common Stock on the third anniversary of the date such Employee Director
was last granted an Option. Thereafter, each Outside Director who holds
NSOs granted under this Section 5 and is re-elected to the Board shall be
granted an additional NSO to purchase nine thousand (9,000) shares of
Common Stock on the third anniversary of the date such Outside Director was
last granted an Option.
5.2 Expiration
Except to the extent otherwise provided in or pursuant to Section 11,
each Option shall expire, and all rights to purchase shares of Common Stock
shall expire, on the tenth anniversary of the date on which the Option was
granted.
5.3 Exercise Price
The exercise price of each NSO granted to an Outside Director shall be
the "Fair Market Value," on the date on which the Option is granted, of the
Common Stock subject to the Option. For purposes of the Plan, "Fair Market
Value" shall mean the closing sales price of the Common Stock on The Nasdaq
National Market, or other national securities exchange which is the
principal securities market on which the Common Stock is traded (as
reported in The Wall Street Journal, Eastern Edition).
5.4 Vesting
Each such NSO shall become exercisable ("vest") with respect to
one-third of the total number of shares of Common Stock subject to the
Option on the first anniversary following the date of its grant, and with
respect to an additional one-third of the total number of shares of Common
Stock subject to the Option, on each anniversary thereafter during the
succeeding two years.
5.5 Restricted Stock, Restricted Stock Units and Stock Appreciation Rights
Notwithstanding the foregoing, the Board of Directors may determine
that, in lieu of being granted NSOs as described in this Section 5, an
Outside Director shall be granted an Award of shares of Restricted Stock,
Restricted Stock Units and/or Stock Appreciation Rights as described in
Section 8 or 10 hereof which, at the time of grant, for the same value as
9,000 Options as determined by the method the Company uses to value Awards.
In any such event, the restrictions as to such Award of Restricted Stock
and/or Restricted Stock Units shall lapse, and any such Award of Stock
Appreciation Rights shall vest, in accordance with the vesting schedule set
forth in Section 5.4.
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SECTION 6 GRANTS OF OPTIONS TO EMPLOYEES, CONSULTANTS AND ADVISERS
6.1 Grants
Subject to the terms of the Plan, the Committee may from time to time
grant Options which are ISOs to Key Employees and Options which are NSOs to
Key Employees, consultants and advisers of the Company. Each such grant
shall specify whether the Options so granted are ISOs or NSOs, provided,
however, that if, notwithstanding its designation as an ISO, all or any
portion of an Option does not qualify under the Code as an ISO, the portion
which does not so qualify shall be treated for all purposes as a NSO.
6.2 Expiration
Except to the extent otherwise provided in or pursuant to Section 11,
each Option shall expire, and all rights to purchase shares of Common Stock
shall expire, on the tenth anniversary of the date on which the Option was
granted.
6.3 Vesting
Except to the extent otherwise provided in or pursuant to Section 11,
or in the proviso to this sentence, Options shall vest pursuant to the
following schedule: with respect to one-third of the total number of shares
of Common Stock subject to Option on the first anniversary following the
date of its grant, and with respect to an additional one-third of the total
number of shares of Common Stock subject to the Option, on each anniversary
thereafter during the succeeding two years; provided, however, that the
Committee, in its sole discretion, shall have the authority to shorten or
lengthen the vesting schedule with respect to any or all Options, or any
part thereof, granted under the Plan.
6.4 Required Terms and Conditions of ISOs
ISOs may be granted to Key Employees. Each ISO granted to a Key
Employee shall be in such form and subject to such restrictions and other
terms and conditions as the Committee may determine, in its sole
discretion, at the time of grant, subject to the general provisions of the
Plan, the applicable Option agreement or grant certificate, and the
following specific rules:
(a) Except as provided in Section 6.4(c), the exercise price per
share of each ISO shall be the Fair Market Value of a share of
Common Stock on the date such ISO is granted.
(b) The aggregate Fair Market Value (determined with respect to
each ISO at the time such Option is granted) of the shares of
Common Stock with respect to which ISOs are exercisable for
the first time by an Optionee during any calendar year (under
all incentive stock option plans of the Company) shall not
exceed $200,000.
(c) Notwithstanding anything herein to the contrary, if an ISO is
granted to an individual who owns stock possessing more than
ten percent (10%) of the total combined voting power of all
classes of stock of the Company, (i) the exercise price of
each ISO shall be not less than one hundred ten percent (110%)
of the Fair Market Value of a share of Common Stock on the
date the ISO is granted, and (ii) the ISO shall expire and all
rights to purchase shares thereunder shall cease no later than
the fifth anniversary of the date the ISO was granted.
6.5 Required Terms and Conditions of NSOs
Each NSO granted to Key Employees and consultants and advisers shall
be in such form and subject to such restrictions and other terms and
conditions as the Committee may determine, in its sole discretion, at the
time of grant, subject to the general provisions of the Plan, the
applicable Option agreement or grant certificate, and the following
specific rule: except as otherwise determined by the Committee in its sole
discretion with respect to a specific grant, the exercise price per share
of each NSO shall be not less than the Fair Market Value of a share of
Common Stock on the date the NSO is granted.
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SECTION 7 EXERCISE OF OPTIONS
7.1 Notices
A person entitled to exercise an Option may do so by delivery of a
written notice to that effect, in a form specified by the Committee,
specifying the number of shares of Common Stock with respect to which the
Option is being exercised and any other information or documents the
Committee may prescribe. The notice shall be accompanied by payment as
described in Section 7.2. All notices, documents or requests provided for
herein shall be delivered to the Secretary of the Company.
7.2 Exercise Price
Except as otherwise provided in the Plan or in any Option agreement or
grant certificate, the Optionee shall pay the exercise price of the number
of shares of Common Stock with respect to which the Option is being
exercised upon the date of exercise of such Option (a) in cash, (b)
pursuant to a cashless exercise arrangement with a broker on such terms as
the Committee may determine, (c) by delivering shares of Common Stock held
by the Optionee for at least six (6) months and having an aggregate Fair
Market Value on the date of exercise equal to the Option exercise price,
(d) in the case of a Key Employee, by such other medium of payment as the
Committee, in its sole discretion, shall authorize, or (e) by any
combination of (a), (b), (c), and (d). The Company shall issue, in the name
of the Optionee, stock certificates representing the total number of shares
of Common Stock issuable pursuant to the exercise of any Option as soon as
reasonably practicable after such exercise, provided that any shares of
Common Stock purchased by an Optionee through a broker pursuant to clause
(b) above shall be delivered to such broker in accordance with applicable
law.
SECTION 8 STOCK APPRECIATION RIGHTS
The Committee may award shares of Common Stock to Outside Directors,
Key Employees and consultants and advisors under a Stock Appreciation Right
Award, upon such terms as the Committee deems applicable, including the
provisions set forth below:
8.1 General Requirements
Stock Appreciation Rights may be granted in tandem with another Award,
in addition to another Award, or freestanding and unrelated to another
Award. Stock Appreciation Rights granted in tandem with or in addition to
an Award may be granted either at the same time as the Award or, except in
the case of Incentive Stock Options, at a later time. The Committee shall
determine the number of shares of Common Stock to be issued pursuant to a
Stock Appreciation Right Award, the grant price thereof and the conditions
and limitations applicable to the exercise thereof.
8.2 Payment
A Stock Appreciation Right shall entitle the Grantee to receive, upon
exercise of the Stock Appreciation Right or any portion thereof, an amount
equal to the product of (a) the excess of the Fair Market Value of a share
of Common Stock on the date of exercise over the grant price thereof and
(b) the number of shares of Common Stock as to which such Stock
Appreciation Right Award is being exercised. Payment of the amount
determined under this Section 8.2 shall be made solely in shares of Common
Stock, provided that, the Stock Appreciation Rights which are settled shall
be counted in full against the number of shares available for award under
the Plan, regardless of the number of shares of Common Stock issued upon
settlement of the Stock Appreciation Right.
8.3 Exercise
(a) Except to the extent otherwise provided in Section 11 or 12,
or in the proviso to this sentence, Stock Appreciation Rights
shall vest pursuant to the following schedule: with respect to
one-third of the total number of shares of Common Stock
subject to the Stock Appreciation Right on the first
anniversary following the date of its grant, and with respect
to an additional one-third of the total number of shares of
Common Stock subject to the Stock Appreciation Right,
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on each anniversary thereafter during the succeeding two years;
provided, however, that the Committee, in its sole discretion,
shall have the authority to shorten or lengthen the vesting
schedule with respect to any or all Stock Appreciation Rights, or
any part thereof, granted under the Plan. Notwithstanding the
foregoing, a tandem stock appreciation right shall be exercisable
at such time or times and only to the extent that the related
Award is exercisable.
(b) A person entitled to exercise a Stock Appreciation Right Award
may do so by delivery of a written notice to that effect, in a
form specified by the Committee, specifying the number of
shares of Common Stock with respect to which the Stock
Appreciation Right Award is being exercised and any other
information or documents the Committee may prescribe. Upon
exercise of a tandem Stock Appreciation Right Award, the
number of shares of Common Stock covered by the related Award
shall be reduced by the number of shares with respect to which
the Stock Appreciation Right has been exercised.
SECTION 9 TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Unless otherwise determined by the Committee, no Option or Stock
Appreciation Right granted pursuant to the Plan shall be transferable otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code.
SECTION 10 RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The Committee may award shares of Common Stock to Outside Directors, Key
Employees and consultants and advisors under an Award of Restricted Stock and/or
Restricted Stock Units, upon such terms as the Committee deems applicable,
including the provisions set forth below.
10.1 General Requirements
Shares of Common Stock issued or transferred pursuant to an Award of
Restricted Stock and/or Restricted Stock Units may be issued or transferred
for consideration or for no consideration, and subject to restrictions or
no restrictions, as determined by the Committee. The Committee may
establish conditions under which restrictions on shares of Restricted Stock
and/or Restricted Stock Units shall lapse over a period of time or
according to such other criteria (including performance-based criteria) as
the Committee deems appropriate. The period of time during which shares of
Restricted Stock and/or Restricted Stock Units remain subject to
restrictions will be designated in the written agreement or grant
certificate as the "Restricted Period."
10.2 Number of Shares
The Committee shall determine the number of shares of Common Stock to
be issued pursuant to an Award of Restricted Stock and/or Restricted Stock
Units and the restrictions applicable to the shares subject to such Award.
10.3 Restrictions on Transfer and Legend on Stock Certificate
During the Restricted Period, subject to such exceptions as the
Committee may deem appropriate, a Grantee may not sell, assign, transfer,
donate, pledge or otherwise dispose of the shares of Restricted Stock or
Restricted Stock Units. Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the applicable
restrictions. The Grantee shall be entitled to have the legend removed from
the stock certificate covering the shares of Restricted Stock subject to
restrictions when all restrictions on such shares lapse. The Board may
determine that the Company will not issue certificates for shares of
Restricted Stock until all restrictions on such shares lapse, or that the
Company will retain possession of certificates for shares of Restricted
Stock until all restrictions on such shares lapse.
10.4 Right to Vote and to Receive Dividends
During the Restricted Period, except as otherwise set forth in the
applicable written agreement or grant certificate, the Grantee shall have
the right to vote shares of Restricted Stock and to receive any dividends
or
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other distributions paid on such shares of Restricted Stock, subject to any
restrictions deemed appropriate by the Committee. The Committee may
determine in its discretion with respect to any Award of Restricted Stock
Units that, in the event that dividends are paid on shares of Common Stock,
an amount equal to the dividend paid on each such share shall be credited
to the shares subject to Award of Restricted Stock Units ("Dividend
Credits"). Any Dividend Credits shall be paid to the Grantee if and when
the restrictions with respect to such Restricted Stock Units lapse as set
forth in Section 10.5.
10.5 Lapse of Restrictions
(a) All restrictions imposed on Restricted Stock and/or Restricted
Stock Units shall lapse upon the expiration of the applicable
Restricted Period and the satisfaction of all conditions
imposed by the Committee (the date on which restrictions lapse
as to any shares of Restricted Stock or Restricted Stock
Units, the "Vesting Date"). The Committee may determine, as to
any grant of Restricted Stock and/or Restricted Stock Units,
that the restrictions shall lapse without regard to any
Restricted Period.
(b) Upon the lapse of restrictions with respect to any Restricted
Stock Units, the value of such Restricted Stock Units shall be
paid to the Grantee in shares of Common Stock. For purposes of
the preceding sentence, each Restricted Stock Unit as to which
restrictions have lapsed shall have a value equal to the Fair
Market Value as of the Units Vesting Date. "Units Vesting
Date" means, with respect to any Restricted Stock Units, the
date on which restrictions with respect to such Restricted
Stock Units lapse.
SECTION 11 EFFECT OF TERMINATION OF EMPLOYMENT
11.1 Termination Generally
(a) Except as provided in Section 11.2, 11.3 or 12, or as
determined by the Committee, in its sole discretion, all
rights to exercise the vested portion of any Option held by an
Optionee or of any Stock Appreciation Right Award held by a
Grantee whose employment or relationship (if a non-employee)
with the Company or service on the Board is terminated for any
reason other than "Cause," as defined below, shall terminate
ninety (90) days following the date of termination of
employment or the relationship or service on the Board, as the
case may be. All rights to exercise the vested portion of any
Option held by an Optionee or of any Stock Appreciation Right
Award held by a Grantee whose employment or relationship (if a
non-employee) with the Company is terminated for "Cause" shall
terminate on the date of termination of employment or the
relationship. For the purposes of this Plan, "Cause" shall
mean a finding by the Committee that the Optionee has engaged
in conduct that is fraudulent, disloyal, criminal or injurious
to the Company, including, without limitation, acts of
dishonesty, embezzlement, theft, felonious conduct or
unauthorized disclosure of trade secrets or confidential
information of the Company. Unless otherwise provided in the
Plan or determined by the Committee, vesting of Options and
Stock Appreciation Right Awards ceases immediately upon
termination of employment, or the date of termination of the
relationship with the Company, and any portion of an Option
and/or Stock Appreciation Right Award that has not vested on
or before the date of such termination is forfeited on such
date.
(b) If a Grantee who has received an Award of Restricted Stock
and/or Restricted Stock Units ceases to be employed by the
Company during the Restricted Period, or if other specified
conditions are not met, the Award of Restricted Stock and/or
Restricted Stock Units shall terminate as to all shares
covered by the Award as to which the restrictions have not
lapsed, and, in the case of Restricted Stock, those shares of
Common Stock shall be canceled in exchange for the purchase
price, if any, paid by the Grantee for such shares. The
Committee may provide, however, for complete or partial
exceptions to this requirement as it deems appropriate.
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(c) The transfer of employment from the Company to a Subsidiary,
or from a Subsidiary to the Company, or from a Subsidiary to
another Subsidiary, shall not constitute a termination of
employment for purposes of the Plan. Awards granted under the
Plan shall not be affected by any change of duties in
connection with the employment of the Key Employee or by a
leave of absence authorized by the Company.
11.2 Death and Disability
In the event of the death or Disability (as defined below) of an
Optionee or Grantee during employment or such Optionee's or Grantee
relationship with the Company or service on the Board, (a) all Options held
by the Optionee and all Stock Appreciation Right Awards held by the Grantee
shall become fully exercisable on such date of death or Disability and (b)
all restrictions and conditions on all Restricted Stock and/or Restricted
Stock Units held by the Grantee shall lapse on such date of death or
Disability. Each of the Options held by such an Optionee and each of the
Stock Appreciation Right Awards held by such a Grantee shall expire on the
earlier of (i) the first anniversary of the date of death or Disability and
(ii) the date that such Option or Stock Appreciation Right Award expires in
accordance with its terms, provided that, in any event, NSOs granted under
this Plan shall not expire earlier than one year from the date of death or
disability. For purposes of this Section 11.2, "Disability" shall mean the
inability of an individual to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which is
expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months. The Committee,
in its sole discretion, shall determine the existence and date of any
Disability.
11.3 Retirement
(a) Key Employees. In the event the employment of a Key Employee
with the Company shall be terminated by reason of "Normal
Retirement" or "Early Retirement," as defined below, all
Options and Stock Appreciation Right Awards held by such Key
Employee shall become fully exercisable on the date of such
Employee retirement. Each of the Options and Stock
Appreciation Right Awards held by such a Key Employee shall
expire on the earlier of (i) the fifth anniversary of the date
of the Employee retirement, or (ii) the date that such Option
expires in accordance with its terms. For the purposes hereof,
"Normal Retirement" shall mean retirement of a Key Employee at
or after age 65 and "Early Retirement" shall mean retirement
of a Key Employee at or after age 60 with a minimum of 15
years of service with the Company. In the event the employment
of a Key Employee with the Company shall be terminated by
reason of a retirement that is not an Normal Retirement or
Early Retirement, the Committee may, in its sole discretion,
determine the vesting, exercisability and exercise periods
applicable to Options and Stock Appreciation Right Awards held
by such Key Employee. In the event the employment of a Key
Employee with the Company shall be terminated by reason of
"Normal Retirement" or "Early Retirement", all restrictions
and conditions on all Restricted Stock and/or Restricted Stock
Units held by such Key Employee shall lapse on the date of
such Normal Retirement or Early Retirement. In the event the
employment of a Key Employee with the Company shall be
terminated by reason of a retirement that is not a Normal
Retirement or Early Retirement, the Committee may, in its sole
discretion, determine the restrictions and conditions, if any,
on Restricted Stock and/or Restricted Stock Units held by such
Key Employee that will lapse.
(b) Outside Directors. In the event the service on the Board of
an Outside Director shall be terminated by reason of the
retirement of such Outside Director in accordance with the
Company's retirement policy for members of the Board ("Outside
Director Retirement"), all Options and Stock Appreciation
Right Awards held by such Outside Director shall become fully
exercisable on the date of such Outside Director Retirement.
Each of the Options and Stock Appreciation Right Awards held
by such an Outside Director shall expire on the earlier of (i)
the date that such Option or Stock Appreciation Right Award
expires in accordance with its terms or (ii) the five year
anniversary date of such Outside Director Retirement. In the
A-8
event the service on the Board of an Outside Director shall be
terminated by reason of an "Outside Director Retirement", all
restrictions and conditions on all Restricted Stock and/or
Restricted Stock Units held by such Outside Director shall
lapse on the date of such Outside Director Retirement.
(c) Key Employees Who Are Employee Directors. Section 11.3(a)
shall be applicable to Options, Stock Appreciation Rights,
Restricted Stock and/or Restricted Stock Units held by any Key
Employee who is an Employee Director at the time that such Key
Employee's employment with the Company terminates by reason of
Employee Retirement. If such Key Employee continues to serve
on the Board as of the date of such Key Employee's Employee
Retirement, then Section 11.3(b) shall be applicable to
Options, Stock Appreciation Rights Restricted Stock and/or
Restricted Stock Units granted after such date.
SECTION 12 CHANGE IN CONTROL
12.1 Effect of Change in Control
Notwithstanding any of the provisions of the Plan or any written
agreement or grant certificate evidencing Awards granted hereunder,
immediately upon a "Change in Control" (as defined in Section 12.2), all
outstanding Options and Stock Appreciation Rights granted to Key Employees
or Outside Directors, whether or not otherwise exercisable as of the date
of such Change in Control, shall accelerate and become fully exercisable
and all restrictions thereon shall terminate in order that Optionees and
Grantees may fully realize the benefits thereunder, and all restrictions
and conditions on all Restricted Stock and Restricted Stock Units granted
to Key Employees or Outside Directors shall lapse upon the effective date
of the Change of Control. The Committee may determine in its discretion
(but shall not be obligated to do so) that any or all holders of
outstanding Options and Stock Appreciation Right Awards which are
exercisable immediately prior to a Change of Control (including those that
become exercisable under this Section 12.1) will be required to surrender
them in exchange for a payment, in cash or Common Stock as determined by
the Committee, equal to the value of such Options and Stock Appreciation
Right Awards (as determined by the Committee in its discretion), with such
payment to take place as of the date of the Change in Control or such other
date as the Committee may prescribe.
12.2 Definition of Change in Control
The term "Change in Control" shall mean the occurrence, at any time
during the term of an Award granted under the Plan, of any of the following
events:
(a) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") (other
than the Company or any benefit plan sponsored by the Company)
of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 30% or more of either (i) the then
outstanding shares of the Common Stock (the "Outstanding
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting
Securities"); or
(b) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least one-third (1/3) of the Board (rounded down
to the nearest whole number), provided that any individual
whose election or nomination for election was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or
threatened election contest relating to the election of the
Directors of the Company; or
(c) Consummation by the Company of a reorganization, merger or
consolidation (a "Business Combination"), in each case, with
respect to which all or substantially all of the individuals
and entities who were the respective beneficial owners of the
Outstanding Common Stock
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and Voting Securities immediately prior to such Business
Combination do not, following such Business Combination,
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such Business Combination in substantially the same
proportion as their ownership immediately prior to such
Business Combination of the Outstanding Common Stock and
Voting Securities, as the case may be; or
(d) Consummation of a complete liquidation or dissolution of the
Company, or sale or other disposition of all or substantially
all of the assets of the Company other than to a corporation
with respect to which, following such sale or disposition,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors is then owned beneficially, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Voting Securities immediately
prior to such sale or disposition in substantially the same
proportions as their ownership of the Outstanding Common Stock
and Voting Securities, as the case may be, immediately prior
to such sale or disposition.
(e) In addition to the foregoing, with respect to any Key Employee
covered under this provision, consummation by the Company of a
Business Combination, in each case, with respect to which all
or substantially all of the individuals and entities who were
the respective beneficial owners of the Outstanding Common
Stock and Voting Securities immediately prior to such Business
Combination do not, following such Business Combination,
beneficially own, directly or indirectly, more than 55% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such Business Combination in substantially the same
proportion as their ownership immediately prior to such
Business Combination of the Outstanding Common Stock and
Voting Securities, as the case may be, and any Key Employees
who were employed by the Company and were Optionees or
Grantees under the Plan at the time of such Business
Combination is terminated other than for Cause or voluntarily
leaves the employ of the Company within two (2) years from the
date of any such Business Combination as the result of a
voluntary termination of employment by such Key Employee
within sixty (60) days after any one or more of the following
events have occurred:
(i) failure by the Company to maintain the duties, status, and
responsibilities of the Key Employee substantially
consistent with those prior to the Business Combination, or
(ii) a reduction by the Company in the Key Employee's base salary
as in effect as of the date prior to the Business
Combination, or
(iii) the failure of the Company to maintain and to continue the
Key Employee's participation in the Company's benefit plans
as in effect from time to time on a basis substantially
equivalent to the participation and benefits of Company
employees similarly situated to the Employee.
SECTION 13 RIGHTS AS STOCKHOLDER
Except as provided in Section 10.4 with respect to an Award of Restricted
Stock or Restricted Stock Units, an Optionee or Grantee (or a transferee of any
such person pursuant to Section 9) shall have no rights as a stockholder with
respect to any Common Stock covered by an Award or receivable upon the exercise
of Award until the Optionee, Grantee or transferee shall have become the holder
of record of such Common Stock, and no adjustments shall be made for dividends
in cash or other property or other distributions or rights in respect to such
Common Stock for which the applicable record date is prior to the date on which
the Optionee or Grantee shall have become the holder of record of the shares of
Common Stock purchased pursuant to exercise of the Award.
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SECTION 14 POSTPONEMENT OF EXERCISE
The Committee may postpone any exercise of an Option or Stock Appreciation
Right Awards for such time as the Committee in its sole discretion may deem
necessary in order to permit the Company to comply with any applicable laws or
rules, regulations or other requirements of the Securities and Exchange
Commission or any securities exchange or quotation system upon which the Common
Stock is then listed or quoted. Any such postponement shall not extend the term
of an Option or Stock Appreciation Right Award, unless such postponement extends
beyond the expiration date of the Award in which case the expiration date shall
be extended thirty (30) days, and neither the Company nor its directors,
officers, employees or agents shall have any obligation or liability to an
Optionee or Grantee, or to his or her successor or to any other person.
SECTION 15 TAXES
15.1 Taxes Generally
The Company shall have the right to withhold from any Award, from any
payment due or transfer made under any Award or under the Plan or from any
compensation or other amount owing to a participant the amount (in cash,
shares or other property) of any applicable withholding or other taxes in
respect of an Award, its exercise, or any payment or transfer under an
Award or under the Plan and to take such other action as may be necessary
in the opinion of the Committee to satisfy all obligations for the payment
of such taxes.
15.2 Payment of Taxes
A participant, with the approval of the Committee, may satisfy the
obligation set forth in Section 15.1, in whole or in part, by (a) directing
the Company to withhold such number of shares of Common Stock otherwise
issuable upon exercise or vesting of an Award (as the case may be) having
an aggregate Fair Market Value on the date of exercise equal to the amount
of tax required to be withheld, or (b) delivering shares of Common Stock of
the Company having an aggregate Fair Market Value equal to the amount
required to be withheld on any date. The Committee may, in its sole
discretion, require payment by the participant in cash of any such
withholding obligation and may disapprove any election or delivery or may
suspend or terminate the right to make elections or deliveries under this
Section 15.2.
SECTION 16 TERMINATION, AMENDMENT AND TERM OF PLAN
16.1 The Board or the Committee may terminate, suspend, or amend the Plan,
in whole or in part, from time to time, without the approval of the
stockholders of the Company provided, however, that no Plan amendment
shall be effective until approved by the stockholders of the Company
if the effect of the amendment is to lower the exercise price of
previously granted Options or Stock Appreciation Rights or if such
stockholder approval is required in order for the Plan to continue to
satisfy the requirements of Rule 16b-3 under the 1934 Act or
applicable tax or other laws.
16.2 The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Award granted
hereunder in the manner and to the extent it shall deem desirable, in
its sole discretion, to effectuate the Plan. No amendment or
termination of the Plan shall adversely affect any Award theretofore
granted without the consent of the recipient, except that the
Committee may amend the Plan in a manner that does affect Awards
theretofore granted upon a finding by the Committee that such
amendment is in the best interests of holders of outstanding Options
affected thereby.
16.3 The Plan became effective as of March 22, 2002. An amendment and
restatement of the Plan has been adopted and authorized by the Board
of Directors for submission to the stockholders of the Company for
their approval. If the Plan, as amended and restated, is approved by
the stockholders of the Company, the amendment and restatement shall
be deemed to have become effective as of May 11, 2005. Unless earlier
terminated in accordance herewith, the Plan shall terminate on March
22, 2012. Termination of the Plan shall not affect Awards previously
granted under the Plan.
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SECTION 17 GOVERNING LAW
The Plan shall be governed and interpreted in accordance with the laws of
the State of Delaware, without regard to any conflict of law provisions which
would result in the application of the laws of any other jurisdiction.
SECTION 18 NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT
No person shall have any claim of right to be granted an Award under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee of the Company any right to be retained in the employ of the
Company or as giving any member of the Board any right to continue to serve in
such capacity.
SECTION 19 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES
Income recognized by a participant pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company, except
as may be provided under the terms of such plans or determined by resolution of
the Committee.
SECTION 20 NO STRICT CONSTRUCTION
No rule of strict construction shall be implied against the Company, the
Committee, or any other person in the interpretation of any of the terms of the
Plan, any Award granted under the Plan or any rule or procedure established by
the Board.
SECTION 21 CAPTIONS
All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions have been used in the Plan.
SECTION 22 SEVERABILITY
Whenever possible, each provision in the Plan and every Award at any time
granted under the Plan shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of the Plan or any Award at
any time granted under the Plan shall be held to be prohibited by or invalid
under applicable law, then such provision shall be deemed amended to accomplish
the objectives of the provision as originally written to the fullest extent
permitted by law, and all other provisions of the Plan and every other Award at
any time granted under the Plan shall remain in full force and effect.
SECTION 23 MODIFICATION FOR GRANTS OUTSIDE THE U.S.
The board may, without amending the plan, determine the terms and
conditions applicable to grants of awards to participants who are foreign
nationals or employed outside the united states in a manner otherwise
inconsistent with the plan if the board deems such terms and conditions
necessary in order to recognize differences in local law or regulations, tax
policies or customs.
A-12
APPENDIX B
DENTSPLY INTERNATIONAL INC.
AUDIT & INFORMATION TECHNOLOGY COMMITTEE
CHARTER
I. PURPOSE
The primary function of the Audit & Information Technology Committee
("Committee") is to assist the Board of Directors ("Board") in fulfilling its
oversight responsibilities related to corporate accounting, financial reporting
practices, quality and integrity of financial reports as well as legal
compliance, business ethics and review of information technology matters. It
shall be the policy of the Committee to maintain free and open communication
between the Board, the independent registered public accounting firm, the
internal auditors and the management of the company.
II. ORGANIZATION
1.MEMBERS -- The Committee shall be composed of directors who are independent,
as defined by the Securities and Exchange Commission and NASDAQ, of the
management of the Company and are free of any relationship that, in the
opinion of the Board, would interfere with their exercise of independent
judgement as a committee member. Committee members shall be nominated by the
Board, and the Committee shall be composed of not less than three independent
Directors who meet the NASDAQ requirements regarding financial knowledge,
experience and expertise.
2.MEETINGS -- The Committee will meet on a regular basis and special meetings
will be called as circumstances require. The Committee will meet privately
from time to time with representatives of the Company's independent registered
public accounting firm, the internal auditor and management. Written minutes
will be kept for all meetings.
3.FUNDING -- The Committee shall receive sufficient funding to carry out its
functions, including the hiring of outside advisors as deemed appropriate by
the Committee.
III. FUNCTIONS
1.INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- The Committee shall have
responsibility for the appointment, compensation, retention and oversight of
the independent registered public accounting firm. These responsibilities
shall include, but not be limited to, the following: (a) Advise the Board
annually of the firm retained by the Committee to be the Company's independent
registered public accounting firm; (b) Instruct the independent registered
public accounting firm that they are ultimately responsible to the Board and
the Committee; (c) Receive from the independent registered public accounting
firm a formal written statement delineating all relationships between the
independent registered public accounting firm and the Company, confirming
their objectivity and independence, including in regard to scope of services;
and (d) Receive direct reports from the independent registered public
accounting firm regarding their audit activities and findings.
2.AUDIT PLANS & RESULTS -- Review and approve the plans, scope, fees and results
for the annual audit and the internal audits with the independent registered
public accounting firm and the internal auditors. Inquire of management and
the independent registered public accounting firm if any significant financial
reporting issues arose during the current audit and, if so, how they were
resolved. Discuss and resolve any significant issues raised by the independent
registered public accounting firm in their Letter of Recommendations to
Management regarding internal control weaknesses and process improvements.
Review the extent of all services and fees to be performed for the Company by
its independent registered public accounting firm and approve all engagements
of the independent registered public accounting firm for services, including
specifically all non-audit related services. The approval of non-audit
services may be provided by the Chair of the Committee, provided that such
approval shall be reviewed at the next immediate meeting of the Committee and
subject to ratification by the Committee.
B-1
3.ACCOUNTING PRINCIPLES AND DISCLOSURES -- Review significant developments in
accounting rules and recommended changes in the Company's methods of
accounting or financial statements. The Committee also shall review with the
independent registered public accounting firm the quality and acceptability of
the application of the Company's accounting principles to the Company's
financial reporting, including any significant proposed changes in accounting
principles and financial statements.
4.INTERNAL ACCOUNTING CONTROLS -- Consult with the independent registered public
accounting firm regarding the adequacy of internal accounting controls.
Inquire as to the adequacy of the Company's accounting, financial, and
auditing personnel resources. As appropriate, consultation with the
independent registered public accounting firm regarding internal controls
should be conducted out of management's presence.
5.INTERNAL CONTROL SYSTEMS -- Review with management and internal auditors the
Company's internal control systems intended to ensure the reliability of
financial reporting and compliance with applicable codes of conduct, laws, and
regulations. Reports on internal audit projects with management responses
shall be available for Committee review. Special presentations may be
requested of Company personnel responsible for such areas as legal, human
resources, information technology, environmental, risk management, tax
compliance and others as considered appropriate.
6.INFORMATION TECHNOLOGY -- Review information technology plans with respect to
corporate goals, industry trends, and competitive advantages. Review and
assess the security of computer systems and applications and contingency plans
for computer system breakdowns, particularly with respect to the processing of
financial information.
7.COMPLAINT HANDLING -- Review and approve the procedures established for the
receipt, retention and treatment of complaints received by the Company
regarding accounting, internal controls or auditing matters.
8.OUTSIDE ADVISORS -- The Committee shall directly engage independent advisors
when deemed appropriate by the Committee.
In carrying out its responsibilities, the Committee shall remain flexible in its
policies and procedures in order that it can best react to changing conditions
and environment and to assure to the directors and shareholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
B-2
APPENDIX C
DENTSPLY INTERNATIONAL INC.
CORPORATE GOVERNANCE COMMITTEE CHARTER
I. PURPOSE
The primary function of the Corporate Governance Committee is to assist the
Board of Directors of the Company (the "Board") in the establishment of criteria
for the selection and nomination of Board members and to establish policies and
procedures for the governance of the Company and the Board. The Committee shall
report to the Board on matters relating to the activities of the Committee.
II. ORGANIZATION
A. Members. The Committee shall consist of directors who are independent, as
defined by NASDAQ and SEC rules, and are free from any relationship with the
Company or management of the Company that, in the opinion of the Board as
evidenced by its election of such Committee members, would interfere with the
exercise of independent judgment as a Committee member.
B. Meetings. The Committee will meet as often as necessary to carry out its
responsibilities. Meetings may be called by the Chairman of the Committee
and/or management of the Company. Written minutes of each meeting shall be
duly filed in the Company records. Reports of meetings of the Committee shall
be made to the Board accompanied by any recommendations to the Board for
matters that the Committee determines requires approval of the Board.
III. FUNCTIONS
The Corporate Governance Committee shall have the following specific
responsibilities:
- Review the qualifications of and recommend to the Board (i) those persons
to be nominated for membership on the Board who shall be submitted to the
shareowners for election at each Annual Meeting of Shareowners and (ii)
the nominees for directors to be elected by the Board to fill vacancies
and newly created directorships;
- Establish criteria for membership on the Board of Directors and its
Committees, such as depth of experience, business interest and
experience, required expertise and qualifications for membership on each
Committee;
- Aid in recruiting and attracting qualified candidates to serve on the
Board;
- Consider and appraise the performance of incumbent members of the Board
in determining whether to recommend that they be nominated for
re-election;
- Make recommendations to the Board concerning (i) the size and composition
of the Board and (ii) the size and composition of each standing Committee
of the Board;
- Recommend appointments of directors as members of Committees of the
Board;
- Periodically review and recommend Board policies, including, but not
limited to: (i) recommending the policy governing retirement of directors
from the Board, (ii) recommending the term of office for directors and
whether or not the Board should be classified according to terms, (iii)
recommending the desirable ratio of employee and non-employee directors,
and (iv) reviewing the format of Board meetings and making
recommendations for the improvement of such meetings.
- Approve the acceptance of outside Board seats by Company executives;
- Review the compensation of the members of the Board for services as a
director or member of any Committee of the Board and make recommendations
to the Board concerning the fixing of such compensation;
C-1
- Evaluate Company policies relating to the recruitment of directors,
including D&O insurance and indemnification and make recommendations to
the Board, or any appropriate Board Committee, regarding such matters;
and
- Review periodically, in the light of changing conditions, new
legislation, regulations and other developments, the Company's Code of
Conduct, and make recommendations to the Board for any changes,
amendments and modifications to the Code that the Committee shall deem
desirable.
- Review and report to the Board annually concerning Board member
independence as defined by the NASDAQ rules.
C-2
APPENDIX D
DENTSPLY INTERNATIONAL, INC.
HUMAN RESOURCES COMMITTEE
CHARTER
I. PURPOSE
The primary function of the Human Resources Committee is to provide general
oversight and assistance to the Board of Directors of the Company (the "Board")
for the organizational structure of the Company and the compensation and hiring
plans, policies and practices of the Company, including specifically the
compensation of the executive officers.
II. ORGANIZATION
A. Composition. The Committee shall consist of directors who are independent,
as defined by NASDAQ and SEC rules, and are free from any relationship with
the Company or management of the Company that, in the opinion of the Board as
evidenced by its appointment of such Committee members, would interfere with
the exercise of independent judgment as a Committee member.
B. Meetings. The Committee will meet as often as necessary to carry out its
responsibilities. Meetings may be called by the Chairman of the Committee
and/or management of the Company. A majority of the Committee shall
constitute a quorum. Written minutes of each meeting shall be duly filed in
the Company records. Reports of meetings of the Committee shall be made to
the Board accompanied by any recommendations to the Board for matters that
the Committee determines requires approval of the Board.
III. FUNCTIONS
A. General. The Committee's general responsibility is to oversee the Company's
employment, hiring and compensation plans, personnel practices and policies,
and assure that the senior executives of the Company and its wholly-owned
affiliates are compensated effectively in a manner consistent with the stated
compensation strategy of the Company, internal equity considerations,
competitive practice, and the requirements of the appropriate regulatory
bodies. The Committee shall communicate to shareholders, as deemed
appropriate or as required by the Securities and Exchange Commission or other
regulatory body, the Company's compensation policies and practices. More
specifically, the Committee shall be responsible for the following:
- Reviewing periodically the appointments, promotions and performance of
certain officers of the Company and the potential successors of the
principal executive officers of the Company, as the Committee shall
designate, and making recommendations to the Board with respect to such
matters to the extent it deems appropriate;
- Review from time to time and approve the Company's stated compensation
strategy to ensure that management is rewarded appropriately for its
contributions to Company growth and profitability and that the executive
compensation strategy supports organization objectives and shareholder
interests;
- Review annually and determine the individual elements of total
compensation for the executive management of the Company and communicate
in the annual Board Compensation Committee Report to shareholders the
factors and criteria on which the executive officers', including the
Chief Executive Officer's, compensation for the last year was based;
- Assure that the Company's executive incentive compensation program(s) are
administered in a manner consistent with the Company's compensation
strategy as to participation, target annual incentive awards, corporate
financial goals, and actual awards paid to executive management;
- Approve, subject to shareholders approval when appropriate, all new
equity-related incentive plans for senior management;
D-1
- Recommend to the Board participants in the Company's Supplemental
Executive Retirement Plan;
- Review the recruitment, hiring and promotion practices of the Company and
its subsidiaries in the light of applicable legal requirements and
corporate governance policies established by the Board;
- Receive and review annually or otherwise, as the Committee shall deem
appropriate, reports on significant matters and actions taken in
connection with the operation and administration of the employee benefits
plans of the Company and its subsidiaries;
- Review with the Chief Executive Officer matters relating to management
succession;
- If appropriate, hire experts in the field of executive compensation and
other matters related to the functions of the Committee to assist the
Committee with its areas of responsibility; and
- Such other duties and responsibilities as may be assigned to the
Committee, from time to time, by the Board of the Company, or as
designated in Company plan documents.
B. Consultants. The Committee shall at all times have the authority to retain
and terminate any compensation consultants or other advisors to assist it in
any aspect of the evaluation of executive compensation or on any other
subject relevant to the Committee's responsibilities, including the authority
to approve such consultant's or advisor's fees and other retention terms.
C. Stock Option Plans. Either directly or through delegation to the
subcommittee, administer the Company's Stock Option Plans, including but not
limited to:
- Participating in the establishment of option guidelines and general size
of overall grants;
- Making grants;
- Interpreting the Plans;
- Determining rules and regulations relating to the Plans;
- Modifying existing or canceling existing grants and substituting new ones
(with the consent of the grantees);
- Approving any exceptions to receive retiree treatment; and
- Authorizing foreign subsidiaries to adopt plans pursuant to the
provisions of the Plans.
D-2
APPENDIX E
DENTSPLY INTERNATIONAL, INC.
CORPORATE GOVERNANCE GUIDELINES/POLICIES
TABLE OF CONTENTS
I. FUNCTIONS/RESPONSIBILITIES OF THE BOARD OF DIRECTORS........ E-1
II. SELECTION/SERVICE OF BOARD MEMBERS.......................... E-1
A. IDENTIFICATION.......................................... E-1
B. NON-DISCRIMINATION...................................... E-1
C. INDEPENDENCE............................................ E-2
D. CRITERIA FOR THE NOMINATION............................. E-2
E. NUMBER OF BOARD SEATS................................... E-2
F. SIZE OF BOARD........................................... E-3
III. TERM........................................................ E-3
A. NORMAL TERMS............................................ E-3
B. MANAGEMENT DIRECTOR RESIGNATION......................... E-3
C. TERM LIMITS............................................. E-3
IV. STOCK OWNERSHIP OF DIRECTORS................................ E-3
V. BOARD MEETINGS.............................................. E-3
A. SCHEDULING OF MEETINGS.................................. E-3
B. AGENDA.................................................. E-3
C. MANAGEMENT PRESENTATIONS................................ E-3
D. EXECUTIVE SESSIONS...................................... E-4
VI. ATTENDANCE.................................................. E-4
A. BOARD MEETINGS.......................................... E-4
B. ANNUAL SHAREHOLDERS MEETING............................. E-4
VII. LEAD DIRECTOR............................................... E-4
VIII. BOARD COMMITTEES............................................ E-4
A. GENERALLY............................................... E-4
B. CHARTERS................................................ E-4
C. ADVISORS................................................ E-4
D. COMMITTEE ASSIGNMENTS................................... E-5
E. COMMITTEE MEETINGS...................................... E-5
IX. COMPENSATION................................................ E-5
X. SELF-EVALUATION BY THE BOARD................................ E-5
XI. DIRECTOR EDUCATION.......................................... E-5
XII. EXPENSES.................................................... E-5
XIII. CAPITAL EXPENDITURES........................................ E-6
XIV. COMMUNICATION WITH THE BOARD................................ E-6
A. GENERAL COMMUNICATIONS.................................. E-6
B. DIRECTOR NOMINATIONS.................................... E-6
DENTSPLY INTERNATIONAL INC.
CORPORATE GOVERNANCE GUIDELINES/POLICIES
(Revised July 2004)
The following Corporate Governance Guidelines have been adopted by the Board of
Directors of the Corporation to assist the Board in the exercise of its
responsibilities. These Corporate Governance Guidelines reflect the Board's
commitment to monitor the effectiveness of policy and decision making both at
the Board and management level. These Corporate Governance Guidelines shall be
reviewed by the Board, through the Governance Committee (or successor thereof),
on a periodic basis and are subject to modification from time to time by the
Board.
I. Functions/Responsibilities of the Board of Directors
The Directors shall have the authority to manage the business and affairs
of the Corporation in accordance with the Delaware General Corporation law and
as set forth in the By-Laws. Directors shall discharge the duties of their
positions in good faith, in a manner reasonably believed to be in the best
interests of the Corporation and with such care, including reasonable inquiry,
skill and diligence as a person of ordinary prudence would use under similar
circumstances. The responsibility of the Board of Directors is to supervise and
direct the management of the Corporation. To that end, the Board of Directors
(references to the Board include the Committees of the Board, as applicable)
shall have the following duties:
(1) Overseeing the conduct of the Corporation's business to evaluate
whether the business is being properly managed;
(2) Reviewing and, where appropriate, approving the Corporation's major
financial objectives, plans and actions;
(3) Reviewing the Corporation's financial statements;
(4) Assessing major risk factors relating to the Corporation and its
performance, and reviewing measures to address and mitigate such
risks;
(5) The selection and appointment and regularly evaluating the
performance and approving the compensation of the Chief Executive
Officer and, with the advise of the Chief Executive Officer, the
principal senior executives; and
(6) Planning for succession with respect to the position of Chief
Executive Officer and monitoring management's succession planning
for other key executives.
The Chief Executive Officer, working with the other executive officers of
the Corporation and its affiliates, shall have the authority and
responsibility for managing the business of the Corporation in a manner
consistent with the standards of the Corporation, and in accordance with
any specific plans, instructions or directions of the Board.
The Chief Executive Officer shall seek the advice and, in appropriate
situations, the approval of the Board with respect to extraordinary actions
to be undertaken by the Corporation, including those that would make a
significant change in the financial structure or control of the
Corporation, the acquisition or disposition of any significant business or
the entry of the Corporation into a major new line of business.
II. Selection/Service of Board Members
A. Identification. The responsibility for the selection of new Directors
resides with the Board and shareholders. The identification, screening
and recommendation process has been delegated to the Governance
Committee, which reviews candidates for election as Directors and
annually recommends a slate of Directors for approval by the Board and
election by the shareholders. New Directors shall be the subject of and
must satisfactorily pass a background check.
B. Non-Discrimination. Potential candidates for membership on the Board
and Committees of the Board shall not be denied consideration by reason
of race, sex, religion, color or ethnicity. Nor shall any candidate be
approached or selected solely because of any such reason.
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C. Independence. It is intended that the Board be comprised of a strong
majority of independent Directors and no less than are required by
NASDAQ or applicable law. Independence shall be defined as provided by
the rules of NASDAQ and any applicable law. The Board, in consultation
with the Company's Secretary, shall undertake an annual review of the
independence of all non-employee Directors. In advance of the meeting
at which this review occurs, each non-employee Director shall provide
to the Corporation for presentation to the Board, full information
regarding the Director's business and other relationships with the
Corporation and its affiliates and with senior management and their
affiliates to enable the Board to evaluate the Director's independence.
Directors have an affirmative obligation to inform the Board of any
material changes in their circumstances or relationships that may impact
their designation by the Board as "independent." This obligation
includes all business relationships between Directors and the
Corporation and its affiliates or members of senior management and their
affiliates, whether or not such business relationships are subject to
the approval requirement set forth in the following provision.
D. Criteria for the Nomination:
1. The Governance Committee shall consider for selection as
Directors those persons:
a. who have the proven ability and experience to bring informed,
thoughtful and well-considered opinions to corporate
management and the Board;
b. who have the competence, maturity and integrity to monitor and
evaluate the Corporation's management, performance and
policies;
c. who have the willingness and ability to devote the necessary
time and effort required for service on the Board;
d. who have the capacity to provide additional strength,
diversity of view and new perceptions to the Board and its
activities;
e. who have the necessary measure of self-confidence and
articulateness to ensure ease of participation in Board
discussion; and
f. who hold or have held a senior position with a significant
business Corporation or a position of senior leadership in an
educational, medical, religious, or other non-profit
institution or foundation of significance.
2. Not more than one person who is or was employed, within a two (2)
year period, by the same company or organization (other than the
Corporation, directly or indirectly) may simultaneously serve as
a Director.
3. Persons who have attained the age of 70 shall not be eligible for
election or re-election as a Director.
4. Any Director who (i) retires from; or (ii) discontinues their
active employment with the business or other enterprise with
which they were primarily affiliated at the time of their most
recent election to the Board; or (iii) incurs a significant
reduction in responsibilities, title or activities as related to
the time of their most recent election to the Board, shall submit
their resignation upon the occurrence of any of the aforesaid
events. The Governance Committee will review with the Board the
effects of this change upon the interests of the Company and
recommend to the Board whether to accept the resignation.
E. Number of Board Seats. The Corporation does not have a policy limiting
the number of other company boards of directors upon which a Director
may sit. However, the Governance Committee shall consider the number of
other company boards and other boards (or comparable governing bodies)
on which a prospective nominee is a member. It is the sense of the
Board that prospective Directors should simultaneously serve on no more
than 2-4 other company Boards, depending on their personal
circumstances.
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Directors are expected to advise the Chairman of the Board and the
Chairman of the Governance Committee in advance of accepting any other
company directorship or any assignment to the audit committee or
compensation committee of the board of directors of any other company.
F. Size of Board. The by-laws of the Corporation provide that the size of
the Board of Directors shall consist of not more than thirteen (13)
Directors. The Board shall determine the number of Directors as deemed
appropriate by the Board, subject to the Corporation's by-laws.
III. Term
A. Normal Terms. The Board of Directors are classified into three
classes. Each class of Directors is elected for three year terms at the
annual meeting of shareholders on the third anniversary of their
previous election. Any vacancy in the Board for any reason, including a
vacancy resulting from an increase in the number of Directors, may be
filled by action of the Board of Directors. Directors shall hold office
from the time of their election and qualification and shall serve until
the election and qualification of their successor or until such
Director's earlier death, resignation, disqualification or removal.
B. Management Director Resignation. A Director who also is an officer of
the Corporation, who either resigns or retires their officer position,
shall simultaneously submit their resignation as a Director, acceptance
of which shall be at the discretion of the other Board members.
C. Term Limits. The Board does not believe it should establish term
limits. While term limits could help ensure that there are fresh ideas
and viewpoints available to the Board, they hold the disadvantage of
losing the contribution of Directors who have been able to develop,
over a period of time, increasing insight into the Corporation and its
operations and, therefore, provide an increasing contribution to the
Board as a whole.
IV. Stock Ownership of Directors
It is the policy of the Board that all Directors hold an equity interest in
the Corporation. Toward this end, the Board expects that all Directors own,
or acquire within five years of first becoming a Director, shares of common
stock of the Corporation (including share units held under the
Corporation's Board of Directors Deferred Compensation Plan, or any
successor plan) having a market value of at least five times the annual
retainer paid to Board members. The Board recognizes that exceptions to
this policy may be necessary or appropriate in individual cases, and may
approve such exceptions from time to time as it deems appropriate.
V. Board Meetings
A. Scheduling of Meetings. The Chairman, in consultation with the other
members of the Board, shall determine the timing and length of the
meetings of the Board. The Board expects that five to six meetings at
appropriate intervals are in general desirable for the performance of
the Board's responsibilities. In addition to regularly scheduled
meetings, additional Board meetings may be called upon appropriate
notice at any time to address specific needs of the Corporation. A
special meeting of the Board may be called at any time by the Chief
Executive Officer, the Chairman, or by members of the Board of
Directors constituting no less than a majority of the total number of
independent Directors then in office. Participation in such special
meetings may be by means of conference telephone.
B. Agenda. The Chairman and Chief Executive Officer shall establish the
agenda for each Board meeting. Each Director shall be entitled to
suggest the inclusion of items on the agenda, request the presence of
or a report by any member of the Corporation's senior management, or at
any Board meeting raise subjects that are not on the agenda for that
meeting. Subject to reasonable exception, Directors shall be advised of
significant agenda items and shall be furnished with appropriate
supporting materials in advance of meetings of the Board and Committees
of the Board.
C. Management Presentations. Management shall make presentations to the
Board on the performance, operations and significant activities of the
Corporation.
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D. Executive Sessions. The Board shall meet in regularly scheduled
Executive Sessions no less than twice per year. These meetings shall
take place without the participation of the Chief Executive Officer or
other members of the Corporation's management and non-independent
Directors to deal with such other matters as the Lead Director and
participating Directors may deem appropriate. Additional Executive
Sessions may be scheduled from time to time as determined by a majority
of the independent Directors in consultation with the Lead Director.
This Session, or portion thereof, will be chaired by the Lead Director
and if the Lead Director is not present, then by the Chairman of the
Committee for the relevant subject matter discussed in the Session.
VI. Attendance
A. Board Meetings. It is expected that Board Members will make every
effort to attend Board Meetings and meetings of their respective
Committees, with the expectation that Board Members will attend no less
than collectively seventy-five percent (75%) of such meetings, except
when exceptional circumstances prevent such attendance.
B. Annual Shareholders Meeting. It is expected that Board Members will
attend the Annual Shareholders Meeting, except when exceptional
circumstances prevent such attendance.
VII. Lead Director
An independent Director shall act in a lead capacity to perform certain
functions ("Lead Director") as outlined below. The Lead Director will be
elected annually by the independent Directors.
The Lead Director's responsibilities are to:
(a) preside at the Executive Sessions of the independent Directors;
(b) provide the Chairman with input into the agenda for the Board
meetings, to the extent necessary, on behalf of the independent
Directors and establish the agenda for Executive Sessions of
independent Directors; and
(c) act as the principal liaison between the independent Directors,
the Chairman and the CEO, and keep the Chairman advised of
activities of the independent Directors.
VIII. Board Committees
A. Generally. Standing or temporary committees, consisting of two or more
Directors, may be appointed by the Board from time to time. The Board
may vest committees with such power and authority as the Board
determines appropriate, subject to such limitations as are set forth in
the Delaware General Corporation law and the Corporation's Certificate
of Incorporation and By-Laws. The Governance Committee shall consider
and recommend to the Board the rotation of Committee memberships and
chairmanships, as determined appropriate. The Board does not have a
practice of automatic rotation of Committee chairs and members after a
set time period. There are many reasons to maintain an individual
Director on a specific Committee, including continuity and subject
matter expertise necessary for an effective Committee. There are
currently four standing committees:
- Executive Committee
- Audit & Information Technology Committee ("Audit Committee")
- Human Resources Committee
- Corporate Governance Nominating Committee ("Governance Committee")
B. Charters. Each standing Committee (other than the Executive Committee)
shall have a written charter of responsibilities, duties and
authorities, which shall periodically be reviewed by the Board. Each
Committee shall report to the full Board, as deemed necessary, with
respect to its activities, findings and recommendations.
C. Advisors. Each Committee shall have full power and authority to retain
the services of such advisers and experts, including counsel, as the
Committee deems necessary or appropriate with respect to specific
matters within its purview.
E-4
D. Committee Assignments. The Governance Committee, after consideration
of the desires, experience and expertise of individual Directors, shall
recommend to the Board the assignment of Directors to Committees,
including the designation of Committee Chairs. In acting upon such
recommendation and report, the full Board shall give consideration to
the following objectives:
- the target size of each Committee should be three or five members,
unless circumstances call for an exception;
- Committee, Chairmanship and membership should be considered for
rotation periodically, subject to any applicable legal, regulatory
and stock exchange listing requirements; and
- The Audit, Human Resources Board and Governance Committees shall be
composed entirely of independent Directors. The Executive Committee
shall include the Chief Executive Officer of the Corporation.
E. Committee Meetings. Each Committee Chair, in consultation with the
Chairman of the Board, Committee member and management of the
Corporation shall establish agendas and set meetings at the frequency
and length appropriate and necessary to carry out the Committee's
responsibilities. Any Director who is not a member of a particular
Committee may attend any Committee meeting with the concurrence of the
Committee Chair or a majority of the members of the Committee.
IX. Compensation
Outside Directors shall be appropriately compensated for their service on
the Board. This compensation shall take into consideration the amount of
time required to be devoted to Board activities, the risks of such
positions and the competitiveness of the compensation levels. Compensation
is subject to change at the discretion of the Board. The current
compensation paid to Outside Directors shall be; an annual retainer of
$30,000; a $1,000 Board meeting fee; and, a $1,000 committee meeting fee.
Further, the Chairman of a Board Committee and the Lead Director shall each
be paid an additional annual fee of $4,000 (Chairman's Fee"), provided that
a Board member shall be paid only one Chairman's Fee regardless of the
number of chairmanships. Board members may also receive stock option grants
under the Corporation's Stock Option Plan(s). The Company has adopted a
deferred compensation plan which allows Directors to defer payment of their
Board compensation. This plan may be changed from time to time.
X. Self-Evaluation by the Board
The Governance Committee will sponsor an annual self-assessment of the
Board's performance as well as the performance of each committee of the
Board, the results of which will be discussed with the full Board and each
committee. The Governance Committee will also utilize the results of this
self-evaluation process in assessing and determining the characteristics
and critical skills required of prospective candidates for election to the
Board and making recommendations to the Board with respect to assignments
of Board members to various committees.
XI. Director Education
The Corporation shall assist the Board by providing appropriate orientation
programs for new Directors, which shall be designed both to familiarize new
Directors with the full scope of the Corporation's businesses and to assist
new Directors in developing and maintaining skills necessary or appropriate
for the performance of their responsibilities. The Board and the Company's
management shall similarly work together to develop and implement
appropriate continuing education programs for the same purposes.
XII. Expenses
Directors shall be reimbursed for ordinary, necessary and reasonable
expenses incident to their service on the Board and to their attendance at
meetings of the Board, Committees of the Board and shareholders.
Requests for reimbursement for expenses over $75.00 must be accompanied by
a receipt for such expenses. Directors shall be reimbursed for air travel
expenses not exceeding the first-class commercial air travel rate. All such
requests are to be forwarded to the Secretary of the Corporation.
E-5
XIII. Capital Expenditures
Management shall submit to the Board an Annual Capital Expenditure Budget
for Board approval at the same time the Annual Operating Budget is
submitted.
While the Capital Expenditure Budget will outline anticipated projects, the
projects may change at the discretion of management as long as total annual
capital expenditures do not exceed the total Annual Budget and subject to
the individual expenditure approval levels established by the Board. If
management anticipates that expenditures will exceed the amount budgeted,
it must obtain Board approval for amounts that exceed the approved budget.
Management authority to approve funding for individual expenditures within
the scope of the approved budget is as follows:
Up to $25,000 Division General Manager
Greater than $25,000 to $75,000 Senior Vice President
Greater than $75,000 to $600,000 President/Chief Operating Officer
Greater than $600,000 to $2 million Chair/Chief Executive Officer
Greater than $2 million Board of Directors
XIV. Communication with the Board
A. General Communications. All Board members, including their Committee
assignments, are identified each year in the Company's Proxy Statement.
Communications which are intended for Board members can be sent to the
Company's Secretary at the Company's Headquarters for delivery to
individual Board members. All mail received will be opened and screened
for security purposes and mail determined to be appropriate will be
delivered to the respective Board member to which the communication is
addressed. Mail addressed to "Outside Directors" or "Non-Management
Directors" will be forwarded or delivered to the Chairman of the
Governance Committee. Mail addressed to the "Board of Directors" will
be forwarded or delivered to the Chairman of the Board.
B. Director Nominations. The Directors welcome and are willing to
consider recommendations from shareholders for Director nominations.
Shareholders desiring to make candidate recommendations for the Board
may do so by submitting nominations to the Company or the Company's
Governance Committee, in accordance with the Company's Bylaws and
addressed to the Corporate Secretary or to the Chairman of the
Governance Committee at the following address: DENTSPLY International
Inc., 221 West Philadelphia Street, York, Pennsylvania 17405-0872.
THESE GUIDELINES/POLICIES SHALL BE SUBJECT TO CHANGE AS REQUIRED BY LAW OR AS
DEEMED APPROPRIATE BY THE BOARD OF DIRECTORS.
E-6
{DENTSPLY LOGO} VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the
DENTSPLY WORLD HEADQUARTERS day before the cut-off date or meeting date. Have
SUSQUEHANNA COMMERCE CENTER your proxy card in hand when you access the web
221 WEST PHILADELPHIA ST. site and follow the instructions to obtain your
YORK, PA 17405-0872 records and to create an electronic voting
instruction form.
{BARCODE} ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER
COMMUNICATIONS
If you would like to reduce the costs incurred by
DENTSPLY International Inc. in mailing proxy
materials, you can consent to receiving all future
proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign
up for electronic delivery, please follow the
instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive
or access shareholder communications
electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call
and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card
and return it in the postage-paid
envelope we have provided or return to
DENTSPLY International Inc., c/o ADP,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: {X}
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
--------------------------------------------------------------------------------
DENTSPLY INTERNATIONAL INC.
VOTE ON DIRECTORS
FOR WITHHOLD FOR ALL To withhold authority to vote, mark
ALL ALL EXCEPT "For All Except" and write the
{ } { } { } nominees's number on the line below.
Prop 1 - Directors ___________________________________
01) MICHAEL C. ALFANO, D.M.D.
02) ERIC K. BRANDT
03) WILLIAM F. HECHT
04) FRANCIS J. LUNGER
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
Prop 2 - PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP, INDEPENDENT { } { } { }
ACCOUNTANTS, TO AUDIT THE BOOKS AND
ACCOUNTS OF THE COMPANY FOR THE YEAR
ENDING DECEMBER 31, 2005.
Prop 3 - PROPOSAL TO APPROVE THE DENTSPLY
INTERNATIONAL INC. 2002 AMENDED AND { } { } { }
RESTATED EQUITY INCENTIVE PLAN.
*NOTE* SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF
For comments, please check this box and write
them on the back where indicated { }
YES NO
Please indicate if you plan to attend this meeting { } { }
HOUSEHOLDING ELECTION - Please indicate if you
consent to receive certain future investor
communications in a single package per household { } { }
-------------------------------------------
Signature {PLEASE SIGN WITHIN BOX} Date
-------------------------------------------
Signature (Joint Owners) Date
DO NOT RETURN PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE
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Solicited on behalf of the Board of Directors of DENTSPLY International Inc.
The undersigned stockholder of DENTSPLY International Inc. (the "Company")
hereby appoints Brian M. Addison as the attorney and proxy of the undersigned,
with full power of substitution, to vote all shares of Common Stock, par value
$.01 per share, of the Company which the undersigned would be entitled to vote
if personally present at the Annual Meeting of the Stockholders of the Company,
to be held at the Company's Employee Meeting Room at DENTSPLY International
Inc., 570 West College Avenue, York, Pennsylvania, on Wednesday, May 11, 2005,
commencing at 9:30 a.m., local time, and at any adjournment or postponement
thereof, as indicated on the reverse side.
This proxy also provides voting instructions for shares held by T. Rowe Price
Retirement Plan Services, Inc., the trustee for the DENTSPLY International Inc.
Employee Stock Ownership Plan (the "ESOP") and/or the DENTSPLY International
Inc. 401(k) Savings Plan (the "401(k)"). I hereby instruct you to (a) vote the
shares of Common Stock, par value $.01 per share ("Common Stock") of DENTSPLY
International Inc. (the "Company") allocated to my ESOP and/or 401(k) account in
accordance with the directions on the reverse side and (b) to grant a proxy to
the proxy nominated by the Company's Board of Directors authorizing him to vote
in his discretion upon such other matters as may properly come before the
meeting.
This proxy/voting instruction card is solicited pursuant to a separate Notice of
Annual Meeting and Proxy Statement, receipt of which is hereby acknowledged.
This card should be voted by mail, Internet or telephone, in time to reach the
Company's tabulator, Automatic Data Processing, by 11:59 p.m. Eastern Time on
Tuesday May 10, 2005, for all registered shares to be voted and by 5:00 p.m.
Eastern Time on Friday, May 6, 2005, for the Trustee to vote the Plan shares.
Comments:
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(If you noted any Comments above, please mark corresponding box on the reverse
side.)
(Continued and to be signed on reverse side.)