UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 (AMENDMENT NO.  )

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12

 

DENTSPLY INTERNATIONAL INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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o		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.

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DENTSPLY International Inc.

World Headquarters

Susquehanna Commerce Center

221 W. Philadelphia Street

York, PA 17405-0872

(717) 845-7511

Fax (717) 854-2343

 

 

April 11, 2008

 

 

Dear DENTSPLY Stockholder:

 

You are cordially invited to attend the 2008 Annual Meeting of Stockholders to be held on Tuesday, May 13, 2008, 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,

 

Bret W. Wise
Chairman of the Board,
Chief Executive Officer and President

 

DENTSPLY INTERNATIONAL INC.
SUSQUEHANNA COMMERCE CENTER
221 WEST PHILADELPHIA STREET
YORK, PENNSYLVANIA 17405-0872

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 13, 2008

 

 

The Annual Meeting of Stockholders (the “Annual Meeting”) of DENTSPLY International Inc., a Delaware corporation (the “Company”), will be held on Tuesday, May 13, 2008, 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, 2008;

 

3. If properly presented at the meeting, to vote on a shareholder proposal requesting the Company to prepare a sustainability report; 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 17, 2008 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 by mail, by telephone 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, 2008

 

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 TELEPHONE BY CALLING 1-800-690-6903, OR 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

 

 

Table of Contents

 

DENTSPLY INTERNATIONAL INC.
SUSQUEHANNA COMMERCE CENTER
221 WEST PHILADELPHIA STREET
YORK, PENNSYLVANIA 17405-0872

 

 

PROXY STATEMENT

 

 

 

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 2008 Annual Meeting of Stockholders (together with any and all adjournments and postponements thereof, the “Annual Meeting”) to be held on Tuesday, May 13, 2008, 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, 2008.

 

The Board of Directors (“the Board”) fixed the close of business on March 17, 2008 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 148,791,129 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 and sought by the Board of Directors 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 for no additional consideration. The Company may specifically engage a firm to assist in the solicitation of proxies on behalf of the Board and would anticipate paying a reasonable fee for such services plus reasonable out-of-pocket expenses.

 

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”).

 

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 the Board of Directors. The Board is currently comprised of eleven 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 2009 and 2010 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 four incumbent Class I directors are nominees for election to the Board this year for a three-year term expiring at the 2011 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 four 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

 

 

Directors Continuing as Class II Directors

 

 

Directors Continuing as Class III Directors

 

 

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.

 

The Audit and Finance 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, 2008.

 

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.

 

Following is a summary of the fees billed to the Company by PricewaterhouseCoopers LLP for professional services rendered during 2007 and 2006, and are categorized in accordance with the rules of the Securities Exchange Commission (“SEC”) on auditor independence as follows (in thousands):

 

 

The Audit and Finance Committee reviewed summaries of the services provided by PwC and the related fees and determined that the provision of non-audit services is compatible with maintaining the independence of PwC.

 

The Audit and Finance 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 and Finance Committee, or can be pre-approved by the Chairman of the Audit and Finance 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. All of the fees reported above were approved by the Audit and Finance Committee (“Audit Committee”) in accordance with their procedures.

 

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, as it is a share represented by proxy and entitled to vote. 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 and Finance 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.

 

 

We have received a stockholder proposal from Walden Asset Management (“Walden”) as primary filer, whose address is One Beacon Street, Boston, Massachusetts 02108. Walden indicated in its proposal that it holds 265,000 shares (approximately two tenths of a percent) of the Company’s stock and intends to introduce the following resolution at the Annual Meeting and has furnished the following statement in support of the proposal. There were also co-filers to the proposal who collectively indicated they hold 40,835 shares of the Company’s stock. The names, addresses and shareholdings of the co-filers are available upon request made to the secretary of the Company.

 

SUSTAINABILITY REPORT RESOLUTION

 

Whereas:

 

Sustainability requires balancing the needs of the present with the needs of the future, whether these needs are considered in ecological, economic, or societal contexts. Sustainable business includes “encouraging long lasting social well being in communities where [companies] operate, interacting with different stakeholders (e.g. clients, suppliers, employees, government, local communities, and non-governmental organizations), and responding to their specific and evolving needs, thereby securing a long-term ’license to operate,’ superior customer and employee loyalty, and ultimately superior financial returns.” (Dow Jones Sustainability Group)

 

Mainstream institutional investment and brokerage houses are seeking tools to understand the links between sustainability performance and capital markets. Leading companies such as MG, Goldman Sachs, Legg Mason, Merrill Lynch, and Morgan Stanley collect information on companies’ social and environmental practices to help make investment decisions. In addition, the Carbon Disclosure Project, a coalition of 315 institutional investors representing more than $40 trillion in assets, has requested greater disclosure from companies on their climate change programs and policies.

 

We believe that developing a sustainability report allows a company to be more responsive to the global business environment, one with finite natural resources, shifting legislation, and changing public expectations of corporate behavior. The reporting process helps companies to: better integrate and gain strategic value from existing corporate social responsibility efforts, identify gaps and opportunities, develop company-wide communications, and structure a venue to publicize innovative practices or respond to critiques.

 

Given DENTSPLYS’ business focus, we believe the importance of a corporate wide analysis of opportunities and exposures in sustainability issues is important. We believe that DENTSPLY will benefit from understanding the risks and opportunities that sustainability issues, such as climate change, toxins legislation and standards for human rights, can play across its many business lines. We ask that the company make clear to shareholders that it is taking the necessary steps to identify, understand, monitor, and manage sustainability issues.

 

RESOLVED: Shareholders request that the Board of Directors issue a sustainability report to shareholders, at reasonable cost, and omitting proprietary information, by September 1, 2008.

 

SUPPORTING STATEMENT

 

The report should include the company’s definition of sustainability, as well as a company-wide review of company policies, practices, and metrics related to long-term social and environmental sustainability.

 

We recommend that DENTSPLY use the Global Reporting Initiative’s Sustainability Reporting Guidelines (“the Guidelines”) to prepare the report. The Global Reporting Initiative (www.globalreporting.org) is an international organization developed with representatives from the business, environmental, human rights and labor communities. The Guidelines provide guidance on report content, including performance on direct economic impacts, environmental, labor practices and decent work conditions, human rights, society, and product responsibility. The Guidelines provide a flexible reporting system that allows the omission of content that is not relevant to company operations. Over 800 companies use or consult the Guidelines for sustainability reporting, including 3M, Akzo Nobel, BASF, Ingersoll-Rand, and General Electric.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:

 

The Company recognizes the importance of social, environmental and economic considerations in the manner in which it conducts business and their potential impact on its economic performance. The Company also recognizes the importance of these issues to our stockholders and others that have business relationships with us. The Company is committed to ethical business practices and compliance with the law in all areas of its operations and strives to be a good corporate citizen in the communities where it operates. The Company takes the issues raised by the proposal seriously but believes that conducting a special review of social, environmental and economic performance for the purpose of preparing an additional report to stockholders on sustainability would be expensive, time-consuming and unnecessary. Such a report would not add to the Company’s efforts in these areas or result in any additional benefit to stockholders, employees or others because the Company’s current policies and practices address the concerns of the stockholder proposal.

 

It should be noted that the stockholder proposal recommends the use of the Global Reporting Initiative’s (“GRI”) Sustainability Reporting Guidelines to prepare the report. The GRI Guidelines are a complex, vague and voluminous set of metrics that would require substantial time and funds to evaluate and apply. The proposal does not convey the burden on human resources or the considerable expense involved in preparing a report using the GRI Guidelines other than to note that the sustainability report should be prepared “at reasonable cost.” Information previously available on GRI’s website stated that companies that responded to a survey conducted by GRI spent an average of more than $600,000 in preparing sustainability reports using the GRI Guidelines — with one entity spending $3 million on its sustainability report. The Company does not believe that stockholders would be benefited by having the Company expend hundreds of thousands of dollars, or more, on preparing a separate sustainability report in accordance with a costly, complex and ambiguous set of guidelines. Instead, the Company prefers, in the exercise of its business judgment, to prudently allocate its limited resources and assets to the continued development and enhancement of its business operations and the activities described herein.

 

As a manufacturer of dental products in the healthcare market the Company recognizes that its commercial success depends on its ability to promote the health of the public and that ultimately the achievement of the Company’s business objectives is based on the welfare of the end users of its products, the members of the public who are treated by the dental professionals who are our customers. Competitive advantage and the promotion of the wellbeing of the public are compatible objectives and are pursued by the Company in tandem.

 

DENTSPLY has an active and long-standing corporate social responsibility policy. We believe that we currently integrate and gain strategic value from our existing corporate social responsibility initiatives. As a dental manufacturer, our first goal is to improve the oral health of the public, including underserved individuals, both children and adults. DENTSPLY was instrumental in the founding of the American Fund for Dental Health over 50 years ago, which subsequently became Oral Health America, a vital and active non-profit organization committed to improving the oral health of the public. The Company continues to invest in dental charitable organizations dedicated to providing needed dental care for children and adults. The Company also invests in the future of dental services and professionals through support of student research in dental schools throughout the world. In addition, we strive to serve as good corporate citizens improving the social, educational and health infrastructure in the communities in which we operate. The Company supports various non-profit and charitable organizations with cash grants from the DENTSPLY Foundation and encourages the Company’s senior management to donate their time through service on the boards of various non-profit organizations. The Company also encourages its Associates to give back to their communities by donating their time as volunteers.

 

The Company believes that in addition to social considerations, environmental considerations are also important in the conduct of our business. Although the nature of the Company’s business is such that it is not a heavy consumer of energy resources or raw materials, the Company has ongoing initiatives to evaluate and improve its operating efficiencies, including the reduction of energy usage and raw material consumption. Most notable of these is the Company’s lean manufacturing program that is applied throughout our global manufacturing base with an emphasis on streamlining operations, increasing throughput per square footage of plant space, reducing material and energy consumption, and reducing scrap materials. In addition, the Company engages in

numerous recycling programs and we have various initiatives to automate and streamline administrative functions through use of electronic media, to reduce paper consumption in our business units.

 

The Company’s products and operations are subject to extensive regulations administered by the Federal Food and Drug Administration and similar foreign agencies. These regulations relate to all aspects of the Company’s business including the manner in which the Company manufactures and markets its products and operates its facilities. We are subject to periodic inspections by agents of the FDA and other government agencies who are responsible for ensuring that our products and practices meet all applicable standards. Additionally, the Company’s facilities are periodically inspected by third party Notified Bodies to allow the Company’s products to be sold on a worldwide basis.

 

The Company has programs to ensure compliance with FDA regulations and all other laws applicable to our business, including product safety, environmental and labor laws. Specifically, although the Company’s operations have minimal environmental impacts, it maintains an environmental, health and safety audit program to monitor its compliance with applicable requirements. The Company’s environmental programs include, among others, hazardous and general waste handling and management, recycling, and energy and water usage reduction.

 

As a general matter, the Company does not subcontract out the production of its products, particularly in countries where use of child labor has been identified as occurring. Moreover, the Company has human resources personnel responsible for various Company operations throughout the world to ensure compliance with applicable labor and employment laws to ensure compliance with human rights standards.

 

The Company’s ethical approach to business operations is embedded in the Company’s culture. The Company has adopted a Code of Business Conduct & Ethics to promote the appropriate and responsible conduct of its businesses throughout the world. This Code applies to all Company personnel and all employees receive a copy of our Code. Violation of this Code of Conduct is basis for dismissal from the Company. The Code and compliance activities hereunder are overseen by a corporate compliance committee consisting of the most senior business and legal officers of the Company. These compliance activities are supported by the Company’s commitment to sound ethical practices and a mission statement that places “unquestionable integrity” as the guiding core value of our Company.

 

The Company continues to monitor and review its policies to ensure that the principles set forth above are appropriately implemented and to address new concerns or issues that arise by our participation in a global marketplace whose standards continue to evolve.

 

In sum, the Company believes that its existing corporate practices including programs and activities to ensure compliance with applicable legal requirements, existing corporate social responsibility programs, our dedication to improving the health and welfare of the communities in which we operate, and our manufacturing initiatives that reduce the impact that our operations have on the environment adequately address the matters raised by the proposal. Therefore, conducting a special review and preparing a sustainability report are unnecessary, and an ineffective use of the Company’s funds. The time and expense that would be incurred would divert personnel and resources from our business and operations, including the sustainability activities described above, and would not be in the best interests of our stockholders.

 

The proposal to request the Company’s Board to prepare a Sustainability Report will be approved 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 as it is a share represented by proxy and entitled to vote. 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 AGAINST THE PROPOSAL TO ISSUE A SUSTAINABILITY REPORT.

 

The following table sets forth certain information with respect to all persons or groups known by the Company to be the beneficial owners of more than 5% of its outstanding Common Stock as of March 17, 2008.

 

 

 

 

The following table sets forth information regarding the beneficial ownership of the Company’s Common Stock as of March 17, 2008 held by (i) the Company’s chief executive officer, chief financial officer and the other named executive officers, (ii), each director and nominee for director and (iii) all directors and executive officers of the Company as a group (based on 148,791,129 shares of Common Stock outstanding as of such date).

 

 

 

 

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 persons required to file reports, the Company believes that during fiscal 2007, all such persons complied with all applicable filing requirements, except that, Form 4s were filed late for Brian Addison, Christopher Clark, William Jellison, Rachel McKinney, James Mosch, Robert Size, Timothy Warady and Bret Wise for a grant of Restricted Stock Units (RSUs) in February 2007 and their annual SERP allocation in March 2007. Also, one report was filed late for each director to report the application of the quarterly dividend in October 2007 to their existing RSUs.

 

The Human Resources Committee is comprised of three directors, all of whom are independent under the listing standards of the NASDAQ Stock Market, Inc. (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. The Compensation Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis section of this Proxy Statement. Based on such review and discussions, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. The Compensation Discussion and Analysis is incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

 

HUMAN RESOURCES COMMITTEE

 

 

Role of the Human Resources Committee

 

The Human Resources Committee of the Board of Directors (the “Committee”) administers the Company’s executive compensation program. The role of the Committee is to oversee DENTSPLY’s compensation plans and policies, administer its equity incentive plans (including reviewing and approving equity grants to executive officers) and annually review and approve all compensation decisions relating to executive officers, including those for the Chief Executive Officer (“CEO”) and the other executive officers named in the Summary Compensation Table (the “Named Executive Officers”). The Committee reviews and approves, among other things, salary increases for the Company’s Named Executive Officers, the structure of the Company’s Annual Incentive Plan, including annual performance objectives for the Named Executive Officers; and the structure and actual grants of awards under the Company’s equity incentive programs. The Committee reviews with the Board its decisions regarding compensation for the CEO, and if it determines appropriate, seeks ratification by the Board.

 

The Committee is assisted in its work by the Company’s Corporate Human Resources Department. In addition, with respect to the compensation established for the Named Executive Officers for 2007, the Committee engaged an independent compensation consultant, Towers Perrin, to advise on matters related to CEO and other executive compensation.

 

As part of the review of the CEO’s compensation, the Committee reviews and approves goals and objectives relevant to the compensation of the Company’s CEO, evaluates the CEO’s performance with respect to those goals and objectives and determines, either as a committee or together with the Board of Directors, the CEO’s total compensation level based on such evaluation. The Committee also reviews and approves compensation and incentive arrangements (including performance-based arrangements and bonus awards under the Annual Incentive Plan) for the Company’s other Named Executive Officers (as well as such other employees of the Company as the Committee may determine from time to time to be necessary or desirable) and the grant of awards pursuant to the Company’s Equity Incentive Plan.

 

General Compensation Philosophy and Objectives

 

The Committee’s compensation philosophy is to provide a compensation package that is designed to satisfy the following principal objectives:

 

 

The Committee believes that compensation paid to the Company’s executive officers should be competitive with the market, be aligned with the performance of the Company on both a short-term and long-term basis, take into consideration individual performance of the executive, and assist the Company in attracting and retaining key executives critical to the Company’s long-term success. The Company’s executive compensation program balances a level of fixed compensation with incentive compensation that varies with the performance of the Company and the individual executive. The Company’s base pay and benefit programs for executives provide basic economic security at a level that is consistent with the market for executive management and competitive compensation practices. The annual and long-term incentive compensation programs reward performance measured against goals and standards established by the Committee, and are designed to encourage executives to increase shareowner value by focusing on growth in revenue and earnings, generation of cash flow and efficient deployment of capital, leading to increasing the Company’s stock price.

 

Other objectives of the total compensation program are to provide: the ability for executives to accumulate capital, predominantly in the form of equity in the Company, in order to align executive interests with those of the shareowners; a competitive level of retirement income; and, in the event of special circumstances, such as termination of employment in connection with a change in control of the Company, special severance protection to help ensure executive retention during the change in control process and to ensure executive focus on serving the Company and shareowner interests without the distraction of possible job and income loss.

 

In furtherance of the philosophy and objectives discussed above, the Committee has determined that the total compensation program for executive officers should consist of the following components:

 

 

Determination of Executive Compensation

 

The Company focuses annually on developing a total remuneration level for executives that is intended to be externally competitive and meet the Company’s compensation objectives. Salary ranges, annual bonus plan targets and equity compensation targets are developed using a ”total remuneration” perspective.

 

Generally speaking, the Company designs its compensation programs such that there is a correlation between level of position and degree of risk. Based on that guiding principle, the Company’s more senior executives with the highest levels of responsibility and accountability have a higher percentage of their total potential remuneration at risk, i.e., incentive and equity compensation, than do employees with lower levels of responsibility and accountability. This means that a higher proportion of their total potential compensation is based upon variable incentive pay and equity compensation, than is the case with the Company’s employees with lower levels of responsibility and accountability.

 

In establishing the Company’s current executive compensation policies, compensation programs and awards, the Committee reviewed, for purposes of market comparison, the levels of current compensation at companies of similar size as the Company, using compensation surveys provided by Towers Perrin. In November 2006, competitive data was developed by Towers Perrin, using a Towers Perrin database of compensation surveys. The database used by Towers Perrin in 2006 was comprised of one hundred and ninety-six comparator companies generating annual revenues of $1 billion to $3 billion (“Peer Group”) and included the companies set forth in Appendix A to this proxy statement. This data from the Peer Group is considered by the Committee and compared with the compensation of the Company’s executive officers in evaluating the amount and proportions of base pay, annual incentive pay and long-term compensation, as well as the targeted total compensation value. In reviewing

executive officers’ compensation, the Committee also considers recommendations from the CEO regarding total compensation for other executive officers. The Towers Perrin report provides to the Committee historical and prospective total compensation components for each executive officer as compared to the Peer Group. Base pay and annual incentives are targeted to a range around the 50th percentile, and long-term incentives are targeted to a range around the 75th percentile of the Peer Group, subject to individual performance and experience factors of each executive officer. The Committee does not consider the overall wealth accumulation or prior compensation of executives in establishing the current level of compensation, except to the extent the prior year’s compensation is considered in the comparative analysis described above.

 

Determination of Annual Base Salaries

 

In establishing base salaries of the Company’s executives, the Committee strives to reflect the external market value of a particular role as well as the experiences and qualifications that an individual brings to the role. The primary purpose of the base salaries is to pay a fair, market competitive rate in order to attract and retain key executives. Base salary adjustments are generally made annually and have in the past been awarded based on individual performance, level of responsibilities, competitive data from the Peer Group, employee retention efforts, the Company’s overall guidelines and annual salary budget guidelines. Base salaries are targeted to a range around the 50th percentile of the base pay paid by the Peer Group for a comparable role, in order to ensure that the Company is able to compete in the market for outstanding employees without unduly emphasizing fixed compensation.

 

The starting point for the Committee in establishing base salaries and annual incentive awards is to review the total annual cash compensation of the executive officers with the total annual cash compensation for comparable positions in the Peer Group. In determining the total annual cash compensation of the executive officer, the Committee establishes a comparative base salary and what the annual incentive awards would be at the 100% target achievement level. Once the Committee establishes the appropriate range for base salaries relative to comparable positions reflected in the Peer Group, the Committee adjusts the base salary of the individual executive officer based on consideration of several factors, including individual performance, Company performance, the experience level of the executive, the nature and breadth of the executive’s responsibilities, and the desire to minimize the risk of losing the services of the executive to another company. Total direct compensation in relation to other executives, as well as prior year individual performance and performance of the business lines for which the executive is responsible, are also taken into consideration in determining any adjustment. The base salaries of the executive officers were reviewed in December 2006 in connection with the review of total compensation and changes were made effective at the beginning of 2007. Because target annual incentive award levels are set as a percentage of salary, increases in salary also affect the annual cash incentive award opportunity. At its meeting in December 2006, the Committee approved base salaries for the named executive officers for 2007 as follows:

 

Bret W. Wise, Chairman of the Board, Chief Executive Officer and President — $700,000

 

Christopher T. Clark, Executive Vice President and Chief Operating Officer — $450,000

 

William R. Jellison, Senior Vice President and Chief Financial Officer — $383,000

 

James G. Mosch, Senior Vice President — $342,000

 

Brian M. Addison, Vice President, Secretary and General Counsel — $331,000

 

Determination of Annual Incentive Awards

 

As discussed above in the section on General Compensation Philosophy and Objectives, the Committee believes it is important to have a portion of the executive’s total annual cash compensation tied to the short-term (annual) performance of the Company and its executives. It is intended that this component of the total compensation of executives be competitive with the market, but also reward executives for good performance and reduce the targeted compensation opportunity for performance that fails to meet the objectives established by the Committee. The Committee believes this helps to align the compensation and objectives of the executives with the Company and its shareholders. Annual incentive awards are determined as a percentage of each executive’s base salary. The Committee determines the general performance measures and other terms and conditions of awards for executives covered under the Company’s annual incentive program, and the weight attributable to each performance goal for

the Named Executive Officers. For executives below the level of the Named Executive Officers, the CEO and other executives establish the performance objectives and weighting based on direction provided in the Annual Incentive Plan.

 

The Committee annually reviews and establishes targets for annual bonus payouts to be applicable for the performance year. These targets are generally established in the fourth quarter of the year preceding or at the beginning of the performance year. In establishing the target payouts, the Committee evaluates the compensation levels in the Peer Group. The Committee establishes performance targets for the executive officers, which if achieved at the 100% level, would result in annual bonuses that, in combination with base salary, are competitive in the 50th percentile range with the total annual compensation of comparable positions in the Peer Group. If the Company exceeds the targets established by the Committee, the executives will be rewarded with higher annual bonuses and if the Company falls below the targets, the executive’s bonuses will be reduced below the 100% target level. The general principle in setting targets and measuring performance is that management is responsible and accountable for the financial results of the Company as measured based on United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”) consistently applied. The annual incentive plan provides that the Committee may adjust the GAAP results to address unique or significant events, such as the impact of merger and acquisition activity, charges related to settlement of litigation, unbudgeted restructuring expenses or gains, interest carrying costs related to unbudgeted share repurchases, and the impact of significant or non- recurring unbudgeted one-time gains or losses, that were not considered in the targets set for the year, are not reflective of current operations, or benefit future periods.

 

As noted earlier, the Committee believes that employees in higher ranks should have a higher proportion of their total compensation delivered through pay-for-performance cash incentives; as a result, their total annual compensation will be more significantly correlated, both upward and downward, to the Company’s performance. The variability of the cash compensation of the Company’s executives is closely linked to annual financial results of the Company, delivering lower-than-market total cash compensation in times of poor financial performance and higher total cash compensation when the Company performs well. Consistent with this principle, for 2007, the bonus targets for the named Executive Officers ranged from 50 to 100% of base salary depending on the executive’s position, as set forth below.

 

Bret W. Wise, Chairman, Chief Executive Officer and President — 100%

 

Christopher T. Clark, Executive Vice President and Chief Operating Officer — 75%

 

William R. Jellison, Senior Vice President and Chief Financial Officer — 55%

 

James G. Mosch, Senior Vice President — 55%

 

Brian M. Addison, Vice President, Secretary and General Counsel — 50%

 

As noted above, the actual annual incentive awards are based on an executive’s performance against objectives established by the Committee. Generally, the Committee expects awards, in the aggregate, to range from 90% to 110% of target. Awards may range from no award being earned to 200% of target, although attainment at the maximum award level is not expected. Awards, for the positions of the Named Executive Officers over the last three years have ranged from 93.6% to 145.5% of target. The key performance measures for the Named Executive Officers are targets for the Company’s net income and internal sales growth. In the case of operating executives who have responsibility for certain businesses, in addition to the targets for the Company’s income and sales growth, a portion of their annual target is comprised of the operating income and internal sales growth of those businesses. The targets for net income and internal sales growth are evaluated in conjunction so that minimal levels of achievement must be met on both targets in order for any incentive award to be paid. The Committee establishes objectives for net income and internal sales growth which it believes is challenging but fair and consistent with the executive compensation objectives described above. If the objectives are met the Company will produce better than market results which should translate into greater shareholder returns. The targets for 2007 at 100% for the Named Executive Officers, other than Mr. Mosch, who has direct operating segment responsibility, were internal sales growth of 5% and corporate net income of $244.5 million. 50% of Mr. Mosch’s objectives were based on the same objectives as the other Named Executive Officers and the other 50% was based on the sales growth and income from operations of the operating segment for which Mr. Mosch had responsibility. The Company believes it would be

competitively harmful to disclose the operating segment objectives as that would enable competitors to identify what the financial targets and business strategies are for certain specific operating businesses. The targets for the operating segments are set based on the projected budgets for the operating businesses and are meant to be challenging and which, if met, would result in the operating business outperforming its competition in the market.

 

At its February 2008 meeting, the Committee reviewed the performance of the Company and its executives with respect to objectives to determine whether the Named Executive Officers had met or exceeded the 2007 performance goals. Annual cash incentive awards are determined by multiplying the results for each performance objective by the target award opportunity for each Named Executive Officer as described above, and then multiplied by the base salary as of December 31, 2007, the end of the performance period.

 

The target net income used for annual incentive objective purposes is corporate reported net income, net of specific items as described above. The items that were excluded from reported net income for 2007 were unbudgeted restructuring and other costs, the impact of unbudgeted acquisitions, interest carrying costs on unbudgeted share repurchases, and the favorable impact of the change in the corporate tax rate in Germany.

 

Based on the Committee’s assessment of the performance of the Named Executive Officers and the Company, the Named Executive Officers were paid bonuses at the percent of target as set forth below:

 

Bret W. Wise, Chairman, Chief Executive Officer and President — 145.5%

 

Christopher T. Clark, Executive Vice President and Chief Operating Officer — 145.5%

 

William R. Jellison, Senior Vice President and Chief Financial Officer — 145.5%

 

James G. Mosch, Senior Vice President — 160.4%

 

Brian M. Addison, Vice President, Secretary and General Counsel — 145.5%

 

Long-Term Incentive Compensation

 

The third principal component in total compensation for the Company’s executives is the award of stock options and restricted stock units (“RSUs”) under the Company’s Equity Incentive Plan.

 

The Committee believes that long-term incentive compensation serves an essential purpose in attracting and retaining senior executives and providing them long-term incentives to maximize shareholder value. We also believe that long-term incentive awards align the interests of the executive officers with those of our shareowners. Long-term incentive awards for executive officers are made generally annually, as part of the “total remuneration” approach to executive compensation, under the shareholder-approved Amended and Restated Dentsply Equity Incentive Plan. The long-term incentive program is designed to reward mid- and long-term performance and is currently comprised of two components:

 

 

A stock option becomes valuable only if DENTSPLY’s stock price increases above the option exercise price and the holder of the option remains employed for the period required for the option to vest. This provides an incentive for an option holder to remain employed by DENTSPLY and to maximize shareholder value. The Committee believes that equity-based compensation ensures that the Company’s executive officers have a continuing stake in the long-term success of the Company and is most closely aligned with the interest of shareholders. For this reason, the Committee has placed more emphasis and weight on the long-term equity incentive portion of the total compensation of executives, targeting the equity incentive compensation at a range around the 75th percentile of the Peer Group.

 

Historically, the Company’s equity incentive has been comprised of stock options which are granted at the Board meeting in December of each year as well as to newly hired executives at the Committee meeting which follows the executive’s employment date. Stock options are granted at the closing price on the day of the grant and accordingly, will have value only if the market price of the Company’s common stock increases after the grant date.

As a result, stock option awards are designed to reward executives for increases in the Company’s stock price. Stock option grants become exercisable over three years — one-third at the end of each year following grant — and are exercisable for ten years from the grant date, subject to earlier expiration in the event of termination of employment or retirement. Under the terms of the Company’s Equity Incentive Plan, RSUs and unvested stock options are forfeited if the executive voluntarily leaves prior to a qualified retirement.

 

During 2006, the Committee performed a comprehensive review of the use and value of the Company’s Equity Incentive Program with respect to executive officer compensation programs. As a result of this review, the Committee decided to utilize, beginning in 2007, RSUs as part of the Company’s equity incentive program, in addition to stock options. The Committee believes that the use of RSUs as part of the Company’s equity compensation program is more consistent with current market practices, provides a greater opportunity for executives to build share ownership in the Company, provides an incentive for executives to remain with the Company and provides an equity vehicle that allows DENTSPLY to attract, motivate and retain the employee talent considered critical for achieving the Company’s goals.

 

Determination of Stock Option and RSU Grants

 

Guidelines for the size and type of awards are developed based upon, among other factors, shares available for grant under the Equity Incentive Plan, the executive’s position in the Company, his or her contributions to the Company’s objectives and total compensation, as compared to the Peer Group. Larger equity awards are made to more senior executives so that a larger portion of their total potential compensation will be variable and will increase upon shareholder value creation. In determining the size of equity incentive grants to executive officers, the Committee targets a range around the 75th percentile of the Peer Group for persons holding comparable positions. The Committee then takes into consideration the Company’s performance against its business and financial objectives and its strategic plan, and individual performance, as well as the allocation of overall share usage attributed to executive officers. With respect to the number of RSUs granted, the Committee focuses, in particular, on the performance of the Company over the prior three years, primarily based on performance of executives relative to objectives under the Annual Incentive Plan. Once the RSU grant target for each executive is established it may be adjusted up or down based on performance of the Company against the objectives under the Annual Incentive Plan for the prior three years, and the Company’s progress toward certain strategic objectives.

 

For stock option grants in December 2007 and grants of RSUs in February 2007, 70% of the expected value target established by the Committee was converted to an estimated number of stock options, and the remaining 30% of value was converted to RSUs. The split between stock options and RSUs was based both on comparisons to the market and the overall risk/reward tradeoff. With respect to the RSUs, the Committee considered the performance of the Company against the annual objectives for the past three years and progress by the Company against strategic objectives. Based on this review, the Committee determined that RSU grants in February 2007 should be made at 100% of targeted levels. In this determination, the Committee weighed heavily the progress made in 2007 against both established earnings and sales targets and strategic objectives.

 

While equity awards under the Equity Incentive Plan generally involve no immediate cash cost, the Company does recognize expense for such awards in accordance with Statement of Financial Accounting Standards (”SFAS”) No. 123(R), ”Share-Based Payment” (”SFAS No. 123(R)”).

 

Equity Grant Practices

 

The Committee reviewed the Company’s practices for equity incentive grants. The grant date utilized for annual and other grants is always on the date the Committee or the Board approves the grants. Stock options are granted with an exercise price equal to the closing price on the day of the grant and with RSUs the recipient is granted a right to a specified number of shares.

Post-Termination Arrangements

 

Termination of Employment

 

The Company has entered 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 other than in a change of control of the Company (as defined in the agreements) without cause, or by the employee with good reason, (i) the Company will be obligated to pay the employee, for a period of two years subsequent to termination of employment, all compensation at the base salary rate immediately preceding the termination, and (ii) the employee will be entitled to receive the benefits that they would have accrued during the two-year period following termination under employee benefit plans, programs or other arrangements of the Company or any of its affiliates in which the employee participated before their termination.

 

The amounts that each Named Executive Officer would receive in the event of a termination described above is set forth in the Potential Payment Upon Termination or Change in Control tables below.

 

Termination following Change-in-Control

 

The Committee believes executive officers, including all the Named Executive Officers, who are terminated or elect to resign for “good reason” (as defined in the employment agreements) in connection with a change in control (as defined in the employment agreements) of the Company should be provided separation benefits. These benefits are intended to ensure that executives focus on serving the Company and shareholder interests during a change in control transaction or activity without the distraction of possible job and income loss.

 

The Company’s change-in-control benefits are consistent with the practices of companies with whom DENTSPLY competes for talent, and are intended to assist in retaining executives and recruiting new executives to the Company. As of the close of a transaction that results in a change in control of DENTSPLY, all outstanding equity grants awarded as part of the Company’s equity incentive compensation program become available to executives, that is, restrictions on all outstanding restricted stock units lapse and all non-exercisable stock options become exercisable. In the event that a termination of employment is made by the Company without cause or by the employee with good reason within a period of two (2) years after a change in control of the Company, the Company is required to pay to the Named Executive Officers, within five days after the employee’s termination (subject to the requirements of Section 409A(a)(2)(B) of the Internal Revenue Code), the benefits described in the Potential Payment Upon Termination or Change in Control tables below.

 

Retirement and Other Benefits

 

The Company also maintains standard benefits that are consistent with those offered by other major corporations and are generally available to all of the Company’s full time employees (subject to meeting basic eligibility requirements).

 

DENTSPLY offers retirement benefits to its U.S. employees through tax-qualified plans, including an employee and employer-funded 401(k) Savings Plan and a discretionary company-funded Employee Stock Ownership Plan (“ESOP”). The Committee allows for the participation of the executive officers in these plans, and the terms governing the retirement benefits under these plans for the executive officers are the same as those available for other eligible employees in the U.S. Similarly situated employees, including DENTSPLY’s executive officers, may have materially different account balances because of a combination of factors: the number of years that the person has participated in the plan; the amount of money contributed, and the investments chosen by the participant with regard to those plans providing for participant investment direction. These plans do not involve any guaranteed minimum returns or above-market returns as the investment returns are dependent upon actual investment results. Employees direct their own investments in the 401(k) Savings Plan. The ESOP is a defined

contribution plan designed to allow employees, including executive officers, to accumulate retirement accounts through ownership of Company stock, and to allow DENTSPLY to make contributions or allocations to those funds.

 

DENTSPLY’s healthcare, insurance, and other welfare and employee-benefit programs are the same for all eligible employees, including the Named Executive Officers. DENTSPLY shares the cost of health and welfare benefits with its employees, a cost that is dependent on the level of benefits coverage that each employee elects. The Company also provides other benefits such as medical, dental and life insurance to each Named Executive Officer, in a similar fashion to those provided to all other U.S.-based DENTSPLY employees.

 

The Company maintains a very limited number of benefit programs that are only available to the Named Executive Officers and other senior employees qualifying for eligibility based on salary grade level. Such benefits include a Supplemental Executive Retirement Plan (“SERP”) and the Dentsply Supplemental Savings Plan (“DSSP”). The purpose of the SERP is to provide additional retirement benefits for a limited group of management employees, including the Named Executive Officers, whom the Board concluded were not receiving competitive retirement benefits. The Committee annually approves participants in the SERP. Contributions equal to 11.7% of total annual compensation, reduced by Company contributions to the ESOP and 401(k) plans, are allocated to the participant’s accounts. No actual benefits are put aside for participants in the SERP 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 savings with interest or stock unit accounts, with stock units being distributed in the form of common stock at the time of distribution. Upon retirement or termination for any reason, participants in the SERP are paid the benefits in their account based on an earlier distribution election.

 

Effective January 1, 2008, the Company adopted the DSSP. This is a deferred compensation plan that allows management employees of the Company, including the Named Executive Officers, to defer a portion of their base salary and annual incentive bonus for payment at a future time, as elected by the participant. Deferred amounts are not funded by the Company but are a general obligation of the Company to administer and pay as set forth in the DSSP. The Plan is administered by T. Rowe Price, the Administrator of the Company’s retirement plans, and participants have the right to elect investment options for the deferred funds, which are tracked by the Administrator.

 

Stock Ownership Guidelines

 

Because the Committee believes in further linking the interests of management and the shareholders, the Company maintains stock ownership guidelines for its executives. The guidelines specify the number of shares that DENTSPLY’s executive management should accumulate and hold within six (6) years of the date of appointment to the executive position. “Stock ownership” is defined to include stock owned by the officer directly, stock owned indirectly through the Company’s retirement Plans, and stock awarded pursuant to the equity incentive program, other than stock options. Under the current guideline established by the Committee, executives are required to own Company common stock equal in value to a multiple of their base salary, as set forth below:

 

 

All Named Executive Officers in their positions for at least six (6) years were in compliance with the Stock Ownership Guidelines as of the end of 2007.

 

Tax Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Tax Code”), places a limit of $1,000,000 on the amount of compensation that the Company may deduct in any one year with respect to the Named Executive Officers. There is an exception to the $1,000,000 limitation for performance-based compensation meeting certain requirements. Stock option incentive awards generally are performance-based compensation meeting those requirements, and, as such, are believed to be fully deductible. The Committee generally seeks ways to limit the impact of Section 162(m), however, the Committee believes that the tax deduction limitation should not compromise our ability to establish and implement incentive programs that support the compensation objectives discussed above. Accordingly, achieving these objectives and maintaining required flexibility in this regard may result in compensation that is not deductible for federal income tax purposes. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Committee has not adopted a policy requiring all compensation to be deductible. The Committee has established a performance goal for the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer for the vesting of their RSUs granted in 2007, requiring the Company to be profitable over the three year vesting period, consistent with the performance based requirements established by 162(m).

 

Summary Compensation

 

The following table sets forth the compensation earned by the named executive officers for the fiscal year ended December 31, 2007. The named executive officers are the Company’s chief executive officer, chief financial officer, and three other most highly compensated executive officers ranked in the table below by their total compensation.

 

Summary Compensation Table
For Fiscal Year End December 31, 2007

 

 

 

 

Refer to the Compensation Discussion and Analysis section for a complete description of the components of compensation, along with a description of the material terms and conditions of each component.

 

For the named executive officers, salary compensation as a percentage of total compensation are as follows: Mr. Wise — 16.0%, Mr. Jellison — 28.7%, Mr. Clark — 22.5%, Mr. Mosch — 28.8%, and Mr. Addison — 33.0%

 

Grants of Plan-Based Awards

 

The following table reflects the terms of compensation plan-based awards granted to Named Executive Officers in 2007.

 

2007 Grants of Plan-Based Awards

 

 

 

 

The grant date of stock and option awards is always on the date the Human Resources Committee or the Board of Directors approves the grants. Stock options are granted with an exercise price equal to the closing price on the day of the grant.

 

Outstanding Equity Awards at Year End

 

The following table reflects the number and terms of stock option awards and stock awards outstanding as of December 31, 2007 for the named executive officers.

 

Outstanding Equity Awards at Fiscal Year End