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)

Payment of Filing Fee (Check the appropriate box):

þ		No fee required.
o		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:
	(2)		Aggregate number of securities to which transaction applies:
	(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):
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

o		Fee paid previously with preliminary materials.
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.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

LOGO

DENTSPLY International Inc.

World Headquarters

Susquehanna Commerce Center

221 W. Philadelphia Street

York, PA 17405-0872

(717) 845-7511

Fax (717) 854-2343

 

 

April 13, 2007

 

 

Dear DENTSPLY Stockholder:

 

You are cordially invited to attend the 2007 Annual Meeting of Stockholders to be held on Tuesday, May 15, 2007, 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, President, and
Chief Executive Officer

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 15, 2007

 

 

The Annual Meeting of Stockholders (the “Annual Meeting”) of DENTSPLY International Inc., a Delaware corporation (the “Company”), will be held on Tuesday, May 15, 2007, 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 III 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, 2007;

 

3. To approve amendments to the Company’s 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 27, 2007 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 13, 2007

 

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 2007 Annual Meeting of Stockholders (together with any and all adjournments and postponements thereof, the “Annual Meeting”) to be held on Tuesday, May 15, 2007, 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 13, 2007.

 

The Board of Directors (“the Board”) fixed the close of business on March 27, 2007 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 152,006,639 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”).

 

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 III directors expires at the Annual Meeting. The terms of the Class I and Class II directors will expire at the 2008 and 2009 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 III directors are nominees for election to the Board this year for a three-year term expiring at the 2010 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 III 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 III directors and each continuing Class I and Class II director.

 

Nominees for Election as Class III Directors

 

Directors Continuing as Class I Directors

 

 

Directors Continuing as Class II Directors

 

Votes Required

 

The Class III 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 III 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, 2007.

 

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 2006 and 2005, and are categorized in accordance with the SEC’s rules on auditor independence as follows:

 

 

 

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 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 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 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.

 

 

 

AMENDMENT TO THE 2002 AMENDED AND RESTATED EQUITY INCENTIVE PLAN TO ELIMINATE AUTOMATIC STOCK OPTION GRANTS TO OUTSIDE DIRECTORS AND TO INCLUDE PERFORMANCE CRITERIA WITH RESPECT TO THE GRANT OF PERFORMANCE-BASED RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

We are asking stockholders to approve an amendment to our 2002 Amended and Restated Equity Incentive Plan (the “Plan”) to eliminate automatic stock option grants to members of the Company’s Board of Directors who are not employees of the Company (“Outside Directors”) and to incorporate specific performance-based criteria with respect to the grant of restricted stock and restricted stock units.

 

Elimination of Automatic Grant Program

 

The Plan currently provides that Outside Directors automatically receive a nonqualified stock option grant upon first joining the Board, and an additional option grant every three years thereafter that they continue to serve as an Outside Director (or an equivalent grant of restricted stock, restricted stock units, or stock appreciation rights). The Company’s Board of Directors recently retained an independent compensation consultant, Towers Perrin, to provide it with information and recommendations concerning current market and peer-company practices in compensating non-employee directors, including stock-based compensation. Based on such information and recommendations, the Company’s Board of Directors has determined that it would be in the best interest of the Company and its stockholders to eliminate these automatic grants and to provide instead that grants under the Plan to Outside Directors, like grants to Key Employees, consultants and advisors, would be made in the discretion of the Human Resources Committee of the Board of Directors.

 

The full text of the amendments to the Plan are set forth in Appendix A to this Proxy.

 

Inclusion of Performance Criteria

 

Section 162(m) of the Code (“Section 162(m)”) disallows a Federal income tax deduction to a publicly held company for compensation that is paid to its chief executive officer, chief financial officer and its three other most highly compensated executive officers (“covered employees”) to the extent such compensation exceeds $1,000,000 annually. The limitation does not apply to compensation that qualifies as “performance-based” under regulations promulgated under Section 162(m). Among other requirements, performance-based compensation is compensation that is paid solely on account of one or more pre-established, objective performance goals, the material terms of which have been disclosed to and approved by the stockholders of the publicly held company.

 

The Board has determined that the Company should preserve its ability to deduct the amount of compensation paid to its covered employees to the extent practicable. Accordingly, the Board is recommending that stockholders approve the material terms of performance goals that the Human Resources Committee may apply to grants of restricted stock and restricted stock units so that such awards qualify as “performance-based” for purposes of Section 162(m). If stockholders approve the amendment, the Human Resources Committee may grant restricted

stock and restricted stock unit awards subject to the attainment of performance goals in addition to, or in lieu of, time-based vesting conditions.

 

The performance goals are described in detail in Paragraph 9 of the amendments to the Plan in Appendix A. Under the plan no more than two million (2,000,000) shares may be awarded as restricted stock or restricted stock units, and in any calendar year no key employee may be granted restricted stock and restricted stock units in excess of 150,000 shares of common stock.

 

If stockholders approve the amendment, subject to compliance with other factors that must be met to satisfy the performance-based compensation requirements, the Company will be able to fully deduct compensation that is paid to its covered employees in the form of restricted stock and restricted stock units upon the attainment of specified performance measures. The Company can currently fully deduct compensation that is paid to its covered employees in the form of stock options and stock appreciation rights since the plan was structured to comply with the performance-based requirements applicable to such awards.

 

The following is a summary of the principal features of the Plan with the proposed Amendments.

 

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”), members of the Board who are not employees of the Company (“Outside 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.”

 

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 Awards 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.

 

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 to Key Employees, or options which do not meet such requirements (“Nonqualified Options” or “NSOs”), to Key Employees or Outside Directors of, or consultants or advisors to, 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. 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); (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 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 under the Plan.

 

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, including performance requirements established by the Committee. 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 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).

 

Effect of Termination of Employment or Service

 

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 or service on the Board 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 or to provide service to 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.

 

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.

 

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 and Outside Directors 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 Outside Directors, Key Employees or groups of Key Employees under the Equity Incentive Plan.

 

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.

 

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.

 

YOU ARE NOT BEING ASKED TO APPROVE ANY ADDITIONAL SHARES FOR ISSUANCE
UNDER THE PLAN.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE AMENDMENTS TO THE 2002 EQUITY INCENTIVE PLAN.

 

 

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 27, 2007.

 

 

 

The following table sets forth information regarding the beneficial ownership of the Company’s Common Stock as of March 27, 2007 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 152,006,639 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 the persons, the Company believes that during fiscal 2006, all such persons complied with all applicable filing requirements, except that, one report was filed one day late in connection with the allocation of phantom stock to the Director’s deferred compensation account of Mr. Eric Brandt.

 

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 stock 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 its decisions regarding compensation for the CEO with the Board, 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, the Committee engages an independent compensation consultant, Towers Perrin, to advise on matters related to CEO and other executive compensation.

 

General Compensation Philosophy

 

The Committee believes that compensation paid to 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 that such compensation should assist the Company in attracting and retaining key executives critical to the Company’s long-term success. The Company’s base pay and benefit programs provide basic economic security for our employees at a level consistent with competitive practices to help retain a highly skilled and qualified workforce. The annual and long-term incentive compensation programs are designed to reward performance measured against goals and standards established by the Committee, and to encourage executives to increase shareowner value by focusing on growth in revenue and earnings, generation of cash flow and efficient deployment of capital, as well as increasing the Company’s stock price. In furtherance of these objectives, the Committee has determined that the total compensation program for executive officers should consist of the following components:

 

 

The executive compensation program in general is intended to reward executive officers for individual performance and performance of the Company relative to objectives established by the Committee. 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 which have similar attributes as the Company using compensation surveys provided by Towers Perrin, an independent compensation consultant. The database used by Towers Perrin is comprised of 196 comparator companies generating annual revenues of $1 billion to $3 billion (“Peer Group”). This data from the Peer Group is considered by the Committee in determining the 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 executive officers. The compensation consultant 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 50^th percentile, and long-term incentives are targeted to a range around the 75^th percentile of the Peer Group, subject to individual performance and experience factors of the executive officers. 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 compensation is considered in the comparative analysis described above.

 

Base Salaries and Annual Incentive Awards

 

Base Salaries 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 Salaries are targeted to a range around the 50^th percentile of the base pay paid by the Peer Group for a comparative 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 retain and risk of losing the services of the executive to another company. The Base Salaries of executive officers are generally reviewed by the Committee in the fourth quarter of each year in connection with the review of total compensation and changes are made effective at the beginning of the following year.

 

Annual Incentive Awards

 

The Committee believes it is important to have a portion of 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. The Committee believes this helps to align the compensation and objectives of the executives with the Company and its shareholders. 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 annual bonus payouts will exceed the 50th percentile and if the Company falls below the targets, the annual bonuses will be less than the 50th percentile of the Peer Group. The general principle in setting targets and measuring performance are that management is responsible and accountable for results as measured based on U. S. GAAP, consistently applied, however, the Committee may adjust the targets or the payouts in its discretion to address unique or significant events, such as the impact of merger and acquisition activity, charges related to settlement of litigation, asset write-downs and unbudgeted restructuring expenses or gains, and the impact of significant or non-recurring unbudgeted one-time gains or losses, that are either outside the control of management, are not reflective of current operations, or benefit future periods.

 

Annual incentive awards are determined as a percentage of each executive’s base salary. The Committee determines the performance measures and other terms and conditions of awards for executives covered under the Company’s Annual Incentive program. Performance measures include targets for net income, sales growth for the Company and, in the case of operating executives who have responsibility for certain businesses, the net income and sales growth of those businesses. The Committee believes that employees in higher ranks should have a higher proportion of their total compensation delivered through pay-for-performance cash incentives and long-term equity compensation; as a result, their total compensation will be more significantly correlated, both upward and downward, to DENTSPLY’s financial performance and stock price performance. For example, the CEO’s annual incentive award at the target level is 100% of base salary and the COO’s annual incentive award at the target level is 75% of base salary. The variability of the cash compensation of the Company’s executives is closely linked to annual financial results, delivering lower-than-market total cash compensation in times of poor financial performance. Conversely, in times of excellent performance, compensation variability yields higher total cash compensation, rewarding the executives for such performance. The Annual Incentive payments are not directly linked to DENTSPLY’s stock price performance. For 2006, the bonus targets for executives ranged from 50% to 100% of Base Salary depending on the executive’s position.

 

Long-Term Incentive Compensation

 

The Committee believes that long-term incentive compensation performs an essential role in attracting and retaining senior executives and providing them long-term incentives to maximize shareholder value. Historically, DENTSPLY has relied primarily on stock options for its long-term incentive program. 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. If shareholder value grows through appreciation of the stock price, the compensation of the Company’s executives will reflect that stock performance. 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, at the closing price on the day of the grant. Accordingly, those stock options will have value only if the market price of the Company’s common stock increases after that date.

 

During 2006, the Committee reviewed the use and value of the equity program with respect to executive officer compensation programs. The Committee retained Towers Perrin to assist with this review. Working with Towers Perrin, the Committee did a comprehensive review and evaluation of current market practices with respect to equity compensation. In this review, the Committee considered the new accounting requirement that companies expense stock option grants and the changing perceptions of the advantages and disadvantages of stock option based equity compensation. As a result of this review, the Committee decided to utilize, beginning in 2007, restricted stock units (“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 and provides an equity vehicle that allows DENTSPLY to attract, motivate and retain the employee talent considered critical for achieving the Company’s goals.

 

In determining the size of equity incentive grants to executive officers, the Committee targets a range around the 75^th percentile of the Peer Group companies for persons holding comparable positions. The Committee then takes into consideration the Company’s performance against the strategic plan, and individual performance against the individual’s objectives, 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. For stock option grants in December 2006 and grants of RSUs in 2007, seventy percent of the value was converted to a number of stock options using an estimated Black-Scholes value, and the remaining 30% of value was converted to RSUs on the basis of a restricted stock unit deemed to be equivalent in value to three stock options. The split between stock options and RSUs was based both on comparisons to the market and the overall risk/reward tradeoff, with stock options providing compensation based solely upon increases in the Company’s stock price and RSUs providing compensation based both upon accomplishment of corporate performance goals as well as enhancement of the stock value.

 

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.

 

Total Compensation

 

The Company intends to continue its strategy of compensating its executives through programs that recognize market conditions and emphasize performance-based incentive compensation. To that end, executive compensation is structured to ensure that there is an appropriate balance between the long-term and short-term performance of the Company, and also a balance between Company financial performance and shareholder return. For 2006, the actual total compensation of the Named Executive Officers was approximately 24% above the median of total compensation paid to executives holding equivalent positions in the Peer Group. The Committee believes that this position was consistent with the experience level of the Company’s executives, the Company’s financial performance and the performance of each of the Named Executive Officers.

 

Post Termination Arrangements

 

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 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 rate paid and in the term 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 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 control of the Company, 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.

 

Retirement and Other Benefits

 

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

 

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, including the named executive officers, whom the Board concluded were not receiving competitive retirement benefits. The Committee annually approves participants in the Plan. Contributions equal to 11.7% of total annual compensation, reduced by ESOP contributions, are allocated to the participant’s accounts. 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 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 Supplemental Executive Retirement Plan are paid the benefits in their account based on an earlier distribution election.

 

DENTSPLY’s healthcare, insurance, and other welfare and employee-benefit programs are the same for all eligible employees, including 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.

 

Stock Ownership Program

 

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, and subsequently deferred. 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:

 

 

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 options generally are performance-based compensation meeting those requirements, and, as such, are fully deductible. 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).

 

Adoption of Compensation Discussion and Analysis

 

The Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K with management and, based on such review and discussions, the Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

This report was adopted on February 14, 2007 by the Human Resources Committee of the Board of Directors:

 

William F. Hecht
Michael C. Alfano
Michael J. Coleman
W. Keith Smith

 

 

The Human Resources Committee is comprised of four 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.

 

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, 2006.

 

HUMAN RESOURCES COMMITTEE

 

 

Summary Compensation

 

The following table sets forth the compensation earned by the named executive officers for the fiscal year ended December 31, 2006. 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, 2006

 

 

 

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. Kunkle — 47.2%, Mr. Jellison — 39.4%, Mr. Wise — 19.8%, Mr. Clark — 29.1%, and Mr. Addison — 43.6%

 

Grants of
Plan-Based Awards

 

The following table reflects the terms of compensation plan-based awards granted to named executive officers in 2006.

 

2006 Grants of Plan-Based Awards

 

 

 

The grant date of annual and other grants 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, 2006 for the named executive officers.

 

Outstanding Equity Awards at Fiscal Year End

 

 

 

 

 

All Other Compensation

 

 

 

Option Exercises and Stock Vested

 

The following table sets forth certain information with respect to the exercise of options and stock vested during the year ended December 31, 2006 and the value of options held at that date.

 

Option Exercises and Stock Vested

 

 

Non-Qualified Deferred Compensation

 

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, including the named executive officers, whom the Board concluded were not receiving competitive retirement benefits. Contributions equal to 11.7% of compensation reduced by ESOP contributions are allocated to the participants accounts. 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 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 Supplemental Executive Retirement Plan are 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.

 

In the event of a participant’s death before his or her account has been distributed, distribution shall be made to the beneficiary selected by the participant within thirty (30) days after the date of death (or, if later, after the proper beneficiary has been identified.)

 

In the event of a change in control as defined in this Plan, participants will be given the option to receive the value of their accounts in lump sums no later than sixty (60) days after the Change in Control. Optional distributions received subject to a change in control must represent the entire Supplemental Executive Retirement Accounts and will be subject to five percent (5%) penalty reductions.

 

All distributions under this Plan shall be based upon the amount credited to a participant’s account as of the last business day of the month immediately preceding the date of the distribution. The amount of installments payable to a participant electing distribution through installments shall be determined by dividing the amount credited to the participant’s vested account by the remaining number of installments, including the current installment, to be paid.

It is understood that administrative or legal requirements may lead to a delay between such valuation date and the date of distribution.

 

The following table sets forth contributions, earnings and year-end balances for 2006 with respect to non-qualified deferred compensation plans for the Named Executive Officers.

 

Non-Qualified Deferred Compensation