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PROXY STATEMENT TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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DYNAMIC MATERIALS CORPORATION.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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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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Form, Schedule or Registration Statement No.:
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Table of Contents
DYNAMIC MATERIALS CORPORATION
5405 Spine Road
Boulder, Colorado 80301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2013
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To the Stockholders of
DYNAMIC MATERIALS CORPORATION:
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April 12, 2013
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NOTICE
IS HEREBY GIVEN that the Annual Meeting of Stockholders of DYNAMIC MATERIALS CORPORATION, a Delaware corporation, will be held on May 23, 2013, at 8:30 a.m. local
time at the St. Julien Hotel, 900 Walnut Street, Boulder, Colorado, for the following purposes:
1. To
elect eight directors to hold office until the 2014 Annual Meeting of Stockholders;
2. To
approve an amendment to the Company's 2006 Stock Incentive Plan;
3. To
approve the Company's Performance-Based Plan;
4. To
approve the non-binding, advisory vote on executive compensation;
5. To
ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013; and
6. To
transact such other business as may properly come before the meeting or any adjournment or postponement thereof.
The
foregoing items of business are more fully described in the proxy statement accompanying this notice.
The
Board of Directors has fixed the close of business on April 1, 2013, as the record date for the determination of stockholders entitled to notice of, and to vote at, this Annual Meeting and
at any adjournment or postponement thereof.
Similar
to last year we will be using the "Notice and Access" method that allows companies to provide proxy materials to stockholders via the Internet. On or about April 12, 2013, we will mail
to our
stockholders a Notice of Internet Availability of Proxy Materials which contains specific instructions on how to access Annual Meeting materials via the Internet, as well as instructions on how to
request paper copies. We believe this process should provide a convenient way to access your proxy materials and vote. The Proxy Statement and the Annual Report for the fiscal year ended
December 31, 2012 are available at www.edocumentview.com/boom.
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By Order of the Board of Directors,
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/s/
RICHARD A. SANTA
RICHARD A. SANTA
Senior Vice President, Chief Financial Officer and Secretary
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Boulder,
Colorado
ALL
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE FOLLOW THE INSTRUCTIONS PROVIDED TO YOU AND VOTE YOUR SHARES AS PROMPTLY
AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES
OF RECORD ARE HELD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM SUCH RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
Table of Contents
PROXY STATEMENT TABLE OF CONTENTS
Table of Contents
DYNAMIC MATERIALS CORPORATION
5405 Spine Road
Boulder, Colorado 80301
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2013
INFORMATION CONCERNING THE ANNUAL MEETING AND VOTING
General
The Board of Directors (the "Board") of Dynamic Materials Corporation, a Delaware corporation, is soliciting proxies for use at the
Annual Meeting of Stockholders to be held on May 23, 2013, at 8:30 a.m., local time, or at any adjournment or postponement thereof, for the purposes described in this proxy statement and
in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at the St. Julien Hotel, which is located at 900 Walnut Street, Boulder, Colorado. On or about April 12,
2013, we will mail to all stockholders entitled to vote at the meeting, a Notice of Internet Availability of Proxy Materials that contains specific instructions on how to access Annual Meeting
materials via the Internet, as well as instructions on how to request paper copies. Unless the context otherwise requires, references to "the company," "we," "us" or "our" refer to Dynamic Materials
Corporation.
Solicitation
We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of the Notice of
Internet Availability of Proxy Materials and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries, and
custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of common stock
for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies via the Internet may be
supplemented by mail, telephone, telegram, or personal solicitation by our directors, officers, or other regular employees. No additional compensation will be paid to directors, officers, or other
regular employees for such services.
Outstanding Shares and Quorum
Only holders of record of common stock at the close of business on April 1, 2013, will be entitled to notice of and to vote at
the Annual Meeting. At the close of business on April 1, 2013, we had 13,683,307 shares of common stock outstanding and entitled to vote. Each holder of record of common stock on such
date will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting.
A
majority of the outstanding shares of common stock entitled to vote represented in person or by proxy will constitute a quorum at the Annual Meeting. However, if a quorum is not
represented at the Annual Meeting, the stockholders entitled to vote at the meeting, present in person or represented by proxy, have the power to adjourn the Annual Meeting from time to time, without
notice other than by announcement at the Annual Meeting, until a quorum is present or represented. At any such adjourned meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the originally scheduled meeting.
Voting Rights and Procedures
Votes cast by proxy or in person will be counted by one or more persons appointed by us to act as inspectors (the "Election
Inspectors") for the Annual Meeting. The Election Inspectors will treat shares represented by proxies that reflect abstentions as shares that are present and entitled to vote for the
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purpose
of determining the presence of a quorum. Abstentions will not have any effect for the election of directors but, with respect to the other proposals, will have the same effect as a vote
against the proposal.
Broker
non-votes occur when a broker holding stock in street name votes the shares on some matters but not others. Brokers are permitted to vote on routine,
non-controversial proposals in instances where they have not received voting instruction from the beneficial owner of the stock but are not permitted to vote on non-routine
matters. The missing votes on non-routine matters are deemed to be "broker non-votes." The Election Inspectors will treat broker non-votes as shares that are
present and entitled to vote for the purpose of determining the presence of a quorum. The only "routine" proposal on our ballot this year is the ratification of the appointment of Ernst & Young
LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013. Therefore no broker non-votes are expected to exist in connection with that
proposal. Brokers are no longer permitted to vote shares for the election of directors without customer direction and will not be permitted to vote on the non-binding, advisory vote on
executive compensation, the amendment to our stock incentive plan or adoption of our performance-based plan.
Therefore, we urge you to give voting instructions to your broker
on all proposals.
Directors
are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. Proxies may not be voted for a greater
number of persons than there are nominees. It is intended that unless authorization to vote for one or more nominees for director is withheld, proxies will be voted for the election of all of the
eight nominees named in this Proxy Statement.
The
affirmative vote of a majority of the votes cast in person or by proxy by stockholders represented and entitled to vote at the meeting is required for approval of the amendment to
the Company's 2006 Stock Incentive Plan and approval of the Company's Performance Based Plan. If approved, the Performance Based Plan will be effective January 1, 2013.
The
selection of our auditors will be ratified if the number of votes of authorized shares of our common stock cast in favor of the respective proposal exceeds the votes cast opposing
the proposal. The non-binding advisory vote on the compensation of our named executive officers will be approved if the number of votes of authorized shares of our common stock cast in
favor of the respective proposal exceeds the votes cast opposing the proposal. Accordingly, a majority of votes cast is required to approve these proposals.
Abstentions
will have no effect on the election of directors, but will have the same effect as a "no" vote with respect to the other proposals.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time prior to the Annual Meeting. It may be
revoked by filing with our Secretary at our principal executive office, 5405 Spine Road, Boulder, Colorado 80301, a written notice of revocation or a duly executed proxy bearing a later date, or it
may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy. If no direction is indicated, the shares will be voted FOR each of the
proposals set forth in this proxy statement. The persons named in the proxies will have discretionary authority to vote all proxies with respect to additional matters that are properly presented for
action at the Annual Meeting.
Stockholder Proposals
Proposals of stockholders that are intended to be presented at our 2014 Annual Meeting of Stockholders must be received by us not later
than December 13, 2013, in order to be included in the proxy statement and proxy relating to that annual meeting.
Notice
of any stockholder proposal to be considered at our 2014 Annual Meeting, but not included in the proxy materials, must be submitted in writing and received by us not later than
60 days and not earlier than 90 days prior to the first anniversary of this year's annual meeting date; provided, however, that in the event that fewer than 70 days' notice or
public announcement of the date of the meeting is given or made to stockholders, to be timely, notice by the stockholder must be received not later than the close of business of the tenth day
following the day on which we first publicly announce the meeting date.
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PROPOSAL 1ELECTION OF DIRECTORS
There are eight nominees for election to the Board. Each director to be elected will hold office until the 2014 Annual Meeting of
Stockholders. In any event, a director elected
pursuant to this proxy statement will hold office until his successor is elected and is qualified, or until such director's earlier death, resignation, or removal.
Shares
represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the eight nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as the Corporate Governance and Nominating Committee of the
Board may propose. Each person nominated for election has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve.
NOMINEES
The names of the nominees and certain information about them are set forth below. In addition, we have included information about each
nominee's specific experience, qualifications, attributes or skills that led our Board of Directors to conclude that the nominee should serve as a director of the Company at the time we are filing
this proxy statement, in light of our business and corporate strategy.
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Name
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Position
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Age
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Kevin T. Longe
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Director, President and Chief Executive Officer
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Yvon Pierre Cariou
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Director
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Robert A. Cohen
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Director
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James J. Ferris
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Director
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Richard P. Graff
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Director
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Bernard Hueber
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Director
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Gerard Munera
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Director
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Rolf Rospek
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Director
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Kevin T. Longe.
Mr. Longe became our President and Chief Executive Officer on March 1, 2013. He has
served as a director since joining the Company on July 17, 2012 as our Chief Operating Officer. From March, 2011 until agreeing to join the Company, Mr. Longe served as an executive of
Sonoco, Inc., first as President of Sonoco's Thermo Safe business from March 2011 to March 2012 and then from March 2012 to July 2012 as a Vice President and General Manager with Sonoco's Protective
Packaging Division. From April 2010 until joining Sonoco, Mr. Longe was self-employed performing consulting and investment work. From 2004 through April 2010, Mr. Longe
served in various positions at Lydall, Inc., most recently (2007-2010) serving as president of its subsidiary, Lydall Performance Materials, Inc.
We
believe it is important to have our Chief Executive Officer also serve as a Director to properly align management's execution of our business objectives with the oversight and
direction of the Board. Mr. Longe brings extensive operating and strategic planning and implementation experience from his leadership roles in other larger multinational companies. On the
operations side, he brings deep experience in manufacturing, marketing and sales, supply-chain management, and personnel development as well as strong financial analysis and management skills. In
selecting Mr. Longe as the Company's next Chief Executive Officer, the Board also focused on his strategic vision and planning expertise and teambuilding and leadership skills to grow the
Company within its existing businesses and potentially through additional acquisitions.
Yvon Pierre Cariou.
Mr. Cariou served as our President and Chief Executive Officer from November 2000 until his retirement on
March 1,
2013 and has been a director since May 2006. Prior to joining the Company, from 1998 to 2000, Mr. Cariou was President and Chief Executive Officer of Astrocosmos Metallurgical Inc., a division
of Mersen Group, involved in the design and fabrication of process
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equipment
for the chemical and pharmaceutical industries. From 1991 to 1998, Mr. Cariou held executive leadership positions at Hydrodyne/FPI Inc., an aerospace propulsion components
manufacturer, and MAINCO Corp., an elevator design, build and service company and a division of Nu-Swift, a public company based in the United Kingdom. Earlier in his career,
Mr. Cariou served as President and Chief Executive Officer of two industrial and engineering companies. He also was employed for fifteen years by Mersen Group, a global industrial components
manufacturer, where he held various executive positions in France and the United States, including President of Mersen USA. Mr. Cariou graduated with a degree in mechanical engineering from
Ecole Nationale Superieure des Arts et Metiers in Paris and obtained an MBA from Fairleigh Dickinson University.
Having
served as our President and Chief Executive Officer for over 12 years, Mr. Cariou has detailed knowledge of our operations and corporate strategy. In that role, he
had primary accountability for accomplishing operational excellence and successfully achieving our corporate strategy. He led and
implemented our acquisition of DYNAenergetics in late 2007, increasing our share of the worldwide explosion cladding business as well as diversifying the Company's business into the Oilfields Products
segment. From decades of leadership experience with global manufacturing companies, he brings both valuable "process" and "product" expertise and focus to the Board.
Robert A. Cohen.
Mr. Cohen has served as a director since February 2011. He is the managing partner of Joranel LLC, a private
investment and
consulting firm serving institutional clients. Prior to joining Joranel in 2005, Mr. Cohen spent four years as president and Chief Executive Officer of Korea First Bank. Previously,
Mr. Cohen spent 25 years with Credit Lyonnais, including eight years as Chief Executive Officer of Credit Lyonnais USA. He taught economics and finance for 16 years at the Paris
Institut Technique de Banque et Finance and the French School of Management (ESSEC). He is a graduate of Ecole Polytechnique in Paris and earned a doctorate in finance from the University Paris
Dauphine.
The
Board added Mr. Cohen as a member in 2011 because of his extensive financial background and his management experience with multinational companies. From his four years serving
as Chief Executive Officer of one of the largest banks in Korea as well as living in Korea and working with many Korean and Asian companies, he brings rich expertise in the Korean and Asian markets.
Many of the key fabricators and end-customers of the Company's cladding division are located in Korea and Asia and the Company is focusing on this region for sales growth. His management
experience also increases the depth of the Board's expertise in the areas of corporate governance, strategic planning and leadership, finance and risk management.
James J. Ferris.
Dr. Ferris has served as a director since July 2010. From 1994 until his retirement in 2007, he held a variety of
positions,
including director and president/group chief executive officer, with CH2M Hill Companies Ltd., an employee owned, global engineering, major projects and construction company. Previously,
Dr. Ferris spent 18 years with the engineering and construction firm Ebasco Services Incorporated, where he was a director and held various project leadership and senior and executive
management positions, including president and chief executive officer of Ebasco Environmental. Dr. Ferris has more than 35 years of diverse, senior and executive level leadership
experience in the worldwide engineering, major projects and construction industry. He has been a member of the G8 Renewable Energy Task Force, an active attendee at The World Economic Forum in Davos,
Switzerland, and a member of the Prince of Wales Business Leaders Forum. Dr. Ferris has over 20 years of board experience including with two global engineering, major projects and
construction companies, a technology start-up company (Sentegra), and a non-profit enterprise (The Keystone Center) focused on energy, environmental and public health policy
initiatives. He has served on seven special purpose mega-project company boards with over $20 billion in capital expenditures, two of which he acted as the Board's Chairman. His
Board Committee experience is extensive and includes direct membership and involvement on audit, compensation, nominating and governance, executive, safety and risk management committees.
Dr. Ferris
received his undergraduate degree from Marquette University and his Ph.D. in Molecular Microbiology from Rensselaer Polytechnic Institute. He also attended the Advanced
Executive
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Management
Program at Wharton. He began his career as a member of the faculty at Rensselaer and transitioned into private industry in 1975. He also has served as an advisor to Rensselaer leadership
and has held similar strategic advisory roles to various companies since his retirement from CH2M Hill.
The
Board added Dr. Ferris as a member in mid-2010 because of his management and previous board experience, including his tenure as director and president of two
significant multinational companies, his extensive experience in the global energy, environmental, industrial, and national government markets, and his experience overseeing operations and projects in
many of the geographic regions where the Company has operations or is working to expand, including China, South Korea, Japan, the Middle East, numerous countries in eastern and western Europe, and
elsewhere. He brings significant strategic planning and risk management expertise and successful records of accelerated growth for companies to the Board, especially in light of the Company's broad
geographic operations. Dr. Ferris also has strong corporate governance, safety management and compensation policy experience as well as substantial financial management skills.
Richard P. Graff.
Mr. Graff has served as a director since June 2007. He is a retired partner of PricewaterhouseCoopers LLP where
he served as
the audit leader in the United States for the mining industry, until his retirement on December 31, 2001. Mr. Graff began his career with PricewaterhouseCoopers LLP in 1973. Since his
retirement, Mr. Graff has been a consultant to the mining industry and was a member of a Financial Accounting Standards Board task force for establishing accounting and financial reporting
guidance in the mining industry. He represents a consortium of international mining companies and has provided recommendations to the International Accounting Standards Board on mining industry issues
and to regulators on industry disclosure requirements of securities legislation. Mr. Graff serves on the board of directors of Yamana Gold Inc. and Alacer Gold Corporation. He received his
undergraduate degree in Economics from Boston College and his post-graduate degree in Accounting from Northeastern University.
With
more than 35 years of experience in public company accounting, including as a partner with a "big four" public accounting firm and consulting on public company accounting
policy and practice in the mining industry, Mr. Graff brings substantial insight and experience to the Company, especially with regard to accounting and financial reporting matters for a
company operating worldwide. Mr. Graff has served as a director on boards of public companies since 2005, and currently serves on the board of two other multinational public companies. His
experience brings insight to the Board as to best practices with respect to accounting, corporate governance and other issues for multinational public companies.
Bernard Hueber.
Mr. Hueber rejoined the Board in June 2006; previously, he served as a director from June 2000 to June 2005 and was
Chairman
of the Board from June 2000 until June 2002. From 1972 to 1990, Mr. Hueber served as managing director of the explosives division of Nobel Bozel group and was therefore involved in the
acquisition and development of its cladding activities in Europe. From 1990 to 2000, Mr. Hueber served as the Chairman of the Board and Chief Executive Officer of Nobel Explosifs France when it
became a subsidiary of Groupe SNPE and as General Manager of its Industrial Explosive Division. He participated in SNPE's acquisition of the Swedish cladding activities and, in 2000, helped bring
together SNPE's cladding subsidiaries with the Company. He was nominated Chairman of the Board of the Company in 2000 to oversee the consolidation of these operations. Mr. Hueber was deeply
involved in explosives and operational safety as a Director (from 1975 to 2005), and as Secretary General (from 2002 to 2005) of SAFEX, an industry association with the objective to increase safety in
the explosive manufacturing sites throughout the world. Following his retirement from Groupe SNPE in 2002 and until January 2008, Mr. Hueber was the Secretary General of the Federation of
European Explosives Manufacturers (FEEM). During this time, Mr. Hueber also worked as an independent consultant. From June 2003 to June 2007, Mr. Hueber served as a Director of
Financiere Harle Bickford & Cie and its subsidiary Davey Bickford & Smith, companies involved in pyrotechnics for the explosives and automotive industries and in radio communication.
Mr. Hueber is a graduate of Ecole Polytechnique in Paris and started his career by working successively with Societe Generale, a leading bank in France, and with a U.S. air conditioning firm,
Trane Corp.
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Mr. Hueber
has detailed knowledge of the Company's development, historical business cycles, customer base and competitive environment from his over 10 years of experience
as a director of the Company, including two years as the Company's Chairman, as well as his 30 years' prior work experience with the predecessor company to the Company's European operations.
With his extensive experience in the explosives business and work with FEEM, he brings insights to the Company in regulatory, safety, operational and supplier issues facing the Company.
Mr. Hueber also brings to the Board more than 40 years of management experience leading multinational manufacturing companies.
Gerard Munera.
Mr. Munera has served as a director since September 2000. The Board has elected Mr. Munera to serve as
Chairman of the
Board following Dean Allen's retirement from that position effective upon the close of the Annual Meeting. From 1996 to the present, Mr. Munera has been General Manager of Synergex Group LLC, a
family controlled holding company with diversified investments, including real estate, securities, gold mining and high technology industries and Executive Chairman of Arcadia, Inc., a family
controlled private manufacturer of glass/aluminum products. Mr. Munera is a current director of one public company, Nevsun Resources Ltd., as well as two private companies. From 1994 to 1996,
Mr. Munera was Chairman and CEO of Latin American Gold Inc., a gold exploration and mining company. Between 1991 and 1994, Mr. Munera was President and CEO of Minorco (USA), a
diversified $1.5 billion natural resources group. Between 1990 and 1991, Mr. Munera
was Senior Vice President of Corporate Planning and Development and a member of the Executive Committee of RTZ plc, a British mining and mineral processing company. Mr. Munera is a
graduate of Ecole Polytechnique and Ecole Nationale des Ponts et Chaussees, both in Paris.
As
a director of the Company for over a decade, Mr. Munera has detailed knowledge of the Company's development, historical business cycles and customer base. From his prior
executive and director roles, he has extensive experience in the mining and metallurgical industries, a key customer base of the Company's explosion welding division. With over four decades of
successful business experience, he also brings a solid international exposure, financial literacy, extensive management experience, as well as extensive work in strategic planning and implementing
corporate goals. As a director to other public companies, he brings experience and insight to the Board on corporate governance and leadership issues.
Rolf Rospek.
Mr. Rospek served as Chief Executive of our DYNAenergetics subsidiary since it was acquired on November 15, 2007
until his
retirement on December 31, 2012 and has been a director of the Company since November 2007. From October 2001 to November 15, 2007, Mr. Rospek was Chief Executive Officer and a
managing director of DYNAenergetics Beteiligungs GmbH. From 1993 to 2001, Mr. Rospek was employed by Dynamit Nobel where he served in various sales, marketing and management positions,
including general manager of their DYNAwell business unit from 1998 to October, and general manager of their Dynaplat business unit from 1999 to 2001. Prior to joining Dynamit Nobel, Mr. Rospek
served as general manager of the logging department of Preussag, Erdöl und Erdgas GmbH, an oil and gas company that is now a subsidiary of Gaz de France. For several years during the
1980's, Mr. Rospek worked for Atlas Wireline Services, which is now part of Baker Hughes and operates under the name Baker Atlas, where he held various engineering and management positions in
Germany, England, Italy, and Holland. Mr. Rospek graduated with a degree in Physics (
Dipl. Ing. Physikalische Technik
) from the
FachhochschuleLübeck in Lübeck, Germany.
The
acquisition of DYNAenergetics six years ago expanded our explosion welding operations as well as enabled us to diversify into a new business of manufacturing and selling a range of
proprietary and nonproprietary products for the global oil and gas industries. As the chief executive of this growing Oilfield Products segment and its predecessor company for the past twelve years,
Mr. Rospek has detailed knowledge of this important segment's business, customer base, strategy and growth opportunities. He has successfully integrated three acquired companies into the
Oilfield Products segment and is a key resource in setting strategy for this growing segment. He has extensive experience in establishing and managing sales operations in many of the world's regions
in which we are operating or expanding our business.
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Requisite Vote
Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is
present. Abstentions and broker non-votes will not be counted as votes cast for the proposal.
THE BOARD RECOMMENDS
A VOTE "FOR" EACH NAMED NOMINEE
Executive Officers
The following individuals serve as our executive officers. Each executive officer is appointed by the Board and serves at the pleasure
of the Board, subject to the terms of their respective employment agreements in the case of Messrs Longe and Santa described under "Executive Compensation."
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Name
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Position
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Age
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Kevin T. Longe
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President and Chief Executive Officer
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54
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Richard A. Santa
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Senior Vice President, Chief Financial Officer and Secretary
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62
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Jeff Nicol
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Senior Vice President and General Manager, Nobelclad
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49
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Ian Grieves
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Senior Vice President and General Manager, DYNAenergetics
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Kevin T. Longe.
Information regarding Mr. Longe, our President and Chief Executive Officer, is provided under Proposal 1 of
this proxy
statement under the caption, "Nominees."
Richard A. Santa.
Mr. Santa has served as our Senior Vice President, Chief Financial Officer and Secretary since January 2008; our
Vice
President, Chief Financial Officer and Secretary from October 1996 to December 2007; and our interim Chief Financial Officer from August 1996 to October 1996. Prior to joining us in August 1996,
Mr. Santa was Corporate Controller of Scott Sports Group Inc. from September 1993 to April 1996. From April 1996 to August 1996, Mr. Santa was a private investor. From 1992 to 1993,
Mr. Santa was Chief Financial Officer of Scott USA, a sports equipment manufacturer and distributor. Earlier in his career, Mr. Santa was a senior manager of PricewaterhouseCoopers LLP,
where he was employed for ten years.
Jeff Nicol.
Mr. Nicol was appointed Senior Vice President and General Manager of our DMC Nobelclad
business in September 2012. He served previously as vice president and general manager of DMC Clad Metal in North America, and joined the Company in 2008 as that division's vice president of sales and
marketing. From 1986 until joining the Company, he was employed in various positions with Alcoa, Inc. culminating in the positions of chief metallurgist and global marketing director.
Ian Grieves.
Mr. Grieves joined the Company in January 2013 as Senior Vice President and General Manager of our DYNAenergetics
oilfield
products business. From 2006 until joining the Company, Mr. Grieves was employed by Lydall Inc., as senior vice president of the company's performance materials division
(2010-2013), and as vice president and general manager Europe of the company's filtration division (2006-2010). From 1995 to 2005, he was employed in various financial and
general management positions with AAF International Inc., with his last position being that of vice president and general manager of AAF Europe (2003-2005).
Board of Directors
Directors are encouraged to attend our Annual Meeting of Stockholders. All of our directors attended the 2012 Annual Meeting of
Stockholders held on May 24, 2012 and are planning on attending the 2013 Annual Meeting of Stockholders.
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During
the fiscal year ended December 31, 2012, each of our current directors attended more than 75% of the aggregate of (i) the number of meetings of the Board held during
the period in which he was a director and (ii) the number of meetings of the committees on which he served.
The Board has determined that five of our eight current directors, Messrs. Cohen, Ferris, Graff, Hueber and Munera, all of whom
are nominated for re-election, are "independent" directors under the rules promulgated by the Securities and Exchange Commission ("SEC") and the applicable rules of the NASDAQ. In making
its determinations of independence, in addition to consideration of the relevant SEC and NASDAQ rules, the Board considered factors for each director such as any other directorships, any employment or
consulting arrangements, and any relationship with our customers or suppliers. The Board determined that there were no related-party transactions or other relationships that needed to be considered in
evaluating whether these directors are "independent." Mr. Longe, our President and Chief Executive Officer, Mr. Cariou, our former President and Chief Executive Officer, and
Mr. Rospek, the former Chief Executive of our DYNAenergetics subsidiary, are the only Board members who are not independent based on these criteria.
All
current members of the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee are independent directors. With the committee assignments
that will be effective following the Annual Meeting, the Corporate Governance and Nominating Committee will include two non-employee directors who are not independent and three independent
directors. Our independent, non-executive directors hold regularly scheduled meetings in executive session, at which only independent, non-executive directors are present.
The Company does not have a policy on whether the Chairman and Chief Executive Officer positions should be separate or combined.
Currently we have separated the positions of Chairman and Chief Executive Officer. Our Chief Executive Officer is responsible for setting the strategic direction for the Company and the day to day
leadership and performance of the Company, while our Chairman of the Board provides guidance to the Chief Executive Officer and sets the agenda for Board meetings and presides over meetings of the
full Board.
During the fiscal year ended December 31, 2012, the Board held six meetings, including one telephonic meeting. The Board
currently has an Audit Committee, a
Compensation Committee, a Corporate Governance and Nominating Committee and a Safety Committee.
The Audit Committee meets with our independent registered public accounting firm at least four times a year to review quarterly
financial results and the annual audit, discuss financial statements and related disclosures, and receive and consider the accountants' comments as to controls, adequacy of staff and management
performance and procedures in connection with the annual audit and financial controls. The Audit Committee also appoints the independent registered public accounting firm. Messrs. Graff, Cohen,
Ferris, Hueber and Munera were members of the Audit Committee for the full year ended December 31, 2012, with Mr. Graff serving as Chairman. Effective following the Annual Meeting, the
members of the Audit Committee will be Messrs. Graff, Cohen and Ferris, with Mr. Graff continuing to serve as its Chairman. All members of the Audit Committee are
non-employee directors whom the Board has determined to be "independent" as that concept is defined in Section 10A of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the rules promulgated by the SEC thereunder, and the applicable rules of the NASDAQ. The Audit Committee has determined that Mr. Graff qualifies as an
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"audit
committee financial expert" under the rules of the SEC. The Audit Committee met six times during the 2012 fiscal year.
In
2000, the Board adopted a written Charter of the Audit Committee, which was subsequently updated and revised in 2004, 2007 and 2012. The Charter of the Audit Committee requires the
Audit Committee be comprised of three or more independent directors, at least one of whom has relevant financial or accounting experience. The Charter of the Audit Committee charges the Audit
Committee with the responsibility of reviewing any related party transactions for potential conflicts of interest pursuant to our Related Party Transaction Policy and Procedures, which are described
in more detail under, "Certain Relationships and Related Transactions." The Charter of the Audit Committee may be viewed on our website, www.dynamicmaterials.com.
The Compensation Committee makes recommendations concerning salaries and incentive compensation, grants equity-based awards to
employees and non-employee directors under our stock incentive plan and otherwise determines compensation levels and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is also responsible for reviewing and approving the Compensation Discussion and Analysis included in the Company's proxy statement. Messrs. Allen, Cohen,
Ferris, Hueber and Munera were members of the Compensation Committee for the full year ended December 31, 2012, with Mr. Cohen serving as the Chairman. Effective following the Annual
Meeting, the members of the Compensation Committee will be Messrs. Cohen, Ferris, Hueber and Munera, with Mr. Cohen continuing to serve as its Chairman. All members of the Compensation
Committee are non-employee directors whom the Board has determined to be "independent" under SEC rules and the applicable rules of the NASDAQ. During the 2012 fiscal year, the Compensation
Committee met five times.
In
2006, the Board adopted a written Charter of the Compensation Committee, which was subsequently updated and revised in 2007 and 2012. The Charter of the Compensation Committee may be
viewed on our website, www.dynamicmaterials.com.
The Corporate Governance and Nominating Committee nominates directors and sets corporate governance policies for the Board and Company.
Messrs. Allen, Ferris, Hueber and Munera were members of the Corporate Governance and Nominating Committee for the full fiscal year ended December 31, 2012. Mr. Munera serves as
Chairman of the Committee. Effective following the Annual Meeting, the members of the Corporate Governance and Nominating Committee will be Messrs. Ferris, Cariou, Graff, Hueber and Rospek,
with Mr. Ferris serving as its Chairman. The main purposes of this Committee are (i) to identify and recommend individuals to the Board for nomination as members of the Board and its
committees; (ii) to develop and recommend to the Board corporate governance principles applicable to the Company; (iii) to oversee the Board's annual evaluation of its performance; and
(iv) to undertake such other duties as the Board may from time to time delegate to the Committee. Members of the Corporate Governance and Nominating Committee identified, selected and nominated
Messrs. Ferris (in 2010), Cohen (in 2011) and Longe (in 2012) for election to the Board. The Corporate Governance and Nominating Committee held five meetings during the 2012 fiscal year. The
Charter of the Corporate Governance and Nominating Committee, which was adopted in 2006 and revised in 2012, may be viewed on our website, www.dynamicmaterials.com.
The
Corporate Governance and Nominating Committee does not have a formal policy with regard to the consideration of any director nominees recommended by its stockholders because
historically we have not received recommendations from our stockholders and the costs of establishing and maintaining procedures for the consideration of stockholder nominations would have been unduly
burdensome. However, any recommendations received from stockholders will be evaluated in the same manner that
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potential
nominees recommended by Board members, management or other parties are evaluated. Stockholders may nominate persons for election to the Board of Directors in accordance with our Bylaws. Any
stockholder nominations proposed for Board consideration should include the nominee's name and qualifications for Board membership and should be mailed to Dynamic Materials Corporation, c/o Corporate
Secretary, 5405 Spine Road, Boulder, Colorado 80301, or faxed to (303) 604-1897. We do not intend to treat stockholder recommendations in any manner differently from other
recommendations. No such suggestions were received during 2012.
Qualifications
for consideration as a director nominee may vary according to the particular area of expertise being sought as a complement to the existing Board composition. However, in
making its nominations, the Corporate Governance and Nominating Committee considers, among other things, an individual's business experience, industry experience, financial background, breadth of
knowledge about issues affecting our business, time available for meetings and consultation, integrity, independence, diversity of experience, leadership and other particular skills and experience
possessed by the individual. Diversity is considered in the nominating process as described above and in our Governance and Nominating Committee Charter, which provides that we develop and recommend
to the Board the criteria for Board membership, including, among other things, integrity, independence, diversity of experience, leadership and the ability to exercise sound judgment. We do not have a
separate Board diversity policy.
We
do not currently employ an executive search firm or pay a fee to any other third party to locate qualified candidates for director positions.
In 2009, at the direction of the Board, the Company established a Quality and Safety Committee (subsequently renamed the Safety
Committee) comprised of the Company's Chief Executive Officer, two independent directors and up to three Company managers. Mr. Hueber serves as the Chairman of this Committee.
Messrs. Allen and Cariou are also members of this
Committee, together with managers of some of the Company's U.S. and European operating divisions. Effective following the Annual Meeting, the members of the Safety Committee who are directors will be
Messrs. Hueber, Cariou, Longe and Rospek, with Mr. Hueber continuing to serve as its Chairman. The purpose of this Committee is to review, at least annually, the Company's performance in
meeting its safety objectives established by management and to facilitate the Board's oversight of these critical operational issues. The Safety Committee met once during the 2012 fiscal year as it
inspected the Company's Nobelclad France manufacturing facility.
Our senior management manages the risks facing the Company under the oversight and supervision of the Board. While the full Board is
ultimately responsible for risk oversight at our Company, two of our Board committees assist the Board in fulfilling its oversight function in certain areas of risk. The Audit Committee assists the
Board in fulfilling its oversight responsibilities with respect to risk in the areas of financial reporting and internal controls. The Safety Committee assists the Board in fulfilling its oversight
responsibilities with respect to the management of risks related to operations and safety. Other general business risks such as economic and regulatory risks are monitored by the full Board. Risk
management and assessment reports are regularly provided by management to these committees and the full Board.
Our Compensation Committee considered whether our compensation program encouraged excessive risk-taking by employees at the expense of
long-term Company value. Based upon its assessment, the Compensation Committee does not believe that our compensation program encourages excessive or inappropriate risk-taking.
The Compensation Committee believes that the design of our compensation program, which includes a mix of annual and long-term incentives, cash and equity awards and retention incentives,
is balanced and does not motivate imprudent risk-taking.
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The Board believes that it is important for stockholders to have a process to send communications to the Board. Accordingly,
stockholders desiring to send a communication to the Board, or to a specific director, may do so by delivering a letter to our Secretary at Dynamic Materials Corporation, c/o Corporate Secretary, 5405
Spine Road, Boulder, Colorado 80301 or fax to (303) 604-1897. The mailing envelope or fax cover sheet must contain a clear notation indicating that the enclosed letter is a
"Stockholder-Board Communication" or "Stockholder-Director Communication." All such letters must identify the author as a stockholder and clearly state whether the intended recipients of the letter
are all members of the Board or certain specified individual directors. The Secretary will open such communications and make copies and then circulate them to the appropriate director or directors.
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PROPOSAL 2APPROVAL OF THE AMENDMENT TO THE COMPANY'S 2006 STOCK INCENTIVE PLAN
We are asking stockholders to approve an amendment to the Dynamic Materials Corporation 2006 Stock Incentive Plan (the "2006 Plan") to
increase the number of shares of our common stock available for award by 675,000 shares. This amount is slightly less than 5% of the Company's currently outstanding shares of common stock. The
amendment to increase the number of shares under the 2006 Plan is included in this proxy statement as Appendix A. Capitalized terms not otherwise defined in this section have the meaning set
forth in the 2006 Plan.
Purpose of the 2006 Stock Incentive Plan
The purpose of the 2006 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to
provide additional incentive to Participants and to optimize the profitability and growth of the Company through incentives that are consistent with the Company's goals and that link the personal
interests of Participants to those of the Company's stockholders. The 2006 Plan permits the grant of the following types of incentive awards: (1) Options, (2) Restricted Stock,
(3) Restricted Stock Units ("RSUs:), (4) Stock Appreciation Rights ("SARs"), (5) Performance Shares, (6) Performance Units and (7) Other Stock-Based Awards. Over the
past several years, the only awards we have issued under the 2006 Plan are restricted stock and RSU's, the restrictions on which typically lapse over a three year vesting period.
Background
The number of shares of the Company's Common Stock initially reserved for issuance under the 2006 Plan was 942,500 (which included
92,500 shares rolled over from our 1997 Equity Inventive Plan). As of March 31, 2013, the Company granted an aggregate of 942,500 shares of restricted stock and restricted stock units under the
2006 Plan, leaving zero shares available for future grant. The Company has also issued 7,500 shares of restricted stock units, subject to stockholder approval of this amendment, to Rolf Rospek, the
former Chief Executive of our DYNAenergetics subsidiary and a current director of the Company.
If
the amendment is approved, the number of shares available for future grants under the 2006 Plan will increase by 675,000. If stockholder approval is not obtained, then the amendment
to the 2006 Plan will not be implemented, and the 2006 Plan will continue in effect pursuant to its current terms. Approval of the amendment will ensure that the Company is able to continue recruiting
and retaining talented employees and directors and award, as a portion of their compensation package, equity awards that further align the employees' and directors' interests with the Company\'s
stockholders.
Summary of the 2006 Stock Incentive Plan
The following paragraphs provide a summary of the principal features of the 2006 Plan and do not purport to be complete and are subject
to and qualified in its entirety by the actual terms of the plan.
Background and Objectives.
The objectives of the 2006 Plan are to attract and retain the best available personnel for positions of
substantial
responsibility, to provide additional incentive to Participants and to optimize the profitability and growth of the Company through incentives that are consistent with the Company's goals and that
link the personal interests of Participants to those of the Company's stockholders. The 2006 Plan permits the grant of the following types of incentive awards: (1) Options,
(2) Restricted Stock, (3) Restricted Stock Units ("RSUs:), (4) Stock Appreciation Rights ("SARs"), (5) Performance Shares, (6) Performance Units and (7) Other
Stock-Based Awards (each individually, an "Award").
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Shares Subject to the 2006 Plan.
The number of shares of the Company's Common Stock ("Shares") initially reserved for issuance under
the 2006 Plan
was 942,500 Shares (which included 92,500 shares rolled over from our 1997 Equity Incentive Plan). Upon approval of the amendment, the number of Shares will be increased to 1,617,500. In addition, the
following Shares shall not be considered as having been issued under the 2006 Plan or the Prior Plan: (i) Shares that are potentially deliverable under an Award or a Prior Plan award that
expires or is canceled, forfeited, settled in cash or otherwise settled without the delivery of Shares, (ii) Shares that are held back or tendered (either actually or by attestation) to cover
the Exercise Price or tax withholding obligations with respect to an Award or a Prior Plan award, (iii) Shares that are issued pursuant to Awards that are assumed, converted or substituted in
connection with a merger, acquisition, reorganization or similar transaction and (iv) Shares that are repurchased in the open market with Option Proceeds from Awards or a Prior Plan award,
provided that the aggregate number of Shares deemed not issued pursuant to the repurchase of Shares with Options Proceeds shall not exceed the amount of such proceeds divided by the Fair Market Value
of a Share on the date of exercise of the Option or Prior Plan option giving rise to such proceeds. However, for purposes of determining the number of Shares available for grant as Incentive Stock
Options, only Shares that are subject to an Award or a Prior Plan award that expires or is canceled, forfeited or settled in cash shall be treated as not having been issued under the 2006 Plan or the
Prior Plan. The market value of a Share as of April 3, 2013 was $16.54.
Administration.
The 2006 Plan is administered by a committee of the Board (the "Committee"). The Board of Directors has currently
designated the
Compensation Committee as the Committee for the 2006 Plan. Subject to the provisions of the 2006 Plan, the Committee has the authority to: (1) select the persons to whom Awards are to be
granted, (2) determine whether and to what extent Awards are to be granted, (3) determine the size and type of Awards, (4) approve forms of agreement for use under the 2006 Plan,
(5) determine the terms and conditions applicable to Awards, (6) establish performance goals for any Performance Period and determine whether such goals were satisfied, (7) amend
any outstanding Award subject to shareholder approval as described below and participant consent in
certain circumstances, (8) construe and interpret the 2006 Plan and any Award Agreement and apply its provisions and (9) subject to certain limitations, take any other actions deemed
necessary or advisable for the administration of the 2006 Plan. All decisions, interpretations and other actions of the Committee shall be final and binding on all holders of Options or rights and on
all persons deriving their rights therefrom. Subject to applicable law, the Committee may delegate its authority under the 2006 Plan.
Eligibility to Receive Awards.
The 2006 Plan provides that Awards may be granted to Participants, except that Incentive Stock Options
may be granted
only to Employees. The approximate number of persons eligible to participate in the 2006 Plan is 50.
Code Section 162(m).
The Company has designed the 2006 Plan so that it permits the issuance of Awards that are intended to qualify
as
performance-based under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
No Repricing.
The 2006 Plan prohibits repricing of Options and SARs, including by way of an exchange for another Award, unless
stockholder approval
is obtained.
Terms and Conditions of Stock Options.
Each Option granted under the 2006 Plan is evidenced by an Award Agreement between the optionee
and the
Company and is subject to the following terms and conditions:
-
-
Exercise Price.
The Committee sets the Exercise Price of
the Shares subject to each Option, provided that the Exercise Price cannot be less than 100% of the Fair Market Value of the Company's Common Stock on the Option grant date. In addition, the Exercise
Price of an Incentive Stock Option must be at least 110% of Fair Market Value if, on the grant date, the Participant owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any of its subsidiaries (a "10% Stockholder").
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-
-
Form of Consideration.
The means of payment for Shares
issued upon exercise of an option is specified in each option agreement. Payment generally may be made by cash, other Shares of Common Stock owned by the optionee, any other method permitted by the
Committee, or by a combination of the foregoing.
-
-
Exercise of the Option.
Each Award Agreement will specify
the term of the Option and the date when the Option is to become exercisable, provided that except as specified in an Award Agreement upon a termination of employment of a Change in Control or
Subsidiary Disposition, no Option may be exercisable prior to one (1) year from the date of grant. The 2006 Plan provides that in no event shall an Option granted under the 2006 Plan be
exercised more than ten (10) years after the date of grant. Moreover, in the case of an Incentive Stock Option granted to a 10% Stockholder, the term of the Option shall be for no more than
five (5) years from the date of grant.
-
-
Termination of Employment.
If an optionee's employment
terminates for any reason (including death or permanent disability), all Options held by such optionee under the 2006 Plan expire upon the earlier of (i) such period of time as is set forth in
his or her Award agreement or (ii) the expiration date of the Option. The optionee may exercise all or part of his or her Option at any time before such expiration to the extent that such
Option was exercisable at the time of termination of employment.
Terms and Conditions of Stock Appreciation Rights.
SAR grants may be either freestanding or tandem with Option grants. Each SAR grant
shall be
evidenced by an agreement that shall specify the Exercise Price, the term of the SAR, the conditions of the exercise, and other such terms and conditions as the Committee shall determine.
The
Exercise Price of SARs may not be less than 100% of the Fair Market Value of the Company's Common Stock on the grant date of the Award. The Committee, subject to the provisions of
the 2006 Plan, shall have the discretion to determine the terms and conditions of SARs granted under the 2006 Plan. Each Award Agreement will specify the term of the SAR and the date when the SAR is
to
become exercisable, provided that except as specified in an Award Agreement upon termination of employment or a Change in Control or Subsidiary Disposition, no freestanding SAR may be exercisable
prior to one year from date of grant.
Upon
exercise of a SAR, the holder of the SAR shall be entitled to receive payment in an amount equal to the product of (i) the difference between the Fair Market Value of a share
on the date of exercise and the Exercise Price and (ii) the number of shares for which the SAR is exercised. At the discretion of the Committee, payment to the holder of a SAR may be in cash,
Shares of Common Stock or a combination thereof. To the extent that a SAR is settled in cash, the shares available for issuance under the 2006 Plan shall not be diminished as a result of the
settlement.
SARs
granted under the 2006 Plan expire as determined by the Committee, but in no event later than ten (10) years from the date of grant. No SAR may be exercised by any person
after its expiration.
Share Limit for Stock Options and SARs.
In order that such Awards may qualify as performance-based compensation under Section 162
(m) of the
Code, no Participant may be granted Options and SARs to purchase more than 425,000 Shares in any 36-month period. If the Options are Incentive Stock Options, the maximum aggregate number
of options that may be granted with respect thereto in any 12-month to any one Participant shall be 150,000 options.
Terms and Conditions of Restricted Stock and Restricted Stock Unit Grants.
Each Restricted Stock and RSU grant shall be evidenced by an
agreement
that shall specify the purchase price (if any) and such other terms and conditions as the Committee shall determine.
The
Committee shall have the discretion to determine (i) the number of Shares subject to a Restricted Stock Award or Restricted Stock Unit granted to any Participant and
(ii) the conditions for vesting that
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must
be satisfied, provided that there shall be a minimum vesting period of three years, which period may, at the discretion of the Committee, lapse on a pro-rated, graded, or cliff basis,
except that the Committee has the discretion to provide for a shorter vesting period (not less than one year) for up to 5% of the shares available for Full-Value Awards under the 2006 Plan
for Restricted Stock Units and up to 20% for Restricted Stock Awards.
Performance Share Grants.
Each Performance Share grant shall be evidenced by an agreement that shall specify such other terms and
conditions as the
Committee, in its sole discretion, shall determine.
The
Committee shall have complete discretion to determine (i) the number of Shares of Common Stock subject to a Performance Share Award and (ii) the conditions that must be
satisfied for grant or for vesting, provided that, except in certain circumstances, there shall be a minimum vesting period of one year.
Share Limit for Restricted Stock, Restricted Stock Units, Performance Shares and Other Stock-Based Awards.
In order that such Awards
may qualify as
performance-based compensation under Section 162(m) of the Code, no Participant shall be granted Restricted Stock, RSUs, Performance Shares, or Other Stock-Based Awards covering, in the
aggregate, more than 425,000 Shares in any 36-month period.
Performance Units.
Performance Units are similar to Performance Shares, except that they are cash-based and may be settled in Shares,
cash or a combination of the two. The Shares available for issuance under the 2006 Plan shall not be diminished as a result of the settlement of a Performance Unit in cash. Each Performance Unit grant
shall be evidenced by an Award Agreement that shall specify such terms and conditions as shall be determined at the discretion of the Committee, provided that there shall be a minimum vesting period
of one year.
Limit for Performance Units.
In order that such Awards may qualify as performance-based compensation under Section 162(m) of the
Code, no
Participant shall be granted a Performance Unit Award providing for a payment value of more than $5,000,000 in any one fiscal year.
Other Stock-Based Awards.
The Committee has the right to grant other stock-based Awards that may include, without limitation, grants of
Shares based
on attainment of performance goals, payment of Shares as a bonus in lieu of cash based on performance goals, and the payment of shares in lieu of cash under other Company incentive or bonus programs.
The Committee shall have the discretion to determine the vesting of any such Award, provided that, except as specified in an Award Agreement upon a termination of employment or a Change in Control or
Subsidiary Disposition, there shall be a minimum vesting period of three years, except that the Committee has the discretion to provide for a
shorter vesting period (not less than one year) for up to 20% of the shares available for Full-Value Awards under the 2006 Plan, and provided further that an Award with a payment of Shares
in lieu of cash under other Company incentive or bonus programs shall not be subject to a minimum vesting period.
Performance-Based Awards.
The Committee may grant Award which are intended to qualify as "performance-based compensation" for purposes
of
deductibility under Section 162(m) of the Code. For any such Award, the Committee will establish the performance objectives to be used within 90 days after the commencement of the
Performance Period, or, if less, 25% of the Performance Period applicable to such Award. The performance objectives to be used shall be selected from the following list of measures (collectively, the
"Performance Measures"): total stockholder return, stock price, net customer sales, volume, gross profit, gross margin, operating profit, operating margin, management profit, earnings from continuing
operations before income taxes, earnings from continuing operations, earnings per share from continuing operations, net operating profit after tax, net earnings, net earnings per share, return on
assets, return on investment, return on equity, return on invested capital, cost of capital, average capital employed, cash value added, economic value added, cash flow, cash flow from operations,
working capital,
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working
capital as a percentage of net customer sales, asset growth, asset turnover, market share, customer satisfaction and employee satisfaction. The targeted level or levels of performance with
respect to the Performance Measures may be established at such levels and on such terms as the Committee may determine, in its discretion, on a corporate-wide basis or with respect to one
or more business units, divisions, subsidiaries, business segments or functions, and in either absolute terms or relative to the performance of one or more comparable companies or an index covering
multiple companies. Unless otherwise determined by the Committee, measurement of performance goals with respect to the Performance Measures above shall exclude the impact of charges for
restructurings, discontinued operations, extraordinary items and other unusual or non-recurring items, as well as the cumulative effects of tax or accounting changes, each as determined in
accordance with generally accepted accounting principles or identified in the Company's financial statements, notes to the financial statements, management's discussion and analysis or other filings
the SEC. Awards that are not intended to qualify as "performance-based compensation" under Section 162(m) of the Code may be based on these or such other performance measures as the Committee
may determine.
Non-Transferability of Awards.
An Award granted under the 2006 Plan which is an Incentive Stock Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution an may be exercised, during the
lifetime of the recipient, only by the recipient. Other Awards will be transferable to the extent provided in the Award, except that no Award may be transferred for consideration.
Adjustments Upon Changes in Capitalization.
In the event of any non reciprocal transaction between the Company and the stockholders of
the Company
that causes the per share value of shares underlying an Award to change, such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a large, nonrecurring cash
dividend, the Board shall, and in the event of any other change in corporate capitalization, such as a merger, consolidation, any reorganization (whether or not such reorganization comes within the
definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Company, the Board, in its sole discretion, may cause there to be made an equitable adjustment
to the number and kind of shares that may be issued under the 2006 Plan, or to any individual under the 2006 Plan, and to the number and kind of shares or other property subject to and the exercise
price (if applicable) of any then outstanding Awards, and such adjustment shall be conclusive and binding for all purposes of the 2006 Plan.
Change in Control.
Except as provided in an Award Agreement, in the event of a Change in Control, if the successor corporation does not
assume,
convert, or replace outstanding options or SARs, those options or SARs shall become immediately vested and exercisable, provided that the Committee may, in its sole discretion, provide that such
options and SARs are cashed out in connection with such Change in Control. Except as provided in an Award Agreement, any period of restriction or other restriction imposed on Restricted Stock,
Restricted Stock Units, and other Stock-based Awards shall lapse unless such awards are assumed, converted, or replaced in connection with a Change in Control. Notwithstanding the foregoing, if any
options, SARs, Restricted Stock, Restricted Stock Units, or Other Stock-Based Awards are assumed, converted, or replaced in connection with a Change in Control, such awards shall vest or become
exercisable, as appropriate, upon a participant's termination of employment without Cause during the 24 month period following such Change in Control. Except as provided in an Award Agreement,
any Performance Shares, Performance Units, and other performance-based awards shall vest on a pro rata monthly basis based on the performance level attained on the date of the Change in Control, if
determinable, or target level, if not determinable.
Amendment, Suspensions and Termination of the 2006 Plan.
The Company's Board of Directors may amend, suspend or terminate the 2006 Plan
at any time;
provided, however, that stockholder approval is required for any amendment to the extent necessary to comply with the NASDAQ listing standards or applicable laws. In addition, no amendment, suspension
or termination may adversely impact an Award
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previously
granted without the written consent of the Participant to whom such Award was granted unless required by applicable laws.
Federal Tax Aspects
The following paragraphs are a summary of the material U.S. federal income tax consequences associated with Awards granted under the
2006 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be
complete and does not discuss the tax consequences upon a Participants' death, or the provisions of the income tax laws of any municipally, state or foreign country in which the Participant may
reside.
Incentive Stock Options.
No taxable income is recognized when an Incentive Stock Option is granted or exercised, although the exercise
is an
adjustment item for alternative minimum tax purposes and may subject the optionee to the alternative minimum tax. If the Participant exercises the Option and then later sells or otherwise disposes of
the Shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the Exercise Price generally will be taxed as
long-term capital gain or loss. If these holding periods are not satisfied, the Participant will recognize ordinary income and be subject to withholding at the time of the sale or other
disposition equal to the difference between the Exercise Price and the lower of (i) the Fair Market Value of the Shares at the date of the Option exercise or (ii) the sale price of the
Shares. Any gain or loss recognized on such a premature disposition of the Shares in excess of the amount treated as ordinary income will be treated as long-term or short-term
capital gain or loss, depending on the holding period.
Nonqualified Stock Options.
No taxable income is recognized when a Nonqualified Stock Option is granted to a Participant with an
Exercise Price equal
to the Fair Market Value on the date of grant. Upon exercise, the Participant will recognize ordinary income in an amount equal to the excess of the Fair Market Value of the Shares on the exercise
date over the Exercise Price. Any taxable income recognized in connection with the exercise of a Nonqualified Stock Option by an Employee is subject to tax withholding by the Company. Any additional
gain or loss recognized upon later disposition of the Shares is capital gain or loss, which may be long-term or short-term capital gain or loss depending on the holding period.
Stock Appreciation Rights.
No taxable income is recognized when a stock appreciation right is granted to a Participant. Upon exercise,
the
Participant will recognize ordinary income in an amount equal to the amount of cash received and the Fair Market Value of any Shares received. Any additional gain or loss recognized upon later
disposition of the Shares is capital gain or loss, which may be long-term or short-term capital gain or loss depending on the holding period.
Restricted Stock, Restricted Stock Units, Performance Shares, and Performance Units.
A Participant generally will not have taxable
income upon grant
of Restricted Stock, RSUs, Performance Shares, or Performance Units. Instead, the Participant will recognize ordinary income at the time of vesting, or, if later, settlement, equal to the Fair Market
Value (on the vesting date) of the Shares or cash received minus any amount paid.
For
Restricted Stock only, a Participant instead may elect to be taxed at the time of grant. This election is made within 30 days of the date of grant and is irrevocable. The
amount included in a Participant's income at the time of grant is equal to the Fair Market Value of the underlying stock on the date of grant of the Restricted Stock. The Participant's holding period
begins on the date of the election. If such an election is made and the Participant then forfeits the restricted stock, the Participant may not deduct as a loss the amount previously included in gross
income.
Other Stock-Based Awards.
A Participant generally will recognize income upon receipt of the Shares subject to Award (or, if later, at
the time of
vesting of such shares).
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Tax Effect for the Company.
The Company generally will be entitled to a tax deduction in connection with an Award under the 2006 Plan in
an amount
equal to the ordinary income realized by a Participant and at the time the Participant recognizes such income (for example, the exercise of a Nonqualified Stock Option). Special rules limit the
deductibility of compensation paid to the chief executive officer and to each of the next four most highly compensated executive officers. Under Section 162(m) of the Code, unless various
conditions are met that enable compensation to qualify as "performance-based," the annual compensation paid to any of these specified executives will be
deductible only to the extent that it does not exceed $1,000,000. However, the 2006 Plan has been designed to permit the Committee to grant Awards that qualify as performance-based for purposes of
satisfying the conditions of Section 162(m) of the Code, thereby permitting the Company to receive federal income tax deduction in connection with such Awards even to the extent that they
exceed $1,000,000.
Code Section 409A.
Section 409A of the Code generally provides that any deferred compensation arrangement that does not meet
specific
requirements regarding (i) timing of payouts, (ii) advance election of deferrals, and (iii) restrictions on acceleration of payouts will result in immediate taxation of any
amounts deferred to the extent not subject to a substantial risk of forfeiture. In addition to regular income taxes that result from such immediate taxation, a participant is subject to an interest
penalty and an additional 20% in income taxes on the amounts immediately taxable as a result of a Section 409A violation. Payments that are subject to Section 409A and made by a
publicly-held company upon the separation from service of certain officers and other individuals are subject to a 6-month delay.
Section 409A
is broadly applicable to certain types of equity-based and cash-based compensation. For example, RSUs may be classified as deferred compensation subject
to the requirements of Section 409A. Awards issued under the 2006 Plan are intended to be exempt from or comply with the requirements of Section 409A of the Code.
REQUISITE VOTE
Approval of the amendment to the Company's 2006 Stock Incentive Plan requires the affirmative vote of a majority of votes cast with
respect to this Proposal 2. Broker non-votes have no legal effect on this proposal and abstentions have the same effect as a vote against this proposal.
THE BOARD RECOMMENDS
A VOTE "FOR" APPROVAL OF PROPOSAL 2.
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PROPOSAL 3APPROVAL OF THE COMPANY'S PERFORMANCE-BASED PLAN
On March 11, 2013, The Compensation Committee approved the Dynamic Materials Corporation Performance-Based Plan (the "Plan") for
the five year period ending December 31, 2017. Based on this approval and the Board's approval, the Board is submitting the Plan for stockholder approval. Under the plan, executive officers of
the Company may receive annual cash incentive compensation based upon the achievement of a pre-established performance goal. As discussed further under the heading of "Compensation
Discussion and Analysis," annual cash incentives are an integral part of the Company's compensation program. The plan is substantially similar in purpose to the Company's 2008 Performance-Based Plan,
which had a five year term, and which was approved by the Company's stockholders at the 2009 annual meeting. Unlike the previous plan which contained one specific formula for the calculation of the
performance compensation based upon the Company's net income, the Plan gives the Compensation Committee the flexibility of setting
different performance goals each year. Capitalized terms not otherwise defined in this section have the meaning set forth in the Plan.
The
Plan was designed to enable the annual bonus that may be earned by executive officers of the Company to be deductible in its entirety. Section 162(m) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code") generally limits to $1,000,000 the deduction that a publicly-held company may claim in any year for compensation paid to each of its executive
officers. However, an exception to this deduction limit applies to qualifying "performance-based" compensation, as defined under the Code. For a program such as the Plan to qualify for the
performance-based compensation exception, the Company must obtain stockholder approval of the material terms of the program, including the eligible employees, the specific formula by which the bonus
is calculated or the maximum amount payable to any individual for any specified period, and the performance criteria on which performance goals are based. In addition, other requirements for
deductibility must be met. The material terms that the stockholders approve constitute the framework within which the Compensation Committee would set actual performance goals. The Board recommends
approval of the Plan by our stockholders, so that compensation paid in accordance with the Plan will be eligible to qualify as performance-based compensation under the Code, provided the other
requirements for deductibility are met.
Consistent
with the Company's compensation philosophy, the Company expects that its incentive compensation program may result in one or more named executive officers receiving annual
compensation in excess of $1 million in some years. The Board accordingly recommends approval of the Plan to make awards granted under the Plan eligible for tax deductibility and believes that
stockholder approval of the Plan is in the best interests of the Company and its stockholders.
The
affirmative vote of a majority of the votes cast in person or by proxy by stockholders represented and entitled to vote at the meeting is required for approval of the Plan. If our
stockholders do not approve the Plan, no payments relating to the specified performance goals under the Plan will be made to executives in excess of the deduction limits of Section 162(m) of
the Code. We reserve the right to pay discretionary bonuses, or other types of compensation outside of the Plan. No executive has a guaranteed right to any discretionary bonus as a substitute for an
award granted under the Plan in the event the specified performance goals are not met or that stockholders fail to approve the material terms of the Plan.
The
following is a brief description of the material features of the Plan, which is qualified in its entirety by reference to the Plan. A copy of the full text of the Plan is attached to
this proxy statement as Appendix B.
Summary of the Performance-Based Plan
Purpose.
The purpose this Plan is intended to enable the Company to attract, retain, motivate and reward qualified senior executive
officers by
providing them with the opportunity to earn competitive annual bonus compensation directly linked to business unit performance and overall Company performance. Compensation paid under this Plan is
intended to qualify as "performance-based
19
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compensation"
within the meaning of Section 162(m), so as to exempt such compensation from the deduction limits imposed by Section 162(m) and to make such compensation deductible by the
Company for Federal income tax purposes.
Administration.
The Compensation Committee will administer and interpret the Plan. The Compensation Committee will certify whether such
performance
goals have been met, and determine the amount of the Award to be paid following the end of the relevant Performance Period. The Compensation Committee's determinations under this Plan will be final
and conclusive. The Compensation Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as the Compensation Committee deems necessary or advisable.
Eligibility.
Participation in the Plan is limited to officers of the Company selected by the Compensation Committee provided that in
all events the
Chief Executive Officer and Chief Financial Officer are participants. As part of this Proposal 3, the Compensation Committee is seeking stockholder approval to include two additional executives
of the Company as Plan participants at a later date upon the election of the Compensation Committee: the Senior Vice President and General Manager, Nobelclad and Senior Vice President and General
Manager, DYNAenergetics.
Establishment and Terms of Performance Periods.
The Compensation Committee shall establish one or more Performance Periods under the
Plan. Each
Performance Goal must be established in writing no later than 90 days after the commencement of the relevant Performance Period or such shorter time period required for the
pre-establishment of performance goals under Section 162(m). For each Performance Period the Compensation Committee shall (i) designate the Participants for such Performance
Period, (ii) establish one or more objective Performance Goals for each Participant or class of Participants, and (iii) adopt objective formulas or standards for computing the amounts of
Awards payable under the Plan based on actual results compared to the Performance Goals. The Performance Goals and target Award may be different, or may be weighted differently, for different
Participants or classes of Participants.
The
objective performance goals for each Performance Period shall be based upon one or more of the following performance criteria, as determined by the Compensation Committee: revenues
or sales; EBITDA; adjusted pre-tax income; net income; operating income; earnings per share of the Company; book value per share; stockholders' equity; adjusted pre-tax return
on stockholders' equity; expense management; total shareholder return; return on investment before or after the cost of capital; improvements in capital structure; profitability of the Company or an
identifiable business segment, unit or product; maintenance or improvement of profit margins; stock price; market share; costs; cash flow; working capital; changes in net assets, whether or not
multiplied by a constant percentage intended to represent the cost of capital; return on assets; debt ratings; debt or net debt to EBITDA ratio; debt or net debt to total capital ratios; debt or net
debt to equity ratios; gross margins; closings/deliveries; net orders/growth; SG&A and expense management; procurement of land/well located lots; operating margins; mortgage capture rates;
acquisitions/entrance into new markets; inventory turnover; liquidity; interest coverage; cost targets, reductions and savings; productivity and efficiencies; strategic business criteria; human
resources management; supervision of litigation; economic value added; customer satisfaction; credit rating; debt to equity; cash to debt; inventory; land and other asset acquisitions; debt
management; new debt issues; debt retirement. The foregoing criteria may relate to the Company, one or more of its subsidiaries, divisions or units, or any combination of the foregoing, and may be
applied on an absolute basis and/or be relative to one or more peer group companies or other industries, or any combination thereof, as the Compensation Committee shall determine.
Notwithstanding
the degree to which the applicable Performance Goals are satisfied, the Compensation Committee shall have the discretion to reduce the amount of any Participant's Award
payout below the standard or formula amount to reflect individual performance and/or unanticipated factors.
20
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Compensation Limit.
In no event will an amount be payable under the Plan to a Participant with respect
to a Performance Period exceed the lesser of 150% of that Participant's base salary for such Performance Period or $1,500,000.
Expiration.
Unless earlier terminated, this Plan shall terminate on December 31, 2017, provided that the Company may continue to
make payments
hereunder following December 31, 2017 for Performance Periods that end on or prior to December 31, 2017. The Board may at any time amend or terminate this Plan, except that no amendment
will be effective without approval by the Company's shareholders if such approval is necessary to qualify amounts payable hereunder as "performance-based compensation" under Section 162(m). No
termination of this Plan shall affect performance goals and related Awards established by the Committee prior to such termination.
Certification of Bonus.
Following the conclusion of any year and prior to the payment of any awards, the Compensation Committee will
certify in
writing the levels of attainment of the performance goals for the year and calculation of the total payable award for each participant. Awards shall be paid as soon as practicable following
certification by the Compensation Committee, and no later than the 15
th
day of the third month following the end of the relevant performance period.
Federal Income Tax Consequences.
Participants in the Plan will recognize in the year of payment ordinary income equal to the bonus award
amount,
which will be subject to applicable income and employment tax withholding by us. Under current guidance, we expect that awards under the Plan will satisfy the short-term deferral exception
to Section 409A of the Code, which imposes restrictions on non-qualified deferred compensation arrangements.
We
expect that we will be entitled to claim a deduction for federal income tax purposes equal to the amount of ordinary income recognized by the participant without regard to the
$1,000,000 per year deduction limit under Section 162(m) of the Code if the Plan is approved by our stockholders and the awards otherwise satisfy the requirements of Section 162(m) and
other relevant provisions of the Code. Section 162(m) of the Code limits the deductibility of compensation paid to each of certain of our executive officers to no more than $1,000,000 per year
except for qualified performance-based compensation defined in applicable tax regulations. Generally, the executives subject to this limit consist of individuals who, on the last day of the taxable
year, are the chief executive officer and the three highest compensated officers (other than the chief executive officer and the chief financial officer).
New Plan Benefits.
The following table sets forth the potential awards payable to the executive officers, non-executive officer
directors
and employees for awards granted in 2013, subject to
stockholder approval. The awards in the first column represent amounts which would have been received by each named executive officer for 2012 if the Performance-Based Plan, subject to stockholder
approval of the plan as described in Proposal 3, had been in effect for that year. The awards in the second column represent awards granted during 2013 under the 2006 Plan, as amended, subject
to stockholder approval of
21
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the
amendment to the plan as described in Proposal 2. As of April 3, 2013 the closing price of a share of our common stock was $16.54.
|
|
|
|
|
|
|
|
|
|
Name and Position
|
|
Performance-Based
Plan(1)
$
|
|
2006 Stock
Incentive Plan,
as amended(2)
No. of Shares
|
|
|
|
Yvon Pierre Cariou (3)
President Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
Richard A. Santa
Senior Vice President Chief Financial Officer and Secretary
|
|
$
|
63,295
|
|
|
|
|
|
|
Kevin T. Longe
Executive Vice President and Chief Operating Officer
|
|
$
|
146,554
|
|
|
|
|
|
|
John G. Banker (3)
Senior Vice President, Customers and Technology
|
|
|
|
|
|
|
|
|
|
Rolf Rospek (3)
Director and DYNAenergetics Chief Executive Officer
|
|
|
|
|
|
7,500
|
|
|
|
Jeff Nicol (4)
Senior Vice President and General Manager Nobelclad
|
|
$
|
38,783
|
|
|
|
|
|
|
Ian Grieves (4)
Senior Vice President and General Manager DYNAenergetics
|
|
$
|
20,238
|
|
|
|
|
|
|
Executive Officers as a Group
|
|
$
|
268,870
|
|
|
7,500
|
|
|
|
Non-Executive Director Group
|
|
|
|
|
|
|
|
|
|
Non-Executive Officer Employee Group
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
amount represents the actual performance bonus payable for 2012, had the plan been in effect for that year, based on the actual financial performance of
the Company during 2012. The maximum potential performance bonus payable for 2012 had the plan been in effect for that year for Mr. Santa, Mr. Longe, Mr. Nicol and
Mr. Grieves was $233,996, $541,800, $108,486 and $131,040, respectively. The amount of performance bonus awards payable for future fiscal years is not determinable.
-
(2)
-
On
January 16, 2013, the Company granted 12,500 shares to Mr. Rospek with 7,500 shares of restricted stock units subject to
stockholder approval of the amendment to the 2006 Plan. The awards are scheduled to vest in one-third increments on the first, second and third anniversary of the date of grant.
-
(3)
-
Mr. Cariou
retired effective March 1, 2013, Mr. Banker retired effective December 31, 2012, and Mr. Rospek retired
effective December 31, 2012.
-
(4)
-
Mr. Nicol
became an executive officer of the Company in September 2012 and Mr. Grieves became an executive officer of the Company during 2013.
22
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REQUISITE VOTE
Approval of the Performance-Based Plan requires the affirmative vote of a majority of votes cast with respect to this
Proposal 3. Broker non-votes have no legal effect on this proposal and abstentions have the same effect as a vote against this proposal.
THE BOARD RECOMMENDS
A VOTE "FOR" APPROVAL OF PROPOSAL 3.
23
Table of Contents
PROPOSAL 4
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
As described under the heading "Compensation Discussion and Analysis," our executive compensation program is designed to
(1) attract, motivate and retain high-caliber managerial talent; (2) provide competitive compensation opportunities; (3) create incentives to achieve both
short-term performance measures and long-term strategic goals; and (4) provide incentive programs that are linked to stockholder value. For additional information about
our executive compensation program, please read the "Compensation Discussion and Analysis" beginning on page 29.
At
our 2011 Annual Meeting, our stockholders voted in favor of holding an annual advisory vote on executive compensation. In line with this recommendation, our Board has decided to
include an advisory stockholder vote on executive compensation in our proxy materials every year until the next required advisory vote on the frequency of stockholder advisory votes on executive
compensation. We are asking our stockholders to indicate their support for the compensation of our named executive officers, as described in this proxy statement. This proposal, commonly known as a
"say-on-pay" proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address
any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, objectives and practices described in this proxy statement. Accordingly, we
are asking our stockholders to vote "FOR" approval of the following resolution at our 2012 annual meeting:
"RESOLVED,
that the compensation paid to the Company's named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the
Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED."
Requisite Vote
The advisory vote on the compensation of our named executive officers will be approved if the number of votes of authorized shares of
our common stock cast in favor of this proposal exceeds the votes cast opposing this proposal. Abstentions and broker non-votes will not be counted as votes cast on the proposal. However,
this say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions
of our stockholders and will consider the outcome of the vote when considering future decisions on the compensation of our named executive officers.
THE BOARD RECOMMENDS
A VOTE "FOR" APPROVAL OF PROPOSAL 4.
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PROPOSAL 5
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected Ernst & Young LLP ("E&Y") as our independent registered public accounting
firm for the fiscal year ending December 31, 2013. E&Y has been so engaged since 2002.
Ratification
of the selection of E&Y by stockholders is not required by law. However, as a matter of internal policy and good corporate governance, such selection is being submitted to
the stockholders for ratification at the Annual Meeting and it is the present intention of the Board to continue this policy. If the stockholders do not ratify this appointment, the Audit Committee
will reconsider whether to retain E&Y. If the selection of E&Y is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting
firm at any time it decides that such a change would be in the best interest of the Company and its stockholders.
A
representative of E&Y will be present at the annual meeting and will be available to respond to appropriate questions. We do not anticipate that the representative will make a prepared
statement at the meeting; however, he or she will have the opportunity to do so if he or she so desires.
The
Company paid the following fees to E&Y for the audit of the consolidated financial statements and for other services provided in the years ended December 31, 2012 and 2011.
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
Audit Fees
|
|
$
|
693,574
|
|
$
|
625,324
|
|
Audit Related Fees(1)
|
|
$
|
31,439
|
|
$
|
32,399
|
|
Tax Fees(2)
|
|
$
|
43,450
|
|
$
|
56,901
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
768,463
|
|
$
|
714,624
|
|
|
|
|
|
|
|
-
(1)
-
Consists
of reimbursement of costs incurred in connection with performance of work on the audit including transportation and meal expenses.
-
(2)
-
Tax
Fees included fees related to federal and state tax compliance, tax advice and tax planning.
Audit Committee Pre-Approval Policies and Procedures
In accordance with the SEC's rules requiring the Audit Committee to pre-approve all audit and non-audit
services provided by our independent auditor, the Audit Committee has adopted a formal policy on auditor independence requiring the approval by the Audit Committee of all professional services
rendered by our independent auditor prior to the commencement of the specified services. The Audit Committee approved all services performed by E&Y in fiscal year 2012 in accordance with our formal
policy on auditor independence.
Requisite Vote
The selection of our auditors will be ratified if the number of votes of authorized shares of our common stock cast in favor of the
proposal exceeds the votes cast opposing the proposal. Abstentions and broker non-votes will not be counted as votes cast on the proposal.
THE BOARD RECOMMENDS
A VOTE "FOR" APPROVAL OF PROPOSAL 5.
25
Table of Contents
Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
that might incorporate future filings, including this proxy statement, in whole or in part, the following Audit Committee Report and the Compensation Committee Report shall not be deemed to be
"Soliciting Material," and are not deemed "filed" with the SEC and shall not be incorporated by reference into any filings under the Securities Act or Exchange Act whether made before or after the
date of this proxy statement and irrespective of any general incorporation language in such filings.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
As of December 31, 2012, the Audit Committee of Dynamic Materials Corporation (the "Company") was comprised of
Messrs. Richard P. Graff (Chairman), Robert A. Cohen, James J. Ferris, Bernard Hueber and Gerard Munera, each of whom the Board of Directors of the Company has determined to be independent as
that concept is defined in Section 10A of the Exchange Act, the rules promulgated by the SEC thereunder; and the applicable rules of the NASDAQ. As required by the written Charter of the Audit
Committee, the Audit Committee reviewed and discussed the Company's audited financial statements with the Company's management. The Audit Committee has also discussed with Ernst &
Young LLP ("E&Y"), the Company's independent registered public accounting firm, the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended. The Audit
Committee has received from E&Y the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's
communications with the Audit Committee concerning independence, and the Audit Committee has discussed with E&Y that firm's independence. Based upon these discussions and the Audit Committee's review,
the Audit Committee recommended to the Board of Directors that the Company include the audited financial statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2012.
26
Table of Contents
COMPENSATION PROCEDURES
Our executive compensation program is administered by our Compensation Committee. Below is a discussion of the process and procedures
followed by the Compensation Committee in determining the 2012 compensation for our named executive officers as well as in setting the 2013 compensation levels and frame-work for 2013
performance bonus opportunities.
Roles of the Parties Involved in Executive Compensation Decisions
Role of Compensation Committee.
As provided in the Compensation Committee Charter, the Compensation Committee is composed of at
least three
non-employee directors who are also "independent directors," as defined under the applicable corporate governance rules of NASDAQ, and operates pursuant to its charter. The Compensation
Committee determines the compensation arrangements of our named executive officers and recommends to the Board for its consideration and approval, the aggregate amount of equity-based compensation for
our other employees. The Compensation Committee seeks to ensure that our compensation policies and practices are consistent with our values and pay philosophy and support the successful recruitment,
development and retention of executive talent who are focused on achieving our business objectives and optimizing our long-term financial returns to stockholders. Additional information
regarding the Compensation Committee is contained in the section of this proxy statement entitled, "Board of DirectorsBoard Committees and MeetingsThe Compensation
Committee."
Role of Independent Compensation Consultant.
Since early 2006, the Compensation Committee has engaged an independent compensation
consultant to
assist the Compensation Committee in making compensation decisions with respect to the named executive officers. Harlon Group has served as the compensation consultant to the Compensation Committee
since mid-2009. Harlon Group is an independent firm that provides consultation services to boards of directors and their compensation committees and does not provide any other services to
us. The Compensation Committee engaged Harlon Group to review the Company's overall executive officer and director compensation in comparison to other comparably-sized public companies in industries
similar to the Company's, to help the Compensation Committee identify the appropriate mix of compensation components for compensating our executive officers and to facilitate the Compensation
Committee's determination of our executive officers' performance bonus payments. Harlon Group does not provide any other services to the Company or our management or have any other direct or indirect
business relationships with us or our management. The Compensation Committee has assessed the independence of Harlon Group and concluded that its work does not raise any conflicts of interest.
Role of Chief Executive Officer in Compensation Decisions.
Our Chief Executive Officer confers with the chairman of the
Compensation Committee in
determining the base salary compensation for the executive officers other than himself. For 2012 our Chief Executive Officer also proposed recommendations to the Compensation Committee as to the 2012
performance bonus for each of the named executive officers other than the Chief Executive Officer. The Compensation Committee also asked for the input of our Chief Operating Officer as to the 2012
performance bonus for each of the named executive officers other than the Chief Executive Officer and Chief Operating Officer.
Meetings of Compensation Committee
The 2012 salary and framework for performance bonuses for Messrs. Cariou, Santa, Rospek and Banker were set by the Compensation
Committee at its November 2011 and January 2012 meetings. The Compensation Committee approved the amount of Mr. Longe's 2012 salary and guaranteed bonus, which was negotiated between the
Company and Mr. Longe in connection with his commencement of employment with us in July 2012 as our Chief Operating Officer and set forth in his employment agreement. The formula for the
incentive bonus for Messrs. Cariou, Santa and Banker that was earned for
27
Table of Contents
2012
is contained in the Company's Performance-Based Plan that was approved by stockholders at the 2009 annual stockholders meeting. The formula for Mr. Rospek's incentive bonus was approved by
the Compensation Committee following consultation with our Chief Executive Officer and included in Mr. Rospek's January 2011 employment agreement. The Compensation Committee had two meetings in
November 2012 and January 2013 to determine 2012 performance bonuses for Messrs. Cariou, Santa, Banker and Rospek and 2012 equity grants for all of the named executive officers as well as to
set compensation for 2013 for the named executive officers. The Compensation Committee also reviewed and refined its philosophy on compensating our executive officers at each of the meetings at which
it set compensation for 2012 and 2013.
At
the direction of the Compensation Committee, Harlon Group prepared various materials and analysis to assist the Compensation Committee in its review and determination of compensation
for the named executive officers.
Comparator Group Research
At the direction of the Compensation Committee, Harlon Group researched market compensation levels and trends and presented its reports
to the Compensation Committee in November 2011 for 2012 compensation decisions and in November 2012 for 2013 compensation decisions. This research focused on all aspects of compensation for our named
executive officers. The research included identifying compensation levels by executive position, with a break-out by salary, bonus and equity grants. Among other things, the research also
identified the proportion of total pay that is based on performance as well as the compensation for various executive officer positions relative to one another. The research compared the Company's
historic levels of executive compensation to that of the median and mean of comparator groups. In mid-2012 the Compensation Committee instructed Harlon Group to provide a reset comparator
group to reflect the larger contribution, on a percentage basis, made by the oilfield products segment to the Company's financial results
2012 Compensation2010-2011 Comparator Group.
Harlon Group gathered research data from several different data sources,
including various executive compensation surveys of companies in metal fabrication and advanced metals industries with comparable annual revenues (ranging from $138 million to
$520 million). Data for those few competing companies in our primary industry is not available. Our competitors are either privately-held, foreign-owned and/or are wholly-owned
subsidiaries or divisions of larger companies and no applicable compensation information is publicly-available. Rather, we have reviewed the executive compensation packages of a "comparator group" of
similarly-sized, public companies that operate in metal fabrication and advanced
metals industries, for 2012 consisting of: Altra Holdings, Inc.; AZZ Incorporated; Cabot Microelectronics Corp.; CARBO Ceramics, Inc.; Chart Industries Inc.;
Gorman-Rupp Company; Great Lakes Dredge & Dock Corporation; Haynes International Inc.; Houston Wire & Cable Company; Insteel Industries, Inc.; L.B. Foster
Company; LMI Aerospace, Inc.; McGrath RentCorp; Preformed Line Products; RTI International Metals, Inc.; Sun Hydraulics Corporation; T-3 Energy Services, Inc.; and
Universal Stainless & Alloy Products, Inc. Though not an exact match to our Company, we believe that these metal fabrication and advanced metals industries companies are our closest
relevant comparators.
2013 CompensationReset 2012 Comparator Group.
For 2013 compensation decisions, Harlon Group gathered research data from
several
different data sources, including various executive compensation surveys of companies in metal fabrication, advanced metals and oilfield products and services industries and comparable annual revenues
(ranging from $137 million to $480 million, and a median of $253 million). The reset "comparator group" consists of: Cal Drive International, Inc., Compx
International Inc., Forbes Energy Services Ltd., Friedman Industries, Incorporated, The Gorman Rupp Company, Gulf Island Fabrication, Inc., Insteel Industries, Inc.,
Material Sciences Corporation, MFRI, Inc., NN, Inc., PGT, Inc., RBC Bearings Incorporated, Sun Hydraulics Corporation; Synalloy Corporation, and Universal Stainless & Alloy
Products, Inc.
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Table of Contents
COMPENSATION COMMITTEE REPORT
The Compensation Committee of Dynamic Materials Corporation has reviewed and discussed the "Compensation Discussion and Analysis" for
the 2012 fiscal year with management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the "Compensation Discussion and Analysis" be
included in the Proxy Statement for the 2013 annual meeting of stockholders and incorporated by reference into the Company's annual report on Form 10-K for the year ended
December 31, 2012.
Compensation
Committee Members:
Robert
A. Cohen, Chairman
Dean K. Allen
James J. Ferris
Bernard Hueber
Gerard Munera
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2012, the Compensation Committee was composed of Messrs. Allen, Cohen, Ferris,
Hueber and Munera, with Mr. Allen serving as the Chairman until May 24, 2012 and Mr. Cohen serving as Chairman thereafter. We do not have any interlocking relationships between
any member of our Compensation Committee and any of our executive officers that would require disclosure under the applicable rules promulgated under the U.S. federal securities laws.
COMPENSATION DISCUSSION AND ANALYSIS
Philosophy and Objectives of Our Executive Compensation Program
Our compensation philosophy is to (i) provide a compensation program that attracts, motivates, and retains
high-caliber managerial talent; (ii) offer compensation opportunities that are competitive with those provided by other comparable U.S. public companies as determined by our market
research; (iii) create incentive compensation opportunities that emphasize the importance of achieving both short-term performance measures
(
i.e.
, annual) and long-term strategic goals; and (iv) sponsor incentive pay programs which are linked to stockholder value. The
primary elements of our executive compensation program include base salary, an annual incentive bonus based on the net income of the Company, an annual performance bonus based on achievement of
non-objective criteria and equity grants of restricted stock or units.
Below
is a brief summary of the objectives of our executive compensation program:
-
1.
-
Linkage to Performance.
Our executive compensation program is designed to link executive
compensation to the Company's performance as well as the individual executive's performance. A sizable portion of each named executive officer's total compensation package is linked to accomplishing
specific and measurable goals, including growing revenue profitably and increasing stockholder value. For 2012, the Compensation Committee used net income as the performance measure for the award of
incentive bonuses and will use revenues and EBITDA as the performance measure for the award of 2013 incentive bonuses. Our equity awards are performance based because they take into account the
increase or decrease in the trading price of our common stock over a period of years.
We
believe that the interests of our named executive officers should be closely aligned with those of our stockholders. We have historically granted shares of restricted stock to our executive
officers to reinforce a long-term focus on delivering value to stockholders. We also provided retirement compensation in 2008 in the form of shares of restricted stock, the restrictions of
29
Table of Contents
During
2012, we compared the compensation of our named executive officers to market data gathered by our compensation consultant to help establish compensation levels for each executive. See
"Compensation ProceduresComparator Group Research" above. We selected median as the targeted level of compensation as we do not intend to pay compensation at levels significantly below or
above the midpoint of our competitive market, taking into account the Company's performance compared to that of the comparator group. In comparing actual total direct compensation paid to our named
executive officers for 2010 and 2011 against the actual median of our comparator group for the same years, we note that our compensation for those years was slightly below the median of the comparator
group. Our philosophy on annual and long-term incentive compensation is that it should vary with our performance, relative to budgets, goals and expectations.
-
5.
-
Perquisites.
In 2012, our named executive officers received certain supplemental life insurance
benefits. Coverage under the supplemental life insurance policies for 2012 was $750,000 for our Chief Executive Officer, $500,000 for our Chief Operating Officer, $415,000 for each of the other two
U.S.-based named executive officers, our Chief Financial Officer and Senior Vice President, Customers and Technology and €250,000 ($321,450 based on the average exchange rate for 2012)
for the Chief Executive Officer of our DYNAenergetics subsidiary. Also in 2012 we leased automobiles for each of our named executive officers. We paid all operating expenses associated with the leased
automobiles. We paid $30,025 of housing and relocation expenses in connection with the hiring of our new Chief Operating Officer in 2012 and his relocation near our corporate office.
-
6.
-
Retirement Benefits.
Through the end of 2012, we did not sponsor any retirement plan for
executives that would provide a pension benefit above the level provided to our other employees. We provide all eligible employees, including the U.S.-based named executive officers, with a
30
Table of Contents
401(k)
savings plan to which we make matching contributions. The 401(k) savings plan allows eligible employees to defer a percentage of their eligible compensation on a pre-tax basis,
subject to the applicable dollar limit set by the Internal Revenue Service. We make a matching contribution of 100% of an employee's contribution up to 3% of eligible compensation and 50% of an
employee's contribution on the next 2% of eligible compensation. Under the terms of the employment agreement for our European-based named executive officer, we made payments of
€56,169 ($72,222 based on the average exchange rate for 2012) under a retirement insurance policy. As described below, in 2008, we granted three of the named executive officers
supplemental retirement plan compensation in the form of restricted stock that vested in early 2013, five years from the date of grant.
-
7.
-
Employment Contracts and Severance Protection.
Each of our named executive officers had
employment agreements with us with a term ending on December 31, 2012, other than Mr. Longe's Chief Operating Officer employment agreement, which has no specified term but rather
specified notice and payment provisions upon termination by the Company. The primary purpose of the employment agreements was to set forth with clarity the terms and conditions of the executive's
employment, to protect us from certain business risks (
e.g.
, disclosure of trade secrets and improper competitive conduct), and to specify our right to
terminate the employment relationship under various conditions. The employment agreements also protect the executive from certain risks, including termination of employment without cause. The
agreements other than Mr. Longe's employment agreement do not, however, provide any special terms pertaining to a change in control of the Company. In 2013 we entered into a new employment
agreement with Mr. Longe in connection with his role as our Chief Executive Officer as well as a severance payment agreement with Mr. Santa. We do not have employment agreements with the
other officers who we expect to be our named executive officers for 2013. A summary of the provisions of the employment agreements for our named executive officers can be found below under "Employment
Agreements."
Primary Elements of Our Executive Compensation Program
Our philosophy regarding each element of our executive compensation program is as follows:
-
1.
-
Base
salary is what we pay our named executive officers for their efforts for doing their job, given their scope of responsibility and their accountability
for results that impact our success;
-
2.
-
An
annual incentive bonus is what we pay our named executive officers for the short-term results of their efforts, measured by the net income of
the Company or a business segment of the Company;
-
3.
-
An
annual performance bonus is what we pay our named executive officers for the results of their efforts judged by the Compensation Committee by reference to
specified individual non-objective performance goals; and
-
4.
-
Long-term/stock
incentive compensation is what we pay executives as both rewards for performance during the past year and as forward looking
incentives to promote long-term results for their efforts, for growing the value of the enterprise, and for enhancing value for our stockholders.
Base Salary.
When establishing base salaries for our named executive officers, the Compensation Committee considers compensation
paid for similar
positions at comparable companies included in compensation surveys. Using this information, it establishes salary guidelines that reflect the responsibilities of the executive in relation to similar
positions in comparable companies. The Compensation Committee considers the named executive officer's performance against certain corporate objectives, such as successful execution of our strategies;
comparisons of budgeted amounts to actual
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amounts;
and our overall profitability. Other factors, such as specific job responsibilities, length of time in their current position, and the potential for future advancement influence the
Compensation Committee's final determination of salaries for the named executive officers.
Annual Incentive Bonus.
Pursuant to our Performance-Based Plan approved by our stockholders, we provide annual incentive bonus
awards for our Chief
Executive Officer, Chief Financial Officer and Senior Vice President, Customers and Technology to promote the achievement of our short-term
(
i.e.
, annual) business objectives, which are also tied to stockholder value. The amount of the incentive bonus is based on the net income of the
Company recognized for that fiscal year. The annual incentive bonus is paid in cash following completion of the audited financial statements of the Company for that year and certification, pursuant to
Section 162(m) of the Internal Revenue Code, by the Compensation Committee. Under the terms of his employment agreement, we provide a similar annual incentive bonus award for the Chief
Executive Officer of our DYNAenergetics subsidiary, the amount of which is based in part on the net income of the Company and in part on the operating income of our Oilfield Products segment
recognized for that fiscal year.
Annual Performance Bonus.
We provide annual performance bonus awards for our named executive officers to promote individual
performance in meeting or
exceeding objectives contained in the Company's strategy. This strategy and the performance objectives are updated and reviewed annually. The amount of the performance bonus award varies by the extent
to which the named executive
officer's target objectives are achieved. The total amount of performance bonus that may be awarded is set at a percentage of the named executive officer's base salary as provided in their respective
employment agreements. At the start of each fiscal year, the Compensation Committee reviews and approves our non-objective performance goals for the named executive officers. Our
objectives consist of operating, strategic, and financial goals that are considered critical to our fundamental long-term goal of building stockholder value.
After
the end of the fiscal year, the Compensation Committee evaluates the performance of each named executive officer in meeting these target objectives. Awards are paid in cash
following the determination of the award amounts.
Long-Term Incentives and Retirement Benefits.
We currently provide long-term incentive awards to our named executive officers
through our 2006 Stock Incentive Plan. While the 2006 Stock Incentive Plan permits a broad range of types of equity grants, the past several years we have only made awards in the form of restricted
stock grants. The purpose of the 2006 Stock Incentive Plan is to enable us to attract, retain and motivate our named executive officers and to align a significant portion of executive compensation
with the long-term interests of our stockholders.
In
January 2013, we made grants of restricted stock to our named executive officers. These grants typically vest in equal installments over three years, subject to continued employment
with us. In light of Mr. Banker's retirement on December 31, 2012 and Mr. Cariou's planned retirement on March 1, 2013, in lieu of shares to these executives we paid cash
in an amount equal to the value of the shares of stock awarded based on the closing price of the Company's stock on the following day. The purposes of the restricted stock grants typically are to
retain the executive over a long timeframe and further strengthen the link between the named executive officer's compensation and the goal of building long-term value for stockholders. To
the extent that dividends are declared and paid by the Company, any such dividends are paid on shares of restricted stock held by our named executive officers both prior to and after their vesting
dates. In January 2012, we made similar grants of restricted stock, vesting over three years, to our named executive officers. We also made a special grant of restricted stock, vesting at the end of
five years, to three of our named executive officers in January 2011. In anticipation of the retirements of Messrs. Cariou and Banker after long service to the Company, the Compensation
Committee accelerated the lapse of all remaining restrictions on all restricted stock previously granted to these two executives, effective upon their respective retirement dates.
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Table of Contents
In
January 2008, we established a Supplemental Executive Retirement Plan ("SERP") to provide additional retirement benefits to Messrs. Cariou, Santa and Banker based upon their
salary levels, ages and years of service with the Company. The SERP benefit consists of shares of restricted stock granted under the 2006 Stock Incentive Plan. The Compensation Committee used the
principles of a "defined benefit" pension plan to determine the number of shares of restricted stock to be granted to each of the executives. The shares of restricted stock vested in January 2013,
five years from date of grant.
In
consideration of Mr. Cariou's long and successful service to the Company, the Compensation Committee made a special award to Mr. Cariou upon his March 1, 2013
retirement of 70,000 shares of common stock, payable in shares or cash, at Mr. Cariou's election, equal to the closing price on his retirement date. Mr. Cariou elected to receive payment
of this special award through the issuance of 37,650 shares of common stock and a cash payment of $550,274, which was equal to 32,350 shares multiplied by the March 1, 2013 closing price of
$17.01 per share.
2012 Advisory Vote on Executive Compensation
At our 2012 annual meeting of stockholders, we received an approximately 94% vote approving, on a non-binding advisory
basis, our 2011 executive compensation. This vote accounts for all of the shares that voted for or against this "say-on-pay" proposal and does not include the "broker
non-votes" or small number of shares that abstained from voting on this proposal. We believe this vote demonstrates our stockholders' approval of the Compensation Committee's compensation
philosophy and the manner and amount in which it set compensation for 2011. We followed a similar approach in 2012.
Compensation Decisions for Our Named Executive Officers
Compensation of Chief Executive Officer.
In determining the compensation of Mr. Cariou, our President and Chief Executive
Officer for 2012,
the Compensation Committee focused on (i) competitive levels of compensation for chief executive officers who are leading a company of similar size and complexity and (ii) the importance
of retaining a chief executive officer with the strategic, financial and leadership skills to ensure our continued growth and success, especially during the period his successor was to be selected and
groomed for the transition. Harlon Group has advised us that Mr. Cariou's base salary, annual incentive target opportunity, and equity-based compensation for 2012 are consistent with reasonable
and competitive practices for high-performing chief executive officers.
A
key task for Mr. Cariou in 2011 and 2012 was to assist the Board in planning for and implementing the Chief Executive Officer succession initiative upon his retirement.
Mr. Cariou was instrumental in this critical process which lead to the hiring of Mr. Longe as the Company's Chief Operating Officer in mid-2012 and his becoming the Company's
President and Chief Executive Officer on March 1, 2013. So as to remove any compensation considerations from the decision as to the appropriate date for Mr. Longe's appointment as Chief
Executive Officer and Mr. Cariou's retirement from that position, the Compensation Committee determined to pay Mr. Cariou as compensation for 2013 an amount equal to his 2012
compensation, regardless of the date in 2013 that Mr. Cariou and the Board determined as the time for the transition to a new Chief Executive Officer.
During
2012, Mr. Cariou continued to demonstrate strong leadership and vision for us, to implement key strategic initiatives that strengthen us and increase long-term
stockholder value, and to enhance our competitiveness. Despite the difficult economic and market challenges facing the Company in 2012, we believe Mr. Cariou's leadership has been exceptional
in enabling the Company to maintain a similar level of sales and margins to what it achieved in 2011 while wisely using Company resources in furthering opportunities for the Company's growth. We
believe Mr. Cariou's efforts have been essential in our ability to hire and smoothly transition the Company's leadership to Mr. Longe.
Base Salary.
For 2012, Mr. Cariou's base salary was $483,147, a 3% increase from 2011.
33
Table of Contents
Annual Bonus.
We paid Mr. Cariou a total bonus of $419,226 for his performance in 2012. This bonus was comprised of two components:
an incentive bonus pursuant to the Company's Performance-Based Plan and a performance bonus determined at the discretion of the Compensation Committee. Mr. Cariou's 2012 annual incentive bonus
was $292,400, which is 2.5% of our annual consolidated net income for the year. The performance bonus was $126,826, which represented 26.3% (out of a possible 35% maximum target) of
Mr. Cariou's salary. The Compensation Committee determined the amount of this performance bonus based on its assessment of contributions by Mr. Cariou in achieving important
non-objective corporate goals related to development, leadership and executive management, organic growth, safety, quality and risk management, operational and financial performance and
investor relations.
Long-Term Incentives.
In light of Mr. Cariou's pending retirement, in January 2013 we awarded him $465,000 in cash, in
lieu of the usual long-term incentive restricted stock award. This amount is equivalent to 30,000 shares of the Company's stock at the closing price on January 16, 2013, the
effective date of the award. The award reflects our view of the value of Mr. Cariou's long-term contribution to, and leadership of the Company and the
long-term benefits realized by our stockholders. In January 2012, we made a grant of 30,000 shares of restricted stock to Mr. Cariou, vesting over three years or on earlier
retirement.
Compensation of the Other Named Executive Officers.
Kevin T. Longe
Chief Operating Officer (our Chief Executive Officer effective as of March 1, 2013).
Base Salary.
For 2012, Mr. Longe's annualized base salary was $350,000. His base salary was increased to $450,000 effective upon
Mr. Longe becoming our President and Chief Executive Officer on March 1, 2013.
Annual Bonus.
We paid Mr. Longe a starting bonus of $200,000 for his performance in 2012.
Mr. Longe
is eligible for a 2013 total bonus opportunity in an amount up to 180% of his base salary. 70% of this bonus opportunity will be based on objective performance criteria established by
the Compensation Committee and 30% of the bonus opportunity will be based on non-objective criteria as determined by the Compensation Committee.
Long-Term Incentives.
Mr. Longe was not eligible to receive a long-term incentive award for 2012. When
Mr. Longe became our Chief Executive Officer in March 2013, he was awarded 30,000 shares of restricted stock. These shares of restricted stock are scheduled to vest annually in equal
installments over three years.
Richard A. Santa
Senior Vice President, Chief Financial Officer and Secretary.
Base Salary.
For 2012, Mr. Santa's base salary was $301,970, a 3% increase from 2011. The Compensation Committee determined to
increase Mr. Santa's base salary to $309,519 for 2013 (an increase of 2.5%).
Annual Bonus.
We paid Mr. Santa a total bonus of $175,542 for his performance in 2012. This bonus was comprised of two components:
an incentive bonus pursuant to the Company's Performance-Based Plan and a performance bonus determined at the discretion of the Compensation Committee. Mr. Santa's 2012 annual incentive bonus
was $116,960, which is 1.0% of our annual consolidated net income for the year. The Compensation Committee awarded a performance bonus of $58,582, which represented 19.4% (out of a possible 25%
maximum target) of Mr. Santa's salary. The Compensation Committee determined the amount of this performance bonus based on how well the Committee believed Mr. Santa achieved important
non-objective corporate goals related to operational and financial performance, safety, quality and risk management, development, leadership and executive management, organic growth and
investor relations.
34
Table of Contents
Mr. Santa
is eligible for a 2013 total bonus opportunity in an amount up to 108% of his base salary. 70% of this bonus opportunity will be based on objective performance criteria established by
the Compensation Committee and 30% of the bonus opportunity will be based on non-objective criteria as determined by the Compensation Committee.
Long-Term Incentives.
We granted Mr. Santa a restricted stock award of 12,500 shares effective January 16, 2013.
These shares of restricted stock are scheduled to vest annually in equal installments over three years. The grant reflects (i) our view of the value of Mr. Santa's long-term
contribution to, and leadership of, the Company and the long-term benefits realized by our stockholders, (ii) the Compensation Committee's and the Board's desire to retain
Mr. Santa and foster his desire to exceed their expectations, and (iii) competitive marketplace practices. In January 2012, we made a similar grant of 12,500 shares of restricted stock
to Mr. Santa, vesting over three years.
John G. Banker
Senior Vice President, Customers and Technology (Retired December 31, 2012).
Base Salary.
For 2012, Mr. Banker's base salary was $301,970, a 3% increase from 2011.
Annual Bonus.
We paid Mr. Banker a total bonus of $175,089 for his performance in 2012. This bonus was comprised of two components:
an incentive bonus pursuant to the Company's Performance-Based Plan and a performance bonus determined at the discretion of the Compensation Committee. Mr. Banker's 2012 annual incentive bonus
was $116,960, which is 1.0% of our annual consolidated net income for the year. The Compensation Committee awarded a performance bonus of $58,129, which represented 19.25% (out of a possible 25%
maximum target) of Mr. Banker's salary. The Compensation Committee determined the amount of this performance bonus based on how well the Committee
believed Mr. Banker achieved important non-objective corporate goals related to sales growth, safety, quality and risk management, development, leadership and executive management.
Long-Term Incentives.
In light of Mr. Banker's pending retirement, in January 2013 we awarded him $193,750 in cash, in
lieu of the usual long-term incentive restricted stock award. This amount is equivalent to 12,500 shares of the Company's stock at the closing price on January 16, 2013, the
effective date of the award. The award reflects our view of the value of Mr. Banker's long-term contribution to the Company and the long-term benefits realized by our
stockholders. In January 2012, we made a grant of 12,500 shares of restricted stock to Mr. Banker, vesting over three years or on earlier retirement.
Rolf Rospek
Director and DYNAenergetics Chief Executive Officer (Retired December 31, 2012).
Base Salary.
For 2012, Mr. Rospek's base salary was €195,700 ($251,631 based on the average exchange rate for 2012)
an increase of 3% from 2011.
Annual Bonus.
We paid Mr. Rospek a total bonus of $166,695 for his performance in 2012. This bonus was comprised of two components:
an incentive bonus pursuant to the Company's Performance-Based Plan and a performance bonus determined at the discretion of the Compensation Committee. Mr. Rospek's annual incentive bonus was
$128,950, which is an amount equal to the sum of (1) 0.5% of the Company's annual net income and (2) 1.0% of the annual operating income of the oilfield products segment of the Company.
The Compensation Committee awarded a performance bonus of $37,745, which represented 15% (out of a possible 25% maximum target) of Mr. Rospek's salary. The Compensation Committee determined the
amount of this performance bonus based on operational and financial performance, development, leadership and executive management, organic growth, safety, quality and risk management.
Long-Term Incentives.
We granted Mr. Rospek a restricted stock unit award of 12,500 shares effective January 16,
2013. These shares of restricted stock vest annually in equal installments over three years; provided, however, if the Company's consulting agreement with Mr. Rospek is not extended beyond its
December 31, 2014 term, the remaining restrictions on the restricted stock will automatically lapse
35
Table of Contents
on
December 31, 2014. The grant reflects our view of the value of Mr. Rospek's long-term contribution to the Company and the long-term benefits realized by our
stockholders. In January 2012, we made a similar grant of 12,500 shares restricted stock units to Mr. Rospek, vesting over three years.
Consulting Agreement.
In September 2012, we entered into a consulting agreement to use Mr. Rospek's consulting services on a
part-time basis in 2013 and 2014 following his retirement from the Company. See "Employment Agreement-Rolf Rospek."
Note on Currency Translation.
Mr. Rospek's compensation is paid to him in Euros. All amounts described in U.S. Dollars were
converted using an average exchange rate for 2012 of approximately 1.2858.
Impact of Regulatory Requirements
Income Tax Considerations.
Under Section 162(m) of the Internal Revenue Code, unless various conditions are met that enable
compensation to
qualify as "performance-based," the annual compensation paid to each of our three U.S.-based named executive officers who are covered employees will be tax-deductible only to the extent
that it does not exceed $1,000,000. The 2006 Stock Incentive Plan as well as the Performance Based Plan have been designed to permit the Compensation Committee to grant awards that may qualify as
performance-based compensation for purposes of Section 162(m) of the Code provided certain other requirements are met. The Compensation Committee generally intends that compensation paid by us
will be tax-deductible. However, it may choose to pay nondeductible compensation if it deems it necessary or desirable to attract, retain and reward the executive talent necessary for our
success. For example, the restricted stock awards issued under the SERP in 2008 and other restricted stock awards that include time-based vesting do not satisfy the conditions of
Section 162(m) of the Code for qualifying performance-based compensation, and we anticipate that amounts payable under the SERP at the end of the five year period and other restricted stock
awards that, together with other compensation paid in that year, exceed $1,000,000 will not deductible for federal income tax purposes.
Accounting Considerations.
We are required to treat stock options and restricted stock as an expense under FASB ASC Topic 718,
"Share-Based
Payments." The Compensation Committee takes this requirement into account in setting the awards under the 2006 Stock Incentive Plan and the vesting schedule that attaches to those awards.
Summary
The Compensation Committee and the Board set executive compensation policy and pay opportunities for our named executive officers by
keeping in mind competitive practice for a company like Dynamic Materials Corporation, the importance of incentivizing performance, and the continuing need to align the executives' interests with
those of our stockholders.
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Table of Contents
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)(1)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yvon Pierre Cariou
|
|
|
2012
|
|
$
|
483,147
|
|
$
|
126,826
|
|
$
|
630,000
|
|
$
|
292,400
|
|
$
|
38,388
|
(2)
|
$
|
1,570,761
|
|
|
|
|
2011
|
|
$
|
469,075
|
|
$
|
117,269
|
|
$
|
647,900
|
|
$
|
312,275
|
|
$
|
36,216
|
(2)
|
$
|
1,582,735
|
|
|
|
|
2010
|
|
$
|
455,400
|
|
$
|
102,465
|
|
$
|
629,700
|
|
$
|
131,625
|
|
$
|
38,192
|
(2)
|
$
|
1,357,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin T. Longe(3)
|
|
|
2012
|
|
$
|
155,340
|
|
$
|
200,000
|
|
$
|
0
|
|
$
|
0
|
|
$
|
50,086
|
(4)
|
$
|
405,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Santa
|
|
|
2012
|
|
$
|
301,970
|
|
$
|
58,582
|
|
$
|
262,500
|
|
$
|
116,960
|
|
$
|
39,987
|
(5)
|
$
|
779,999
|
|
|
|
|
2011
|
|
$
|
293,175
|
|
$
|
62,300
|
|
$
|
292,600
|
|
$
|
124,910
|
|
$
|
37,578
|
(5)
|
$
|
810,563
|
|
|
|
|
2010
|
|
$
|
284,625
|
|
$
|
51,233
|
|
$
|
251,880
|
|
$
|
52,650
|
|
$
|
37,328
|
(5)
|
$
|
677,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John G. Banker
|
|
|
2012
|
|
$
|
301,970
|
|
$
|
58,129
|
|
$
|
262,500
|
|
$
|
116,960
|
|
$
|
34,602
|
(6)
|
$
|
774,161
|
|
|
|
|
2011
|
|
$
|
293,175
|
|
$
|
63,399
|
|
$
|
292,600
|
|
$
|
124,910
|
|
$
|
32,034
|
(6)
|
$
|
806,118
|
|
|
|
|
2010
|
|
$
|
284,625
|
|
$
|
51,233
|
|
$
|
251,880
|
|
$
|
52,650
|
|
$
|
29,209
|
(6)
|
$
|
669,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rolf Rospek
|
|
|
2012
|
|
$
|
251,631
|
|
$
|
37,745
|
|
$
|
262,500
|
|
$
|
128,950
|
|
$
|
90,676
|
(7)
|
$
|
771,502
|
|
|
|
|
2011
|
|
$
|
264,556
|
|
$
|
57,211
|
|
$
|
188,100
|
|
$
|
113,824
|
|
$
|
98,118
|
(7)
|
$
|
721,809
|
|
|
|
|
2010
|
|
$
|
236,254
|
|
$
|
58,161
|
|
$
|
188,910
|
|
$
|
0
|
|
$
|
94,783
|
(7)
|
$
|
578,108
|
|
-
(1)
-
Amounts
in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used to determine
the amounts in this column are the same as those used in the valuation of compensation expense for our audited financial statements. This column was prepared assuming none of the awards will be
forfeited. The grant date fair values of restricted stock awards were based on the market price of our stock on the grant dates. For additional information about these restricted stock awards, refer
to Note 6 of our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012.
-
(2)
-
Includes
expenses relating to a company-leased automobile that was provided to Mr. Cariou ($16,210 in 2012, $16,612 in 2011 and $18,588 in 2010),
matching contributions under the company's 401(k) plan ($10,000 in 2012 and $9,800 in 2011 and 2010), life insurance premium payments ($7,178 in 2012, $4,804 in 2011 and $4,804 in 2010), and $5,000 in
2011, 2011 and 2010 for the reimbursement of professional fees for financial planning advisory services. Automobile expenses include monthly lease payments and all operating expenses (gas,
maintenance, insurance, etc.).
-
(3)
-
Mr. Longe
commenced employment with us in July 2012.
-
(4)
-
Includes
housing and relocation expenses of $30,025, expenses relating to a company-leased automobile that was provided to Mr. Longe of $11,820,
matching contributions under the company's 401(k) plan of $3,241, and $5,000 for reimbursement of professional fees for financial planning advisory services. Automobile expenses include monthly lease
payments and all operating expenses (gas, maintenance, insurance, etc.).
-
(5)
-
Includes
expenses relating to a company-leased automobile that was provided to Mr. Santa ($16,191 in 2012, $14,540 in 2011 and $15,475 in 2010),
matching contributions under the company's 401(k) plan ($10,000 in 2012 and $9,800 in 2011 and 2010), life insurance premium payments ($8,796 in 2012, $8,238 in 2011 and $7,053 in 2010), and $5,000 in
2012, 2011 and 2010 for the reimbursement of professional fees for financial planning advisory services. Automobile expenses include monthly lease payments and all operating expenses (gas,
maintenance, insurance, etc.).
-
(6)
-
Includes
expenses relating to a company-leased automobile that was provided to Mr. Banker ($14,941 in 2012, $13,071 in 2011 and $10,723 in 2010),
matching contributions under the company's 401(k) plan ($10,000 in 2012 and $9,800 2011 and 2010), life insurance premium payments ($4,661 in 2012, $4,163 in 2011 and $3,686 in 2010), and $5,000 in
2012, 2011 and 2010 for the reimbursement of professional fees for financial planning advisory services. Automobile expenses include monthly lease payments and all operating expenses (gas,
maintenance, insurance, etc.).
-
(7)
-
Includes
expenses relating to a company-leased automobile that was provided to Mr. Rospek ($14,566 in 2012, $15,773 in 2011 and $16,253 in 2010),
company contributions to pension plan ($3,888 in 2012, $4,135 in 2011 and $3,944 in 2010), and life insurance premium payments ($72,222 in 2012, $78,210 in 2011 and $74,586 in 2010).Automobile
expenses include monthly lease payments and all operating expenses (gas, maintenance, insurance, etc.). Mr. Rospek's compensation is paid to him in Euros. All amounts included in this and other
tables are described in U.S. dollars and were converted using an average exchange rate for 2012 or approximately 1.2858.
37
Table of Contents
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR-END 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
Estimated
Possible
Payouts
Under Non-
Equity
Incentive Plan
Awards
Target ($)
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock (#)(2)
|
|
Grant Date Fair
Value of Stock
Awards ($)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yvon Pierre Cariou(1)
|
|
|
|
|
$
|
292,400
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
1/18/2012
|
|
|
|
|
|
30,000
|
|
$
|
630,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin T. Longe(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Santa(1)
|
|
|
|
|
$
|
116,960
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
1/18/2012
|
|
|
|
|
|
12,500
|
|
$
|
262,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John G. Banker(1)
|
|
|
|
|
$
|
116,960
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
1/18/2012
|
|
|
|
|
|
12,500
|
|
$
|
262,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rolf Rospek(1)
|
|
|
|
|
$
|
128,950
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
1/18/2012
|
|
|
|
|
|
12,500
|
|
$
|
262,500
|
|
|
|
-
(1)
-
Mr. Cariou's
non-equity incentive plan award for 2012 was calculated by a formula specified in the Performance-Based Plan that provided
an annual incentive equal to 2.5% of the Company's 2012 net income up to an amount equal to 175% of Mr. Cariou's salary and thereafter 1.0% of the Company's 2012 net income.
Non-equity incentive plan awards for Mr. Santa and Mr. Banker were calculated by a formula specified in the Performance-Based Plan that provided annual incentives equal to 1%
of the Company's 2012 net income for each executive up to an amount equal to 125% of such executive's salary and thereafter 0.5% of the Company's 2012 net income. Mr. Rospek's
non-equity inventive plan award for 2012 was calculated by a formula specified in the Performance-Base Plan that provided an annual incentive equal to the sum of 0.5% of the
Company's 2012 net income and 1.0% of the 2012 operating income of the oilfield products segment of the Company. The target award for each of the named executive officers reflects the incentive that
was paid. Since the formula in the Performance-Based Plan contains no thresholds or maximums, these columns have been deleted.
-
(2)
-
Awards
granted to all named executive officers were in the form of shares of restricted stock awards or units granted under the 2006 Stock Incentive Plan,
which are scheduled to vest one-third on each of the first three anniversary dates. In accordance with FASB ASC Topic 718, the grants reflects the grant date fair value of the awards based
upon the quoted closing market price of $21.00 per share of our common stock on January 18, 2012. Dividends of $0.12 per share were paid in 2012 on restricted stock awards granted to
Messrs Cariou, Santa and Banker. The awards granted to Mr. Rospek were in the form of restricted stock units which do not qualify for dividends until shares of common stock are issued on
each of the respective vesting dates.
-
(3)
-
Mr. Longe
commenced employment with us in July 2012. He did not receive any grants of plan-based awards for 2012.
38
Table of Contents
EMPLOYMENT AGREEMENTS
During 2012, the Company had employment agreements with each of our named executive officers. The terms of the employment agreements
with Messrs Cariou, Santa, Banker and Rospek expired on December 31, 2012. The Company and Mr. Longe entered into an employment agreement effective July 17, 2012, for his
service as our Chief Operating Officer. This agreement was replaced by a new employment agreement, effective March 1, 2013, when he became the Company's President and Chief Executive Officer.
Mr. Santa entered into a severance payment agreement with the Company effective as of January 1, 2013. Mr. Cariou retired as the Company's President and Chief Executive Officer
effective as of March 1, 2013. Mr. Banker retired as the Company's Senior Vice President, Customers and Technology as of December 31, 2012 and Mr. Rospek retired as Chief
Executive of DYNAenergetics on December 31, 2012. Mr. Rospek will provide consulting services on a part-time basis to the Company in 2013 and 2014 under the terms of a
consulting agreement entered into in September 2012.
Mr. Cariou served as our President and Chief Executive Officer in 2012 pursuant to an amended employment agreement that was
effective as of January 1, 2010 and ended on December 31, 2012. Because of Mr. Cariou's pending retirement, a new agreement was not entered into upon the expiration of the
existing employment agreement.
The
employment agreement provided for an annual base salary of $455,400, with annual adjustments at the discretion of our Board. The agreement also provided for annual incentive-based
compensation. For the years ended December 31, 2010, 2011 and 2012, Mr. Cariou was eligible to receive an annual incentive bonus equal to an amount equal to 2.5% of the Company's 2010,
2011 and 2012, respectively, consolidated net income up to an amount equal to 175% of Mr. Cariou's salary and thereafter 1.0% of the Company's 2010, 2011 and 2012, respectively, net income. For
the years ended December 31, 2010, 2011 and 2012, Mr. Cariou was also eligible to receive an annual performance bonus equal to an amount up to 25% of his salary, which the Compensation
Committee subsequently increased to 35%. The performance bonuses were determined based on performance goals and rules established by our Compensation Committee. Under the employment agreement,
Mr. Cariou was eligible to receive awards of restricted shares of common stock of the Company under the 2006 Stock Incentive Plan, subject to the terms and conditions of such plan and as
granted by the Compensation Committee.
Mr. Cariou
also received the following benefits: (i) term life insurance coverage in the amount of $750,000, which is in addition to the standard term life insurance
provided in our standard benefit plan; (ii) participation in the executive long-term disability plan, subject to any waiting periods or exclusions required by the insurance
provider; (iii) five weeks of vacation per year until such time as Mr. Cariou's length of service entitled him to additional vacation; (iv) participation in our standard benefit
programs including health and dental insurance, term life insurance, accidental death and dismemberment insurance, short and long term disability, paid holiday, and certain other standard benefits
provided by us; and (v) participation in our 401(k) retirement plan.
Mr. Cariou's
employment agreement also contained customary non-competition and non-solicitation covenants. These covenants are effective during
Mr. Cariou's employment and for a period of two years following termination of his employment for any reason.
On June 8, 2012, the Company entered into an employment agreement with Mr. Longe to serve as the Company's Chief
Operating Officer and Executive Vice President. The employment agreement, which was effective as of July 17, 2012, provided for an annual base salary of $350,000, to be reviewed annually and
may be increased (but not decreased) at the discretion of the Compensation Committee. The employment agreement also provided that Mr. Longe will receive a $200,000 starting bonus, payable in
January 2013,
39
Table of Contents
which
will be attributable for his services in 2012. Mr. Longe was also eligible to receive a discretionary annual bonus for 2013 of up to 100% of his base salary; however, Mr. Longe is
not guaranteed any bonus amount for 2013.
Under
the COO agreement, Mr. Longe also received the following benefits: (i) term life insurance coverage in the amount of $500,000, which is in addition to the standard
term life insurance provided in the Company's standard benefit plan; (ii) participation in the executive long-term disability plan; (iii) four weeks of vacation per year;
(iv) participation in the Company's standard benefit programs including health and dental insurance, term life insurance, accidental death and dismemberment insurance, short and long term
disability, paid holiday, and certain other standard benefits provided by the Company; (v) participation in the Company's 401(k) retirement plan; (vi) reimbursement of up to $5,000 of
professional service fees annually for a financial planning and/or tax consultant; (vii) reimbursement for two trips to Colorado for Mr. Longe and his family; and (viii) a housing
allowance for the rental of a suitable local apartment during an initial period.
The
COO employment agreement also contained customary non-competition and non-solicitation covenants. These covenants are effective during Mr. Longe's
employment and for a period of two years following termination of his employment for any reason.
At
the time of his hiring as the Company's Chief Operating Officer, the Company and Mr. Longe agreed upon the terms and form of an employment agreement the parties would execute
if the Board made Mr. Longe the Company's President and Chief Executive Officer. This new CEO employment agreement was executed when Mr. Longe assumed the position of President and Chief
Executive Officer on March 1, 2013.
The
CEO employment agreement provides for an annual base salary of $430,000, which will be reviewed annually and may be increased (but not decreased) at the discretion of the
Compensation Committee. This agreement provides that Mr. Longe is eligible (but not guaranteed) to receive a discretionary annual bonus of up to 100% of his base salary, based upon achievement
of performance goals established by the Compensation Committee. Pursuant to the CEO employment agreement, Mr. Longe received an award of 30,000 shares of restricted stock of the Company, which
vests in three equal annual installments, upon the Company's Chief Executive Officer on March 1, 2015. Mr. Longe will be eligible to receive other incentive awards, which will vest
immediately if Mr. Longe's employment is terminated other than for cause.
Under
the CEO employment agreement, Mr. Longe also receives the following benefits: (i) term life insurance coverage in the amount of $750,000, which is in addition to the
standard term life insurance provided in the Company's standard benefit plan; (ii) participation in the executive long-term disability plan; (iii) four weeks of vacation per
year; (iv) participation in the Company's standard benefit programs including health and dental insurance, term life insurance, accidental death and dismemberment insurance, short and long term
disability, paid holiday, and certain other standard benefits provided by the Company; (v) participation in the Company's 401(k) retirement plan; and (vi) reimbursement of up to $5,000
of professional service fees annually for a financial planning and/or tax consultant.
The
CEO employment agreement may be terminated at any time by the Company for cause (as defined below) effective immediately upon written notice to Mr. Longe. The employment
agreement also provides that Mr. Longe's employment can be terminated by the Company for any reason other than for cause upon the payment of an amount equal to 18 months of salary,
payable in equal monthly payments, plus a bonus for such period equal to 150% of the average bonus (if any) paid to Mr. Longe for the three years preceding his termination (or, if shorter, the
number of years of his employment with the Company), provided that Mr. Longe releases us from all claims as a condition of receiving the payments. Such amounts will be reduced to the extent
that Mr. Longe accepts other employment prior to the final payment. Mr. Longe may terminate his employment with the Company at any time upon sixty days written notice (or upon such
shorter period as the Company may agree in writing).
40
Table of Contents
The
CEO employment agreement also contains customary non-competition and non-solicitation covenants. These covenants will be effective during Mr. Longe's
employment and for a period of two years following termination of his employment for any reason
Mr. Santa serves as our Senior Vice President and Chief Financial Officer. Mr. Santa's amended employment agreement that
was effective as of January 1, 2010 ended on December 31, 2012.
The
employment agreement provided for an annual base salary of $284,625, with annual adjustments at the discretion of our Board. The agreement also provided for annual incentive-based
compensation. For the years ended December 31, 2010, 2011 and 2012, Mr. Santa was eligible to receive an annual incentive bonus equal to an amount equal to 1% of the Company's 2010, 2011
and 2012, respectively, consolidated net income up to an amount equal to 125% of Mr. Santa's salary and thereafter 0.5% of the Company's 2010, 2011 and 2012, respectively, net income. For the
years ended December 31, 2010, 2011 and 2012, Mr. Santa was also eligible to receive an annual performance bonus equal to an amount up to 20% of his salary, which the Compensation
Committee subsequently increased to 25%. The performance bonus will be determined based on performance goals and rules established by our Compensation Committee. Under the employment agreement,
Mr. Santa was eligible to receive awards of restricted shares of common stock of the Company under the Company's 2006 Stock Incentive Plan, subject to the terms and conditions of such plan and
as granted by the Compensation Committee.
Mr. Santa
also received the following benefits: (i) term life insurance coverage in the amount of $415,000 which is in addition to the standard term life insurance provided
in our standard benefit plan; (ii) participation in the executive long-term disability plan, subject to any waiting periods or exclusions required by the insurance provider;
(iii) five weeks of vacation per year until such time as Mr. Santa's length of service entitles him to additional vacation; (iv) participation in our standard benefit programs
including health and dental insurance, term life insurance, accidental death and dismemberment insurance, short and long term disability, paid holiday, and certain other standard benefits provided by
us; and (v) participation in our 401(k) retirement plan.
Mr. Santa's
employment agreement also contained customary non-competition and non-solicitation covenants. These covenants are effective during
Mr. Santa's employment and for a period of one year, with respect to non-competition, and two years, with respect to non-solicitation, following termination of his
employment for any reason.
On
January 18, 2013 the Company entered into a new agreement with Mr. Santa, effective as of January 1, 2013. The agreement provides that in the event of termination
of Mr. Santa's employment by the Company prior to December 19, 2016, for reasons other than death, disability, or Cause (generally similar to the definition in Mr. Longe's
agreement described below) he would be entitled to a lump sum payment from the Company equal to the sum of (a) an amount equal to 18 months of Mr. Santa's annual base salary (as
in effect immediately prior to the termination), plus (b) an amount equal to 150% of the amount of the average bonus (if any) paid to Mr. Santa for the three years preceding the
termination, if any, less applicable withholdings;
provided however
, that if Mr. Santa's age on the date of termination is more than
64.5 years, the amount payable under subparagraph (a) above shall be reduced by an amount
equal to one month of Mr. Santa's annual base salary for each month of Mr. Santa's age in excess of 64.5 years. In the event of Mr. Santa's death or disability prior to
December 19, 2016, he would be entitled to a lump sum payment from the Company equal to any accrued but unpaid portion of his salary and the bonus, if any, he would have received in respect of
the portion of the fiscal year prior to his termination. The bonus shall be an amount equal to the average annual bonus (if any) paid to Mr. Santa for the three years preceding the termination
of his employment multiplied by the fraction that represents the portion of the year (rounded up to the next full month) he worked prior to the termination of his employment.
41
Table of Contents
Mr. Banker served as our Senior Vice President Customers and Technology in 2012 pursuant to an amended employment agreement that
was effective as of January 1, 2010 and ended on December 31, 2012. Mr. Banker retired from the Company as of December 31, 2012.
Mr. Banker's
employment agreement provided for an annual base salary of $284,625, with annual adjustments at the discretion of our Board. The agreement also provided for annual
incentive-based compensation. For the years ended December 31, 2010, 2011 and 2012, Mr. Banker was eligible to receive an annual incentive bonus equal to an amount equal to 1% of the
Company's 2010, 2011 and 2012, respectively, consolidated net income up to an amount equal to 125% of Mr. Banker's salary and thereafter 0.5% of the Company's 2010, 2011 and 2012, respectively,
net income. For the years ended December 31, 2010, 2011 and 2012, Mr. Banker was also eligible to receive an annual performance bonus equal to an amount up to 20% of his salary, which
the Compensation Committee subsequently increased to 25%. The performance bonus was determined based on performance goals and rules established by our Compensation Committee. Under the employment
agreement, Mr. Banker was eligible to receive awards of restricted shares of common stock of the Company under the Company's 2006 Stock Incentive Plan, subject to the terms and conditions of
such plan and as granted by the Compensation Committee.
Mr. Banker
also received the following benefits: (i) term life insurance coverage in the amount of $415,000 which is in addition to the standard term life insurance
provided in our standard benefit plan; (ii) participation in the executive long-term disability plan, subject to any waiting periods or exclusions required by the insurance
provider; (iii) five weeks of vacation per year until such time as Mr. Banker's length of service entitles him to additional vacation; (iv) participation in our standard benefit
programs including health and dental insurance, term life insurance, accidental death and dismemberment insurance, short and long term disability, paid holiday, and certain other standard benefits
provided by us; and (v) participation in our 401(k) retirement plan.
Mr. Banker's
employment agreement also contained customary non-competition and non-solicitation covenants. These covenants are effective during
Mr. Banker's employment and for a period of two years following termination of his employment for any reason.
Mr. Rospek currently serves as our director and served, until his retirement on December 31, 2012, as the Chief Executive
Officer of our DYNAenergetics subsidiary. Mr. Rospek served pursuant to an employment agreement that was effective January 1, 2011 and ended December 31, 2012.
Mr. Rospek's
employment agreement provided for an annual base salary of €190,000 with annual adjustments at the discretion of our Board. The agreement also
provided for annual incentive-based compensation. For the years ended December 31, 2011 and 2012, Mr. Rospek was eligible to receive an annual incentive bonus equal to an amount equal to
(A) the sum of (1) 0.5% of the Company's annual net income for that year and (2) 1.0% of the annual operating income of the oilfield products segment of the Company for that year,
until such time as he has received total payments under this non-discretionary annual bonus with respect to such year equal to 125% of that year's salary (the "Initial Bonus Limit"), plus
(B) following such time as Mr. Rospek has received the Initial Bonus Limit, (1) 0.25% of the Company's annual net income for that year and (2) 0.5% of the annual operating
income of the oilfield products segment of the Company for that year. Mr. Rospek was also be eligible to receive, at the discretion of the Compensation Committee, an annual performance bonus in
an amount up to 20% of his annual salary, which the Compensation Committee subsequently increased to 25%. The discretionary bonus was determined based on performance goals and rules established by our
Compensation Committee. Under the employment agreement, Mr. Rospek was eligible to receive awards of restricted stock of the Company under the Company's 2006 Stock Incentive Plan, subject to
the terms and conditions of such plan and as granted by the Compensation Committee.
42
Table of Contents
Mr. Rospek
also received the following benefits: (i) employer contributions to the DYNAenergetics pension plan; (ii) life insurance coverage in the amount of
€250,000 in case of death or €500,000 in case of disability; (iii) director and officer insurance coverage of at least €10 million;
(iv) reimbursement for an existing life insurance policy of Mr. Rospek with an annual payment of €56,169; (v) reimbursement for business-related expenses,
including first class travel while taking the train and business class travel
while traveling on business by plane; (vi) a company car with monthly leasing rates of not more than €1,200 and (vii) 30 working days of annual vacation per the terms of
the agreement.
Mr. Rospek's
employment agreement also contained customary non-competition and non-solicitation covenants. These covenants are effective during
Mr. Rospek's employment and for a period of one year, with respect to non-competition, and two years, with respect to non-solicitation, following termination of his
employment for any reason.
On
September 11, 2012, the Company and DYNAenergetics entered into a consulting agreement with Mr. Rospek and RoRo-Consult GmbH (the "Consultant"), a
German limited liability company owned by Mr. Rospek. The consulting agreement is effective as of January 1, 2013 and continues until December 31, 2014, with the term to be
extended automatically through December 31, 2015, unless either the Company or the Consultant notifies the other prior to July 1, 2014 that it elects not to extend the term, or the
agreement is otherwise terminated pursuant to the provisions thereof.
The
consulting agreement provides that the Consultant, through Mr. Rospek, will provide up to 60 days per year during the term of the agreement (exclusive of time spent by
Mr. Rospek as a director of the Company) providing consulting services to the Company and DYNAenergetics on specified strategic projects. As compensation for these services, the Consultant will
receive, for each calendar month during the term, a guaranteed amount equal to USD $10,000, payable (a) 50% by DYNAenergetics in Euros, using the last business day of the applicable month for
the Euro-USD exchange rate; and (b) 50% by the Company in U.S. dollars. DYNAenergetics also will reimburse the Consultant, in accordance with its expense reimbursement policies and
procedures in effect from time to time, for all reasonable office and travel expenses actually paid or incurred by the Consultant in the course of and pursuant to the performance of consulting
services.
During
the term of the consulting agreement, Consultant and Mr. Rospek may not work for any direct or indirect competitors of the Company, DYNAenergetics or their respective
affiliates, or any affiliates of those competitors, and may not solicit or accept work from any customer of the Company, DYNAenergetics or their affiliates. The Consultant and Mr. Rospek also
agree to maintain the confidentiality of information of the Company and DYNAenergetics disclosed to them pursuant to the Consulting Agreement, which obligation will continue following the expiration
or termination of the Consulting Agreement.
The
consulting agreement was reviewed and approved by the Audit Committee of the Board in accordance with the Company's related party transaction policy and procedures, and was also
approved by the Compensation Committee and the full Board, with Mr. Rospek abstaining.
Definition of Cause
For purposes of each of the four employment agreements described above that terminated on December 31, 2012, "cause" is defined
as: (i) a willful and substantial breach by the executive of the terms of his employment agreement or any written agreement between the executive and the Company that has a materially adverse
effect on the business and affairs of the Company; (ii) the failure by the executive to substantially perform, or the gross negligence in the performance of, his duties hereunder for a period
of fifteen days after the Chief Executive Officer of the Company or, in the case of the Chief Executive Officer, the Board has made a written demand for performance which specifically identifies the
manner in which he or it believes that the executive has not substantially performed his duties; (iii) the commission by the executive of a willful act or failure to act of misconduct which is
injurious to the Company, including,
43
Table of Contents
but
not limited to, material violations of any Company policy (such as the Company's code of ethics); (iv) conviction or a plea of guilty or nolo contendere in connection with fraud or any
crime that constitutes a felony in the jurisdiction involved; or (v) an act or failure to act constituting fraud or dishonesty that compromises the executive's ability to act effectively as a
high-level executive of the Company. In the case of Mr. Rospek, "cause" includes any other "important reason" under German law.
For
purposes of Mr. Longe's CEO employment agreement, "cause" is defined as: (i) a willful and substantial breach by Mr. Longe of the terms of the employment
agreement that has a materially adverse effect on the business and affairs of the Company; (ii) the failure by Mr. Longe to substantially perform, or the gross negligence in the
performance of, his duties hereunder for a period of fifteen days after the Board has made a written demand for performance which specifically identifies the manner in which it believes that
Mr. Longe has not substantially performed his duties; (iii) the commission by Mr. Longe of a willful act or failure to act of misconduct which is injurious to the Company,
including, but not limited to, material violations of any Company policy (such as the Company's code of ethics); (iv) conviction or a plea of guilty or nolo contendere in connection with fraud
or any crime that constitutes a felony in the jurisdiction involved; or (v) an act or failure to act constituting fraud or dishonesty that compromises Mr. Longe's ability to act
effectively as a high-level executive of the Company.
2006 Stock Incentive Plan
Under the respective award agreements, if the named executive officer's employment is terminated for any reason other than
(i) death, (ii) disability, (iii) retirement or (iv) termination without cause (as defined in the executive's employment agreement), the named executive officer shall, for
no consideration, forfeit to us any shares of restricted stock to the extent such shares are not vested at the time of such termination of employment. If the named executive officer's employment
terminates due to death, disability, retirement, or is terminated without cause, any unvested shares of restricted stock will immediately vest on the date of the executive's termination of employment
for such reason.
44
Table of Contents
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2012
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
Name
|
|
Number of Shares of Stock
or Units Held that Have
Not Vested
(#)
|
|
Market Value of Shares of
Stock or Units Held that Have
Not Vested
($)(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yvon Pierre Cariou(1)
|
|
|
35,000
|
(4)
|
$
|
486,500
|
|
|
|
|
|
|
10,000
|
(5)
|
$
|
139,000
|
|
|
|
|
|
|
17,333
|
(6)
|
$
|
240,929
|
|
|
|
|
|
|
5,000
|
(7)
|
$
|
69,500
|
|
|
|
|
|
|
30,000
|
(8)
|
$
|
417,000
|
|
|
|
|
|
|
|
|
|
|
|
Kevin T. Longe(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Santa
|
|
|
25,000
|
(4)
|
$
|
347,500
|
|
|
|
|
|
|
4,000
|
(5)
|
$
|
55,600
|
|
|
|
|
|
|
7,333
|
(6)
|
$
|
101,929
|
|
|
|
|
|
|
3,000
|
(7)
|
$
|
41,700
|
|
|
|
|
|
|
12,500
|
(8)
|
$
|
173,750
|
|
|
|
|
|
|
|
|
|
|
|
John G. Banker(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rolf Rospek
|
|
|
3,000
|
(9)
|
$
|
41,700
|
|
|
|
|
|
|
6,000
|
(10)
|
$
|
83,400
|
|
|
|
|
|
|
12,500
|
(11)
|
$
|
173,750
|
|
|
|
There
were no outstanding options for the named executive officers at December 31, 2012.
-
(1)
-
Pursuant
to the terms in the restricted stock award agreement or as otherwise provided by the Compensation Committee, effective upon Mr. Cariou's
March 1, 2013 retirement date, vesting on all outstanding shares of restricted stock were accelerated to his retirement date.
-
(2)
-
Mr. Longe
commenced employment with us in July 2012. He did not receive any grants of plan-based awards for 2012; therefore,
Mr. Longe had no outstanding awards as of December 31, 2012.
-
(3)
-
Mr. Banker
had no outstanding unvested equity awards as of December 31, 2012 as, pursuant to the terms in the restricted stock award agreement
or as otherwise provided by the Compensation Committee, effective upon Mr. Banker's December 31, 2012 retirement date vesting on all outstanding shares of restricted stock were
accelerated to his retirement date.
-
(4)
-
These
restricted stock awards were granted on January 9, 2008 under the SERP and vested on January 9, 2013 which is five years from the date
of grant. The shares qualify for dividends if and when the Company declares dividend payments. Dividends of $0.16 per share were paid on these shares in 2012.
45
Table of Contents
-
(5)
-
These
restricted stock awards were granted on January 13, 2010 and are scheduled to vest one-third on each of the first three anniversary
dates. The shares qualify for dividends if and when the Company declares dividend payments. Dividends of $0.16 per share were paid on these shares in 2012.
-
(6)
-
These
restricted stock awards were granted on January 19, 2011 and are scheduled to vest one-third on each of the first three anniversary
dates. The shares qualify for dividends if and when the Company declares dividend payments. Dividends of $0.16 per share were paid on these shares in 2012.
-
(7)
-
These
restricted stock awards were granted on January 19, 2011 and are scheduled to vest five years from the date of grant, January 19, 2016,
or, if earlier, retirement from employment with the Company. The shares qualify for dividends if and when the Company declares dividend payments. Dividends of $0.16 per share were paid on these shares
in 2012.
-
(8)
-
These
restricted stock awards were granted on January 18, 2012 and are schedule to vest one-third on each of the first three anniversary
dates. The shares qualify for dividends if and when the Company declares dividend payments. Dividends of $0.12 per share were paid on these shares in 2012.
-
(9)
-
These
restricted stock units were granted on January 13, 2010 and are scheduled to vest one-third on each of the first three anniversary
dates. These restricted stock units do not qualify for dividends until shares of common stock are issued on each of the respective vesting dates.
-
(10)
-
These
restricted stock units were granted on January 19, 2011 and are scheduled to vest one-third on each of the first three anniversary
dates. These restricted stock units do not qualify for dividends until shares of common stock are issued on each of the respective vesting dates.
-
(11)
-
These
restricted stock units were granted on January 18, 2012 and are scheduled to vest one-third on each of the first three anniversary
dates. These restricted stock units do not qualify for dividends until shares of common stock are issued on each of the respective vesting dates.
-
(12)
-
The
fair market value is calculated as the product of the closing price on December 31, 2012, of $13.90 per share, and the number of unvested
shares.
Supplemental Executive Retirement Plan
On January 9, 2008, the Board approved the SERP for the named executive officers. Under the terms of the SERP, on
January 9, 2008, the Compensation Committee granted 35,000, 25,000 and 30,000 restricted shares of Company stock to Messrs. Cariou, Santa, and Banker, respectively, at the closing price
of $49.22. These restricted shares were issued from the 2006 Stock Incentive Plan and vested on Mr. Banker's December 31, 2012 retirement date as to the shares awarded him and on the
regularly scheduled vesting date of January 9, 2013 for shares awarded to Messrs. Cariou and Santa.
Additional
information regarding the SERP is contained in the section of this proxy statement entitled "Compensation Discussion and AnalysisPrimary Elements of Our Executive
Compensation ProgramLong-Term Incentives and Retirement Benefits."
46
Table of Contents
STOCK VESTED DURING 2012
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name(1)
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
Value Realized
Upon Vesting
($)(3)
|
|
|
|
|
|
|
|
|
|
Yvon Pierre Cariou
|
|
|
10,000
|
|
$
|
209,000
|
|
|
|
|
8,667
|
|
$
|
187,814
|
|
|
|
|
|
|
|
|
|
Kevin T. Longe(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Santa
|
|
|
4,000
|
|
$
|
83,600
|
|
|
|
|
3,667
|
|
$
|
79,464
|
|
|
|
|
|
|
|
|
|
John G. Banker
|
|
|
4,000
|
|
$
|
83,600
|
|
|
|
|
3,667
|
|
$
|
79,464
|
|
|
|
|
30,000
|
|
$
|
417,000
|
|
|
|
|
4,000
|
|
$
|
55,600
|
|
|
|
|
3,667
|
|
$
|
50,971
|
|
|
|
|
3,666
|
|
$
|
50,957
|
|
|
|
|
3,000
|
|
$
|
41,700
|
|
|
|
|
4,167
|
|
$
|
57,921
|
|
|
|
|
4,167
|
|
$
|
57,921
|
|
|
|
|
4,166
|
|
$
|
57,907
|
|
|
|
|
|
|
|
|
|
Rolf Rospek
|
|
|
3,000
|
|
$
|
62,700
|
|
|
|
|
3,000
|
|
$
|
65,010
|
|
-
(1)
-
There
were no options outstanding, and thus no option exercises, for any of our named executive officers during 2012.
-
(2)
-
Mr. Longe
commenced employment with us in July 2012. He did not have any vesting of plan-based awards during 2012.
-
(3)
-
Represents
the number of shares vested multiplied by the per share closing market price of our common stock on the respective vesting dates.
47
Table of Contents
POTENTIAL PAYMENTS UPON TERMINATION
The table below sets forth the potential payments to our named executive officers under various termination scenarios including
termination without cause, termination as a result of death or disability and termination as a result of retirement, under the terms of their respective current employment agreements, the 2006 Stock
Incentive Plan, and the 1997 Equity Incentive Plan. For purposes of this table, we have assumed the date of termination of employment (regardless of the circumstances) is December 31, 2012, and
that termination occurred under the terms of the current employment agreements, which are effective beginning January 1, 2010 for Messrs. Cariou, Santa and Banker and beginning
January 1, 2011 for Mr. Rospek. The price of our common stock on December 31, 2012 was $13.90. We have not included the financial effect of a termination for cause as the named
executive officers are not entitled to any further compensation or benefits following such a termination. Furthermore, the amounts shown in the tables below do not include payments to the extent they
are provided on a non-discriminatory basis to salaried employees generally upon termination of employment, including accrued salary and vacation pay. Payment of salary continuation upon
termination will be made in monthly payments while any salary owed upon termination will be paid in a single lump sum. Payment of these amounts after termination without cause is generally conditioned
upon the former executive's execution of release and waivers and continued compliance with non-competition, non-solicitation, and confidentiality obligations. We may make
changes to the current employment and termination arrangements with our executive officers or enter into new arrangements from time to time. See "Employment Agreements" above.
Messrs. Rospek
and Banker retired from employment with the company on December 31, 2012 and Mr. Cariou retired from employment on March 1, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yvon Pierre Cariou
|
|
Richard A. Santa
|
|
Kevin T. Longe
|
|
Executive Benefits and Payments upon Termination of Employment
|
|
Involuntary
Termination
without
Cause(1)
|
|
Death,
Disability,
Retirement(2)
|
|
Involuntary
Termination
without
Cause(1)
|
|
Death,
Disability,
Retirement(2)
|
|
Involuntary
Termination
without
Cause(1)
|
|
Death,
Disability,
Retirement(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
525,000
|
(3)
|
|
|
|
Incentive Bonus
|
|
$
|
419,226
|
(4)
|
$
|
419,226
|
(4)
|
$
|
175,542
|
(5)
|
$
|
175,542
|
(5)
|
$
|
300,000
|
(6)
|
$
|
200,000
|
(7)
|
Acceleration of vesting of Restricted Stock(8)
|
|
$
|
1,352,929
|
|
$
|
1,352,929
|
|
$
|
720,479
|
|
$
|
720,479
|
|
|
|
|
|
|
|
Retirement Payout(9)
|
|
|
|
|
$
|
2,465,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
1,772,155
|
|
$
|
4,237,315
|
|
$
|
896,021
|
|
$
|
896,021
|
|
$
|
825,000
|
|
$
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John G. Banker
|
|
Rolf Rospek
|
|
Executive Benefits and Payments upon Termination of Employment
|
|
Involuntary
Termination
without
Cause(1)
|
|
Death,
Disability,
Retirement(2)
|
|
Involuntary
Termination
without
Cause(1)
|
|
Death,
Disability,
Retirement(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
|
|
|
|
|
|
|
|
$
|
61,076
|
(10)
|
Incentive Bonus
|
|
$
|
175,089
|
(11)
|
$
|
175,089
|
(11)
|
$
|
166,695
|
(12)
|
$
|
208,369
|
(13)
|
Acceleration of vesting of Restricted Stock(8)
|
|
$
|
789,979
|
|
$
|
789,979
|
|
$
|
298,850
|
|
$
|
298,850
|
|
TOTAL
|
|
$
|
965,068
|
|
$
|
965,068
|
|
$
|
465,545
|
|
$
|
568,295
|
|
-
(1)
-
Includes
involuntary termination without cause resulting from a change in control.
48
Table of Contents
-
(2)
-
The
only compensation payable to named executive officers in the event of death, disability or retirement, is the accelerated vesting of restricted stock
awards and a pro-rated bonus for the portion of the fiscal year prior to his death, disability or retirement.
-
(3)
-
Equals
18 months of base salary of $350,000 for Mr. Longe.
-
(4)
-
Equals
Mr. Cariou's 2012 bonus that was paid in 2013.
-
(5)
-
Equals
Mr. Santa's 2012 bonus that was paid in 2013.
-
(6)
-
Equals
150% of Mr. Longe's 2012 bonus.
-
(7)
-
Equals
Mr. Longe's 2012 bonus.
-
(8)
-
The
value of the restricted stock is based on the closing market price of our common stock on December 31, 2012, $13.90 per share.
-
(9)
-
Equals
the retirement payouts in cash and stock to Mr. Cariou who retired on March 1, 2013.
-
(10)
-
Equals
three month's salary that is payable to Mr. Rospek's estate in the event of his death.
-
(11)
-
Equals
Mr. Banker's 2012 bonus that was paid in 2013.
-
(12)
-
Equals
Mr. Rospek's 2012 bonus that was paid in 2013.
-
(13)
-
Equals
Mr. Rospek's 2012 bonus that was paid in 2013 plus an additional three month's bonus that is due in the event of Mr. Rospek's death.
49
Table of Contents
DIRECTOR COMPENSATION FOR 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-employee Director(1)
|
|
Fees Earned or
Paid in Cash
($)(2)(4)
|
|
Stock
Awards($)
(3)
|
|
Option
Awards($)
(3)
|
|
Total($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean K. Allen
|
|
$
|
49,000
|
|
$
|
63,468
|
|
$
|
0
|
|
$
|
112,468
|
|
|
|
Robert Cohen
|
|
$
|
42,000
|
|
$
|
63,468
|
|
$
|
0
|
|
$
|
105,468
|
|
|
|
James J. Ferris
|
|
$
|
39,000
|
|
$
|
63,468
|
|
$
|
0
|
|
$
|
102,468
|
|
|
|
Richard P. Graff
|
|
$
|
41,000
|
|
$
|
63,468
|
|
$
|
0
|
|
$
|
104,468
|
|
|
|
Bernard Hueber
|
|
$
|
43,000
|
|
$
|
63,468
|
|
$
|
0
|
|
$
|
106,468
|
|
|
|
Gerard Munera
|
|
$
|
43,000
|
|
$
|
63,468
|
|
$
|
0
|
|
$
|
106,468
|
|
|
|
-
(1)
-
Mr. Cariou
and Mr. Rospek have been omitted from the table because they do not receive any compensation for serving on our Board, beyond their
compensation as employees of the Company. See the "Summary Compensation Table" for Mr. Cariou's and Mr. Rospek's compensation.
-
(2)
-
The
annual fees for each member of the Board and fees related to the applicable Board member's serving as a member of the Board and as the chair or a member
of one or more committees and are paid quarterly.
-
(3)
-
Amounts
shown in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See Note 6 of the
consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012 regarding assumptions underlying valuation of equity awards. The
grant date fair value of the restricted stock awarded to each director on May 24, 2012 was $63,468 for the 3,600 shares granted to each independent director. The 2012 restricted stock awards
vest one-third on each of the first three anniversary dates. Restricted stock awards are forfeited for no consideration if a director's service is terminated for any reason. As of
December 31, 2012, Messrs. Allen, Cohen, Ferris, Graff and Hueber each had no outstanding options and 3,600 shares of restricted stock and Mr. Munera had 10,000 options
outstanding and 3,600 shares of restricted stock. During 2012, aggregate dividends of $0.16 per share were paid on shares of restricted stock.
-
(4)
-
In
fourth quarter 2012, the Board authorized a one-time prepayment of first quarter 2013 fees paid to our U.S. Board members. The amounts paid
in December 2012 to Mr. Allen, Mr. Cohen, Mr. Ferris, Mr. Graff and Mr. Munera were $16,250, $14,500, $12,500, $14,500 and $14,500, respectively, and are not
included in the amounts above for 2012 because the amounts were earned in 2013 and will be reported for 2013.
Compensation for Non-Employee Directors
In 2012, each of our non-employee directors received an annual retainer of $12,000. The directors also received per meeting
fees of $2,000 for in-person attendance at Board meetings, $1,000 for Board meeting attendance by telephone, and $1,000 for attendance at committee meetings. In addition, each independent
director received per meeting fees of $2,000 for attendance at executive sessions. The non-executive Chairman of the Board, Mr. Allen, receives an additional annual retainer for
service in that position of $12,000 per year. Chairmen of the Board's committees receive an additional annual retainer for service in that position of $6,000 (Audit Committee), $4,000 (Compensation
Committee), $2,000 (Nominating and Corporate Governance Committee), and $2,000 (Quality and Safety Committee) per year. The members of the Board were also eligible for reimbursement of their expenses
incurred in connection with attendance at Board meetings.
50
Table of Contents
In
2012, we granted 3,600 shares of restricted stock to each individual serving as a non-employee director at the time of his re-election to the Board at our
annual meeting of stockholders. The 2012 restricted stock awards vest one-third on each of the first three anniversary dates. Our intent is that approximately one-half of a
non-employee director's annual fees will be cash, and the other one-half will be stock. Under our stock ownership guidelines, our non-employee directors are
expected to hold stock worth at least five times their annual cash fees for serving as a director. Additional information about our stock ownership guidelines are contained in the section this proxy
statement entitled "Compensation Discussion and AnalysisPhilosophy and Objectives of our Executive Compensation ProgramStock Ownership Guidelines."
The
Compensation Committee determined new compensation packages for non-employee directors beginning January 1, 2013. Non-employee directors will receive
an annual retainer of $50,000 with an additional annual retainer of $15,000 to the Chairman of the Board and $8,000 to the chairman of each of the Board's four committees. The annual retainers will be
paid quarterly. If two meetings are missed by a director, the retainer will be reduced by 25% and reduced further on a pro rata basis for each additional meeting missed. Beginning in 2013, the Company
has eliminated per meeting fees for directors. In addition to the cash retainers, each non-employee director will be granted on the date of the Company's annual stockholder meeting a
restricted stock award with a value equivalent to $60,000 that will vest one-third on each of the first three anniversary dates.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2012 with respect to the shares of our common stock that may be
issued under our equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
(a)
|
|
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
15,500
|
|
$
|
14.92
|
|
|
294,705
|
(1)
|
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
$
|
|
|
|
N/A
|
|
|
|
Total
|
|
|
15,500
|
|
$
|
14.92
|
|
|
294,705
|
|
|
|
-
(1)
-
Includes
158,055 shares issuable with respect to outstanding rights under our Employee Stock Purchase Plan and 136,650 shares available for issuance under
our 2006 Stock Incentive Plan, both as of December 31, 2012.
51
Table of Contents
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of our common stock as of April 1, 2013, including,
shares subject to stock options exercisable within 60 days of that date, by: (i) each of our executive officers; (ii) each of our directors; and (iii) all of our executive
officers and directors as a group.
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership(1)
|
|
|
|
|
|
Name and Address of Beneficial Owner(2)
|
|
Number
of Shares
|
|
Percent
of Total
|
|
|
|
|
|
|
|
|
|
|
|
Yvon Pierre Cariou
|
|
|
285,090
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
Richard A. Santa
|
|
|
159,734
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
Rolf Rospek
|
|
|
110,781
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Dean K. Allen
|
|
|
58,600
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Kevin T. Longe
|
|
|
30,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Gerard Munera(3)
|
|
|
29,100
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Bernard Hueber
|
|
|
19,600
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Richard P. Graff
|
|
|
16,400
|
|
|
*
|
|
|
|
|
|
|
|
|
|
James J. Ferris
|
|
|
9,600
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Robert Cohen
|
|
|
9,600
|
|
|
*
|
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (10 persons)
|
|
|
728,505
|
|
|
5.3
|
%
|
|
|
-
*
-
Less
than 1%
-
(1)
-
This
table is based upon information supplied by officers and directors as well as filings made pursuant to Section 16(a) of the Exchange Act with
the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 13,683,307 shares of common stock outstanding on April 1, 2013, adjusted as
required by rules promulgated by the SEC.
-
(2)
-
Unless
otherwise indicated, the address of each beneficial owner is c/o Dynamic Materials Corporation, 5405 Spine Road, Boulder, Colorado 80301.
-
(3)
-
Includes
10,000 shares that may be acquired upon exercise of currently exercisable stock options. Shares of common stock subject to options that are
exercisable within 60 days of April 1, 2013, are deemed to be beneficially owned by the person holding those options for
52
Table of Contents
the
purpose of computing the percentage ownership of the person but are not treated as outstanding for the purpose of computing any other person's percentage ownership.
The
following table sets forth certain information regarding the ownership of our common stock as of April 1, 2013, by each person or group known by us to be the beneficial owner
of more than 5% of our common stock.
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership(1)
|
|
Name and Address of Beneficial Owner
|
|
Number
of Shares
|
|
Percent
of Total
|
|
Brown Capital Management, LLC(2)
1201 N. Calvert Street
Baltimore, MD 21202
|
|
|
2,242,142
|
|
|
16.4
|
%
|
BlackRock, Inc.(3)
40 East 52
nd
Street
New York, NY 10022
|
|
|
785,680
|
|
|
5.7
|
%
|
Vanguard Group, Inc.(4)
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
711,629
|
|
|
5.2
|
%
|
WHV Investment Management, Inc.(5)
301 Battery Street, Suite 400
San Francisco, CA 94111
|
|
|
697,200
|
|
|
5.1
|
%
|
-
(1)
-
This
table is based upon information supplied by the principal stockholders on the Statement of Beneficial Ownership filed on Schedule 13G with the
SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 13,683,307 shares outstanding on April 1, 2013.
-
(2)
-
Based
on the Statement of Beneficial Ownership filed on Schedule 13G/A on February 14, 2013, by Brown Capital Management, LLC, in its
capacity as an investment advisor for shares owned by its clients. Brown Capital Management has the sole power to vote or direct the vote for 1,224,917 shares, and the sole power to dispose or direct
the disposition of 2,242,142 shares.
-
(3)
-
Based
on the Statement of Beneficial Ownership filed on Schedule 13G/A on February 8, 2013, by BlackRock, Inc., in its capacity as an
investment advisor for shares owned by its clients. BlackRock, Inc. has the sole power to vote or direct the vote for 785,680 shares, and the sole power to dispose or direct the disposition of
785,680 shares.
-
(4)
-
Based
on the Statement of Beneficial Ownership filed on Schedule 13G/A on February 11, 2013, by Vanguard Group, Inc. in its capacity as
an investment advisor for shares owned by its clients. Vanguard Group has the sole power to vote of direct the vote for 23,070 shares, and the sole power to dispose or direct the disposition of
711,629 shares.
-
(5)
-
Based
on the Statement of Beneficial Ownership filed on Schedule 13G on February 6, 2013, by WHV Investment Management, Inc. in its
capacity as an investment advisor for shares owned by its clients. WHV Investment Management has the sole power to vote or direct the vote for 150,200 shares, and the sole power to dispose or direct
the disposition of 697,200 shares.
53
Table of Contents
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and officers, and persons who own more than 10% of a registered class
of our equity securities, to file with the SEC an initial report of ownership and to report changes in ownership of our common stock and other equity securities. Officers, directors, and greater than
10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
To
our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended
December 31, 2012, all Section 16(a) filing requirements applicable to our officers, directors, and greater than 10% beneficial owners were complied with and filed on time.
Code of Business Conduct and Ethics
We have adopted a Code of Ethics applicable to each of the named executive officers. The Code of Ethics may be viewed on our website,
www.dynamicmaterials.com.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board recognizes that certain transactions, arrangements, and relationships between us, on the one hand, and members of the Board,
certain officers and persons and entities affiliated with such persons, on the other hand, present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof),
compared to transactions between us and unaffiliated third parties. Accordingly, the Board has adopted a written Related Party Transaction Policy and Procedures (the "Related Party Transaction
Policy") for the purpose of establishing guidelines and procedures by which our Audit Committee shall evaluate and consider for approval all proposed Related Party Transactions, as more fully
described therein.
In
accordance with the Related Party Transaction Policy, we may enter into, or continue with, a "Related Party Transaction" only if: (i) such transaction, arrangement or
relationship has been approved or ratified by the Audit Committee in accordance with the guidelines set forth therein and (ii) such
transaction arrangement or relationship contains commercial terms that are no less favorable to us than those that could be obtained in a transaction between us and an unrelated third party.
All
Related Party Transactions will be disclosed in our filings with the SEC to the extent required by the Securities Act of 1933, as amended, the Exchange Act and the rules and
regulations promulgated thereunder.
HOUSEHOLDING
As permitted by applicable law, we intend to deliver only one copy of certain of our documents, including the Notice of Internet
Availability of Proxy Materials, proxy statements, annual reports and information statements to stockholders residing at the same address, unless such stockholders have notified us of their desire to
receive multiple copies thereof. Any request for multiple copies or paper copies of proxy materials should be directed to Dynamic Materials Corporation, c/o Corporate Secretary, 5405 Spine Road,
Boulder, Colorado 80301, or by telephone at (303) 665-5700. Upon request, we will promptly deliver a separate copy. Stockholders who currently receive multiple copies of the proxy
statement at their address and would like to request householding of their communications should contact their broker.
54
Table of Contents
OTHER MATTERS
The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
|
|
|
|
|
By Order of the Board of Directors,
|
|
|
/s/ RICHARD A. SANTA
RICHARD A. SANTA
Senior Vice President, Chief Financial Officer and Secretary
|
|
|
April 12, 2013
|
Accompanying
this proxy statement is a copy of our Annual Report to Stockholders, which includes our Annual Report to the SEC on Form 10-K for the fiscal year ended
December 31, 2012.
Additional copies of the Annual Report and the Form 10-K are available without charge upon written request to: Corporate Secretary,
Dynamic Materials Corporation, 5405 Spine Road, Boulder, Colorado 80301.
55
Table of Contents
Appendix A
Amendment to
Dynamic Materials Corporation
2006 Stock Incentive Plan
The Dynamic Materials Corporation 2006 Stock Incentive Plan (the "Plan") is amended as follows:
1.
Increase in Number of Shares Available.
Section 3(a) of the Plan is hereby amended to read in its
entirety as follows:
Number of Shares Available for Grants.
Subject to adjustment as provided in Section 18 hereof, the maximum number of Shares that may
be issued pursuant to Awards under the Plan shall be 1,617,500. The Shares to be issued pursuant to the Awards may be authorized but unissued Shares or treasury Shares.
A-1
Table of Contents
Appendix B
DYNAMIC MATERIALS CORPORATION PERFORMANCE-BASED PLAN
(Adopted
March 11,2013; Effective January 1, 2013)
(Approved by Shareholders May , 2013)
PURPOSES.
This Plan is intended to enable the Company to attract, retain, motivate and reward qualified senior executive officers by providing
them with the opportunity to earn competitive annual bonus compensation directly linked to business unit performance and overall Company performance. Compensation paid under this Plan is intended to
qualify as "performance-based compensation" within the meaning of Section 162(m), so as to exempt such compensation from the deduction limits imposed by Section 162(m) and to make such
compensation deductible by the Company for Federal income tax purposes.
DEFINITIONS.
The following words as used in this Plan have the meanings ascribed to each below:
Performance Goal
means a performance goal established in writing by the Committee for a Performance Period. Each Performance Goal for a
Performance Period shall be based upon one or more of the following criteria: revenues or sales; EBITDA; adjusted pre-tax income; net income; operating income; earnings per share of the
Company; book value per share; stockholders' equity; adjusted pre-tax return on stockholders' equity; expense management; total shareholder return; return on investment before or after the
cost of capital; improvements in capital structure; profitability of the Company or an identifiable business segment, unit or product; maintenance or improvement of profit margins; stock price; market
share; costs; cash flow; working capital; changes in net assets, whether or not multiplied by a constant percentage intended to represent the cost of capital; return on assets; debt ratings; debt or
net debt to EBITDA ratio; debt or net debt to total capital ratios; debt or net debt to equity ratios; gross margins; closings/deliveries; net orders/growth; SG&A and expense management; procurement
of land/well located lots; operating margins; mortgage capture rates; acquisitions/entrance into new markets; inventory turnover; liquidity; interest coverage; cost targets, reductions and savings;
productivity and efficiencies; strategic business criteria; human resources management; supervision of litigation; economic value added; customer satisfaction; credit rating; debt to equity; cash to
debt; inventory; land and other asset acquisitions; debt management; new debt issues; debt retirement. The foregoing criteria may relate to the Company, one or more of its subsidiaries, divisions or
units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or other industries, or any combination thereof, as the
Committee shall determine.
Award
means an annual incentive award, payable in cash or property, payable in accordance with Section 5 of this Plan.
Board
means the Board of Directors of the Company.
Committee
means the Compensation Committee of the Board, which shall be comprised solely of two or more "outside directors" as defined in
regulations and other guidance promulgated under Section 162(m).
Company
means Dynamic Materials Corporation.
Disability
means a disability determined by the Committee based on the Company's Long Term Disability Plan.
Effective Date
means January 1, 2013. This Plan has been adopted by the Board within 90 days of the beginning of the 2013
calendar year.
B-1
Table of Contents
Participant
means such officers of the Company selected by the Committee for participation in this Plan for a Performance Period in
accordance with Section 3 of this Plan, provided that in all events the Chief Executive Officer and Chief Financial Officer of the Company shall be Participants.
Performance Period
means a designated calendar year or such shorter period within one calendar year as the Committee may designate.
Plan
means the Dynamic Materials Corporation Performance-Based Plan, as set forth herein and as may be amended from time to time.
Section 162(m)
means Section 162(m) of the Internal Revenue Code of 1986, as amended, and any regulations and guidance
promulgated thereunder.
ESTABLISHMENT AND TERMS OF PERFORMANCE PERIODS.
(a) The
Committee shall establish one or more Performance Periods under the Plan. Each Performance Goal must be established in writing no later than 90 days after the
commencement of the relevant Performance Period or such shorter time period required for the pre-establishment of performance goals under Section 162(m).
(b) For
each Performance Period, the Committee shall (i) designate the Participants for such Performance Period, (ii) establish one or more objective
Performance Goals for each Participant or class of Participants, and (iii) adopt objective formulas or standards for computing the amounts of Awards payable under the Plan based on actual
results compared to the Performance Goals. The Performance Goals and target Award may be different, or may be weighted differently, for different Participants or classes of Participants.
ADMINISTRATION.
The Committee will administer and interpret this Plan. In accordance with Section 5 of this Plan, the Committee will certify
whether such performance goals have been met, and determine the amount of the Award to be paid. The Committee's determinations under this Plan will be final and conclusive. The Committee shall have
full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable.
AMOUNT, CERTIFICATION, AND PAYMENT OF BONUSES
(a) Following
the conclusion of any Performance Period, prior to the payment of any Awards in the form of cash bonuses under this Plan with respect to that Performance
Period, the Committee shall certify in writing the levels of attainment of the Performance Goals for that Performance Period and the calculation of the Award amount payable to each Participant.
(b) The
payable portion of Awards shall be paid as soon as practicable following certification by the Committee, but in no event later than the 15
th
day
of the third month following the end of the applicable Performance Period.
(c) Except
to the extent that a written contract between the Company and a Participant may provide otherwise, a Participant whose employment terminates for any reason prior
to the end of a Performance Period shall have no right to any portion of an Award for that Performance Period. A Participant shall not cease to be entitled to payment under this Plan with respect to a
Performance Period if his or her employment with the Company terminates following the end of such Performance Period but prior to payout of his or her Award for such Performance Period.
B-2
Table of Contents
(d) Notwithstanding
the degree to which the applicable Performance Goals are satisfied, the Committee shall have the discretion to reduce the amount of any Participant's
Award payout below the standard or formula amount to reflect individual performance and/or unanticipated factors.
(e) No
Award shall be paid under this Plan until the Plan has received stockholder approval as required by Section 162(m).
(f) In
no event will the Award payable to a Participant with respect to a Performance Period exceed 180% of that Participant's base salary for such Performance Period.
CERTAIN ACCELERATING PAYMENT EVENTS.
Normally, an Award is only payable upon the attainment of Performance Goals. However, in the event of death or Disability, the affected
Participant will entitled to any payout of his or her outstanding Award under this Plan without regard to the actual attainment of
Performance Goals. Such payout shall occur as soon as administratively practicable following the end of the Performance Period during which such death or Disability occurred, but in no event later
than the 15
th
day of the third month following the end of such Performance Period.
GENERAL PROVISIONS.
Shareholder Approval Required.
This Plan is subject to approval of the Company's shareholders and shall be submitted for such approval
at the 2013
Annual Meeting of Shareholders. If this Plan is not approved by the shareholders at that meeting, no bonus amounts shall be paid with respect to the Awards made under this Plan.
Termination; Amendment.
Unless earlier terminated, this Plan shall terminate on December 31, 2017, provided that the Company may
continue to
make payments hereunder following December 31, 2017 for Performance Periods that end on or prior to December 31, 2017. The Board may at any time amend or terminate this Plan, except that
no amendment will be effective without approval by the Company's shareholders if such approval is necessary to qualify amounts payable hereunder as "performance-based compensation" under
Section 162(m). No termination of this Plan shall affect performance goals and related Awards established by the Committee prior to such termination.
No Employment or Bonus Rights.
Nothing in this Plan will be construed as conferring upon any Participant any right to continue in the
employment of
the Company or any of its subsidiaries.
Nonalienation of Benefits.
Except as expressly provided herein or otherwise required by applicable law, no Participant or beneficiary
will have the
power or right to alienate, transfer, anticipate, sell, assign, pledge, attach, or otherwise encumber the Participant's interest under this Plan.
Withholding.
Any Award payable to a Participant or a beneficiary under this Plan will be subject to any
applicable Federal, state and local income and employment taxes and any other amounts that the Company or a subsidiary is required at law to deduct and withhold from such Award.
Plan Unfunded.
The entire cost of this Plan shall be paid from the general assets of the Company. The rights of any Participant or
beneficiary to
receive an Award under this Plan shall be only those of a general unsecured creditor, and neither the Company nor the Board or the Committee shall be responsible for the adequacy of the general assets
of the Company to meet and discharge Plan liabilities.
Severability.
If any provision of this Plan is held unenforceable, the remainder of this Plan will continue in full force and effect
without regard
to such unenforceable provision and will be applied as though the unenforceable provision were not contained in this Plan.
B-3
Table of Contents
Governing Law.
This Plan will be construed in accordance with and governed by the laws of the State of Delaware, without reference to
the principles
of conflict of laws.
Headings.
Headings are inserted in this Plan for convenience of reference only and are to be ignored in any construction of the
provisions of this
Plan.
Additional Compensation Arrangements.
Nothing contained in the Plan shall prohibit the Company from adopting any other bonus or
incentive plan or
from granting other performance awards or other forms of cash or non-cash remuneration to employees (including Participants) under such conditions, and in such form and manner, as the
Company sees fit.
B-4
PROXY
PROXY
DYNAMIC MATERIALS CORPORATION
2013 Annual Meeting of Dynamic Materials Corporation Stockholders
May 23, 2013, 8:30 a.m. local time
St. Julien Hotel, 900 Walnut Street, Boulder, Colorado 80302
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DYNAMIC MATERIALS CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERSMAY 23, 2013
The undersigned hereby constitutes and appoints Kevin T. Longe and Richard A. Santa, and each of them, the undersigned's true and lawful agents and proxies with
full power of substitution in each, to represent the undersigned and vote all shares that the undersigned may be entitled to vote at the Annual Meeting of Stockholders of Dynamic Materials Corporation
to be held at the St. Julien Hotel, 900 Walnut Street, Boulder, Colorado 80302, on May 23, 2013, at 8:30 a.m. local time, and at any postponements, continuations and adjournments
thereof, on all matters as may properly come before said meeting.
You
are encouraged to specify your choices by marking the appropriate boxes, but you need not mark any boxes if you wish to vote in accordance with the Board of Director's
recommendations. The persons named herein as agents and proxies cannot vote your shares unless you sign and return this card.
PLEASE
VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
DYNAMIC MATERIALS CORPORATION
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. (X)
|
|
|
|
|
|
|
1.
|
|
Election of Directors
|
|
FOR all nominees
(except as marked to the contrary below)
[ ]
|
|
WITHHOLD AUTHORITY
to vote for all nominees
[ ]
|
|
|
(INSTRUCTION: To withhold authority to vote for any individual nominee mark the box next to the nominee's name below)
|
|
|
Kevin T. Longe [ ]
|
|
Yvon Pierre Cariou [ ]
|
|
Robert A. Cohen [ ]
|
|
|
James J. Ferris [ ]
|
|
Richard P. Graff [ ]
|
|
Bernard Hueber [ ]
|
|
|
Gerard Munera [ ]
|
|
Rolf Rospek [ ]
|
|
|
2.
|
|
To approve the amendment to the Company's 2006 Stock Incentive Plan.
|
|
|
FOR [ ]
|
|
AGAINST [ ]
|
|
ABSTAIN [ ]
|
3.
|
|
To approve the adoption of the Company's Performance-Based Plan.
|
|
|
FOR [ ]
|
|
AGAINST [ ]
|
|
ABSTAIN [ ]
|
4.
|
|
To approve the non-binding, advisory vote on executive compensation.
|
|
|
FOR [ ]
|
|
AGAINST [ ]
|
|
ABSTAIN [ ]
|
5.
|
|
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013.
|
|
|
FOR [ ]
|
|
AGAINST [ ]
|
|
ABSTAIN [ ]
|
This
proxy, when properly executed, will be voted in the manner directed herein by the undersigned.
If no direction is made, this proxy will be voted
FOR
Proposals 1, 2,
3, 4 and 5.
The Board of Directors recommends a vote "FOR" the listed proposals.
|
|
|
|
|
|
|
|
|
|
|
Dated:
|
|
|
|
|
|
, 2013
|
|
|
|
|
|
|
|
|
|
Signature(s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Please
sign exactly as name(s) appears hereon. When shares are held by joint tenants, both should sign. Executors, administrators, trustees, etc. should give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer. If a partnership, please sign in partnership name by authorized person.
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