SCHEDULE
14A INFORMATION
Proxy
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____________________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 17, 2010
____________________________________
TO OUR
STOCKHOLDERS:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Stockholders of Balchem Corporation will
be held at the West Rooms I & II of the Harvard Club of New York City, 35
West 44
th
Street, New York, NY 10036-6645, on Thursday, June 17, 2010 at 10:00 a.m. for
the following purposes:
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1.
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To
elect two Class 1 directors to the Board of Directors to serve until the
Annual Meeting of Stockholders in 2013 and thereafter until their
respective successors are elected and
qualified;
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2.
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To
ratify the appointment of McGladrey & Pullen, LLP as our independent
registered public accounting firm for the fiscal year ending December 31,
2010; and
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3.
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To
transact such other business as may properly come before the Meeting or
any adjournment thereof.
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Information
with respect to the above matters is set forth in the Proxy Statement, which
accompanies this Notice.
The Board
of Directors has set April 21, 2010 as the record date for the Annual Meeting.
This means that only stockholders of record at the close of business on that
date are entitled to notice of and to vote at the Meeting or any adjournment
thereof.
We hope
that all stockholders who can conveniently do so will attend the
Meeting. Stockholders who do not expect to be able to attend the
Meeting are requested to fill in, date and sign the enclosed proxy and promptly
return the same in the stamped, self-addressed envelope enclosed for your
convenience. Stockholders who are present at the Meeting may withdraw
their proxies and vote in person, if they so desire.
BY ORDER
OF THE BOARD OF DIRECTORS
Dino A.
Rossi, Chairman, President &
CEO
Dated:
May 4, 2010
New
Hampton, New York 10958 Tel: 845-326-5600 Fax: 845-326-5702
PROXY
STATEMENT
BALCHEM
CORPORATION
GENERAL
This Proxy Statement is furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Balchem Corporation (the “Company”) to be voted at the 2010 Annual Meeting of
Stockholders (the “Annual Meeting” or the “Meeting”) in the West Rooms I &
II of the Harvard Club of New York City, 35 West 44
th
Street, New York, NY 10036-6645, on Thursday, June 17, 2010 at 10:00 a.m., local
time, and at any adjournments or postponements thereof. This Proxy
Statement and a proxy card are expected to be sent to stockholders beginning on
or about May 4, 2010.
The Board of Directors has fixed the
close of business on April 21, 2010 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting. At the
Annual Meeting, stockholders will be asked to consider and vote upon the
election of two Class 1 directors to the Board of Directors to serve until the
Annual Meeting of Stockholders in 2013 and thereafter until their respective
successors are elected and qualified. Stockholders will also be asked to ratify
the Board of Directors’ selection of McGladrey & Pullen, LLP as the
Company’s independent registered public accounting firm for the 2010 fiscal
year. Stockholders may also consider and act upon such other matters as may
properly come before the Annual Meeting or any adjournment or adjournments
thereof.
You can
ensure that your shares are voted at the Annual Meeting by completing, signing,
dating and returning the enclosed proxy card in the envelope provided. Sending
in a signed proxy will not affect your right to attend the Meeting and
vote. A stockholder who gives a proxy may revoke it at any time
before it is exercised by voting in person at the Annual Meeting, by submitting
another proxy bearing a later date or by notifying the Inspectors of Election or
the Secretary of the Company of such revocation, in writing, prior to the Annual
Meeting. Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to attend and vote in person at the
Annual Meeting, you must obtain from the record holder a proxy issued in your
name.
Broker non-votes are shares held by
brokers or nominees that are present in person or represented by proxy, but are
not voted on a particular matter because instructions have not been received
from the beneficial owner and the broker or nominee does not have discretion to
vote without such instructions. Brokers and nominees generally do not
have such discretion when the matter is deemed by the broker voting rules to be
“non-routine.” The ratification of the independent registered public
accounting firm is considered to be a “routine” matter with respect to which
brokers and nominees could vote shares held by them in street-name in their
discretion absent any instructions received from the beneficial owners of such
shares. Brokers and nominees do not have such discretion with respect
to the election of directors.
Proxies
may be solicited, without additional compensation, by directors, officers and
other regular employees of the Company by telephone, email, telefax or in
person. All expenses incurred in connection with this solicitation will be borne
by the Company. Brokers, nominees, fiduciaries and other custodians
have been requested to forward soliciting material to the beneficial owners of
Common Stock held of record by them, and such custodians will be reimbursed for
their reasonable expenses.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to
be Held on June 17, 2010.
The
Company’s proxy statement and annual report to stockholders for the year ended
December 31, 2009 are available at
http://proxymaterials.balchem.com
.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
Company’s By-laws provide for a staggered term Board of Directors consisting of
six (6) members, with the classification of the Board of Directors into three
classes (Class 1, Class 2 and Class 3). The term of the
two current Class 1 directors will expire at the Annual Meeting. The Class 3 and
Class 2 directors will remain in office until their terms expire, at the annual
meetings of stockholders to be held in the years 2011 and 2012,
respectively.
Accordingly,
at the 2010 Annual Meeting, two Class 1 directors are to be elected to hold
office until the annual meeting of stockholders to be held in 2013 and
thereafter until their successors have been elected and qualified. The nominees
are listed below with brief biographies and are currently directors and have
been nominated for election after due consideration by the Corporate Governance
and Nominating Committee. The Board is not aware of any reason why any such
nominee may be unable to serve as a director. If either or both of such nominees
are unable to serve, the shares represented by all valid proxies will be voted
for the election of such other person or persons, as the case may be, as the
Board may recommend.
Vote
Required to Elect Directors
Under the
rules of the Securities and Exchange Commission, boxes and a designated blank
space are provided on the form of proxy for stockholders to mark if they wish to
vote in favor of or withhold authority to vote for the Company’s nominees for
director.
Assuming
a quorum has been reached, a determination must be made as to the results of the
vote on each matter submitted for stockholder approval.
A
director nominee must receive a plurality of the votes cast at the Meeting,
which means that a broker non-vote or a vote withheld from a particular nominee
will not affect the outcome of the election of directors.
All shares represented by duly
executed proxies will be voted
For
the election of the nominees named
in this Proxy Statement as director unless authority to vote
For
any such nominee has been
withheld.
If for any reason any such named nominee should not be
available as a candidate for director, the proxies will be voted in accordance
with the authority conferred in the proxy for such other candidate as may be
nominated by the Company’s Board of Directors.
Nominees
for Election as Director
Dino A. Rossi
, age 55, has
been a director of the Company since 1997 and Chairman of the Company’s Board of
Directors since February 22, 2007. Mr. Rossi has been President and
Chief Executive Officer of the Company since October 1997, Chief Financial
Officer of the Company from April 1996 to January 2004 and Treasurer of the
Company from June 1996 to June 2003. He was Vice President, Finance
and Administration of Norit Americas Inc., a wholly-owned subsidiary of Norit
N.V., a Dutch chemicals company, from January 1994 to February 1996, and Vice
President, Finance and Administration of Oakite Products Inc., a specialty
chemicals company, from 1987 to 1993. Recently, Mr. Rossi was named a
director of Scientific Learning Corporation, a NASDAQ company. Mr.
Rossi’s years of experience as the primary source of corporate and operational
leadership for this company and with other manufacturing entities, make him a
valuable member of our Board of Directors.
Dr. Elaine R. Wedral,
age 66,
has been a director of the Company since October 2003. Dr. Wedral is retired.
Currently, she serves as the President of the International Life Sciences
Institute in North America, which position she has held since January 2008. She
was President of Nestlé R&D Center, Inc. in New Milford, Connecticut and
Head of Nestlé Food Service Systems worldwide from 1999 to 2005. Prior to that,
she held a variety of technical positions at Nestlé. Dr. Wedral holds 34 patents
in food processing, food nutrition and ingredient areas, and is on the editorial
board of Food Processing Magazine. She received her Ph.D. from Cornell
University in Food Biochemistry, an M.S. in Food Microbiology and a B.S. from
Purdue University in Biochemistry. She is
currently
also a director of Sensient Technologies Corporation, a public company listed on
the NYSE, and continues to work with several key industry/university related
groups in an advisory capacity. Dr. Wedral’s background and knowledge
of the global food industry are particularly valuable to the success of our
Food, Pharma and Nutrition business segment, and also to our Board of
Directors.
Upon
recommendation by the Corporate Governance & Nominating Committee, the Board
of Directors of the Company recommends a vote
FOR
the election of Dino A.
Rossi and
Elaine R.
Wedral as Class 1 directors to hold office until the annual meeting of
stockholders for the year 2013 and until their successors are elected. Proxies
received by the Company will be so voted unless such proxies withhold authority
to vote for such nominees.
Directors
Not Standing For Election
In addition to Mr. Rossi and Dr.
Wedral, the Company’s Board of Directors includes the following
members:
Edward L. McMillan,
age 64,
has been a director of the Company since February 2003. Mr. McMillan
owns and manages McMillan, LLC, a transaction-consulting firm that provides
strategic consulting services and facilitates mergers and/or acquisitions
predominantly to the food and agribusiness industry sectors. From
1988 to 1996, he was President and CEO of Purina Mills, Inc., where he was
involved for approximately 25 years in various senior level positions in
marketing, strategic planning, and business segment management. Since September
2005, he has been a director of NutraCea, a publicly traded OTC
company. Mr. McMillan is also a member of the Board of Trustees for
the University of Illinois in Champaign, Illinois. Mr. McMillan’s
background, experience and continued involvement in the agribusiness industry
are of particular value to our Board of Directors.
Perry
W. Premdas
,
age 57, was appointed as a
director of the Company in January 2008. He is currently
retired. From 1999 to 2004, Mr. Premdas was Chief Financial Officer
of Celanese AG, a chemical and plastics business spun-off by Hoechst AG and
listed on the Frankfurt stock exchange and the NYSE. He was Senior
Executive Vice President and Chief Financial Officer of Centeon LLC from 1997 to
1998. Over his 30 year career, he has led the treasury, finance, audit and
investor relations functions
in US and international companies and had
general manager, executive and director roles in various wholly-owned and joint
venture operations. Mr. Premdas holds a BA from Brown University and an
MBA from the Harvard University Graduate School of Business. He is currently a
member of the Board of Directors of Compass Minerals and Ferro Corporation (both
NYSE) and Fresenius Kabi Pharmaceuticals Holding, Inc. (NASDAQ). Mr.
Premdas has been our Audit Committee Chairman and the Board of Director’s
financial expert since 2008. The Company’s financial compliance
programs and policies benefit from Mr. Premdas’ particular input and skilled
guidance. Mr. Premdas’ combination of financial and international business
management experience make him a valuable member of our Board of
Directors.
Kenneth P. Mitchell
, age 70,
has been the Company’s Lead Director since October 1, 2005 and has been a
director of the Company since 1993. Mr. Mitchell, who is currently retired, was
Chief Executive Officer of Oakite Products Inc., a specialty chemical company
from 1986 to 1993. Since February 1997, he has also been a director of Tetra
Technologies, Inc., an NYSE traded company, where he also serves as chairman of
the Nominating and Corporate Governance Committee. Mr. Mitchell’s
most significant contributions to the Company come in two areas. First, Mr.
Mitchell has over forty years experience associated with the industrial and
specialty chemical manufacturing industries. Second, Mr. Mitchell has
been the chief executive officer of a publicly traded specialty chemical
manufacturing company, responsible for every aspect of its operations, financial
and otherwise. Mr. Mitchell’s years of experience in the chemical
manufacturing industry, as well as his extensive corporate management experience
is as source of knowledge and guidance which provides significant value to the
Board of Directors.
Dr. John Y. Televantos,
age
57, has been a director since February 2005. Dr. Televantos is a Principal of
Arsenal Capital Partners, Inc., a private equity investment firm, where he leads
the Chemicals and Materials practice of the firm. Dr. Televantos was
formerly with Hercules, Inc. as President of the Aqualon Division and as Vice
President of Hercules, Inc. from April 2002 through February 2005. He had been
President and Chief Executive Officer, and prior to that Chief Operating
Officer, of Foamex International Inc. during the period from June 1999 through
December 2001. Prior to that, he was Vice President, Development Businesses and
Research at Lyondell Chemical Company since 1998. Dr. Televantos holds
B.S. and Ph.D. degrees in Chemical Engineering from the
University
of London, United Kingdom. He also has been on several public and private
company Boards and is affiliated with other key industry-related
groups. In addition to Dr. Televantos’ experience in the chemical
manufacturing industry and management of publicly traded chemical manufacturing
entities. Dr. Televantos is also significantly involved in the
venture capital markets and processes involving chemical manufacturing
companies. Collectively, these make Dr. Televantos a valuable member
of the Board of Directors.
Director
Independence
The Board
of Directors has made an affirmative determination that each of the Company’s
directors, other than Mr. Rossi, is independent, as such term is defined under
NASDAQ Marketplace Rules.
Meeting
Attendance
During
fiscal 2009, the Board of Directors had five regular meetings and one telephonic
special meeting. Each director attended at least 75% of the meetings
of the Board held when he or she was a director and of the meetings of those
Committees of the Board on which he or she served.
The
Company has a policy to strongly encourage directors to attend the annual
meeting of stockholders. Historically, attendance has been excellent. All
directors were in attendance at the Company’s 2009 annual meeting of
stockholders.
Committees
of the Board of Directors
The
Company’s Board of Directors has a standing Audit Committee, Executive
Committee, Compensation Committee, and Corporate Governance and Nominating
Committee. The Board of Directors appoints the members of each
Committee. In 2009, the Audit Committee held four meetings, the
Corporate Governance and Nominating Committee held three meetings and the
Compensation Committee held four meetings. The Executive Committee
did not meet in 2009.
Audit
Committee
.
The
Audit Committee is directly responsible for appointing, compensating and
overseeing the work of the Company’s independent registered public accounting
firm. The Audit Committee also assists the Board of Directors in fulfilling its
oversight responsibilities with respect to the Company’s financial reporting,
internal controls and procedures, and audit functions. Responsibilities,
activities and independence of the Audit Committee are discussed in greater
detail under the section of this Proxy Statement entitled “Audit Committee
Report.”
The Board
of Directors of the Company has adopted a written charter for the Audit
Committee, which is available on the Corporate Governance page in the Investor
Relations section of the Company’s website,
www.balchem.com
. The
current members of the Audit Committee are Messrs. Premdas (Chair), McMillan and
Mitchell. The Board of Directors of the Company has determined that
the Audit Committee Chairman, Mr. Premdas, qualifies as an “audit committee
financial expert”, as defined in Section 407 of the Sarbanes-Oxley Act of 2002,
and that all members of the Audit Committee are “independent” under the NASDAQ
Marketplace Rules applicable to audit committee members.
Compensation
Committee
. The duties of the Compensation Committee are to (i)
recommend to the Board of Directors a compensation program, including
incentives, for the Chief Executive Officer and senior executives of the
Company, for approval by the full Board of Directors, (ii) prepare an Annual
Report of the Compensation Committee for inclusion in the Company’s Proxy
Statement as contemplated by the requirements of Schedule 14A of the Securities
Exchange Act of 1934, as amended, (iii) propose to the full Board of Directors
the compensation of directors, and (iv) to administer the Company’s Second
Restated and Amended 1999 Stock Plan for officers, directors, directors emeritus
and employees of and consultants to the Company and its subsidiaries (referred
to in this Proxy Statement as the “1999 Stock Plan” or the
“Plan”).
The Board
of Directors of the Company has adopted a written charter for the Compensation
Committee, which is available on the Corporate Governance page in the Investor
Relations section of the Company’s website,
www.balchem.com
. The
current members of the Compensation Committee are Dr. Televantos (Chair),
Messrs. McMillan and Mitchell, and Dr. Wedral, all of whom are independent
directors.
See
“Compensation Discussion and Analysis” and below.
Corporate
Governance & Nominating Committee
.
The duties of the Corporate
Governance & Nominating Committee are, among other things, to consider and
make recommendations to the Board concerning the appropriate size, function and
needs of the Board, to determine the criteria for Board membership, to evaluate
and recommend responsibilities of the Board committees, to review annually and
assess the adequacy of the Company’s corporate governance guidelines and
recommend any changes to the Board, to oversee an annual self-evaluation of the
Board and Board Committees, to oversee compliance with the Company’s Stock
Ownership Policies, to consider matters of corporate social responsibility and
corporate public affairs related to the Company’s employees and stockholders, to
recruit, evaluate and nominate new candidates for directorships, to prepare and
update an orientation program for new directors, to evaluate the performance of
current directors in connection with the expiration of their term in office
providing advice to the full Board as to nomination for reelection, and to
recommend policies on director retirement age.
The Board
of Directors of the Company has adopted a written charter for the Corporate
Governance & Nominating Committee, which is available on the Corporate
Governance page in the Investor Relations section of the Company’s website,
www.balchem.com
. The
current members of the Corporate Governance & Nominating Committee are Dr.
Wedral (Chair), Messrs. Premdas and Mitchell and Dr. Televantos, all of whom are
independent directors.
Executive
Committee
.
The Executive
Committee is authorized to exercise all the powers of the Board of Directors in
the interim between meetings of the Board, subject to the limitations imposed by
Maryland law. The Executive Committee is also responsible for the
recruitment, evaluation and selection of suitable candidates for the position of
Chief Executive Officer (“CEO”), for approval by the full Board, for the
preparation, together with the Compensation Committee, of objective criteria for
the evaluation of the performance of the CEO, and for reviewing the CEO’s plan
of succession for key executives of the Company.
The
current members of the Executive Committee are Messrs. Mitchell (Chair) and
McMillan and Dr. Televantos.
Nominations
of Directors
The
Corporate Governance & Nominating Committee considers re-nominating
incumbent directors who continue to satisfy the Company’s criteria for
membership on the Board; whom the Board believes will continue to make
contributions to the Board; and who consent to continue their service on the
Board. If the incumbent directors are not nominated for re-election
or if there is otherwise a vacancy on the Board, the Corporate Governance &
Nominating Committee will solicit recommendations for nominees from persons that
the Corporate Governance & Nominating Committee believes are likely to be
familiar with qualified candidates, including members of the Board and
management. The Corporate Governance & Nominating Committee may also
determine to engage a professional search firm to assist in identifying
qualified candidates. The Corporate Governance & Nominating Committee also
considers external director candidates or candidates recommended by one or more
substantial, long-term stockholders. Generally, stockholders who individually or
as a group hold 5% or more of the Company’s common stock and have continued to
do so for over one year will be considered substantial, long-term stockholders,
provided the names of such nominees, accompanied by relevant biographical
information, are properly submitted, in writing, to the Secretary of the Company
in accordance with the manner described for shareholder nominations as set forth
below in “Stockholder Proposals for 2011 Annual Meeting.” Stockholder
nominations that comply with these procedures and that meet the criteria
outlined above will receive the same consideration that other candidates
receive.
The
Corporate Governance & Nominating Committee and the Board has adopted
guidelines for identifying or evaluating nominees for directors, including
incumbent directors and nominees recommended by stockholders.
The
Company’s current policy is to require that a majority of the Board of Directors
be independent; at least three of the directors have the financial literacy
necessary for service on the audit committee and at least one of these directors
qualifies as an audit committee financial expert. In addition, directors may not
serve on the boards of more than three other public companies without the
approval of the Board of Directors and directors must satisfy the Company’s age
limit policy for directors which require that a director retire at the
conclusion of his or her term in which he or she reaches the age of
70. The guidelines for nomination for a position on the Board of
Directors, provide for the selection of nominees based on the nominee’s skills,
achievements and knowledge, and also contemplate that the following will be
considered, among other things, in selecting nominees: experience and skills in
areas critical to understanding the Company and its business; personal
characteristics, such as integrity and judgment; and the candidate’s ability to
commit to the Board of Directors of the Company. Members of the Corporate
Governance & Nominating Committee (and/or the Board) also meet personally
with each nominee to evaluate the candidate’s ability to work effectively with
other members of the Board, while also exercising independent judgment. Although
the Board does not have a formal diversity policy, the Board endeavors to
comprise itself of members with a broad mix of professional and personal
backgrounds. Further, in considering nominations, the Committee takes into
account how a candidate’s professional background would fit into the mix of
experiences represented by the then-current Board.
Lead
Director
Mr.
Mitchell has been the Lead Director since 2005. The Lead Director functions, in
general, to reinforce the independence of the Board of Directors of the
Company. This person is appointed on a rotating basis from the
independent directors. The Lead Director will serve at the election of the
Board and, in any event, only so long as that person shall be an independent
director of the Company. The Corporate Governance and Nominating Committee will
review annually the functions of the Lead Director and recommend to the Board
any changes that it considers appropriate. The Lead Director provides a
source of Board leadership complementary to that of the
Chairman. Amongst other things, the Lead Director is responsible
for: working with the Chairman and other directors to set agendas for
Board meetings; providing leadership in times of crisis together with the
Executive Committee; chairing regular meetings of independent Board members
without management present (executive sessions); acting as liaison between the
independent directors and the Chairman; and chairing Board meetings when the
Chairman is not in attendance.
Current
Board Leadership Structure
The Corporate Governance and
Nominating Committee reviews the function of the Board and makes recommendations
to the Board regarding the CEO, Chairman and Lead Director, in the manner in
which it determines to be in the best interests of our stockholders, which is
consistent with the Governance Guidelines adopted by the Company. Our Governance
Guidelines are available on the Corporate Governance page in the Investor
Relations section of the Company’s website,
www.balchem.com
.
Since 2007, the positions of
Chairman of
the Board and CEO are held by the same person. The Board and the Corporate
Governance and Nominating Committee currently believe that the Company and its
stockholders are best served by having Mr. Rossi serve in both positions.
He is most familiar with our business and the unique challenges the Company
faces in the current environment and is best situated to lead and focus
discussions on those critical matters affecting the Company, which eliminates
ineffective and unproductive meetings. In addition, the combination
of the Chairman and the CEO position succeeds because of the engaged,
knowledgeable involvement of our Board of Directors in combination with our
culture of open communication with the CEO and senior management, enabling the
CEO to be an effective conduit between management and the Board. This
structure’s effectiveness is dependent upon the active function of the Lead
Director, who provides and confirms the necessary independence in the
functioning of the Board.
Board
Role in Risk
Oversight
While our Board provides direct risk
oversight, responsibility for risk oversight is primarily administered through
the Corporate Governance and Nominating Committee, and to a certain extent,
through the Audit Committee. The Board and both of these Committees regularly
discuss with management, our major risk exposures, their potential financial
impact on the Company and the management thereof. In
particular, the Corporate Governance and Nominating Committee receives periodic
reports from management on areas of material risk to the
Company,
including operational, financial, legal and regulatory, and strategic risks,
with the Audit Committee focusing on areas of financial risk. The Company does
not have a chief risk officer, therefore, the Corporate Governance and
Nominating Committee and the Audit Committee will receive these reports from the
member of management tasked with the responsibility to understand, manage and
mitigate the particular risks. The Chairman of the relevant Committee reports on
the discussion to the full Board during the Committee reports portion of the
next Board meeting, which enables to the Board and its Committees to coordinate
the
risk
oversight role, particularly with respect to
cross-discipline risks and interrelated risks.
Communicating
With the Board of Directors
Members
of the Board and executive officers are accessible by mail in care of the
Company. Any matter intended for the Board, or for any individual member or
members of the Board, should be directed to the General Counsel with a request
to forward the communication to the intended recipient. In the alternative,
stockholders can direct correspondence to the Board via the Chairman, or to the
attention of the Lead Director, in care of the Company at the Company’s
principal executive office address, 52 Sunrise Park Road, New Hampton, NY 10958.
The Company will forward such communications, unless of an obviously
inappropriate nature, to the intended recipient.
Executive
Sessions of the Board of Directors
The
Company’s independent directors meet regularly in executive sessions following
each regularly scheduled meeting of the Board of Directors. These executive
sessions are presided over by the Lead Director. The independent directors
presently consist of all current directors, except Mr. Rossi.
Executive
Officers
Set forth
below is certain information concerning the executive officers of the Company
(other than Mr. Rossi, whose background is described above under the caption
“Nominees for Election as Director”), which officers serve at the discretion of
the Board of Directors:
Frank J. Fitzpatrick
, CPA, age
49, has been the Chief Financial Officer of the Company since January 2004 and
Treasurer of the Company since June 2003, and was Controller of the Company from
April 1997 to January 2004. He has been an executive officer and
Assistant Secretary of the Company since June 1998. He was Director
of Financial Operations/Controller of Alliance Pharmaceutical Corp., a
pharmaceuticals company, from September 1989 through March 1997.
Matthew D. Houston,
age
46, has been General
Counsel since January of 2005 and Secretary since June of 2005. He
was General Counsel and Secretary of Eximias Pharmaceutical Corporation, a
privately held corporation, from 2001 to 2004. Mr. Houston also held
several internal counsel positions at BASF Corporation, a Delaware corporation,
from 1994 to 2001. Mr. Houston received his Juris Doctorate from
Saint Louis University.
David F. Ludwig,
age 52, has
been Vice President and General Manager, Specialty Products since July 1999 and
an executive officer of the Company since June 2000. He was Vice
President and General Manager of Scott Specialty Gases, a manufacturer of high
purity gas products and specialty gas blends, from September 1997 to June
1999. From 1986 to 1997 he held various international and domestic
sales and marketing positions with Engelhard Corporation’s Pigments and
Additives Division.
Paul H. Richardson
, Ph.D.,
CChem, age 40, has been Vice President of Research and Development and an
Executive Officer of the Company since July 2005, and was Director of Research
and Development, from January 2004 to July 2005 and Director of Materials
Science, from January 2001 to January 2004. Since obtaining his Bachelor’s
degree in chemistry and Ph.D. in polymer science from the University of Durham,
England, Dr. Richardson has held Research Scientist and Project Management
positions at Unilever Plc. (January 1995 to April 1997) and National Starch and
Chemical Company (September 1997 to December 2000).
Code
of Business Conduct and Ethics
The
Company has adopted a Code of Ethics for Senior Financial Officers that applies
to the Company’s Chief Executive Officer, Chief Financial Officer, Treasurer and
Corporate Controller. The Company has also adopted a Business Ethics Policy
applicable to its employees and a further Policy Statement which confirms that,
as and when appropriate, the Business Ethics Policy and the Code of Ethics for
Senior Financial Officers are applicable to the Company’s directors and
officers. Any waiver of any provision in the Code of Ethics or Business Ethics
Policy in favor of members of the Board or in favor of executive officers may be
made only by the Board. Any such waiver, and any amendment to such Code, will be
publicly disclosed in a Current Report on Form 8-K. The Code of
Ethics and Business Ethics Policy and further Policy Statement are available on
the Corporate Governance page in the Investor Relations section of the Company’s
website,
www.balchem.com
.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
directors and executive officers and holders of more than 10% of the Company’s
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of any subsequent changes in ownership of Common Stock
and other equity securities of the Company. Specific due dates for
these reports have been established and the Company is required to disclose any
failure to file by these dates.
Based
upon a review of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that during
the fiscal year ended December 31, 2009, its officers and directors and holders
of more than 10% of the Company’s Common Stock complied with Section 16(a)
filing date requirements with respect to transactions during such year, except
that due to an administrative error, the Forms 4 for the grants of 4,829
restricted shares of the Company’s Common Stock to our independent
directors,
Messrs.
Premdas, Mitchell, McMillan and Drs. Televantos and Wedral, were filed
late.
Compensation
Committee Interlocks and Insider Participation
Messrs.
McMillan and Mitchell and Drs. Televantos and Wedral, each of whom is a director
of the Company, served as the members of the Compensation Committee during 2009.
None of Messrs. McMillan or Mitchell or Drs. Televantos or Wedral (i) was,
during the last completed fiscal year, an officer or employee of the Company,
(ii) was formerly an officer of the Company or (iii) had any relationship
requiring disclosure by the Company under Item 404 of Regulation S-K under the
Securities Act of 1933, as amended, which has not been
disclosed. During 2009, there were no interlocking relationships
between the Company’s Board of Directors or Compensation Committee, or the board
of directors or compensation committee of any other company that are required to
be disclosed under Item 407 of Regulation S-K.
Compensation
Committee and Processes
During
the fiscal year ended December 31, 2009, our Compensation Committee held primary
responsibility for determining executive compensation levels. The Compensation
Committee is composed of four independent directors. The Compensation
Committee solicits, receives and analyzes compensation recommendations from
Company management and consultants to determine each facet of the compensation
for our executive officers. The Compensation Committee also
administers our 1999 Stock Plan. The Compensation Committee solicits input from
our CEO with respect to the performance of our executive officers and their
compensation levels no less than once per calendar year, usually in the first
quarter.
The
members of our Compensation Committee have extensive and varied experience with
various public and private corporations - as investors and stockholders, as
senior executives, and as directors charged with the oversight of management and
the setting of executive compensation levels. In addition to the
extensive experience and expertise of the Compensation Committee’s members and
their familiarity with the Company’s performance and the performance of our
executive officers, the Compensation Committee is able to draw on the experience
of other directors and on various legal and accounting executives employed by
the Company, and the Compensation
Committee
has access to readily available public information regarding executive
compensation structure and the establishment of appropriate compensation
levels.
COMPENSATION
DISCUSSION AND ANALYSIS
General Compensation Objectives and
Guidelines
The
Company’s overall compensation philosophy has been to offer competitive
salaries, cash incentives, stock options, restricted shares and benefit plans
consistent with peer entities, while considering the Company’s financial
performance. Rewarding key employees who contribute to the continued
success of the Company through cash compensation and equity participation are
key elements of the Company’s compensation policy. The Company’s executive
compensation policy is to attract and retain key executives necessary for the
Company’s short and long-term success by establishing a direct link between
executive compensation and the performance of the Company, by rewarding
individual initiative and the achievement of annual corporate goals through
salary and cash bonus awards, and by providing equity awards, wherein executives
are incentivized to generate enhanced stockholder value. To effectuate this
philosophy, the Compensation Committee favors a “pay for performance”
approach. As a result, our compensation program contains a mix of
stable and at risk compensation components, where significant percentage of
executive compensation is tied to individual and corporate
performance.
Compensation
Committee Methodology
The CEO
recommends to the Compensation Committee the amount of total annual compensation
for each of the other named executive officers. The CEO completes an annual
performance assessment for each of the other named executive officers, which is
reviewed and considered by the Compensation Committee in its deliberations of
compensation amounts. The Compensation Committee conducts an annual
performance appraisal of the CEO based on evaluation information solicited from
each of the independent members of the Board of Directors, and recommends to the
Board of Directors the annual compensation package for the CEO. In
determining the compensation of the Company’s named executive officers for 2009,
including the compensation of the CEO, the Compensation Committee considered a
number of quantitative and qualitative performance factors. The
Committee’s considerations consisted of, but were not limited to, analysis of
the following factors: financial performance of the Company, including
return on equity, return on assets, growth of the Company, management of assets,
liabilities, capital, liquidity and risk. The Compensation Committee
endeavors to balance short-term and long-term performance of the Company and
cumulative shareholder value when establishing performance criteria for each of
the named executive officers and for the management team as a group. In
formulating total compensation, the Committee also considers intangible factors
such as: the scope of responsibility of the executive; leadership within the
Company, the community and the applicable industries in which the Company
engages; and the enhancement of shareholder value. All of these factors
are considered in the context of the market for the Company’s products and
services, and the complexity and difficulty of managing business risks in the
prevailing economic conditions and regulatory environment. The analysis is
conducted with respect to each of the named executive officers, including the
CEO. The Compensation Committee believes that the total compensation
provided to the Company’s named executive officers is competitive and has been
demonstrated as effective. Details regarding the compensation of each of
the named executive officers are set forth in the tables that
follow.
Benchmarks
The
Compensation Committee has authority to engage attorneys, accountants and
consultants, including executive compensation consultants, to solicit input
concerning compensation matters, and to delegate any of its responsibilities to
one or more directors or members of management, where it deems such delegation
appropriate and permitted under applicable law.
For 2007, the Compensation Committee retained the
Deloitte Compensation Consulting Group to perform an executive compensation
analysis with respect to total cash compensation and long term compensation as
such relates to both executives and directors of the Company. While compensation
survey data and benchmarking are
useful
guides for comparative purposes, we believe that a successful compensation
program also requires the application of judgment and subjective determinations,
particularly with respect to individual performance. Accordingly, our
Compensation Committee applies its judgment to adjust and align each individual
element of our compensation program with the broader objectives of the
program. For example, we consider other factors, including, but not
limited to, the Company’s historical compensation trends; recommendations of the
CEO; the performance of the Company, its operating units and their respective
executives; market factors such as the health of the economy and of the
industries served by the Company; the availability of executive talent;
executives’ length of service; and internal assessments and recommendations
regarding particular executives.
For benchmarking purposes and in an
effort to compare the competiveness of the Company’s compensation in 2007, the
Deloitte Consulting Group compiled compensation data primarily from a “peer
group” of companies, that approximated the Company in that the “peer
group” operated in the food, pharmaceutical ingredients and specialty chemical
industries and had: (1) demonstrated recent revenue growth of 15-25%;
(2) market capitalization of two hundred million dollars to four hundred million
dollars; and (3) approximately two hundred million dollars to five hundred
million dollars in revenue. The Company believes that the “peer
group” continues to be representative for executive compensation benchmarking
purposes. As a general rule, from time to time, we intend to retain
outside compensation consultants that will provide benchmarking “peer groups” of
companies that will change certain members from one period to another, as the
Company refines its benchmarking criteria and as the Company and members of the
“peer group” change in ways that make comparisons less or more
appropriate.
The
Deloitte compensation study “peer group” was comprised of the following
companies:
American Pacific
Corp.
|
Innophos
Holdings, Inc.
|
NektarTherapeutics
|
American
Vanguard Corp.
|
Innospec,
Inc.
|
Park
Electrochemical Corp.
|
Bentley
Pharmaceuticals, Inc.
|
KGM
Chemicals
|
Penford
Corp.
|
Calgon
Carbon Corp.
Cambrex
Corporation
|
LSB
Industries, Inc.
|
Quaker
Chemical Corp.
Stepan
Company
|
The “peer group” analysis was not aimed
at establishing exact benchmarks for our compensation program, but rather to
provide a point of reference and a “reality check” to obtain a general
understanding of then current compensation levels. This data was not
used by the Compensation Committee for purposes of establishing or setting a
specific level of compensation to be achieved. The data included an assessment
of the annual salary, total cash compensation and total direct compensation
(which consists of the sum of annual salary, target annual cash incentives and
the value of annual long-term equity awards) for each of the Company’s
executives, including the named executive officers. The results of an
analysis of the data showed that the Company’s total compensation levels
generally fall below the median compensation levels of the companies within the
“peer group.
”
Base
Salary
Base
Annual Salary
Base
salary represents the fixed component of the executive compensation program. The
base annual salaries we provide to our executive officers are intended as
compensation for each executive officer’s ongoing contributions to the
performance of the area(s) for which they are responsible and to the performance
of the Company as a whole. Base salary changes also impact target annual
incentive cash bonus amounts and actual annual incentive cash bonus payouts,
because they are based on a percentage of base salary.
In
keeping with our compensation philosophy to attract and retain individuals of
high quality, executive officer base salaries have been targeted to be
competitive with base salaries paid to executive officers of the “peer group”
referenced above in the Benchmarks Section. The Compensation Committee also
considers: experience and industry knowledge of the named executive
officers;the quality and effectiveness of their leadership at the Company;
performance relative to total compensation; internal pay equity among named and
other Company senior executives; historical considerations; company strategy;
retention factors and input from our CEO regarding individual
performance.
The base
annual salary levels of each of our executive officers are reviewed annually and
adjusted from time to time to recognize individual performance, promotions,
competitive compensation levels, retention requirements, internal pay equity,
overall budgetary considerations and other qualitative factors. As
discussed below in “Executive Compensation - Summary Compensation Table,” the
Compensation Committee increased the base salaries of the named executive
officers as a result of overall Company and individual performance in
2009.
Cash
Based Incentives
Bonuses
represent the variable, at-risk, component of the executive compensation program
that is tied to both Company performance and individual achievement. The
Company’s policy is to base a meaningful portion of its executive officers’ cash
compensation on bonus opportunities. In determining bonuses, the
Company considers factors such as the individual’s contribution to the Company’s
performance and the relative performance of the Company during the year.
At the end of each calendar year, the
Compensation Committee of the Board of Directors approves an Incentive
Compensation Program for the succeeding calendar year (the “ICP”). The ICP
provides for the awarding of bonus compensation to executive officers and
certain other employees, based upon objective levels of achievement of specific
goals established for the particular officer or employee, and for the weighting
of those goals to determine the amount of the bonus. The goals require an
individual to stretch beyond his or her defined job description
responsibility.
The process of establishing applicable
goals requires a well-defined annual business plan and targets defined therein
from which most ICP goals are measured. Our annual business plan evolves from
our corporate strategic plan and is approved by the Board of Directors each
December for the following fiscal year. Individual goals under the ICP are a
composite of certain corporate goals and key segment/individual objectives. In
addition, no bonuses are required to be paid under the ICP unless the Company
attains at least 90% of a target minimum consolidated earnings before interest,
taxes, depreciation and amortization (“EBITDA”). The Compensation Committee
established such target level of EBITDA for the 2009 calendar year as part of
the approval of the ICP for that year, based, amongst other things, upon the
Company’s preliminary results of operations for the 2008 calendar
year. The Company’s 2009 target EDITDA was set at $45,100,000, which
was a 21% improvement over 2008 EBITDA.
In addition to the EBITDA goal, each ICP
participant typically has 4-6 ICP goals, each of which constitutes a portion of
the individuals target ICP bonus target. ICP target bonuses are based
upon a percentage of each executive officer’s base yearly salary. The ICP bonus
target for Mr. Rossi is 50% of his annual base salary; for Mr. Fitzpatrick, 35%
of his annual base salary; for Mr. Ludwig, 35% of his annual base salary; for
Dr. Richardson, 35% of his annual base salary; and for Mr. Houston, 25% of his
annual base salary. These percentages were selected because the
Compensation Committee believes that they are consistent with the custom and
practice in the industry and are appropriate to attract and retain executive
talent. The Compensation Committee may, in its discretion, approve cash
based bonuses when ICP goals are not met, as a result of exceptional segment or
individual performance, when it deems appropriate.
Each ICP goal is weighted as determined
by the Compensation Committee. The value or weight placed on each
individual ICP goal depends heavily upon the degree of which the goal will help
us meet our annual plan; the relative degree of difficulty, creativity or
involvement required to achieve the goal; the intrinsic value of the goal, i.e.,
magnitude of income enhancement or cost savings; and/or milestones for certain
longer term strategic objectives. In addition, the Compensation
Committee identifies a range of completion for each ICP goal, a target
performance, a minimum, or threshold performance and a maximum
performance. Achievement of the target goal entitles the executive to
100% of that portion of the target ICP bonus, determined by the weight ascribed
to the particular ICP goal. Minimum or threshold performance,
entitles the executive to 70% of that portion of the bonus, while achievement of
the maximum entities the executive to 130% of the applicable portion of the ICP
bonus.
The following table sets forth the
individual ICP goals for bonus cash compensation for the named executive
officers, Mr. Rossi, Mr. Fitzpatrick, Dr. Richardson, Mr. Ludwig and Mr. Houston
for the fiscal year ended December 31, 2009, together with the corresponding
percentage weight of each goal as such related to total ICP bonus for each
individual and the amount of ICP cash bonus relative to performance.
Named
Executive Officers’ 2009 ICP Goals and Performance
NEO
|
ICP
Goal
|
Weight
|
Target
Range
|
2009
ICP
Award
|
|
|
|
Min
|
Plan
|
Max
|
|
Dino
Rossi
|
Consolidated
EBITDA
|
35%
|
$40.6M
|
$45.1M
|
$50.0M
|
|
Consolidated
Gross Margin
|
20%
|
$58.0M
|
$64.4M
|
$70.8M
|
|
Acquisition
Strategy
|
20%
|
N/A
|
1
|
2
|
|
Target
EPS
|
25%
|
$0.72
|
$0.83
|
$0.90
|
|
|
|
|
|
|
|
**
$467,500
|
Frank
Fitzpatrick
|
Consolidated
EBITDA
|
30%
|
$40.6M
|
$45.1M
|
$50.0M
|
|
Target
EPS
|
20%
|
$0.72
|
$0.83
|
$0.90
|
|
Cash
Flow
|
20%
|
$21.6M
|
$25.6M
|
$29.6M
|
|
Acquisition
Strategy
|
15%
|
N/A
|
1
|
2
|
|
Enhance
Balchem Italia Accounting Structure
|
15%
|
6/1/09
|
3/31/09
|
2/28/09
|
|
|
|
|
|
|
|
$88,626
|
David
Ludwig
|
Consolidated
EBITDA
|
10%
|
$40.6M
|
$45.1M
|
$50.0M
|
|
|
Consolidated
Sales ARC
|
15%
|
$36.0M
|
$36.5M
|
$38.0M
|
|
ARC
NIBIT
|
25%
|
$12.8M
|
$13.1M
|
$14.0M
|
|
*
|
10%
|
*
|
*
|
*
|
|
ERC
Unit Sales
|
25%
|
1,000
|
5,000
|
7,000
|
|
ARC
Acquisition Strategy
|
15%
|
N/A
|
1
|
2
|
|
|
|
|
|
|
$75,606
|
Paul
Richardson
|
Consolidated
EBITDA
|
20%
|
$40.6M
|
$45.1M
|
$50.M
|
|
|
Consolidated
Gross Margin
|
10%
|
$225M
|
$233M
|
$240M
|
|
|
New
Core Technology
|
20%
|
7
|
10
|
12
|
|
|
Products
Developed (# and Sales $)
|
|
($1MM)
|
($1.25MM)
|
($1.75MM)
|
|
|
New
Coating Technologies for Alternative Markets
|
15%
|
Efficacy
|
Trial
|
>$50,000
|
|
|
Develop
New Core Technology for AN&H
|
25%
|
1
|
2
|
3
or more
|
|
|
Develop
New Products for FP&N
|
10%
|
1
|
3
|
5
or more
|
|
|
|
|
|
|
|
$73,676
|
Matthew
Houston
|
Consolidated
EBITDA
|
20%
|
$40.6M
|
$45.1M
|
$50.0M
|
|
|
Control
Outside Legal Expenses
|
20%
|
$100K
|
$90K
|
$80K
|
|
|
Improve
ISS CGQ Rating
|
15%
|
5
pts
|
10
pts
|
15
pts
|
|
|
Acquisition
Strategy
|
15%
|
N/A
|
1
|
2
|
|
|
ARC
EO/EU Biocides Registration
|
15%
|
N/A
|
12/31/09
|
N/A
|
|
|
Refine/Improve
Trademark Estate
|
15%
|
N/A
|
12/31/09
|
6/30/09
|
|
|
|
|
|
|
|
$43,631
|
*
Omitted as not material and in any event disclosure would likely cause
competitive harm to the Company. The omitted targets were deemed difficult to
achieve in light of the comparison thereof with historical and projected
metrics.
**Please
see 2009 ICP discussion below regarding Mr. Rossi’s non ICP bonus.
2009
ICP Discussion
As set forth in the table above,
based on the overall assessment of the performance of the Company and the named
executive officer against ICP goals, the Compensation Committee determined as
set forth below for fiscal year 2009:
Corporate EBITDA.
The Compensation Committee determined that the Company achieved EBITDA of
$48,800,000 or 123% of the Corporate EBITDA goal. Each of the named
executive officers earned 123% of that portion of their ICP target
bonus.
Earnings per
Share.
The Compensation Committee determined that the Company achieved
earnings per share of $0.93. Both Mr. Rossi and Mr. Fitzpatrick
earned 130% of that portion of their ICP target bonus.
Mr. Rossi.
The Compensation Committee determined that Mr. Rossi earned the
following percentages of his ICP goals for 2009: (i) Target
Consolidated Gross Margin - 112%; and (ii) Acquisition Strategy -
130%.
Mr. Fitzpatrick.
The Compensation Committee determined that Mr. Fitzpatrick
earned the following percentages of his ICP goals for 2009: (i) target cash flow
- 130%; (ii) acquisition strategy - 100%; and (iii) enhance Balchem accounting
structure - 130%.
Mr. Ludwig.
The Compensation Committee determined that Mr. Ludwig earned
the following percentages of his ICP goals for 2009: (i) target
consolidated sales, ARC - 100%; (ii) target ARC NIBIT - 130%; (iii) reference is
made to the * in the
Named Executive
Officers’ 2009 ICP Goals and Performance Table above - 130%; (iv)
ERC’s sold in 2009 - 0%; and (v) ARC acquisition strategy - 100%.
Dr. Richardson.
The Compensation Committee determined that Dr. Richardson earned
the following percentages of his ICP goals for 2009: (i) target
consolidated gross margin - 112%; (ii) new core technology products developed -
130%; (iii) new coating technologies for alternative markets - 130%; (iv)
develop new core technology for AN&H - 100%; (v) develop new products for
FP&N - 100%.
Mr.
Houston.
The Compensation Committee determined that Mr.
Houston earned the following percentages of his ICP goals for 2009: (i) target
legal expenses - 70%; (ii) improve ISS CGQ Rating - 100%; (iii) complete
acquisition or licensing transaction - 100%; (iv) complete ARC EO/EU Biocides
Reg. - 100%; (v) refine and simplify trademark estate - 100%.
Pursuant to the terms of the
employment agreement between the Company and Mr. Rossi, Mr. Rossi is entitled to
earn an annual bonus of up to 100% of his base salary, based upon achieving
operating and/or financial targets established by the Board or an authorized
committee thereof. Half of such bonus compensation opportunity is determined
pursuant to the above noted ICP and those specific goals are set forth above.
The Compensation Committee has established a higher minimum level of
consolidated EBITDA and EPS for the 2009 fiscal year to be achieved by the
Company in order for Mr. Rossi to be entitled to the non-ICP bonus. Mr. Rossi’s
non-ICP bonus for 2009 was $233,750.
Additional,
discretionary bonuses were paid to reward certain executive officers for their
contributions to the Company during extraordinarily challenging times during the
early portion of 2009. The Compensation Committee determined that
the these individuals were responsible
for the Company’s significantly improved financial results in the first fiscal
quarter of 2009 and had particular responsibility for and effectiveness in
establishing a successful product sales campaign for our Animal Nutrition and
Health Segment. These discretionary bonus amounts were: Mr. Rossi,
$180,000; Mr. Fitzpatrick, $60,000; and Dr. Richardson, $10,000 and are also
disclosed in the “All Other Compensation” column of Summary Compensation Table
of this Proxy Statement.
Equity
Based Compensation
The
Compensation Committee believes that one important goal of the executive
compensation program should be to provide executives, key employees — who have
significant responsibility for the management, growth and future success of the
Company, and directors — with an opportunity for investment in the Company and
the incentive advantages inherent in stock ownership in the Company. The goal of
this approach is that the interests of the stockholders, executives, employees
and directors will be closely aligned.
Equity
awards under our 1999 Stock Plan are based upon individual contribution and
expected contribution going forward, and may or may not be granted in any given
fiscal year. The annual awards to our senior management, including
executive officers, are typically granted coinciding with the date of our
December Board of Directors meeting. In determining equity awards of
both option and restricted shares, the Compensation Committee considers input
from the CEO relating to individual executives performance during the year;
internal pay equity, as such relates to equity grants; and overall Company
performance. Of particular importance to the Company is the
annual
expense of the total equity granted to executives and its impact on the
Company’s bottom line. Finally, the Compensation Committee also
considers the benchmarking referenced above with respect to equity
compensation. The Compensation Committee endeavors to maintain the
Company’s equity compensation in proportion to the median of the equity
compensation levels within the “peer group.”
The
Company grants a combination of nonqualified stock options and restricted stock
to executive officers and other key employees of the Company under the terms of
the Plan. Options are granted at the prevailing market value of the
Company’s Common Stock and vest incrementally over three
years. Restricted stock awards cliff-vest after four
years.
The
options granted in 2009 had an exercise price of $21.39 per share, which was the
common stock price at the end of trading on the day of grant (December 8, 2009),
and the restricted shares were granted subject to the terms and conditions of
the Company’s standard Employee Restricted Stock Purchase
Agreement.
In
2008, the Company adopted formal stock ownership requirements for its directors
and executive officers. According to the policy, directors are
required to own shares of the Company’s Common Stock at least equal to five
times their annual cash retainer and executive officers must own such shares as
determined by a multiple of their annual base salary as follows: (1)
CEO, three times; (2) Chief Financial Officer, one and one half times; and (3)
Vice President/Officer, one times. Both directors and executive
officers have five years from the date of the adoption of this Policy or from
the date of hire or commencement as a director, as applicable, to attain the
required level of ownership. As is disclosed elsewhere in this Proxy
Statement, our directors and executive officers are stockholders of the
Company. It is also noteworthy that the Company provides in its
insider trading policy that directors and executive officers may not sell
Company securities short and may not sell puts, calls or other similar
derivative securities tied to our Common Stock.
Employment
Agreement
The
Company entered into an employment agreement with Mr. Rossi in 2001. Except for
Mr. Rossi, there are no agreements or understandings between the Company and any
executive officer which guarantee continued employment or guarantee any level of
compensation, including incentive or bonus payments. The Company does not have a
written policy regarding employment agreements.
Retirement
Plans
401(k)/Profit
Sharing Plan
The Company’s executive officers, as
well as most employees, are eligible to participate in the 401(k) Retirement
Plan/Profit Sharing Plan (the “401(k) Plan”). The 401(k) Plan provides that
participating employees may make elective contributions of up to 15% of pre-tax
salary, subject to ERISA limitations, and for the Company to make matching
contributions on a monthly basis equal in value to 35% of each participant’s
elective contributions. Such matching contributions are made in
shares of the Company’s Common Stock.
The profit-sharing portion of the
401(k) Plan is discretionary and non-contributory. Profit sharing contributions
are restricted to non-union employees (including executive officers) who have
completed 1,000 hours of service and are employed on the last day of a plan
year. The Company has historically contributed, in cash, 3.55% of an eligible
participant’s taxable compensation (subject to certain exclusions).
Perquisites
Perquisites
are granted to the executive officers occasionally and are generally de minimis
and not a material component of compensation.
Mr. Rossi
is entitled to the use of an automobile leased by the Company and to be
reimbursed for a specified level of premiums for life and disability insurance.
He is also entitled to the use of a financial planner, as
well as
participation in a country club membership for corporate
business. The Company pays to insure and maintain Mr. Rossi’s
automobile, as well as reimburses Mr. Rossi for auto expenses to the extent
related to Company business. Messrs. Fitzpatrick, Ludwig and Houston and Dr.
Richardson receive cash allowances associated with the use of their personal
automobiles.
Risk
Considerations in our Compensation Program
Our Compensation Committee has
discussed the concept of risk as it relates to our compensation program and does
not believe our compensation program encourages excessive or inappropriate risk
taking for the following reasons:
|
|
|
|
•
|
Our
compensation consists of both fixed and variable components. The fixed (or
salary) portion of compensation is designed to provide a steady income
regardless of our stock price performance so that executives do not feel
pressured to focus exclusively on stock price performance to the detriment
of other important business aspects. The variable (cash bonus and equity)
portions of compensation are designed to reward both short and long-term
corporate performance. For short-term performance, our cash bonus is
awarded based on individual and corporate performance goals or
targets. For long-term performance,
our
stock option awards generally incrementally vest over three years and are
only valuable if our stock price increases over time. Our restricted stock
grants generally “cliff vest” in four years. We feel that these variable
elements of compensation are a sufficient percentage of overall
compensation to motivate executives to produce superior short- and
long-term corporate results, while the fixed element is also sufficiently
high that the executives are not encouraged to take unnecessary or
excessive risks in doing
so.
|
|
|
|
|
•
|
Because
consolidated Company EBITDA is the contingent factor upon which ICP cash
incentive compensation depends, we believe our executives are encouraged
to take a balanced approach that focuses on corporate profitability,
rather than other measures such as revenue targets, which may incentivize
management to drive sales levels without regard to cost structure. If we
are not sufficiently profitable, there are no payouts under the ICP
program.
|
|
|
|
|
•
|
Our
ICP bonuses are generally capped at 130% of target for each ICP
participant, which mitigates excessive risk taking. Even if the Company
dramatically exceeds its ICP bonus target, bonus payouts are limited.
Conversely, there are no bonus payouts unless minimum performance levels
of ICP goals are achieved.
|
|
|
|
|
•
|
We
have stock ownership guidelines, which we believe provide a considerable
incentive for management to consider the Company’s long-term interests
because a portion of their personal investment portfolio consists of the
Company’s stock. In addition, we prohibit all hedging transactions
involving our stock so our executives cannot insulate themselves from the
effects of poor Company stock price performance.
|
|
|
|
|
•
|
Our
compensation program has been structured essentially as set forth herein
for many years and we have no evidence that it encourages unnecessary or
excessive risk taking.
|
COMPENSATION
COMMITTEE REPORT
We have
reviewed and discussed the above “Compensation Discussion and Analysis” with
management.
Based
upon this review and discussion, we have recommended to the Board of Directors
that the “Compensation Discussion and Analysis” be included in this Proxy
Statement.
Submitted
by the Compensation Committee of the Board of Directors.
John Y.
Televantos (Chairman)
Edward L.
McMillan
Kenneth
P. Mitchell
Elaine R.
Wedral
EXECUTIVE
COMPENSATION
SUMMARY COMPENSATION
TABLE
The
following table sets forth the compensation earned by (i) our Chief Executive
Officer (“Principal Executive Officer”), (ii) our Chief Financial Officer
(“Principal Financial Officer”), and (iii) each of our other “Named Executive
Officers” for the fiscal years ended December 31, 2009, 2008 and
2007.
Summary
Compensation Table
Name
and Principal
|
|
Salary
|
Stock
Awards
(1)
|
Option
Awards
(1)
|
Non-Equity
Incentive
Plan
Compensation
(2
)
|
All
Other
Compensation
(3
)
|
|
Total
|
Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
($)
|
Dino
A. Rossi
|
2009
|
$467,500
|
$201,996
|
$299,795
|
$467,500
|
$199,648
|
(a)
|
$1,636,439
|
Chairman,
President &
|
2008
|
$431,968
|
$133,268
|
$254,877
|
$0
|
$17,849
|
|
$837,962
|
CEO
|
2007
|
$368,814
|
$56,111
|
$209,769
|
$260,000
|
$13,688
|
|
$908,382
|
|
|
|
|
|
|
|
|
|
Francis
J. Fitzpatrick
|
2009
|
$215,400
|
$72,402
|
$236,050
|
$88,626
|
$84,853
|
(b)
|
$697,331
|
CFO,
Treasurer and Asst.
|
2008
|
$197,062
|
$44,677
|
$195,388
|
$0
|
$22,770
|
|
$459,897
|
Secretary
|
2007
|
$180,000
|
$18,704
|
$161,359
|
$59,220
|
$21,993
|
|
$441,276
|
|
|
|
|
|
|
|
|
|
David
F. Ludwig
|
2009
|
$220,000
|
$44,343
|
$182,154
|
$75,606
|
$25,877
|
(c)
|
$547,980
|
VP/GM
Specialty Products
|
2008
|
$209,635
|
$27,259
|
$152,068
|
$55,000
|
$18,497
|
|
$462,459
|
|
2007
|
$201,385
|
$12,469
|
$129,226
|
$52,636
|
$13,689
|
|
$409,405
|
|
|
|
|
|
|
|
|
|
Paul
H. Richardson
|
2009
|
$191,000
|
$62,647
|
$139,718
|
$73,676
|
$31,979
|
(d)
|
$499,020
|
VP, R&D
|
2008
|
$176,500
|
$41,833
|
$116,814
|
$12,000
|
$21,111
|
|
$368,258
|
|
2007
|
$166,000
|
$18,704
|
$101,854
|
$34,160
|
$20,773
|
|
$341,491
|
|
|
|
|
|
|
|
|
|
Matthew
D. Houston
|
2009
|
$177,000
|
$21,844
|
$48,304
|
$43,631
|
$20,207
|
(e)
|
$310,986
|
General
Counsel and Secretary
|
2008
|
$176,385
|
$14,765
|
$41,811
|
$5,000
|
$21,120
|
|
$259,081
|
|
2007
|
$168,115
|
$6,235
|
$36,807
|
$42,250
|
$18,327
|
|
$271,734
|
|
|
|
|
|
|
|
|
|
(1)
|
The
amounts included in the “Stock Awards” and “Option Awards” columns reflect
the dollar amount recognized for financial statement reporting purposes
for each reported fiscal year, in accordance with FAS 123(R) adjusted to
eliminate service-based forfeiture assumptions used for financial
reporting purposes. A discussion of the assumptions used in valuation of
stock and option awards may be found in “Note 2 – Stockholders’ Equity” in
the Notes to Consolidated Financial Statements of our Annual Report on
Form 10-K for the year ended December 31, 2009, as filed with the SEC on
March 12, 2010.
|
(2)
|
Reflects
the value of cash incentive bonuses earned under our ICP and Mr. Rossi’s
non ICP bonus as applicable.
|
(3)
|
The
amounts reflected represent employer matching contributions and profit
sharing contributions made under the Company’s combined 401(k)/profit
sharing plan, automobile allowance and the Company paid portion of life,
health, and disability insurance benefits, in the following amounts for
each Named Executive Officer for the indicated
year:
|
|
(a)
|
Mr.
Rossi’s other compensation for 2009 consists of $180,000 of discretionary
bonus as described under Cash Based Incentives above, $14,472
for contributions under the Company’s 401(k)/profit sharing plan, $4,660
for automobile allowance, and $516 for life, health and disability
insurance benefits.
|
|
(b)
|
Mr.
Fitzpatrick’s other compensation for 2009 consists of $60,000 of
discretionary bonus as described under Cash Based Incentives above,
$14,473 for contributions under the Company’s 401(k)/profit sharing plan,
$10,200 for automobile allowance, and $180 for life, health and disability
insurance benefits.
|
|
(c)
|
Mr.
Ludwig’s other compensation for 2009 consists of $14,473 for contributions
under the Company’s 401(k)/profit sharing plan, $11,128 for automobile
allowance, and $276 for life, health and disability insurance
benefits.
|
|
(d)
|
Mr.
Richardson’s other compensation for 2009 consists of $10,000 of
discretionary bonus as described under Cash Based Incentives above,
$13,159 for contributions under the Company’s 401(k)/profit sharing plan,
$8,700 for automobile allowance, and $120 for life, health and disability
insurance benefits.
|
|
(e)
|
Mr.
Houston’s other compensation for 2009 consists of $12,227 for
contributions under the Company’s 401(k)/profit sharing plan, $7,800 for
automobile allowance, and $180 for life, health and disability insurance
benefits.
|
Grants
of Plan Based Awards
The
following table provides information on stock awards and options granted in 2009
to each of the Named Executive Officers and information on estimated possible
payouts under our non-equity incentive plan for 2009.
Name
|
Grant
Date
|
Estimated
Future Payouts
under Non-Equity Incentive
Plan Awards
(1)
|
All
Other
Stock
Awards:
Number
of
Shares
of
Restricted
Stock
(#)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
Price
of
Option
Awards
($/Sh)
|
Grant
Date
Fair
Value
(2)
|
Threshold
|
Target
|
Maximum
|
Dino
A. Rossi
|
12/8/2009
|
--
|
$233,750
|
$303,875
|
10,500
|
45,000
|
$
21.39
|
$746,520
|
|
|
|
|
|
|
|
|
|
Francis
J. Fitzpatrick
|
12/8/2009
|
--
|
$71,820
|
$93,366
|
5,700
|
42,000
|
$
21.39
|
$609,258
|
|
|
|
|
|
|
|
|
|
David
F. Ludwig
|
12/8/2009
|
--
|
$77,000
|
$100,100
|
3,150
|
30,000
|
$
21.39
|
$415,521
|
|
|
|
|
|
|
|
|
|
Paul
H. Richardson
|
12/8/2009
|
--
|
$63,350
|
$82,355
|
3,750
|
22,500
|
$
21.39
|
$341,438
|
|
|
|
|
|
|
|
|
|
Matthew
D. Houston
|
12/8/2009
|
--
|
$44,250
|
$57,525
|
1,500
|
6,900
|
$
21.39
|
$112,119
|
(1)
|
Represents
target payout levels under the ICP for 2009 performance. The actual amount
of incentive bonus earned by each Named Executive Officer in 2009 is
reported under the Non-Equity Incentive Plan Compensation column in the
Summary Compensation Table. Additional information regarding the design of
the ICP is included in the Compensation Discussion and
Analysis.
|
(2)
|
The
FAS 123(R) value of awards granted on 12/8/2009 was $21.39 per share of
restricted stock, and $11.61 per stock option with an exercise price of
$21.39.
|
As of January 1, 2001, the Company
entered into an employment agreement (the “Employment Agreement”) with Mr.
Rossi, which provides for Mr. Rossi to serve as the Company’s President and
Chief Executive Officer. ’The Employment Agreement initially provided
for a base salary, subject to annual increases if approved by the Board of
Directors. Mr. Rossi’s current salary for fiscal 2010 pursuant to the
Employment Agreement is $514,250. Mr. Rossi is eligible to earn a
bonus of 50% of base salary under the ICP. Mr. Rossi is also eligible to receive
a performance bonus (as determined by the Board of Directors) of up to 50% of
annual salary, based on a target figure which exceeds financial targets
established by the Board of Directors in the ICP, for each fiscal year during
the term of his employment.
The Employment Agreement also provides
that if the Company terminates his employment other than for cause or in the
event Mr. Rossi terminates his employment under certain limited
circumstances effectively amounting to a constructive termination, he will be
entitled to severance payments of 150% of his then current annual salary, and if
such termination by the Company occurs within two years after a change of
control event involving the Company he would be entitled to severance
payments equal to 200% of the sum of his then current annual salary plus the
annual bonus earned by him for the fiscal year immediately preceding the year in
which the change of control event occurred. If Mr. Rossi were to
terminate his employment prior to the second anniversary of such a change of
control event, he would be entitled to severance payments equal to 100% of his
then current annual salary. In the event of any termination by the
Company entitling Mr. Rossi to severance payments, his theretofore granted
but unvested options to purchase Common Stock of the Company would immediately
vest and be exercisable in accordance with their terms. Mr. Rossi’s
entitlement to severance payments would be subject to a modified payment
schedule to the extent necessary to avoid such payments being considered an
“excess parachute payment” for purposes of Section 280G of the Internal
Revenue Code. During the period of Mr. Rossi’s employment (or,
in the case of a voluntary termination by Mr. Rossi or a termination of his
employment by the Company for cause, the balance of the term of the Employment
Agreement before giving effect to such termination) and for a period of one year
thereafter, the Employment Agreement imposes on Mr. Rossi certain
non-competition and non-solicitation obligations regarding the Company and its
customers and its employees.
The
Employment Agreement was amended as of December 9, 2005 to conform certain
provisions thereof to Section 409A of the Internal Revenue Code, which was
enacted as part of the American Jobs Creation Act of 2004, and the proposed
regulations issued by the Treasury Department under Section 409A. The amendment
provides that certain payments to Mr. Rossi in connection with the termination
of his employment would not be due and payable before six months after the
applicable termination. The six-month delay relates to Mr. Rossi’s status as a
“key employee” (as defined under Section 409A and the accompanying proposed
regulations).
Terms
and Conditions of Awards
The
Company’s 1999 Stock Plan was adopted and approved by our stockholders in 1999
and was amended in 2003 and again in 2008. Under the 1999 Stock Plan, officers
and other employees of the Company may be granted options to purchase Common
Stock of the Company which qualify as “incentive stock options” (“ISO” or
“ISOs”) under Section 422(b) of the Internal Revenue Code of 1986, as amended
(the “Code”); directors, officers and employees may be granted options to
purchase Common Stock which do not qualify as ISOs (“non-Qualified Option” or
“Non-Qualified Options”); and directors, officers and employees may be granted
the right to make direct purchases of Common Stock from the Company
(“Purchases”). Both ISOs and Non-Qualified Options are referred to in
this Proxy Statement individually as an “Option” and collectively as “Options.”
The exercise price per share specified to each Option granted under the 1999
Stock Plan may not be less than the fair market value per share of Common Stock
on the date of such grant.
All of
our restricted stock awards for executive officers have the same
features. Each executive officer may purchase the stock at a purchase
price equal to the par value of the shares ($.06-2/3 per share). The
purchased restricted stock is subject to a repurchase option in favor of the
Company and to restrictions on transfer until it vests.
The
purchased stock will vest in full in four years, or upon an earlier change of
control of the Company, provided the executive officer is employed by the
Company on that date. In the event the purchaser’s employment with
the Company is terminated for cause or upon the purchaser’s voluntary
resignation from the Company’s employ, prior to vesting in full, the Company may
repurchase all of the purchased shares at a purchase price of $.06-2/3 per
share. The Company may repurchase a pro-rated amount of the purchased
shares, based on the amount of time remaining until the vesting date, at a
purchase price of $.06-2/3 per share in the event the purchaser ceases to be an
employee of the Company prior to vesting by reason of: (1) the
purchaser’s voluntary retirement from the Company’s employ at or after age 62;
(2) the purchaser’s death, major disability or significant illness; or (3)
termination of the purchaser’s employment by the Company without
cause. Repurchases are subject to the approval of the Compensation
Committee of the Board. Although available under the 1999 Stock Plan, the
Company has not granted stock appreciation rights or performance
awards.
Our
Non-Qualified Options granted vest as follows: 20% on the first
anniversary of the grant date; 40% on the second anniversary of the grant date;
and 40% on the third anniversary of the grant date. Our Non-Qualified Options
expire ten years after grant.
Outstanding
Equity Awards at Fiscal Year End
The
following table shows outstanding Option awards classified as exercisable and
unexercisable as of December 31, 2009 for each Named Executive Officer. The
table also discloses the number and value of unvested restricted stock awards as
of December 31, 2009.
|
Option
Awards
|
|
Stock
Awards
|
|
Number
of Securities
Underlying
Unexercised
Options
(#)
|
|
|
|
|
|
Number
of
Shares
of
Stock
that
Have
Not
Vested
(2)
|
|
Market
Value
of
Shares
of
Stock
that
Have
Not
Vested
(3)
($)
|
Name
|
Exercisable
(1)
|
|
Un-
Exercisable
(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dino
A. Rossi
|
101,250
|
|
-
|
|
$ 4.51
|
|
12/12/13
|
|
|
|
|
|
111,375
|
|
-
|
|
$ 5.85
|
|
09/16/14
|
|
|
|
|
|
135,000
|
|
-
|
|
$ 9.21
|
|
09/16/15
|
|
|
|
|
|
67,500
|
|
-
|
|
$
11.87
|
|
12/08/16
|
|
|
|
|
|
13,500
|
|
54,000
|
|
$
13.61
|
|
01/11/18
|
|
|
|
|
|
12,000
|
|
48,000
|
|
$
17.28
|
|
12/10/18
|
|
|
|
|
|
-
|
|
45,000
|
|
$
21.39
|
|
12/08/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,000
|
|
$
1,474,440
|
|
|
|
|
|
|
|
|
|
|
|
|
Francis
J. Fitzpatrick
|
60,750
|
|
-
|
|
$ 4.55
|
|
09/12/12
|
|
|
|
|
|
91,125
|
|
-
|
|
$ 5.85
|
|
09/16/14
|
|
|
|
|
|
101,250
|
|
-
|
|
$ 9.21
|
|
09/16/15
|
|
|
|
|
|
51,750
|
|
-
|
|
$
11.87
|
|
12/08/16
|
|
|
|
|
|
10,500
|
|
42,000
|
|
$
13.61
|
|
01/11/18
|
|
|
|
|
|
9,600
|
|
38,400
|
|
$
17.28
|
|
12/10/18
|
|
|
|
|
|
-
|
|
42,000
|
|
$
21.39
|
|
12/08/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,200
|
|
$
562,968
|
|
|
|
|
|
|
|
|
|
|
|
|
David
F. Ludwig
|
48,600
|
|
-
|
|
$ 4.51
|
|
12/12/13
|
|
|
|
|
|
75,938
|
|
-
|
|
$ 5.85
|
|
09/16/14
|
|
|
|
|
|
81,000
|
|
-
|
|
$ 9.21
|
|
09/16/15
|
|
|
|
|
|
40,500
|
|
-
|
|
$
11.87
|
|
12/08/16
|
|
|
|
|
|
7,950
|
|
31,800
|
|
$
13.61
|
|
01/11/18
|
|
|
|
|
|
7,500
|
|
30,000
|
|
$
17.28
|
|
12/10/18
|
|
|
|
|
|
-
|
|
30,000
|
|
$
21.39
|
|
12/08/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,150
|
|
$
338,451
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
H. Richardson
|
15,000
|
|
-
|
|
$ 8.79
|
|
06/24/15
|
|
|
|
|
|
33,750
|
|
-
|
|
$ 9.21
|
|
09/16/15
|
|
|
|
|
|
33,750
|
|
-
|
|
$
11.87
|
|
12/08/16
|
|
|
|
|
|
6,150
|
|
24,600
|
|
$
13.61
|
|
01/11/18
|
|
|
|
|
|
5,400
|
|
27,000
|
|
$
17.28
|
|
12/10/18
|
|
|
|
|
|
-
|
|
22,500
|
|
$
21.39
|
|
01/11/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,000
|
|
$
469,140
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew
D. Houston
|
28,575
|
|
-
|
|
$ 6.58
|
|
01/24/15
|
|
|
|
|
|
16,875
|
|
-
|
|
$ 9.21
|
|
09/16/15
|
|
|
|
|
|
6,750
|
|
-
|
|
$
11.87
|
|
12/08/16
|
|
|
|
|
|
3,000
|
|
12,000
|
|
$
13.61
|
|
01/11/18
|
|
|
|
|
|
1,800
|
|
7,200
|
|
$
17.28
|
|
12/10/18
|
|
|
|
|
|
-
|
|
6,900
|
|
$
21.39
|
|
01/11/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
$
167,550
|
|
(1)
|
Stock
option awards have a term of ten years from the grant date and become
exercisable 20% after 1 year, 60% after 2 years and 100% after 3 years
beginning on the first anniversary of the grant
date.
|
|
(2)
|
Restricted
stock vests
four years from the
date of grant
.
The
following table provides information with respect to the vesting dates of
each outstanding Restricted Stock award held by each Named Executive
Officer as of December 31,
2009:
|
|
Mr.
Rossi
|
Mr.
Fitzpatrick
|
Mr.
Ludwig
|
Mr.
Richardson
|
Mr.
Houston
|
December
8, 2010
|
20,250
|
6,750
|
4,500
|
6,750
|
2,250
|
January
11, 2012
|
20,250
|
6,750
|
3,750
|
6,000
|
2,250
|
December
10, 2012
|
15,000
|
6,000
|
3,750
|
4,500
|
1,500
|
December
8, 2013
|
10,500
|
5,700
|
3,150
|
3,750
|
1,500
|
|
66,000
|
25,200
|
15,150
|
21,000
|
7,500
|
|
(3)
|
Value
is computed based on the closing price of our Common Stock on the NASDAQ
on December 31, 2009, which was $22.34 per
share.
|
Option
Exercises and Stock Vested
The
following table sets forth certain information regarding Options and stock
awards exercised and vested, respectively, by each of our Named Executive
Officers during the fiscal year ended December 31, 2009.
Option
Exercises and Stock Vested Table
|
|
Option
Awards
|
|
|
Stock
Awards
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)(1)
|
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting ($)
|
Dino
A. Rossi
|
263,251
|
|
$ 3,336,273
|
|
|
–
|
–
|
Francis
J. Fitzpatrick
|
75,938
|
|
$ 1,038,837
|
|
|
–
|
–
|
David
F. Ludwig
|
18,225
|
|
$ 250,594
|
|
|
–
|
–
|
Paul
H. Richardson
|
47,101
|
|
$ 430,814
|
|
|
–
|
–
|
Matthew
D. Houston
|
–
|
|
–
|
|
|
–
|
–
|
(1) Value
realized represents the excess of the fair market value of the shares at the
time of exercise over the exercise price of the options.
Termination
of Employment and Change of Control Arrangements
Agreement with Dino A. Rossi
.
We entered into an employment agreement with Mr. Rossi on January 1, 2001, which
provides for automatic one-year extensions of the employment term unless either
party provides written notice of its intention not to extend the agreement
within 60 days of the end of the then-current term. Mr. Rossi receives an
annual base salary of $514,250 in 2010, an annual incentive bonus and medical
and other benefits. Mr. Rossi’s bonus is targeted to be 50% of his base
salary for the appropriate year, although he may be entitled to up to 100% of
his base salary as bonus.
If we
terminate ’the Employment Agreement other than for cause or in the event
Mr. Rossi terminates his employment under certain limited circumstances
effectively amounting to a constructive termination, he will be entitled to
severance payments of 150% of his then current annual salary, plus the pro rata
portion of the annual
bonus he
would have received had he been employed by us through the end of the full
fiscal year in which the termination occurred. If such termination by the
Company occurs within two years after a change of control event, he would be
entitled to severance payments equal to 200% of the sum of his then current
annual salary plus the annual bonus earned by him for the fiscal year
immediately preceding the year in which the change of control event occurred. If
Mr. Rossi were to terminate his employment prior to the second anniversary
of such a change of control event, he would be entitled to severance payments
equal to 100% of his then current annual salary. In the event of any
termination by the Company entitling Mr. Rossi to severance payments, his
granted but unvested options and restricted stock would immediately vest and be
exercisable in accordance with their terms.
Under the
employment agreement with Mr. Rossi, “Cause” means: habitual absence
or lateness; gross insubordination; failure to devote full time to Company’s
business; failure to comply with the obligations of confidentiality; any action
which constitutes a violation of any applicable criminal statute; or any act
which frustrates or violates the undivided duty of loyalty owed by Mr. Rossi to
the Company. In addition, “Change in Control” means:
(a) any
person or group is or becomes (including by merger, consolidation or otherwise)
the beneficial owner, directly or indirectly, of 50% or more of the voting power
of the total outstanding voting stock of Company;
(b) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new
directors whose election to the Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of 75% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease to constitute a majority of the Board of Directors then in
office; or
(c) the
sale or other disposition (other than by way of merger or consolidation) of all
or substantially all of the capital stock or assets of Company to any person or
group as an entirety or substantially as an entirety in one transaction or a
series of related transactions, unless the ultimate beneficial owners of the
voting stock of such person immediately after giving effect to such transaction
own, directly or indirectly, more than 80% of the total voting power of the
total outstanding voting stock of Company immediately prior to such
transaction.
The
amount of compensation payable to Mr. Rossi in the event of termination of
employment, assuming termination as of December 31, 2009, and a share price for
the Company’s common stock equal to the closing market price on the last
trading day prior to that date, is set
forth in the table below. We are not obligated to provide any compensation to
Mr. Rossi in the case of a change in control that does not result in termination
of employment.
Benefits
and Payments upon Termination
|
|
Base
Salary
|
ICP
Bonus(1)
|
Acceleration
of
Vesting
of
Options
and
Restricted
Stock
(2)
|
Total
|
Voluntary
termination by Mr. Rossi or termination for Cause
|
$0
|
$467,500
|
$6,299,711
|
$6,767,211
|
|
|
|
|
|
Termination
by Mr. Rossi within 12 months after demotion by Company or as a result of
constructive termination
|
$701,250
|
$467,500
|
$8,528,306
|
$9,697,056
|
|
|
|
|
|
Termination
by Company following a Change in Control, except for
Cause(3)
|
$935,000
|
$467,500
|
$8,528,306
|
$9,930,806
|
|
|
|
|
|
Voluntary
termination by Mr. Rossi following a Change of Control(3)
|
$467,500
|
$467,500
|
$8,528,306
|
$9,463,306
|
|
|
|
|
|
Termination
by Company for any reason other than for Cause or after receipt of notice
of termination from Mr. Rossi
|
$701,250
|
$467,500
|
$8,528,306
|
$9,697,056
|
Death
|
$0
|
$467,500
|
$6,299,711
|
$6,767,211
|
|
1.
|
Represents
the target bonus level under the
ICP
|
|
2.
|
Amounts
in this column are calculated by multiplying the number of shares subject
to accelerated vesting by the difference between $22.34, which is the
closing market price per share of our common stock on December 31,
2009, and the per share exercise price of the applicable accelerated stock
award or option.
|
|
3.
|
Assumes
the Change of Control occurred within the two year period prior to
December 31, 2009.
|
The
amounts shown in the table above do not include payments for accrued salary and
vacation, or payments made under the life insurance policy in the case of
death.
All of
our executive officers other than Mr. Rossi are employees-at-will and, as such,
do not have employment agreements, therefore, we are not obligated to provide
any post-employment compensation or benefits. However, upon a change of control,
as defined in the 1999 Stock Plan, all unvested Option grants immediately vest
and become exercisable, and all restrictions, applicable to outstanding shares
of restricted stock, lapse. Assuming such a change of control as of
December 31, 2009, and a share price for the Company’s common stock equal to the
closing market price on that date, the amount of compensation payable to the
Named Executive Officers other than Mr. Rossi, are as follows: Mr.
Fitzpatrick, $5,757,577; Mr. Ludwig, $4,509,372; Dr. Richardson, $1,894,418; and
Mr. Houston, $1,092,848.
The
Company recognizes that the possibility of a change of control of the Company
may be a distraction to management and may result in the departure of
executives, which clearly would be a
detriment to our operations. Accordingly, the Company adopted changes to
its 1999 Stock Plan in 2008, which provided for acceleration of vesting of
unvested stock options and removal of restrictions relative to restricted
shares, in the event of a change of control. It is the belief of the
Company that such benefits relating to a change of control are: (1) a customary
practice of other public companies; (2) necessary to retain our executives in a
competitive business marketplace; and (3) fair and reasonable to the
executives.
The
Company pays each of its directors, other than Mr. Rossi, an annual retainer of
$24,000 and $4,000 for each Board meeting attended, plus expenses. The Lead
Director, Chairman of the Audit Committee and Chairman of the Compensation
Committee are paid an additional $8,000 annual retainer fee. The Chairman of the
Corporate Governance & Nominating Committee is paid an additional $6,000
annual retainer fee. The Company also pays to each of its directors serving on
Committees a fee of $1,000, plus expenses, for each Committee meeting
attended.
The
following table discloses the cash, equity awards, and other compensation
earned, paid, or awarded, as the case may be, to each of the Company’s directors
(other than Mr. Rossi, whose compensation is set forth in the Summary
Compensation Table above) during the fiscal year ended December 31,
2009.
Name
|
Fees
Earned
or
Paid
in
Cash
($)
|
|
Stock
Awards
(1)(2)
($)
|
|
All
Other
Compensation
($)
|
Total
($)
|
Edward
McMillan
|
$52,000
|
|
$103,264
|
|
–
|
$155,264
|
Kenneth
Mitchell
|
$63,000
|
|
$103,264
|
|
–
|
$166,264
|
Perry
Premdas
|
$59,000
|
|
$103,264
|
|
–
|
$162,264
|
John
Televantos
|
$59,000
|
|
$103,264
|
|
–
|
$162,264
|
Elaine
Wedral
|
$57,000
|
|
$103,264
|
|
–
|
$160,264
|
(1)
|
On
December 8, 2009, each director, other than Mr. Rossi was awarded 4,839
shares of restricted stock. The shares are subject to a repurchase option
in favor of the Company and to restrictions on transfer until they vest in
accordance with the provisions of the Restricted Stock Purchase Agreement
dated December 8, 2009 between the Company and each such
director. The amounts included in the “Stock Awards” column
reflect the dollar amount to be recognized for financial statement
reporting purposes in accordance with FAS 123(R) adjusted to eliminate
service-based forfeiture assumptions used for financial reporting
purposes. The weighted average grant date fair value per share of each
award was $21.39. A discussion of the assumptions used in valuation of
stock and option awards may be found in “Note 2 – Stockholders’ Equity” in
the Notes to Consolidated Financial Statements of our Annual Report on
Form 10-K for the year ended December 31, 2009, as filed with the SEC on
March 12, 2010.
|
(2)
|
The
following table shows the aggregate number of options and stock awards
outstanding for each outside director as of December 31,
2009:
|
|
Aggregate
Stock
Options
Outstanding
as
of
12/31/2009
|
Aggregate
Stock
Awards
Outstanding
as
of
12/31/2009
|
Edward
McMillan
|
62,080
|
38,964
|
Kenneth
Mitchell
|
-
|
38,964
|
Perry
Premdas
|
-
|
21,339
|
John
Televantos
|
6,750
|
38,964
|
Elaine
Wedral
|
44,436
|
38,964
|
Directors
have entered into restricted stock purchase agreements with the Company to
purchase the Company’s Common Stock pursuant to the 1999 Stock Plan. These
agreements replace the stock option plan in which non-employee directors
participated in prior years.
Under the
restricted stock purchase agreements, each of the directors purchased shares of
the Company’s Common Stock at the purchase price of $.06-2/3 per share. The
purchased stock is subject to a repurchase option in favor of the Company and to
restrictions on transfer until it vests in accordance with the provisions of the
restricted stock purchase agreements. The purchased stock will vest in full
either in four years for certain restricted stock purchase agreements or in
seven years for the balance of the Agreements, provided the purchaser is still a
director of the Company on that date. The purchased stock will also vest in full
prior to the four or seven year vesting schedule upon: (1) the purchaser’s
retirement from the Company’s Board of Directors at or after age 70; (2) the
purchaser’s death or major disability, (3) the purchaser’s resignation from the
Company’s Board of Directors due to a conflict of interest or serious illness,
and (4) a change of control of the Company (as defined in the restricted stock
purchase agreements). The purchased shares will not vest and the Company may
repurchase all of the purchased shares at a purchase price of $.06-2/3 per share
in the event of gross misconduct on the part of the purchaser in the performance
of his or her duties as a director of the Company prior to vesting, as
determined by majority vote of the Board of Directors. A prorated amount of the
purchased shares may be repurchased by the Company at a purchase price of
$.06-2/3 per share in the event the purchaser ceases to be a director of the
Company prior to vesting of the purchased shares for any reason other than gross
misconduct.
The
Company does not pay any other direct or indirect compensation to directors in
their capacity as such.
Related
Party Transactions
Other
than the compensation and employment arrangements described above, we have not
entered into any transactions with any of our directors or executive officers or
their immediate family members in 2009.
The
Company has adopted a related party transaction policy. Under the related
party transaction policy, our audit committee reviews and approves proposed
transactions or courses of dealings with respect to which holders of 5% or more
of our stock and/or our executive officers or directors or members of their
immediate families have an interest. Before entering into any transaction,
arrangement or relationship constituting an interested transaction, other than
certain basic pre-approved transactions, all material facts are required to be
reviewed by the audit committee, which has the authority to approve or
disapprove the transaction based on appropriate factors, including whether the
transaction is on terms no less favorable to the company than terms generally
available from an un-affiliated third party and the extent of the related
persons interest in the transaction.
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides
information, as of December 31, 2009, with respect to shares of the Company’s
Common Stock that may be issued pursuant to awards under the 1999 Stock Plan,
described above, as well as under the Company’s prior stock option plans, which
plans were replaced by the 1999 Stock Plan. These plans are the Company’s only
equity compensation plans approved by security holders, and there are no equity
compensation plans that have not been approved by security holders. It should be
noted that shares of the Company’s Common Stock may be allocated to, or
purchased on behalf of, participants in the Company’s 401(k)/Profit Sharing Plan
(described above). Consistent with Securities and Exchange Commission
regulations governing equity compensation plans, information relating to shares
issuable or purchased under the Company’s 401(k)/Profit Sharing Plan is not
included in the table below.
|
(a)
|
(b)
|
(c)
|
Plan
Category
|
Number
of shares to be
issued
upon exercise of
outstanding
options,
warrants
and rights
|
Weighted-average
exercise
price
per share of
outstanding
options,
warrants
and rights
|
Number
of shares
remaining
available for
future
issuance under
equity
compensation plans
(excluding
shares reflected
in
column (a))
|
Equity
compensation plans
approved by security holders
|
3,704,366
|
$10.01
|
3,704,366
|
Equity
compensation plans
not approved by security holders
|
-
|
-
|
-
|
Total
|
3,704,366
|
$10.01
|
3,704,366
|
Security
Ownership of Certain Beneficial Owners and of Management
The
table below sets forth as of April 1, 2010, the number of shares of Common Stock
beneficially owned by (i) each director, (ii) each of the Named Executive
Officers, (iii) each beneficial owner of, or institutional investment manager
exercising investment discretion with respect to 5% or more of the outstanding
shares of Common Stock known to the Company based upon filings with the
Securities and Exchange Commission, and (iv) all current directors and executive
officers of the Company as a group, and the percentage ownership of the
outstanding Common Stock as of such date held by each such holder and
group:
Name
and Address of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership (1)
|
Percent
of
Class
(2)
|
|
|
|
BlackRock
Institutional Trust Company (3)
|
2,234,000
|
7.9%
|
Brown
Capital Management, Inc (4).
|
1,840,448
|
6.5%
|
Segall,
Bryant & Hamill Investment Counsel (5)
|
1,602,887
|
5.7%
|
Dino
A. Rossi (6)*
|
601,465
|
2.1%
|
Frank
Fitzpatrick (7)*
|
395,698
|
1.4%
|
David
F. Ludwig (8)*
|
304,378
|
1.1%
|
Paul
Richardson (9)*
|
131,250
|
**
|
Edward
L. McMillan (10)*
|
102,492
|
**
|
Elaine
R. Wedral (11)*
|
85,100
|
**
|
Matt
Houston (12)*
|
70,626
|
**
|
Kenneth
P. Mitchell (13)*
|
51,366
|
**
|
John
Televantos(14)*
|
48,714
|
**
|
Perry
Premdas (15)*
|
32,139
|
**
|
All
current directors and executive officers as a group (10 persons)
(16)
|
1,823,228
|
6.5%
|
|
|
|
Shares
Outstanding April 1, 2010
|
28,183,505
|
|
* Such
person’s address is c/o the Company, New Hampton, New York
10958.
|
** Indicates less than
1%.
|
(1)
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (“SEC”) and generally includes voting
or investment power with respect to securities. In accordance with
SEC rules, shares which may be acquired upon exercise of stock options
which are currently exercisable or which become exercisable within 60 days
after the date of the information in the table are deemed to be
beneficially owned by the optionee. Except as indicated by footnote, and
subject to community property laws where applicable, to the Company’s
knowledge, the persons or entities named in the table above are believed
to have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
|
(2)
For purposes of calculating the percentage of outstanding shares held by
each person named above, any shares which such person has the right to
acquire within 60 days after the date of the information in the table are
deemed to be outstanding, but not for the purpose of calculating the
percentage ownership of any other
person.
|
(3)
Based upon information provided in a Schedule 13G for such entity filed
with the SEC. Such entity’s address as reported in its Schedule 13G
is 40 East 52nd Street New York, NY 10022.
|
(4) Based upon
information provided in a Schedule 13G for such entity filed with the
SEC. Such entity’s address as reported in its Schedule 13G is 1201
N. Calvert Street Baltimore, Maryland 21202.
|
(5)
Based upon information provided in a Schedule 13F for such entity filed
with the SEC. Such entity’s address as reported in its Schedule 13F
is 10 S. Wacker Dr. Suite 3500. Chicago, IL 60606. Segall Bryant and
Hamill had voting authority as follows: sole, 436,365 shares; none,
1,166,522 shares.
|
(6) Consists of 467,625
shares such person has the right to acquire pursuant to stock options,
66,000 shares of restricted stock, 21,265 shares held in such person’s
Company 401(k)/profit sharing plan account, and 46,575 shares held
directly.
|
(7) Consists of 345,975
shares such person has the right to acquire pursuant to stock options,
25,200 shares of restricted stock, 16,930 shares held in such person’s
Company 401(k)/profit sharing plan account, and 7,593 shares held
directly.
|
(8) Consists of 277,388
shares such person has the right to acquire pursuant to stock options,
15,150 shares of restricted stock and 11,840 shares held in such person’s
Company 401(k)/profit sharing plan account.
|
(9)
Consists of 106,350 shares such person has the right to acquire pursuant
to stock options, 21,000 shares of restricted stock and 3,900 shares held
in such person’s Company 401(k)/profit sharing plan
account.
|
(10) Consists
of 62,080 shares such person has the right to acquire pursuant to stock
options, 38,964 shares of restricted stock and 1,448 shares held
directly.
|
(11)
Consists of 44,636 shares such person has the right to acquire pursuant to
stock options, 38,964 shares of restricted stock and 1,500 shares held
directly.
|
(12)
Consists of 61,500 shares such person has the right to acquire pursuant to
stock options, 7,500 shares of restricted stock and 1,626 shares held in
such person’s Company 401(k)/profit sharing plan
account.
|
(13)
Consists of 38,964 shares of restricted stock and 12,402 shares held
directly.
|
(14)
Consists of 6,750 shares such person has the right to acquire pursuant to
stock options, 38,964 shares of restricted stock and 3,000 shares held
directly.
|
(15)
Consists of 21,339 shares of restricted stock and 10,800 shares held
directly.
|
(16)
Consists of options to purchase 1,372,304 shares, 312,045 shares of
restricted stock, 55,562 shares in the accounts of five executive officers
under the Company’s 401(k)/profit sharing plan, and 83,318 shares held by
individuals directly.
|
PROPOSAL
NO. 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING
FIRM
The Audit
Committee has selected McGladrey & Pullen LLP (“M&P”) as the Company’s
independent registered public accounting firm for the year ending
December 31, 2010. The Company is submitting its selection of M&P for
ratification by the stockholders at the Annual Meeting. M&P has audited the
Company’s financial statements since 2005. Representatives of M&P will be
present at the Annual Meeting and will have an opportunity to make a statement
if they wish and will be available to respond to appropriate
questions.
The
Company’s bylaws do not require that the stockholders ratify the selection of
M&P as the Company’s independent registered public accounting firm. However,
the Company is submitting the selection of M&P to stockholders for
ratification as a matter of good corporate governance practice. If stockholders
do not ratify the selection, the Audit Committee will reconsider whether to
retain M&P. Even if the selection is ratified, the Audit Committee in its
discretion may change the appointment at any time during the year if they
determine that such a change would be in the best interests of the Company and
its stockholders.
Principal
Accountant Fees and Services
During
2009, the Company retained M&P to audit the consolidated financial
statements for 2009. In addition, the Company also retained M&P to
provide services relating to Management’s Assessment of
Internal
Controls
as required by Section 404 of the Sarbanes-Oxley Act, as well as for other
audit-related and tax-related services. The following table shows the fees
paid or accrued by the Company for the audit and other professional services
provided by M&P for 2009 and 2008:
|
|
2009
|
|
|
2008
|
|
Audit
fees (1)
|
|
$
|
520,805
|
|
|
$
|
510,925
|
|
|
|
|
|
|
|
|
|
|
Audit-related
fees (2)
|
|
|
35,800
|
|
|
|
43,500
|
|
|
|
|
|
|
|
|
|
|
Tax
fees (3)
|
|
|
4,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Total
fees
|
|
$
|
560,605
|
|
|
$
|
554,425
|
|
|
(1)
|
Fees
relating to audit of the annual consolidated financial statements and
quarterly reviews.
|
|
(2)
|
Fees
relating to employee benefit plan audit, S-8 Consent, SEC comment letter
and other audit-related matters.
|
|
(3)
|
Fees
for tax compliance, state tax audits, international tax issues and
advisory services.
|
|
Effective
2008, M&P no longer provides services relating to preparation of the
Company’s corporate income tax
returns.
|
Policy
on Pre-Approval of Audit and Non-Audit Services
All auditing and non-audit services
provided to the Company by the independent accountants are pre-approved by the
Audit Committee or in certain instances by one or more of its members pursuant
to delegated authority. At the beginning of each year, the Audit Committee
reviews and approves all known audit and non-audit services and fees to be
provided by and paid to the independent accountants. During the year, specific
audit and non-audit services or fees not previously approved by the Audit
Committee are approved in advance by the Audit Committee or in certain instances
by one or more of its members pursuant to delegated authority. In addition,
during the year the Chief Financial Officer and the Audit Committee monitor
actual fees to the independent accountants for audit and non-audit
services.
Audit
Committee Review
The Audit Committee has reviewed the
services rendered by M&P during 2009 and has determined that the services
rendered are compatible with maintaining the independence of M&P as the
Company’s independent registered public accounting firm.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE
RATIFICATION OF THE APPOINTMENT OF M&P AS THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31,
2010.
The Board
of Directors has appointed an Audit Committee consisting of three directors.
Each member of the Audit Committee is independent as defined under the NASDAQ
Marketplace Rules applicable to audit committee members. The Board of
Directors has adopted a written charter with respect to the Audit Committee’s
responsibilities. The Audit Committee oversees the Company’s internal and
independent auditors and assists the Board of Directors in overseeing matters
relating to the Company’s financial reporting process.
In
fulfilling its responsibilities, the Audit Committee reviewed and discussed the
audited financial statements for the fiscal year ended December 31, 2009 with
management and discussed the audit with McGladrey & Pullen, LLP (“M&P”),
the Company’s independent registered public accounting firm. The
Audit Committee also discussed with the Company’s independent registered public
accounting firm the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees), as amended, as adopted
by the Public Company Accounting Oversight Board (“PCAOB”). This included a
discussion of the independent auditors’ judgment as to the quality, not just the
acceptability, of the Company’s accounting principles as applied to the
Company’s financial reporting, and such other matters that generally accepted
auditing standards require to be discussed with the Audit Committee. The Audit
Committee also received from M&P the written disclosures and letter required
by applicable requirements of the PCAOB regarding the independent accountant’s
communications with the Audit Committee concerning independence, and the Audit
Committee discussed with M&P and management M&P’s
independence.
Management
is responsible for maintaining internal controls over financial reporting and
assessing the effectiveness of internal control over financial reporting. The
independent registered public accounting firm’s responsibility is to express an
opinion on the effectiveness of the Company’s internal control over financial
reporting based on their audit. In fulfilling its oversight responsibilities,
the Audit Committee reviewed the Company’s assessment process of internal
controls over financial reporting. The Audit Committee reviewed with the
independent registered public accounting firm any deficiencies that had been
identified during their engagement.
The Audit
Committee also considered whether the provision of non-audit services by M&P
to the Company is compatible with M&P’s independence. M&P
advised the Audit Committee that M&P was and continues to be independent
with respect to the Company.
Based
upon the reviews, discussions and considerations referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2009 for filing with the Securities and
Exchange Commission.
The Audit
Committee has also recommended the Board of Directors approve the selection of
M&P as the Company’s independent auditors for 2010.
Perry W.
Premdas (Chair)
Kenneth
P. Mitchell
Edward L.
McMillan
being the
members of the Audit
Committee
of the Board of Directors
Quorum
Required
Maryland law and the Company’s by-laws
require the presence of a quorum for the Meeting, defined as the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at the Meeting. Abstentions and broker non-votes will be
treated as “present” for purposes of determining whether a quorum has been
reached.
Broker non-votes are votes relating to
shares held by brokers or nominees that are present in person or represented by
proxy, but are not voted on a particular matter because instructions have not
been received from the beneficial owner and the broker or nominee does not have
discretion to vote without such instructions. Brokers and nominees
generally do not have such discretion when the matter is deemed by the broker
voting rules to be “non-routine.” The ratification of the independent
registered public accounting firm is considered to be a “routine” matter with
respect to which brokers and nominees could vote shares held by them in
street-name in their discretion absent any instructions received from the
beneficial owners of such shares. Brokers and nominees do not have
such discretion with respect to the election of directors.
Voting
Securities
Stockholders
of record on April 21, 2010 (the “Record Date”) will be eligible to vote at the
Meeting. The voting securities of the Company consist of its Common
Stock, $.06-2/3 par value, of which 28,183,505 shares were outstanding on
the Record Date. Each share of Common Stock outstanding on the Record
Date will be entitled to one vote.
Stockholder
Proposals for 2011 Annual Meeting
From time
to time, the stockholders of the Company may wish to submit proposals which they
believe should be voted upon by the stockholders. The Securities and
Exchange Commission has adopted regulations which govern the inclusion of such
proposals in the Company’s annual meeting proxy materials. All such
proposals must be submitted to the Secretary of the Company at the Company’s
principal executive offices no later than January 4, 2011 in order to be
considered for inclusion in the Company’s year 2011 proxy materials. With
respect to any stockholder proposal not submitted for inclusion in the Company’s
year 2010 proxy materials, the proxy for such meeting will confer discretionary
authority to vote on such proposal unless the Company is notified of such
proposal not later than March 20, 2011 (45 days prior to the anniversary of the
date this Proxy Statement is first being sent to stockholders).
Matters
Not Determined at the Time of Solicitation
The Board
of Directors is not aware of any matters to come before the Meeting other than
as described above. If any matter other than as described above
should come before the Meeting, then the persons named in the enclosed form of
proxy will have discretionary authority to vote all proxies with respect thereto
in accordance with their judgment.
Approval
of any other matter that may come before the Annual Meeting will be determined
by the vote of a majority of the shares of Common Stock present in person or by
proxy at the Annual Meeting and voting on such matters. With respect to an
abstention, the shares will be considered present and entitled to vote at the
Annual Meeting and they will have the same effect as votes against the matter.
With respect to broker non-votes, the shares will not be considered entitled to
vote at the Annual Meeting for such matter and the broker non-votes will have
the practical effect of reducing the number of affirmative votes required to
achieve a majority vote for such matter by reducing the total number of shares
from which the majority is calculated.
New
Hampton, New York
__________
The
Annual Report to Stockholders of the Company for the fiscal year ended December
31, 2009 is being mailed to stockholders with these proxy
materials. The Annual Report does not form part of these proxy
materials for the solicitation of proxies.
REVOCABLE
PROXY
BALCHEM
CORPORATION
[X] PLEASE
MARK VOTES
AS IN
THIS EXAMPLE
PROXY
SOLICITED ON BEHALF OF
THE
BOARD OF DIRECTORS
FOR
THE ANNUAL MEETING TO BE HELD JUNE 17, 2010
The
undersigned hereby appoints Dino A. Rossi, Francis J. Fitzpatrick and David
Ludwig, and each of them individually, as attorneys and proxies of the
undersigned, with full power of substitution, at the Annual Meeting of
Stockholders of Balchem Corporation scheduled to be held on June 17, 2010, and
at any adjournments thereof, and to vote all shares of Common Stock of the
Company which the undersigned is entitled to vote on all matters coming before
said meeting.
The
undersigned hereby revokes all proxies heretofore given by the undersigned to
vote at said meeting or any adjournment thereof.
Please be
sure to sign and date
this
Proxy in the box below.
---------------------------------
Date
---------------------------------
Stockholder
sign above
---------------------------------
Co-holder
(if any) sign above
Election
of Directors:
Election
of two (2)
Class
1 directors
Nominees
for Election as Class 1 directors: Dino A. Rossi
and Elaine R.
Wedral
|
For
All
[ ]
|
Withhold
All
[ ]
|
For
All Except*
[ ]
|
Ratification
and approval of the appointment of McGladrey and Pullen, LLP, as the
Company’s independent registered accounting firm for the year
2010
|
For
[ ]
|
Against
[ ]
|
Abstain
[ ]
|
*INSTRUCTION: To
withhold authority to vote for any one or more individual nominee(s) for
election to the Board of Directors, mark “For All Except” and write the name of
such nominee in the space provided below:
----------------------------------------------------------------
The
proxies are directed to vote as specified and in their discretion on all other
matters coming before the Annual Meeting. If no direction is made, the proxies
will vote: FOR the nominees for election as directors named above;
and FOR the ratification and approval of the appointment of McGladrey and
Pullen, LLP, as the Company’s independent registered accounting firm for the
year 2010.
The Board
of Directors recommends a vote: FOR each named nominee for election as a
director; and FOR the ratification and approval of the appointment of McGladrey
and Pullen, LLP, as the Company’s independent registered accounting firm for the
year 2010.
PLEASE
CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [ ]
PLEASE
MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE.
Please
sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should
sign. If the signer is a corporation, please sign full corporate name
by duly authorized officer. If a partnership or a limited liability
company, please sign in partnership or limited liability company name by
authorized persons.
PLEASE
ACT PROMPTLY
SIGN,
DATE & MAIL YOUR PROXY CARD TODAY
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