SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DYNAMIC MATERIALS CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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DYNAMIC MATERIALS CORPORATION
551 Aspen Ridge Drive
Lafayette, Colorado 80026
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1999
To the Stockholders of
DYNAMIC MATERIALS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DYNAMIC
MATERIALS CORPORATION, a Delaware corporation (the "Company"), will be held on
Friday, May 21, 1999 at 9:00 a.m. local time at 551 Aspen Ridge Drive,
Lafayette, Colorado, 80026 for the following purposes:
1. To elect one director to hold office until the 2002 Annual Meeting
of Stockholders.
2. To approve the increase of the aggregate number of shares of
Common Stock authorized for issuance under the Company's Employee Stock
Purchase Plan to 125,000 shares.
3. To ratify the selection of Arthur Andersen LLP as independent
accountants of the Company for its fiscal year ending December 31, 1999.
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 15, 1999,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors,
/s/ RICHARD A. SANTA
RICHARD A. SANTA
Vice President, Finance, Chief Financial Officer
and Secretary
Lafayette, Colorado
April 23, 1999
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
DYNAMIC MATERIALS CORPORATION
551 Aspen Ridge Drive
Lafayette, Colorado 80026
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1999
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Dynamic Materials Corporation, a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders to be held on Friday, May 21, 1999 at 9:00
a.m. local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at 551 Aspen Ridge Drive,
Lafayette, Colorado, 80026. The Company intends to mail this proxy statement and
accompanying proxy card on or about April 23, 1999, to all stockholders entitled
to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
15, 1999 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 15, 1999, the Company had outstanding and entitled to
vote 2,817,891 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of elections appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes will be
considered present at the Annual Meeting for the purpose of establishing a
quorum.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect.
Abstentions may be specified on the proposals to approve the increase of
the number of shares of Common Stock authorized for issuance under the Employee
Stock Purchase Plan and to ratify the Company's auditors. Abstentions on the
proposals to approve the increase of the number of shares of Common Stock
authorized for issuance under the Employee Stock Purchase Plan and to ratify the
Company's auditors will have no effect.
Brokerage firms who hold shares in "street name" for customers have the
authority to vote those shares with respect to the election of directors and the
ratification of the appointment of the Company's auditors if such firms have not
received voting instructions from a beneficial owner. Brokers will not have
authority to vote shares with respect to the proposal to approve the increase of
Common Stock reserved under the Employee Stock Purchase Plan. The failure of a
broker to vote shares in the absence of instructions (a "broker non-vote") will
have no effect with respect to the proposal to approve the increase of Common
Stock reserved under the Employee Stock Purchase Plan.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 551 Aspen
Ridge Road, Lafayette, Colorado 80026, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy. If no direction is indicated, the shares will be voted FOR the
election of each of the nominees for director, FOR the increase of Common Stock
reserved under the Employee Stock Purchase Plan and FOR the selection of Arthur
Andersen LLP as the Company's independent accountants for the current fiscal
year. The persons named in the proxies will have discretionary authority to vote
all proxies with respect to additional matters that are properly presented for
action at the Annual Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 2000 Annual Meeting of Stockholders must be received by the Company
not later than December 23, 1999 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
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PROPOSAL 1
ELECTION OF DIRECTOR
The Company's Certificate of Incorporation and Bylaws provide that the
Board of Directors shall be divided into three classes, with each class having a
three-year term. Directors are assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. Vacancies on the
Board may be filled only by persons elected by a majority of the remaining
directors. A director elected by the Board to fill a vacancy (including a
vacancy created by an increase in the Board of Directors) shall serve for the
remainder of the full term of the class of directors in which the vacancy
occurred and until such director's successor is elected and qualified.
The authorized size of the Board of Directors is presently five members.
There is one nominee for the directorship in the class whose term of office
expires in 1999. The nominee is a current director of the Company who was
previously elected by the stockholders. If elected at the Annual Meeting, the
nominee would serve until the 2002 annual meeting and until his successor is
elected and has qualified, or until such director's earlier death, resignation
or removal.
Shares represented by executed proxies will be voted, if authority to do so is
not withheld, for the election of the one nominee named below. In the event that
any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. The person nominated for election has agreed
to serve if elected and management has no reason to believe that he will be
unable to serve. Directors are elected by a plurality of the votes present in
person or represented by proxy and entitled to vote at the meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
The name of the nominee and certain information about him are set forth
below.
Mr. Dean K. Allen. Mr. Allen, age 63, has served the Company as a director
since July 1993. Mr. Allen is President of Parsons Europe, Middle East and South
Africa, a position he has held since February 1996. Mr. Allen was Vice President
and General Manager of Raytheon Engineers and Constructors, Europe, from
February 1994 to December 1995.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
Mr. David E. Bartlett. Mr. Bartlett, age 46, has served the Company as a
director since February 1996. Mr. Bartlett is currently a principal of
Strategic Alliances Holding LLC, a venture capital firm. From November 1997
through February 1999, he was a partner with the law firm of Davis, Graham &
Stubbs LLP. From June 1997 through October 1997, he was a partner in the firm
of Bartlett & Studer and prior thereto, he was Vice President of Business
Development and General Counsel of Netsage Corporation (f/k/a Agent Based
Curricula, Inc.), a position he held from September 1996 through May 1997. From
September 1993 to October 1996, Mr. Bartlett was a partner in the Boulder office
of the law firm Cooley Godward LLP.
Mr. Joseph P. Allwein. Mr. Allwein, age 47, has served the Company as a
director since January 1999 and has served as the Company's President and Chief
Executive Officer since September 1998. Mr. Allwein was Vice President and
General Manager of Spin Forge, LLC ("Spin Forge"), a division of the Company
since March 1998, when the Company acquired certain assets of Spin Forge, for
which Mr. Allwein was the President since 1996. From 1991 to 1996, Mr. Allwein
was President of Hoover Containment Systems, Inc. ("HCS"), a subsidiary of
Hoover Group, Inc.
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("Hoover"). Mr. Allwein served as the President and principal shareholder of HCS
(then known as Lube Cube Inc.) from 1988 until its acquisition by Hoover in
1991.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
Mr. Michael C. Franson. Mr. Franson, age 44, has served the Company as a
director since May 1998. Since 1993, Mr. Franson has been an Executive Vice
President of the Wallach Company, Inc., an investment banking firm, where he is
responsible for its Information Technology investment banking practice and has
served in various positions since 1988. Mr. Franson is a member of the advisory
board for the Center for Entrepreneurship at the University of Colorado at
Boulder and a member of the Board of Directors of Koala Corporation, a
manufacturer of child protection products. He is also a Chartered Financial
Analyst.
Dr. George W. Morgenthaler. Dr. Morgenthaler, age 72, has served as a
director of the Company since June 1986 and during the period from 1971 to 1976.
Dr. Morgenthaler has been a Professor of Aerospace Engineering, Department Chair
and Associate Dean of Engineering at the University of Colorado at Boulder since
1986. He is currently Director of the University of Colorado's BioServe
Commercial Space Center. Previously, Dr. Morgenthaler was Vice President
Primary Products Division of Martin Marietta Aluminum Co. and Vice President and
General Manager of the Baltimore Division of Martin Marietta Aerospace Co. Dr.
Morgenthaler has served as a director of CTA, Inc. since 1993 and served as a
director Board of Columbia Aluminum Company from 1987 to 1996.
EXECUTIVE OFFICERS
The following individuals serve as executive officers of the Company. Each
executive officer is elected by the Board of Directors and serves at the
pleasure of the Board.
Name Position Age
---- -------- ---
Mr. Joseph P. Allwein President and Chief Executive Officer 47
Mr. Richard A. Santa Vice President, Finance, Chief Financial Officer and Secretary 48
Mr. Mark W. Jarman Vice President of Corporate Development 38
Mr. Joseph P. Allwein. Mr. Allwein has served the Company as a director
since January 1999 and has served as the Company's President and Chief Executive
Officer since September 1998. Mr. Allwein was Vice President and General
Manager of Spin Forge, a division of the Company since March 1998, when the
Company acquired certain assets of Spin Forge, for which Mr. Allwein was the
President since 1996. From 1991 to 1996, Mr. Allwein was President of HCS, a
subsidiary of Hoover. Mr. Allwein served as the President and principal
shareholder of HCS (then known as Lube Cube Inc.) from 1988 until its
acquisition by Hoover in 1991.
Mr. Richard A. Santa. Mr. Santa has served as Vice President of Finance,
Chief Financial Officer and Secretary of the Company since October 1996 and
served as interim Chief Financial Officer from August 1996 to October 1996.
Prior to joining the Company, Mr. Santa was Corporate Controller of Scott Sports
Group Inc. from September 1993 to April 1996. From June 1992 to August 1993 Mr.
Santa was Chief Financial Officer of Scott USA.
Mr. Mark W. Jarman. Mr. Jarman has served as Vice President of Corporate
Development of the Company since September 1998 and has been employed by the
Company since October 1996. Prior to joining the Company, Mr. Jarman was an
Account Executive with Carl Thompson Associates from January 1996 to October
1996. From March 1993 to May 1995 Mr. Jarman was Vice President of Marketing
and New Business Development at Norby International.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1998, the Board of Directors held
nine meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent accountants at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent accountants to be
retained; and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. During the year ended December 31, 1998, the Audit
Committee was composed of two non-employee directors, Mr. Bartlett and Dr.
Morgenthaler. The Audit Committee met once during such fiscal year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and non-employee
directors under the Company's stock option plans and otherwise determines
compensation levels and performs such other functions regarding compensation as
the Board may delegate. During the year ended December 31, 1998, the
Compensation Committee was composed of three non-employee directors, Mr. Allen,
Mr. Bartlett and Dr. Morgenthaler. It met four times during such fiscal year.
During the fiscal year ended December 31, 1998, each Board member attended
75% or more of the meetings of the Board and of the committees on which he
served that were held during the period for which he served as a director or
committee member, respectively.
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PROPOSAL 2
APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE EMPLOYEE STOCK PURCHASE PLAN
In March 1997, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's Employee Stock Purchase Plan (the "Purchase
Plan"). At December 31, 1997, there were 50,000 shares of the Company's Common
Stock authorized for issuance under the Purchase Plan. As of December 31, 1998,
the Company had issued 23,068 shares under the Purchase Plan and 26,932 shares
remained available for issuance.
On January 8, 1999, the Board approved an increase of the number of shares
authorized for issuance under the Purchase Plan by 75,000 shares, from a total
of 50,000 shares to 125,000 shares. The Board approved the increase of the
number of shares authorized for issuance under the Purchase Plan to ensure that
the Company can continue to provide a means by which employees of the Company
may be given an opportunity to purchase Common Stock of the Company.
Stockholders are requested in this Proposal 2 to approve the increase in
the number of shares authorized for issuance under the Purchase Plan. The
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote will be required to
approve the increase in the number of shares authorized for issuance under the
Purchase Plan. Broker non-votes and abstentions are counted towards a quorum
and will have no effect on this matter being proposed. A copy of the Purchase
Plan is attached hereto as Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Purchase Plan are outlined below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees
of the Company (and any parent or subsidiary of the Company designated by the
Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
to assist the Company in retaining the services of its employees, to secure and
retain the services of new employees and to provide incentives for such persons
to exert maximum efforts for the success of the Company.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has delegated administration of
such plan to the Compensation Committee.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering is of
six months' duration.
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ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan, provided such employee has been in the continuous employ of the Company
for such continuous period not equal to or greater than two years as the Board
may require. The Board may provide that officers of the Company who are "highly
compensated" as defined in the Code are not eligible to participate in an
offering.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering
to the Company, within the time period specified in the offering date for the
offering, an agreement authorizing payroll deductions of up to 15% of such
employees' earnings (as defined by the Board for each offering) during the
specified purchase period.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan may not be less than the lower of (a) 85% of the fair market
value of a share of Common Stock on the date of commencement of the offering, or
(b) 85% of the fair market value of a share of Common Stock on the date on which
rights are exercised and purchases of such shares are made ("Purchase Date").
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. A participant may reduce (including to zero) or increase
or begin such payroll deductions after the beginning of any offering period only
as provided for in the offering. All payroll deductions made for a participant
are credited to his or her account under the Purchase Plan and deposited with
the general funds of the Company. A participant may make additional payments
into such account only if specifically provided for in the offering and only if
the participant has not had the maximum amount withheld during the offering
period.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board may specify a maximum number of shares
any employee may be granted the right to purchase and the maximum aggregate
number of shares which may be purchased pursuant to such offering by all
participants. In addition, in connection with any offering that contains more
than one Purchase Date, the Board may specify a maximum aggregate number of
shares which may be purchased pursuant to such offering by all eligible
employees. If the aggregate number of shares to be purchased upon exercise of
rights granted in the offering would exceed any such maximum aggregate number,
the Board would make a pro rata allocation of shares available in a uniform and
equitable manner. Unless the employee's participation is discontinued, his or
her right to purchase shares is exercised automatically at the applicable price
on one or more Purchase Dates established by the Board.
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WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering and terminate his or her payroll deductions by delivering to the
Company a notice of withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of the applicable offering period except as
provided by the Board in the offering.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, and such employee's interest in the offering will be automatically
terminated. The employee is not entitled to again participate in such offering.
An employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable otherwise than
by will or the laws of descent and distribution or by designation of a
beneficiary to receive rights, shares or accumulated payroll deductions upon the
participant's death. Rights may be exercised, during his or her lifetime, only
by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the Company's stockholders within 12 months of
its adoption by the Board if the amendment would (a) increase the number of
shares of Common Stock reserved for issuance under the Purchase Plan, (b) modify
the requirements relating to eligibility for participation in the Purchase Plan
(to the extent such modification requires stockholder approval in order for the
Purchase Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or in order to comply with the requirements of Rule 16b-3 under the
Exchange Act), or (c) modify the Purchase Plan in any other way if such
modification requires stockholder approval in order for the Purchase Plan to
obtain employee stock purchase plan treatment under Section 423 of the Code or
in order to comply with the requirements of Rule 16b-3 under the Exchange Act.
Rights and obligations under any rights granted before amendment or
termination of the Purchase Plan will not be altered or impaired by any
amendment or termination of such plan without the consent of the person to whom
such rights were granted or except as necessary to comply with any laws or
governmental regulations or to ensure that the Purchase Plan and/or rights
granted under it comply with the requirements of Section 423 of the Code.
EFFECT OF CERTAIN CORPORATE EVENTS
If any change is made in the stock subject to the Purchase Plan, or subject
to any rights granted under the plan, the Purchase Plan and outstanding rights
will be appropriately adjusted in the class(es) and maximum number of shares
subject to the plan and the class(es) and number of shares and price per share
of stock subject to outstanding rights as the Board determines.
In the event of a dissolution, liquidation or specified type of merger or
acquisition of the Company, then, as determined by the Board in its sole
discretion, the surviving or acquiring corporation may assume the rights under
the Purchase Plan or substitute similar rights, such rights may continue in full
force and effect, or participants' accumulated
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payroll deductions may be used to purchase Common Stock immediately prior to any
such event and the participants' rights under the offering may be terminated.
STOCK SUBJECT TO PURCHASE PLAN
If rights granted under the Purchase Plan for any reason terminate without
having been exercised, the Common Stock not purchased under such rights again
becomes available for issuance under such plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of more than two years after the beginning of the
offering period and more than one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a long-term capital gain or loss. Capital gains currently are generally
subject to lower tax rates than ordinary income. The maximum capital gains rate
for federal income tax purposes is 20% while the maximum ordinary rate is
effectively 39.6% at the present time.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be long or short-term
depending on whether the stock has been held for more than one year.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is
entitled to a deduction to the extent amounts are taxed as ordinary income to a
participant by reason of a disposition before the expiration of the holding
periods described above (subject to the requirement of reasonableness and,
perhaps, in the future the satisfaction of a withholding obligation).
NEW PLAN BENEFITS
The benefits that will be received by the Named Executive Officers, all
executive officers as a group and all non-executive officer employees as a group
under the Purchase Plan are not determinable at the present time as the number
and dollar value of shares that may be purchased in the future are dependent
upon the amount of payroll deductions each person may elect. Non-employee
directors are not eligible to purchase shares under the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ending December 31, 1999 and has
further directed that management submit the selection of independent accountants
for ratification by the stockholders at the Annual Meeting. Arthur Andersen LLP
has audited the Company's financial statements since 1991. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting. They will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
Although stockholder ratification of the selection of Arthur Andersen LLP
as the Company's independent accountants is not required by the Company's Bylaws
or otherwise, the Board is submitting the selection to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection, the Audit Committee and the Board will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Audit
Committee and the Board in their discretion may direct the appointment of
different independent accountants 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.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
-10-
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 1, 1999 by: (i) each director and
nominee for director; (ii) each executive officer (including each Named
Executive Officer); (iii) all executive officers and directors of the Company as
a group; and (iv) each person known by the Company to be the beneficial owner of
more than five percent of the Company's Common Stock.
Beneficial
Ownership(1)
------------------------
Number Percent
Name and Address of Beneficial Owner of Shares of Total
- ------------------------------------ ------------- ---------
Heartland Advisors, Inc.(2) ....................................................................... 550,000 19.40%
790 North Milwaukee Street
Milwaukee, WI 53202
Nobel Explosifs France(3).......................................................................... 406,400 14.34%
La Societe Nationale des
Poudres et Exlosifs
12, Quai Henri IV
75181 Paris Cedex 04, France
Joseph P. Allwein(4)............................................................................... 73,750 2.50%
551 Aspen Ridge Drive
Lafayette, CO 80026
Mr. Richard A. Santa(5)........................................................................... 24,533 *
Mr. Mark W. Jarman(6).............................................................................. 10,970 *
Mr. Dean K. Allen(7)............................................................................... 24,500 *
Mr. David E. Bartlett(8)........................................................................... 22,500 *
Mr. Michael C. Franson(9)......................................................................... 8,500 *
Dr. George W. Morgenthaler(10)..................................................................... 105,278 3.68%
All executive officers and directors as a group (7 persons)(11).................................... 270,031 9.14%
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
2,954,725 shares outstanding on April 1, 1999 adjusted as required by rules
promulgated by the SEC. The Company is not aware of any other stockholder
owning in excess of five percent of the outstanding Common Stock of the
Company.
(2) Based solely on information contained in the 13G filed with the SEC by
Heartland Advisors, Inc. ("Heartland"). Heartland reported that it had sole
power to vote or direct the vote of 287,200 shares and sole power to
dispose or direct the disposition of 550,000 shares. Heartland reported
beneficial ownership of 550,000 shares.
(3) Based solely on information contained in the Schedule 13D filed by each of
Nobel Explosifs France ("NEF") and NEF's parent, La Societe Nationale des
Poudres et Explosifs ("SNPE"). Each of NEF and SNPE reported that it had
shared power to vote or direct the vote of 406,4000 shares and that it had
beneficial ownership of 406,400 shares.
(4) Includes 11,250 shares subject to stock options exercisable within 60 days
of April 1, 1999. Mr. Allwein has sole voting power over the shares
reported, the voting power over 50,000 of such shares being held by him as
manager of Spin Forge, the record owner of such shares. The sole members of
Spin Forge are Mr. Allwein and his spouse. Mr. Allwein has sole dispositive
power over 25,000 of the shares reported. Of the 50,000 shares held of
record by Spin Forge 25,000 shares are subject to repurchase at fair market
value if Mr. Allwein terminates his employment with the Company. Such right
of repurchase terminates to the extent of 50% per year on March 18, 2000
and March 18, 2001. Five thousand six hundred twenty-five of the shares
reported are subject to forfeiture if Mr. Allwein terminates his employment
with the Company. Such shares will
-11-
no longer be subject to forfeiture to the extent of 33.33% shares per year
on March 18 in each of the years 2000, 2001 and 2002.
(5) Includes 23,750 shares subject to stock options exercisable within 60 days
of April 1, 1999.
(6) Includes 10,084 shares subject to stock options exercisable within 60 days
of April 1, 1999.
(7) Includes 22,500 shares subject to stock options exercisable within 60 days
of April 1, 1999.
(8) Includes 22,500 shares subject to stock options exercisable within 60 days
of April 1, 1999.
(9) Includes 7,500 shares subject to stock options exercisable within 60 days
of April 1, 1999.
(10) Includes 22,500 shares subject to stock options exercisable within 60 days
of April 1, 1999.
(11) See Notes 4 through Note 10 above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and officers, and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except that Mr. Franson's
Form 3 was filed late.
-12-
FINANCIAL PERFORMANCE
The following graph compares the performance of the Company's Common Stock
with the Nasdaq Non-Financial Stocks Index and the Nasdaq Composite (US) Index.
The comparison of total return (change in year end stock price plus reinvested
dividends) for each of the years assumes that $100 was invested on December 31,
1993 in each of the Company, Nasdaq Non-Financial Stocks Index and the Nasdaq
Composite (US) Index with investment weighted on the basis of market
capitalization. Historical results are not necessarily indicative of future
performance.
[GRAPH APPEARS HERE]
Total Return Analysis
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
Dynamic Materials Corporation $ 100 $ 89.47 $ 115.79 $ 394.74 $ 373.68 $ 150.02
- ------------------------------------------------------------------------------------------------------------------------------------
Nasdaq Non-Financial $ 100 $ 96.16 $ 134.03 $ 162.84 $ 191.05 $ 279.82
Stocks
- ------------------------------------------------------------------------------------------------------------------------------------
Nasdaq Composite (US) $ 100 $ 97.75 $ 138.26 $ 170.01 $ 208.58 $ 293.21
- ------------------------------------------------------------------------------------------------------------------------------------
-13-
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
During 1998, each non-employee director of the Company received a quarterly
retainer of $1,000 and per meeting fees of $1,000 for attendance at non-
telephonic Board meetings, $500 for attendance at telephonic Board meetings and
$250 for attendance at committee meetings. In the fiscal year ended December 31,
1998, the aggregate compensation paid to all non-employee directors was $47,250.
The members of the Board of Directors are also eligible for reimbursement for
their expenses incurred in connection with attendance at Board meetings, in
accordance with Company policy. Effective January 1, 1999, each non-employee
director of the Company will receive a quarterly retainer of $2,000 and per
meeting fees of $2,000 for attendance at non-telephonic Board meetings, $1,000
for attendance at telephonic Board meetings and $500 for attendance at committee
meetings
Each non-employee director of the Company also receives automatic grants of
nonstatutory stock options under the Company's Amended and Restated 1997 Equity
Incentive Plan (the "1997 Plan"). Upon the initial election or appointment of a
non-employee director to the Company's Board of Directors, such director is
automatically granted, without further action by the Company, the Board of
Directors or the stockholders of the Company, a nonstatutory option to purchase
7,500 shares of Common Stock of the Company. On the date of each annual meeting
of the Company's stockholders, each person who is then a non-employee director
is automatically granted an option to purchase that number of shares of Common
Stock of the Company determined by multiplying 5,000 shares by a fraction the
numerator of which is the number of days the person continuously has been a non-
employee director since the date of the last annual meeting as of the date of
grant and the denominator of which is 365. The exercise price of such options
may not be less than 85% of the fair market value of the Common Stock subject to
the option on the date of the option grant. The options may be exercised as
provided in each option agreement which typically states that the option may not
be exercised until the date upon which the optionee has provided one year of
continuous service as a non-employee director following the date of grant of the
option. The term of each option is 10 years. If the non-employee director's
continuous status as a director terminates, the option will terminate on the
earlier of its expiration date and three months following the date of such
termination.
During the fiscal year ended December 31, 1998, the Company granted options
covering an aggregate of 30,000 shares to five individuals serving as non-
employee directors of the Company, at a weighted-average exercise price of $8.95
per share. During the fiscal year ended December 31, 1998, options for an
aggregate of 1,000 shares of the Company's Common Stock were exercised by an
individual currently serving as a non-employee director.
-14-
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows compensation awarded or paid to, or earned by,
the Company's executive officers (the "Named Executive Officers") during the
fiscal years ended December 31, 1998, 1997 and 1996:
Summary Compensation Table
Long-Term Compensation
----------------------
Annual Compensation Payouts
------------------- -------
Awards
Name and ------
Principal Fiscal Other Annual All Other
Position Year Salary($) Bonus ($) Compensation ($)(1) Options (#) Compensation ($)
- ----------------------------------- ------ --------- --------- ------------------- ----------- ----------------
Joseph P. Allwein.................. 1998 127,381 75,000 - 62,500 5,966(3)
President and
Chief Executive Officer(2)
Richard A. Santa................... 1998 124,730 30,000 - 40,000 6,305(4)
Vice President, Finance, Chief 1997 120,000 34,800 - - 3,629(5)
Financial Officer and 1996 21,846 16,263 - 25,000 -
Secretary(6)
Mark W. Jarman..................... 1998 67,481 15,000 - 23,750 2,662(8)
Vice President,
Corporate Development(7)
Paul Lange......................... 1998 176,562 - 218,077(10) - 6,544(13)
Former President and 1997 210,000 189,000 484,894(11) - 6,275(14)
Chief Financial Officer(9) 1996 166,333 100,000 35,781(12) 25,000 83,489(15)
(1) Except as disclosed in this column, the amount of perquisites provided to
each Named Executive Officer did not exceed the lesser of $50,000 or 10% of
total salary and bonus for each fiscal year.
(2) Mr. Allwein joined the Company in March 1998.
(3) Includes $995 of life insurance premiums and $4,971 of matching
contributions under the 401(k) plan.
(4) Includes $1,306 of life insurance premiums and $5,000 of matching
contributions under the 401(k) plan.
(5) Includes $1,044 of life insurance premiums and $2,585 of matching
contributions under the 401(k) plan.
(6) Mr. Santa joined the Company in October 1996.
(7) Mr. Jarman joined the Company in October 1996 and became a Named Executive
Officer in September 1998.
(8) Includes $23 of life insurance premiums and $2,639 of matching
contributions under the 401(k) plan.
(9) Mr. Lange resigned as President and Chief Executive Officer of the Company
in September 1998.
(10) Includes $147,998 for forgiveness of debt, $38,442 in consideration for
earned but unused vacation time, $21,910 which represents the dollar value
of the difference between the fair market value and exercise price of non-
statutory options exercised during 1998 and $9,286 for the cost of a
Company-provided automobile.
(11) Includes $473,640 which represents the dollar value of the difference
between the fair market value and exercise price of non-statutory options
exercised during 1997 and $11,254 for the cost of a Company-provided
automobile.
(12) Includes $28,596 paid to Mr. Lange in consideration for earned but unused
vacation time and $7,185 for the cost of a Company-provided automobile.
(13) Includes $1,544 for life insurance premiums paid by the Company and $5,000
for the Company's matching contributions under its 401(k) plan.
(14) Includes $1,462 for life insurance premiums paid by the Company and $4,813
for the Company's matching contributions under its 401(k) plan.
(15) Includes $78,628 paid to Mr. Lange in reimbursement of relocation expenses,
including reimbursement of rental payments, relocation agent services and
other moving expenses; $703 of life insurance premiums; and $4,158 of
matching contributions under the 401(k) plan.
-15-
STOCK OPTION EXERCISES
The Company grants options to its executive officers under its 1997 Plan. As
of April 1, 1999, options to purchase a total of 588,000 shares were outstanding
under the 1997 Plan and options to purchase 264,250 shares remained available
for grant thereunder.
The following table shows for the fiscal year ended December 31, 1998,
certain information regarding options exercised by, and held at year-end by, the
Named Executive Officers:
Option Exercises in Fiscal 1998 and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1998 December 31, 1998 (1)
----------------- ---------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- -------------------------------------- ---------------- ------------ ----------------- ---------------------
Joseph P. Allwein..................... - - 2,500/60,000 -/-
Richard A. Santa...................... - - 17,500/47,500 -/-
Mark W. Jarman........................ - - 7,584/22,166 -/-
___________________
(1) Represents value of options for which the fair market value of the Company's
Common Stock at December 31, 1998 ($3.75) exceeds the exercise price.
EMPLOYMENT AGREEMENTS
Mr. Allwein has an employment agreement with the Company under which he is
entitled to receive his base salary for the longer of six months or the
remaining term of the employment agreement which expires March 18, 2000 if (i)
he is involuntarily terminated without cause or (ii) there is a change of
control of the Company.
Mr. Santa has an employment agreement with the Company under which he is
entitled to receive 26 weeks of salary if (i) he is involuntarily terminated
without cause or (ii) there is a change of control of the Company.
In connection with his resignation as President and Chief Executive Officer
of the Company, Mr. Lange entered into a separation agreement with the Company
whereby he received (i) a lump sum payment equivalent to seven weeks salary,
(ii) forgiveness by the Company of $147,998 of debt owed by him and (iii) a
$38,442 payment for earned but unused vacation time.
-16-
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXCUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board, which is composed of three nonemployee
members of the Board. The Compensation Committee reviews compensation
arrangements of all executive officers of the Company and recommends certain
arrangements to the Board for approval. In reviewing the compensation of
individual executive officers, the Compensation Committee takes under
consideration published industry compensation surveys, compensation paid to
executive officers at other comparable companies, current market conditions and
the recommendations of management.
Compensation Philosophy
The Company's compensation philosophy is to (i) provide a compensation
program that will be able to attract and retain high caliber managerial talent,
(ii) provide compensation opportunities that are competitive with those provided
by other comparable companies, and (iii) create a balance between short-term
performance measures and long-term strategic direction and decisions through
incentive programs which are linked to stockholder value. Available forms of
executive compensation include base salary, annual performance bonuses and stock
options.
Base Salary
Base salary for executive officers is determined in the same manner as that
of other salaried employees. Salary guidelines are established by comparing the
responsibilities of the individual's position in relation to similar positions
in comparable companies. Individual salaries are determined considering the
person's performance against certain corporate objectives, such as successful
execution of the Company's acquisition strategy, comparisons of budgeted amounts
to actual amounts and overall profitability of the Company.
Bonus Plan
The Bonus Plan, an annual incentive award plan, is a variable pay program
for officers and other senior managers of the Company to earn additional annual
cash compensation. The actual incentive award earned depends on the extent to
which the Company and individual performance objectives are achieved. At the
start of each year, the Compensation Committee and the Board review and approve
the performance objectives for the Company and individual officers. The
Company's objectives consist of operating, strategic and financial goals that
are considered critical to the Company's fundamental long-term goal - building
stockholder value.
After the end of the year, the Compensation Committee evaluates the degree
to which the Company has met its goals and establishes a total bonus award pool
under the Bonus Plan. Individual awards are determined by evaluating each
participant's performance against personal objectives and allocating a portion
of the award pool base upon a participant's contribution during the year.
Awards are paid in cash in January or February following the performance year.
Amended and Restated 1997 Equity Incentive Plan
The 1997 Plan authorizes the Compensation Committee, or its designee, to
grant incentive or non-statutory stock options to purchase shares of the
Company's Common Stock. The purpose of the 1997 Plan is to enable the Company
to attract, retain and motivate its employees and to enable employees to
participate in the long-term growth of the Company by providing for or
increasing the proprietary interest of such employees in the Company. Periodic
grants are generally made annually to eligible employees, with additional grants
being made upon commencement of employment and, occasionally, following a
significant change in job responsibilities, scope or title. Grants to executive
officers under the 1997 Plan are designed to align a portion of the executive's
compensation with the long-term interests of the Company's stockholders.
-17-
Compensation of the Chief Executive Officer
Mr. Allwein's performance is reviewed annually by the Compensation
Committee and the Board. In setting the initial compensation for Mr. Allwein
when he was named the Chief Executive Officer in September 1998, the
Compensation Committee considered the salaries paid to, and experience levels
of, chief executive officers at other comparable companies, as well as Mr.
Allwein's performance as Vice President of the Aerospace Group prior to assuming
the Chief Executive Officer position. Based upon these factors and the
Company's overall future business objectives, Mr. Allwein's initial base salary
was established at $200,000, a level that falls in the third quartile for chief
executive officers of public and private manufacturing companies of fabricated
metal products or durable goods of comparable size based on a data provided by
Mountain States Employer's Council, 1998 National Executive Compensation Survey
and The Management Association of Illinois.
Pursuant to the Bonus Plan described above, Mr. Allwein, during his tenure
as Vice President of the Aerospace Group, was deemed to have exceeded
expectations at achieving the overall strategic objectives of the Company.
During his tenure as President and Chief Executive Officer, Mr. Allwein was
deemed to have exceeded the expectations of the Compensation Committee during a
transition period for the Company. Mr. Allwein was awarded a bonus of $75,000
in January 1999 for his performance in the fiscal year 1998. Additionally, Mr.
Allwein was granted options to purchase 20,000 shares of the Company's Common
Stock under the 1997 Plan when he was named to the Chief Executive Officer
position and granted options to purchase another 40,000 shares in January 1999
in recognition of his performance during the 1998 fiscal year. The options were
granted at an exercise price of $6.00 per share and $4.19 per share for the
September 1998 and January 1999 grants, respectively, and vest in four equal
annual installments beginning on the first anniversary following the date of the
respective grant.
Compensation Committee Members
Dean K. Allen
David E. Bartlett
George W. Morgenthaler
-18-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 18, 1998, the Company completed the acquisition of certain assets
of Spin Forge for a purchase price of approximately $3,826,000 that was paid
with a combination of approximately $2,616,000 in cash, assumption of
approximately $760,000 in liabilities and 50,000 shares of DMC Common Stock
valued at $449,800. The Company agreed to lease land and buildings from Spin
Forge until January 2002 and holds an option to purchase such property for
approximately $2.9 million, subject to certain adjustments, exercisable under
certain conditions through January 2002. The Company made lease payments to Spin
Forge in the aggregate of amount of approximately $175,000 in 1998 and will
continue to make lease payments until the expiration of the lease. The lease
payments are equal to the interest and principle due and payable by Spin Forge
pursuant to a certain note and currently are in the amount of approximately
$17,000 per month. The option may be extended beyond this date under specified
conditions provided that the option price must be adjusted upwards in the event
that the fair market value of the property at the time of exercise is higher
than $2.9 million. Mr. Allwein and his spouse are the sole members of Spin
Forge. In connection with this transaction, Mr. Allwein entered into an
employment agreement with the Company under which he is entitled to receive his
base salary for the longer of six months or the remaining term of the employment
agreement which expires March 18, 2000 if (i) he is involuntarily terminated
without cause or (ii) there is a change of control of the Company.
Mr. Bartlett was a partner of the law firm of Davis, Graham & Stubbs, LLP
until February of 1999. During 1998, Davis, Graham & Stubbs provided general
legal counsel to the Company and continues to provide such services to the
Company.
Mr. Franson is a principal in the investment banking firm of The Wallach
Company, Inc. ("Wallach"). In January 1999, the company retained Wallach to
provide financial advisory services for the Company pursuant to which the
Company has agreed to pay Wallach a monthly retainer in the amount of $7,500 and
certain contingent fees. In addition, Wallach represented Precision Machined
Products, Inc. ("PMP") during the Company's acquisition of PMP in December of
1998 and was paid a fee by PMP in connection with the sale of the assets of PMP
to the Company.
-19-
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors,
/s/ RICHARD A. SANTA
RICHARD A. SANTA
Vice President, Finance,
Chief Financial Officer and Secretary
April 23, 1999
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 31, 1998 is available
without charge upon written request to: Corporate Secretary, Dynamic Materials
Corporation, 551 Aspen Ridge Drive, Lafayette, Colorado 80026.
-20-
EXHIBIT A
DYNAMIC MATERIALS CORPORATION
Employee Stock Purchase Plan
Adopted January 9, 1998
Approved by the Stockholders on May 22, 1998
1. PURPOSE
a. The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Dynamic Materials Corporation, a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph 1
(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
1. The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
2. The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
3. The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION
a. The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
b. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
c. To determine when and how rights to purchase stock of the Company shall
be granted and the provisions of each offering of such rights (which need not be
identical).
d. To designate from time to time which Affiliates of the Company shall be
eligible to participate in the Plan.
e. To construe and interpret the Plan and rights granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
f. To amend the Plan as provided in paragraph 13.
A-1
g. Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
"employee stock purchase plan within the meaning of Section 423 of the Code.
h. The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN
a. Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate one hundred twenty-five thousand
(125,000) shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
b. The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING
The Board or the Committee may from time to time grant or provide for the grant
of rights to purchase Common Stock of the Company under the Plan to eligible
employees (an "Offering") on a date or dates (the "Offering Date(s)") selected
by the Board or the Committee. Each Offering shall be in such form and shall
contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8 hereof, inclusive.
b. .lf an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY
a. Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be equal to or greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliates is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
A-2
b. The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(1) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of
the exercise price of such rightthe period of the Offering with respect to
such right shall begin on its Offering Date and end coincident with the end
of such Offering; and
(2) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before
the end of the Offering, he or she will not receive any right under that
Offering.
c. No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
d. An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
e. Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE
a. On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
b. In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
c. The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
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(1) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(2) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION
a. An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings (as defined
by the Board for each Offering) during the Offering. The payroll deductions made
for each participant shall be credited to an account for such participant under
the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.
b. At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
c. Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
d. Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE
a. On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
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b. No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY
a. During the terms of the rights granted under the Plan, the Company shall
keep available at all times the number of shares of stock required to satisfy
such rights.
b. The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's share holdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK
If any change is made in the stock subject to the Plan, or subject to any
rights granted under the Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan and outstanding rights will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction not involving the receipt of consideration by
the Company.")
In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation,
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the
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"Exchange Act") or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or any
Affiliate of the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then, as
determined by the Board in its sole discretion (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for those
under the Plan, (ii) such rights may continue in full force and effect, or (iii)
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the participants'
rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN
Board at any time, and from time to time, may amend the Plan. However,
except as provided in paragraph 12 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for rights under the
Plan; Modify the provisions as to eligibility for participation in the Plan
(to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended ("Rule 16b-3")); or
(2) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to comply
with the requirements of Rule 16b-3. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible employees with the maximum benefits provided
or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to employee stock purchase plans and/or to
bring the Plan and/or rights granted under it into compliance therewith.
Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY
A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such shares and/or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN
The Board in its discretion, may suspend or terminate the Plan at any time.
No rights may
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be granted under the Plan while the Plan is suspended or after it is terminated.
Rights and obligations under any rights granted while the Plan is in effect
shall not be altered or impaired by suspension or termination of the Plan,
except as expressly provided in the Plan or with the consent of the person to
whom such rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on January 1, 1998 (the "Effective Date"),
but no rights granted under the Plan shall be exercised unless and until the
Plan has been approved by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board or the
Committee.
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PROXY PROXY
DYNAMIC MATERIALS CORPORATION
551 ASPEN RIDGE DRIVE, LAFAYETTE, COLORADO 80026
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS--MAY 21, 1999
The undersigned hereby constitutes and appoints Joseph P. Allwein and Richard
A. Santa, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of Dynamic Materials Corporation to be held at the
Company's executive offices at 551 Aspen Ridge Drive, Lafayette, Colorado, on
Friday, May 21, 1999, at 9:00 a.m. local time, and at any postponements,
continuations and adjournments thereof, on all matters coming before said
meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATIONS. The persons named herein as agents and
proxies cannot vote your shares unless you sign and return this card.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
DYNAMIC MATERIALS CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Director
Nominee: Dean K. Allen For Withheld For Against Abstain
[_] [_] 3. Ratification of Selection of [_] [_] [_]
Independent Acountants.
For Against Abstain
2. Approval of the amendment and [_] [_] [_] 4. In their discretion, upon such
restatement of the Employee other matters as may properly
Stock Purchase Plan. come before the meeting.
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned. If no direction
is made, this proxy will be voted FOR Pro-posals 1 through
3.
Dated: ___________________, 1999
Signature(s)______________________________________________
__________________________________________________________
Please mark, sign and return promptly using the enclosed
envelope. Executors, administrators, trustees, etc. should
give a title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer.