def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Gen-Probe Incorporated
(Name of Registrant as Specified in Its Charter)
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10210 Genetic Center
Drive
San Diego, California
92121
Dear Fellow Stockholders:
You are cordially invited to attend our Companys Annual
Meeting of Stockholders on Thursday, May 14, 2009 at the
corporate headquarters of the Company at 10210 Genetic Center
Drive, San Diego, California 92121. The formal meeting will
begin at 10:00 a.m., at which time I will ask you to vote
on the following four proposals: Proposal 1: Election of
three directors whose term of office will expire in 2012;
Proposal 2: Amendment to The 2003 Incentive Award Plan of
the Company to increase the number of shares of common stock
authorized for issuance thereunder by 2,500,000 shares;
Proposal 3: Ratification of Independent Auditors; and
Proposal 4: Approval, through a non-binding advisory vote,
of the Board of Directors proposed appointment of Carl W.
Hull to the Companys Board of Directors, effective
May 18, 2009. Following the meeting, I will report on the
Companys business.
We are pleased to be in a position to take advantage of the
Securities and Exchange Commission rule allowing companies to
furnish proxy materials to their stockholders over the Internet.
We believe that the
e-proxy
process will expedite stockholders receipt of proxy
materials and lower the costs and reduce the environmental
impact of our Annual Meeting. On or about March 31, 2009,
we mailed to stockholders a Notice of Internet Availability of
Proxy Materials containing instructions on how to access our
2009 Proxy Statement and Annual Report as well as vote online.
Stockholders with previously existing requests to receive paper
copies of our proxy materials will receive these materials in
the mail consistent with prior years. The Proxy Statement
contains instructions on how you may (i) receive a paper
copy of the Proxy Statement and Annual Report, if you only
received a Notice of Internet Availability of Proxy Materials by
mail, or (ii) elect to receive your Proxy Statement and
Annual Report over the Internet in future years, if you received
them by mail this year.
Whether or not you plan to attend the meeting, your vote is
important and we encourage you to vote promptly. You may vote
your shares in a variety of ways: over the Internet; via a
toll-free telephone number; by completing, signing and returning
a proxy card in the envelope provided; or by attending the
Annual Meeting. Instructions regarding all methods of voting are
contained in the Proxy Statement.
Your vote is very important to us. The items of business to
be considered at the Annual Meeting are more fully described in
the accompanying Proxy Statement. Please review the proxy
materials and vote today.
I look forward to seeing you at the Annual Meeting.
Sincerely,
Henry L. Nordhoff
Chairman and Chief Executive Officer
10210 Genetic Center Drive
San Diego, California 92121
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 14, 2009
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Gen-Probe Incorporated, a Delaware corporation
(the Company). The meeting will be held on Thursday,
May 14, 2009 at 10:00 a.m. local time at the corporate
headquarters of the Company at 10210 Genetic Center Drive,
San Diego, California 92121, for the following purposes:
1. To elect the three nominees for director named herein to
hold office until the 2012 Annual Meeting of Stockholders;
2. To approve an amendment to The 2003 Incentive Award Plan
of the Company to increase the number of shares of common stock
authorized for issuance thereunder by 2,500,000 shares;
3. To ratify the selection by the Audit Committee of the
Board of Directors of Ernst & Young LLP as the
Companys independent auditors for its fiscal year ending
December 31, 2009;
4. To approve, through a non-binding advisory vote, the
Board of Directors proposed appointment of Carl W. Hull to
the Companys Board of Directors, effective May 18,
2009; and
5. To conduct any other business properly brought before
the meeting.
These items of business are more fully described in the
accompanying Proxy Statement.
The record date for the Annual Meeting is March 19, 2009.
Only stockholders of record at the close of business on that
date may vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
Sincerely,
Henry L. Nordhoff
Chairman and Chief Executive Officer
San Diego, California
March 31, 2009
You are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please vote
over the Internet or by telephone as instructed in these
materials, or complete, date, sign and return the enclosed proxy
if you received a proxy card by mail, as promptly as possible in
order to ensure your representation at the meeting. If you
received a paper copy of the proxy card by mail, a return
envelope (which is postage prepaid if mailed in the United
States) is enclosed for your convenience. Even if you have voted
by 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 a proxy issued in your name from
that record holder.
TABLE OF CONTENTS
GEN-PROBE
INCORPORATED
10210 Genetic Center Drive
San Diego, California 92121
PROXY
STATEMENT
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS
May 14, 2009
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I
receiving these materials?
The Board of Directors of Gen-Probe Incorporated (referred to
herein as the Company or
Gen-Probe)
has made these proxy materials available to you on the Internet
and/or has
delivered printed versions of these materials to you by mail,
because the Board of Directors (sometimes referred to herein as
the Board) is soliciting your proxy to vote at the
2009 Annual Meeting of Stockholders (the Annual
Meeting). You are invited to attend the Annual Meeting to
vote on the proposals described in this proxy statement.
However, you do not need to attend the Annual Meeting to vote
your shares.
Why did I
receive a one-page notice in the mail regarding the Internet
availability of proxy materials?
As permitted by rules adopted by the Securities and Exchange
Commission (the SEC), Gen-Probe is making this proxy
statement and its annual report available to its stockholders
electronically via the Internet. Accordingly, we are sending by
mail a Notice of Internet Availability of Proxy Materials to our
stockholders of record containing instructions on how to access
the proxy materials and vote by proxy over the Internet. All
stockholders have the ability to access the proxy materials on a
website referred to in the Notice of Internet Availability of
Proxy Materials or request the delivery of a printed set of
proxy materials. If you received a Notice of Internet
Availability of Proxy Materials by mail and would like to
receive a printed copy of our proxy materials, you should follow
the instructions for requesting such materials included in the
Notice of Internet Availability of Proxy Materials.
We intend to mail the Notice of Internet Availability of Proxy
Materials (or this proxy statement, our annual report and a
proxy card to stockholders with pre-existing requests to receive
paper copies of such materials) on or about March 31, 2009
to all stockholders of record entitled to vote at the Annual
Meeting.
Who can
vote at the Annual Meeting?
Only stockholders of record at the close of business on
March 19, 2009 will be entitled to vote at the Annual
Meeting. On this record date, there were 52,065,173 shares
of common stock outstanding and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If, on March 19, 2009, your shares were registered directly
in your name with Gen-Probes transfer agent, Mellon
Investor Services, LLC, then you are a stockholder of record. As
a stockholder of record, you may vote in person at the Annual
Meeting or vote by proxy. Whether or not you plan to attend the
Annual Meeting, we urge you to vote by proxy on the Internet or
over the telephone, or complete, sign and return a proxy card as
instructed below, to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or
Bank
If, on March 19, 2009, your shares were held not in your
name, but rather in an account at a brokerage firm, bank, dealer
or other similar organization, then you are the beneficial owner
of shares held in street name and the Notice of
Internet Availability of Proxy Materials or these proxy
materials are being forwarded to you by that organization. The
organization holding your account is considered to be the
stockholder of record for purposes of voting at the Annual
Meeting. As a beneficial owner, you have the right to direct
your broker or other agent regarding how to vote the shares in
your account. You are also invited to attend the Annual Meeting.
However, since you are not the stockholder of record, you may
not vote your shares in person at the Annual Meeting unless you
request and obtain a valid proxy from your broker or other agent.
What am I
voting on?
There are four matters scheduled for a vote at the Annual
Meeting:
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Election of three directors to hold office until the 2012 Annual
Meeting of Stockholders;
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Amendment to The 2003 Incentive Award Plan of the Company to
increase the number of shares of common stock authorized for
issuance thereunder by 2,500,000 shares;
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Ratification of the selection by the Audit Committee of the
Board of Directors of Ernst & Young LLP as the
Companys independent auditors for its fiscal year ending
December 31, 2009; and
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Approval, through a non-binding advisory vote, of the Board of
Directors proposed appointment of Carl W. Hull to the
Companys Board of Directors, effective May 18, 2009.
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How do I
vote?
For each of the matters to be voted on, you may vote
For or Against or abstain from voting.
The procedures for voting are set forth below:
Stockholder
of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote in person at
the Annual Meeting, vote by proxy over the telephone, vote by
proxy on the Internet or vote by proxy using a proxy card.
Whether or not you plan to attend the Annual Meeting, we urge
you to vote by proxy to ensure your vote is counted. You may
still attend the Annual Meeting and vote in person if you have
already voted by proxy.
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To vote in person, come to the Annual Meeting and we will give
you a ballot when you arrive.
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To vote over the telephone, dial
1-800-690-6903
(toll-free for those calling from the USA, Canada and Puerto
Rico only) using a touch-tone telephone and follow the recorded
instructions. You will be asked to provide the control number
from the Notice of Internet Availability of Proxy Materials or
the proxy card mailed to you. Your vote must be received by
11:59 p.m. Eastern Time on May 13, 2009 to be
counted.
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To vote on the Internet, go to
http://www.proxyvote.com
to complete an electronic proxy card. You will be asked to
provide the control number from the Notice of Internet
Availability of Proxy Materials or the proxy card mailed to you.
Your vote must be received by 11:59 p.m. Eastern Time
on May 13, 2009 to be counted.
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To vote using a proxy card, simply complete, sign and return it
promptly in the envelope provided. If you return your signed
proxy card to us before the Annual Meeting, we will vote your
shares as you direct. If you received a Notice of Internet
Availability of Proxy Materials and would like to request a
proxy card by mail, please follow the instructions contained in
the Notice of Internet Availability of Proxy Materials.
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Beneficial
Owner: Shares Registered in the Name of Broker or
Bank
If you are a beneficial owner of shares registered in the name
of your broker, bank or other agent, you should have received a
Notice of Internet Availability of Proxy Materials or a proxy
card and voting instructions with these proxy materials from
that organization rather than from Gen-Probe. Simply follow the
instructions in the Notice of Internet Availability of Proxy
Materials received from your broker, bank or other agent to vote
on the Internet or, if you received a proxy card by mail,
complete, sign and return the proxy card to ensure that your
vote is counted. To vote in person at the Annual Meeting, you
must obtain a valid proxy from your broker, bank or other agent.
Follow the instructions from your broker, bank or other agent
included in the Notice of Internet Availability of Proxy
Materials or with these proxy materials, or contact your broker,
bank or other agent to request a proxy form.
We provide telephone and Internet proxy voting to allow you
to vote your shares telephonically and on-line, with procedures
designed to ensure the authenticity and correctness of your
proxy vote instructions. However, please be aware that you must
bear any costs associated with your telephone or Internet
access, such as usage charges from telephone companies and
Internet access providers.
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How many
votes do I have?
On each matter to be voted upon, you have one vote for each
share of Gen-Probe common stock you owned as of March 19,
2009.
What if I
return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any
voting selections, your shares will be voted For the
election of all three nominees for director, For the
amendment to The 2003 Incentive Award Plan of the Company to
increase the number of shares of common stock authorized for
issuance thereunder by 2,500,000 shares, For
the ratification of Ernst & Young LLP as the
Companys independent auditors for its fiscal year ending
December 31, 2009, and For the approval of the
Board of Directors proposed appointment of Carl W. Hull to
the Companys Board of Directors, effective May 18,
2009. If any other matters are properly presented at the Annual
Meeting, your proxy (one of the individuals named on your proxy
card) will vote your shares using his best judgment.
Who is
paying for this proxy solicitation?
Gen-Probe will pay for the entire cost of soliciting proxies. In
addition to these proxy materials, our directors and employees
may also solicit proxies in person, by telephone or by other
means of communication. Directors and employees will not be paid
any additional compensation for soliciting proxies. The
solicitation of proxies is also being supplemented through the
use of a proxy solicitation firm. Our proxy solicitation firm
will receive a customary fee, which we estimate to be $10,000,
plus out-of-pocket expenses. We may also reimburse brokerage
firms, banks and other agents for the cost of forwarding proxy
materials to beneficial owners.
What does
it mean if I receive more than one Notice of Internet
Availability of Proxy Materials or proxy card?
If you receive more than one Notice of Internet Availability of
Proxy Materials or proxy card, your shares are registered in
more than one name or are registered in different accounts.
Please follow the voting instructions in each Notice of
Internet Availability of Proxy Materials, or complete, sign and
return each proxy card, to ensure that all of your shares
are voted.
Can I
revoke or change my vote after submitting my proxy?
Yes. You can revoke your proxy and change your vote at any time
before the final vote at the Annual Meeting. If you are the
record holder of your shares, you may revoke your proxy and
change your vote in any one of four ways:
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You may submit another properly completed proxy card with a
later date;
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You may vote again by telephone or over the Internet at a later
time;
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You may send a written notice that you are revoking your proxy
to Gen-Probes Corporate Secretary at 10210 Genetic Center
Drive, San Diego, California 92121; or
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You may attend the Annual Meeting and vote in person. Simply
attending the meeting will not, by itself, revoke your proxy or
change your vote.
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If your shares are held by your broker or bank as a nominee or
agent, you should follow the instructions provided by your
broker or bank.
When are
stockholder proposals due for next years annual
meeting?
To be considered for inclusion in next years proxy
materials, your proposal must be submitted in writing by
December 1, 2009, to Gen-Probes Corporate Secretary
at 10210 Genetic Center Drive, San Diego, California 92121.
If you wish to submit a proposal that is not to be included in
next years proxy materials or nominate a director, then,
pursuant to our Bylaws, you must do so by no earlier than
January 31, 2010 and no later than March 2, 2010. If
you wish to bring a matter before the stockholders at next
years annual meeting and you do not notify
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Gen-Probe
before March 2, 2010, for all proxies we receive, the
proxyholders will have discretionary authority to vote on the
matter, including discretionary authority to vote in opposition
to the matter.
How are
votes counted?
Votes will be counted by the inspector of election appointed for
the Annual Meeting, who will separately count For
and Against votes, abstentions and broker non-votes.
Except with respect to the election of directors and the
approval of the Board of Directors proposed appointment of
Carl W. Hull to the Board, abstentions will be counted as
present for quorum purposes and towards the vote total for each
proposal, and will have the same effect as Against
votes. With respect to the election of directors and the
approval of the Boards proposed appointment of Carl W.
Hull to the Board of Directors, abstentions will have no effect
and will not be counted towards the vote total for any nominee.
Broker non-votes have no effect and will not be counted towards
the vote total for any proposal.
What are
broker non-votes?
Broker non-votes occur when a beneficial owner of shares held in
street name does not give instructions to the broker
or nominee holding the shares as to how to vote on matters
deemed non-routine. Generally, if shares are held in
street name, the beneficial owner of the shares is entitled to
give voting instructions to the broker or nominee holding the
shares. If the beneficial owner does not provide voting
instructions, the broker or nominee can still vote the shares
with respect to matters that are considered to be
routine, but not with respect to
non-routine matters. Under the rules and
interpretations of the New York Stock Exchange, which apply to
its membership brokerage firms, non-routine matters
are generally those involving a proxy contest or matters that
may substantially affect the rights or privileges of
stockholders, such as mergers or stockholder proposals. Under
Delaware law, a broker non-vote is counted as present for quorum
purposes but is not considered to be entitled to vote on the
specified matter.
How many
votes are needed to approve each proposal?
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For the election of directors, any director receiving the
majority of votes cast in person or by proxy (i.e., the number
of shares voted For a director must exceed 50% of
the number of votes cast in person or by proxy with respect to
that directors election) will be elected as a director,
provided that if the number of nominees exceeds the number of
directors to be elected (a situation we do not anticipate), the
three nominees receiving the most For votes among
votes properly cast in person or by proxy will be elected. Only
votes For and Against will affect the
outcome. Abstentions and broker non-votes will have no effect.
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To be approved, Proposal No. 2, amendment of The 2003
Incentive Award Plan of the Company to increase the number of
shares of common stock authorized for issuance thereunder by
2,500,000 shares, must receive For votes from
the holders of a majority of shares present and entitled to vote
either in person or by proxy. If you Abstain from
voting, it will have the same effect as an Against
vote. Broker non-votes will have no effect.
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To be approved, Proposal No. 3, ratification of the
selection by the Audit Committee of the Board of Directors of
Ernst & Young LLP as the Companys independent
auditors for its fiscal year ending December 31, 2009, must
receive For votes from the holders of a majority of
shares present and entitled to vote either in person or by
proxy. If you Abstain from voting, it will have the
same effect as an Against vote. Broker non-votes
will have no effect.
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To be approved, Proposal No. 4, approval of the
Boards proposed appointment of Carl W. Hull to the Board,
must receive a majority of votes cast in person or by proxy
(i.e., the number of shares voted For approval of
the proposal must exceed 50% of the number of votes cast in
person or by proxy with respect to the proposal). Only votes
For and Against will affect the outcome.
Abstentions and broker non-votes will have no effect.
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What is
the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A
quorum will be present if stockholders holding at least a
majority of the outstanding shares on the record date are
present at the Annual Meeting in person or represented by proxy.
On March 19, 2009, the record date, there were
52,065,173 shares outstanding and entitled
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to vote. Thus, the holders of 26,032,587 shares must be
present in person or represented by proxy at the Annual Meeting
to have a quorum. Your shares will be counted towards the quorum
only if you submit a valid proxy (or one is submitted on your
behalf by your broker, bank or other nominee) or if you vote in
person at the Annual Meeting. Abstentions and broker non-votes
will be counted towards the quorum requirement. If there is no
quorum, the holders of a majority of the shares present at the
meeting in person or represented by proxy may adjourn the Annual
Meeting to another date.
How can I
find out the results of the voting at the Annual
Meeting?
Preliminary voting results will be announced at the Annual
Meeting. Final voting results will be published in the
Companys quarterly report on
Form 10-Q
for the second quarter ending June 30, 2009.
5
PROPOSAL 1
ELECTION OF DIRECTORS
Gen-Probes Board of Directors presently has eight members
and is divided into three classes. Each class has a three-year
term. Effective May 16, 2008, the Board appointed Lucy
Shapiro, Ph.D. as a member of the Board and, in connection
therewith, increased the Board from seven to eight members.
Dr. Shapiro serves as a member of the class of directors
serving in office until Gen-Probes 2010 Annual Meeting of
Stockholders.
There are three directors in the class whose term of office
expires at the Annual Meeting. Each of the nominees listed
below, other than John Martin, Ph.D., is currently a
director of the Company who was previously elected by the
stockholders. Dr. Martin was appointed by the Board on
September 20, 2007 to fill a vacancy on the Board. If
elected at the Annual Meeting, each of these nominees would
serve until the 2012 annual meeting and until his successor is
elected and qualified or, if sooner, until the directors
earlier death, resignation or removal. It is the Companys
policy to encourage our directors and nominees for director to
attend our annual meetings of stockholders. All of our
then-current directors attended the 2008 Annual Meeting of
Stockholders, including the nominees for election as a director
at the 2008 Annual Meeting of Stockholders.
For the election of directors, any director receiving the
majority of votes cast (i.e., the number of shares voted
For a director must exceed 50% of the number of
votes cast in person or by proxy with respect to that
directors election) will be elected as a director,
provided that if the number of nominees for director exceeds the
number of directors to be elected (a contested
election), directors are elected by a plurality of the
votes properly cast in person or by proxy. The Companys
Bylaws require an incumbent director who fails to receive the
affirmative vote of a majority of the votes cast in an
uncontested election at a meeting of stockholders to promptly
submit his or her resignation, with such resignation to be
considered by the members of the Nominating and Corporate
Governance Committee of the Board. Under Delaware law, an
incumbent director who fails to receive the required votes
holds over, or continues to serve as a director,
until his or her successor is elected and qualified. The
Nominating and Corporate Governance Committee will make a
recommendation to the Board whether to accept or reject the
tendered resignation, or whether other action should be taken.
The Board will act on the tendered resignation, taking into
account the Nominating and Corporate Governance Committees
recommendation, and publicly disclose its decision regarding the
tendered resignation and the rationale behind the decision
within 90 days from the date of the certification of the
election results. A director who tenders his or her resignation
will not participate in the recommendation of the Nominating and
Corporate Governance Committee or the Boards decision with
respect to his or her resignation. If the incumbent
directors resignation is not accepted by the Board, such
director will continue to serve until the end of his or her term
of office and until his or her successor is elected and
qualified, or his or her earlier death, resignation or removal.
If a directors resignation is accepted by the Board, or if
a nominee for director is not elected and the nominee is not an
incumbent director, then the Board, in its sole discretion, may
fill any resulting vacancy.
Vacancies on the Board, including by reason of an increase in
the number of directors, may be filled only by the affirmative
vote of the directors of the Company then in office. Directors
appointed to fill vacancies hold office until the end of the
term of the director that he or she replaced or until their
successors are duly elected or qualified. Because the Board
believes it is important to provide the Companys
stockholders with an opportunity to consider the Boards
appointment of any new director, in accordance with
Gen-Probes Corporate Governance Guidelines, as amended by
the Board in February 2009, the Board will submit future Board
appointments of a director to the stockholders for ratification
at the next regularly scheduled annual meeting of stockholders.
If the appointment is ratified by the stockholders, the
appointed Board member will continue to serve the remaining term
of the class of directors to which he or she was appointed by
the Board. If the appointment is not ratified by the
stockholders, the Board member will be expected to promptly
tender his or her resignation to the Board. The Nominating and
Corporate Governance Committee will then make a recommendation
to the Board as to whether to accept or reject the tendered
resignation, or whether other action should be taken. The Board
will act on the tendered resignation, and publicly disclose its
decision regarding the tendered resignation and the rationale
behind the decision within 90 days of the date of the
annual meeting at which the appointment was submitted for
ratification. The director who tenders his or her resignation
will not participate in the recommendation of the Nominating and
Corporate Governance Committee or the decision of the Board with
respect to his or her resignation. If the directors
6
resignation is not accepted by the Board, such director will
continue to serve the remaining term of the class of directors
to which he or she was appointed by the Board.
Shares represented by executed proxies will be voted, if
authority to do so is not withheld, for the election of the
three nominees named below. If any nominee becomes unavailable
for election as a result of an unexpected occurrence, your
shares will be voted for the election of any substitute nominee
proposed by the Companys Nominating and Corporate
Governance Committee. Each person nominated for election has
agreed to serve if elected. Our management has no reason to
believe that any nominee will be unable to serve.
The following is a brief biography of each nominee and each
director whose term will continue after the Annual Meeting.
Nominees
for Election to the Board of Directors
For a Three-Year Term Expiring at the
2012 Annual Meeting of Stockholders
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Name
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Age
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Present Position with the Company
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John W. Brown
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74
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Director
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John C. Martin, Ph.D.
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57
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Director
|
Henry L. Nordhoff
|
|
|
67
|
|
|
Chairman and Chief Executive Officer
|
John W. Brown, has served as a director of the Company
since December 2005. Mr. Brown has served as Chairman of
the board of directors of Stryker Corporation, a worldwide
leader in orthopedic medical devices, since January 1981.
Mr. Brown was previously the President and Chief Executive
Officer of Stryker from February 1977 to June 2003, and Chief
Executive Officer of Stryker from June 2003 through December
2004. Mr. Brown is also a director of St. Jude Medical,
Inc., the American Business Conference, an association of
mid-size growth companies, and Chair of the Institute for Health
Technology Studies. Mr. Brown received a bachelors
degree in chemical engineering from Auburn University.
John C. Martin, Ph.D., has served as a director of
the Company since September 2007. Dr. Martin has served as
Chief Executive Officer of Gilead Sciences, Inc. and as Chairman
of Gileads board of directors since May 2008.
Dr. Martin joined Gilead in 1990 and served as President
and Chief Executive Officer and as a member of Gileads
board of directors from 1996 to May 2008. Prior to joining
Gilead, Dr. Martin held several leadership positions in the
antiviral chemistry division at Bristol-Myers Squibb and served
for six years with Syntex Corporation, from 1978 until 1984.
Dr. Martin is a member of the Presidential Advisory Council
on HIV/AIDS and the board of directors of the California
Healthcare Institute. Dr. Martin received a Ph.D. in
organic chemistry from the University of Chicago and an M.B.A.
in marketing from Golden Gate University.
Henry L. Nordhoff, has served as a director of the
Company since July 1994. Mr. Nordhoff joined the Company in
July 1994 as Chief Executive Officer and President and was
elected Chairman of the Board in September 2002. Since
March 1, 2008, Mr. Nordhoff has served as the
Companys Chairman and Chief Executive Officer. As
previously disclosed, Mr. Nordhoff intends to retire as the
Companys Chief Executive Officer on May 17, 2009. The
Company and Mr. Nordhoff intend that he will continue to
serve as the Companys non-executive Chairman of the Board,
and he has been recommended by the Companys Nominating and
Corporate Governance Committee and Board of Directors for
re-election at the Annual Meeting. Prior to joining the Company,
Mr. Nordhoff was President and Chief Executive Officer of
TargeTech, Inc., a gene therapy company that was merged into
Immune Response Corporation. Prior to that, Mr. Nordhoff
was at Pfizer, Inc. in senior positions in Brussels, Seoul,
Tokyo and New York. Mr. Nordhoff received a B.A. in
international relations and political economy from Johns Hopkins
University and an M.B.A. from Columbia University.
Mr. Nordhoff is also a member of the board of directors of
MannKind Corporation.
The Board of Directors recommends a vote in favor of each
named nominee.
7
Directors
Continuing in Office until the
2010 Annual Meeting of Stockholders
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Present Position with the Company
|
|
Armin M. Kessler
|
|
|
71
|
|
|
Director
|
Lucy Shapiro, Ph.D.
|
|
|
68
|
|
|
Director
|
Armin M. Kessler, has served as a director of the Company
since November 2002. Mr. Kessler served as Chief Operating
Officer of Hoffman-La Roche in Basel, Switzerland from 1990
to 1995. Prior to being appointed Chief Operating Officer,
Mr. Kessler held several senior positions at
Hoffman-La Roche, including head of the diagnostics and
pharmaceutical divisions of the organization. Earlier positions
in his career included Director of Pharmaceutical Marketing
Worldwide for Novartis (formerly Sandoz) and President of Sandoz
KK in Tokyo. Mr. Kessler currently serves on the board of
directors of two other public companies, Actelion Ltd and The
Medicines Company, and one private company, MedGenisis.
Mr. Kessler has also served on the boards of
Hoffman-La Roche,
Syntex Chemicals and Genentech. Mr. Kessler received a
degree in physics and chemistry from Pretoria University in
South Africa, a degree in chemical engineering from the
University of Cape Town, South Africa, a J.D. from Seton Hall
University, and a Dr.hc. in business administration from the
University of Pretoria.
Lucy Shapiro, Ph.D., has served as a director of the
Company since May 2008. Dr. Shapiro currently serves as the
Virginia and D.K. Ludwig Professor of Cancer Research and the
Director of the Beckman Center for Molecular and Genetic
Medicine at Stanford Universitys School of Medicine, where
she has served as a faculty member since 1989. Dr. Shapiro
is a co-founder and director of Anacor Pharmaceuticals, a
privately held biopharmaceutical company developing novel
small-molecule therapeutics to treat infectious and inflammatory
diseases. From 1989 to 1997, Dr. Shapiro was the founding
Chair of Stanford Universitys Department of Developmental
Biology. From 1986 to 1989, Dr. Shapiro served as Chair of
the Department of Microbiology in the College of Physicians and
Surgeons of Columbia University, where she also served as a
faculty member. Dr. Shapiro has been elected to the
National Academy of Sciences, the American Academy of
Microbiology, the American Academy of Arts and Sciences and the
Institute of Medicine of the National Academy of Sciences for
her work in the fields of molecular biology and microbiology.
Dr. Shapiro was elected to the American Philosophical
Society and received the Selman Waksman Award from the National
Academy of Sciences in 2005. Dr. Shapiro previously served
as a non-executive director of GlaxoSmithKline plc from 2001 to
2006. Dr. Shapiro received a B.A. from Brooklyn College and
a Ph.D. in Molecular Biology from the Albert Einstein College of
Medicine.
Directors
Continuing in Office until the
2011 Annual Meeting of Stockholders
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Present Position with the Company
|
|
Raymond V. Dittamore
|
|
|
65
|
|
|
Director
|
Phillip M. Schneider
|
|
|
53
|
|
|
Director
|
Abraham D. Sofaer
|
|
|
70
|
|
|
Director
|
Raymond V. Dittamore, has served as a director of the
Company since August 2002. Mr. Dittamore is a retired audit
partner of the international accounting firm of
Ernst & Young LLP. Mr. Dittamore retired from
Ernst & Young in 2001 after 35 years of service
with the firm, including 14 years as the managing partner
of the firms San Diego office.
Mr. Dittamores practice in San Diego focused on
companies in the life sciences industry, and he was a
collaborative editor for Ernst & Youngs annual
biotechnology report. Mr. Dittamore is a member of the
board of directors of Life Technologies Corporation and Qualcomm
Incorporated. Mr. Dittamore received a B.S. in accounting
from San Diego State University.
Phillip M. Schneider, has served as a director of the
Company since November 2002. Mr. Schneider is the former
Chief Financial Officer of IDEC Pharmaceuticals Corporation.
During his
15-year
tenure at IDEC, Mr. Schneider served as Senior Vice
President and Chief Financial Officer where he played an
integral role in the companys growth. Prior to his
association with IDEC, Mr. Schneider held various
management positions at Syntex Pharmaceuticals Corporation and
was previously with KPMG, LLP. Mr. Schneider is a member of
the board
8
of directors of Arena Pharmaceuticals, Inc. and Targegen, Inc.,
a privately held company. Mr. Schneider received an M.B.A.
from the University of Southern California and a B.S. in
biochemistry from the University of California at Davis.
Abraham D. Sofaer, has served as a director of the
Company since August 2002. Since 1994, Mr. Sofaer has been
the George P. Shultz Distinguished Scholar and Senior Fellow,
The Hoover Institution, Stanford University. Mr. Sofaer
previously served as a United States District Judge for the
Southern District of New York, as the Legal Adviser for the
United States Department of State, as a Professor at Columbia
University School of Law, and as a partner in the New York law
firm of Hughes, Hubbard & Reed. Mr. Sofaer is a
member of the board of directors of two other public companies,
Neurobiological Technologies, Inc. and Rambus, Inc., and three
private companies, 3L&T, Inc., IntelliGeneScan, Inc. and
PLC Diagnostics. Mr. Sofaer received a B.A. in history from
Yeshiva College and an L.L.B. from New York University School of
Law.
INFORMATION
REGARDING THE BOARD OF DIRECTORS
AND CORPORATE GOVERNANCE
Independence
of the Board of Directors
As required under The NASDAQ Stock Market (Nasdaq)
listing standards, a majority of the members of a listed
companys board of directors must qualify as
independent, as affirmatively determined by the
Companys Board of Directors. The Board consults with the
Companys counsel to ensure that the Boards
determinations are consistent with all relevant securities and
other laws and regulations regarding the definition of
independent, including those set forth in pertinent
Nasdaq listing standards, as in effect from time to time.
Consistent with these considerations, after review of all
relevant transactions or relationships between each director, or
any of his or her family members, and the Company, its senior
management and its independent auditors, the Board affirmatively
determined that the following directors are independent
directors within the meaning of the applicable Nasdaq listing
standards: John W. Brown, Raymond V. Dittamore, Armin M.
Kessler, John C. Martin, Ph.D.,
Phillip M. Schneider, Lucy Shapiro, Ph.D. and
Abraham D. Sofaer. In making this determination, the Board found
that none of the directors or nominees for director, other than
Mr. Nordhoff, has a material or other disqualifying
relationship with the Company. Mr. Nordhoff, the Chairman
and Chief Executive Officer (CEO) of the Company, is
not an independent director by virtue of his employment with the
Company.
Meetings
of the Board of Directors
The Board of Directors met seven times during 2008. All
directors attended at least 75% or more of the meetings of the
Board and of the Board committees on which they served, held
during the period for which they were directors or committee
members, except Dr. Shapiro, who was unable to attend at
least 75% of the meetings of the Nominating and Corporate
Governance Committee held following her appointment to the Board
and such committee on May 16, 2008. Prior to
Dr. Shapiros appointment to the Board of Directors
and Nominating and Corporate Governance Committee on
May 16, 2008, Dr. Shapiro fully informed the Board
regarding her
pre-existing
professional commitments and related scheduling conflicts with
the Boards scheduled meetings for the remainder of the
2008 calendar year. After considering Dr. Shapiros
commitments for the remainder of 2008 and her extensive and
unique experience, education, professional background and other
qualifications, including her tenure at Stanford University and
her prior service on the Board of Directors of GlaxoSmithKline,
the Nominating and Corporate Governance Committee recommended
the appointment of, and the Board agreed to appoint,
Dr. Shapiro to the Companys Board of Directors and
Nominating and Corporate Governance Committee. Dr. Shapiro
has attended all four Board meetings held to date in 2009 and
has committed to attend all regular quarterly meetings of the
Board of Directors and Nominating and Corporate Governance
Committee for the remainder of 2009.
As required under applicable Nasdaq listing standards, in fiscal
2008, the Companys independent directors met four times in
regularly scheduled executive sessions at which only independent
directors were present. Persons interested in communicating with
the independent directors regarding their concerns or issues may
address
9
correspondence to a particular director or to the independent
directors generally, in care of Gen-Probe Incorporated,
Attention: Corporate Secretary, 10210 Genetic Center Drive,
San Diego, California 92121.
Information
Regarding Committees of the Board of Directors
During 2008, the Board had four committees: an Audit Committee;
a Compensation Committee; a Nominating and Corporate Governance
Committee; and a Special Awards Committee. The following table
provides membership information as of December 31, 2008 and
meeting information for fiscal 2008 for each of the current
Board committees:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committee Members
|
|
Audit
|
|
|
Compensation
|
|
|
Governance
|
|
|
Awards
|
|
|
John W. Brown
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Raymond V. Dittamore
|
|
|
X
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Armin M. Kessler
|
|
|
|
|
|
|
X
|
*
|
|
|
X
|
|
|
|
|
|
John C. Martin, Ph.D.
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Henry L. Nordhoff
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
Phillip M. Schneider
|
|
|
X
|
*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Lucy Shapiro, Ph.D.(1)
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Abraham D. Sofaer
|
|
|
X
|
|
|
|
|
|
|
|
X
|
*
|
|
|
|
|
Total meetings in 2008
|
|
|
5
|
|
|
|
6
|
|
|
|
4
|
|
|
|
0
|
()
|
|
|
|
* |
|
Committee Chairperson |
|
() |
|
The Special Awards Committee acted only by written consent
during 2008. |
|
(1) |
|
Dr. Shapiro was appointed as a director of the Company and
as a member of the Nominating and Corporate Governance Committee
effective May 16, 2008. |
Below is a description of each committee of the Board of
Directors. The Board of Directors has determined that, except as
specifically described below, each member of each committee
meets the applicable Nasdaq rules and regulations regarding
independence and that each member is free of any
relationship that would impair his or her individual exercise of
independent judgment with regard to the Company.
Audit
Committee
The Audit Committee of the Board of Directors was established by
the Board in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the Exchange
Act), to oversee the Companys corporate accounting
and financial reporting processes and audits of its financial
statements. For this purpose, the Audit Committee performs
several functions. The Audit Committee evaluates the
performance, and assesses the qualifications, of the independent
auditors; determines and approves the engagement of the
independent auditors; determines whether to retain or terminate
the existing independent auditors or to appoint and engage new
independent auditors; reviews and approves the retention of the
independent auditors to perform any proposed permissible
non-audit services; monitors the rotation of partners of the
independent auditors on the Companys audit engagement team
as required by law; reviews and approves or rejects transactions
between the Company and any related persons; confers with
management and the independent auditors regarding the
effectiveness of internal control over financial reporting;
establishes procedures, as required under applicable law, for
the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls
or auditing matters and the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters; meets to review the
Companys annual audited financial statements and quarterly
financial statements with management and the Companys
independent auditors; reviews the Managements
Discussion and Analysis of Financial Condition and Results of
Operations portion of the Companys periodic filings
with the SEC; reviews the financial statements to be included in
the Companys Annual Reports on
Form 10-K;
reviews earnings releases and financial information and guidance
prior to public dissemination; oversees the internal audit
function of the Company; and discusses with management and the
independent auditors the results of the annual audits and the
results of the Companys quarterly financial statements.
10
Three directors comprise the Audit Committee: Mr. Schneider
(Chairman); Mr. Dittamore; and Mr. Sofaer. The Audit
Committee has adopted a written charter that is available to
stockholders on the Companys website at
www.gen-probe.com.
The Board of Directors annually reviews the Nasdaq listing
standards definition of independence for Audit Committee members
and has determined that all members of the Companys Audit
Committee are independent (as independence is currently defined
in Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq
Marketplace Rules). The Board of Directors has determined that
Mr. Schneider and Mr. Dittamore each qualify as an
audit committee financial expert, as defined in
applicable SEC rules. The Board made a qualitative assessment of
Mr. Schneiders and Mr. Dittamores level of
knowledge and experience based on a number of factors, including
their formal education and, in the case of Mr. Schneider,
his experience as a chief financial officer for a public
reporting company, and in the case of Mr. Dittamore, his
experience as a partner with Ernst & Young LLP. In
addition to the Companys Audit Committee,
Mr. Schneider also serves as Chairman of the Audit
Committee of Arena Pharmaceuticals, Inc. In addition to the
Companys Audit Committee, Mr. Dittamore also serves
as Chairman of the Audit Committees of Life Technologies
(formerly Invitrogen Corporation) and Qualcomm Corporation.
Mr. Sofaer also serves as a member of the Audit Committee
of Neurobiological Technologies, Inc. and Rambus, Inc. The Board
of Directors has determined that such simultaneous service does
not impair Mr. Schneiders, Mr. Dittamores
or Mr. Sofaers respective ability to effectively
serve on the Companys Audit Committee.
Report of
the Audit Committee of the Board of Directors
Each member of the Audit Committee is an independent director as
determined by the Companys Board of Directors, based on
Nasdaq listing rules and the Companys independence
guidelines. Each member of the Audit Committee also satisfies
the SECs additional independence requirements for members
of audit committees.
The Audit Committee has adopted, and annually reviews, a charter
outlining the practices it follows. The charter specifies that
the primary purpose of the Audit Committee is to assist the
Board of Directors in its oversight of:
|
|
|
|
|
the adequacy of the Companys internal controls, corporate
accounting, financial reporting practices and audits of
financial statements;
|
|
|
|
the quality, integrity and reliability of the Companys
financial statements and financial reports to the public;
|
|
|
|
the performance of the Companys internal audit
function; and
|
|
|
|
the independence, qualifications and performance of the
Companys independent auditors.
|
In carrying out these responsibilities, the Audit Committee,
among other things:
|
|
|
|
|
monitors preparation of quarterly and annual financial reports
by the Companys management;
|
|
|
|
supervises the relationship between the Company and its
independent auditors, including: having direct responsibility
for their appointment, compensation and retention; reviewing the
scope of their audit services; approving audit and non-audit
services; and confirming the independence of the independent
auditors; and
|
|
|
|
oversees managements implementation and maintenance of
effective systems of internal and disclosure controls, including
review of the Companys policies relating to ethics and
conflicts of interests and review of the Companys internal
auditing program.
|
The Audit Committee met five times during fiscal 2008. The Audit
Committee schedules its meetings with a view to ensuring that it
devotes appropriate attention to all of its tasks. The Audit
Committees agenda is established by the Audit
Committees chairman and the Companys director of
internal audit. The Audit Committee meetings include discussion
of significant accounting policies applied by the Company in its
financial statements, as well as any alternative treatments. The
Audit Committees meetings include, whenever appropriate,
executive sessions in which the Audit Committee meets separately
with the Companys independent auditors, the Companys
director of internal audit, and the Companys Chief
Financial Officer.
11
The Audit Committee has been updated quarterly on
managements process to assess the adequacy of the
Companys system of internal control over financial
reporting, the framework used to make the assessment, and
managements conclusions on the effectiveness of the
Companys internal control over financial reporting. The
Audit Committee has also discussed with the independent auditors
the Companys internal control assessment process,
managements assessment with respect thereto and the
independent auditors evaluation of the Companys
system of internal control over financial reporting.
The Company has an internal audit department that reports to the
Audit Committee. The Audit Committee reviews and approves the
internal audit plan once a year and receives periodic updates of
internal audit activity in meetings held at least quarterly
throughout the year. Updates include discussion of audit project
results, including assessment of internal controls.
The Audit Committee engaged Ernst & Young LLP as the
Companys independent auditors for the year ended
December 31, 2008, and reviewed with senior members of the
Companys financial management team, the independent
auditors, and the director of internal audit, the overall audit
scope and plans and the results of internal and external audit
examinations. Although the Audit Committee has the sole
authority to appoint the independent auditors, the Audit
Committee will continue its long-standing practice of
recommending that the Board ask the Companys stockholders,
at the annual meeting, to ratify the appointment of the
independent auditors.
As part of its oversight of the Companys financial
statements, the Audit Committee reviews and discusses with both
management and the Companys independent auditors all
annual and quarterly financial statements prior to their
issuance. During fiscal 2008, management advised the Audit
Committee that each set of financial statements reviewed had
been prepared in accordance with generally accepted accounting
principles, and reviewed significant accounting and disclosure
issues with the Audit Committee. These reviews included
discussion with the independent auditors of matters required to
be discussed pursuant to Statement on Auditing Standards
No. 114 (The Auditors Communication with Those
Charged with Governance), as adopted by the Public Company
Accounting Oversight Board (the PCAOB) in
Rule 3200T (including any successor rule adopted by the
PCAOB), including the quality of the Companys accounting
principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements. The Audit
Committee also discussed with Ernst & Young LLP
matters relating to its independence, including a review of
audit and non-audit fees and the written disclosures and letter
from Ernst & Young LLP to the Committee pursuant to
applicable requirements of the PCAOB. The Audit Committee has
concluded that Ernst & Young LLPs provision of
audit and non-audit services to the Company and its affiliates
is compatible with Ernst & Young LLPs
independence.
Taking all of these reviews and discussions into account, on
February 11, 2009, the Audit Committee recommended to the
Board of Directors that the audited financial statements be
included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, for filing
with the SEC.
AUDIT COMMITTEE
Phillip M. Schneider, Chairman
Raymond V. Dittamore
Abraham D. Sofaer
Compensation
Committee
The Compensation Committee is comprised of four directors:
Mr. Kessler (Chairman); Mr. Brown; Dr. Martin;
and Mr. Schneider. All members of the Companys
Compensation Committee are independent directors who are not
employees of the Company or its subsidiaries. Please see the
Companys Compensation Discussion and Analysis (the
CD&A) for more information regarding the duties
and authority of the Compensation Committee. Commencing in 2006,
the Compensation Committee also began to review with management
the CD&A and to consider whether to recommend that it be
included in proxy
statements and other filings. The Compensation Committee has
adopted a written charter that is available to stockholders on
the Companys website at www.gen-probe.com.
12
Compensation
Committee Processes and Procedures
Typically, the Compensation Committee meets at least once
quarterly and with greater frequency if necessary. The
Compensation Committee met six times during fiscal 2008. The
agenda for each meeting is usually developed by the Chair of the
Compensation Committee, in consultation with the Companys
Senior Vice President, Human Resources and the Companys
General Counsel. The Compensation Committee meets regularly in
executive session. However, from time to time, various members
of management and other employees, as well as outside advisors
or consultants, may be invited by the Compensation Committee to
make presentations, provide financial or other background
information or advice or otherwise participate in Compensation
Committee meetings. Our CEO may not participate in or be present
during any deliberations or determinations of the Compensation
Committee regarding his compensation. The charter of the
Compensation Committee grants the Compensation Committee full
access to all books, records, facilities and personnel of the
Company, as well as authority to obtain, at the expense of the
Company, advice and assistance from internal and external legal,
accounting or other advisors and consultants and other external
resources that the Compensation Committee considers necessary or
appropriate in the performance of its duties. In particular, the
Compensation Committee has the sole authority to retain
compensation consultants to assist in its evaluation of
executive and director compensation, including the authority to
approve the consultants reasonable fees and other
retention terms.
The Compensation Committee has engaged Compensia as compensation
consultant since 2005. Over the course of its engagement,
Compensia has assisted the Company in:
|
|
|
|
|
evaluating the efficacy of the Companys existing
compensation strategy and practices in supporting and
reinforcing the Companys long-term strategic
goals; and
|
|
|
|
refining the Companys compensation strategy and developing
and implementing an executive compensation program to execute
that strategy.
|
As part of its engagement, the Compensation Committee has
directed Compensia to develop and update as appropriate a
comparative group of companies and to perform analyses of
competitive performance and compensation levels for that group.
Compensia has also conducted individual interviews with members
of senior management and the Compensation Committee to learn
more about the Companys business operations and strategy,
key performance metrics and strategic goals, as well as the
labor markets in which the Company competes. Compensia
ultimately develops recommendations and metrics that are
presented to the Compensation Committee for its consideration.
The Company does not have any relationship or arrangement with
Compensia other than engaging Compensia as a compensation
consultant.
Historically, the Compensation Committee has made the most
significant adjustments to annual compensation and determined
bonus awards for executive officers of the Company, and
established new financial and other corporate performance
objectives, at one or more meetings held during the first
quarter of the year. Annual equity awards have historically been
determined at a meeting held in the third quarter of the year.
The Compensation Committee also considers matters related to
individual compensation, such as compensation for new executive
hires, as well as high-level strategic issues, such as the
efficacy of the Companys compensation strategy, potential
modifications to that strategy and new trends, plans or
approaches to compensation, at various meetings throughout the
year. Generally, the Compensation Committees process
comprises two related elements: the determination of
compensation levels and the establishment of financial and/or
other corporate performance objectives for the current year. For
executives other than the CEO, the Compensation Committee
solicits and considers evaluations and recommendations submitted
to the Compensation Committee by the CEO. In the case of the
CEO, the evaluation of his performance is conducted by the
Compensation Committee, which determines any adjustments to his
compensation as well as awards to be granted. For all executives
and directors, as part of its deliberations, the Compensation
Committee may review and consider, as appropriate, materials
such as financial reports and projections, operational data, tax
and accounting information, tally sheets that set forth the
total compensation that may become payable to executives in
various hypothetical scenarios, company stock performance data,
analyses of historical executive compensation levels and current
Company-wide compensation levels, and the recommendations of
Compensia, including analyses of executive and director
compensation paid at other companies identified by the
consultant. The specific determinations of the Compensation
Committee with respect to executive compensation for fiscal 2008
are described in greater detail in the CD&A section of this
proxy statement.
13
In May 2005, the Compensation Committee recommended that the
Board of Directors form a Special Awards Committee and delegate
to the Special Awards Committee the authority to grant, at its
discretion and without any further action required by the Board
or the Compensation Committee, stock options and restricted
stock awards to employees of the Company other than officers and
other direct reports to the CEO. The Special Awards Committee is
currently composed solely of Mr. Nordhoff. Under this
original Board authorization, the number of restricted shares
and options that were authorized for grant by the Special Awards
Committee at its discretion in any calendar year could exceed
10,000 in the aggregate, and the number of restricted stock
awards could exceed 2,500 in the aggregate.
In October 2005, the Board of Directors authorized the Special
Awards Committee to make the final determination concerning
grants of stock options and restricted stock awards to be made
to certain non-officer employees of the Company as of
October 15, 2005 pursuant to targeted amounts and terms
established by the Compensation Committee, with the aggregate
grants not to exceed total amounts approved by the Compensation
Committee. At the same time, the Board of Directors confirmed
the Special Awards Committees authority to make initial
option grants to newly-hired and promoted employees, other than
officers, on a standardized employment-grade basis. In May of
2006, 2007 and 2008, the Board again authorized the Special
Awards Committee to make the final determination concerning
grants of stock options and restricted stock awards to be made
to certain non-officer employees of the Company as of August 15
of each such year pursuant to targeted amounts and terms
established by the Compensation Committee, with the aggregate
grants not to exceed total amounts approved by the Compensation
Committee. Under the Board authorization granted in May 2008,
the number of restricted shares and options that are authorized
for grant by the Special Awards Committee at its discretion in
any calendar year cannot exceed 20,000 in the aggregate, and the
number of restricted stock awards cannot exceed 10,000 in the
aggregate.
The purpose of the delegation of authority to the Special Awards
Committee is to enhance the flexibility of equity incentive
grants within the Company and to facilitate the timely grant of
options to newly-hired and promoted employees, other than
officers.
Compensation
Committee Interlocks and Insider Participation
No interlocking relationship exists between any member of the
Compensation Committee and any member of any other
companys board of directors or compensation committee. No
member of the Compensation Committee is, or was during the
fiscal year ended December 31, 2008, an officer or employee
of the Company or any of its subsidiaries or was formerly an
officer of the Company or any of its subsidiaries.
Compensation
Committee Report
The Compensation Committee has reviewed and discussed with
management the CD&A contained in this proxy statement.
Based on this review and discussion, the Compensation Committee
has recommended to the Board of Directors that the CD&A be
included in this proxy statement and incorporated into the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008.
COMPENSATION COMMITTEE
Armin M. Kessler, Chairman
John W. Brown
John C. Martin, Ph.D.
Phillip M. Schneider
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board
of Directors is responsible for identifying, reviewing and
evaluating candidates to serve as directors of the Company
(consistent with criteria approved by the Board), reviewing and
evaluating incumbent directors, recommending to the Board
candidates for election to the Board of Directors, making
recommendations to the Board regarding the membership of the
committees of the Board, assessing the performance of management
and the Board, and developing a set of corporate governance
principles for the Company. Four directors currently comprise
the Nominating and Corporate
14
Governance Committee: Mr. Sofaer (Chairman);
Mr. Dittamore; Mr. Kessler; and Dr. Shapiro. All
members of the Nominating and Corporate Governance Committee are
independent (as independence is currently defined in
Rule 4200(a)(15) of the Nasdaq Marketplace Rules). The
Nominating and Corporate Governance Committee met four times
during 2008. The Nominating and Corporate Governance Committee
has adopted a written charter that is available to stockholders
on the Companys website at www.gen-probe.com.
The Nominating and Corporate Governance Committee believes that
candidates for director should have certain minimum
qualifications, including the ability to read and understand
basic financial statements, being over 21 years of age and
having the highest personal integrity and ethics. In addition,
the Nominating and Corporate Governance Committee generally
discourages directors from serving on more than four other
public company boards, and the Committee will consider the
number of such boards on which a prospective nominee is a member
when formulating its Board membership recommendations. The
Nominating and Corporate Governance Committee also considers
such factors as possessing relevant expertise upon which to be
able to offer advice and guidance to management, having
sufficient time to devote to the affairs of the Company,
demonstrated excellence in his or her field, having the ability
to exercise sound business judgment and having the commitment to
rigorously represent the long-term interests of the
Companys stockholders. However, the Nominating and
Corporate Governance Committee retains the right to modify these
qualifications from time to time. Candidates for director
nominees are reviewed in the context of the current composition
of the Board, the operating requirements of the Company and the
long-term interests of stockholders. In conducting this
assessment, the Nominating and Corporate Governance Committee
considers skills, diversity, age, and such other factors as it
deems appropriate given the current needs of the Board and the
Company, to maintain a balance of knowledge, experience and
capability. In the case of incumbent directors whose terms of
office are set to expire, the Nominating and Corporate
Governance Committee reviews each directors overall
service to the Company during their term, including the number
of meetings attended, level of participation, quality of
performance, and any other relationships and transactions that
might impair each directors independence. To identify
relationships and transactions that might impair such
directors independence, the Nominating and Corporate
Governance Committee relies on information supplied to the
Companys legal department by the Companys executive
officers and directors in the form of responses to annual
questionnaires. In the case of new director candidates, the
Nominating and Corporate Governance Committee also determines
whether the nominee must be independent for Nasdaq purposes,
which determination is based upon applicable Nasdaq listing
standards, applicable SEC rules and regulations and the advice
of counsel, if necessary. The Nominating and Corporate
Governance Committee may engage, if it deems appropriate, a
professional search firm to help identify new director
candidates or may
follow-up on
suggestions received from members of the Board or other sources.
The Nominating and Corporate Governance Committee conducts any
appropriate and necessary inquiries into the backgrounds and
qualifications of possible candidates after considering the
function and needs of the Board. The Nominating and Corporate
Governance Committee meets to discuss and consider such
candidates qualifications and then selects a nominee for
recommendation to the Board by majority vote. To date, the
Nominating and Corporate Governance Committee has not paid a fee
to any third party to assist in the process of identifying or
evaluating director candidates.
After consideration of the factors noted above and
Dr. Shapiros qualifications, the Nominating and
Corporate Governance Committee recommended, and the Board of
Directors approved, an increase in the size of the Board of
Directors from seven members to eight members, and the
appointment of Dr. Shapiro to each of the Board of
Directors and the Nominating and Corporate Governance Committee,
effective May 16, 2008.
To date, the Board has not received or rejected a timely
director nominee for election at the upcoming annual meeting
from a stockholder or stockholders holding more than 5% of the
Companys voting stock. The Nominating and Corporate
Governance Committee is not obligated to consider director
candidates recommended by stockholders, but it may do so in its
discretion if it believes consideration of a candidate would be
in the Companys best interests. The Nominating and
Corporate Governance Committee believes that it is in the best
position to identify, review, evaluate and select qualified
candidates for Board membership, based on the comprehensive
criteria for Board membership approved by the Board.
15
Special
Awards Committee
The Special Awards Committee of the Board of Directors is
responsible for making the final determination of specific
grants of stock options and restricted stock awards to be made
to certain individual non-officer employees of the Company
pursuant to guidelines and terms established by the Compensation
Committee. Mr. Nordhoff is the sole member of the Special
Awards Committee. In this capacity, Mr. Nordhoff reviews
and approves the monthly grants for non-officer new hires of the
Company and promotional grants to non-officer employees.
Mr. Nordhoff, the Companys Chairman and CEO, is not
independent (as independence is currently defined in
Rule 4200(a)(15) of the Nasdaq Marketplace Rules) by virtue
of his employment with the Company. The Special Awards Committee
acted by Unanimous Written Consent 14 times during 2008.
Stockholder
Communications with the Board of Directors
Historically, the Company has not provided a formal process
related to stockholder communications with the Board.
Nevertheless, the Company makes efforts to ensure that the views
of stockholders are heard by the Board or individual directors,
as applicable, and that appropriate responses are provided to
stockholders in a timely manner. The Nominating and Corporate
Governance Committee will periodically assess the adoption of a
formal process for stockholder communications with the Board
and, if adopted, publish it promptly and post it to the
Companys website.
Stockholders interested in communicating with the Board of
Directors regarding their concerns or issues may address
correspondence to a particular director or to the directors
generally, in care of Gen-Probe Incorporated, Attention:
Corporate Secretary, 10210 Genetic Center Drive, San Diego,
California 92121.
Code of
Ethics
The Company has adopted the Gen-Probe Incorporated Code of
Ethics that applies to all officers, directors and employees.
The Code of Ethics is available on our website at
www.gen-probe.com. If the Company makes any substantive
amendments to the Code of Ethics or grants any waiver from a
provision of the Code of Ethics to any executive officer or
director, the Company will promptly disclose the nature of the
amendment or waiver on its website.
Open Door
Policy
The Company has adopted an Open Door Policy for Reporting
Complaints regarding accounting, auditing and other matters to
facilitate the receipt, retention and treatment of complaints
regarding misconduct, illegal activities or fraud, including any
accounting, internal accounting controls or auditing matters, or
violations of federal or state laws or the Companys Code
of Ethics.
Corporate
Governance Guidelines
In November 2003, the Board of Directors documented the
governance practices followed by the Company by adopting
Corporate Governance Guidelines. The Corporate Governance
Guidelines were adopted by the Board to, among other things,
reflect changes to the Nasdaq listing standards and SEC rules
adopted to implement provisions of the Sarbanes-Oxley Act of
2002. In connection with the Board of Directors periodic
review of the guidelines, in February 2009, the Board adopted a
revised set of Corporate Governance Guidelines. The guidelines
are designed to ensure that the Board will have the necessary
authority and practices in place to review and evaluate the
Companys business operations as needed and to make
decisions that are independent of the Companys management.
The guidelines are also intended to align the interests of
directors and management with those of the Companys
stockholders. The Corporate Governance Guidelines set forth the
practices the Board follows with respect to Board composition
and selection, Board meetings and involvement of senior
management, CEO performance evaluation and succession planning,
and Board committees and compensation. The Corporate Governance
Guidelines, as well as the charters for each of the Audit
Committee, Compensation Committee and Nominating and Corporate
Governance Committee of the Board, may be viewed at
www.gen-probe.com.
16
The Board believes that good corporate governance practices
promote the principles of fairness, transparency, accountability
and responsibility and will ensure that the Company is managed
for the long term benefits of its stockholders. During the past
few years, we have continued to review our corporate governance
policies and practices and compare them to those suggested by
various authorities in corporate governance and the practices of
other public companies. Based on this review, we have taken the
following actions to continue our implementation of best
corporate governance practices:
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In September 2006, the Board approved an amendment to accelerate
the termination of the Companys stockholder rights plan
from September 2012 to November 30, 2006. As a result, the
rights plan, which was originally adopted in September 2002, was
effectively terminated on November 30, 2006;
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In September 2006, the Board adopted a stock ownership policy
for directors and officers of the Company that, subject to a
phase-in period, requires these individuals to maintain
ownership of Company stock equal to between one and three times
their annual salary, or director fees, as applicable, depending
on position;
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In February 2007, the Nominating and Corporate Governance
Committee recommended the amendment of, and the Board agreed to
amend, the Companys Bylaws to change the voting standard
for the election of directors from a plurality to a majority
vote in uncontested elections;
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In February 2007, the Nominating and Corporate Governance
Committee adopted a policy which generally discourages directors
from serving on more than four other public company boards, and
provides that the Nominating and Corporate Governance Committee
will consider the number of such boards on which a prospective
nominee is a member when formulating its Board membership
recommendations;
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In May 2007, the Compensation Committee recommended the adoption
of, and the Board agreed to adopt, an Equity Award Policy in
order to establish written guidelines for equity incentive
awards such as stock options. The policy establishes guidelines
and procedures for, among other things, the administration,
grant, pricing and documentation of equity awards; and
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In November 2008, the Nominating and Corporate Governance
Committee recommended the amendment of, and in February 2009 the
Board agreed to amend, the Companys Corporate Governance
Guidelines to provide that any future appointment of a new
director by the Board be submitted to the Companys
stockholders for ratification at the next regularly scheduled
annual meeting of stockholders.
|
Under the majority vote standard applicable to the
Companys director elections, a director must receive the
affirmative vote of a majority of the shares cast in the
election of directors, except that directors shall be elected by
a plurality of the votes cast if the number of director nominees
exceeds the number of directors to be elected. A majority of the
votes cast means that the number of shares voted For
a director nominee must exceed 50% of the number of votes cast
with respect to that directors election.
Under Delaware law, an incumbent director who fails to receive
the required vote holds over, or continues to serve
as a director, until his or her successor is elected and
qualified. Consequently, in order to address the hold
over issue, the Companys Amended and Restated Bylaws
require that if a nominee who already serves as a director is
not re-elected, and no successor is elected, the director shall
tender his or her resignation to the Board of Directors. The
Nominating and Corporate Governance Committee will make a
recommendation to the Board as to whether to accept or reject
the resignation, or whether other action should be taken. The
Board will act on the Nominating and Corporate Governance
Committees recommendation and publicly disclose its
decision and the rationale behind it within 90 days from
the date of the certification of the election results. A
director who tenders his or her resignation will not participate
in the recommendation of the Nominating and Corporate Governance
Committee or in the Boards decision with respect to his or
her resignation. If the failure of a nominee to be elected at
the annual meeting results in a vacancy on the Board, that
vacancy may be filled by action of the Board. The Amended and
Restated Bylaws of the Company are available through our
periodic filings with the SEC, which can be viewed through our
website at www.gen-probe.com.
17
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides certain information regarding all
of the Companys equity compensation plans in effect as of
December 31, 2008.
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Number of Securities
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Remaining Available for
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Number of Securities
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Issuance Under
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to be Issued Upon
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Weighted-Average
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Equity Compensation
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Exercise of
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Exercise Price of
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Plans (Excluding
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Outstanding Options,
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Outstanding Options,
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Securities Reflected in
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Plan Category
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Warrants and Rights
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Warrants and Rights
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Column (a))
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(a)
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(b)
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(c)
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Equity compensation plans approved by security holders
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5,566,570
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$
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44.49
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966,494
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(1)
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Equity compensation plans not approved by security holders(2)
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90,318
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$
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20.99
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65,444
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Total
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5,656,888
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$
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44.12
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1,031,938
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(1) |
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Includes 483,516 shares of common stock available for
future issuance under the 2000 Equity Participation Plan and the
2003 Incentive Award Plan and 482,978 shares under our
Employee Stock Purchase Plan (the ESPP), as amended,
as of December 31, 2008. |
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(2) |
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Consists of shares of common stock issuable under the 2002 New
Hire Stock Option Plan (the 2002 Plan), which at the
time of adoption did not require the approval of, and has not
been approved by, the Companys stockholders. See the
description below of the 2002 Plan. |
The following equity compensation plan of the Company was in
effect as of December 31, 2008 and was adopted without
approval of the Companys stockholders.
Description
of the 2002 New Hire Plan
General Nature and Purposes of the 2002 New Hire
Plan. The principal purposes of the 2002 Plan are
to provide incentives for certain employees of the Company and
its subsidiaries through granting of options (the 2002
Plan Awards), thereby stimulating optionees personal
and active interest in the Companys development and
financial success, and inducing them to remain in the
Companys employ. The 2002 Plan was approved by the Board
on November 11, 2002 without approval by the Companys
stockholders. The Company has not issued options under the 2002
Plan since March 2004.
A brief description of the principal features of the 2002 Plan
follows, but the description is qualified in its entirety by
reference to the 2002 Plan itself, as amended and filed with the
SEC on February 23, 2007 as an exhibit to the
Companys Annual Report on
Form 10-K.
Administration of the Plan. The 2002 Plan is
administered by the Compensation Committee of the Companys
Board of Directors (or another committee or a subcommittee of
the Board assuming the functions of the Compensation Committee
under the 2002 Plan) (for purposes of this summary, the
Committee). The Committee consists of at least two
members of the Board of Directors, each of whom is a
non-employee director for purposes of
Rule 16b-3
under the Exchange Act
(Rule 16b-3),
and an outside director for purposes of
Section 162(m) (Section 162(m)) of the
Internal Revenue Code of 1986, as amended (the
Code). Subject to the terms and conditions of the
2002 Plan, the Committee has the authority to select the persons
to whom 2002 Plan Awards are to be made, to determine the number
of shares to be subject thereto and the terms and conditions
thereof, and to make all other determinations and to take all
other actions necessary or advisable for the administration of
the 2002 Plan. The Committee is also authorized to adopt, amend,
interpret and revoke rules relating to the administration of the
2002 Plan.
Securities Subject to the 2002 Plan. The
aggregate number of shares of common stock authorized for
issuance upon exercise of options granted under the 2002 Plan
was 200,000 as of the date the 2002 Plan was adopted. In
September 2003, the 200,000 share reserve authorized for
issuance under the 2002 Plan was adjusted to 400,000 shares
to reflect the Companys
2-for-1
stock split implemented as a 100% stock dividend.
18
The shares available under the 2002 Plan upon exercise of stock
options may be either previously unissued shares or treasury
shares. The Committee has the discretion to make appropriate
adjustments in the number of securities subject to the 2002 Plan
and to outstanding 2002 Plan Awards to reflect dividends or
other distributions; a reorganization, merger or consolidation
of the Company; a combination, repurchase, liquidation or
dissolution of the Company; a disposition of all or
substantially all of the assets of the Company or exchange of
common stock or other securities of the Company; or other
similar corporate transaction or event (an extraordinary
corporate event). The 2002 Plan provides for automatic
adjustments in the number of securities subject to the 2002 Plan
and to outstanding 2002 Plan Awards to reflect a non-reciprocal
transaction between the Company and its stockholders, such as a
stock dividend, stock split, spin-off, rights offering or
recapitalization through a large non-recurring cash dividend,
that affects the shares of the Companys common stock (or
other securities of the Company) or the share price of the
common stock (or other securities of the Company) and causes a
change in the per share value of the common stock underlying
outstanding awards.
If any portion of a 2002 Plan Award terminates or lapses
unexercised, or is canceled upon grant of a new 2002 Plan Award
(which may be at a higher or lower exercise price than the 2002
Plan Award so canceled), the shares which were subject to the
unexercised portion of such 2002 Plan Award will continue to be
available for issuance under the 2002 Plan.
Term of the 2002 Plan and Amendments. The 2002
Plan will expire on November 10, 2012, unless earlier
terminated. The 2002 Plan may be amended, modified, suspended or
terminated by the Committee or the Board of Directors.
Amendments of the 2002 Plan will not, without the consent of the
participant, affect such persons rights under any
outstanding 2002 Plan Award, unless the 2002 Plan Award
agreement governing such 2002 Plan Award itself otherwise
expressly so provides.
Eligibility. 2002 Plan Awards may be granted
only to newly hired employees of the Company, including newly
hired officers or employee directors of the Company, who have
not previously been employed by the Company.
Payment for Shares. The exercise price for all
2002 Plan Awards, together with any applicable tax required to
be withheld, must be paid in full in cash at the time of
exercise or the Committee may, in its sole and absolute
discretion (i) allow a delay in payment up to 30 days
from the date the option is exercised, (ii) allow payment,
in whole or in part, through the delivery of shares of common
stock which have been held by the holder for at least six
months, (iii) allow payment, in whole or in part, through
the surrender of shares of common stock then issuable upon
exercise of the option having a fair market value on the date of
option exercise equal to the aggregate exercise price of the
option or exercised portion thereof, (iv) allow payment, in
whole or in part, through the delivery of a notice that the
holder has placed a market sell order with respect to shares of
common stock then issuable upon exercise of the option, and that
the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the
option exercise price; provided, that the payment of such
proceeds is then made to the Company upon settlement of such
sale, and (v) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii),
(iii) and (iv).
Awards under the 2002 Plan. The 2002 Plan
provides that the Committee may grant or issue nonqualified
stock options (NQSOs). NQSOs provide for the right
to purchase common stock at the fair market value on the date of
grant and usually will become exercisable (in the discretion of
the Committee) in one or more installments after the grant date,
subject to the participants continued provision of
services to the Company. NQSOs may be granted for any term
specified by the Committee; provided that the term may not
exceed 10 years.
Agreements; Consideration to the Company. Each
2002 Plan Award will be set forth in a separate agreement with
the person receiving the 2002 Plan Award and will indicate the
terms and conditions of the 2002 Plan Award. The dates on which
2002 Plan Awards under the 2002 Plan first become exercisable
and on which they expire will be set forth in individual 2002
Plan Award agreements setting forth the terms of the 2002 Plan
Awards. The agreements generally will provide that 2002 Plan
Awards expire upon termination of the participants status
as an employee, although the Committee may provide that Awards
granted to employees continue to be exercisable following a
termination without cause, or following a Change in
Control of the Company, as defined in the 2002 Plan, or
because of the grantees retirement, death, disability or
otherwise.
19
General
Terms of 2002 Plan Awards under the 2002 Plan
Non-Assignability. 2002 Plan Awards may not be
assigned or transferred by the grantee, except by will, the laws
of descent and distribution or pursuant to a qualified domestic
relations order, although the shares of common stock underlying
such 2002 Plan Awards may be transferred if all applicable
restrictions have lapsed. During the lifetime of the holder of
any 2002 Plan Award, the 2002 Plan Award may be exercised only
by the holder. Notwithstanding the foregoing, the Committee may
grant NQSOs that may be assigned or transferred, subject to
certain conditions, to permitted transferees, which
include a child, grandchild, parent, spouse, niece or nephew of
the holder.
Extraordinary Corporate Events. The Committee
has discretion under the 2002 Plan to provide that 2002 Plan
Awards will expire at specified times following, or become
exercisable in full upon, the occurrence of certain specified
extraordinary corporate events; and in such event
the Committee may also give optionees the right to exercise
their outstanding NQSOs in full during some period prior to such
event, even though the NQSOs have not yet become fully
exercisable.
Effect of Change in Control. Notwithstanding
anything in the 2002 Plan or the provisions of any 2002 Plan
Award to the contrary, in the event of a Change in Control, each
outstanding 2002 Plan Award shall, immediately prior to the
effective date of the Change in Control, automatically become
fully vested or exercisable, as applicable, for all of the
shares of common stock at the time subject to such 2002 Plan
Award and, as applicable, may be exercised for any or all of the
shares of common stock subject to the 2002 Plan Award.
For purposes of the 2002 Plan, Change in Control
means a change in ownership or control of the Company effected
through any of the following transactions: (a) any person
or related group of persons (other than the Company or a person
that, prior to such transaction, directly or indirectly
controls, is controlled by, or is under common control with, the
Company) directly or indirectly acquires beneficial ownership
(within the meaning of
Rule 13d-3
under the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the
Companys outstanding securities pursuant to a tender or
exchange offer for securities of the Company; (b) there is
a change in the composition of the Board over a period of
thirty-six (36) consecutive months (or less) such that a
majority of the Board members (rounded up to the nearest whole
number) ceases, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who
either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or
nominated for election as Board members during such period by at
least a majority of the Board members described in
clause (i) who were still in office at the time such
election or nomination was approved by the Board; (c) a
merger or consolidation of the Company with any other
corporation (or other entity), other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or another
entity) more than
662/3%
of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a
merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no person
acquires more than 25% of the combined voting power of the
Companys then outstanding voting securities shall not
constitute a Change in Control; or (d) a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Companys assets.
Transfer Restrictions. The Committee, in its
discretion, may impose such restrictions on the transferability
of the shares purchasable upon the exercise of an NQSO as it
deems appropriate. Any such other restriction shall be set forth
in the respective 2002 Plan Award agreement and may be referred
to on the certificates evidencing such shares.
Withholding Tax Obligations. As a condition to
the issuance or delivery of stock pursuant to the exercise of a
2002 Plan Award granted under the 2002 Plan, the Company
requires participants to discharge applicable withholding tax
obligations. Shares held by or to be issued to a participant may
also be used to discharge tax withholding obligations related to
exercise of 2002 Plan Awards, subject to the discretion of the
Committee to disapprove such use.
Securities Law. The 2002 Plan is intended to
conform to the extent necessary with all provisions of the
Securities Act of 1933, as amended (the Securities
Act), and the Exchange Act, and any and all regulations
and rules promulgated by the SEC thereunder, including without
limitation
Rule 16b-3.
The 2002 Plan will be administered, and options will be granted
and may be exercised, only in such a manner as to conform to
such laws, rules and regulations. To the extent permitted by
applicable law, the 2002 Plan and options granted thereunder
shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
20
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE 2003 INCENTIVE AWARD PLAN,
AS AMENDED AND RESTATED
In this Proposal 2, the Company is seeking stockholder
approval to amend and restate the Companys 2003 Incentive
Award Plan (the 2003 Plan), to increase the number
of shares of common stock authorized for issuance thereunder by
2,500,000 shares and adopt other amendments described
below. The Company and the Board of Directors believe that your
approval of this Proposal 2 will enable the Company to
continue to attract and retain the highest caliber of employees
and directors, to link incentive rewards to Company performance,
and to align the interests of employees and directors with those
of stockholders.
The Companys Board of Directors originally adopted the
2003 Plan in March 2003, subject to stockholder approval. On
May 13, 2003, prior to stockholder approval, the Board
reduced the number of shares of common stock proposed to be
authorized for issuance under the 2003 Plan to
2,500,000 shares. On May 29, 2003, the Companys
stockholders approved the 2003 Plan. In September 2003, the
2,500,000 share reserve authorized for issuance under the
2003 Plan was adjusted to 5,000,000 shares to reflect the
Companys
2-for-1
stock split, which was implemented as a 100% stock dividend.
In February 2006, the Companys Board of Directors amended
and restated the 2003 Plan (the Amended and Restated 2003
Plan), subject to stockholder approval, to increase the
number of shares of common stock authorized for issuance under
the 2003 Plan by 3,000,000 shares. On May 17, 2006,
the Companys stockholders approved the Amended and
Restated 2003 Plan increasing the number of shares available for
issuance under the 2003 Plan from 5,000,000 to
8,000,000 shares.
In November 2006, the Companys Board of Directors amended
and restated the Amended and Restated 2003 Plan (the
Second Amended and Restated 2003 Plan) in order to
provide for the automatic adjustment of outstanding awards under
the 2003 Plan in the event the Company experienced an equity
restructuring event (e.g., a stock split, spin-off, or
recapitalization through a large non-recurring dividend). In
addition, the Second Amended and Restated 2003 Plan changed the
date for determination of the exercise price of options granted
under the 2003 Plan to the market close on the date of the
grant, rather than the preceding date. Stockholder approval of
this amendment and restatement was not required or sought.
In February 2007, the Companys Board of Directors amended
and restated the Second Amended and Restated 2003 Plan (the
Third Amended and Restated 2003 Plan) in order to
modify the 2003 Plan to provide that, with respect to future
grants under the 2003 Plan, a Termination under the
2003 Plan would not occur if an employee continues to serve as a
director of the Company after his or her employment with the
Company ends. Stockholder approval of this amendment and
restatement was not required or sought.
On March 20, 2009, the Companys Board of Directors
amended and restated the Third Amended and Restated 2003 Plan
(the Fourth Amended and Restated 2003 Plan), subject
to stockholder approval, to increase the number of shares of
common stock authorized for issuance under the 2003 Plan by
2,500,000 shares, and adopted other amendments to the 2003
Plan as described below. Proposal 2, if approved by the
Companys stockholders, would increase the aggregate number
of shares of common stock authorized for issuance under the 2003
Plan from 8,000,000 shares to 10,500,000 shares. As of
March 1, 2009, approximately 443,840 shares of common
stock remained available for future grant under the 2003 Plan.
Since 2006, the Company has made annual equity award grants to
Company employees, including executive officers, in August of
each year, which have consisted of stock options and, for
certain senior level employees, restricted stock awards. All
such equity awards have included time-based vesting provisions
only.
The Compensation Committee of the Board of Directors intends
that future grants of equity incentive awards to Company
officers, and other senior level Company employees
receiving restricted stock awards, will generally be comprised
of stock options, representing approximately 75% of the value of
the aggregate applicable award, and restricted stock,
representing approximately 25% of the value of the aggregate
applicable award. The Compensation Committee currently intends
that beginning in 2010 restricted stock awards to be granted to
senior level employees under the 2003 Plan will predominantly
incorporate performance-based vesting provisions in lieu of
time-based
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vesting. Although the specific performance criteria applicable
to such awards have not yet been established, they are expected
to encompass both quantitative
and/or
qualitative measures, such as revenue and fully diluted earnings
per share (EPS) growth
and/or
product development progress, in each case designed to be
objectively measurable and to drive long-term Company
performance.
If, as currently intended, restricted stock awards to be made to
senior level employees in 2010 and thereafter predominantly
incorporate performance-based vesting provisions, the
Compensation Committee anticipates that annual equity award
grants, which have been made in August of each year beginning in
2006, will instead be made in January or February beginning in
2010, in order to align the performance criteria for restricted
stock awards with each years business objectives. Because
the Company intends to make its next two equity grants less than
one year apart, the Company expects that the grant of equity
awards in January or February 2010 will be pro-rated and smaller
than the annual equity grants made in recent years. The Company
currently believes that the proposed increase in share
availability under the 2003 Plan, together with the
approximately 81,863 shares available for issuance under
the Companys 2000 Equity Participation Plan and the 2002
Plan, will be sufficient for anticipated equity award grants to
employees, including executive officers, in August 2009 as well
as the anticipated grants of equity awards in January or
February 2010 and 2011, which are expected to include
predominantly performance-based vesting for restricted stock
awards made to senior level employees. The Fourth Amended and
Restated 2003 Plan provides that additional shares may not be
authorized for issuance under the 2003 Plan without stockholder
approval. Outstanding stock options and other stock awards
previously granted under the 2003 Plan will continue to be
subject to the terms and conditions of the original award
agreements.
The approval of this Proposal 2 will allow the Company to
continue to grant stock options and other equity incentive
awards at levels it determines appropriate to attract and retain
highly qualified individuals. The Board of Directors believes
that the future success of the Company depends, in large part,
upon the ability of the Company to maintain a competitive
position in attracting, retaining and motivating employees and
directors. Accordingly, the Board of Directors believes the
approval of this Proposal 2 is in the best interests of the
Company and its stockholders and recommends a vote
For the approval of Proposal 2 for the
following reasons, among others:
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The Company believes past stock option and restricted stock
awards have helped attract and retain high-quality employees who
have contributed to Gen-Probes strong financial results
since 2002, when the Company was spun off from Chugai
Pharmaceutical, Co. Ltd. For example, Gen-Probes fully
diluted EPS has increased from $0.27 in 2002 to $1.95 in 2008,
representing a compound annual growth rate (CAGR) of
approximately 39%. In addition, total revenues have increased
from $156 million in 2002 to $473 million in 2008, a
CAGR of approximately 20%. During this same period, the
Companys share price has significantly outperformed both
the Nasdaq Composite Index and the Nasdaq Biotech Index.
Although past performance is not a guarantee of future results,
the Company believes that maintaining a competitive equity
compensation plan will help attract and retain employees who
will contribute to the Companys future growth.
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Gen-Probes potential dilution, or overhang,
from outstanding awards and shares available for future awards
as of March 1, 2009 under all of the Companys equity
incentive plans was approximately 12.5%. This percentage would
have been lower if the Company had not repurchased approximately
1.7 million shares of Company common stock during 2008
under the terms of its recently announced stock repurchase
program. The foregoing overhang calculation is
calculated conservatively as (a) the total shares
underlying outstanding stock option and restricted stock awards
(5,991,713) and shares available for future awards under all of
the Companys equity incentive plans (525,703),
divided by (b) the total shares of Gen-Probe common
stock outstanding as of March 1, 2009. Based on an analysis
performed by an independent compensation consulting firm
retained by Gen-Probe, this figure is comparable to an average
total overhang of 14.2% for the 22 companies analyzed, with
whom the Company believes it competes for human resources,
capital
and/or
customers. The average total overhang calculation for these
22 companies was based on the most recent period for which
comprehensive data were publicly available as of January 2009.
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Equity compensation remains a key component of a competitive
compensation package in the Companys industry and,
Gen-Probe believes, effectively rewards employees and directors
for the success of the Company over time. In 2006, 2007 and
2008, respectively, the Company granted approximately 1,661,282,
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1,336,191 and 1,095,652 stock options and restricted stock
awards to employees and directors, with the total number of
awards granted declining each year. Gen-Probes average
annual burn rate over the last three years of
approximately 2.86% is comparable to a three-year average burn
rate of approximately 2.93% for the 22 companies analyzed
on behalf of Gen-Probe referenced above. The data analyzed on
behalf of
Gen-Probe
regarding the equity compensation practices of these companies
was based on the most recent three-year period for which
comprehensive data regarding such companies were available as of
January 2009. Gen-Probes average annual burn
rate over the last three years is calculated as
(a) the sum of awards of stock options and restricted stock
(adjusted using a conversion premium based on the Companys
annual stock price volatility, such that each restricted stock
award is valued as two stock option awards) granted during the
applicable year, divided by the total shares of Gen-Probe
common stock outstanding as of the applicable fiscal year end.
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As of March 1, 2009, the Company was authorized to grant
awards to acquire only an additional approximately
525,703 shares of common stock under all of the
Companys existing equity plans, with this number being
significantly smaller than the Companys recent annual
grants. If Gen-Probe were unable to continue to grant stock
option and restricted stock awards at a competitive level, the
Company believes it would be at a significant disadvantage
relative to its peers, especially in the biotechnology hub of
San Diego, where the Company believes equity compensation
is an expected and valued component of total compensation.
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Since 2006, when stockholders last approved an increase in the
number of shares authorized for issuance under the 2003 Plan,
the Company has made a number of notable changes to improve its
corporate governance practices and better align the interests of
directors, employees and stockholders. Many of these changes are
described on page 17 under the heading Corporate
Governance Guidelines above.
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In addition to increasing the number of shares available for
issuance under the 2003 Plan by 2,500,000, the Fourth Amended
and Restated 2003 Plan would make the following notable
amendments to the 2003 Plan:
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Types of Awards Added. The following
additional types of awards will be available for issuance under
the 2003 Plan to employees, consultants or independent
directors: performance-based stock
and/or cash
bonus awards; dividend equivalent awards; stock payment awards;
deferred stock awards; and restricted stock units. Each of the
foregoing awards is described in further detail below.
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Share Reserve. The number of shares available
for issuance under the 2003 Plan will be reduced by two shares
for each share of common stock issued pursuant to any future
award, other than an award of stock appreciation rights or
options. Formerly, this share count reduction applied only to
issuances pursuant to an award of restricted stock. Furthermore,
dividend equivalents paid in cash under the 2003 Plan in
conjunction with any outstanding awards will not be counted
against the 10,500,000-share cap on shares issuable under the
2003 Plan.
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Award Limit. The 2003 Plan will cap the number
of shares that may be issued to any individual in a given
calendar year to 500,000 to comply with Section 162(m) of
the Code. In addition, a $3,000,000 cap will be added on the
amount of cash that may be paid to any individual in a given
calendar year with respect to awards granted under the 2003 Plan.
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Amendments to Existing Types of
Awards. Thirty-day
payment delays after a stock option has been exercised will be
eliminated.
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Minimum Exercise Price for Stock Appreciation
Rights. Presently, the 2003 Plan does not specify
a minimum exercise price for a stock appreciation right. As
amended, the exercise price for common stock subject to stock
appreciation rights will be no less than the fair market value
of the stock on the grant date of the stock appreciation right.
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Performance Criteria. The performance criteria
under the 2003 Plan will be revised to be consistent with the
Companys 2007 Executive Bonus Plan, which include revenue,
cash flow, return on equity, working capital and certain other
objectively-measurable criteria, or other specific criteria
determined by the Fourth Amended and Restated Plan administrator.
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Independent Director Equity Compensation
Plan. A written non-discretionary formula will be
established by the administrator pursuant to the terms of the
Fourth Amended and Restated 2003 Plan that will govern stock
option award grants to the Companys independent directors.
The policy will set forth the type of award(s) to be granted to
independent directors, the number of shares subject to awards,
the conditions on which such awards will be granted, become
exercisable
and/or
payable and expire, and such other terms and conditions as the
administrator determines.
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Compliance with Foreign Laws. Discretion will
be granted to the Board of Directors or Compensation Committee
to determine which Company subsidiaries will be governed by the
2003 Plan and which individuals outside of the United States
will be eligible for awards under the 2003 Plan in order to
comply with applicable foreign laws. The Board of Directors or
Compensation Committee will also be given discretion to modify
terms and conditions of individual awards to comply with foreign
laws, to establish subplans or modify exercise procedures where
advisable, and to take other actions necessary to comply with
foreign laws and stock exchange requirements.
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409A Compliance. Awards granted under the 2003
Plan and extensions to the term of any outstanding stock option
granted by the Board of Directors or the Compensation Committee
must comply with the requirements of Section 409A of the
Code (Section 409A).
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Full Value Award Vesting Limit. The 2003 Plan
previously required that vesting of stock options and stock
appreciation rights and lapsing of restrictions on restricted
stock grants cannot occur sooner than monthly over three years.
As amended, the Fourth Amended and Restated 2003 Plan provides
that the minimum vesting period for awards granted to employees
or consultants, other than awards of stock options or stock
appreciation rights (Full Value Awards), will
generally be three years, with no minimum vesting required for
stock options or stock appreciation rights. In the case of
performance-based vesting, the minimum vesting period for Full
Value Awards will generally be one year, commencing
simultaneously with the evaluation of the performance. However,
the Fourth Amended and Restated 2003 Plan provides that the
Company may grant Full Value Awards without regard to these
minimum vesting restrictions, in an aggregate amount of up to 5%
of the share reserve of the Fourth Amended and Restated 2003
Plan.
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Stockholder Approval. Stockholder approval
will be required for any amendment of the 2003 Plan that would
enable stock options or stock appreciation rights to be granted
with an exercise price below the fair market value on the date
of grant, or that would allow for the extension of the
applicable exercise period beyond seven years from the date of
grant. Without stockholder approval, stock options and stock
appreciation rights may not be amended to reduce the exercise
price below the share price as of the date of grant. Generally,
new stock options or stock appreciation right grants may not be
made in exchange for the cancellation of outstanding awards, and
awards may not be bought-out without stockholder approval.
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Stockholders are requested in this Proposal 2 to approve
the amendment and restatement of the 2003 Plan, including the
2,500,000 authorized share increase under 2003 Plan. 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 meeting will be required to approve this Proposal 2.
Abstentions will have the same effect as an Against
vote. Broker non-votes will have no effect.
A general description of the Fourth Amended and Restated 2003
Plan is set forth below. However, the description is qualified
in its entirety by reference to the full text of the Fourth
Amended and Restated 2003 Plan, a copy of which is attached as
Appendix A to this proxy statement.
Description
of the Fourth Amended and Restated 2003 Plan
General Nature and Purposes of the Fourth Amended and
Restated 2003 Plan. The principal purposes of the
Fourth Amended and Restated 2003 Plan are to provide incentives
for officers, employees and consultants of the Company and its
subsidiaries through granting of stock options, restricted
stock, stock appreciation rights, performance-based stock
and/or cash
bonus awards, dividend equivalent awards, stock payment awards,
deferred stock awards and restricted stock units (collectively,
Awards), thereby stimulating their personal and
active interest in the Companys development and financial
success, and inducing these individuals to remain in the
Companys employ or service. In addition to Awards made to
officers, employees or consultants, the Fourth
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Amended and Restated 2003 Plan provides for the granting of
Awards, subject to the terms of the Fourth Amended and Restated
2003 Plan and pursuant to the Independent Director Equity
Compensation Plan to be established by the Compensation
Committee, to the Companys non-employee directors (the
Independent Directors).
Administration of the Plan. The Fourth Amended
and Restated 2003 Plan will be administered by the Compensation
Committee with respect to Awards granted to employees or
consultants and by the full Board of Directors with respect to
Awards granted to Independent Directors (such administrative
body, as applicable, the Administrator). The
Compensation Committee consists of at least two members of the
Board, each of whom is a non-employee director for
purposes of
Rule 16b-3
and an outside director for purposes of
Section 162(m) of the Code. Subject to the terms and
conditions of the Fourth Amended and Restated 2003 Plan, the
Compensation Committee has the authority to select the persons
to whom Awards are to be made, to determine the number of shares
to be subject thereto and the terms and conditions thereof, and
to make all other determinations and to take all other actions
necessary or advisable for the administration of the Fourth
Amended and Restated 2003 Plan. Similarly, the Board of
Directors has discretion to determine the terms and conditions
of Awards granted to Independent Directors and to interpret and
administer the Fourth Amended and Restated 2003 Plan with
respect to Awards, subject to the terms of the Fourth Amended
and Restated 2003 Plan. The Administrator is also authorized to
adopt, amend, interpret and revoke rules relating to the
administration of the Fourth Amended and Restated 2003 Plan,
including the discretion to modify terms and conditions of
individual awards to comply with foreign laws, to establish
subplans or modify exercise procedures where advisable, and to
take other actions necessary to comply with foreign laws and
stock exchange requirements.
Securities Subject to the Fourth Amended and Restated 2003
Plan. The aggregate number of shares of common
stock which may be issued upon exercise of stock options and
stock appreciation rights, or, subject to the limitation
described below, as other Awards granted under the Fourth
Amended and Restated 2003 Plan, will not exceed 10,500,000 in
the aggregate. This share reserve consists of the
8,000,000 shares previously authorized for issuance under
the 2003 Plan, plus an additional 2,500,000 shares.
Further, the maximum number of shares of common stock which may
be subject to Awards granted under the 2003 Plan to any
individual in any calendar year shall not exceed 500,000. In
addition, the maximum aggregate amount of cash that may be paid
to a participant during any calendar year with respect to one or
more Awards payable in cash shall be $3,000,000. Under the
Fourth Amended and Restated 2003 Plan, an increase in the number
of shares of common stock authorized for issuance may not be
made without stockholder approval, except for adjustments as
described below.
The shares available for Awards under the Fourth Amended and
Restated 2003 Plan may be either previously unissued shares or
treasury shares. Shares of common stock issued pursuant to
equity incentives granted under the Fourth Amended and Restated
2003 Plan will be reduced by two shares for each share of common
stock issued pursuant to any Award, other than an award of stock
appreciation rights or options. Formerly, this reduction applied
only to issuances pursuant to an award of restricted stock.
Furthermore, dividend equivalents paid in cash under the Fourth
Amended and Restated 2003 Plan in conjunction with any
outstanding Awards will not be counted against the
10,500,000-share cap on shares issuable under the Fourth Amended
and Restated 2003 Plan. The Administrator has the discretion to
make appropriate adjustments in the number of securities subject
to the Fourth Amended and Restated 2003 Plan and to outstanding
Awards thereunder to reflect certain equity restructuring
changes, such as stock splits or stock dividends, as well as an
extraordinary corporate event.
If any portion of a stock option, stock appreciation right or
other Award granted under the 2003 Plan outstanding as of the
effective date of the Fourth Amended and Restated 2003 Plan
terminates or lapses unexercised, the shares which were subject
to the unexercised portion of such option, stock appreciation
right or other Award will continue to be available for issuance
under the Fourth Amended and Restated 2003 Plan. If, following
the issuance of a share of common stock pursuant to an Award
which counted as two shares against the share reserve, such
Award terminates, lapses or cancels, then the number of shares
of common stock available for issuance under the Fourth Amended
and Restated 2003 Plan shall increase by two shares.
Term of the Fourth Amended and Restated 2003 Plan and
Amendments. The Fourth Amended and Restated 2003
Plan will expire on March 3, 2013, unless earlier
terminated. Amendments of the Fourth Amended and Restated 2003
Plan to increase the number of shares authorized for issuance
under the plan (except for adjustments resulting from stock
splits and the like, and mergers, consolidations and other
corporate transactions) require the
25
approval of the Companys stockholders. The Fourth Amended
and Restated 2003 Plan includes a new provision which also
requires stockholder approval of any amendment that would enable
options or stock appreciation rights to be granted with an
exercise price below the fair market value on the grant date, or
that would allow for the extension of the exercise period of an
option or stock appreciation right beyond seven years from the
grant date. The Fourth Amended and Restated 2003 Plan further
provides that the Administrator may not (i) amend stock
options and stock appreciation rights to reduce the exercise
price below the share price as of the date of grant,
(ii) grant new stock options or stock appreciation rights
in exchange for the cancellation of outstanding awards, or
(iii) offer a cash payment to buy out any outstanding stock
option or stock appreciation right, unless stockholders have
approved such an action. In all other respects, the Fourth
Amended and Restated 2003 Plan can be amended, modified,
suspended or terminated by the Administrator, unless such action
would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. Amendments of the Fourth
Amended and Restated 2003 Plan will not, without the consent of
the participant, affect such persons rights under an
outstanding Award, unless the Award agreement governing such
Award itself otherwise expressly so provides.
Eligibility. Awards may be granted under the
Fourth Amended and Restated 2003 Plan to individuals who are
then officers or other employees of the Company or any of its
present or future subsidiaries. Such Awards also may be granted
to consultants of the Company selected by the Administrator for
participation in the Fourth Amended and Restated 2003 Plan. All
of our employees are eligible to participate in the Fourth
Amended and Restated 2003 Plan. The Administrator has discretion
to determine which Company subsidiaries will be governed by the
Fourth Amended and Restated 2003 Plan and which individuals
outside of the United States will be eligible for awards under
the Fourth Amended and Restated 2003 Plan in order to comply
with applicable foreign laws. Independent Directors of the
Company and its subsidiaries may be granted Awards in accordance
with the Fourth Amended and Restated 2003 Plan and the
Independent Director Equity Compensation Policy referenced
therein.
Payment for Shares. The exercise or purchase
price for all Awards, together with any applicable tax required
to be withheld, must be paid in full in cash at the time of
exercise or purchase or such other permissible consideration as
the Administrator may, in its sole and absolute discretion,
allow. The Fourth Amended and Restated 2003 Plan provides that,
with respect to stock options, the Administrator, in its sole
discretion, may (i) allow payment, in whole or in part,
through the delivery of shares of common stock (without regard
to whether the shares were held by the holder for at least six
months, as was formerly required under the 2003 Plan),
(ii) allow payment, in whole or in part, through the
surrender of shares of common stock then issuable upon exercise
of the option having a fair market value on the date of option
exercise equal to the aggregate exercise price of the option or
exercised portion thereof, (iii) allow payment, in whole or
in part, through the delivery of a notice that the holder has
placed a market sell order with respect to shares of common
stock then issuable upon exercise of the option, and that the
broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the
option exercise price; provided, that the payment of such
proceeds is then made to the Company upon settlement of such
sale, and (iv) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (i),
(ii) and (iii). The Fourth Amended and Restated 2003 Plan
eliminates the provision of the Third Amended and Restated 2003
Plan which permitted a delay in the payment of the option
exercise price of up to 30 days.
Awards under the Fourth Amended and Restated 2003
Plan. The Fourth Amended and Restated 2003 Plan
provides that the Administrator may grant or issue stock
options, restricted stock, stock appreciation rights,
performance-based stock
and/or cash
bonus awards, dividend equivalent awards, stock payment awards,
deferred stock awards and restricted stock units, or any
combination thereof.
Non-Qualified Stock Options. NQSOs will
provide for the right to purchase common stock at a specified
price, which may not be less than the fair market value on the
date of grant, and usually will become exercisable (in the
discretion of the Administrator) in one or more installments
after the grant date, subject to the participants
continued provision of services to the Company
and/or
subject to the satisfaction of individual or Company performance
targets established by the Administrator. NQSOs may be granted
for any term specified by the Administrator; provided that such
term may not exceed seven years.
Incentive Stock Options
(ISOs). ISOs will be designed to
comply with applicable provisions of the Code and will be
subject to certain restrictions contained in the Code. Among
such restrictions, ISOs must have an
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exercise price not less than the fair market value of a share of
our common stock on the date of grant, may only be granted to
employees, must expire within a specified period of time
following the optionees termination of employment, death
or disability, and must be exercised within seven years after
the date of grant. In the case of an ISO granted to an
individual who owns (or is deemed to own) at least 10% of the
total combined voting power of all classes of stock of the
Company, the Fourth Amended and Restated 2003 Plan provides that
the exercise price for such ISO must be at least 110% of the
fair market value of a share of common stock on the date of
grant and the ISO must expire upon the fifth anniversary of the
date of its grant. To the extent the aggregate fair market value
of stock with respect to which ISOs (determined without regard
to the vesting limitations contained in Section 422(d) of
the Code) are exercisable for the first time by an optionee
during any calendar year exceeds $100,000, such stock options
will be taxed as NQSOs. For this purpose, the fair market value
of stock will be determined as of the time the option is granted.
Director Options and Awards. The Independent
Director Equity Compensation Policy established by the
Administrator pursuant to the Fourth Amended and Restated 2003
Plan will govern stock option and other Award grants to
Independent Directors, including with respect to term and
vesting period. Director options are NQSOs to purchase shares of
common stock granted to Independent Directors. Director options
will provide for the right to purchase common stock at a
specified price, which may not be less than the fair market
value on the date of grant. No portion of a director option will
be exercisable upon the expiration of twelve months following
termination of such directors services as a director of
the Company by reason of permanent and total disability or
death, or upon the expiration of three months following
termination of such directors services as a director of
the Company by reason other than of permanent and total
disability or death, unless the option holder dies within such
three month period or unless otherwise set forth in the option
agreement. Under the Companys form of option agreement for
employees and directors, option holders may exercise vested
stock options for a period of twelve months following their
retirement.
In addition to NQSOs, the Independent Director Equity
Compensation Policy may permit the Independent Directors to
receive other types of Awards under the 2003 Plan, with such
terms and conditions as may be set forth in such policy.
Independent Directors may not receive discretionary Award grants
under the 2003 Plan which are not authorized by the Independent
Director Equity Compensation Policy.
Restricted Stock. The Administrator is
authorized to determine (i) which employees and consultants
of the Company or any subsidiary should be issued restricted
stock, (ii) the number of shares of restricted stock to be
issued to such employees and consultants and (iii) the
terms and conditions applicable to such restricted stock,
consistent with the Fourth Amended and Restated 2003 Plan.
Restricted stock issued under the Fourth Amended and Restated
2003 Plan is subject to such restrictions as the Administrator
may provide in the terms of each individual restricted stock
agreement, which restrictions may include, without limitation,
restrictions concerning voting rights and transferability and
restrictions based on duration of employment with or services to
the Company, Company performance and individual performance;
provided, however, that the Administrator may remove any
or all of such restrictions after issuance of the restricted
stock. Restricted stock typically may be repurchased by the
Company at the original purchase price if the conditions or
restrictions are not met and in the event of the grantees
termination of employment or consultancy, although the
Administrator may make exceptions based on the reason for
termination or on other factors. Shares of restricted stock may
also be granted to Independent Directors, pursuant to such
policies as may be adopted by the Board of Directors from time
to time. Shares of restricted stock granted to Independent
Directors may be fully vested as of the date of grant.
Stock Appreciation Rights. The Administrator
may grant stock appreciation rights having terms and conditions
consistent with the Fourth Amended and Restated 2003 Plan to
employees, consultants or Independent Directors in connection
with stock options or separately. Stock appreciation rights
granted by the Administrator in connection with stock options
entitle the optionee to surrender unexercised to the Company a
portion of the stock option to which the stock appreciation
right relates in exchange for an amount determined by
multiplying (i) the difference obtained by subtracting the
stock option exercise price from the fair market value of a
share of common stock on the date of exercise of the stock
appreciation right by (ii) the number of shares of common
stock with respect to which the stock appreciation right has
been exercised. Stock appreciation rights granted by the
Administrator independent of stock options granted under the
Fourth Amended and Restated 2003 Plan would entitle the grantee
to exercise all or a specified portion of the stock appreciation
right (at the exercise
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price per share of common stock subject to such stock
appreciation right set by the Administrator) in exchange for an
amount determined by multiplying (i) the difference
obtained by subtracting the stock appreciation right purchase
price from the fair market value of a share of common stock on
the date of exercise of the stock appreciation right by
(ii) the number of shares of common stock with respect to
which the stock appreciation right has been exercised. The
amounts determined above may be paid to the grantee of a stock
appreciation right in cash, in common stock (based on its fair
market value as of the date the stock appreciation right is
exercised) or a combination of both, as determined by the
Administrator.
The exercise price per share of a stock appreciation right may
not be less than the fair market value of a share of common
stock on the date of grant. Stock appreciation rights may be
granted for any term specified by the Administrator; provided
that such term for stock appreciation rights granted following
approval of the Fourth Amended and Restated 2003 Plan may not
exceed seven years. Except as described in the preceding
sentence or otherwise required by Section 162(m) of the
Code with respect to a stock appreciation right intended to
qualify as performance-based compensation as described in
Section 162(m) of the Code, there are no restrictions
specified in the Fourth Amended and Restated 2003 Plan on the
exercise of stock appreciation rights or the amount of gain
realizable therefrom, although restrictions may be imposed by
the Administrator in the stock appreciation right agreements.
Performance Awards. The Administrator is
authorized to grant performance awards (Performance
Awards) to employees, consultants and Independent
Directors and to determine whether such Awards will be
performance-based compensation for purposes of
Section 162(m) of the Code. The value of Performance Awards
may be linked to any one or more of the performance criteria
described in the Fourth Amended and Restated 2003 Plan (as
described in the Section 162(m) Limitation
discussion below) or other specific criteria determined by the
Administrator, in each case on a specified date or dates or over
any period or periods determined by the Administrator. In making
such determinations, the Administrator is to consider (among
such other factors as it deems relevant in light of the specific
type of Award) the contributions, responsibilities and other
compensation of the particular eligible individual. Performance
Awards may be paid in cash, shares of common stock, or both, as
determined by the Administrator. The Administrator may grant
Performance Awards in the form of a cash bonus payable upon the
attainment of objective performance goals, or such other
criteria, whether or not objective, which are established by the
Administrator, in each case on a specified date or dates or over
any period or periods determined by the Administrator. Any such
bonuses paid which are intended to be performance-based
compensation for purposes of Section 162(m) of the Code
must be based upon objectively determinable bonus formulas
established in accordance with the Fourth Amended and Restated
2003 Plan.
Dividend Equivalents. The Administrator may
grant the right to receive the equivalent value (in cash or
common stock) of dividends paid on common stock (Dividend
Equivalents) based on dividends declared on the common
stock subject to any Award, to be credited as of dividend
payment dates during the period between the date an Award is
granted to a holder and the date such Award vests, is exercised,
is distributed or expires, as determined by the Administrator.
Such Dividend Equivalents will be converted to cash or
additional shares of common stock by such formula and at such
time and subject to such limitations as may be determined by the
Administrator. No Dividend Equivalents will be payable with
respect to stock options or stock appreciation rights.
Stock Payments. The Administrator may make a
payment to employees, consultants and Independent Directors in
the form of shares of common stock, or an option or other right
to purchase shares of common stock, as part of a bonus, deferred
compensation or other arrangement under the Fourth Amended and
Restated 2003 Plan (a Stock Payment). The number or
value of shares of any Stock Payment will be determined by the
Administrator and may be based on one or more performance
criteria described below in the Section 162(m)
Limitation discussion or any other specific criteria,
including continued service, determined by the Administrator.
Common stock underlying a Stock Payment which is subject to a
vesting schedule or other conditions or criteria will not be
issued until those conditions have been satisfied. Unless
otherwise provided by the Administrator, a holder of a Stock
Payment will have no rights as a Company stockholder with
respect to such Stock Payment until such time as the Stock
Payment has vested and the common stock underlying the Award has
been issued to the holder. Stock Payments may (but are not
required to) be made in lieu of base salary, bonus, fees or
other cash compensation otherwise payable to the applicable
individual.
28
Deferred Stock. The Administrator may grant
deferred stock to employees, consultants and Independent
Directors. The number of shares of deferred stock will be
determined by the Administrator and may be based on one or more
performance criteria described below in the
Section 162(m) Limitation discussion or other
specific criteria, including continued service, as the
Administrator determines, in each case on a specified date or
dates or over any period or periods determined by the
Administrator. Common stock underlying a deferred stock award
which is subject to a vesting schedule or other conditions or
criteria will not be issued until those conditions have been
satisfied. Unless otherwise provided by the Administrator, a
holder of deferred stock shall have no rights as a Company
stockholder with respect to such deferred stock until such time
as the Award has vested and the common stock underlying the
Award has been issued to the holder.
Restricted Stock Units. The Administrator may
grant restricted stock units to employees, consultants and
Independent Directors. The number and terms and conditions of
restricted stock units will be determined by the Administrator,
including the date or dates on which the restricted stock units
will become fully vested and nonforfeitable. The Administrator
may specify such conditions to vesting as it deems appropriate,
including conditions based on one or more performance criteria
described below in the Section 162(m)
Limitation discussion or other specific criteria,
including continued service, in each case on a specified date or
dates or over any period or periods, as the Administrator
determines. The Administrator will specify, or permit the holder
to elect, the conditions and dates upon which the shares of
common stock underlying the restricted stock units shall be
issued, which dates shall not be earlier than the date as of
which the restricted stock units vest and become nonforfeitable
and which conditions and dates will be subject to compliance
with Section 409A of the Code. On the distribution dates,
the Company will issue to the holder one unrestricted, fully
transferable share of common stock for each vested and
nonforfeitable restricted stock unit.
Agreements; Consideration to the Company. Each
Award will be set forth in a separate agreement with the person
receiving the Award and will indicate the type, terms and
conditions of the Award. The dates on which Awards under the
Fourth Amended and Restated 2003 Plan first become exercisable
and on which they expire will be set forth in individual Award
agreements setting forth the terms of the Awards. Such
agreements generally will provide that Awards expire upon
termination of the participants status as an employee,
consultant or director, although the Administrator may provide
that Awards granted to employees or consultants continue to be
exercisable following a termination without cause, or because of
the grantees retirement, death, disability or otherwise.
General
Terms of Awards under the Fourth Amended and Restated 2003
Plan
Full Value Award Vesting Restriction. The 2003
Plan previously required that vesting of stock options and stock
appreciation rights and lapsing of restrictions on restricted
stock grants cannot occur sooner than monthly over three years.
The Fourth Amended and Restated 2003 Plan provides that the
minimum vesting period for Full Value Awards will generally be
three years, with no minimum vesting required for stock options
or stock appreciation rights. In the case of performance-based
vesting, the minimum vesting period for Full Value Awards will
generally be one year, commencing simultaneously with the
evaluation of the performance. However, the Fourth Amended and
Restated 2003 Plan provides that the Company may grant Full
Value Awards without regard to these minimum vesting
restrictions, in an aggregate amount of up to 5% of the share
reserve of the Fourth Amended and Restated 2003 Plan.
Non-Assignability. No Award granted under the
Fourth Amended and Restated 2003 Plan may be assigned or
transferred by the grantee, except by will, the laws of descent
and distribution or pursuant to a qualified domestic relations
order, although the shares underlying such Awards may be
transferred if all applicable restrictions have lapsed. During
the lifetime of the holder of any stock option or right, the
stock option or right may be exercised only by the holder.
Notwithstanding the foregoing, the Administrator may grant NQSOs
that may be assigned or transferred, subject to certain
conditions, to permitted transferees, which include
a child, grandchild, parent, spouse, niece or nephew of the
holder.
Extraordinary Corporate Events. The
Administrator has discretion under the Fourth Amended and
Restated 2003 Plan to provide that stock options and other
rights to acquire common stock will expire at specified times
following, or become exercisable in full upon, the occurrence of
certain specified extraordinary corporate events;
but in such event the Administrator may also give optionees and
other grantees the right to exercise their outstanding stock
options or rights in full during some period prior to such
event, even though Awards have not yet become fully
29
exercisable, and the Administrator may also provide that all
restrictions imposed on some or all shares of restricted stock
and other Awards shall lapse, and some or all shares of
restricted stock may cease to be subject to the Companys
repurchase right after such event.
Effect of Change in Control. Notwithstanding
anything in the Fourth Amended and Restated 2003 Plan or the
provisions of any Award to the contrary, in the event of a
Change in Control, each outstanding Award shall, immediately
prior to the effective date of the Change in Control,
automatically become fully vested, exercisable or payable, as
applicable, for all of the shares of common stock at the time
subject to such Award and, as applicable, may be exercised for
any or all of the shares of common stock subject to the Award.
For purposes of the Fourth Amended and Restated 2003 Plan,
Change in Control means a change in ownership or
control of the Company effected through any of the following
transactions: (a) any person or related group of persons
(other than the Company or a person that, prior to such
transaction, directly or indirectly controls, is controlled by,
or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of
Rule 13d-3
under the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the
Companys outstanding securities pursuant to a tender or
exchange offer for securities of the Company; (b) there is
a change in the composition of the Board over a period of
thirty-six (36) consecutive months (or less) such that a
majority of the Board members (rounded up to the nearest whole
number) ceases, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who
either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or
nominated for election as Board members during such period by at
least a majority of the Board members described in
clause (i) who were still in office at the time such
election or nomination was approved by the Board; (c) a
merger or consolidation of the Company with any other
corporation (or other entity), other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or another
entity) more than
662/3%
of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a
merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no person
acquires more than 25% of the combined voting power of the
Companys then outstanding voting securities shall not
constitute a Change in Control; or (d) a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Companys assets.
Transfer Restrictions. The Administrator, in
its discretion, may impose such restrictions on the
transferability of the shares purchasable upon the exercise of
an Award as it deems appropriate. Any such other restriction
shall be set forth in the respective Award agreement and may be
referred to on the certificates evidencing such shares. The
Administrator may require the employee to give the Company
prompt notice of any disposition of shares of stock acquired by
exercise of an ISO within two years from the date of granting
such ISO or one year after the transfer of such shares to such
employee. The Administrator may direct that the certificates
evidencing shares acquired by exercise of an ISO refer to such
requirement to give prompt notice of disposition.
Withholding Tax Obligations. As a condition to
the issuance or delivery of stock or payment of other
compensation pursuant to the exercise or lapse of restrictions
of any Award granted under the Fourth Amended and Restated 2003
Plan, the Company requires participants to discharge applicable
withholding tax obligations. Shares held by or to be issued to a
participant may also be used to discharge tax withholding
obligations related to exercise of stock options or receipt of
other Awards, subject to the discretion of the Administrator to
disapprove such use.
Securities Law. The Fourth Amended and
Restated 2003 Plan is intended to conform to the extent
necessary with all provisions of the Securities Act and the
Exchange Act, and any and all regulations and rules promulgated
by the SEC thereunder, including, without limitation,
Rule 16b-3
of the Exchange Act. The Fourth Amended and Restated 2003 Plan
will be administered, and Awards will be granted and may be
exercised, only in such a manner as to conform to such laws,
rules and regulations. To the extent permitted by applicable
law, the Fourth Amended and Restated 2003 Plan and Awards
granted thereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
Certain Federal Income Tax Consequences With Respect to the
Fourth Amended and Restated 2003 Plan. The
U.S. federal income tax consequences of the Fourth Amended
and Restated 2003 Plan are summarized in the
30
following discussion which deals with the general tax principles
applicable to the Fourth Amended and Restated 2003 Plan, and is
intended for general information only. Foreign, state and local
income taxes are not discussed. Also, the following discussion
does not address U.S. federal employment tax consequences.
Tax laws are complex and subject to change and may vary
depending on individual circumstances and from locality to
locality. The tax information summarized herein is not tax
advice.
Non-Qualified Stock Options. For federal
income tax purposes, an optionee generally will not recognize
taxable income on the grant of an NQSO under the Fourth Amended
and Restated 2003 Plan, but will recognize ordinary income, and
the Company or other employer corporation generally will be
entitled to a deduction, upon the exercise of an NQSO. The
amount of income recognized (and the amount generally deductible
by the Company or other employer corporation) generally will be
equal to the excess, if any, of the fair market value of the
shares at the time of exercise over the aggregate exercise price
paid for the shares, regardless of whether the exercise price is
paid in cash or in shares or other property. An optionees
basis for the stock for purposes of determining his or her gain
or loss upon a subsequent disposition of the shares generally
will be the fair market value of the stock on the date of
exercise of the NQSO, and any subsequent gain or loss will
generally be taxable as capital gains or losses.
Incentive Stock Options. An optionee generally
will not recognize taxable income upon either the grant or
exercise of an ISO; however, the amount by which the fair market
value of the shares at the time of exercise exceeds the exercise
price will be an item of adjustment for the optionee
for purposes of the alternative minimum tax. Generally, upon the
sale or other taxable disposition of the shares of common stock
acquired upon exercise of an ISO, the optionee will recognize
income taxable as capital gains in an amount equal to the
excess, if any, of the amount realized in such disposition over
the option exercise price, provided that no disposition of the
shares has taken place within either (a) two years from the
date of grant of the ISO or (b) one year from the date of
exercise. If the shares of common stock are sold or otherwise
disposed of before the end of the one-year and two-year periods
specified above, the difference between the ISO exercise price
and the fair market value of the shares on the date of exercise
generally will be taxable as ordinary income; the balance of the
amount realized from such disposition, if any, generally will be
taxed as capital gains. If the shares of common stock are
disposed of before the expiration of the one-year and two-year
periods, the optionees ordinary income generally is
limited to the excess, if any, of the amount realized in such
disposition over the option exercise price paid. The Company (or
other employer corporation) generally will be entitled to a tax
deduction with respect to an ISO only to the extent the optionee
has ordinary income upon sale or other disposition of the shares
of common stock.
Stock Appreciation Rights. Taxable income is
not generally recognized upon the receipt of a stock
appreciation right, but upon exercise of the stock appreciation
right the fair market value of the shares (or cash in lieu of
shares) received generally will be taxable as ordinary income to
the recipient in the year of such exercise. The Company (or
other employer corporation) generally will be entitled to a
compensation deduction for the same amount which the recipient
recognizes as ordinary income.
Restricted Stock. An employee to whom
restricted stock is issued generally will not recognize taxable
income upon such issuance and the Company (or other employer
corporation) generally will not then be entitled to a deduction,
unless an election is made under Section 83(b) of the Code.
However, when restrictions on shares of restricted stock lapse,
such that the shares are no longer subject to a substantial risk
of forfeiture, the employee generally will recognize ordinary
income and the Company (or other employer corporation) generally
will be entitled to a deduction for an amount equal to the
excess of the fair market value of the shares at the date such
restrictions lapse over the purchase price therefor. If a timely
election is made under Section 83(b) with respect to
qualifying restricted stock, the employee generally will
recognize ordinary income at the date of issuance equal to the
excess, if any, of the fair market value of the shares at that
date over the purchase price therefor and the Company (or other
employer corporation) will be entitled to a deduction for the
same amount.
Restricted Stock Units. The grantee generally
will not realize taxable income at the time of the grant or
vesting of restricted stock units, and the Company will not be
entitled to a deduction at such times, and a grantee may not
make a Section 83(b) election with respect to restricted
stock units. When a vested restricted stock unit award is paid,
the grantee will have ordinary income in an amount equal to the
fair market value of the shares delivered, and the Company will
be entitled to a corresponding deduction for the same amount.
31
Dividend Equivalents, Deferred Stock, Stock Payments and
Performance Awards. A 2003 Plan participant will
not recognize taxable income and the Company will not be
entitled to a tax deduction upon the grant of Dividend
Equivalents, deferred stock, Stock Payments or Performance
Awards until cash or shares are paid or distributed to the
participant. At that time, any cash payments or the fair market
value of shares that the participant receives will be taxable to
the participant at ordinary income tax rates and the Company
should be entitled to a corresponding tax deduction for the same
amount. Payments in shares will be valued at the fair market
value of the shares at the time of the payment.
Section 409A of the Code. Certain types
of Awards under the 2003 Plan, including restricted stock units,
may constitute, or provide for, a deferral of compensation
subject to Section 409A of the Code. Unless certain
requirements set forth in Section 409A are complied with,
holders of such Awards may be taxed earlier than would otherwise
be the case (e.g., at the time of vesting instead of the time of
payment) and may be subject to an additional 20% penalty tax
(and, potentially, certain interest penalties). To the extent
applicable, the 2003 Plan and Awards granted thereunder will be
structured and interpreted to comply with Section 409A of
the Code and the Department of Treasury regulations and other
interpretive guidance that may be issued under
Section 409A. To the extent determined necessary or
appropriate by the Administrator, the 2003 Plan and applicable
Award agreements may be amended to exempt the applicable Awards
from Section 409A of the Code or to comply with
Section 409A.
Section 162(m) Limitation. In general,
under Section 162(m) of the Code, income tax deductions of
publicly held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option
exercises, transfers of property and benefits paid under
non-qualified plans) for certain executive officers exceeds
$1,000,000 (less the amount of any excess parachute
payments as defined in Section 280G of the Code) in
any one year. However, under Section 162(m), the deduction
limit does not apply to certain performance-based
compensation.
Under Section 162(m), stock options and stock appreciation
rights will satisfy the performance-based
compensation exception if (a) Proposal 2 is
approved by stockholders at the Annual Meeting, (b) the
award of the stock options or stock appreciation rights are made
by a committee of the Board consisting solely of two or more
outside directors, (c) the plan sets the
maximum number of shares that can be granted to any person
within a specified period and (d) the compensation is based
solely on an increase in the stock price after the grant date
(i.e., the stock option or stock appreciation right exercise
price is equal to or greater than the fair market value of the
stock subject to the award on the grant date). Other types of
awards may only qualify as performance-based
compensation if such awards are only granted or payable to
the recipients based upon the attainment of objectively
determinable and pre-established performance goals which are
established by a qualifying committee and which relate to
performance targets which are approved by the Companys
stockholders.
The Fourth Amended and Restated 2003 Plan has been designed to
permit the Administrator to grant stock options and stock
appreciation rights which will qualify as
performance-based compensation. In addition, to
permit Awards other than stock options and stock appreciation
rights to qualify as performance-based compensation,
the Fourth Amended and Restated 2003 Plan provides that the
Administrator may designate as Section 162(m)
Participants certain employees whose compensation for a
given fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code. The
Administrator may grant Awards to Section 162(m)
Participants that vest or become exercisable upon the attainment
of performance targets which are related to one or more of the
following performance goals with respect to the Company, any
subsidiary or any division or operating unit: (a) revenue;
(b) sales; (c) cash flow; (d) earnings per share
of common stock (including earnings before any one or more of
the following: (i) interest; (ii) taxes;
(iii) depreciation; and (iv) amortization);
(e) return on equity; (f) total stockholder return;
(g) return on capital; (h) return on assets or net
assets; (i) income or net income; (j) operating income
or net operating income; (k) operating profit or net
operating profit; (l) operating margin; (m) cost
reductions or savings; (n) research and development
expenses (including research and development expenses as a
percentage of sales or revenues); (o) working capital; and
(p) market share.
Awards Granted Under the 2003 Plan. We cannot
currently determine the benefits or number of shares subject to
Awards that may be granted in the future to directors, executive
officers and employees (including employee directors) under the
Fourth Amended and Restated 2003 Plan. The following table sets
forth information with respect to restricted stock awards
and/or stock
options granted under the 2003 Plan to each of the
Companys
32
named executive officers, all current executive officers as a
group, all current directors (other than executive officers) as
a group and all employees (including all current officers who
are not executive officers) receiving awards as a group in the
year ended December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
Dollar Value
|
|
|
Number of Shares Underlying
|
|
Name
|
|
($)(1)
|
|
|
Awards Granted (#)
|
|
|
Henry L. Nordhoff
|
|
|
5,714,250
|
|
|
|
95,000
|
|
Herm Rosenman
|
|
|
1,303,270
|
|
|
|
21,667
|
|
Carl W. Hull
|
|
|
2,857,125
|
|
|
|
47,500
|
|
Daniel L. Kacian, Ph.D., M.D.
|
|
|
1,629,042
|
|
|
|
27,083
|
|
R. William Bowen
|
|
|
1,303,270
|
|
|
|
21,667
|
|
All current executive officers as a group (12 persons)
|
|
|
19,092,693
|
|
|
|
317,418
|
|
All current directors (other than executive officers) as a group
(7 persons)
|
|
|
3,864,068
|
|
|
|
67,797
|
|
All employees receiving awards (including all current officers
who are not executive officers) as a group (591 persons)
|
|
|
41,154,475
|
|
|
|
710,437
|
|
|
|
|
(1) |
|
Determined by multiplying the applicable number of shares
underlying stock options and restricted stock awards granted by
(a) with respect to stock options, the exercise price of
each award on the date of grant (which in each case is equal to
the fair market value of our common stock on the date of grant),
or (b) with respect to restricted stock awards, the fair
market value of our common stock on the date of grant. |
The Board
of Directors recommends a vote in favor of
Proposal 2.
33
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected
Ernst & Young LLP as the Companys independent
auditors for the fiscal year ending December 31, 2009, and
has further directed that management submit the selection of the
independent auditors for ratification by the stockholders at the
Annual Meeting. Ernst & Young LLP has audited the
Companys financial statements since 1989. Representatives
of Ernst & Young 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.
Neither the Companys Bylaws nor other governing documents
or applicable law require stockholder ratification of the
selection of Ernst & Young LLP as the Companys
independent auditors. However, the Audit Committee of the Board
of Directors is submitting the selection of Ernst &
Young LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the
selection, the Audit Committee of the Board of Directors will
reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee of the Board of
Directors in its discretion may direct the appointment of
different independent auditors at any time during the year if it
determines 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 Ernst & Young LLP.
Principal
Accountant Fees and Services
In connection with the audit of the 2008 financial statements,
the Company entered into an engagement agreement with
Ernst & Young LLP which sets forth the terms by which
Ernst & Young LLP will perform audit services for the
Company. That agreement is subject to alternative dispute
resolution procedures and an exclusion of punitive damages.
The following table represents aggregate fees billed to the
Company for fiscal years ended December 31, 2008 and 2007
by Ernst & Young LLP, the Companys principal
accountant. All fees described below were approved by the Audit
Committee.
During the fiscal year ended December 31, 2008, none of the
hours expended on the Companys financial audit by
Ernst & Young LLP were provided by persons other than
Ernst & Young LLPs full-time employees.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Audit Fees(1)(2)
|
|
$
|
1,156
|
|
|
$
|
1,087
|
|
Audit-related Fees
|
|
|
|
|
|
|
|
|
Tax Fees(3)
|
|
|
|
|
|
|
4
|
|
All Other Fees
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
1,160
|
|
|
$
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes the audit of the Companys annual financial
statements (including audits of the Companys subsidiaries
Gen-Probe UK Limited and Molecular Light Technology Limited and
its subsidiaries), review of the Companys financial
information included in its quarterly reports on
Form 10-Q,
and accounting consultations. Also includes fees incurred for
the evaluation of managements assessment of the
effectiveness of the Companys internal control over
financial reporting as well as the audit of the effectiveness of
the Companys internal control over financial reporting,
pursuant to the Sarbanes-Oxley Act of 2002. |
|
(2) |
|
Prior year amounts have been adjusted for invoices received
after the filing date of the Companys 2008 Proxy Statement
for services rendered in 2007. |
|
(3) |
|
Includes consultations related to federal and California state
tax audits. |
34
Pre-approval
Policies and Procedures
The Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by
Ernst & Young LLP. Pursuant to the policy, the Audit
Committee generally pre-approves specified services in the
defined categories of audit services, audit-related services,
and tax services, up to specified amounts. Pre-approval may also
be given as part of the Audit Committees approval of the
scope of the engagement of the independent auditor or on an
individual explicit
case-by-case
basis before the independent auditor is engaged to provide each
service. The pre-approval of services may be delegated to one or
more of the Audit Committees members, but the decision
must be reported to the full Audit Committee and ratified at its
next scheduled meeting. The Audit Committee has delegated this
pre-approval authority to the Chairman of the Audit Committee
and the Chairmans decision is then discussed and ratified
at the next scheduled meeting.
The Audit Committee has determined that the rendering of the
services other than audit services by Ernst & Young
LLP is compatible with maintaining the principal auditors
independence.
The Board
of Directors recommends a vote in favor of
Proposal 3.
35
PROPOSAL 4
ADVISORY VOTE TO APPROVE THE
PROPOSED APPOINTMENT OF CARL W. HULL TO
THE COMPANYS BOARD OF DIRECTORS, EFFECTIVE MAY 18, 2009
The Board of Directors presently has eight members. As
previously disclosed, Mr. Nordhoff intends to retire as CEO
of the Company on May 17, 2009. As described under
Proposal 1, the Company and Mr. Nordhoff intend that
he will continue to serve as the Companys non-executive
Chairman of the Board of Directors, and he has been recommended
by the Companys Nominating and Corporate Governance
Committee and Board of Directors for
re-election
at the Annual Meeting.
On March 20, 2009, the Board of Directors appointed Carl W.
Hull, the Companys current President and Chief Operating
Officer, as the Companys CEO, effective May 18, 2009
following Mr. Nordhoffs retirement as the
Companys CEO. In connection with Mr. Hulls
appointment as CEO, the Board of Directors expects to increase
the size of the Board from eight to nine members and elect
Mr. Hull to serve as a member of the Companys Board
of Directors, effective May 18, 2009, to serve in the class
of directors holding office until the Companys 2010 Annual
Meeting of Stockholders. Pursuant to the Companys Amended
and Restated Bylaws, newly created directorships resulting from
any increase in the authorized number of directors may be filled
solely by the affirmative vote of a majority of the directors
then in office. If so appointed, Mr. Hull would hold office
until expiration of his term of office, and until his successor
is elected and qualified or his earlier death, resignation or
removal. Mr. Hull has agreed to serve on the Companys
Board of Directors if appointed by the Board. If so appointed,
Mr. Hull will not qualify as independent, as
that term is defined by Nasdaq Marketplace
Rule 4200(a)(15), by virtue of his employment with the
Company. A description of Mr. Hulls recent
professional experience is set forth below under the heading
Executives Executive Officers.
Mr. Hull does not currently serve on the board of directors
of any publicly traded company.
Because the Board of Directors believes it is important to
provide the Companys stockholders with an opportunity to
consider the Boards appointment of any new director, in
February 2009 the Board amended and restated Gen-Probes
Corporate Governance Guidelines to provide that the Board of
Directors will submit future Board appointments of a director to
the stockholders for ratification at the next regularly
scheduled annual meeting of stockholders.
Neither the Companys Amended and Restated Bylaws nor the
Companys Corporate Governance Guidelines, or applicable
law, requires stockholders to approve the proposed appointment
of Mr. Hull to the Board. However, in an effort to remain
consistent with the intent of the recent amendments made to the
Companys Corporate Governance Guidelines described in the
preceding paragraph, the Nominating and Corporate Governance
Committee has recommended the submission of, and the Board of
Directors has agreed to submit, the matter to the Companys
stockholders for an advisory vote. If the Companys
stockholders fail to approve Mr. Hulls proposed
appointment to the Board, the Board will consider that vote in
determining whether to appoint Mr. Hull to the Board. Even
if Mr. Hulls appointment is not approved by the
Companys stockholders, the Board of Directors in its
discretion may appoint Mr. Hull as a director.
To be approved, Proposal 4 must receive a majority of votes
cast in person or by proxy (i.e., the number of shares voted
For approval of the proposal must exceed 50% of the
number of votes cast in person or by proxy with respect to the
proposal). Only votes For and Against
will affect the outcome. Abstentions and broker non-votes will
have no effect.
The Board of Directors recommends a vote in favor of
Proposal 4.
36
SECURITY
OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Companys common stock as of
February 13, 2009 by: (i) all those known by the
Company to be beneficial owners of more than five percent of its
common stock; (ii) each of the Companys named
executive officers; (iii) each director and nominee for
director of the Company; and (iv) all directors and
executive officers of the Company as a group. Except as
otherwise noted, the address of each person listed in the table
is
c/o Gen-Probe
Incorporated, 10210 Genetic Center Drive, San Diego,
California 92121.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership(1)
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
Shares Owned
|
|
|
Right to Acquire
|
|
|
Total
|
|
|
Total
|
|
|
|
(#)(2)
|
|
|
(#)(3)
|
|
|
(#)
|
|
|
(%)
|
|
|
Five Percent Beneficial Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FMR LLC(4)
|
|
|
4,492,747
|
|
|
|
|
|
|
|
4,492,747
|
|
|
|
8.58
|
%
|
Morgan Stanley(5)
|
|
|
3,690,615
|
|
|
|
|
|
|
|
3,690,615
|
|
|
|
7.05
|
%
|
Barclays Global Fund Advisors(6)
|
|
|
2,722,578
|
|
|
|
|
|
|
|
2,722,578
|
|
|
|
5.20
|
%
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry L. Nordhoff
|
|
|
141,774
|
(7)
|
|
|
699,396
|
|
|
|
841,170
|
|
|
|
1.58
|
%
|
Herm Rosenman
|
|
|
25,817
|
|
|
|
113,203
|
|
|
|
139,020
|
|
|
|
|
*
|
Carl W. Hull
|
|
|
23,731
|
|
|
|
52,916
|
|
|
|
76,647
|
|
|
|
|
*
|
Daniel L. Kacian, Ph.D., M.D.
|
|
|
37,901
|
|
|
|
237,186
|
|
|
|
275,087
|
|
|
|
|
*
|
R. William Bowen
|
|
|
31,314
|
|
|
|
48,619
|
|
|
|
79,933
|
|
|
|
|
*
|
John W. Brown
|
|
|
5,677
|
|
|
|
46,249
|
|
|
|
51,926
|
|
|
|
|
*
|
Raymond V. Dittamore
|
|
|
4,577
|
(8)
|
|
|
46,249
|
|
|
|
50,826
|
|
|
|
|
*
|
Armin M. Kessler
|
|
|
14,483
|
|
|
|
56,249
|
|
|
|
70,732
|
|
|
|
|
*
|
John C. Martin, Ph.D.
|
|
|
1,045
|
|
|
|
16,249
|
|
|
|
17,294
|
|
|
|
|
*
|
Phillip M. Schneider
|
|
|
8,234
|
|
|
|
76,249
|
|
|
|
84,483
|
|
|
|
|
*
|
Lucy Shapiro, Ph.D.
|
|
|
156
|
|
|
|
|
|
|
|
156
|
|
|
|
|
*
|
Abraham D. Sofaer
|
|
|
16,331
|
(9)
|
|
|
76,249
|
|
|
|
92,580
|
|
|
|
|
*
|
All executive officers and directors as a group (19 individuals)
|
|
|
389,519
|
(10)
|
|
|
1,632,083
|
(11)
|
|
|
2,021,602
|
|
|
|
3.74
|
%
|
|
|
|
* |
|
Represents beneficial ownership of less than 1% of our common
stock. |
|
(1) |
|
This table is based on information supplied by officers,
directors and principal stockholders and Schedules 13G (as
indicated) filed with 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
52,336,758 shares outstanding on February 13, 2009,
adjusted as required by rules promulgated by the SEC. |
|
(2) |
|
Includes the following specified number of shares of restricted
stock that are still subject to restriction as of 60 days
after February 13, 2009: Mr. Hull (21,250);
Mr. Rosenman (17,167); Dr. Kacian (24,333); and
Mr. Bowen (18,167). These shares of restricted stock were
granted on October 17, 2005, August 15, 2006,
August 15, 2007, March 1, 2007 (with respect to
Mr. Hull only) and August 15, 2008, and vest as
follows:
one-fourth
(1/4) of the shares vest annually over four years from the date
of grant. |
|
(3) |
|
Represents the number of shares issuable upon exercise of stock
options exercisable within 60 days after February 13,
2009. |
|
(4) |
|
Beneficially owned by FMR LLC (formerly FMR Corp.) and certain
affiliated entities, including Fidelity Management &
Research Company, a wholly-owned subsidiary of FMR LLC. The
business address for FMR |
37
|
|
|
|
|
LLC is: 82 Devonshire Street, Boston, Massachusetts 02109. The
foregoing information is based solely upon information contained
in a Schedule 13G/A filed with the SEC by the foregoing
entity on February 17, 2009. |
|
(5) |
|
The business address for Morgan Stanley is: 1585 Broadway, New
York, New York 10036. The foregoing information is based solely
upon information contained in a Schedule 13G/A filed with
the SEC by the foregoing entity on February 17, 2009. |
|
(6) |
|
Beneficially owned by Barclays Global Fund Advisors and
certain affiliated entities, including Barclays Global
Investors, N.A., Barclays Global Investors, LTD, Barclays Global
Investors Japan Limited, Barclays Global Investors Canada
Limited, Barclays Global Investors Australia Limited, and
Barclays Global Investors (Deutschland) AG. The business address
for Barclays Global Fund Advisors is 400 Howard Street,
San Francisco, California 94105. The foregoing information
is based solely upon information contained in a
Schedule 13G filed with the SEC by the foregoing entities
on February 5, 2009. |
|
(7) |
|
Includes an aggregate of 80,000 deferred issuance restricted
stock awards, of which an aggregate of 41,248 shares
underlying such awards were vested as of 60 days after
February 13, 2009. Pursuant to the applicable deferred
issuance agreement, and subject to vesting in accordance with
their terms, the deferred issuance restricted stock awards will
be issued to Mr. Nordhoff at the earlier of his election or
upon the termination of his employment with the Company. All
deferred issuance restricted stock awards will further be issued
in a manner that complies with Section 409A of the Code,
which may include deferring the issuance of such shares for six
months after the termination of Mr. Nordhoffs
employment. |
|
(8) |
|
Includes 2,000 shares of common stock held by the Dittamore
Family Trust A, for which Mr. Dittamore is the trustee. |
|
(9) |
|
Includes 1,000 shares of common stock held by the
Trust FBO Michael J. Sofaer, in which Mr. Sofaer is a
trustee; 1,000 shares of common stock held by the
Trust FBO Helen R. Sofaer, in which Mr. Sofaer is a
trustee; 1,000 shares of common stock held by the
Trust FBO Joseph S. Sofaer, in which Mr. Sofaer is a
trustee; 1,000 shares of common stock held by the
Trust FBO Aaron R. Sofaer, in which Mr. Sofaer is a
trustee; and 1,000 shares of common stock held by the
Trust FBO Raphael J. Sofaer, in which Mr. Sofaer is a
trustee. |
|
(10) |
|
Includes an aggregate of 78,479 shares (including
restricted shares) which other executive officers of the Company
own as of February 13, 2009, as follows: Ms. De Walt
(24,540); Ms. Ellerbrock (6,154); Dr. Gargan (18,697);
Mr. Kondor (19,717); Mr. Tardif (200); and
Ms. Yang (9,171). |
|
(11) |
|
Includes an aggregate of 163,269 shares issuable to other
executive officers of the Company pursuant to outstanding stock
options exercisable as of February 13, 2009 or which become
exercisable within 60 days after February 13, 2009, as
follows: Ms. De Walt (79,666); Ms. Ellerbrock (8,333);
Dr. Gargan (27,564); Mr. Kondor (28,853); and
Ms. Yang (18,853). |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers, and persons who
own more than ten percent of a registered class of the
Companys 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 ten percent stockholders
are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Companys 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, 2008, all Section 16(a)
filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
38
EXECUTIVES
Executive
Officers
The following table sets forth information as to persons who
serve as our executive officers as of March 15, 2009.
|
|
|
|
|
|
|
Name
|
|
Position
|
|
Age
|
|
Henry L. Nordhoff
|
|
Chairman and Chief Executive Officer
|
|
|
67
|
|
Carl W. Hull
|
|
President and Chief Operating Officer
|
|
|
51
|
|
Daniel L. Kacian, Ph.D., M.D.
|
|
Executive Vice President and Chief Scientist
|
|
|
62
|
|
R. William Bowen
|
|
Senior Vice President, General Counsel and Secretary
|
|
|
56
|
|
Diana De Walt
|
|
Senior Vice President Human Resources
|
|
|
54
|
|
Jorgine Ellerbrock
|
|
Senior Vice President Operations
|
|
|
47
|
|
Paul E. Gargan, Ph.D.
|
|
Senior Vice President Business Development
|
|
|
52
|
|
Stephen J. Kondor
|
|
Senior Vice President Sales and Marketing
|
|
|
53
|
|
Eric Lai, Ph.D.
|
|
Senior Vice President Research and Development
|
|
|
52
|
|
Herm Rosenman
|
|
Senior Vice President Finance and Chief Financial
Officer
|
|
|
61
|
|
Eric Tardif
|
|
Senior Vice President Corporate Strategy
|
|
|
40
|
|
Christina C. Yang, Ph.D.
|
|
Senior Vice President Clinical, Regulatory and
Quality
|
|
|
52
|
|
Henry L. Nordhoff, Chairman and Chief Executive Officer.
Mr. Nordhoff has served as a director of the Company since
July 1994. Mr. Nordhoff joined the Company in July 1994 as
Chief Executive Officer and President and was elected Chairman
of the Board in September 2002. Since March 1, 2008,
Mr. Nordhoff has served as the Companys Chairman and
Chief Executive Officer. As previously disclosed,
Mr. Nordhoff intends to retire as the Companys Chief
Executive Officer on May 17, 2009. The Company and
Mr. Nordhoff intend that he will continue to serve as the
Companys non-executive Chairman of the Board, and he has
been recommended by the Companys Nominating and Corporate
Governance Committee and Board of Directors for re-election at
the Annual Meeting. Prior to joining the Company,
Mr. Nordhoff was President and Chief Executive Officer of
TargeTech, Inc., a gene therapy company that was merged into
Immune Response Corporation. Prior to that, Mr. Nordhoff
was at Pfizer, Inc. in senior positions in Brussels, Seoul,
Tokyo and New York. Mr. Nordhoff received a B.A. in
international relations and political economy from Johns Hopkins
University and an M.B.A. from Columbia University.
Mr. Nordhoff is also a member of the board of directors of
MannKind Corporation.
Carl W. Hull, President and Chief Operating
Officer. Mr. Hull joined the Company as
Executive Vice President and Chief Operating Officer in February
2007 and was appointed President in March 2008. In
March 2009, Mr. Hull was appointed as the Companys
Chief Executive Officer, effective May 18, 2009 following
Mr. Nordhoffs retirement as the Companys CEO.
Mr. Hull previously served as Vice President &
General Manager of the SDS/Arrays Business Unit of Applied
Biosystems, which develops and sells genomic research systems
and reagents, from January 2005 to January 2007. Prior to
joining Applied Biosystems, Mr. Hull held a number of
positions with Applied Imaging Corp., which makes automated
imaging and imaging analysis systems, most recently serving as
its Chief Executive Officer from January 2001 to December 2004.
Mr. Hull received a B.A. in political science and
international relations from Johns Hopkins University and an
M.B.A. from the University of Chicago.
Daniel L. Kacian, Ph.D., M.D., Executive Vice
President and Chief Scientist. Dr. Kacian joined the
Company in 1985 as Director of Medical and Scientific Affairs
and until 1992 was primarily responsible for directing
Research & Development and Regulatory Affairs.
Dr. Kacian has held various management positions with the
Company and, in 2002, was promoted to Executive Vice President
and Chief Scientist. From 1980 to 1985,
39
Dr. Kacian was on the faculty of the Department of
Pathology and Laboratory Medicine at the University of
Pennsylvania and was Director of Clinical Microbiology at the
Hospital of the University of Pennsylvania. Dr. Kacian
received an M.D. in 1978 from the University of Miami and did
his internship and residency in laboratory medicine at
Washington University and Barnes Hospital in St. Louis.
Prior to attending medical school, Dr. Kacian received a
B.A. in mathematics from Western Reserve University and an M.S.
in microbiology and Ph.D. in molecular genetics from the
University of Illinois and served on the faculty of the
Department of Human Genetics and Development at Columbia
University.
R. William Bowen, Senior Vice President, General
Counsel and Secretary. Mr. Bowen joined the Company in 1997
as Vice President, General Counsel and Assistant Secretary and
was appointed Secretary in August 2002 and Senior Vice President
in May 2007. Prior to joining the Company, Mr. Bowen was a
business litigation partner with the law firm of Luce, Forward,
Hamilton & Scripps in San Diego, California.
Mr. Bowen received a B.S. in commerce and a J.D. from the
University of Virginia.
Diana De Walt, Senior Vice President Human
Resources. Ms. De Walt joined the Company in January 2005
as Vice President, Human Resources and was appointed Senior Vice
President in May 2007. Prior to joining the Company, Ms. De
Walt founded The HR Company in 1993 and served as its President
and Principal Consultant providing professional human resources
services to over 85 companies in a wide variety of
industries. From 1988 to 1993, Ms. De Walt worked at Mitek
Systems, Inc. as Director, Human Resources and subsequently Vice
President, Human Resources. From 1987 to 1988, Ms. De Walt
was Vice President, Human Resources of Imperial Savings Real
Estate Lending Group. From 1984 to 1987, Ms. De Walt was
Manager, Human Resources of Security Pacific Business Credit and
Vice President, Human Resources of Security Pacific Business
Finance. Ms. De Walt received an A.A. in liberal arts from
St. Cloud State University and holds a Senior Professional In
Resource Management certification.
Jorgine Ellerbrock, Senior Vice President
Operations. Ms. Ellerbrock joined the Company in November
2007 as Senior Vice President, Operations. From August 2004 to
November 2007, Ms. Ellerbrock served as Vice President,
Operations of various business units of Invitrogen Corporation,
most recently serving as Vice President, Operations of its
Molecular Biology Business from February 2007 to November 2007.
Prior to joining Invitrogen Corporation, Ms. Ellerbrock
held a number of positions with GE Healthcare Bio-Sciences
(formerly Amersham Biosciences), a medical technology and
services company, most recently serving as its Vice President,
Operations from November 2002 to July 2004 and its Vice
President, Genomics Product Management from January 2002 to
November 2002. Ms. Ellerbrock received a B.S. in
microbiology and an M.B.A. from San Diego State University.
Paul E. Gargan, Ph.D., Senior Vice
President Business Development. Dr. Gargan
joined the Company as Vice President, Business Development and
Planning in 1997. In July 2002 Dr. Gargan was named Vice
President Business Development and in March 2009
Dr. Gargan was appointed Senior Vice President
Business Development. Prior to joining the Company,
Dr. Gargan was President and Chief Scientific Officer of
American Biogenetic Sciences. Dr. Gargan received a B.S. in
chemistry and a Ph.D. in biochemistry from Queens University and
an M.B.A. from the University of Notre Dame.
Stephen J. Kondor, Senior Vice President
Sales and Marketing. Mr. Kondor joined the Company in July
2005 as Vice President, Sales and Marketing and was appointed
Senior Vice President in May 2007. Mr. Kondor previously
served as Vice President/General Manager Genetic
Analysis Business of Applied Biosystems (APPLERA), a life
sciences company, from November 2004 to June 2005. From January
2003 to November 2004, Mr. Kondor served as Vice President
and General Manager of Fisher Scientific, a life sciences
company. From August 2001 to January 2003, Mr. Kondor
served as Senior Vice President and General Manager of IGEN
International, a biotechnology diagnostics company. From August
2000 to January 2001, Mr. Kondor served as Vice President,
Worldwide Marketing & Sales of Avocet Medical Inc., a
life sciences company. Prior to those positions, Mr. Kondor
also held positions at Becton Dickinson Company, Biometric
Imaging, Inc., the Diagnostics Division of Abbott Laboratories,
and B. Braun Medical. Mr. Kondor received his B.S. in
business administration from Moravian College in 1981.
Eric Lai, Ph.D., Senior Vice President
Research and Development. Dr. Lai joined the Company in
February 2009 as Senior Vice President, Research and
Development. Prior to joining the Company, Dr. Lai was
employed by GlaxoSmithKline, where he most recently served as
Vice President, Pharmacogenetics Experimental Coordination
40
and Analysis from 2006 to 2009 and Vice President, Discovery and
Pipeline Genetics from 2003 to 2006. Prior to joining
GlaxoSmithKline in 1995, Dr. Lai was an Assistant Professor
in the Department of Pharmacology at the University of North
Carolina, Chapel Hill. Dr. Lai received a B.S. in chemistry
from the University of Waterloo in Ontario, Canada, M. Phil. and
M.A. degrees from the department of pharmacology at Columbia
University, and a Ph.D. in pharmacology and microbiology from
the College of Physicians and Surgeons at Columbia University.
Herm Rosenman, Senior Vice President Finance
and Chief Financial Officer. Mr. Rosenman joined the
Company as Chief Financial Officer in June 2001 and was
appointed Senior Vice President in May 2007. Prior to joining
the Company, he was President and Chief Executive Officer of
Ultra Acquisition Corp., a retail chain and consumer products
manufacturer, from 1997 to 2000. Mr. Rosenman served as
President and Chief Executive Officer of RadNet Management,
Inc., a large healthcare provider, from 1994 to 1997, and prior
to that was Chief Financial Officer for Rexene Corp., a Fortune
1000 company in the petrochemicals industry.
Mr. Rosenman was previously a partner at
Coopers & Lybrand (now PricewaterhouseCoopers LLP)
where he served numerous Fortune 1000 clients, principally in
the pharmaceuticals and telecommunications industries.
Mr. Rosenman received a B.B.A. in finance and accounting
from Pace University and an M.B.A. in finance from the Wharton
School of the University of Pennsylvania. Mr. Rosenman
serves on the Board of Directors of ARYx Therapeutics, a drug
discovery and development company, where he serves as Chairman
of the Audit Committee and as Lead Independent Director.
Mr. Rosenman also serves on the Board of Directors of
Emphasys Medical, Inc., where he serves as Chairman of the
Corporate Governance Committee and as a member of the Audit
Committee.
Eric Tardif, Senior Vice President Corporate
Strategy. Mr. Tardif joined the Company in January 2009 as
Senior Vice President, Corporate Strategy. Prior to joining the
Company, Mr. Tardif was a managing director of Morgan
Stanleys healthcare investment banking group from December
2007 to November 2008 and an executive director of Morgan
Stanleys healthcare investment banking group from February
2006 until December 2007. Before joining Morgan Stanley in
February 2006, Mr. Tardif was a principal in Piper
Jaffrays healthcare investment banking group from January
2005 to February 2006, and a vice president in Piper
Jaffrays healthcare investment banking group from January
2003 until December 2004. Mr. Tardif holds a chartered
financial analyst (CFA) designation. Mr. Tardif received a
B.A. in business from Bishops University in Québec,
an M.B.A. from the University of British Columbia, and an M.S.
in finance from the Carroll Graduate School of Management at
Boston College.
Christina C. Yang, Ph.D., Senior Vice
President Clinical, Regulatory and Quality.
Dr. Yang joined the Company in April 2007 as Vice
President, Clinical, Regulatory and Quality and was appointed
Senior Vice President in May 2007. Prior to joining the Company,
Dr. Yang was employed by Focus Diagnostics, a healthcare
diagnostics company, most recently serving as Vice President,
Quality and Regulatory Affairs from June 2003 to April 2007 and
as Senior Director, Quality Systems from March 2001 until June
2003. Dr. Yang received a B.S. in biology from National
Taiwan Normal University and a Ph.D. in zoology from Iowa State
University. Dr. Yang is a Regulatory Affairs Certified
(RAC), ISO9000 certified lead auditor as well as a Certified
Quality Auditor (CQA).
41
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Role
and Membership of the Compensation Committee
Members of the Compensation Committee are independent directors
who are not employees of the Company or its subsidiaries. The
Compensation Committee is currently comprised of the following
four members: Mr. Kessler, who serves as Chairperson;
Mr. Brown; Dr. Martin; and Mr. Schneider. None of
the Compensation Committee members has any material business
relationships with the Company or its subsidiaries. All of the
members of the Compensation Committee are
independent, as that term is defined by Nasdaq
Marketplace Rule 4200(a)(15).
The Compensation Committee operates pursuant to a written
charter that outlines its specific authority, duties and
responsibilities. The charter is periodically reviewed and
revised by the Compensation Committee and the Board and is
available on the Companys website at
www.gen-probe.com.
The Compensation Committee meets at scheduled times during the
year and holds additional meetings from time to time to review
and discuss executive compensation issues. The Compensation
Committee may also take action by written consent. The
Compensation Committee held six meetings during fiscal year 2008
and acted by written consent on one occasion. Executive officers
are not present during the discussion of their compensation.
The Compensation Committee acts on behalf of the Board to
review, adopt and oversee the Companys compensation
strategy, policies, plans and programs, including:
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establishment of corporate performance objectives relevant to
the compensation of the Companys named executive officers
(NEOs) and evaluation of performance in light of
these stated objectives;
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review and approval of the compensation and other terms of
employment or service, including severance and
change-in-control
arrangements, of the Companys CEO and the other NEOs and
directors; and
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administration of the Companys equity compensation plans,
deferred compensation plan and other similar plans and programs.
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Executive
Compensation Philosophy
Compensation for our NEOs is intended to be largely
performance-based. In establishing the Companys
compensation program for the NEOs, the Compensation Committee
has four principal objectives:
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ensuring that the Company is able to attract and retain
executives through the use of industry-competitive
base compensation;
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providing total compensation that is competitive in the industry
and that is tied to, and varies based upon, individual
and/or
corporate performance;
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incentivizing NEOs to make prudent business decisions and
maximize stockholder value by providing a significant portion of
total compensation opportunities in the form of direct ownership
in the Company through restricted stock and stock
options; and
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maintaining internal pay equity among employees.
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In order to address these priorities, the Compensation Committee
regularly assesses compensation components that it believes will
most cost effectively attract and motivate executive officers
and reward them for their individual achievements and those of
the Company as a whole. The Compensation Committee has since
2005 retained an independent consultant, Compensia, to assist it
in its analysis of key elements of compensation programs.
Compensia is an independent consultant specializing in
compensation matters.
The Compensation Committee allocates total compensation between
cash and equity compensation based on benchmarking to the
Companys peer group, discussed below, while considering
the balance between providing short-term incentives and
long-term parallel investment with stockholders to align the
interests of management with
42
stockholders. The Compensation Committee evaluates the balance
between equity and cash compensation among NEOs on an annual
basis.
Based on its review of the above-mentioned objectives, the
Company has established a compensation program that consists of
the following six components:
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base salary;
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an annual cash bonus that is dependent on individual
and/or
corporate performance;
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equity awards, consisting currently of stock options and
restricted stock;
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the opportunity to defer compensation under a nonqualified
deferred compensation plan;
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post-termination benefits that are triggered in limited
circumstances; and
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other health and welfare benefits generally offered to all
employees of the Company.
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To tie compensation to performance, there is no minimum award of
compensation required by the Companys bonus plan or the
Companys stock option/restricted stock award program.
Determination
of Compensation Awards
The Compensation Committee is provided with the authority to
determine the compensation awards available to NEOs. In
determining such awards, the Compensation Committee has relied
on regular written reports provided by Compensia with respect to
competitive practices and the amounts and nature of compensation
paid to executive officers in a peer group of companies.
Compensia has also provided advice to the Compensation Committee
regarding, among other things, structuring the Companys
various compensation programs and determining the appropriate
levels of salary, bonus and other awards payable to the
Companys executive officers. Based upon Compensias
recommendations, the Companys cash and stock-based
incentive awards are weighted significantly towards variable
components to ensure that total compensation reflects the
overall success or failure of the Company, and to motivate
executive officers to meet appropriate performance measures,
thereby maximizing total return to stockholders.
In addition, to further aid the Compensation Committee in making
its determinations, our CEO provides recommendations annually to
the Compensation Committee regarding the compensation of all
NEOs, excluding himself. Our CEOs recommendations are
guided by the results of his annual performance review of each
NEO, at which time each NEOs individual goals are assessed
in light of overall corporate goals. In addition, each NEO
provides input about his or her individual contributions to the
Companys success for the period being assessed.
Compensation
Benchmarking and Peer Group
An important component of structuring compensation and
establishing target compensation levels for the Companys
newly hired executive officers, as well as gauging the
competitiveness of compensation packages for existing executive
officers, is determining the compensation packages offered to
similarly situated executive officers of peer group companies.
As part of its engagement, the Compensation Committee has on an
annual basis since 2005 directed Compensia to develop and
regularly update as appropriate a comparative group of
companies, as well as perform analyses of competitive
performance and compensation levels for that group. During the
term of its engagement, Compensia has also conducted individual
interviews with members of senior management and the
Compensation Committee to learn more about the Companys
business operations and strategy, key performance metrics and
strategic goals, as well as the labor markets in which the
Company competes. Compensia ultimately develops recommendations
and metrics that are presented to the Compensation Committee for
its consideration. The Company does not have any relationship or
arrangement with Compensia other than engaging Compensia as a
compensation consultant.
In preparation for the 2008 fiscal year, Compensia prepared a
report in November 2007 at the direction of the Compensation
Committee, which analyzed competitive practices and the amounts
and nature of compensation paid to executive officers of a peer
group of diagnostic, pharmaceutical and biotechnology companies
of similar size. Compensation information contained in the
report was derived from publicly available information as well
as
43
survey data contained in the Radford 2007 Global Life Sciences
Industry Survey (the Radford Survey), which provides
total compensation and compensation practice data for
approximately 650 multinational life sciences companies.
Compensia developed a focused set of peer group companies from
the broader data presented in the Radford Survey, generally on
the basis of industry, market capitalization, revenues and
certain other factors. The peer group of companies identified in
the November 2007 Compensia report consisted of the following
companies:
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Affymetrix
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Immucor
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OSI Pharmaceuticals
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Alkermes
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Inverness Medical Innovations
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PDL BioPharma
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Amylin Pharmaceuticals
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Invitrogen
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Quidel
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Cytyc Corporation
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Martek Biosciences
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TECHNE Corporation
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IDEXX Labs
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Meridian Bioscience
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United Therapeutics
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Illumina
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MGI Pharma
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Ventana Medical Systems
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ImClone Systems
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Millennium Pharmaceuticals
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The following five companies were eliminated from the
Companys previously reported peer group: KOS
Pharmaceuticals; Medicis; Neurocrine Biosciences; Sepracor and
Vertex. The following 10 companies were added to the
Companys previously reported peer group: Alkermes;
Illumina; Immucor; Invitrogen; Meridian Bioscience; MGI Pharma;
OSI Pharmaceuticals; PDL BioPharma; Quidel; and Ventana Medical
Systems. In general, companies were eliminated from the peer
group as a result of a change in comparative circumstances
relative to the Company (e.g., reduced revenues, market
capitalization, etc.) or sufficient comparative data no longer
being available due to acquisitions or other reasons. In
general, companies were added to the peer group based on the
comparative circumstances relative to the Company (e.g.,
revenues, market capitalization, etc.). In addition, the
Compensation Committee increased the size of the Companys
previously reported peer group to include four additional
companies to ensure a broader set of specific comparative data
was available to the Compensation Committee when making
executive compensation determinations.
Based on data presented to the Compensation Committee by
Compensia over the years and the analysis described above, the
Compensation Committee has targeted base salary and annual cash
incentive compensation for NEOs around the 60th percentile
of this peer group of companies and targeted equity incentive
compensation for NEOs around the 75th percentile of this
peer group. In determining the level of compensation provided to
its executive officers, the Compensation Committee also
evaluates the financial performance of peer group companies, in
addition to evaluating the Companys independent
performance, to gauge the Companys comparative performance
within its peer group. In addition, the Compensation Committee
considers the Companys geographic location in
San Diego, where there is significant competition for
employees in the diagnostic, pharmaceutical and biotechnology
industries. The Compensation Committee may also consider or
reference data presented in the Radford Survey if, for example,
limited data is available for comparison of an NEO to similarly
situated executive officers of the peer group or if certain peer
group data appears to deviate from broader-based market or
industry trends. The Compensation Committee also evaluates
individual NEO performance on an annual basis and may award
merit salary increases as a result of these assessments. This
approach ensures that the Companys compensation structures
will enable it to remain competitive in its markets and reward
individual NEO performance.
While the Compensation Committee generally targets cash
compensation and equity awards in the percentiles stated above,
the Compensation Committee recognizes the Companys desire
to keep the best talent among the Companys executive
management team. To retain and motivate these key individuals,
the Compensation Committee may determine that it is in the best
interests of the Company to negotiate or award total
compensation that may deviate from the general benchmark targets
described above. Actual pay for each executive is determined
around this structure, driven by the performance of the
executive and historical compensation arrangements over time, as
well as the annual performance of the Company. Equity grant
guidelines are then set by job level, using market survey data
and current guidelines to determine the appropriate annual grant
levels for the upcoming year.
For 2008, NEOs other than our CEO received base salary and
annual cash incentive compensation between approximately the
45th and 60th percentile, and equity incentive awards
between approximately the 60th and 70th percentile, in each case
as compared to similarly situated executive officers of the
Companys designated peer
44
group. Our CEO received base salary and cash incentive
compensation, as well as equity incentive awards, between
approximately the 55th and 60th percentile of the Companys
peer group. The foregoing comparisons are based on the most
current peer group data available to the Company as presented to
the Compensation Committee by Compensia. Please see the
Summary Compensation Table and Employment
Agreements with Named Executive Officers below for
additional information regarding the amounts payable to our NEOs
for fiscal 2008.
Base
Salary
Each executive officers base salary is determined by the
Compensation Committee during the first quarter of the fiscal
year. Our CEO has a minimum base salary of $645,000 that was
established by the terms of his employment agreement, which is
described below under Employment Agreements with Named
Executive Officers. The Companys other executive
officers do not have minimum salary levels established by
contract.
The base salary component of the Companys compensation
program is designed to provide its executive officers with total
cash compensation that is around the 60th percentile among
peer group companies and that is competitive in the
San Diego market. In establishing this target amount, the
Compensation Committee has relied on peer group data included in
Compensias regular written reports. The Company pays a
base salary at the levels established by the Compensation
Committee to satisfy the competitive base
compensation priority within the Companys compensation
philosophy. In addition, each year the Compensation Committee
determines base salary increases for the NEOs based upon the
Compensation Committees continuing review of peer group
compensation, as well as its subjective evaluation of the
performance of the executive officers as assessed by the
Compensation Committee and the CEO, as well as the
officers experience, commitment to corporate core values
and potential for advancement. No formulaic base salary
increases are provided to the NEOs.
The Compensation Committee awarded base salary increases of
approximately 5% to all NEOs other than Mr. Hull for fiscal
2008. On February 8, 2008, the Board of Directors appointed
Mr. Hull as President and Chief Operating Officer of the
Company, effective March 1, 2008. In connection with
Mr. Hulls promotion, the Compensation Committee
approved an annual base salary for Mr. Hull of $490,875,
effective March 1, 2008. In February 2009, the Compensation
Committee awarded each of the Companys NEOs a base salary
merit increase of 5% of 2008 annual base salary, other than the
Companys Senior Vice President and General Counsel who
received a 4% base salary merit increase, in each case effective
January 1, 2009.
Annual
Cash Bonus Awards
2008
Named Executive Officer Annual Cash Bonus Awards
Annual cash bonuses for executive officers are determined under
the terms of the Companys annual bonus plans. As detailed
below, cash bonuses are not guaranteed and are not paid if the
Company fails to achieve adequate growth in comparison to its
financial performance targets, which for 2008 were based on
total revenues and fully diluted EPS. Bonus awards under each of
our bonus plans vary upon our financial performance in these
areas. In addition, bonus awards for NEOs (other than our CEO
and President and Chief Operating Officer) are based on an
assessment of individual performance, as well as achievement of
the Companys financial performance goals. The
Companys annual cash bonus plans are designed to reward
NEOs for their contribution to the Companys achievement of
its financial goals and reflect the executives overall job
performance.
Fiscal 2008 bonus awards for the Companys CEO and
President and Chief Operating Officer were made under the
Gen-Probe Incorporated 2007 Executive Bonus Plan (the
Executive Plan). Under the Executive Plan, the 2008
target bonus amounts for our CEO and President and Chief
Operating Officer were 75% and 60%, respectively, of annual base
salary. Fiscal 2008 bonus awards for all other NEOs were made
under the 2008 Gen-Probe Employee Bonus Plan (the 2008
Plan, and together with the Executive Plan, the
Bonus Plans). Under the 2008 Plan, the target bonus
amount for each participating NEO was 25% of annual base salary,
which, when taken together with 2008 base salary compensation,
was designed to approximate around the 60th percentile of the
Companys peer group for base salary and annual cash
incentive compensation of similarly situated executive officers
of the Companys peer group.
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In addition to the target bonus amounts describe above, two
factors, the Company Performance Factor (CPF) and
the Individual and Team Performance Factor (ITPF),
were used to determine bonuses payable under the Bonus Plans for
fiscal 2008. Bonus awards paid to our CEO and President and
Chief Operating Officer under the Executive Plan were determined
solely by the CPF, which is based on the achievement of the
Companys annual financial performance targets described
below. Bonus awards under the 2008 Plan were determined using
the CPF and an ITPF assigned to each participating NEO, which is
based on the assessment of that NEOs individual
performance. Fiscal 2008 bonuses were calculated under the Bonus
Plans in accordance with the formulas set forth below (the
Bonus Formulas):
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Executive Plan
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2008 Plan
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Bonus = (Base Pay x% Target x CPF)
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Bonus = X + Y
X = (Base Pay x% Target x CPF x 50%)
Y = (Base Pay x% Target x CPF x ITPF x 50%)
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In the first quarter of 2008, the Compensation Committee
established fiscal 2008 financial performance goals of between
8% and 9% EPS growth and between 12% and 13% total revenue
growth, in each case as compared to fiscal 2007 financial
performance. EPS and total revenue growth values were then
plotted on a bonus matrix approved by the Compensation
Committee, which awarded CPF values of between 0% and 150% based
on the achievement of our financial performance goals. The bonus
matrix weighted EPS growth at 40% and total revenue growth at
60% in establishing CPF values. The precise achievement of each
performance goal would yield a CPF value of 100%. Under the
bonus matrix, total revenue and EPS growth of greater than 16%
and greater than 15%, respectively, would have yielded a 150%
CPF value, while less than 9% total revenue growth and less than
7% EPS growth would have yielded a 0% CPF value. For fiscal
2008, the Company had total revenue of $472.7 million and
fully diluted EPS of $1.95, representing an increase of
approximately 17% and 23%, respectively, over fiscal 2007
financial performance. As a result, a CPF value of 150% was
awarded under the Bonus Plans in accordance with the
predetermined bonus matrix for fiscal 2008 financial performance.
Also in the first quarter of 2008, each NEO participating in the
2008 Plan, with the review, input and approval of our CEO,
established between six to ten individual performance goals that
formed the basis upon which their respective ITPF value would be
determined. These goals were designed to reflect each
executives area of responsibility within the Company and,
to the extent possible, were generally structured to include an
objectively measurable component (i.e., a numeric or
other criteria capable of independent measurement or
satisfaction). Each goal was then assigned a specific percentage
of that officers overall ITPF value, with all goals
totaling 100%. In 2008, no individual performance goal accounted
for greater than 25% of any NEOs total ITPF value. Set
forth below are general descriptions of certain primary
individual goals for each 2008 Plan NEO participant:
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Named Executive Officer
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Goal Description
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Herm Rosenman
Senior Vice President, Finance and Chief
Financial Officer
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Achieve budgeted total revenue and net income in accordance with
2008 operating plan
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Successfully drive the company-wide continuous improvement
process
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Daniel L. Kacian, Ph.D., M.D.
Executive Vice President and Chief Scientist
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Seek, identify and support acquisition of new technologies and
business opportunities
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Drive competitive advantages through innovation
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R. William Bowen
Senior Vice President and General Counsel
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Management of legal matters within 2008 budget
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Support negotiation and documentation of significant
transactions
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As part of the Companys annual employee performance
appraisal process, in February 2009 our CEO provided to the
Compensation Committee his assessment of the individual
performance of each NEO set forth above against their respective
2008 ITPF goals. Each NEO was eligible to receive an ITPF value
of between 0% and 150% under the 2008 Plan. After performing an
assessment of fiscal 2008 individual NEO performance and taking
into consideration the recommendations of our CEO, the
Compensation Committee awarded NEOs participating in the 2008
Plan with ITPF values of between 100% and 110%. Actual bonus
awards paid to our NEOs in the first
46
quarter of 2009 for fiscal 2008 performance in accordance with
the Bonus Formulas are set forth below in the Summary
Compensation Table.
2009
Named Executive Officer Annual Cash Bonus Awards
In February 2009, the Compensation Committee determined that our
CEO, President and Chief Operating Officer, and Executive Vice
President and Chief Scientist (collectively, the Covered
Employees) would participate in the Executive Plan for the
2009 calendar year. The 2009 target bonus for the Companys
CEO is an amount equal to 75% of his annual base salary as of
December 31, 2009, the 2009 target bonus for the
Companys President and Chief Operating Officer is an
amount equal to 60% of his annual base salary as of
December 31, 2009, and the 2009 target bonus for the
Companys Executive Vice President and Chief Scientist is
an amount equal to 40% of his annual base salary as of
December 31, 2009 (such target bonus amount, as applicable
to each such executive officer, the Target Bonus
Amount).
In February 2009, the Compensation Committee also established
four performance goals (collectively, the 2009 Performance
Goals) for each Covered Employee for the 2009 calendar
year performance period, which consist of: (1) the
attainment of an adjusted earnings per share target (the
EPS Target); (2) the attainment of an adjusted
revenue target (the Revenue Target, and together
with the EPS Target, the Financial Performance
Targets); (3) the accelerated development of the
Companys development-stage PANTHER instrument (the
Instrumentation Target); and (4) the strategic
acquisition of new companies, products and technologies (the
Acquisition Target, and together with the
Instrumentation Target, the Operational Performance
Targets).
Each Covered Employee will be eligible to receive a bonus for
the 2009 performance period equal to (a) the Covered
Employees Target Bonus Amount, multiplied by
(b) the 2009 Company Performance Factor (the 2009
CPF), which will be a specified percentage that is applied
to each Covered Employees target bonus and is based on the
achievement of the 2009 Performance Goals. Each of the 2009
Performance Goals will represent a specific portion of the
overall 2009 CPF value. A 2009 CPF value of between 80% and 150%
may be awarded for each 2009 Performance Goal if at least a
specified threshold performance level for that goal is achieved.
The precise achievement of a 2009 Performance Goal will result
in a 2009 CPF value of 100% for that goal. Any achievement of
less than the specified threshold performance level for any
particular 2009 Performance Goal will result in a 0% 2009 CPF
value for that goal. That portion of the bonus (if any) payable
to each Covered Employee in respect of the Operational
Performance Targets will not be paid pursuant to the Executive
Plan and will not constitute qualified performance-based
compensation for purposes of Section 162(m), but will be
payable outside of the Executive Plan subject to the same terms
and conditions as are set forth in the Executive Plan.
In February 2009, the Compensation Committee also adopted the
2009 Gen-Probe Employee Bonus Plan (the 2009 Bonus
Plan). The 2009 Bonus Plan provides for the payment to
NEOs other than the Covered Employees of cash incentive
compensation for fiscal 2009 performance. The 2009 Bonus Plan
was adopted by the Compensation Committee as part of its regular
review of the Companys annual bonus programs. For each of
our eligible NEOs, the target bonus amount under the 2009 Bonus
Plan is 35% of annual base salary as of December 31, 2009.
Bonuses for our eligible NEOs will be calculated under the 2009
Bonus Plan based on the following two factors:
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2009 CPF. The 2009 CPF value under the 2009 Bonus Plan for each
eligible NEO will be the same overall 2009 CPF value awarded to
Covered Employees under the Executive Plan and calculated as
described above. The 2009 CPF value will be applied to a portion
of each eligible NEOs target bonus.
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2009 Individual and Team Performance Factor (the 2009
ITPF). The 2009 ITPF will be a percentage between 0% and
150% that is applied to a portion of each participants
target bonus. Each participant will be assigned a 2009 ITPF
percentage based on the assessment of his or her overall
performance during 2009, including performance on functional
teams at the Company.
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Based on this bonus calculation, each NEO other than the Covered
Employees may receive between 0% and 150% of his target bonus
amount for the 2009 calendar year performance period.
47
Equity
Awards
Overview. Each executive officer is eligible
to receive an annual equity compensation award. The Company
believes, based on its performance-based approach to
compensation, that equity ownership in the Company is important
to tie the ultimate level of compensation to the performance of
the Companys stock and stockholder gains while creating an
incentive for sustained growth. The Company believes that this
is especially true in the case of executive officers.
The Compensation Committee generally does not consider the
number of options
and/or
restricted stock awards held by NEOs when making grants as it
believes that awards should be given based on successful job
performance and should not be discounted on account of
accumulated equity value. Further, the Compensation Committee
believes that competitors who may try to hire the Companys
NEOs would not give full credit for existing equity ownership in
the Company, and, to remain competitive, similarly do not credit
old awards when approving new grants.
Allocation of equity awards between options and restricted stock
is generally based on an analysis of market practice among peer
group companies, existing compensation guidelines established by
the Compensation Committee, availability of equity awards under
the Companys equity compensation plans and individual NEO
performance. Guidelines for the number of stock options and
restricted stock awards granted to each executive officer are
determined using a procedure approved by the Compensation
Committee based upon the executive officers rank,
performance and the value of the award at the time of grant. In
addition, the Compensation Committee may consider peer group
data presented in Compensias reports in making such
awards, as well as other factors. As a result, additional grants
other than our customary annual award may be made following a
significant change in job responsibility or in recognition of a
significant achievement.
In May 2008, based on data presented and recommendations made by
Compensia to the Compensation Committee, the Compensation
Committee determined that future broad-based equity incentive
grants would generally be limited to certain personnel ranks,
option grants would be reduced by 25% from historical levels for
all employees receiving such grants, and restricted stock grant
levels would generally remain unchanged compared to historical
levels. The Compensation Committee determined that the foregoing
reduction in stock option awards was appropriate in light of the
limited number of awards then available for issuance under the
terms of the 2003 Plan.
In 2008, all stock options and restricted stock awards made to
NEOs, and all Company employees, were made under the terms of
the 2003 Plan. Stock options granted under the 2003 Plan have a
four-year vesting schedule in order to provide an incentive for
continued employment. All stock options granted after
May 17, 2006, when stockholders approved an amendment to
the 2003 Plan, expire seven years from the date of the grant.
This provides a reasonable time frame in which to align the
executive officer with any price appreciation of the
Companys shares, while managing overhang more effectively
as compared to a more typical ten-year option term, which the
Company used prior to the May 2006 amendment. Effective
November 16, 2006, the exercise price of options granted
under the Companys stock plans, including the 2003 Plan,
is equal to the closing price of the Companys common stock
on the date of grant. Prior to this date, the Companys
stock option plans, including the 2003 Plan, provided that the
exercise price of options would be equal to the closing price of
the Companys common stock on the date prior to the date of
grant.
All restricted stock awards granted to NEOs in 2008 have a
four-year vesting schedule, with 25% of the shares vesting on
each anniversary of the grant date, subject to trading window
restrictions. The deferred issuance restricted stock awards
granted to Mr. Nordhoff vest 25% one year from the date of
grant and
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each month thereafter until fully vested and subsequently
issued. Under the terms of the 2003 Plan, each share of
restricted stock granted subsequent to May 17, 2006 reduces
the number of shares reserved for issuance under the plan by two
shares.
In the event of a change in control of the Company, each of the
Companys equity incentive plans provides that all
outstanding stock options and restricted shares automatically
become fully vested, exercisable or payable, as applicable. The
Company believes that this provision effectively rewards its
employees, substantially all of who receive equity compensation,
in the event the Company is acquired and encourages NEOs to seek
out and support transactions that are in the best interests of
the Company and its stockholders, even though they may
personally experience potential employment and other economic
risks from the transactions.
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Since 2006, the Company has made annual equity award grants to
Company employees, including executive officers, in August of
each year, which have consisted of stock options and, for
certain senior level employees, restricted stock awards. All
such equity awards have included time-based vesting provisions
only. The Compensation Committee of the Board of Directors
currently intends that future grants of equity incentive awards
to Company officers, and other senior level Company
employees receiving restricted stock awards, will generally be
comprised of stock options, representing approximately 75% of
the value of the aggregate applicable award, and restricted
stock, representing approximately 25% of the value of the
aggregate applicable award. The Compensation Committee currently
intends that beginning in 2010 restricted stock awards to be
granted to senior level employees under the 2003 Plan will
predominantly incorporate performance-based vesting provisions
in lieu of time-based vesting. Although the specific performance
criteria applicable to such awards have not yet been
established, they are expected to encompass both quantitative
and/or
qualitative measures, such as revenue and fully diluted EPS
growth
and/or
product development progress, in each case designed to be
objectively measurable and to drive long-term Company
performance. If, as currently intended, restricted stock awards
to be made to senior level employees in 2010 and thereafter
predominantly incorporate performance-based vesting provisions,
the Compensation Committee anticipates that annual equity award
grants, which have been made in August of each year beginning in
2006, will instead be made in January or February beginning in
2010, in order to align the performance criteria for restricted
stock awards with each years business objectives. Because
the Company intends to make its next two equity grants less than
one year apart, the Company expects that the grant of equity
awards in January or February 2010 will be pro-rated and smaller
than the annual equity grants made in recent years.
The anticipated future grant of predominantly performance-based
restricted stock awards to senior level Company employees
and the expected allocation of annual equity awards between
stock options and performance-based restricted stock awards is
based on data presented to the Compensation Committee by
Compensia at the request of the Compensation Committee, which
included analysis of various long-term equity incentive
alternatives and their respective advantages and disadvantages
for fostering the Companys long-term growth, executive
retention and performance goal achievement. The Compensation
Committee believes this anticipated overall mix of equity
awards, as well as the expected future adoption of predominantly
performance-based vesting for restricted stock awards granted to
senior level employees, further increases the alignment between
NEO equity compensation, achievement of the Companys
long-term growth and financial objectives and, ultimately,
stockholder returns.
Deferred
Compensation Plan
The Company maintains a Deferred Compensation Plan (the
DCP) that allows certain highly compensated
management, including NEOs, key employees and directors of the
Company, to defer up to 80% of annual base salary (or director
fees) and annual bonus compensation. In 2008, our CEO and Senior
Vice President and General Counsel were the only NEOs to
participate in the DCP.
Deferred amounts are credited with gains and losses based on the
performance of deemed investment options selected by a committee
appointed by our Board of Directors to administer the DCP. The
DCP also allows for discretionary contributions to be made by
the Company. Participants may receive distributions upon
(i) a pre-set date or schedule that is elected during an
appropriate election period, (ii) the occurrence of
unforeseeable financial emergencies, (iii) termination of
employment (including retirement), (iv) death,
(v) disability, or (vi) a change in control of the
Company as defined in the DCP. Certain participants must wait
six months following termination of employment to receive
distributions. Amounts deferred under the DCP after 2004 are
subject to Section 409A of the Code, and the DCP was
amended in 2008 to satisfy the documentary compliance
requirements of Section 409A.
The Company may terminate the DCP at any time with respect to
participants providing services to the Company. Upon termination
of the DCP, participants will be paid out in accordance with
their prior distribution elections and otherwise in accordance
with the DCP. Upon and for twelve months following a change in
control, the Company has the right to terminate the DCP and,
notwithstanding any elections made by participants, to pay out
all benefits in a lump sum, subject to the provisions of the
Code.
49
Post-Termination
Benefits
Post-termination benefits for executive officers are established
pursuant to the terms of their individual employment agreements.
As further described under Potential Payments Upon
Termination or
Change-in-Control,
each NEO is entitled to certain cash consideration and other
benefits in the event the NEO is terminated other than for
cause, if the NEO terminates employment for
good reason or if the NEO is terminated in
connection with a change in control, in each case with such
payments and benefits conditioned upon the execution by the NEO
of a general release of all claims. As described above under the
heading Equity Awards, the Companys equity
incentive plans provide for full acceleration of vesting of
awards held by all persons (including NEOs) upon a change in
control of the Company. The employment agreements with each NEO
that provide for the additional severance benefits for
terminations related to a change in control each reflect a
double trigger change in control policy. The single
trigger acceleration of vesting under the Companys equity
incentive plans provides an incentive for all employees,
including NEOs, to support transactions which are in the best
interests of the stockholders, and the Compensation Committee
believes that the policy of providing enhanced severance upon a
double trigger best aligns the interests of
stockholders and management since it keeps the decision of
paying severance costs with the acquiring company, not with
current management. As a result, in the event an acquiring
company desires to employ some or all of management following an
acquisition, the consideration that otherwise would be allocated
solely to management under a single trigger policy
(other than the acceleration of vesting of equity awards) can
instead be shared by all stockholders.
The Compensation Committee intends that this double
trigger severance change in control policy provides fair
and equitable compensation in the event of a termination in
connection with a change in control. By providing for reasonable
severance in the event of an employment termination upon a
change in control, the Compensation Committee intends to provide
each NEO with compensation that is sufficient to mitigate the
risk of employment loss and encourage him to assist in
undertaking the transaction. The amount of the severance is
balanced against the Companys need to be responsible to
its stockholders, and also takes into account the potential
negative impact such severance payments may have on the
acquiring party in a change in control transaction.
The various levels of post-termination benefits for each NEO
were determined by the Compensation Committee to be appropriate
for the individual based on such persons duties and
responsibilities with the Company and were the result of
arms-length negotiations. The Company also determined the
different levels to be appropriate and reasonable when generally
compared to post-termination benefits provided by the
Companys peers to executives with the same title and
similar levels of responsibility. The Company also believes that
these benefits take into account the expected length of time and
difficulty the individual may experience in trying to secure new
employment.
Other
Benefits
The Company provides its executive officers with the following
benefits that are also available to all of its
full-time
employees:
Employee Stock Purchase Plan. The Company
maintains a tax-qualified ESPP that allows all participants to
acquire Company common stock at a discount price. This plan has
a six-month look-back and allows participants to buy Company
stock at a 15% discount to the lower of the market price on the
first or last day of the applicable
six-month
offering period with up to 15% of his or her base salary or a
maximum of $21,250 annually. The Company offers the ESPP to
allow employees to profit when the value of Company stock
increases over time. Because of the tax advantages associated
with holding stock purchased through the ESPP, the Company also
believes the ESPP aligns participants interests with
stockholders. All of our NEOs other than Mr. Hull purchased
shares under the ESPP in 2008.
401(k) Plan. The Company offers to all
full-time employees the opportunity to participate in a 401(k)
Plan. The 401(k) Plan permits eligible employees of the Company
to defer up to 100% of their annual compensation, subject to
certain limitations imposed by the Code. The employees
elective deferrals are immediately vested and non-forfeitable
upon contribution to the 401(k) Plan. In order to incentivize
prudent retirement savings and supplement retirement income, the
Company matches up to 50% of the first 6% of an employees
contributions, subject to a four-year vesting schedule. All of
our NEOs participated in the 401(k) Plan in 2008 and received
matching contributions in the amount of $6,900 from the Company.
50
Health and Welfare Benefits. The
Companys healthcare, life and disability insurance, and
other welfare and employee-benefit programs are the same for all
eligible full-time employees, including executive officers.
Because of the importance placed by the Company on the health
and welfare of its employees, the Company paid 100% of the
premiums associated with these programs on behalf of all of its
full-time employees in 2008. The Company also subsidizes all but
a nominal amount of the healthcare premiums for all employees
with eligible dependents.
In addition to the foregoing, the Company provides the following
benefits to Mr. Nordhoff pursuant to his employment
agreement: a term life insurance policy providing for payment of
$1,000,000 to his designated beneficiaries upon his death; a
long term disability insurance policy providing for payment at a
rate of not less than $200,000 per annum; and accidental death
and disability insurance for a benefit of $400,000 (airplane)
and $200,000 (automobile or walking) should Mr. Nordhoff
suffer accidental death or disability during the term of his
employment agreement. Please see Employment Agreements
with Named Executive Officers below for additional
information regarding the benefits provided to Mr. Nordhoff
pursuant to his employment agreement.
Policies
with Respect to Equity Compensation Awards and Equity
Ownership
The Compensation Committee evaluates the allocation of equity
awards among stock option grants, restricted stock grants and
the various other incentives available under the Companys
equity incentive plans by reference to the peer group discussed
above. Since November 16, 2006, the Company grants all
equity incentive awards based on the fair market value as of the
date of grant. Prior to this date, the Company used the fair
market value as of the close of business on the date prior to
the date of grant, as required under the then-applicable terms
of its option plans. The Company does not have a policy of
granting equity-based awards at other than the fair market value
on the date of grant. The exercise price for stock option grants
and similar awards is determined by looking at the fair market
value of the last quoted price per share on the Nasdaq Global
Select Market on the date of grant.
In 2006, the Company introduced a stock ownership policy for
executive officers. Under the policy, executive officers are
expected, within five years of the later of September 28,
2006 or an executives appointment, to acquire and hold
Company stock (including restricted shares) equal in value to at
least three times base salary in the case of our CEO, two times
base salary in the case of our president and executive and
senior vice presidents, and one times base salary in the case of
vice presidents. The Company believes that this ownership policy
further aligns executive and stockholder interests and thereby
promotes the objective of increasing stockholder value.
On August 1, 2008, the Compensation Committee determined
the size of the actual equity awards to be granted to NEOs and
determined that the grant date for all annual equity awards to
eligible employees, including the NEOs, would be August 15,
2008, in accordance with the Companys Equity Award Policy,
adopted in May 2007. The Company does not have any formal
clawback policies relating to equity awards. The Compensation
Committee intends to evaluate the prudence of adopting such
policies in the future.
Tax
Considerations
Section 162(m) of the Code limits the Companys tax
deductibility of annual compensation in excess of $1,000,000
paid to our Chief Executive Officer and any of our three other
most highly compensated executive officers, other than our Chief
Financial Officer. However, performance-based compensation that
has been approved by our stockholders is excluded from the
$1,000,000 limit if, among other requirements, the compensation
is payable only upon the attainment of pre-established,
objective performance goals and the committee of our Board of
Directors that establishes such goals consists only of
outside directors. All members of the Compensation
Committee qualify as outside directors.
The Compensation Committee considers the anticipated tax
treatment to the Company and our executive officers when
reviewing executive compensation and our compensation programs.
The deductibility of some types of compensation payments can
depend upon the timing of an executives vesting or
exercise of previously granted rights or termination of
employment. Interpretations of and changes in applicable tax
laws and regulations, as well as other factors beyond the
Compensation Committees control, also can affect the
deductibility of compensation.
While the tax impact of any compensation arrangement is one
factor to be considered, this impact is evaluated in light of
the Compensation Committees overall compensation
philosophy and objectives. The Compensation Committee will
consider ways to maximize the deductibility of executive
compensation, while retaining the discretion it deems necessary
to compensate officers in a manner commensurate with performance
and the competitive environment for
51
executive talent. From time to time, the Compensation Committee
may award compensation to our executive officers which is not
fully deductible if it determines that the award is consistent
with its philosophy and is in our and our stockholders
best interests, such as time vested grants of restricted stock
or grants of incentive stock options.
Our Executive Plan has been designed and implemented with the
intent to allow us to pay performance-based compensation under
Section 162(m) of the Code.
SUMMARY
COMPENSATION TABLE
The following table shows for the fiscal years ended
December 31, 2006, 2007 and 2008, compensation awarded to
or paid to, or earned by, our NEOs, consisting of the
Companys CEO, Chief Financial Officer, and our three other
most highly compensated executive officers in fiscal 2008.
Summary
Compensation Table
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|
|
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|
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Restricted
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|
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Non-Equity
|
|
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All
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|
|
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Stock
|
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Option
|
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Incentive Plan
|
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Other
|
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|
|
|
|
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|
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Salary
|
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Awards
|
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Awards
|
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Compensation
|
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Compensation
|
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Total
|
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Name and Principal Positions
|
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Year
|
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|
($)
|
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|
($)(1)
|
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($)(2)
|
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($)(3)
|
|
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($)(4)
|
|
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($)
|
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Henry L. Nordhoff
|
|
|
2008
|
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|
|
710,000
|
|
|
|
987,948
|
|
|
|
1,506,326
|
|
|
|
798,750
|
|
|
|
49,102
|
|
|
|
4,052,126
|
|
Chairman and Chief Executive Officer
|
|
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2007
|
|
|
|
677,389
|
|
|
|
905,035
|
|
|
|
1,428,261
|
|
|
|
668,250
|
|
|
|
46,844
|
|
|
|
3,725,779
|
|
|
|
|
2006
|
|
|
|
645,000
|
|
|
|
739,503
|
|
|
|
1,883,693
|
|
|
|
470,000
|
|
|
|
64,450
|
|
|
|
3,802,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herm Rosenman
|
|
|
2008
|
|
|
|
343,938
|
|
|
|
305,433
|
|
|
|
286,660
|
|
|
|
128,977
|
|
|
|
9,130
|
|
|
|
1,074,138
|
|
Senior Vice President, Finance and
|
|
|
2007
|
|
|
|
330,308
|
|
|
|
204,980
|
|
|
|
277,863
|
|
|
|
109,134
|
|
|
|
21,117
|
|
|
|
943,402
|
|
Chief Financial Officer
|
|
|
2006
|
|
|
|
315,000
|
|
|
|
106,721
|
|
|
|
380,093
|
|
|
|
83,000
|
|
|
|
7,890
|
|
|
|
892,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Carl W. Hull
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2008
|
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482,293
|
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|
|
251,829
|
|
|
|
589,160
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|
|
|
441,788
|
|
|
|
7,590
|
|
|
|
1,772,660
|
|
President and Chief Operating Officer
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2007
|
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375,961
|
|
|
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130,469
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|
|
309,179
|
|
|
|
280,500
|
|
|
|
301,911
|
|
|
|
1,398,020
|
|
|
|
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2006
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|
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|
|
|
|
|
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|
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|
|
|
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Daniel L. Kacian, Ph.D., M.D.
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2008
|
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404,019
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454,268
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|
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409,244
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|
|
|
159,082
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|
|
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8,880
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|
|
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1,435,493
|
|
Executive Vice President and
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2007
|
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|
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384,169
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317,474
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|
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437,904
|
|
|
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146,024
|
|
|
|
8,730
|
|
|
|
1,294,301
|
|
Chief Scientist
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2006
|
|
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363,000
|
|
|
|
161,701
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|
|
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617,292
|
|
|
|
110,000
|
|
|
|
8,580
|
|
|
|
1,260,573
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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R. William Bowen
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2008
|
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349,461
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|
|
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326,841
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|
|
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362,969
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|
|
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131,048
|
|
|
|
8,190
|
|
|
|
1,178,509
|
|
Senior Vice President,
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2007
|
|
|
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335,486
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|
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217,477
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356,312
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110,887
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7,440
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|
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1,027,602
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General Counsel and Secretary
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2006
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|
317,000
|
|
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|
109,032
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450,584
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87,000
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|
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7,515
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|
|
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971,131
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|
|
|
|
(1) |
|
The amounts included in the Restricted Stock Awards
column represent the compensation cost that was recognized by
the Company in fiscal years 2006, 2007 and 2008 related to
awards of restricted stock granted during such years and
previous fiscal years determined in accordance with Statement of
Financial Accounting Standards (SFAS)
No. 123(R), Share-Based Payment. The valuation
assumptions used in determining such amounts are described in
Note 2 to our consolidated financial statements included in
our Annual Report on
Form 10-K
for the year ended December 31, 2008. Please see the
Grants of Plan-Based Awards in Fiscal 2008 table
below for more information regarding awards of restricted stock
during fiscal 2008. |
|
(2) |
|
The amounts included in the Option Awards column
represent the compensation cost that was recognized by the
Company in fiscal years 2006, 2007 and 2008 related to grants of
stock options during such years and previous fiscal years
determined in accordance with SFAS No. 123(R). The
valuation assumptions used in determining these amounts are
described in Note 2 to our consolidated financial
statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2008. Please see the
Grants of Plan-Based Awards in Fiscal 2008 table
below for more information regarding stock option grants during
fiscal 2008. |
|
(3) |
|
Non-Equity Incentive Plan Compensation is comprised
entirely of cash bonuses awarded under our bonus plans with
respect to performance during the 2006, 2007 and 2008 fiscal
years. Please see Annual Cash Bonus Awards above for
additional information regarding our bonus plans in effect for
fiscal 2008. Amounts earned in 2006 were paid during fiscal year
2007, amounts earned in 2007 were paid during fiscal year 2008
and amounts earned in 2008 were paid during fiscal year 2009.
All individual and financial performance goals used in
calculating amounts earned under the Bonus Plans were
pre-determined. In addition, to the extent possible, |
52
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|
|
individual performance goals were generally structured to
include an objectively measurable component. All amounts paid
were at the determination of the Compensation Committee. |
|
(4) |
|
Amounts included in the All Other Compensation
column are as follows: |
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|
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|
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|
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|
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|
|
Life
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Tax
|
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|
|
|
|
|
|
|
|
|
|
|
Matching
|
|
|
Insurance
|
|
|
Relocation
|
|
|
Travel
|
|
|
Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k)
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Expenses
|
|
|
Payments
|
|
|
Miscellaneous
|
|
|
Total
|
|
Named Executive Officer
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
Henry L. Nordhoff
|
|
|
2008
|
|
|
|
6,900
|
|
|
|
16,470
|
|
|
|
|
|
|
|
14,023
|
|
|
|
11,359
|
|
|
|
350
|
|
|
|
49,102
|
|
|
|
|
2007
|
|
|
|
6,750
|
|
|
|
16,470
|
|
|
|
|
|
|
|
13,496
|
|
|
|
10,128
|
|
|
|
|
|
|
|
46,844
|
|
|
|
|
2006
|
|
|
|
6,600
|
|
|
|
18,450
|
|
|
|
|
|
|
|
19,938
|
|
|
|
17,004
|
|
|
|
2,458
|
|
|
|
64,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herm Rosenman
|
|
|
2008
|
|
|
|
6,900
|
|
|
|
1,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
|
|
9,130
|
|
|
|
|
2007
|
|
|
|
6,750
|
|
|
|
1,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,387
|
(3)
|
|
|
21,117
|
|
|
|
|
2006
|
|
|
|
6,600
|
|
|
|
1,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl W. Hull
|
|
|
2008
|
|
|
|
6,900
|
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,590
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
610
|
|
|
|
174,006
|
|
|
|
|
|
|
|
127,295
|
|
|
|
|
|
|
|
301,911
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel L. Kacian, Ph.D., M.D.
|
|
|
2008
|
|
|
|
6,900
|
|
|
|
1,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,880
|
|
|
|
|
2007
|
|
|
|
6,750
|
|
|
|
1,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,730
|
|
|
|
|
2006
|
|
|
|
6,600
|
|
|
|
1,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. William Bowen
|
|
|
2008
|
|
|
|
6,900
|
|
|
|
1,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,190
|
|
|
|
|
2007
|
|
|
|
6,750
|
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,440
|
|
|
|
|
2006
|
|
|
|
6,300
|
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
525
|
|
|
|
7,515
|
|
|
|
|
(1) |
|
Includes travel expenses for Mr. Nordhoff and his wife
incurred solely in connection with attendance at the
Companys CEO Club, an annual resort trip for
the Companys top sales manager, sales representatives,
field technical specialists, and their spouses. |
|
(2) |
|
Includes tax
gross-up
payments for (a) Mr. Nordhoffs travel expenses
and (b) Mr. Hulls relocation benefits. |
|
(3) |
|
In 2007, the Company identified an administrative error that
resulted in Mr. Rosenman not participating in the
Companys ESPP during the 2005 and 2006 fiscal years,
despite his election to do so. Included within
Mr. Rosenmans Miscellaneous column for
2007 is a payment by the Company to Mr. Rosenman in the
amount of $11,787, which reflected the amount necessary to
permit Mr. Rosenmans open market purchase of the
shares that would have been purchased on his behalf through the
ESPP but for the administrative error. In May 2007, the
Compensation Committee approved this payment to
Mr. Rosenman, subject to applicable withholding. |
53
Grants of
Plan-Based Awards
The following table shows for the fiscal year ended
December 31, 2008, certain information regarding grants of
plan-based awards to our NEOs:
Grants of
Plan-Based Awards in Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Option
|
|
|
|
|
|
Closing
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Market
|
|
|
Date Fair
|
|
|
|
|
|
|
Board or
|
|
|
Estimated Future Payouts Under
|
|
|
of
|
|
|
Number of
|
|
|
or Base
|
|
|
Price
|
|
|
Value of
|
|
|
|
|
|
|
Comp.
|
|
|
Non-Equity Incentive Plan
|
|
|
Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
on the
|
|
|
Stock and
|
|
|
|
|
|
|
Committee
|
|
|
Awards(1)
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Grant
|
|
|
Option
|
|
|
|
Grant
|
|
|
Approval
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Date
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)(2)
|
|
|
(#)(3)
|
|
|
($/Sh)
|
|
|
($/Sh)
|
|
|
($)(4)
|
|
|
Henry L. Nordhoff
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
532,500
|
|
|
|
798,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
60.15
|
|
|
|
1,203,000
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
60.15
|
|
|
|
60.15
|
|
|
|
1,419,735
|
|
Herm Rosenman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,985
|
|
|
|
161,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
|
|
|
|
|
|
|
|
60.15
|
|
|
|
401,020
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
60.15
|
|
|
|
60.15
|
|
|
|
283,947
|
|
Carl W. Hull
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294,525
|
|
|
|
441,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
60.15
|
|
|
|
601,500
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
60.15
|
|
|
|
60.15
|
|
|
|
709,868
|
|
Daniel L. Kacian, Ph.D., M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,005
|
|
|
|
189,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,333
|
|
|
|
|
|
|
|
|
|
|
|
60.15
|
|
|
|
501,230
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750
|
|
|
|
60.15
|
|
|
|
60.15
|
|
|
|
354,934
|
|
R. William Bowen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,365
|
|
|
|
163,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
|
|
|
|
|
|
|
|
60.15
|
|
|
|
401,020
|
|
|
|
|
8/15/08
|
|
|
|
8/1/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
60.15
|
|
|
|
60.15
|
|
|
|
283,947
|
|
|
|
|
(1) |
|
These numbers represent the target and maximum cash bonus
amounts that could have been earned for fiscal 2008 pursuant to
the Bonus Plans. Actual amounts awarded for 2008 are included in
the Summary Compensation Table above. For fiscal
2008, for all individuals above other than Mr. Nordhoff and
Mr. Hull, cash bonuses were paid pursuant to the 2008 Plan
based upon the attainment of the Companys financial
performance goals and each NEOs individual performance goals.
For Mr. Nordhoff and Mr. Hull, a cash bonus was paid
for 2008 pursuant to the Executive Plan based solely upon the
attainment of the Companys financial performance goals.
See Annual Cash Bonus Awards above for additional
information regarding the amounts reported. |
|
(2) |
|
Restricted stock awards were granted pursuant to the 2003 Plan.
The awards granted to all NEOs other than Mr. Nordhoff have
a four-year vesting schedule with 25% of the shares subject to
each award vesting on each anniversary of the date of grant,
subject to trading window restrictions. The deferred issuance
restricted stock awards granted to Mr. Nordhoff vest 25%
one year from the date of grant and 1/48 each month thereafter
until fully vested and subsequently issued. |
|
(3) |
|
Option grants were made pursuant to the 2003 Plan. The options
vest and become exercisable on a four-year vesting schedule.
Options vest 25% one year from the date of grant and 1/48 each
month thereafter until fully vested. |
|
(4) |
|
The amounts set forth in the Grant Date Fair Value of
Stock and Option Awards column reflect the full grant date
fair value of the awards determined in accordance with
SFAS No. 123(R). The valuation assumptions used in
determining such amounts are described in Note 2 to our
consolidated financial statements included in our Annual Report
on
Form 10-K
for the year ended December 31, 2008. |
54
Outstanding
Equity Awards at Fiscal Year-End
The following table shows for the fiscal year ended
December 31, 2008, certain information regarding
outstanding equity awards at fiscal year end for our NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
|
Stock Awards(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Incentive
|
|
|
Payout Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
Plan Awards:
|
|
|
of Unearned
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Shares or
|
|
|
Number of
|
|
|
Shares,
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Units of
|
|
|
Unearned
|
|
|
Units or
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
Units of
|
|
|
Stock That
|
|
|
Shares, Units or
|
|
|
Other Rights
|
|
|
|
Award
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
Stock That
|
|
|
Have Not
|
|
|
Other Rights
|
|
|
That Have
|
|
|
|
Grant
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Price
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Vested
|
|
|
That Have
|
|
|
Not Vested
|
|
Name
|
|
Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options (#)
|
|
|
($)(3)
|
|
|
Date
|
|
|
Vested (#)
|
|
|
($)(4)
|
|
|
Not Vested (#)
|
|
|
($)(5)
|
|
|
Henry L. Nordhoff
|
|
|
06/01/02
|
|
|
|
276,918
|
|
|
|
|
|
|
|
|
|
|
|
12.29
|
|
|
|
06/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/03
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
29.53
|
|
|
|
08/15/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/04
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
41.94
|
|
|
|
06/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/20/05
|
|
|
|
89,583
|
|
|
|
10,417
|
|
|
|
|
|
|
|
43.55
|
|
|
|
05/20/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/17/05
|
|
|
|
15,041
|
|
|
|
3,959
|
|
|
|
|
|
|
|
42.50
|
|
|
|
10/17/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/18/06
|
|
|
|
64,583
|
|
|
|
35,417
|
|
|
|
|
|
|
|
52.69
|
|
|
|
05/18/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
33,333
|
|
|
|
66,667
|
|
|
|
|
|
|
|
60.82
|
|
|
|
08/15/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
60.15
|
|
|
|
08/15/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/20/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,084
|
|
|
|
89,279
|
|
|
|
17,916
|
|
|
|
767,521
|
|
|
|
|
05/18/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,084
|
|
|
|
303,479
|
|
|
|
12,916
|
|
|
|
553,321
|
|
|
|
|
08/15/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,334
|
|
|
|
571,229
|
|
|
|
6,666
|
|
|
|
285,571
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
856,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
679,458
|
|
|
|
191,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,502
|
|
|
|
1,820,787
|
|
|
|
37,498
|
|
|
|
1,606,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herm Rosenman
|
|
|
08/15/03
|
|
|
|
50,288
|
|
|
|
|
|
|
|
|
|
|
|
29.53
|
|
|
|
08/15/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09/13/04
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
36.59
|
|
|
|
09/13/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/17/05
|
|
|
|
15,833
|
|
|
|
4,167
|
|
|
|
|
|
|
|
42.50
|
|
|
|
10/17/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/06
|
|
|
|
11,666
|
|
|
|
8,334
|
|
|
|
|
|
|
|
49.29
|
|
|
|
08/15/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
6,666
|
|
|
|
13,334
|
|
|
|
|
|
|
|
60.82
|
|
|
|
08/15/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
60.15
|
|
|
|
08/15/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/17/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
74,970
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500
|
|
|
|
149,940
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,250
|
|
|
|
224,910
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
285,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
109,453
|
|
|
|
40,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,167
|
|
|
|
735,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl W. Hull
|
|
|
03/01/07
|
|
|
|
32,812
|
|
|
|
42,188
|
|
|
|
|
|
|
|
47.42
|
|
|
|
03/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
11,666
|
|
|
|
23,334
|
|
|
|
|
|
|
|
60.82
|
|
|
|
08/15/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
37,500
|
|
|
|
|
|
|
|
60.15
|
|
|
|
08/15/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
321,300
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
160,650
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
428,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
44,478
|
|
|
|
103,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,250
|
|
|
|
910,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel L. Kacian, Ph.D., M.D.
|
|
|
08/17/00
|
|
|
|
36,749
|
|
|
|
|
|
|
|
|
|
|
|
13.66
|
|
|
|
08/17/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09/01/01
|
|
|
|
9,544
|
|
|
|
|
|
|
|
|
|
|
|
12.29
|
|
|
|
09/01/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/01/02
|
|
|
|
14,707
|
|
|
|
|
|
|
|
|
|
|
|
12.29
|
|
|
|
06/01/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/03
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
29.53
|
|
|
|
08/15/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09/13/04
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
36.59
|
|
|
|
09/13/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/17/05
|
|
|
|
23,750
|
|
|
|
6,250
|
|
|
|
|
|
|
|
42.50
|
|
|
|
10/17/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/06
|
|
|
|
18,666
|
|
|
|
13,334
|
|
|
|
|
|
|
|
49.29
|
|
|
|
08/15/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
8,333
|
|
|
|
16,667
|
|
|
|
|
|
|
|
60.82
|
|
|
|
08/15/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
18,750
|
|
|
|
|
|
|
|
60.15
|
|
|
|
08/15/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/17/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
107,100
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
257,040
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
321,300
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,333
|
|
|
|
356,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
231,749
|
|
|
|
55,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,333
|
|
|
|
1,042,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. William Bowen
|
|
|
09/13/04
|
|
|
|
521
|
|
|
|
|
|
|
|
|
|
|
|
36.59
|
|
|
|
09/13/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/17/05
|
|
|
|
18,056
|
|
|
|
5,209
|
|
|
|
|
|
|
|
42.50
|
|
|
|
10/17/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/06
|
|
|
|
17,500
|
|
|
|
12,500
|
|
|
|
|
|
|
|
49.29
|
|
|
|
08/15/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
7,666
|
|
|
|
15,334
|
|
|
|
|
|
|
|
60.82
|
|
|
|
08/15/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
60.15
|
|
|
|
08/15/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/17/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
74,970
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
160,650
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
257,040
|
|
|
|
|
|
|
|
|
|
|
|
|
08/15/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
285,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
43,743
|
|
|
|
48,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,167
|
|
|
|
778,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
(1) |
|
Options vest 25% one year from the grant date and 1/48 each
month thereafter until fully vested. |
|
(2) |
|
For all NEOs other than Mr. Nordhoff, restricted stock
awards vest over four years with 25% of the shares subject to
each award vesting on each anniversary of the date of grant,
subject to trading window restrictions. For Mr. Nordhoff,
deferred issuance restricted stock awards vest over four years
with 25% vesting one year from the grant date and the remainder
vesting 1/48 each month thereafter until fully vested and
subsequently issued. |
|
(3) |
|
Prior to November 16, 2006, the exercise price of option
grants was based on the closing market price of the
Companys common stock on the date immediately prior to the
grant date, pursuant to the then-applicable provisions of the
Companys equity incentive plans. Effective
November 16, 2006, the Companys equity incentive
plans were amended and the exercise price of all option grants
is now based on the closing price of the Companys common
stock on the date of grant. |
|
(4) |
|
Based on a closing stock price of $42.84 at fiscal-year end
(December 31, 2008). |
|
(5) |
|
Amounts represent the aggregate fair market value of shares of
deferred issuance restricted stock awards that have vested, but
have not yet been issued, based on a closing stock price of
$42.84 at fiscal-year end (December 31, 2008). On
August 15, 2003, and as amended in August 2004,
Mr. Nordhoff was granted 20,000 shares of restricted
stock under the 2003 Plan that vested as follows: 10,000 of the
shares vested on August 15, 2005, 5,000 shares vested
on August 15, 2006 and 5,000 shares vested on
August 15, 2007 (the 2003 RSA). On June 1,
2004, Mr. Nordhoff was granted 20,000 shares of
restricted stock under the 2003 Plan that vested as follows:
one-fourth (1/4th) of the shares vested one year after
June 1, 2004 and the remainder of the shares vest monthly
thereafter over the following three years at a rate of 1/48th of
the shares each month (the 2004 RSA). On
September 10, 2004, the Company converted the 2003 RSA and
the 2004 RSA into 40,000 shares of deferred issuance
restricted stock awards. The 40,000 shares of deferred
issuance restricted stock awards are subject to the same vesting
terms as the 2003 RSA and the 2004 RSA. In addition,
Mr. Nordhoff has received 20,000 shares of deferred
issuance restricted stock awards on each of May 20, 2005,
May 18, 2006, August 15, 2007 and August 15,
2008, each of which vests as follows: 25% one year from the
grant date and 1/48 each month thereafter until fully vested.
Subject to vesting in accordance with their terms, the deferred
issuance restricted stock awards will be issued to
Mr. Nordhoff at the earlier of his election or upon the
termination of his employment with the Company and in a manner
that complies with Section 409A, which may include,
deferring the issuance of such shares for six months after the
termination of Mr. Nordhoffs employment. On
August 15, 2007, after all shares underlying the 2003 RSA
grant were fully vested, the Company issued to Mr. Nordhoff
20,000 shares of common stock underlying the 2003 RSA
grant. Upon complete vesting of the shares underlying the 2004
RSA grant on June 1, 2008, the Company issued to
Mr. Nordhoff 20,000 shares of common stock underlying
the 2004 RSA grant. |
56
Option
Exercises and Stock Vested
The following table shows for the fiscal year ended
December 31, 2008, certain information regarding option
exercises and stock vested during the last fiscal year with
respect to the NEOs.
Option
Exercises and Stock Vested in Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value Realized
|
|
|
Shares
|
|
|
Value Realized
|
|
|
|
Acquired on
|
|
|
on Exercise
|
|
|
Acquired on
|
|
|
on Vesting
|
|
Name
|
|
Exercise (#)
|
|
|
($)(1)
|
|
|
Vesting (#)(2)
|
|
|
($)(3)
|
|
|
Henry L. Nordhoff
|
|
|
88,032
|
|
|
|
3,768,568
|
|
|
|
19,166
|
|
|
|
1,026,035
|
|
Herm Rosenman
|
|
|
17,227
|
|
|
|
864,902
|
|
|
|
5,250
|
|
|
|
293,003
|
|
Carl W. Hull
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
194,863
|
|
Daniel L. Kacian, Ph.D., M.D.
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
448,710
|
|
R. William Bowen
|
|
|
10,000
|
|
|
|
201,801
|
|
|
|
5,625
|
|
|
|
315,604
|
|
|
|
|
(1) |
|
The value is the difference between the option exercise price
and the market price of the underlying shares multiplied by the
number of shares acquired upon exercise of the option. |
|
(2) |
|
The number of shares of restricted stock for which the
restrictions lapsed. For Mr. Nordhoff, these shares are
comprised of deferred issuance restricted stock awards that have
vested, but have not yet been issued, other than
20,000 shares underlying the 2004 RSA grant, which were
issued to Mr. Nordhoff on June 1, 2008, after all such
shares had fully vested. See footnote 5 to the Outstanding
Equity Awards at Fiscal Year-End table above for
additional information. |
|
(3) |
|
The value reported is the fair market value of the underlying
shares on the vesting date multiplied by the number of shares
covered by the award, which vested on such date. |
57
Post-Employment
Compensation
Pension
Benefits
We do not provide pension arrangements or post-retirement health
coverage for our executives or employees, other than for
Mr. Nordhoff pursuant to his employment agreement. Our NEOs
and all other employees are eligible to participate in our
401(k) plan. In any plan year, we will contribute to each
participant a matching contribution equal to 50% of the first 6%
of the participants compensation that has been contributed
to the plan, up to a maximum matching contribution of $6,900 for
fiscal 2008. All of our NEOs participated in our 401(k) plan
during fiscal 2008 and received the maximum matching
contributions.
Nonqualified
Deferred Compensation
The following table shows for the fiscal year ended
December 31, 2008, certain information regarding
nonqualified deferred compensation benefits for the NEOs. A
description of the material terms of the Companys Deferred
Compensation Plan is included in the CD&A portion of this
proxy statement.
Nonqualified
Deferred Compensation for Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions in
|
|
|
Earnings
|
|
|
Withdrawals/
|
|
|
Balance
|
|
|
|
in Last FY
|
|
|
Last FY
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
at 12/31/08
|
|
Name
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Henry L. Nordhoff
|
|
|
282,646
|
|
|
|
|
|
|
|
(294,343
|
)
|
|
|
|
|
|
|
595,029
|
|
Herm Rosenman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl W. Hull
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel L. Kacian, Ph.D. M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. William Bowen
|
|
|
20,968
|
|
|
|
|
|
|
|
(31,195
|
)
|
|
|
|
|
|
|
50,004
|
|
|
|
|
(1) |
|
This column includes amounts that were also reported as either
Salary or Non-Equity Incentive Plan
Compensation in the Summary Compensation Table
above. These amounts have been earned during fiscal year 2008,
but payment has been deferred until a future date. |
58
Potential
Payments Upon Termination or
Change-in-Control
Post-termination benefits for our NEOs are established pursuant
to the terms of their individual employment agreements. The
following table sets forth the amount of payments to each of our
NEOs based on an assumed termination: (i) other than for
cause, or a termination by the NEO for good reason, in each case
on December 31, 2008, which is not related to a change in
control; (ii) a termination without cause or termination
for good reason related to a change in control; and
(iii) the acceleration of vesting of equity awards which
would occur upon a change in control under the terms of our
equity plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel L.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kacian,
|
|
|
|
|
|
|
Henry L.
|
|
|
Herm
|
|
|
|
|
|
Ph.D.,
|
|
|
R. William
|
|
Compensation Component
|
|
Nordhoff
|
|
|
Rosenman
|
|
|
Carl W. Hull
|
|
|
M.D.
|
|
|
Bowen
|
|
|
Severance not due to a Change in Control(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
1,420,000
|
|
|
$
|
343,938
|
|
|
$
|
490,875
|
|
|
$
|
404,019
|
|
|
$
|
349,461
|
|
Bonus
|
|
|
1,597,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance
|
|
|
32,940
|
|
|
|
1,980
|
|
|
|
690
|
|
|
|
1,980
|
|
|
|
1,290
|
|
Outplacement Services
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
Medical Reimbursement
|
|
|
10,000
|
(2)
|
|
|
11,316
|
|
|
|
15,276
|
|
|
|
5,652
|
|
|
|
15,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,068,440
|
|
|
$
|
365,234
|
|
|
$
|
514,841
|
|
|
$
|
419,651
|
|
|
$
|
374,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance due to a Change in Control(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
2,130,000
|
|
|
$
|
515,907
|
|
|
$
|
736,313
|
|
|
$
|
606,029
|
|
|
$
|
524,192
|
|
Bonus
|
|
|
1,597,500
|
|
|
|
163,701
|
|
|
|
589,050
|
|
|
|
219,036
|
|
|
|
166,331
|
|
Life insurance
|
|
|
32,940
|
|
|
|
1,980
|
|
|
|
690
|
|
|
|
1,980
|
|
|
|
1,290
|
|
Outplacement Services
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
8,000
|
|
Medical Reimbursement
|
|
|
10,000
|
(2)
|
|
|
11,316
|
|
|
|
15,276
|
|
|
|
5,652
|
|
|
|
15,276
|
|
Gross-up on
excise tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,778,440
|
|
|
|
700,904
|
|
|
|
1,349,329
|
|
|
|
840,697
|
|
|
|
715,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automatic vesting due to a Change in Control(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,346
|
|
|
|
1,417
|
|
|
|
|
|
|
|
2,125
|
|
|
|
1,771
|
|
Restricted stock
|
|
|
1,820,786
|
|
|
|
735,434
|
|
|
|
910,350
|
|
|
|
1,042,426
|
|
|
|
778,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (Severance and accelerated vesting due to a Change in
Control)
|
|
$
|
5,600,572
|
|
|
$
|
1,437,755
|
|
|
$
|
2,259,679
|
|
|
$
|
1,885,248
|
|
|
$
|
1,495,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See discussion below in Employment Agreements with Named
Executive Officers for a discussion of the severance
triggers and benefits to be provided upon a triggering
termination, including the form in which payments are made. |
|
(2) |
|
Under the terms of Mr. Nordhoffs employment
agreement, summarized below, since Mr. Nordhoff has reached
age 65, he is entitled to receive up to $10,000 per year in
medical reimbursement to cover medical and prescription expenses
incurred but not covered by Medicare, regardless of the reason
for the termination of the employment relationship. |
|
(3) |
|
The value of the acceleration of vesting of unvested stock
options is based on the excess of $42.84 per share, the closing
price of our common stock on December 31, 2008, over the
option exercise price per share. The value of the acceleration
of unvested restricted stock is based on $42.84 per share, the
closing price of our common stock on December 31, 2008. |
59
Employment
Agreements with Named Executive Officers
Employment
Agreement with the Companys Chief Executive
Officer
The Company entered into an Amended and Restated Employment
Agreement with its Chairman and CEO, Henry L. Nordhoff, on
November 18, 2008, which specifies the terms and conditions
of his employment that were set through the course of
arms-length negotiations with Mr. Nordhoff. The 2008
amendment and restatement to Mr. Nordhoffs existing
employment agreement was adopted to provide for certain changes
to comply with Section 409A of the Code. The terms and
conditions embodied in Mr. Nordhoffs agreement
reflect the Companys assessment of what was reasonable and
appropriate to ensure Mr. Nordhoffs continued
employment in a competitive marketplace. The agreement states
that Mr. Nordhoffs base salary will be $645,000 for
the term of the agreement, which amount can be increased
annually by the Compensation Committee. In 2008,
Mr. Nordhoff received an annual base salary of $710,000.
The agreement also provides that Mr. Nordhoffs salary
may not be decreased during the term of the agreement. The term
of the agreement is three years from May 17, 2006.
Mr. Nordhoffs target bonus will be 75% of his base
salary, with the actual amount determined by the Compensation
Committee. The agreement further provides that Mr. Nordhoff
may receive an annual grant of options, restricted stock or
other equity awards of the Company, as determined by the
Compensation Committee. The Company is required to provide
Mr. Nordhoff with a term life insurance policy providing
for payment of $1,000,000 to his designated beneficiaries, a
long term disability policy providing for payment at a rate of
not less than $200,000 per annum and accidental death and
disability insurance providing for a benefit of $400,000
(airplane) or $200,000 (automobile or walking) should
Mr. Nordhoff suffer accidental death or disability during
the term of the agreement. Mr. Nordhoff is also eligible
pursuant to the agreement to participate in the Companys
retirement, stock option, insurance and similar plans as in
effect from time to time. After Mr. Nordhoff ceases
employment with the Company for any reason and reaches
age 65 (which he did in 2006), the Company will provide for
up to $10,000 per year in medical reimbursement to cover medical
and prescription expenses incurred but not covered by Medicare.
Mr. Nordhoff may terminate his employment with the Company
at any time. In the event Mr. Nordhoffs employment is
terminated for reasons other than cause, or if he
terminates his employment for good reason (each as
defined below), Mr. Nordhoff will receive severance
pursuant to the agreement in the form of 24 months salary
continuation at his base salary rate in effect at the time of
the termination, plus a pro rata portion of his targeted level
bonus in the year of the termination and an amount equal to two
times his targeted level bonus in the year of termination. If
Mr. Nordhoffs termination is in connection with a
change in control (as defined in the agreement), he will receive
severance in the form of a lump sum payment, which is generally
payable on the later of five days after the change in control or
60 days after the date of his termination of employment
(subject to certain adjustments as to timing to comply with
Section 409A), in an amount equal to
(a) 12 months base salary if the termination
occurs within six months prior to a change in control, in
addition to the
24-month
salary continuation benefit described in the preceding sentence,
or (b) 36 months base salary if the termination
occurs within 18 months after a change in control, in lieu
of the
24-month
salary continuation benefit described in the preceding sentence.
In addition, if Mr. Nordhoffs termination is due to a
change in control, Mr. Nordhoff will receive an additional
amount equal to three times his targeted level bonus in the year
of the termination. A termination is considered in
connection with a change in control if the termination occurs
within the period six months before or 18 months after a
change in control. Upon a termination without cause or for good
reason, Mr. Nordhoff will receive the costs of life
insurance premiums for 24 months and outplacement services
for six months.
The agreement also provides that if it is determined that any
payment or distribution of any type to Mr. Nordhoff or for
his benefit by the Company, any of its affiliates, any person
who acquires ownership or effective control of the Company or
ownership of a substantial portion of its assets (within the
meaning of Section 280G of the Code and the regulations
thereunder), whether paid or payable or distributed or
distributable pursuant to the terms of the agreement or
otherwise, would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with
respect to such excise tax, then Mr. Nordhoff will be
entitled to receive an additional gross up payment
in an amount calculated to ensure that after Mr. Nordhoff
pays all taxes (and any interest or penalties imposed with
respect to such taxes), including any excise tax, imposed upon
the gross-up
payment, Mr. Nordhoff retains an amount of the
gross-up
payment equal to the excise tax imposed upon the total payments
made to him. However, if the excise tax could be avoided by
reducing the total payments by $10,000 or less, then the total
payments would be reduced to the extent necessary to avoid the
excise tax and no
gross-up
60
payment would be required under the agreement. The reasons for
providing this benefit included, but were not limited to,
preserving the intended benefit to Mr. Nordhoff of his
existing benefits package, avoiding any conflict between
Mr. Nordhoffs personal financial impact and pursuing
any transaction as appropriate for the Company, as well as
providing a competitive package of benefits for
Mr. Nordhoff to ensure his continued employment through the
completion of any potential transaction.
For purposes of the agreement, good reason means any
of the following events that are not consented to by
Mr. Nordhoff: (i) the removal of Mr. Nordhoff
from his position as the CEO of the Company; (ii) a
substantial and material diminution in Mr. Nordhoffs
duties and responsibilities; (iii) a reduction of
Mr. Nordhoffs base salary or target bonus percentage;
(iv) the location of Mr. Nordhoffs assignment on
behalf of the Company is moved to a location more than
30 miles from its present location; (v) the failure of
the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform the
agreement; or (vi) a material breach by the Company of its
obligations under the agreement after notice in writing from
Mr. Nordhoff and a reasonable opportunity for the Company
to cure or substantially mitigate any material adverse effect of
such breach. In addition, cause means any of the
following events: (i) any act of gross or willful
misconduct, fraud, misappropriation, dishonesty, embezzlement or
similar conduct on the part of Mr. Nordhoff;
(ii) Mr. Nordhoffs conviction of a felony or any
crime involving moral turpitude (which conviction, due to the
passage of time or otherwise, is not subject to further appeal);
(iii) Mr. Nordhoffs misuse or abuse of alcohol,
drugs or controlled substances and failure to seek and comply
with appropriate treatment; (iv) willful and continued
failure by Mr. Nordhoff to substantially perform his duties
under the agreement (other than any failure resulting from
disability or from termination by Mr. Nordhoff for good
reason) as determined by a majority of the Board after written
demand from the Board of Directors for substantial performance
is delivered to Mr. Nordhoff, and Mr. Nordhoff fails
to resume substantial performance of his duties on a continuous
basis within 30 days of such notice; (v) the death of
Mr. Nordhoff; or (vi) Mr. Nordhoffs
becoming disabled such that he is not able to perform his usual
duties for the Company for a period in excess of six consecutive
calendar months.
The Company has provided Mr. Nordhoff with greater
compensation and benefits (including post-employment benefits)
than that provided to the Companys other NEOs to reflect
his increased level of responsibility, the increased risk faced
by Mr. Nordhoff as the Companys Chairman and CEO and
the Companys performance since Mr. Nordhoff was hired
as the Companys CEO. Mr. Nordhoffs compensation
also differs as a direct result of the Compensation
Committees review of peer group compensation data, and
reflects the competitive nature of compensation paid to chief
executive officers within the Companys peer group. The
Compensation Committee believes that Mr. Nordhoffs
competitive compensation package has been critical in motivating
and retaining him as a highly valued chief executive officer.
As previously disclosed, Mr. Nordhoff intends to retire as
CEO of the Company on May 17, 2009. As described elsewhere
in this Proxy Statement, Mr. Nordhoff intends to continue
to serve as the Companys non-executive Chairman of the
Board of Directors and has been recommended by the
Companys Nominating and Corporate Governance Committee and
Board of Directors for re-election at the Annual Meeting. On
March 20, 2009, the Board of Directors appointed Carl W.
Hull, the Companys current President and Chief Operating
Officer, as the Companys CEO, effective May 18, 2009
following Mr. Nordhoffs retirement as the
Companys CEO.
Employment
Agreement with the Companys President and Chief Operating
Officer
Effective March 1, 2008, the Company entered into an
amended and restated employment agreement with Carl W. Hull.
Mr. Hulls amended employment agreement reflected the
following changes to his prior employment agreement with the
Company: his promotion to President and Chief Operating Officer
of the Company; an increased annual base salary of $490,875; and
an increase to Mr. Hulls bonus target from 50% of
base salary to 60% of base salary. Mr. Hulls amended
employment agreement was subsequently amended in October 2008 to
provide for certain changes to comply with the requirements of
Section 409A. Pursuant to Mr. Hulls employment
agreement, as amended, if he is terminated for reasons other
than cause, or if he terminates his employment for
good reason (each as defined in the agreement),
Mr. Hull will receive (a) severance in the form of
continued compensation, at his salary rate paid at the time of
the termination plus employer-funded costs of life insurance
premiums, if any, for a period of 12 months, (b) COBRA
benefits for himself and his eligible dependents until the
earlier of one year
61
following the termination date or the first date that
Mr. Hull is covered under another employers health
benefit program providing substantially the same or better
benefits, and (c) outplacement services for six months.
If Mr. Hulls termination is due to a change in
control (as defined in the agreement), he will receive
severance in the form of a lump sum payment, which is generally
payable on the later of five days after the change in control or
60 days after the date of his termination of employment
(subject to certain adjustments as to timing to comply with
Section 409A), in an amount equal to (a) six
months base salary if the termination occurs within six
months prior to a change in control, in addition to the
12-month
salary continuation benefit described in the preceding
paragraph, or (b) 18 months base salary if the
termination occurs within 18 months after a change in
control, in lieu of the
12-month
salary continuation benefit described in the preceding
paragraph. In addition, if Mr. Hulls termination is
due to a change in control, he will be entitled to an amount
equal to two times the greater of his targeted bonus level in
the year of the termination or his highest discretionary bonus
in the preceding three years. A termination is considered due to
a change in control if the termination occurs within the period
six months before or 18 months after a change in control.
For purposes of the agreement, good reason means any
of the following events that are not consented to in writing by
Mr. Hull: (i) a substantial and material diminution in
his duties and responsibilities; (ii) the removal of
Mr. Hull from his positions as President
and/or Chief
Operating Officer of the Company; (iii) the location of
Mr. Hulls assignment on behalf of the Company is
moved to a location more than 30 miles from its present
location; (iv) a reduction of more than ten percent (10%)
in Mr. Hulls base salary, annual target bonus
percentage or in Mr. Hulls benefits received from the
Company; (v) the failure of the Company to obtain a
satisfactory agreement from any other successor to the Company
to assume and agree to perform the agreement; or (vi) a
material breach by the Company of its obligations under the
agreement after notice in writing from Mr. Hull and a
reasonable opportunity for the Company to cure or substantially
mitigate any material adverse effect of such breach. In
addition, cause means any of the following events:
(i) any act of gross or willful misconduct, fraud,
misappropriation, dishonesty, embezzlement or similar conduct on
the part of Mr. Hull; (ii) Mr. Hulls
conviction of a felony or any crime involving moral turpitude
(which conviction, due to the passage of time or otherwise, is
not subject to further appeal); (iii) Mr. Hulls
misuse or abuse of alcohol, drugs or controlled substances and
failure to seek and comply with appropriate treatment;
(iv) willful and continued failure by Mr. Hull to
substantially perform his duties under the agreement (other than
any failure resulting from disability or from termination by
Mr. Hull for good reason) as determined by a majority of
the Board of Directors after written demand from the Board for
substantial performance is delivered to Mr. Hull, and
Mr. Hull fails to resume substantial performance of his
duties on a continuous basis within 30 days of such notice;
(v) Mr. Hulls death; or (vi) Mr. Hull
becoming disabled such that he is not able to perform his usual
duties for the Company for a period in excess of six consecutive
calendar months.
The Company has provided Mr. Hull with greater compensation
and benefits (including post-employment benefits) than that
provided to the Companys other NEOs (other than
Mr. Nordhoff) to reflect his increased level of
responsibility, especially in light of Mr. Hulls
appointment as the Companys CEO following
Mr. Nordhoffs retirement as CEO of the Company on
May 17, 2009. Mr. Hulls compensation also
differs from other NEOs as a direct result of the Compensation
Committees review of peer group compensation data, and
reflects the competitive nature of compensation paid to
similarly situated executive officers within the Companys
peer group. The Compensation Committee believes that
Mr. Hulls competitive compensation package is
critical in motivating and retaining him as a highly valued
executive officer and ensuring an orderly and efficient
transition of chief executive officers upon
Mr. Nordhoffs retirement as CEO of the Company in May
2009.
Employment
Agreements with Other Named Executive Officers
The Company also has entered into employment agreements with its
other NEOs. Pursuant to these agreements, if the NEO is
terminated for reasons other than cause, or if the
NEO terminates his employment for good reason (each
as defined in the agreement), the NEO will receive
(a) severance in the form of continued compensation, at the
NEOs salary rate paid at the time of the termination plus
employer-funded costs of life insurance premiums, if any, for a
period of 12 months, (b) COBRA benefits for himself
and the NEOs eligible dependents until the earlier of one
year following the termination date or the first date that the
NEO is covered under another employers health benefit
program providing substantially the same or better benefits, and
(c) outplacement services for six months.
62
If the NEOs termination is due to a change in
control (as defined in the agreement), the NEO will
receive severance in the form of a lump sum payment, payable on
the later of five days after the change in control or
60 days after the date of the NEOs termination of
employment, in an amount equal to (a) six months base
salary if the termination occurs within six months prior to a
change in control, in addition to the
12-month
salary continuation benefit described in the preceding
paragraph, or (b) 18 months base salary if the
termination occurs within 18 months after a change in
control, in lieu of the
12-month
salary continuation benefit described in the preceding
paragraph. In addition, if the NEOs termination is due to
a change in control, the NEO will be entitled to an amount equal
to 1.5 times the greater of the NEOs targeted bonus level
in the year of the termination or the NEOs highest
discretionary bonus in the preceding three years. A termination
is considered due to a change in control if the termination
occurs within the period six months before or 18 months
after a change in control.
As used in these agreements, good reason means any
of the following events that are not consented to by the
executive: (i) a substantial and material diminution in the
executives duties and responsibilities; (ii) the
location of the executives assignment on behalf of the
Company is moved to a location more than 30 miles from its
present location; (iii) a reduction of more than 10% in the
executives base salary; (iv) the failure of the
Company to obtain a satisfactory agreement from any other
successor to the Company to assume and agree to perform the
agreement; or (v) a material breach by the Company of its
obligations under the agreement after notice in writing from the
executive and a reasonable opportunity for the Company to cure
or substantially mitigate any material adverse effect of such
breach. In addition, cause means any of the
following events: (i) any act of gross or willful
misconduct, fraud, misappropriation, dishonesty, embezzlement or
similar conduct on the part of the executive; (ii) the
executives conviction of a felony or any crime involving
moral turpitude (which conviction, due to the passage of time or
otherwise, is not subject to further appeal); (iii) the
executives misuse or abuse of alcohol, drugs or controlled
substances and failure to seek and comply with appropriate
treatment; (iv) willful and continued failure by the
executive to substantially perform his duties under the
agreement (other than any failure resulting from disability or
from termination by the executive for good reason) as determined
by a majority of the Board of Directors after written demand
from the Board for substantial performance is delivered to the
executive, and the executive fails to resume substantial
performance of his duties on a continuous basis within
30 days of such notice; (vi) the death of the
executive; or (vii) the executive becoming disabled such
that the executive is not able to perform his usual duties for
the Company for a period in excess of six consecutive calendar
months.
Director
Compensation
The following table shows for the fiscal year ended
December 31, 2008, certain information with respect to the
compensation of all non-employee directors of the Company.
Director
Compensation for Fiscal 2008
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Fees Earned
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Restricted
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or Paid
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Stock
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Option
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Total
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Name
|
|
($)(1)
|
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($)(2)
|
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|
($)(3)
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($)
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($)
|
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John W. Brown
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48,082
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11,918
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188,352
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248,352
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Raymond V. Dittamore
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48,082
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11,918
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159,197
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219,197
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Armin M. Kessler
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66,101
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23,898
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159,197
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10,000
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(4)
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259,196
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John C. Martin, Ph.D.
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25,511
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36,282
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239,063
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|
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300,856
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Phillip M. Schneider
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50,109
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|
|
|
29,891
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|
|
|
159,197
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|
|
|
|
|
|
|
239,197
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Lucy Shapiro, Ph.D.(5)
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18,226
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|
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4,521
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|
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68,817
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|
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|
|
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91,564
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Abraham D. Sofaer
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40,109
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|
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29,891
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|
|
|
159,197
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|
|
|
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229,197
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(1) |
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Amounts reflect the aggregate dollar amount of all fees earned
or paid in cash for services as a director, including annual
retainer fees, committee and/or chairmanship fees, lead
independent director fees and meeting fees. |
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(2) |
|
The amounts included in the Restricted Stock Awards
column represent director fees that were paid in fiscal 2008 in
the form of restricted stock awards in accordance with the
Companys director compensation policy |
63
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described in greater detail below. Under this policy, a minimum
of 20% of each directors annual retainer is paid in the
form of restricted common stock of the Company, if shares are
then available for issuance under an equity incentive plan
adopted by the Company. In fiscal 2008, each director received
the following number of shares of restricted stock in accordance
with this policy: Mr. Brown (223); Mr. Dittamore
(223); Mr. Kessler (447); Dr. Martin (699);
Mr. Schneider (559); Dr. Shapiro (87); and
Mr. Sofaer (559). The aggregate number of shares of
restricted stock that have been issued to each of our directors
as of December 31, 2008 are as follows: Mr. Brown
(608); Mr. Dittamore (1,508); Mr. Kessler (3,024);
Dr. Martin (699); Mr. Schneider (4,861);
Dr. Shapiro (87); and Mr. Sofaer (3,788). The Company
did not recognize any compensation cost in fiscal 2008 relating
to grants of restricted stock to directors during fiscal year
2008 and previous fiscal years determined in accordance with
SFAS No. 123(R). The grant date fair value of each
restricted stock award granted to our
non-employee
directors during fiscal year 2008 determined in accordance with
SFAS No. 123(R) is set forth below: |
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|
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Grant Date Fair
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|
|
|
|
Stock Awards
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Value of Stock
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|
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Granted
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|
Awards Granted
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Director
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Grant Date
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During 2008 (#)
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During 2008 ($)
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John W. Brown
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01/02/08
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|
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47
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|
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2,958
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|
|
|
04/01/08
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|
|
|
59
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|
|
|
2,990
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|
|
|
|
07/01/08
|
|
|
|
62
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|
|
|
2,994
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|
|
|
|
10/01/08
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|
|
|
55
|
|
|
|
2,976
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Total
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|
|
|
|
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223
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|
|
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11,918
|
|
|
|
|
|
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|
|
|
|
|
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Raymond V. Dittamore
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01/02/08
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47
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|
|
|
2,958
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|
|
|
|
04/01/08
|
|
|
|
59
|
|
|
|
2,990
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|
|
|
|
07/01/08
|
|
|
|
62
|
|
|
|
2,994
|
|
|
|
|
10/01/08
|
|
|
|
55
|
|
|
|
2,976
|
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Total
|
|
|
|
|
|
|
223
|
|
|
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11,918
|
|
|
|
|
|
|
|
|
|
|
|
|
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Armin M. Kessler
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01/02/08
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95
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|
|
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5,979
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|
|
|
|
04/01/08
|
|
|
|
118
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|
|
|
5,980
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|
|
|
|
07/01/08
|
|
|
|
124
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|
|
|
5,988
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|
|
|
|
10/01/08
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|
110
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|
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5,951
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Total
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|
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447
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23,898
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John C. Martin, Ph.D.
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01/02/08
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53
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3,336
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|
|
|
|
04/01/08
|
|
|
|
59
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|
|
|
2,990
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|
|
|
|
07/01/08
|
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|
|
310
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|
|
|
14,970
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|
|
|
10/01/08
|
|
|
|
277
|
|
|
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14,986
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Total
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|
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699
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|
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36,282
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|
|
|
|
|
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|
|
|
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Phillip M. Schneider
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01/02/08
|
|
|
|
119
|
|
|
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7,490
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|
|
|
|
04/01/08
|
|
|
|
147
|
|
|
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7,450
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|
|
|
|
07/01/08
|
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|
|
155
|
|
|
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7,485
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|
|
|
|
10/01/08
|
|
|
|
138
|
|
|
|
7,466
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|
Total
|
|
|
|
|
|
|
559
|
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|
|
29,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lucy Shapiro, Ph.D.
|
|
|
07/01/08
|
|
|
|
32
|
|
|
|
1,545
|
|
|
|
|
10/01/08
|
|
|
|
55
|
|
|
|
2,976
|
|
Total
|
|
|
|
|
|
|
87
|
|
|
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4,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abraham D. Sofaer
|
|
|
01/02/08
|
|
|
|
119
|
|
|
|
7,490
|
|
|
|
|
04/01/08
|
|
|
|
147
|
|
|
|
7,450
|
|
|
|
|
07/01/08
|
|
|
|
155
|
|
|
|
7,485
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|
|
|
|
10/01/08
|
|
|
|
138
|
|
|
|
7,466
|
|
Total
|
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|
|
|
|
|
559
|
|
|
|
29,891
|
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|
|
|
|
|
|
|
|
|
|
|
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|
64
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(3) |
|
The amounts included in the Option Awards column
represent the compensation cost that was recognized by the
Company in fiscal year 2008 related to grants of options during
fiscal year 2008 and previous fiscal years determined in
accordance with SFAS No. 123(R). The valuation
assumptions used in determining such amounts are described in
Note 2 to our consolidated financial statements included in
our Annual Report on
Form 10-K
for the year ended December 31, 2008. In May 2008, each
director, other than Dr. Shapiro who was not yet appointed
to the Board of Directors, received an award of options to
acquire 7,500 shares with a grant date fair value of
$133,691 determined in accordance with SFAS No. 123(R)
(7,500 shares multiplied by $17.8254). On June 2,
2008, Dr. Shapiro was granted options to acquire
20,000 shares in connection with her appointment to the
Board in May 2008, with a grant date fair value of $355,082
(20,000 shares multiplied by $17.7541) determined in
accordance with SFAS No. 123(R). The aggregate number
of option awards issued and outstanding as of December 31,
2008 for each director as of such date was as follows:
Mr. Brown (47,500); Mr. Dittamore (47,500);
Mr. Kessler (57,500); Dr. Martin (27,500);
Mr. Schneider (77,500); Dr. Shapiro (20,000); and
Mr. Sofaer (77,500). |
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(4) |
|
Amount represents payments made to Mr. Kesslers
spouse, Ann C. Kessler, Ph.D., for her service as a member
of the Companys Scientific Advisory Board, upon which she
has served since 2004. Prior to retiring in 1995,
Dr. Kessler served for 25 years with
Hoffman-La Roche in a number of management positions,
including Director of International Project Management with
responsibility for global project development decisions. |
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(5) |
|
Dr. Shapiro was elected to the Board of Directors effective
May 16, 2008. |
Annual Retainer. Each non-employee director of
the Company receives an annual retainer of $60,000, payable in
quarterly installments. A minimum of 20% of the annual retainer
is paid in the form of restricted common stock of the Company
(if shares are then available for issuance under an equity
incentive plan adopted by the Company), which is fully vested as
of the grant date but must be held by the director until the
director retires from the Board of Directors. In addition,
directors may elect to receive the remainder of their annual
retainer in the form of restricted common stock of the Company,
subject to share availability. In 2008, non-employee directors
received an aggregate of 2,797 shares of restricted common
stock in lieu of cash compensation. Shares were granted as
restricted stock awards under the 2003 Plan and the number of
shares is determined based on the fair market value on the date
of grant. The members of the Board of Directors are also
eligible for reimbursement for their expenses incurred in
attending Board meetings in accordance with Company policy.
Board Committee Compensation. During 2008,
non-employee directors other than Committee Chairs were not
separately compensated for their service on Committees of the
Board of Directors. In November 2008, after review of data
presented by Compensia to the Compensation Committee of the
Board of Directors, the Compensation Committee recommended and
the Board of Directors approved the following annual retainers
payable to Committee members other than the Chairs of such
Committees, effective January 1, 2009: Audit Committee
($12,500); Compensation Committee ($7,500); and Nominating and
Corporate Governance Committee ($5,000).
Board Committee Chair and Lead Independent Director
Retainers. In 2008, the Company paid an annual
retainer of $20,000 to the Chairman of the Audit Committee and
$10,000 to each of the Chairs of the Compensation Committee and
the Nominating and Corporate Governance Committee. On
May 15, 2008, the Board of Directors re-elected
Mr. Kessler to serve as the Companys Lead Independent
Director. In 2008, the Companys Lead Independent Director
was paid an annual retainer of $20,000. In fiscal 2008, the
total cash compensation paid to non-employee directors for
service on the Board of Directors or Committees of the Board was
$296,221. An additional $122,500 was paid in January 2009 for
director services rendered during the fourth quarter of 2008, of
which $77,670 was paid in cash and $44,830 was paid in the form
of restricted stock.
In November 2008, after review of data presented by Compensia to
the Compensation Committee, the Compensation Committee
recommended and the Board of Directors approved an increase to
the annual retainers payable to each of the Audit Committee
Chair and the Lead Independent Director of $5,000, from $20,000
to $25,000, effective January 1, 2009. In addition, the
Board of Directors approved an increase to the annual retainer
payable to the Chair of the Compensation Committee of $5,000,
from $10,000 to $15,000, effective January 1, 2009.
65
Equity Compensation. The Company introduced a
stock ownership policy for directors in 2006. Under the policy,
directors are expected, within five years of the later of
September 28, 2006 or a directors appointment to the
Board of Directors, to acquire and hold Company stock (including
restricted shares) equal in value to at least three times the
directors annual retainer. The Company believes that this
ownership policy further aligns director and stockholder
interests and thereby promotes the objective of increasing
stockholder value.
Upon joining the Board, non-employee directors have historically
received an initial grant of options to purchase
20,000 shares of the Companys common stock, if
options are then available under an equity incentive plan
adopted by the Company. The shares vest over three years with
one-third of the shares vesting one year after the date of grant
and the remainder of the shares vesting monthly thereafter over
the following two years of service as a director. The exercise
price of the options granted to the non-employee directors is
equal to the fair market value of the Companys common
stock on the date of grant. On June 2, 2008, in connection
with Dr. Shapiros appointment to the Board of
Directors effective May 16, 2008, the Board of Directors
granted Dr. Shapiro options to purchase 20,000 shares
of common stock pursuant to the 2003 Plan at an exercise price
of $55.85, the fair market value of the Companys common
stock as of the grant date. One-third of the shares subject to
the option vest and become exercisable on June 2, 2009.
Thereafter, the remaining shares vest and become exercisable in
24 equal monthly installments.
In May 2008, consistent with its determination that future
broad-based employee stock option grants should generally be
reduced by 25% from historical levels, the Compensation
Committee determined that future annual option grants to
non-employee directors should also be similarly reduced compared
to historical levels (from options to acquire 10,000 shares
to 7,500 shares). As a result, in May 2008, the Company
granted options to purchase 7,500 shares of its common
stock to each non-employee director of the Company as of such
date, as described in footnote 3 to the Director Compensation
Table above, for aggregate grants to non-employee directors as
of such date of options to purchase 45,000 shares of common
stock. All such options were granted under the 2003 Plan at an
exercise price per share of $57.75, the fair market value of the
Companys common stock on the date of grant. The shares
vest over one year at the rate of one-twelfth of the shares
vesting monthly.
RELATED-PERSON
TRANSACTIONS POLICY AND PROCEDURES
We review all relationships and transactions in which the
Company and our directors and executive officers or their
immediate family members are participants to determine whether
such persons have a direct or indirect material interest. The
Companys legal department is primarily responsible for the
development and implementation of processes and controls to
obtain information from directors and executive officers with
respect to related person transactions and for then determining,
based on the facts and circumstances, whether the Company or a
related person has a direct or indirect material interest in the
transaction. To identify related-person transactions in advance,
the Companys legal department relies on information
supplied by its executive officers and directors in the form of
questionnaires.
In September 2007, our Board of Directors adopted the Gen-Probe
Incorporated Related-Person Transactions Policy. Under this
written policy, a Related-Person Transaction is
defined as a transaction, arrangement or relationship (or any
series of similar transactions, arrangements or relationships)
in which the Company and any Related Person are, were or will be
participants in which the amount involved exceeds $120,000.
Transactions involving compensation for services provided to the
Company as an employee, consultant or director are not
considered Related-Person Transactions under the policy. A
Related-Person means any of the following:
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a person who is, or at any time since the beginning of the
Companys last fiscal year, was, a director or executive
officer of the Company or a nominee to become a director of the
Company;
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a security holder known by the Company to be a beneficial owner
of more than 5% of any class of the Companys voting
securities;
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an immediate family member of any of the foregoing,
which means any child, stepchild, parent, stepparent, spouse,
sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law
or
sister-in-law
of such person, and any person (other than a tenant or employee)
sharing the household of such person; and
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a firm, corporation or other entity in which any of the
foregoing persons is an executive officer, partner, principal or
similar control position or in which such person has a 5% or
greater beneficial ownership interest.
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Under the policy, any proposed transaction that has been
identified as a Related-Person Transaction may be consummated or
materially amended only with the prior approval of the Audit
Committee in accordance with the provisions of the policy. In
the event it is inappropriate for the Audit Committee to review
the transaction for reasons of conflict of interest or
otherwise, after taking into account possible recusals by
Committee members, then the transaction must be approved by the
Board of Directors or by an independent Committee of the Board
(such body, the Committee).
In the event the Company proposes to enter into, or materially
amend, a Related-Person Transaction, management of the Company
must present the transaction to the Committee for review,
consideration and approval or ratification. Such presentation
must include:
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all of the parties to the transaction;
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the interests, direct or indirect, of any Related Person in the
transaction in sufficient detail so as to enable the Committee
to fully assess such interests;
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a description of the purpose of the transaction;
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all of the material facts of the proposed Related-Person
Transaction, including the proposed aggregate value of such
transaction, or, in the case of indebtedness, the amount of
principal that would be involved;
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the benefits to the Company of the proposed Related-Person
Transaction;
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if applicable, the availability of other sources of comparable
products or services;
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an assessment of whether the proposed Related-Person Transaction
is on terms that are comparable to the terms available to or
from, as the case may be, an unrelated third party or to
employees generally; and
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managements recommendation with respect to the proposed
Related-Person Transaction.
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The Committee, in approving or rejecting the proposed
Related-Person Transaction, must consider all of the facts and
circumstances deemed relevant by and available to the Committee,
including, but not limited to:
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the risks, costs and benefits to the Company;
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the impact on a directors independence in the event the
Related Person is a director, immediate family member of a
director or an entity with which a director is affiliated;
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the terms of the transaction;
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the availability of other sources for comparable services or
products; and
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the terms available to or from, as the case may be, unrelated
third parties or to or from employees generally.
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In making its determination, the Committee may approve only
those Related-Person Transactions that, in light of known
circumstances, are in, or are not inconsistent with, the best
interests of the Company and its stockholders, as the Committee
determines in the good faith exercise of its discretion.
CERTAIN
RELATED PERSON TRANSACTIONS
The Company has entered into indemnity agreements with its
directors and officers that provide, among other things, that
the Company will indemnify such officer or director, under the
circumstances and to the extent provided for therein, for
expenses, damages, judgments, fines and settlements he or she
may be required to pay in actions or proceedings which he or she
is or may be made a party by reason of his or her position as a
director, officer or other agent of the Company, and otherwise
to the fullest extent permitted under Delaware law and the
Companys Bylaws.
67
HOUSEHOLDING
OF PROXY MATERIALS
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers) to satisfy the delivery
requirements for the Notice of Internet Availability of Proxy
Materials, proxy statements and annual reports with respect to
two or more stockholders sharing the same address by delivering
a single Notice of Internet Availability of Proxy Materials or
proxy statement addressed to those stockholders. This process,
which is commonly referred to as householding,
potentially means extra convenience for stockholders and cost
savings for companies.
This year, a number of brokers with account holders who are
Company stockholders will be householding our proxy
materials. A single Notice of Internet Availability of Proxy
Materials or proxy statement will be delivered to multiple
stockholders sharing an address unless contrary instructions
have been received from the affected stockholders. Once you have
received notice from your broker that they will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate Notice of Internet
Availability of Proxy Materials or proxy statement and annual
report, please notify your broker, direct your written request
to Gen-Probe Incorporated, Attention: Investor Relations, 10210
Genetic Center Drive, San Diego, California 92121, or
contact the Companys Investor Relations Department at
(858) 410-8000.
Stockholders who currently receive multiple copies of the Notice
of Internet Availability of Proxy Materials or proxy statement
at their address and would like to request
householding of their communications should contact
their broker.
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
Henry L. Nordhoff
Chairman and Chief Executive Officer
March 31, 2009
A copy of the Companys Annual Report to the Securities
and Exchange Commission on
Form 10-K
for the fiscal year ended December 31, 2008 is available
without charge upon written request to: Investor Relations,
Gen-Probe Incorporated, 10210 Genetic Center Drive,
San Diego, California 92121.
68
Appendix A
THE
2003 INCENTIVE AWARD PLAN
OF
GEN-PROBE
INCORPORATED
Originally Adopted by the Board of Directors on March 3,
2003
Amendment Adopted by Board of Directors on May 13, 2003
Originally Approved by the Stockholders on May 29, 2003
Amendment and Restatement Adopted by Board of Directors on
February 9, 2006
Amendment and Restatement Approved by the Stockholders on
May 17, 2006
Second Amendment and Restatement Adopted by Board of Directors
on November 16, 2006
Third Amendment and Restatement Adopted by Board of Directors on
February 8, 2007
Fourth Amendment and Restatement Adopted by Board of Directors
on March 20, 2009
Gen-Probe Incorporated, a Delaware corporation, has adopted The
2003 Incentive Award Plan of Gen-Probe Incorporated (the
Plan) for the benefit of its eligible Employees,
Consultants and Directors.
The purposes of the Plan are as follows:
(1) To provide an additional incentive for Directors,
Employees and Consultants (as such terms are defined below) to
further the growth, development and financial success of the
Company by personally benefiting through the ownership of
Company stock
and/or
rights which recognize such growth, development and financial
success.
(2) To enable the Company to obtain and retain the services
of Directors, Employees and Consultants considered essential to
the long range success of the Company by offering them an
opportunity to own stock in the Company
and/or
rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I.
DEFINITIONS
1.1 General. Whenever the following
terms are used in the Plan they shall have the meanings
specified below, unless the context clearly indicates otherwise.
1.2 Administrator. Administrator
shall mean the entity that conducts the general administration
of the Plan as provided herein. With reference to the
administration of the Plan with respect to Awards granted to
Independent Directors, the term Administrator shall
refer to the Board. With reference to the administration of the
Plan with respect to any other Awards, the term
Administrator shall refer to the Committee, except
to the extent the Board has assumed the authority for
administration of the Plan as provided in Section 11.2.
1.3 Award. Award shall
mean an Option, a Restricted Stock award, a Restricted Stock
Unit award, a Performance Award, a Dividend Equivalents award, a
Deferred Stock award, a Stock Payment award or a Stock
Appreciation Right, which may be awarded or granted under the
Plan (collectively, Awards).
1.4 Award Agreement. Award
Agreement shall mean a written agreement executed by an
authorized officer of the Company and the Holder, which shall
contain such terms and conditions with respect to an Award, as
the Administrator shall determine, consistent with the Plan.
1.5 Award Limit. Award
Limit shall mean Five Hundred Thousand (500,000) shares of
Common Stock, as adjusted pursuant to Section 12.3 of the
Plan.
1.6 Board. Board shall
mean the Board of Directors of the Company.
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1.7 Change in Control. Change
in Control shall mean a change in ownership or control of
the Company effected through any of the following transactions:
(a) any person or related group of persons (other than the
Company or a person that, prior to such transaction, directly or
indirectly controls, is controlled by, or is under common
control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of
Rule 13d-3
under the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the
Companys outstanding securities pursuant to a tender or
exchange offer for securities of the Company;
(b) there is a change in the composition of the Board over
a period of thirty-six (36) consecutive months (or less)
such that a majority of the Board members (rounded up to the
nearest whole number) ceases, by reason of one or more proxy
contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members
continuously since the beginning of such period or
(ii) have been elected or nominated for election as Board
members during such period by at least a majority of the Board
members described in clause (i) who were still in office at
the time such election or nomination was approved by the Board;
(c) a merger or consolidation of the Company with any other
corporation (or other entity), other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or another
entity) more than
662/3%
of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires
more than 25% of the combined voting power of the Companys
then outstanding voting securities shall not constitute a Change
in Control; or
(d) a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Companys assets.
1.8 Code. Code shall
mean the Internal Revenue Code of 1986, as amended from time to
time.
1.9 Committee. Committee
shall mean the Board, or Compensation Committee of the Board, or
another committee or subcommittee of the Board, appointed as
provided in Section 11.1.
1.10 Common Stock. Common
Stock shall mean the Common Stock of the Company, par
value $0.0001 per share.
1.11 Company. Company
shall mean Gen-Probe Incorporated, a Delaware corporation.
1.12 Consultant. Consultant
shall mean any consultant or adviser (other than an Employee) if:
(a) the consultant or adviser renders bona fide services to
the Company or any Subsidiary;
(b) the services rendered by the consultant or adviser are
not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Companys
securities; and
(c) the consultant or adviser is a natural person who has
contracted directly with the Company or any Subsidiary to render
such services.
1.13 Deferred Stock. Deferred
Stock shall mean a right to receive Common Stock awarded
under Section 9.4.
1.14 Director. Director
shall mean a member of the Board, whether such Director is an
Employee or an Independent Director.
1.15 Dividend
Equivalent. Dividend Equivalent shall
mean a right to receive the equivalent value (in cash or Common
Stock) of dividends paid on Common Stock, awarded under
Section 9.2.
1.16 DRO. DRO shall
mean a domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
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1.17 Eligible
Individual. Eligible Individual shall
mean any person who is an Employee, a Consultant or an
Independent Director, as determined by the Administrator.
1.18 Employee. Employee
shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.
1.19 Equity
Restructuring. Equity Restructuring
shall mean a non-reciprocal transaction between the Company and
its stockholders, such as a stock dividend, stock split,
spin-off, rights offering or recapitalization through a large,
nonrecurring cash dividend, that affects the number or kind of
shares of Common Stock (or other securities of the Company) or
the share price of Common Stock (or other securities) and causes
a change in the per share value of the Common Stock underlying
outstanding Awards.
1.20 Exchange Act. Exchange
Act shall mean the Securities Exchange Act of 1934, as
amended.
1.21 Fair Market Value. Fair
Market Value shall mean, as of any date, the value of the
Common Stock determined as follows:
(a) If the Common Stock is listed on any established stock
exchange or a national market system, the Fair Market Value of a
share of Common Stock shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system (or the exchange or system with the
greatest volume of trading in the Common Stock) for such date,
or if no bids or sales were reported for such date, then the
closing sales price (or the closing bid, if no sales were
reported) on the trading date immediately prior to such date
during which a bid or sale occurred, in each case, as reported
by The NASDAQ Stock Market or such other source as the Board
deems reliable.
(b) In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Board.
1.22 Full Value Award. Full
Value Award shall mean any Award other than an Option or a
Stock Appreciation Right.
1.23 Holder. Holder
shall mean a person who has been granted or awarded an Award.
1.24 Incentive Stock
Option. Incentive Stock Option shall
mean an Option which conforms to the applicable provisions of
Section 422 of the Code and which is designated as an
Incentive Stock Option by the Administrator.
1.25 Independent
Director. Independent Director shall
mean a member of the Board who is not an Employee.
1.26 Independent Director Equity Compensation
Policy. Independent Director Equity Compensation
Policy shall mean a written non-discretionary formula to
provide for granting Awards to Independent Directors that is
established by the Administrator in accordance with
Article X.
1.27 Non-Qualified Stock
Option. Non-Qualified Stock Option
shall mean an Option not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
1.28 Option. Option
shall mean a stock option granted under Article IV of the
Plan. An Option granted under the Plan shall, as determined by
the Administrator, be either a Non-Qualified Stock Option or an
Incentive Stock Option; provided, however, that Options granted
to Independent Directors and Consultants shall be Non-Qualified
Stock Options.
1.29 Performance
Award. Performance Award shall mean a
cash bonus award, stock bonus award, performance award or
incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Section 9.1.
1.30 Performance-Based
Compensation. Performance-Based
Compensation shall mean any compensation that is intended
to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code.
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1.31 Performance
Criteria. Performance Criteria shall
mean the following business criteria with respect to the
Company, any Subsidiary or any division or operating unit:
(a) revenue, (b) sales, (c) cash flow,
(d) earnings per share of Common Stock (including earnings
before any one or more of the following: (i) interest,
(ii) taxes, (iii) depreciation and
(iv) amortization), (e) return on equity,
(f) total stockholder return, (g) return on capital,
(h) return on assets or net assets, (i) income or net
income, (j) operating income or net operating income,
(k) operating profit or net operating profit,
(l) operating margin, (m) cost reductions or savings,
(n) research and development expenses (including research
and development expenses as a percentage of sales or revenues);
(o) working capital and (p) market share.
1.32 Plan. Plan shall
mean The 2003 Incentive Award Plan of Gen-Probe Incorporated.
1.33 Restricted
Stock. Restricted Stock shall mean
Common Stock awarded under Article VII of the Plan.
1.34 Restricted Stock
Units. Restricted Stock Units shall
mean the right to receive Common Stock awarded under
Section 9.5.
1.35 Rule 16b-3. Rule 16b-3
shall mean that certain
Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to
time.
1.36 Section 162(m)
Employee. Section 162(m)
Employee shall mean any Employee designated by the
Administrator as an Employee whose compensation for the fiscal
year in which the Employee is so designated or a future fiscal
year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.37 Securities
Act. Securities Act shall mean the
Securities Act of 1933, as amended.
1.38 Stock Appreciation
Right. Stock Appreciation Right shall
mean a stock appreciation right granted under Article VIII
of the Plan.
1.39 Stock Payment. Stock Payment
shall mean (a) a payment in the form of shares of Common
Stock, or (b) an option or other right to purchase shares
of Common Stock, as part of a bonus, deferred compensation or
other arrangement, awarded under Section 9.3.
1.40 Subsidiary. Subsidiary
shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
1.41 Substitute
Award. Substitute Award shall mean an
Option granted under the Plan upon the assumption of, or in
substitution for, outstanding equity awards previously granted
by another company or entity in connection with a corporate or
similar transaction, such as a merger, combination,
consolidation or acquisition of property or stock; provided,
however, that in no event shall the term Substitute
Award be construed to refer to an option granted in
connection with the cancellation and repricing of an Option.
1.42 Termination of
Consultancy. Termination of
Consultancy shall mean the time when the engagement of a
Holder as a Consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death,
disability or retirement; but excluding terminations where there
is a simultaneous engagement by or commencement of employment
with the Company or any Subsidiary or a parent corporation
thereof (within the meaning of Section 424 of the Code).
The Administrator, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination
of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a
discharge for cause, and all questions of whether a particular
leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of the Plan, the Company or
any Subsidiary has an absolute and unrestricted right to
terminate a Consultants service at any time for any reason
whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
1.43 Termination of
Directorship. Termination of
Directorship shall mean the time when a Holder who is an
Independent Director ceases to be a Director for any reason,
including, but not by way of limitation, a termination by
resignation, removal, failure to be re-elected, death,
disability or retirement. The Board, in its sole and absolute
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discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect
to Independent Directors.
1.44 Termination of
Employment. Termination of Employment
shall mean the time when the employee-employer relationship
between a Holder and the Company or any Subsidiary is terminated
for any reason, with or without cause, including, but not by way
of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (a) terminations
where there is a simultaneous reemployment or continuing
employment of a Holder by the Company or any Subsidiary or a
parent corporation thereof (within the meaning of
Section 424 of the Code), (b) at the discretion of the
Administrator, terminations which result in a temporary
severance of the employee-employer relationship, and (c) at
the discretion of the Administrator, terminations which are
followed by the simultaneous establishment of a consulting
relationship by the Company or a Subsidiary with the former
employee, until the consultancy terminates and
(d) terminations of employment due to retirement which are
followed by the continuing service of the Holder as a Director
of the Company, until such service as a director terminates. The
Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of
Employment, including, but not by way of limitation, the
question of whether a Termination of Employment resulted from a
discharge for cause, and all questions of whether a particular
leave of absence constitutes a Termination of Employment;
provided, however, that, with respect to Incentive Stock
Options, unless otherwise determined by the Administrator in its
discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.
ARTICLE II.
SHARES SUBJECT
TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Awards shall be Common
Stock, subject to Section 12.3 of the Plan. The aggregate
number of such shares which may be issued upon exercise of such
Options or rights or upon any such Awards under the Plan shall
not exceed Ten Million Five Hundred Thousand (10,500,000)
shares. No additional shares may be authorized for issuance
under the Plan without stockholder approval (subject to
adjustment as set forth in Section 12.3). The shares of
Common Stock issuable upon exercise of such Options or rights or
upon any such Awards may be either previously authorized but
unissued shares or treasury shares.
(b) Subject to Section 2.2, the number of shares
available for issuance under the Plan shall be reduced by:
(i) one (1) share for each share of stock issued
pursuant to (A) an Option granted under Article IV,
(B) an award of Restricted Stock under Article VII
granted prior to May 17, 2006 and (C) a Stock
Appreciation Right granted under Article VIII with respect
to which the exercise price is at least one hundred percent
(100%) of the Fair Market Value of the underlying Common Stock
on the date of grant; and (ii) two (2.0) shares for each
share of Common Stock issued pursuant to a Full Value Award
granted after May 17, 2006.
(c) The maximum number of shares of Common Stock which may
be subject to Awards granted under the Plan to any individual in
any calendar year shall not exceed the Award Limit. To the
extent required by Section 162(m) of the Code, shares
subject to Options that are canceled continue to be counted
against the Award Limit. The maximum aggregate amount of cash
that may be paid during any calendar year with respect to one or
more Awards payable in cash shall be $3,000,000.
2.2 Add-Back of Options and Other
Rights. If any Option or other right to acquire
shares of Common Stock under any other Award under the Plan
expires or is canceled without having been fully exercised, or
is exercised in whole or in part for cash as permitted by the
Plan, then the number of shares of Common Stock subject to such
Option or other right but as to which such Option or other right
was not exercised prior to its expiration or cancellation may
again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1; provided that to the extent
there is issued a share of Common Stock pursuant to an Award
that counted as two (2.0) shares against the number of shares
available for issuance under the Plan pursuant to
Section 2.1(b) and such share
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of Common Stock again becomes available for issuance under the
Plan pursuant to this Section 2.2, then the number of
shares of Common Stock available for issuance under the Plan
shall increase by two (2.0) shares. Furthermore, any shares
subject to Awards which are adjusted pursuant to
Section 12.3 and become exercisable with respect to shares
of stock of another corporation shall be considered cancelled
and may again be optioned, granted or awarded hereunder, subject
to the limitations of Section 2.1. Shares of Common Stock
which are delivered by the Holder or withheld by the Company
upon the exercise of any Award under the Plan, in payment of the
exercise price thereof or tax withholding thereon, may not again
be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1. If any shares of Restricted
Stock are surrendered by the Holder or repurchased by the
Company pursuant to Section 7.4 or 7.5 hereof, such shares
may again be optioned, granted or awarded hereunder, subject to
the provisions of Section 2.1. Notwithstanding the
provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would
cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the
Code. The payment of Dividend Equivalents in cash in conjunction
with any outstanding Awards shall not be counted against the
shares available for issuance under the Plan.
ARTICLE III.
GRANTING OF
AWARDS
3.1 Award Agreement. Each Award
shall be evidenced by an Award Agreement. Award Agreements
evidencing Awards intended to qualify as Performance-Based
Compensation shall contain such terms and conditions as may be
necessary to meet the applicable provisions of
Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions
as may be necessary to meet the applicable provisions of
Section 422 of the Code.
3.2 Provisions Applicable to Section 162(m)
Employees.
(a) The Committee, in its discretion, may determine whether
an Award is to qualify as Performance-Based Compensation.
(b) Notwithstanding anything in the Plan to the contrary,
the Committee may grant any Award to a Section 162(m)
Employee that vests or becomes exercisable or payable upon the
attainment of performance goals which are related to one or more
of the Performance Criteria, including Restricted Stock the
restrictions to which lapse upon the obtainment of performance
goals which are related to one or more of the Performance
Criteria.
(c) To the extent necessary to comply with the requirements
of Section 162(m)(4)(C) of the Code, with respect to any
Award granted under Article VII or IX which may be granted
to one or more Section 162(m) Employees, no later than
ninety (90) days following the commencement of any fiscal
year in question or any other designated fiscal period or period
of service (or such other time as may be required or permitted
by Section 162(m) of the Code), the Committee shall, in
writing, (i) designate one or more Section 162(m)
Employees, (ii) select the Performance Criteria applicable
to the fiscal year or other designated fiscal period or period
of service, (iii) establish the various performance
targets, in terms of an objective formula or standard, and
amounts of such Awards, as applicable, which may be earned for
such fiscal year or other designated fiscal period or period of
service, and (iv) specify the relationship between
Performance Criteria and the performance targets and the amounts
of such Awards, as applicable, to be earned by each
Section 162(m) Employee for such fiscal year or other
designated fiscal period or period of service. Following the
completion of each fiscal year or other designated fiscal period
or period of service, the Committee shall certify in writing
whether the applicable performance targets have been achieved
for such fiscal year or other designated fiscal period or period
of service. In determining the amount earned by a
Section 162(m) Employee, the Committee shall have the right
to reduce (but not to increase) the amount payable at a given
level of performance to take into account additional factors
that the Committee may deem relevant to the assessment of
individual or corporate performance for the fiscal year or other
designated fiscal period or period of service.
(d) Furthermore, notwithstanding any other provision of the
Plan, any Award that is granted to a Section 162(m)
Employee and is intended to qualify as Performance-Based
Compensation shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations
or rulings issued thereunder that are requirements for
qualification as Performance-
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Based Compensation and the Plan and such Awards shall be deemed
amended to the extent necessary to conform to such requirements.
3.3 Limitations Applicable to
Section 16 Persons. Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or
awarded to any individual who is then subject to Section 16
of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to
Rule 16b-3
of the Exchange Act) that are requirements for the application
of such exemptive rule. To the extent permitted by applicable
law, the Plan and Awards granted or awarded hereunder shall be
deemed amended to the extent necessary to conform to such
applicable exemptive rule.
3.4 At-Will Employment. Nothing in
the Plan or in any Award Agreement hereunder shall confer upon
any Holder any right to continue in the employ of, or as a
Consultant for, the Company or any Subsidiary, or as a Director
of the Company, or shall interfere with or restrict in any way
the rights of the Company and any Subsidiary, which are hereby
expressly reserved, to discharge any Holder at any time for any
reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in a written employment or
consulting agreement between the Holder and the Company and any
Subsidiary.
3.5 Foreign
Holders. Notwithstanding any provision of the
Plan to the contrary, in order to comply with the laws in other
countries in which the Company and its Subsidiaries operate or
have Employees, Independent Directors or Consultants, or in
order to comply with the requirements of any foreign stock
exchange, the Administrator, in its sole discretion, shall have
the power and authority to: (a) determine which
Subsidiaries shall be covered by the Plan; (b) determine
which Eligible Individuals outside the United States are
eligible to participate in the Plan; (c) modify the terms
and conditions of any Award granted to Eligible Individuals
outside the United States to comply with applicable foreign laws
or listing requirements of any such foreign stock exchange;
(d) establish subplans and modify exercise procedures and
other terms and procedures, to the extent such actions may be
necessary or advisable (any such subplans
and/or
modifications shall be attached to the Plan as appendices);
provided, however, that no such subplans
and/or
modifications shall increase the share limitations contained in
Section 2.1 and (e) take any action, before or after
an Award is made, that it deems advisable to obtain approval or
comply with any necessary local governmental regulatory
exemptions or approvals or listing requirements of any such
foreign stock exchange. Notwithstanding the foregoing, the
Administrator may not take any actions hereunder, and no Awards
shall be granted, that would violate the Code, the Exchange Act,
the Securities Act or any other securities law or governing
statute or any other applicable law.
ARTICLE IV.
GRANTING OF
OPTIONS
4.1 Eligibility. Any Employee or
Consultant selected by the Committee pursuant to
Section 4.4(a)(i) shall be eligible to be granted an
Option. Any Independent Director shall be eligible to be granted
an Option pursuant to the Independent Director Equity
Compensation Policy. All grants, other than those made pursuant
to the Independent Director Equity Compensation Policy, shall be
made at the discretion of the Committee or the Board, as the
case may be, and no person shall be entitled to a grant of an
Option as a matter of right.
4.2 Disqualification for Stock
Ownership. No person may be granted an Incentive
Stock Option under the Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any then existing Subsidiary
or parent corporation (within the meaning of Section 424 of
the Code) unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
4.3 Qualification of Incentive Stock
Options. No Incentive Stock Option shall be
granted to any person who is not an Employee.
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4.4 Granting of Options to Employees and
Consultants.
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:
(i) Select from among the Employees or Consultants
(including Employees or Consultants who have previously been
granted Awards under the Plan) such of them as in its opinion
should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares of Common Stock to be subject to such Options granted to
the selected Employees or Consultants;
(iii) Subject to Section 4.3, determine whether such
Options are to be Incentive Stock Options or Non-Qualified Stock
Options and whether such Options are to qualify as
Performance-Based Compensation; and
(iv) Determine the terms and conditions of such Options,
consistent with the Plan; provided, however, that the terms and
conditions of Options intended to qualify as Performance-Based
Compensation shall include, but not be limited to, such terms
and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code.
(b) Upon the selection of an Employee or Consultant to be
granted an Option, the Committee shall instruct the Secretary of
the Company to issue the Option and may impose such conditions
on the grant of the Option as it deems appropriate, and the
Committee shall authorize one or more of the officers of the
Company to prepare, execute and deliver the Award Agreement with
respect to such Option.
(c) Any Incentive Stock Option granted under the Plan may
be modified by the Committee, with the consent of the Holder, to
disqualify such Option from treatment as an incentive
stock option under Section 422 of the Code.
4.5 Options in Lieu of Cash
Compensation. Options may be granted under the
Plan to Employees and Consultants in lieu of cash bonuses that
would otherwise be payable to such Employees and Consultants
pursuant to such policies that may be adopted by the
Administrator from time to time and to Independent Directors in
lieu of directors fees that would otherwise be payable to
such Independent Directors pursuant to the Independent Director
Equity Compensation Policy.
ARTICLE V.
TERMS OF
OPTIONS
5.1 Option Price. The price per
share of the shares of Common Stock subject to each Option
granted to Employees and Consultants shall be set by the
Committee; provided, however, that such price shall be no less
than 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted, and:
(a) in the case of Incentive Stock Options, such price
shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code; and
(b) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or
any Subsidiary or parent corporation thereof (within the meaning
of Section 422 of the Code), such price shall not be less
than 110% of the Fair Market Value of a share of Common Stock on
the date the Option is granted (or the date the Option is
modified, extended or renewed for purposes of
Section 424(h) of the Code).
5.2 Option Term. The term of an
Option granted to an Employee or Consultant shall be set by the
Committee in its absolute discretion; provided, however, that
the term shall not be more than ten (10) years from the
date the Option is granted; provided, further, however, that the
term of any Option granted after May 17, 2006 shall not be
more than seven (7) years from the date the Option is
granted; and, provided, further, that, in the case of Incentive
Stock Options, the term shall not be more than five
(5) years from the date the Incentive Stock Option is
granted if the Incentive Stock Option is granted to an
individual then owning (within the meaning of
Section 424(d)
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of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 424 of
the Code). Except as limited by requirements of Section 422
of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, as well as any applicable requirements
of Section 409A of the Code and the guidance and
regulations thereunder, the Committee may extend the term of any
outstanding Option in connection with any Termination of
Employment or Termination of Consultancy of the Holder, or amend
any other term or condition of such Option relating to such a
termination; provided, however, that any extended term shall not
be more than seven (7) years from the date the Option is
granted.
5.3 Option Vesting.
(a) The period during which the right to exercise, in whole
or in part, an Option granted to an Employee or a Consultant
vests in the Holder shall be set by the Committee and the
Committee may determine that an Option may not be exercised in
whole or in part for a specified period after it is granted.
Subject to the provisions of the prior sentence, at any time
after grant of an Option, the Committee may, in its absolute
discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option granted to
an Employee or Consultant vests and becomes exercisable.
(b) No portion of an Option granted to an Employee or
Consultant which is unexercisable at Termination of Employment
or Termination of Consultancy, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by the
Committee either in the Award Agreement or by action of the
Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which incentive stock options
(within the meaning of Section 422 of the Code, but without
regard to Section 422(d) of the Code) are exercisable for
the first time by a Holder during any calendar year (under the
Plan and all other incentive stock option plans of the Company
and any parent or subsidiary corporation (within the meaning of
Section 422 of the Code) of the Company), exceeds $100,000,
such Options or other options shall be treated as non-qualified
stock options to the extent required by Section 422 of the
Code. The rule set forth in the preceding sentence shall be
applied by taking Options or other options into account in the
order in which they were granted. For purposes of this
Section 5.3(c), the Fair Market Value of stock shall be
determined as of the time the Option or other options with
respect to such stock is granted.
5.4 Terms of Options Granted to Independent
Directors. The price per share of the shares
subject to each Option granted to an Independent Director shall
equal 100% of the Fair Market Value of a share of Common Stock
on the date the Option is granted. The period during which the
right to exercise, in whole or in part, an Option granted to an
Independent Director vests in the Holder and the term of such
Option shall be set forth in the Independent Director Equity
Compensation Policy; provided, however, that the term of any
Option granted after May 17, 2006 shall not be more than
seven (7) years from the date the Option is granted. Except
as otherwise provided in the Independent Director Equity
Compensation Policy, no portion of an Option which is
unexercisable at Termination of Directorship shall thereafter
become exercisable. Options granted to Independent Directors
shall be subject to such other terms and conditions as are
determined by the Administrator and set forth in the Independent
Director Equity Compensation Policy.
5.5 Substitute
Awards. Notwithstanding the foregoing provisions
of this Article V to the contrary, in the case of an Option
that is a Substitute Award, the price per share of the shares
subject to such Option may be less than the Fair Market Value
per share on the date of grant, provided, that the excess of:
(a) the aggregate Fair Market Value (as of the date such
Substitute Award is granted) of the shares subject to the
Substitute Award; over
(b) the aggregate exercise price thereof; does not exceed
the excess of;
(c) the aggregate fair market value (as of the time
immediately preceding the transaction giving rise to the
Substitute Award, such fair market value to be determined by the
Administrator) of the shares of the predecessor entity that were
subject to the grant assumed or substituted for by the Company;
over
(d) the aggregate exercise price of such shares.
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5.6 Restrictions on Common Stock.
The Administrator may, in its sole discretion, provide under the
terms of an Option that shares of Common Stock purchased upon
exercise of such Option shall be subject to repurchase from the
Holder by the Company, or shall be subject to such restrictions
as the Administrator shall provide, which restrictions may
include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of
employment with the Company and the Subsidiaries, Company
performance and individual performance; provided, however, that,
by action taken before or after the Common Stock is purchased
upon exercise of the Option, the Administrator may, on such
terms and conditions as it may determine to be appropriate,
terminate the Companys repurchase right or remove any or
all of the restrictions imposed by the terms of the Award
Agreement. The Companys right to repurchase the Common
Stock from the Holder then subject to the right shall provide
that immediately upon a Termination of Employment, a Termination
of Consultancy, or a Termination of Directorship, as applicable,
and for such period as the Administrator shall determine, the
Company shall have the right to purchase the Common Stock at a
price per share equal to the price paid by the Holder for such
Common Stock, or such other price as is determined by the
Administrator; provided, however, that, in the event of a Change
in Control, such right of repurchase shall terminate immediately
prior to the effective date of such Change in Control. Shares of
Common Stock purchased upon the exercise of an Option may not be
sold, transferred or encumbered until any repurchase right and
any and all restrictions are terminated or expire. The Secretary
of the Company or such other escrow holder as the Administrator
may appoint shall retain physical custody of each certificate
representing such shares of Common Stock until the repurchase
right and any and all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such
certificate terminate, expire or shall have been removed. In
order to enforce the restrictions imposed upon shares of Common
Stock hereunder, the Administrator shall cause a legend or
legends to be placed on certificates representing all shares of
Common Stock that are still subject to any repurchase right or
restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed
thereby. If a Holder makes an election under Section 83(b)
of the Code, or any successor section thereto, to be taxed with
respect to the Common Stock as of the date of transfer of the
Common Stock rather than as of the date or dates upon which the
Holder would otherwise be taxable under Section 83(a) of
the Code, the Holder shall deliver a copy of such election to
the Company immediately after filing such election with the
Internal Revenue Service.
ARTICLE VI.
EXERCISE OF
OPTIONS
6.1 Partial Exercise. An
exercisable Option may be exercised in whole or in part.
However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the
terms of the Option, a partial exercise be with respect to a
minimum number of shares.
6.2 Manner of Exercise. All or a
portion of an exercisable Option shall be deemed exercised upon
delivery of all of the following to the Secretary of the Company
or his office:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a
portion thereof, is exercised. The notice shall be signed by the
Holder or other person then entitled to exercise the Option or
such portion of the Option;
(b) Such representations and documents as the
Administrator, in its absolute discretion, deems necessary or
advisable to effect compliance with all applicable provisions of
the Securities Act and any other federal or state securities
laws or regulations. The Administrator may, in its absolute
discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised
pursuant to Section 12.1 by any person or persons other
than the Holder, appropriate proof of the right of such person
or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company, or
such other person or entity designated by the Administrator, for
the shares with respect to which the Option, or portion thereof,
is exercised. However, the
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Administrator, may in its sole and absolute discretion
(i) allow payment, in whole or in part, through the
delivery of shares of Common Stock owned by the Holder duly
endorsed for transfer to the Company (or the Holders
attestation of ownership of such shares) with a Fair Market
Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof;
(ii) allow payment, in whole or in part, through the
surrender of shares of Common Stock then issuable upon exercise
of the Option having a Fair Market Value on the date of Option
exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or
in part, through the delivery of a notice that the Holder has
placed a market sell order with a broker with respect to shares
of Common Stock then issuable upon exercise of the Option, and
that the broker has been directed to pay a sufficient portion of
the net proceeds of the sale to the Company in satisfaction of
the Option exercise price, provided that payment of such
proceeds is then made to the Company upon settlement of such
sale; (iv) allow payment in another form of legal
consideration acceptable to the Administrator; or (v) allow
payment through any combination of the consideration provided in
the foregoing subparagraphs (i)-(iv).
6.3 Conditions to Issuance of Stock
Certificates. The Company shall not be required
to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion
thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any state or federal law, or
under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body which the
Administrator shall, in its absolute discretion, deem necessary
or advisable;
(c) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Administrator
shall, in its absolute discretion, determine to be necessary or
advisable;
(d) The lapse of such reasonable period of time following
the exercise of the Option as the Administrator may establish
from time to time for reasons of administrative
convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax,
which in the discretion of the Administrator may be in the form
of consideration used by the Holder to pay for such shares under
Section 6.2(d).
6.4 Rights as Stockholders. Holders
shall not be, nor have any of the rights or privileges of,
stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the
Company to such Holders.
6.5 Ownership and Transfer
Restrictions. The Administrator, in its absolute
discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of
an Option as it deems appropriate. Any such restriction shall be
set forth in the respective Award Agreement and may be referred
to on the certificates evidencing such shares. The Holder shall
give the Company prompt notice of any disposition of shares of
Common Stock acquired by exercise of an Incentive Stock Option
within (a) two years from the date of granting (including
the date the Option is modified, extended or renewed for
purposes of Section 424(h) of the Code) such Option to such
Holder or (b) one year after the transfer of such shares to
such Holder.
6.6 Limitations on Exercise of Options Granted to
Independent Directors. No Option granted to an
Independent Director may be exercised to any extent by anyone
after the first to occur of the following events:
(a) The expiration of 12 months from the date of the
Holders death;
(b) The expiration of 12 months from the date of the
Holders Termination of Directorship by reason of his or
her permanent and total disability (within the meaning of
Section 22(e)(3) of the Code); or
(c) Except as otherwise provided in any Award Agreement or
the Independent Director Equity Compensation Policy, the
expiration of three months from the date of the Holders
Termination of Directorship for any reason other than such
Holders death or his or her permanent and total
disability, unless the Holder dies within said three-month
period.
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6.7 Additional Limitations on Exercise of
Options. Holders may be required to comply with
any timing or other restrictions with respect to the settlement
or exercise of an Option, including a window-period limitation,
as may be imposed in the discretion of the Administrator.
ARTICLE VII.
AWARD OF
RESTRICTED STOCK
7.1 Eligibility. Subject to the
Award Limit, Restricted Stock may be awarded to any Eligible
Individual who the Administrator determines should receive such
an Award.
7.2 Award of Restricted Stock.
(a) The Administrator may from time to time, in its
absolute discretion:
(i) Select from among the Eligible Individuals (including
Eligible Individuals who have previously been granted other
Awards under the Plan) such of them as in its opinion should be
awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent
with the Plan.
(b) The Administrator shall establish the purchase price,
if any, and form of payment for Restricted Stock; provided,
however, that such purchase price shall be no less than the par
value of the Common Stock to be purchased, unless otherwise
permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted
Stock.
(c) Upon the selection of an Eligible Individual to be
awarded Restricted Stock, the Administrator shall instruct the
Secretary of the Company to issue such Restricted Stock and may
impose such conditions on the issuance of such Restricted Stock
as it deems appropriate, and the Committee shall authorize one
or more officers of the Company to prepare, execute and deliver
the Award Agreement with respect to such Restricted Stock.
7.3 Rights as Stockholders. Subject
to Section 7.4, upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the
Administrator, all the rights of a stockholder with respect to
said shares, subject to the restrictions in his Award Agreement,
including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided,
however, that in the discretion of the Administrator, any
extraordinary distributions with respect to the Common Stock
shall be subject to the restrictions set forth in
Section 7.4.
7.4 Restriction. All shares of
Restricted Stock issued under the Plan (including any shares
received by holders thereof with respect to shares of Restricted
Stock as a result of stock dividends, stock splits or any other
form of recapitalization) shall, in the terms of each individual
Award Agreement, be subject to such restrictions as the
Administrator shall provide, if any, which restrictions may
include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual
performance; provided, however, that, except with respect to
shares of Restricted Stock granted to Section 162(m)
Employees, by action taken after the Restricted Stock is issued,
the Administrator may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Award Agreement subject
to the limitations contained herein. Restricted Stock may not be
sold or encumbered until all restrictions are terminated or
expire. If no consideration was paid by the Holder upon
issuance, a Holders rights in unvested Restricted Stock
shall lapse, and such Restricted Stock shall be surrendered to
the Company without consideration, upon Termination of
Employment, Termination of Consultancy or, if applicable, upon
Termination of Directorship; provided, however, that the
Administrator in its sole and absolute discretion may provide
that such rights shall not lapse in the event of a Termination
of Employment because of the Holders death or disability.
7.5 Repurchase of Restricted
Stock. The Administrator shall provide in the
terms of each individual Award Agreement that the Company shall
have the right to repurchase from the Holder the Restricted
Stock then subject to restrictions under the Award Agreement
immediately upon a Termination of Employment, a Termination of
Consultancy, or, if applicable, a Termination of Directorship at
a cash price per share equal to the price paid by the
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Holder for such Restricted Stock; provided, however, that the
Committee in its sole and absolute discretion may provide that
no such right of repurchase shall exist in the event of a
Termination of Employment following a change of ownership
or control (within the meaning of Treasury
Regulation Section 1.162-27(e)(2)(v)
or any successor regulation thereto) of the Company or because
of the Holders death or disability; provided, further,
that, except with respect to shares of Restricted Stock granted
to Section 162(m) Employees, the Committee in its sole and
absolute discretion may provide that no such right of repurchase
shall exist in the event of a Termination of Employment, a
Termination of Consultancy or a Termination of Directorship
without cause or following any Change in Control of the Company
or because of the Holders retirement, or otherwise.
7.6 Escrow. The Secretary of the
Company or such other escrow holder as the Administrator may
appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions
imposed under the Award Agreement with respect to the shares
evidenced by such certificate expire or shall have been removed.
7.7 Legend. In order to enforce the
restrictions imposed upon shares of Restricted Stock hereunder,
the Administrator shall cause a legend or legends to be placed
on certificates representing all shares of Restricted Stock that
are still subject to restrictions under Award Agreements, which
legend or legends shall make appropriate reference to the
conditions imposed thereby.
7.8 Section 83(b) Election. If
a Holder makes an election under Section 83(b) of the Code,
or any successor section thereto, to be taxed with respect to
the Restricted Stock as of the date of transfer of the
Restricted Stock rather than as of the date or dates upon which
the Holder would otherwise be taxable under Section 83(a)
of the Code, the Holder shall deliver a copy of such election to
the Company immediately after filing such election with the
Internal Revenue Service.
7.9 Restricted Stock in Lieu of Cash
Compensation. Notwithstanding anything herein to
the contrary, shares of Restricted Stock may be granted to
Independent Directors in lieu of directors fees which
would otherwise be payable to such Independent Directors
pursuant to the Independent Director Equity Compensation Policy.
ARTICLE VIII.
STOCK
APPRECIATION RIGHTS
8.1 Grant of Stock Appreciation
Rights. A Stock Appreciation Right may be granted
to any Eligible Individual selected by the Administrator. A
Stock Appreciation Right may be granted (a) in connection
and simultaneously with the grant of an Option, (b) with
respect to a previously granted Option, or (c) independent
of an Option. The exercise price per share of Common Stock
subject to each Stock Appreciation Right shall be set by the
Administrator, but shall not be less than 100% of the per share
Fair Market Value of the Common Stock on the date the Stock
Appreciation Right is granted. A Stock Appreciation Right shall
be subject to such other terms and conditions not inconsistent
with the Plan as the Administrator shall impose and shall be
evidenced by an Award Agreement.
8.2 Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right (CSAR)
shall be related to a particular Option and shall be exercisable
only when and to the extent the related Option is exercisable.
(b) A CSAR may be granted to the Holder for no more than
the number of shares subject to the simultaneously or previously
granted Option to which it is coupled.
(c) A CSAR shall entitle the Holder (or other person
entitled to exercise the Option pursuant to the Plan) to
surrender to the Company unexercised a portion of the Option to
which the CSAR relates (to the extent then exercisable pursuant
to its terms) and to receive from the Company in exchange
therefor an amount determined by multiplying the difference
obtained by subtracting the Option exercise price from the Fair
Market Value of a share of Common Stock on the date of exercise
of the CSAR by the number of shares of Common Stock with respect
to which the CSAR shall have been exercised, subject to any
limitations the Administrator may impose.
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8.3 Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right
(ISAR) shall be unrelated to any Option and shall
have a term set by the Administrator; provided, however, that
the term shall not be more than seven (7) years from the
date the ISAR is granted. An ISAR shall be exercisable in such
installments as the Administrator may determine. Subject to the
provisions of the prior sentence, at any time after grant of an
ISAR, the Administrator may, in its absolute discretion and
subject to whatever terms and conditions it selects, accelerate
the period during which an Option granted to an Employee or
Consultant vests and becomes exercisable. An ISAR shall cover
such number of shares of Common Stock as the Administrator may
determine. The exercise price per share of Common Stock subject
to each ISAR shall be set by the Committee. An ISAR is
exercisable only while the Holder is an Employee, Consultant or
Director; provided that the Committee may determine that the
ISAR may be exercised subsequent to Termination of Employment,
Termination of Consultancy or Termination of Directorship
without cause, or following a Change in Control of the Company,
or because of the Holders retirement, death or disability,
or otherwise.
(b) An ISAR shall entitle the Holder (or other person
entitled to exercise the ISAR pursuant to the Plan) to exercise
all or a specified portion of the ISAR (to the extent then
exercisable pursuant to its terms) and to receive from the
Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR
from the Fair Market Value of a share of Common Stock on the
date of exercise of the ISAR by the number of shares of Common
Stock with respect to which the ISAR shall have been exercised,
subject to any limitations the Administrator may impose.
8.4 Payment and Limitations on Exercise.
(a) Payment of the amounts determined under
Section 8.2(c) and 8.3(b) above shall be in cash, in Common
Stock (based on its Fair Market Value as of the date the Stock
Appreciation Right is exercised) or a combination of both, as
determined by the Administrator. To the extent such payment is
effected in Common Stock it shall be made subject to
satisfaction of all provisions of Section 6.3 above
pertaining to Options.
(b) Holders of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including
a window-period limitation, as may be imposed in the discretion
of the Administrator.
ARTICLE IX.
AWARD OF
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
STOCK
PAYMENTS AND RESTRICTED STOCK UNITS
9.1 Performance Awards.
(a) The Administrator is authorized to grant Performance
Awards to any Eligible Individual and to determine whether such
Performance Awards shall be Performance-Based Compensation. The
value of Performance Awards may be linked to any one or more of
the Performance Criteria or other specific criteria determined
by the Administrator, in each case on a specified date or dates
or over any period or periods determined by the Administrator.
In making such determinations, the Administrator shall consider
(among such other factors as it deems relevant in light of the
specific type of Award) the contributions, responsibilities and
other compensation of the particular Eligible Individual.
Performance Awards may be paid in cash, shares of Common Stock,
or both, as determined by the Administrator.
(b) Without limiting Section 9.1(a), the Administrator
may grant Performance Awards to any Eligible Individual in the
form of a cash bonus payable upon the attainment of objective
Performance Goals, or such other criteria, whether or not
objective, which are established by the Administrator, in each
case on a specified date or dates or over any period or periods
determined by the Administrator. Any such bonuses paid to a
Holder which are intended to be Performance-Based Compensation
shall be based upon objectively determinable bonus formulas
established in accordance with the provisions of Article 5.
Additionally, any such bonuses paid to any Eligible Individual
shall be subject to the Award Limit.
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9.2 Dividend Equivalents.
(a) Dividend Equivalents may be granted by the
Administrator based on dividends declared on the Common Stock
subject to any Award, to be credited as of dividend payment
dates during the period between the date an Award is granted to
a Holder and the date such Award vests, is exercised, is
distributed or expires, as determined by the Administrator. Such
Dividend Equivalents shall be converted to cash or additional
shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the
Administrator.
(b) Notwithstanding the foregoing, no Dividend Equivalents
shall be payable with respect to Options or Stock Appreciation
Rights.
9.3 Stock Payments. The
Administrator is authorized to make Stock Payments to any
Eligible Individual. The number or value of shares of any Stock
Payment shall be determined by the Administrator and may be
based upon one or more Performance Criteria or any other
specific criteria, including service to the Company or any
Subsidiary, determined by the Administrator. Common Stock
underlying a Stock Payment which is subject to a vesting
schedule or other conditions or criteria set by the
Administrator will not be issued until those conditions have
been satisfied. Unless otherwise provided by the Administrator,
a Holder of a Stock Payment shall have no rights as a Company
stockholder with respect to such Stock Payment until such time
as the Stock Payment has vested and the Common Stock underlying
the Award have been issued to the Holder. Stock Payments may,
but are not required to be made in lieu of base salary, bonus,
fees or other cash compensation otherwise payable to such
Eligible Individual.
9.4 Deferred Stock. The
Administrator is authorized to grant Deferred Stock to any
Eligible Individual. The number of shares of Deferred Stock
shall be determined by the Administrator and may be based on one
or more Performance Criteria or other specific criteria,
including service to the Company or any Subsidiary, as the
Administrator determines, in each case on a specified date or
dates or over any period or periods determined by the
Administrator. Common Stock underlying a Deferred Stock award
which is subject to a vesting schedule or other conditions or
criteria set by the Administrator will not be issued until those
conditions have been satisfied. Unless otherwise provided by the
Administrator, a Holder of Deferred Stock shall have no rights
as a Company stockholder with respect to such Deferred Stock
until such time as the Award has vested and the Common Stock
underlying the Award has been issued to the Holder.
9.5 Restricted Stock Units. The
Administrator is authorized to grant Restricted Stock Units to
any Eligible Individual. The number and terms and conditions of
Restricted Stock Units shall be determined by the Administrator.
The Administrator shall specify the date or dates on which the
Restricted Stock Units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it
deems appropriate, including conditions based on one or more
Performance Criteria or other specific criteria, including
service to the Company or any Subsidiary, in each case on a
specified date or dates or over any period or periods, as the
Administrator determines. The Administrator shall specify, or
permit the Holder to elect, the conditions and dates upon which
the shares of Common Stock underlying the Restricted Stock Units
which shall be issued, which dates shall not be earlier than the
date as of which the Restricted Stock Units vest and become
nonforfeitable and which conditions and dates shall be subject
to compliance with Section 409A of the Code. On the
distribution dates, the Company shall issue to the Holder one
unrestricted, fully transferable share of Common Stock for each
vested and nonforfeitable Restricted Stock Unit.
9.6 Term. The term of a Performance
Award, Dividend Equivalent award, Deferred Stock award, Stock
Payment award
and/or
Restricted Stock Unit award shall be set by the Administrator in
its sole discretion.
9.7 Exercise or Purchase Price. The
Administrator may establish the exercise or purchase price of a
Performance Award, shares of Deferred Stock, shares distributed
as a Stock Payment award or shares distributed pursuant to a
Restricted Stock Unit award; provided, however,
that value of the consideration shall not be less than the par
value of a share of Common Stock, unless otherwise permitted by
applicable law. Any such exercise or purchase price shall be
payable in the form(s) of legal consideration specified in the
Award Agreement.
9.8 Exercise upon Termination of
Service. A Performance Award, Dividend Equivalent
award, Deferred Stock award, Stock Payment award
and/or
Restricted Stock Unit award is exercisable or distributable only
while the Holder is an Employee, Director or Consultant, as
applicable. The Administrator, however, in its sole discretion
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may provide that the Performance Award, Dividend Equivalent
award, Deferred Stock award, Stock Payment award
and/or
Restricted Stock Unit award may be exercised or distributed
subsequent to a Termination of Consultancy, Termination of
Directorship or Termination of Employment in certain events,
including a Change in Control, the Holders death,
retirement or disability or any other specified Termination of
Consultancy, Termination of Directorship or Termination of
Employment.
ARTICLE X.
INDEPENDENT
DIRECTOR AWARDS
The Board may grant Awards to Independent Directors, subject to
the limitations of the Plan, pursuant to the Independent
Director Equity Compensation Policy, as adopted by the
Administrator from time to time. The Independent Director Equity
Compensation Policy shall set forth the type of Award(s) to be
granted to Independent Directors, the number of shares of Common
Stock to be subject to Independent Director Awards, the
conditions on which such Awards shall be granted, become
exercisable
and/or
payable and expire, and such other terms and conditions as the
Administrator shall determine in its discretion. For the
avoidance of doubt, Awards granted to Independent Directors
shall be subject to all of the limitations set forth in the Plan.
ARTICLE XI.
ADMINISTRATION
11.1 Committee. The Committee shall
be the Compensation Committee of the Board, unless the Board
specifically assumes the functions of the Committee or appoints
another committee to assume such functions.
11.2 Duties and Powers of
Committee. It shall be the duty of the Committee
to conduct the general administration of the Plan in accordance
with its provisions. The Committee shall have the power to
interpret the Plan and the Award Agreements, and to adopt such
rules for the administration, interpretation, and application of
the Plan as are consistent therewith, to interpret, amend or
revoke any such rules and to amend any Award Agreement provided
that the rights or obligations of the Holder of the Award that
is the subject of any such Award Agreement are not affected
adversely. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions
of Section 422 of the Code. In its absolute discretion, the
Board may at any time and from time to time assume any and all
rights and duties of the Committee under the Plan, except with
respect to matters which under
Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules
issued thereunder, are required to be determined in the sole
discretion of the Committee. Notwithstanding the foregoing, the
full Board, acting by a majority of its members in office, shall
conduct the general administration of the Plan with respect to
Awards granted to Independent Directors.
11.3 Majority Rule; Unanimous Written
Consent. The Committee shall act by a majority of
its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by
all members of the Committee.
11.4 Compensation; Professional Assistance; Good
Faith Actions. Members of the Committee shall
receive such compensation, if any, for their services as members
as may be determined by the Board. All expenses and liabilities
which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The
Committee may, with the approval of the Board, employ attorneys,
consultants, accountants, appraisers, brokers, or other persons.
The Committee, the Company and the Companys officers and
Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the
Board in good faith shall be final and binding upon all Holders,
the Company and all other interested persons. No members of the
Commit