SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant      ý
Filed by a party other than the Registrant      o
Check the appropriate box:
o		Preliminary Proxy Statement		o		Confidential, For Use of the Commission
ý		Definitive Proxy Statement				Only (as permitted by Rule 14a-6(e)(2))
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

          ý No fee required.

          o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

          (1) Title of each class of securities to which transaction applies:

          (2) Aggregate number of securities to which transaction applies:

          (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

          (4) Proposed maximum aggregate value of transaction:

          (5) Total fee paid:

          o Fee paid previously with preliminary materials:

          o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number of the Form or Schedule and the date of its filing.

          (1) Amount Previously paid:

          (2) Form, Schedule or Registration Statement No.:

          (3) Filing Party:

          (4) Date Filed:

 

June 4, 2010

 

 

Dear Fellow Stockholder:

 

You are cordially invited to attend Inverness Medical Innovation, Inc.’s Annual Meeting of Stockholders on Wednesday, July 14, 2010 at 12:30 p.m., local time, at our corporate headquarters located at 51 Sawyer Road, Suite 200, Waltham, MA 02453.

 

In addition to the matters described in the attached proxy statement, we will report on our activities for our fiscal year ended December 31, 2009. You will have an opportunity to ask questions and to meet your directors and executives.

 

We are pleased to be able to offer to our stockholders the option to access our proxy materials on the Internet. We believe this option will be preferred by many of our stockholders, as it allows us to provide our stockholders the information they need in a convenient and efficient format.

 

Whether or not you plan to attend the meeting in person, it is important that your shares be represented and voted. Accordingly, please review our proxy materials and request a proxy card to sign, date, and return or submit your proxy or voting instruction card, as applicable, by telephone or through the Internet. Instructions for each type of voting are included in the Notice of Internet Availability of Proxy Materials that you received and on the proxy card. If you attend the meeting and prefer to vote at that time, you may do so.

 

We look forward to seeing you at the meeting. Your vote is important to us.

 

Cordially,

 

 

Ron Zwanziger
Chairman, Chief Executive Officer and President

 

INVERNESS MEDICAL INNOVATIONS, INC.
51 Sawyer Road, Suite 200
Waltham, Massachusetts 02453

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

Purpose:

 

 

Only stockholders of record on May 25, 2010 may vote at the annual meeting and at any adjournment or postponement thereof. We will begin mailing the Notice of Internet Availability of Proxy Materials on or before June 4, 2010. Our proxy materials, including this proxy statement and our 2009 Annual Report, which includes financial statements for the period ended December 31, 2009, will also be available on or before June 4, 2010 on the website referred to in the Notice of Internet Availability of Proxy Materials.

 

Our Board of Directors unanimously recommends you vote “FOR” each of the proposals presented to you in this proxy statement.

 

Your vote is important. Please cast your vote by mail, telephone or over the Internet by following the instructions included in the Notice of Internet Availability of Proxy Materials and on your proxy card.

 

Paul T. Hempel, Esq.

Secretary

 

June 4, 2010

 

TABLE OF CONTENTS

 

June 4, 2010

 

INVERNESS MEDICAL INNOVATIONS, INC.

 

51 Sawyer Road, Suite 200

Waltham, Massachusetts 02453

 

PROXY STATEMENT

­ ­

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Inverness Medical Innovations, Inc. for use at our 2010 Annual Meeting of Stockholders to be held on Wednesday, July 14, 2010, at 12:30 p.m., local time, at our corporate headquarters located at 51 Sawyer Road, Suite 200, Waltham, MA 02453, and at any adjournments or postponements of the annual meeting. References in this proxy statement to “us,” “we,” “our” and “Company” refer to Inverness Medical Innovations, Inc., except where otherwise indicated, such as in the “Compensation Committee Report” and the “2009 Audit Committee Report.”

 

 

We are providing access to our proxy materials (including this proxy statement, together with a notice of meeting and our annual report) on the Internet pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”). Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to stockholders entitled to vote at the meeting. You may also request a printed copy of the proxy materials by mail. If you do so, these materials will also include the proxy card for the annual meeting. The Notice that you received via mail provides instruction for accessing the current proxy materials over the Internet, requesting a printed copy of the proxy materials, establishing your future preferences for proxy material delivery and casting your vote via the Internet. To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by July 5, 2010.

 

All stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request to receive a printed copy of the proxy materials at no charge. If you request a printed copy of the proxy materials, we will mail them to you within three business days of your request. The Notice includes instructions on how to access the electronic proxy materials, as well as instructions for requesting a printed copy. In addition, stockholders may permanently elect to receive future proxy materials in either electronic form by email or printed form by mail. If you make such an election, we will continue to send you the materials pursuant to your election, until you notify us otherwise.

 

Holders of our common stock, as recorded in our stock register at the close of business on May 25, 2010, may vote at the annual meeting on matters properly presented at the meeting. As of that date, there were 84,073,371 shares of our common stock outstanding and entitled to one vote per share. A list of stockholders will be available for inspection for at least ten days prior to the meeting at the principal executive offices of the Company at 51 Sawyer Road, Suite 200, Waltham, MA 02453.

 

The Notice includes instructions regarding how to:

 

 

If you choose to receive future proxy materials by email, next year you will receive an

email with a link to the proxy materials and proxy voting site. Your election to receive future proxy materials by email will remain in effect until you terminate your election. Choosing to receive your future proxy materials by email will save us the cost of producing and mailing these documents.

 

Your vote is important. Your shares can be voted at the annual meeting only if you are present in person or represented by proxy. Even if you plan to attend the meeting, we urge you to authorize your proxy in advance. We encourage you to authorize your proxy electronically by going to the website identified on the Notice or on your proxy card, or by calling the toll-free number (for residents of the United States and Canada) listed on your proxy card. Please have your proxy card in hand when going online or calling. If you authorize your proxy electronically, you do not need to return your proxy card. If you received proxy materials by mail and choose to authorize your proxy by mail, simply mark your proxy card, and then date, sign and return it in the postage-paid envelope provided.

 

If you hold your shares beneficially in street name, i.e., through a nominee (such as a bank or broker), you may be able to authorize your proxy by telephone or the Internet as well as by mail. You should follow the instructions you receive from your broker or other nominee to vote these shares.

 

Our Board of Directors (the “Board”) is asking for your proxy. Giving us your proxy means you authorize our designated proxy holders, Ron Zwanziger and Paul T. Hempel (or their substitutes), to vote your shares at the meeting, or at any adjournment or postponement thereof, in the manner you direct. With respect to the election of directors, you may vote for all, some or none of our director candidates. With respect to the other proposals, you may vote for or against the proposal or abstain from voting.

 

Your shares will be voted at the annual meeting as directed by your electronic proxy, the instructions on your proxy card or voting instructions if: (1) you are entitled to vote, (2) your proxy was properly executed or properly authorized electronically, (3) we received your proxy prior to the annual meeting and (4) you did not revoke your proxy prior to or at the meeting.

 

If you authorize your proxy electronically or send a properly executed proxy without specific voting instructions, the designated proxy holders will vote your shares in favor of our director candidates and in favor of the other proposals.

 

As of the date hereof, we do not know of any other business that will be presented at the meeting. If other business shall properly come before the meeting, including any proposal submitted by a stockholder that was omitted from this proxy statement in accordance with applicable federal securities laws, the designated proxy holders will vote your shares according to their best judgment.

 

In addition to this mailing, our employees may solicit proxies personally, electronically or by telephone. We pay all of the costs of soliciting this proxy. We also reimburse brokers, banks, nominees and other fiduciaries for their expenses in sending these materials to you and getting your voting instructions. We have also engaged The Altman Group to assist us with the solicitation of proxies, and we expect to pay The Altman Group approximately $6,000 for its services, plus out-of-pocket expenses incurred during the course of its work.

 

You may revoke your proxy at any time before it is voted at the meeting by:

 

 

In order to carry on the business of the meeting, we must have a quorum. Under our bylaws, this means at least a majority of the voting power of all outstanding shares entitled to vote

must be represented at the meeting, either by proxy or in person. Proxies marked as abstaining or withheld, limited proxies and proxies containing broker non-votes with respect to any matter to be acted upon by stockholders will be treated as present at the meeting for purposes of determining a quorum, but will not be counted as votes cast on such matter. A “broker non-vote” is a proxy submitted by a broker or other nominee holding shares on behalf of a client in which the broker or other nominee indicates that it does not have discretionary authority to vote such shares on a particular matter.

 

Each proposal sets forth the vote required for approval of the matter.

 

Under Delaware law, you will not have dissenter’s, appraisal or other similar rights with respect to any of the proposals set forth in this proxy statement.

 

Please note that brokers may deliver only one Notice, annual report and proxy statement to multiple security holders sharing an address. This practice, known as “householding,” is designed to reduce printing and postage costs. If any stockholder residing at such an address wishes to receive a separate Notice, annual report or proxy statement, we will promptly deliver a separate copy to any stockholder upon written or oral request to Doug Guarino at Inverness Medical Innovations, Inc., 51 Sawyer Road, Suite 200, Waltham, MA 02453, by telephone at (781) 647-3900 or by e-mail at doug.guarino@invmed.com.

 

 

Our Board of Directors currently consists of ten members who are divided into three classes as follows: three Class I Directors (John F. Levy, Jerry McAleer, Ph.D. and John A. Quelch, Ph.D.), three Class II Directors (Carol R. Goldberg, James Roosevelt, Jr. and Ron Zwanziger) and four Class III Directors (Robert P. Khederian, David Scott, Ph.D., Peter Townsend and Eli Y. Adashi, M.D.). The members of each class serve for a staggered three-year term and, at each annual meeting of stockholders, a class of directors is elected for a three-year term to succeed the directors of the same class whose terms are expiring. The current terms of the Class I Directors, Class II Directors and Class III Directors will expire at the annual meetings of stockholders held following the end of calendar years 2010, 2011 and 2009, respectively. The Board has determined that the following directors are independent under the rules of the New York Stock Exchange (“NYSE”): Dr. Adashi, Ms. Goldberg, Mr. Khederian, Mr. Levy, Dr. Quelch, Mr. Roosevelt and Mr. Townsend.

 

The Board held 10 meetings during the last fiscal year. We have no formal policy regarding Board members’ attendance at annual meetings of stockholders. Last year, no members of the Board attended our annual meeting of stockholders.

 

The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each composed solely of directors who satisfy the applicable independence requirements of the NYSE’s listing standards. All three committees operate pursuant to written charters which are posted on the Corporate Governance page on our website at www.invmed.com.

 

The Audit Committee consists of Mr. Levy, its Chairperson, Mr. Townsend and Mr. Khederian. Among other things, the Audit Committee oversees our accounting and financial reporting processes, including the selection, retention and oversight of our independent registered public accountant and the pre-approval of all auditing and non-auditing services provided by the independent registered public accountant. The Audit Committee’s 2009 Audit Committee Report is included in this proxy statement beginning on page 46. The Board has determined that Mr. Levy is an “audit committee financial expert,” as defined by SEC rules adopted pursuant to the Sarbanes-Oxley Act. The Audit Committee held 10 meetings during fiscal year 2009.

 

The Compensation Committee consists of Ms. Goldberg, its Chairperson, Dr. Adashi and Mr. Khederian. The Compensation Committee develops and implements executive officer and director compensation policies and plans that are appropriate for us in light of all relevant circumstances and which provide incentives that further our long-term strategic plans and are consistent with our culture and the overall goal of enhancing enduring stockholder value. Under its charter, the Compensation Committee may delegate any or all of its responsibilities to a subcommittee, but to date it has not chosen to do so. During fiscal year 2009, the Compensation Committee held 7 meetings. The Compensation Discussion and Analysis recommended by the Compensation Committee to be included in this proxy statement begins on page 28. Among other things, the Compensation Discussion and Analysis describes in greater detail the Compensation Committee’s role in the executive compensation process. In addition, the Compensation Committee’s role in establishing director compensation is described in more detail under “Compensation of Directors” beginning on page 43 of this proxy statement.

 

Our Nominating and Corporate Governance Committee currently consists of Dr. Quelch, its Chairperson, Mr. Khederian, Mr. Levy and Mr. Roosevelt. The Nominating and Corporate Governance Committee is charged with recommending nominees for election to the Board, overseeing the selection and composition of committees to the Board, developing and recommending corporate governance principles and overseeing our continuity planning process. The Nominating and Corporate Governance Committee conducts all necessary and appropriate inquiries

into the backgrounds and qualifications of possible director candidates and has the authority to retain any search firm or other advisors to assist in identifying candidates to serve as directors. The Nominating and Corporate Governance Committee has established a policy with regard to the consideration of director candidates recommended by holders of our voting stock. The material elements of this policy are set forth and discussed below under “Stockholder Proposals” beginning on page 48 and the full policy can be viewed on the Corporate Governance page of our website at www.invmed.com. Pursuant to the committee’s charter, in identifying and evaluating director candidates, including candidates proposed or recommended by stockholders, the Nominating and Corporate Governance Committee takes into account all factors it considers appropriate, which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the Board. While the Company does not have a formal diversity policy for Board membership, the Board seeks directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s discussions and decisions. The Nominating and Corporate Governance Committee considers diversity with respect to viewpoints, accomplishments, skills, experiences and community involvement, among other factors such as gender, race, national origin and age, in its evaluation of candidates for Board membership. Such diversity considerations are discussed by the Nominating and Corporate Governance Committee in connection with the general qualifications of each potential nominee. In considering candidates for the Board, the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials in the context of these standards and whether the candidate would bring a unique perspective to the Board, which is consistent with the committee’s goal of creating a board of directors that best serves the needs of the Company and the interest of its shareholders. During fiscal year 2009, the Nominating and Corporate Governance Committee held 2 meetings.

 

The non-management directors meet at regularly scheduled executive sessions without management participation, generally in connection with regularly scheduled Board meetings. At each such session, the non-management directors select a director to preside over such session.

 

The Board has determined that a board leadership structure featuring a single leader as Chairman and Chief Executive Officer (“CEO”) best serves the interests of the Company and its shareholders. The combined role promotes consistent and unified leadership, timely decision-making, strategy development and execution and effective management of company resources. The combined role also facilitates information flow between management and the Board. Combining the roles of Chairman and CEO makes clear that the individual serving in these roles has primary responsibility for managing the Company’s business, under the oversight and review of the Board. The CEO is the individual with primary responsibility for implementing the Company’s strategy, directing the work of other executive officers and leading implementation of the Company’s strategic plans as approved by the Board. This structure results in a single leader being directly accountable to the Board and, through the Board, to shareholders, and enables the CEO to act as the key link between the Board and other members of management.

 

We do not have a lead director, but our non-management directors meet in executive session without management present regularly, generally after all regular meetings of the Board. Prior to each meeting in executive session a presiding director is selected by the non-management directors. All of the directors on each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are independent directors.

 

Management is responsible for the day-to-day management of the risks that we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board is responsible for satisfying itself that the risk management processes are adequate and functioning as designed. The Board’s involvement in risk oversight includes receiving regular reports from members of senior management and evaluating areas of material risk to the Company,

including operational, financial, legal, regulatory, strategic and reputational risks. In addition, the Board has delegated risk oversight to each of its key committees within their areas of responsibility. The Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee each report at the next meeting of the Board all significant items discussed at each committee meeting, which includes a discussion of items relating to risk oversight. The Compensation Committee assists the Board in its risk oversight function by overseeing strategies related to our incentive compensation programs and key employee retention issues. The Audit Committee assists the Board in its risk oversight function by reviewing our system of disclosure controls and our internal controls over financial reporting. The Nominating and Corporate Governance Committee assists the Board in its risk oversight function by managing risks associated with director candidate selection, governance and succession matters.

 

Stockholders and interested parties wishing to communicate with the Board or any director or group of directors (including only the non-management directors) should direct their communications to: Secretary, Inverness Medical Innovations, Inc., 51 Sawyer Road, Suite 200, Waltham, MA 02453. Stockholder communications must state the number of shares of our stock beneficially owned by the stockholder sending the communication. The Secretary will forward the stockholder or interested party communication to the Board or to any individual director or directors to whom the communication is directed; provided, however, that if the communication is unduly hostile, profane, threatening, illegal or otherwise inappropriate, the Secretary has the authority to discard the communication and take any appropriate legal action.

 

Our Board has adopted a code of ethics that applies to all of our employees and agents worldwide, including our chief executive officer, our chief financial officer, our other executive officers and the members of the Board. Known as The Inverness Medical Innovations Business Conduct Guidelines, this code of ethics is posted in its entirety on the Corporate Governance page of our website at www.invmed.com.

 

Election of Directors

 

At the 2010 annual meeting, the term of the Class III Directors will expire. The Board proposes, at the recommendation of the Nominating and Corporate Governance Committee, that at the 2010 annual meeting of stockholders the following nominees be elected as Class III Directors:

 

Robert P. Khederian

David Scott, Ph.D.

Peter Townsend

Eli Y. Adashi, M.D.

 

As noted above, each of these nominees is currently serving as a member of the Board. The proxies granted by stockholders will be voted individually at the annual meeting for the election of these four nominees. In the event that Mr Khederian, Dr. Scott, Mr. Townsend or Dr. Adashi shall be unable to serve, it is intended that the proxy will be voted for any replacements nominated by the Board. Mr. Khederian, Dr. Scott, Mr. Townsend and Dr. Adashi have indicated that they will serve on the Board, if elected. For information regarding these nominees, see “Information Regarding Nominees, Other Directors and Executive Officers” beginning on page 19 of this proxy statement.

 

The Class III Directors must be elected by a plurality of the votes properly cast at the annual meeting. This means that the four nominees receiving the highest number of FOR votes will be elected as Class III Directors. Votes may be cast FOR or WITHHELD FROM each nominee. Votes that are WITHHELD FROM the nominees will be excluded entirely from the vote and will have no effect. Furthermore, if you hold your shares in your own name as a holder of record, and you fail to vote your shares, either in person or by proxy, the votes represented by your shares will be excluded entirely from the vote and will have no effect. Under NYSE rules, if you do not give instructions to your broker, it is permitted to vote any shares it holds for your account in its discretion with respect to “routine” proposals, but it is not allowed to vote your shares with respect to certain non-routine proposals. Starting this year, the election of directors is a “non-routine” proposal. If you do not instruct your broker how to vote with respect to the election of directors, your broker will not vote with respect to this proposal and those votes will be counted as “broker non-votes.” If your shares are held by a broker, bank or other nominee (i.e., in “street name”) and you fail to give instructions as to how you want your shares voted, the broker, bank or other nominee will not vote your shares in the election of directors and the votes represented by your shares will be excluded entirely from the vote and will have no effect.

 

The Board unanimously recommends a vote FOR the election of the nominees listed above.

 

Approval of Amendment to Amended and Restated Certificate of

 

 

The Board has adopted and is seeking stockholder approval of an amendment to our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to change our name from “Inverness Medical Innovations, Inc.” to “Alere Inc.” (the “Name Change”). The Board recommends this action in order to create a more unified company identity under a single, global brand, and to better serve medical professionals, health plans, employers, and consumers in the process.

 

A strong brand name is a powerful commercial differentiator—an important driver of growth.

 

Since our inception, we have grown our business based on our goal of becoming the world-leader in enabling individuals to take charge of their health at home. A component of this strategy has been the acquisition of numerous companies, products and technologies. Through our acquisitions and internal initiatives, we have built a complementary portfolio of innovative diagnostic products and differentiated health management services which will allow us to provide extensive support to health care professionals and patients across the globe.

 

In order to best leverage the strength of our combined offerings, which currently include products and services offered by numerous companies under several brand names, we believe that an alignment of our core brands and customer-facing companies is required to maximize our visibility and growth potential. We thoroughly evaluated a number of potential names, including new potential names and names already in use by us. Based on extensive research with investors, customers, and industry experts in the United States and abroad, we selected the name Alere. We currently utilize the Alere brand for our health management services offerings and, therefore, the brand already benefits from recognition within the healthcare community by providers and patients alike. Alere is a Latin verb meaning, in the greater sense, “to nurture,” “to care for,” or “to support.” As a company focused on changing the future of healthcare through advances in individual patient care, the name Alere clearly reflects our goals and our strategy.

 

We therefore intend to launch future products under the Alere brand, rebrand core products under the Alere name by 2012 and change the names of our local sales companies and many of the other businesses that we operate to Alere. By unifying our core operations under a single, global brand, customers, business affiliates, and employees will be able to identify Alere as a world leader in enabling individuals to take charge of improving their health and quality of life. Building a highly recognized brand will facilitate acceptance of our products, new and existing, across the globe and particularly in new markets as well as reinforce our vision of bringing healthcare closer to the home. We believe that changing our corporate name to Alere will further support the understanding and acceptance of our newly unified brand.

 

If the Name Change is approved by stockholders, it will be implemented through, and become effective upon, the filing of an amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware. This amendment will change Article I of the Certificate of Incorporation to read in its entirety as follows:

 

Article I

 

The name of the Corporation is Alere Inc.

 

No changes will be made to the other provisions of the Certificate of Incorporation pursuant to this Proposal 2. A copy of the proposed amendment to our Certificate of Incorporation is set forth in Appendix A hereto.

 

If the Name Change becomes effective, the rights of stockholders holding certificated shares under currently outstanding stock certificates and

the number of shares represented by those certificates will remain unchanged. The Name Change will not affect the validity or transferability of any currently outstanding stock certificates nor will it be necessary for stockholders with certificated shares to surrender or exchange any stock certificates they currently hold as a result of the name change. Regardless of whether the name change is approved, we will continue our product and services rebranding efforts under the Alere brand as described above.

 

A quorum being present, the affirmative vote of a majority of the outstanding shares of common stock entitled to vote on this Proposal 2 is required to approve the Name Change. Votes may be cast for or against the proposal or may abstain; votes that abstain and broker non-votes will have the effect of a vote against the proposal.

 

The Board is of the opinion that the change of the Company name from “Inverness Medical Innovations, Inc.” to “Alere Inc.” is in the interest of the Company and its stockholders as a whole. Accordingly, the Board unanimously recommends a vote FOR the approval of the amendment to change the Company name from “Inverness Medical Innovations, Inc.” to “Alere Inc.”

 

 

The Board has adopted, subject to stockholder approval, the Inverness Medical Innovations, Inc. 2010 Stock Option and Incentive Plan (the “2010 Plan”). The Board believes it is in the best interest of the Company to adopt the 2010 Plan because, as of May 12, 2010, only 529,386 shares of our common stock remained available for future grants or awards under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (the “2001 Plan”) and because no incentive stock options are able to be granted under the 2001 Plan after August 14, 2011. While some additional shares may become available under the 2001 Plan through employee terminations, this number is not expected to be significant.

 

The Board recommends this action in order to enable the Company to continue to provide a source of stock to attract and retain talented personnel, especially in the event of future acquisitions and anticipated future growth. The Board believes that stock options promote growth and provide a meaningful incentive to employees of successful companies.

 

The 2010 Plan would authorize the Company to issue shares of Inverness common stock pursuant to various stock incentive awards. The total number of shares of Inverness common stock issuable pursuant to the 2010 Plan would equal 1,000,000, plus an additional number of shares equal to the number of shares remaining available for new grants or awards under the 2001 Plan as of the date this Proposal 3 is approved by our stockholders. The number of shares of Inverness common stock reserved for issuance under the 2010 Plan is subject to adjustment for stock splits, stock dividends and similar events. The 2001 Plan will terminate as to new grants or awards as of the date this Proposal 3 is approved by our stockholders.

 

The following description of material terms of the 2010 Plan is intended to be a summary only. This summary is qualified in its entirety by reference to the complete text of the 2010 Plan. Stockholders are urged to read the actual text of the 2010 Plan, as proposed, in its entirety which is set forth as Appendix B to this proxy statement.

 

Administration.  The 2010 Plan provides for administration by the Board or by a committee of not fewer than two independent directors, referred to as the “administrator,” provided that, for purposes of awards to directors and officers who are subject to the requirements to Section 16 of the Securities Exchange Act of 1934, the administrator shall be deemed to include only directors who are independent directors and for purposes of performance based awards, the administrator shall be a committee of the Board composed of two or more outside directors, as appointed by the Board from time to time. As proposed, the Board of Directors will serve as the administrator of the 2010 Plan.

 

The administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2010 Plan. The administrator may permit common stock, and other amounts payable pursuant to an award, to be deferred. In such instances, the administrator may permit interest, dividends or deemed dividends to be credited to the amount of deferrals.

 

Eligibility and Limitations on Grants.  All of our officers, employees, directors, consultants and other key persons (including prospective employees) are eligible to participate in the 2010 Plan, subject to the discretion of the administrator. We currently have approximately 9,400 employees, excluding temporary and contract employees. In no event may any one participant receive options to purchase more than 1,000,000 shares of common stock, subject to adjustment for stock splits and similar events, during any one calendar year. The 2010 Plan will provide that different types of awards will count differently against the total number of shares available. Full value awards settled in stock, other than an award that is a stock option or other award that requires the grantee to purchase shares for an amount not less than their fair market value at the time of grant, will be

counted against the overall share limitation as 3 shares. All other awards will continue to be counted against the overall share limitation as 1 share.

 

Stock Options.  Options granted under the 2010 Plan may be either incentive stock options, referred to as “incentive options,” within the definition of Section 422 of the Internal Revenue Code, or non-qualified stock options, referred to as “non-qualified options.” Options granted under the 2010 Plan will be non-qualified options if they fail to meet the Internal Revenue Code definition of incentive options, are granted to a person not eligible to receive incentive options under the Internal Revenue Code, or otherwise so provide. Incentive options may be granted only to officers or other employees of the Company or its subsidiaries. Non-qualified options may be granted to persons eligible to receive incentive options and to non-employee directors and other key persons.

 

Other Option Terms.  The administrator has authority to determine the terms of options granted under the 2010 Plan. Options are granted with an exercise price that is not less than the fair market value of our common stock on the date of the option grant. In addition, the repricing of stock options shall not be permitted without shareholder approval.

 

The life of each option will be fixed by the administrator and may not exceed ten years from the date of grant. The administrator will determine at what time or times each option may be exercised and the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised. Options may be made exercisable in installments, and the exercisability of options may be accelerated by the administrator; provided that the administrator may not accelerate the exercisability of options, other than by reason of, or in connection with, the death, disability or retirement of the optionee, the termination without cause of the optionee’s employment or a change of control of the Company, if the number of options so accelerated when combined with the number of unrestricted stock awards granted would exceed 10% of the maximum number of shares issuable under the 2010 Plan. In general, unless otherwise permitted by the administrator, no option granted under the 2010 Plan is transferable by the optionee other than by will or by the laws of descent and distribution, and options may be exercised during the optionee’s lifetime only by the optionee, or by the optionee’s legal representative or guardian in the case of the optionee’s incapacity.

 

Options granted under the 2010 Plan may be exercised for cash or by the transfer to us of shares of common stock which are not then subject to restrictions under the 2010 Plan or any other stock plan that we maintain, and which have a fair market value equivalent to the option exercise price of the shares being purchased. Such options may also be exercised by compliance with certain provisions pursuant to which a securities broker delivers the purchase price for the shares to us on behalf of the optionee. In addition, non-qualified options granted under the 2010 Plan may be exercised under a “net exercise” arrangement between the Company and the optionee pursuant to which the number of shares of common stock issued upon exercise of the option will be reduced by a number of shares with an aggregate fair market value equal to the aggregate exercise price of the option.

 

To qualify as incentive options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options which first become exercisable in any one calendar year, and a shorter term and higher minimum exercise price in the case of certain large stockholders.

 

Stock Appreciation Rights.  The administrator may award stock appreciation rights to participants subject to such terms and conditions as the administrator may determine. The exercise price for a stock appreciation right shall not be less than the fair market value of our common stock on the date of grant and the term of a stock appreciation right may not be longer than ten years. A stock appreciation right is an award entitling the recipient to receive shares of stock having a value on the date of exercise calculated as follows: (i) the grant date exercise price of a share of Stock is (ii) subtracted from the fair market value of the Stock on the date of exercise and (iii) the difference is multiplied by the number of shares of stock with respect to which the stock appreciation right shall have been exercised.

 

Restricted Stock Awards.  The administrator may grant or sell shares of common stock to any participant subject to such conditions and restrictions as the administrator may determine. The shares may be sold for a price determined by

the administrator. These conditions and restrictions may include the achievement of pre-established performance goals and/or continued employment with us through a specified vesting period. The vesting period shall be determined by the administrator but shall be at least one year for attainment of pre-established performance goals or at least three years for other conditions and restrictions, including the participant’s continued employment with us. If the applicable performance goals and other restrictions are not attained, or if the participant’s employment with the Company terminates for any reason, the Company shall have the right to repurchase restricted stock that has not vested at its original purchase price from the participant or the participant’s legal representative.

 

Unrestricted Stock Awards.  The administrator may also grant shares of common stock which are free from any restrictions under the 2010 Plan. Unrestricted stock may be granted to any participant in recognition of past services or other valid consideration, and may be issued in lieu of cash compensation due to such participant. The aggregate number of unrestricted stock awards that may be granted under the plan, when combined with stock underlying options that were accelerated other than by reason of, or in connection with, death, disability or retirement of the participant, the termination without cause of the participant’s employment or change of control of the Company, may not exceed 10% of the maximum number of shares issuable under the plan.

 

Restricted Stock Units.  The administrator may also award phantom stock units to participants as restricted stock units. The restricted stock units are ultimately payable in the form of shares of common stock and may be subject to such conditions and restrictions as the administrator may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period. The vesting period shall be determined by the administrator but shall be at least one year for attainment of pre-established performance goals or at least three years for other conditions and restrictions, including the participant’s continued employment with us. During the deferral period, subject to terms and conditions imposed by the administrator, the restricted stock units may be credited with dividend equivalent rights with respect to the phantom stock units underlying the restricted stock units. Subject to the consent of the administrator and in accordance with the requirements of Section 409A of the Internal Revenue Code, a participant may make an advance election to receive a portion of his compensation or restricted stock award otherwise due in the form of restricted stock units. If the participant’s employment with the Company terminates for any reason, the participant’s right in all restricted stock units that have not vested shall automatically terminate.

 

Performance Share Awards.  The administrator may grant performance share awards to any participant which entitle the recipient to receive shares of common stock upon the achievement of individual or company performance goals and such other conditions as the administrator shall determine. The periods during which performance is to be measured shall not be, in the aggregate, less than one year.

 

Dividend Equivalent Rights.  The administrator may grant dividend equivalent rights, which entitle the recipient to receive credits for dividends that would be paid if the grantee held specified shares of common stock. Dividend equivalent rights may be settled either in cash or shares of common stock. Dividend equivalent rights may be granted as a component of another award or as a freestanding award.

 

Performance-Based Awards.  Grants of performance-based awards enable us to treat restricted stock awards, restricted stock units and performance share awards granted under the 2010 Plan to covered persons, as defined in Section 162(m) under the Internal Revenue Code as “performance-based compensation” under Section 162(m) and preserve the deductibility of these awards for federal income tax purposes. Participants are only entitled to receive payment for a performance-based award for any given performance period to the extent that pre-established performance goals set by the administrator for the period are satisfied. These pre-established performance goals may include: earnings before interest, taxes, depreciation and amortization; net income or loss (either before or after interest, taxes, depreciation and/or amortization); changes in the market price of our common stock; cash flow; funds from operations or similar measure; sales or revenue; acquisitions or strategic transactions; operating income or loss;

return on capital, assets, equity, or investment; total stockholder returns or total returns to stockholders; gross or net profit levels; productivity; expense; margins; operating efficiency; customer satisfaction; working capital; earnings per share of stock; or lease up performance, net operating income performance or yield on development or redevelopment communities—any of which may be measured either in absolute terms with or as compared to any incremental increase or as compared to results of a peer group. With regard to a particular performance period, the administrator will have the discretion to select the length of the performance period, the type of performance-based awards to be granted, and the goals that will be used to measure the performance for the period. In determining the actual size of an individual performance-based award for a performance period, the administrator may reduce or eliminate (but not increase) the award. Generally, a participant will have to be employed on the date the performance-based award is paid to be eligible for a performance-based award for that period.

 

Section 409A Awards.  To the extent that any award granted under the 2010 Plan is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code, the administrator shall impose additional rules and requirements as may be necessary in order to comply with Section 409A. In this regard, if any amount under an award subject to Section 409A is payable upon a “separation from service” (within the meaning of Section 409A) to a participant who is then considered a “specified employee” (also within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the participant’s separation from service, or (ii) the participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. The settlement of any Section 409A award may not be accelerated or postponed except to the extent permitted by Section 409A.

 

Change of Control Provisions.  The 2010 Plan provides that in the event of a “change of control” as defined in the 2010 Plan, all stock options will automatically become fully exercisable and the restrictions and conditions on all other awards will automatically be deemed waived, unless otherwise provided in the applicable award agreement.

 

Adjustments for Stock Dividends, Mergers, etc.  The 2010 Plan authorizes the administrator to make appropriate adjustments to the number of shares of common stock that are subject to the 2010 Plan and to any outstanding awards to reflect stock dividends, stock splits and similar events. In the event of certain transactions, such as a merger, consolidation, dissolution or liquidation of our Company, the 2010 Plan and all awards will terminate unless the parties to the transaction, in their discretion, provide for appropriate substitutions or adjustments of outstanding stock options or awards. Before any outstanding stock options or other awards terminate, the option holders will have an opportunity to exercise their outstanding options, and holders of other awards will receive a cash or in kind payment of such appropriate consideration as determined by the administrator in its sole discretion after taking into account the consideration payable per share of common stock pursuant to the business combination. The administrator may adjust the number of shares subject to outstanding awards and the exercise price and the terms of outstanding awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the administrator that such adjustment is appropriate to avoid distortion in the operation of the 2010 Plan, provided that no such adjustment shall be made in the case of an incentive stock option, without the consent of the grantee, if it would constitute a modification, extension or renewal of the option within the meaning of Section 424(h) of the Code.

 

Amendments and Termination.  Subject to requirements of law or the rules of any stock exchange, the Board may at any time amend or discontinue the 2010 Plan and the administrator may at any time amend or cancel any outstanding award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect the rights under any outstanding awards without the holder’s consent. To the extent required by the Internal Revenue Code to ensure that options granted under the 2010 Plan qualify as incentive options or that compensation earned under the options granted

under the 2010 Plan qualifies as performance-based compensation under the Internal Revenue Code, plan amendments shall be subject to approval by our stockholders.

 

Forfeiture of Awards under Sarbanes-Oxley Act.  If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under state or federal securities laws, then, to the extent required by law, any participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any award received by that individual under the 2010 Plan during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission, of the financial document embodying such financial reporting requirement.

 

Future Plan Benefits.  Approximately 9,400 employees, including our named executive officers, and all of our non-employee directors will be eligible to receive awards under the 2010 Plan. Because the granting of awards under the 2010 Plan is discretionary, we cannot now determine the number or type of awards to be granted in the future to any particular person or group if the 2010 Plan is approved.

 

The following discussion describes the material federal income tax consequences of transactions under the 2010 Plan. It does not describe all federal tax consequences under the 2010 Plan, nor does it describe state or local tax consequences.

 

Incentive Options.  No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option. If shares of common stock issued to an optionee pursuant to the exercise of an incentive option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then upon sale of such shares, any amount realized in excess of the option price will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and we will not have a deduction for federal corporate income tax purposes. The exercise of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.

 

If shares of common stock acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and one-year holding periods described above, a “disqualifying disposition,” generally the optionee will realize ordinary income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the shares of common stock at exercise (or, if less, the amount realized on a sale of such shares of common stock) over the option price thereof, and we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive option is paid by tendering shares of common stock.

 

If an incentive option is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a non-qualified option. Generally, an incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment, or one year in the case of termination of employment by reason of disability. In the case of termination of employment by reason of death, the three-month rule does not apply.

 

Non-qualified Options.  With respect to non-qualified options under the 2010 Plan, no income is realized by the optionee at the time the option is granted. Generally,

 

 

Special rules will apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares of common stock.

 

Stock Appreciation Rights.  The grantee of a stock appreciation right recognizes no income for federal income tax purposes on the grant thereof. On the exercise of a stock appreciation right, the

grantee will recognize as ordinary income the difference between the fair market value of our common stock on the date of exercise and the exercise price of the stock appreciation right, multiplied by the number of shares of common stock subject to the stock appreciation right. If the grantee of a stock appreciation right does not exercise such right, the grantee will recognize as ordinary income the excess of the fair market value of our common stock on the last day of the term of the stock appreciation right over the exercise price of the stock appreciation right, if any, multiplied by the number of shares of common stock subject to the stock appreciation right.

 

Restricted and Unrestricted Stock Awards.  The grantee of a restricted or unrestricted stock award recognizes no income for federal income tax purposes on the grant thereof.

 

A grantee of a restricted stock award recognizes no income for federal income tax purposes upon the receipt of common stock pursuant to that award, unless, as described below, the grantee otherwise elects. Instead, the grantee will recognize ordinary income in an amount equal to the fair market value of the common stock on the date that it is no longer subject to a substantial risk of forfeiture less the amount, if any, the grantee paid for such stock. Such fair market value becomes the basis for the underlying shares and will be used in computing any capital gain or loss upon the disposition of such shares (which will be long-term capital gain if the grantee held the shares for more than one year after the date on which the shares are no longer subject to a substantial risk of forfeiture).

 

Alternatively, the grantee of a restricted stock award may elect, pursuant to Section 83(b) of the Internal Revenue Code, within 30 days of the acquisition of common stock pursuant to the restricted stock award, to include in gross income as ordinary income for the year in which the common stock is received, the fair market value of the common stock on the date it is received less the amount, if any, the grantee paid for such stock. Such fair market value will become the basis for the shares and will be used in determining any capital gain or loss upon the disposition of such shares (which will be long-term capital gain if the disposition is more than one year after the date the shares are received). Grantees of restricted stock awards are advised to consult their own tax advisors with regard to elections pursuant to Section 83(b) of the Internal Revenue Code.

 

Upon receipt of common stock pursuant to an unrestricted stock award, the grantee will recognize as ordinary income the difference between the fair market value of the common stock less the amount, if any, the grantee paid for such stock. The grantee’s basis in such shares will be equal to the fair market value of the shares on the date of receipt, and this basis will be used in determining any capital gain or loss upon a subsequent disposition of the shares (which will be long-term capital gain if the disposition is more than one year after the date the shares are received).

 

Subject to certain limitations, we may deduct an amount equal to the amount recognized by the grantee of a restricted or unrestricted stock award as ordinary income for the year in which such income is recognized.

 

Restricted Stock Units.  The grantee of a restricted stock unit recognizes no income for federal income tax purposes on the grant thereof. Upon the receipt of common stock pursuant to a restricted stock unit, the federal income tax laws applicable to restricted stock awards, described above, will apply if the stock is restricted stock, and the federal income tax laws applicable to unrestricted stock awards, described above, will apply if the stock is unrestricted common stock.

 

Subject to certain limitations, we may deduct an amount equal to the amount recognized by the grantee of a restricted stock unit as ordinary income for the year in which the restricted stock unit is exercised or lapses.

 

Performance Share Awards.  The federal income tax laws applicable to performance share awards are the same as those applicable to restricted stock awards, described above.

 

Dividend Equivalent Rights.  There generally will be no tax consequences as a result of the award of a dividend equivalent right. When payment is made, the holder of the dividend equivalent rights generally will recognize ordinary income, and we will be entitled to a deduction, equal to the amount received in respect of the dividend equivalent.

 

Parachute Payments.  The vesting or exercisability of any portion of any option or other award that is accelerated due to the occurrence of a change of control may cause a portion of the

payments with respect to such accelerated awards to be treated as “parachute payments” as defined in Section 280G of the Internal Revenue Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment in addition to other taxes ordinarily payable.

 

Limitation on our Deductions.  As a result of Section 162(m) of the Internal Revenue Code, our deduction for certain awards under the stock option plan may be limited to the extent that a covered employee receives compensation in excess of $1,000,000 in such taxable year, other than performance-based compensation that otherwise meets the requirements of Section 162(m) of the Internal Revenue Code.

 

The approval of the proposal to adopt the 2010 Stock Option and Incentive Plan requires the affirmative vote of a majority of the votes properly cast on the proposal, provided that, in accordance with the rules of the NYSE, the total votes cast on the proposal represent over 50% in interest of all securities entitled to vote on the proposal (the “NYSE Voting Requirement”). Under the rules of the NYSE, abstentions will count as votes casts with respect to this matter; accordingly, abstentions will be included in determining whether the NYSE Voting Requirement has been achieved, but will have the effect of a vote “against” the proposal. Broker non-votes will not be counted as votes cast on this matter; accordingly, broker non-votes will make it more difficult for the NYSE Voting Requirement to be achieved (as they will not be included), but if the NYSE Voting Requirement is achieved, they will have no effect on the outcome of the vote.

 

The Board unanimously recommends a vote FOR the approval of the 2010 Stock Option and Incentive Plan.

 

Approval of Amendment to Amended and Restated Certificate of

 

Our Certificate of Incorporation currently authorizes the issuance of up to 150,000,000 shares of common stock, and 5,000,000 shares of preferred stock. On April 7, 2010, the Board unanimously adopted a resolution setting forth a proposed amendment to Article IV of the Certificate of Incorporation, subject to stockholder approval, to increase the shares of common stock that are authorized for issuance by 50,000,000 shares (the “Amendment”), bringing the total number of shares of common stock authorized for issuance to 200,000,000. No change will be made to the other provisions of the Certificate of Incorporation pursuant to this Proposal 4. The additional authorized shares of common stock, if and when issued, would have the same rights and privileges as the shares of common stock previously authorized. As of May 12, 2010, there were 84,081,927 shares of common stock issued and outstanding, including 23,863 shares of common stock held in treasury, 8,591,912 shares of common stock reserved for issuance under our 2001 Stock Option and Incentive Plan (including outstanding options), 944,932 shares reserved for issuance under our 2001 Employee Stock Purchase Plan, 398,507 shares of common stock reserved for issuance upon the exercise of outstanding warrants, 1,973,846 shares of common stock reserved for issuance under other outstanding stock options that were not issued under our 2001 Stock Option and Incentive Plan, 3,410,641 shares of common stock reserved for issuance under our $150.0 million, 3% senior subordinated convertible notes, convertible at $43.98 per share, 27,647 shares of common stock reserved for issuance under our $1.7 million of subordinated convertible promissory notes, convertible at $61.49 per share and 23,157,911 shares of common stock reserved for issuance upon conversion of, or as dividends on, the Series B Convertible Perpetual Preferred Stock (“Series B Preferred Stock”). Accordingly, as of May 12, 2010, there were an aggregate of 122,587,323 shares reserved for issuance, leaving only 27,412,677 shares available for future issuance. If Proposal 3 to this proxy statement is approved, the shares available for future issuance will be further reduced by 1,000,000 shares.

 

The additional shares of common stock authorized by the Amendment could be issued at the direction of the Board from time to time for any proper corporate purpose, including, without limitation, the acquisition of other businesses, the raising of additional capital for use in our business, a split of or dividend on then outstanding shares or in connection with any employee stock plan or program. The holders of shares of common stock do not presently have preemptive rights to subscribe for any of our securities and holders of common stock will not have any such rights to subscribe for the additional common stock proposed to be authorized.

 

To implement the Amendment, the first paragraph of Article IV of our Certificate of Incorporation would be amended to read as follows: “The total number of shares of capital stock which the Corporation shall have authority to issue is Two Hundred Five Million (205,000,000) shares, of which (i) Two Hundred Million (200,000,000) shares shall be a class designated as common stock, par value $0.001 per share (the “Common Stock”), and (ii) Five Million (5,000,000) shares shall be a class designated as preferred stock, par value $0.001 per share (the “Preferred Stock”).” A copy of the proposed Amendment is set forth in Appendix C hereto.

 

The proposed increase in the number of authorized shares of common stock could have a number of effects on our stockholders depending upon the exact nature and circumstances of any actual issuances of authorized but unissued shares. The increase could have an anti-takeover effect, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover of our Company more difficult. For example, additional shares could be issued by us so as to dilute the stock ownership or voting rights of persons seeking to obtain control of us. Similarly, the issuance of additional shares to certain persons allied with our management could have the effect of making it more difficult to remove our current management by diluting the

stock ownership or voting rights of persons seeking to cause such removal. The subsequent issuance of additional common stock could result in dilution of net income per share and book value per share and the dilution of the voting rights of the common stock. The Board is not aware of any attempt, or contemplated attempt, to acquire control of our company, and this proposal is not being presented with the intent that it be utilized as a type of anti-takeover device.

 

Except as described herein, there are currently no definitive plans, arrangements, commitments or understandings for the issuance of the additional shares of common stock which are to be authorized.

 

Except for (i) shares of common stock reserved for issuance upon exercise of outstanding stock options under our 2001 Stock Option and Incentive Plan and other outstanding stock options, (ii) shares reserved for issuance under our 2001 Employee Stock Purchase Plan, (iii) shares of common stock the Company would be required to issue upon the exercise of outstanding warrants, (iv) shares of common stock that may be issued upon conversion of our 3% senior subordinated convertible notes, (v) shares of common stock that may be issued upon conversion of our subordinated convertible promissory notes, (vi) shares of common stock that may be issued upon conversion of, or as dividends on, the Series B Preferred Stock, and (vii) shares of common stock reserved for issuance upon exercise of outstanding stock options under our 2010 Stock Option and Incentive Plan, if Proposal 3 to this proxy statement is approved, the Board has no current plans to issue additional shares of common stock. However, the Board believes that the benefits of providing it with the flexibility to issue shares without delay for any proper business purpose outweigh the possible disadvantages of dilution and discouraging unsolicited business combination proposals, and that it is prudent and in the best interests of stockholders to provide the advantage of greater flexibility which will result from the Amendment.

 

A quorum being present, the affirmative vote of a majority of the outstanding shares of common stock entitled to vote on this proposal is required to approve the Amendment. Votes may be cast for or against the proposal or may abstain; votes that abstain and broker non-votes will have the effect of a vote against the proposal.

 

The Board unanimously recommends a vote FOR the approval of the amendment to our Certificate of Incorporation increasing the number of shares of common stock available thereunder.

 

The following biographical descriptions set forth certain information with respect to the four nominees for election as Class III Directors, the incumbent, continuing directors who are not up for election at this annual meeting and our current executive officers who are not directors. This information has been furnished by the respective individuals.

 

 

Our Class III Directors—Term Expiring 2010

 

Eli Y. Adashi, MD, MS, CPE, FACOG, joined the Board on April 1, 2009. The outgoing Dean of Medicine and Biological Sciences and the Frank L. Day Professor of Biology at Brown University, Dr. Adashi—Harvard-educated in Health Care Management (MS; 2005; HSPH)—is presently a Professor of Medical Science at The Warren Alpert Medical School of Brown University and has been since 2004. A Physician-Scientist-Executive with over 25 years of experience in Health Care and in the Life Sciences, Dr. Adashi is a member of the Institute of Medicine of the National Academy of Sciences and of its Board on Health Sciences Policy. Dr. Adashi is the founder and former leader of the multidisciplinary Ovarian Cancer Program of the NCI-designated Huntsman Cancer Research Institute. Dr. Adashi also served on sabbatical on the Quality Improvement Group of the Office of Clinical Standards and Quality, Centers for Medicare and Medicaid Services (CMS) and is a current ad hoc member of the Reproductive Health Drugs Advisory Committee of the U.S. Food & Drug Administration. A fellow of the American Association for the Advancement of Science and a member of the Association of American Physicians, Dr. Adashi is the author or co-author of over 250 peer-reviewed publications, over 120 book chapters/reviews, and 13 books focusing

on ovarian biology, ovarian cancer and reproductive health. Dr. Adashi is a member of the Board’s Compensation Committee. Dr. Adashi brings to our Board senior management experience and immense knowledge and experience in medicine and science from the provider perspective.

 

Robert P. Khederian has served on the Board since July 31, 2001. Mr. Khederian is the Chairman of Belmont Capital, a venture capital firm he founded in 1996, and Provident Corporate Finance, an investment banking firm he founded in 1998. From 1984 through 1996, he was founder and Chairman of Medical Specialties Group, Inc., a nationwide distributor of medical products which was acquired by Bain Capital. Mr. Khederian had been the Chairman of the Board of Cambridge Heart, Inc. from August 2006 to August 2008. Mr. Khederian also served as the interim CEO of Cambridge Heart, Inc. from December 2006 to December 2007. Mr. Khederian is a member of the Company Board’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. A former chief executive officer, Mr. Khederian has extensive knowledge of the capital markets and brings to the Board significant and valuable financial and investment expertise.

 

David Scott, Ph.D. has served on the Board since July 31, 2001 and has served as our Chief Scientific Officer since our inception in May 2001. Dr. Scott served as Chairman of Inverness Medical Limited, a subsidiary of our predecessor company, Inverness Medical Technology, from July 1999 through November 2001, when that company was acquired by Johnson & Johnson, and as a managing director of Inverness Medical Limited from July 1995 to July 1999. Dr. Scott served as Managing Director of Great Alarm Limited, a consulting company, from October 1993 to April 1995. Between October 1984 and September 1993, he held several positions at MediSense UK, serving most recently as Managing Director, where he was responsible for managing product development, as well as the mass manufacture of one of its principal products, ExacTech. Dr. Scott’s scientific and management background in our industry provides our Board with valuable general business and research and development expertise.

 

Peter Townsend has served on the Board since May 30, 2001. Mr. Townsend served as a director of our predecessor company, Inverness Medical Technology, from August 1996 through November 2001, when that company was acquired by Johnson & Johnson. From 1991 to 1995, when he retired, Mr. Townsend served as Chief Executive Officer and a director of Enviromed plc, a medical products company. Mr. Townsend is a member of the Board’s Audit Committee. As a former chief executive officer of a medical products company, Mr. Townsend brings to the Board financial expertise, significant industry experience and an international business perspective.

 

Our Class I Directors—Term Expiring 2011

 

John A. Quelch, Ph.D. joined the Board on March 10, 2003. Since June 2001, Dr. Quelch has been a professor and Senior Associate Dean at the Harvard Business School. From July 1998 through June 2001, he was Dean of the London Business School. Dr. Quelch also serves as a director of WPP plc, the world’s largest marketing and media services company, and as Chairman of the Massachusetts Port Authority. Dr. Quelch served as a director of Pepsi Bottling Group from 2005 to 2010 and of Gentiva Health Services, Inc. from 2006 to 2009. He is Chairperson of the Board’s Nominating and Corporate Governance Committee. Through his general business experience and academic credentials, Dr. Quelch brings to our Board both industry and academic expertise in marketing and organizational management.

 

John F. Levy has served on the Board since May 30, 2001. Mr. Levy served as director of Inverness Medical Technology from August 1996 through November 2001, when that company was acquired by Johnson & Johnson. Since 1993, he has been an independent consultant. Mr. Levy served as President and Chief Executive Officer of Waban, Inc., a warehouse merchandising company, from 1989 to 1993. Mr. Levy is Chairperson of the Board’s Audit Committee and is a member of the Board’s Compensation Committee and Nominating and Corporate Governance Committee. A former chief executive officer, Mr. Levy brings to our Board financial expertise, investment experience and knowledge of distribution systems.

 

Jerry McAleer, Ph.D. joined the Board on March 10, 2003. Dr. McAleer recently assumed the title Senior Vice President, R&D. Prior to that he served as our Vice President, Research and Development since our inception in May 2001 and as our Vice President, Cardiology since early 2006. Dr. McAleer served as Vice President of Research and Development of our predecessor company, Inverness Medical Technology,

from 1999 through November 2001, when that company was acquired by Johnson & Johnson. From 1995 to 1999, Dr. McAleer served as Director of Development of Inverness Medical Limited, Inverness Medical Technology’s primary research and development unit, where he headed the development of Inverness Medical Technology’s electrochemical glucose strips. Prior to joining Inverness Medical Technology, Dr. McAleer held senior research and development positions at MediSense, a medical device company, and Ecossensors, Inc., an environmental research company. Dr. McAleer’s scientific background in our industry provides our Board with valuable research and development expertise.

 

Our Class II Directors—Term Expiring 2012

 

Carol R. Goldberg has served on the Board since May 30, 2001. Ms. Goldberg served as a director of our predecessor company, Inverness Medical Technology, from August 1992 through November 2001, when that company was acquired by Johnson & Johnson. Since December 1989, she has served as President of The AVCAR Group, Ltd., an investment and management consulting firm in Boston, Massachusetts. Ms. Goldberg is Chairperson of the Board’s Compensation Committee and a member of the Board’s Nominating and Corporate Governance Committee. As the former President and Chief Operating Officer of Stop & Shop Companies, Inc., Ms. Goldberg brings a wealth of financial, marketing and consumer expertise to the Board.

 

James Roosevelt, Jr. joined the Board on February 6, 2009. Mr. Roosevelt has served as the President and Chief Executive Officer of Tufts Health Plan since 2005. From 1999 to 2005, Mr. Roosevelt was Senior Vice President and General Counsel of Tufts Health Plan. Mr. Roosevelt also serves as Co-Chair of the Rules and By-laws Committee of the Democratic National Committee, Co-Chair of the Board of Directors for the Tufts Health Care Institute, and member of the Board of Directors at American Health Insurance Plans, Emmanuel College and PointRight Inc., where he serves as a member of the Compensation Committee. Mr. Roosevelt is a member of the Board’s Nominating and Corporate Governance Committee. Mr. Roosevelt brings to our Board extensive senior management, policy-making and financial experience within the health insurance industry, which includes important customers of the Company and is a driving force behind the demand for control of healthcare costs, which is reshaping the diagnostic and health management industries in which we operate.

 

Ron Zwanziger has served as our Chairman, Chief Executive Officer and President since our inception on May 11, 2001. Mr. Zwanziger served as Chairman, Chief Executive Officer and President of our predecessor company, Inverness Medical Technology, from its inception in 1992 through November 2001 when that company was acquired by Johnson & Johnson. From 1981 to 1991, he was Chairman and Chief Executive Officer of MediSense, a medical device company. Mr. Zwanziger also serves as a director and Chairperson of the Nominating and Corporate Governance Committee of AMAG Pharmaceuticals, Inc., and served a portion of 2009 as a member of the Compensation Committee for AMAG Pharmaceuticals, Inc. As the Chief Executive Officer of the Company, as well as the founder and chief executive officer of two other successful medical diagnostic companies, Mr. Zwanziger brings strategic vision, leadership, extensive business and operating experience and an immense knowledge of our Company and the industry to the Board.

 

Executive Officers Who Are Not Directors

 

John Bridgen, Ph.D. recently assumed the title of Senior Vice President, Business Development, after serving as our Vice President, Business Development since June 2006. Prior to that, he served as our Vice President, Strategy since September 2005. Dr. Bridgen joined our Company in September 2002 upon our acquisition of Wampole Laboratories, LLC. Dr. Bridgen served as President of Wampole from August 1984 until September 2005. Prior to joining Wampole, Dr. Bridgen had global sales and marketing responsibility for the hematology and immunology business units of Ortho Diagnostic Systems Inc., a Johnson & Johnson company.

 

Gordon Norman, M.D. has served as our Chief Innovation Officer since February 2010. Dr. Norman continues to serve as Executive Vice President, as well as Chief Innovation Officer, at our subsidiary, Alere Health, LLC, where he held the title of EVP, Science & Innovation from May 2008 to February 2010. From June 2007 to May 2008, Dr. Norman served as EVP, Chief Science Officer of Alere Medical, Inc., which we

acquired in November 2007. Prior to June 2007, Dr. Norman served Alere Medical as EVP and Chief Medical Officer. Prior to joining Alere Medical in July 2005, Dr. Norman served in a variety of executive medical management roles for PacifiCare Health Services since July 1994.

 

Hilde Eylenbosch, M.D. recently assumed the title of Senior Vice President, Marketing, after serving as our Vice President, Marketing since April 1, 2009. Prior to that, she served as Chief Executive Officer of SPD Swiss Precision Diagnostics GmbH, our 50/50 joint venture with Procter & Gamble, since its inception on May 18, 2007. Dr. Eylenbosch has also served as our President, Consumer Diagnostics since June 2006. Prior to assuming that title she served as Vice President, Consumer Diagnostics from July 2005 to June 2006, Vice President, Consumer Marketing from October 2004 to July 2005 and Vice President of International Women’s Health from November 2001 to October 2004. Dr. Eylenbosch served in the same capacity for our predecessor company, Inverness Medical Technology, from August 2001 until that company was acquired by Johnson & Johnson in November 2001. Prior to that, she held various positions at Inverness Medical Technology, including Director of U.S. Women’s Health from September 1998 through October 2000. When she joined Inverness Medical Technology in January 1995, Dr. Eylenbosch was responsible for marketing that company’s women’s health products in Europe. Before joining Inverness Medical Technology, Dr. Eylenbosch was employed by Synthelabo, a French pharmaceutical company, where she held various marketing positions.

 

John Yonkin was appointed Vice President, Operations in July 2009. Previously, he served as President, Inverness Medical Innovations North America, Inc. from January 2008. Prior to that, he served as President, U.S. Point of Care from June 2006. Mr. Yonkin also served as President, Nutritionals, a role he had from June 2006 until we sold that business in 2010. Prior to that, he served as our Vice President, Nutritionals from April 2005 to June 2006 and Vice President, U.S. Sales and Marketing from November 2001 to April 2005. Mr. Yonkin served as Vice President of U.S. Sales of our predecessor company, Inverness Medical Technology, from October 1998 through January 2000 and as its General Manager from January 2000 through November 2001, when that company was acquired by Johnson & Johnson. He also served as Manager of Product Development for Inverness Medical Technology from October 1997 until October 1998. From January 1995 to September 1997, Mr. Yonkin was Director of National Accounts for Genzyme Genetics, a subsidiary of Genzyme, Inc., a leader in genetic testing services for hospitals, physicians and managed healthcare companies.

 

Daniel Delaney has served as President, Inverness Medical Innovations North America, Inc. since August 2009. Previously, he served as Vice President and General Manager, Acute Care from July 2008 and as Vice President and General Manager of Clinical Products from July 2007. Mr. Delaney joined us in December 2004 as Vice President and General Manager of Wampole Laboratories, LLC. In his more than 20 years of health care industry experience prior to joining Inverness Medical Innovations, Mr. Delaney held various commercial leadership roles of increasing responsibility with Abbott Laboratories Diagnostics Division, Abbott Hospital Products Division and Hospira, Inc. from 1984 through 2004.

 

David Toohey was appointed President, Europe/Middle East in January 2008. Prior to that, he served as President, Professional Diagnostics from December 2005, as Vice President, Professional Diagnostics from October 2002, as Vice President, European Operations from February 2002, and as Vice President, New Products from November 2001. He also served as Managing Director of our Unipath Limited subsidiary from December 2001 through October 2002. Mr. Toohey was employed by our predecessor company, Inverness Medical Technology, as its Vice President, New Products from May 2001 through November 2001, when that company was acquired by Johnson & Johnson. Prior to joining Inverness Medical Technology, Mr. Toohey served as Vice President of Operations at Boston Scientific Corporation’s Galway, Ireland facility where he oversaw its growth, from a start-up to Boston Scientific Corporation’s largest manufacturing facility, between 1995 and 2001. Prior to that time he held various executive positions at Bausch & Lomb, Inc., Digital Equipment Corp. and Mars, Inc.

 

David Walton serves as Vice President, Asia Pacific.  Mr. Walton joined us in December 2001 when we acquired the Unipath business from Unilever, where he was previously International Director for the Consumer and Professional Diagnostic business units. Prior to this, Mr. Walton held various senior global sales and

marketing roles in the Diagnostics Division of Eli Lilly based at Hybritech in San Diego, California and Liege, Belgium, Biorad U.K. and Corning Medical U.K.

 

Emanuel Hart served as Chief Executive Officer and President of Orgenics Ltd. (Israel), one of our subsidiaries, from July 1997 through 2007. Orgenics Ltd. includes manufacturing, research and development and marketing business units. In August 2007, Mr. Hart was appointed Vice President for International Business responsible for the Latin America, Africa, Russia, ex-Soviet Union countries and Israel territories (LAmARCIS) for all of our products.

 

Tom Underwood has served as Chief Executive Officer of Alere Health, LLC since February 2010. Mr. Underwood served as President of the Technology Solutions Division of Alere from May 2008 and then as our Chief Information Officer since September 2009. Mr. Underwood served as President and Chief Operating Officer of Matria Healthcare from January 2008 until May 2008 when we acquired Matria. Prior to this role and since joining Matria Healthcare in June 2007, he served as Executive Vice President of Technology. Mr. Underwood came to Matria from First Consulting Group (FCG), where he last served as President of Global Shared Services. During his tenure with FCG, Mr. Underwood served in various executive leadership roles, including President of Global Shared Services, Executive Vice President of Healthcare, Executive Vice President of Government and Technology, and President of FCG Software Services. Previously, Mr. Underwood was Chief Executive Officer and President of Paragon Solutions, an offshore software development business that was acquired by FCG. Prior to his employment with Paragon and FCG, Mr. Underwood was the technology executive for IMNET Systems, an electronic medical record solutions company, which was acquired by McKesson HBOC. Earlier in his career, Mr. Underwood held numerous management and technology roles within Perceptics, a division of the Westinghouse Company, and AT&T Bell Laboratories.

 

David Teitel has served as our Chief Financial Officer and Treasurer since December 2006. Mr. Teitel has over 20 years of public and private company finance experience, including nine years of audit experience at Arthur Andersen and senior financial positions with Thermo Electron Corp., which is now Thermo Fisher Scientific Inc. and Deknatel Snowden Pencer Inc. Mr. Teitel joined the Company in December 2003 as Director of Finance Operations and assumed the title Vice President, Finance in December 2004.

 

Jon Russell has served as our Vice President, Finance since December 2006. In this role, Mr. Russell oversees financial systems management and integration and shares responsibility for external communications with the Chief Executive Officer. Previously, Mr. Russell was Chief Financial Officer of Wampole Laboratories, LLC. He has more than 20 years of experience in finance and operations management, including senior operational finance positions in North America and Europe with Precision Castparts Corporation, Vertex Interactive, Inc. and Genicom Corporation. Mr. Russell began his career at Ernst & Young LLP.

 

Robert Di Tullio joined us as Vice President, Global Regulatory and Clinical Affairs in March 2010. He has over 36 years experience in the in vitro diagnostics industry, the last 25 of which is in quality and regulatory management. Mr. Di Tullio served as Vice President, Regulatory Affairs and Quality at ProteoGenix, Inc. from July 2008 to March 2010. He held the position of Vice President, Regulatory and Clinical Affairs and Quality at Sequenom, Inc. from June 2007 to July 2008. Prior to that time, Mr. Di Tullio served as Vice President, Regulatory Affairs and Quality Systems from June 1991 to June 2007 at Diagnostic Products Corporation, or DPC, and then Siemens Medical Solutions Diagnostics once DPC was acquired.

 

Paul T. Hempel served as our General Counsel and Secretary from our inception on May 11, 2001 until April 2006, when Mr. Hempel became Senior Vice President in charge of Leadership Development, while retaining his role as Secretary. Mr. Hempel also retained oversight of our legal affairs until May 2007. Mr. Hempel served as General Counsel and Assistant Secretary of our predecessor company, Inverness Medical Technology, from October 2000 through November 2001, when that company was acquired by Johnson & Johnson. Prior to joining Inverness Medical Technology, he was a founding stockholder and Managing Director of Erickson Schaffer Peterson Hempel & Israel PC from 1996 to 2000. Prior to 1996, Mr. Hempel was a partner and managed the business practice at Bowditch & Dewey LLP.

Ellen Chiniara serves as Vice President, General Counsel and Assistant Secretary and is responsible for managing legal matters for our Company. Ms. Chiniara joined us in October 2006 as General Counsel of the Professional Diagnostics strategic business unit and became our General Counsel in May 2007. From 2002 to 2006, Ms. Chiniara was Associate General Counsel, Neurology of Serono, Inc., a biopharmaceutical company. Previously, she served as General Counsel to a healthcare venture capital fund and a healthcare management services organization, where she also was Chief Operating Officer of its clinical trial site management division. From 1994 to 1997, Ms. Chiniara was Assistant General Counsel at Value Health, a specialty managed healthcare company. Prior to 1994, Ms. Chiniara was a corporate attorney in Boston with Hale and Dorr (now Wilmer Cutler Pickering Hale and Dorr LLP).

 

The following table furnishes information as to shares of our common stock beneficially owned by:

 

 

Unless otherwise stated, beneficial ownership is calculated as of May 1, 2010. For the purpose of this table, a person, group or entity is deemed to have “beneficial ownership” of any shares that such person, group or entity has the right to acquire within 60 days after such date through the exercise of options or warrants.

 

Security Ownership of Certain Beneficial Owners and Management

 

 

 

 

 

In addition, the Zwanziger Family Trust, a trust for the benefit of Mr. Zwanziger’s children the trustee of which is Mr. Zwanziger’s sister, and Mr. Underwood own, respectively, 11,984 shares and 4,104 shares of our Series B Preferred Stock. The shares of Series B Preferred Stock owned by the Zwanziger Family Trust and Mr. Underwood represent, both individually and in the aggregate, less than 1% of the outstanding shares of the Series B Preferred Stock. Mr. Zwanziger disclaims beneficial ownership of the Series B Preferred Stock owned by the Zwanziger Family Trust. We are not aware that any of our directors or executive officers beneficially own any other shares of Series B Preferred Stock.

 

This Compensation Discussion and Analysis discusses the compensation paid to our key executives, our chief financial officer, or our CFO, and our three other most highly-compensated executive officers. These officers are collectively referred to as the named executive officers for purposes of this discussion. We refer to Ron Zwanziger, or our CEO; David Scott, Ph.D., our Chief Scientific Officer; and Jerry McAleer, Ph.D., our Senior Vice President, R&D, as our “key executives.”

 

The objective of our executive compensation program is to attract, retain and motivate the talented and dedicated executives who are critical to our goals of continued growth, innovation, increasing profitability and ultimately maximizing shareholder value. Specifically, we seek to attract and reward executives who display certain fundamental leadership characteristics for hiring and promotion that we have identified as consistent with our Company goals and culture. We provide these executives with what we believe to be a competitive total compensation package consisting primarily of base salary, long-term equity incentive compensation and a broad-based benefits program. Our compensation program is designed to reward each executive’s individual performance by considering generally their past and potential contribution to our achievement of key strategic goals such as revenue generation, margin improvement and the establishment and maintenance of key strategic relationships. Our executive compensation program aims to provide a risk-balanced compensation package which is competitive in our market sector and, more importantly, relevant to the individual executive.

 

Our policy for allocating between long-term and currently-paid compensation is to ensure adequate base compensation to attract and retain personnel, while providing incentives to maximize long-term value for our Company and our stockholders. Accordingly, (i) we provide cash compensation in the form of base salary to meet competitive cash compensation norms and (ii) we provide non-cash compensation, primarily in the form of stock-based awards, to reward superior performance against long-term strategic goals. Although we did grant cash bonuses during 2009, as discussed below, we do not provide a formal short-term incentive plan, as our strategic philosophy is to focus on the long-term goals discussed above. Because we do not have an annual cash incentive compensation plan, we set the base salaries for our named executive officers at a level higher than the average base salaries for executives in similar positions with similar responsibilities at comparable companies. In general, we target our base salaries at the average of the range of annual cash compensation (base salary plus annual non-equity incentive compensation) for competitive positions. Our Compensation Committee believes this compensation structure focuses our executives’ attention primarily on long-term stock price appreciation, rather than short-term results, and yet enables us to recruit and retain talented executives by ensuring that their annual cash compensation in the form of base salary is competitive with the aggregate annual cash compensation paid by other companies through base salaries and short-term cash incentive plans.

 

The compensation of our named executive officers, as well as our other executive officers, is reviewed by our Compensation Committee at least annually for consistency with the objectives described above. Our management, including our CEO, participates in this review by making its own recommendations as to the compensation of our executive officers to the Compensation Committee. The Compensation Committee considers the recommendations of management in assessing executive compensation but also relies on other data and resources and may utilize the services of a compensation consultant in reviewing and determining executive compensation.

 

In reviewing executive compensation, the Compensation Committee and management also consider the practices of comparable companies of similar size, geographic location and market focus. In 2009, management and the Compensation Committee utilized the 2009 Radford Global Life Sciences Survey, or the 2009 Radford Survey, which provided comprehensive baseline compensation data on positions at the executive, management and professional levels, including salary, total cash compensation, options and equity

compensation. Management and the Compensation Committee occasionally collect and analyze publicly available compensation data and other subscription compensation survey data. While benchmarking may not always be appropriate as a standalone tool for setting compensation due to the aspects of our business and objectives that may be unique to us, we generally believe that gathering this compensation information is an important part of our compensation-related decision-making process.

 

In addition, during 2009 the Compensation Committee engaged a compensation consultant, Aon Consulting’s Radford Surveys + Consulting, or Radford, to assist the committee in assessing total compensation of our key executives. As part of its engagement, Radford assisted the Compensation Committee in selecting a new peer group to utilize in assessing the competitiveness of the compensation of our key executives. The peer group the Compensation Committee had used in assessing 2008 compensation was considered out of date due to the fact that a number of the peer companies had been acquired, merged or no longer fit our peer criteria. The peer group selected by the Compensation Committee for purposes of evaluating 2009 executive compensation of the key executives consisted of nineteen publicly traded companies in a similar industry space and with similar revenues and market capitalizations. Of the 2009 peer group companies, 26% are health management companies and 74% are diagnostics/medical equipment companies. Specifically, the peer group is comprised of the following companies:

 

 

In connection with this engagement, Radford provided a detailed report, the 2009 Radford Report, which included summary observations and considerations regarding our compensation philosophy and methodology, as well as detailed competitive assessments of the cash and equity compensation of the key executives.

 

The Compensation Committee considered the 2009 Radford Survey and, in connection with the compensation of the key executives, the 2009 Radford Report, in its assessment of each element of 2009 executive compensation, as well as overall compensation.

 

In determining each component of an executive’s compensation, numerous factors particular to the executive are considered, including:

 

 

Executive compensation consists of the following elements:

 

Base Salary.  Base Salary is established based on the factors discussed above. Our general

compensation philosophy, as described above, is to offer a competitive base salary plus long-term, equity-based incentive compensation, Because of this, we ensure that the cash compensation of our executives is competitive by targeting annual base salary for a particular individual near the average of the range of annual cash compensation (base salary plus annual non-equity incentive compensation) for executives in similar positions with similar responsibilities at comparable companies. Other elements of compensation, including past and present grants of stock-based awards, may also be considered. The Compensation Committee believes that a competitive base salary is necessary to attract and retain a management team with the requested skills to lead our Company. Despite this general philosophy, due to uncertainties facing the Company’s businesses, including poor economic conditions and severe disruptions in the capital and credit markets stemming from the recent worldwide financial crisis, the Compensation Committee decided to freeze 2009 base salaries of the named executives, as well as the Company’s other executive officers and most managers, at 2008 levels. As a result, the Compensation Committee anticipated that 2009 salaries might fall behind the targeted average levels.

 

Bonuses.  Cash bonuses and non-equity incentive compensation are generally not a regular or important element of our executive compensation strategy, and we focus instead on stock-based awards designed to reward long-term performance. Consistent with this approach, the Compensation Committee did not implement any bonus or non-equity incentive plan for 2009. However, in light of the fact that no increases in base salary had been made for 2009 in anticipation of uncertain performance during the year, when the Company’s financial performance for 2009 turned out to be significantly more positive than originally anticipated, our Compensation Committee decided in March 2010 to award discretionary, one-time cash bonuses to many of the Company’s executives for 2009. These discretionary, one-time bonuses, or the 2009 Bonuses, for which a total of $4.0 million was reserved during the fourth quarter of 2009, were not part of any previously announced compensation plan or arrangement. The Compensation Committee’s overall executive compensation strategy and philosophy continue to focus on base salary combined with long-term equity incentives.

 

The 2009 Bonuses were established based on an assessment of each executive’s performance and contribution to our achievement of company goals and objectives during the year. Twelve senior executives reviewed the list of approximately fifty executives (other than the key executives) and rated them on a scale as to their overall performance and leadership behaviors. Once completed, the CEO and the Sr. Vice President of Leadership Development analyzed the results and submitted recommended bonus amounts intended to compensate for market comparisons as well as performance to the Compensation Committee, which ultimately approved all of the 2009 Bonuses.

 

In establishing the amount of the 2009 Bonuses, the Compensation Committee also considered the 2009 Radford Report for our key executives, the 2009 Radford Survey for our other executive officers and most other executives, and other regional data sources for certain executives. Generally, the total 2009 cash compensation for each executive awarded a bonus was targeted at the average of the range of total annual cash compensation for executives in similar positions with similar responsibilities at comparable companies, although comparison to other executives within our Company was also considered. In some cases, retention considerations were also evaluated.

 

The following named executive officers received 2009 Bonuses in the following amounts:

 

In determining Mr. Zwanziger’s bonus, the Compensation Committee first considered that, prior to the bonus, Mr. Zwanziger’s total cash compensation (which consisted of salary only) was significantly below the average range for total cash compensation within our peer group according to the 2009 Radford Report. Taking into consideration the information from the 2009 Radford Report, coupled with the various factors described above, including Mr. Zwanziger’s significant history and role in forming and leading our Company and in establishing and developing our core business strategy and direction, his expertise and experience as a successful chief executive and his performance and contribution to our overall goals and objectives, the Compensation Committee discussed and adopted the bonus described above in an effort to be more in line with our cash compensation objectives. While background, expertise and experience, and individual performance and contribution to our overall goals and objectives are all subjective measures, and are not based on any stated quantifiable objectives, they play an important role in the Compensation Committee’s overall decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the amount of Mr. Zwanziger’s bonus.

 

In determining Dr. Scott’s bonus, the Compensation Committee first considered that, prior to the bonus, Dr. Scott’s total cash compensation (which consisted of salary only) was below the average range for total cash compensation within our peer group according to the 2009 Radford Report. Taking into consideration the information from the 2009 Radford Report, coupled with the various factors described above, including Dr. Scott’s significant history with our Company as a founder and as a driving force in developing and implementing our overall business strategy and technology initiatives, his expertise and experience in these areas and his performance and contribution to our overall goals and objectives, the Compensation Committee discussed and adopted the bonus described above in an effort to be more in line with our cash compensation objectives. Because his salary was already closer to our targeted objective, the bonus awarded to Dr. Scott was less than that awarded to Mr. Zwanziger. While background, expertise and experience, and individual performance and contribution to our overall goals and objectives are all subjective measures, and are not based on any stated quantified objectives, they play an important role in the Compensation Committee’s decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the amount of Dr. Scott’s bonus.

 

In determining Dr. McAleer’s bonus, the Compensation Committee first considered that, prior to the bonus, Dr. McAleer’s total cash compensation (which consisted of salary only) was below the average range for total cash compensation within our peer group according to the 2009 Radford Report. Taking into consideration the information from the 2009 Radford Report, coupled with the various factors described above, including Dr. McAleer’s significant history with our Company as a founder and as a driving force in developing and implementing our overall business strategy and technology initiatives, his expertise and experience in these areas and his performance and contribution to our overall goals and objectives, the Compensation Committee discussed and adopted the bonus described above in an effort to be more in line with our cash compensation objectives. Because his salary was already closer to our targeted objective, the bonus awarded to Dr. McAleer was less than that awarded to Mr. Zwanziger. While background, expertise and experience, and individual performance and contribution to our overall goals and objectives are all subjective measures, and are not based on any quantified objections, they play an important role in the Compensation Committee’s decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the amount of Dr. McAleer’s bonus.

 

As noted above, one of the subjective factors that played a role in determining each of the key executive’s bonus award (as well as the option grants discussed below) was such person’s performance and contribution to our overall goals and objectives. Generally, our overall goals and objectives are continued growth, innovation, increasing profitability and ultimately maximizing shareholder value. Our core strategy for achieving these goals is to lead the way in the convergence of rapid diagnostics with technology-driven health

management programs focused on personal healthcare. By utilizing our innovative diagnostics in these programs we can enable consumers to gain greater control over their own health, as well as enable healthcare providers to improve clinical outcomes and lower costs. With respect to achievement of these goals, and implementation of our core strategy, over the last three years we have, through strategic acquisitions, established our Company as a leading supplier of cardiology diagnostic products, significantly enhanced our position in drugs of abuse testing, established a presence in oncology, continued to build a worldwide distribution network and become a leader in the growing health care management market. Through our research and development programs, we are developing new technology platforms that will facilitate our core strategy by moving testing out of the hospital and central laboratory and into the physician’s office and ultimately the home. Additionally, through our strong pipeline of novel proteins or combinations of proteins that function as disease biomarkers, we are developing new tests targeted towards all of our areas of focus. Other achievements include continuing to consolidate certain of our higher-cost manufacturing operations into lower-cost facilities, continued progress with respect to business integration activities and consolidating sales processing and certain other back-office services from multiple U.S. operations into a shared services center.

 

Assessing each executive’s contribution to achievement of these goals is a subjective analysis, as there are no stated quantified objectives on which compensation-related decisions are based, either at the Company level or the individual level. In general, when making a compensation-related decision, the Compensation Committee considers, along with all of the other factors described above, the executive’s role with us in light of these goals and our considerable achievements relative to these goals, as described above. As CEO, Mr. Zwanziger was evaluated with respect to establishing and developing our goals and our core strategy for achieving those goals, and our progress towards achieving our goals, particularly our progress as it relates to our acquisition strategy and our financial performance. As Chief Scientific Officer and as Senior Vice President, R&D, respectively, Dr. Scott and Dr. McAleer were evaluated with respect to developing our core strategy, and our progress towards implementing this strategy, particularly our progress on technology initiatives supporting this strategy.

 

In determining Mr. Teitel’s bonus, the Compensation Committee considered Mr. Teitel’s performance, as rated by management in the manner described above, and his contribution to our achievement of company goals and objectives during the year. In deciding to award Mr. Teitel a bonus, the Compensation Committee determined that Mr. Teitel’s overall performance was rated as outstanding and considerably above expectations. This assessment of Mr. Teitel’s performance was subjective in nature, and not based on any stated quantified objectives. Subjective factors are considered in the aggregate, and accordingly, no specific factor played a greater role in determining Mr. Teitel’s bonus award. The Compensation Committee also considered that, prior to the bonus, Mr. Teitel’s total cash compensation (which consisted of salary only) was significantly below the average range for total cash compensation for chief financial officers at comparable companies based on the 2009 Radford Survey.

 

In determining Dr. Bridgen’s bonus, the Compensation Committee considered Dr. Bridgen’s performance, as rated by management in the manner described above, and his contribution to our achievement of company goals and objectives during the year. In deciding to award Dr. Bridgen’s bonus, the Compensation Committee determined, based upon the assessment and rating process described above, that his overall performance was rated as outstanding and considerably above expectations. This assessment of Dr. Bridgen’s performance was subjective in nature, and not based on any stated quantified objectives. Subjective factors are considered in the aggregate, and accordingly, no specific factor played a greater role in determining Dr. Bridgen’s bonus award. The Compensation Committee also considered that, prior to the bonus, Dr. Bridgen’s total cash compensation (which consisted of salary only) was significantly below the average range for total cash compensation for heads of business development at comparable companies based on the 2009 Radford Survey.

 

In determining Mr. Underwood’s bonus, the Compensation Committee considered Mr. Underwood’s performance, as rated by

management in the manner described above, and his contribution to our achievement of company goals and objectives during the year. In deciding to award Mr. Underwood a bonus, the Compensation Committee determined, based upon the assessment and rating process described above, that his overall performance was rated as outstanding and considerably above expectations and also considered the strategic importance of his new role as Chief Executive Officer of our Alere Health business unit. This assessment of Mr. Underwood’s performance was subjective in nature and not based on any stated quantified objectives. Subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining Mr. Underwood’s bonus award.

 

Mr. Geraty, who is expected to leave the Company in the near future, was not awarded a 2009 Bonus.

 

On November 18, 2009, we paid Tom Underwood a bonus of $462,666 pursuant to a retention and severance agreement with Mr. Underwood dated the same day. This agreement, which provides for identical bonuses in 2010 and 2011 subject to continued employment, represents a restructuring of a change of control severance obligation under a 2007 agreement between Mr. Underwood and Matria Healthcare, Inc., a predecessor of Alere Health. The 2007 agreement predated our acquisition of Matria Healthcare and we viewed it as providing a potential disincentive to Mr. Underwood’s continued employment.

 

Stock Option and Stock-based Awards.  We continue to believe long-term performance is best stimulated through an ownership culture that encourages such performance through the use of stock-based awards. The Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan, or the 2001 Option Plan, was established to provide certain of our employees, including our executive officers, with incentives to help align those employees’ interests with the interests of stockholders and with our long-term success. The Compensation Committee believes that the use of stock options and other stock-based awards offers the best approach to achieving our long-term compensation goals. While the 2001 Option Plan allows our Compensation Committee to grant a number of different types of stock-based awards, other than one restricted stock grant made to Mr. Zwanziger in 2001, we have relied exclusively on stock options to provide equity incentive compensation. Stock options granted to our executive officers have an exercise price equal to the fair market value of our common stock on the grant date, except that the options granted in February 2010, discussed below, as well as certain options granted to the key executives in July 2008, have a premium exercise price of $61.49. Our stock options typically vest 25% per annum based upon continued employment over a four-year period, and generally expire ten years after the date of grant. Stock option grants to our executive officers are made in connection with the commencement of employment, in conjunction with an annual review of total compensation and, occasionally, following a significant change in job responsibilities or to meet other special retention or performance objectives. Proposals to grant stock options to our executive officers are made by our CEO to the Compensation Committee. With respect to proposals for grants made to our executive officers, the Committee generally reviews competitive compensation survey data and, if applicable, consultant reports, as discussed above, individual performance, the executive’s existing compensation and other retention considerations. The Compensation Committee considers the estimated Black-Scholes valuation of each proposed stock option grant in determining the number of options subject to each grant. Generally, stock option grants for a particular individual are based on the factors discussed above and are intended to be valued near the average of the range of the value of long-term incentive awards for executives in similar positions with similar responsibilities at comparable companies, although other elements of compensation, including salary, may also be considered.

 

Generally, stock option grants to executive officers have been made in conjunction with meetings of the Board of Directors. During 2007, we adopted and currently have in force a stock option granting policy that includes the following elements:

 

 

 

We have not adopted stock ownership guidelines.

 

During 2009, our Compensation Committee considered the fact that the value of the CEO’s total long-term incentive awards trails the market at the 25th percentile and the value of the long-term incentive awards to our other key executives approximates the market at the 50th percentile. In February 2010, the Compensation Committee approved grants of stock options, or the February Grants, to purchase 250,000, 90,000 and 75,000 shares of common stock to Mr. Zwanziger, Dr. Scott and Dr. McAleer, respectively. While the closing price of our common stock on the date of grant was $39.02, these options were granted with a premium exercise price of $61.49, which was the offering price of a secondary offering of our common stock conducted by the Company in November 2007. Due to the premium exercise price and the fact that the price of our common stock would need to increase almost 65% in order for these option grants to even be “in the money,” the Compensation Committee considered these grants to be stronger incentives than standard option grants and in the best interest of our stockholders.

 

In determining Mr. Zwanziger’s February Grant, the Compensation Committee considered the analysis set forth in the 2009 Radford Report of the number of stock options required to deliver “market competitive” annual long-term incentives within the range of 2009 grants by our peer group. Taking that into consideration, coupled with the various factors described above, including Mr. Zwanziger’s cash compensation, prior equity grants, significant history and role in leading our Company, his expertise and experience and his performance and contribution to our overall goals and objectives, as well as the fact that the exercise price of the grant would be at a significant premium to the then current trading price of our common stock, the Compensation Committee discussed and adopted the February Grant in an effort to meet our total compensation objectives. While background, expertise and experience, and individual performance and contribution to our overall goals and objectives are all subjective measures, and are not based on any stated quantifiable objectives, they play an important role in the Compensation Committee’s overall decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the grant.

 

In determining Dr. Scott’s February Grant, the Compensation Committee considered the analysis set forth in the 2009 Radford Report of the number of stock options required to deliver “market competitive” annual long-term incentives within the range of 2009 grants by our peer group. Taking that into consideration, coupled with the various factors described above, including Dr. Scott’s cash compensation, prior equity grants, significant history and role with our Company, his expertise and experience and his performance and contribution to our overall goals and objectives, as well as the fact that the exercise price of the grant would be at a significant premium to the then

current trading price of our common stock, the Compensation Committee discussed and adopted the February Grant in an effort meet our total compensation objectives. While background, expertise and experience, and individual performance and contribution to our overall goals and objectives are all subjective measures, and are not based on any stated quantifiable objectives, they play an important role in the Compensation Committee’s overall decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the grant.

 

In determining Dr. McAleer’s February Grant, the Compensation Committee considered the analysis set forth in the 2009 Radford Report of the number of stock options required to deliver “market competitive” annual long-term incentives within the range of 2009 grants by our peer group. Taking that into consideration, coupled with the various factors described above, including Dr. McAleer’s cash compensation, prior equity grants, significant history and role with our Company, his expertise and experience and his performance and contribution to our overall goals and objectives, as well as the fact that the exercise price of the grant would be at a significant premium to the then current trading price of our common stock, the Compensation Committee discussed and adopted the February Grant in an effort meet our total compensation objectives. While background, expertise and experience, and individual performance and contribution to our overall goals and objectives are all subjective measures, and are not based on any stated quantifiable objectives, they played an important role in the Compensation Committee’s overall decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the grant.

 

As of June 30, 2009, Mr. Underwood, Mr. Teitel, Dr. Bridgen and Dr. Geraty were granted options to purchase 12,000, 23,581, 22,564 and 36,069 shares of common stock, respectively, at an exercise price of $35.58 per share. In approving these grants, as well as other grants made to other officers, managers and employees of the Company as of the same date, the Compensation Committee considered the disincentive offered by “underwater” stock options held by each individual as a result of declines in the Company’s stock price during 2008 and 2009 and determined the amount of the grants initially based upon a formula applied against all outstanding company stock options. The Compensation Committee then adjusted the amount of each award after considering the various subjective factors previously described. With respect to these grants, the Compensation Committee considered each recipient’s cash compensation, prior equity grants, role in leading our Company, expertise and experience, and his performance and contribution to our overall goals and objectives. While background, expertise and experience, and individual performance and contribution to our overall goals and objectives are all subjective measures, and are not based on any stated quantified objectives, they play an important role in the Compensation Committee’s decision-making process. These subjective factors are considered in the aggregate and, accordingly, none of these subjective factors played a greater role in determining the grants.

 

As of August 31, 2009, Mr. Underwood was granted options to purchase 40,000 shares of common stock at an exercise price of $35.60 per share, in connection with Mr. Underwood’s appointment as our Chief Information Officer. The Compensation Committee considered this grant an appropriate incentive for Mr. Underwood in accepting this new role, which the committee expected would constitute a global, strategic leadership role once Mr. Underwood was able to transition into it. The Compensation Committee also considered an analysis of total compensation for comparable executives, the estimated Black-Scholes valuation of the proposed stock option grant, as well as Mr. Underwood’s background, expertise and experience, and individual performance and past contribution to our overall goals and objectives in approving this grant. While many of these factors are subjective measures, and are not based on any stated quantified objectives, they play an important role in the Compensation Committee’s decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the grant.

 

In addition, as of October 30, 2009, Mr. Teitel was granted options to purchase 10,000 shares of common stock at an exercise price of $38.01 per share. The Compensation Committee considered an analysis of total

compensation for comparable executives and determined that Mr. Teitel’s long-term incentive compensation remained significantly lower than that of executives at comparable companies. In approving this grant, the Compensation Committee also considered the estimated Black-Scholes valuation of the proposed stock option grant, as well as Mr. Teitel’s background, expertise and experience, and individual performance and past contribution to our overall goals and objectives. While many of these factors are subjective measures, and are not based on any stated quantified objectives, they play an important role in the Compensation Committee’s decision-making process. These subjective factors are considered in the aggregate and, accordingly, no specific factor played a greater role in determining the grants.

 

Other Compensation.  Other than as discussed below, our named executive officers do not have employment agreements. The named executive officers are not eligible to participate in, and do not have any accrued benefits under, any company-sponsored defined benefit pension plan. They are eligible to, and in some case do, participate in defined contributions plans, such as a 401(k) plan, on the same terms as other employees. The terms of these defined contribution plans vary depending on the jurisdiction of employment of the executive. In addition, consistent with our compensation philosophy, we intend to continue to maintain our current benefits and perquisites for our executive officers; however, the Compensation Committee in its discretion may revise, amend or add to the officer’s executive benefits and perquisites if it deems it advisable. We believe these benefits and perquisites are currently lower than median competitive levels for comparable companies. Finally, all of our executives are eligible to participate in our other employee benefit plans, including, medical, dental, life and disability insurance.

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the deductibility on our tax return of compensation of over $1,000,000 to certain of the named executive officers unless, in general, the compensation is paid pursuant to a plan which is performance-related, non-discretionary and has been approved by our stockholders. We periodically review the potential consequences of Section 162(m) and may structure the performance-based portion of our executive compensation to comply with the exemptions available under Section 162(m). We believe that options granted under the 2001 Option Plan will generally qualify as performance-based compensation under Section 162(m). However, we reserve the right to use our judgment to authorize compensation payments that do not comply with these exemptions when we believe that such payments are appropriate and in the best interest of the stockholders, after taking into consideration changing business conditions or the officer’s performance.

 

We, the Compensation Committee, have reviewed and discussed the Compensation and Discussion and Analysis beginning on page 28 of this proxy statement with management.

 

Based on this review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

THE COMPENSATION COMMITTEE

 

Carol R. Goldberg, Chairperson

Eli Y. Adashi, Member

Robert P. Khederian, Member

 

Set forth below is information regarding the compensation of our Chief Executive Officer, our Chief Financial Officer, our other key executives and our three other most highly-compensated executive officers for the fiscal year 2009. Such officers are collectively referred to as the “named executive officers.”

 

Summary Compensation Table.  The following table sets forth information regarding the named executive officers’ compensation for fiscal years 2009, 2008 and 2007. For our named executive officers, the amount of salary and bonus represented between 45% and 100% of the named executive officers’ total compensation for 2009.

 

 

 

 

 

Grants of Plan-Based Awards.  The following table sets forth certain information with respect to options granted to the named executive officers in fiscal year 2009.

 

 

 

Outstanding Equity Awards at Fiscal Year-End.  The following table sets forth certain information with respect to unexercised options held by the named executive officers at the end of fiscal year 2009.

 

 

 

 

Option Exercises and Stock Vested.  The following table sets forth certain information with respect to options exercised by the named executive officers in fiscal year 2009.

 

 

 

 

Non-qualified Defined Contribution and Other Non-qualified Deferred Compensation Plans.  Our named executive officers do not participate in any non-qualified defined contribution or other deferred compensation plans.

 

Pension Benefits.  Our named executive officers do not participate in any plan that provides for specified retirement benefits, or payments and benefits that will be provided primarily following retirement, other than defined contribution plans such as our 401(k) savings plan.

 

Employment Agreements and Potential Payments upon Termination or Change-in-Control.  On November 18, 2009, we entered into a retention and severance agreement with Tom Underwood in order to restructure change of control severance obligations existing under a 2007 agreement between Mr. Underwood and Matria Healthcare, Inc., a predecessor to Alere Health. In addition to a bonus paid in 2009, Mr. Underwood’s current retention and severance agreement provides for two further “stay bonuses” of $462,666 payable November 18, 2010 and June 30, 2011, as well as severance payable in the event of involuntary termination without cause or voluntary termination with good reason. As consideration for these severance benefits, Mr. Underwood agreed that (i) for one year after his employment terminates if less than all of the stay bonuses have been paid, or (ii) for two years after his employment terminates if the full amount of all of the stay bonuses has been paid, he will not provide similar services to any business that competes with Alere Health in many states within the United States. As part of the agreement, Mr. Underwood also entered into Alere Health’s standard non-solicitation agreement.

 

Dr. Geraty, who is expected to leave the Company in the near future, has an employment agreement which provides for severance payments in the event of involuntary termination without cause or constructive termination. These payments will be triggered by his departure. Dr. Geraty has agreed not to engage in any business activity which is directly or indirectly in competition with us within the United States or to solicit our employees or customers for a period of one year following the date his employment terminates.

The table below sets forth the estimated payments and benefits that would be provided to the extent that payments under these agreements are triggered, or in the case of Dr. Geraty, the amount of the expected payment obligation that will be triggered when he leaves the Company.

 

 

 

 

Our named executive officers are otherwise employees-at-will and do not have employment contracts with us. Other than provisions in our 2001 Stock Option and Incentive Plan that provide for all stock options to automatically become fully exercisable and any stock awards to become vested and non-forfeitable in the event of a “change of control” as defined in the plan, there are no other contracts, agreements, plans or arrangements that provide for payments to our named executive officers at, following, or in connection with any termination of employment, change in control of our Company or a change in a named executive officer’s responsibilities. All of the outstanding stock options held by our named executive officers reported above under “Outstanding Equity Awards at Fiscal Year-End” were issued under our 2001 Stock Option and Incentive Plan and are subject to accelerated exercisability upon a change of control. The table below sets forth the value attributable to such an acceleration of exercisability.

 

 

 

 

Our compensation policies and practices for our employees, including our executive compensation program described in our Compensation Discussion and Analysis, aim to provide a risk-balanced compensation package which is competitive in our market sectors and relevant to the individual executive. Generally, we provide cash compensation in the form of base salary to meet competitive cash compensation norms and non-cash compensation, primarily in the form of stock-based awards, to reward superior performance against long-term strategic goals. This focus on base salary supplemented by long-term, non-cash compensation discourages short-term risk taking and provides motivation for employees to pursue the same strategic goals, including increasing shareholder value. While we did provide one-time, discretionary bonuses to many of our executives and managers for 2009, as discussed in our Compensation Discussion and Analysis, and we do provide commission-based compensation to a limited number of sales personnel consistent with industry practices, we do not believe that these practices, or our compensation policies and practices considered as a whole, are reasonably likely to have a material adverse effect on us.

 

The following table sets forth information regarding the compensation of our directors during fiscal year 2009.