DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 (AMENDMENT NO.
)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to
Section 240.14a-12 |
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement, if
other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12. |
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(1) |
Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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(3) |
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): |
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(4) |
Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing. |
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(1) |
Amount Previously Paid: |
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(2) |
Form, Schedule or Registration Statement No.: |
311
ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON JULY 9, 2008
To the Stockholders of Integra LifeSciences Holdings Corporation:
NOTICE IS HEREBY GIVEN that the 2008 Annual Meeting of
Stockholders (the Meeting) of Integra LifeSciences
Holdings Corporation (the Company) will be held as,
and for the purposes, set forth below:
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TIME |
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9:00 a.m. local time on Wednesday, July 9, 2008 |
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PLACE |
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Integra LifeSciences Holdings Corporation Corporate
Headquarters
315 Enterprise Drive
Plainsboro, New Jersey 08536 |
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ITEMS OF BUSINESS |
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1. To elect eight directors of the Company to serve until
the next annual meeting of stockholders and until their
successors are duly elected and qualified.
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2. To ratify the appointment of PricewaterhouseCoopers LLP
as the Companys independent registered public accounting
firm for the fiscal year 2008.
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3. To approve the terms of the Amended and Restated 2003
Equity Incentive Plan.
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4. To approve an amendment to the 2003 Equity Incentive
Plan to increase the number of shares that may be issued under
the plan.
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5. To act upon any other matters properly coming before the
meeting or any adjournment or postponement thereof.
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RECORD DATE |
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Holders of record of the Companys common stock at the
close of business on May 22, 2008 are entitled to notice
of, and to vote at, the Meeting and any adjournment or
postponement thereof. A complete list of stockholders entitled
to vote at the Meeting will be available for inspection by any
stockholder for any purpose germane to the Meeting for ten days
prior to the Meeting during ordinary business hours at the
Companys headquarters located at 311 Enterprise Drive,
Plainsboro, New Jersey. |
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ANNUAL REPORT |
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The 2007 Annual Report of Integra LifeSciences Holdings
Corporation is being mailed simultaneously herewith. The Annual
Report is not to be considered part of the proxy solicitation
materials. |
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IMPORTANT |
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In order to avoid additional soliciting expense to the Company,
please MARK, SIGN, DATE and MAIL your proxy PROMPTLY in the
return envelope provided, even if you plan to attend the
Meeting. If you attend the Meeting and wish to vote your shares
in person, arrangements will be made for you to do so. |
By order of the Board of Directors,
Richard D. Gorelick
Senior Vice President, General Counsel,
Human Resources and Secretary
Plainsboro, New Jersey
May 30, 2008
INTEGRA
LIFESCIENCES HOLDINGS CORPORATION
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 9,
2008
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON JULY 9, 2008. The proxy
statement and annual
report to security holders are available on our internet site
at
http://investor.integra-ls.com/financials.cfm
PURPOSE
OF MEETING
We are providing this Proxy Statement to holders of our common
stock in connection with the solicitation by the Board of
Directors of Integra LifeSciences Holdings Corporation (the
Company) of proxies to be voted at the
Companys 2008 Annual Meeting of Stockholders (the
Meeting) and at any adjournments or postponements
thereof. The Meeting will begin at 9:00 a.m. local time on
Wednesday, July 9, 2008 at the Companys Corporate
Headquarters, 315 Enterprise Drive, Plainsboro, New Jersey. We
are first mailing this Proxy Statement, the Notice of Annual
Meeting of Stockholders and the form of proxy to stockholders of
the Company on or about May 30, 2008.
At the Meeting, we will ask the stockholders of the Company to
consider and vote upon:
(i) the election of eight directors to serve until the next
annual meeting of stockholders and until their successors are
duly elected and qualified (see Proposal 1. Election
of Directors);
(ii) the ratification of the appointment of
PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for the fiscal year 2008 (see
Proposal 2. Ratification of Independent Registered
Public Accounting Firm);
(iii) the terms of the Companys Amended and Restated
2003 Equity Incentive Plan (see Proposal 3. Amended
and Restated 2003 Equity Incentive Plan); and
(iv) an amendment to the Companys 2003 Equity
Incentive Plan to increase the number of shares that may be
issued or awarded under the plan (see Proposal 4.
Amendment to 2003 Equity Incentive Plan to Increase
Shares).
We know of no other matters that will be presented for
consideration at the Meeting. If any other matters are properly
presented at the Meeting or any postponement or adjournment
thereof, the persons named in the enclosed proxy will have
authority to vote on such matters in accordance with their best
judgment.
RECORD
DATE
As of May 22, 2008, the record date for the Meeting,
27,307,058 shares of our common stock were outstanding.
Only holders of record of our common stock as of the close of
business on the record date are entitled to notice of, and to
vote at, the Meeting or at any adjournment or postponement
thereof.
VOTING
AND REVOCABILITY OF PROXIES
Each share of our common stock entitles the holder of record
thereof to one vote. Each stockholder may vote in person or by
proxy on all matters that properly come before the Meeting and
any adjournment or postponement thereof. The presence, in person
or by proxy, of stockholders entitled to vote a majority of the
shares of common stock outstanding on the record date will
constitute a quorum for purposes of voting at the Meeting.
Shares abstaining from voting and shares present but not voting,
including broker non-votes, are counted as present
for purposes of determining the existence of a quorum. Broker
non-votes are shares held by a broker or nominee for
which an executed proxy is received by the Company, but which
are not voted as to one or more proposals because timely
instructions have not been received from the beneficial owners
or persons entitled to vote and the broker or nominee does not
have discretionary voting power to vote such shares.
If we fail to obtain a quorum for the Meeting or a sufficient
number of votes to approve a proposal, we may adjourn the
Meeting for the purpose of obtaining additional proxies or votes
or for any other purpose. At any subsequent reconvening of the
Meeting, all proxies will be voted in the same manner as they
would have been voted at the original Meeting (except for any
proxies that have theretofore effectively been revoked or
withdrawn). Proxies voting against a proposal set forth herein
will not be used to adjourn the Meeting to obtain additional
proxies or votes with respect to such proposal.
The Board of Directors is soliciting the enclosed proxy for use
in connection with the Meeting and any postponement or
adjournment thereof. All properly executed proxies received
prior to or at the Meeting or any postponement or adjournment
thereof and not revoked in the manner described below will be
voted in accordance with the instructions indicated on such
proxies. For each proposal, you may vote FOR,
AGAINST or ABSTAIN. If you sign your
proxy card or broker voting instruction card with no further
instructions, your shares will be voted in accordance with the
recommendations of the Board of Directors.
You may revoke your proxy by (a) delivering to the
Secretary of the Company at or before the Meeting a written
notice of revocation bearing a later date than the proxy,
(b) duly executing a subsequent proxy relating to the same
shares of common stock and delivering it to the Secretary of the
Company at or before the Meeting or (c) attending the
Meeting and voting in person (although attendance at the Meeting
will not in and of itself constitute revocation of a proxy). Any
written notice revoking a proxy should be delivered at or prior
to the Meeting to: Integra LifeSciences Holdings Corporation,
311 Enterprise Drive, Plainsboro, New Jersey 08536, Attention:
Senior Vice President, General Counsel, Human Resources and
Secretary. Beneficial owners of our common stock who are not
holders of record and wish to revoke their proxy should contact
their bank, brokerage firm or other custodian, nominee or
fiduciary to inquire about how to revoke their proxy, and may
not revoke their proxy by one of the methods set forth above.
We will bear all expenses of this solicitation, including the
cost of preparing and mailing this Proxy Statement. In addition
to solicitation by use of the mail, proxies may be solicited by
telephone, telegraph or personally by our directors, officers
and employees, who will receive no extra compensation for their
services. We will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy soliciting materials to
beneficial owners of shares of common stock. The Company has
retained Georgeson Inc. to assist in the solicitation of proxies
for a fee of $10,000 and reimbursement of the firms
out-of-pocket expenses.
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PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors has nominated eight persons for election
as directors who will serve until the next annual meeting of
stockholders and until their successors are duly elected and
qualified: Thomas J. Baltimore, Jr., Keith
Bradley, Ph.D., Richard E. Caruso, Ph.D., Stuart M.
Essig, Neal Moszkowski, Christian S. Schade, James M. Sullivan
and Anne M. VanLent, each of whom are currently directors of the
Company.
If any nominee should be unable to serve as director, an event
not now anticipated, the shares of common stock represented by
proxies would be voted for the election of such substitute as
the Board of Directors may nominate. Set forth below is certain
information with respect to the persons nominated as directors
of the Company. See Principal Stockholders for
information regarding the security holdings of our director
nominees.
THOMAS J. BALTIMORE, JR. has been a director of the
Company since March 2007. He has served as President of RLJ
Development, LLC, which he co-founded, since 2000. Prior to
launching RLJ, he worked at Hilton Hotels Corporation as Vice
President, Development and Finance (1999 to 2000) and Vice
President, Gaming Development (1997 to 1998). From 1994 to 1996,
Mr. Baltimore was Vice President, Business Development for
Host Marriott Services (a spinoff entity from Host Marriott
Corporation). Mr. Baltimore also worked for Marriott
Corporation from 1988 to 1989 and from 1991 to 1993, holding
various positions in the company, including Senior Director and
Manager. Prior to his employment with Marriott,
Mr. Baltimore was a staff auditor for Price Waterhouse.
Mr. Baltimore is 44 years old.
KEITH BRADLEY, PH.D. has been a director of the Company
since 1992. Between 1996 and 2003, he was a director of Highway
Insurance plc, an insurance company listed on the London Stock
Exchange, and has been a consultant to a number of business,
government and international organizations. Dr. Bradley was
formerly a visiting professor at the Harvard Business School,
Wharton and UCLA, a visiting fellow at Harvards Center for
Business and Government and a professor of international
management and management strategy at the Open University and
Cass London Business Schools. Dr. Bradley has taught at the
London School of Economics and was the director of the
Schools Business Performance Group for more than six
years. He received B.A., M.A. and Ph.D. degrees from British
universities. He also serves as a director and chair of North
Star Capital Management Limited and GRS Financial Solutions
Limited. Dr. Bradley is 63 years old.
RICHARD E. CARUSO, PH.D. founded the Company in 1989 and
has served as the Companys Chairman since March 1992.
Dr. Caruso is currently a member of The Provco Group, a
venture and real estate investment company, an advisor to Quaker
BioVentures, a medical venture capital financial investor, a
member of the Board of Directors of Nitric Biotherapeutics,
Inc., a
start-up
company in which Quaker BioVentures is an investor, focused on
novel proprietary technologies for the treatment of non-healing
chronic wounds, and an advisor to NewSpring Capital, a
diversified venture capital financial investor. Dr. Caruso
served as the Companys Chief Executive Officer from March
1992 to December 1997 and also as the Companys President
from September 1995 to December 1997. From 1969 to 1992,
Dr. Caruso was a principal of LFC Financial Corporation, a
project finance company, where he was also a director and
Executive Vice President. Dr. Caruso is on the Board of
Susquehanna University, The Baum School of Art, The Uncommon
Individual Foundation (Founder) and the American Revolution
Center. He received a B.S. degree from Susquehanna University,
an M.S.B.A. degree from Bucknell University and a Ph.D. degree
from the London School of Economics, University of London
(United Kingdom). Dr. Caruso is 65 years old.
STUART M. ESSIG is Integras President and Chief
Executive Officer and a director. He joined Integra in December
1997. Before joining Integra, Mr. Essig supervised the
medical technology practice at Goldman, Sachs & Co. as
a managing director. Mr. Essig had ten years of broad
health care experience at Goldman Sachs serving as a senior
merger and acquisitions advisor to a broad range of domestic and
international medical technology, pharmaceutical and
biotechnology clients. Mr. Essig also serves on the Board
of Directors of St. Jude Medical Corporation, Zimmer Holdings,
Inc. and ADVAMED, the Advanced Medical Technology Association.
Mr. Essig received an A.B. degree from the Woodrow Wilson
School of Public and International Affairs at Princeton
University and an M.B.A. and a Ph.D. degree in Financial
Economics from the University of Chicago, Graduate School of
Business. Mr. Essig is 46 years old.
3
NEAL MOSZKOWSKI has been a director of the Company since 2006.
He previously served as a director of the Company from March
1999 to May 2005. He has been the Co-Chief Executive Officer of
TowerBrook Capital Partners, LP, a private equity investment
firm, since 2005. Prior to joining TowerBrook,
Mr. Moszkowski was Managing Director and Co-Head of Soros
Private Equity, the private equity investment business of Soros
Fund Management LLC, where he served since August 1998.
From August 1993 to August 1998, Mr. Moszkowski worked for
Goldman, Sachs & Co. and affiliates, where he served
as Vice President and Executive Director in the Principal
Investment Area. Mr. Moszkowski also currently serves as a
director of Wellcare Health Plans, Inc., Bluefly, Inc., Spheris,
Inc. and JetBlue Airways Corporation as well as several
privately owned companies. Mr. Moszkowski is 42 years
old.
CHRISTIAN S. SCHADE has been a director of the Company
since 2006. He has been the Senior Vice President, Finance and
Administration, and Chief Financial Officer of Medarex, Inc.
since 2000. From 1992 to 2000, Mr. Schade was a Managing
Director of Merrill Lynch & Co. Mr. Schade
received an A.B. degree from Princeton University and an M.B.A.
degree from the Wharton School of the University of
Pennsylvania. Mr. Schade is 47 years old.
JAMES M. SULLIVAN has been a director of the Company since 1992.
Since 1986, he has held several positions with Marriott
International, Inc. (and its predecessor, Marriott Corp.),
including Vice President of Mergers and Acquisitions, and his
current position as Executive Vice President of Lodging
Development. From 1983 to 1986, Mr. Sullivan was Chairman,
President and Chief Executive Officer of Tenly Enterprises,
Inc., a privately held company operating 105 restaurants. Prior
to 1983, he held senior management positions with Marriott
Corp., Harrahs Entertainment, Inc., Holiday Inns, Inc.,
Kentucky Fried Chicken Corp. and Heublein, Inc. He also was
employed as a senior auditor with Arthur Andersen &
Co. and served as a director of Classic Vacation Group, Inc.
until its acquisition by Expedia, Inc. in March 2002.
Mr. Sullivan received a B.S. degree in Accounting from
Boston College and an M.B.A. degree from the University of
Connecticut. Mr. Sullivan is 64 years old.
ANNE M. VANLENT has been a director of the Company since
2004. She had been Executive Vice President and Chief Financial
Officer of Barrier Therapeutics, Inc., a publicly-traded
pharmaceutical company that develops and markets prescription
dermatology products, from May 2002 through April 2008. Prior to
joining Barrier Therapeutics, Ms. VanLent served as a
principal of the Technology Compass Group, LLC, a
healthcare/technology consulting firm, since she founded it in
October 2001. From July 1997 to October 2001, she was the
Executive Vice President Portfolio Management for
Sarnoff Corporation, a multidisciplinary research and
development firm. From 1985 to 1993, she served as Senior Vice
President and Chief Financial Officer of The Liposome Company,
Inc., a publicly-traded biopharmaceutical company.
Ms. VanLent also currently serves as a director of Penwest
Pharmaceuticals Co., a NASDAQ-listed company. Ms. VanLent
received a B.A. degree in Physics from Mount Holyoke College.
Ms. VanLent is 60 years old.
Required
Vote for Approval and Recommendation of the Board of
Directors
Directors are to be elected by the majority of the votes cast
with respect to that director in uncontested elections. Thus,
the number of shares voted FOR a director must
exceed the number of votes cast AGAINST that
director. Under our By-Laws, any director who fails to be
elected must offer to tender his or her resignation to the Board
of Directors. The Corporate Governance and Nominating Committee
would then make a recommendation to the Board of Directors
whether to accept or reject the resignation, or whether other
action should be taken. The Board of Directors will act on the
Corporate Governance and Nominating Committees
recommendation and publicly disclose its decision and the
rationale behind it within 90 days from the date the
election results are certified. The director who tenders his or
her resignation will not participate in the Boards
decision. Abstentions and broker non-votes will have no effect
on the outcome of this proposal.
The Board of Directors hereby recommends that the
stockholders of the Company
vote FOR the election of each nominee for
director.
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INFORMATION
CONCERNING MEETINGS AND CERTAIN COMMITTEES
The Board of Directors held five regularly scheduled and four
special meetings during 2007. The Companys independent
directors meet at least twice a year in executive session
without management present. The Board of Directors has
determined that all of the Companys directors, except for
Mr. Essig, are independent, as defined by the applicable
NASDAQ Stock Market listing standards. In making this decision
with respect to Dr. Caruso, the Board of Directors
considered that the Company leases certain production equipment
from an entity controlled by Dr. Caruso and leases a
manufacturing facility that is 50% owned by a subsidiary of
Provco Industries. Provcos stockholders are trusts whose
beneficiaries include the children of Dr. Caruso.
Dr. Caruso is the President of Provco. In making this
decision with respect to Mr. Sullivan, who serves as
Executive Vice President of Lodging Development of Marriott
International, Inc., the Board of Directors considered that the
Company makes payments to Marriott International, Inc. and its
franchisees for hotel rooms and meeting facilities and concluded
that such payments do not affect Mr. Sullivans
independence.
The Company has standing Audit, Nominating and Corporate
Governance, and Compensation Committees of its Board of
Directors. Each committee operates pursuant to a written
charter. Copies of these charters are available on our website
at www.integra-LS.com through the Investors
Relations link under the heading Corporate
Governance. During 2007, each incumbent director attended
in person or by conference telephone at least 75% of the total
number of meetings of the Board of Directors and of each
committee of the Board of Directors on which he or she served.
Audit Committee. The Audit Committee is
comprised of Ms. VanLent (chair), Mr. Schade and
Mr. Sullivan, and it met twelve times in 2007. The purpose
of the Audit Committee is to oversee the Companys
accounting and financial reporting process and the audits of the
Companys financial statements. The Board of Directors has
determined that all of the members of the Audit Committee are
independent within the meaning of the rules of the Securities
and Exchange Commission and the applicable NASDAQ Stock Market
listing standards. The Board of Directors has also determined
that Ms. VanLent, Mr. Schade and Mr. Sullivan are
audit committee financial experts, as defined under
Item 407(d) of
Regulation S-K,
and that each of them are financially sophisticated
in accordance with NASDAQ Stock Market listing standards.
Nominating and Corporate Governance
Committee. The Nominating and Corporate
Governance Committee is comprised of Dr. Caruso (chair),
Dr. Bradley and Mr. Sullivan, and it met four times in
2007. The purpose of the Nominating and Corporate Governance
Committee is to assist the Board of Directors in the
identification of qualified candidates to become directors, the
selection of nominees for election as directors at the
stockholders meeting, the selection of candidates to fill any
vacancies on the Board of Directors, the development and
recommendation to the Board of Directors of a set of corporate
governance guidelines and principles applicable to the Company,
the oversight of the evaluation of the Board of Directors and
otherwise taking a leadership role in shaping the corporate
governance of the Company. The Board of Directors has determined
that all of the members of the Nominating and Corporate
Governance Committee are independent, as defined by the
applicable NASDAQ Stock Market listing standards.
When considering a candidate for nomination as a director, the
Nominating and Corporate Governance Committee may consider,
among other things it deems appropriate, the candidates
personal and professional integrity, ethics and values,
experience in corporate management and a general understanding
of marketing, finance and other elements relevant to the success
of a publicly-traded company in todays business
environment, experience in the Companys industry and with
relevant social policy concerns, experience as a board member of
another publicly held company, academic expertise in an area of
the Companys operations, and practical and mature business
judgment, including the ability to make independent analytical
inquiries. The Nominating and Corporate Governance Committee
applies the same criteria to nominees recommended by
stockholders that it does to other new nominees.
The Nominating and Corporate Governance Committee will consider
stockholder nominated candidates for director provided that the
nominating stockholder identifies the candidates principal
occupation or employment, the number of shares of the
Companys common stock beneficially owned by such
candidate, a description of all arrangements or understandings
between the nominating stockholder and such candidate and any
other person or persons (naming such person or persons) pursuant
to which the nominations are to be made by the stockholder,
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detailed biographical data, qualifications and information
regarding any relationships between the candidate and the
Company within the past three years, and any other information
relating to such nominee that is required to be disclosed in
solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A
of the Securities Exchange Act of 1934, as amended (the
Exchange Act).
A stockholders recommendation must also set forth the name
and address, as they appear on the Companys books, of the
stockholder making such recommendation, the class and number of
shares of the Companys common stock beneficially owned by
the stockholder and the date the stockholder acquired such
shares, any material interest of the stockholder in such
nomination, any other information that is required to be
provided by the stockholder pursuant to Regulation 14A
under the Exchange Act, in its capacity as a proponent of a
stockholder proposal, and a statement from the recommending
stockholder in support of the candidate, references for the
candidate, and an indication of the candidates willingness
to serve, if elected. Recommendations for candidates to the
Board of Directors must be submitted in writing to Integra
LifeSciences Holdings Corporation, 311 Enterprise Drive,
Plainsboro, New Jersey 08536, Attention: Senior Vice President,
General Counsel, Human Resources and Secretary.
Compensation Committee. The Compensation
Committee is currently comprised of Dr. Bradley (chair),
Mr. Baltimore and Mr. Moszkowski, and it met six times
in 2007. The Compensation Committee makes decisions concerning
salaries and incentive compensation, including the issuance of
equity awards, for employees and consultants of the Company. The
Compensation Committee also administers the Companys 2000,
2001 and 2003 Equity Incentive Plans, the Companys 1998
Stock Option Plan (which expired in February 2008), the
Companys 1999 Stock Option Plan, the Companys 1993
and 1996 Incentive Stock Option and Non-Qualified Stock Option
Plans and the Companys Employee Stock Purchase Plan
(collectively, the Approved Plans). Each member of
the Compensation Committee is an outside director as
defined in Section 162(m) of the Internal Revenue Code of
1986, as amended (the Code), and a
non-employee director within the meaning of
Rule 16b-3
under the Exchange Act. The Board of Directors has determined
that each of the members of the Compensation Committee is
independent, as defined by the applicable NASDAQ Stock Market
listing standards.
The Compensation Committee may delegate any or all of its
responsibilities, except that it shall not delegate its
responsibilities regarding (i) the annual review and
approval of all elements of compensation of executive officers,
(ii) the management, review and approval of annual bonus,
long-term incentive compensation, stock option, employee pension
and welfare benefit plans, (iii) any matters that involve
executive officer compensation or (iv) any matters where it
has determined such compensation is intended to comply with
Section 162(m) of the Code by virtue of being approved by a
committee of outside directors or is intended to be
exempt from Section 16(b) under the 1934 Act pursuant
to
Rule 16b-3
by virtue of being approved by a committee of non-employee
directors.
The Compensation Committee has delegated authority for making
equity awards to non-executive officer employees under the
Approved Plans to a Special Award Committee, consisting of
Mr. Essig. The authority to grant equity to executive
officers, employees who are, or could be, a covered
employee within the meaning of Section 162(m) of the
Code or employees whose grants would result in their receiving
more than 10,000 shares of common stock during the previous
12 months, however, rests with the Compensation Committee.
On an annual basis, the Compensation Committee establishes the
aggregate number of awards that the Special Award Committee may
make. The Compensation Committee authorized the Special Award
Committee to grant a maximum of 300,000 shares of awards
during the one-year period beginning May 17, 2007.
The Companys President and Chief Executive Officer
provides significant input on the compensation, including annual
merit adjustments and equity awards, of his direct reports and
the other executive officers. As discussed below in
Executive Compensation Compensation Disclosure
and Analysis Annual Review of Compensation,
the Compensation Committee approves the compensation of these
officers, taking into consideration the recommendations of the
President and Chief Executive Officer.
The Company does not regularly use compensation consultants.
However, during 2008, Watson Wyatt & Company has
served as a consultant to the Compensation Committee in
connection with a review of the Companys 2003 Equity
Incentive Plan. Watson Wyatt & Company was also called
upon in 2007 and 2008 to provide consulting services to the
Compensation Committee on the Compensation Discussion and
Analysis part of the 2007 proxy
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statement and this proxy statement, respectively. In addition,
Watson Wyatt & Company provided consulting services to
the Committee in 2006 in connection with the establishment of
our management incentive compensation plan.
DIRECTOR
ATTENDANCE AT ANNUAL MEETINGS; SHAREHOLDER
COMMUNICATIONS WITH DIRECTORS
It is our policy to encourage our directors to attend the annual
meeting of stockholders. Seven of our eight directors attended
the 2007 Annual Meeting of Stockholders.
Stockholders may communicate with our Board of Directors, any of
its constituent committees or any member thereof by means of a
letter addressed to the Board of Directors, its constituent
committees or individual directors and sent care of Integra
LifeSciences Holdings Corporation, 311 Enterprise Drive,
Plainsboro, NJ 08536, Attention: Senior Vice President, General
Counsel, Human Resources and Secretary.
7
PROPOSAL 2.
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The firm of PricewaterhouseCoopers LLP served as our independent
registered public accounting firm for fiscal year 2007 and has
been selected by the Audit Committee to serve in the same
capacity for fiscal year 2008. The stockholders will be asked to
ratify this appointment at the Meeting. The ratification of our
independent registered public accounting firm by the
stockholders is not required by law or our By-Laws. We have
traditionally submitted this matter to the stockholders and
believe that it is good practice to continue to do so.
If stockholders fail to ratify the selection, the Audit
Committee will reconsider whether to retain
PricewaterhouseCoopers LLP. Even if the selection is ratified,
the Audit Committee in its discretion may direct the appointment
of a different independent registered public accounting firm at
any time during the year if the Audit Committee determines that
such a change would be in the best interests of the Company and
its stockholders.
During fiscal year 2007, PricewaterhouseCoopers LLP not only
provided audit services, but also rendered other services,
including tax and acquisition-related due diligence services.
The following table sets forth the aggregate fees billed or
expected to be billed by PricewaterhouseCoopers LLP and
affiliated entities for audit and non-audit services (as well as
all out-of-pocket costs incurred in connection with
these services) and are categorized as Audit Fees, Audit-Related
Fees and Tax Fees. The nature of the services provided in each
such category is described following the table.
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Actual Fees
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2007
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2006
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(In thousands)
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Audit Fees
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$
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3,805
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$
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2,174
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Audit-Related Fees
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773
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284
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Total Audit and Audit-Related Fees
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$
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4,578
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$
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2,458
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Tax Fees
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|
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194
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|
|
|
377
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Total Fees
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$
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4,772
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|
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$
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2,835
|
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The nature of the services provided in each of the categories
listed above is described below:
Audit Fees Consists of professional services
rendered for the integrated audit of the consolidated financial
statements of the Company, quarterly reviews, statutory audits,
consents and review of documents filed with the Securities and
Exchange Commission.
Audit-Related Fees Consists of services
related to an employee benefits plan audit, financial due
diligence and accounting consultations in connection with
proposed acquisitions and consultations concerning financial
accounting and reporting standards.
Tax Fees Consists of tax compliance (review
and preparation of corporate tax returns, assistance with tax
audits, review of the tax treatment for certain expenses,
extra-territorial income analysis, transfer pricing
documentation for compliance purposes and tax due diligence
relating to acquisitions) and state and local tax planning and
consultations with respect to various domestic and international
tax planning matters.
No other fees were incurred to PricewaterhouseCoopers LLP during
2006 or 2007.
All fees described above were approved by the Audit Committee.
Pre-Approval
of Audit and Non-Audit Services
Under the Audit Committee Charter, the Audit Committee must
pre-approve all audit and non-audit services provided by the
independent registered public accounting firm. The policy, as
described below, sets forth the procedures and conditions for
such pre-approval of services to be performed by the independent
registered public accounting firm.
Management submits requests for approval in writing to the Audit
Committee, which meets to discuss such requests and to approve
or decline to approve the requests. Audit Committee pre-approval
of audit and non-audit services is not required if the
engagement for the services is entered into pursuant to
pre-approval policies and
8
procedures established by the Audit Committee regarding the
Companys engagement of the independent registered public
accounting firm, provided that the policies and procedures are
detailed as to the particular service, the Audit Committee is
informed of each service provided and such policies and
procedures do not include delegation of the Audit
Committees responsibilities under the Exchange Act to the
Companys management.
The Audit Committee may delegate to one or more designated
members of the Audit Committee the authority to grant
pre-approvals, provided such approvals are presented to the
Audit Committee at a subsequent meeting. If the Audit Committee
elects to establish pre-approval policies and procedures
regarding non-audit services, the Audit Committee must be
informed of each non-audit service provided by the independent
registered public accounting firm.
The Audit Committee has determined that the rendering of the
services other than audit services by PricewaterhouseCoopers LLP
is compatible with maintaining PricewaterhouseCoopers LLPs
independence.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the Meeting and will be allowed to make a statement.
Additionally, they will be available to respond to appropriate
questions from stockholders during the Meeting.
Required
Vote for Approval and Recommendation of the Board of
Directors
The affirmative vote of the holders of a majority of the shares
present, in person or represented by proxy, at the Meeting and
entitled to vote is required to ratify the appointment of
PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for the fiscal year 2008.
Abstentions will not be voted and will have the effect of a vote
against this proposal. Broker non-votes will not be counted in
determining the number of shares necessary for approval and will
have no effect on the outcome of this proposal.
The Audit Committee of the Board of Directors has adopted a
resolution approving the appointment of PricewaterhouseCoopers
LLP. The Board of Directors hereby recommends that the
stockholders of the Company vote FOR ratification of
the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for
fiscal year 2008.
9
PROPOSAL 3.
AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN
The Board of Directors is submitting for stockholder approval
our Amended and Restated 2003 Equity Incentive Plan (the
Amended Plan). On April 17, 2008, the
Compensation Committee recommended that the Board of Directors
adopt the Amended Plan, subject to stockholder approval. On
April 23, 2008, the Board of Directors adopted the Amended
Plan, subject to stockholder approval.
The Amended Plan amends our 2003 Equity Incentive Plan (the
Plan) by imposing a one million share limit on the
number of shares of common stock that may be subject to awards
granted to any employee under the Amended Plan during any
calendar year. This new limit on all types of awards replaces
the current one million share limit on the number of shares
covered by options
and/or stock
appreciation rights that could be granted to any employee under
the Plan in any calendar year. The Amended Plan also makes other
minor and clarifying changes to the Plan. In particular, the
Amended Plan (i) amends the definition of fair market
value in certain circumstances to refer to the quoted
closing price or the mean of the high bid and low asked prices
for our common stock for certain dates, (ii) expands the
prohibition on the Compensation Committees authority to
lower the exercise price of any option to also prohibit its
authority to lower the exercise price of any stock appreciation
right, (iii) provides that the maximum term for any stock
appreciation right is ten years from the date of grant or such
earlier date as may be specified in the award agreement and
(iv) clarifies that issuances of restricted stock under the
Amended Plan for no consideration are limited to the extent
permitted by applicable law. In addition, as described below,
stockholder approval of the Amended Plan will permit all types
of awards under the Amended Plan to be eligible to qualify as
performance-based compensation under
Section 162(m) of the Code, should our Compensation
Committee determine to grant qualifying awards, and will
constitute stockholder re-approval of the material terms of the
performance goals under Section 162(m).
Section 162(m) of the Code generally limits the
deductibility of compensation paid to certain executive officers
of a publicly-held corporation to $1,000,000 in any taxable year
of the corporation. Certain types of compensation, including
qualified performance-based compensation, are exempt
from this deduction limitation. In order to qualify for the
exemption for qualified performance-based compensation,
Section 162(m) of the Code generally requires that:
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The compensation be paid solely upon account of the attainment
of one or more pre-established objective performance goals;
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The performance goals must be established by a compensation
committee comprised of two or more outside directors;
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The material terms of the performance goals (including the
maximum amount of compensation that could be paid to the
employee) must be disclosed to and approved by the
shareholders; and
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The compensation committee of outside directors must
certify that the performance goals have been met prior to
payment.
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To continue to qualify for the exemption for qualified
performance-based compensation, the shareholders must re-approve
the material terms of the performance goals every five years.
Our stockholders last approved the material terms of the
Plans performance goals when the Plan was initially
approved by our stockholders in 2003. We are now submitting for
re-approval in 2008 the material terms of the Amended
Plans performance goals, which have not changed from those
that are included in the current terms of the Plan as approved
by our stockholders in 2003. Stockholder approval of the Amended
Plan under this Proposal 3 will also constitute stockholder
re-approval of the material terms of the performance goals for
purposes of Section 162(m) of the Code.
In addition, Section 162(m) contains a special rule for
stock options and stock appreciation rights which provides that
stock options and stock appreciation rights will satisfy the
qualified performance- based compensation exception if the
awards are made by a qualifying compensation committee, the plan
sets forth the maximum number of shares that can be granted to
any person within a specified period and the compensation is
based solely on an increase in the stock price after the grant
date. The Amended Plan has been designed to permit our
Compensation Committee to grant stock options and other awards
which will qualify as qualified performance-based compensation
under Section 162(m) of the Code. The Board of Directors
has recommended that you approve the Amended Plan to re-approve
the material terms of the performance goals for purposes of
Section 162(m) and to permit all
10
types of awards under the Amended Plan to be eligible to qualify
as performance-based compensation under Section 162(m)
should our Compensation Committee determine to grant qualifying
awards. The Plan was originally adopted by our Board of
Directors and approved by our stockholders in 2003. An amendment
to the Plan increasing the total number of shares of common
stock that may be issued or awarded under the Plan to 4,000,000
was adopted by our Board of Directors and approved by our
stockholders in 2005. As of May 1, 2008, awards covering
2,655,444 shares of our common stock were outstanding under
the Plan, and only 936,170 shares remained available for
future issuance or the grant of awards under the Plan. In
addition, as of May 1, 2008, awards covering
1,168,467 shares of our common stock were outstanding under
other Approved Plans, and only 31,389 shares remained
available for future issuance or the grant of awards under such
other Approved Plans. No additional awards can be made under the
1998 Stock Option Plan, which expired on February 26, 2008.
On May 22, 2008, the closing price of a share of our common
stock on the NASDAQ Global Select Market was $42.05.
The principal features of the Amended Plan are summarized below,
but the summary is qualified in its entirety by reference to the
actual plan document, a copy of which is included as
Appendix A.
1. Shares Subject To Awards. The total
number of shares of common stock that may be issued or awarded
under the Amended Plan is 4,000,000. While this Proposal 3
is separate from and not contingent or otherwise conditioned on
your vote with respect to Proposal 4, if Proposal 4 is
approved by our stockholders, an additional 750,000 shares
will be available for issuance or award under the Plan. If any
award is forfeited, expires or otherwise terminates without
having been exercised in full, or if any award payable in cash
or shares of common stock is paid in cash rather than shares, or
if any shares are withheld for the payment of taxes with respect
to an award, the number of shares of common stock as to which
such award was not exercised or for which cash was paid or which
were withheld, as applicable, will continue to be available for
future awards under the Plan. In addition, the aggregate fair
market value (determined at the time the option is granted) of
shares of common stock with respect to which incentive stock
options (ISOs) are exercisable for the first time by
any participant during a calendar year (under the Amended Plan
and under any other stock option plan of the Company or a
Related Corporation (as defined in the Amended Plan)) may not
exceed $100,000. The Amended Plan makes minor changes to the
definition of fair market value to refer to the
quoted closing price or the mean of the high bid and low asked
prices for our common stock for certain dates. For purposes of
the Amended Plan, the fair market value of a share of common
stock as of a given date will be (a) if there are sales of
shares of common stock on a national securities exchange or in
an over-the-counter market on such date, then the quoted closing
price on such date, (b) if no such sales occurred on such
date, the quoted closing price on the last preceding date for
which such quotation exists, (c) if the shares of common
stock are not listed on an established securities exchange or
over-the-counter market system but are regularly quoted by a
recognized securities dealer, the mean of the high bid and low
asked prices for our common stock for such date, or if there are
no high bid and low asked prices for our common stock on such
date, the high bid and low asked prices for our common stock on
the last preceding date for which such information exists, or
(d) if clauses (a) through (c) above are not
applicable, then such other method of determining fair market
value as adopted by our Compensation Committee.
The shares of common stock issued under the Amended Plan may be
authorized but unissued shares or reacquired shares, and the
Company may purchase shares required for this purpose, from time
to time, if it deems such purchase to be advisable. The Plan
currently provides that no employee may receive stock options
and/or stock
appreciation rights for more than 1,000,000 shares during
any calendar year. The Amended Plan extends this limit to all
awards, providing that no employee may be granted awards under
the Amended Plan for more than 1,000,000 shares in the
aggregate during any calendar year.
2. Administration. The Amended Plan is
administered by our Compensation Committee, which under the
Amended Plan is required to consist of not fewer than two
directors of our Board of Directors who are appointed by the
entire Board of Directors. Under the Amended Plan, the
Compensation Committee generally has the authority (i) to
select the eligible individuals to be granted awards under the
Amended Plan, (ii) to grant awards on behalf of the
Company, and (iii) to set the terms of such awards. The
Plan currently prohibits the Compensation Committee from
lowering the exercise price of any option, and the Amended Plan
expands this provision to prohibit the Compensation Committee
from lowering the exercise price of any option or stock
appreciation right. Currently, the members of the Compensation
Committee are Mr. Baltimore, Dr. Bradley (Chair) and
Mr. Moszkowski. The
11
Compensation Committee has delegated authority for making equity
awards to non-executive officer employees under the Approved
Plans to a Special Award Committee consisting of Mr. Essig.
3. Eligibility. Officers, executives,
managerial and non-managerial employees of the Company, a
Related Corporation or an affiliate as well as non-employee
directors, consultants and other service providers to the
Company, a Related Corporation or an affiliate are eligible to
participate in the Amended Plan. Only eligible employees of the
Company or a Related Corporation may receive ISOs under the
Amended Plan. Other types of awards may be granted to all
eligible individuals. As of the date of this Proxy Statement,
approximately 2,200 employees and directors are eligible to
receive equity awards under the Amended Plan.
4. Term Of Amended Plan. The Amended Plan
by its terms has no expiration date. However, no ISO may be
granted under the Amended Plan after February 23, 2013,
although ISOs granted prior to February 23, 2013 may
be exercisable beyond that date.
5. Awards.
Stock Options. The Amended Plan permits the
Compensation Committee to grant options that qualify as ISOs
under the Code and stock options that do not so qualify
(nonqualified stock options or NQSOs).
An option gives the holder the right to purchase common stock in
the future at an exercise price that is set on the date of
grant. The per share exercise price of options granted under the
Amended Plan may not be less than the fair market value of a
share of common stock on the date of grant (or, if greater, the
par value per share). No ISO may be granted to a grantee who
owns more than 10% of our stock unless the exercise price is at
least 110% of the fair market value at the time of grant (or, if
greater, 110% of the par value per share). Notwithstanding
whether an option is designated as an ISO, to the extent that
the aggregate fair market value of the shares with respect to
which such option is exercisable for the first time by any
participant during any calendar year exceeds $100,000, such
excess will be treated as a nonqualified stock option.
Payment of the exercise price of an option may be made
(i) in cash or by check (acceptable to the Compensation
Committee), bank draft or money order payable to the order of
the Company, (ii) in shares of common stock previously
acquired by the participant, subject to certain limitations
under the Amended Plan, (iii) by delivery of a notice of
exercise of the option to the Company and a broker, with
irrevocable instructions to the broker promptly to deliver to
the Company the amount of sale or loan proceeds necessary to pay
the exercise price of the option; or (iv) by any
combination of the above.
Stock options may be exercised during the period specified in
the award agreement, but in no event after the tenth anniversary
of the date of grant. However, in the case of an ISO granted to
a person who owns more than 10% of our stock on the date of
grant, such term will not exceed 5 years.
Stock Appreciation Rights. The
Compensation Committee may grant stock appreciation rights,
either alone or in tandem with options, entitling the
participant upon exercise to receive an amount in cash, shares
of common stock or a combination thereof (as determined by the
Compensation Committee), measured by the increase since the date
of grant in the value of the shares covered by such right.
Stock appreciation rights may be exercised during the period
specified in the award agreement, but in no event after the
tenth anniversary of the date of grant
Restricted Stock. The Compensation Committee
may grant shares of common stock to participants either with or
without any required payment by the participant, subject to such
restrictions as the Compensation Committee may determine. The
Amended Plan clarifies that any such issuances of restricted
stock under the Amended Plan without any required payment by the
participant are limited to the extent permitted by applicable
law.
12
Performance Stock. The Compensation Committee
may grant awards entitling a participant to receive shares of
common stock without payment provided certain performance
criteria are met. The business criteria selected by the
Compensation Committee may be expressed in absolute terms or
relative to the performance of other companies or an index. In
determining the performance criteria applicable to a grant of
performance stock, the Compensation Committee may use one or
more of the following criteria (the Performance
Criteria):
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return on assets
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return on net assets
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asset turnover
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return on equity
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return on capital
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market price appreciation of the common stock
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economic value added
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total stockholder return
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net income
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pre-tax income
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earnings per share
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operating profit margin
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net income margin
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sales margin
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cash flow
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market share
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inventory turnover
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sales growth
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capacity utilization
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increase in customer base
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environmental health & safety
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diversity
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quality
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These Performance Criteria in the Amended Plan have not changed
from the Performance Criteria under the current terms of the
Plan. However, as described above, stockholder approval of the
Amended Plan under this Proposal 3 will also constitute
stockholder re-approval of the material terms of the performance
goals for purposes of Section 162(m) of the Code.
Contract Stock. The Compensation Committee may
grant shares of common stock to participants, conditioned upon
the participants continued provision of services to the
Company and its Related Corporations and affiliates through the
date specified in the award.
Dividend Equivalent Rights. The Compensation
Committee may grant awards that entitle the participant to
receive a benefit in lieu of cash dividends that would have been
payable on any or all shares of common stock subject to another
award granted to the participant had such shares been
outstanding.
6. Adjustments. If there is any stock
split, reverse split, stock dividend, or similar change in the
capitalization of the Company, the Compensation Committee will
make proportionate adjustments to any or all of the following in
order to reflect such change: (i) the maximum number of
shares that may be delivered under the Amended Plan,
(ii) the maximum number of shares with respect to which
awards may be granted to any participant under the Amended Plan,
and (iii) the number of shares issuable upon the exercise
or vesting of outstanding awards under the Amended Plan (as well
as the exercise price per share under outstanding options or
stock appreciation rights).
7. Change in Control. In the event of
certain corporate transactions (such as a merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation), the Amended Plan provides that each outstanding
award will be assumed by the surviving or successor entity,
provided that in the event of a proposed corporate transaction,
the Compensation Committee may terminate all or a portion of any
outstanding award and give each participant the right to
exercise such award, or arrange to have such surviving or
acquiring entity or affiliate grant a replacement award, subject
to certain conditions. Notwithstanding any other provision of
the Amended Plan, all outstanding options, stock appreciation
rights, restricted stock, performance stock, contract stock and
dividend equivalent rights will become fully vested, exercisable
or payable, as applicable, upon a change in control of the
Company.
8. Termination or Amendment. The Board of
Directors may from time to time suspend, terminate or amend the
Amended Plan at any time. However, stockholder approval will be
required for any amendment to change the class of employees
eligible to participate in the Amended Plan with respect to
ISOs, to increase the maximum number of shares with respect to
which ISOs may be granted under the Amended Plan (except to the
extent permitted by the Amended Plan in connection with a change
in the Companys capitalization), to extend the term of the
Amended Plan with respect to any ISOs granted under the Amended
Plan, or to reprice or regrant through cancellation or modify
(except to the extent permitted by the Amended Plan in
connection with a change in the Companys capitalization)
any award, if the effect would be to reduce the exercise price
for the shares underlying such award. In addition, no amendment
may be made to the Amended Plan that would constitute a
modification of
13
the material terms of the performance goal(s) within
the meaning of Section 162(m) of the Code (to the extent
compliance with Section 162(m) of the Code is desired).
9. Federal Income Tax Aspects Of Awards Under The
Amended Plan. The Federal income tax consequences
of the Amended Plan under current federal income tax law are
summarized in the following discussion which deals with the
general tax principles applicable to the Amended Plan and is
intended for general information only. The following discussion
of federal income tax consequences does not purport to be a
complete analysis of all of the potential tax effects of the
Amended Plan. It is based upon laws, regulations, rulings and
decisions now in effect, all of which are subject to change. The
following does not describe alternative minimum tax, other
Federal taxes, or foreign, state or local income taxes which may
vary depending on individual circumstances and from locality to
locality.
Stock Options. If an option qualifies for ISO
treatment, the optionee will recognize no income upon grant or
exercise of the option except that at the time of exercise, the
excess of the then fair market value of the common stock over
the exercise price will be an item of tax preference for
purposes of the alternative minimum tax. If the optionee holds
the shares for more than two years after grant of the option and
more than one year after exercise of the option, upon an
optionees sale of his or her shares of common stock, any
gain will be taxed to the optionee as capital gain. If the
optionee disposes of his or her shares of common stock prior to
the expiration of one or both of the above holding periods, the
optionee generally will recognize ordinary income in an amount
measured as the difference between the exercise price and the
lower of the fair market value of the common stock at the
exercise date or the sale price of the common stock. Any gain
recognized on such a disposition of the common stock in excess
of the amount treated as ordinary income will be characterized
as capital gain. The Company will be allowed a business expense
deduction to the extent the optionee recognizes ordinary income,
subject to Sections 162(m) and 280G of the Code.
An optionee will not recognize any taxable income at the time
the optionee is granted a NQSO. However, upon exercise of the
option, the optionee will recognize ordinary income for federal
income tax purposes in an amount generally measured as the
excess of the then fair market value of the common stock over
the exercise price, and the Company will be entitled to a
corresponding deduction at the time of exercise, subject to
Sections 162(m) and 280G of the Code. Upon an
optionees sale of such shares, any difference between the
sale price and fair market value of such shares on the date of
exercise will be treated as capital gain or loss and will
qualify for long-term capital gain or loss treatment if the
common stock has been held for at least the applicable long-term
capital gain period (currently 12 months).
Stock Appreciation Rights. Generally, stock
appreciation rights will not be taxable to the participant at
grant. Upon exercise of the stock appreciation right, the fair
market value of the shares received, determined on the date of
exercise, or the amount of cash received in lieu of shares, will
be taxable to the participant as ordinary income in the year of
such exercise. The Company will be entitled to a business
expense deduction to the extent the grantee recognizes ordinary
income, subject to Sections 162(m) and 280G of the Code.
Restricted Stock. Generally, a participant
will not be taxed upon the grant or purchase of restricted stock
that is subject to a substantial risk of forfeiture,
within the meaning of Section 83 of the Code, until such
time as the restricted stock is no longer subject to the
substantial risk of forfeiture. At that time, the participant
will be taxed on the difference between the fair market value of
the common stock and the amount the participant paid, if any,
for such restricted stock. However, the recipient of restricted
stock under the Amended Plan may make an election under
Section 83(b) of the Code to be taxed with respect to the
restricted stock as of the date of transfer of the restricted
stock rather than the date or dates upon which the restricted
stock is no longer subject to a substantial risk of forfeiture
and the participant would otherwise be taxable under
Section 83 of the Code.
Performance Stock. A participant will
recognize ordinary income on the fair market value of the shares
when the performance stock is delivered.
Contract Stock. A participant will generally
not have ordinary income upon grant of contract stock. When the
shares of our common stock are delivered under the terms of the
contract stock, the participant will recognize ordinary income
equal to the fair market value of the shares delivered, less any
amount paid by the participant for such shares.
14
Dividend Equivalents. A participant will
recognize ordinary income on dividend equivalents as they are
paid.
Code Section 409A. Certain types of
awards under the Amended Plan, including performance stock,
contract stock and dividend equivalents, may constitute, or
provide for, a deferral of compensation under Section 409A
of the Code. Unless certain requirements set forth in
Section 409A are complied with, holders of such awards may
be taxed earlier than would otherwise be the case (e.g., at the
time of vesting instead of the time of payment) and may be
subject to an additional 20% penalty tax (and, potentially,
certain interest penalties). To the extent applicable, the
Amended Plan and awards granted under the Amended Plan generally
will be structured and interpreted to comply with
Section 409A and the Department of Treasury regulations and
other interpretive guidance that may be issued pursuant to
Section 409A.
Section 162(m). As described above, under
Section 162(m) of the Code, in general, income tax
deductions of publicly-traded companies may be limited to the
extent total compensation (including base salary, annual bonus,
stock option exercises and nonqualified benefits) for certain
executive officers exceeds $1,000,000 in any one taxable year.
However, under Section 162(m) of the Code, the deduction
limit does not apply to certain qualified
performance-based compensation established by an
independent compensation committee that conforms to certain
restrictive conditions stated under the Code and related
regulations.
The Amended Plan has been structured with the intent that
certain awards granted under the Amended Plan may meet the
requirements for qualified performance-based
compensation under Section 162(m) of the Code. To the
extent granted with an exercise price not less than the fair
market value on the date of grant, options granted under the
Amended Plan are intended to qualify as
performance-based under Section 162(m) of the
Code. Stock appreciation rights will also qualify as
performance-based under Section 162(m) of the
Code, to the extent they relate to the increase in the market
value of the shares of common stock from the date of grant.
Performance stock awards granted under the Amended Plan may also
qualify as performance-based under
Section 162(m) of the Code if they vest or are otherwise
payable based solely upon the Performance Criteria. As described
above, in order for these types of awards to qualify as
performance-based under Section 162(m) of the
Code, the Company has submitted this proposal for stockholder
approval.
Other Considerations. Awards that are granted,
accelerated or enhanced upon the occurrence of a change in
control may give rise, in whole or in part, to excess parachute
payments within the meaning of Section 280G of the Code to
the extent that such payments, when aggregated with other
payments subject to Section 280G, exceed the limitations
contained in that provision. Such excess parachute payments are
not deductible by the Company and are subject to an excise tax
of 20% payable by the recipient.
The Amended Plan is not subject to any provision of the Employee
Retirement Income Security Act of 1974, as amended, and is not
qualified under Section 401(a) of the Code. Special rules
may apply to a participant who is subject to Section 16 of
the Exchange Act. Certain additional special rules apply if the
exercise price for an option is paid in shares of common stock
previously owned by the participant rather than in cash.
10. Accounting Treatment. Stock-based
compensation expense for all stock-based compensation awards
granted after January 1, 2006 under the Amended Plan is
based on the fair value on the grant date, estimated in
accordance with the guidelines of a Statement of Financial
Accounting Standards (SFAS) rule,
SFAS No. 123R, using the binomial distribution model.
The amount of compensation cost attributable to stock-based
awards in 2007 was $10.0 million, net of tax.
11. New Plan Benefits. The number of
awards that our named executive officers and other employees may
receive under the Amended Plan is in the discretion of the
Compensation Committee and therefore cannot be determined in
advance. Each of our non-employee directors will receive a
grant, at their election, of 7,500 options or 1,875 shares
of restricted stock under the Amended Plan each year, and the
Chairman of the Board of Directors will receive a grant, at his
election, of 10,000 options or 2,500 shares of restricted
stock. The dollar value of such options or restricted stock
cannot be determined at this time. We also cannot determine in
advance what election the directors will make. In addition, each
of our non-employee directors will receive an annual retainer of
$55,000 payable in one of four ways: (1) in cash,
(2) one half in cash and one half in restricted stock,
(3) in restricted stock, or (4) in options (the number
of options determined by valuing the options at 25% of the fair
market value of the Companys common stock underlying the
option on the date of grant) with a maximum of 7,500 options.
Options
15
and restricted stock, as applicable, will be issued under the
Amended Plan. The director makes the election to receive the
retainer in cash, restricted stock or options on the date of our
annual meeting. At this time we cannot determine whether any
director will elect to receive his or her retainer in restricted
stock or options under the Amended Plan. In addition, we are
required under the terms of our employment agreement with our
President and CEO to grant stock options to him covering between
100,000 and 200,000 shares of common stock on an annual
basis. We also are required under our employment agreements to
grant equity-based compensation to certain other executive
officers on an annual basis, commensurate with the equity
compensation grants of other executive officers and based on
performance. In addition, we expect to renegotiate the
employment agreements with certain executive officers, including
our President and CEO, which will be expiring in 2009. Although
the Compensation Committee has not determined the terms of any
such renewals or extensions, it is possible that equity grants
will be made in connection with any renewal or extension of the
agreements. Except with respect to the annual equity grants and
retainers payable to our non-employee directors as described
above pursuant to their elections, and subject to the
requirements of our employment agreement with our President and
CEO, awards under the Amended Plan are subject to the discretion
of the Compensation Committee, and the Compensation Committee
has not made any determination to make future grants to any
persons under the Amended Plan as of the date of this Proxy
Statement. Therefore, it is not possible to determine the future
benefits that will be received by participants other than our
President and CEO under the Amended Plan.
Certain tables below under the general heading Executive
Compensation, including the Summary Compensation Table,
Grants of Plan-Based Awards Table, Outstanding Equity Awards at
Fiscal Year End Table, Option Exercises and Stock Vested Table,
Nonqualified Deferred Compensation in 2007 Table and Equity
Compensation Plan Information Table set forth information with
respect to prior awards granted to our individual named
executive officers under the Plan and other Approved Plans. In
addition, the table below sets forth the estimated awards of all
types to be made under the Amended Plan during 2008. These
estimates are based on awards made under the Plan and other
Approved Plans between January 1, 2008 and May 1,
2008, as well as awards estimated to be made during the rest of
2008 based on the number of shares covered by awards made during
the same period in 2007:
New Plan
Benefits
Under Amended and Restated 2003 Equity Incentive Plan
in Fiscal Year 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares/Units
|
Name and Position
|
|
Dollar Value ($)
|
|
Covered by Awards
|
|
Stuart M. Essig
|
|
|
(l
|
)
|
|
|
200,000
|
(2)
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
John B. Henneman, III
|
|
|
(1
|
)
|
|
|
3,855
|
|
Executive Vice President, Finance and Administration, and Chief
Financial Officer
|
|
|
|
|
|
|
|
|
Gerard S. Carlozzi
|
|
|
(1
|
)
|
|
|
3,855
|
|
Executive Vice President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
Judith E. OGrady
|
|
|
(1
|
)
|
|
|
2,295
|
|
Senior Vice President, Regulatory, Quality Assurance and
Clinical Affairs
|
|
|
|
|
|
|
|
|
Jerry E. Corbin
|
|
|
(1
|
)
|
|
|
2,295
|
|
Vice President and Corporate Controller
|
|
|
|
|
|
|
|
|
All Current Executive Officers as a Group
|
|
|
(1
|
)
|
|
|
212,300
|
|
All Current Directors Who are Not Executive Officers as a Group
|
|
|
(3
|
)
|
|
|
|
(3)(4)
|
All Employees Who are Not Executive Officers as a Group
|
|
|
(1
|
)
|
|
|
93,451
|
|
|
|
|
(1) |
|
Not determinable at this time |
|
(2) |
|
Assumes the Company will grant the maximum annual option grant
specified under the terms of Mr. Essigs employment
agreement. The agreement provides that the Company shall
annually grant stock options to Mr. Essig covering between
100,000 and 200,000 shares based on performance for the
preceding 12 month period. |
16
|
|
|
(3) |
|
The value of the aggregate number of options to be granted to
non-employee directors who elect to receive their 2008 equity
grant in options will depend on the value of such options on the
grant date. The value of the aggregate number of shares of
restricted stock to be granted to non-employee directors who
elect to receive their 2008 equity grant in restricted stock
will depend on the value of such stock on the grant date. The
value of the awards to non-employee directors that elect to
receive their $55,000 annual retainer in options will depend on
the value of the options issued on the grant date. Each
non-employee director who elects to receive his or her annual
retainer in restricted stock will receive restricted stock with
a value of $55,000. We cannot determine what elections will be
made by the non-employee directors for equity-based compensation
to be paid to them in 2008. |
|
(4) |
|
In addition to the aggregate number of options and/or aggregate
number of shares of restricted stock to be granted to the
non-employee directors during 2008, each non-employee director
may elect to receive his or her $55,000 annual retainer in
restricted stock or options. The calculation of the number of
shares of restricted stock and options to be granted if this
option is elected is set forth in the text preceding this table.
We cannot determine what elections will be made by the
non-employee directors for equity-based compensation to be paid
to them in 2008. |
17
The following table provides information as of December 31,
2007, with respect to awards granted under the Plan, excluding
cancelled or forfeited awards, to our individual named executive
officers and other groups since the adoption and approval of the
Plan in 2003.
Awards
Granted Under 2003 Equity Incentive Plan
Since
Inception of Plan in Fiscal Year 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
Options
|
|
Options
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
|
(#)
|
|
(#)
|
|
Exercise
|
|
Expiration
|
|
Have
|
|
Have Not
|
Name and Position
|
|
Exercisable(1)
|
|
Unexercisable(2)
|
|
Price
|
|
Date
|
|
Vested (#)(3)
|
|
Vested (#)
|
|
Stuart M. Essig,
|
|
|
150,000
|
|
|
|
50,000
|
|
|
|
34.49
|
|
|
|
12/17/2014
|
|
|
|
|
|
|
|
|
|
President and Chief
|
|
|
213,541
|
|
|
|
36,459
|
|
|
|
31.38
|
|
|
|
7/27/2014
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
35.57
|
|
|
|
12/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
150,000
|
|
|
|
42.53
|
|
|
|
12/19/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
40.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750,000
|
|
|
|
|
|
John B. Henneman, III,
|
|
|
5,312
|
|
|
|
2,188
|
|
|
|
38.72
|
|
|
|
2/1/2011
|
|
|
|
|
|
|
|
|
|
Executive Vice President,
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
30.25
|
|
|
|
7/26/2011
|
|
|
|
|
|
|
|
|
|
Finance and Administration,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
(4)
|
|
|
|
|
and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(5)
|
Gerard S. Carlozzi,
|
|
|
1,406
|
|
|
|
2,188
|
|
|
|
38.72
|
|
|
|
2/1/2011
|
|
|
|
|
|
|
|
|
|
Executive Vice President and
|
|
|
25,000
|
|
|
|
50,000
|
|
|
|
30.25
|
|
|
|
7/26/2011
|
|
|
|
|
|
|
|
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(5)
|
Judith E. OGrady,
|
|
|
3,750
|
|
|
|
3,750
|
|
|
|
33.48
|
|
|
|
11/1/2011
|
|
|
|
|
|
|
|
|
|
Senior Vice President, Regulatory,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,112
|
|
Quality Assurance and Clinical Affairs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry E. Corbin,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
685
|
|
Vice President and Corporate Controller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maureen B. Bellantoni,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
|
|
|
(6)
|
Former Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Current Executive Officers as a Group
|
|
|
599,009
|
|
|
|
644,585
|
|
|
|
|
(7)
|
|
|
|
(7)
|
|
|
750,000
|
|
|
|
215,529
|
|
All Directors Who Are Not Executive Officers as a Group
|
|
|
91,420
|
|
|
|
|
|
|
|
|
(8)
|
|
|
|
(8)
|
|
|
26,187
|
|
|
|
|
|
Thomas J. Baltimore, Jr., Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,293
|
|
|
|
|
|
Keith Bradley, Ph.D., Director
|
|
|
7,500
|
|
|
|
|
|
|
|
33.32
|
|
|
|
5/17/2011
|
|
|
|
6,197
|
|
|
|
|
|
Richard E. Caruso, Ph.D.,
|
|
|
10,000
|
|
|
|
|
|
|
|
33.32
|
|
|
|
5/17/2011
|
|
|
|
|
|
|
|
|
|
Director and Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,071
|
|
|
|
|
|
Neal Moszkowski, Director
|
|
|
12,500
|
|
|
|
|
|
|
|
35.76
|
|
|
|
8/9/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
11,960
|
|
|
|
|
|
|
|
49.33
|
|
|
|
6/12/2013
|
|
|
|
|
|
|
|
|
|
Christian S. Schade,
|
|
|
7,500
|
|
|
|
|
|
|
|
37.53
|
|
|
|
5/17/2012
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
49.33
|
|
|
|
6/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,223
|
|
|
|
|
|
James M. Sullivan,
|
|
|
7,500
|
|
|
|
|
|
|
|
33.32
|
|
|
|
5/17/2011
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,155
|
|
|
|
|
|
Anne M. VanLent,
|
|
|
7,500
|
|
|
|
|
|
|
|
33.32
|
|
|
|
5/17/2011
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
37.53
|
|
|
|
5/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
11,960
|
|
|
|
|
|
|
|
49.33
|
|
|
|
6/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,248
|
|
|
|
|
|
All Employees Who Are Not Executive Officers as a Group
|
|
|
17,175
|
|
|
|
0
|
|
|
|
18.63
|
|
|
|
2/24/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
8,320
|
|
|
|
6,862
|
|
|
|
29.24
|
|
|
|
7/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
1,124
|
|
|
|
1,126
|
|
|
|
30.86
|
|
|
|
8/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
8,570
|
|
|
|
6,588
|
|
|
|
32.92
|
|
|
|
6/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
39,000
|
|
|
|
40,500
|
|
|
|
33.48
|
|
|
|
11/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
15
|
|
|
|
35.07
|
|
|
|
7/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
4,650
|
|
|
|
2,321
|
|
|
|
35.09
|
|
|
|
4/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
126
|
|
|
|
35.10
|
|
|
|
9/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
107,791
|
|
|
|
43,002
|
|
|
|
35.91
|
|
|
|
1/3/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
27,436
|
|
|
|
14,278
|
|
|
|
38.06
|
|
|
|
3/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
13,808
|
|
|
|
14,642
|
|
|
|
38.20
|
|
|
|
10/3/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
190
|
|
|
|
104
|
|
|
|
38.72
|
|
|
|
2/1/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,750
|
|
|
|
176,884
|
|
18
|
|
|
(1) |
|
On May 22, 2008, the closing price of a share of our common
stock on the NASDAQ Global Select Market was $42.05. |
|
(2) |
|
For option awards made to Mr. Essig and option awards made
prior to July 26, 2005 to other officers, 25% of each award
vests on the first anniversary of the grant date and the
remaining 75% vests monthly thereafter over 36 months. For
option awards made on or after July 26, 2005 to employees
other than Mr. Essig, each award vests in four equal annual
installments beginning on the first anniversary of the grant
date. Options issued to non-employee directors vest in full on
the six month anniversary of the grant date. |
|
(3) |
|
In general, grants of restricted stock, restricted stock units
and contract stock for employees vest in full on the third
anniversary of the grant date. In special circumstances, the
Company has granted employees restricted stock awards that vest
with respect to one-third of the shares on each of the first,
second and third anniversaries of the applicable grant date.
Restricted stock granted to non-employee directors vests in full
on the six month anniversary of the grant date. The shares
underlying performance stock awards will be delivered as soon as
practicable following the end of the three-year performance
period, if the performance condition is met. |
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(4) |
|
Consists of 4,366 shares of common stock underlying a
performance stock award. The terms of the award provide that
these shares will be deliverable as soon as practicable after
December 31, 2009 if the performance condition is met. The
performance condition was met in 2007. |
|
(5) |
|
Consists of 100,000 shares of common stock underlying a
performance stock award. The terms of the award provide that
these shares will be deliverable as soon as practicable after
December 31, 2008 if the performance condition is met. The
performance condition was met in 2006. |
|
(6) |
|
As of September 6, 2007, all outstanding awards held by
Ms. Bellantoni were forfeited as a result of her leaving
the Company on that date. |
|
(7) |
|
See data above for the option price and expiration date for each
option granted to our executive officers. |
|
(8) |
|
See data below for the option price and expiration date for each
option granted to our non-employee directors. |
Required
Vote for Approval and Recommendation of the Board of
Directors
The affirmative vote of the holders of a majority of the shares
present, in person or represented by proxy, at the Meeting and
entitled to vote is required to approve and adopt the proposed
Amended Plan. Abstentions will not be voted and will have the
effect of a vote against this proposal. Broker non-votes will
not be counted in determining the number of shares necessary for
approval and will have no effect on the outcome of this proposal.
If our stockholders do not approve this proposal, the Plan will
remain in full force without giving effect to the amendments
contemplated by the Amended Plan, and the Company may continue
to grant awards under the Plan. In that case, certain awards
granted under the Plan may not be eligible to satisfy the
requirements for performance-based compensation
required for deductibility under Section 162(m) of the Code.
Your vote with respect to the Amended Plan in this
Proposal 3 is separate from and not contingent or otherwise
conditioned on your vote with respect to Proposal 4 below.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE
AMENDED
AND RESTATED 2003 EQUITY INCENTIVE PLAN AND HEREBY RECOMMENDS
THAT
THE STOCKHOLDERS OF THE COMPANY VOTE FOR THE
APPROVAL OF THE
AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN.
19
PROPOSAL 4.
AMENDMENT TO 2003 EQUITY INCENTIVE PLAN TO INCREASE
SHARES
The Board of Directors is submitting for stockholder approval an
amendment to our 2003 Equity Incentive Plan (the
Plan) which increases the maximum number of shares
of common stock which may be issued or awarded under the Plan by
750,000 shares to a total of 4,750,000. On April 23,
2008, the Board of Directors adopted this amendment to the Plan,
subject to stockholder approval. Under the current terms of the
Plan, the maximum number of shares of common stock that may be
issued or awarded under the Plan is 4,000,000 shares. The
amendment will become effective only upon stockholder approval.
If the amendment is not approved by our stockholders, it will
not become effective and the Plan will continue in full force
and effect in accordance with its terms without giving effect to
this amendment. The Board of Directors has recommended that you
approve the amendment to the Plan in order for the Company to be
able to continue providing equity-based incentive awards to key
employees and associates under the Plan.
The Board of Directors believes that the Plan promotes the
success and enhances the value of the Company by linking the
personal interest of participants to those of Company
stockholders and by providing participants with an incentive for
outstanding performance. The Board believes that increasing the
number of shares of common stock authorized for issuance or
award under the Plan is necessary to permit the Company to
continue to align the interests of participants with those of
our stockholders and to provide participants with
performance-based compensation. The number of shares authorized
for issuance or award under the Plan has not been increased
since our stockholders approved an increase in 2005.
In addition, the Company fosters an ownership culture in which
our executive officers must meet the stock ownership guidelines
that the Board of Directors has established in order to align
their interests more closely with those of our stockholders. The
guidelines require our executive officers to own shares with an
aggregate value equal to the executives base salary. In
addition, to continue the acceleration in Company growth and
financial performance that has been achieved over the life of
the Plan, it is important that the amendment to the Plan be
approved by our stockholders to ensure the Company has
sufficient shares authorized for issuance and award to current
and future employees.
The Plan was originally adopted by our Board of Directors and
approved by our stockholders in 2003. An amendment to the Plan
increasing the total number of shares of common stock that may
be issued or awarded under the Plan to 4,000,000 was adopted by
our Board of Directors and approved by our stockholders in 2005.
As of May 1, 2008, awards covering 2,655,444 shares of
our common stock were outstanding under the Plan, and only
936,170 shares remained available for future issuance or
the grant of awards under the Plan. In addition, as of
May 1, 2008, awards covering 1,168,467 shares of our
common stock were outstanding under other Approved Plans, and
only 31,389 shares remained available for future issuance
or the grant of awards under such other Approved Plans. No
additional awards can be made under the 1998 Stock Option Plan,
which expired on February 26, 2008.
On May 22, 2008, the closing price of a share of our common
stock on the NASDAQ Global Select Market was $42.05.
The principal features of the Plan are summarized below, but the
summary is qualified in its entirety by reference to the actual
plan document, including the proposed amendment, a copy of which
is included as Appendix B.
1. Shares Subject To Awards. The total
number of shares of common stock that may be issued or awarded
under the Plan is 4,000,000. If the amendment that is the
subject of this Proposal 4 is approved by our stockholders,
an additional 750,000 shares will be available for issuance
or award under the Plan, bringing the total to 4,750,000. The
Plan currently provides that in no event may any individual
receive options
and/or stock
appreciation rights for more than 1,000,000 shares during
any calendar year. While this Proposal 4 is separate from
and not contingent or otherwise conditioned on your vote with
respect to Proposal 3, if Proposal 3 is approved, the
one million share individual award limit will apply to all types
of awards under the Plan. If any award is forfeited, expires or
otherwise terminates without having been exercised in full, or
if any award payable in cash or shares of common stock is paid
in cash rather than shares, or if any shares are withheld for
the payment of taxes with respect to an award, the number of
shares of common stock as to which such award was not exercised
or for which cash was paid or which were withheld, as
applicable, will continue to be available for future awards
under the Plan. In addition, the aggregate fair market value
(determined at the time the option is granted) of shares of
common stock with respect to which ISOs
20
are exercisable for the first time by any participant during a
calendar year (under the Plan and under any other stock option
plan of the Company or a Related Corporation (as defined in the
Plan)) may not exceed $100,000. The Plan provides for the
determination of fair market value of shares of common stock.
While this Proposal 4 is separate from and not contingent
or otherwise conditioned on your vote with respect to
Proposal 3, if Proposal 3 is approved, the Plan will
include minor amendments to the definition of fair market
value to refer to the quoted closing price or the mean of
the high bid and low asked prices for our common stock for
certain dates. If Proposal 3 is approved, for purposes of
the Plan, the fair market value of a share of common stock as of
a given date will be (a) if there are sales of shares of
common stock on a national securities exchange or in an
over-the-counter market on such date, then the quoted closing
price on such date, (b) if no such sales occurred on such
date, the quoted closing price on the last preceding date for
which such quotation exists, (c) if the shares of common
stock are not listed on an established securities exchange or
over-the-counter market system but are regularly quoted by a
recognized securities dealer, the mean between the high bid and
low asked prices for our common stock for such date, or if there
are no high bid and low asked prices on such date, the high bid
and low asked prices for our common stock on the last preceding
date for which such information exists, or (d) if
clauses (a) through (c) above are not applicable, then
such other method of determining fair market value as adopted by
our Compensation Committee.
The shares of common stock issued under the Plan may be
authorized but unissued shares or reacquired shares, and the
Company may purchase shares required for this purpose, from time
to time, if it deems such purchase to be advisable.
2. Administration. The Plan is
administered by our Compensation Committee, which under the Plan
is required to consist of not fewer than two directors of our
Board of Directors who are appointed by the entire Board of
Directors. Under the Plan, the Compensation Committee generally
has the authority (i) to select the eligible individuals to
be granted awards under the Plan, (ii) to grant awards on
behalf of the Company, and (iii) to set the terms of such
awards. The Plan currently prohibits the Compensation Committee
from lowering the exercise price of any option. While this
Proposal 4 is separate from and not contingent or otherwise
conditioned on your vote with respect to Proposal 3, if
Proposal 3 is approved, this provision will be expanded to
prohibit the Compensation Committee from lowering the exercise
price of any option or stock appreciation right. Currently, the
members of the Compensation Committee are Mr. Baltimore,
Dr. Bradley (Chair) and Mr. Moszkowski. The
Compensation Committee has delegated authority for making equity
awards to non-executive officer employees under the Approved
Plans to a Special Award Committee, consisting of Mr. Essig.
3. Eligibility. Officers, executives,
managerial and non-managerial employees of the Company, a
Related Corporation or an affiliate as well as non-employee
directors, consultants and other service providers to the
Company, a Related Corporation or an affiliate are eligible to
participate in the Plan. Only eligible employees of the Company
or a Related Corporation may receive ISOs under the Plan. Other
types of awards may be granted to all eligible individuals. As
of the date of this Proxy Statement, approximately
2,200 employees and directors are eligible to receive
equity awards under the Plan.
4. Term Of Plan. The Plan by its terms
has no expiration date. However, no ISO may be granted under the
Plan after February 23, 2013, although ISOs granted prior
to February 23, 2013 may be exercisable beyond that
date.
5. Awards.
Stock Options. The Plan permits the
Compensation Committee to grant options that qualify as ISOs
under the Code and NQSOs. An option gives the holder the right
to purchase common stock in the future at an exercise price that
is set on the date of grant. The per share exercise price of
options granted under the Plan may not be less than the fair
market value of a share of common stock on the date of grant
(or, if greater, the par value per share). No ISO may be granted
to a grantee who owns more than 10% of our stock unless the
exercise price is at least 110% of the fair market value at the
time of grant (or, if greater, 110% of the par value per share).
Notwithstanding whether an option is designated as an ISO, to
the extent that the aggregate fair market value of the shares
with respect to which such option is exercisable for the first
time by any participant during any calendar year exceeds
$100,000, such excess will be treated as a nonqualified stock
option.
Payment of the exercise price of an option may be made
(i) in cash or by check (acceptable to the Compensation
Committee), bank draft or money order payable to the order of
the Company, (ii) in shares of common stock previously
acquired by the participant, subject to certain limitations
under the Plan, (iii) by delivery
21
of a notice of exercise of the option to the Company and a
broker, with irrevocable instructions to the broker promptly to
deliver to the Company the amount of sale or loan proceeds
necessary to pay the exercise price of the option; or
(iv) by any combination of the above.
Stock options may be exercised during the period specified in
the award agreement, but in no event after the tenth anniversary
of the date of grant. However, in the case of an ISO granted to
a person who owns more than 10% of our stock on the date of
grant, such term will not exceed 5 years.
Stock Appreciation Rights. The Compensation
Committee may grant stock appreciation rights, either alone or
in tandem with options, entitling the participant upon exercise
to receive an amount in cash, shares of common stock or a
combination thereof (as determined by the Compensation
Committee), measured by the increase since the date of grant in
the value of the shares covered by such right.
Stock appreciation rights may be exercised during the period
specified in the award agreement. If Proposal 3 is
approved, the maximum term of a stock appreciation right will be
ten years
Restricted Stock. The Plan currently provides
that the Compensation Committee may grant shares of common stock
to participants either with or without any required payment by
the participant, subject to such restrictions as the
Compensation Committee may determine. While this Proposal 4
is separate from and not contingent or otherwise conditioned on
your vote with respect to Proposal 3, if Proposal 3 is
approved, the Plan will clarify that any such issuances of
restricted stock under the Plan without any required payment by
the participant are limited to the extent permitted by
applicable law.
Performance Stock. The Compensation Committee
may grant awards entitling a participant to receive shares of
common stock without payment provided the Performance Criteria
are met. The business criteria selected by the Compensation
Committee may be expressed in absolute terms or relative to the
performance of other companies or an index. In determining the
Performance Criteria applicable to a grant of performance stock,
the Compensation Committee may use one or more of the
Performance Criteria.
While this Proposal 4 is separate from and not contingent
or otherwise conditioned on your vote with respect to
Proposal 3, if Proposal 3 is approved, such approval
will also constitute stockholder re- approval of the material
terms of the performance goals for purposes of
Section 162(m) of the Code, as described below. However,
the Performance Criteria in the current terms of the Plan will
remain unchanged.
Contract Stock. The Compensation Committee may
grant shares of common stock to participants, conditioned upon
the participants continued provision of services to the
Company and its Related Corporations and affiliates through the
date specified in the award.
Dividend Equivalent Rights. The Compensation
Committee may grant awards that entitle the participant to
receive a benefit in lieu of cash dividends that would have been
payable on any or all shares of common stock subject to another
award granted to the participant had such shares been
outstanding.
6. Adjustments. If there is any stock
split, reverse split, stock dividend, or similar change in the
capitalization of the Company, the Compensation Committee will
make proportionate adjustments to any or all of the following in
order to reflect such change: (i) the maximum number of
shares that may be delivered under the Plan, (ii) the
maximum number of shares with respect to which options or stock
appreciation rights may be granted to any participant under the
Plan, and (iii) the number of shares issuable upon the
exercise or vesting of outstanding awards under the Plan (as
well as the exercise price per share under outstanding options).
With respect to the individual award limit under
clause (ii) above, the Plan currently provides that in no
event may any individual receive options
and/or stock
appreciation rights for more than 1,000,000 shares during
any calendar year. While this Proposal 4 is separate from
and not contingent or otherwise conditioned on your vote with
respect to Proposal 3, if Proposal 3 is approved, the
one million share individual award limit will apply to all types
of awards under the Plan.
22
7. Change in Control. In the event of
certain corporate transactions (such as a merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation), the Plan provides that each outstanding award will
be assumed by the surviving or successor entity, provided that
in the event of a proposed corporate transaction, the
Compensation Committee may terminate all or a portion of any
outstanding award and give each participant the right to
exercise such award, or arrange to have such surviving or
acquiring entity or affiliate grant a replacement award, subject
to certain conditions. Notwithstanding any other provision of
the Plan, all outstanding options, stock appreciation rights,
restricted stock, performance stock, contract stock and dividend
equivalent rights will become fully vested, exercisable or
payable, as applicable, upon a change in control of the Company.
8. Termination or Amendment. The Board of
Directors may from time to time suspend, terminate or amend the
Plan at any time. However, stockholder approval will be required
for any amendment to change the class of employees eligible to
participate in the Plan with respect to ISOs, to increase the
maximum number of shares with respect to which ISOs may be
granted under the Plan (except to the extent permitted by the
Plan in connection with a change in the Companys
capitalization), to extend the term of the Plan with respect to
any ISOs granted under the Plan, or to reprice or regrant
through cancellation or modify (except to the extent permitted
by the Plan in connection with a change in the Companys
capitalization) any award, if the effect would be to reduce the
exercise price for the shares underlying such award. In
addition, no amendment may be made to the Plan that would
constitute a modification of the material terms of the
performance goal(s) within the meaning of
Section 162(m) of the Code (to the extent compliance with
Section 162(m) of the Code is desired).
9. Federal Income Tax Aspects Of Awards Under The
Plan. The federal income tax consequences of the
Plan under current federal income tax law are summarized in the
following discussion which deals with the general tax principles
applicable to the Plan and is intended for general information
only. The following discussion of federal income tax
consequences does not purport to be a complete analysis of all
of the potential tax effects of the Plan. It is based upon laws,
regulations, rulings and decisions now in effect, all of which
are subject to change. The following does not describe
alternative minimum tax, other federal taxes, or foreign, state
or local income taxes which may vary depending on individual
circumstances and from locality to locality.
Stock Options. If an option qualifies for ISO
treatment, the optionee will recognize no income upon grant or
exercise of the option except that at the time of exercise, the
excess of the then fair market value of the common stock over
the exercise price will be an item of tax preference for
purposes of the alternative minimum tax. If the optionee holds
the shares for more than two years after grant of the option and
more than one year after exercise of the option, upon an
optionees sale of his or her shares of common stock, any
gain will be taxed to the optionee as capital gain. If the
optionee disposes of his or her shares of common stock prior to
the expiration of one or both of the above holding periods, the
optionee generally will recognize ordinary income in an amount
measured as the difference between the exercise price and the
lower of the fair market value of the common stock at the
exercise date or the sale price of the common stock. Any gain
recognized on such a disposition of the common stock in excess
of the amount treated as ordinary income will be characterized
as capital gain. The Company will be allowed a business expense
deduction to the extent the optionee recognizes ordinary income,
subject to Sections 162(m) and 280G of the Code.
An optionee will not recognize any taxable income at the time
the optionee is granted a NQSO. However, upon exercise of the
option, the optionee will recognize ordinary income for federal
income tax purposes in an amount generally measured as the
excess of the then fair market value of the common stock over
the exercise price, and the Company will be entitled to a
corresponding deduction at the time of exercise, subject to
Sections 162(m) and 280G of the Code. Upon an
optionees sale of such shares, any difference between the
sale price and fair market value of such shares on the date of
exercise will be treated as capital gain or loss and will
qualify for long-term capital gain or loss treatment if the
common stock has been held for at least the applicable long-term
capital gain period (currently 12 months).
Stock Appreciation Rights. Generally, stock
appreciation rights will not be taxable to the participant at
grant. Upon exercise of the stock appreciation right, the fair
market value of the shares received, determined on the date of
exercise, or the amount of cash received in lieu of shares, will
be taxable to the participant as ordinary income in the year of
such exercise. The Company will be entitled to a business
expense deduction to the extent the grantee recognizes ordinary
income, subject to Sections 162(m) and 280G of the Code.
23
Restricted Stock. Generally, a participant
will not be taxed upon the grant or purchase of restricted stock
that is subject to a substantial risk of forfeiture,
within the meaning of Section 83 of the Code, until such
time as the restricted stock is no longer subject to the
substantial risk of forfeiture. At that time, the participant
will be taxed on the difference between the fair market value of
the common stock and the amount the participant paid, if any,
for such restricted stock. However, the recipient of restricted
stock under the Plan may make an election under
Section 83(b) of the Code to be taxed with respect to the
restricted stock as of the date of transfer of the restricted
stock rather than the date or dates upon which the restricted
stock is no longer subject to a substantial risk of forfeiture
and the participant would otherwise be taxable under
Section 83 of the Code.
Performance Stock. A participant will
recognize ordinary income on the fair market value of the shares
when the performance stock is delivered.
Contract Stock. A participant will generally
not have ordinary income upon grant of contract stock. When the
shares of our common stock are delivered under the terms of the
contract stock, the participant will recognize ordinary income
equal to the fair market value of the shares delivered, less any
amount paid by the participant for such shares.
Dividend Equivalents. A participant will
recognize ordinary income on dividend equivalents as they are
paid.
Code Section 409A. Certain types of
awards under the Plan, including performance stock, contract
stock and dividend equivalents, may constitute, or provide for,
a deferral of compensation under Section 409A of the Code.
Unless certain requirements set forth in Section 409A are
complied with, holders of such awards may be taxed earlier than
would otherwise be the case (e.g., at the time of vesting
instead of the time of payment) and may be subject to an
additional 20% penalty tax (and, potentially, certain interest
penalties). To the extent applicable, the Plan and awards
granted under the Plan generally will be structured and
interpreted to comply with Section 409A and the Department
of Treasury regulations and other interpretive guidance that may
be issued pursuant to Section 409A.
Section 162(m). Under Section 162(m)
of the Code, in general, income tax deductions of
publicly-traded companies may be limited to the extent total
compensation (including base salary, annual bonus, stock option
exercises and nonqualified benefits) for certain executive
officers exceeds $1,000,000 in any one taxable year. However,
under Section 162(m) of the Code, the deduction limit does
not apply to certain qualified performance-based
compensation established by an independent compensation
committee that conforms to certain restrictive conditions stated
under the Code and related regulations. These conditions
include, without limitation, the requirements that the
compensation be paid solely upon account of the attainment of
one or more pre-established objective performance goals, that
the material terms of the performance goals be disclosed to and
approved by the shareholders, and that the shareholders
re-approve the material terms of the performance goals every
five years.
The Plan has been structured with the intent that certain awards
granted under the Plan may meet the requirements for
qualified performance-based compensation under
Section 162(m) of the Code. To the extent granted with an
exercise price not less than fair market value on the date of
grant, options granted under the Plan are intended to qualify as
performance-based under Section 162(m) of the
Code. Stock appreciation rights will also qualify as
performance-based under Section 162(m) of the
Code, to the extent they relate to the increase in the market
value of the shares of common stock from the date of grant.
Performance stock awards granted under the Plan may also qualify
as performance-based under Section 162(m) of
the Code if they vest or are otherwise payable based solely upon
the Performance Criteria. In order for these types of awards to
qualify as performance-based under
Section 162(m) of the Code, the Company has submitted
Proposal 3 for stockholder approval of the Plan, as amended
and restated as described in Proposal 3. The Plan, as
amended and restated, has been designed to permit our
Compensation Committee to grant stock options and other awards
which will qualify as performance-based compensation under
Section 162(m). As described above, to continue to qualify
for the exemption for performance-based compensation, the
shareholders must re-approve the material terms of the
performance goals every five years. Our stockholders last
approved the material terms of the Plans performance goals
when the Plan was initially approved by our stockholders in
2003. The Company has submitted Proposal 3 for stockholder
approval of the Plan, as amended and restated, including the
material terms of the performance goals, which have not changed
from those that are included in the current terms of the Plan.
While this Proposal 4 is separate from and
24
not contingent or otherwise conditioned on your vote with
respect to Proposal 3, stockholder approval of the Plan, as
amended and restated, under Proposal 3 will also constitute
stockholder re-approval of the material terms of the performance
goals for purposes of Section 162(m) of the Code and will
permit all types of awards under the Plan to be eligible to
qualify as performance-based compensation under
Section 162(m) should our Compensation Committee determine
to grant qualifying awards.
Other Considerations. Awards that are granted,
accelerated or enhanced upon the occurrence of a change in
control may give rise, in whole or in part, to excess parachute
payments within the meaning of Section 280G of the Code to
the extent that such payments, when aggregated with other
payments subject to Section 280G, exceed the limitations
contained in that provision. Such excess parachute payments are
not deductible by the Company and are subject to an excise tax
of 20% payable by the recipient.
The Plan is not subject to any provision of the Employee
Retirement Income Security Act of 1974, as amended, and is not
qualified under Section 401(a) of the Code. Special rules
may apply to a participant who is subject to Section 16 of
the Exchange Act. Certain additional special rules apply if the
exercise price for an option is paid in shares of common stock
previously owned by the participant rather than in cash.
10. Accounting Treatment. Stock-based
compensation expense for all stock-based compensation awards
granted after January 1, 2006 under the Plan is based on
the fair value on the grant date, estimated in accordance with
the guidelines of SFAS No. 123R, using the binomial
distribution model. The amount of compensation cost attributable
to stock-based awards in 2007 was $10.0 million, net of tax.
11. Reasons For Amendment Of The Plan. As
of May 1, 2008 a total of 2,655,444 shares were
subject to outstanding options and other awards held by
approximately 950 officers, employees and other participants
under the Plan, of which 992,405 options were vested and
exercisable and 34,029 shares or units of shares were
vested. As of May 1, 2008 only 936,170 shares remained
available for the grant of new awards under the Plan. In
addition, as of May 1, 2008 a total of
1,168,467 shares were subject to outstanding options and
other awards held by approximately 1,000 officers, employees and
other participants under the other Approved Plans, of which
1,118,041 options were vested and exercisable and
2,251,334 shares or units of shares were vested. As of
May 1, 2008 only 31,389 shares remained available for
the grant of new awards under such other Approved Plans. The
proposed amendment to the Plan would increase the maximum number
of shares available for grant under the Plan by 750,000 to a
total of 4,750,000. As described above, our Board of Directors
has determined that it is advisable to amend the Plan to be able
to continue providing stock-based incentive compensation to our
key employees and associates, thereby continuing to align the
interests of such individuals with those of our stockholders,
and that grants of awards under the terms of the Plan are an
effective means of providing such compensation.
12. New Plan Benefits. The number of
awards that our named executive officers and other employees may
receive under the Plan is in the discretion of the Compensation
Committee and therefore cannot be determined in advance. Each of
our non-employee directors will receive a grant, at their
election, of 7,500 options or 1,875 shares of restricted
stock, under the Plan each year, and the Chairman of the Board
of Directors will receive a grant, at his election, of 10,000
options or 2,500 shares of restricted stock. The dollar
value of such options or restricted stock cannot be determined
at this time. We also cannot determine in advance what election
the directors will make. In addition, each of our non-employee
directors will receive an annual retainer of $55,000 payable in
one of four ways: (1) in cash, (2) one half in cash
and one half in restricted stock, (3) in restricted stock,
or (4) in options (the number of options determined by
valuing the options at 25% of the fair market value of the
Companys common stock underlying the option on the date of
grant) with a maximum of 7,500 options. Options and restricted
stock, as applicable, will be issued under the Plan. The
director makes the election to receive the retainer in cash,
restricted stock or options on the date of our annual meeting.
At this time we cannot determine whether any director will elect
to receive his or her retainer in restricted stock or options
under the Plan. In addition, we are required under the terms of
our employment agreement with our President and CEO to grant
stock options to him covering between 100,000 and
200,000 shares of common stock on an annual basis. We also
are required under our employment agreements to grant
equity-based compensation to certain other executive officers on
an annual basis, commensurate with the equity compensation of
other executive officers and based on performance. In addition,
we expect to renegotiate the employment agreements with certain
executive officers, including our President and CEO, which will
be expiring in 2009. Although the Compensation Committee has not
determined the terms of any such renewals or extensions, it is
possible that equity grants will be made in connection with any
renewal or extension of the
25
agreements. Except with respect to the annual equity grants and
retainers payable to our non-employee directors as described
above pursuant to their elections, and subject to the
requirements of our employment agreement with our President and
CEO, awards under the Plan are subject to the discretion of the
Compensation Committee, and the Compensation Committee has not
made any determination to make future grants to any persons
under the Plan as of the date of this Proxy Statement.
Therefore, it is not possible to determine the future benefits
that will be received by participants other than our President
and CEO under the Plan.
Certain tables above under the general heading Executive
Compensation, including the Summary Compensation Table,
Grants of Plan-Based Awards Table, Outstanding Equity Awards at
Fiscal Year End Table, Option Exercises and Stock Vested Table,
Nonqualified Deferred Compensation in 2007 Table and Equity
Compensation Plan Information Table set forth information with
respect to prior awards granted to our individual named
executive officers under the Plan and other Approved Plans. In
addition, please refer to the following tables set forth in
Proposal 3:
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New Plan Benefits Under Amended and Restated 2003 Equity
Incentive Plan in Fiscal Year 2008 Table, which sets forth the
estimated awards of all types to be made under the Plan to our
individual named executive officers and other groups during
2008; and
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Awards Granted Under 2003 Equity Incentive Plan Since Inception
of Plan in Fiscal Year 2003 Table, which sets forth the awards
of all types granted under the Plan to our individual named
executive officers and other groups since the adoption and
approval of the Plan in 2003.
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Required
Vote for Approval and Recommendation of the Board of
Directors
The affirmative vote of the holders of a majority of the shares
present, in person or represented by proxy, at the Meeting and
entitled to vote is required to approve and adopt the proposed
amendment to the Plan. Abstentions will not be voted and will
have the effect of a vote against this proposal. Broker
non-votes will not be counted in determining the number of
shares necessary for approval and will have no effect on the
outcome of this proposal.
If our stockholders do not approve this proposal, the Plan will
remain in full force without giving effect to this amendment and
the Company may continue to grant awards under the Plan within
the current 4,000,000 share limit.
Your vote with respect to the amendment of the Plan in this
Proposal 4 is separate from and not contingent or otherwise
conditioned on your vote with respect to Proposal 3 above.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING
THE
AMENDMENT TO THE 2003 EQUITY INCENTIVE PLAN AND HEREBY
RECOMMENDS THAT
THE STOCKHOLDERS OF THE COMPANY VOTE FOR THE
APPROVAL OF THE
AMENDMENT TO THE 2003 EQUITY INCENTIVE PLAN.
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EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
This discussion supplements the more detailed information
concerning executive compensation in the tables and narrative
discussion that follow. This Compensation Discussion and
Analysis section discusses the compensation policies and
programs for our named executive officers, who consist of our
Chief Executive Officer, our former and current Chief Financial
Officer and three other executive officers, as determined under
the rules of the SEC. For 2007, our named executive officers
were:
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Stuart M. Essig, our President and Chief Executive Officer;
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John B. Henneman, III, our Executive Vice President,
Finance and Administration, and Chief Financial Officer;
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Gerard S. Carlozzi, our Executive Vice President and Chief
Operating Officer;
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Maureen B. Bellantoni, our former Executive Vice President and
Chief Financial Officer;
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Judith E. OGrady, our Senior Vice President, Regulatory,
Quality Assurance and Clinical Affairs; and
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Jerry E. Corbin, our Vice President and Corporate Controller.
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The Compensation Committee of our Board of Directors plays a key
role in designing and administering our executive compensation
program. All principal elements of compensation paid to our
executive officers are subject to the Compensation
Committees approval. The report of the committee appears
following this section.
Philosophy
We have designed our executive compensation program to attract,
retain and motivate highly qualified executives and to align
their interests with the interests of our stockholders. The
ultimate goal of our program is to increase stockholder value by
providing executives with appropriate incentives to achieve our
business objectives. We seek to achieve this goal through a
program that rewards executives for performance, as measured by
both financial and non-financial factors. Our use of
equity-based awards that vest over time also encourages our
talented executives to remain in our employ. Executive officers
are required to enter into non-competition or other restrictive
covenants with us, a practice that we believe limits the
possibility of losing them to our closest competitors. We also
encourage executives to act as equity owners through the stock
ownership guidelines described later in this discussion.
Role of
Executive Officers in Compensation Process
Our President and Chief Executive Officer provides significant
input on the compensation, including annual merit adjustments
and equity awards, of his direct reports and the other named
executive officers. In addition, he attends meetings of the
Compensation Committee. As discussed below under Annual
Review of Compensation, the Compensation Committee
approves the compensation of the named executive officers,
taking into consideration the recommendations of our President
and Chief Executive Officer.
Compensation
Consultants
We do not regularly use compensation consultants. However,
during 2008 Watson Wyatt & Company has served as a
consultant to the Compensation Committee in connection with a
review of the Companys 2003 Equity Incentive Plan. Watson
Wyatt & Company was also called upon in 2007 and 2008
to provide consulting services to the Compensation Committee on
the Compensation Discussion and Analysis part of the 2007 proxy
statement and this proxy statement, respectively. In addition,
Watson Wyatt & Company provided consulting services to
the Committee in 2006 in connection with the establishment of
our management incentive compensation plan.
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Compensation
of Other Companies
Our Compensation Committee considers the compensation practices
of other companies in our industry. This consideration generally
occurs in connection with our entering into employment or
severance agreements with executive officers, rather than on an
annual basis. The Committee generally considers market
compensation of other companies in our industry when reviewing
base salaries of our executives. Over the past several years,
the list of companies (with current information publicly
available today) includes Advanced Medical Optics, Inc.,
ArthroCare Corporation, Bio-Rad Laboratories, Boston Scientific
Corporation, Cardinal Healthcare, ConMed Corporation, Cooper
Industries Ltd., C.R. Bard, Cyberonics, Inc., Edwards
Lifesciences Corporation, Haemonetics Corporation, Hologic,
Inc., Johnson & Johnson, Medicis Pharmaceutical
Corporation, Medtronic, Inc., Mentor Corporation, St. Jude
Medical Corporation, Steris Corporation, Stryker Corporation,
Wright Medical Group, Inc. and Zimmer Holdings, Inc. We do not
target our executives base salaries at a specific
percentile of market salaries.
Elements
of Compensation
There are three major elements of our executive compensation
program: (1) base salary, (2) annual cash incentives
in the form of bonus
and/or
incentive compensation plan payments and (3) long-term
equity-based incentives in the form of stock options, restricted
stock, performance stock and other forms of equity. The
Compensation Committee reviews these elements of compensation on
an annual basis.
Base
Salaries
We use base salary as a recruiting and retention tool, and to
recognize individual performance and responsibility through
merit and promotional increases. Historically, we typically paid
base salaries of executives at below the 50th percentile of
salaries for comparable positions or responsibilities at other
medical device companies, based on the data obtained from the
published salary survey sources and these companies proxy
statements. This decision was based, in part, upon the size of
the Company, our historical lack of cash and our desire to use
our available cash for acquisitions. In addition, we wanted to
link managerial compensation to our stock performance and, as a
growing company, to attract people with an entrepreneurial
spirit and a long-term objective. As we have grown, we have
moved our compensation program towards a greater percentage of
cash compensation to become more competitive with larger
companies and companies in our geographic region. The
Compensation Committee reviews base salaries annually, but it
does not automatically increase them if the Compensation
Committee believes that other elements of compensation are more
appropriate in light of our stated objectives. We consider
market factors, individual and Company performance, rate of
inflation, responsibilities and experience when considering
merit or promotion-related increases.
In addition, in determining salaries for 2007 for
Messrs. Essig, Carlozzi and Henneman, the Committee
considered the extent to which the Company achieved the goals
assigned to these executives for 2006 and the extent to which
the individuals contributed to the achievement of those goals.
No weightings were assigned and the Committee viewed the
objectives in the aggregate, with emphasis on the qualitative
goals. In addition, the Committee considered the Companys
long-term performance and overall accomplishments. See
Annual Review of Compensation and 2007 Named
Executive Officer Compensation Base Salaries
below for additional information.
Annual
Cash Incentives
Because our Company has grown and become recognized as a market
leader in our industry, we need to pay more competitively to
retain our top executives and attract new ones. Accordingly, we
have determined that we need to provide a greater percentage of
cash compensation as a percentage of overall compensation. To
move our compensation program towards providing a higher
percentage of cash compensation, in 2006 we introduced cash
bonuses and adopted the Integra LifeSciences Holdings
Corporation Management Incentive Compensation Plan (the
MICP). These forms of compensation create annual
incentive opportunities tied to objectives that are designed to
help us achieve our short-term plans to grow the business and
increase stockholder value.
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Cash Bonuses. We believe that setting
performance-based target bonuses accomplishes the goal of
creating annual incentives, and we further believe that this
form of compensation is similar to what other companies offer
based on publicly available information of companies in our
industry. The employment agreements that we entered into with
our President and Chief Executive Officer (Mr. Essig), our
Executive Vice Presidents (Mr. Carlozzi and
Mr. Henneman) and a former Executive Vice President
(Ms. Bellantoni) provide (or, in the case of
Ms. Bellantoni, provided) for annual cash bonuses equal to
a targeted percentage of base salary. The targeted amounts are
100% for Mr. Essig and 40% for Mr. Carlozzi,
Mr. Henneman and Ms. Bellantoni. Rather than receiving
similar cash bonuses, Ms. OGrady and Mr. Corbin
participate in the MICP, as described below. As discussed below
under Annual Review of Compensation, the amount of
the bonus that we will pay is based upon the satisfaction of
performance objectives and is determined by the Compensation
Committee, in its sole discretion. As discussed below, prior to
2006 Mr. Essig waived his right to receive an annual cash
bonus.
Our President and Chief Executive Officer and our Executive Vice
Presidents do not participate in the MICP because their
employment agreements, which were all entered into prior to the
adoption of the MICP, provide for targeted cash bonuses. We
believe that paying these executive officers a targeted bonus
based on both qualitative and quantitative objectives without
weightings or a formula, as opposed to only quantitative
measures under the MICP, allows the Compensation Committee to
have flexibility to judge the performance of these officers on a
number of factors, such as leadership, the accomplishment of
goals that were set during the year after the MICP performance
goals are set, and compliance and quality objectives.
When deciding cash bonuses for 2007 for Messrs. Essig,
Carlozzi and Henneman, the Committee considered the extent to
which the Company achieved the goals assigned to these
executives for 2006 and the extent to which the individuals
contributed to the achievement of those goals. No weightings
were assigned and the Committee viewed the objectives in the
aggregate, with emphasis on the qualitative goals. See
Annual Review of Compensation below.
Management Incentive Compensation Plan. In
August 2006, we adopted the MICP. The purpose of the MICP is to
offer incentive compensation to key employees below the level of
Executive Vice President by rewarding the achievement of
corporate goals and measurable individual goals that are
consistent with and support our overall corporate goals. Under
the MICP, these key employees are eligible for an annual cash
incentive award.
The Compensation Committee is charged with establishing the
performance goals in making award opportunities to executive
officers under the MICP. The Compensation Committee is
responsible for establishing these performance goals and the
amount of the target awards prior to the beginning of each year
after a review of the factors it believes will be most important
to our business over the coming year. The target award will be
equal to a percentage of the officers base salary. The
amount of the awards to be paid is conditioned upon our
achievement of those targets. We may not make any payments if we
fail to achieve a performance level of at least 90% of the
target performance goal. We may increase the award by as much as
50% above the target award upon the approval of the MICP
administrator (the Compensation Committee or, in the case of
employees who are not executive officers, the head of our human
resources department) based on the extent to which the level of
achievement of the performance goals exceeds the target level
for that performance period (to a maximum of 120% of the target
performance goals).
The MICP allows the MICP administrator to select EBITDA
and/or
global sales as the performance measures. In addition,
performance measures may relate to the participants
attainment of other performance goals that are specified for
such participant and may be weighted as to corporate and
individual goals. While we have not yet used individual
performance goals under the MICP for our executive officers we
could have used individual performance to reduce an award amount
for executive officers in 2007. Target performance goals are set
at levels that are achievable in the opinion of the Compensation
Committee, but at levels high enough so that the achievement of
these levels would benefit the Company. For 2007, the
performance measure was adjusted EBITDA (defined as net income
before interest, taxes, depreciation and amortization, as
adjusted, in the discretion of the Compensation Committee, to
account for any items that do not reflect our core operating
performance). In addition, for 2007, the Company could reduce
awards for individuals based on an assessment of the
individuals performance for 2007. Mr. Corbin and
Ms. OGrady received their respective formula award
amount for 2007 with no reduction (or increase), based on their
respective individual performance.
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Employees who participate in the MICP are entitled to receive
discretionary cash bonuses in addition to their MICP payments.
These additional bonuses are, however, reserved for
extraordinary performance and may be granted in the sole
discretion of the President and Chief Executive Officer, except
that all such awards to executive officers require approval of
the Compensation Committee. There is no limit on the amount of
such bonuses. The amount of MICP payments that these employees
receive is taken into account in determining these bonus
payments. For 2007, no executive officers who participated in
the MICP received an additional non-MICP bonus because their
compensation package when taken as a whole was determined to be
adequate.
Long-Term
Equity-Based Incentives
We use stock options, restricted stock, performance stock and
other equity equivalents to provide long-term incentives. These
awards help us retain executives and align their interests with
stockholders by setting multi-year vesting requirements and
subjecting a significant portion of the compensation value to
increases in the value of our stock. Existing ownership levels
are not a factor in award determination because we do not want
to discourage executives and other employees from holding
significant amounts of our stock if they so choose.
We grant equity awards to employees in three situations:
(1) upon their hiring or entering into new employment
agreements, (2) in connection with annual performance
reviews and (3) from time to time, to award employees who
have accomplished projects that benefit our Company.
With certain exceptions, we have historically used stock options
with six-year terms that vested over a period of four years to
provide incentives to members of management. Under the terms of
Mr. Essigs employment agreements, we have granted
restricted stock units to Mr. Essig at the time he entered
into new employment agreements and have made annual stock option
grants with
10-year
terms to him. In 2005 we began granting restricted stock to
employees below the Executive Vice President rank, generally
with a three-year cliff vesting in addition to
options, and in 2006, we generally ceased granting options to
our employees, except for Mr. Essigs annual option
grant (which is required under his employment agreement) and for
compensation of our Board of Directors. The three-year cliff
vesting provides that no shares shall vest until the third
anniversary of the grant, at which time all shares will vest. We
believe that restricted stock ties the value of employees
equity compensation to our long-term performance. By granting
restricted stock instead of stock options we are able to issue
fewer shares and conserve the amount of equity available under
our equity incentive plans. In addition, stock options no longer
receive favorable accounting treatment. Thus, we lost the
benefit that stock options previously provided. Finally, we
believe that the three-year cliff vesting of restricted stock
awards provides an effective retention tool.
In April 2007 and April 2008, we granted performance stock to
Messrs. Carlozzi and Henneman in connection with the equity
grants relating to their 2006 and 2007 performance,
respectively. These grants cover the performance periods
2007-2009
and
2008-2010,
respectively. The decision to grant performance stock was based
on the reasons described above relating to the use of restricted
stock, as well to tie their compensation to an important Company
goal. The performance condition is that our revenues during any
year of the performance period exceed revenues during the year
prior to the performance period. If the performance condition is
met, the shares covered by the grant are deliverable on the
third anniversary of the date of grant, subject to continued
employment.
In April 2007 and April 2008, we granted restricted stock to
certain executives, including Mr. Corbin and
Ms. OGrady, in connection with the Companys
2006 and 2007 performance, respectively, as well as their
individual performance.
As described above under Information Concerning Meetings
and Committees, the Compensation Committee has delegated
authority for making equity awards to certain non-executive
officer employees under the Approved Plans to a Special Award
Committee, consisting of Mr. Essig. On an annual basis, the
Compensation Committee establishes the aggregate number of
awards that the Special Award Committee may make during the year.
We require all executive officers and substantially all
U.S.-based
employees to sign a non-competition agreement, or an employment
or severance agreement with non-competition provisions, as a
condition of receiving an equity award.
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Perquisites
We provide our named executive officers with very few
perquisites and other benefits not generally available to other
employees. We have provided relocation assistance, including
reimbursement of temporary housing and moving expenses, for
certain named executive officers upon their hiring. We also
provide management-level employees with a corporate credit card
not available to all employees which includes an airport club
membership benefit.
Annual
Review of Compensation
We make the key decisions regarding named executive officer
compensation (salary increases, equity grants and bonus and MICP
payments) in connection with our annual performance review
process. The decisions regarding Mr. Essigs
compensation generally occur at the Compensation Committee
meeting held each December. For fiscal year 2007, we completed
our review process for other named executive officers in January
and February 2008. We anticipate that we will adhere to a
similar timetable for annual reviews in future years. We
generally do not make equity grants to named executive officers
other than Mr. Essig until after the end of the year. Thus,
such grants do not appear in the Summary Compensation Table for
the year in which cash compensation is reported.
In the fourth quarter of each year, Mr. Essig discusses
with the Compensation Committee a proposed list of his
performance objectives. These objectives, described below, cover
financial and organizational matters. The financial measures
include revenue, gross margin, EBITDA, earnings and similar
metrics. At the end of each year, Mr. Essig provides a
self-evaluation of his performance, which the Compensation
Committee reviews and discusses with Mr. Essig. The
Committee then solicits input from the full Board of Directors
and meets in executive session to determine
Mr. Essigs annual salary increase, bonus amount and
stock option grant. Mr. Essigs targets and objectives
are purposefully set to be aggressive and ambitious. As a
result, the objectives are not meant to be a
check-the-box chart pursuant to which we will award
Mr. Essig a certain percentage of his contractually
obligated salary increase, equity award or bonus based upon a
percentage of the objectives achieved. Rather, they are meant to
guide the members of the Compensation Committee as to what
compensation awards are appropriate for Mr. Essig based
upon his overall performance.
Messrs. Carlozzi and Henneman discussed a proposed list of
their objectives for 2007 with Mr. Essig. The objectives,
described below, relate to each named executive officers
areas of responsibility and include achieving the years
general operating plan performance levels. At the end of each
year, Mr. Essig reviews the performance of these named
executive officers, which includes evaluating whether they
satisfied their performance objectives, solicits feedback from
other employees, and makes recommendations to the Compensation
Committee regarding their salary increases, bonus amounts and
equity awards. Mr. Essig also evaluates the performance of
the other named executive officers with their supervisors and
makes similar recommendation to the Compensation Committee. The
Compensation Committee then considers Mr. Essigs
recommendations in making its compensation determinations for
these named executive officers.
For 2007, the quantitative goals for Messrs. Essig,
Carlozzi and Henneman that were explicitly listed were as
follows: consolidated plan revenues of $500-$520 million
(excluding acquisitions), adjusted earnings per share of
$1.70-$1.85, 62% gross margin (before acquisitions), adjusted
EBITDA goal of $120-130 million and progress in managing
capital efficiently (receivables of 60 days and inventory
of 200 days). These quantitative goals were intended as
stretch goals that would significantly benefit the
Company. A goal of developing a five-year strategic plan with
the following objectives also was provided: minimum revenue
growth of 15% per year, minimum earnings per share growth of 20%
per year, progress in operating margin, approaching best
competitive benchmark levels within five years and increased
focus on sales, marketing and product development divisional
management. In addition, the following qualitative goals were
assigned to these individuals:
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leadership;
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leveraging and maintaining high quality relationships with the
investment community and key customers;
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keeping the Board informed and consulted on appropriate matters;
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ensuring corporate governance and ethical responsibilities are
met;
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employee development;
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business development;
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aligning and motivating the organization;
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recruiting high quality executives and developing succession
planning for critical positions;
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supporting and guiding the strengthening of organization
development and planning efforts;
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maintaining corporate environment for continuous improvement;
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supporting the development of business opportunities;
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achieving operating synergies projected in operating plans;
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improving diversity;
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encouraging employee equity ownership;
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reviewing and enhancing compliance programs;
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improving the timeliness and effectiveness of the finance
function (for Messrs. Essig and Henneman);
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improving and enhancing commitment to quality systems;
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continuing to enhance evaluation process by tying compliance
initiatives with performance evaluations; and
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participating in the development of the industry and public
policy positions and action plans.
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For 2007, the Compensation Committee reviewed corporate and
individual performance against the 2007 goals described above
for Messrs. Essig, Carlozzi and Henneman. For 2007, the
Company (i) exceeded the consolidated plan revenues goal,
(ii) achieved approximately 91% of the adjusted earnings
per share goal of
$1.70-$1.85
(due to decisions to invest in systems, increase personnel and
impact of the IsoTis acquisition), (iii) exceeded the gross
margin goal, (iv) achieved $105.5 million (or
approximately 88%) of the adjusted EBITDA goal of
$120-130 million and (v) partially achieved the goal
of managing capital efficiently (receivables at goal of
60 days and inventory at 269 days). Much of the
inventory buildup was due to acquisition activity and
restructuring. In addition, the Committee considered the
Companys long-term performance and overall
accomplishments. Further, the goal of developing the five-year
strategic plan was achieved. In addition, the Committee reviewed
the individuals performance against the other goals
described in the preceding paragraph. No weightings were
assigned, and the Committee viewed the objectives in the
aggregate, with special emphasis on the qualitative goals,
particularly compliance, leadership, business development and
employee development. As a result of the annual review,
including a determination that a significant amount of
achievement of the stretch goals had been met and
the qualitative goals had been met or exceeded, the Committee
determined that these individuals had met or achieved their 2007
objectives goals taken as a whole. The Committee considered the
performance of the Company and the individuals against these
goals when determining the 2008 salaries, bonus amounts and
equity grants for these individuals.
For 2006, the Compensation Committee reviewed corporate and
individual performance against the 2006 goals established for
Messrs. Essig, Carlozzi and Henneman. The quantitative
goals were intended as stretch goals that would
significantly benefit the Company. For 2006, the Company
(i) fully achieved the adjusted earnings per share goal of
$1.65-$1.75, (ii) achieved approximately 95% of
consolidated plan revenue goal of
$330-$340 million
(excluding acquisitions), (iii) achieved the 63% adjusted
gross margin (excluding restructuring charges) compared to our
goal (before acquisitions) of 64%, (iv) exceeded the
adjusted EBITDA goal of $75-80 million for the full year by
almost 30% and (v) made progress in managing capital
efficiently (receivables down to 59 days versus goal of
60 days and inventory at 219 days versus goal of
120 days). Much of the inventory buildup was due to
acquisition activity and the shutdown of various facilities. In
addition, the Committee considered the Companys long-term
performance and overall accomplishments. Further, the goal of
developing the five-year strategic plan with the following
objectives was achieved: minimum revenue growth of 18% per year,
minimum earnings per share growth of 25% per year, progress in
operating margin, and approaching best competitive benchmark
levels within five years. In addition, the Committee reviewed
the individuals performance against the other goals for
2006 described above. No weightings were assigned, and the
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Committee viewed the objectives in the aggregate, with special
emphasis on the qualitative goals (which were essentially the
same as described above for 2007), particularly compliance,
leadership, business development and employee development. As a
result of the annual review, including a determination that a
significant amount of achievement of the stretch
goals had been met and the qualitative goals had been met or
exceeded, the Committee determined that these individuals had
met or achieved their 2006 objectives goals taken as a whole.
The Committee considered the performance of the Company and the
individuals against these goals when determining the 2007
salaries, bonus amounts and equity grants for these individuals
In addition, during 2007, the Committees compensation
decisions for Messrs. Carlozzi and Henneman reflected the
Committees intent to provide the same level of
compensation for them, reflecting similar responsibilities and
individual performance.
For 2007, the Committees decisions regarding the
compensation of Ms. OGrady and Mr. Corbin were
intended to keep their compensation in line with the
compensation of other Senior Vice Presidents and Vice
Presidents, respectively, as well as to maintain their overall
package consistent with that of prior years. In addition, such
decisions recognized their individual performance and, in the
case of their MICP bonus, the Companys performance against
the MICP goal.
Mr. Essigs employment agreement provides that
(1) we increase Mr. Essigs salary by a minimum
of $50,000 each year during the term of the agreement,
(2) Mr. Essig be eligible for a cash target bonus that
shall not be less than 100% of his base salary and (3) we
award Mr. Essig an annual stock option grant ranging from
100,000 to 200,000 shares of our common stock. The
compensation we have paid to Mr. Essig has demonstrated a
connection between these three provisions. We have increased
Mr. Essigs salary by the minimum amount during each
year of his agreement. Prior to 2006, Mr. Essig had waived
his right to a cash bonus because of our limited historical cash
flow. For 2006 and 2007, the Committee awarded him 100% of his
cash target bonus. In addition, we have awarded Mr. Essig
the maximum amount of 200,000 stock options each year of his
employment agreement due primarily to his outstanding
performance and the Companys long-term performance and
partly due to our decisions regarding his salary increase and
his decision to waive his right to cash bonuses for such past
years.
Historically, we have not used specific guidelines in making
equity grants to our other executive officers. However, we have
made equity grants with the objective of compensating our
executive officers in a competitive manner, based on publicly
available information on other companies, necessary to retain
their services and have considered the cash compensation that we
pay to executive officers in setting the size of equity grants.
Equity
Grant Practices
Equity grant decisions are made without regard to anticipated
earnings or other major announcements by the Company.
Historically, the Compensation Committee has approved option
grants to Mr. Essig at its December meeting and generally
approved the annual stock option or other equity-based grants to
other management-level employees at a meeting held in the last
quarter of the year. The Compensation Committee, however,
approved the performance stock awards for 2007 for
Messrs. Henneman and Carlozzi on January 17, 2008 and
the restricted stock awards for 2007 for Ms. OGrady
and Mr. Corbin on February 26, 2008 after our annual
review process for those named executive officers was completed.
These grants were effective on April 1, 2008. We expect
this general timetable to continue.
The grant date of Mr. Essigs annual stock option
grant under his current employment agreement, entered into in
July 2004, has been the date the award was approved. In general,
the grant date for awards to other executive officers is either
the date of the required approval or, for administrative
convenience, the first business day of the month following the
required approval. For example, the Compensation Committee
designated April 2, 2007 as the grant date for the
restricted stock and performance stock awards that the
Compensation Committee approved on March 15, 2007. In
addition, in order to maintain the same grant schedule for such
officers in 2008, the Committee designated April 1, 2008 as
the grant date for such awards that the Committee approved on
January 17, 2008 and February 26, 2008. As we have
moved from granting options to granting restricted stock and
performance stock, we expect grants to our named executive
officers, other than stock option grants to Mr. Essig
pursuant to his employment agreement, to be made on the first
business day of the month or quarter following Compensation
Committee approval. The Special Award Committee approves and
makes equity grants on the first business day of
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the month. We make equity grants to members of our Board of
Directors on the date of our annual meeting of stockholders.
The exercise price of stock options is equal to the closing
price of our common stock on the NASDAQ Global Select Market on
the date of grant. The Compensation Committee or Special Award
Committee, as applicable, may set a higher exercise price for
options granted to employees based outside the United States if
our counsel advises that it is necessary or advisable to do so
under the applicable countrys law. This practice with
respect to setting stock option exercise prices is consistent
with the terms of our equity incentive plans. The terms of these
plans require that the exercise price of options granted under
the plans be not less than the fair market value of our common
stock on the date of grant. The plans define fair market
value as the closing prices of our common stock on the
NASDAQ Global Select Market on the date of grant.
Post-Employment
Arrangements
We have entered into employment agreements with our President
and Chief Executive Officer and our Executive Vice Presidents.
We also entered into an employment agreement with
Ms. Bellantoni, a former Executive Vice President, who
resigned from the Company effective September 6, 2007. The
employment agreements provide for payments in the event that the
executive is terminated by us (or the employment agreement is
not renewed) other than for cause and in the event that the
executive terminates his or her employment for good reason and
provides for additional payments in the event the
executives employment is terminated under these
circumstances following a change in control.
In 2006, we began replacing the employment agreements that we
had entered into with two Senior Vice Presidents with severance
agreements that provide for payment to the officer under fewer
scenarios than provided for under the employment agreements. In
January 2007, we entered into a severance agreement with
Ms. OGrady that replaced the employment agreement
that we had entered into with her in 2003. Following the
expiration of that severance agreement, in January 2008, we
entered into a new severance agreement with
Ms. OGrady. Ms. OGradys severance
agreement provides for a payment in the event that, following a
change in control, we terminate her employment other than for
cause or she terminates her employment with us for good reason.
Our movement from employment agreements to severance agreements
reflects our philosophy that it is in the best interest of our
stockholders to limit the number of employees who receive
termination payments outside a
change-in-control
event. As a result of this change, the only named executive
officers who have employment agreements that provide for
termination payments outside of a change in control are our
President and Chief Executive Officer and our two Executive Vice
Presidents, and only a limited number of
U.S.-based
employees are parties to agreements that provide for such
payments.
The Company is not obligated to provide Mr. Corbin with any
severance or
change-in-control
benefits or payments.
In 2006, we amended Mr. Essigs employment agreement
to provide for
change-in-control
benefits. Mr. Essigs employment agreement entered
into in 2004 provided that on a change in control all stock
options would vest and become exercisable through their original
expiration date and all restricted stock units would vest and be
distributed on the date of the change in control.
Mr. Essigs employment agreement also provided for a
full
gross-up
payment to cover excise taxes under Section 280G of the
Internal Revenue Code. We included
change-in-control
benefits in the employment agreement we entered into with our
Executive Vice Presidents in late 2005 and early 2006, and our
Compensation Committee determined that it was appropriate to
amend Mr. Essigs employment agreement to provide
similar benefits.
The amendment provides Mr. Essig with
change-in-control
benefits that are in addition to the benefits provided currently
in the initial agreement. Specifically, if within 18 months
following a change in control (i) we terminate
Mr. Essigs employment for a reason other than death,
disability or cause, (ii) Mr. Essig terminates his
employment for good reason or (iii) we do not extend
Mr. Essigs employment agreement after a change in
control, Mr. Essig will be entitled to additional severance
benefits.
Effective September 6, 2007, we entered into a separation
agreement with Ms. Bellantoni in connection with her
resignation. See 2007 Named Executive Officer
Compensation Severance Payment below.
34
These agreements are further described in the section entitled
Executive Compensation Potential Payments
under Termination or Change in Control.
2007
Named Executive Officer Compensation
Base
Salaries
In December 2006 for Mr. Essig, and March 2007 for the
other named executive officers, the Compensation Committee
approved the following base salaries, for the named executive
officers for 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
Name
|
|
2007 Base Salary
|
|
|
Increase from 2006
|
|
|
Stuart M. Essig
|
|
$
|
550,000
|
|
|
|
10.0
|
%
|
John B. Henneman, III
|
|
$
|
420,000
|
|
|
|
N/A
|
|
Gerard S. Carlozzi
|
|
$
|
420,000
|
|
|
|
5.0
|
%
|
Maureen B. Bellantoni
|
|
$
|
325,000
|
|
|
|
8.3
|
%
|
Judith E. OGrady
|
|
$
|
235,000
|
|
|
|
2.2
|
%
|
Jerry E. Corbin
|
|
$
|
210,000
|
|
|
|
8.8
|
%
|
The salary change for Mr. Essig was effective
January 1, 2007. Mr. Hennemans salary was not
increased in 2007 because the Committee determined that his
salary level was appropriate. The increases for the other named
executive officers were effective March 1, 2007. The
increase in Mr. Essigs salary from $500,000 to
$550,000 was the minimum required under his employment
agreement. The salary percentage increases for
Mr. Carlozzi, Ms. Bellantoni, Ms. OGrady
and Mr. Corbin were in line with those of our other named
executive officers and reflected an assessment of their
individual performance and job responsibilities. See
Elements of Compensation Base Salaries
above.
Management
Incentive Compensation Plan Awards and Payments
For 2007, the performance objective under the MICP for
Ms. OGrady and Mr. Corbin, our named executive
officers who participate in the MICP, was a $109 million of
adjusted EBITDA. Adjusted EBITDA was defined as net income
before interest, taxes, depreciation and amortization, as
adjusted, in the discretion of the Compensation Committee, to
account for any items that do not reflect our core operating
performance. For this performance period, the Compensation
Committee determined that these items consisted of charges
relating to acquisitions, facility consolidation, manufacturing
transfer and systems integration, discontinued or withdrawn
products, European legal entity restructuring, litigation
settlements, intangible asset impairment, IsoTis operating
losses and employee severance. We expect the adjusting items to
differ for each performance period. The target awards under the
MICP for 2007 were 30% and 25% of base salary for
Ms. OGrady and Mr. Corbin, respectively. The
MICP specified the target award percentage for their respective
position level. These amounts were based on competitive pay
practices of other companies considered by the Committee. The
Compensation Committee determined that we achieved 99.5% of the
performance goal. Under the terms of the MICP, each participant
was eligible to receive up to 98.75% of the target award. The
Compensation Committee approved a payment to
Ms. OGrady of $69,619 and a payment of $51,844 to
Mr. Corbin, or in each case, 98.75% of the target award,
the maximum allowed. This amount is set forth in the
Non-Equity Incentive Plan Compensation column to the
Summary Compensation Table in this Proxy Statement.
Annual
Bonus Payments
Mr. Essigs employment agreement provides that he
shall be eligible for a cash bonus that shall not be less than
100% of his base salary. Prior to 2006 Mr. Essig waived his
right to this bonus because of our limited cash flow. In 2007,
Mr. Essig received the target $550,000 bonus based upon our
financial performance, strong cash-flow position and other
qualitative objectives described above.
A target bonus of 40% of base salary is provided in the
employment agreements to which Mr. Carlozzi and
Mr. Henneman are parties. The Compensation Committee
awarded each of these named executive officers (except
Ms. Bellantoni who did not receive an award due to her
separation) the target bonus of 40%: $168,000 for
35
Mr. Carlozzi; and $168,000 for Mr. Henneman. These
awards were made based upon the Compensation Committees
determination that Mr. Carlozzi and Mr. Henneman had
met or achieved their performance objectives taken as a whole.
Equity
Awards
Mr. Essigs employment agreement provides that we
shall award him an annual stock option grant ranging from
100,000 to 200,000 shares of our common stock. In December
2007, we granted 200,000 stock options to Mr. Essig. Our
grant of the maximum amount was due, in part, as a result of our
making no more than the minimum annual salary increase to
Mr. Essig. The Committee also considered his 2007
performance, the extent of the Companys achievement of
2007 objectives, the Companys long-term performance and
other factors. See Annual Review of Compensation
above.
In April 2008, we granted restricted stock having an aggregate
grant date value equal to $100,000 to each of
Ms. OGrady and Mr. Corbin for their 2007
performance. These amounts reflect the Committees intent
to maintain their overall compensation package consistent with
that of prior years. We granted performance stock having an
aggregate grant date value equal to $168,000 to each of
Mr. Carlozzi and Mr. Henneman for their 2007
performance. The performance condition for the
2008-2010
performance period is that our revenues during any year of the
performance period exceed revenues during the year prior to the
performance period. These grant amounts are equivalent to 40% of
base salary, which is the same amount paid as cash bonuses to
them for 2007. This represents the Committees practice of
paying them half of their bonus in cash and half in equity-based
compensation. See Annual Review of Compensation
above. Because these grants were made in 2008, they do not
appear in the Summary Compensation Table or the Grants Of Plan
Based Awards table.
In April 2007, we granted restricted stock having a grant date
value equal to $200,000 to Ms. Bellantoni, restricted stock
having a grant date value equal to $165,450 to
Ms. OGrady and restricted stock having a grant date
value equal to $120,746 to Mr. Corbin for their 2006
performance. We granted performance stock having a grant date
value equal to $200,000 to each of Mr. Carlozzi and
Mr. Henneman pursuant to their employment agreement and for
their 2006 performance. See Annual Review of
Compensation above. The performance goal of the
performance stock was that our sales in any calendar year during
the performance period of January 1, 2007 and ending
December 31, 2009, shall be greater than consolidated sales
in calendar year 2006. These named executive officers will
receive the shares of common stock underlying the performance
stock on December 31, 2009 since the performance goal has
been met. Because these grants were made in 2007, they are shown
in the Summary Compensation Table and the Grants Of Plan Based
Awards table for 2007.
Ms. Bellantonis outstanding grants of restricted
stock and performance stock were forfeited as a result of her
leaving the Company prior to the vesting of the restricted stock
and completion of the performance period for the performance
stock.
Severance
Payment
Effective September 6, 2007, Ms. Bellantoni resigned
from the Company. At that time, the Company and
Ms. Bellantoni entered into a separation agreement which
terminated her employment agreement. Under her separation
agreement, Ms. Bellantoni received a payment of $325,000,
equal to her annual base salary, and received a payment of
$11,563 for accrued time off. Pursuant to her separation
agreement, Ms. Bellantoni is also generally entitled to
continue to participate, at no cost to her, in all group life,
health, accident and disability insurance plans maintained for a
period of one year following her termination or, if earlier,
until she obtains full-time employment with another employer,
subject to certain conditions. As a result, she is participating
in our group health insurance plan. These amounts are set forth
in the All Other Compensation column of the Summary
Compensation Table.
36
Compensation
Plan Changes Effective for 2008
Management
Incentive Compensation Plan
In January 2008, we amended the MICP to provide more flexibility
in its administration, commencing with the 2008 performance
period. The MICP administrator may establish the target award
percentage for individuals, but in no event may the percentage
exceed 50% of base salary. In addition, the MICP administrator
may increase or decrease awards by up to 100% from the
formula-determined amount, based on an assessment of the
individuals performance.
2003
Equity Incentive Plan
In April, 2008, the Board of Directors approved an Amended and
Restated 2003 Equity Incentive Plan, subject to stockholder
approval. These amendments would provide a one million share
limit on the number of shares of common stock that may be issued
pursuant to awards that may be granted to any individual under
the plan in any calendar year. This change is intended to
provide us with more flexibility in granting awards under the
plan that qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code and, therefore,
allow us to deduct certain compensation paid to certain
executives. These amendments would also make other technical
changes to the plan. In addition, the Board approved amendments,
subject to your approval, that would increase the amount of
common stock that may be issued or awarded under the plan by
750,000 shares. This change is intended to provide us with
additional shares under the plan for the grant of
stock based awards to our executives and other
employees, thereby linking their compensation to the value of
our stock. For more details, see Proposals 3 and 4. This
practice has serviced the Company well in the past by providing
an incentive to executive officers, thereby helping the Company
grow and the share price to increase over time.
Stock
Ownership Guidelines for Executive Officers
Our executive officers must meet the stock ownership guidelines
that the Board of Directors has established in order to align
their interests more closely with those of our stockholders. The
Nominating and Corporate Governance Committee oversees
compliance with these guidelines and periodically reviews the
guidelines. The guidelines require executive officers, including
the named executive officers, to own shares with an aggregate
value equal to the executives base salary. Vested shares
of restricted stock and vested restricted stock units may be
included to determine whether the required ownership interest
has been met. Directors and executive officers have five years
from the later of February 23, 2006 and the date of their
election or appointment as directors or officers to attain this
ownership threshold. We have approved procedures by which every
executive officer must obtain clearance prior to selling any
shares of our common stock, in part to ensure no officer falls
out of compliance with the stock ownership guidelines.
In addition, our policies prohibit our employees from selling
our stock short or otherwise speculating that the
value of our stock will decline through the use of derivative
securities. Such derivative transactions include writing
uncovered call options or the purchase of put
options. Buying our securities on margin is also prohibited. In
addition, our policies also prohibit the frequent buying and
selling of our stock to capture short-term profits.
Tax
Considerations
Section 162(m). Section 162(m) of
the Internal Revenue Code limits the deductibility of
compensation paid to certain executive officers to $1,000,000
per year unless the compensation qualifies as performance-based.
The Compensation Committees policy is to take into account
Section 162(m) in establishing compensation of our
executives. The deductibility of some types of compensation
payments can depend upon the timing of the vesting or an
executives exercise of previously granted awards.
Interpretations of and changes in applicable tax laws and
regulations as well as other factors beyond our control also can
affect deductibility of compensation. For these and other
reasons, the Compensation Committee has determined that it will
not necessarily seek to limit executive compensation to that sum
which is deductible under Section 162(m) of the Code. For
example, the sum of Mr. Essigs salary and target
bonus for each of 2007 and 2008, respectively, exceeds
$1,000,000.
Our equity incentive plans contain performance-based conditions
and our stockholders previously approved the terms of those
plans to ensure deductibility of certain awards and payments
under those plans under
37
Section 162(m). We will continue to monitor developments
and assess alternatives for preserving the deductibility of
compensation payments and benefits to the extent reasonably
practicable, consistent with our compensation policies and what
we believe is in the best interests of our stockholders.
Section 409A. In 2006 and 2007, we
reviewed the effect that Section 409A to the Internal
Revenue Code could have on existing arrangements with our
executive officers. Following our review in 2006, we entered
into amendments to the agreements governing the restricted stock
unit grants made in 2000 and 2004 to Mr. Essig in an
attempt to be in good-faith compliance with the requirements of
Section 409A of the Code. Following the issuance of further
guidance from the Internal Revenue Service, our review in 2007
resulted in our entering into amendments to certain employment
agreements and equity award agreements with Messrs. Essig,
Carlozzi and Henneman in order to comply with the
Section 409A requirements. In addition, the severance
agreement entered into with Ms. OGrady in January
2008 reflects certain minor changes made to comply with these
requirements.
Compensation
Committee Report
We have reviewed and discussed with management the Compensation
Discussion and Analysis prepared by management. Based on this
review and discussion, we have recommended to the Board of
Directors that the Compensation Discussion and Analysis prepared
by management be included in this Proxy Statement.
The Compensation Committee of the
Board of Directors
KEITH BRADLEY (CHAIR)
THOMAS J. BALTIMORE, JR.
NEAL MOSZKOWSKI
38
Summary
Compensation Table
The following table sets forth information regarding
compensation paid to our Chief Executive Officer, the two people
who served as principal financial officer in 2007 and each of
our three other most highly compensated executive officers based
on total compensation earned during 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards(1)
|
|
Awards(1)
|
|
Compensation(2)
|
|
Earnings
|
|
Compensation(3)
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Stuart M. Essig
|
|
|
2007
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
3,421,373
|
|
|
|
550,000
|
|
|
|
|
|
|
|
3,875
|
|
|
|
4,525,248
|
|
President and Chief Executive Officer
|
|
|
2006
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
2,531,090
|
|
|
|
500,000
|
|
|
|
|
|
|
|
3,750
|
|
|
|
3,534,840
|
|
Maureen B. Bellantoni
|
|
|
2007
|
|
|
|
220,673
|
|
|
|
|
|
|
|
(117,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349,213(4
|
)
|
|
|
452,795
|
|
Former Executive Vice President and Chief Financial Officer(6)
|
|
|
2006
|
|
|
|
293,077
|
|
|
|
|
|
|
|
117,091
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
118,411(5
|
)
|
|
|
648,579
|
|
John B. Henneman, III
|
|
|
2007
|
|
|
|
420,000
|
|
|
|
|
|
|
|
1,233,430
|
|
|
|
617,287
|
|
|
|
168,000
|
|
|
|
|
|
|
|
3,875
|
|
|
|
2,442,592
|
|
Executive Vice President, Finance and Administration, and Chief
Financial Officer(7)
|
|
|
2006
|
|
|
|
420,000
|
|
|
|
|
|
|
|
1,169,462
|
|
|
|
785,907
|
|
|
|
168,000
|
|
|
|
|
|
|
|
3,750
|
|
|
|
2,547,119
|
|
Gerard S. Carlozzi
|
|
|
2007
|
|
|
|
416,538
|
|
|
|
|
|
|
|
1,233,430
|
|
|
|
878,020
|
|
|
|
168,000
|
|
|
|
|
|
|
|
|
|
|
|
2,695,988
|
|
Executive Vice President and Chief Operating Officer
|
|
|
2006
|
|
|
|
400,000
|
|
|
|
|
|
|
|
1,169,462
|
|
|
|
973,568
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
2,703,030
|
|
Judith E. OGrady
|
|
|
2007
|
|
|
|
234,135
|
|
|
|
|
|
|
|
87,260
|
|
|
|
155,088
|
|
|
|
69,619
|
|
|
|
|
|
|
|
3,875
|
|
|
|
549,977
|
|
Senior Vice President, Regulatory, Quality Assurance and
Clinical Affairs
|
|
|
2006
|
|
|
|
227,577
|
|
|
|
|
|
|
|
37,411
|
|
|
|
167,828
|
|
|
|
44,112
|
|
|
|
|
|
|
|
3,750
|
|
|
|
480,678
|
|
Jerry E. Corbin
|
|
|
2007
|
|
|
|
207,058
|
|
|
|
|
|
|
|
48,388
|
|
|
|
|
|
|
|
51,844
|
|
|
|
|
|
|
|
3,875
|
|
|
|
311,165
|
|
Vice President and Corporate Controller(8)
|
|
|
2006
|
|
|
|
97,242
|
|
|
|
|
|
|
|
6,320
|
|
|
|
|
|
|
|
32,191
|
|
|
|
|
|
|
|
1,821
|
|
|
|
137,574
|
|
|
|
|
(1) |
|
The amounts in Columns (e) and (f) reflect the dollar
amount recognized for financial statement reporting purposes for
the fiscal year ended December 31, 2007 in accordance with
FAS 123R of awards pursuant to the Companys equity
incentive plans and therefore may include amounts from awards
granted in 2007 and prior periods. Assumptions used in the
calculation of these amounts for awards granted in fiscal years
ended December 31, 2007, 2006, 2005 and 2004 are included
in Note 2, Summary of Significant Accounting Policies, in
the Companys audited financial statements for the fiscal
year ended December 31, 2007, included in Item 15 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2007 as filed with the
Securities and Exchange Commission on May 16, 2008.
Assumptions used in the calculation of these amounts for the
fiscal years ended December 31, 2003 and 2002 are included
in Note 2, Summary of Significant Accounting Policies, in
the Companys audited financial statements for the fiscal
year ended December 31, 2003, included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2003 as filed with the
Securities and Exchange Commission on March 12, 2004. The
amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. |
|
(2) |
|
The amounts in column (g) reflect cash awards earned under
the MICP and/or as a discretionary bonus or pursuant to
employment agreements. |
|
(3) |
|
Except with respect to Ms. Bellantoni, (a) the amounts
in this column consist of matching contributions made by the
Company under the Companys 401(k) plan and (b) the
aggregate amount of perquisites and other personal benefits for
each executive officer was less than $10,000. |
|
(4) |
|
This amount consists of (a) $325,000 of severance payments
made pursuant to Ms. Bellantonis separation
agreement, (b) $9,708 of COBRA payments made or to be made
by the Company on Ms. Bellantonis behalf for the
twelve months in connection with the termination of her
employment on September 6, 2007, (c) $11,563 of
accrued personal time paid to Ms. Bellantoni in connection
with the termination of her employment, (d) $2,642 |
39
|
|
|
|
|
of Company matching contributions made by the Company under the
Companys 401(k) plan and (e) $300 paid by the Company
for the annual fee for a corporate credit card provided only to
certain employees. |
|
(5) |
|
This amount consists of (a) $116,380 for moving and
relocation expenses paid by the Company, (b) $1,731 of
Company matching contributions made by the Company under the
Companys 401(k) plan, and (c) $300 paid by the
Company for the annual fee for a corporate credit card provided
only to certain employees. |
|
(6) |
|
Ms. Bellantoni was the Companys principal financial
officer from January 10, 2006 until September 6, 2007.
Ms. Bellantonis last day with the Company was
September 6, 2007. |
|
(7) |
|
Mr. Henneman was appointed Acting Chief Financial Officer
on September 6, 2007 and Chief Financial Officer on
May 13, 2008. |
|
(8) |
|
Mr. Corbin joined the Company in June 2006 as Vice
President and Corporate Controller. |
Grants Of
Plan Based Awards
The following table presents information on annual incentive
opportunities granted under the MICP and equity awards granted
under the Companys 2003 Equity Incentive Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Fair
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Value of
|
|
|
|
|
|
|
Under Non-Equity
|
|
Under Equity
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
Stock and
|
|
|
|
|
Date of
|
|
Incentive Plan Awards(1)
|
|
Incentive Plan Awards(2)
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Comp.
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units(3)
|
|
Options
|
|
Awards
|
|
Awards(4)
|
Name
|
|
Date
|
|
Committee
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/Sh)
|
|
($)
|
(a)
|
|
(b)
|
|
Action
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
|
Stuart M. Essig
|
|
|
12-18-07
|
|
|
|
12-18-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000(6
|
)
|
|
|
40.34
|
|
|
|
3,366,000
|
|
|
|
|
01-02-07
|
|
|
|
07-21-04(5
|
)
|
|
|
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maureen B. Bellantoni
|
|
|
04-02-07
|
|
|
|
03-15-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366(7
|
)
|
|
|
|
|
|
|
|
|
|
|
200,006
|
|
|
|
|
01-02-07
|
|
|
|
01-08-06(5
|
)
|
|
|
|
|
|
|
130,000(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John B. Henneman, III
|
|
|
04-02-07
|
|
|
|
03-15-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,006
|
|
|
|
|
01-02-07
|
|
|
|
12-19-05(5
|
)
|
|
|
|
|
|
|
168,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard S. Carlozzi
|
|
|
04-02-07
|
|
|
|
03-15-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,006
|
|
|
|
|
01-02-07
|
|
|
|
12-19-05(5
|
)
|
|
|
|
|
|
|
168,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judith E. OGrady
|
|
|
04-02-07
|
|
|
|
03-15-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,612
|
|
|
|
|
|
|
|
|
|
|
|
165,466
|
|
|
|
|
01-02-07
|
|
|
|
03-15-07
|
|
|
|
56,400
|
|
|
|
70,500
|
|
|
|
105,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry E. Corbin
|
|
|
04-02-07
|
|
|
|
03-15-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,636
|
|
|
|
|
|
|
|
|
|
|
|
120,755
|
|
|
|
|
01-02-07
|
|
|
|
03-15-07
|
|
|
|
42,000
|
|
|
|
52,500
|
|
|
|
78,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts shown in these columns represent each
executives annual incentive opportunity under the MICP or
pursuant to an employment agreement. See
Compensation Discussion and
Analysis Elements of Compensation Annual
Cash Incentives for more information regarding the MICP
and applicable employment agreement. The Target is
calculated by multiplying the officers base salary by the
executives target award percentages provided in the
applicable employment agreement for Messrs. Essig, Henneman
and Carlozzi and Ms. Bellantoni and under the MICP for
Ms. OGrady and Mr. Corbin. Under the MICP, the
Maximum is calculated by multiplying the
Target by 150%. The Threshold shows the
amount payable if the performance goals under the MICP are
achieved at the minimum required 90% level. |
|
(2) |
|
The amounts shown in these columns represent shares of
performance stock granted under the Companys 2003 Equity
Incentive Plan. See Compensation Discussion
and Analysis Elements of Compensation
Long-Term Equity-Based Incentives for a description of the
material terms of these performance stock awards. |
|
(3) |
|
The amounts shown in this column represent shares of restricted
stock granted under the Companys 2003 Equity Incentive
Plan. See Compensation Discussion and
Analysis Elements of Compensation
Long-Term Equity-Based Incentives for a description of the
material terms of these restricted stock awards. |
|
(4) |
|
This column reflects the full grant date fair value of the
restricted stock, performance stock and stock options under
FAS 123R granted to each named executive officer in 2007.
Generally, the full grant date fair value is the amount that the
Company would expense in its financial statements over the
awards vesting schedule. For restricted stock and
performance stock, fair value is calculated using the closing
price of the Companys common stock on the grant date |
40
|
|
|
|
|
noted, which was $45.81 on April 2, 2007. For the stock
options granted to Mr. Essig, fair value is calculated
using the binomial distribution value on the grant date. The
fair value shown for stock awards and option awards are
accounted for in accordance with FAS 123R. For additional
information on the valuation assumptions, refer to Note 2
of the Companys financial statements in Item 15 of
the
Form 10-K
for the year ended December 31, 2007, as filed with the
Securities and Exchange Commission on May 16, 2008. These
amounts reflect the Companys accounting expense and do not
correspond to the actual value that will be recognized by the
named executive officers. |
|
(5) |
|
The Compensation Committee approved the terms of the
executives employment agreement, including the bonus
opportunity, on this date. |
|
(6) |
|
This amount represents the annual stock option grant to
Mr. Essig. 25% of the award vests one year after the grant
date and the remaining 75% vests monthly thereafter over
36 months. The option has a term of 10 years. |
|
(7) |
|
Ms. Bellantoni forfeited this award in connection with the
termination of her employment with the Company.. |
Outstanding
Equity Awards At Fiscal Year-End
The following table presents information with respect to
outstanding equity awards as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Number of
|
|
Value of
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number
|
|
Value of
|
|
Unearned
|
|
Unearned
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of Shares
|
|
Shares or
|
|
Shares, Units
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
or Units
|
|
Units of
|
|
or Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
of Stock That
|
|
Stock
|
|
Rights
|
|
Rights
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
That Have
|
|
That Have
|
|
That Have
|
|
|
(#)
|
|
(#)
|
|
Price(2)
|
|
Expiration
|
|
Vested
|
|
Not Vested(3)
|
|
Not Vested
|
|
Not Vested(4)
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Stuart M. Essig
|
|
|
282,086
|
|
|
|
|
|
|
|
11.00
|
|
|
|
12/22/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,208
|
|
|
|
|
|
|
|
17.65
|
|
|
|
12/31/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,479
|
|
|
|
521
|
|
|
|
28.78
|
|
|
|
01/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
50,000
|
|
|
|
34.49
|
|
|
|
12/17/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213,541
|
|
|
|
36,459
|
|
|
|
31.38
|
|
|
|
07/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
35.57
|
|
|
|
12/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
150,000
|
|
|
|
42.53
|
|
|
|
12/19/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
40.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
Maureen B. Bellantoni
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
|
|
|
(6)
|
|
|
|
(6)
|
|
|
|
(6)
|
John B. Henneman, III
|
|
|
10,000
|
|
|
|
|
|
|
|
14.87
|
|
|
|
08/02/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
17.72
|
|
|
|
11/21/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
17.60
|
|
|
|
12/16/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,062
|
|
|
|
|
|
|
|
17.65
|
|
|
|
12/31/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
18.63
|
|
|
|
02/24/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
22.78
|
|
|
|
04/07/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
32.39
|
|
|
|
11/03/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,479
|
|
|
|
521
|
|
|
|
28.78
|
|
|
|
01/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
2,500
|
|
|
|
32.32
|
|
|
|
06/01/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,261
|
|
|
|
5,739
|
|
|
|
35.52
|
|
|
|
11/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,312
|
|
|
|
2,188
|
|
|
|
38.72
|
|
|
|
02/01/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
30.25
|
|
|
|
07/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
(7)
|
|
|
183,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(8)
|
|
|
4,193,000
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Number of
|
|
Value of
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number
|
|
Value of
|
|
Unearned
|
|
Unearned
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of Shares
|
|
Shares or
|
|
Shares, Units
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
or Units
|
|
Units of
|
|
or Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
of Stock That
|
|
Stock
|
|
Rights
|
|
Rights
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
That Have
|
|
That Have
|
|
That Have
|
|
|
(#)
|
|
(#)
|
|
Price(2)
|
|
Expiration
|
|
Vested
|
|
Not Vested(3)
|
|
Not Vested
|
|
Not Vested(4)
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Gerard S. Carlozzi
|
|
|
12,500
|
|
|
|
|
|
|
|
27.32
|
|
|
|
09/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
834
|
|
|
|
|
|
|
|
32.39
|
|
|
|
11/03/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,688
|
|
|
|
522
|
|
|
|
28.78
|
|
|
|
01/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
32.32
|
|
|
|
06/01/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,687
|
|
|
|
5,730
|
|
|
|
35.52
|
|
|
|
11/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,406
|
|
|
|
2,188
|
|
|
|
38.72
|
|
|
|
02/01/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
50,000
|
|
|
|
30.25
|
|
|
|
07/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
(7)
|
|
|
183,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(8)
|
|
|
4,193,000
|
|
Judith E. OGrady
|
|
|
1,875
|
|
|
|
|
|
|
|
14.87
|
|
|
|
08/02/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
17.60
|
|
|
|
12/16/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,583
|
|
|
|
|
|
|
|
17.65
|
|
|
|
12/31/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
22.78
|
|
|
|
04/07/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
32.39
|
|
|
|
11/03/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,687
|
|
|
|
313
|
|
|
|
28.78
|
|
|
|
01/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,375
|
|
|
|
625
|
|
|
|
32.32
|
|
|
|
06/01/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,732
|
|
|
|
518
|
|
|
|
32.02
|
|
|
|
11/01/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,435
|
|
|
|
3,565
|
|
|
|
35.52
|
|
|
|
11/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
3,750
|
|
|
|
33.48
|
|
|
|
11/01/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,394
|
(9)
|
|
|
310,030
|
|
|
|
|
|
|
|
|
|
Jerry E. Corbin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,090
|
(10)
|
|
|
171,494
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For option awards made to Mr. Essig and option awards made
prior to July 26, 2005 to other officers, 25% of the award
vests one year after the grant date and the remaining 75% vests
monthly thereafter over 36 months. Option awards made on or
after July 26, 2005 to employees other than Mr. Essig
vest in four equal annual installments beginning on the first
anniversary of the grant date. Options issued to Mr. Essig
have a term of 10 years. Options issued to other officers
have a term of six years. |
|
(2) |
|
The option exercise price is equal to the closing price of our
common stock as reported by the NASDAQ Global Select Market on
the date of grant. |
|
(3) |
|
Market value is calculated by multiplying the number of shares
in column (g) by $41.93, the closing price of the
Companys common stock as reported by the NASDAQ Global
Select Market on December 31, 2007. |
|
(4) |
|
Market value is calculated by multiplying the number of shares
in column (i) by $41.93, the closing price of the
Companys common stock as reported by the NASDAQ Global
Select Market on December 31, 2007. |
|
(5) |
|
500,000 and 750,000 shares of common stock underlying
restricted stock units granted to Mr. Essig in 2000 and
2004, respectively, were vested as of the grant date. However,
Mr. Essig is not entitled to receive such underlying shares
until after December 31, 2007. Therefore, they are shown in
the Nonqualified Deferred Compensation Table. |
|
(6) |
|
As of September 6, 2007, all outstanding awards held by
Ms. Bellantoni were forfeited as a result of her
termination of employment with the Company on that date. |
42
|
|
|
(7) |
|
Consists of 4,366 shares of common stock underlying a
performance stock award. The terms of the award provide that
these shares will be deliverable as soon as practicable after
December 31, 2009 if the performance condition is met. The
performance condition was met in 2007. |
|
(8) |
|
Consists of 100,000 shares of common stock underlying a
performance stock award. The terms of the award provide that
these shares will be deliverable as soon as practicable after
December 31, 2008 if the performance condition is met. The
performance condition was met in 2006. |
|
(9) |
|
Consists of 2,500 shares of restricted stock that will vest
on January 3, 2009, 1,282 shares of restricted stock
that will vest on July 3, 2009, and 3,612 shares of
restricted stock that will vest on April 2, 2010 (in each
case subject to continued employment). |
|
(10) |
|
Consists of 769 shares of restricted stock that will vest
on July 3, 2009, 685 shares of restricted stock that
will vest on November 1, 2009, and 2,636 shares of
restricted stock that will vest on April 2, 2010 (in each
case subject to continued employment). |
Option
Exercises And Stock Vested
The following table presents information on stock option
exercises and stock award vesting during 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
|
Acquired on Exercise
|
|
|
on Exercise(1)
|
|
|
Acquired on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
Stuart M. Essig
|
|
|
31,565
|
|
|
|
681,804
|
|
|
|
|
|
|
|
|
|
Maureen B. Bellantoni
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John B. Henneman, III
|
|
|
152,000
|
|
|
|
2,954,311
|
|
|
|
|
|
|
|
|
|
Gerard S. Carlozzi
|
|
|
41,613
|
|
|
|
744,317
|
|
|
|
|
|
|
|
|
|
Judith E. OGrady
|
|
|
7,500
|
|
|
|
117,757
|
|
|
|
|
|
|
|
|
|
Jerry E. Corbin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Value realized is calculated on the basis of the difference
between the per share exercise price and the market price of the
Companys common stock as reported by the NASDAQ Global
Select Market on the date of exercise, multiplied by the number
of shares of common stock underlying the options exercised. |
Nonqualified
Deferred Compensation in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
|
|
|
Aggregate
|
|
|
Aggregate Balance
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Aggregate
|
|
|
Withdrawals/
|
|
|
at Last Fiscal
|
|
|
|
Last Fiscal Year
|
|
|
Last Fiscal Year
|
|
|
Earnings in Last
|
|
|
Distributions
|
|
|
Year-End (1)
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
Fiscal Year
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
Stuart M. Essig
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,412,500
|
|
|
|
|
(1) |
|
This represents the year-end value of 500,000 shares of
common stock underlying restricted stock units granted in 2000
and 750,000 shares of common stock underlying restricted
stock units granted in 2004. These restricted units vested as of
the grant date, but Mr. Essig did not have the right to
receive the underlying shares of common stock as of
December 31, 2007. The 500,000 shares underlying the
2000 grant were delivered to Mr. Essig on March 4,
2008. The 750,000 shares underlying the 2004 grant are
deliverable as soon as administratively practicable on or after
the first business day that occurs immediately following the
6-month
period after the date of Mr. Essigs separation from
service from the Company. Mr. Essig has the right to defer
the delivery of these shares until June 20, 2029 if certain
conditions are met. The aggregate balance shown above is based
on the $41.93 closing price of our common stock on
December 31, 2007. |
43
Potential
Payments Upon Termination or Change in Control
The Company has entered into agreements with each of its named
executive officers other than Mr. Corbin which provide
certain payments and benefits upon any of several events of
termination of employment, including termination of employment
in connection with a change in control. This section describes
these payments and benefits, with amounts calculated based on
the assumption that a named executive officers termination
of employment with the Company occurred on December 31,
2007. On December 31, 2007, the Companys common stock
had a closing sale price on the NASDAQ Global Select Market of
$41.93. Actual amounts payable would vary based on the date of
the named executive officers termination of employment and
can only be finally determined at that time.
Unless specified otherwise, the information in this section is
based upon the terms of (i) the Second Amended and Restated
Employment Agreement between the Company and Stuart M. Essig,
dated as of July 27, 2004 and subsequently amended on
December 19, 2006, (the Essig Agreement);
(ii) the Amended and Restated Employment Agreement, dated
December 19, 2005, between the Company and John B.
Henneman, III (the Henneman Agreement),
(iii) the Amended and Restated Employment Agreement, dated
December 19, 2005, between the Company and Gerard S.
Carlozzi (the Carlozzi Agreement); and (iv) the
Severance Agreement, dated January 1, 2007, between the
Company and Judith OGrady (the OGrady
Agreement) (collectively, the Essig Agreement, the
Henneman Agreement, the Carlozzi Agreement and the OGrady
Agreement are referred to in this section as the
Agreements).
Ms. Maureen Bellantoni, who resigned effective as of
September 6, 2007, is discussed at the end of this section
under Terminated Executive During 2007 Calendar
Year. Ms. Bellantoni and the Company entered into a
Separation Agreement dated as of September 6, 2007 (the
Bellantoni Separation Agreement) which terminated
the Employment Agreement, dated as of January 10, 2006,
between the Company and Ms. Bellantoni.
Payments
Upon Termination By The Company Without Cause Or By The
Executive For Good Reason Prior to a Change in
Control
The Agreements provide each of the applicable named executive
officers (except Ms. OGrady) severance payments and
benefits upon termination of employment by the Company without
cause or by the executive for good reason before a change in
control of the Company. For Mr. Essig, the Company will pay
him a lump sum cash severance payment equal to his annual base
salary (including the minimum increases) during the remainder of
the current term of his agreement. For Messrs. Henneman and
Carlozzi, the Company will pay them a lump sum cash severance
payment equal to the sum of their annual base salary as of their
last day of active employment and their target bonus for the
year of termination.
In addition, the Agreements provide that the Company will
continue to provide to each of the applicable named executive
officers (other than Ms. OGrady) continued
participation in all of the Companys life insurance,
health and accident, disability and other employee benefit plans
for a specified period of time. Specifically, Mr. Essig
will receive continued coverage until the end of the
then-current term (currently December 31, 2009), and the
other executives will have continued coverage for a maximum of
one year following their date of termination.
The Agreements also provide the applicable named executive
officers (except Ms. OGrady) with accelerated vesting
of their equity awards upon such termination of employment. In
addition, for Mr. Essig only, all of his stock options will
remain exercisable through their original expiration dates and
he will receive payment of the shares of common stock underlying
the 750,000 restricted stock units granted to him on
July 27, 2004 (the 2004 RSUs), unless he
previously elected a different payment date.
The OGrady Agreement provides that upon termination of her
employment prior to a change in control, the Companys
standard employment termination policies and practices that are
applicable to her at the time of her termination would be
applicable, unless a written employment agreement between the
Company and Ms. OGrady is in effect at the time of
such termination. The Company currently does not have a written
severance plan for employees generally or a separate employment
agreement with Ms. OGrady. Accordingly,
Ms. OGrady will not be entitled to any payments or
benefits upon termination of her employment without cause prior
to a change in control.
Good reason under the Agreements generally exists if
(i) the Company materially breaches the respective
Agreement and does not cure the breach within a specified period
of time after its receipt of written notice of such breach;
(ii) the Company relocates the executive to a location more
than forty miles from Princeton, New Jersey (or for
Mr. Essig only,
44
more than thirty miles from Princeton, New Jersey and sixty
miles from New York, New York); (iii) without the
executives express written consent, the Company reduces
the executives base salary or bonus opportunity, or
materially reduces the aggregate fringe benefits provided to the
executive, or substantially alters the executives
authority
and/or title
in a manner reasonably construed to constitute a demotion,
provided that, for all executives (except Mr. Essig), the
executive resigns within ninety days after the change objected
to; (iv) without the executives express written
consent, the executive fails at any point after a change in
control to hold the title and authority with the parent
corporation of the surviving corporation after the change in
control (or, for all executives other than Mr. Essig, if
there is no parent corporation, the surviving corporation) that
the executive held with the Company immediately prior to the
change in control, provided that the executive resigns within
one year after the change in control (or for Mr. Essig
only, he resigns for good reason within eighteen months after
the change in control (in which case, no notice or cure period
would apply)); or (v) the Company fails to obtain the
assumption of the executives Agreement by any successor
company.
The Essig Agreement provides for the following additional good
reason terminations rights that are specific only to
Mr. Essig: (i) if the Board of Directors fails to
nominate him as a candidate for director; (ii) if he is not
appointed as the President and Chief Executive Officer of the
Company or as a member of the Board of Directors; (iii) if
the Company materially breaches any equity compensation plan
implemented after July 27, 2004 or any of the agreements
evidencing his equity grant awards; (iv) if the Company
materially fails to provide annual medical examinations and
vacation benefits, or to substantially provide any material
employee benefits due to him (other than any such failure which
affects all senior executive officers); (v) if the Company
fails to indemnify him in all material respects in accordance
with the Companys by-laws and terms of any directors and
officers liability insurance policy; or (vi) if the
Company fails to initiate the procedures, as soon as
practicable, to establish and maintain registration statements
with respect to stock options and restricted stock units granted
to him prior to July 27, 2004.
Payments
Upon Termination For Cause Or By Executive Without Good
Reason
The Agreements generally do not provide the applicable named
executive officers with any payments or other benefits in the
event of their termination of employment by the Company for
cause or by the executive without good reason other than amounts
accrued and owing, but not yet paid, as of the date of the
executives termination of employment.
A termination for cause under each Agreement generally would
result from an executives: (i) continued failure to
perform the executives stated duties in all material
respects for a specified period of time after receipt of written
notice of such failure; (ii) intentional and material
breach of any provision of the Agreement which is not cured (if
curable) within a specified period of time after receipt of
written notice of such breach; (iii) demonstrated personal
dishonesty in connection with the executives employment
with the Company; (iv) breach of fiduciary duty in
connection with the executives employment with the
Company; (v) willful misconduct that is materially and
demonstrably injurious to the Company or any of its
subsidiaries; or (vi) conviction or plea of guilty or
nolo contendere to a felony or to any other crime
involving moral turpitude which conviction or plea is materially
and demonstrably injurious to the Company or any of its
subsidiaries.
Payments
Upon Non-Renewal Of Employment Agreement
Only the Essig, Henneman and Carlozzi Agreements provide
payments and benefits upon non-renewal of the term of the
respective Agreements. For Mr. Essig, all of his
outstanding stock options granted after July 27, 2004 will
immediately vest and remain exercisable through their original
expiration dates. In addition, he will receive the shares
underlying his 2004 RSUs, unless he previously elected a
different payment date.
For Messrs. Henneman and Carlozzi, the Company will pay
them the same payments and benefits as those payments and
benefits described under Payments Upon
Termination By The Company Without Cause Or By The Executive For
Good Reason Before a Change in Control discussed above.
However, while their stock options will accelerate and become
fully exercisable, only a pro-rata portion of
Messrs. Hennemans and Carlozzis outstanding
shares of restricted stock will be deemed to have vested as of
the last day of their employment. Such pro-rata portion will be
based on the number of days that they worked for the Company
after the grant of their restricted stock awards and the total
number of days of the restriction period set forth in their
respective restricted stock grant agreements.
45
Payments
Upon Death
Only the Essig, Henneman and Carlozzi Agreements provide
severance payments and benefits upon death. Specifically, if
Messrs. Essig, Henneman and Carlozzi die during the term of
their employment, then the Company will pay to their estate a
lump sum payment equal to one times their annual base salary. In
addition, their eligible beneficiaries will continue to
participate in all of the Companys life insurance, health
and accident, disability and other employee benefit plans
generally for a period of one year from the date of their death.
The Essig, Henneman and Carlozzi Agreements also provide for
acceleration of their respective equity compensation awards. In
addition, all of Mr. Essigs stock options will remain
exercisable until one year following his death, but in no event
beyond their respective original expiration dates. Moreover, as
promptly as practicable following his death,
Mr. Essigs estate will receive the shares underlying
the 2004 RSUs, unless he previously elected a different payment
date.
Payments
Upon Disability
Only the Essig Agreement provides payments upon termination of
Mr. Essigs employment on account of disability.
Specifically, if his employment is terminated on account of his
disability, then the Company will pay him an amount equal to
(i) if such payments are taxable, his then-current base
salary, or alternatively, (ii) if such payments are not
taxable, the after-tax equivalent of his then-current base
salary, in either case until December 31, 2009. The Company
will also generally continue all of the Companys life
insurance, health and accident, disability and other employee
benefits to him for a period of one year from the date of his
termination. Following December 31, 2009, Mr. Essig
will continue to be entitled to receive long-term disability
benefits under the Companys long-term disability program
in effect at such time to the extent he is eligible to receive
such benefits.
In addition to the foregoing payments upon his termination of
employment on account of his disability, all of
Mr. Essigs stock options will immediately vest and
will remain exercisable until one year following his
termination, but in no event beyond their respective original
expiration dates. As promptly as practicable following such
termination, all shares underlying the outstanding 2004 RSUs
will be paid to him, unless he previously elected a different
payment date.
Although no cash severance payments will be made to
Messrs. Henneman and Carlozzi upon their termination of
employment on account of their disability, all of their equity
awards will accelerate and become fully vested on the date of
their termination of employment for disability.
Under the Agreements, disability generally means the
executives inability to perform his duties by reason of
any medically determinable physical or mental impairment which
is expected to result in death or which has lasted or is
expected to last for a continuous period of not fewer than six
months.
Payments
in Connection with a Change In Control
The Agreements provide each of the applicable named executive
officers with severance payments and benefits upon termination
of their employment in connection with or following a change in
control. If (i) Mr. Essigs employment is
terminated by the Company for a reason other than death,
disability, or cause, (ii) Mr. Essig terminates his
employment for good reason, or (iii) the Company fails to
renew the Essig Agreement, in each case, within eighteen months
following a change in control, he will be entitled to a
severance payment equal to the sum of (a) 2.99 times the
sum of his base salary and target bonus for the fiscal year of
his termination and (b) a pro rata portion of his target
bonus in the year of termination. In addition, the Company will
generally provide him with continued participation in all of the
Companys life insurance, health and accident, disability
and other employee benefit plans until the end of the later of
the expiration of the then-current term of the agreement,
currently December 31, 2009, or one year following his
termination date. Moreover, the Company will reimburse him for
all reasonable legal fees and expenses incurred by him as a
result of such termination of employment. The Company will also
pay him interest on any severance payments that are delayed for
six months because of the application of section 409A of
the Code.
The Agreements with the other applicable named executive
officers provide that, if within twelve months of a change in
control, their employment with the Company is terminated by the
Company for a reason other than death, disability or cause, or
they terminate employment with the Company for good reason, (or
for Messrs. Henneman and Carlozzi only, the Company fails
to renew their respective Agreements), the Company will pay a
lump sum cash
46
payment equal to a multiple (2.99 times for
Messrs. Henneman and Carlozzi and 1.99 times for
Ms. OGrady) of the sum of their annual base salary
and target bonus (for Ms. OGrady, the cash portion of
the bonus payable for 2006). In addition, the Company will
continue to maintain and provide to these executives continued
participation in all of the Companys life insurance,
health and accident, disability and other employee benefit plans
for a period generally ending on the earlier to occur of
(i) the fifth anniversary of the date of their Agreements
(or for Ms. OGrady, the first anniversary of the date
of termination of employment), or (ii) their date of death.
All of the Agreements (except the OGrady Agreement) also
provide that the Company will pay all reasonable fees and
expenses incurred by the executives as a result of their
termination of employment.
The Agreements (except the OGrady Agreement) provide that
if any payment, coverage or benefit provided to them is subject
to the excise tax under section 4999 of the Code, the
executives will be
grossed-up
so that the executive would be in the same net after-tax
position he would have been in had sections 280G and 4999
not been part of the Code. The OGrady Agreement provides
that if any payment or benefit provided to her would be subject
to the excise tax under section 4999 of the Code, the
amounts payable to her and benefits she will receive will be
reduced so that no amounts she would receive would be subject to
the excise tax under section 4999 of the Code if such
reduction would result in her receiving a greater amount on an
after-tax basis than if no reduction had occurred.
The Companys equity plans provide for the acceleration of
the vesting
and/or
delivery of all equity compensation awards for all of the named
executive officers upon a change in control, regardless of
whether their employment has terminated. The Essig Agreement
provides that all stock options granted to Mr. Essig will
remain exercisable through their original expiration dates, and
he will generally receive payment of all outstanding restricted
stock units (including the shares underlying the 2004 RSUs and
the 500,000 shares underlying the restricted stock units
granted to Mr. Essig in 2000) on the date of the
change in control. The 500,000 shares underlying the 2000
grant of restricted stock units were distributed to
Mr. Essig on March 4, 2008 in accordance with the
terms of his restricted stock unit agreement.
Under the Agreements, a change in control would be deemed to
have occurred: (i) if the beneficial ownership of
securities representing more than fifty percent (or for
Mr. Essig only, thirty-five percent) of the combined voting
power of the voting securities of the Company is acquired by any
individual, entity or group; (ii) if the individuals who,
as of the date of the Agreement, constitute the Board of
Directors cease for any reason (for the Henneman, Carlozzi and
OGrady Agreements, during any period of at least
twenty-four months) to constitute at least a majority of the
Board of Directors; (iii) upon consummation of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of assets of the Company
or the acquisition of assets or stock of another entity; or
(iv) upon approval by the stockholders of a complete
liquidation or dissolution of the Company.
Restrictive
Covenants And Other Conditions
The foregoing severance benefits payable upon termination of
employment prior to or after a change in control to the
applicable named executive officers (except
Ms. OGrady) are conditioned on, for
Messrs. Essig, Henneman and Carlozzi, their execution of a
mutual release.
In addition, for all of the applicable named executive officers,
such benefits are consideration for the restrictive covenants
set forth in their respective Agreements; provided, however,
that such restrictive covenants would not apply to
Mr. Essig if he is terminated by the Company without cause
or he terminates his employment for good reason prior to a
change in control. Specifically, during the term of their
employment with the Company and the one year period thereafter
(or for Mr. Essig, the two-year period thereafter), all of
the named executive officers may not compete against the Company
or solicit employees and customers of the Company.
Terminated
Executive During 2007 Calendar Year
Effective as of September 6, 2007, Ms. Maureen
Bellantoni terminated her employment as Executive Vice President
and Chief Financial Officer of the Company. In connection with
her termination, therewith, Ms. Bellantoni received
payments and benefits totaling $346,271, which consisted of cash
severance in the amount of $325,000, continued health benefits
in the amount of $9,708 and $11,563 for accrued time off. These
amounts were paid or provided to her pursuant to the Bellantoni
Severance Agreement.
47
Summary
of Potential Payments
The following table summarizes the payments that would be made
by the Company to the named executive officers upon the events
discussed above, assuming that each named executive
officers termination of employment with the Company
occurred on December 31, 2007 or a change in control of the
Company occurred on December 31, 2007, as applicable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
or With Good
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause or
|
|
|
|
Reason (Before a
|
|
|
|
|
|
|
|
|
|
|
|
Upon a Change
|
|
|
With Good Reason
|
|
|
|
Change In
|
|
|
Non-Renewal
|
|
|
|
|
|
|
|
|
in Control
|
|
|
(After a Change in
|
|
Named Executive Officer
|
|
Control)
|
|
|
of Agreement
|
|
|
Death
|
|
|
Disability
|
|
|
(No Termination)
|
|
|
Control)
|
|
|
Stuart M. Essig
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
1,250,000
|
|
|
|
|
|
|
$
|
550,000
|
|
|
$
|
1,100,000
|
|
|
|
|
|
|
$
|
3,839,000
|
|
Continued Health & Other Benefits(1)
|
|
$
|
29,400
|
|
|
|
|
|
|
$
|
14,700
|
|
|
$
|
14,700
|
|
|
|
|
|
|
$
|
29,400
|
|
Acceleration of Stock Options
|
|
$
|
1,716,973
|
|
|
$
|
1,716,973
|
|
|
$
|
1,716,973
|
|
|
$
|
1,716,973
|
|
|
$
|
1,716,973
|
|
|
$
|
1,716,973
|
|
Acceleration of Other Grants(2)
|
|
$
|
31,447,500
|
|
|
$
|
31,447,500
|
|
|
$
|
31,447,500
|
|
|
$
|
31,447,500
|
|
|
$
|
52,412,500
|
|
|
$
|
52,412,500
|
|
Fees/Interest(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
74,301
|
|
280G
Gross-up
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,443,873
|
|
|
$
|
33,164,473
|
|
|
$
|
33,729,173
|
|
|
$
|
34,279,173
|
|
|
$
|
54,129,473
|
|
|
$
|
58,072,174
|
|
John B. Henneman, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
588,000
|
|
|
$
|
588,000
|
|
|
$
|
420,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,758,120
|
|
Continued Health & Other Benefits(1)
|
|
$
|
14,700
|
|
|
$
|
14,700
|
|
|
$
|
14,700
|
|
|
|
|
|
|
|
|
|
|
$
|
44,100
|
|
Acceleration of Stock Options
|
|
$
|
658,687
|
|
|
$
|
658,687
|
|
|
$
|
658,687
|
|
|
$
|
658,687
|
|
|
$
|
658,687
|
|
|
$
|
658,687
|
|
Acceleration of Other Grants
|
|
$
|
4,376,066
|
|
|
$
|
2,832,404
|
|
|
$
|
4,376,066
|
|
|
$
|
4,376,066
|
|
|
$
|
4,376,066
|
|
|
$
|
4,376,066
|
|
Fees/Interest(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G
Gross-up
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,637,453
|
|
|
$
|
4,093,791
|
|
|
$
|
5,469,453
|
|
|
$
|
5,034,753
|
|
|
$
|
5,034,753
|
|
|
$
|
6,836,973
|
|
Gerard S. Carlozzi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
588,000
|
|
|
$
|
588,000
|
|
|
$
|
420,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,758,120
|
|
Continued Health & Other Benefits(1)
|
|
$
|
14,700
|
|
|
$
|
14,700
|
|
|
$
|
14,700
|
|
|
|
|
|
|
|
|
|
|
$
|
44,100
|
|
Acceleration of Stock Options
|
|
$
|
658,642
|
|
|
$
|
658,642
|
|
|
$
|
658,642
|
|
|
$
|
658,642
|
|
|
$
|
658,642
|
|
|
$
|
658,642
|
|
Acceleration of Other Grants
|
|
$
|
4,376,066
|
|
|
$
|
2,832,404
|
|
|
$
|
4,376,066
|
|
|
$
|
4,376,066
|
|
|
$
|
4,376,066
|
|
|
$
|
4,376,066
|
|
Fees/Interest(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G
Gross-up
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
961,373
|
|
Total
|
|
$
|
5,637,408
|
|
|
$
|
4,093,746
|
|
|
$
|
5,469,408
|
|
|
$
|
5,034,708
|
|
|
$
|
5,034,708
|
|
|
$
|
7,798,301
|
|
Judith OGrady
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
555,433
|
|
Continued Health & Other Benefits(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,700
|
|
Acceleration of Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69,795
|
|
|
$
|
69,795
|
|
Acceleration of Other Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
310,030
|
|
|
$
|
310,030
|
|
Fees/Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280G
Gross-up
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
379,825
|
|
|
$
|
949,958
|
|
48
|
|
|
(1) |
|
The cost of continued participation in the Companys health
and other employee benefit plans for each executive is assumed
to be $1,225 per month. |
|
(2) |
|
Includes the value of certain vested and deferred restricted
stock units. |
|
(3) |
|
The Essig, Henneman and Carlozzi Agreements provide for
reasonable legal fees and expenses that may be incurred by each
executive as a result of his termination of employment related
to a change in control. However, the table does not include a
value for these fees and expenses because they would be incurred
only if there is a dispute under these Agreements. Thus, these
amounts are undeterminable. For Mr. Essig only, the $74,301
value represents the interest on his cash severance payment if
it is required to be delayed for six months because of the
application of section 409A of the Code, with such interest
applied at the rate of 3.84% compounded monthly. |
Director
Compensation
The Board of Directors believes that providing competitive
compensation is necessary to attract and retain qualified
non-employee directors. The key components of non-employee
director compensation include an annual equity grant and an
annual retainer.
Compensation. The compensation of directors
during 2007 included the compensation payable during the
one-year period beginning with the Companys 2006 Annual
Meeting of Stockholders on May 17, 2006 and the one year
period beginning with the Companys 2007 Annual Meeting of
Stockholders on May 17, 2007.
As compensation for their service during the one year period
beginning with the Companys 2006 Annual Meeting of
Stockholders, non-employee directors were able to elect to
receive an annual equity grant of 1,875 shares of
restricted stock or options to purchase 7,500 shares of
common stock (with the Chairman of the Board of Directors being
able to elect to receive 2,500 shares of restricted stock
instead of options to purchase 10,000 shares of common
stock). Directors also received an annual retainer of $50,000,
payable in one of four ways, at their election: (1) in
cash, (2) in restricted stock, (3) one half in cash
and one half in restricted stock, or (4) in options to
purchase common stock (the number of options determined by
valuing the options at 25% of the fair market value of our
common stock underlying the option), with a maximum of 5,000
options.
In addition, effective as of the 2007 Annual Meeting of
Stockholders, the annual retainer was increased to $55,000,
payable in the four ways described above except that the cap on
options was increased to 7,500 options.
The Company pays reasonable travel and out-of-pocket expenses
incurred by non-employee directors in connection with attendance
at meetings to transact business of the Company or attendance at
meetings of the Board of Directors or any committee thereof.
The following table provides details of the total compensation
earned by non-employee directors in 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in Cash(1)
|
|
|
Stock Awards(2)
|
|
|
Option Awards(2)(3)
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(h)
|
|
|
Thomas J. Baltimore, Jr.(4)
|
|
|
|
|
|
|
147,497
|
|
|
|
|
|
|
|
147,497
|
|
Keith Bradley
|
|
|
|
|
|
|
147,497
|
|
|
|
|
|
|
|
147,497
|
|
Richard E. Caruso
|
|
|
|
|
|
|
178,328
|
|
|
|
|
|
|
|
178,328
|
|
Neal Moszkowski
|
|
|
|
|
|
|
|
|
|
|
208,224
|
|
|
|
208,224
|
|
Christian Schade
|
|
|
26,549
|
|
|
|
27,477
|
|
|
|
130,575
|
|
|
|
184,601
|
|
James M. Sullivan
|
|
|
9,511
|
|
|
|
147,497
|
|
|
|
|
|
|
|
157,008
|
|
Anne M. VanLent
|
|
|
19,022
|
|
|
|
|
|
|
|
208,224
|
|
|
|
227,246
|
|
|
|
|
(1) |
|
Includes amounts earned for 2007, but not paid until 2008. |
|
(2) |
|
Reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31,
2007 in accordance with FAS 123R. Assumptions used in the
calculation of these amounts are included in Note 2 of the
Companys financial statements in Item 15 of the
Companys Annual Report on |
49
|
|
|
|
|
Form 10-K
for the year ended December 31, 2007 as filed with the
Securities and Exchange Commission on May 16, 2008. |
|
|
|
However, as required, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. |
|
(3) |
|
The aggregate number of options held by each director as of
December 31, 2007 was as follows: Thomas J. Baltimore,
Jr. 0; Keith Bradley 30,000; Richard E.
Caruso 55,000; Neal Moszkowski 24,460;
Christian Schade 15,000; James M.
Sullivan 40,000 and Anne M. VanLent
39,460. All of these options had vested as of such date. No
shares of restricted stock were held by any director as of such
date. |
|
(4) |
|
Mr. Baltimore joined the Board of Directors on
March 5, 2007. |
Stuart Essig, the Companys President and Chief Executive
Officer, is not included in this table because he is an employee
of the Company and does not receive compensation for his
services as a director. The compensation received by
Mr. Essig as an employee of the Company is shown above in
the Summary Compensation Table.
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information as of December 31,
2007 regarding existing compensation plans (including individual
compensation arrangements) under which equity securities of the
Company are authorized for issuance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities to be
|
|
|
Weighted-Average
|
|
|
Number of Securities
|
|
|
|
Issued Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Remaining Available for
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Future Issuance Under
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Equity Compensation Plans(1)
|
|
|
Equity compensation plans approved by stockholders
|
|
|
4,391,695
|
(2)
|
|
$
|
30.81
|
(3)
|
|
|
2,116,168
|
(4)(5)
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,391,695
|
|
|
$
|
30.81
|
|
|
|
2,116,168
|
|
|
|
|
(1) |
|
Excludes securities to be issued upon the exercise of
outstanding options, warrants and rights. |
|
(2) |
|
Consists of (a) 1,251,310 shares of common stock
underlying Restricted Stock Units of which 500,000 were
converted to shares and distributed on March 4, 2008,
(b) 208,732 shares of common stock underlying
outstanding performance stock, (c) 13,198 shares of
common stock underlying outstanding contract stock and
(d) 2,918,455 shares of common stock underlying
outstanding options. Of these amounts, the following securities
are issuable under the 2003 Plan, (a) 753,518 shares
of common stock underlying Restricted Stock Units,
(b) 208,732 shares of common stock underlying
outstanding performance stock, (c) 10,990 shares of
common stock underlying outstanding contract stock and
(d) 2,666,091 shares of common stock underlying
outstanding options. |
|
(3) |
|
Excluding the Restricted Units, performance stock and contract
stock, the weighted average exercise price is $30.81. |
|
(4) |
|
Consists of 1,093,443 shares of common stock which remain
available for issuance under the Employee Stock Purchase Plan
and 1,022,725 shares which remain available for issuance
under the other Approved Plans, including 993,220 shares
under the 2003 Plan. The 1998 Stock Option Plan expired on
February 26, 2008. Although 2,310 shares remained
available for issuance under that plan as of December 31,
2007, no grants were made or shares issued after
December 31, 2007 under that plan. |
|
(5) |
|
This number does not include the 750,000 additional shares
proposed to be authorized for issuance under the 2003 Equity
Incentive Plan as proposed to be amended pursuant to
Proposal 4, subject to your approval. |
50
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Baltimore, Dr. Bradley and Mr. Moszkowski are
the current members of the Compensation Committee.
Dr. Bradley, Ms. VanLent and Dr. David Auth, a
former director of the Company, served as members until
May 17, 2006, and Dr. Bradley, Mr. Schade and
Ms. VanLent served as members from May 17, 2006
through August 1, 2006. Mr. Schade served as a member
from August 1, 2006 through May 17, 2007. None of
these persons was an officer, employee or former officer of the
Company or had any relationship requiring disclosure herein
pursuant to Securities and Exchange Commission regulations. No
executive officer of the Company served as a member of a
compensation committee or a director of another entity under
circumstances requiring disclosure under Securities and Exchange
Commission regulations.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Review
and Approval of Related Person Transactions
Pursuant to a written policy, the Company reviews all
transactions, arrangements or relationships (or any series of
similar transactions, arrangements or relationships) in excess
of $100,000 in which the Company (including any of its
subsidiaries) was, is or will be a participant and the amount
involved exceeds $100,000, and in which any Related Person had,
has or will have a direct or indirect interest. For purposes of
the policy, a Related Person means:
(a) any person who is, or at any time since the beginning
of the Companys last fiscal year was, a director or
executive officer of the Company or a nominee to become a
director of the Company;
(b) any person who is known to be the beneficial owner of
more than 5% of any class of the Companys voting
securities;
(c) any immediate family member of any of the foregoing
persons; and
(d) any firm, corporation or other entity in which any of
the foregoing persons is employed or is a partner or principal
or in a similar position or in which such person has a 5% or
greater beneficial ownership interest.
If the Companys legal department determines that a
proposed transaction is a transaction for which approval is
required under applicable rules and regulations of the
Securities and Exchange Commission, the proposed transaction
shall be submitted to the Audit Committee for consideration.
The Audit Committee, will consider all of the relevant facts and
circumstances available to the Committee, including (if
applicable) but not limited to: the benefits to the Company; the
impact on a directors independence in the event the
Related Person is a director, an immediately family member of a
director or an entity in which a director is a partner,
shareholder or executive officer; the availability of other
sources for comparable products or services; the terms of the
transaction; and the terms available to unrelated third parties
or to employees generally. No member of the Audit Committee
shall participate in any review, consideration or approval of
any Related Person Transaction with respect to which such member
or any of his or her immediate family members is the Related
Person. The Audit Committee shall approve only those Related
Person Transactions that are in, or are not inconsistent with,
the best interests of the Company and its stockholders, as the
Audit Committee determines in good faith.
The policy provides that the above determination should be made
at the next Audit Committee meeting. In those instances in which
the legal department, in consultation with the Chief Executive
Officer or the Chief Financial Officer, determines that it is
not practicable or desirable for the Company to wait until the
next Audit Committee meeting, the transaction shall be presented
to the Chair of the Audit Committee (who will possess delegated
authority to act between Audit Committee meetings).
Related
Person Transactions
The Company leases its manufacturing facility in Plainsboro, New
Jersey from Plainsboro Associates, a New Jersey general
partnership. Ocirne, Inc., a subsidiary of Provco Industries,
owns a 50% interest in Plainsboro Associates. Provco
Industries stockholders are trusts whose beneficiaries
include the children of Dr. Caruso, the Chairman and a
principal stockholder of the Company. Dr. Caruso is the
President of Provco Industries. The Company paid $234,371 in
rent for this facility during 2007.
51
AUDIT
COMMITTEE REPORT
The following report of the Audit Committee is required by the
rules of the Securities and Exchange Commission to be included
in this Proxy Statement. This report shall not be deemed
incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Exchange Act, by virtue of any
general statement in such filing incorporating this Proxy
Statement by reference, except to the extent that the Company
specifically incorporates the information contained in this
section by reference, and shall not otherwise be deemed filed
under either the Securities Act or the Exchange Act.
The purpose of the Audit Committee is to oversee the
Companys accounting and financial reporting process and
the audits of the Companys financial statements. The Audit
Committee operates pursuant to a Charter that the Board amended
and restated on March 2, 2004, a copy of which is available
on the Companys website.
As set forth in the Audit Committee Charter, management of the
Company is responsible for the preparation, presentation and
integrity of the Companys financial statements, the
Companys financial reporting process, accounting policies,
internal audit function, internal controls and disclosure
controls and procedures. The independent registered public
accounting firm is responsible for auditing the Companys
financial statements and expressing an opinion as to their
conformity with generally accepted accounting principles and on
managements assessment of the effectiveness of the
Companys internal control over financial reporting. The
Audit Committees responsibility is to monitor and oversee
this process.
In the performance of its oversight function, the Audit
Committee has reviewed and discussed with management and the
independent registered public accounting firm the audited
financial statements and managements assessment of the
effectiveness of the Companys internal control over
financial reporting and the independent registered public
accounting firms evaluation of the Companys internal
control over financial reporting. The Audit Committee has also
discussed with the independent registered public accounting firm
the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit
Committees, as currently in effect. Finally, the Audit
Committee has received the written disclosures and the letter
from the independent registered public accounting firm required
by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees,
as currently in effect, has discussed with the independent
registered public accounting firm its independence in relation
to the Company and has considered the compatibility of non-audit
services with such independence. Management has represented to
the Audit Committee that the Companys consolidated
financial statements were prepared in accordance with generally
accepted accounting principles.
Based upon the review and discussions referred to above, the
Audit Committee recommended to the Board of Directors that the
audited financial statements of the Company for the fiscal year
ended December 31, 2007 be included in the Companys
Annual Report on
Form 10-K
for such fiscal year, as filed with the Securities and Exchange
Commission on May 16, 2008.
The Audit Committee of the Board of Directors
ANNE M. VANLENT (CHAIR)
CHRISTIAN S. SCHADE
JAMES M. SULLIVAN
52
PRINCIPAL
STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of common stock as of May 1, 2008 by:
(a) each person or entity known to the Company to be the
beneficial owner of more than five percent of the outstanding
shares of common stock, based upon Company records or statements
filed with the Securities and Exchange Commission; (b) each
of the Companys directors and nominees for directors;
(c) each of the named executive officers; and (d) all
executive officers, directors and nominees as a group. Except as
otherwise indicated, each person has sole voting power and sole
investment power with respect to all shares beneficially owned
by such person. Unless otherwise provided, the address of each
individual listed below is
c/o Integra
LifeSciences Holdings Corporation, 311 Enterprise Drive,
Plainsboro, NJ 08536.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
Beneficial Ownership
|
|
|
|
|
|
|
Percent
|
|
Name and Address of Beneficial Owner
|
|
Shares(1)
|
|
|
of Class
|
|
|
Thomas J. Baltimore, Jr.
|
|
|
3,293
|
|
|
|
*
|
|
Keith Bradley, Ph.D.
|
|
|
36,197
|
(2)
|
|
|
*
|
|
Richard E. Caruso, Ph.D.
|
|
|
6,711,614
|
(3)
|
|
|
24.6
|
%
|
Stuart M. Essig
|
|
|
2,217,813
|
(4)
|
|
|
7.8
|
%
|
Neal Moszkowski
|
|
|
27,971
|
(5)
|
|
|
*
|
|
Christian S. Schade
|
|
|
16,223
|
(6)
|
|
|
*
|
|
James M. Sullivan
|
|
|
69,796
|
(7)
|
|
|
*
|
|
Anne M. VanLent
|
|
|
40,708
|
(8)
|
|
|
*
|
|
Maureen B. Bellantoni
|
|
|
0
|
|
|
|
*
|
|
John B. Henneman, III
|
|
|
231,775
|
(9)
|
|
|
*
|
|
Gerard S. Carlozzi
|
|
|
61,785
|
(10)
|
|
|
*
|
|
Jerry E. Corbin
|
|
|
6,385
|
|
|
|
*
|
|
Judith E. OGrady
|
|
|
79,225
|
(11)
|
|
|
*
|
|
All directors, nominees for director and executive officers as a
group (13 persons)
|
|
|
9,502,785
|
(12)
|
|
|
33.1
|
%
|
FMR LLC and Edward C. Johnson 3d
|
|
|
3,425,735
|
(13)
|
|
|
12.6
|
%
|
82 Devonshire Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
Provco Leasing Corporation
|
|
|
6,614,543
|
(14)
|
|
|
24.2
|
%
|
209B Bayard Building
3411 Silverside Road
Wilmington, DE 19810
|
|
|
|
|
|
|
|
|
TRU ST PARTNERSHIP, L.P.
|
|
|
6,591,205
|
(15)
|
|
|
24.1
|
%
|
795 E. Lancaster Avenue, Suite 200
Villanova, PA 19085
|
|
|
|
|
|
|
|
|
Neuberger Berman Inc., Neuberger Berman, LLC, Neuberger Berman
Management Inc, and Neuberger Berman Equity Funds
|
|
|
2,852,195
|
(16)
|
|
|
10.4
|
%
|
605 Third Avenue
New York, NY 10158
|
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc.
|
|
|
2,224,300
|
(17)
|
|
|
8.1
|
%
|
100 E. Pratt Street
Baltimore, MD 21202
|
|
|
|
|
|
|
|
|
William Blair & Company, L.L.C
|
|
|
1,993,280
|
(18)
|
|
|
7.3
|
%
|
222 W. Adams Street
Chicago, IL 60606
|
|
|
|
|
|
|
|
|
Oz Management LP, Och-Ziff Holding Corporation, Och-Ziff
Capital Management Group LLC, Daniel S. Och and Oz Master Fund,
Ltd.
|
|
|
1,437,962
|
(19)
|
|
|
5.3
|
%
|
53
|
|
|
* |
|
Represents beneficial ownership of less than 1%. |
|
(1) |
|
Shares not outstanding but deemed beneficially owned by virtue
of the right of an individual to acquire them within
60 days of May 1,2008 upon the exercise of an option
or other convertible security are treated as outstanding for
purposes of determining beneficial ownership and the percentage
beneficially owned by such individual. |
|
(2) |
|
Consists of 30,000 shares that Dr. Bradley has the
right to acquire within 60 days of May 1, 2008 upon
the exercise of options held by him. |
|
(3) |
|
Includes 6,591,205 shares held by TRU ST PARTNERSHIP, L.P.,
a Pennsylvania general partnership (TRU ST) (also
see footnote 15 below). Also includes 23,338 shares held by
Provco Leasing Corporation (Provco), of which
Dr. Caruso is President and sole director and
19,000 shares held by The Uncommon Individual Foundation,
of which Dr. Caruso is the Chief Executive Officer. Provco
is the corporate general partner of TRU ST. Dr. Caruso may
be deemed to have shared voting and dispositive power over the
shares held by TRU ST and Provco. Also includes
38,071 shares owned by Dr. Caruso and
40,000 shares that Dr. Caruso has the right to acquire
within 60 days of May 1, 2008 upon the exercise of
options held by him. Dr. Caruso disclaims beneficial
ownership of the shares held by TRU ST, except to the extent of
his pecuniary interest therein. Dr. Carusos address
is
c/o TRU
ST PARTNERSHIP, L.P, 795 E. Lancaster Avenue, Suite
200, Villanova, PA 19085. |
|
(4) |
|
Includes 963,085 shares that Mr. Essig has the right
to acquire within 60 days of May 1, 2008 upon the
exercise of options held by him. Excludes outstanding Restricted
Units awarded to Mr. Essig in 2004, which entitle him to
receive an aggregate of 750,000 shares of common stock.
These 750,000 Restricted Units held by Mr. Essig vested on
the grant date, but are not yet deliverable and do not give him
the right to acquire any shares within 60 days of
May 1, 2008. Pursuant to the terms of a forward sale
contract entered into with Credit Suisse First Boston Capital
LLC on December 14, 2004, Mr. Essig is obligated to
deliver to Credit Suisse First Boston Capital LLC on
March 28, 2013 between 264,550 and 500,000 shares of
common stock (or, at the election of Mr. Essig, the cash
equivalent of such shares). Mr. Essig retains voting power
over these shares pending the settlement of the forward sale
contract. |
|
(5) |
|
Includes 24,460 shares that Mr. Moszkowski has the
right to acquire within 60 days of May 1, 2008 upon
the exercise of options held by him. |
|
(6) |
|
Includes 15,000 shares that Mr. Schade has the right
to acquire within 60 days of May 1, 2008 upon the
exercise of options held by him. |
|
(7) |
|
Includes 30,000 shares that Mr. Sullivan has the right
to acquire within 60 days of May 1, 2008 upon the
exercise of options held by him. |
|
(8) |
|
Includes 39,460 shares that Ms. VanLent has the right
to acquire within 60 days of May 1, 2008 upon the
exercise of options held by her. |
|
(9) |
|
Includes 203,703 shares that Mr. Henneman has the
right to acquire within 60 days of May 1, 2008 upon
the exercise of options held by him. |
|
(10) |
|
Includes 58,700 shares that Mr. Carlozzi has the right
to acquire within 60 days of May 1, 2008 upon the
exercise of options held by him. |
|
(11) |
|
Includes 53,600 shares that Ms. OGrady has the
right to acquire within 60 days of May 1, 2008 upon
the exercise of options held by her. |
|
(12) |
|
See footnotes 2 through 11 above. |
|
(13) |
|
FMR LLC, a holding company of investment companies, and Edward
C. Johnson 3d each report beneficially owning and having sole
dispositive power over 3,425,735 shares of which FMC LLC
has sole voting power over 864,558 shares. Of the
3,425,735 shares, Fidelity Management & Research
Company (Fidelity), a wholly-owned subsidiary of FMR
LLC and an investment adviser registered under Section 203
of the Investment Advisers Act of 1940 (the 1940
Act), is the beneficial owner of 2,499,717 shares as
a result of acting as such an investment advisor, Edward C.
Johnson 3d and FMR LLC, through its control of Fidelity, and the
funds each has sole dispositive power over 2,
499,717 shares owned by the funds. Members of the family of
Mr. Johnson, Chairman of FMR LLC, are the predominant
owners, directly or through trusts, of Series B |
54
|
|
|
|
|
voting common shares of FMR LLC, representing 49% of the voting
power of FMR LLC. The Johnson family group and all other
Series B shareholders have entered into a
shareholders voting agreement under which all
Series B voting common shares will be voted in accordance
with the majority vote of Series B voting common shares.
Accordingly, through their ownership of voting common shares and
the execution of the voting agreement, members of the Johnson
family group may be deemed under the 1940 Act to form a
controlling group with respect to FMR LLC. Neither FMR LLC nor
Mr. Johnson has the sole power to vote or direct the voting
of the shares owned directly by the Fidelity funds, which power
resides with the funds board of trustees. Pyramis Global
Advisors, LLC (PGALLC), an indirect wholly-owned
subsidiary of FMR LLC and an investment advisor registered under
the 1940 Act, is the beneficial owner of 120,200 shares as
a result of its serving as an investment advisor.
Mr. Johnson and FMR LLC, through its control of PGALLC,
each has sole dispositive power and sole voting power over
120,200 shares. Pyramis Global Advisors Trust Company
(PGATC), an indirect wholly-owned subsidiary of FMR
LLC and a bank as defined under Section 3(a)(6) of the
Exchange Act, is the beneficial owner of 731,609 shares as
a result of its serving as an investment manager.
Mr. Johnson and FMR LLC, through its control of PGATC, each
has sole dispositive power over 731,609 shares and sole
voting power over 670,149 shares. Fidelity International
Limited (FIL) is the beneficial owner of
74,209 shares. Partnerships controlled predominately by
members of the family of Mr. Johnson and FIL, or trusts for
their benefit, own shares of FIL stock with the right to cast
approximately 47% of the total votes which may be cast by all
holders of FIL voting stock. FMR LLC and FIL are of the view
that they are not acting as a group for purposes of
Section 13(d) under the Exchange Act. However, FMR LLC made the
filing of its Schedule 13G/A on a voluntary basis as if all
the shares are beneficially owned by FMR LLC and FIL on a joint
basis. The foregoing information has been included solely in
reliance upon, and without independent investigation of, the
disclosures contained in the Schedule 13G/A filed by FMR
LLC with the Securities and Exchange Commission on
February 13, 2008. |
|
(14) |
|
Includes 6,591,205 shares held by TRU ST (see footnote 15
below), of which Provco is the general corporate partner. Provco
may be deemed to have shared voting and dispositive power over
these shares. |
|
(15) |
|
Pursuant to the terms of a forward sale contract entered into
with Credit Suisse First Boston Capital LLC on November 23,
2004, TRU ST is obligated to deliver to Credit Suisse First
Boston Capital LLC on January 15, 2013 between 322,581 and
600,000 shares of common stock (or, at the election of TRU
ST, the cash equivalent of such shares). TRU ST retains voting
power over these shares pending the settlement of the forward
sale contract. |
|
(16) |
|
Neuberger Berman Inc. and Neuberger Berman, LLC each have shared
dispositive power over all of these shares, shared voting power
over 2,415,402 of these shares and sole voting power over 1,600
of these shares Neuberger Berman Management Inc has shared
dispositive power over and shared voting power over 2,415,402 of
these shares. Neuberger Berman Equity Funds has shared
dispositive power over and shared voting power over 2,398,802 of
these shares The foregoing information has been included solely
in reliance upon, and without independent investigation of, the
disclosures contained in the Schedule 13G/A filed by
Neuberger Berman Inc., Neuberger Berman, LLC, Neuberger Berman
Management Inc, and Neuberger Berman Equity Funds with the
Securities and Exchange Commission on February 8, 2008. |
|
(17) |
|
T. Rowe Price Associates, Inc. (T. Rowe Price) has
sole dispositive power over all of these shares and has sole
voting power over 255,200 of these shares. These securities are
owned by various individual and institutional investors which T.
Rowe Price Associates, Inc. (Price Associates)
serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the
reporting requirements of the Exchange, Price Associates is
deemed to be a beneficial owner of such securities; however,
Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities. The foregoing information
has been included solely in reliance upon, and without
independent investigation of, the disclosures contained in the
Schedule 13G/A filed by T. Rowe Price with the Securities and
Exchange Commission on February 14, 2008. |
|
(18) |
|
William Blair & Company, L.L.C. (William
Blair) has sole dispositive and voting power over all of
these shares. The foregoing information has been included solely
in reliance upon, and without independent investigation of, the
disclosures contained in the Schedule 13G/A filed by
William Blair with the Securities and Exchange Commission on
January 9, 2008. |
55
|
|
|
(19) |
|
Oz Management LP, Och-Ziff Holding Corporation, Och-Ziff Capital
Management Group LLC and Daniel S. Och. have shared dispositive
voting power and shared voting power over these shares. Oz
Master Fund, Ltd. has shared dispositive power and shared voting
power over 1,421,231 of these shares. For purposes of the
reporting requirements of the Exchange, Oz Management LP,
Och-Ziff Holding Corporation, Och-Ziff Capital Management Group
LLC, Daniel S. Och and Oz Master Fund, Ltd. may be deemed to be
a beneficial owner of such securities; however, each of them
expressly disclaims that it or he is, in fact, the beneficial
owner of such securities. The foregoing information has been
included solely in reliance upon, and without independent
investigation of, the disclosures contained in the
Schedule 13G filed by Oz Management LP,
Och-Ziff
Holding Corporation, Och-Ziff Capital Management Group LLC,
Daniel S. Och and Oz Master Fund, Ltd with the Securities and
Exchange Commission on March 10, 2008. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers, as well as
persons beneficially owning more than 10% of the Companys
outstanding shares of common stock and certain other holders of
such shares (collectively, Covered Persons), to file
with the Securities and Exchange Commission, within specified
time periods, initial reports of ownership and subsequent
reports of changes in ownership of common stock and other equity
securities of the Company.
Based solely upon the Companys review of copies of such
reports furnished to it and upon representations of Covered
Persons that no other reports were required, to the
Companys knowledge all of the Section 16(a) filing
requirements applicable to Covered Persons were complied with
during 2007, except for the following, which resulted from an
administrative error: a statement of changes in beneficial
ownership of securities on Form 4 for five exercises of
stock options and one sale of stock on July 6, 2007 was
filed late by Gerard Carlozzi, an executive officer of the
Company.
STOCKHOLDER
PROPOSALS
The deadline for stockholders to submit proposals pursuant to
Rule 14a-8
of the Exchange Act for inclusion in the Companys proxy
statement and form of proxy for the 2009 Annual Meeting of
Stockholders is December 16, 2008. Such proposals must be
sent to: Integra LifeSciences Holdings Corporation, 311
Enterprise Drive, Plainsboro, New Jersey 08536, Attention:
Senior Vice President, General Counsel, Human Resources and
Secretary. The date after which notice of a stockholder proposal
submitted outside of the processes of
Rule 14a-8
of the Exchange Act is considered untimely is March 2,
2009. If notice of a stockholder proposal submitted outside of
the processes of
Rule 14a-8
of the Exchange Act is received by the Company after
March 2, 2009, then the Companys proxy for the 2009
Annual Meeting of Stockholders may confer discretionary
authority to vote on such matter without any discussion of such
matter in the proxy statement for such annual meeting of
stockholders.
56
OTHER
MATTERS
A copy of the Companys 2007 Annual Report to Stockholders
is being mailed simultaneously herewith to stockholders but is
not to be regarded as proxy solicitation material. In addition,
our Code of Conduct, which applies to all of the Companys
directors and officers, and the charters for each of our Audit,
Compensation, and Nominating and Corporate Governance Committees
are accessible via our website at www.integra-LS.com
through the Investor Relations link under the
heading Corporate Governance.
The Company, upon request, will furnish to record and
beneficial holders of its common stock, free of charge, a copy
of its Annual Report on
Form 10-K
(including financial statements and schedules, but without
exhibits) for the fiscal year ended December 31, 2007 as
filed with the Securities and Exchange Commission on
May 16, 2008. Copies of exhibits to the
Form 10-K
also will be furnished upon request and the payment of a
reasonable fee. All requests should be directed to the investor
relations department, at the offices of the Company set forth on
page one of this Proxy Statement.
By order of the Board of Directors,
Richard D. Gorelick
Senior Vice President, General Counsel,
Human Resources and Secretary
Plainsboro, New Jersey
May 30, 2008
57
APPENDIX A
INTEGRA
LIFESCIENCES HOLDINGS CORPORATION
AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN
(EFFECTIVE AS
OF ,
2008,
SUBJECT TO STOCKHOLDER APPROVAL)
(Language added is underscored. Language deleted is shown in
brackets.)
WHEREAS, Integra LifeSciences Holdings Corporation (the
Company) desires to have the ability to award
certain equity-based benefits to certain Key
Employees and Associates (as defined below);
NOW, THEREFORE, the Integra LifeSciences Holdings Corporation
Amended and Restated 2003 Equity Incentive Plan is
hereby adopted under the following terms and conditions. This
Plan amends and restates in its entirety the Integra
LifeSciences Holdings Corporation 2003 Equity Incentive Plan,
originally adopted by the Board as of February 2, 2003 and
approved by the Companys stockholders as of May 21,
2003.
1) Purpose. The Plan is
intended to provide a means whereby the Company may grant ISOs
to Key Employees and may grant NQSOs, Restricted Stock, Stock
Appreciation Rights, Performance Stock, Contract Stock and
Dividend Equivalent Rights to Key Employees and Associates.
Thereby, the Company expects to attract and retain such Key
Employees and Associates and to motivate them to exercise their
best efforts on behalf of the Company and any Related
Corporations and Affiliates.
2) Definitions
a) Affiliate shall mean an entity in
which the Company or a Related Corporation has a 50 percent
or greater equity interest.
b) Associate shall mean a
designated nonemployee director, consultant or other person
providing services to the Company, a Related Corporation or an
Affiliate.
c) Award shall mean ISOs, NQSOs,
Restricted Stock, Stock Appreciation Rights, Performance Stock,
Contract Stock
and/or
Dividend Equivalent Rights awarded by the Committee to a
Participant.
d) Award Agreement shall mean a
written document evidencing the grant of an Award, as described
in Section 10.1.
e) Board shall mean the Board of
Directors of the Company.
f) Code shall mean the Internal
Revenue Code of 1986, as amended.
g) Committee shall mean the
Companys Compensation Committee of the Board, which shall
consist solely of not fewer than two directors of the Company
who shall be appointed by, and serve at the pleasure of, the
Board (taking into consideration the rules under
section 16(b) of the Exchange Act and the requirements of
section 162(m) of the Code).
h) Company shall mean Integra
LifeSciences Holdings Corporation, a Delaware corporation.
i) Contract Date shall mean the
date specified in the Award Agreement on which a Participant is
entitled to receive Contract Stock, provided he or she is still
providing services to the Company, a Related Corporation, or an
Affiliate on such date.
j) Contract Stock shall mean an
Award that entitles the recipient to receive unrestricted
Shares, without payment, if the recipient is still providing
services to the Company or a Related Corporation as of a future
date specified in the Award Agreement.
k) Disability shall mean
separation from service as a result of permanent and total
disability, as defined in section 22(e)(3) of the Code.
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l) Dividend Equivalent Right
shall mean an Award that entitles the recipient to receive a
benefit in lieu of cash dividends that would have been payable
on any or all Shares subject to another Award granted to the
Participant had such Shares been outstanding.
m) Exchange Act shall mean the
Securities Exchange Act of 1934, as amended.
n) Fair Market Value shall mean
the following, arrived at by a good faith determination of the
Committee:
i) if there are sales of Shares on a national securities
exchange or in an over-the-counter market on the date of grant
(or on such other date as value must be determined), then the
quoted closing price on such date; or
ii) if there are no such sales of Shares on the date of
grant (or on such other date as value must be determined)[but
there are such sales on dates within a reasonable period both
before and after such date, the weighted average of the quoted
closing price on the nearest date before and the nearest date
after such date on which there were such sales], then the
quoted closing price on the last preceding date for which such
quotation exists; or
iii) if the Shares are not listed on an established
securities exchange or over-the-counter market system on the
date of grant, but the Shares are regularly quoted by a
recognized securities dealer, then the mean of the high bid and
low asked prices for such date or, if there are no high bid and
low asked prices for a Share on such date, the high bid and low
asked prices for a Share on the last preceding date for which
such information exists;[if actual sales are not available
during a reasonable period beginning before and ending after the
date of grant (or on such other date as value must be
determined), then the mean between the bid and asked price on
such date as reported by the National Quotation Bureau] or
iv) if paragraphs (i) through (iii) above are not
applicable, then such other method of determining fair market
value as shall be adopted by the Committee.
[Where the Fair Market Value of Shares is determined under
paragraph (ii) above, the average of the quoted closing
prices on the nearest date before and the nearest date after the
last business day prior to the specified date shall be weighted
inversely by the respective numbers of trading days between the
dates of reported sales and such date (i.e., the valuation
date), in accordance with Treas. Reg.
§ 20.2031-2(b)(1), or any successor thereto.]
o) ISO shall mean an Option
which, at the time such Option is granted under the Plan,
qualifies as an incentive stock option within the meaning of
section 422 of the Code, unless the Award Agreement states
that the Option will not be treated as an ISO.
p) Key Employee shall mean an
officer, executive, or managerial or nonmanagerial employee of
the Company, a Related Corporation, or an Affiliate.
q) More-Than-10-Percent Stockholder
shall mean any person who at the time of grant owns,
directly or indirectly, or is deemed to own by reason of the
attribution rules of section 424(d) of the Code, Shares
possessing more than 10 percent of the total combined
voting power of all classes of Shares of the Company or of a
Related Corporation.
r) NQSO shall mean an Option
that, at the time such Option is granted to a Participant, does
not meet the definition of an ISO, whether or not it is
designated as a nonqualified stock option in the Award Agreement.
s) Option is an Award entitling
the Participant on exercise thereof to purchase Shares at a
specified exercise price.
t) Participant shall mean a Key
Employee or Associate who has been granted an Award under the
Plan.
u) Performance Stock shall mean
an Award that entitles the recipient to receive Shares, without
payment, following the attainment of designated Performance
Goals.
v) Performance Goals shall mean
goals deemed by the Committee to be important to the success of
the Company or any of its Related Corporations or Affiliates.
The Committee shall establish the specific measures for each
such goal at the time an Award of Performance Stock is granted.
In creating these measures, the Committee shall use one or more
of the following business criteria: return on assets, return on
net assets, asset turnover, return on equity, return on capital,
market price appreciation of Shares, economic value added, total
stockholder return, net
A-2
income, pre-tax income, earnings per share, operating profit
margin, net income margin, sales margin, cash flow, market
share, inventory turnover, sales growth, capacity utilization,
increase in customer base, environmental health and safety,
diversity,
and/or
quality. The business criteria may be expressed in absolute
terms or relative to the performance of other companies or an
index.
w) Plan shall mean the Integra
LifeSciences Holdings Corporation Amended and Restated
2003 Equity Incentive Plan, as set forth herein and as it may be
amended from time to time.
x) Related Corporation shall mean
either a subsidiary corporation of the Company (if
any), as defined in section 424(f) of the Code, or the
parent corporation of the Company (if any), as
defined in section 424(e) of the Code.
y) Restricted Stock shall mean an
Award that grants the recipient Shares at no cost but subject to
whatever restrictions are determined by the Committee.
z) Securities Act shall mean the
Securities Act of 1933, as amended.
aa) Shares shall mean shares of
common stock of the Company, par value $0.01 per share.
bb) Stock Appreciation Right
shall mean an Award entitling the recipient on exercise to
receive an amount, in cash or Shares or a combination thereof
(such form to be determined by the Committee), determined in
whole or in part by reference to appreciation in Share value.
3. Administration
a) The Plan shall be administered by the Committee. Each
member of the Committee, while serving as such, shall be deemed
to be acting in his or her capacity as a director of the
Company. Acts approved by a majority of the members of the
Committee at which a quorum is present, or acts without a
meeting reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the
Committee. Any authority of the Committee may be delegated
either by the Committee or the Board to a committee of the Board
or any other Plan administrator, but only to the extent such
delegation complies with the requirements of Section 162(m) of
the Code,
Rule 16b-3
promulgated under the Exchange Act or as required by any other
applicable rule or regulation.
b) The Committee shall have the authority:
i) to select the Key Employees and Associates to be granted
Awards under the Plan and to grant such Awards at such time or
times as it may choose;
ii) to determine the type and size of each Award, including
the number of Shares subject to the Award;
iii) to determine the terms and conditions of each Award;
iv) to amend an existing Award in whole or in part
(including the extension of the exercise period for any NQSO),
except that the Committee may not (A) lower the exercise
price of any Option or Stock Appreciation Right, or
(B) without the consent of the Participant holding the
Award, take any action under this clause if such action would
adversely affect the rights of such Participant;
v) to adopt, amend and rescind rules and regulations for
the administration of the Plan;
vi) to interpret the Plan and decide any questions and
settle any controversies that may arise in connection with
it; and
vii) to adopt such modifications, amendments, procedures,
sub-plans and the like, which may be inconsistent with the
provisions of the Plan, as may be necessary to comply with the
laws and regulations of other countries in which the Company and
its Related Corporations and Affiliates operate in order to
assure the viability of Awards granted under the Plan to
individuals in such other countries.
Such determinations and actions of the Committee, and all other
determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, shall be
conclusive and shall bind all parties. Nothing in this
subsection (b) shall be construed as limiting the power of
the Board or the Committee to make the adjustments described in
Sections 8.3 and 8.4.
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4. Effective Date and Term of Plan
a) Effective Date. The Plan, as
amended and restated, having been adopted by the Board on
April 23, 2008 [February 2, 2003], [shall
become effective on that date, but] is subject to the
approval of the stockholders of the Company in accordance
with [pursuant to] Section 9(b), and shall become
effective on the date on which such approval is obtained.
[Awards may be granted under the Plan prior to such stockholder
approval (but after the Boards adoption of the Plan),
subject to such stockholder approval.]
b) Term of Plan for ISOs. No ISO
may be granted under the Plan after February 23, 2013, but
ISOs previously granted may extend beyond that date. Awards
other than ISOs may be granted after that date.
5. Shares Subject to the
Plan. The aggregate number of Shares that may
be delivered under the Plan is 4,000,000. Further, no Key
Employee shall receive Awards [Options
and/or Stock
Appreciation Rights] for more than 1,000,000 Shares in
the aggregate during any calendar year under the Plan.
However, the limits in the preceding two sentences shall be
subject to the adjustment described in Section 8.3. Shares
delivered under the Plan may be authorized but unissued Shares
or reacquired Shares, and the Company may purchase Shares
required for this purpose, from time to time, if it deems such
purchase to be advisable. Any Shares still subject to an Option
which expires or otherwise terminates for any reason whatever
(including, without limitation, the surrender thereof) without
having been exercised in full, any Shares that are still subject
to an Award that is forfeited, any Shares withheld for the
payment of taxes with respect to an Award, and the Shares
subject to an Award which is payable in Shares or cash and that
is satisfied in cash rather than in Shares shall continue to be
available for Awards under the Plan.
6. Eligibility. The class of
individuals who shall be eligible to receive Awards under the
Plan shall be the Key Employees (including any directors of the
Company who are also officers or Key Employees) and the
Associates. More than one Award may be granted to a Key Employee
or Associate under the Plan.
7. Types of Awards
7.1 Options
a) Kinds of Options. Both ISOs and
NQSOs may be granted by the Committee under the Plan. However,
ISOs may only be granted to Key Employees of the Company or of a
Related Corporation. NQSOs may be granted to both Key Employees
and Associates. Once an ISO has been granted, no action by the
Committee that would cause the Option to lose its status as an
ISO under the Code will be effective without the consent of the
Participant holding the Option.
b) $100,000 Limit. The aggregate
Fair Market Value of the Shares with respect to which ISOs are
exercisable for the first time by a Key Employee during any
calendar year (counting ISOs under this Plan and under any other
stock option plan of the Company or a Related Corporation) shall
not exceed $100,000. If an Option intended as an ISO is granted
to a Key Employee and the Option may not be treated in whole or
in part as an ISO pursuant to the $100,000 limit, the Option
shall be treated as an ISO to the extent it may be so treated
under the limit and as an NQSO as to the remainder. For purposes
of determining whether an ISO would cause the limit to be
exceeded, ISOs shall be taken into account in the order granted.
The annual limits set forth above for ISOs shall not apply to
NQSOs.
c) Exercise Price. The exercise
price of an Option shall be determined by the Committee, subject
to the following:
i) The exercise price of an ISO shall not be less than the
greater of (A) 100 percent (110 percent in the
case of an ISO granted to a
More-Than-10-Percent Stockholder) of the Fair Market Value
of the Shares subject to the Option, determined as of the time
the Option is granted, or (B) the par value per Share.
ii) The exercise price of an NQSO shall not be less than
the greater of (A) 100 percent of the Fair Market
Value of the Shares subject to the Option, determined as of the
time the Option is granted, or (B) the par value per Share.
A-4
d) Term of Options. The term of
each Option may not be more than 10 years (five years, in
the case of an ISO granted to a
More-Than-10-Percent Stockholder) from the date the Option
was granted, or such earlier date as may be specified in the
Award Agreement.
e) Exercise of Options. An Option
shall become exercisable at such time or times (but not less
than three months from the date of grant), and on such
conditions, as the Committee may specify. The Committee may at
any time and from time to time accelerate the time at which all
or any part of the Option may be exercised. Any exercise of an
Option must be in writing, signed by the proper person, and
delivered or mailed to the Company, accompanied by (i) any
other documents required by the Committee and (ii) payment
in full in accordance with subsection (f) below for the
number of Shares for which the Option is exercised (except that,
in the case of an exercise arrangement approved by the Committee
and described in subsection (f)(iii) below, payment may be made
as soon as practicable after the exercise). Only full shares
shall be issued under the Plan, and any fractional share that
might otherwise be issuable upon exercise of an Option granted
hereunder shall be forfeited.
f) Payment for Shares. Shares
purchased on the exercise of an Option shall be paid for as
follows:
i) in cash or by check (acceptable to the Committee), bank
draft, or money order payable to the order of the Company;
ii) in Shares previously acquired by the Participant;
provided, however, that if such Shares were acquired through the
exercise of an ISO and are used to pay the Option price of an
ISO, such Shares have been held by the Participant for a period
of not less than the holding period described in
section 422(a)(1) of the Code on the date of exercise, or
if such Shares were acquired through the exercise of an NQSO and
are used to pay the Option price of an ISO, or if such Shares
were acquired through the exercise of an ISO or an NQSO and are
used to pay the Option price of an NQSO, such Shares have been
held by the Participant for such period of time as required to
be considered mature Shares for purposes of
accounting treatment;
iii) by delivering a properly executed notice of exercise
of the Option to the Company and a broker, with irrevocable
instructions to the broker promptly to deliver to the Company
the amount of sale or loan proceeds necessary to pay the
exercise price of the Option; or
iv) by any combination of the above-listed forms of payment.
In the event the Option price is paid, in whole or in part, with
Shares, the portion of the Option price so paid shall be equal
to the Fair Market Value on the date of exercise of the Option
of the Shares surrendered in payment of such Option price.
7.2. Stock Appreciation Rights
a) Grant of Stock Appreciation
Rights. Stock Appreciation Rights may be
granted to a Key Employee or Associate by the Committee. Stock
Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan. A Stock
Appreciation Right granted in tandem with an Option that is not
an ISO may be granted either at or after the time the Option is
granted. A Stock Appreciation Right granted in tandem with an
ISO may be granted only at the time the ISO is granted.
b) Nature of Stock Appreciation
Rights. A Stock Appreciation Right entitles
the Participant to receive, with respect to each Share as to
which the Stock Appreciation Right is exercised, the excess of
the Shares Fair Market Value on the date of exercise over
its Fair Market Value on the date the Stock Appreciation Right
was granted. Such excess shall be paid in cash, Shares, or a
combination thereof, as determined by the Committee.
c) Rules Applicable to Tandem
Awards. When Stock Appreciation Rights are
granted in tandem with Options, the number of Stock Appreciation
Rights granted to a Participant that shall be exercisable during
a specified period shall not exceed the number of Shares that
the Participant may purchase upon the exercise of the related
Option during such period. Upon the exercise of an Option, the
Stock Appreciation Right relating to the Shares covered by such
Option will terminate. Upon the exercise of a Stock Appreciation
Right, the related Option will terminate to the extent of an
equal number of Shares. The Stock Appreciation Right will be
exercisable only at such time or times, and to the extent, that
the related Option is exercisable and will be exercisable in
accordance with the procedure required for exercise of the
related Option. The Stock Appreciation Right will be
transferable only when the related Option is transferable, and
under the same conditions. A Stock Appreciation Right granted in
A-5
tandem with an ISO may be exercised only when the Fair Market
Value of the Shares subject to the ISO exceeds the exercise
price of such ISO.
d) Exercise of Independent Stock Appreciation
Rights. A Stock Appreciation Right not
granted in tandem with an Option shall become exercisable at
such time or times, and on such conditions, as the Committee may
specify in the Award Agreement. The Committee may at any time
accelerate the time at which all or any part of the Stock
Appreciation Right may be exercised. Any exercise of an
independent Stock Appreciation Right must be in writing, signed
by the proper person, and delivered or mailed to the Company,
accompanied by any other documents required by the Committee.
e) Term of Stock Appreciation
Rights. The term of each Stock
Appreciation Right may not be more than 10 years from the
date the Stock Appreciation Right was granted, or such earlier
date as may be specified in the Award Agreement.
7.3. Restricted Stock
a) General
Requirements. Restricted Stock may be issued
or transferred to a Key Employee or Associate (for no
consideration), to the extent permitted by applicable law.
b) Rights as a Stockholder. Unless
the Committee determines otherwise, a Key Employee or Associate
who receives Restricted Stock shall have certain rights of a
stockholder with respect to the Restricted Stock, including
voting and dividend rights, subject to the restrictions
described in subsection (c) below and any other conditions
imposed by the Committee at the time of grant. Unless the
Committee determines otherwise, certificates evidencing shares
of Restricted Stock will remain in the possession of the Company
until such Shares are free of all restrictions under the Plan.
c) Restrictions. Except as
otherwise specifically provided by the Plan, Restricted Stock
may not be sold, assigned, transferred, pledged, or otherwise
encumbered or disposed of, and if the Participant ceases to
provide services to any of the Company and its Related
Corporations and Affiliates for any reason, must be forfeited to
the Company. These restrictions will lapse at such time or
times, and on such conditions, as the Committee may specify in
the Award Agreement. Upon the lapse of all restrictions, the
Shares will cease to be Restricted Stock for purposes of the
Plan. The Committee may at any time accelerate the time at which
the restrictions on all or any part of the Shares will lapse.
d) Notice of Tax Election. Any
Participant making an election under section 83(b) of the
Code for the immediate recognition of income attributable to an
Award of Restricted Stock must provide a copy thereof to the
Company within 10 days of the filing of such election with
the Internal Revenue Service.
7.4. Performance Stock; Performance
Goals
a) Grant. The Committee may grant
Performance Stock to any Key Employee or Associate, conditioned
upon the meeting of designated Performance Goals. The Committee
shall determine the number of Shares of Performance Stock to be
granted.
b) Performance Period and Performance
Goals. When Performance Stock is granted, the
Committee shall establish the performance period during which
performance shall be measured, the Performance Goals, and such
other conditions of the Award as the Committee deems appropriate.
c) Delivery of Performance
Stock. At the end of each performance period,
the Committee shall determine to what extent the Performance
Goals and other conditions of the Award have been met and the
number of Shares, if any, to be delivered with respect to the
Award.
7.5. Contract Stock
a) Grant. The Committee may grant
Contract Stock to any Key Employee or Associate, conditioned
upon the Participants continued provision of services to
the Company and its Related Corporations and Affiliates through
the date specified in the Award Agreement. The Committee shall
determine the number of Shares of Contract Stock to be granted.
A-6
b) Contract Date. When Contract
Stock is granted, the Committee shall establish the Contract
Date on which the Contract Stock shall be delivered to the
Participant, provided the Participant is still providing
services to the Company and its Related Corporations and
Affiliates on such date.
c) Delivery of Contract Stock. If
the Participant is still providing services to the Company and
its Related Corporations and Affiliates as of the Contract Date,
the Committee shall cause the Contract Stock to be delivered to
the Participant in accordance with the terms of the Award
Agreement.
7.6. Dividend Equivalent
Rights. The Committee may provide for payment
to a Key Employee or Associate of Dividend Equivalent Rights,
either currently or in the future, or for the investment of such
Dividend Equivalent Rights on behalf of the Participant.
8. Events Affecting Outstanding Awards
8.1. Termination of Service (Other Than by
Death or Disability). If a Participant ceases
to provide services to the Company and its Related Corporations
and Affiliates for any reason other than death or Disability, as
the case may be, the following shall apply:
a) Except as otherwise determined by the Committee, all
Options and Stock Appreciation Rights held by the Participant
that were not exercisable immediately prior to the
Participants termination of service shall terminate at
that time. Any Options or Stock Appreciation Rights that were
exercisable immediately prior to the termination of service will
continue to be exercisable for six months (or for such longer
period as the Committee may determine), and shall thereupon
terminate, unless the Award Agreement provides by its terms for
immediate termination or for termination in less than six months
in the event of termination of service.
In no event, however, shall an Option or Stock Appreciation
Right remain exercisable beyond the latest date on which it
could have been exercised without regard to this Section. For
purposes of this subsection (a), a termination of service shall
not be deemed to have resulted by reason of a sick leave or
other bona fide leave of absence approved for purposes of the
Plan by the Committee.
b) Except as otherwise determined by the Committee, all
Restricted Stock held by the Participant at the time of the
termination of service must be transferred to the Company (and,
in the event the certificates representing such Restricted Stock
are held by the Company, such Restricted Stock shall be so
transferred without any further action by the Participant), in
accordance with Section 7.3.
c) Except as otherwise determined by the Committee, all
Performance Stock, Contract Stock, and Dividend Equivalent
Rights to which the Participant was not irrevocably entitled
prior to the termination of service shall be forfeited and the
Awards canceled as of the date of such termination of service.
8.2. Death or Disability. If
a Participant dies or incurs a Disability, the following shall
apply:
a) Except as otherwise determined by the Committee, all
Options and Stock Appreciation Rights held by the Participant
immediately prior to death or Disability, as the case may be, to
the extent then exercisable, may be exercised by the Participant
or by the Participants legal representative (in the case
of Disability), or by the Participants executor or
administrator or by the person or persons to whom the Option or
Stock Appreciation Right is transferred by will or the laws of
descent and distribution, at any time within the one-year period
ending with the first anniversary of the Participants
death or Disability (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate. In no
event, however, shall an Option or Stock Appreciation Right
remain exercisable beyond the latest date on which it could have
been exercised without regard to this Section. Except as
otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by a Participant immediately prior to
death or Disability that are not then exercisable shall
terminate at the date of death or Disability.
b) Except as otherwise determined by the Committee, all
Restricted Stock held by the Participant at the date of death or
Disability, as the case may be, must be transferred to the
Company (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock
shall be so transferred without any further action by the
Participant), in accordance with Section 7.3.
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c) Except as otherwise determined by the Committee, all
Performance Stock, Contract Stock, and Dividend Equivalent
Rights to which the Participant was not irrevocably entitled
prior to death or Disability, as the case may be, shall be
forfeited and the Awards canceled as of the date of death or
Disability.
8.3. Capital
Adjustments. The maximum number of Shares
that may be delivered under the Plan, and the maximum number of
Shares with respect to which Awards [Options or Stock
Appreciation Rights] may be granted to any Key Employee or
Associate under the Plan, both as stated in Section 5, and the
number of Shares issuable upon the exercise or vesting of
outstanding Awards under the Plan (as well as the exercise price
per Share under outstanding Options or Stock Appreciation
Rights), shall be proportionately adjusted, as may be deemed
appropriate by the Committee, to reflect any increase or
decrease in the number of issued Shares resulting from a
subdivision (share-split), consolidation (reverse split), stock
dividend, or similar change in the capitalization of the Company.
8.4. Certain Corporate Transactions
a) In the event of a corporate transaction (as, for
example, a merger, consolidation, acquisition of property or
stock, separation, reorganization, or liquidation), each
outstanding Award shall be assumed by the surviving or successor
entity; provided, however, that in the event of a proposed
corporate transaction, the Committee may terminate all or a
portion of any outstanding Award, effective upon the closing of
the corporate transaction, if it determines that such
termination is in the best interests of the Company. If the
Committee decides to terminate outstanding Options or Stock
Appreciation Rights, the Committee shall give each Participant
holding an Option or Stock Appreciation Right to be terminated
not less than seven days notice prior to any such
termination, and any Option or Stock Appreciation Right that is
to be so terminated may be exercised (if and only to the extent
that it is then exercisable) up to, and including the date
immediately preceding such termination. Further, the Committee,
in its discretion, may (i) accelerate, in whole or in part,
the date on which any or all Options and Stock Appreciation
Rights become exercisable, (ii) remove the restrictions
from outstanding Restricted Stock, (iii) cause the delivery
of any Performance Stock, even if the associated Performance
Goals have not been met, (iv) cause the delivery of any
Contract Stock, even if the Contract Date has not been reached;
and/or
(v) cause the payment of any Dividend Equivalent Rights.
The Committee also may, in its discretion, change the terms of
any outstanding Award to reflect any such corporate transaction,
provided that, in the case of ISOs, such change would not
constitute a modification under section 424(h)
of the Code, unless the Participant consents to the change.
b) With respect to an outstanding Award held by a
Participant who, following the corporate transaction, will be
employed by or otherwise providing services to an entity which
is a surviving or acquiring entity in such transaction or an
affiliate of such an entity, the Committee may, in lieu of the
action described in subsection (a) above, arrange to have
such surviving or acquiring entity or affiliate grant to the
Participant a replacement award which, in the judgment of the
Committee, is substantially equivalent to the Award.
8.5. Exercise Upon Change in Control
a) Notwithstanding any other provision of this Plan, all
outstanding Options and all Stock Appreciation Rights shall
become fully vested and exercisable, all Performance Stock and
all Dividend Equivalent Rights shall become fully vested, all
Contract Stock shall become immediately payable, and all
restrictions shall be removed from any outstanding Restricted
Stock, upon a Change in Control.
b) Change in Control shall mean:
i) An acquisition (other than directly from the Company) of
any voting securities of the Company (Voting
Securities) by any Person (as such term is
used for purposes of section 13(d) or 14(d) of the Exchange
Act) immediately after which such Person has Beneficial
Ownership (within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 50 percent or more
of the combined voting power of all the then outstanding Voting
Securities, other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of
the Company or an affiliate thereof, or any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company; provided, however, that any acquisition from the
Company or any acquisition pursuant to a transaction which
complies with paragraph (iii)(A) and (B) below shall not be
a Change in Control under this paragraph (i);
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ii) The individuals who, as of March 1, 2003, are
members of the Board (the Incumbent Board) cease for
any reason to constitute at least two-thirds of the Board;
provided, however, that if the election, or nomination for
election by the stockholders, of any new director was approved
by a vote of at least two-thirds of the members of the Board who
constitute Incumbent Board members, such new directors shall for
all purposes be considered as members of the Incumbent Board as
of March 1, 2003, provided further, however, that no
individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of
either an actual or threatened Election Contest (as
described in
Rule 14a-11
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board of Directors (a Proxy
Contest) including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest;
iii) consummation by the Company of a reorganization,
merger, or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another entity (a
Business Combination), unless immediately following
such Business Combination: (A) more than 50 percent of
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors of (I) the corporation resulting from such
Business Combination (the Surviving Corporation), or
(II) if applicable, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Companys assets either directly or through one or more
subsidiaries (the Parent Corporation), is
represented, directly or indirectly, by Company Voting
Securities outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into
which such Company Voting Securities were converted pursuant to
such Business Combination), and such voting power among the
holders thereof is in substantially the same proportions as
their ownership, immediately prior to such Business Combination,
of the Company Voting Securities; and (B) at least a
majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) were members of the Incumbent Board at
the time of the execution of the initial agreement, or the
action of the Board, providing for such Business Combination;
iv) approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company; or
v) acceptance by the stockholders of the Company of shares
in a share exchange if the stockholders of the Company
immediately before such share exchange do not own, directly or
indirectly, immediately following such share exchange more than
50 percent of the combined voting power of the outstanding
Voting Securities of the corporation resulting from such share
exchange in substantially the same proportion as their ownership
of the Voting Securities outstanding immediately before such
share exchange.
9. Amendment or Termination of the Plan
a) In General. The Board, pursuant
to a written resolution, may from time to time suspend or
terminate the Plan or amend it and, except as provided in
Section 3(b)(iv), 7.1(a), and 8.4(a), the Committee may
amend any outstanding Awards in any respect whatsoever; except
that, without the approval of the stockholders (given in the
manner set forth in subsection (b) below): no amendment may
be made that would:
(A) change the class of employees eligible to participate
in the Plan with respect to ISOs;
(B) except as permitted under Section 8.3, increase
the maximum number of Shares with respect to which ISOs may be
granted under the Plan;
(C) extend the duration of the Plan under Section 4(b)
with respect to any ISOs granted hereunder; or
(D) reprice or regrant through cancellation, or modify
(except in connection with a change in the Companys
capitalization) any award, if the effect would be to reduce the
exercise price for the shares underlying such award.
ii) no amendment may be made that would constitute a
modification of the material terms of the performance
goal(s) within the meaning of Treas. Reg.
§ 1.162-27(e)(4)(vi) or any successor thereto (to the
extent compliance with section 162(m) of the Code is
desired).
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Notwithstanding the foregoing, no such suspension, termination
or amendment shall materially impair the rights of any
Participant holding an outstanding Award without the consent of
such Participant.
b) Manner of Stockholder
Approval. The approval of stockholders must
be effected by a majority of the votes cast (including
abstentions, to the extent abstentions are counted as voting
under applicable state law) in a separate vote at a duly held
stockholders meeting at which a quorum representing a
majority of all outstanding voting stock is, either in person or
by proxy, present and voting on the Plan.
10. Miscellaneous
10.1. Documentation of
Awards. Awards shall be evidenced by such
written Award Agreements, if any, as may be prescribed by the
Committee from time to time. Such instruments may be in the form
of agreements to be executed by both the Participant and the
Company, or certificates, letters, or similar instruments, which
need not be executed by the Participant but acceptance of which
will evidence agreement to the terms thereof.
10.2. Rights as a
Stockholder. Except as specifically provided
by the Plan or an Award Agreement, the receipt of an Award shall
not give a Participant rights as a stockholder; instead, the
Participant shall obtain such rights, subject to any limitations
imposed by the Plan or the Award Agreement, upon the actual
receipt of Shares.
10.3. Conditions on Delivery of
Shares. The Company shall not deliver any
Shares pursuant to the Plan or remove restrictions from Shares
previously delivered under the Plan (i) until all
conditions of the Award have been satisfied or removed,
(ii) until all applicable Federal and state laws and
regulations have been complied with, and (iii) if the
outstanding Shares are at the time of such delivery listed on
any stock exchange, until the Shares to be delivered have been
listed or authorized to be listed on such exchange. If an Award
is exercised by the Participants legal representative, the
Company will be under no obligation to deliver Shares pursuant
to such exercise until the Company is satisfied as to the
authority of such representative.
10.4. Registration and Listing of
Shares. If the Company shall deem it
necessary to register under the Securities Act or any other
applicable statute any Shares purchased under this Plan, or to
qualify any such Shares for an exemption from any such statutes,
the Company shall take such action at its own expense. If Shares
are listed on any national securities exchange at the time any
Shares are purchased hereunder, the Company shall make prompt
application for the listing on such national securities exchange
of such Shares, at its own expense. Purchases and grants of
Shares hereunder shall be postponed as necessary pending any
such action.
10.5. Compliance with
Rule 16b-3. All
elections and transactions under this Plan by persons subject to
Rule 16b-3,
promulgated under section 16(b) of the Exchange Act, or any
successor to such Rule, are intended to comply with at least one
of the exemptive conditions under such Rule. The Committee shall
establish such administrative guidelines to facilitate
compliance with at least one such exemptive condition under
Rule 16b-3
as the Committee may deem necessary or appropriate.
10.6. Tax Withholding
a) Obligation to
Withhold. The Company shall withhold from any
cash payment made pursuant to an Award an amount sufficient to
satisfy all Federal, state, and local withholding tax
requirements (the Withholding Requirements). In the
case of an Award pursuant to which Shares may be delivered, the
Committee may require that the Participant or other appropriate
person remit to the Company an amount sufficient to satisfy the
Withholding Requirements, or make other arrangements
satisfactory to the Committee with regard to the Withholding
Requirements, prior to the delivery of any Shares.
b) Election to Withhold
Shares. The Committee, in its discretion, may
permit or require the Participant to satisfy the federal, state,
and/or local
withholding tax, in whole or in part, by electing to have the
Company withhold Shares (or by returning previously acquired
Shares to the Company); provided, however, that the Company may
limit the number of Shares withheld to satisfy the Withholding
Requirements to the extent necessary to avoid adverse accounting
consequences. Shares shall be valued, for purposes of this
subsection (b), at their Fair Market Value (determined as of the
date an amount is includible in income by the Participant (the
Determination Date), rather than the date of grant).
If Shares acquired by the exercise of an ISO are used to satisfy
the Withholding Requirements, such Shares must have been held by
the Participant for a period of not less than the holding period
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described in section 422(a)(1) of the Code as of the
Determination Date. The Committee shall adopt such withholding
rules as it deems necessary to carry out the provisions of this
Section.
10.7. Transferability of
Awards. No ISO may be transferred other than
by will or by the laws of descent and distribution. No other
Award may be transferred, except to the extent permitted in the
applicable Award Agreement. During a Participants
lifetime, an Award requiring exercise may be exercised only by
the Participant (or, in the event of the Participants
incapacity, by the person or persons legally appointed to act on
the Participants behalf).
10.8. Registration. If the
Participant is married at the time Shares are delivered and if
the Participant so requests at such time, the certificate or
certificates for such Shares shall be registered in the name of
the Participant and the Participants spouse, jointly, with
right of survivorship.
10.9. Acquisitions.
Notwithstanding any other provision of this
Plan, Awards may be granted hereunder in substitution for awards
held by directors, key employees, and associates of other
corporations who are about to, or have, become Key Employees or
Associates as a result of a merger, consolidation, acquisition
of assets, or similar transaction by the Company or a Related
Corporation or (in the case of Awards other than ISOs) an
Affiliate. The terms of the substitute Awards so granted may
vary from the terms set forth in this Plan to such extent as the
Committee may deem appropriate to conform, in whole or in part,
to the provisions of the awards in substitution for which they
are granted.
10.10. Employment
Rights. Neither the adoption of the Plan nor
the grant of Awards will confer upon any person any right to
continued employment by the Company or any of its Related
Corporations or Affiliates or affect in any way the right of any
of the foregoing to terminate an employment relationship at any
time.
10.11. Indemnification of Board and
Committee. Without limiting any other rights
of indemnification that they may have from the Company or any of
its Related Corporations or Affiliates, the members of the Board
and the members of the Committee shall be indemnified by the
Company against all costs and expenses reasonably incurred by
them in connection with any claim, action, suit or proceeding to
which they or any of them may be a party by reason of any action
taken or failure to act under, or in connection with, the Plan
or any Award granted thereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved
by legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or
proceeding, except a judgment based upon a finding of willful
misconduct or recklessness on their part. Upon the making or
institution of any such claim, action, suit or proceeding, the
Board or Committee member shall notify the Company in writing,
giving the Company an opportunity, at its own expense, to handle
and defend the same before such Board or Committee member
undertakes to handle it on his or her own behalf. The provisions
of this Section shall not give members of the Board or the
Committee greater rights than they would have under the
Companys by-laws or Delaware law.
10.12. Application of
Funds. Any cash proceeds received by the
Company from the sale of Shares pursuant to Awards granted under
the Plan shall be added to the general funds of the Company. Any
Shares received in payment for additional Shares upon exercise
of an Option shall become treasury stock.
10.13. Governing Law. The
Plan shall be governed by the applicable Code provisions to the
maximum extent possible. Otherwise, except as provided in
Section 10.12, the laws of the State of Delaware (without
reference to the principles of conflict of laws) shall govern
the operation of, and the rights of Participants under, the Plan
and Awards granted hereunder.
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APPENDIX B
AMENDMENT
TO THE
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
2003 EQUITY INCENTIVE PLAN
(SUBJECT TO STOCKHOLDER APPROVAL)
This Amendment (the Amendment) to the Integra
LifeSciences Holdings Corporation 2003 Equity Incentive Plan
(the Plan), which was adopted by the Board of
Directors of Integra LifeSciences Holdings Corporation (the
Company) on April 23, 2008, subject to approval
by the stockholders of the Company, amends the Plan as follows:
The first sentence of Section 5 is hereby amended to read
in its entirety as follows:
The aggregate number of Shares that may be delivered under
the Plan is 4,750,000.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer
of the Company, has caused this Amendment to be executed on
this day of , 2008.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
Name:
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ANNUAL MEETING OF STOCKHOLDERS OF INTEGRA LIFESCIENCES HOLDINGS CORPORATION July 9, 2008 The proxy
statement and annual report to security holders are available on our internet site at
http://investor.integra-ls.com/financials.cfm Please sign, date and mail your proxy card in the
envelope provided as soon as possible. Please detach along perforated line and mail in the envelope
provided. 00003333333330330000 2 070908 THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF DIRECTORS AND FOR PROPOSALS 2, 3 AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 1. Election of Directors: FOR
AGAINST ABSTAIN Thomas J. Baltimore, Jr. Keith Bradley Richard E. Caruso Stuart M. Essig Neal
Moszkowski Christian S. Schade James M. Sullivan Anne M. VanLent 2. Proposal to ratify the
appointment of PricewaterhouseCoopers LLP as the Companys independent registered public accounting
firm for the fiscal year 2008. 3. Proposal to approve the terms of the Amended and Restated 2003
Equity Incentive Plan. 4. Proposal to approve an amendment to the 2003 Equity Incentive Plan to
increase the number of shares that may be issued or awarded under the plan. To change the address
on your account, please check the box at right and In their discretion, the Proxies are authorized,
to the extent permitted by the rules of indicate your new address in the address space above.
Please note that the Securities and Exchange Commission, to vote upon such other business as may
changes to the registered name(s) on the account may not be submitted via this method. properly
come before the meeting or any adjournment or postponement thereof. Signature of Stockholder Date:
Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this
Proxy. When shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by authorized person. |
0 PROXY CARD INTEGRA LIFESCIENCES HOLDINGS CORPORATION 311 ENTERPRISE DRIVE PLAINSBORO, NEW JERSEY
08536 PROXY Annual Meeting of Stockholders Wednesday, July 9, 2008 THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Stuart M. Essig and John B.
Henneman, III as proxies, each with the power to appoint his substitute, and hereby authorizes them
to represent and to vote, as designated on the reverse side hereof, all the shares of Common Stock
of Integra LifeSciences Holdings Corporation (the Company) held of record by the undersigned on
May 22, 2008 at the Annual Meeting of Stockholders to be held on Wednesday, July 9, 2008 or at any
adjournment or postponement thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
IN FAVOR OF PROPOSALS 2, 3 AND 4; FOR ALL NOMINEES LISTED FOR ELECTION OF DIRECTORS UNDER PROPOSAL
1; AND IN ACCORDANCE WITH THE PROXIES JUDGMENT UPON OTHER MATTERS PROPERLY COMING BEFORE THE
MEETING AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF. (Continued and to be signed on the reverse
side.) 14475 |