DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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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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Soliciting Material Pursuant to §240.14a-12 |
Luminex Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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LUMINEX CORPORATION
12212 Technology Boulevard
Austin, Texas 78727
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 21, 2009
Luminex Corporation (the Company) will hold its 2009 annual meeting of stockholders (the
Meeting) on Thursday, May 21, 2009, at 10:00 a.m., local time, at the Hilton Austin Airport
Hotel, 9515 New Airport Drive, Austin, Texas 78719. At the Meeting, stockholders will act on the
following matters:
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election of four persons nominated by the board of directors to serve for
three-year terms as Class III Directors (designated as Proposal 1 in the accompanying
proxy statement); |
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approval of the Luminex Corporation Amended and Restated 2006 Equity Incentive
Plan (designated as Proposal 2 in the accompanying proxy statement); |
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ratification of the appointment by the Companys Audit Committee of Ernst &
Young LLP as the Companys independent registered public accounting firm for fiscal
2009 (designated as Proposal 3 in the accompanying proxy statement); and |
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such other business as may properly come before the Meeting or any adjournment
or postponement thereof. |
The board of directors has fixed the close of business on March 31, 2009 as the record date
for the determination of stockholders entitled to notice of, and to vote at, the Meeting or any
adjournment or postponement thereof. A complete list of such stockholders will be available for
examination at our offices in Austin, Texas, during normal business hours for a period of ten days
prior to the Meeting.
This year, we are pleased to be using the new U.S. Securities and Exchange Commission rule
that allows companies to furnish their proxy materials over the Internet. As a result, we are
mailing to many of our stockholders a notice instead of a paper copy of our proxy statement and our
annual report. The notice contains instructions on how to access those documents over the Internet.
The notice also contains instructions on how each of those stockholders can receive a paper copy of
our proxy materials, including the proxy statement, our 2008 Annual Report and a form of proxy card
or voting instruction card. All stockholders who do not receive a notice will receive a paper copy
of the proxy materials by mail.
Your attention is directed to the proxy statement for a more complete statement regarding the
matters to be acted upon at the Meeting. Our annual report to stockholders is being mailed or made
available to our stockholders along with our proxy solicitation materials, but it is not part of
the proxy solicitation materials. All stockholders are cordially invited to attend the Meeting.
Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible.
You may vote your shares via a toll-free telephone number or over the Internet. If you received a
paper copy of a proxy or voting instruction card by mail, you may submit your proxy or voting
instruction card for the annual meeting by completing, signing, dating and returning your proxy or
voting instruction card in the pre-addressed envelope provided.
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By Order of the Board of Directors, |
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David S. Reiter |
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Vice President, General |
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Counsel and Corporate Secretary |
Austin, Texas
April 9, 2009
LUMINEX CORPORATION
12212 Technology Boulevard
Austin, Texas 78727
PROXY STATEMENT
For Annual Meeting of Stockholders
To Be Held May 21, 2009
This proxy statement is being furnished to the stockholders of Luminex Corporation (the
Company, Luminex, we or us) in connection with the solicitation by the board of directors
of proxies for use at the 2009 annual meeting of stockholders (the Meeting) to be held at the
time and place and for the purposes set forth in the accompanying notice, and at any and all
adjournments or postponements thereof. This proxy statement and the accompanying proxy card are
being distributed and made available on or about April 9, 2009.
Important Notice Regarding the Availability of Proxy materials for the Stockholder Meeting To
Be Held on May 21, 2009: This proxy statement and our annual report to stockholders are available
at http://phx.corporate-ir.net/phoenix.zhtml?c=79403&p=proxy.
Voting Procedures; General Information
Proposals 1, 2 and 3 will be presented by management at the Meeting. With regard to Proposal
1, the form of proxy permits votes for or withholding of votes as to all nominees for director or
for withholding votes for any specific nominee, and permits votes for, against, or abstention with
regard to Proposals 2 and 3. If the form of proxy is properly executed, returned, and not revoked,
it will be voted in accordance with the specifications, if any, made by the stockholder and, if
specifications are not made, will be voted FOR the nominees named in this proxy statement to the
Companys board of directors, FOR the approval of the Luminex Corporation Amended and Restated 2006
Equity Incentive Plan, and FOR the ratification of the appointment of Ernst & Young LLP as the
Companys independent registered public accounting firm for fiscal 2009.
If your shares are held by your broker or other nominee, often referred to as in street
name, you will receive a form from your broker seeking instructions as to how your shares should
be voted. If you are a registered stockholder and received a notice of availability of our proxy
materials over the Internet, you may vote by telephone or electronically through the Internet by
following the instructions included in the notice. If you are a registered stockholder and
received paper proxy materials through the mail, you may vote by telephone or electronically
through the Internet by following the instructions included with your proxy card. If your shares
are held in street name, you should contact your broker or nominee to determine whether you will be
able to vote by telephone or electronically. If your shares are held in street name and you do not
issue instructions to your broker, your broker, under the rules of The NASDAQ Stock Market LLC, may
vote your shares in its discretion on routine matters, but may not vote your shares on
non-routine matters. The election of directors and the ratification of Ernst & Young LLP as our
independent registered public accounting firm for fiscal 2009 (Proposals 1 and 3) are both deemed
routine matters. Therefore, your broker has discretionary authority to vote your shares on such
matters absent specific instructions from you. However, Proposal 2 is a non-routine matter. If
your broker turns in a proxy card expressly stating that the broker is not voting on a non-routine
matter (Proposal 2) as a result of your failure to provide specific instructions, such action is
referred to as a broker nonvote.
It is not expected that any matter not referred to herein will be presented for action at the
Meeting. If any other matters are properly brought before the Meeting, including, without
limitation, a motion to adjourn the Meeting to another time and/or place for the purpose of, among
other things, permitting dissemination of information regarding material developments relating to
any of the Proposals, or soliciting additional proxies in favor of the approval of any of the
Proposals, the persons named on the accompanying proxy card will vote the shares represented by
such proxy upon such matters in their discretion. Should the Meeting be reconvened, all proxies
will be voted in the same manner as such proxies would have been voted when the Meeting was
originally convened, except for the proxies effectively revoked or withdrawn prior to the time
proxies are voted at such reconvened meeting.
Any stockholder giving a proxy may revoke it at any time before it is voted by communicating
such revocation in writing to our Corporate Secretary at the address indicated above, by executing
and delivering a later-dated proxy or by voting in person at the Meeting.
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Quorum; Required Votes and Recommendations
Our only outstanding voting security is our common stock. Holders of record of common stock
at the close of business on March 31, 2009, the record date for the Meeting, are entitled to notice
of and to vote at the Meeting. On the record date for the Meeting, there were 41,461,355 shares of
common stock outstanding and entitled to vote at the Meeting. In deciding all matters, a holder of
common stock on the record date shall be entitled to cast one vote for each share of common stock
then registered in such holders name or otherwise beneficially owned.
The holders of a majority of the outstanding shares of the Companys common stock as of the
record date must be present in person or be represented by proxy to constitute a quorum and act
upon the proposed business. Failure of a quorum to be represented at the Meeting will necessitate
an adjournment or postponement and will subject the Company to additional expense. Votes withheld
from any nominee for director, abstentions and broker nonvotes are counted as present or
represented for purposes of determining the presence or absence of a quorum.
Proposal 1 discussed in this Proxy Statement requires the affirmative vote of a plurality of
the votes cast at the Meeting. Accordingly, the four nominees receiving the highest number of
affirmative votes of the shares present or represented and entitled to vote at the Meeting shall be
elected as Class III directors. Proposals 2 and 3 require the affirmative vote of the holders of a
majority of the outstanding shares represented at the Meeting and entitled to vote thereon. Votes
will be counted by the Companys transfer agent or our Corporate Secretary. Under Delaware law,
abstentions are not counted as voting for or against a particular matter. However, abstentions
are included in the number of shares present or represented at the Meeting and entitled to vote,
and therefore, abstentions will have the same effect as a vote cast against Proposals 2 and 3.
Abstentions and withhold votes will have no effect on the outcome of Proposal 1. Additionally, if
a broker turns in a proxy card expressly stating that the broker is not voting on a nonroutine
matter, such action is referred to as a broker nonvote. Broker nonvotes are counted for the
purpose of determining the presence or absence of a quorum, but are not counted for determining the
number of votes cast, as a broker nonvote is not considered entitled to vote on a matter.
Accordingly, for purposes of Proposals 2 and 3, broker nonvotes have the effect of reducing the
number of affirmative votes required to achieve a majority of the shares present and entitled to
vote for such matter by reducing the total number of shares from which such majority is calculated.
Broker nonvotes will have no effect on the outcome of Proposal 1.
The Board of Directors unanimously recommends that you vote:
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FOR the Class III Director nominees named in this proxy statement; |
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FOR the approval of the Luminex Corporation Amended and Restated 2006 Equity
Incentive Plan; and |
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FOR the ratification of the appointment of Ernst & Young LLP as the Companys
independent registered public accounting firm for fiscal 2009. |
CORPORATE GOVERNANCE
We believe that effective corporate governance is critical to our long-term health and ability
to create value for our stockholders. Our board of directors believes that we have in place
appropriate charters, policies (including a comprehensive Code of Compliance and corporate
governance guidelines), procedures and controls that promote and enhance corporate governance,
accountability and responsibility with respect to the Company and a culture of honesty and
integrity. We will continue to monitor emerging developments and best practices in corporate
governance and augment these charters, policies, procedures and controls when required or when our
board determines it would benefit the Company and our stockholders. Our corporate governance
policies, including our various board committee charters, can be viewed at the Investor Relations
section of our website at www.luminexcorp.com. Information contained on our website, other than
the electronic version of our proxy statement provided on our website, is not incorporated into
this proxy statement by this or any other reference to our website in this proxy statement, and we
do not intend for such information on or linked to our website to constitute part of this proxy
statement.
Director Independence
Our board of directors consults with the Companys counsel to ensure that the boards
independence determinations are consistent with all relevant securities and other laws and
regulations regarding the definition of independent director, including but not limited to those
set forth in pertinent listing standards of The NASDAQ Stock Market LLC as in effect from time to
time. To assist in the boards independence determinations, each director completed materials
designed to identify any relationships that could affect the directors independence. In
addition, through discussion among the directors a subjective analysis of independence was
reviewed. The board has determined that each of the following directors is an independent
director consistent with the objective requirements of applicable laws and regulations, and that
such persons do not otherwise have any relationship that, in the opinion of the board of directors,
would interfere with the exercise of such persons independent judgment in carrying out the
responsibilities of a director: Robert J. Cresci; Thomas W. Erickson; Fred C. Goad, Jr.; Jay B.
Johnston; Jim D. Kever; Kevin M. McNamara; J. Stark Thompson; and Gerard Vaillant. The board has
also determined that director nominee Edward A. Ogunro, Ph.D., if elected at the Meeting, will
qualify as an independent director. The board has not established categorical standards or
guidelines to make the subjective aspect of these determinations, but considers all relevant facts
and circumstances known to the board.
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Director Qualifications
The Nominating and Corporate Governance Committee may consider whatever factors it deems
appropriate in its assessment of a candidate for board membership; however, candidates nominated to
serve as directors will, at a minimum, in the committees judgment:
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be able to represent the interests of the Company and all of its stockholders and not be
disposed by affiliation or interest to favor any individual, group or class of stockholders
or other constituency; and |
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possess the background and demonstrated ability to contribute to the boards performance
of its collective responsibilities, through senior executive management experience,
relevant professional or academic distinction, and/or a record of relevant civic and
community leadership. |
The consideration of a candidate for director will include the Nominating and Corporate
Governance Committees assessment of the individuals background, skills and abilities, and whether
such characteristics fulfill the needs of the board of directors at that time. As part of the
Nominating and Corporate Governance Committees consideration of a candidate, the committee also
believes that the candidate must:
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be of high ethical character and share the core values of Luminex as reflected in our
Code of Compliance; |
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have a reputation, both personal and professional, consistent with the image and
reputation of Luminex; |
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be highly accomplished in the candidates field; |
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be an active or former chief executive officer of a public company or a biotechnology
company or an active or former leader of another complex organization; |
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otherwise have relevant expertise and experience, and be able to offer advice and
guidance to the chief executive officer based on that expertise and experience; and/or |
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have the ability to exercise sound business judgment. |
Process for Identifying Director Candidates
The Nominating and Corporate Governance Committee may utilize a variety of methods for
identifying nominees for director. Candidates may come to the attention of the Nominating and
Corporate Governance Committee through current board members, professional search firms,
stockholders or other persons. The Nominating and Corporate Governance Committee considers
nominees proposed by the Companys stockholders in accordance with the provisions contained in our
bylaws. Pursuant to our bylaws, any stockholder may nominate a person for election to our board of
directors, provided that the nomination is received by the Secretary of the Company not less than
30 days nor more than 90 days prior to the first anniversary of the preceding years Meeting. Each
nomination submitted in this manner shall include the name and address of the nominee(s) and all
other information with respect to the nominee as required to be disclosed in the proxy statement
for the election of directors under applicable rules of the Securities and Exchange Commission
(SEC), including the nominees consent to being named as a nominee and to serving as a director,
if elected.
The nominating stockholder shall also provide a completed written questionnaire with respect
to each nominee with respect to the background and qualification of each nominee and any other
person or entity that each nominee may represent (which questionnaire shall be provided by the
Corporate Secretary) and a written representation and agreement (in the form provided by the
Corporate Secretary) that each nominee:
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has no undisclosed commitment, agreement or understanding with any person or
entity as to how such nominee will act or vote on any issue or question as a
director; |
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is not a party to any undisclosed commitment, agreement or understanding with any
person or entity other than Luminex with respect to compensation, reimbursement or
indemnification in connection with service or action as a director; |
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will comply with any director stock ownership and trading guidelines of Luminex;
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in such nominees individual capacity and on behalf of any person or entity for
whom such nominee may be a representative, has complied and will comply with all
applicable corporate governance, conflicts, confidentiality and other policies of
Luminex. |
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Additionally, the nominating stockholder must provide:
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his or her name and address as it appears in the stock records of Luminex; |
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the number and type of shares of Luminex capital stock beneficially owned by the
stockholder and a description in reasonable detail of any hedging, derivative, swap,
profit interests, option or other transactions or series of transactions engaged in,
directly or indirectly, by such stockholder, or any agreement, arrangement or
understanding (including any short position, or any borrowing or lending of shares)
to which such stockholder is a party, in each case, the effect or intent of which is
to mitigate loss to, manage the risk or benefit of share price changes for, or
increase or decrease the voting power of, such stockholder with respect to shares of
capital stock of Luminex, or otherwise to reduce the economic risk or benefit of
ownership of shares of capital stock of Luminex to such stockholder (including where
the value of any agreement, arrangement or understanding to which such stockholder
is a party is determined by reference to the price or value of shares of Luminex
capital stock), and the agreement of the stockholder to notify Luminex in writing
within five business days after the record date for the meeting of any changes to
the above information in effect as of the record date for the meeting; |
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all contracts, arrangements, understandings and relationships with respect to the
stockholders investment in Luminex, including with other stockholders, potential
investors in Luminex, transaction counterparties, directors or proposed director
nominees and potential transaction advisers such as financial advisers, legal
counsel and proxy solicitation firms, and the agreement of the stockholder to notify
Luminex in writing within five business days after the record date for the meeting
of any changes to the above information in effect as of the record date for the
meeting; |
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any material agreement such stockholder may have with any other person or entity
in connection with the nomination, and the agreement of the stockholder to notify
Luminex in writing within five business days after the record date for the meeting
of any changes to the above information in effect as of the record date for the
meeting; and |
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a representation as to whether such stockholder intends to deliver a proxy
statement and/or form of proxy to holders of at least the percentage of Luminexs
outstanding shares required to approve the nomination and/or otherwise to solicit
proxies from stockholders in support of the nomination, and as to whether the
stockholder intends to appear in person or by proxy at the meeting to propose such
nomination. |
Our bylaws also provide that certain of the above information also be provided with respect to
certain other persons associated with the nominating stockholder. The foregoing is a summary of
the requirements for stockholders to nominate persons for election to our board of directors, which
requirements are set out fully in our bylaws and the foregoing description is qualified by
reference to the full text of our bylaws.
Evaluation of Director Candidates
The chair of the Nominating and Corporate Governance Committee will preliminarily assess a
candidates qualifications and suitability, working with management support and seeking board
input, and report such assessment to the Nominating and Corporate Governance Committee members.
When feasible, the chair of the Nominating and Corporate Governance Committee will interview
candidates whom the chair believes are likely to meet the criteria for board membership as part of
the preliminary assessment process. The report may be made to the Nominating and Corporate
Governance Committee at a meeting of the committee or informally to each committee member between
meetings.
If it is the consensus of the Nominating and Corporate Governance Committee that a candidate
is likely to meet the criteria for board membership, the chair of the committee will advise the
candidate of the committees preliminary interest. If the candidate expresses sufficient interest,
the committee will arrange interviews of the candidate with one or more members of the committee,
and request such additional information from the candidate as the committee deems appropriate. The
Nominating and Corporate Governance Committee will consider the candidates qualifications,
background, skills and abilities, and whether such characteristics fulfill the needs of the board
at that time, and confer and reach a collective assessment as to the qualifications and suitability
of the candidate for board membership.
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If the Nominating and Corporate Governance Committee determines that the candidate is suitable
and meets the criteria for board membership, the candidate will be invited to meet with the senior
management of the Company and other members of the board of directors, both to allow the candidate
to obtain further information about the Company and to give management and the other directors a
basis for input to the Nominating and
Corporate Governance Committee regarding the candidate. On the basis of its assessment, and
taking into consideration input from other board members and senior management, the Nominating and
Corporate Governance Committee will formally consider whether to recommend the candidates
nomination for election to the board of directors.
Code of Compliance
We have a Code of Compliance that applies to all of the employees, officers and directors of
the Company and its subsidiaries. The purpose of our Code of Compliance is to provide written
standards that are reasonably designed to deter wrongdoing and to promote honest and ethical
conduct; full, fair, accurate, timely and understandable disclosure in reports and documents that
the Company files with the SEC and other public communications by the Company; compliance with
applicable governmental laws, rules and regulations; prompt internal reporting of violations of the
Code of Compliance; and accountability for adherence to the Code of Compliance. Our Code of
Compliance also includes a formal policy regarding the approval of related party transactions,
which is administered by our Audit Committee. This policy is described more fully below under
Certain Relationships and Related Party Transactions. Each director, officer and employee is
required to read and certify that he or she has read, understands and will comply with the Code of
Compliance.
Under the Sarbanes-Oxley Act of 2002 and the SECs related rules, the Company is required to
disclose whether it has adopted a code of ethics that applies to the Companys principal executive
officer, principal financial officer, principal accounting officer or controller or persons
performing similar functions. The NASDAQ Stock Market LLC rules also require the Company to adopt
a code of conduct applicable to the Companys directors, officers and employees that meets the
SECs definition of code of ethics. Our Code of Compliance meets the SECs definition of code
of ethics. The Companys employees, including our Chief Executive Officer and senior financial
officers, are bound by our Code of Compliance.
A copy of our Code of Compliance can be obtained from the Investor Relations section of our
website at www.luminexcorp.com. We intend to disclose amendments to, or waivers from, the Code of
Compliance (to the extent applicable to our directors, Chief Executive Officer, principal financial
officer, principal accounting officer or persons performing similar functions) on our website.
Communications with Members of the Board
Our board of directors has established procedures for the Companys stockholders to
communicate with members of the board of directors. Stockholders may communicate with any of the
Companys directors, including the chairperson of any of the committees of the board of directors
or the presiding director, if any, by writing to a director, care of Corporate Secretary, Luminex
Corporation, 12212 Technology Boulevard, Austin, Texas 78727. Appropriate communications will be
forwarded to such director(s) by the Corporate Secretary. The Corporate Secretary maintains a log
of such communications and transmits such communications to identified director addressee(s) as
soon as practical, unless there are safety or security concerns that mitigate against further
transmission of the communication, as determined by our Corporate Secretary in consultation with
advice from counsel, when necessary. The board of directors or individual directors so addressed
are advised of any communication withheld for safety or security reasons as soon as practicable. If
multiple communications are received on a similar topic, the Corporate Secretary may, in his
discretion, forward only representative correspondence.
Communications Regarding Accounting Matters
Communications expressing concerns or complaints relating to accounting matters, internal
disclosure controls or controls over financial reporting, or auditing matters are handled in
accordance with procedures established by the Audit Committee, including, without limitation, a
dedicated hot line and email address. Under those procedures, concerns having to do with
accounting matters, internal disclosure controls or controls over financial reporting, or auditing
matters are presented by the Companys compliance officer to the Audit Committee for consideration
and, if appropriate, corrective action.
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Board Member Attendance at Annual Meeting of Stockholders
The Company strongly encourages each member of the board of directors to attend each annual
meeting of stockholders. Accordingly, we expect most, if not all, of the Companys directors to be
in attendance at the Meeting. All of our directors attended the 2008 annual meeting of
stockholders.
Meetings and Committees of the Board of Directors
The board of directors and its committees meet periodically during the year as deemed
appropriate. During 2008, the board of directors met ten times. No director attended fewer than
75% of all the 2008 meetings of the board of directors and its committees on which each such
director served.
The board of directors is generally responsible for establishing our broad corporate policies
and reviewing and assessing our corporate objectives and strategies, and other major transactions
and capital commitments. The board of directors currently has five standing committees: the Audit
Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, the
Executive Committee and the Development and Strategy Committee. Each of our committees, other than
the Executive Committee and Development and Strategy Committee, operates under a charter adopted by
our board of directors. It is the policy of the board and each committee to periodically review
its performance and the effectiveness of its charter and policies, as applicable. If elected at
the Meeting, it is anticipated that Mr. Ogunro will serve on the Strategy and Development Committee
of the board of directors.
Audit Committee
The Audit Committee, which met five times in 2008, currently consists of Mr. McNamara, who
serves as Chairman, Mr. Cresci, and Mr. Thompson. The board of directors has determined that each
member of the Audit Committee meets the independence requirements of the applicable rules of the
The NASDAQ Stock Market LLC and the SEC and has a basic understanding of finance and accounting and
is able to read and understand fundamental financial statements. The board of directors has
further determined that Mr. McNamara is an audit committee financial expert as such term is
defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC. The Audit Committees
primary duties and responsibilities are to oversee the Companys accounting and financial reporting
processes and audits of the Companys financial statements; oversee the integrity of the Companys
systems of internal controls regarding finance, accounting and legal compliance, including the
oversight of the Companys internal audit function; oversee the qualifications, independence and
performance of the Companys independent registered public accounting firm; pre-approve all audit
and permitted non-audit services to be performed by such firm; provide an avenue of free and open
communication among the independent registered public accountants, management, internal audit and
the board of directors; and to approve related party transactions. It is the function of the Audit
Committee to help ensure the Companys financial statements accurately reflect the Companys
financial position and results of operations. In addition, the Audit Committee, following its
review of the audited financial statements, is charged with recommending the audited financial
statements to the board of directors for inclusion in the Companys annual reports. Additional
information regarding the purpose and functions of the Audit Committee is set forth in the Report
of the Audit Committee provided below.
Compensation Committee
The Compensation Committee, which met eleven times in 2008, currently consists of Jay B.
Johnston, who serves as Chairman, Mr. Goad, Mr. Kever, and Mr. Vaillant. The board of directors
has determined that each member of the Compensation Committee is a non-employee director as
defined in Rule 16b-3 of the rules promulgated under the Securities Exchange Act of 1934, an
outside director for the purposes of the Internal Revenue Code of 1986, as amended (the Code),
and an independent director as defined by the applicable rules of The NASDAQ Stock Market LLC. The
Compensation Committees function is to establish and apply our compensation policies and
philosophies to assure that the executive officers, directors and other officers and key employees
are compensated in a manner consistent with the compensation policies and objectives adopted by the
Compensation Committee, competitive practice and the requirements of the appropriate regulatory
bodies. The Compensation Committee also administers our equity incentive plans. Additionally, the
Compensation Committee is charged with recommending the Compensation Discussion and Analysis to
the board of directors for inclusion in the Companys proxy statement and incorporated by reference
into the Companys Annual Report on Form 10-K. Additional information regarding the functions
performed by the Compensation Committee and the process undertaken by the Compensation Committee in
the determination of executive compensation is included under Executive and Director
CompensationCompensation Discussion and Analysis.
7
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee, which met five times in 2008, currently
consists of Mr. Cresci, who serves as Chairman, Mr. Thompson and Mr. Vaillant. The board of
directors has determined that each member of the Nominating and Corporate Governance Committee is
independent as defined by the applicable rules of the The NASDAQ Stock Market LLC. The Nominating
and Corporate Governance Committee provides assistance to the board of directors in identifying and
recommending individuals qualified to serve as directors of the
Company, reviews the composition of the board of directors, periodically evaluates the
performance of the board of directors and its committees, and reviews and recommends corporate
governance policies for the Company. In addition, the Nominating and Corporate Governance
Committee recommends our various committee memberships based upon, among other considerations, a
directors available time commitment, background and/or skill set it deems appropriate to
adequately perform the responsibilities of the applicable committee.
Executive Committee
The Executive Committee, which met three times in 2008, currently consists of Mr. Erickson,
who serves as Chairman, Mr. Balthrop and Mr. Loewenbaum. The Executive Committee is authorized to
act on behalf of the board of directors as a whole, to the extent delegated to the committee and
otherwise permitted by law. The Executive Committee primarily meets to discuss Company performance
and strategy. No formal actions on behalf of the board were taken in 2008 by the Executive
Committee.
Strategy and Development Committee
The Strategy and Development Committee was formed by the board of directors in March 2009, and
currently consists of Mr. Balthrop, Mr. Vaillant and Mr. Johnston. The Strategy and Development
Committee was formed for the purpose of overseeing the Companys technology-related initiatives,
including strategic decisions with respect to existing and new platforms and product offerings,
research and development, and intellectual property issues. If elected at the Meeting, it is
anticipated that Mr. Ogunro will serve as a member of the Strategy and Development Committee.
Executive Sessions of Non-employee Directors
Generally, an executive session of non-employee directors is held in conjunction with each
regularly scheduled board meeting and other times as deemed appropriate. The executive sessions
are generally led by Mr. Loewenbaum in his capacity as Chairman of the board. At least two
meetings per year are also held by solely our independent directors, led by the presiding director.
The presiding director is the then chair of the Nominating and Corporate Governance Committee
(currently Mr. Cresci), as further described in our corporate governance guidelines.
Scientific Advisory Board
The Scientific Advisory Board (the Advisory Board), which met two times in 2008, was created
in 2005 to, among other responsibilities, provide strategic advice regarding our research and
development efforts and to evaluate and provide new scientific and technological perspectives
relating to the current and future application of our technologies. Our former director, Dr. C.
Thomas Caskey, was the initial member of the Advisory Board, which now also includes Dr. Andrea
Ferreira-Gonzalez, Dr. Thomas Joos and Dr. Gary Procop. Richard Janeczko also serves on the
Advisory Board as a management representative. It is expected that each member of our Advisory
Board will be qualified and experienced in the markets and/or industries in which our products are
or may be utilized and, with the exception of Mr. Janeczko, are neither employees nor directors of
Luminex. Additionally, Luminex may invite members of our board of directors to serve on the
Advisory Board in their capacity as members of our board of directors in order to help oversee and
direct the Advisory Board and help communicate the Advisory Boards conclusions and recommendations
to our board of directors. The Advisory Board operates at the discretion of the board of
directors.
8
Compensation Committee Interlocks and Insider Participation
During 2008, the Compensation Committee of the board of directors consisted of Mr. Johnston,
who served as Chairman, Mr. Goad, Mr. Kever and Mr. Vaillant, none of whom has ever been an officer
or employee of the Company or its subsidiaries. No interlocking relationship existed during 2008
between any officer, member of our board of directors or the Compensation Committee and any
officer, member of the board of directors or compensation committee of any other company.
PROPOSAL 1 ELECTION OF CLASS III DIRECTORS
The number of directors on our board of directors is currently fixed at ten. Our certificate
of incorporation divides our board of directors into three classes which serve staggered three-year
terms. The terms of the Class I, Class II and Class III directors will expire upon the election
and qualification of directors at the annual meeting of stockholders to be held in 2010, 2011 and
2009, respectively.
Currently, our board of directors is composed of three Class I directors (consisting of Robert
J. Cresci, Thomas W. Erickson and Gerard Vaillant), three Class II directors (consisting of Fred C.
Goad, Jr., Jim D. Kever and Jay B. Johnston) and four Class III directors (consisting of Patrick J.
Balthrop, Sr., G. Walter Loewenbaum II, J. Stark Thompson, and Kevin M. McNamara). Mr. Thompson is
not standing for re-election to the board of directors and his services as a director, and as a
member of our Audit and Nominating and Corporate Governance Committees, will cease on the date of
the Meeting. As described below, Edward A. Ogunro, Ph.D. has been nominated to serve as a Class
III director.
At the Meeting, the stockholders will elect four Class III directors nominated by the board of
directors. Each of these directors is to serve a three-year term until the 2012 annual meeting of
stockholders and until a successor is elected and qualified or until the directors earlier
resignation or removal. The board of directors and its Nominating and Corporate Governance
Committee, pursuant to and consistent with the nomination procedures described above under
Corporate Governance, have nominated Messrs. Balthrop, Loewenbaum, and McNamara for re-election,
and Edward A. Ogunro, PhD. for election, as Class III directors. It is the intention of the
persons named in the proxy to vote the proxies for the election of the aforementioned nominees.
Proxies may not be voted for persons other than those, or for more persons than, named in the
proxy. If any nominee should be unwilling or become unavailable to serve as a director for any
reason, the persons named as proxies reserve full discretion to vote for such other person or
persons as may be properly nominated by the board of directors. The board of directors has no
reason to believe that any of the nominees will be unable or unwilling to serve as a director if
elected.
Certain information about the Class III nominees for the board of directors, and those
directors whose terms do not expire at the Meeting, is furnished below.
Class III Director Nominees
Patrick J. Balthrop, Sr., age 52. Mr. Balthrop joined Luminex in May 2004 as President and
Chief Executive Officer and has served as a member of the board of directors since September 2004.
He served as president of Fisher Healthcare, a Fisher Scientific International company, a
manufacturer and supplier of products and services principally to the scientific and laboratory
markets from 2002 to May 2004. Prior to Fisher Scientific International, Mr. Balthrop served in a
number of leadership positions for over 20 years with Abbott Laboratories, a global, broad-based
health care company (Abbott), primarily in Abbotts Diagnostics Division. Mr. Balthrops most
recent positions at Abbott were as head of worldwide commercial diagnostics operations and as head
of Abbott Vascular. Mr. Balthrop holds an M.B.A. from the Kellogg Graduate School of Management of
Northwestern University, and a B.S. in Biology from Spring Hill College.
G. Walter Loewenbaum II, age 64. Mr. Loewenbaum has served as a member of the board of
directors since May 1995 and as Chairman of the board of directors since September 2002. He served
as Vice Chairman of the board of directors from April 1998 until January 2000. Mr. Loewenbaum
currently serves as Chairman and chief executive officer of Mumboe Corp. (f/k/a Finetooth Corp.), a
provider of contract management solutions, a position that he has held since February 2002.
Additionally, from July 1999 through 2003, he served as a member of LeCorgne Loewenbaum & Co., LLC,
an investment banking firm. From April 1990 until June 1999, he served as the president, chairman
and chief executive officer of Loewenbaum & Company, Inc. (f/k/a Southcoast Capital), an investment
banking company. Mr. Loewenbaum also has served as chairman of the board of directors of 3D
Systems Corporation (3D Systems), a provider of 3-D printing, rapid prototyping and manufacturing
solutions, since September 1999, and was previously chairman of the board of directors of Envoy
Corporation (Envoy), a provider of electronic transaction processing services for the healthcare
industry. He holds a B.A. from the University of North Carolina.
9
Kevin M. McNamara, age 53. Mr. McNamara has served as a member of the board of directors
since May 2003. In addition, he provided financial and strategic consulting services to the
Company from October 2001 through December 2002. Mr. McNamara has served as executive vice
president, chief financial officer and treasurer of HealthSpring, Inc., a managed care company,
since April 2005. Mr. McNamara also served as non-executive chairman from April 2005 through
January 2006 of MedAvant Healthcare Solutions (f/k/a ProxyMed, Inc.), a provider of automated
healthcare business and cost containment solutions for financial, administrative and clinical
transactions in the healthcare payments marketplace, and served as interim chief executive officer
of ProxyMed, Inc. from December 2004 through June 2005. Mr. McNamara previously served as chief
financial officer of HCCA International, Inc., a healthcare management and recruitment company from
October 2002 to April 2005, and currently serves on the board of directors of HCCA. Mr. McNamara
serves on the board of directors of Tyson Foods, Inc., a food production company (Tyson).
Mr. McNamara is a Certified Public Accountant (inactive) and holds a B.S. in Accounting from
Virginia Commonwealth University and a M.B.A. from the University of Richmond.
Edward A. Ogunro, Ph.D., age 56. Dr. Ogunro served as senior vice president, R&D and medical
affairs and chief scientific officer at Hospira Inc., a global specialty pharmaceutical and
medication delivery company, from April 2004 until December 2007. Prior to Abbotts spin-off of
Hospira in 2004, Dr. Ogunro served in a number of leadership positions for over 20 years with
Abbott, primarily in Abbotts Diagnostics Division, and most recently served as corporate vice
president, R&D, medical and regulatory affairs in Abbotts Hospital Products Division. He held
numerous other positions with Abbott, including program director for AxSym, one of the most
successful analyzers in the diagnostic industry, and divisional vice president for Abbotts
Immunodiagnostics and Chemistry R&D Organization. Dr. Ogunro serves on the board of directors of
Applied NeuroSolutions, Inc., a company focused on the development of an integrated portfolio of
products for the treatment and diagnosis of Alzheimers disease. Previously, Dr. Ogunro pursued
postdoctoral studies and served as an assistant professor at Northwestern University Medical School
in Chicago from 1977 to 1982. Mr. Ogunro holds a B.S. in Physiology and Biochemistry from Reading
University and a Ph.D. in Biochemistry from London University.
Class I Directors (Terms Expire in 2010)
Robert J. Cresci, age 65. Mr. Cresci has served as a member of the board of directors since
December 1996. He has been a Managing Director of Pecks Management Partners Ltd., an investment
management firm, since September 1990. Mr. Cresci currently serves on the boards of directors of
j2 Global Communications, Inc., a provider of outsourced, value-added messaging and communications
services, ContinuCare Corporation, a provider of outpatient primary care physician services, and
Sepracor Inc., a research-based pharmaceutical company. Mr. Cresci holds an undergraduate degree
from the United States Military Academy at West Point and holds a M.B.A. in Finance from the
Columbia University Graduate School of Business.
Thomas W. Erickson, age 58. Mr. Erickson has served as a member of the board of directors
since May 2004. Mr. Erickson served as our Interim President and Chief Executive Officer from
September 2002 until our hiring of Mr. Balthrop in May 2004. He is currently chairman of the board
of PATHCare, Inc., an operator of long term care facilities, and is a Senior Advisor to New
Mountain Capital, LLC, a private equity firm. Previously, he served as chairman of the board of
national Medical Health Card Systems, Inc., a pharmacy benefits manager, chairman of the board of
TransHealthcare, Inc., a health care services company, chairman and interim president and chief
executive officer of LifeCare Holdings, Inc., an operator of long-term acute care hospitals, and
interim president and chief executive officer of Omega Healthcare Investors, Inc., a healthcare
focused real estate investment trust. Mr. Erickson was also co-founder, president and chief
executive officer of CareSelect Group, Inc., a physician practice management company. Earlier in
his career, he held several management positions at American Hospital Supply Corporation. Mr.
Erickson holds a Bachelors degree from University of Iowa and an M.B.A. from Southern Methodist
University.
Gerard Vaillant, age 67. Mr. Vaillant has served as a member of the board of directors since
February 2005. Mr. Vaillant held a number of positions within Johnson & Johnson, a manufacturer of
health care products, from 1981 through 2004. Most recently, Mr. Vaillant served as company group
chairman of Johnson & Johnson until he retired. He also served as chairman for Ortho-Clinical
Diagnostics, Inc., a provider of total solutions for screening, diagnosing, monitoring and
confirming diseases, Veridex LLC, a provider of high-value oncology products, and Therakos, Inc., a
provider of innovative cellular therapy products, and as a member of several other operating
committees within Johnson & Johnson during that period. In addition, from 1992-1995, he was the
worldwide president of LifeScan, a company dedicated to improving the quality of life for people
with diabetes by developing, manufacturing and marketing a wide range of blood glucose monitoring
systems and software. He currently serves on the board of directors of Sensors for Medicine and
Science, Inc., a developer of senro technologies, Tecan AG, a provider of laboratory instruments
and solutions in biopharmaceuticals, forensics, and clinical diagnostics, and OncoMethylome
Sciences, a molecular diagnostics company. He holds a Masters Degree & Superior Certificate in
Biochemistry & Industrial Chemistry from Paris University of Sciences and a Degree in Marketing
from Ecole Superieure de Commerce de Paris.
10
Class II Director (Terms Expire in 2011)
Fred C. Goad, Jr., age 68. Mr. Goad has served as a member of the board of directors since
September 1997. Since August 2001, he has been a member in Voyent Partners, L.L.C. (Voyent), a
private investment company. Mr. Goad served as co-chief executive officer of the transaction
services division of WebMD Corporation (WebMD), a provider of healthcare transaction, information
and technology services, from June 2000 through March 2001. From March 1999 through May 2000,
Mr. Goad served as senior advisor to the office of the president of the transaction services
division of Quintiles Transnational Corporation (Quintiles), a contract research company
providing a wide range of clinical research services for biotech and pharmaceutical clients.
Mr. Goad served as co-chief executive officer and chairman of Envoy from June 1996 until Envoy was
acquired by Quintiles in March 1999. From 1985 to June 1996, Mr. Goad served as president and
chief executive officer of Envoy. Mr. Goad serves on the board of directors of Emageon Inc., a
provider of information technology systems
for hospitals, healthcare networks and imaging facilities, and several private companies. Mr.
Goad holds a B.S. in business from the University of Virginia.
Jim D. Kever, age 56. Mr. Kever has served as a member of the board of directors since
December 1996. He has been a member in Voyent since August 2001. Mr. Kever served as co-chief
executive officer of the transaction services division of WebMD from June 2000 to March 2001. From
March 1999 through May 2000, Mr. Kever served as chief executive officer of the transaction
services division of Quintiles. From August 1995 through March 1999, Mr. Kever was the president
and co-chief executive officer of Envoy. Mr. Kever serves on the boards of directors of 3D
Systems, Tyson, and ACI Worldwide, Inc, a leading provider of electronic payments software and
services. Mr. Kever holds a B.S. in business and administration from the University of Arkansas
and a J.D. from the Vanderbilt University School of Law.
Jay B. Johnston, age 66. Mr. Johnston has served as a member of the board of directors since
February 2005. Mr. Johnston currently serves as chairman of QuesTek Innovations, LLC, a
privately-held company that designs and markets high tech materials, a position he has held since
August 2001. From 1975-1999, he held numerous positions at Abbott, most recently as corporate vice
president for diagnostic assays and systems. He held numerous other positions with Abbott,
including president of Dainabot Co. Ltd. and vice president Asia Pacific. Mr. Johnston has
experience in general management, product development, technology management, strategic marketing
and business development. He holds an M.B.A. in General Management from the Amos Tuck School of
Business Administration and a B.A. degree in Public Administration from Dartmouth College.
Required Vote; Recommendation of the Board
Election of Class III directors will be determined by a plurality of the votes cast at the
Meeting.
The board of directors unanimously recommends that stockholders vote FOR the election of its
nominees for Class III directors.
11
PROPOSAL 2 APPROVAL OF THE LUMINEX CORPORATION AMENDED AND RESTATED 2006
EQUITY INCENTIVE PLAN
Our Board of Directors has adopted and recommends that you approve the Luminex Corporation
Amended and Restated 2006 Equity Incentive Plan (the Equity Incentive Plan). The Luminex
Corporation 2006 Equity Incentive Plan (the Original Plan) was initially approved by the Company
on May 25, 2006 by a majority of our stockholders present in person or by proxy and entitled to
vote at our 2006 annual meeting of stockholders. The amendments, among other things:
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increase the number of shares available for issuance under
the Original Plan by 3,325,000
shares (see Shares Available for Awards under the Plan below); |
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provide that each share issued pursuant to a restricted share or a restricted share unit
award will reduce the share reserve for issuance under the Equity Incentive Plan by 1.48
shares, and that the expiration, termination, cash settlement or otherwise forfeiting or
cancelling of restricted share or restricted share unit awards will increase such share
reserve by 1.48 shares for each share subject to the expired, terminated, cash settled or
otherwise forfeited or cancelled restricted share or restricted share unit awards (see Shares
Available for Awards under the Plan below); |
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modify the permissible performance goals associated with performance awards under the
Equity Incentive Plan (see Performance Awards below); and |
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modify the change in control provision to provide the Compensation Committee of the Board
of Directors greater flexibility in administering the Equity Incentive Plan in the event of a
change of control (see Change in Control below). |
The amendments to the Equity Incentive Plan also include conforming amendments required by
changes in law, including Section 409A of the Internal Revenue Code of 1986 (the Code), and
miscellaneous clarifications to plan language. NASDAQ Stock Market Rules require us to obtain
stockholder approval of material amendments to equity compensation plans, such as the increase in
shares available for issuance under the Original Plan.
The primary purpose of the Equity Incentive Plan is to promote the interests of the Company
and its stockholders by, among other things, (i) attracting and retaining key officers, employees
and directors of, and consultants to, the Company and its subsidiaries and affiliates, (ii)
motivating those individuals by means of performance-related incentives to achieve long-range
performance goals, (iii) enabling such individuals to participate in the long-term growth and
financial success of the Company, (iv) encouraging ownership of stock in the Company by such
individuals, and (v) linking their compensation to the long-term interests of the Company and its
stockholders. Increasing the number of shares available for issuance under the Equity Incentive
Plan will enable the Company to continue to attract, retain and motivate key officers, employees
and directors.
As of March 31, 2009:
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983,731 shares were available for grant in the aggregate from all of our pre-existing
equity incentive plans; |
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awards were outstanding representing 1,200,352 shares that are full-value awards (i.e.,
restricted shares, RSUs or other full-value awards as contemplated by the Equity Incentive
Plan); |
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options representing 2,714,500 shares were outstanding; |
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the weighted-average exercise price (WAEP) for outstanding options was $11.88; and |
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the weighted-average remaining term (WART) for outstanding options was 3.98 years. |
12
The following is a brief summary of the principal features of the Equity Incentive Plan, which
is qualified in its entirety by reference to the Equity Incentive Plan itself, a copy of which is
attached hereto as Exhibit A and incorporated herein by reference.
Shares Available for Awards under the Plan. Under the Equity Incentive Plan, awards
may be made in common stock of the Company. Subject to adjustment as provided by the terms of the
Equity Incentive Plan, the maximum number of shares of common stock with respect to which awards
may be granted under the Equity
Incentive Plan is the sum of (i) 3,325,000 and (ii) the number of shares available for grant
under the Original Plan as of the end of the day May 21, 2009 (assuming approval of this Proposal
on the date of the Annual Meeting). Except
as adjusted in accordance with the terms of the Equity Incentive Plan, no more than 1,000,000
shares of common stock authorized under the Equity Incentive Plan may be awarded as incentive stock
options.
Each share issued pursuant to an option shall reduce the share reserve by one share. Each
share subject to a redeemed portion of a stock appreciation right (SAR) shall reduce the share
reserve by one share. Each share issued pursuant to a restricted stock award or a restricted stock
unit award shall reduce the share reserve by 1.48 shares. If any award granted under the Equity
Incentive Plan, the Original Plan or the Companys 2000 Long-Term Incentive Plan (the 2000 Plan)
expires, terminates, is settled in cash (in whole or in part) or is otherwise forfeited or canceled
for any reason before it has vested or been exercised in full, the shares subject to such award
shall, to the extent of such expiration, cash settlement, forfeiture, or termination, again be
available for awards under the Equity Incentive Plan and the share reserve will be increased. Any
shares that again become available for grant shall be added back as (i) one share if such shares
were subject to options or SARs granted under the Equity Incentive Plan or under the 2000 Plan, and
(ii) 1.48 shares if such shares were subject to restricted share or restricted share unit awards
granted under the Equity Incentive Plan, the Original Plan or under the 2000 Plan. Notwithstanding
the foregoing, if an option or SAR is exercised, in whole or in part, by tender of shares or if the
Companys tax withholding obligation is satisfied by withholding shares, the number of shares
deemed to have been issued under the Equity Incentive Plan shall be the number of shares that were
subject to the option or SAR or portion thereof, and not the net number of shares actually issued
and any SARs to be settled in shares shall be counted in full against the number of shares
available for issuance under the Equity Incentive Plan, regardless of the number of shares issued
upon the settlement of the SAR.
Shares issued by the Company as substitute awards granted solely in connection with the
assumption of outstanding awards previously granted by a company acquired by the Company, or with
which the Company combines (Substitute Awards), do not reduce the number of shares available for
awards under the Equity Incentive Plan.
In addition, the Equity Incentive Plan imposes individual limitations on the amount of certain
awards in order to comply with Sections 162(m), 422 and 409A of the Code. Under these limitations,
no single participant may receive options or SARs in any calendar year that, taken together, relate
to more than 300,000 shares of common stock, subject to adjustment in certain circumstances.
With certain limitations and exceptions, awards made under the Equity Incentive Plan will be
equitably and proportionately adjusted by the Compensation Committee of the Board of Directors (the
Committee), as deemed appropriate by the Committee, to prevent dilution or enlargement of
benefits or potential benefits intended to be made available under the Equity Incentive Plan in the
event of any stock dividend, reorganization, recapitalization, stock split, combination, merger,
consolidation, change in laws, regulations or accounting principles or other relevant unusual or
nonrecurring event affecting the Company.
Eligibility and Administration. Current and prospective officers and employees, and
directors of, and consultants to, the Company or its subsidiaries or affiliates are eligible to be
granted awards under the Equity Incentive Plan. As of March 31, 2009, approximately 385 individuals
were eligible to participate in the Equity Incentive Plan. However, the Company has not at the
present time determined who will receive the shares of common stock that will be authorized for
issuance under the Equity Incentive Plan or how they will be allocated. The Committee will
administer the Equity Incentive Plan, except with respect to awards to non-employee directors, for
which the Equity Incentive Plan will be administered by the Board. The Committee will be composed
of not less than two non-employee directors, each of whom will be a Non-Employee Director for
purposes of Section 16 of the Exchange Act and Rule 16b-3 thereunder, an outside director within
the meaning of Section 162(m) and the regulations promulgated under the Code and will be an
independent director as defined by the listing standards of The Nasdaq Stock Market. Subject to the
terms of the Equity Incentive Plan, the Committee is authorized to select participants, determine
eligibility for participation and decide all questions concerning eligibility for and the amount of
awards under the Equity Incentive Plan, determine the type and number of awards to be granted,
determine and later amend (subject to certain limitations) the terms and conditions of any award,
interpret and specify the rules and regulations relating to the Equity Incentive Plan, and make all
other determinations which may be necessary or desirable for the administration of the Equity
Incentive Plan.
13
In addition, the Equity Incentive Plan authorizes the Committee to grant awards as an
alternative to, or as the form of payment for grants or rights earned or payable under, other bonus
or compensation plans, arrangements or policies of the Company, grant substitute awards on such
terms and conditions as the Committee may prescribe,
subject to compliance with the incentive stock option rules under Section 422 of the Code and
the nonqualified deferred compensation rules under Section 409A of the Code, make all
determinations under the Equity Incentive Plan concerning any participants separation from service
with the Company, including whether such separation occurs by reason of cause, good reason,
disability, retirement, or in connection with a change in control and whether a leave constitutes a
separation from service.
Stock Options and Stock Appreciation Rights. The Committee is authorized to grant
stock options, including both incentive stock options, which can result in potentially favorable
tax treatment to the participant, and non-qualified stock options. The grant of an option or SAR
occurs when the Committee by resolution, written consent, or other appropriate action determines to
grant such option or SAR for a particular number of shares to a particular participant at a
particular option price or grant price, or such later date as the committee shall specify in such
resolution, written consent or other appropriate action. The Committee may specify the terms of
such grants subject to the terms of the Equity Incentive Plan. The Committee is also authorized to
grant SARs, either with or without a related option. The exercise price per share subject to an
option and the grant price of an SAR is determined by the Committee at the time granted, but may
not be less than the fair market value of a share of common stock on the date of the grant, except
in the case of Substitute Awards. In the case of Substitute Awards or awards granted in connection
with an adjustment in the form of options or SARs, such grants shall have an option price (or grant
price) per share that is intended to maintain the economic value of the award that was replaced or
adjusted as determined by the Committee. The maximum term of each option or SAR, the times at
which each option or SAR will be exercisable, and the provisions requiring forfeiture of
unexercised options at or following separation from service generally are fixed by the Committee,
except that no option or SAR relating to an option may have a term exceeding ten years. Incentive
stock options that are granted to holders of more than ten percent of the Companys voting
securities are subject to certain additional restrictions, including a five-year maximum term and a
minimum exercise price of 110% of fair market value.
A stock option or SAR may be exercised in whole or in part at any time, with respect to whole
shares only, within the period permitted thereunder for the exercise thereof. Stock options and
SARs shall be exercised by written notice of intent to exercise the stock option or SAR and, with
respect to options, payment in full to the Company of the amount of the option price for the number
of shares with respect to which the option is then being exercised. An award agreement may
provide that the period of time over which an option, other than an incentive stock option, or SAR
may be exercised shall be automatically extended if on the scheduled expiration of such award, the
participants exercise of such award would violate applicable securities law; provided, however,
that during the extended exercise period the option or SAR may only be exercised to the extent such
award was exercisable in accordance with its terms immediately prior to such scheduled expiration
date; provided further, however, that such extended exercise period shall end not later than 30
days after the exercise of such option or SAR first would no longer violate such laws.
Payment of the option price shall be made in (i) cash or cash equivalents, or, (ii) at the
discretion of the Committee, by transfer, either actually or by attestation, to the Company of
unencumbered shares previously acquired by the participant, valued at the fair market value of such
shares on the date of exercise (or next succeeding trading date, if the date of exercise is not a
trading date), together with any applicable withholding taxes, such transfer to be upon such terms
and conditions as determined by the Committee, (iii) by a combination of (i) or (ii), or (iv) by
any other method approved or accepted by the Committee in its sole discretion, including, if the
Committee so determines, (x) a cashless (broker-assisted) exercise that complies with applicable
laws or (y) withholding shares (net-exercise) otherwise deliverable to the participant pursuant to
the option having an aggregate fair market value at the time of exercise equal to the total option
price. Until the optionee has been issued the shares subject to such exercise, he or she shall
possess no rights as a stockholder with respect to such shares. The Company reserves, at any and
all times in the Companys sole discretion, the right to establish, decline to approve or terminate
any program or procedures for the exercise of options by means of a method set forth in subsection
(iv) above, including with respect to one or more participants specified by the Company
notwithstanding that such program or procedures may be available to other participants.
Except as otherwise provided in the applicable award agreement, an option or SAR ceases to
become exercisable upon a separation from service of the holder thereof. The Committee may
determine in its discretion that an option or SAR may be exercised following any such separation
from service, whether or not exercisable at the time of such separation; provided, however, that in
no event may an option or SAR be exercised after the expiration date of such award specified in the
applicable award agreement, except as otherwise provided in the Equity Incentive Plan.
14
Restricted Shares and Restricted Share Units. The Committee is authorized to grant
restricted shares of common stock and restricted share units. Restricted shares are shares of
common stock subject to transfer restrictions as well as forfeiture upon certain separations from
service prior to the end of a restricted period or other
conditions specified by the Committee in the award agreement. A participant granted restricted
shares of common stock generally has most of the rights of a stockholder of the Company with
respect to the restricted shares, including the right to receive dividends and the right to vote
such shares. None of the restricted shares may be transferred, encumbered or disposed of during the
restricted period or until after fulfillment of the restrictive conditions.
Each restricted share unit has a value equal to the fair market value of a share of common
stock on the date of grant. The Committee determines, in its sole discretion, the restrictions
applicable to the restricted share units. A participant will be credited with dividend equivalents
on any vested restricted share units at the time of any payment of dividends to stockholders on
shares of common stock. Except as determined otherwise by the Committee, restricted share units may
not be transferred, encumbered or disposed of, and such units shall terminate, without further
obligation on the part of the Company, unless the participant remains in continuous employment (or
other service-providing capacity) of the Company for the restricted period and any other
restrictive conditions relating to the restricted share units are met. Restricted share units are
subject to similar transfer restrictions as restricted shares, except that no shares are actually
awarded to a participant who is granted restricted share units on the date of grant, and such
participant shall have no rights of a stockholder with respect to such restricted share units until
the restrictions set forth in the applicable award agreement have lapsed.
Performance Awards. A performance award consists of a right that is denominated in
cash or shares of common stock, valued in accordance with the achievement of certain performance
goals during certain performance periods as established by the Committee, and payable at such time
and in such form as the Committee shall determine. Performance awards may be paid in a lump sum or
in installments following the close of a performance period or on a deferred basis, as determined
by the Committee. Separation from service prior to the end of any performance period, other than
for reasons of death or total disability, will result in the forfeiture of the performance award. A
participants rights to any performance award may not be transferred, encumbered or disposed of in
any manner, except by will or the laws of descent and distribution or as the Committee may
otherwise determine.
Performance awards are subject to certain specific terms and conditions under the Equity
Incentive Plan. Unless otherwise expressly stated in the relevant award agreement, each award
granted to a Covered Officer under the Equity Incentive Plan is intended to be performance-based
compensation within the meaning of Section 162(m) of the Code. Performance goals for Covered
Officers will be limited to one or more of the following financial performance measures relating to
the Company or any of its subsidiaries, operating units, business segments or divisions:
(a) earnings before interest, taxes, depreciation, amortization and/or stock compensation;
(b) operating (or gross) income or profit; (c) operating efficiencies; (d) return on equity,
assets, capital, capital employed or investment; (e) after tax operating income; (f) net income;
(g) earnings or book value per share; (h) financial ratios; (i) cash flow(s); (j) total sales or
revenues or sales or revenues per employee; (k) production (separate work units or SWUs); (l) stock
price or total stockholder return; (m) dividends; (n) debt or cost reduction; or (o) strategic
business objectives, consisting of one or more objectives based on meeting specified cost targets,
business expansion goals, and goals relating to acquisitions, joint ventures or collaborations or
divestitures; or (p) any combination thereof. Each goal may be expressed on an absolute and/or
relative basis, may be based on or otherwise employ comparisons based on internal targets, the past
performance of the Company or any subsidiary, operating unit or division of the Company and/or the
past or current performance of other companies, and in the case of earnings-based measures, may use
or employ comparisons relating to capital, stockholders stock and/or shares outstanding, or to
assets or net assets. The Committee may appropriately adjust any evaluation of performance under
criteria set forth in the Equity Incentive Plan to exclude any of the following events that occurs
during a performance period: (i) asset impairments or write-downs, (ii) litigation or claim
judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other
such laws or provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs, (v) any extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in managements discussion and analysis of financial
condition and results of operations appearing in the Companys annual report to stockholders for
the applicable year, and (vi) the effect of adverse federal, governmental or regulatory action, or
delays in federal, governmental or regulatory action; provided that the Committee commits to make
any such adjustments no longer than 90 days following the commencement of each performance period
(or such other time as may be required or permitted by Section 162(m) of the Code).
Notwithstanding the foregoing, the Committee may in its discretion, waive any performance goals
and/or other terms and conditions relating to a performance award.
15
To the extent necessary to comply with Section 162(m) of the Code, with respect to grants of
performance awards, no later than 90 days following the commencement of each performance period (or
such other time as may be required or permitted by Section 162(m) of the Code), the Committee will,
in writing, (1) select the performance goal or goals applicable to the performance period,
(2) establish the various targets and bonus amounts which may be earned for such performance
period, and (3) specify the relationship between performance goals and targets and the amounts to
be earned by each Covered Officer for such performance period. Following the completion of each
performance period, the Committee will certify in writing whether the applicable performance
targets have been achieved and the amounts, if any, payable to Covered Officers for such
performance period. In determining the amount earned by a Covered Officer for a given performance
period, subject to any applicable award agreement, the Committee shall have the right to reduce
(but not increase) the amount payable at a given level of performance to take into account
additional factors that the Committee may deem relevant to the assessment of individual or
corporate performance for the performance period. With respect to any Covered Officer, the maximum
annual number of shares in respect of which all performance awards may be granted under the Equity
Incentive Plan is 300,000 and the maximum annual amount of all performance awards that are settled
in cash is $3,000,000.
For purposes of the share counting provisions of the Equity Incentive Plan, a performance
award that is not settled in cash shall be treated as (i) an option award if the amounts payable
thereunder will be determined by reference to the appreciation of a share, and (ii) a restricted
share award if the amounts payable thereunder will be determined by reference to the full value of
a share.
Other Stock-Based Awards. The Committee is authorized to grant any other type of
awards that are denominated or payable in, valued by reference to, or otherwise based on or related
to shares of common stock. The Committee will determine the terms and conditions of such awards,
consistent with the terms of the Equity Incentive Plan. For purposes of the share counting
provisions of the Equity Incentive Plan, an other stock-based award that is not settled in cash
shall be treated as (i) an option award if the amounts payable thereunder will be determined by
reference to the appreciation of a share, and (ii) a restricted share award if the amounts payable
thereunder will be determined by reference to the full value of a share.
Non-Employee Director Awards. The Board may provide that all or a portion of a
non-employee directors annual retainer and/or retainer fees or other awards or compensation as
determined by the Board be payable in non-qualified stock options, restricted shares, restricted
share units and/or other stock-based awards, including unrestricted shares, either automatically or
at the option of the non-employee directors. The Board will determine the terms and conditions of
any such awards, including those that apply upon the termination of a non-employee directors
service as a member of the Board. Non-employee directors are also eligible to receive other awards
pursuant to the terms of the Equity Incentive Plan, including options and SARs, restricted shares
and restricted share units, and other stock-based awards upon such terms as the Committee may
determine; provided, however, that with respect to awards made to members of the Committee, the
Equity Incentive Plan will be administered by the Board.
Separation from Service. The Committee will determine the terms and conditions that
apply to any award upon the separation from service with the Company, its subsidiaries and
affiliates, and provide such terms in the applicable award agreement or in its rules or
regulations.
Change in Control. Unless otherwise provided by the Committee, or in an award
agreement or by a contractual agreement between the Company and an award holder, if, within one
year following a Change in Control (as defined in the Equity Incentive Plan), an award holder
separates from service with the Company (or its successor) by reason of (a) death; (b) disability;
(c) normal retirement or early retirement; (d) for Good Reason (as defined in the Equity Incentive
Plan) by the award holder; or (e) involuntary termination by the Company for any reason other than
for Cause (as defined in the Equity Incentive Plan), all outstanding Awards of such award holder
shall vest, become immediately exercisable and payable and have all restrictions lifted.
Additionally, in the event of a Change in Control, subject to certain conditions provided for
in the Equity Incentive Plan: (i) the Committee may take such actions as it deems appropriate to
provide for the acceleration of the exercisability, vesting and/or settlement in connection with
such Change in Control of each or any outstanding award or portion thereof and shares acquired
pursuant thereto upon such conditions (if any), including termination of the award holders service
prior to, upon, or following such Change in Control, to such extent as the Committee shall
determine, (ii) the surviving, continuing, successor, or purchasing corporation or other business
entity or parent thereof, as the case may be (the Acquiror), may, without the consent of any
award holder, either assume or continue the Companys rights and obligations under each or any
award or portion thereof outstanding immediately prior to the Change in Control or substitute for
each or any such outstanding award or portion thereof a substantially equivalent award with respect
to the Acquirors stock, as applicable, and (iii) the Committee may, in its discretion and without
the consent of any award holder, determine that, upon the occurrence of a Change in Control, each
or any award or a portion thereof outstanding immediately prior to the Change in Control and not
previously exercised or settled shall be canceled in exchange for a payment with respect to each
vested share (and each unvested share, if so determined by the Committee) subject to such canceled
award in (a) cash, (b) stock of the Company or of a corporation or other business entity a party to
the Change in Control, or (c) other property which, in any such case, shall be in an amount having
a fair market value equal to the fair market value of the consideration to be paid per share in the
Change in Control, reduced by the exercise or purchase price per share, if any, under such award
(which payment may, for the avoidance of doubt, be $0, in the event the per share exercise or
purchase price of an award is
greater than the per share consideration in connection with the Change in Control).
16
Amendment and Termination. The Board may amend, alter, suspend, discontinue or
terminate the Equity Incentive Plan or any portion of the Equity Incentive Plan at any time, except
that stockholder approval must be obtained for any such action if such approval is necessary to
comply with any tax or regulatory requirement with which the Board deems it desirable or necessary
to comply. The Committee may waive any conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate any award, either prospectively or retroactively. The
Committee does not have the power, however, to (i) amend the terms of previously granted options to
reduce the exercise price per share subject to such option, (ii) amend the terms of previously
granted SARs to reduce the grant price of such SARs, (iii) cancel such options and grant substitute
options with a lower exercise price per share than the cancelled options, or (iv) cancel such SARs
and grant substitute and grant substitute SARs with a lower grant price than the cancelled SARs, in
each case without the approval of the Companys stockholders. The Committee also may not materially
and adversely affect the rights of any award holder without the award holders consent.
Other Terms of Awards. The Company may take action, including the withholding of
amounts from any award made under the Equity Incentive Plan, to satisfy withholding and other tax
obligations. The Committee may provide for additional cash payments to participants to defray any
tax arising from the grant, vesting, exercise or payment of any award. Except as permitted by the
applicable award agreement, awards granted under the Equity Incentive Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by the laws of descent
and distribution, or as permitted by the Committee in its discretion.
Certain Federal Income Tax Consequences. The following is a brief description of the
Federal income tax consequences generally arising with respect to awards under the Equity Incentive
Plan.
Tax consequences to the Company and to participants receiving awards will vary with the type
of award. Generally, a participant will not recognize income, and the Company is not entitled to
take a deduction, upon the grant of an incentive stock option, a nonqualified option, a SAR or a
restricted share award. A participant will not have taxable income upon exercising an incentive
stock option (except that the alternative minimum tax may apply). Upon exercising an option other
than an incentive stock option, the participant must generally recognize ordinary income equal to
the difference between the exercise price and fair market value of the freely transferable and
non-forfeitable shares of common stock acquired on the date of exercise. Similarly, the exercise
of an SAR will result in ordinary income on the value of the stock appreciation right to the
individual at the time of exercise.
If a participant sells shares of common stock acquired upon exercise of an incentive stock
option before the end of two years from the date of grant and one year from the date of exercise,
the participant must generally recognize ordinary income equal to the difference between (i) the
fair market value of the shares of common stock at the date of exercise of the incentive stock
option (or, if less, the amount realized upon the disposition of the incentive stock option shares
of common stock), and (ii) the exercise price. Otherwise, a participants disposition of shares of
common stock acquired upon the exercise of an option (including an incentive stock option for which
the incentive stock option holding period is met) or SAR generally will result in short-term or
long-term capital gain or loss measured by the difference between the sale price and the
participants tax basis in such shares of common stock (the tax basis generally being the exercise
price plus any amount previously recognized as ordinary income in connection with the exercise of
the option or SAR).
The Company generally will be entitled to a tax deduction equal to the amount recognized as
ordinary income by the participant in connection with an option or SAR. The Company generally is
not entitled to a tax deduction relating to amounts that represent a capital gain to a participant.
Accordingly, the Company will not be entitled to any tax deduction with respect to an incentive
stock option if the participant holds the shares of common stock for the incentive stock option
holding periods prior to disposition of the shares.
17
Upon an award of restricted shares, the participant will recognize ordinary income on the fair
market value of the common stock at the time restricted shares vest unless a participant makes an
election under Section 83(b) of the Code to be taxed at the time of grant. The participant also is
subject to capital gains treatment on the subsequent sale of any common stock acquired through the
vesting of a restricted share award. For this purpose, the participants basis in the common stock
is its fair market value at the time the restricted share becomes vested (or is granted, if an
election under Section 83(b) is made). Payments made under performance awards are taxable as
ordinary income at the time an individual attains the performance goals and the payments are made
available to, and are transferable by, the participant.
Section 162(m) of the Code generally disallows a public companys tax deduction for
compensation paid in excess of $1 million in any tax year to its chief executive officer and
certain other most highly compensated
executives. However, compensation that qualifies as performance-based compensation is
excluded from this $1 million deduction limit and therefore remains fully deductible by the company
that pays it. The Company generally intends that, except as otherwise determined by the Committee
(i) performance awards and (ii) options granted (a) with an exercise price at least equal to 100%
of fair market value of the underlying shares of common stock at the date of grant (b) to employees
the Committee expects to be named executive officers at the time a deduction arises in connection
with such awards, qualify as performance-based compensation so that these awards will not be
subject to the Section 162(m) deduction limitations. The Committee will not necessarily limit
executive compensation to amounts deductible under Section 162(m) of the Code, however, if such
limitation is not in the best interests of the Company and its stockholders.
Although the Company intends to administer the plan so that awards will be exempt from, or
will comply with, the requirements of Section 409A of the Code, the Company does not warrant that
any award under the plan will qualify for favorable tax treatment under Section 409A of the Code or
any other provision of federal, state, local or foreign law. The Company shall not be liable to
any participant for any tax, interest, or penalties that participant might owe as a result of the
grant, holding, vesting, exercise, or payment of any award under the plan.
The foregoing discussion is general in nature and is not intended to be a complete description
of the Federal income tax consequences of the Equity Incentive Plan. This discussion does not
address the effects of other Federal taxes or taxes imposed under state, local or foreign tax laws.
Participants in the Equity Incentive Plan are urged to consult a tax advisor as to the tax
consequences of participation.
The Equity Incentive Plan is not intended to be a qualified plan under Section 401(a) of the
Code.
Required Vote; Recommendation of the Board
The approval of the Equity Incentive Plan requires the affirmative vote of a majority of the
shares present in person or by proxy and entitled to vote at the Meeting.
The Board of Directors unanimously recommends that stockholders vote FOR the Proposal to
approve the Equity Incentive Plan.
18
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth, as of December 31, 2008, certain information with respect to
shares of the Companys common stock authorized for issuance under the Companys equity
compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities Remaining |
|
|
|
|
|
|
|
|
|
|
|
Available for Future Issuance |
|
|
|
Number of Securities to |
|
|
Weighted-Average |
|
|
Under Equity Compensation Plans |
|
|
|
be Issued Upon Exercise |
|
|
Exercise Price of |
|
|
(Excluding Securities Reflected |
|
Plan Category |
|
of Outstanding Options |
|
|
Outstanding Options |
|
|
in Column (A)) |
|
|
|
(A) |
|
|
(B) |
|
|
(C) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
approved by security
holders |
|
|
1,705,332 |
|
|
$ |
9.04 |
|
|
|
822,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
not approved by security
holders
(1) |
|
|
1,345,800 |
|
|
$ |
13.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,051,132 |
|
|
|
|
|
|
|
822,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes shares issuable upon the exercise of options granted under the Tm Bioscience
Corporation Share Option Plan assumed by Luminex in connection with the acquisition of Tm
Bioscience. These options have a weighted average exercise price of $23.99. No further grants
will be made pursuant to this plan. Also includes options to purchase 500,000 shares of the
Companys common stock issued to Patrick J. Balthrop, Sr. on May 15, 2004, in connection with his
hiring and outside of any stockholder approved equity incentive plan. The terms of this option,
together with the amendment to the related option agreement, are more fully described in Note 14 to
the Consolidated Financial Statements included in the Companys Annual Report on Form 10-K filed
with the SEC on February 26, 2009. |
19
PROPOSAL 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as the Companys independent registered
public accounting firm to audit the financial statements of the Company and to perform other
accounting services, if appropriate, for the year ending December 31, 2009. Such appointment will
be presented to the stockholders for ratification at the Meeting. A representative of Ernst &
Young LLP is expected to be present at the Meeting to respond to questions from stockholders and
will be given the opportunity to make a statement if so desired.
Stockholder ratification of the selection of Ernst & Young LLP as the Companys independent
registered public accountants is not required by the Companys bylaws or otherwise. However, the
Audit Committee is submitting the selection of Ernst & Young LLP to the stockholders for
ratification. If the stockholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain that firm. 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 it determines that such a change would be in the
best interests of the Company and its stockholders.
Fees paid to Ernst & Young LLP for services provided during the years ended December 31, 2008
and 2007 are presented below.
Audit Fees. The aggregate audit fees billed to us by Ernst & Young LLP for professional
services rendered for the audit of our annual consolidated financial statements, for the reviews of
the consolidated financial statements included in our quarterly reports on Form 10-Q, for the audit
of managements report on the effectiveness of our internal control over financial reporting, as
required under Section 404 of the Sarbanes-Oxley Act of 2002, and other services that are normally
provided by the independent auditor in connection with statutory and regulatory filings totaled
$645,000 for 2008 and $565,500 for 2007.
Audit-Related Fees. There were no other fees billed to us by Ernst & Young LLP for assurance
and related services with regard to the performance of the audit or review of the Companys
consolidated financial statements, and for the review of the Companys internal controls over
financial reporting and not described above under Audit Fees, for 2008 and 2007.
Tax Fees. There were no other fees billed to us by Ernst & Young LLP for professional
services rendered for tax compliance, tax advice and tax planning for 2008 and 2007.
All Other Fees. There were no fees billed by Ernst & Young LLP for products or services other
than those described above for 2008 and 2007.
The Restated Audit Committee Charter, among other things, requires the Audit Committee to
pre-approve all audit and permitted non-audit services (including the fees and terms thereof) to be
performed for the Company by its independent auditor. The Audit Committee has adopted a
pre-approval policy in order to ensure that the performance of audit and non-audit services by the
independent auditor does not impair the auditors independence. The policy provides for the
general pre-approval of specific types of services, gives guidance to management as to the specific
type of services that are eligible for pre-approval and provides cost limits for each such service
on an annual basis. The policy requires specific pre-approval of all other permitted services.
Requests or applications to provide services that require separate approval by the Audit Committee
are submitted by the Companys chief financial officer to the Audit Committee and must include a
statement as to whether, in the chief financial officers view, the request or application is
consistent with the SECs rules on auditor independence. The Audit Committee may delegate
pre-approval authority to one or more of its members who shall report any pre-approval decisions to
the Audit Committee at its next scheduled meeting.
All audit related services, tax services and other services provided in 2008 and 2007 were
pre-approved by the Audit Committee. The Audit Committee concluded that the provision of such
services by Ernst & Young LLP was compatible with the maintenance of the firms independence in the
conduct of its auditing functions.
Required Vote; Recommendation of the Board
Approval of this proposal requires the affirmative vote of a majority of the shares present in
person or by proxy and entitled to vote on the matter.
The board of directors unanimously recommends that stockholders vote FOR Proposal 3.
20
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting material and should
not be deemed filed or incorporated by reference into any other Company filing under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this Report by reference therein.
To the Stockholders of Luminex Corporation:
The board of directors maintains an Audit Committee comprised of three independent directors.
The board of directors and the Audit Committee believe that the Audit Committees current member
composition satisfies the rules of The NASDAQ Stock Market LLC that govern audit committee
composition, including the requirement that audit committee members meet the heightened
independence requirements as contemplated by the applicable rules of the The NASDAQ Stock Market
LLC. The Audit Committee operates under a written charter, which was adopted by the board of
directors (as amended to date, the Restated Audit Committee Charter). A copy of the Restated
Audit Committee Charter may be viewed on the Investor Relations section of our website at
www.luminexcorp.com.
Pursuant to the Restated Audit Committee Charter, the Audit Committee oversees the financial
reporting process on behalf of the entire board of directors. The Audit Committee is responsible
for the appointment, compensation and oversight of the work of Luminexs independent registered
public accountants. Management has the primary responsibility for the financial statements and the
reporting process including the systems of internal controls. Our independent registered public
accountants are responsible for performing an independent audit of Luminexs financial statements
in accordance with standards established by the Public Company Accounting Oversight Board,
expressing an opinion on the conformity of our audited financial statements to generally accepted
accounting principles and auditing the effectiveness of Luminexs internal control over financial
reporting and issuing a report thereon. In fulfilling its oversight responsibilities, the Audit
Committee reviews and discusses with management and the independent registered public accountants
the audited and interim financial statements included in our reports filed with the SEC in advance
of the filings of such reports.
The Audit Committee has reviewed and discussed the audited financial statements with
management and the independent registered public accountants. Furthermore, the Audit Committee
has discussed with the independent registered public accountants the matters required to be
discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards,
Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee has also received the written disclosures and the letter from the independent
registered public accountants required by applicable requirements of the Public Company Accounting
Oversight Board, regarding the independent registered public accountants communications with the
audit committee concerning independence, and has discussed with the independent registered public
accountants the independent registered public accountants independence.
The Audit Committee discussed with the independent registered public accountants the overall
scope and plans for their audit. The Audit Committee met with the independent registered public
accountants, with and without management present, to discuss the results of their examination,
their evaluation of Luminexs internal controls requirements under Section 404 of the
Sarbanes-Oxley Act of 2002, and the overall quality of Luminexs financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended
to the board of directors (and the board of directors approved) that the audited financial
statements be included in our Annual Report on Form 10-K for the year ended December 31, 2008, as
filed with the SEC.
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SUBMITTED BY THE AUDIT COMMITTEE OF |
|
|
THE BOARD OF DIRECTORS |
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|
|
|
|
Kevin M. McNamara (Chairman) |
|
|
Robert J. Cresci |
|
|
J. Stark Thompson |
21
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion And Analysis
Overview of Compensation Process. The Compensation Committee of the board of directors (the
Committee) is primarily responsible for establishing the compensation programs for the Companys
Chief Executive Officer (the CEO) and all other executive officers. In addition, the Committee
reviews and makes recommendations to the full board regarding non-employee director compensation.
The Committee administers the Companys 2006 Equity Incentive Plan (the Equity Plan) under which
equity-based and other incentive awards may be made to key employees, directors and consultants,
together with the Luminex Corporation 2006 Management Stock Purchase Plan (the MSPP).
At least annually, the Committee reviews executive compensation and the Companys compensation
policies and costs in an attempt to ensure that our compensation programs are consistent with our
compensation philosophy and promote the objectives of our organization and stockholder interests.
The Committee also typically reviews tally sheets quantifying every aspect, current or
contingent, of executive compensation, together with additional compensation summaries and analyses
prepared by management and the Committees compensation consultants, as part of its annual
compensation review. The information is used by the Committee primarily to confirm that executives
are compensated, as a whole, in a manner generally consistent with the design and objectives of our
compensation programs. The Committee also utilizes this information to understand internal pay
equity and external market positioning among the Companys executives. This information, however,
is only one of numerous factors considered by the Committee consistent with our flexible
compensation philosophy described below.
The Committee intends to seek the advice and analyses of compensation consultants as and when
it deems appropriate. The Committee engaged Hewitt Associates, LLC (Hewitt) as its compensation
consultant for 2008 and has done so for 2009. The Committee periodically examines the
appropriateness of our peer group and collects peer group net total compensation data, based to
the extent possible upon positions of comparable scope and complexity, in order to assess our
executive compensation in relation to our general compensation benchmarks. In 2008, Hewitt
prepared peer compensation studies to assist the Committee in this analysis, which focused on the
core direct elements of our executive compensation program. Hewitt also assisted the Committee in
the design of our executive equity grant policies, as well as our senior executive long-term
incentive plan (the LTIP) initiated in 2008.
Finally, given the CEOs insight into internal pay equity issues as well as executive
performance versus expectations, skill sets, potential and past and projected responsibilities, the
views and recommendations of the CEO are solicited by the Committee with respect to executive
compensation. The CEOs recommendations are generally given significant weight. The Committee
also solicits the views of other board members with particular insight into relevant matters, who
may, upon request, attend Committee meetings in an observer capacity. However, the Committee makes
all final decisions regarding executive compensation. The CEO is excused from meetings prior to
the Committees approval of his compensation and discussion of his performance in relation to his
compensation decisions. The Committee does not delegate the authority to make equity or other
compensatory awards to our executive officers.
Compensation Objectives. The Committee has established the following primary objectives in
designing and reviewing compensation for our CEO and the other executive officers:
|
|
|
Offer competitive and effective total compensation for executives to enable the company
to attract, reward and retain skilled executives in a competitive recruiting environment; |
|
|
|
Provide a substantial portion of executive compensation through performance-contingent
compensation, where annual incentives are based on achieving designated and pre-approved
quantitative and qualitative measures of performance; |
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Encourage and share superior and sustained corporate performance based on performance
measures that create value for stockholders, reward corporate growth and encourage
measured risk-taking in support of our corporate objectives; and |
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Align the long-term financial interests of our executives with those interests of our
stockholders by creating incentives that deliver value based on long-term performance and
stock price appreciation. |
22
We believe these objectives reflect our strong desire to specify and reward executive behavior
that is aligned with stockholder interests, effective corporate governance and the successful
execution of the Companys business plan and strategies.
Compensation Philosophy. Our compensation programs and objectives are designed around four
core philosophies:
1. Each element of compensation should support our compensation objectives and should,
when viewed collectively, work together to appropriately support all of these objectives. The
Committee believes that each element of our compensation program should be designed to
simultaneously fulfill one or more of our compensation objectives described above, and that each
element should work together as a whole to appropriately support all of these objectives.
2. Our compensation programs should create a management culture that is performance-driven
and has a vested interest in increasing stockholder value and the successful execution of our
corporate goals and strategies. Accordingly, our philosophy emphasizes performance-based
incentives for our executive officers, in part by having a substantial portion of each officers
cash compensation contingent upon the successful financial, operating and strategic performance of
the Company, as well as upon the successful execution of an executives individual goals or
directives. Equity incentives that vest over several years and/or upon the achievement of
performance targets will also play a prominent role in our program.
3. Our compensation decisions should support the Companys anticipated growth and
executive development. The Committee anticipates the Company will have significant future
growth, in terms of both revenue and the expansion and complexity of our operations. Therefore,
our compensation policies must primarily be designed to attract and retain the required talent to
support our anticipated growth and increasing operational complexity. Simultaneously, our
policies should foster and reward the growth and development, in terms of competency,
responsibilities and leadership, of our executive team.
4. Our compensation decisions should be flexible to reflect the unique attributes of the
Company and each executive. The Committees compensation philosophy for an executive officer
allows for flexibility in assessing an overall analysis of the executives performance for the
prior year, projected role and responsibilities, required impact on execution of Company strategy,
external pay practices and competitive market conditions, total cash compensation and relative
equity positioning internally, recommendations from our CEO and compensation consultants it may
engage, and other factors the Committee deems appropriate. Our philosophy also considers an
officers prior experience and professional status, employee retention, vulnerability to
recruitment by other companies and the difficulty and costs associated with replacing executive
talent. The weighting of these and other relevant factors is determined on a case by case basis
for each executive in the context of the relevant facts and circumstances. The Committee believes
this flexibility is important in order to make individual compensation decisions that appropriately
reflect the unique attributes of our Company, particularly our stage of development, evolving
business plan and diverse operational focus (including research, medical device, diagnostic and
administrative focuses), and the unique contributions and qualifications of each executive. We
believe our ability to offer fair and competitive compensation packages is essential in increasing
executive satisfaction and decreasing the distraction that may result from a management team that
perceives itself as undercompensated versus its peers, internally or externally. We believe that
this approach will result in a more productive management team, focused on achieving or exceeding
our business objectives, which should help create value for our stockholders.
Additionally, as part of our annual review of compensation best practices, the Committee
determined to add a fifth core element to our compensation philosophy, commencing in 2009:
5. Our compensation programs and policies should consider external perceptions and good
governance and should not provide incentives for excessive risk taking for short-term gains.
The Committee believes that it is important to undertake a specific review of our compensation
programs and policies each year to be sure that they follow good governance practices in the
Committees view, they do not incentivize excessive or inappropriate risk taking in the Committees
view, and to assure they reflect best practices in terms of risk management to the extent deemed
appropriate by the Committee.
23
Program Design
What are the primary compensation elements? The Committee has designed our
executives compensation packages around three primary elements:
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annual variable performance awards payable in cash (with the individual executive
having the right to take such awards in restricted stock pursuant to the MSPP); and |
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long-term stock-based incentive awards, including, in addition to annual time vested
equity awards, RSUs under our LTIP for our most senior executive officers that are
subject to both performance- and time-based vesting. |
How do we use benchmarks? The Committee has spent significant time on formulating a
total compensation philosophy and strategy and uses this as an anchor for decision-making. It has
formed and refined the use of a peer group, selecting a base of companies of similar industry and
business models and size as indicated by market capitalization, sales, assets and geographic scope.
While we do not support rigid adherence to compensatory formulas, there are general pay
positioning policies, or benchmarks, we refer to which have been derived, in part, based on the
market-based recommendations from Hewitt. Our benchmark for base salary is to be generally
competitive with market pay levels, usually defined as the median (50th percentile)
salary levels in an appropriate peer group based, to the extent possible, upon comparable
positions. The Committees desire is to provide total short-term cash opportunities near the peer
group median (50th percentile) for meeting targeted annual goals, but allow for upside
for meeting or exceeding performance goals approved by the Committee. The Committee also targets
total potential compensation opportunities (including equity awards) with an upside between the
50th and the 75th percentile of our peer group (and approximating the
75th percentile for LTIP participants), provided the Company and the executive deliver
superior performance.
We chose the base salary benchmark primarily to target a market competitive base salary as the
norm. Our benchmarks for short-term cash bonus and total compensation opportunities reflect our
desire that target performance results in median, market competitive incentives similar to our
base salary objective, but, consistent with our goal of driving the achievement of business and
financial objectives that help create stockholder value and share price appreciation, rewards
above-average performance with above-average cash and total compensation. These benchmarks also
reflect that we compete with larger companies for executive talent that may offer base and total
target compensation opportunities above the market median.
To help assess whether our executives are being compensated competitively, and how they are
compensated in relation to our pay positioning policies, the Committee collects compensation data
from our peer group. However, these survey results will be used by the Committee solely as a
baseline reference, in part due to the fact that the survey data does not provide full insight as
to actual performance, responsibilities, tenure, prior experience and other relevant information
needed to accurately assess position comparability and the competitiveness of our compensation
packages. Accordingly, certain executives may be compensated below or above the Committees
benchmarks based on various factors consistent with our flexible compensation philosophy. Our
process and rationale for determining our peer group for 2008 are described below under Executive
Compensation for 2008.
Do we have a target compensation mix? We have also derived, with the assistance of
Hewitt, general guidelines with respect to compensation allocation or mix. We generally believe
at least 60% of an executives total compensation opportunity, typically increasing with level of
responsibility, should be performance and equity based, with the equity component approximating at
least 60% of target total compensation opportunities at the CEO level (split equally between
traditional time-based equity grants and LTIP grants), and ranging from approximately 40% to 60%
for the other named executive officers. We believe emphasis on equity appropriately focuses our
executives on long-term performance and value creation. Additionally, we generally believe 15% to
20% of an executives total compensation opportunities should be allocated to short-term
performance bonus opportunities. This reflects our desire to reward and encourage the achievement
of short-term business objectives and performance which should also benefit our stockholders.
However, as with our use of benchmarks (and for similar reasons), our targeted compensation mix
thresholds are only intended to be reference points.
How does our compensation design support our compensation objectives and philosophies?
Base Salary. The primary goal for base salary is to be market competitive and to
compensate an executives short-term contributions, as well as to provide current financial
stability. The minimum base compensation for our executive officers has historically been
established by the terms of employment agreements between the Company and the executives negotiated
at the time of hire. The Committees goal when reviewing salary adjustments on an annual basis is
to initially target base salaries at or near our benchmark and then adjust this target based on
other relevant considerations, including the impact of base salary on short-term performance bonus
opportunities.
24
Short-Term Performance Incentive Opportunity. The Committee believes that a
significant portion of an executives total cash compensation should be linked to Company operating
performance and individual contributions to our strategic and growth objectives. Accordingly, our
cash-based incentive opportunities will generally be targeted as a percentage of base salary based
on specific financial and individual accountability
performance goals. Though our benchmark is market median, the minimum target incentive
opportunities are generally as set forth in the executives employment agreement. Individual goals
based on an executives specific responsibilities are typically a significant portion of the bonus
opportunities (weighted up to 50% of the total target bonus opportunity). While certain individual
goals can be measured objectively, others, such as leadership and teamwork, involve subjective
assessment that will ultimately be left to the Committee, based primarily on recommendations of our
CEO. Additionally, where an executives primary responsibility may be in a particular business
unit or function (for example, marketing, R&D, Luminex Bioscience Group or Luminex Molecular
Diagnostics), the performance goals may be more heavily weighted towards specific financial or
other critical business outcomes and achievements in that unit or function. In the case of
strategic and other tangible non-financial goals, such as product milestones or FDA clearances for
new products, we attempt to target individual goals with respect to which the executive can
directly influence the successful execution.
Accordingly, our annual incentive programs are designed to focus our executives on
organizational priorities and performance, including accomplishing organizational strategies and
financial goals. The potential payouts under the incentive plans are currently based on a
sliding scale designed to relate the annual incentive payout to a range. For superior performance,
there is a maximum range of payout, with a reduced payout for below target performance and no
payout for performance below a minimum level. Accordingly, significant underachievement is not
rewarded in the design of our plan, which promotes our goal of executive accountability with
respect to their role in the collective success of our organization.
The performance goals are determined near the beginning of each fiscal year. Our CEO
typically recommends performance goals to the Committee, which are then reviewed and approved or
modified in the Committees sole discretion. Pursuant to our incentive plans, these goals can be
adjusted during the year for litigation or claim judgments or settlements and certain other
extraordinary non-recurring items (such as a material acquisition).
While we do not presently have any formal policies or practices that provide for the recovery
or adjustment of amounts previously paid to a named executive officer in the event the operating
results on which the payment was based are restated or otherwise adjusted, in such event we would
reserve the right to seek all appropriate remedies available under the law.
Long-Term Stock-Based Incentive Compensation. We believe that stock-based
compensation helps to create a culture that encourages our executives to think and act as
stockholders. We believe long-term equity incentives also hold executives accountable for
decisions that may have a long-term impact and thus focus executives on the implications of their
decisions over an extended time frame. At the same time, these awards allow our executives to
share in the Companys long-term success when their efforts were a substantial factor in that value
creation. Finally, we believe equity incentives are necessary to be competitive in our recruitment
and retention efforts.
Time-based Equity Awards. In conjunction with the 2008 equity awards, the Committee
determined the desired value to be delivered to an executive pursuant to the time-based equity
component of his or her total compensation opportunity, and allocated 75% of that value to
restricted shares and 25% to stock options. We believe our use of restricted shares, in addition
to limiting dilution, serves our compensation objectives of retention and alignment interests with
our stockholders given the five year vesting. Additionally, providing a substantial portion of the
equity award as full value restricted shares will add to the perceived value, as a whole, of the
annual equity award, given the volatility of our stock and our stage of development can create
uncertainty of value with respect to stock options. We believe a significant long-term stake in
our equity will also help reduce excessive or inappropriate risk-taking principally motivated by
short-term share price appreciation. At the same time, having 25% of the annual equity award in
the form of options makes a material portion of the value of each annual award linked solely to
long-term share price appreciation to help ensure our executives are appropriately motivated and
focused on delivering long-term stockholder value. The use of stock options also contributes to
the competitiveness of our compensation packages and promotes entrepreneurial decision making. The
Committee believes its policy to utilize a portfolio approach, or a combination of restricted
shares and options, provides it the flexibility to set what it believes to be optimal combinations
of retention- and performance-focused equity incentives based on, among other factors, the dilutive
effect of our equity program, the Companys stage of development and size and the competitive
practices of our peers.
25
The Committee makes annual equity awards based on a target dollar amount. While this results
in an uncertain share usage, it results in a predictable expense for the Company and allows the
Committee to tailor the value of the awards more precisely to reflect its compensation
philosophies, objectives and design. The Committee determines the target dollar amount for
stock-based awards to the executive officers on a discretionary basis and takes into account, among
other factors, the recommendations of the CEO and any compensation consultants the
Committee may engage, together with our compensation benchmarks, prior equity grants and current
equity holdings, and seniority and internal pay equity considerations.
The actual number of restricted shares granted are generally determined by dividing the dollar
amount allocated to the restricted share component by the fair market value of the shares on the
date of grant. For 2008, the Committee did not apply a discount to the value of these shares to
reflect the forfeiture restrictions associated with service-based vesting. The number of shares
subject to options granted are generally determined by dividing the dollar amount allocated to the
option component by the value of an option share with reference to the fair market value of the
shares on the date of grant calculated pursuant to a modified Black-Scholes model specific to the
Company. For 2008, this calculation resulted in a option share value of approximately 50% of the
fair market value of our common stock on the grant date.
The restricted shares currently are generally subject to time vesting over five years in equal
annual increments on the anniversary date of such grants, while 2008 stock option grants vest over
three years in equal annual increments. Except with respect to Mr. Balthrop (as described below)
and in connection with the LTIP commencing in 2008 for certain key executives, we have not utilized
performance-based vesting restrictions with respect to equity awards, though the Committee
periodically assesses the merits of performance-based vesting. We believe, however, that
time-based equity awards appropriately align the interests of our executives with those of our
stockholders. Time-based vesting of restricted shares and stock options provide economic benefit
only to the extent the employee maintains a long-term business relationship with and commitment to
the Company. Additionally, stock price appreciation is required in order to realize value from
stock options, and is required to create significant additional value with respect to restricted
shares.
LTIP. The primary goals of the design of the LTIP are to offer an additional
long-term performance driven incentive to certain of our most senior executives who can most
directly influence key performance metrics, as well as serving as a retention vehicle. For LTIP
participants, the Committee typically allocates up to 50% of the total targeted value for all
equity-based compensation to the target LTIP award amount. The LTIP award, taken together with
all compensation opportunities, is intended to offer participating executives total compensation
opportunities exceeding the 75th percentile of our peer group as a reward for maximum
performance under the LTIP (which performance would reflect, in our view, exceptional performance
and value creation). For 2008, the participants in the LTIP were our CEO and COO. For 2009, our
CFO is included, and we intend to evaluate the participants on an annual basis.
Awards under the LTIP are granted by the Committee in the form of RSUs and are treated as
performance awards under the Equity Plan. Grants of RSUs under the LTIP shall initially be
unvested and represent the maximum amount of shares that participants may receive under the LTIP,
assuming achievement of the maximum level of performance goals established for the grant. The
vesting and value of the LTIP awards are dependent on continued service, but also on company
performance over a three-year period measured by, for 2008 and 2009, (i) appreciation in our share
price and (ii) operating cash flows per share. The Committee believes that by making an LTIP grant
every year, with vesting tied to financial and share price performance over a three-year period and
continued service over a five-year period (as a result of 50% of the value of the award earned
vesting at the end of the three-year performance period and the remaining 50% vesting on the
two-year anniversary of the initial vesting date), our participating executives are given a
powerful incentive to focus on long-term, sustained improvement in Company performance and
stockholder value.
Each year, in establishing the goals for each performance metric, the Committee determines the
levels of performance that will represent target performance based, in part, by reference to our
long-range business plan at the time the LTIP awards are granted. The Committee also considers and
establishes threshold and maximum performance levels for each goal. Each successive years goals
will typically build on the previous years performance which, in the Committees judgment,
provides an increased level of difficulty as compared to the previous years goals.
The metrics for determining performance against operating cash flow goals follow generally
accepted accounting principles; however, the Committee may consider certain items or events as
extraordinary when determining the Companys performance against cash flow goals (and share price
goals) and make what it deems to be appropriate adjustments, in each case subject to certain
limitations.
26
The
specific design of the 2008 LTIP is more fully described on page 31 below. Additionally,
in the event that any settlement of RSUs causes the aggregate payments or benefits to be made or
afforded to an LTIP participant under the RSU agreement, together with any other payments or
benefits received or to be received by such participant, in connection with a change in control to
exceed 110% of the maximum amount permitted under the Code to be received without incurring an
excise tax, then we shall pay to such participant an additional amount, in
cash, necessary to reimburse such participant on an after-tax basis, for any excise tax payable by
such participant, as further described in the form of RSU agreement previously filed with the SEC.
The Company is not party to any other 280G gross-up arrangements with its named executive
officers, but believed it was appropriate in the case of the LTIP to ensure the award maintained
its full motivational value by preserving to the maximum extent deemed reasonable the intended
value of the award to each participant, resulting in the modified gross-up structure described
above and recommended by Hewitt.
Accelerated Vesting upon Change in Control. Our employment agreements with our named
executive officers provide for acceleration of vesting, or lapse of restrictions, in connection
with a change in control. We believe this is appropriate in order to avoid being at a competitive
disadvantage in our recruiting and retention efforts, as employees often consider equity upside
opportunities in a change in control transaction a critical element of compensation. Additionally,
accelerated vesting provisions provide security that equity related consideration will be earned in
the event the Company is sold or the subject of a hostile takeover. The absence of such an
agreement could impact an employees willingness to work through a merger transaction which could
be beneficial to our stockholders. The outstanding restricted shares and stock options of our
named executive officers also vest in full upon their death or disability. We have been advised by
Hewitt that this is not an uncommon practice among our peer group.
With respect to LTIP awards, if a change in control occurs prior to the end of the performance
period, the Committee shall determine the vested units by (i) applying the performance criteria set
forth in the LTIP using the effective date of the change in control as the end of the performance
period, and by appropriately and proportionately adjusting the performance criteria for such
shortened performance period, and (ii) multiplying the number of units so determined by .3333 if
the change in control occurs in the first year of the performance period, .6667 if the change in
control occurs in the second year of the performance period, and 1 if the change in control occurs
in the third year of the performance period. Additionally, upon a change in control, the
restricted period for any units awarded following the end of the applicable performance periods
shall automatically terminate.
Timing of Equity Grants. Except with respect to new hires or promotions, we generally
make annual executive equity compensation awards each year (including LTIP grants, except for the
initial 2008 grants as described below) in the first quarter and no earlier than the meeting in
which we approve the prior years annual performance bonuses. This allows us to assess the prior
years total compensation and performance when considering current year grants. It is the
Companys current policy that annual grants to existing employees shall be effective on the later
of: i) the first trading day of the month that immediately follows the month in which grants are
approved; or ii) the first trading day following the end of the blackout period, if one is in
effect on the first trading day of the month that immediately follows the month in which grants are
approved. In the event of a new hire, promotional or other ad hoc equity award, that equity
award shall not be approved except at a meeting of the Committee and it shall be effective on the
first trading day of the month that immediately follows the month in which the start date,
promotion or other event triggering an ad hoc award occurs. The per share exercise price of an
option award shall be the closing price of the Companys common stock on the NASDAQ Global Market
on the applicable effective date as specified above. This policy applies to awards to all
employees, not just our executive officers. The Committee may make an exception to the general
policies above when it determines an exception is in the best interest of the Company based on the
recommendation of our CEO. In the event of an exception to these policies, the Committee will seek
to avoid making grants when senior management is in possession of favorable material non-public
information, to the extent practicable, and will, in any event, consider the potential impact of
such non-public information on our share price when determining the amount of the grant, including
whether to adjust the number of shares and/or shares subject to an option grant in the event we
believe the subsequent announcement of such material non-public information or financial earnings
would positively impact our stock price to avoid the appearance of spring-loading or a windfall
at the Companys expense.
Executive Compensation for 2008. Our named executive officers for 2008 consisted of Patrick
J. Balthrop, CEO and President; Douglas C. Bryant, our former Executive Vice President and Chief
Operating Officer; Harriss T. Currie, Vice President, Finance, Chief Financial Officer and
Treasurer; Gregory J. Gosch, Vice President, Luminex Bioscience Group; and Russell W. Bradley, Vice
President, Business Development and Strategic Planning. Effective February 1, 2009, Mr. Bryant
voluntarily terminated his employment with the Company in order to become the CEO of Quidel
Corporation.
27
For 2008, the Committee engaged Hewitt to assist it in reviewing our existing executive
compensation strategies and policies. Hewitt was selected, in part, because of its national
recognition as a compensation consulting firm. For purposes of Hewitts compensation survey, peer
companies were selected, with the concurrence of the Committee, from within the relevant
biotechnology (including research, medical device and diagnostic) industries and a group of larger
companies targeted by the Committee and our CEO that were believed to be relevant peers, based in
part on past and expected recruitment and retention patterns. The Company peers were
selected primarily based on market capitalization and/or revenue (within a range of approximately
one-half to two and two-thirds times the Companys market capitalization and/or revenue), as well
as similar organizational and operational complexity and stage of development where practicable.
The goal of the peer group selection was to find an appropriate peer group where the Company was at
the 25% percentile according to market capitalization, reflecting our view of our growth
expectations and the likely companies who we do and will compete with for executive talent. The
study focused primarily on public companies due to the lack of reliable data with respect to
potentially similar private companies.
The following peer companies were included in the analysis:
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Affymetrix, Inc.
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Illumina, Inc.
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Neurocrine Biosciences, Inc. |
Albany Molecular Research, Inc.
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Immucor, Inc.
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PAREXEL International Corporation |
American Oriental Bioengineering, Inc.
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Kendle International Inc.
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PharmaNet Development Group, Inc. |
Array BioPhama Inc.
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L-1 Identity Solutions, Inc.
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PRA International |
Cepheid
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Lexicon Pharmaceuticals,
Inc.
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Quidel Corporation |
Cogent, Inc.
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LifeCell Corporation
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Regeneron Pharmaceuticals, Inc. |
Enzo Biochem, Inc.
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Meridian Bioscience, Inc.
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Savient Pharmaceuticals, Inc. |
ev3 Inc.
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Medarex, Inc.
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SurModics, Inc. |
Exelixis, Inc.
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The Medicines Company
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Symyx Technologies, Inc. |
GenProbe Incorporated
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Myriad Genetics, Inc.
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Third Wave Technologies, Inc. |
Hologic, Inc.
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Nabi Biopharmaceuticals
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Verenium Corporation |
Idenix Pharmaceuticals, Inc.
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Nanogen, Inc.
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Zymogenetics, Inc |
Indevus Pharmaceuticals, Inc.
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Qiagen N.V. |
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The size of the peer group (38 companies) is also reflective of the diverse nature of our
industries, industry and sector volatility (mergers and acquisitions) and the potential recruiting
and retention concerns of the Committee. The analysis reviewed the most recent publicly available
proxy statement data of the peer companies. A proprietary Hewitt executive compensation database
was also utilized to validate and supplement peer group data, though significantly more weight
was given to the proxy data. Specific executive position matches within the peer group were based,
to the extent practicable, on the degree of compatibility of the positions roles and
responsibilities. Certain executive officers were consulted in order to establish appropriate
position comparables and to ensure Hewitt understands our business strategy and objectives. The
survey results were presented on a comparative basis to our then current compensation, on both an
actual basis from the proxy tables (i.e., actual medians and percentiles) and based on a regression
analysis (i.e., using Luminexs revenues and market capitalization as of November 2007 to reflect
company size) that attempted to normalize the results by adjusting for significant differences in
the size of our peers and/or the scope of the position comparables. Hewitt was also requested in
2008 to review our outside director compensation policies and to make recommendations regarding
compensation policies for our top 30 officers and eventually across our employee population,
including the development of sustainable and appropriate future job development and market pricing
strategies. These studies were generally congruent and consistent with the Companys compensation
philosophy.
The Committee considered the information from Hewitts peer compensation analysis, together
with tally sheets and summary compensation tables prepared by management. The Committee assessed
this information relative to the policies and objectives described above and the recommendations of
our CEO and made the following determinations regarding 2008 named executive officer compensation,
as further detailed under the Summary Compensation Table below.
28
Base Salary. The results of the market analysis performed by Hewitt revealed that
base salaries of our named executive officers (other than our CEO) were generally below our
benchmark for our peer group. Additionally, the study indicated that base salaries (other than our
CEO) together with cash bonus opportunities were in the aggregate below our benchmark. The
Committee, however, also considered that total target compensation opportunities were only slightly
below our benchmarks on average, primarily as a result of increased value allocated to equity
grants in 2007 which were awarded, in part, to compensate for below market equity compensation in
prior years. It was, in part on this basis, determined that our cash-based compensation programs,
including performance bonus opportunities, for our named executive officers were generally
appropriate and consistent with our compensation philosophies, objectives and benchmarks. Primarily
on this basis, and upon the recommendation of our CEO, named executive officer base salaries
(excluding our CEO) only modestly increased in 2008, ranging from increases of approximately 3% to
7%, with specific adjustments based primarily on internal pay level considerations and 2007
performance reviews.
With respect to our CEO, the revised survey indicated his base salary to approximate our
benchmark, while bonus, equity and total compensation opportunities were higher than market median,
though below the 75th
percentile. Mr. Balthrops salary was increased in 2008 by 4% to $450,000 per annum,
primarily to more closely align his salary with the market median.
Performance-based Cash Awards. Hewitts market analysis indicated that performance
bonus opportunities for our named executive officers (other than our CEO) were generally slightly
below the market median. However, in light of the approximately median total compensation
opportunities, the Committee determined that the bonus opportunities were generally appropriate
when viewing total compensation opportunities as a whole and generally consistent with our desired
compensation mix. Our CEO also indicated his view that the current bonus opportunities were
appropriate from an internal pay positioning standpoint. Primarily based on the foregoing, and upon
the recommendation of our CEO, named executive officer target bonus amounts, expressed as a
percentage of base salary, did not increase for 2008, except for Mr. Bryant whose target bonus was
increased from 50% to 70% primarily based on the Committees desire to bring Mr. Bryants bonus and
total compensation opportunities closer to those of our CEO to reflect his projected roles and
responsibilities for 2008. The target bonus for the other named executive officers (other than our
CEO and Mr. Bryant) was 50% of each executives base salary, consistent with 2007 bonus
percentages.
As the market survey indicated Mr. Balthrops target cash bonus amount was above the market
median, and in light of the implicit increase in his target amount resulting from the increase in
his base salary, the Committee did not adjust Mr. Balthrops target bonus percentage in 2008, which
was 100% of base salary.
Annual Incentive Plan for Named Executive Officers Other than CEO
The Committee approved 2008 performance award opportunities based upon achievement of Company
performance goals (Company Goals) as well as personal business objectives (Individual Goals).
For 2008, for named executive officers (other than the CEO), the total target awards under the
performance-based cash bonus plan were weighted 50% for the achievement of Company Goals and 50%
for the achievement of Individual Goals. The weighting of specific components of the Individual
Goals varied for each executive taking into account, among other factors, responsibilities,
seniority and other strategic initiatives in which an executive may be involved. The Company Goals
were subject to an over/underachievement scale with possible payouts of 0% to 200% of the potential
bonus for Company Goals based on financial results in relation to the applicable performance
targets, with minimum payouts starting at 50% of the target value for each goal for minimum
threshold performance. Individual Goals were not subject to an over/underachievement scale.
Accordingly, total annual cash performance awards could range from 0% to a maximum of 150% of the
target bonus (which was 50% of the named executive officers base salary other than our CEO (100%)
and Mr. Bryant (70%)).
The Company Goals and weight afforded to each goal in 2008 are set forth in the table below:
Company Performance Goals
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Goal |
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Percentage Weight (1) |
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A. Achieve Consolidated Revenue of $104 million |
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10 |
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B. Achieve Consolidated Assay Revenue of $24 million |
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5 |
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C. Achieve Combined Consumables + Royalties Revenue of $39 million |
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5 |
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D. Achieve Consolidated Gross Profit of $64 million |
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10 |
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E. Achieve Adjusted Operating Profit of $6 million |
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10 |
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F. Achieve Quarterly Adjusted Operating Expense Control ($14.85
million, $14.5 million, $14.5 million and $14.2 million, in the
1st, 2nd, 3rd and 4th
quarter, respectively) |
|
|
10 |
|
|
|
|
|
Total |
|
|
50 |
|
|
|
|
|
|
|
|
(1) |
|
Expressed as a percentage of total target bonus amount. |
29
The target performance goals were primarily determined by reference to our business plan.
The Individual Goals varied by executive (and according to areas of responsibility) and were
based on specified management initiatives and projects for 2008 (including business and product
development milestones, partnership and strategic goals and leadership objectives), with each
objective given a specified weight typically 5% to 20% for projects, and 10% to 15% (out of the
total target award opportunity) for leadership and team contributions. The project goals were
graded 100% for on time completion, 75% for completed late, 50% for partially complete and 0% for
failure to produce even partial completion, in each case in the subjective judgment of the
Committee based, in part, upon the recommendation of the CEO. The maximum number of points a named
executive officer was eligible to receive for completion of his Individual Goals was 50.
At a Committee meeting in February 2009, our CEO reviewed in detail both the Companys
financial and operating performance relative to the Company Goals for 2008, as well as the
performance of the individual named executive officers relative to the applicable Individual Goals.
Actual performance under the bonus plan for named executive officers (other than our CEO) was
determined and certified by our management to be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Company Goals |
|
|
Individual Goals |
|
|
Total |
|
Mr. Bradley |
|
|
70.49/50 |
|
|
|
48.75/50 |
|
|
|
119.24 |
|
Mr. Bryant |
|
|
70.49/50 |
|
|
|
42.375/50 |
|
|
|
112.87 |
|
Mr. Currie |
|
|
70.49/50 |
|
|
|
49.15/50 |
|
|
|
119.64 |
|
Mr. Gosch |
|
|
70.49/50 |
|
|
|
45/50 |
|
|
|
115.49 |
|
Based on these results, and consistent with the requirements of the bonus plan, the Committee
approved a cash bonus amount in 2008 for each named executive officer (other than our CEO) ranging
from approximately 58% to 60% of their base salary, except for Mr. Bryant, who received a cash
bonus amount equal to 79% of his base salary.
Annual Incentive Plan for CEO
For 2008, the CEO incentive plan was based upon achievement of certain financial, project and
R&D targets. The project and R&D objectives were based on specified management initiatives, with
each objective given a specific weight. The total target awards under the CEO incentive plan were
weighted 45% for the achievement of the Company performance goals, 30% for the achievement of Mr.
Balthrops project objectives and 25% for the achievement of the R&D objectives. These target
performance goals and objectives were primarily determined with reference to our business plan and
strategic goals and initiatives recommended by our CEO.
Mr. Balthrops 2008 incentive plan included an overachievement feature with possible payouts
between 0% and 150% with respect to Company financial objectives based on financial results between
specified threshold minimum and maximum performance levels of the applicable performance targets,
calculated on a linear basis. The project and R&D goals that are not financial were graded 100%
for on time completion, 75% for completed late, 50% for partially completed and 0% for failure to
produce partial completion. For 2008, Mr. Balthrops total award opportunity under the CEO
incentive plan ranged from zero to a maximum of 132.5% of his target bonus amount. The actual
target bonus established by the Committee was 100% of Mr. Balthrops base salary as described
above.
At the Committee meeting approving incentive payouts for 2008 for our other executive
officers, the Committee also reviewed our CEOs performance generally and relative to his plan for
2008. After consideration of this recommendation without the CEO present, and the Committees
overall view of the CEOs performance and contributions in 2008, the Committee determined to award
Mr. Balthrop approximately 89% of his target incentive for 2008, which was consistent with the
requirements of his 2008 plan. The following table breaks down Mr. Balthrops incentive plan goals
per goal, which were overachieved on the Company performance metrics (62.1 points out of a targeted
52.5 points), but underachieved on the project and R&D goals (26.5 points out of a targeted 47.5
points).
|
|
|
|
|
Goal |
|
Weight |
|
Achieve Total Revenue per 2008 Plan of $104.0M* |
|
|
15 |
|
Achieve Gross Profit per 2008 Plan of $64.0M* |
|
|
15 |
|
Achieve EBITDASC** per 2008 Plan of $10.5M* |
|
|
15 |
|
Achieve LMD Revenue per 2008 Plan of $19.7M |
|
|
7.5 |
|
Project and R&D Goals, including customer contracts, product ships
and launch, and project milestones (including clinical and
regulatory)*** |
|
|
47.5 |
|
|
|
|
|
Total |
|
|
100 |
|
|
|
|
|
|
|
|
* |
|
Subject to overachievement. If actual results were over maximum performance level then bonus is
increased by 150% and on a linear basis in between. |
|
** |
|
Earnings before interest, taxes, depreciation and amortization, and after stock compensation. |
|
*** |
|
Compensation Committee had discretion to award up to 150% of target for certain objectives. |
30
Long-Term Stock-Based Incentive Compensation. The market survey generally indicated
that our executives were historically compensated above the market median in terms of equity
compensation. Based on various factors, including the CEOs recommendations (emphasizing internal
equity considerations, the amount of the 2007 equity grants, our targeted compensation mix and
the CEOs view of an executives performance and potential contributions), the Committee determined
it was appropriate to establish for 2008 a uniform targeted value of equity awards of $250,000 for
our named executive officers (other than our CEO and COO), and other than Mr. Gosch (who received a
value of $350,000 in recognition of his new responsibilities for 2008 as the head of our LBG
division).
For our CEO and COO, the Committee determined it was appropriate to significantly increase
their equity and total compensation opportunities by increasing both the total targeted amounts, as
well as through participation in the newly created LTIP. As indicated above, a primary goal of
implementing the LTIP program was to provide a significantly performance-based incentive structure
that allows the participating executive an opportunity for total compensation at or exceeding the
75th percentile as a reward for exceptional long-term performance and value creation.
The Committee also adopted the LTIP in recognition of the Committees view as to the participants
performance and anticipated future contributions, and for its potential retention value. The
target amount for total equity compensation was determined to be $1,650,000 for Mr. Balthrop and
$1,150,000 for Mr. Bryant, reflecting increases of 85% and 109%, respectively, from 2007 equity
amounts. For Mr. Balthrop approximately $850,000 of this target amount was allocated to time-based
restricted stock and options on the same basis as for our other executives, and approximately
$800,000 was allocated to the target LTIP awards. For Mr. Bryant, approximately $550,000 of this
target amount was allocated to time-based restricted stock and options on the same basis as for our
other executives, and approximately $600,000 was allocated to the target LTIP awards.
The restricted shares granted in 2008 are generally subject to time vesting over five years,
and the options over three years, in equal annual increments on the anniversary date of such
grants. See above under Program DesignLong-Term Stock-Based Incentive Compensation.
The Committee believes the increased stock based compensation opportunities, including the
LTIP program established in 2008, will further motivate these executives to increase the long-term
value of the Company.
On December 4, 2008, the Committee recommended and adopted, and the Board ratified, the LTIP
and the initial targets and awards thereunder to our CEO and COO. This adoption was the
culmination of a process commenced early in 2008 by the Committee with the assistance of Hewitt.
The process involved significant deliberation of alternatives and several meetings. The
Committees intent was to include the LTIP as part of the 2008 compensation program for our CEO and
COO. Because of extended deliberations and the fact that the LTIP was not recommended until
December 4, 2008, the performance period was determined to be only two years from the grant date.
The initial LTIP award and the related targets were determined from the date of grant. The
targets, however, were set at a level taking into account performance from the beginning of 2008
(therefore effectively reflecting performance over a three year period).
For 2008, each participant was assigned a target award amount expressed in dollars (the
Target Amount). The potential payout amounts are based on Threshold, Target and Maximum
levels of payout based on the aggregate weighted achievement of the corresponding performance
targets for the LTIP participants and were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Dollar |
|
|
|
|
|
|
|
|
|
|
Participant |
|
Amount |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
CEO |
|
$ |
800,000 |
|
|
|
60 |
% |
|
|
100 |
% |
|
|
275 |
% |
|
|
|
|
|
|
(22,378 shares |
) |
|
(37,296 shares |
) |
|
(102,564 shares |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COO |
|
$ |
600,000 |
|
|
|
60 |
% |
|
|
100 |
% |
|
|
275 |
% |
|
|
|
|
|
|
(16,783 shares |
) |
|
(27,972 shares |
) |
|
(76,923 shares |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
The potential payout amounts are expressed above both as a percentage of the applicable Target
Amount and the number of shares eligible to be vested (determined by dividing the specified amount
of the Threshold, Target or Maximum Amount by the closing price of the Companys common stock as
reported by the Nasdaq Stock Market on the grant date), in each case at the applicable weighted
aggregate performance level. Payouts between Threshold and Maximum for Participants shall be
calculated by the Committee in its sole discretion using straight-line interpolation.
Accordingly, for 2008, Mr. Balthrop was granted an unvested RSU under the LTIP for 102,564
shares of our common stock, and Mr. Bryant was granted an unvested RSU under the LTIP for 76,923
shares of our common stock. Mr. Bryants award was cancelled in connection with his voluntary
termination effective February 1, 2009. Partial or complete vesting of the RSUs for Mr. Balthrop
shall be dependent upon his continued employment and the achievement of the specific performance
goals described below, extending from the date of grant through December 31, 2010. The Committee,
in its sole discretion, shall determine whether and to what extent performance goals have been
achieved under outstanding awards on or before March 15, 2011 (the Determination Date). In the
event that Mr. Balthrop achieves less than the maximum level of the performance goals, the total
number of shares represented by his RSU shall be reduced to reflect where actual interpolated
performance lies in the range of performance goals and weighted aggregate corresponding payout
opportunities established for the grant, including up to 37,296 shares for Mr. Balthrop if target
performance is achieved, 22,378 shares in the event that minimum threshold goals are achieved, and
zero shares in the event that minimum threshold goals are not achieved. Calculation of shares
between
threshold and maximum performance shall be determined based on straight-line interpolation.
Vesting of the RSU (after giving effect to the adjustment above) shall occur as follows: 50% on the
Determination Date and 50% on December 31, 2012. The Committee reserves the right to make certain
adjustments to awards under the LTIP from time to time, in its sole discretion, to accommodate for
certain unusual or nonrecurring events, or to avoid unwarranted penalties or windfalls for
participants.
Performance goals under the grants are based on the following components, with the following
weights given to each: 50% on the trading price of our common stock at the end of the performance
period (the Trading Price Goal) and 50% on our operating cash flows per diluted share at the end
of the performance period (the Operating Cash Flow Goal), each as described more fully below and
in the LTIP.
Partial or complete achievement of the Trading Price Goal is dependent upon the average
closing price of our common stock for the twenty consecutive trading days ending December 31, 2010,
inclusive, subject to certain adjustments as described in the LTIP. Each of Mr. Balthrop and Mr.
Bryant was assigned a range of trading price targets as follows: a minimum threshold of $24.79 per
share, a target of $28.17 per share, and a maximum goal of $44.73 per share.
Partial or complete achievement of the Operating Cash Flow Goal is dependent upon the average
quarterly total operating cash flows per diluted share (as defined in the LTIP) for the four
quarters ended December 31, 2010 (Average CFPS), as further described in the LTIP. Total
operating cash flows means Luminexs GAAP net cash provided by operating activities as shown on
its financial statements for the 12 month period ended December 31, 2010, as further described in
the LTIP. Each of Mr. Balthrop and Mr. Bryant was assigned a range of Average CFPS targets as
follows: a minimum threshold of $0.101 per share, a target of $0.111 per share, and a maximum goal
of $0.157 per share.
These goals should not be viewed as predictions or estimates of future performance, and the
actual achievement of these targets are subject to numerous known and unknown risks and
uncertainties including, without limitation, those described under forward looking statements,
risk factors or similar headings in our quarterly and annual reports filed with the SEC.
When considering the design of the LTIP for 2008 grants, the Committee determined that share
price appreciation and operating cash flows per share were the most appropriate performance metrics
for the following reasons:
Share price appreciation is likely the most readily quantifiable metric to confirm an
increase in total value and investment return from a stockholder perspective over the performance
period; and
Cash flow per share measures the true value of our business. Our ability to translate
earnings to cash indicates the health of our business and allows our company to invest for the
future of the business as well as returning value to shareowners.
The foregoing summary of the 2008 LTIP is qualified in its entirety by reference to the
complete texts of the 2008 LTIP and form of RSU award agreement previously filed by the Company
with the SEC.
32
Executive Compensation for 2009. The Committee again engaged Hewitt to serve as the
Committees compensation consultant for 2009. Hewitt, among other matters, was asked to update its
detailed peer group compensation analyses, including a further refinement of the chosen peer group
with the assistance of the Committee.
Hewitts updated survey indicated that base salaries for our named executive officers (other
than our CEO), as well as our total cash compensation opportunities, were generally below the
market median. However, primarily as a result of equity compensation levels in 2008 and our
emphasis on restricted share grants, the equity component and total compensation (including equity)
were above our benchmarks. With respect to our CEO, the revised survey indicated his base salary
to be below our benchmark, while bonus, equity and total compensation opportunities were higher
than market median, though below the 75th percentile.
Based on a review process substantially similar to that conducted in 2008, and in
consideration of similar data points and summaries (including updated tally sheets, additional
internal pay comparisons and information and the results of the updated and revised peer group
compensation survey prepared by Hewitt), as well as the recommendations of our CEO, the Committee
made the following determinations regarding 2009 named executive officer compensation.
It was determined that our executive base salaries (excluding our CEO) should be increased to
reflect both merit adjustments and market-based adjustments, with merit-based adjustments at
approximately 3% and market adjustments ranging from 18% to 20%, designed to bring our executive
salaries more in line with the market median based on Hewitts survey results. The CEO recommended
these increases in large part for retention purposes, but also based on performance and anticipated
responsibilities for 2009 and the increasing complexity of the Companys operations. With respect
to our CEO, the Committee increased his salary to $495,000 per annum from $450,000, or
approximately 9%, for similar reasons.
In light of the salary increases, the Committee determined it was reasonable and consistent
with our compensation philosophies to maintain the target performance bonus opportunities
(expressed as a percentage of base salary) the same for 2009, as compared with 2008. Accordingly,
the bonus programs will be substantially the same in 2009 for our named executive officers
(including for our CEO), subject to modifications to applicable performance objectives and
corresponding weighting under our cash-based bonus plans to reflect updates to responsibilities and
our business plan and strategic and other initiatives for 2009. Accordingly, as in 2008, target
bonus amounts, expressed as a percentage of base salary, were confirmed to be 50% for each
executive officer, except for our CEO (100%, consistent with 2008 and as required by his employment
agreement).
The 2009 targeted value of equity awards for our named executive officers (other than our CEO)
were based on various factors reflecting the Committees application of our flexible compensation
philosophy. In particular, the CEOs recommendations were the most significant factor and were
based on his assessment of performance, potential, internal pay positioning and market
competitiveness based on our compensation survey. The value of these grants, split 75/25 between
RSAs and options, are follows: Mr. Bradley $250,000; Mr. Currie $300,000; and Mr. Gosch -
$250,000. Additionally, the Committee determined to expand the LTIP program to include Mr. Currie
for 2009, with a target grant value of $300,000. This was largely based on the recommendation of
our CEO in recognition of Mr. Curries performance reviews, importance to the Company and for
retention purposes.
Mr. Balthrops target equity award remained substantially the same in 2009, at $800,000 for
time-based equity (split 75/25 between RSAs and options) and $800,000 under the LTIP (which plan is
designed with a similar structure as in 2008).
Change in Control; Termination Benefits. We believe that reasonable and appropriate severance
and change in control benefits are necessary in order to be competitive in our executive recruiting
and retention efforts. We also believe that a change in control arrangement will provide an
executive security that will likely reduce the reluctance of an executive to pursue a change in
control transaction that could be in the best interests of our stockholders. Finally, while we
have not conducted a study to confirm this, we believe formalized severance and change in control
arrangements are common benefits offered by employers competing for similar executive talent.
While the Committee will receive this information as part of its review of annual tallies of total
executive compensation (including contingent compensation), we do not typically consider the value
of potential severance and change in control payments when assessing annual compensation as these
payouts are contingent and have a primary purpose unrelated to ordinary compensation matters and
objectives. The Committee generally assesses these potential payouts only in view of their
reasonableness during negotiations with a new hire, and periodically in light of competitive market
conditions or in respect of internal equity considerations as described below.
33
Therefore, upon their joining the Company, we entered into employment agreements with our
named executive officers. These agreements generally provide for severance payments (including
premiums for certain continuing health and insurance benefits) where the executive is terminated
without cause (including the Companys failure to renew the employment agreement) or as a result
of incapacity or death, or if the executive resigns for good reason. Although the definitions
may vary slightly across these agreements, good reason generally means certain demotions in
responsibilities or title, decreases in compensation, the Companys continued material breach of
the employment agreement and/or relocation requirements, while cause typically means a material
fraud by the executive upon the Company or the executives continued material breach of the
employment agreement (or, for Mr. Balthrop, failure to perform the duties outlined in his
employment agreement, conduct likely to cause injury to the Company, conviction of a felony or a
criminal act involving moral turpitude, violation of a Company policy or a breach of his
employment agreement).
Severance generally consists of an amount equal to the executives base salary at the highest
rate in effect for the six month period prior to termination (or, for Mr. Balthrop the amount of
base salary that would have been paid over the remainder of the then-current term if greater) and
the prior years bonus amount, less any payment or payments received during the 12 month period
from the time of termination under any long-term disability plan if the executive was terminated by
reason of incapacity. In addition, health or other employee benefits (other than bonus and
incentive compensation benefits) for the executive (and the executives family) generally continue
for a
period of twelve months following an executives termination to the extent permitted by the
applicable plans and law. If the termination occurs other than for cause or voluntary termination,
Mr. Balthrop is entitled to additional severance in an amount equal to the pro rated portion of the
current-year bonus to the extent the performance measures are achieved.
The severance payments are paid in semi-monthly installments for a period of twelve months
following the date of termination. If the executive is terminated without cause, the severance
payments are generally made upfront at the time of termination (or within six months as described
below) in a lump payment in order to make a clean separation from, and avoid continued entanglement
with, the employee. Additionally, certain of the employment agreements, including Mr. Balthrops,
were amended in 2006 to provide that in the event the payment of any severance amounts payable
pursuant to the employment agreements within six months of the date of the applicable executives
termination of employment would cause such executive to incur any additional tax under Section 409A
of the Code, then payment of such amounts shall be delayed until the date that is six months
following such executives termination date.
In addition, as described above, upon a change of control, all unvested options or other
restricted shares, and upon a termination without cause or as a result of death or disability, all
unvested restricted shares held by the executive will immediately become vested and exercisable, as
applicable, pursuant to these agreements.
Each named executive officer has agreed to limitations on his ability to disclose confidential
information relating to us and acknowledges that all discoveries, inventions and other work product
relating to his employment belong to us. Also, during the one year period following an executives
termination of employment, each executive has agreed not to compete, directly or indirectly, with
the core business of the Company. Furthermore, during the non-compete period, each executive has
agreed not to solicit our employees or consultants.
The foregoing summaries are qualified in their entireties by reference to the complete texts
of the employment agreements previously filed by the Company with the SEC.
Historically, while each agreement has been the result of an arms-length negotiation, we have
tried to utilize a similar form of agreement where possible (apart from minimum salary and cash
bonus targets). Accordingly, Messrs. Bradley, Currie and Gosch have a similar form. Mr.
Balthrops agreement varies to some extent from the forms above and again reflects an arms-length
negotiation following a lengthy CEO search, and we believe the terms are appropriate in light of
Mr. Balthrops background, skill set, the difficulty in replacing Mr. Balthrop and the competitive
nature of his recruitment process.
Retirement Plans. We match contributions by our named executive officers to our 401(k) plan
up to the maximum amount permitted under the Code.
34
MSPP. In 2006, the Committee approved, and the stockholders adopted, the MSPP to encourage
stock ownership and further align the long-term economic interests of our senior officers and our
stockholders. Another goal of the MSPP is to enable us to utilize the cash saved in lieu of paying
a portion of annual performance bonuses for research and development and other productive corporate
purposes. The MSPP allows select executives to elect to receive, in lieu of a specified portion of
his or her annual performance bonus, a number of restricted shares equal to the amount of such
specified portion of the annual bonus divided by a dollar amount equal to 80% of the fair market
value of a share on the date on which such restricted shares are granted. Any participant who
makes such an election will be entitled to a grant of restricted shares generally by March 15 of
each calendar year following the year for which the election is in effect. The restricted period
for restricted shares granted under the MSPP is generally three years from the date of grant. The
Committee may, in its discretion, accelerate the lapse of such restrictions upon a participants
retirement or a change in control.
No shares have been purchased to date under the MSPP.
Perquisites and Other Benefits. The Company does not generally provide perquisites that are
not, in the Committees view, integrally and directly related to the named executive officers
duties. While we have no formal relocation policy for new hires, we will on occasion agree to
reimbursement of certain relocation and related costs as part of a negotiation for an executive
based on the particular facts and circumstances of the negotiation. Senior management also
participates in our other broad-based benefit programs available to our salaried employees
including health, dental and life insurance programs. The Company generally does not provide tax
gross-up perquisites to its named executive officers, except to LTIP participants as described on
page 27 above. Except as otherwise discussed herein, other welfare and employee-benefit programs
are generally the same for all eligible Company employees, including our executive officers, with
some variation as required by law with respect to our international employees. While the Committee
believes the existing benefits to be reasonable, the Committee
intends to periodically reassess our perquisite and benefits programs to help ensure that these
programs are appropriately competitive with market medians and effective as a recruiting and
retention tool.
Stock Ownership/Retention Guidelines. The board expects each officer and director to
demonstrate a long-term commitment to the Company and to the Companys stockholders by acquiring
and holding a meaningful investment in the Companys common stock. We believe requiring directors
and officers to hold a significant long-term stake in our equity accomplishes to the following
principle goals: (i) further aligning long-term economic interests of our executives and our
stockholders by encouraging our management to think and act like long-term investors; and (ii)
helping to reduce excessive or inappropriate risk-taking motivated principally by short-term share
price appreciation. Therefore, the board has established specific ownership and retention
guidelines for the Companys officers and directors, summarized below.
Over time each officer and director is expected to build his or her ownership of the Companys
common stock. The targeted ownership levels are expected to be achieved over five years from June
13, 2005, the effective date of the program, or from the time they are named an officer or a
director, as applicable, and maintained thereafter. The targeted ownership levels are as follows:
CEO: five (5) times annual salary; executive officers: two and one half (21/2) times annual salary;
non-employee directors: $100,000 market value. Each officer and director who has not yet achieved
the targeted ownership levels is expected to retain certain shares of common stock acquired upon
exercise of stock options or from restricted share grants pursuant to the Companys equity plans as
follows: (1) a minimum of one-half the net number of shares acquired upon option exercises; and
(2) in the case of restricted shares, after each vesting date of the award, at least one half of
the net vested shares. The board of directors is authorized to make temporary exemptions to the
foregoing ownership guidelines in its discretion where compliance would impose a severe economic
hardship or otherwise prevent the officer or director from complying with a court order.
35
Accounting and Tax Matters. In part because of our lack of supplemental or top hat
retirement or deferred compensation plans (apart from the MSPP) typical of larger companies, we do
not presently consider the tax or accounting consequences to be a material factor in the design of
our executive compensation packages, except as to the applicability of Section 162(m) of the Code
and to the extent of the Section 280 gross-up
protection described on page 27 above with respect
to LTIP participants. The compensation paid to our officers for 2008 did not exceed the $1 million
limit per officer for qualifying executive compensation for deductibility under Section 162(m) of
the Code. Our Equity Plan is structured so that any compensation deemed paid to an officer when he
or she exercises an outstanding option under the Equity Plan with an exercise price equal to the
fair market value of the option shares on the grant date will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Restricted share grants, for
which the vesting restrictions are solely time-based (including our CEOs performance-based
restricted share grant in light of the recent modification to include a cliff vesting feature at
the end of the five year performance period as described above), may not qualify as
performance-based compensation and could be subject to the $1 million limitation. The Balthrop
Option (see Narrative to Summary Compensation Table below) was not issued pursuant to a
stockholder approved plan and, if exercised while Mr. Balthrop is a covered employee, will not
qualify as performance-based compensation and will therefore be subject to the $1 million
limitation. We have also attempted to structure the LTIP and our cash performance bonus program
for 2009 to qualify for deductibility under Section 162(m) of the Code for future years, primarily
in light of the current and projected compensation expense for our CEO and our growth expectations.
It is import to note, however, that the Company is carrying forward significant net operating
losses based on historical operations in a net loss position. Although it will consider the tax
implications of its compensation decisions, the Committee believes its primary focus should be to
attract, retain, and motivate executives and to align the executives interests with those of the
Companys stakeholders. Accordingly, because the amount and mix of individual compensation are
based on competitive considerations as well as Company and individual performance, executive
officer compensation that is not performance-based may exceed $1 million in a given year.
The Committee operates its compensation programs with the good faith intention of complying
with Section 409A of the Code. Effective January 1, 2006, the Company began accounting for
stock-based payments with respect to its long-term equity incentive award programs in accordance
with the requirements of SFAS 123R.
Compensation Committee Report
The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed
it with management and, based on such review and discussion, recommended to the board of directors
that the Compensation Discussion and Analysis be included in this proxy statement and incorporated
by reference into the Companys Annual Report on Form 10-K.
Submitted by the Compensation Committee of the board of directors,
|
|
|
|
|
Jay B. Johnston (Chairman) |
|
|
Fred C. Goad, Jr. |
|
|
Jim D. Kever |
|
|
Gerard Vaillant |
36
Summary Compensation Table
The following table sets forth certain summary information for the years ending December 31,
2008, 2007 and 2006, with respect to the compensation awarded to, earned by, or paid to our named
executive officers. Compensation information for each executive officer below has only been
provided for years during which such executive officers qualified as named executive officers as
defined by SEC rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Plan |
|
|
All Other |
|
|
|
|
Name and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
|
|
Principal Position |
|
Year |
|
|
Salary ($) |
|
|
Bonus ($) |
|
|
($) (1) |
|
|
($) (2) |
|
|
($) (3) |
|
|
($) (4) |
|
|
Total ($) |
|
Patrick J. Balthrop, Sr. |
|
|
2008 |
|
|
|
445,500 |
|
|
|
75,851 |
(5) |
|
|
918,359 |
|
|
|
501,344 |
|
|
|
394,691 |
|
|
|
8,073 |
|
|
|
2,343,818 |
|
President & |
|
|
2007 |
|
|
|
408,000 |
|
|
|
92,496 |
(5) |
|
|
765,955 |
|
|
|
958,351 |
|
|
|
432,000 |
|
|
|
7,062 |
|
|
|
2,663,864 |
|
Chief Executive Officer |
|
|
2006 |
|
|
|
400,000 |
|
|
|
192,496 |
(6) |
|
|
569,586 |
|
|
|
893,472 |
|
|
|
337,000 |
|
|
|
7,292 |
|
|
|
2,399,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harriss T. Currie |
|
|
2008 |
|
|
|
239,199 |
|
|
|
|
|
|
|
143,371 |
|
|
|
48,123 |
|
|
|
143,089 |
|
|
|
5,000 |
|
|
|
578,782 |
|
Vice President, Finance, |
|
|
2007 |
|
|
|
230,754 |
|
|
|
|
|
|
|
116,761 |
|
|
|
182,531 |
|
|
|
111,204 |
|
|
|
4,800 |
|
|
|
646,050 |
|
Chief Financial Officer and
Treasurer |
|
|
2006 |
|
|
|
228,800 |
|
|
|
|
|
|
|
71,029 |
|
|
|
253,634 |
|
|
|
141,376 |
|
|
|
5,000 |
|
|
|
699,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas C. Bryant |
|
|
2008 |
|
|
|
325,600 |
|
|
|
|
|
|
|
203,120 |
|
|
|
109,290 |
|
|
|
257,253 |
|
|
|
|
|
|
|
895,263 |
|
Executive Vice President and
Chief Operating Officer (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory J. Gosch |
|
|
2008 |
|
|
|
219,364 |
|
|
|
|
|
|
|
134,731 |
|
|
|
124,411 |
|
|
|
126,672 |
|
|
|
6,000 |
|
|
|
567,547 |
|
Vice President, |
|
|
2007 |
|
|
|
204,160 |
|
|
|
|
|
|
|
93,135 |
|
|
|
124,130 |
|
|
|
106,710 |
|
|
|
6,000 |
|
|
|
534,135 |
|
Luminex Bioscience Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell W. Bradley |
|
|
2008 |
|
|
|
215,710 |
|
|
|
|
|
|
|
165,329 |
|
|
|
31,803 |
|
|
|
128,606 |
|
|
|
7,750 |
|
|
|
546,480 |
|
Vice President,
Business Development
and Strategic Planning |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts shown in this column represent the dollar amounts recognized for financial
statement reporting in the applicable year and thus include amounts from awards granted in and
prior to such years. Assumptions used in the calculation of these amounts are described in
Note 14 to the Companys audited financial statements for the fiscal year ended December 31,
2008, included in the Companys Annual Report on Form 10-K that was filed with the SEC on
February 26, 2009. All grants of restricted stock were made in 2006 under the Companys 2000
Long-Term Incentive Plan (the 2000 Plan) and in 2007 and 2008 under the Companys 2006
Equity Incentive Plan (the 2006 Plan), and are subject to individual award agreements, the
forms of which were previously filed with the SEC. During 2008, there were no forfeitures of
restricted stock awards related to service-based vesting conditions for the named executive
officers. |
|
(2) |
|
The amounts shown in this column represent the dollar amounts recognized for financial
statement reporting purposes in accordance with SFAS 123R (calculated, per the SEC rules,
without consideration of the impact of estimated forfeitures related to service-based vesting
conditions) and thus include amounts from awards granted in and prior to 2006, 2007 and 2008,
respectively. Assumptions used in the calculation of these amounts are described in Note 14
to the Companys audited financial statements for the fiscal year ended December 31, 2008,
included in the Companys Annual Report on Form 10-K that was filed with the SEC on February
26, 2009. All grants of options to purchase the Companys common stock were made under the
2006 Plan, the 2000 Plan or predecessor plans and are subject to individual award agreements,
the forms of which were previously filed with the SEC, except that the Balthrop Option (see
below under Narrative to Summary Compensation Table and Grants of Plan-Based Awards in 2008
Table) was not issued pursuant to a stockholder approved plan. During 2008, there were no
forfeitures of option awards related to service-based vesting conditions for the named
executive officers. |
37
|
|
|
(3) |
|
The amounts shown in this column reflect annual cash-based incentive bonuses earned by each
of the named executive officers pursuant to the Companys 2006, 2007 and 2008 management
incentive plans, respectively, which are discussed in further detail under Compensation
Discussion and AnalysisExecutive Compensation for 2008. The potential payouts under the
2008 plan at the time the plan was established in 2008 are provided below under Grants of
Plan-Based Awards in 2008. |
|
(4) |
|
This column includes matching payments under our 401(k) Plan and the Registered Retirement
Savings Plan in Canada. |
|
(5) |
|
This amount includes the 2008 and 2007 installments, respectively, of the payments to Mr.
Balthrop in connection with the repricing of his sign-on option grant in 2005. |
|
(6) |
|
Reflects a subjective, discretionary bonus for 2006 of $100,000 awarded to Mr. Balthrop in
2007 relating to 2006 performance. This amount also includes the 2006 installments of the
payments to Mr. Balthrop in connection with the repricing of his sign-on option grant in 2005. |
|
(7) |
|
Mr. Bryant resigned from Luminex effective February 1, 2009. |
38
Grants Of Plan-Based Awards in 2008
The following table summarizes grants of plan-based awards made to our named executive
officers in 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
|
|
|
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
Awards: |
|
|
Exercise |
|
|
Date |
|
|
|
|
|
|
|
Estimated Possible Payouts |
|
|
Estimated Possible Payouts |
|
|
Number |
|
|
Number of |
|
|
or Base |
|
|
Fair Value |
|
|
|
|
|
|
|
Under Non-Equity Incentive |
|
|
Under Equity Incentive Plan |
|
|
of Shares |
|
|
Securities |
|
|
Price of |
|
|
of Stock |
|
|
|
|
|
|
|
Plan Awards(1) |
|
|
Awards(2) |
|
|
of Stock |
|
|
Underlying |
|
|
Option |
|
|
and Option |
|
|
|
Grant |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
or Units |
|
|
Options |
|
|
Awards |
|
|
Awards |
|
Name |
|
Date |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
(#) |
|
|
(#) |
|
|
(#) |
|
|
(#) |
|
|
(#) |
|
|
($/Sh) |
|
|
($)(3) |
|
Patrick J. Balthrop, Sr. |
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,797 |
|
|
|
|
|
|
|
|
|
|
|
637,498 |
|
|
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,110 |
|
|
|
20.70 |
|
|
|
211,273 |
|
|
|
|
12/04/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,378 |
|
|
|
37,296 |
|
|
|
102,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,199,998 |
|
|
|
|
N/A |
|
|
|
216,000 |
|
|
|
432,000 |
|
|
|
561,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harriss T. Currie |
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,058 |
|
|
|
|
|
|
|
|
|
|
|
187,501 |
|
|
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,032 |
|
|
|
20.70 |
|
|
|
62,135 |
|
|
|
|
N/A |
|
|
|
58,916 |
|
|
|
117,832 |
|
|
|
176,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas C. Bryant |
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,928 |
|
|
|
|
|
|
|
|
|
|
|
412,510 |
|
|
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,071 |
|
|
|
20.70 |
|
|
|
136,704 |
|
|
|
|
12/04/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,783 |
|
|
|
27,972 |
|
|
|
76,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,650,020 |
|
|
|
|
N/A |
|
|
|
80,000 |
|
|
|
160,000 |
|
|
|
240,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory J. Gosch |
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,775 |
|
|
|
|
|
|
|
|
|
|
|
243,743 |
|
|
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,542 |
|
|
|
20.70 |
|
|
|
80,780 |
|
|
|
|
N/A |
|
|
|
54,031 |
|
|
|
108,061 |
|
|
|
162,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell W. Bradley |
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,058 |
|
|
|
|
|
|
|
|
|
|
|
187,501 |
|
|
|
|
05/13/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,032 |
|
|
|
20.70 |
|
|
|
62,135 |
|
|
|
|
N/A |
|
|
|
53,000 |
|
|
|
106,000 |
|
|
|
159,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts shown in these columns reflect the threshold, target and maximum amounts
(assuming threshold, target and maximum performance across all performance objectives were
achieved) that each of the named executive officers (other than our CEO) could have earned
for the fiscal year ended December 31, 2008 pursuant to the Companys 2008 management
incentive plans. The terms of our named executive officer bonus plans are discussed in
further detail in Compensation Discussion and AnalysisExecutive Compensation for 2008.
The amounts actually awarded to each of the named executive officers are reflected in the
Summary Compensation Table above. |
|
(2) |
|
The amounts shown in these columns reflect the threshold, target and maximum number of
shares underlying restricted stock units (assuming threshold, target and maximum performance
across all performance objectives were achieved) that our CEO and COO could earn pursuant to
the Companys LTIP. The terms of the 2008 LTIP grants are discussed in further detail in
Compensation Discussion and Analysis Long-Term Stock-Based Incentive Compensation. Mr.
Bryant forfeited his LTIP grant upon his resignation on February 1, 2009. |
|
(3) |
|
The amounts shown in this column reflect the grant date fair value of the respective stock
and option awards determined pursuant to FAS 123R. |
39
Narrative to Summary Compensation Table and Grants of Plan-Based Awards in 2008 Table
The following discussion is intended to be read as a supplement to the Summary Compensation
Table and the Grants of Plan-Based Awards in 2008 table (including the notes to such tables),
and to the disclosure under Compensation Discussion and Analysis, and the following discussion
should be read in conjunction with such other disclosures.
Compensation Mix
As reflected in the Summary Compensation Table and Grants of Plan-Based Awards in 2008
table, the primary components of the Companys 2008 compensation program for our named executive
officers were cash compensation, consisting of a mix of base salary and cash incentive plan
compensation, and equity incentive compensation, consisting of a mix of stock options and
restricted stock with time-based vesting. Generally, and excluding the Companys CEO, bonus
compensation for 2008 was 18% to 24% of the total of these elements, while the value of 2008 equity
awards, valued at fair market value on the date of grant, for 2008 represented 39% to 49% of the
total compensation opportunities for 2008. As for the CEO, Mr. Balthrops bonus compensation for
2008 was 23% of the total of these elements (not including the LTIP award) and his equity award,
valued at fair market value on the date of grant, for 2008 was 50% of the total compensation
elements (not including the LTIP award). For Messrs. Balthrop and Bryant, bonus compensation for
2008 was 16% and 15%, respectively, of these elements, including their respective awards under the
LTIP (assuming Target payouts), while the value of 2008 equity awards, including their respective
awards under the LTIP (assuming Target payouts), valued at fair market value on the date of grant,
for 2008 represented approximately 66% of these elements. For a detailed discussion of each of
these components, including the LTIP, and explanation of how the level of each of these elements of
compensation is generally determined in relation to an executives total compensation, see
Compensation Discussion and Analysis Program Design.
For information regarding the annual incentive and LTIP awards to our named executive officers
for our 2008 fiscal year, please see Compensation Discussion and Analysis Annual Incentive Plan
for Named Executive Officers Other than CEO, Compensation Discussion and Analysis Long-Term
Stock-Based Incentive Compensation.
Option Repricing
Mr. Balthrop was hired as the Companys chief executive officer and president on May 15, 2004.
In connection therewith, Mr. Balthrop was granted a non-qualified stock option to purchase 500,000
shares of common of the Company (the Balthrop Option). The Balthrop Option is subject to
time-based vesting, provided Mr. Balthrop continues in the employment of the Company, with 125,000
shares vested as of May 15, 2005, and the remaining shares vesting in equal increments over the
following 36 months. The Balthrop Option was initially granted at an exercise price of $9.36 per
share. As previously reported, at a meeting of the Committee on February 10, 2005, the Committee
approved resolutions to increase the exercise price of the Balthrop Option from $9.36 per share to
$10.10 per share (the closing market price on the date immediately preceding the original grant
date). This modification was made in order to eliminate the potential application of certain
adverse tax implications in light of tax law changes created as a result of the American Jobs
Creation Action of 2004. In connection therewith, the Compensation Committee of our board of
directors approved a cash bonus payable to Mr. Balthrop to be paid consistent with the vesting
period of the Balthrop Option, subject to Mr. Balthrops continued employment, equal to $370,000.
According to the vesting schedule and assuming no acceleration event contemplated by the Balthrop
Option, one quarter of the cash bonus was paid as of May 15, 2005 (the first vesting date and under
the Balthrop Option) and the balance of such payments are being made in equal monthly installments
over the 36 months thereafter and are reflected in the Bonus column of the Summary Compensation
Table.
Employment Agreements
We have entered into employment agreements with each of our named executive officers, each
previously filed with the SEC. The employment agreements provide for certain salary, annual bonus
opportunities and other benefits, including potential severance entitlements. The employment
agreements with Messrs. Balthrop, Currie, Bryant, Gosch, and Bradley are generally automatically
renewable on an annual basis unless either party provides the other written notice of its intent
not to renew the agreement at least 60 (in the case of Messrs. Currie, Bryant and Bradley), or 180
(for Mr. Balthrop), days prior to the end of the then-current term of their agreements. These
agreements are described in more detail under Compensation Discussion and AnalysisChange in
Control; Termination Benefits. The potential payouts under these agreements in connection with
the termination of these executives is provided under Potential Payments Upon Termination or
Change in Control.
40
Outstanding Equity Awards at 2008 Fiscal Year-End
The following table summarizes the number of outstanding equity awards held by each of our
named executive officers as of December 31, 2008. The market value of shares was calculated using
the year-end closing price of $21.36 as reported on the NASDAQ Global Market.
|
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Option Awards |
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Stock Awards |
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Equity |
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Equity |
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Market |
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Incentive Plan |
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Incentive Plan |
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Number of |
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Number of |
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Number of |
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Value of |
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Awards: |
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Awards: |
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Securities |
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Securities |
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Shares or |
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Shares or |
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Number of |
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Market Value |
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Underlying |
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Underlying |
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Units of |
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Units of |
|
|
Unearned |
|
|
of Unearned |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
Option |
|
|
Stock That |
|
|
Stock That |
|
|
Shares That |
|
|
Shares That |
|
|
|
Options (#) |
|
|
Options (#) |
|
|
Exercise |
|
|
Grant |
|
|
Expiration |
|
|
Have Not |
|
|
Have Not |
|
|
Have Not |
|
|
Have Not |
|
Name |
|
Exercisable |
|
|
Unexercisable(1) |
|
|
Price ($) |
|
|
Date |
|
|
Date |
|
|
Vested (#)(2) |
|
|
Vested ($) |
|
|
Vested (#) |
|
|
Vested ($) |
|
|
Patrick J. Balthrop, Sr. |
|
|
500,000 |
(3) |
|
|
|
|
|
|
10.10 |
|
|
|
05/15/2004 |
|
|
|
05/15/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,844 |
|
|
|
19,690 |
|
|
|
14.39 |
|
|
|
03/25/2007 |
|
|
|
03/25/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,110 |
|
|
|
20.70 |
|
|
|
05/13/2008 |
|
|
|
05/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,200 |
|
|
|
410,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,441 |
|
|
|
757,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,797 |
|
|
|
657,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,564 |
(4) |
|
|
2,190,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
(5) |
|
|
4,272,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harriss T. Currie |
|
|
10,000 |
|
|
|
|
|
|
|
17.00 |
|
|
|
03/15/2000 |
|
|
|
03/15/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
|
|
|
|
|
13.05 |
|
|
|
04/25/2001 |
|
|
|
04/25/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
6.52 |
|
|
|
05/23/2002 |
|
|
|
05/23/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
4.68 |
|
|
|
03/17/2003 |
|
|
|
03/17/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,000 |
|
|
|
|
|
|
|
8.41 |
|
|
|
10/13/2003 |
|
|
|
10/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
8.22 |
|
|
|
03/25/2004 |
|
|
|
03/25/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,474 |
|
|
|
6,949 |
|
|
|
14.39 |
|
|
|
03/25/2007 |
|
|
|
03/25/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,032 |
|
|
|
20.70 |
|
|
|
05/13/2008 |
|
|
|
05/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,742 |
|
|
|
165,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,864 |
|
|
|
189,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,508 |
|
|
|
267,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,058 |
|
|
|
193,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas C. Bryant |
|
|
10,833 |
|
|
|
21,667 |
|
|
|
12.43 |
|
|
|
07/16/2007 |
|
|
|
07/16/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,071 |
|
|
|
20.70 |
|
|
|
05/13/2008 |
|
|
|
05/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,800 |
|
|
|
828,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,930 |
|
|
|
425,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,924 |
(4) |
|
|
1,643,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory J. Gosch |
|
|
75,000 |
|
|
|
|
|
|
|
7.05 |
|
|
|
10/25/2004 |
|
|
|
10/25/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,474 |
|
|
|
6,949 |
|
|
|
14.39 |
|
|
|
03/25/2007 |
|
|
|
03/25/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,542 |
|
|
|
20.70 |
|
|
|
05/13/2008 |
|
|
|
05/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,742 |
|
|
|
165,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,095 |
|
|
|
130,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,508 |
|
|
|
267,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,775 |
|
|
|
251,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell W. Bradley |
|
|
2,171 |
|
|
|
4,343 |
|
|
|
14.39 |
|
|
|
03/25/2007 |
|
|
|
03/25/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,032 |
|
|
|
20.70 |
|
|
|
05/13/2008 |
|
|
|
05/13/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000 |
|
|
|
341,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,503 |
|
|
|
160,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,818 |
|
|
|
166,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,058 |
|
|
|
193,479 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Except as provided in footnote (3), all options vest in equal 1/3rd increments
on each anniversary of the grant date over the first three years of the option term. |
|
(2) |
|
The restrictions applicable to these awards lapse with respect to 1/5th of the
total shares subject to the grant each year on each anniversary of the grant date, beginning
on the anniversary of the grant date. |
|
(3) |
|
The Balthrop Option was subject to time-based vesting, with an initial 125,000 shares
vested as of May 15, 2005, and the remaining shares vesting in equal monthly increments over
the following 36 months. |
|
(4) |
|
Represents restricted stock units granted under the LTIP, subject to various performance
related vesting criteria over a period of two years as follows: (i) one half of the grant is
conditioned upon Luminexs average common stock trading price for the last twenty
consecutive trading days of 2010; and, (ii) one half of the grant is conditioned upon the
achievement of certain operating cash flow goals for the year ended December 31, 2010.
Vesting of the grant (after giving effect to the aforementioned performance conditions) will
occur 50% upon the date on which the determination is made as to the satisfaction of
performance criteria and the remaining 50% of the RSUs earned on the determination date will
vest on December 31, 2012. Mr. Bryant forfeited his LTIP grant upon his resignation on
February 1, 2009. |
41
|
|
|
(5) |
|
Mr. Balthrop was granted a restricted stock award for 200,000 shares of the Companys
common stock under the 2000 Plan in connection with his hiring in 2004. The restricted
stock is subject to various performance related vesting criteria over a period of five years
as follows: (i) 1/3rd of the grant vests based upon the Companys common stock
trading price, (ii) 1/3rd of the grant vests based upon the achievement of
certain revenue targets, and (iii) 1/3rd of the grant vests based upon the
achievement of certain earnings before interest, taxes, depreciation, and amortization
measures. The Compensation Committee determined at a meeting in March 2007 that it would be
in the best interests of the Company to amend the restricted stock agreement to provide for
the automatic vesting of all unvested restricted shares immediately prior to the fifth
anniversary of the date of the restricted stock agreement, to the extent any or all of the
performance measures have not been previously achieved. |
Option Exercises And Stock Vested in 2008
The following table sets forth information regarding the exercise of stock options and the
vesting of restricted stock awards during the fiscal year ended December 31, 2008 for each of the
named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
Number of |
|
|
|
|
|
|
Number |
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
of Shares |
|
|
Value |
|
|
|
Acquired |
|
|
Value Realized |
|
|
Acquired |
|
|
Realized on |
|
Name |
|
on Exercise (#) |
|
|
on Exercise ($) |
|
|
on Vesting (#) |
|
|
Vesting ($) (1) |
|
Patrick J.
Balthrop, Sr. |
|
|
|
|
|
|
|
|
|
|
15,260 |
|
|
|
297,994 |
|
Harriss T. Currie |
|
|
|
|
|
|
|
|
|
|
11,202 |
|
|
|
219,100 |
|
Douglas C. Bryant |
|
|
|
|
|
|
|
|
|
|
9,700 |
|
|
|
199,820 |
|
Gregory J. Gosch |
|
|
|
|
|
|
|
|
|
|
9,029 |
|
|
|
176,655 |
|
Russell W. Bradley |
|
|
|
|
|
|
|
|
|
|
12,454 |
|
|
|
250,981 |
|
|
|
|
(1) |
|
The value realized upon the vesting of restricted shares shown in the table is calculated
based upon the closing price of our common stock on the NASDAQ Global Market on the vesting
date. |
42
Potential Payments Upon Termination or Change in Control
The following tables show for each of our named executive officers the estimated amount of
potential payments, as well as estimated value of continuing benefits, assuming the executives
employment terminated or a change in control occurred, in either case effective December 31, 2008
and based on compensation and benefit levels in effect on December 31, 2008. Due to the numerous
factors involved in estimating these amounts, the actual benefits and amounts payable can only be
determined at the time of an executives termination from the Company.
Patrick
J. Balthrop, Sr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause |
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary |
|
|
|
|
|
|
or Termination |
|
|
|
|
|
|
in Connection |
|
|
|
|
|
|
|
|
|
|
Executive Benefits and |
|
Termination or |
|
|
|
|
|
|
for Good |
|
|
For Cause |
|
|
with a Change |
|
|
Change in |
|
|
|
|
|
|
|
Payments Upon Separation |
|
Retirement ($) |
|
|
Retirement ($) |
|
|
Reason ($) |
|
|
Termination ($) |
|
|
in Control ($) |
|
|
Control ($) |
|
|
Disability ($) |
|
|
Death ($) |
|
|
Cash Severance (1) |
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
|
|
|
|
|
450,000 |
|
|
|
|
|
|
|
450,000 |
|
|
|
450,000 |
|
Non-equity Incentive Compensation
(Bonus) (1) |
|
|
|
|
|
|
|
|
|
|
882,000 |
|
|
|
|
|
|
|
882,000 |
|
|
|
|
|
|
|
882,000 |
|
|
|
882,000 |
|
Accelerated Vesting of Options (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,532 |
|
|
|
148,532 |
|
|
|
148,532 |
|
Accelerated Vesting of Restricted
Stock (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,827,138 |
|
|
|
8,287,723 |
|
|
|
8,287,723 |
|
Continuation of Insurance Benefits (3) |
|
|
|
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
12,856 |
|
|
Excise Tax Gross-Up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
1,344,856 |
|
|
|
|
|
|
|
1,344,856 |
|
|
|
6,975,670 |
|
|
|
9,768,255 |
|
|
|
9,768,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The cash severance entitlement is described under Compensation Discussion and
AnalysisChange in Control; Termination Benefits. |
|
(2) |
|
Accelerated vesting of stock options and restricted stock is triggered upon a change of
control (whether or not the executives employment is terminated), with respect to stock
options and restricted stock (other than restricted stock units granted under the LTIP), or
the death or disability of the executive, with respect to restricted stock (including
restricted stock units granted under the LTIP). With respect to the 102,564 unvested
restricted stock units granted under the LTIP, if a change of control occurs prior to the end
of the performance period, performance criteria (as adjusted appropriately and
proportionately for such shorter period) will be measured as of the effective date of the
change of control, with the number of restricted stock units reduced, depending upon the year
in which the change of control occurs. For purposes of the above table, the number of
restricted stock units granted to Mr. Balthrop under the LTIP has been reduced by a factor of
0.6667 assuming a change of control occurred on December 31, 2008. The above table assumes
that Mr. Balthrop would be deemed to have achieved all adjusted performance criteria under
the LTIP as of the effective date of the change of control. Accelerated vesting of stock
option amounts are calculated as the difference between the closing market price of our
common stock on December 31, 2008 ($21.36 per share as reported on the NASDAQ Global Market)
and the respective exercise prices of in-the-money unvested stock options. The closing
market price on December 31, 2008 is also used to calculate accelerated vesting of restricted
stock and restricted stock unit amounts. |
|
(3) |
|
Reflects the present value of the medical premiums the executive would be entitled to for a
period of 12 months following the termination date. Amounts are based upon the types of
insurance coverage the Company carried for such executive as of December 31, 2008 and the
premiums in effect on such date. |
43
Harriss T. Currie
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause |
|
|
|
|
|
|
Termination in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Termination |
|
|
|
|
|
|
Connection |
|
|
|
|
|
|
|
|
|
|
Executive Benefits and |
|
Voluntary |
|
|
|
|
|
|
for Good |
|
|
For Cause |
|
|
with a Change |
|
|
Change in |
|
|
|
|
|
|
|
Payments Upon Separation |
|
Termination ($) |
|
|
Retirement ($) |
|
|
Reason ($) |
|
|
Termination ($) |
|
|
in Control ($) |
|
|
Control ($) |
|
|
Disability ($) |
|
|
Death ($) |
|
|
Cash Severance (1) |
|
|
|
|
|
|
|
|
|
|
242,734 |
|
|
|
|
|
|
|
242,734 |
|
|
|
|
|
|
|
242,734 |
|
|
|
242,734 |
|
Non-equity Incentive Compensation
(Bonus) (1) |
|
|
|
|
|
|
|
|
|
|
111,204 |
|
|
|
|
|
|
|
111,204 |
|
|
|
|
|
|
|
111,204 |
|
|
|
111,204 |
|
Accelerated Vesting of Options (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,756 |
|
|
|
51,756 |
|
|
|
51,756 |
|
Accelerated Vesting of Restricted
Stock (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
815,354 |
|
|
|
815,354 |
|
|
|
815,354 |
|
Continuation of Insurance Benefits (3) |
|
|
|
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
12,856 |
|
|
Excise Tax Gross-Up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
366,794 |
|
|
|
|
|
|
|
366,794 |
|
|
|
867,110 |
|
|
|
1,233,904 |
|
|
|
1,233,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The cash severance entitlement is described under Compensation Discussion and
AnalysisChange in Control; Termination Benefits. |
|
(2) |
|
Accelerated vesting of stock options and restricted stock is triggered upon a change of
control (whether or not the executives employment is terminated), with respect to stock
options and restricted stock, or the death or disability of the executive, with respect to
restricted stock. Accelerated vesting of stock option amounts are calculated as the
difference between the closing market price of our common stock on December 31, 2008 ($21.36
per share as reported on the NASDAQ Global Market) and the respective exercise prices of
in-the-money unvested stock options. The closing market price on December 31, 2008 is also
used to calculate accelerated vesting of restricted stock amounts. |
|
(3) |
|
Reflects the present value of the medical premiums the executive would be entitled to for a
period of 12 months following the termination date. Amounts are based upon the types of
insurance coverage the Company carried for such executive as of December 31, 2008 and the
premiums in effect on such date. |
44
Gregory J. Gosch
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause |
|
|
|
|
|
|
Termination in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Termination |
|
|
|
|
|
|
Connection |
|
|
|
|
|
|
|
|
|
|
Executive Benefits and |
|
Voluntary |
|
|
|
|
|
|
for Good |
|
|
For Cause |
|
|
with a Change |
|
|
Change in |
|
|
|
|
|
|
|
Payments Upon Separation |
|
Termination ($) |
|
|
Retirement ($) |
|
|
Reason ($) |
|
|
Termination ($) |
|
|
in Control ($) |
|
|
Control ($) |
|
|
Disability ($) |
|
|
Death ($) |
|
|
Cash Severance (1) |
|
|
|
|
|
|
|
|
|
|
222,606 |
|
|
|
|
|
|
|
222,606 |
|
|
|
|
|
|
|
222,606 |
|
|
|
222,606 |
|
Non-equity Incentive
Compensation (Bonus)
(1) |
|
|
|
|
|
|
|
|
|
|
106,710 |
|
|
|
|
|
|
|
106,710 |
|
|
|
|
|
|
|
106,710 |
|
|
|
106,710 |
|
Accelerated Vesting of
Options (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,752 |
|
|
|
52,752 |
|
|
|
52,752 |
|
Accelerated Vesting of
Restricted Stock (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
814,243 |
|
|
|
814,243 |
|
|
|
814,243 |
|
Continuation of
Insurance Benefits (3) |
|
|
|
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
12,856 |
|
|
Excise Tax Gross-Up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
342,172 |
|
|
|
|
|
|
|
342,172 |
|
|
|
866,995 |
|
|
|
1,209,167 |
|
|
|
1,209,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The cash severance entitlement is described under Compensation Discussion and
AnalysisChange in Control; Termination Benefits. |
|
(2) |
|
Accelerated vesting of stock options and restricted stock is triggered upon a change of
control (whether or not the executives employment is terminated), with respect to stock
options and restricted stock, or the death or disability of the executive, with respect to
restricted stock. Accelerated vesting of stock option amounts are calculated as the
difference between the closing market price of our common stock on December 31, 2008 ($21.36
per share as reported on the NASDAQ Global Market) and the respective exercise prices of
in-the-money unvested stock options. The closing market price on December 31, 2008 is also
used to calculate accelerated vesting of restricted stock amounts. |
|
(3) |
|
Reflects the present value of the medical premiums the executive would be entitled to for a
period of 12 months following the termination date. Amounts are based upon the types of
insurance coverage the Company carried for such executive as of December 31, 2008 and the
premiums in effect on such date. |
45
Russell W. Bradley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause |
|
|
|
|
|
|
Termination in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Termination |
|
|
|
|
|
|
Connection |
|
|
|
|
|
|
|
|
|
|
Executive Benefits and |
|
Voluntary |
|
|
|
|
|
|
for Good |
|
|
For Cause |
|
|
with a Change |
|
|
Change in |
|
|
|
|
|
|
|
Payments Upon Separation |
|
Termination ($) |
|
|
Retirement ($) |
|
|
Reason ($) |
|
|
Termination ($) |
|
|
in Control ($) |
|
|
Control ($) |
|
|
Disability ($) |
|
|
Death ($) |
|
|
Cash Severance (1) |
|
|
|
|
|
|
|
|
|
|
219,420 |
|
|
|
|
|
|
|
219,420 |
|
|
|
|
|
|
|
219,420 |
|
|
|
219,420 |
|
Non-equity Incentive Compensation
(Bonus) (1) |
|
|
|
|
|
|
|
|
|
|
106,000 |
|
|
|
|
|
|
|
106,000 |
|
|
|
|
|
|
|
106,000 |
|
|
|
106,000 |
|
Accelerated Vesting of Options (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,592 |
|
|
|
33,592 |
|
|
|
33,592 |
|
Accelerated Vesting of Restricted
Stock (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
862,495 |
|
|
|
862,495 |
|
|
|
862,495 |
|
Continuation of Insurance Benefits (3) |
|
|
|
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
|
|
|
|
12,856 |
|
|
|
12,856 |
|
|
Excise Tax Gross-Up |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
338,276 |
|
|
|
|
|
|
|
338,276 |
|
|
|
896,087 |
|
|
|
1,234,363 |
|
|
|
1,234,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The cash severance entitlement is described under Compensation Discussion and
AnalysisChange in Control; Termination Benefits. |
|
(2) |
|
Accelerated vesting of stock options and restricted stock is triggered upon a change of
control (whether or not the executives employment is terminated), with respect to stock
options and restricted stock, or the death or disability of the executive, with respect to
restricted stock. Accelerated vesting of stock option amounts are calculated as the
difference between the closing market price of our common stock on December 31, 2008 ($21.36
per share as reported on the NASDAQ Global Market) and the respective exercise prices of
in-the-money unvested stock options. The closing market price on December 31, 2008 is also
used to calculate accelerated vesting of restricted stock amounts. |
|
(3) |
|
Reflects the present value of the medical premiums the executive would be entitled to for a
period of 12 months following the termination date. Amounts are based upon the types of
insurance coverage the Company carried for such executive as of December 31, 2008 and the
premiums in effect on such date. |
Douglas C. Bryant
Mr. Bryant resigned from the Company February 1, 2009 and did not receive any termination
payments, accelerated vesting of outstanding equity awards or post-termination benefits in
connection therewith.
46
Director Compensation for 2008
The following table summarizes the compensation paid with respect to the fiscal year ended
December 31, 2008 to each of the Companys non-employee directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in |
|
|
Stock |
|
|
Option |
|
|
All Other |
|
|
|
|
Name |
|
Cash ($) |
|
|
Awards ($) (1) |
|
|
Awards ($) (2) |
|
|
Compensation ($) |
|
|
Total ($) |
|
|
G. Walter Loewenbaum II |
|
|
133,000 |
|
|
|
189,194 |
|
|
|
|
|
|
|
|
|
|
|
322,194 |
|
Robert J. Cresci |
|
|
60,000 |
|
|
|
87,265 |
|
|
|
|
|
|
|
|
|
|
|
147,265 |
|
Thomas W. Erickson |
|
|
15,500 |
|
|
|
119,648 |
|
|
|
|
|
|
|
|
|
|
|
135,148 |
|
Fred C. Goad, Jr. |
|
|
16,000 |
|
|
|
94,929 |
|
|
|
|
|
|
|
|
|
|
|
110,929 |
|
Jay B. Johnston |
|
|
18,500 |
|
|
|
111,723 |
|
|
|
|
|
|
|
|
|
|
|
130,223 |
|
Jim D. Kever |
|
|
16,000 |
|
|
|
94,929 |
|
|
|
|
|
|
|
|
|
|
|
110,929 |
|
Kevin M. McNamara |
|
|
18,500 |
|
|
|
129,104 |
|
|
|
|
|
|
|
|
|
|
|
147,604 |
|
J. Stark Thompson |
|
|
52,500 |
|
|
|
79,935 |
|
|
|
|
|
|
|
|
|
|
|
132,435 |
|
Gerard Vaillant |
|
|
52,500 |
|
|
|
68,053 |
|
|
|
|
|
|
|
|
|
|
|
120,553 |
|
|
|
|
(1) |
|
The amounts shown in this column represent the dollar amounts recognized for financial
statement reporting purposes for the fiscal year ended December 31, 2008 and thus include
amounts from awards granted in and prior to 2008. Assumptions used in the calculation of
these amounts are described in Note 14 to the Companys audited financial statements for the
fiscal year ended December 31, 2008, included in the Companys Annual Report on Form 10-K
filed February 26, 2009. All grants of restricted shares were made under the 2006 Plan and
are subject to individual award agreements, the forms of which were previously filed with the
SEC. The grant date fair value of the aggregate restricted stock awards granted to our
non-employee directors in 2008 was: Loewenbaum $179,980, Cresci $77,993, Erickson
$130,996, Goad $109,985, Johnston $130,996, Kever $109,985, McNamara $139,989,
Thompson $65,995, and Vaillant $65,995. As of December 31, 2008, the aggregate number
of unvested restricted shares outstanding for each of the Companys non-employee directors
was as follows: Loewenbaum 8,866, Cresci 3,842, Erickson 6,453, Goad 5,418,
Johnston 6,453, Kever 5,418, McNamara 6,896, Thompson 3,251, and Vaillant
3,251. |
|
(2) |
|
All prior option awards vested before 2008. As of December 31, 2008, the aggregate number
of shares subject to option awards outstanding for each of the Companys non-employee
directors was as follows: Loewenbaum 100,000, Cresci 45,200, Erickson 262,500, Goad
10,000, Johnston 15,000, Kever 45,200, McNamara 80,000, Thompson 0, and
Vaillant 15,000. The intrinsic value of these awards, as of December 31, 2008, were
$1,245,940, $509,696, $3,846,175, $0, $208,000, $509,696, $905,400, $0, and $208,200,
respectively, calculated based on the difference between the market value of our common stock
at year end (as reported on the NASDAQ Global Market) and the applicable weighted average
exercise price of these options. |
47
Narrative to Director Compensation Table
Following the completion of its review of the appropriateness of our non-employee director
compensation policy in light of our objectives described below, the compensation policy for our
non-employee directors for 2008 was recommended by our Compensation Committee and approved by our
board of directors. This policy was designed to fairly pay our directors for work required for a
company of our size, scope and complexity, be competitive within an appropriate peer group, and
incorporate an equity component to help align our directors interests with the long-term interests
of our stockholders. We also have adopted stock ownership guidelines for our directors to further
promote this alignment of interests, which can be found in our corporate governance guidelines.
The Compensation Committee also utilized the assistance of the compensation consultant for 2008,
Hewitt, in designing and reviewing our 2008 non-employee director compensation policy, in
particular with respect to the collection of peer group director compensation data and the design
of the compensation deferral program instituted in 2008.
The Director Compensation Table reflects the following compensation policy for our
non-employee directors for 2008 (the Policy), and the individual choices made by each
non-employee director with respect to compensation for their services during 2008 based on the
Policy:
|
|
|
|
|
|
|
Annual Retainer |
|
Annual Cash Retainer for Board and Committee Meetings |
|
$ |
44,000 |
|
|
|
|
|
|
Additional Annual Retainers |
|
|
|
|
Chairman of the Board of Directors |
|
$ |
72,000 |
|
Executive Committee Chair |
|
$ |
14,000 |
|
Compensation Committee Chair |
|
$ |
14,000 |
|
Audit Committee Chair |
|
$ |
20,000 |
|
Nominating and Corporate Governance Committee Chair |
|
$ |
8,000 |
|
Annual retainers for non-employee directors and board and committee chairs are payable
quarterly in arrears. Non-employee directors have the option of accepting all or any part of the
foregoing cash retainer payments in the form of restricted stock. Restricted stock received in
lieu of cash retainers is granted at the annual meeting and vests quarterly on the quarterly cash
payment dates, subject to continued services by directors as a director or chairperson, as
applicable. Non-employee directors may also elect to defer receipt of such restricted stock in
lieu of cash payments and the annual stock retainer as described below.
Non-employee directors do not receive additional compensation for attendance at board
meetings. Each non-employee board member receives $1,000 per meeting for attendance at committee
meetings (to the extent not held in conjunction with a full board meeting), including formal
telephonic meetings and Executive Committee meetings. Non-employee directors do not have the
option of accepting all or any part of cash meeting payments in the form of restricted stock or
deferring such fees as described below.
Non-employee directors also are eligible to receive restricted share awards in the amounts
below. The restricted shares are issued pursuant and subject to the terms of the Companys 2006
Plan and the form of award agreement previously filed with the SEC and vest one year from the date
of grant. Annual grants of restricted stock are made on the date of the annual meeting of
stockholders.
|
|
|
|
|
|
|
Fair Market Value of |
|
|
|
Restricted Stock Award |
|
|
|
on Date of Grant |
|
Each Continuing Board Member |
|
$ |
66,000 |
|
|
|
|
|
|
Additional Grants |
|
|
|
|
Chairman of the Board of Directors |
|
$ |
114,000 |
|
Executive Committee Chair |
|
$ |
21,000 |
|
Compensation Committee Chair |
|
$ |
21,000 |
|
Audit Committee Chair |
|
$ |
30,000 |
|
Nominating and Corporate Governance Committee Chair |
|
$ |
12,000 |
|
48
Non-employee directors may annually make an election to defer (i) the annual restricted stock
award and (ii) all or a portion of the annual cash retainers by electing to receive restricted
stock units settled at a future date, generally retirement from the board of directors or other
termination of service. Such restricted stock units vest one year from the date of grant.
In addition, non-employee directors are reimbursed for reasonable expenses incurred to attend
board and committee meetings and other Company-related business meetings if a board members
presence is requested, as well as director education programs.
Our director who is also an employee (Mr. Balthrop) received no additional compensation for
his services as a director for 2008.
For 2009, the Compensation Committee has recommended, and the board of directors has approved
substantially similar compensation opportunities for our non-employee directors, subject to a 4%
increase in the annual cash and equity retainers.
49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us regarding the ownership of the
common stock of the Company as of the record date (except as otherwise indicated below) by (i) each
director and director nominee, (ii) each named executive officer, (iii) all directors and executive
officers as a group and (iv) each person known to us to own beneficially 5% or more of our
outstanding common stock.
The information set forth below includes shares of common stock directly and indirectly owned
and shares of common stock underlying currently exercisable options, as well as those options which
will become exercisable within 60 days of March 27, 2009. Except as otherwise indicated, the named
persons below have sole voting and dispositive power with respect to beneficially owned shares.
|
|
|
|
|
|
|
|
|
|
|
Common Stock Beneficially Owned |
|
|
|
|
|
|
|
Total as a |
|
|
|
Number of Shares |
|
|
Percentage of |
|
Beneficial Owner |
|
Owned (1) |
|
|
Shares Outstanding |
|
Directors and Named Executive Officers (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Walter Loewenbaum II (3) |
|
|
1,684,399 |
|
|
|
4.0 |
% |
Robert J. Cresci (4) |
|
|
232,396 |
|
|
|
* |
|
Thomas W. Erickson |
|
|
298,157 |
|
|
|
* |
|
Fred C. Goad, Jr. (5) |
|
|
296,555 |
|
|
|
* |
|
Jay Johnston (6) |
|
|
74,883 |
|
|
|
* |
|
Jim D. Kever (7) |
|
|
170,911 |
|
|
|
* |
|
Kevin M. McNamara |
|
|
101,904 |
|
|
|
* |
|
J. Stark Thompson |
|
|
18,289 |
|
|
|
* |
|
Gerard Vaillant |
|
|
54,878 |
|
|
|
* |
|
Patrick J. Balthrop, Sr. |
|
|
882,490 |
|
|
|
2.1 |
% |
Harriss T. Currie |
|
|
284,213 |
|
|
|
* |
|
Russell W. Bradley |
|
|
72,016 |
|
|
|
* |
|
Gregory J. Gosch |
|
|
126,439 |
|
|
|
* |
|
All directors and executive officers
as a group (16 persons) |
|
|
4,560,820 |
|
|
|
10.6 |
% |
|
|
|
|
|
|
|
|
|
Other 5% Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
St. Denis J. Villere & Company, LLC (8) |
|
|
4,119,340 |
|
|
|
9.9 |
% |
210 Baronne Street, Suite 808
New Orleans, LA 70112 |
|
|
|
|
|
|
|
|
Sectoral Asset Management Inc. (9) |
|
|
3,174,443 |
|
|
|
7.7 |
% |
2120-1000 Sherbrooke St.
West Montreal
PQ H3A 3G4 Canada |
|
|
|
|
|
|
|
|
Pictet & CIE Europe SA (10) |
|
|
2,822,392 |
|
|
|
6.8 |
% |
1 Boulevard Royal
Luxembourg
Luxembourg L-2016 N4 2016 |
|
|
|
|
|
|
|
|
Barclays Global Investors, N.A. (11) |
|
|
2,277,371 |
|
|
|
5.5 |
% |
45 Fremont Street
San Francisco, CA 94105 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Includes shares attributable to shares of common stock not outstanding but subject to
currently exercisable options (as well as those options which will become exercisable within
60 days of March 27, 2009) as follows: Mr. Loewenbaum 100,000 shares; Mr. Cresci 45,200
shares; Mr. Erickson 262,500 shares; Mr. Goad 10,000 shares; Mr. Johnston 15,000
shares; Mr. Kever 45,200 shares; Mr. McNamara 80,000 shares; Mr. Thompson 0 shares;
Mr. Vaillant 15,000 shares; Mr. Balthrop 525,392 shares; Mr. Currie 217,625 shares;
Mr. Gosch 81,948 shares; Mr. Bradley 4,342 shares; and all directors and executive
officers as a group 1,533,738 shares. Shares of Douglas C. Bryant, our former Senior Vice President and
Chief Operating Officer, have not been included in the above table as he resigned from the
Company effective February 1, 2009. |
50
|
|
|
(2) |
|
The applicable address for all directors and named executive officers is c/o Luminex
Corporation, 12212 Technology Boulevard, Austin, Texas 78727. |
|
(3) |
|
Does not include 1,041,727 shares held by Mr. Loewenbaums wife, Lillian Loewenbaum; 4,900
shares held by a trust for the benefit of Lillian Loewenbaum of which Lillian Loewenbaum is
the trustee; and 127,472 shares held by a trust for the benefit of Mr. Loewenbaums
descendants which has an independent trustee and over which Mr. Loewenbaum neither has nor
shares investment or voting power. |
|
(4) |
|
Mr. Cresci has granted a security interest in 160,650 shares directly owned by him as
collateral for a loan. |
|
(5) |
|
Includes 4,810 shares held by a trust of which Mr. Goad is the trustee. Mr. Goad disclaims
beneficial ownership of the shares held by the trust. |
|
(6) |
|
Includes 8,000 shares held by JK Investments II, a limited partnership managed by Mr.
Johnston and his wife and of which a trust for the benefit of Mr. Johnstons children is the
limited partner. |
|
(7) |
|
Does not include 51,212 shares held by a trust for the benefit of Mr. Kevers children. Mr.
Kever disclaims beneficial ownership of the shares held by the trust. |
|
(8) |
|
This information is as of February 28, 2009, and is based solely on a Schedule 13G/A filed by
St. Denis J. Villere & Company on March 5, 2009. St. Denis J. Villere & Company is an
investment advisor registered under Section 203 of the Investment Advisors Act of 1940 and
reports sole voting and dispositive power as to 724,123 shares and shared voting and
dispositive power as to 3,395,217 shares. |
|
(9) |
|
This information is as of December 31, 2008, and is based solely on a Schedule 13G filed by
Sectoral Asset Management Inc. on February 13, 2009. Sectoral Asset Management Inc. is an
investment advisor registered under Section 203 of the Investment Advisors Act of 1940 and
reports sole voting power as to 2,887,317 shares and sole dispositive power as to 3,174,443
shares. |
|
(10) |
|
This information is as of December 31, 2008, and is based solely on a Schedule 13G filed by
Pictet & CIE Europe SA on January 12, 2009 Pictet & CIE Europe SA is an investment company
registered under Section 8 of the Investment Company Act of 1940. |
|
(11) |
|
This information is as of December 31, 2008, and is based solely on a Schedule 13G filed by
Barclays Global Investors, N.A. on February 5, 2009. Barclays Global Investors, N.A. is a
Bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934 and reports sole
voting power as to 2,133,305 shares and sole dispositive power as to 2,277,371 shares. |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since the beginning of the last fiscal year, we are aware of no related party transactions
between us and any of our directors, nominees for director, executive officers, 5% stockholders or
their immediate family members which require disclosure under Item 404 of Regulation S-K under the
Securities Exchange Act of 1934.
We have adopted a written related party transaction policy, administered by our Audit
Committee, that requires the Audit Committee (or the chair of the Audit Committee in certain
instances with respect to de minimus transactions) to review and either ratify, approve or
disapprove all Interested Transactions, subject to certain exceptions for specified pre-approved
transactions not believed to create a material interest with respect to a Related Party.
Interested Transactions are generally defined to include any transaction, arrangement or
relationship or series of similar transactions, arrangements or relationships (including any
indebtedness or guarantee of indebtedness) in which:
|
|
|
the aggregate amount involved exceeded, or will or may be expected to exceed, $100,000
in any calendar year; |
|
|
|
|
the Company was, is or will be a participant; and |
|
|
|
|
any Related Party had, has or will have a direct or indirect interest. |
For purposes of the policy, a Related Party is any:
|
|
|
person who is or was (since the beginning of the last fiscal year for which the Company
has filed a Form 10-K and proxy statement, even if they do not presently serve in that
role) an executive officer, director or nominee for election as a director; |
|
|
|
|
greater than 5% beneficial owner of the Companys common stock; |
|
|
|
|
immediate family member of any of the foregoing; or |
|
|
|
|
firm, corporation or other entity in which any of the foregoing persons is employed or
is a general partner, managing member or principal or in a similar position or in which
such person has a 10% or greater beneficial ownership interest. |
51
In determining whether to approve or ratify an Interested Transaction under the policy, the
Audit Committee is to consider all relevant information and facts available to it regarding the
Interested Transaction and take into account factors such as the Related Partys relationship to
the Company and interest (direct or indirect) in the transaction, the terms of the transaction and
the benefits to the Company of the transaction. No director is to participate in the approval of
an Interested Transaction for which he or she is a Related Party or otherwise has a direct or
indirect interest.
In addition, the Audit Committee is to review and assess ongoing Interested Transactions, if
any, on at least an annual basis to determine whether any such transactions remain appropriate or
should be modified or terminated.
Our related party transaction policy has been incorporated into our Code of Compliance, which
can be viewed at the Investor Relations section of our website at www.luminexcorp.com.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors, executive officers and any
persons holding more than ten percent of our common stock are required to report their initial
ownership of our common stock and any subsequent changes in their ownership to the SEC. Specific
due dates have been established by the SEC, and we are required to disclose in this Proxy Statement
any failure of such persons to file by those dates. Based solely upon the copies of Section 16(a)
reports that we have received from such persons for their transactions in 2008 and written
representations to the Company that we have received from such persons that no other reports were
required, we believe that there has been compliance with all Section 16(a) filing requirements
applicable to such directors, executive officers and ten-percent beneficial owners for 2008, except
that Gregory J. Gosch filed a Form 4 late on May 15, 2008 which did not timely disclose one
transaction and Jeremy Bridge-Cook filed a Form 4 late on November 13, 2008 which did not timely
disclose one transaction.
EXPENSES AND SOLICITATION
We will bear the cost of soliciting proxies. Proxies may be solicited in person or by
telephone, facsimile, electronic mail, Internet, or other electronic medium by certain of our
directors, officers and regular employees, without additional compensation. The Company requests
that brokerage houses and other custodians, nominees and fiduciaries forward solicitation materials
to the beneficial owners of shares of the Companys common stock held of record by such persons,
and the Company will reimburse such brokers and other fiduciaries for their reasonable
out-of-pocket expenses incurred when the solicitation materials are forwarded. In addition, we
have retained MacKenzie Partners, Inc., a proxy solicitation firm, for assistance in connection
with the annual meeting at a cost of approximately $6,500 plus reasonable out-of-pocket expenses.
STOCKHOLDER PROPOSALS FOR 2010 ANNUAL MEETING
It is contemplated that our 2010 annual meeting of stockholders will take place in May 2010.
Stockholders proposals will be eligible for consideration for inclusion in the proxy statement for
the 2010 annual meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 if such
proposals are received by us before the close of business on December 7, 2009. Notices of
stockholders proposals submitted outside the processes of Rule 14a-8 will be considered timely
(but not considered for inclusion in our proxy statement), pursuant to the advance notice
requirement set forth in our bylaws, if such notices are filed with our Secretary not earlier than
February 20, 2010 nor later than April 21, 2010 in the manner specified in the bylaws. For
proposals that are not timely filed, we retain discretion to vote proxies that we receive. For
proposals that are timely filed, we retain discretion to vote proxies that we receive provided (1)
we include in our proxy statement advice on the nature of the proposal and how we intend to
exercise our voting discretion and (2) the proponent does not issue a proxy statement. In order to
curtail any controversy as to the date on which a proposal was received by us, we suggest that
stockholders submit their proposals by certified mail, return receipt requested.
52
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the board of directors intends to
present or knows that others will present at the Meeting is as set forth above. If any other
matter or matters are properly brought before the Meeting, or an adjournment or postponement
thereof, it is the intention of the persons named in the accompanying form of proxy to vote the
proxy on such matters in accordance with their best judgment.
UPON WRITTEN REQUEST OF ANY STOCKHOLDER TO DAVID REITER, CORPORATE SECRETARY, LUMINEX
CORPORATION, 12212 TECHNOLOGY BOULEVARD, AUSTIN, TEXAS 78727, THE COMPANY WILL PROVIDE WITHOUT
CHARGE A COPY OF THE COMPANYS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
Austin, Texas
April 9, 2009
53
EXHIBIT A
LUMINEX CORPORATION
AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
|
|
|
|
|
Section 1. Purpose |
|
|
3 |
|
Section 2. Definitions |
|
|
3 |
|
Section 3. Administration |
|
|
6 |
|
Section 4. Shares Available For Awards |
|
|
7 |
|
Section 5. Eligibility |
|
|
8 |
|
Section 6. Stock Options And Stock Appreciation Rights |
|
|
8 |
|
Section 7. Restricted Shares And Restricted Share Units |
|
|
10 |
|
Section 8. Performance Awards |
|
|
11 |
|
Section 9. Other Stock-Based Awards |
|
|
12 |
|
Section 10. Non-Employee Director And Outside Director Awards |
|
|
12 |
|
Section 11. Provisions Applicable To Covered Officers And Performance Awards |
|
|
12 |
|
Section 12. Separation from Service |
|
|
14 |
|
Section 13. Change In Control |
|
|
14 |
|
Section 14. Amendment And Termination |
|
|
15 |
|
Section 15. General Provisions |
|
|
15 |
|
Section 16. Term Of The Plan |
|
|
17 |
|
2
LUMINEX CORPORATION
AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN
Section 1. Purpose.
This plan shall be known as the Luminex Corporation Amended and Restated 2006 Equity
Incentive Plan (the Plan). The purpose of the Plan is to promote the interests of Luminex
Corporation (the Company) and its shareholders by (i) attracting and retaining key officers,
employees and directors of, and consultants to, the Company and its Subsidiaries and Affiliates;
(ii) motivating such individuals by means of performance-related incentives to achieve long-range
performance goals; (iii) enabling such individuals to participate in the long-term growth and
financial success of the Company; (iv) encouraging ownership of stock in the Company by such
individuals; and (v) linking their compensation to the long-term interests of the Company and its
shareholders. With respect to any awards granted under the Plan that are intended to comply with
the requirements of performance-based compensation under Section 162(m) of the Code, the Plan
shall be interpreted in a manner consistent with such requirements.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth below:
2.1 Affiliate shall mean (i) any entity that, directly or indirectly, is controlled by the
Company, (ii) any entity in which the Company has a significant equity interest, (iii) an affiliate
of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, and (iv)
any entity in which the Company has at least twenty percent (20%) of the combined voting power of
the entitys outstanding voting securities, in each case as designated by the Board as being a
participating employer in the Plan.
2.2 Award shall mean any Option, Stock Appreciation Right, Restricted Share Award,
Restricted Share Unit, Performance Award, or Other Stock-Based Award granted under the Plan,
whether singly, in combination or in tandem, to a Participant by the Committee (or the Board)
pursuant to such terms, conditions, restrictions and/or limitations, if any, as the Committee (or
the Board) may establish.
2.3 Award Agreement shall mean any written agreement, contract or other instrument or
document evidencing any Award, which may, but need not, be executed or acknowledged by a
Participant.
2.4 Board shall mean the Board of Directors of the Company.
2.5 Cause shall mean, unless otherwise defined in the applicable Award Agreement, (i) the
engaging by the Participant in willful misconduct that is injurious to the Company or its
Subsidiaries or Affiliates, or (ii) the embezzlement or misappropriation of funds or property of
the Company or its Subsidiaries or Affiliates by the Participant. For purposes of this paragraph,
no act, or failure to act, on the Participants part shall be considered willful unless done, or
omitted to be done, by the Participant not in good faith and without reasonable belief that the
Participants action or omission was in the best interest of the Company. Any determination of
Cause for purposes of the Plan or any Award shall be made by the Committee in its sole discretion.
Any such determination shall be final and binding on a Participant.
2.6 Change in Control shall mean, unless otherwise provided in the applicable Award
Agreement, the happening of one of the following:
(a) any person or entity, including a group as defined in Section 13(d)(3) of the
Exchange Act, other than the Company or a wholly-owned Subsidiary thereof or any employee
benefit plan of the Company or any of its Subsidiaries, becomes the beneficial owner of the
Companys securities having 35% or more of the combined voting power of the then outstanding
securities of the Company that may be cast for the election of directors of the Company
(other than as a result of an issuance of securities initiated by the Company in the
ordinary course of business); or
(b) as the result of, or in connection with, any cash tender or exchange offer, merger
or other business combination, sales of assets or contested election, or any combination of
the foregoing transactions, less than a majority of the combined voting power of the then
outstanding securities of the Company or any successor corporation or entity entitled to
vote generally in the election of the directors of
the Company or such other corporation or entity after such transaction are held in the
aggregate by the holders of the Companys securities entitled to vote generally in the
election of directors of the Company immediately prior to such transaction; or
3
(c) during any period of two consecutive years, individuals who at the beginning of any
such period constitute the Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the Companys shareholders,
of each director of the Company first elected during such period was approved by a vote of
at least two-thirds of the directors of the Company then still in office who were directors
of the Company at the beginning of any such period.
2.7 Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
2.8 Committee shall mean a committee of the Board composed of not less than two Non-Employee
Directors, each of whom shall be (i) a non-employee director for purposes of Exchange Act Section
16 and Rule 16b-3 thereunder, (ii) an outside director for purposes of Section 162(m), and (iii)
independent within the meaning of the listing standards of the Nasdaq Stock Market.
2.9 Consultant shall mean any consultant to the Company or its Subsidiaries or Affiliates.
2.10 Covered Officer shall mean at any date (i) any individual who, with respect to the
previous taxable year of the Company, was a covered employee of the Company within the meaning of
Section 162(m); provided, however, that the term Covered Officer shall not include any such
individual who is designated by the Committee, in its discretion, at the time of any Award or at
any subsequent time, as reasonably expected not to be such a covered employee with respect to the
current taxable year of the Company or the taxable year of the Company in which the applicable
Award will be paid or vested, and (ii) any individual who is designated by the Committee, in its
discretion, at the time of any Award or at any subsequent time, as reasonably expected to be such a
covered employee with respect to the current taxable year of the Company or with respect to the
taxable year of the Company in which any applicable Award will be paid or vested.
2.11 Director shall mean a member of the Board.
2.12 Disability shall mean, unless otherwise defined in the applicable Award Agreement, a
disability that would qualify as a total and permanent disability under the Companys then current
long-term disability plan.
2.13 Early Retirement shall mean retirement, for purposes of this Plan, with the express
consent of the Company at or before the time of such retirement, from active employment with the
Company and any Subsidiary or Affiliate prior to age 65, in accordance with any applicable early
retirement policy of the Company then in effect or as may be approved by the Committee.
2.14 Effective Date shall have the meaning provided in Section 16.1 of the Plan.
2.15 Employee shall mean a current or prospective officer or employee of the Company or of
any Subsidiary or Affiliate.
2.16 Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to
time.
2.17 Fair Market Value with respect to the Shares, shall mean, for purposes of a grant of an
Award as of any date, (i) the reported closing sales price of the Shares on the Nasdaq Stock
Market, or any other such market or exchange as is the principal trading market for the Shares, on
such date, or in the absence of reported sales on such date, the closing sales price on the
immediately preceding date on which sales were reported or (ii) in the event there is no public
market for the Shares on such date, the fair market value as determined, in good faith and by the
reasonable application of a reasonable valuation method, by the Committee in its sole discretion,
and for purposes of a sale of a Share as of any date, the actual sales price on that date.
2.18 Good Reason shall mean (i) a material reduction in a Participants position, authority,
duties or responsibilities, (ii) any material reduction in a Participants annual base salary as in
effect immediately prior to a Change in Control; (iii) the relocation of the office at which the
Participant is to perform the majority of his or her duties following a Change in Control to a
location more than 30 miles from the location at which the Participant performed such duties prior
to the Change in Control; or (iv) the failure by the Company or its successor to continue to
provide the Participant with benefits substantially similar in aggregate value to those enjoyed by
the Participant
under any of the Companys pension, life insurance, medical, health and accident or disability
plans in which Participant was participating immediately prior to a Change in Control, unless the
Participant is offered participation in other comparable benefit plans generally available to
similarly situated employees of the Company or its successor after the Change in Control.
4
2.19 Grant Price shall mean the price established at the time of grant of an SAR pursuant to
Section 6 used to determine whether there is any payment due upon exercise of the SAR.
2.20 Incentive Stock Option shall mean an option to purchase Shares from the Company that is
granted under Section 6 of the Plan and that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
2.21 Non-Employee Director shall mean a member of the Board who is not an officer or
employee of the Company or any Subsidiary or Affiliate.
2.22 Non-Qualified Stock Option shall mean an option to purchase Shares from the Company
that is granted under Sections 6 or 10 of the Plan and is not intended to be an
Incentive Stock Option.
2.23 Normal Retirement shall mean, unless otherwise defined in the applicable Award
Agreement, retirement of a Participant from active employment with the Company or any of its
Subsidiaries or Affiliates on or after such Participants 65th birthday.
2.24 Option shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
2.25 Option Price shall mean the purchase price payable to purchase one Share upon the
exercise of an Option.
2.26 Other Stock-Based Award shall mean any Award granted under Sections 9 or
10 of the Plan. For purposes of the share counting provisions of Section 4.1
hereof, an Other Stock-Based Award that is not settled in cash shall be treated as (i) an Option
Award if the amounts payable thereunder will be determined by reference to the appreciation of a
Share, and (ii) a Restricted Share Award if the amounts payable thereunder will be determined by
reference to the full value of a Share.
2.27 Outside Director shall mean, with respect to the grant of an Award, a member of the
Board then serving on the Committee.
2.28 Participant shall mean any Employee, Director, Consultant or other person who receives
an Award under the Plan.
2.29 Performance Award shall mean any Award granted under Section 8 of the Plan.
For purposes of the share counting provisions of Section 4.1 hereof, a Performance Award
that is not settled in cash shall be treated as (i) an Option Award if the amounts payable
thereunder will be determined by reference to the appreciation of a Share, and (ii) a Restricted
Share Award if the amounts payable thereunder will be determined by reference to the full value of
a Share.
2.30 Person shall mean any individual, corporation, partnership, limited liability company,
association, joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
2.31 Restricted Share shall mean any Share granted under Sections 7 to 10 of the Plan.
2.32 Restricted Share Unit shall mean any unit granted under Sections 7 to 10 of the Plan.
2.33 Retirement shall mean Normal or Early Retirement.
2.34 SEC shall mean the Securities and Exchange Commission or any successor thereto.
2.35 Section 16 shall mean Section 16 of the Exchange Act and the rules promulgated
thereunder and any successor provision thereto as in effect from time to time.
5
2.36 Section 162(m) shall mean Section 162(m) of the Code and the regulations promulgated
thereunder and any successor provision thereto as in effect from time to time.
2.37 Separation from Service or Separates from Service shall have the meaning ascribed to
such term pursuant to Section 409A of the Code and the regulations promulgated thereunder.
2.38 Shares shall mean shares of the common stock, $0.001 par value, of the Company.
2.39 Share Reserve shall have the meaning set forth in Section 4.1 hereof.
2.40 Stock Appreciation Right or SAR shall mean a stock appreciation right granted under
Sections 6, 8 or 10 of the Plan that entitles the holder to receive, with
respect to each Share encompassed by the exercise of such SAR, the amount determined by the
Committee and specified in an Award Agreement. In the absence of such a determination, the holder
shall be entitled to receive, with respect to each Share encompassed by the exercise of such SAR,
the excess of the Fair Market Value of such Share on the date of exercise over the Grant Price.
2.41 Subsidiary shall mean any Person (other than the Company) of which 50% or more of its
voting power or its equity securities or equity interest is owned directly or indirectly by the
Company.
2.42 Substitute Awards shall mean Awards granted solely in assumption of, or in substitution
for, outstanding awards previously granted by a company acquired by the Company or with which the
Company combines.
2.43 2000 Plan shall have the meaning set forth in Section 4.1 hereof.
Section 3. Administration.
3.1 Authority of Committee. The Plan shall be administered by a Committee, which shall be
appointed by and serve at the pleasure of the Board; provided, however, with respect to Awards to
Outside Directors, all references in the Plan to the Committee shall be deemed to be references to
the Board. Subject to the terms of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Committee by the Plan, the Committee shall have full
power and authority in its discretion to: (i) designate Participants; (ii) determine eligibility
for participation in the Plan and decide all questions concerning eligibility for and the amount of
Awards under the Plan; (iii) determine the type or types of Awards to be granted to a Participant;
(iv) determine the number of Shares to be covered by, or with respect to which payments, rights or
other matters are to be calculated in connection with Awards; (v) determine the timing, terms, and
conditions of any Award; (vi) accelerate the time at which all or any part of an Award may be
settled or exercised; (vii) determine whether, to what extent, and under what circumstances Awards
may be settled or exercised in cash, Shares, other securities, other Awards or other property, or
canceled, forfeited or suspended and the method or methods by which Awards may be settled,
exercised, canceled, forfeited or suspended; (viii) determine whether, to what extent, and under
what circumstances cash, Shares, other securities, other Awards, other property, and other amounts
payable with respect to an Award shall be deferred either automatically or at the election of the
holder thereof or of the Committee; (ix) grant Awards as an alternative to, or as the form of
payment for grants or rights earned or payable under, other bonus or compensation plans,
arrangements or policies of the Company or a Subsidiary or Affiliate; (x) grant Substitute Awards
on such terms and conditions as the Committee may prescribe, subject to compliance with the
Incentive Stock Option rules under Section 422 of the Code and the nonqualified deferred
compensation rules under Section 409A of the Code, where applicable; (xi) make all determinations
under the Plan concerning any Participants Separation from Service with the Company or a
Subsidiary or Affiliate, including whether such separation occurs by reason of Cause, Good Reason,
Disability, Retirement, or in connection with a Change in Control and whether a leave constitutes a
Separation from Service; (xii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (xiii) except to the extent prohibited by Section
6.2, amend or modify the terms of any Award at or after grant with the consent of the holder of
the Award; (xiv) establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan; and (xv) make any
other determination and take any other action that the Committee deems necessary or desirable for
the administration of the Plan, subject to the exclusive authority of the Board under Section
14 hereunder to amend or terminate the Plan.
6
3.2 Committee Discretion Binding. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with respect to the
Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and
binding upon all Persons, including the Company, any Subsidiary or Affiliate, any Participant and
any holder or beneficiary of any Award. A Participant or other holder of an Award may contest a
decision or action by the Committee with respect to such person or Award only on the grounds that
such decision or action was arbitrary or capricious or was unlawful, and any review of such
decision or action shall be limited to determining whether the Committees decision or action was
arbitrary or capricious or was unlawful.
3.3 Action by the Committee. The Committee shall select one of its members as its Chairperson
and shall hold its meetings at such times and places and in such manner as it may determine. A
majority of its members shall constitute a quorum. All determinations of the Committee shall be
made by not less than a majority of its members. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully effective as if it had been made
by a majority vote at a meeting duly called and held. The exercise of an Option or receipt of an
Award shall be effective only if an Award Agreement shall have been duly executed and delivered on
behalf of the Company following the grant of the Option or other Award. The Committee may appoint
a Secretary and may make such rules and regulations for the conduct of its business, as it shall
deem advisable.
3.4 Delegation. Subject to the terms of the Plan and applicable law, the Committee may
delegate to one or more officers or managers of the Company or of any Subsidiary or Affiliate, or
to a Committee of such officers or managers, the authority, subject to such terms and limitations
as the Committee shall determine, to grant Awards to or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend or terminate Awards held by Participants who are not
officers or directors of the Company for purposes of Section 16 or who are otherwise not subject to
such Section.
3.5 No Liability. No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted hereunder.
Section 4. Shares Available For Awards.
4.1 Shares Available. Subject to the provisions of Section 4.2 below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards after the effective date of
the amendment and restatement of this Plan is equal to the sum of (i) 3,325,000 Shares and (ii) the
number of shares available for grant under the Plan as of the end of the day that is the effective
date of the amendment and restatement of this Plan (such aggregate amount being, the Share
Reserve). The number of Shares with respect to which Incentive Stock Options may be granted shall
be no more than 1,000,000. Each Share issued pursuant to an Option shall reduce the Share Reserve
by one (1) share. Each Share subject to a redeemed portion of a SAR shall reduce the Share Reserve
by one (1) share. Each Share issued pursuant to a Restricted Stock Award or a Restricted Stock
Unit Award shall reduce the Share Reserve by one and forty-eight one-hundreths (1.48) shares. If
any Award granted under this Plan (whether before or after the effective date of the amendment and
restatement of this Plan) shall expire, terminate, be settled in cash (in whole or in part) or
otherwise be forfeited or canceled for any reason before it has vested or been exercised in full,
the Shares subject to such Award shall, to the extent of such expiration, cash settlement,
forfeiture, or termination, again be available for Awards under the Plan, in accordance with this
Section 4.1. If any Award granted under the Companys 2000 Long-Term Incentive Plan (the
2000 Plan) shall expire, terminate, be settled in cash (in whole or in part) or otherwise be
forfeited or canceled for any reason before it has vested or been exercised in full, the Shares
subject to such Award shall, to the extent of such expiration, cash settlement, forfeiture, or
termination, again be available for Awards under the Plan, and the Share Reserve shall be
increased, in accordance with this Section 4.1. The Committee may make such other
determinations regarding the counting of Shares issued pursuant to this Plan as it deems necessary
or advisable, provided that such determinations shall be permitted by law. Notwithstanding the
foregoing, if an Option or SAR is exercised, in whole or in part, by tender of Shares or if the
Companys tax withholding obligation is satisfied by withholding Shares, the number of Shares
deemed to have been issued under the Plan for purposes of the limitation set forth in this
Section 4.1 shall be the number of Shares that were subject to the Option or SAR or portion
thereof, and not the net number of Shares actually issued and any SARs to be settled in Shares
shall be counted in full against the number of Shares available for issuance under the Plan,
regardless of the number of shares issued upon the settlement of the SAR. Any Shares that again
become available for grant pursuant to this Section shall be added back as (i) one (1) Share if
such Shares were subject to Options or Stock Appreciation Rights granted under the Plan or options
or stock appreciation rights granted under the 2000 Plan, and (ii) as one and forty-eight
one-hundredths (1.48) Shares if such Shares were subject to Awards other than Options or Stock
Appreciation Rights granted under the Plan or awards other than options or stock appreciation
rights granted under the 2000 Plan. Notwithstanding the foregoing and subject to adjustment as
provided in Section 4.2 hereof, no Participant may receive Options or SARs under the Plan
in any calendar year that, taken together, relate to more than 300,000 Shares.
7
4.2 Adjustments. Without limiting the Committees discretion as provided in Section
13 hereof, in the event that the Committee determines that any dividend or other distribution
(whether in the form of cash, Shares, other securities or other property, and other than a normal
cash dividend), recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event affects the Shares, then
the Committee shall, in an equitable and proportionate manner as deemed appropriate by the
Committee (and, as applicable, in such manner as is consistent with Sections 162(m), 422 and 409A
of the Code and the regulations thereunder) either: (i) adjust any or all of (1) the aggregate
number of Shares or other securities of the Company (or number and kind of other securities or
property) with respect to which Awards may be granted under the Plan; (2) the number of Shares or
other securities of the Company (or number and kind of other securities or property) subject to
outstanding Awards under the Plan, provided that the number of Shares subject to any Award shall
always be a whole number; (3) the grant or exercise price with respect to any Award under the Plan,
and (4) the limits on the number of Shares or Awards that may be granted to Participants under the
Plan in any calendar year; (ii) provide for an equivalent award in respect of securities of the
surviving entity of any merger, consolidation or other transaction or event having a similar
effect; or (iii) make provision for a cash payment to the holder of an outstanding Award. Any such
adjustments to outstanding Awards shall be effected in a manner that precludes the material
enlargement of rights and benefits under such Awards.
4.3 Substitute Awards. Any Shares issued by the Company as Substitute Awards in connection
with the assumption or substitution of outstanding grants from any acquired corporation shall not
reduce the Shares available for Awards under the Plan.
4.4 Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may
consist, in whole or in part, of authorized and unissued Shares or of issued Shares which have been
reacquired by the Company.
Section 5. Eligibility.
Any Employee, Director or Consultant shall be eligible to be designated a Participant;
provided, however, that Outside Directors shall only be eligible to receive Awards granted
consistent with Section 10.
Section 6. Stock Options And Stock Appreciation Rights.
6.1 Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete
authority to determine the Participants to whom Options and SARs shall be granted, the number of
Shares subject to each Award, the exercise price and the conditions and limitations applicable to
the exercise of each Option and SAR. An Option may be granted with or without a related SAR. An
SAR may be granted with or without a related Option. The grant of an Option or SAR shall occur
when the Committee by resolution, written consent or other appropriate action determines to grant
such Option or SAR for a particular number of Shares to a particular Participant at a particular
Option Price or Grant Price, as the case may be, or such later date as the Committee shall specify
in such resolution, written consent or other appropriate action. The Committee shall have the
authority to grant Incentive Stock Options and to grant Non-Qualified Stock Options. In the case
of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply
with Section 422 of the Code, as from time to time amended, and any regulations implementing such
statute. A person who has been granted an Option or SAR under this Plan may be granted additional
Options or SARs under the Plan if the Committee shall so determine; provided, however, that to the
extent the aggregate Fair Market Value (determined at the time the Incentive Stock Option is
granted) of the Shares with respect to which all Incentive Stock Options are exercisable for the
first time by an Employee during any calendar year (under all plans described in Section 422(d) of
the Code of the Employees employer corporation and its parent and Subsidiaries) exceeds $100,000,
such Options shall be treated as Non-Qualified Stock Options.
6.2 Price. The Committee in its sole discretion shall establish the Option Price at the time
each Option is granted and the Grant Price at the time each SAR is granted. Except in the case of
Substitute Awards, the Option Price of an Option may not be less than the Fair Market Value of a
Share on the date of grant of such Option. Except with respect to Substitute Awards, the Grant
Price of an SAR may not be less than the Fair Market Value of a Share on the date of grant of such
SAR. In the case of Substitute Awards or Awards granted in connection with an adjustment provided
for in Section 4.2 hereof in the form of Options or SARS, such grants shall have an Option
Price (or Grant Price) per Share that is intended to maintain the economic value of the Award that
was replaced or
adjusted as determined by the Committee. Notwithstanding the foregoing and except as permitted by
the provisions of Section 4.2 hereof, the Committee shall not have the power to (i) amend
the terms of previously granted Options to reduce the Option Price of such Options, (ii) amend the
terms of previously granted SARs to reduce the Grant Price of such SARs, (iii) cancel such Options
and grant substitute Options with a lower Option Price than the cancelled Options, or (iv) cancel
such SARs and grant substitute SARs with a lower Grant Price than the cancelled SARs, in each case
without the approval of the Companys shareholders.
8
6.3 Term. Subject to the Committees authority under Section 3.1 and the provisions
of Section 6.6, each Option and SAR and all rights and obligations thereunder shall expire
on the date determined by the Committee and specified in the Award Agreement. The Committee shall
be under no duty to provide terms of like duration for Options or SARs granted under the Plan.
Notwithstanding the foregoing, but subject to Section 6.4(a) hereof, no Option or SAR shall
be exercisable after the expiration of ten (10) years from the date such Option or SAR was granted.
6.4 Exercise.
(a) Each Option and SAR shall be exercisable at such times and subject to such terms
and conditions as the Committee may, in its sole discretion, specify in the applicable Award
Agreement or thereafter. The Committee shall have full and complete authority to determine,
subject to Section 6.6 herein, whether an Option or SAR will be exercisable in full
at any time or from time to time during the term of the Option or SAR, or to provide for the
exercise thereof in such installments, upon the occurrence of such events and at such times
during the term of the Option or SAR as the Committee may determine. An Award Agreement may
provide that the period of time over which an Option, other than an Incentive Stock Option,
or SAR may be exercised shall be automatically extended if on the scheduled expiration of
such Award, the Participants exercise of such Award would violate applicable securities
law; provided, however, that during the extended exercise period the Option or SAR may only
be exercised to the extent such Award was exercisable in accordance with its terms
immediately prior to such scheduled expiration date; provided further, however, that such
extended exercise period shall end not later than thirty (30) days after the exercise of
such Option or SAR first would no longer violate such laws.
(b) The Committee may impose such conditions with respect to the exercise of Options or
SARs, including without limitation, any relating to the application of federal, state or
foreign securities laws or the Code, as it may deem necessary or advisable. The exercise of
any Option granted hereunder shall be effective only at such time as the sale of Shares
pursuant to such exercise will not violate any state or federal securities or other laws.
(c) An Option or SAR may be exercised in whole or in part at any time, with respect to
whole Shares only, within the period permitted thereunder for the exercise thereof, and
shall be exercised by written notice of intent to exercise the Option or SAR, delivered to
the Company at its principal office, and payment in full to the Company at the direction of
the Committee of the amount of the Option Price for the number of Shares with respect to
which the Option is then being exercised.
(d) Payment of the Option Price shall be made in (i) cash or cash equivalents, or, (ii)
at the discretion of the Committee, by transfer, either actually or by attestation, to the
Company of unencumbered Shares previously acquired by the Participant, valued at the Fair
Market Value of such Shares on the date of exercise (or next succeeding trading date, if the
date of exercise is not a trading date), together with any applicable withholding taxes,
such transfer to be upon such terms and conditions as determined by the Committee, (iii) by
a combination of (i) or (ii), or (iv) by any other method approved or accepted by the
Committee in its sole discretion, including, if the Committee so determines, (x) a cashless
(broker-assisted) exercise that complies with applicable laws or (y) withholding Shares
(net-exercise) otherwise deliverable to the Participant pursuant to the Option having an
aggregate Fair Market Value at the time of exercise equal to the total Option Price. Until
the optionee has been issued the Shares subject to such exercise, he or she shall possess no
rights as a stockholder with respect to such Shares. The Company reserves, at any and all
times in the Companys sole discretion, the right to establish, decline to approve or
terminate any program or procedures for the exercise of Options by means of a method set
forth in subsection (iv) above, including with respect to one or more Participants specified
by the Company notwithstanding that such program or procedures may be available to other
Participants.
(e) At the Committees discretion, the amount payable as a result of the exercise of an
SAR may be settled in cash, Shares or a combination of cash and Shares. A fractional Share
shall not be
deliverable upon the exercise of a SAR but a cash payment will be made in lieu thereof.
9
6.5 Separation from Service. Except as otherwise provided in the applicable Award Agreement,
an Option or SAR may be exercised only to the extent that it is then exercisable, and if at all
times during the period beginning with the date of granting such Award and ending on the date of
exercise of such Award the Participant is an Employee, Non-Employee Director or Consultant, and
shall terminate immediately upon a Separation from Service by the Participant. An Option or SAR
shall cease to become exercisable upon a Separation from Service of the holder thereof.
Notwithstanding the foregoing provisions of this Section 6.5 to the contrary, the Committee
may determine in its discretion that an Option or SAR may be exercised following any such
Separation from Service, whether or not exercisable at the time of such separation; provided,
however, that in no event may an Option or SAR be exercised after the expiration date of such Award
specified in the applicable Award Agreement, except as provided in Section 6.4(a).
6.6 Ten Percent Stock Rule. Notwithstanding any other provisions in the Plan, if at the time
an Option is otherwise to be granted pursuant to the Plan, the optionee or rights holder owns
directly or indirectly (within the meaning of Section 424(d) of the Code) Shares of the Company
possessing more than ten percent (10%) of the total combined voting power of all classes of Stock
of the Company or its parent or Subsidiary or Affiliate corporations (within the meaning of Section
422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee or rights
holder pursuant to the Plan shall satisfy the requirement of Section 422(c)(5) of the Code, and the
Option Price shall be not less than one hundred ten percent (110%) of the Fair Market Value of the
Shares of the Company, and such Option by its terms shall not be exercisable after the expiration
of five (5) years from the date such Option is granted.
Section 7. Restricted Shares And Restricted Share Units.
7.1 Grant.
(a) Subject to the provisions of the Plan, the Committee shall have sole and complete
authority to determine the Participants to whom Restricted Shares and Restricted Share Units
shall be granted, the number of Restricted Shares and/or the number of Restricted Share
Units to be granted to each Participant, the duration of the period during which, and the
conditions under which, the Restricted Shares and Restricted Share Units may be forfeited to
the Company, and the other terms and conditions of such Awards. The Restricted Share and
Restricted Share Unit Awards shall be evidenced by Award Agreements in such form as the
Committee shall from time to time approve, which agreements shall comply with and be subject
to the terms and conditions provided hereunder and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.
(b) Each Restricted Share and Restricted Share Unit Award made under the Plan shall be
for such number of Shares as shall be determined by the Committee and set forth in the Award
Agreement containing the terms of such Restricted Share or Restricted Share Unit Award.
Such agreement shall set forth a period of time during which the grantee must remain in the
continuous employment (or other service-providing capacity) of the Company in order for the
forfeiture and transfer restrictions to lapse. If the Committee so determines, the
restrictions may lapse during such restricted period in installments with respect to
specified portions of the Shares covered by the Restricted Share or Restricted Share Unit
Award. The Award Agreement may also, in the discretion of the Committee, set forth
performance or other conditions that will subject the Shares to forfeiture and transfer
restrictions. The Committee may, at its discretion, waive all or any part of the
restrictions applicable to any or all outstanding Restricted Share and Restricted Share Unit
Awards.
7.2 Delivery of Shares and Transfer Restrictions.
(a) At the time of a Restricted Share Award, a certificate representing the number of
Shares awarded thereunder shall be registered in the name of the grantee. Such certificate
shall be held by the Company or any custodian appointed by the Company for the account of
the grantee subject to the terms and conditions of the Plan, and shall bear such a legend
setting forth the restrictions imposed thereon as the Committee, in its discretion, may
determine. The foregoing to the contrary notwithstanding, the Committee may, in its
discretion, provide that a Participants ownership of Restricted Shares prior to the lapse
of any transfer restrictions or any other applicable restrictions shall, in lieu of such
certificates, be evidenced by a book entry (i.e., a computerized or manual entry) in the
records of the Company or its designated agent in the name of the Participant who has
received such Award, and confirmation and
10
account statements sent to the Participant with respect to such book-entry Shares may
bear the restrictive legend referenced in the preceding sentence. Such records of the
Company or such agent shall, absent manifest error, be binding on all Participants who
receive Restricted Share Awards evidenced in such manner. The holding of Restricted Shares
by the Company or such an escrow holder, or the use of book entries to evidence the
ownership of Restricted Shares, in accordance with this Section 7.2(a), shall not
affect the rights of Participants as owners of the Restricted Shares awarded to them, nor
affect the restrictions applicable to such shares under the Award Agreement or the Plan,
including the transfer restrictions.
(b) Unless otherwise provided in the applicable Award Agreement, the grantee shall have
all rights of a shareholder with respect to the Restricted Shares, including the right to
receive dividends and the right to vote such Shares, subject to the following restrictions:
(i) the grantee shall not be entitled to delivery of the stock certificate until the
expiration of the restricted period and the fulfillment of any other restrictive conditions
set forth in the Award Agreement with respect to such Shares; (ii) none of the Shares may be
sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of
during such restricted period or until after the fulfillment of any such other restrictive
conditions; and (iii) except as otherwise determined by the Committee at or after grant, all
of the Shares shall be forfeited and all rights of the grantee to such Shares shall
terminate, without further obligation on the part of the Company, unless the grantee remains
in the continuous employment of the Company for the entire restricted period in relation to
which such Shares were granted and unless any other restrictive conditions relating to the
Restricted Share Award are met. Restricted Share Units shall be subject to similar transfer
restrictions as Restricted Share Awards, except that no Shares are actually awarded to a
Participant who is granted Restricted Share Units on the date of grant, and such Participant
shall have no rights of a stockholder with respect to such Restricted Share Units until the
restrictions set forth in the applicable Award Agreement have lapsed.
7.3 Termination of Restrictions. At the end of the restricted period and provided that any
other restrictive conditions of the Restricted Share Award are met, or at such earlier time as
otherwise determined by the Committee, all restrictions set forth in the Award Agreement relating
to the Restricted Share Award or in the Plan shall lapse as to the restricted Shares subject
thereto, and a stock certificate for the appropriate number of Shares, free of the restrictions and
restricted stock legend, shall be delivered to the Participant or the Participants beneficiary or
estate, as the case may be (or, in the case of book-entry Shares, such restrictions and restricted
stock legend shall be removed from the confirmation and account statements delivered to the
Participant or the Participants beneficiary or estate, as the case may be, in book-entry form).
7.4 Payment of Restricted Share Units. Each Restricted Share Unit shall have a value equal to
the Fair Market Value of a Share. Restricted Share Units shall be paid in cash, Shares, other
securities or other property, as determined in the sole discretion of the Committee, upon the lapse
of the restrictions applicable thereto, or otherwise in accordance with the applicable Award
Agreement. The applicable Award Agreement shall specify whether a Participant will be entitled to
receive dividend equivalent rights in respect of Restricted Share Units at the time of any payment
of dividends to shareholders on Shares. If the applicable Award Agreement specifies that a
Participant will be entitled to dividend equivalent rights, (i) the amount of any such dividend
equivalent right shall equal the amount that would be payable to the Participant as a stockholder
in respect of a number of Shares equal to the number of vested Restricted Share Units then credited
to the Participant, (ii) any such dividend equivalent right shall be paid in accordance with the
Companys payment practices as may be established from time to time and as of the date on which
such dividend would have been payable in respect of outstanding Shares, and (iii) the applicable
Award Agreement will specify whether dividend equivalents shall be paid in respect of Restricted
Share Units that are not yet vested. Except as otherwise determined by the Committee at or after
grant, Restricted Share Units may not be sold, assigned, transferred, pledged, hypothecated or
otherwise encumbered or disposed of, and all Restricted Share Units and all rights of the grantee
to such Restricted Share Units shall terminate, without further obligation on the part of the
Company, unless the grantee remains in continuous employment of the Company for the entire
restricted period in relation to which such Restricted Share Units were granted and unless any
other restrictive conditions relating to the Restricted Share Unit Award are met.
Section 8. Performance Awards.
8.1 Grant. The Committee shall have sole and complete authority to determine the Participants
who shall receive a Performance Award, which shall consist of a right that is (i) denominated in
cash or Shares (including but not limited to Restricted Shares and Restricted Share Units), (ii)
valued, as determined by the Committee, in accordance with the achievement of such performance
goals during such performance periods as the Committee
shall establish, and (iii) payable at such time and in such form as the Committee shall determine.
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8.2 Terms and Conditions. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any Performance Award and
the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and
may amend specific provisions of the Performance Award; provided, however, that such amendment may
not adversely affect existing Performance Awards made within a performance period commencing prior
to implementation of the amendment.
8.3 Payment of Performance Awards. Performance Awards may be paid in a lump sum or in
installments following the close of the performance period or, in accordance with the procedures
established by the Committee, on a deferred basis. Separation from Service prior to the end of any
performance period, other than for reasons of death or Disability, will result in the forfeiture of
the Performance Award, and no payments will be made. Notwithstanding the foregoing, the Committee
may in its discretion, waive any performance goals and/or other terms and conditions relating to a
Performance Award. A Participants rights to any Performance Award may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of in any manner, except by
will or the laws of descent and distribution, and/or except as the Committee may determine at or
after grant.
Section 9. Other Stock-Based Awards.
The Committee shall have the authority to determine the Participants who shall receive an
Other Stock-Based Award, which shall consist of any right that is (i) not an Award described in
Sections 6 and 7 above and (ii) an Award of Shares or an Award denominated or
payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as deemed by the Committee to
be consistent with the purposes of the Plan. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the terms and conditions of any such Other
Stock-Based Award.
Section 10. Non-Employee Director And Outside Director Awards.
10.1 The Board may provide that all or a portion of a Non-Employee Directors annual retainer,
meeting fees and/or other awards or compensation as determined by the Board, be payable (either
automatically or at the election of a Non-Employee Director) in the form of Non-Qualified Stock
Options, Restricted Shares, Restricted Share Units and/or Other Stock-Based Awards, including
unrestricted Shares. The Board shall determine the terms and conditions of any such Awards,
including the terms and conditions which shall apply upon a termination of the Non-Employee
Directors service as a member of the Board, and shall have full power and authority in its
discretion to administer such Awards, subject to the terms of the Plan and applicable law.
10.2 The Board may also grant Awards to Outside Directors pursuant to the terms of the Plan,
including any Award described in Sections 6, 7 and 9 above. With respect
to such Awards, all references in the Plan to the Committee shall be deemed to be references to the
Board.
Section 11. Provisions Applicable To Covered Officers And Performance Awards.
11.1 Notwithstanding anything in the Plan to the contrary, unless the Committee determines
that a Performance Award to be granted to a Covered Officer should not qualify as
performance-based compensation for purposes of Section 162(m), Performance Awards granted to
Covered Officers shall be subject to the terms and provisions of this Section 11.
11.2 The Committee may grant Performance Awards to Covered Officers based solely upon the
attainment of performance targets related to one or more performance goals selected by the
Committee from among the goals specified below. For the purposes of this Section 11,
performance goals shall be limited to one or more of the following Company, Subsidiary, operating
unit, business segment or division financial performance measures:
(a) earnings before any one or more of the following: interest,
taxes, depreciation, amortization and/or stock compensation;
(b) operating (or gross) income or profit;
(c) operating efficiencies;
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(d) return on equity, assets, capital, capital employed or
investment;
(e) after tax operating income;
(f) net income;
(g) earnings or book value per Share;
(h) financial ratios;
(i) cash flow(s);
(j) total sales or revenues or sales or revenues per employee;
(k) production (separate work units or SWUs);
(l) stock price or total shareholder return;
(m) dividends;
(n) debt or cost reduction;
(o) strategic business objectives, consisting of one or more
objectives based on meeting specified cost targets, business expansion goals
(including, without limitation, developmental, strategic or manufacturing
milestones of products or projects in development, execution of contracts with
current or prospective customers and development of business expansion
strategies) and goals relating to acquisitions, joint ventures or
collaborations or divestitures; or
(p) any combination thereof.
Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise
employ comparisons based on internal targets, the past performance of the Company or any
Subsidiary, operating unit, business segment or division of the Company and/or the past or current
performance of other companies, and in the case of earnings-based measures, may use or employ
comparisons relating to capital, shareholders equity and/or Shares outstanding, or to assets or
net assets. The Committee may appropriately adjust any evaluation of performance under criteria
set forth in this Section 11.2 to exclude any of the following events that occurs during a
performance period: (i) asset impairments or write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and restructuring programs,
(v) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No.
30 and/or in managements discussion and analysis of financial condition and results of operations
appearing in the Companys annual report to shareholders for the applicable year and (vi) the
effect of adverse federal, governmental or regulatory action, or delays in federal, governmental or
regulatory action; provided that the Committee commits to make any such adjustments within the 90
day period set forth in Section 11.4.
11.3 With respect to any Covered Officer, the maximum annual number of Shares in respect of
which all Performance Awards may be granted under Section 8 of the Plan is 300,000 and the
maximum amount of all Performance Awards that are settled in cash and that may be granted under
Section 8 of the Plan in any year is $3,000,000.
11.4 To the extent necessary to comply with Section 162(m), with respect to grants of
Performance Awards, no later than 90 days following the commencement of each performance period (or
such other time as may be required or permitted by Section 162(m) of the Code), the Committee
shall, in writing, (1) select the performance goal or goals applicable to the performance period,
(2) establish the various targets and bonus amounts which may be earned for such performance
period, and (3) specify the relationship between performance goals and targets and the amounts to
be earned by each Covered Officer for such performance period. Following the completion of each
performance period, the Committee shall certify in writing whether the applicable performance
targets have been achieved and the amounts, if any, payable to Covered Officers for such
performance period. In determining the amount earned by a Covered Officer for a given performance
period, subject to any applicable Award Agreement, the Committee shall have the right to reduce
(but not increase) the amount payable at a given level of performance
to take into account additional factors that the Committee may deem relevant in its sole discretion
to the assessment of individual or corporate performance for the performance period.
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11.5 Unless otherwise expressly stated in the relevant Award Agreement, each Award granted to
a Covered Officer under the Plan is intended to be performance-based compensation within the
meaning of Section 162(m). Accordingly, unless otherwise determined by the Committee, if any
provision of the Plan or any Award Agreement relating to such an Award does not comply or is
inconsistent with Section 162(m), such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, and no provision shall be deemed to confer upon the
Committee discretion to increase the amount of compensation otherwise payable to a Covered Officer
in connection with any such Award upon the attainment of the performance criteria established by
the Committee.
Section 12. Separation from Service.
The Committee shall have the full power and authority to determine the terms and conditions
that shall apply to any Award upon a Separation from Service with the Company, its Subsidiaries and
Affiliates, including a separation from the Company with or without Cause, by a Participant
voluntarily, or by reason of death, Disability, Early Retirement or Retirement, and may provide
such terms and conditions in the Award Agreement or in such rules and regulations as it may
prescribe.
Section 13. Change In Control.
Unless otherwise provided by the Committee, or in an Award Agreement or by a contractual
agreement between the Company and a Participant, if, within one year following a Change in Control,
a Participant Separates from Service with the Company (or its successor) by reason of (a) death;
(b) Disability; (c) Normal Retirement or Early Retirement; (d) for Good Reason by the Participant;
or (e) involuntary termination by the Company for any reason other than for Cause, all outstanding
Awards of such Participant shall vest, become immediately exercisable and payable and have all
restrictions lifted. In addition, subject to the requirements and limitations of Section 409A if
applicable, the Committee may provide for any one or more of the following at or after grant of any
Award hereunder:
(a) Accelerated Vesting. The Committee may, in its discretion, provide in any Award
Agreement, or, in the event of a Change in Control, may take such actions as it deems appropriate
to provide, for the acceleration of the exercisability, vesting and/or settlement in connection
with such Change in Control of each or any outstanding Award or portion thereof and Shares acquired
pursuant thereto upon such conditions (if any), including termination of the Participants service
prior to, upon, or following such Change in Control, to such extent as the Committee shall
determine. In the event of a Change of Control, and without the consent of any Participant, the
Committee may, in its discretion, provide that for a period of at least fifteen (15) days prior to
the Change in Control, any Options or Stock Appreciation Rights shall be exercisable as to all
Shares subject thereto and that upon the occurrence of the Change in Control, such Stock Options or
Stock Appreciation Rights shall terminate and be of no further force and effect.
(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business entity or parent
thereof, as the case may be (the Acquiror), may, without the consent of any Participant, either
assume or continue the Companys rights and obligations under each or any Award or portion thereof
outstanding immediately prior to the Change in Control or substitute for each or any such
outstanding Award or portion thereof a substantially equivalent award with respect to the
Acquirors stock, as applicable. For purposes of this Section, if so determined by the Committee,
in its discretion, an Award denominated in Shares shall be deemed assumed if, following the Change
in Control, the Award (as adjusted, if applicable, pursuant to Section 4.2 hereof) confers
the right to receive, subject to the terms and conditions of the Plan and the applicable Award
Agreement, for each Share subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, other securities or property or a combination thereof) to which
a holder of a share of Stock on the effective date of the Change in Control was entitled; provided,
however, that if such consideration is not solely common stock of the Acquiror, the Committee may,
with the consent of the Acquiror, provide for the consideration to be received upon the exercise or
settlement of the Award, for each Share subject to the Award, to consist solely of common stock of
the Acquiror equal in Fair Market Value to the per share consideration received by holders of
Shares pursuant to the Change in Control. If any portion of such consideration may be received by
holders of Shares pursuant to the Change in Control on a contingent or delayed basis, the Committee
may, in its sole discretion, determine such Fair Market Value per share as of the time of the
Change in Control on the basis of the Committees good faith estimate of the present value of the
probable
future payment of such consideration. Any Award or portion thereof which is neither assumed or
continued by the Acquiror in connection with the Change in Control nor exercised or settled as of
the time of consummation of the Change in Control shall terminate and cease to be outstanding
effective as of the time of consummation of the Change in Control.
14
(c) Cash-Out of Awards. The Committee may, in its discretion and without the consent of any
Participant, determine that, upon the occurrence of a Change in Control, each or any Award or a
portion thereof outstanding immediately prior to the Change in Control and not previously exercised
or settled shall be canceled in exchange for a payment with respect to each vested Share (and each
unvested Share, if so determined by the Committee) subject to such canceled Award in (i) cash, (ii)
stock of the Company or of a corporation or other business entity a party to the Change in Control,
or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value
equal to the Fair Market Value of the consideration to be paid per Share in the Change in Control,
reduced by the exercise or purchase price per share, if any, under such Award (which payment may,
for the avoidance of doubt, be $0, in the event the per share exercise or purchase price of an
Award is greater than the per share consideration in connection with the Change in Control). If any
portion of such consideration may be received by holders of Shares pursuant to the Change in
Control on a contingent or delayed basis, the Committee may, in its sole discretion, determine such
Fair Market Value per share as of the time of the Change in Control on the basis of the Committees
good faith estimate of the present value of the probable future payment of such consideration. In
the event such determination is made by the Committee, the amount of such payment (reduced by
applicable withholding taxes, if any), if any, shall be paid to Participants in respect of the
vested portions of their canceled Awards as soon as practicable following the date of the Change in
Control and in respect of the unvested portions of their canceled Awards in accordance with the
vesting schedules applicable to such Awards.
Section 14. Amendment And Termination.
14.1 Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate
the Plan or any portion thereof at any time; provided that no such amendment, alteration,
suspension, discontinuation or termination shall be made without shareholder approval if such
approval is necessary to comply with any tax or regulatory requirement for which or with which the
Board deems it necessary or desirable to comply.
14.2 Amendments to Awards. Subject to the restrictions of Section 6.2, the Committee
may waive any conditions or rights under, amend any terms of or alter, suspend, discontinue, cancel
or terminate, any Award theretofore granted, prospectively or retroactively; provided that any such
waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would
materially and adversely affect the rights of any Participant or any holder or beneficiary of any
Award theretofore granted shall not to that extent be effective without the consent of the affected
Participant, holder or beneficiary.
14.3 Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The
Committee is hereby authorized to make equitable and proportionate adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring
events (and shall make such adjustments for the events described in Section 4.2 hereof)
affecting the Company, any Subsidiary or Affiliate, or the financial statements of the Company or
any Subsidiary or Affiliate, or of changes in applicable laws, regulations or accounting
principles.
Section 15. General Provisions.
15.1 Limited Transferability of Awards. Except as otherwise provided in the Plan, an Award
Agreement or by the Committee at or after grant, no Award shall be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant, except by will or the laws
of descent and distribution. No transfer of an Award by will or by laws of descent and
distribution shall be effective to bind the Company unless the Company shall have been furnished
with written notice thereof and an authenticated copy of the will and/or such other evidence as the
Committee may deem necessary or appropriate to establish the validity of the transfer. No transfer
of an Award for value shall be permitted under the Plan.
15.2 Dividend Equivalents. In the sole and complete discretion of the Committee, an Award may
provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other
securities or other property on a current or deferred basis. All dividend or dividend equivalents
which are not paid currently may, at the Committees discretion, accrue interest, be reinvested
into additional Shares, or, in the case of dividends or dividend equivalents credited in connection
with Performance Awards, be credited as additional Performance Awards and paid to the Participant
if and when, and to the extent that, payment is made pursuant to such Award.
The total number of Shares available for grant under Section 4 shall not be reduced to
reflect any dividends or dividend equivalents that are reinvested into additional Shares or
credited as Performance Awards.
15
15.3. Compliance with Section 409A of the Code. No Award (or modification thereof) shall
provide for deferral of compensation that does not comply with Section 409A of the Code unless the
Committee, at the time of grant, specifically provides that the Award is not intended to comply
with Section 409A of the Code. Notwithstanding any provision of this Plan to the contrary, if one
or more of the payments or benefits received or to be received by a Participant pursuant to an
Award would cause the Participant to incur any additional tax or interest under Section 409A of the
Code, the Committee may reform such provision to maintain to the maximum extent practicable the
original intent of the applicable provision without violating the provisions of Section 409A of the
Code. Although the Company intends to administer the Plan so that Awards will be exempt from, or
will comply with, the requirements of Section 409A of the Code, the Company does not warrant that
any Award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or
any other provision of federal, state, local or foreign law. The Company shall not be liable to
any Participant for any tax, interest, or penalties that Participant might owe as a result of the
grant, holding, vesting, exercise, or payment of any Award under the Plan.
15.4 No Rights to Awards. No Person shall have any claim to be granted any Award, and there
is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards.
The terms and conditions of Awards need not be the same with respect to each Participant.
15.5 Share Certificates. All certificates for Shares or other securities of the Company or
any Subsidiary or Affiliate delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations and other requirements of the SEC or any state
securities commission or regulatory authority, any stock exchange or other market upon which such
Shares or other securities are then listed, and any applicable Federal or state laws, and the
Committee may cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
15.6 Tax Withholding. A Participant may be required to pay to the Company or any Subsidiary
or Affiliate and the Company or any Subsidiary or Affiliate shall have the right and is hereby
authorized to withhold from any Award, from any payment due or transfer made under any Award or
under the Plan, or from any compensation or other amount owing to a Participant the amount (in
cash, Shares, other securities, other Awards or other property) of any applicable withholding or
other tax-related obligations in respect of an Award, its exercise or any other transaction
involving an Award, or any payment or transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes. The Committee may provide for additional cash payments to holders of
Options to defray or offset any tax arising from the grant, vesting, exercise or payment of any
Award. Without limiting the generality of the foregoing, the Committee may in its discretion
permit a Participant to satisfy or arrange to satisfy, in whole or in part, the tax obligations
incident to an Award by: (a) electing to have the Company withhold Shares or other property
otherwise deliverable to such Participant pursuant to the Award (provided, however, that the amount
of any Shares so withheld shall not exceed the amount necessary to satisfy required federal, state
local and foreign withholding obligations using the minimum statutory withholding rates for
federal, state, local and/or foreign tax purposes, including payroll taxes, that are applicable to
supplemental taxable income) and/or (b) tendering to the Company Shares owned by such Participant
(or by such Participant and his or her spouse jointly) and purchased or held for the requisite
period of time as may be required to avoid the Companys or the Affiliates or Subsidiaries
incurring an adverse accounting charge, based, in each case, on the Fair Market Value of the Shares
on the payment date as determined by the Committee. All such elections shall be irrevocable, made
in writing, signed by the Participant, and shall be subject to any restrictions or limitations that
the Committee, in its sole discretion, deems appropriate.
15.7 Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement that
shall be delivered to the Participant and may specify the terms and conditions of the Award and any
rules applicable thereto. In the event of a conflict between the terms of the Plan and any Award
Agreement, the terms of the Plan shall prevail. The Committee shall, subject to applicable law,
determine the date an Award is deemed to be granted. The Committee or, except to the extent
prohibited under applicable law, its delegate(s) may establish the terms of agreements or other
documents evidencing Awards under this Plan and may, but need not, require as a condition to any
such agreements or documents effectiveness that such agreement or document be executed by the
Participant, including by electronic signature or other electronic indication of acceptance, and
that such Participant agree to such further terms and conditions as specified in such agreement or
document. The grant of an Award under this Plan shall not confer any rights upon the Participant
holding such Award other than such terms, and subject to such
conditions, as are specified in this Plan as being applicable to such type of Award (or to all
Awards) or as are expressly set forth in the agreement or other document evidencing such Award.
16
15.8 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent
the Company or any Subsidiary or Affiliate from adopting or continuing in effect other compensation
arrangements, which may, but need not, provide for the grant of Options, Restricted Shares,
Restricted Share Units, Other Stock-Based Awards or other types of Awards provided for hereunder.
15.9 No Right to Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any Subsidiary or Affiliate.
Further, the Company or a Subsidiary or Affiliate may at any time dismiss a Participant from
employment, free from any liability or any claim under the Plan, unless otherwise expressly
provided in an Award Agreement.
15.10 No Rights as Shareholder. Subject to the provisions of the Plan and the applicable
Award Agreement, no Participant or holder or beneficiary of any Award shall have any rights as a
shareholder with respect to any Shares to be distributed under the Plan until such person has
become a holder of such Shares. Notwithstanding the foregoing, in connection with each grant of
Restricted Shares hereunder, the applicable Award Agreement shall specify if and to what extent the
Participant shall not be entitled to the rights of a shareholder in respect of such Restricted
Shares.
15.11 Governing Law. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan and any Award Agreement shall be determined in accordance with the
laws of the State of Delaware without giving effect to conflicts of laws principles.
15.12 Severability. If any provision of the Plan or any Award is, or becomes, or is deemed to
be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would
disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person
or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
15.13 Other Laws. The Committee may refuse to issue or transfer any Shares or other
consideration under an Award if, acting in its sole discretion, it determines that the issuance or
transfer of such Shares or such other consideration might violate any applicable law or regulation
(including applicable non-U.S. laws or regulations) or entitle the Company to recover the same
under Exchange Act Section 16(b), and any payment tendered to the Company by a Participant, other
holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to
the relevant Participant, holder or beneficiary.
15.14 No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship between the Company or
any Subsidiary or Affiliate and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Subsidiary or Affiliate pursuant to an
Award, such right shall be no greater than the right of any unsecured general creditor of the
Company or any Subsidiary or Affiliate.
15.15 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the
Plan or any Award, and the Committee shall determine whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
15.16 Headings. Headings are given to the sections and subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.
Section 16. Term Of The Plan.
16.1 Effective Date. The Plan shall be effective, and will amend and restate the previous
plan as set forth herein effective, as of May 21, 2009 provided it has been approved by the Board
and by the Companys shareholders.
16.2 Expiration Date. No new Awards shall be granted under the Plan after the tenth (10th)
anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the
Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award or to waive any
conditions or rights under any such Award shall, continue after the tenth (10th) anniversary of the
Effective Date.
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
M12036
REVOCABLE PROXY
LUMINEX CORPORATION
12212 Technology Blvd., Austin, Texas 78727
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF LUMINEX CORPORATION FOR
USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 2009 AND AT ANY ADJOURNMENT
OR POSTPONEMENT THEREOF.
The undersigned hereby appoints Harriss T. Currie and David S. Relter, or either of them,
or any successors in their respective positions, as proxies with full powers of substitution, and
hereby authorizes them to represent the undersigned and to vote, as designated on the reverse
side, all the shares of common stock of Luminex Corporation (the Company) held of record by
the undersigned as of March 31, 2009, at the Annual Meeting of Stockholders (the Annual
Meeting) to be held at the Hilton Austin Airport Hotel, 9515 New Airport Drive, Austin, Texas
78719 on Thursday, May 21, 2009, at 10:00 a.m. local time, or at any adjournment or
postponement thereof.
The Board of Directors recommends a vote FOR the Boards Class III Director nominees,
FOR the approval of the Luminex Corporation Amended and Restated 2006 Equity Incentive Plan
and FOR the ratification of the appointment of Ernst & Young LLP as the Companys
independent registered public accounting firm for fiscal 2009. Shares of common stock of
the Company will be voted as specified. If not otherwise specified, this proxy will be
voted FOR the election of the Board of Directors Class III Director nominees to the Board
of Directors, FOR the approval of the Luminex Corporation Amended and Restated 2006 Equity
Incentive Plan, FOR the ratification of the appointment of Ernst & Young LLP as the
Companys independent registered public accounting firm for fiscal 2009, and on other
matters properly presented at the Annual Meeting or any postponement or adjournment
thereof, at the discretion of the proxies. You may revoke this proxy at any time prior to the
time it is voted at the Annual Meeting in the manner described in the Proxy Statement. This
proxy may not be voted for any person who is not a nominee of the Board of Directors of the
Company.
The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of Stockholders
of Luminex Corporation to be held on May 21, 2009, a Proxy Statement for the Annual Meeting and
the 2008 Annual Report, prior to the signing of this proxy. All of the proposals set forth on the
reverse side hereof are more fully described in the Proxy Statement.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued, and to be dated and signed, on reverse side)
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting instruction
form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials,
you can consent to receiving all future proxy statements, proxy cards and annual
reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access proxy materials
electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M12035
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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LUMINEX CORPORATION
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For All |
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Withhold All |
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For All Except |
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To withhold authority to vote for any individual nominee(s), mark
For All Except and write the number(s) of the nominee(s) on the line below. |
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The Board of Directors recommends a vote FOR Proposals 1
through 3.
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Vote On Directors
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1.
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Proposal to elect the following nominees as Class III directors for a three-year term:
Nominees: |
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01) |
Patrick J. Balthrop, Sr. |
02) |
G. Walter Loewenbaum II |
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03) |
Kevin M. McNamara |
04) |
Edward A. Ogunro, Ph.D |
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Vote On Proposals
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For |
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Against |
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Abstain |
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2. Proposal to approve the Luminex Corporation Amended and Restated 2006 Equity
Incentive Plan.
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3. Proposal to ratify the appointment of Ernst & Young LLP as the Companys
independent registered public accounting firm for fiscal 2009.
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In their discretion, the proxies are authorized to vote with respect to matters
incident to the conduct of the Annual Meeting,
or on any other matter that may properly
come before the Annual Meeting or any postponement or adjournment thereof.
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For address changes and/or comments, please check this box and
write them on the back where indicated.
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Please indicate if you plan to attend this meeting.
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Yes
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No
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Please sign exactly as your name(s) appear(s) on this proxy. When signing
in a representative capacity, please give title. When shares are held
jointly, each person should sign. |
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Signature [PLEASE SIGN WITHIN
BOX] |
Date |
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Signature (Joint Owners) |
Date |
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