UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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THERMO FISHER SCIENTIFIC INC.

(Name of Registrant as Specified In Its Charter)

 

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

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 81 Wyman Street

 Waltham, MA 02451

 

April 10, 2008

 

Dear Stockholder:

 

You are cordially invited to attend the 2008 Annual Meeting of Stockholders of Thermo Fisher Scientific Inc., which will be held on Tuesday, May 20, 2008, at 2:00 p.m. (Eastern time) at the Grand Hyatt New York, 109 East 42^nd Street at Grand Central Station, New York, New York.

 

The notice of meeting, proxy statement and proxy card enclosed with this letter describe the specific business to be acted upon at the meeting. The Company’s 2007 Annual Report to Stockholders is also enclosed with this letter.

 

It is important that your shares of the Company’s common stock be represented and voted at the meeting regardless of the number of shares you may hold. Whether or not you plan to attend the meeting in person, you can ensure your shares of the Company’s common stock are voted at the meeting by submitting your instructions by telephone, the Internet, or in writing by returning the enclosed proxy card. Please review the instructions in the enclosed proxy statement and proxy card regarding each of these voting options.

 

Thank you for your continued support of the Company.

 

Yours very truly,

 

MARIJN E. DEKKERS

President and Chief Executive Officer

 

 81 Wyman Street

 Waltham, MA 02451

 

NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS

 

To be held on May 20, 2008

 

Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be Held on May 20, 2008.
The Proxy Statement and 2007 Annual Report are available at ww3.ics.adp.com/streetlink/TMO.

 

April 10, 2008

 

To the Holders of the Common Stock of

THERMO FISHER SCIENTIFIC INC.

 

Notice is hereby given that the 2008 Annual Meeting of Stockholders of Thermo Fisher Scientific (“Thermo Fisher” or the “Company”) will be held on Tuesday, May 20, 2008, at 2:00 p.m. (Eastern time) at the Grand Hyatt New York, 109 East 42^nd Street at Grand Central Station, New York, New York. The purpose of the meeting is to consider and take action upon the following matters:

 

 

Stockholders of record at the close of business on March 28, 2008, are the only stockholders entitled to notice of and to vote at the 2008 Annual Meeting of Stockholders.

 

This notice, the proxy statement and the proxy card enclosed herewith are sent to you by order of the Board of Directors of the Company.

 

By Order of the Board of Directors,

 

SETH H. HOOGASIAN

Senior Vice President, General Counsel and Secretary

 

IMPORTANT

 

Whether or not you intend to attend the meeting in person, please ensure that your shares of the Company’s common stock are present and voted at the meeting by submitting your instructions by telephone, the Internet, or in writing by completing, signing, dating and returning the enclosed proxy card to our transfer agent in the enclosed, self-addressed envelope, which requires no postage if mailed in the United States.

 

Directions to the Annual Meeting are available by calling Investor Relations at (781) 622-1111.

 

 81 Wyman Street

 Waltham, MA 02451

 

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

 

May 20, 2008

 

This proxy statement is furnished in connection with the solicitation of proxies by Thermo Fisher Scientific Inc. (“Thermo Fisher” or the “Company”) on behalf of the Board of Directors of the Company (the “Board”) for use at the 2008 Annual Meeting of Stockholders to be held on Tuesday, May 20, 2008, at 2:00 p.m. (Eastern time) at the Grand Hyatt New York, 109 East 42nd Street at Grand Central Station, New York, New York, and any adjournments thereof. The mailing address of the principal executive office of the Company is 81 Wyman Street, Waltham, Massachusetts 02451. This proxy statement and enclosed proxy card are being first furnished to stockholders of the Company on or about April 17, 2008.

 

Purpose of Annual Meeting

 

At the 2008 Annual Meeting of Stockholders, stockholders entitled to vote at the meeting will consider and act upon the matters outlined in the notice of meeting accompanying this proxy statement, including the election of three directors constituting the class of directors to be elected for a three-year term expiring in 2011, approval of the Company’s 2008 Stock Incentive Plan (the “2008 Stock Plan”), approval of the Company’s 2008 Annual Incentive Award Plan (the “2008 Incentive Plan”) and the ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent auditors for 2008.

 

Voting Securities and Record Date

 

Only stockholders of record at the close of business on March 28, 2008, the record date for the meeting, are entitled to vote at the meeting or any adjournments thereof. At the close of business on March 28, 2008, the outstanding voting securities of the Company consisted of 418,208,902 shares of the Company’s common stock, par value $1.00 per share (“Common Stock”). Each share of Common Stock outstanding at the close of business on the record date is entitled to one vote on each matter that is voted.

 

Quorum

 

The presence at the meeting, in person or by proxy, of a majority of the outstanding shares of Common Stock entitled to vote at the meeting will constitute a quorum for the transaction of business at the meeting. Votes of stockholders of record present at the meeting in person or by proxy, abstentions, and “broker non-votes” (as defined below) are counted as present or represented at the meeting for the purpose of determining whether a quorum exists. A “broker non-vote” occurs when a broker or representative does not vote on a particular matter because it either does not have discretionary voting authority on that matter or it does not exercise its discretionary voting authority on that matter.

 

Manner of Voting

 

Stockholders of Record

 

Shares entitled to be voted at the meeting can only be voted if the stockholder of record of such shares is present at the meeting, returns a signed proxy card, or authorizes proxies to vote his or her shares by telephone or over the Internet. Shares represented by valid proxy will be voted in accordance with your instructions. If you choose to vote your shares by telephone or over the Internet, which you may do until 11:59 p.m. Eastern time on Monday, May 19, 2008, you should follow the instructions provided on the proxy card. In voting by telephone or over the Internet, you will be allowed to confirm that your instructions have been properly recorded.

 

A stockholder of record who votes his or her shares by telephone or Internet, or who returns a proxy card, may revoke the proxy at any time before the stockholder’s shares are voted at the meeting by entering

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new votes by telephone or over the Internet by 11:59 p.m. Eastern time on May 19, 2008, by written notice to the Secretary of the Company received prior to the meeting, by executing and returning a later dated proxy card prior to the meeting, or by voting by ballot at the meeting.

 

Participants in the Thermo Fisher Scientific 401(k) Retirement Plan

 

If you hold your shares through the Thermo Fisher Scientific 401(k) Retirement Plan (the “401(k) Plan”), your proxy represents the number of shares in your 401(k) Plan account as of the record date. For those shares in your 401(k) Plan account, your proxy will serve as voting instructions for the trustee of the 401(k) Plan. You may submit your voting instructions by returning a signed and dated proxy card to the Company’s transfer agent in the enclosed, self-addressed envelope for its receipt by 11:59 p.m. Eastern time on Thursday, May 15, 2008, or by telephone or over the Internet by 11:59 p.m. Eastern time on Thursday, May 15, 2008, in accordance with the instructions provided on the proxy card.

 

You may revoke your instructions by entering new instructions by telephone or over the Internet by 11:59 p.m. Eastern time on May 15, 2008, or by executing and returning a later dated proxy card to the Company’s transfer agent for its receipt by 11:59 p.m. Eastern time on May 15, 2008.

 

Beneficial Stockholders

 

If you hold your shares through a broker, bank or other representative (“broker or representative”), you can only vote your shares in the manner prescribed by the broker or representative. Detailed instructions from your broker or representative will generally be included with your proxy material. These instructions may also include information on whether your shares can be voted by telephone or over the Internet or the manner in which you may revoke your votes. If you choose to vote your shares by telephone or over the Internet, you should follow the instructions provided by the broker or representative.

 

Voting of Proxies

 

Shares represented by proxy will be voted in accordance with your specific choices. If you sign and return your proxy card or vote by telephone or over the Internet without indicating specific choices, your shares will be voted FOR the nominees for director, FOR the approval and adoption of the 2008 Stock Plan, FOR the approval and adoption of the 2008 Incentive Plan and FOR the ratification of the selection of independent auditors for 2008. Should any other matter be properly presented at the meeting, the persons named in the proxy card will vote on such matter in accordance with their judgment.

 

If you sign and return your proxy card marked “abstain” on any proposal or choose the same option when voting by telephone or over the Internet, your shares will not be voted affirmatively or negatively on that proposal and will not be counted as votes cast with regard to that proposal.

 

If you hold your shares as a beneficial owner rather than a stockholder of record, your broker or representative will vote the shares that it holds for you in accordance with your instructions (if timely received) or, in the absence of such instructions, your broker or representative may vote on certain matters for which it has discretionary voting authority.

 

If you hold your shares through the 401(k) Plan, the trustee will vote the shares in your 401(k) Plan account in accordance with your instructions (if timely received) or, in the absence of such instructions, the Company will vote your shares FOR the nominees for director, FOR the approval and adoption of the 2008 Stock Plan, FOR the approval and adoption of the 2008 Incentive Plan and FOR the ratification of the selection of independent auditors for 2008.

 

Vote Required for Approval

 

Under the Company’s bylaws, a nominee for director will be required to obtain a majority of the votes cast in person or by proxy at the annual meeting in order to be elected, such that the number of votes cast “for” a director must exceed the number of votes cast “against” that director. Abstentions and broker non-votes will not have an effect on the determination of whether a nominee for director has been elected.

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Under the Company’s bylaws, approval of the proposal to approve and adopt the Company’s 2008 Stock Plan will require the affirmative vote of a majority of the shares present or represented and entitled to vote at the annual meeting and voting affirmatively or negatively on the matter. Abstentions and broker non-votes will not have an effect on the determination of whether stockholder approval of the matter has been obtained. However, under the listing requirements of the New York Stock Exchange (the “NYSE”), the proposal to approve the Company’s 2008 Stock Plan will also require (a) that a majority of the shares entitled to vote at the annual meeting are voted on the matter (with abstentions counting as votes and broker non-votes not counting as votes) and (b) a majority of the votes cast on the matter are voted in favor of the matter (with abstentions counting as votes cast and broker non-votes not counting as votes cast).

 

Under the Company’s bylaws, approval of the proposal to approve and adopt the Company’s 2008 Annual Incentive Award Plan will require the affirmative vote of a majority of the shares present or represented and entitled to vote at the annual meeting and voting affirmatively or negatively on the matter. Abstentions and broker non-votes will not have an effect on the determination of whether stockholder approval of the matter has been obtained.

 

Under the Company’s bylaws, approval of the proposal to ratify the selection of independent auditors for 2008 will require the affirmative vote of a majority of the shares present or represented and entitled to vote at the annual meeting and voting affirmatively or negatively on the matter. Abstentions and broker non-votes will not have an effect on the determination of whether stockholder approval of the matter has been obtained.

 

- PROPOSAL 1 -

 

ELECTION OF DIRECTORS

 

The number of directors constituting the full Board of Directors of the Company (the “Board”) is fixed at nine. The Board is divided into three classes, each consisting of three directors. Each class is elected for a three-year term at successive Annual Meetings of Stockholders. In all cases, directors hold office until their successors have been elected and qualified, or until their earlier resignation, death or removal.

 

The terms for Scott M. Sperling, Bruce L. Koepfgen and Michael E. Porter, expire at the meeting. The Nominating and Corporate Governance Committee of the Board has recommended to the Board, and the Board has nominated, Messrs. Sperling and Koepfgen and Dr. Porter for a new three-year term expiring at the 2011 Annual Meeting of Stockholders. Thermo Electron Corporation and Fisher Scientific International Inc. (“Fisher”) merged on November 9, 2006 (the “Fisher Merger”), creating Thermo Fisher Scientific, or the “Company.” Messrs. Sperling and Koepfgen were directors of Fisher prior to the merger.

 

Nominee and Incumbent Directors

 

Set forth below are the names of the persons nominated as directors and directors whose terms do not expire this year, their ages, their offices in the Company, if any, their principal occupations or employment for the past five years, the length of their tenure as directors and the names of other public companies in which they hold directorships. Information regarding their beneficial ownership of Common Stock is reported under the heading “SECURITY OWNERSHIP.”

 

Nominees for Director Whose Term of Office Will Expire in 2011

 

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Incumbent Directors Whose Term of Office Will Expire in 2010

 

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Incumbent Directors Whose Term of Office Will Expire in 2009

 

 

The Board of Directors recommends a vote FOR the nominees for director. Proxies solicited by the Board of Directors will be voted FOR the nominee unless stockholders specify to the contrary on their proxy.

 

CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

 

The Board has adopted governance principles and guidelines of the Company (“Corporate Governance Guidelines”) to assist the Board in exercising its duties and to best serve the interests of the Company and its stockholders. In addition, the Company has adopted a code of business conduct and ethics (“Code of Business Conduct and Ethics”) that encompasses the requirements of the rules and regulations of the Securities and Exchange Commission (“SEC”) for a “code of ethics” applicable to principal executive officers, principal financial officers, principal accounting officers or controllers, or persons performing similar functions. The Code of Business Conduct and Ethics applies to all of the Company’s officers, directors and employees. The Company intends to satisfy SEC and NYSE disclosure requirements regarding certain amendments to, or waivers of, the Code of Business Conduct and Ethics by posting such information on the Company’s website. The Company’s Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on its website at www.thermofisher.com and a copy of each such document may also be obtained free of charge by writing to the Company care of its Investor Relations Department at the Company’s principal executive office located at 81 Wyman Street, Waltham, MA 02451.

 

Director Nomination Process

 

The Nominating and Corporate Governance Committee considers recommendations for director nominees suggested by its members, other directors, management and other interested parties. It will consider stockholder recommendations for director nominees that are sent to the Nominating and Corporate Governance

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Committee to the attention of the Company’s Secretary at the principal executive office of the Company. In addition, the bylaws of the Company set forth the process for stockholders to nominate directors for election at an annual meeting of stockholders.

 

The process for evaluating prospective nominees for director, including candidates recommended by stockholders, includes meetings from time to time to evaluate biographical information and background material relating to prospective nominees, interviews of selected candidates by members of the Nominating and Corporate Governance Committee and other members of the Board, and application of the Company’s general criteria for director nominees set forth in the Company’s Corporate Governance Guidelines. These criteria include the prospective nominee’s integrity, business acumen, age, experience, commitment, and diligence. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The committee believes that the backgrounds and qualifications of the directors considered as a group should provide a significant breadth of experience, knowledge and abilities to assist the Board in fulfilling its responsibilities. As such, the Nominating and Corporate Governance Committee also considers such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, and with respect to members of the Audit Committee, financial expertise.

 

After completing its evaluation, the Nominating and Corporate Governance Committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Nominating and Corporate Governance Committee.

 

Director Independence

 

The Company’s Corporate Governance Guidelines require a majority of our Board to be “independent” within the meaning of the NYSE listing requirements including, in the judgment of the Board, the requirement that such directors have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The Board has adopted the following standards to assist it in determining whether a director has a material relationship with the Company. Under these standards, a director will not be considered to have a material relationship with the Company if he or she is not:

 

•     A director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues;

 

•     A director who is (or was within the last three years) an employee, or whose immediate family member is (or was within the last three years) an executive officer, of the Company;

 

•     A director who has received, or whose immediate family member has received, during any twelve-month period within the last three years, more than $100,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

 

•     (A) A director who is, or whose immediate family member is, a current partner of a firm that is the Company’s internal or external auditor; (B) a director who is a current employee of a firm that is the Company’s internal or external auditor; (C) a director whose immediate family member is a current employee of a firm that is the Company’s internal or external auditor and participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) a director who was, or whose immediate family member was, within the last three years (but is no longer) a partner or employee of a firm that is the Company’s internal or external auditor and personally worked on the Company’s audit within that time;

 

•     A director who is (or was within the last three years), or whose immediate family member is (or was within the last three years), an executive officer of another company where any of the Company’s current executive officers at the same time serve or served on the other company’s compensation committee;

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•     A director who is (or was within the last three years) an executive officer of another company that is indebted to the Company, or to which the Company is indebted, in an amount that exceeds one percent (1%) of the total consolidated assets of the other company; and

 

•     A director who is a current executive officer of a tax exempt organization that, within the last three years, received discretionary contributions from the Company in an amount that, in any single fiscal year, exceeded the greater of $1 million or 2% of such tax exempt organization’s consolidated gross revenues. (Any automatic matching by the Company of employee charitable contributions will not be included in the amount of the Company’s contributions for this purpose.)

 

Ownership of a significant amount of the Company’s stock, by itself, does not constitute a material relationship. For relationships not covered by these standards, the determination of whether a material relationship exists shall be made by the other members of the Board who are independent (as defined above).

 

The Board has determined that each of Ms. Ullian, Messrs. Bell, Manning, Manzi, Kaufman, Koepfgen and Sperling, and Dr. Porter is “independent” in accordance with the Company’s Corporate Governance Guidelines and Section 303A.02 of the listing standards of the NYSE. Each of Ms. Ullian, Messrs. Manning, Manzi, Kaufman, Koepfgen and Sperling, and Dr. Porter has no relationship with the Company, other than any relationship that is categorically not material under the guidelines shown above and other than compensation for services as a director as disclosed in this proxy statement under “DIRECTOR COMPENSATION.” The independent directors (other than Mr. Bell) have also determined that Mr. Bell’s relationship with Monitor Clipper Partners, a private equity firm that manages two funds in which a Fisher pension plan is an investor, is not material to his independence as a director of the Company (see “Transactions with Related Persons” on page 38).

 

Board of Directors Meetings and Committees

 

The Board met 10 times during 2007. During 2007, each of our directors attended at least 75% of the total number of meetings of the Board and the committees of which such director was a member. The Board has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. The Company encourages, but does not require, the members of its Board to attend the annual meeting of stockholders. Last year, three of our directors attended the 2007 Annual Meeting of Stockholders.

 

Audit Committee

 

The Audit Committee is responsible for assisting the Board in its oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditors. Certain responsibilities of our Audit Committee and its activities during fiscal 2007 are described with more specificity in the Report of the Audit Committee in this proxy statement under the heading “REPORT OF THE AUDIT COMMITTEE.” The charter of the Audit Committee is available on the Company’s website at www.thermofisher.com. A copy of the charter may also be obtained free of charge by writing to the Company care of its Investor Relations Department at the Company’s principal executive office located at 81 Wyman Street, Waltham, MA 02451.

 

The current members of our Audit Committee are Messrs. Manning (Chairman) and Koepfgen and Ms. Ullian. The Board has determined that each of the members of the Audit Committee is “independent” within the meaning of SEC rules and regulations, the listing standards of the NYSE, and the Company’s Corporate Governance Guidelines, and that each are “financially literate” as is required by the listing standards of the NYSE. The Board has also determined that Mr. Manning qualifies as an “audit committee financial expert” within the meaning of SEC rules and regulations, and that he has accounting and related financial management expertise as is required by the listing standards of the NYSE. The Audit Committee met 22 times during 2007.

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Compensation Committee

 

The Compensation Committee is responsible for reviewing and approving compensation matters with respect to the Company’s chief executive officer and its other officers, reviewing and recommending to the Board management succession plans, and administering equity-based plans. Certain responsibilities of our Compensation Committee and its activities during 2007 are described in this proxy statement under the heading “Compensation Discussion and Analysis.” The Compensation Committee also periodically reviews our director compensation, and makes recommendations on this topic to the Board of Directors as it deems appropriate, as described under the heading “DIRECTOR COMPENSATION.”

 

The charter of the Compensation Committee is available on the Company’s website at www.thermofisher.com. A copy of the charter may also be obtained free of charge by writing to the Company care of its Investor Relations Department at the Company’s principal executive office located at 81 Wyman Street, Waltham, MA 02451.

 

The current members of our Compensation Committee are Messrs. Kaufman (Chairman) and Sperling and Ms. Ullian. The Board has determined that each of the members of the Compensation Committee is “independent” within the meaning of the listing standards of the NYSE and the Company’s Corporate Governance Guidelines. The Compensation Committee met five times during 2007.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee is responsible for identifying persons qualified to serve as members of the Board, recommending to the Board persons to be nominated by the Board for election as directors at the annual meeting of stockholders and persons to be elected by the Board to fill any vacancies, and recommending to the Board the directors to be appointed to each of its committees. In addition, the Nominating and Corporate Governance Committee is responsible for developing and recommending to the Board a set of corporate governance guidelines applicable to the Company (as well as reviewing and reassessing the adequacy of such guidelines as it deems appropriate from time to time) and overseeing the annual self-evaluation of the Board. The charter of the Nominating and Corporate Governance Committee is available on the Company’s website at www.thermofisher.com. A copy of the charter may also be obtained free of charge by writing to the Company care of its Investor Relations Department at the Company’s principal executive office located at 81 Wyman Street, Waltham, MA 02451.

 

The current members of our Nominating and Corporate Governance Committee are Dr. Porter (Chairman), and Messrs. Bell and Sperling. The Board has determined that each of the members of the Nominating and Corporate Governance Committee is “independent” within the meaning of the listing standards of the NYSE and the Company’s Corporate Governance Guidelines. The Nominating and Corporate Governance Committee met eight times during 2007.

 

Executive Sessions and Presiding Director

 

In accordance with the listing standards of the NYSE and the Company’s Corporate Governance Guidelines, (a) non-management directors of the Board meet at regularly scheduled executive sessions without management and at such other times as may be requested by a non-management director and (b) independent directors meet at least once a year in an executive session without management and at such other times as may be requested by an independent director. In accordance with the Company’s Corporate Governance Guidelines, Ms. Ullian has been appointed to preside (the “Presiding Director”) at the meetings of the Company’s non-management and independent directors held in executive session without management.

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Communications from Stockholders and Other Interested Parties

 

The Board has established a process for stockholders and other interested parties to send communications to the Board or any individual director or groups of directors, including the Presiding Director and the non-management and independent directors. Stockholders and other interested parties who desire to send communications to the Board or any individual director or groups of directors should write to the Board or such individual director or group of directors care of the Company’s Corporate Secretary, Thermo Fisher Scientific Inc., 81 Wyman Street, Waltham, Massachusetts 02451. The Corporate Secretary will relay all such communications to the Board, or individual director or group of directors, as the case may be.

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

The Compensation Committee oversees our executive compensation program for officers. In this role, the Compensation Committee reviews and approves annually all compensation decisions relating to our named executive officers.

 

Objectives and Philosophy of Our Executive Compensation Program

 

The primary objectives of our executive compensation program are to:

 

 

To achieve these objectives, the Compensation Committee evaluates our compensation program for officers with the goal of setting compensation at levels the Committee believes are competitive with those of other peer companies that compete with us for executive talent. In addition, our executive compensation program ties a substantial portion of each executive’s overall cash compensation to key strategic, financial and operational goals such as revenue growth, margin expansion, and new product introductions. We also provide a portion of our executive compensation in the form of stock options and restricted stock grants (both time-based and performance-based), which we believe helps to retain our executives and aligns their interests with those of our stockholders by allowing them to participate in the longer term success of the Company as reflected in stock price.

 

The Compensation Committee uses market surveys and analyses prepared by outside consulting firms to stay informed of developments in the design of compensation packages generally and to benchmark our officer compensation program against those of companies with whom we compete for executive talent to ensure our compensation program is in line with current marketplace standards. The Compensation Committee generally targets compensation for executives near (i.e., within 10%) the median of the pay levels derived from the compensation consultants’ studies. Variations to this general target may occur as dictated by individual circumstances.

 

Typically during the first calendar quarter of each year, the chief executive officer makes a recommendation to the Compensation Committee with respect to annual salary increases and bonuses, and annual stock option and restricted stock awards, if any, for executive officers other than himself, which is then reviewed and approved by the Compensation Committee. In the case of the chief executive officer, his individual performance evaluation is conducted by the Compensation Committee, which determines his compensation

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changes and awards after receiving input from the independent directors of the Board. The Compensation Committee reviews, with respect to each named executive officer, the current value of prior equity grants, the balances in deferred compensation accounts, and the amount of compensation the executive officer would receive if he left the Company under a variety of circumstances.

 

Components of our Executive Compensation Program

 

The primary elements of our executive compensation program are:

 

 

We do not have any formal or informal policy or target for allocating compensation between cash and non-cash compensation or among the different forms of non-cash compensation. Instead, the Compensation Committee, after reviewing information provided by compensation consultants, determines what it believes in its business judgment to be the appropriate level of each of the various compensation components.

 

In November 2006, the Compensation Committee considered a market study prepared by Mercer and Executive Compensation Advisors, a Korn/Ferry Company (“ECA”), compensation consulting firms, in setting salaries and target annual cash incentive bonuses for 2007. Mercer and ECA developed a peer group of the following publicly traded companies:

 

 

In late 2007, the Committee directly engaged Pearl Meyer & Partners (“PM&P”), a compensation consulting firm, to assist the Committee in its review and evaluation of the compensation for the executive officers. PM&P provides no services to the Company other than to the Compensation Committee, and is therefore entirely independent of the management of the Company. In making decisions on the payout of bonuses for 2007 performance, and salary changes, the setting of target annual cash incentive bonuses, and equity award decisions for 2008, the Committee considered a market study prepared by PM&P, which included data from three peer groups (the core peer group, the broader industry peer group, and the small competitors peer group) of publicly-traded companies as well as industry survey data for other companies that were deemed relevant by PM&P. PM&P did not consult with management in developing its peer groups or in

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providing its analysis to the Compensation Committee. The core peer group represents companies most similar to Thermo Fisher in terms of size and industry. The companies included in the core peer group are:

 

 

The broader industry peer group represents companies that are of similar size as compared to Thermo Fisher and that compete in broader, but related industries. The broader industry peer group consists of:

 

 

The small competitors peer group represents companies that are similar to Thermo Fisher in product or service offerings, but have annual revenues less than one-third that of Thermo Fisher. The small competitors peer group consists of:

 

 

PM&P employed regression analysis techniques in order to examine the relationship between company revenue size and pay, and used that relationship to calculate predicted pay values for a company of Thermo Fisher’s size. For Messrs. Dekkers, Wilver and Hoogasian, PM&P used a blend of size-regressed peer group data and size-regressed industry survey data. For Messrs. Casper and Malus, PM&P used size-regressed peer group data only, because for these operational positions, PM&P deemed the peer group data more relevant than broader industry survey data that would represent a wider range of businesses.

 

Base Salary

 

Base salary is used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our executive officers. Generally, we believe that executive base salaries should be near (i.e., within 10%) the median of the range of salaries for executives in similar positions at comparable companies. Base salaries are generally reviewed annually by our Compensation Committee in February. However, in connection with the closing of the Company’s merger with Fisher Scientific in November 2006, the Committee established base salaries for 2007, taking into consideration the results of the Mercer and ECA study, as well as a variety of other factors, including the level of the individual’s responsibility, the ability to replace the individual, the current base salary of the individual and the increased size and complexity of the Company as a result of the merger. In November 2006, the Committee increased the salaries of Messrs. Wilver, Malus and Hoogasian, and in February 2007, the Committee increased the salary of Mr. Casper as part of our standard annual compensation review. The Committee did not increase the salary of Mr. Dekkers, the Company’s chief executive officer, in November 2006 or February 2007, because the Committee anticipated increasing Mr. Dekkers’ salary in connection with the re-negotiation of Mr. Dekkers’ employment contract with the Company. However, as noted below, Mr. Dekkers’ base salary was subsequently increased retroactive to January 1, 2007.

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In early March 2008, the Compensation Committee increased the salaries of our executive officers for 2008 in accordance with our standard annual compensation review based on the results of the PM&P study conducted in late 2007. The 2008 base salary for each of the named executive officers was set consistent with our philosophy of keeping salaries within 10% of the median derived from the PM&P study. In light of the fact that Mr. Dekkers did not receive a salary increase at the time of the merger for 2007, the Compensation Committee retroactively increased Mr. Dekkers’ salary for 2007 from $1,050,000 to $1,125,000. Mr. Dekkers’ salary in the Summary Compensation Table on page 17 below reflects this retroactive adjustment.

 

Annual Cash Incentive Bonus

 

Annual cash incentive awards for the Company’s executive officers for 2007 were granted under the Company’s 2003 Annual Incentive Award Plan (the “162(m) Plan”), which was approved by the stockholders of the Company at its 2003 Annual Meeting of Stockholders. The 162(m) Plan was adopted to preserve the tax deductibility of the annual bonus that may be earned by executive officers of the Company. The actual amounts paid are determined by applying negative discretion to the amounts calculated under the 162(m) Plan, as described below.

 

Under the 162(m) Plan, in the first quarter of a calendar year the Compensation Committee selects a performance goal for the year. For 2007, the Committee selected the financial measure of earnings before interest, taxes and amortization, excluding the impact of charges for restructuring, discontinued operations, extraordinary items, other unusual or non-recurring items and cumulative effects of accounting changes (“Adjusted Operating Income”). The Committee selected this financial measure, as opposed to an income measure computed under generally accepted accounting principles (GAAP), because this measure is consistent with how management measures and forecasts the Company’s performance, especially when comparing such results to previous periods or forecasts. Each executive officer was awarded a percentage of Adjusted Operating Income for the year, subject to the right of the committee to lower, but not raise, the actual bonuses paid. In March 2008, the Compensation Committee elected to lower the 2007 bonuses payable under the 162(m) Plan to the amounts computed in accordance with the process described below for the Company’s annual incentive program for the year based on the Compensation Committee’s determinations as to the level of achievement of the supplemental performance measures under the Company’s annual incentive program for 2007.

 

Typically, in the first quarter of a calendar year, the Compensation Committee also establishes a target incentive cash award amount under the Company’s annual incentive program for each officer of the Company, including executive officers. This amount, which is a percentage of base salary, is determined by the Compensation Committee based on the salary level of the officer, the position of the officer within the Company and input from the compensation consultant. The amount actually awarded to an officer, which can range from 0 to 200% of target, varies primarily based on performance of the Company as a whole with respect to financial and non-financial measures, but is subject to adjustment based on the Committee’s subjective evaluation of an officers’ contributions to those results. The Committee generally sets the goals such that the target payout (100% of target bonus) represents attractive financial performance within our industry and can be reasonably expected to be achieved; payouts in the range of 125% of target represent performance somewhat better than average within our industry; and payouts above 150% of this target require extraordinary performance.

 

For 2007, the financial measures established by the Compensation Committee under the Company’s annual incentive program were growth in revenue (adjusted for the impact of acquisitions and divestitures and for foreign currency changes) and earnings (adjusted for restructuring charges and certain other items of income or expense) before interest, taxes and amortization as a percentage of revenue. For each of the financial measures, the Company’s actual performance was measured relative to the Company’s internal operating plan for 2007. The weighting of the financial measures for 2007 was as follows: 35% for the adjusted revenue goal and 35% for the adjusted earnings goal. The remaining 30% was based on company-wide, non-financial measures, which included the achievement of merger synergies, the integration of processes and training at the combined company, increased new product introduction, and the continuation of building a diverse workforce. The baseline targets (for 100% payout) and actual results for the financial

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measures were 5.5% and 5.7%, respectively, for the adjusted revenue goal and 16.2% and 16.8%, respectively, for the adjusted earnings goal. The actual results translated to a payout of 107%, 166%, and 137% of target bonus respectively, for the adjusted revenue goal, adjusted earnings goal, and non-financial measures.

 

The process described above resulted in a preliminary overall achievement payout of 137% of target bonus for the named executive officers. The Compensation Committee elected to compensate the executive officers below, above or at, this percentage of each officer’s target bonus, depending on their subjective assessment of the officer’s individual performance. Messrs. Casper and Malus, each of whom hold operational positions with the Company, were compensated at 145% of target, based on the operating performance of the businesses in which they participate. Mr. Dekkers, the Company’s chief executive officer, Mr. Wilver, the Company’s chief financial officer, and Mr. Hoogasian, the Company’s general counsel, were compensated at 137% of target. In light of the fact that Mr. Dekkers did not receive a target bonus increase in November 2006 or February 2007, because the Committee anticipated increasing Mr. Dekkers’ target bonus in connection with the re-negotiation of Mr. Dekkers’ employment contract with the Company, the Committee increased Mr. Dekkers’ target bonus for 2007 from 110% to 125% of base salary. Mr. Dekkers’ 2007 target and actual cash bonus in the table below, and his bonus in the Summary Compensation Table on page 17 below, reflect this increase.

 

The target bonus awards and actual bonus awards for 2007 for the named executive officers were as follows:

 

 

Stock Option and Restricted Stock Awards

 

Our equity award program is the primary vehicle for offering long-term incentives to our executives. We believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, the vesting feature of our equity grants should further our goal of executive retention because this feature provides an incentive to our executives to remain in our employ during the vesting period. In determining the size of equity grants to our executives, our Compensation Committee considers the long-term equity incentive values derived from the Committee’s consultant’s study, the amount of equity previously awarded to the executive, and the vesting of such awards. The Compensation Committee also considers the recommendations of the chief executive officer with respect to awards to our executives other than the chief executive officer, and input from the independent directors of the Board with respect to awards to our chief executive officer. The Committee then decides how much of these values should be delivered by each of the long-term incentive vehicles utilized by the Company, such as stock options or restricted stock awards.

 

We typically make an initial equity award of stock options to new executives when they become executives and to newly promoted executives to reflect their new responsibilities, and annual equity grants in late February as part of our overall compensation program. Our equity awards have typically taken the form of stock options and restricted stock grants. Because restricted shares have a built-in value at the time the grants are made, we generally grant significantly fewer shares of restricted stock than the number of stock options we would grant for a similar purpose. All grants of options and restricted stock to our officers are approved by the Compensation Committee. The timing of the Compensation Committee meeting in late February is such that the meeting occurs after we have publicly released earnings for the just-completed year. We intend that the

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annualized value of equity awards to our executives will approximate the median levels for companies in our compensation peer group.

 

Typically, the stock options we grant to our named executive officers vest over the first three to five years of the seven-year option term, and restricted stock awards vest equally over two to three years. Vesting normally ceases upon termination of employment, except for acceleration upon certain qualifying retirements, and in the case of certain terminations for Messrs. Dekkers and Casper (see “Potential Payments upon Termination or Change in Control” on page 24). Stock option exercise rights normally cease for officers other than Mr. Dekkers shortly after termination, except for in the cases of death, disability and retirement. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents. Prior to the vesting of restricted stock, the holder has no right to transfer the shares but has voting rights and the right to receive dividends with respect to the shares.

 

Our practice is to set the exercise price of stock options to officers to equal the closing price of our common stock on the New York Stock Exchange on the date of grant. Newly hired executives other than officers normally are granted stock options by the Option Committee, which consists of Marijn Dekkers. These grants are made once per quarter. Officers may receive stock option grants only through the Compensation Committee.

 

The closing of the Fisher Merger in November 2006 triggered a change in control under the Company’s equity plans. As a result, all outstanding restricted stock awards for all executive officers accelerated in connection with the closing, and substantially all unvested stock options accelerated in connection with the closing, except for Mr. Dekkers’, for which he waived acceleration.

 

In order to enhance our goal of executive retention after the Fisher Merger, the Compensation Committee approved new grants of unvested equity. The Committee granted both stock options and restricted stock to executives in November 2006. The stock option grants vest equally over five years, and the time-based restricted stock grants vest over three years. The Committee also granted a performance-based restricted stock award enhancement to certain executives, including the named executive officers, equal to the number of time-based restricted shares granted. The terms of the performance-based restricted stock award are described in detail in the “Outstanding Equity Awards at Fiscal 2007 Year-End” table on page 20. The higher than normal number of stock options and restricted shares granted by the Committee in November 2006 reflected that the options will vest over five years, rather than the Company’s usual three-year vesting period, and the risk associated with the performance-based shares, as well as the Committee’s intention to forego restricted stock grants until February 2008 and stock option grants until February 2009. In light of the November 2006 grants, no equity grants were awarded in 2007 to the executives, including the named executive officers, and no stock options were awarded in 2008, except to Mr. Dekkers as discussed below.

 

On March 5, 2008, in connection with the normal compensation cycle, the Committee granted time-based and performance-based restricted stock to Messrs. Casper, Wilver, Malus and Hoogasian. The amount of time-based restricted stock equated to 30% of the median long-term value to be delivered to the executives through equity, as derived from the PM&P study. The target number of shares of performance-based restricted stock achievable was the same as the number of shares of time-based restricted stock awarded, and the executives will have the ability to earn up to 160% of the target number of shares based on the Company’s achievement of the maximum performance metric. These two grants combined approximated 60% of the PM&P median long-term incentive value for these executives, in consideration of the larger than normal equity grant awarded in November 2006.

 

Also on March 5, 2008, the Committee granted stock options to Mr. Dekkers, in contemplation of the impending execution of his employment agreement, which was signed on April 7, 2008. The size of the option award was intended to approximate two times the PM&P median, as the Committee intends to forego an option grant to Mr. Dekkers in 2009, and because these options will vest over five years with no vesting until 24 months from the date of grant.

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Stock Ownership Policy

 

The Compensation Committee has established a stock holding policy that the chief executive officer hold shares of Common Stock equal in value to at least four times his annual base salary and that each other executive officer hold shares of Common Stock equal in value to at least two times his or her annual base salary. The current chief executive officer and other current executive officers have a period of five years from February 25, 2005, to achieve this ownership level. New executive officers would have a period of five years from the date of initial appointment as an executive officer to achieve this ownership level. For purposes of this policy, shares of time-based restricted Common Stock are counted towards the target. All of our named executive officers are currently in compliance with this policy.

 

Benefits and Other Compensation

 

We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance and a 401(k) plan. Executives are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. The 401(k) plan is a tax-qualified retirement savings plan pursuant to which all U.S. based employees, including officers, are able to contribute a percentage of their annual salary up to the limit prescribed by the Internal Revenue Service to the 401(k) plan on a before-tax basis. The Company matches 100% of the first 6% of pay that is contributed to the plan. All contributions to the 401(k) plan as well as any matching contributions are fully-vested upon contribution.

 

The named executive officers, in addition to certain other U.S.-based eligible executives, are entitled to participate in the Deferred Compensation Plan. Pursuant to the Deferred Compensation Plan, an eligible employee can defer receipt of his or her annual base salary (up to 90%) and/or bonus (up to 100%) until he or she ceases to serve as an employee of the Company or until a future date while the participant continues to be an employee of the Company. The Deferred Compensation Plan is discussed in further detail under the heading “Nonqualified Deferred Compensation For 2007” on page 23. Amounts deferred under this plan can be invested in an array of mutual funds and vehicles administered by Clark Consulting. The Company does not guarantee any above-market interest rates or rates of return on these deferred amounts.

 

The Company provides officers with perquisites and other personal benefits that the Company and the Compensation Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. Each named executive officer receives an allowance for supplemental medical expenses, long-term disability insurance, supplemental life insurance, and a car allowance. Additionally, the Company provides a $3 million term life insurance policy to each of Marijn Dekkers and Marc Casper. Attributed costs of the personal benefits described above for the named executive officers for 2007 are described in the “Summary Compensation Table” on page 17.

 

Severance and Change in Control Benefits

 

Pursuant to our equity plans and agreements we have entered into with our executives, in the event of the termination of their employment under certain circumstances or a change in control, they are entitled to specified benefits. We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the caption “Potential Payments Upon Termination or Change in Control” on page 24. We believe providing these benefits helps us compete for executive talent and that our severance and change in control benefits are generally in line with severance packages offered to comparable executives at other companies.

 

Our practice with respect to acceleration of vesting of equity awards in the case of change in control benefits was, until the Fisher Merger, to structure acceleration as “single trigger”. In other words, the change in control itself triggered acceleration. After the closing of the Fisher Merger, the Compensation Committee elected to change to a “double-trigger” (i.e., the change in control does not itself trigger acceleration; rather, acceleration occurs only if the employment of the executive is terminated during a specified period after the change in control) for all named executive officers except Marijn Dekkers, whose 2002 employment agreement mandated a single trigger. The Committee elected to make this change because it believes that a change in control event, in and of itself, should not result in equity acceleration unless the executive’s position is

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adversely affected. This change applied to the November 2006 grants and grants made thereafter. As part of an amended and restated employment contract signed in April 2008, Mr. Dekkers agreed that his stock option grants would not automatically accelerate upon a change in control.

 

Tax and Accounting Considerations

 

Deductibility of Executive Compensation

 

The Compensation Committee considers the potential effect of Section 162(m) of the Internal Revenue Code of 1986 as amended (the “Internal Revenue Code”), in designing its compensation program, but reserves the right to use its independent judgment to approve nondeductible compensation, while taking into account the financial effects such action may have on the Company. Section 162(m) limits the tax deduction available to public companies for annual compensation that is paid to the Company’s named executive officers in excess of $1,000,000, unless the compensation qualifies as “performance-based” or is otherwise exempt from Section 162(m). Stock options, performance-based restricted stock awards and annual incentive cash bonuses for the executive officers are intended to qualify for the deduction. However, the portion of Mr. Dekkers’ base salary in excess of $1,000,000 as well as time-based restricted stock does not qualify as performance-based compensation, and, as a result, approximately $947,000 of his compensation will not be deductible for 2007.

 

Nonqualified Deferred Compensation

 

On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law, adding Section 409A to the Internal Revenue Code. Section 409A changes the tax rules applicable to nonqualified deferred compensation arrangements. The Company believes it is operating in good faith compliance with Section 409A and applicable guidance issued thereunder. A more detailed discussion of the Company’s nonqualified deferred compensation arrangements is provided on page 23 under the heading “Nonqualified Deferred Compensation For 2007.”

 

Accounting Considerations

 

Accounting considerations also play an important role in the design of our executive compensation programs and policies. SFAS 123R requires us to expense the cost of stock-based compensation awards. We consider the relative impact in terms of accounting cost in addition to other factors such as stockholder dilution, retentive impact, and motivational impact when selecting long-term equity incentive instruments.

 

Compensation Committee Report

 

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

 

THE COMPENSATION COMMITTEE

 

Stephen P. Kaufman (Chairman)

Scott M. Sperling

Elaine S. Ullian

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Summary Compensation Table

 

The following table summarizes compensation for services to the Company earned during the last fiscal year by the Company’s chief executive officer, chief financial officer, and the three other most highly compensated executive officers of the Company during 2007. The executive officers listed below are collectively referred to in this proxy statement as the “named executive officers.”

 

 

(1)     Reflects salary for the year, though a portion of such salary may have been paid early in the subsequent year.

 

(2)     Reflects bonus earned for the year but paid early in the subsequent year.

 

(3)     This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2007 fiscal year for restricted stock awards granted to each of the named executive officers, in accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For information on the valuation assumptions with respect to these awards, refer to note 5 of the Thermo Fisher financial statements in the Form 10-K for the year ended December 31, 2007, as filed with the SEC. The amounts shown in this column reflect the Company’s accounting expense for these awards, and do not correspond to the actual value that will be recognized by the named executives. As a result of the Fisher Merger, on November 9, 2006, the vesting of all of the then-outstanding restricted stock awards held by the named executive officers and other employees accelerated.

 

(4)     This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2007 fiscal year for stock options granted to each of the named executives, in accordance with SFAS 123R. No stock options were granted to the named executive officers in 2007. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For information on the valuation assumptions with respect to these grants, refer to note 5 of the Thermo Fisher financial statements in the Form 10-K for the year ended December 31, 2007, as filed with the SEC. The amounts shown in this column reflect the Company’s accounting expense for these awards, and do not correspond to the actual value that will be recognized by the named executives. As a result of the Fisher Merger, on November 9, 2006, the vesting of substantially all of the then-outstanding stock options held by the named executive officers (except Mr. Dekkers) and other employees accelerated. Mr. Dekkers waived the acceleration of the vesting of his stock options.

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(5)     For Messrs. Dekkers, Casper and Hoogasian, the amounts presented in this column include the entire amount of earnings (if any) for the year under investment alternatives on deferred compensation balances. For Mr. Malus, the amount presented in this column represents the actuarial increase in the present value of his benefits under the Fisher Retirement Plan during the year.

 

(6)     Under SEC rules and regulations, if the total value of all perquisites and personal benefits is $10,000 or more for any named executive officer, then each perquisite or personal benefit, regardless of its amount, must be identified by type. If perquisites and personal benefits are required to be reported for a named executive officer, then each perquisite or personal benefit that exceeds the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for that officer must be quantified and disclosed in a footnote. The amounts presented in this column include (a) matching contributions made on behalf of the named executive officers by the Company pursuant to the Company’s 401(k) Plan, (b) a car allowance, (c) an allowance for medical related expenses, (d) premiums paid by the Company with respect to long-term disability insurance for the benefit of the named executive officers, (e) with respect to Messrs. Dekkers and Casper, premiums paid by the Company for a term life insurance policy for the benefit of Messrs. Dekkers and Casper, respectively, (f) premiums paid by the Company with respect to supplemental group term life insurance, and (g) access to emergency medical service through Massachusetts General Hospital’s global hospital network. For 2007, the dollar value of each such benefit was (1) $11,250 each for Messrs. Dekkers, Wilver, Casper and Hoogasian and $9,000 for Mr. Malus for matching 401(k) contributions, (2) $12,500 each for Messrs. Dekkers, Wilver, Casper and Hoogasian for the car allowance, (3) $5,000 each for Messrs. Dekkers, Wilver, Casper and Hoogasian for the medical expense allowance, (4) $3,182, $3,010, $2,244, and $4,790 for Messrs. Dekkers, Wilver, Casper, and Hoogasian, respectively, for long-term disability insurance premiums, and (5) $3,260 and $11,875 for a term life insurance policy for Messrs. Dekkers and Casper, respectively.

 

(7)     Includes $1,685,283 for the acceleration of restricted stock awards as a result of the Fisher Merger.

 

(8)     Includes $1,984,818 for the acceleration of stock option awards as a result of the Fisher Merger.

 

(9)     Includes $2,864,136 for the acceleration of stock option awards as a result of the Fisher Merger.

 

(10)     Mr. Malus became an executive officer of the Company on November 9, 2006, but was not a named executive officer for the year ended December 31, 2006.

 

(11)     Includes $1,462,345 for the acceleration of stock option awards as a result of the Fisher Merger.

 

Grants of Plan-Based Awards For 2007

 

 

(1)     Represents a time-based restricted stock award which vests in equal annual installments over the three-year period commencing on the date of grant (i.e., the first 1/3 of a restricted stock grant would vest on the first anniversary of the date of grant) so long as the executive officer is employed by the Company on each such date (subject to certain exceptions). The award was granted under the Company’s 2005 Stock Incentive Plan.

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Employment Agreement

 

Employment Agreement with Mr. Dekkers

 

The amended and restated employment agreement with Mr. Dekkers, which was executed on April 7, 2008 and pursuant to which he serves as president and chief executive officer of the Company (the “Employment Agreement”), is for a term ending December 31, 2017. The Employment Agreement currently provides for an annual base salary of $1,165,000 and a target annual incentive bonus of 125% of base salary. The actual amount paid as a bonus in any given year is a multiple of zero to two times the target amount.

 

In contemplation of the execution of his Employment Agreement, the Compensation Committee granted Mr. Dekkers options to purchase 982,000 shares of common stock of the Company in March 2008. Pursuant to the Employment Agreement, future equity grants awarded to Mr. Dekkers will be determined by the Compensation Committee. Equity awards granted to Mr. Dekkers prior to January 1, 2008 that have not yet vested or remain outstanding are reflected in various tables of this proxy statement.

 

If Mr. Dekkers’ employment is terminated (i) by the Company without “cause” or by Mr. Dekkers with “good reason,” he will be entitled to: (A) an amount equal to the sum of: (1) three times his then current base salary, (2) three times his target bonus, and (3) a pro-rata bonus for the year in which the termination date occurs; (B) medical and dental insurance benefits for up to three years after the termination date; and (C) outplacement services up to $50,000; (ii) due to his disability, he will be entitled to: (A) disability benefits in accordance with the long-term disability (“LTD”) program then in effect for senior executives of the Company; (B) his then current base salary through the end of the LTD elimination period; (C) a pro-rata bonus for the year in which the termination date occurs; and (D) medical and dental insurance benefits until the later of December 31, 2017 or 24 months after the termination date; and (iii) due to his death, his estate or his beneficiaries will be entitled to (A) payment of his base salary though the end of the month during which the termination date occurs; and (B) a pro-rata bonus for the year in which the termination date occurs. In the event Mr. Dekkers’ employment is terminated for “cause” or by Mr. Dekkers without “good reason,” he will receive his base salary through the date of termination.

 

In addition, if Mr. Dekkers’ employment is terminated due to his death or disability, by the Company without “cause,” or by Mr. Dekkers with “good reason,” (i) all stock options will become fully vested and will remain exercisable until three years from the termination date, except for options granted prior to November 21, 2002, which will remain exercisable for two years from the termination date (but, in each case, in no event beyond the expiration date of the options); and (ii) the transfer restrictions on all shares of time-based restricted Common Stock (i.e., those that do not include performance-based vesting) granted to him will lapse. If Mr. Dekkers’ employment is terminated by the Company for “cause,” (A) no further vesting of stock options shall occur and he shall have 10 days (except for the options granted to Mr. Dekkers before 2005, which he will have 90 days to exercise) to exercise all vested and outstanding stock options (but in no event beyond the expiration date of the options); and (B) all shares of restricted Common Stock granted to him as to which transfer restrictions have not lapsed shall be forfeited. A termination of employment by Mr. Dekkers’ without “good reason” shall have the same consequences as a termination by the Company for “cause.”

 

In the event of a change in control of the Company, shares of restricted stock granted to Mr. Dekkers prior to March 1, 2008 will vest and no longer be subject to restriction on transfer. In the event his employment is terminated after a change in control, he will be entitled to receive benefits under either the Employment Agreement or the executive retention agreement described below under the heading “Potential Payments Upon Termination or Change in Control,” but not both.

 

The Employment Agreement includes a noncompetition and nonsolicitation provision providing that during the term of Mr. Dekkers’ employment with the Company, and for a period of two (2) years thereafter, Mr. Dekkers will not compete with the Company nor will he solicit or hire employees of the Company or solicit customers of the Company.

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Outstanding Equity Awards at 2007 Fiscal Year-End

 

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* Reflects the closing price of the Company’s Common Stock on the New York Stock Exchange on December 31, 2007.

 

(1)     Unexercisable stock options and unvested shares of restricted stock vest under certain circumstances described under the headings “Employment Agreement” and “Potential Payments Upon Termination or Change in Control.” Unexercisable stock options and unvested shares of restricted stock also vest upon certain other events such as death, disability or, in the case of all officers other than Mr. Dekkers, qualifying retirement.

 

(2)     Represents the balance of a stock option granted on February 25, 2005, which vests on February 25, 2008, so long as the executive officer is employed by the Company on such date (subject to certain exceptions).

 

(3)     Represents the balance of a stock option granted on February 27, 2006, which vests in equal annual installments on February 27, 2008 and 2009, so long as the executive officer is employed by the Company on each such date (subject to certain exceptions).

 

(4)     Represents the balance of a stock option granted on November 9, 2006, which vests in equal annual installments on November 9, 2008, 2009, 2010 and 2011, so long as the executive officer is employed by the Company on each such date (subject to certain exceptions).

 

(5)     Represents the balance of a time-based restricted stock award made on November 9, 2006, which vests in equal annual installments on November 9, 2008 and 2009, so long as the executive officer is employed by the Company on each such date (subject to certain exceptions).

 

(6)     Represents a time-based restricted stock award, which vests in equal annual installments over the three-year period commencing on the date of grant (i.e., the first 1/3 of the restricted stock grant would vest on the first anniversary of the date of grant) so long as the executive officer is employed by the Company on each such date (subject to certain exceptions), with the first vesting date of January 7, 2008.

 

(7)     Represents a performance-based restricted stock award. In connection with awards of performance-based restricted stock, the Compensation Committee adopted as performance goals the measures (i) organic revenue, (ii) adjusted earnings per share and (iii) stock price. The vesting of the performance-based restricted stock awards is as follows:

 

•     Twenty-five percent (25%) of the restricted shares shall vest on the day the Compensation Committee certifies that (i) the performance goals related to the Company’s organic revenues for the period 2007 and 2008 have been achieved and (ii) the performance goals related to the Company’s stock price for any 20 consecutive trading days ending during the period January 1, 2009 through November 9, 2010 have been achieved (such date of certification being referred to as the “First Revenue Vesting Date”), and another

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twenty-five percent (25%) of the restricted shares shall vest on the first anniversary of the First Revenue Vesting Date, assuming continued employment, subject to certain exceptions, and

 

•     Twenty-five percent (25%) of the restricted shares shall vest on the day the Compensation Committee certifies that (i) the performance goals related to the Company’s adjusted earnings per share for the period 2007 and 2008 have been achieved and (ii) the performance goals related to the Company’s stock price for any 20 consecutive trading days ending during the period January 1, 2009 through November 9, 2010 have been achieved (such date of certification being referred to as the “First EPS Vesting Date”), and another twenty-five percent (25%) of the restricted shares shall vest on the first anniversary of the First EPS Vesting Date, assuming continued employment, subject to certain exceptions. Adjusted earnings per share excludes restructuring and other costs/income and amortization of acquisition-related intangible assets, certain other gains and losses, tax provisions/benefits related to the previous items, benefits from tax carryforwards, the impact of significant tax audits or events and discontinued operations.

 

(8)     Represents the balance of a restricted stock unit award made on January 13, 2006, which vests in equal annual installments on January 13, 2008 and 2009, so long as the executive officer is employed by the Company on each such date (subject to certain exceptions).

 

Option Exercises and Stock Vested During 2007

 

The following table reports information regarding stock option exercises and the vesting of stock awards during fiscal year 2007 by the Company’s named executive officers. No stock appreciation rights were exercised or were outstanding during fiscal year 2007.

 

 

(1)     The amounts shown in this column represent the difference between the option exercise price and the market price on the date of exercise.

 

(2)     The amounts shown in this column represent the number of shares vesting multiplied by the market price on the date of vesting.

 

Pension Benefits

 

Prior to the Fisher Merger, Fisher maintained the Fisher Retirement Plan (the “Retirement Plan”), a broad-based, U.S. tax-qualified “cash balance” pension plan. Each month prior to January 1, 2006, Fisher credited each participating employee with an amount equal to 3.5% of monthly compensation, which included base salary plus certain annual bonuses and other types of compensation.

 

The Retirement Plan credits participants monthly with interest on their cash balances. The interest credit is equal to the balance of the participant’s account as of the close of the prior calendar month multiplied by the applicable interest rate. The Retirement Plan sets the interest rate each year based on the average of the interest rates for the thirty-year U.S. Treasury Note over the 12-month period ending during November of the preceding plan year. For 2007, the interest rate was 4.75%.

 

The Retirement Plan was amended, effective December 31, 2005, to discontinue future benefit accruals (other than crediting interest to outstanding account balances) as of such date. Accordingly, effective January 1,

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2006, Fisher no longer credited each participating employee with an amount equal to 3.5% of the employee’s monthly compensation. However, participants continue to earn interest on their previously accrued benefit (account balance). Generally, all participants who were employed as of January 1, 2006 became fully vested in their accrued benefits under the Retirement Plan as of such date. Vested participants can generally elect to receive their benefits under the Retirement Plan after separation from service in either a lump sum or an annuity.

 

The table below shows the present value of accumulated benefits payable to each of the named executive officers under the Retirement Plan. As the Retirement Plan was a pension plan maintained by Fisher prior to the Fisher Merger, and was frozen prior to the merger, only Mr. Malus (a former employee of Fisher) participates in the Retirement Plan.

 

 

(1)     Represents the actuarial present value of accumulated benefit as of December 31, 2007 under the Retirement Plan, based on assumptions of a 5.75% discount rate, a cash balance interest crediting rate of 4.75%, and a retirement age of 65.

 

Nonqualified Deferred Compensation For 2007