<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
IDEXX Laboratories, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
1
<PAGE> 2
IDEXX LABORATORIES, INC.
One IDEXX Drive
Westbrook, ME 04092
April 16, 1999
To all IDEXX stockholders:
We invite you to attend our Annual Stockholders' Meeting on Wednesday, May
19, 1999 at 9:00 a.m. The meeting will be held at the Portland Marriott, 200
Sable Oaks Drive, South Portland, Maine.
The attached notice and proxy statement describe the business to be
conducted at the meeting, including the election of three directors. Nominees
for three-year terms on our Board are John R. Hesse, Kenneth Paigen, Ph.D., and
Jeffrey J. Langan. We are also seeking stockholder approval of an amendment to
the 1998 Stock Incentive Plan and of the 1999 Director Stock Plan, which would
replace the 1997 Director Option Plan.
Our management team and Board of Directors appreciate and encourage
stockholder participation at the Annual Meeting. Whether or not you plan to
attend the meeting, it is important that your shares be represented. Please take
a moment now to sign, date and return your proxy in the envelope provided even
if you plan to attend the meeting.
Sincerely,
David E. Shaw
Executive Chairman
<PAGE> 3
IDEXX LABORATORIES, INC.
One IDEXX Drive
Westbrook, Maine 04092
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MAY 19, 1999
The Annual Meeting of Stockholders of IDEXX Laboratories, Inc. (the
"Company") will be held at the Portland Marriott, 200 Sable Oaks Drive, South
Portland, Maine, on Wednesday, May 19, 1999 at 9:00 a.m., local time, to
consider and act upon the following matters:
1. To elect three Class II Directors for a three-year term;
2. To approve an amendment to the Company's 1998 Stock Incentive Plan
increasing from 1,800,000 to 2,500,000 the number of shares of the
Company's Common Stock authorized for issuance under the plan;
3. To approve the Company's 1999 Director Stock Plan covering 80,000 shares
of the Company's Common Stock, as described in the Proxy Statement;
4. To ratify the selection by the Board of Directors of Arthur Andersen LLP
as the Company's independent public accountants for the current fiscal
year; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 23, 1999 will be
entitled to notice of and to vote at the meeting or any adjournment thereof. The
stock transfer books of the Company will remain open.
By Order of the Board of Directors,
Richard B. Thorp, Secretary
Westbrook, Maine
April 16, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES.
<PAGE> 4
IDEXX LABORATORIES, INC.
One IDEXX Drive
Westbrook, Maine 04092
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of IDEXX Laboratories, Inc. (the "Company")
for use at the Annual Meeting of Stockholders to be held on May 19, 1999 and at
any adjournment of that meeting (the "Annual Meeting"). All proxies will be
voted in accordance with the stockholders' instructions and, if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at any
time before its exercise by delivery of a written revocation or a subsequently
dated proxy to the Secretary of the Company or by voting in person at the Annual
Meeting.
At the close of business on March 23, 1999, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 39,065,684 shares of common
stock, $.10 par value per share, of the Company (the "Common Stock").
Stockholders are entitled to one vote per share.
The Company's Annual Report for 1998 was mailed to stockholders, along with
these proxy materials, on or about April 16, 1999.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Annual Meeting shall constitute a quorum
for the transaction of business at the Annual Meeting. Shares of Common Stock
present in person or represented by proxy (including shares which abstain or do
not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum exists at
the Annual Meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the election
of Directors. The affirmative vote of the holders of a majority of the shares of
Common Stock voting on the matter is required to (i) approve the amendment to
the Company's 1998 Stock Incentive Plan, (ii) approve the Company's 1999
Director Stock Plan, and (iii) ratify the selection of Arthur Andersen LLP as
the Company's independent auditors for the current year. Shares which abstain
from voting as to a particular matter, and shares held in "street name" by
brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter, will not
be counted as votes in favor of such matter, and also will not be counted as
votes cast or shares voting on such matter. Accordingly, abstentions and "broker
non-votes" will have no effect on the voting on the matters being presented for
stockholder action at the Annual Meeting.
<PAGE> 5
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of March 31, 1999,
with respect to the beneficial ownership of the Common Stock by (i) each person
known by the Company to beneficially own more than five percent of the
outstanding shares of Common Stock, (ii) each Director of the Company, (iii)
each executive officer of the Company named in the Summary Compensation Table
set forth under the caption "Executive Compensation" below and (iv) all current
Directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
---------------- ---------------- --------------
<S> <C> <C>
Putnam Investments, Inc.(3)........................... 3,263,870 8.35
One Post Office Square
Boston, Massachusetts 02109
Massachusetts Financial Services Company(4)........... 2,788,770 7.14
500 Boylston Street
Boston, Massachusetts 02116-3741
Mary L. Good, Ph.D.(5)................................ 9,296 *
John R. Hesse(6)...................................... 50,916 *
E. Robert Kinney(7)................................... 137,168 *
Jeffrey J. Langan(8).................................. 50,381 *
James L. Moody, Jr.(9)................................ 101,004 *
Kenneth Paigen, Ph.D.(10)............................. 43,704 *
William F. Pounds(11)................................. 97,088 *
David E. Shaw(12)..................................... 1,261,396 3.14
Erwin F. Workman, Jr., Ph.D.(13)...................... 515,025 1.30
Ralph K. Carlton(14).................................. 52,000 *
Louis W. Pollock(15).................................. 94,276 *
All current Directors and executive officers as a
group (14 persons)(16).............................. 2,431,432 5.93
</TABLE>
- ---------------
* Less than 1%.
(1) The inclusion herein of any shares of Common Stock deemed beneficially
owned does not constitute an admission of beneficial ownership of those
shares. Unless otherwise indicated, each person listed above has sole
voting and investment power with respect to the shares listed. Any
reference below to stock options held by the person or entity in question
refers to stock options which are currently exercisable or exercisable
within 60 days after March 31, 1999.
(2) Number of shares deemed outstanding includes 39,069,099 shares outstanding
as of March 31, 1999, plus any shares subject to options held by the person
or entity in question that are currently exercisable or exercisable within
60 days after March 31, 1999.
(3) Based upon information derived from a Schedule 13G filed by Putnam
Investments, Inc. ("PI") pursuant to Section 13 of the Securities Exchange
Act of 1934 (the "Exchange Act") and the rules promulgated thereunder
reporting its beneficial ownership of shares as of December 31, 1998.
According to the Schedule 13G, PI has the shared power to vote 177,710
shares and shared power to dispose of 3,263,870 shares.
2
<PAGE> 6
(4) Based upon information derived from a Schedule 13G filed by Massachusetts
Financial Services Company ("MFSC") pursuant to Section 13 of the Exchange
Act and the rules promulgated thereunder reporting its beneficial ownership
of shares as of December 31, 1998.
(5) Consists of options to purchase 9,296 shares of Common Stock.
(6) Includes options to purchase 23,000 shares of Common Stock.
(7) Includes options to purchase 33,168 shares of Common Stock. Also includes
4,000 shares of Common Stock held by Mr. Kinney's wife, as to which shares
Mr. Kinney disclaims beneficial ownership.
(8) Includes options to purchase 50,000 shares of Common Stock.
(9) Includes options to purchase 39,668 shares of Common Stock.
(10) Includes of options to purchase 43,504 shares of Common Stock.
(11) Includes options to purchase 26,333 shares of Common Stock.
(12) Includes options to purchase 1,095,600 shares of Common Stock.
(13) Includes options to purchase 420,800 shares of Common Stock. Also includes
595 shares of Common Stock held by Dr. Workman's son, as to which shares
Dr. Workman disclaims beneficial ownership.
(14) Consists of options to purchase 52,000 shares of Common Stock.
(15) Includes options to purchase 89,770 shares of Common Stock. Also includes
174 shares of Common Stock held in an individual retirement account for Mr.
Pollock's wife, as to which shares Mr. Pollock disclaims beneficial
ownership.
(16) Includes options to purchase 1,901,139 shares of Common Stock.
3
<PAGE> 7
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the Board
of Directors is classified into three classes (designated Class I Directors,
Class II Directors and Class III Directors), with members of each class holding
office for staggered three-year terms. There are currently three Class I
Directors, whose terms expire at the 2000 Annual Meeting of Stockholders, three
Class II Directors, whose terms expire at the 1999 Annual Meeting of
Stockholders, and three Class III Directors, whose terms expire at the 2001
Annual Meeting of Stockholders (in all cases subject to the election and
qualification of their successors and to their earlier death, resignation or
removal).
The persons named in the enclosed proxy will vote to elect John R. Hesse,
Kenneth Paigen, Ph.D., and Jeffrey J. Langan as Class II Directors, unless
authority to vote for the election of all or any of the nominees is withheld by
marking the proxy to that effect. Each of the nominees is currently a Class II
Director of the Company. Each nominee has indicated his willingness to serve, if
elected, but if any should be unable or unwilling to serve, proxies may be voted
for a substitute nominee designated by the Board of Directors.
There are no family relationships among the executive officers or Directors
of the Company.
NOMINEES
Set forth below for each Director of the Company (including the three
nominees for Class II Director) is the following information: name and age,
positions with the Company, principal occupation and business experience during
the past five years, directorships of other publicly-held companies, and the
year of commencement of such Director's term as a Director of the Company:
NOMINEES FOR CLASS II DIRECTORS
JOHN R. HESSE, age 65, has been a Director of the Company since 1984. Mr.
Hesse has been President of Private Equity Managers, Inc. since 1980 and
Chairman of the Board of Directors and President of International Garden
Products, Inc. since January 1996.
KENNETH PAIGEN, PH.D., age 71, has been a Director of the Company since
1992. Dr. Paigen has been Director of The Jackson Laboratory, a nonprofit
genetics research institute, since 1989. From 1982 until 1989, Dr. Paigen was a
Professor at the University of California-Berkeley.
JEFFREY J. LANGAN, age 54, has been a Director and President of the Company
since November 1997 and Chief Executive Officer of the Company since February
1999. Mr. Langan served as Chief Operating Officer from November 1997 until
February 1999. From April 1996 until November 1997 Mr. Langan was President and
Chief Executive Officer of Thermedics Detection, Inc. Prior to joining
Thermedics Detection, Mr. Langan was employed by Hewlett Packard Company from
1973 to 1996, where he held several General Manager positions, including General
Manager of the Healthcare Information Management Division and General Manager of
the Clinical Systems Business Unit.
CLASS I DIRECTORS
(TERMS EXPIRE AT 2000 ANNUAL MEETING)
DAVID E. SHAW, age 47, has been Executive Chairman of the Board of
Directors of the Company since February 1999. Mr. Shaw served as Chairman of the
Board of Directors and Chief Executive Officer of the Company from its
incorporation in 1983 until February 1999. Mr. Shaw also served as President of
the Company from 1983 until October 1993.
4
<PAGE> 8
WILLIAM F. POUNDS, age 71, has been a Director of the Company since 1990.
Dr. Pounds has been a Professor at the Sloan School of Management, Massachusetts
Institute of Technology, since 1961 and was President of Rockefeller Financial
Services from September 1981 until May 1991. Dr. Pounds is a director of Putnam
Mutual Funds and The Sun Company, Inc.
MARY L. GOOD, PH.D., age 67, has been a Director of the Company since
December 1997. Dr. Good has been a managing member of Venture Capital Investors,
LLC since July 1997. Dr. Good was the Under Secretary for Technology for the
Technology Administration in the United States Department of Commerce from
August 1993 until June 1997, and was Senior Vice President - Technology at
AlliedSignal Inc. from 1988 until August 1993. Dr. Good is a director of Biogen,
Inc. and Whatman PLC (an English company).
CLASS III DIRECTORS
(TERMS EXPIRE AT 2001 ANNUAL MEETING)
E. ROBERT KINNEY, age 82, has been a Director of the Company since 1986.
Mr. Kinney was President of IDS Mutual Funds Group, a complex of open-end
investment companies, from 1982 until 1987. Prior to joining IDS Mutual Funds
Group, he was the Chief Executive Officer of General Mills, Inc.
JAMES L. MOODY, JR., age 67, has been a Director of the Company since 1992.
Mr. Moody was Chairman of the Board of Hannaford Bros. Co., an operator of
supermarkets, from 1984 until 1997, and served as Chief Executive Officer of
Hannaford Bros. Co. from 1973 until 1992. He is also a director of Penobscot
Shoe Company, Staples, Inc., UNUM Corporation, Empire Company Limited (a
Canadian corporation), and a trustee of various funds of the Colonial Group of
Mutual Funds.
ERWIN F. WORKMAN, JR., PH.D., age 52, has been a Director of the Company
since October 1993. Dr. Workman has served as Executive Vice President and Chief
Scientific Officer of the Company since November 1997. Dr. Workman joined the
Company as a Vice President in 1984, and he became Senior Vice President in
December 1991, Executive Vice President in May 1992 and served as President and
Chief Operating Officer from 1993 to November 1997. Prior to joining the
Company, he was Manager of Research and Development for the Hepatitis and AIDS
Business Unit within the diagnostic division of Abbott Laboratories.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee which provides the opportunity
for direct contact between the Company's independent auditors and the Board. The
Audit Committee met four times during 1998 to review the activities and the
effectiveness of the auditors during the annual audit and related matters, to
discuss the Company's internal accounting control policies and procedures and to
consider and recommend the selection of the Company's independent auditors. The
current Audit Committee members are Messrs. Hesse (Chairman) and Kinney and Dr.
Paigen.
The Company has a standing Compensation Committee which provides
recommendations to the Board regarding compensation programs of the Company,
administers the Company's stock option plans, and authorizes stock option grants
under the 1991 Stock Option Plan and 1998 Stock Incentive Plan. The Compensation
Committee met six times and acted twice by written consent during 1998. The
current members of the Compensation Committee are Dr. Pounds (Chairman), Dr.
Good and Messrs. Kinney and Moody.
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors.
5
<PAGE> 9
The Board of Directors met seven times during 1998. Each Director attended
at least 75% of the aggregate of the number of Board meetings and the number of
meetings held by all committees on which he or she served.
DIRECTORS' COMPENSATION
The Company has not paid cash director's fees to its Directors. Directors
who are not officers or employees of the Company have received stock options
pursuant to formula plans, as described below, and expense reimbursement for
attending Board and Committee meetings. Directors who are officers or employees
of the Company do not receive any additional compensation for their services as
Directors.
Under the Company's 1997 Director Option Plan (the "1997 Director Plan"),
Directors who are not officers or employees of the Company or of any subsidiary
of the Company are entitled to receive non-statutory options to purchase 6,500
shares of Common Stock at each annual meeting through and including the Annual
Meeting of Stockholders held in 2002 (as discussed below, the 1997 Director Plan
will terminate upon stockholder approval of the 1999 Director Stock Plan).
Options granted under the 1997 Director Plan vest and become exercisable on the
first anniversary of the date of grant or, if earlier, the date of the next
annual meeting. In addition, eligible Directors elected to the Board other than
at an annual meeting are granted an option for a pro rata number of shares of
Common Stock. In general, options granted under the 1997 Director Plan are not
transferable and are exercisable during the lifetime of the Director only while
he or she is serving as a Director of the Company or within 90 days after he or
she ceases to serve as a Director of the Company; provided, however, that the
Board has the discretion to allow options to be transferred to family members,
trusts for the benefit of family members, and charitable organizations. If a
Director dies or becomes disabled while serving as a Director, options are
exercisable for a one-year period thereafter. No option is exercisable after ten
years from the date of the grant. The option price per share is equal to the
fair market value of a share of Common Stock on the date the option is granted.
As of March 31, 1999, options to purchase 74,296 shares of Common Stock had
been granted and were outstanding under the 1997 Director Plan and 225,704
shares of Common Stock were available for issuance pursuant to options to be
granted under the 1997 Director Plan.
In February 1999, the Board of Directors adopted, subject to stockholder
approval, the 1999 Director Stock Plan to replace the 1997 Director Plan, which
will terminate upon approval of the 1999 Director Stock Plan. If the 1999
Director Stock Plan is approved, no options will be granted to Directors under
the 1997 Director Plan in connection with the 1999 Annual Meeting of
Stockholders. See "Approval of the Company's 1999 Director Stock Plan." Under
the 1999 Director Stock Plan, the Company will make annual awards of 2,000
shares of Common Stock to each eligible Director. To assist Directors in
satisfying tax obligations resulting from the awards, the Company will make a
cash payment of $15,000 to each Director upon such Director's receipt of each
Common Stock award. If the 1999 Director Stock Plan is not approved, options to
purchase 6,500 shares of Common Stock will be granted at the Annual Meeting to
each eligible Director under the 1997 Director Plan.
6
<PAGE> 10
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation for each of the last three fiscal years of (i) the Company's Chief
Executive Officer and (ii) the four other most highly compensated executive
officers during the fiscal year ended December 31, 1998 who were serving as
executive officers as of December 31, 1998 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER ANNUAL SECURITIES
COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) COMPENSATION($)(2)
--------------------------- ---- --------- -------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
David E. Shaw.................... 1998 $439,500 $378,000 -- 100,000 $3,368
Executive Chairman of the 1997 $390,200 -- -- 135,000(3) $3,176
Board of Directors 1996 $349,038 $210,000 -- 150,000 $3,000
Jeffrey J. Langan................ 1998 $311,700 $216,000 $100,000(4) --(5) $3,269
President and Chief Executive 1997 $ 23,077 -- -- 250,000 --
Officer
Erwin F. Workman, Jr., Ph.D...... 1998 $306,700 $216,000 -- 60,000 $3,220
Executive Vice President and 1997 $293,500 -- -- 108,000(6) $3,302
Chief Scientific Officer 1996 $249,519 $150,000 -- 100,000 $3,000
Ralph K. Carlton................. 1998 $269,400 $147,000 -- 50,000 --
Senior Vice President, Finance 1997 $214,900 -- $ 25,000(7) 105,000(8) --
and Administration and
Chief Financial Officer
Louis W. Pollock................. 1998 $186,400 $ 92,000 -- 30,000 $3,189
Vice President 1997 $165,900 -- -- 35,350(9) $3,175
1996 $149,519 $ 60,000 -- 30,500 $3,000
</TABLE>
- ---------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10 percent
of the total salary and bonus for the Named Executive Officer for such year.
(2) Consists of the Company's matching contribution under the IDEXX Retirement
and Incentive Savings Plan.
(3) Represents options issued in exchange for options to purchase 270,000 shares
in connection with the Company's 1997 option repricing program. Excludes
options to purchase 120,000 shares issued in February 1997 but later
cancelled in exchange for options to purchase 60,000 shares (which are
reflected in the table) in connection with the Company's 1997 option
repricing program.
(4) Represents a bonus paid to Mr. Langan as a result of his joining the Company
in November 1997.
(5) Under a letter agreement between Mr. Langan and the Company, due to the
option grant to Mr. Langan upon joining the Company in 1997, any option
grant for which Mr. Langan would otherwise be eligible for performance
during 1998 would be reduced by 50,000 shares. Accordingly, Mr. Langan did
not
7
<PAGE> 11
receive options to purchase shares as compensation for 1998. See "Executive
Compensation - Employment Agreements."
(6) Represents options issued in exchange for options to purchase 180,000 shares
in connection with the Company's 1997 option repricing program. Excludes
options to purchase 80,000 shares issued in February 1997 but later
cancelled in exchange for options to purchase 48,000 shares (which are
reflected in the table) in connection with the Company's 1997 option
repricing program.
(7) Represents a relocation allowance paid to Mr. Carlton upon his joining the
Company in February 1997.
(8) Represents options issued in exchange for options to purchase 150,000 shares
in connection with the Company's 1997 option repricing program. All of the
cancelled options were granted in February 1997, but are excluded from the
table.
(9) Represents options issued in exchange for options to purchase 50,500 shares
in connection with the Company's 1997 option repricing program. Excludes
options to purchase 20,000 shares issued in February 1997 but later
cancelled in exchange for options to purchase 14,000 shares (which are
reflected in the table) in connection with the Company's 1997 option
repricing program.
Option Grants
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1998 to each of the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS EXERCISE ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO OR PRICE APPRECIATION FOR
OPTIONS EMPLOYEES BASE OPTION TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5%($) 10%($)
---- ---------- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
David E. Shaw(4).................. 100,000 8.06% $13.6875 1/31/08 $860,800 $2,181,435
Jeffrey J. Langan(4)(5)........... -- -- -- -- -- --
Erwin F. Workman, Jr., Ph.D.(4)... 60,000 4.84% $13.6875 1/31/08 $516,480 $1,308,861
Ralph K. Carlton.................. 50,000 4.03% $13.6875 1/31/08 $430,400 $1,090,718
Louis W. Pollock.................. 30,000 2.42% $13.6875 1/31/08 $258,240 $ 654,431
</TABLE>
- ---------------
(1) Options become exercisable in equal annual installments over a five-year
period commencing on the first anniversary of the date of grant.
(2) The exercise price is equal to the fair market value of the Company's Common
Stock on the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will depend
on the future performance of the Common Stock and the date on which the
options are exercised.
(4) Upon a change in control of the Company, vesting of options held by Mr.
Shaw, Dr. Workman and Mr. Langan accelerates and such options become fully
exercisable. If Mr. Shaw's employment is terminated by the Company or
terminated by Mr. Shaw due to a breach by the Company of an
8
<PAGE> 12
employment agreement with Mr. Shaw, the vesting of all options held by Mr. Shaw
will accelerate and such options will become fully exercisable. See "Executive
Compensation - Employment Agreements."
(5) Under a letter agreement between Mr. Langan and the Company, due to the
option grant to Mr. Langan upon joining the Company in 1997, any option
grant for which Mr. Langan would otherwise be eligible for performance
during 1998 would be reduced by 50,000 shares. Accordingly, Mr. Langan did
not receive options to purchase shares as compensation for 1998. See
"Executive Compensation - Employment Agreements."
Option Exercises and Year-End Values
The following table sets forth certain information concerning stock options
exercised during the fiscal year ended December 31, 1998 by each of the Named
Executive Officers and the number and value of unexercised options held by each
of the Named Executive Officers on December 31, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)(2)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
David E. Shaw................ 200,000 $2,705,000 1,006,500/259,200 $20,010,566/$2,793,300
Jeffrey J. Langan............ -- -- 50,000/200,000 $ 557,813/$2,231,250
Erwin F. Workman, Jr.,
Ph.D....................... 30,000 $ 675,938 408,100/170,600 $ 6,894,543/$1,831,616
Ralph K. Carlton............. -- -- 21,000/134,000 $ 200,681/$1,463,663
Louis W. Pollock............. 20,000 $ 207,518 71,060/ 71,690 $ 787,665/$ 798,410
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Based on the fair market value of the Common Stock on December 31, 1998
($26.91) less the option exercise price.
Employment Agreements
In April 1997 the Company entered into employment agreements with Mr. Shaw
and Dr. Workman, and in April 1999 the Company entered into an employment
agreement with Mr. Langan, establishing the terms of employment of such officers
in the event of a change in control of the Company, including the payment of
certain compensation and benefits in the event that, following a change in
control, the employment of any such officer is terminated by the Company or its
successor without cause or by the officer for good reason. For purposes of the
agreements, a "change in control" is deemed to occur, subject to certain
exceptions, upon (i) the acquisition by a person or entity of 20% or more of the
outstanding Common Stock or the combined voting power of the Company's
then-outstanding voting securities, (ii) individuals who comprise the Board of
Directors as of the date of the agreements (the "Incumbent Directors"), and
individuals who are subsequently elected to the Board who are approved by the
Incumbent Directors, ceasing to constitute at least a majority of the Board,
(iii) consummation of a merger, consolidation, reorganization or sale of assets
unless following such transaction (1) the beneficial owners of the Company's
Common Stock and other voting securities immediately prior to such transaction
own, in substantially the same proportions, more than 60% of the
9
<PAGE> 13
outstanding common stock and then-outstanding voting securities of the entity
resulting from such transaction, (2) no person or entity owns 20% or more of the
outstanding common stock or the combined voting power of the then-outstanding
voting securities of the resulting entity, and (3) at least half of the members
of the board of directors of the resulting entity were Incumbent Directors, or
individuals subsequently elected to the Board who are approved by the Incumbent
Directors, at the time of execution of the initial agreement, or of the action
of the Board, providing for the transaction. Upon the occurrence of a change in
control, all outstanding options to purchase Common Stock owned by the officers
would become immediately exercisable in full.
Upon termination of employment following a change in control by the Company
or its successor without cause or by the officer for good reason, the officer
would receive in addition to salary and benefits through the date of termination
(i) a pro-rated bonus payment for the portion of the year of termination prior
to the date of termination, (ii) benefits for a period of 36 months following
termination and (iii) an amount equal to three times the sum of (1) the
officer's annual base salary plus (2) the highest annual bonus received by the
officer. For this purpose "annual base salary" is defined as the officer's base
salary, but not less than 12 times the highest monthly base salary paid within
the 12 months prior to the change of control, and "highest annual bonus" is
defined as the higher of (A) the highest annual bonus paid to the officer for
the three fiscal years preceding the change in control and (B) the annual bonus
paid or payable for the most recently completed fiscal year following the change
in control.
The employment agreements become effective upon a change in control and
terminate three years thereafter. Prior to a change in control, the Company has
no obligation to retain the officer as an employee. Under the employment
agreements, no compensation is payable by the Company to the officers upon any
termination of employment prior to a change in control, except that compensation
substantially equivalent to that described in the preceding paragraph will be
payable prior to a change in control if the termination of the officer's
employment (i) is at the request of a third party who has taken steps reasonably
calculated to effect a change in control or (ii) otherwise arose in connection
with or anticipation of a change in control.
In November 1997, the Company entered into a letter agreement with Mr.
Langan that provides that Mr. Langan will continue to receive salary and
benefits for a period of one year in the event that he is terminated by the
Company without cause prior to January 1, 2000.
In February 1999, the Company entered into an agreement with Mr. Shaw under
which Mr. Shaw will serve as Executive Chairman of the Company through February
17, 2002 (the "Employment Period"). During the Employment Period, Mr. Shaw will
receive an annual base salary of $350,000, subject to adjustment in future years
by mutual agreement, and his eligibility for cash bonuses and stock option
grants will be at the discretion of the Board of Directors. If, during the
Employment Period, Mr. Shaw's employment is terminated by the Company or
terminated by Mr. Shaw due to a breach of the agreement by the Company, all
options to purchase Common Stock held by Mr. Shaw will immediately vest and Mr.
Shaw will continue to receive salary and benefits for the remainder of the
Employment Period.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of copies of reports filed with respect to 1998 by
reporting persons of the Company pursuant to Section 16(a) of the Exchange Act,
or written representations from certain reporting persons that no Form 5 filing
was required for such persons for such period, the Company believes that all
filings required to be made by reporting persons of the Company were timely made
in accordance with the requirements of the Exchange Act.
10
<PAGE> 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, which is responsible for determining the compensation
package of each executive officer and recommending it to the Board of Directors.
The Compensation Committee is currently comprised of four non-employee
Directors.
The Company's executive compensation program is intended to promote the
achievement of the Company's business goals and, thereby, to maximize corporate
performance and stockholder returns. Executive compensation consists of a
mixture of base salary, performance bonuses and stock-based incentives. The
Compensation Committee believes it is important to have bonuses constitute a
portion of each executive's compensation package in order to tie an individual's
compensation level to individual and corporate performance, and believes it is
important to have stock incentives constitute a portion of each executive's
compensation package in order to help align executive and stockholder interests.
In determining levels of compensation, the Compensation Committee considers a
number of factors such as: (i) corporate performance, (ii) individual
performance, and (iii) the Company's need to attract and retain key executive
personnel who will contribute to the creation of stockholder value. In assessing
corporate performance, the Committee primarily measures the Company's
performance against a Board-approved budget.
Base Salary. Generally, each executive officer's base salary is reviewed
on an annual basis. In setting base salary, the Compensation Committee considers
the factors described above, as well as recommendations from the Company's Chief
Executive Officer. The Committee does not, however, use a specific formula based
on a ranking of the indicated criteria, but instead makes a subjective
evaluation of each executive officer's contributions and potential in light of
such criteria. During 1998, the Compensation Committee increased Mr. Shaw's base
salary from $380,000 to $420,000, in recognition of the Company's performance
and his contributions to the Company and attainment of individual goals.
Performance Bonuses. The payment of bonuses to executive officers is
directly related to their achievement of corporate and individual performance
goals. The Compensation Committee's policy is that the payment of bonuses will
not necessarily be authorized unless the Company meets or exceeds its budget
objectives for the fiscal year. The amount of the bonus paid, if any, varies
among the executive officers depending on their success in achieving individual
performance goals and on their contribution to the achievement of corporate
performance goals, with principal emphasis placed by the Compensation Committee
on corporate goals.
At the beginning of each year, Mr. Shaw proposes a budget for the year to
the Board of Directors for approval. This budget includes corporate-wide goals,
including financial objectives for revenues, expenses, gross margin, net income
and earnings per share, goals jointly established by Mr. Shaw or Mr. Langan and
each of the other executive officers for their individual areas of
responsibility, and a proposal regarding the overall size of the target bonus
pool for the year. The individual and corporate goals included in the budget
generally represent objective measures of performance. These goals include
quantifiable financial objectives, such as the achievement of revenue or
operating profit targets, and other milestones in research, development,
marketing and other areas. For 1998, the Board of Directors initially approved a
target bonus pool equal to approximately 30% of the base salaries of all
eligible bonus pool participants, which included all executive officers and
certain other key members of management.
Throughout the year, either Mr. Shaw or Mr. Langan meets with each
executive officer to review his or her progress in achieving these goals and
reports the Company's progress against its budget to the Board of Directors.
After the end of the year, Mr. Shaw or Mr. Langan performs a final performance
review with each executive officer and Mr. Shaw then presents bonus
recommendations to the Compensation Committee for approval.
11
<PAGE> 15
At its meeting in February 1999, the Compensation Committee reviewed the
Company's actual 1998 corporate performance against the five key financial
objectives from the 1998 budget referred to above. The Compensation Committee
determined that in 1998, the Company would have achieved its expense objective,
and would have been slightly below its net income and earnings per share
objectives, but for the operating losses and write-off of in process research
and development incurred by the Company in connection with its acquisition of
Blue Ridge Pharmaceuticals, Inc. The Compensation Committee also determined that
the Company's performance was below its revenue and gross margin goals. The
Committee then considered a report by Mr. Shaw with respect to each executive
officer's performance against his individual goals. As with the determination of
base salary, even though the Committee considered all five of the indicated
financial objectives as well as Mr. Shaw's report, the Compensation Committee
did not make any specific ranking of the indicated criteria, but instead made a
subjective evaluation of each executive officer's performance. On the basis of
that assessment, the Compensation Committee awarded bonuses totaling $4,276,000
or 27.5% of the base salaries of all eligible bonus pool participants, which was
within the previously approved target bonus pool. The Compensation Committee
awarded Mr. Shaw a bonus of $378,000 out of this pool in recognition of the
Company's financial performance for the year and Mr. Shaw's achievement of his
individual goals.
Equity-Based Compensation. Grants of options under the Company's 1991
Stock Option Plan and 1998 Stock Incentive Plan are intended to directly relate
executive compensation to corporate performance and to help align long-term
interests of the Company's executive officers and stockholders. The exercise
price of all options granted to executive officers in 1998 was equal to the fair
market value of the Company's Common Stock on the date of grant.
The Compensation Committee considers options to be an important method of
providing an incentive for executive officers to remain with, and to continue to
make significant contributions to, the Company. Therefore, in granting options,
the Compensation Committee makes a subjective determination after considering
the number and value of options held by each executive officer which will vest
in each future period, in addition to the other factors described above. The
Compensation Committee also seeks to maintain equitable relationships between
executive officers who have similar levels of responsibility. During 1998,
options were granted to each of the Named Executive Officers except Mr. Langan
(see "Executive Compensation-Summary Compensation"), in recognition of their
performance and anticipated future contributions to the Company, including
options for 100,000 shares granted to Mr. Shaw.
Under the Company's employee stock purchase plans, all eligible employees
of the Company, including executive officers, may purchase shares of Common
Stock through payroll deductions at a price equal to 85% of the fair market
value of the Common Stock at the beginning or end of the applicable purchase
period, whichever is lower. Offerings under these plans generally occur over a
six month period and an aggregate of up to 450,000 shares may be issued under
the plans.
12
<PAGE> 16
Compliance with Internal Revenue Code Section 162(m). The Company does not
believe that Section 162(m) of the Internal Revenue Code of 1986, as amended
Code, which disallows a tax deduction to public companies for certain
compensation in excess of $1,000,000 paid to the corporation's Chief Executive
Officer and four other most highly compensated executive officers, will
generally have an effect on the Company. The Company intends to continue to
periodically review the potential consequences of Section 162(m) and in the
future may decide to structure the performance-based portion of its executive
officer compensation to comply with certain exemptions provided in Section
162(m).
William F. Pounds (Chairman)
Mary L. Good
E. Robert Kinney
James L. Moody, Jr.
13
<PAGE> 17
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock since December 31, 1993 with the cumulative total return
of (i) the CRSP Total Return Index for The Nasdaq Stock Market (U.S. Companies)
(the "CRSP Nasdaq Index") and (ii) the Standard and Poor's Health Care Composite
Index (the "S&P Health Care Index"). This graph assumes the investment of $100
on December 31, 1993 in the Company's Common Stock, the CRSP Nasdaq Index and
the S&P Health Care Index and assumes dividends, if any, are reinvested.
Measurement points are the last trading days of the years ended December 31,
1994, 1995, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
IDEXX LABORATORIES, INC. CRSP NASDAQ INDEX S&P HEALTH CARE INDEX
------------------------ ----------------- ---------------------
<S> <C> <C> <C>
12/31/93 100.00 100.00 100.00
12/31/94 113.00 98.00 110.00
12/31/95 295.00 138.00 169.00
12/31/96 226.00 170.00 200.00
12/31/97 100.00 209.00 284.00
12/31/98 169.00 293.00 405.00
</TABLE>
14
<PAGE> 18
AMENDMENT OF THE 1998 STOCK INCENTIVE PLAN
On February 17, 1999, the Board of Directors of the Company adopted,
subject to stockholder approval, an amendment of the 1998 Stock Incentive Plan,
increasing from 1,800,000 to 2,500,000 the number of shares of Common Stock
authorized for issuance under the 1998 Stock Incentive Plan.
As of March 31, 1999, options to purchase 381,635 shares of Common Stock at
an exercise price of $24.50 per share and 59,550 shares of Common Stock at an
exercise price of $25.00 per share were outstanding under the 1998 Stock
Incentive Plan and no options to purchase shares of Common Stock had been
exercised under the 1998 Stock Incentive Plan. All such options were granted to
employees other than executive officers of the Company and are the only awards
that have been made under the 1998 Stock Incentive Plan.
The Board of Directors believes that the future growth and success of the
Company depends, in large part, on its ability to attract, retain and motivate
key employees, consultants and advisors and that stock option grants under the
1998 Stock Incentive Plan have been, and will continue to be, an important
compensation element in attracting, retaining and motivating such persons.
ACCORDINGLY, THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT TO THE
1998 STOCK INCENTIVE PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, AND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS PROPOSAL.
SUMMARY OF THE 1998 STOCK INCENTIVE PLAN
The following is a brief summary of the material terms of the 1998 Stock
Incentive Plan. This summary is qualified in its entirety by reference to the
1998 Stock Incentive Plan, a copy of which may be obtained from the Secretary of
the Company.
The 1998 Stock Incentive Plan provides for the grant of "incentive stock
options" intended to qualify under Section 422 of the Code, nonstatutory stock
options and restricted stock awards (collectively, "Awards"). Officers,
employees (including individuals who have accepted an offer for employment),
directors, consultants and advisors of the Company and its subsidiaries are
eligible to be granted Awards under the 1998 Stock Incentive Plan. Under present
law, however, incentive stock options may be granted only to employees. The
maximum number of shares with respect to which an Award may be granted to any
participant under the 1998 Stock Incentive Plan may not exceed 500,000 shares
per calendar year. Unless the Board of Directors provides otherwise in a
particular Award, Awards may not be transferred except by will or the laws of
descent and distribution. Award recipients must satisfy all tax withholding
obligations arising from an Award. The Board of Directors may allow the
recipient to meet the withholding obligation by delivering shares of Common
Stock, including shares otherwise issuable under the Award.
Stock option Awards give the recipient the right to purchase a specified
number of shares of Common Stock at a specified option price and subject to such
other terms and conditions as are specified in connection with the option grant.
Options granted under the 1998 Stock Incentive Plan may not be granted at an
exercise price less than the fair market value of the Common Stock on the date
of grant (or less than 110% of the fair market value in the case of incentive
stock options granted to optionees holding more than 10% of the voting power of
the Company). Options may not be granted for a term in excess of ten years (five
years in the case of incentive stock options granted to optionees holding more
than 10% of the voting power of the Company). The 1998 Stock Incentive Plan
permits the Board of Directors to determine the manner of payment of the
exercise price of options, including through payment by cash, check or in
connection with a "cashless exercise" through a broker, by surrender to the
Company of shares of Common Stock, by delivery to the Company of a promissory
note, or by any other lawful means.
15
<PAGE> 19
Restricted stock Awards entitle recipients to acquire shares of Common
Stock, subject to the right of the Company to repurchase all or part of such
shares from the recipient in the event that the conditions specified in the
applicable Award are not satisfied prior to the end of the applicable
restriction period established for such Award. The number of shares of Common
Stock subject to restricted stock Awards granted at below 100% of fair market
value may not exceed 10% of the total number of shares of Common Stock issuable
under the 1998 Stock Incentive Plan.
The 1998 Stock Incentive Plan is administered by the Board of Directors.
The Board of Directors has the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the 1998 Stock
Incentive Plan and to interpret the provisions of the 1998 Stock Incentive Plan.
The Board of Directors selects the recipients of Awards and determines (i) the
number of shares of Common Stock covered by options and the dates upon which
such options become exercisable, (ii) the exercise price of options, (iii) the
duration of options, and (iv) the number of shares of Common Stock subject to
any restricted stock Awards and the terms and conditions of such Awards,
including conditions for repurchase and the issue price. The Board of Directors
may amend, modify or terminate any outstanding Award, however neither the Board
of Directors nor the Company may amend any outstanding Award to reduce the
exercise price, other than an adjustment described in the following paragraph,
without prior approval of the Company's stockholders. The Board of Directors may
delegate its authority under the 1998 Stock Incentive Plan to one or more
committees of the Board, and has authorized the Compensation Committee to
administer the granting of stock options under the 1998 Stock Incentive Plan.
The Board of Directors is required to make appropriate adjustments in
connection with the 1998 Stock Incentive Plan and any outstanding Awards to
reflect stock dividends, stock splits and similar events. In the event of a
merger or other acquisition event (as defined in the 1998 Stock Incentive Plan),
the 1998 Stock Incentive Plan provides for outstanding options to be assumed or
substitute awards granted, unless the surviving corporation does not agree to
such assumption or substitution, in which case the Board of Directors shall
accelerate the options or may instead provide for a cash out of the value of the
options. Upon the occurrence of an acquisition event, the 1998 Stock Incentive
Plan provides that the rights of the Company under each restricted stock Award
shall inure to the benefit of the Company's successor.
The 1998 Stock Incentive Plan will expire by its terms on May 15, 2008, but
Awards previously granted may extend beyond that date. The Board of Directors
may at any time amend, suspend or terminate the 1998 Stock Incentive Plan,
except that no outstanding Award designated as subject to Section 162(m) of the
Code by the Board of Directors after the date of such amendment shall become
exercisable, realizable or vested (as applicable to such Award) unless and until
such amendment shall have been approved by the Company's stockholders.
As of March 31, 1999, approximately 2,100 persons were eligible for Awards
under the 1998 Stock Incentive Plan, including the Named Executive Officers. The
granting of Awards under the 1998 Stock Incentive Plan is discretionary, and the
Company cannot now determine the number or type of Awards to be granted in the
future to any particular person or group. On March 31, 1999, the closing sale
price of the Common Stock on the Nasdaq National Market was $23.94.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1998 Stock Incentive Plan and with respect to the sale of Common Stock acquired
under the 1998 Stock Incentive Plan.
Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will generally recognize taxable income with
16
<PAGE> 20
respect to an incentive stock option only upon the sale of Common Stock acquired
through the exercise of the option ("ISO Stock"). The exercise of an incentive
stock option, however, may subject the participant to the alternative minimum
tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of the sale.
If the participant sells ISO Stock for less than the exercise price, then
the participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of the sale.
Nonstatutory Stock Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Common Stock acquired through the exercise of the option (the "NSO
Stock") on the Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term capital gain or loss if the participant has held the NSO Stock for
more than one year prior to the date of the sale.
Restricted Stock Awards. A participant will not recognize taxable income
upon the grant of a restricted stock Award, unless the participant makes an
election under Section 83(b) of the Code (a "Section 83(b) Election"). If the
participant makes a Section 83(b) Election within 30 days of the date of the
grant, then the participant will recognize ordinary compensation income, for the
year in which the Award is granted, in an amount equal to the difference between
the fair market value of the Common Stock at the time the Award is granted and
the purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, the participant will recognize ordinary compensation income, at the time
that the forfeiture provisions or restrictions on transfer lapse, in an amount
equal to the difference between the fair market value of the Common Stock at the
time of such lapse and the original purchase price paid for the Common Stock.
The participant will have a basis in the Common Stock acquired equal to the sum
of the price paid and the amount of ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's tax
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made, or just after the
Award is granted if a Section 83(b) Election is made.
17
<PAGE> 21
Tax Consequences to the Company. The grant of a stock option or restricted
stock Award under the 1998 Stock Incentive Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 1998 Stock Incentive
Plan will have any tax consequences to the Company. The Company generally will
be entitled to a business-expense deduction, however, with respect to any
ordinary compensation income recognized by a participant under the 1998 Stock
Incentive Plan, including as a result of the exercise of a nonstatutory stock
option, a Disqualifying Disposition, or a Section 83(b) Election. Any such
deduction will be subject to the limitations of Section 162(m) of the Code.
18
<PAGE> 22
APPROVAL OF THE COMPANY'S 1999 DIRECTOR STOCK PLAN
On February 17, 1999, the Board of Directors of the Company adopted,
subject to stockholder approval, the Company's 1999 Director Stock Plan covering
80,000 shares of the Company's Common Stock. The 1999 Director Stock Plan is
intended to replace the 1997 Director Plan, which will terminate if the 1999
Director Stock Plan is approved by the stockholders. See "Election of Directors
- - Directors' Compensation." If the 1999 Director Stock Plan is not approved by
the stockholders, the 1997 Director Plan will remain in effect.
A December 1998 proposal by the Financial Accounting Standards Board
("FASB"), if adopted, would require the Company to amortize the fair value of
stock options granted to its Directors over the vesting periods of such options,
thus changing the accounting required for such options. Under the proposal, the
fair value of a stock option would be adjusted quarterly, which would require
the Company to amortize increasingly greater amounts over the vesting period of
the option if the market price of the Common Stock continued to increase over
that period. Currently, the Company does not recognize any expense associated
with the grant of options to Directors. Accordingly, the Board of Directors
believes that the FASB proposal would cause the grant of options under the 1997
Director Plan to be less attractive to the Company and its stockholders than the
award of Common Stock under the 1999 Director Stock Plan, which would require a
one-time expensing of the value of the share award at the time of the grant.
Compensation of Directors under the 1999 Director Stock Plan would also reduce
the total number of shares reserved for Director compensation from 225,704
shares to 80,000 shares.
The Board of Directors believes that the 1999 Director Stock Plan is
necessary to help the Company continue to attract and retain experienced outside
directors needed for the success of the Company, while avoiding the negative
accounting consequences that could result under the 1997 Director Plan and
decreasing the number of shares reserved for Director compensation. ACCORDINGLY,
THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION AND APPROVAL OF THE 1999
DIRECTOR STOCK PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, AND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS PROPOSAL.
The 1999 Director Stock Plan is summarized below. This summary is qualified
in all respects by reference to the full text of the 1999 Director Stock Plan,
copies of which may be obtained from the Secretary of the Company.
SUMMARY OF THE 1999 DIRECTOR STOCK PLAN
Under the terms of the 1999 Director Stock Plan, upon approval of the plan
by the stockholders, Directors who are not officers or employees of the Company
or of any subsidiary of the Company will be awarded 2,000 shares of Common Stock
at the Annual Meeting and at each subsequent annual meeting through and
including the Annual Meeting of Stockholders held in 2004. In addition, eligible
Directors elected to the Board other than at an annual meeting will be awarded a
pro rata number of shares of Common Stock. On March 31, 1999, the closing sale
price of the Common Stock on the Nasdaq National Market was $23.94.
The Board of Directors may suspend or discontinue the 1999 Director Stock
Plan or amend it in any respect whatsoever, provided, however, that without
approval of the stockholders of the Company, no amendment may (i) change the
number of shares subject to the 1999 Director Stock Plan, (ii) change the
designation of directors eligible to receive shares under the 1999 Director
Stock Plan, (iii) increase the number of shares awarded to each eligible
director in a fiscal year or (iv) otherwise materially increase the benefits
accruing to participants in the 1999 Director Stock Plan.
19
<PAGE> 23
As of March 31, 1999, the Company had six non-employee Directors. The
following table sets forth the number of shares of Common Stock currently
expected to be awarded during 1999 under the 1999 Director Stock Plan to each of
the indicated persons and groups:
NEW PLAN BENEFITS
ANTICIPATED BENEFITS UNDER
1999 DIRECTOR STOCK PLAN
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
David E. Shaw............................................. 0
Jeffrey J. Langan......................................... 0
Erwin F. Workman, Jr., Ph.D............................... 0
Ralph K. Carlton.......................................... 0
Louis W. Pollock.......................................... 0
Executive Group........................................... 0
Non-Executive Director Group.............................. 12,000
Non-Executive Officer Employee Group...................... 0
</TABLE>
20
<PAGE> 24
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP as the
Company's independent auditors for the current fiscal year. Arthur Andersen LLP
has served as the Company's independent auditors since the Company's inception.
Although stockholder approval of the Board of Directors' selection of Arthur
Andersen LLP is not required by law, the Board of Directors believes that it is
advisable to give stockholders an opportunity to ratify this selection. If this
proposal is not approved at the Annual Meeting, the Board of Directors will
reconsider its selection of Arthur Andersen LLP.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will also be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting, and, under the Company's by-laws, the deadline for
stockholders to notify the Company of any proposals or director nominations to
be presented for action at the Annual Meeting has passed. However, if any other
matters are properly presented to the Annual Meeting, it is the intention of the
persons named in the accompanying proxy to vote, or otherwise act, in accordance
with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. The Company has retained MacKenzie Partners,
Inc. to assist in the solicitation of proxies for this year's Annual Meeting, at
a cost to the Company of approximately $4,000, plus reimbursement of reasonable
expenses. Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of stock held in their names, and, as required
by law, the Company will reimburse them for their reasonable out-of-pocket
expenses in this regard.
21
<PAGE> 25
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders submitted pursuant to Rule 14a-8 under the
Exchange Act for inclusion in the Company's proxy materials for its 2000 Annual
Meeting of Stockholders must be received by the Secretary of the Company at its
principal office in Westbrook, Maine, not later than December 10, 1999. In
addition, the Company's by-laws require that the Company be given advance notice
of matters which stockholders wish to present for action at an annual meeting of
stockholders (other than matters included in the Company's proxy statement in
accordance with Rule 14a-8). The required notice must be received by the
Secretary of the Company, at the principal offices of the Company no later than
March 20, 2000 or 60 days before the date of the 2000 Annual Meeting of
Stockholders, whichever is later. If a stockholder fails to provide timely
notice of a proposal to be presented at the 2000 Annual Meeting of Stockholders,
the proxies designated by the Board of Directors of the Company will have
discretionary authority to vote on any such proposal which may come before the
meeting.
By Order of the Board of Directors,
Richard B. Thorp, Secretary
April 16, 1999
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE ANNUAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. SHAREHOLDERS
WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY
HAVE SENT IN THEIR PROXIES.
22
<PAGE> 26
1066-PS-99
<PAGE> 27
IDEXX LABORATORIES, INC.
1999 DIRECTOR STOCK PLAN
(as of February 17, 1999)
1. PURPOSE.
The purpose of this 1999 Director Stock Plan (the "Plan") of IDEXX
Laboratories, Inc. (the "Company") is to encourage ownership in the Company by
outside directors of the Company whose continued services are considered
essential to the Company's future progress and to provide them with a further
incentive to remain as directors of the Company.
2. ADMINISTRATION.
The Board of Directors shall supervise and administer the Plan. Grants of
stock awards under the Plan and the amount and nature of the awards to be
granted shall be automatic in accordance with Section 5. However, all questions
of interpretation of the Plan or of any awards issued under it shall be
determined by the Board of Directors and such determination shall be final and
binding upon all persons having an interest in the Plan.
3. PARTICIPATION IN THE PLAN.
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN.
The maximum number of shares which may be issued under the Plan shall be
80,000 shares of the Company's Common Stock, par value $.10 per share ("Common
Stock"), subject to adjustment as provided in Section 8 of the Plan. Shares of
Common Stock issued under the Plan may consist in whole or in part of authorized
but unissued shares or treasury shares.
5. DELIVERY AND TRANSFERABILITY OF AWARDS.
(a) GRANT DATES AND AMOUNT. Following approval of the Plan by the
stockholders of the Company, upon the date of each annual meeting of
stockholders, including the date of the annual meeting of stockholders at which
the Plan is approved and adopted, the Company shall award to each eligible
director continuing in office after, or elected at, such meeting 2,000 shares of
Common Stock. In addition, in the case of any eligible director who is elected
other than at an annual meeting, the Company shall award to such director upon
his or her election the number of shares of Common Stock determined by the
following formula:
2,000 x (365 less the number of days elapsed since last annual meeting)
-------------------------------------------------------------
365
1
<PAGE> 28
(b) CONSIDERATION. To the extent required by Delaware law, the Board of
Directors may require a recipient of shares of Common Stock under the Plan to
pay an amount equal to the par value per share for each share of Common Stock
received under the Plan.
(c) REGISTRATION OF SHARES. Common Stock to be delivered to an eligible
director under the Plan will be registered in the name of the director.
(d) ASSIGNMENTS. The rights and benefits under the Plan may not be
assigned.
(e) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan until (i) in the opinion
of the Company's counsel, all other legal matters in connection with the
issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations, and (ii) the recipient of such shares has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
6. TIME FOR GRANTING AWARDS.
All awards for shares subject to the Plan shall be granted, if at all, not
later than the fifth annual meeting of stockholders after the meeting of
stockholders at which the Plan is approved by the Company's stockholders.
7. NO RIGHT TO CONTINUE AS A DIRECTOR.
Neither the Plan, nor the granting of an award nor any other action taken
pursuant to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that a director will hold office with the
Company for any period of time.
8. CHANGES IN COMMON STOCK.
If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock, or other securities, an appropriate and proportionate adjustment will be
made in the maximum number and kind of shares reserved for issuance under the
Plan and in the number and kind of shares awardable under the Plan pursuant to
Section 5(a) after the date of such event.
2
<PAGE> 29
9. AMENDMENT OF THE PLAN.
The Board of Directors may suspend or discontinue the Plan or review or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company no revision or amendment shall change the number
of shares subject to the Plan (except as provided in Section 8), change the
designation of the class of directors eligible to receive awards, or otherwise
materially increase the benefits accruing to directors under the Plan.
10. NOTICE.
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
11. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
Approved by the Board of Directors on February 17, 1999.
Approved by the Stockholders on ______________, 1999.
3
<PAGE> 30
IDEXX LABORATORIES, INC.
1998 STOCK INCENTIVE PLAN
(AS OF FEBRUARY 17, 1999)
1. PURPOSE.
The purpose of this 1998 Stock Incentive Plan (the "Plan") of IDEXX
Laboratories, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of IDEXX Laboratories, Inc. as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder (the "Code").
2. ELIGIBILITY.
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options or restricted stock awards (each, an "Award")
under the Plan. Each person who has been granted an Award under the Plan shall
be deemed a "Participant".
3. ADMINISTRATION, DELEGATION.
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered
by the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan
<PAGE> 31
to the "Board" shall mean the Board or a Committee of the Board to the extent
that the Board's powers or authority under the Plan have been delegated to such
Committee.
4. STOCK AVAILABLE FOR AWARDS.
(a) NUMBER OF SHARES. Subject to adjustment under Section 7, Awards may
be made under the Plan for up to 2,500,000 shares of common stock, $.10 par
value per share, of the Company (the "Common Stock"). If any Award expires or
is terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 7, the
maximum number of shares of Common Stock with respect to which an Award may be
granted to any Participant under the Plan shall be 500,000 per calendar year.
The per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
5. STOCK OPTIONS.
(a) GENERAL. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price, which
shall in no event be less than 100% of the fair market value of the Common Stock
as determined (or in a manner approved) by the Board in good faith ("Fair Market
Value") at the time
2
<PAGE> 32
of grant, at the time each Option is granted and specify it in the applicable
option agreement.
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement. No option will be granted for a term in excess of
10 years.
(e) EXERCISE OF OPTION. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board,
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise
of an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price, (ii) delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price or (iii) delivery of shares of Common Stock
owned by the Participant valued at their Fair Market Value, which Common Stock
was owned by the Participant at least six months prior to such delivery;
(3) to the extent permitted by the Board, in its sole discretion
(i) by delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) by payment of such other lawful consideration
as the Board may determine; or
(4) any combination of the above permitted forms of payment.
6. RESTRICTED STOCK.
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
3
<PAGE> 33
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
(c) LIMITATION ON NUMBER OF SHARES. Notwithstanding any provision of the
Plan, no more than 10% of the total number of shares issuable under the Plan may
be issued in the form of Restricted Stock Awards which are granted with an issue
price less than the Fair Market Value on the date of grant.
7. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS.
(a) CHANGES IN CAPITALIZATION. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limits set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, and (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award shall be appropriately adjusted by the Company (or
substituted Awards may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or substitution) is necessary
and appropriate. If this Section 7(a) applies and Section 7(c) also applies to
any event, Section 7(c) shall be applicable to such event, and this Section 7(a)
shall not be applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed liquidation
or dissolution of the Company, the Board shall upon written notice to the
Participants provide that (i) all then unexercised Options will (x) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (y) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date, and (ii) all Restricted Stock Awards will become
free of all restrictions as of a specified time prior to the effective date of
such liquidation or dissolution.
4
<PAGE> 34
(c) ACQUISITION EVENTS
(1) DEFINITION. An "Acquisition Event" shall mean: (a) any merger
or consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.
(2) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code. Notwithstanding the foregoing, if the acquiring or
succeeding corporation (or an affiliate thereof) does not agree to assume, or
substitute for, such Options, then the Board shall upon written notice to the
Participants, provide that all then unexercised Options will become exercisable
in full as of a specified time (the "Acceleration Time") prior to the
Acquisition Event and will terminate immediately prior to the consummation of
such Acquisition Event, except to the extent exercised by the Participants
before the consummation of such Acquisition Event; provided, however, that, in
the event of an Acquisition Event under the terms of which holders of Common
Stock will receive upon consummation thereof a cash payment for each share of
Common Stock surrendered pursuant to such Acquisition Event (the "Acquisition
Price"), then the Board may instead provide that all outstanding Options shall
terminate upon consummation of such Acquisition Event and that each Participant
shall receive, in exchange therefor, a cash payment equal to the amount (if any)
by which (A) the Acquisition Price multiplied by the number of shares of Common
Stock subject to such outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such Options.
(3) CONSEQUENCES OF AN ACQUISITION EVENT ON RESTRICTED STOCK
AWARDS. Upon the occurrence of an Acquisition Event, the repurchase and other
rights of the Company under each outstanding Restricted Stock Award shall inure
to the benefit of the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was converted into or
exchanged for pursuant to such Acquisition Event in the same manner and to the
same extent as they applied to the Common Stock subject to such Restricted Stock
Award.
8. GENERAL PROVISIONS APPLICABLE TO AWARDS.
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or
5
<PAGE> 35
otherwise encumbered by the person to whom they are granted, either voluntarily
or by operation of law, except by will or the laws of descent and distribution,
and, during the life of the Participant, shall be exercisable only by the
Participant. References to a Participant, to the extent relevant in the context,
shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award shall be evidenced by a written instrument
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, Participants may satisfy such tax obligations in whole or
in part by delivery of shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to a Participant.
(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant. In addition,
neither the Board nor the Company may amend the terms of any issued and
outstanding Awards to reduce the exercise price, other than pursuant to Section
7 of the Plan, without the prior approval of the Company's stockholders.
(g) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from
6
<PAGE> 36
shares previously delivered under the Plan until (i) all conditions of the Award
have been met or removed to the satisfaction of the Company, (ii) in the opinion
of the Company's counsel, all other legal matters in connection with the
issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations.
(h) ACCELERATION. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part or that any Restricted
Stock Awards shall be free of restrictions in full or in part.
9. MISCELLANEOUS.
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date for
such stock dividend and the distribution date for such stock dividend shall be
entitled to receive, on the distribution date, the stock dividend with respect
to the shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on
the date on which it is approved by the Company's stockholders. No Awards shall
be granted under the Plan after the completion of ten years from the date the
Plan was approved by the Board, but Awards previously granted may extend beyond
that date.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that, to the extent required
by Section
7
<PAGE> 37
162(m), no Award granted to a Participant designated as subject to Section
162(m) by the Board after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award (to the extent that such
amendment to the Plan was required to grant such Award to a particular
Participant), unless and until such amendment shall have been approved by the
Company's stockholders as required by Section 162(m) (including the vote
required under Section 162(m)). In addition, the second sentence of Section 8(f)
of the Plan may not be amended by the Board without the prior approval of the
Company's stockholders.
(e) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Approved by the Board of Directors February 12, 1998.
Adopted by the Stockholders on May 15, 1998.
Amended by the Board of Directors on February 17, 1999.
Amendment approved by the Stockholders on , 1999.
8
<PAGE> 38
PROXY
IDEXX LABORATORIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) David E.
Shaw, William F. Pounds and Richard B. Thorp, and each of them, with full power
of substitution, as proxies to represent and vote, as designated herein, all
shares of Common Stock of IDEXX Laboratories, Inc. (the "Company") which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Portland Marriott, 200
Sable Oaks Drive, South Portland, Maine, on Wednesday, May 19, 1999 at 9:00
a.m., local time, and at any adjournment thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 39
[X] Please mark
votes as in
this example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is given, this proxy
will be voted FOR proposals 1, 2, 3 and 4. Attendance of the undersigned at the
meeting or any adjournment thereof will not be deemed to revoke this proxy
unless the undersigned shall revoke this proxy in writing or affirmatively
indicate his intent to vote in person.
1. To elect the following three Class II Directors:
NOMINEES: John R. Hesse, Kenneth Paigen, Ph.D.
and Jeffrey J. Langan
FOR WITHHELD
[ ] [ ] MARK HERE [ ]
IF YOU PLAN TO
ATTEND THE
MEETING
MARK HERE [ ]
FOR ADDRESS
CHANGE AND
[ ] NOTE BELOW
--------------------------------------
For all nominees except as noted above
2. To approve an amendment to the FOR AGAINST ABSTAIN
Company's 1998 Stock Incentive Plan [ ] [ ] [ ]
increasing from 1,800,000 to
2,500,000 the number of shares of the
Company's Common Stock authorized
for issuance under the Plan, as
described in the Proxy Statement.
3. To approve the Company's Director FOR AGAINST ABSTAIN
Stock Plan covering 80,000 shares of [ ] [ ] [ ]
the Company's Common Stock, as
described in the Proxy Statement.
4. To ratify the selection of Arthur FOR AGAINST ABSTAIN
Andersen LLP as the Company's [ ] [ ] [ ]
independent auditors for the current
year.
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give title as such. If a
corporation or a partnership, please sign by authorized person.
Signature: Date:
----------------------------------- -----------------------
