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SCHEDULE 14A

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HAEMONETICS CORPORATION

(Name of Registrant as Specified In Its Charter)

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HAEMONETICS CORPORATION

 

Notice of Annual Meeting of Stockholders

 

July 29, 2010

 

To the Stockholders:

 

The Annual Meeting of our Stockholders will be held on Thursday, July 29, 2010 at 10:00 a.m. at our Corporate Offices located at 400 Wood Road, Braintree, Massachusetts for the following purposes:

 

 

The Board of Directors has fixed the close of business on June 3, 2010 as the record date for the meeting. All stockholders of record on that date are entitled to notice of and to vote at the meeting.

 

Whether or not you plan to attend the meeting, please complete and return the enclosed proxy in the envelope provided or vote by telephone or the Internet pursuant to instructions provided with the proxy.

 

By Order of the Board of Directors

 

/s/ Alicia R. Lopez

Alicia R. Lopez

Secretary

 

Braintree, Massachusetts

June 17, 2010

HAEMONETICS CORPORATION
PROXY STATEMENT

 

Table of Contents

 

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Haemonetics Corporation (the “Company”) for use at the Annual Meeting of Stockholders (the “Meeting”) to be held on Thursday, July 29, 2010 at the time and place set forth in the Notice of Meeting, and at any adjournment thereof.

 

On approximately June 17, 2010, the Company began mailing to shareholders either this Proxy Statement or a Notice of Internet Availability of Proxy Materials containing instructions on how to access proxy materials via the Internet and how to vote online at https://www.proxyvotenow.com/hae. Shareholders who have received a Notice of Internet Availability can request a paper copy of the proxy materials by contacting our transfer agent, Registrar and Transfer Company, at 10 Commerce Drive, Cranford, New Jersey 07016. There is no charge to you for requesting a copy.

 

Voting

 

If a proxy is properly delivered, it will be voted in the manner directed by the stockholder. This year, stockholders have the ability to choose from four means of voting: (1) mailing of a proxy card, (2) via telephone, by calling 1-866-564-2331, (3) via Internet, by using https://www.proxyvotenow.com/hae, or (4) in person at the Meeting. If no instructions are specified with respect to any particular matter to be acted upon, the proxy will be voted in favor of the election of directors as set forth in this Proxy Statement and FOR Item 2 listed in the Notice of the Meeting. For both Internet and telephone voting you will have the ability to confirm that your vote has been properly recorded.

 

Any person delivering a proxy has the power to revoke it by voting in person at the Meeting or by giving written notice of revocation to the Secretary of the Company at any time before the proxy is exercised. Alternatively, any person wishing to revoke a vote submitted by telephone or Internet may (a) simply re-vote in the same manner and the last received vote cast will be recorded in the final tally or (b) vote in person at the Meeting.

 

Directions to the Meeting may be obtained by contacting Investor Relations. If calling from within the United States, please call (800) 225-5242 extension 9613. International callers, please use (781) 356-9613.

 

To contact us in writing:

 

Haemonetics Corporation
Attn: Investor Relations
400 Wood Road
Braintree, MA 02184

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on July 29, 2010

 

The Company’s 2010 Annual Report, this Proxy Statement, and a form of proxy are available at http://www.proxyvotenow.com/hae.

 

Quorum

 

A majority of the votes entitled to be cast on the matter must be present in person or be represented by proxy at the Meeting in order to constitute a quorum for the election of any director or for the consideration of any question.

 

The election of the nominees for director will be decided by plurality vote. To approve Item 2 listed in the Notice of Meeting, it is necessary that the votes cast favoring the action exceed the votes cast opposing the action.

 

Abstentions and “non-votes” are counted as present in determining whether the quorum requirement is satisfied. A “non-vote” occurs when a nominee holding shares for a beneficial owner is present

or represented at the Meeting but does not vote on a particular matter. Abstentions and broker non-votes will not be taken into account in determining the outcome of the election of directors and in determining the outcome of the votes on Item 2.

 

If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under New York Stock Exchange rules to vote your shares on the ratification of Ernst & Young LLP. However, your broker does not have discretionary authority to vote on the election of directors without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on these matters. An NYSE rule change that is effective for the 2010 Annual Meeting no longer permits brokers to vote in the election of directors if the broker has not received instructions from the beneficial owner. This represents a change from prior years, when brokers had discretionary voting authority in the election of directors. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.

 

However, under a policy adopted by the Board of Directors, in an uncontested election, any nominee for director who does not receive the favorable vote of at least a majority of the votes cast with respect to such director is required to tender his or her resignation to the Board of Directors. For purposes of the policy, a majority of votes cast means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election.

 

Votes cast include votes to withhold authority and exclude abstentions with respect to that director’s election.

 

The Nominating and Governance Committee will make a recommendation to the Board as to whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the committee’s recommendation and publicly disclose its decision, and the rationale behind it, within 90 days from the date of the certification of the election results. The director who tenders his or her resignation will not participate in the committee’s recommendation or in the Board’s decision.

 

If a majority of the members of the committee fail to receive a “majority vote” in the same election, then the independent directors on the full Board of Directors shall appoint a committee from among themselves to consider the resignations and recommend to the Board whether to accept them.

 

If a director’s resignation is not accepted by the Board of Directors, the director shall continue to serve for the balance of the term for which he or she was elected and until his or her successor is duly elected, or his or her earlier resignation or removal.

 

If a director’s resignation is accepted by the Board of Directors, then the Board of Directors may fill any resulting vacancy pursuant to the by-laws of the Company or may decrease the size of the Board of Directors pursuant to the by-laws of the Company.

 

Solicitation of Proxies

 

The Company will bear the cost of this solicitation. It is expected that the solicitation will be made primarily by mail, but regular employees (none of whom will receive any extra compensation for their activities) or representatives of the Company may also solicit proxies by telephone, e-mail or in person and arrange for brokerage houses and their custodians, nominees and fiduciaries to send proxies and proxy materials to their principals at the expense of the Company. The Company’s principal executive offices are located at 400 Wood Road, Braintree, Massachusetts, USA 02184-9114, telephone number (781) 848-7100.

 

Record Date and Voting Securities

 

Only stockholders of record at the close of business on June 3, 2010 are entitled to notice of and to vote at the meeting. On that date, the Company had outstanding and entitled to vote 24,878,661 shares of common stock with a par value of $.01 per share. Each outstanding share entitles the record holder to one vote.

CORPORATE GOVERNANCE

 

Structure of the Board of Directors

 

The Board of Directors oversees, directs and counsels executive management in conducting the business in the long-term interests of the Company and the stockholders. The Board’s responsibilities include:

 

 

The Board of Directors has eight members organized into three standing committees: the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee. Leadership is provided by an Executive Chairman and an independent Lead Director. The Executive Chairman, currently Brad Nutter, a former Chief Executive Officer of the Company, presides over meetings of the Board, prepares meeting agendas in consultation with senior management, and the Lead Director, evaluates Director candidates, and presides over all meetings of the stockholders. Our Lead Director, Ronald Gelbman, presides over Board meetings at which the Executive Chairman is not present, manages the Board’s process for self-assessment and evaluation of the Chief Executive Officer, presides over executive sessions of the non-management directors, and briefs, as appropriate, management directors about the results of such executive sessions.

 

The Board’s Role in Risk Management.  The Board is responsible for oversight of the Company’s Enterprise Risk Management (“ERM”) program. The Board focuses on the quality and scope of the Company’s risk management strategies, considers the most significant areas of risk inherent in the Company’s business strategies and operations, and ensures that appropriate risk mitigation programs are implemented by management. The Board reviews with management (a) the Company’s development and implementation of programs and policies with respect to risk identification, assessment and mitigation, (b) its system of monitoring and reviewing the effectiveness of these programs and policies and (c) the Company’s compliance with legal and regulatory requirements. The Board is also apprised of risk in connection with its general oversight of corporate matters and in its consideration of major business strategies and board decisions.

 

In addition to the full Board’s oversight of the Company’s ERM program, Board committees consider discrete categories of risk relating to their respective areas of responsibility. All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk.

 

The Board also holds executive management responsible for day-to-day risk management. The Chief Executive Officer has overall responsibility for development and maintenance of management’s ERM program. Management responsibility for discrete areas of material risk is also assigned to relevant executives. The Legal, Compliance, Quality, Regulatory, and Finance functions support the ERM program through administration of programs and policies. This responsibility also includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels. The Internal Audit group (known internally as Corporate

Analysis & Control), which reports directly to the Audit Committee of the Board, serves as the primary monitoring and testing function for compliance with company-wide policies and procedures.

 

The Company believes that the division of risk management responsibilities described above constitutes an effective program for addressing the risks inherent in the operation of the Company and the achievement of its business vision.

Meetings.  The Board of Directors meets four times per year in regular meetings to address the following areas in addition to routine or special business: spring meeting (Annual Operating Plan); summer meeting (Governance), fall meeting (Strategic Plan) and winter meeting (Succession Plan). During the last fiscal year, there were four regular meetings of the full Board of Directors of the Company. All of the directors attended at least 75% of the aggregate of (i) the total number of meetings of the full Board of Directors held while he or she was a director, and (ii) the total number of meetings held by Committees of the Board of Directors on which they served. All directors are strongly encouraged to attend the Annual Meeting of Stockholders.

Executive Sessions.  Executive sessions of the non-management directors are generally held at the beginning and end of each board meeting. During the fiscal year 2010, the Lead Director of the Board of Directors, Ronald Gelbman, presided over all such executive sessions.

 

Compensation—The Board of Directors has a Compensation Committee composed of independent directors who are not employees of the Company. Currently, the members of the Compensation Committee are Pedro Granadillo, Chairman, Susan Bartlett Foote, and Ronald Merriman. The Compensation Committee has overall responsibility for evaluating and approving the compensation plans, policies and programs of the Company related to the chief executive officer and his direct reports and administers the Company’s 2005 Long-term Incentive Plan. During the last fiscal year, there were four regular meetings of the Compensation Committee and conference calls as deemed necessary.

 

The Committee specifically:

 

 

 

Audit—The Board of Directors has an Audit Committee composed of independent directors who are not employees of the Company. Currently, the members of the Audit Committee are Ronald Merriman, Chairman, Lawrence Best, and Ronald Gelbman. The Board has determined that service by Ronald Merriman on the audit committees of three other public companies while he is serving on our Audit Committee does not impair Mr. Merriman’s ability to effectively serve on our Audit Committee. During the last fiscal year, there were four regular meetings of the Audit Committee and conference calls as deemed necessary.

 

The Audit Committee:

 

 

Governance—The Board of Directors has a Nominating and Governance Committee composed of independent directors who are not employees of the Company. Currently, the members of the Nominating and Governance Committee are Ronald Gelbman, Chairman, Pedro Granadillo, Mark Kroll, and Susan Foote (who joined April 1, 2010). The Nominating and Governance Committee recommends nominees for election as directors to the full Board of Directors. During the last fiscal year, there were four regular meetings of the Nominating and Governance Committee and conference calls as deemed necessary.

 

The Nominating and Governance Committee:

 

 

The Nominating and Governance Committee is responsible for reviewing and assessing the appropriate skills, experience, and background required for the Company’s Board of Directors. Because our business operates in regulated healthcare markets around the globe and encompasses research, manufacturing, and marketing functions which are subject to technological and market changes, the skills, experience, and background which are needed are diverse.

While the priority and emphasis of each factor change to take into account the needs of the Company, changes to the business and external trends, an assessment of Board members includes factors such as independence, experience in key business disciplines, industry background, age, gender and ethnic diversity. We do not expect directors to have the same skills and experience. The aim is to have diverse portfolio of talents and backgrounds which match those needed by the Company. The committee and the Board review and assess the importance of these factors as part of the Board’s annual self-assessment process to ensure they continue to advance the Company’s goal of creating and sustaining a Board of Directors which can support and effectively oversee the Company’s business.

 

The Nominating and Governance Committee reviews and evaluates all director nominations in the same manner. Stockholders who wish to submit candidates for consideration as nominees may submit an appropriate letter and resume to the Secretary of the Company at the Company’s executive offices in Braintree, Massachusetts.

 

When identifying director nominees, the Nominating and Governance Committee will consider the following minimum criteria:

 

 

In the case of current directors being considered for re-nomination, the Nominating and Governance Committee will also take into consideration the director’s history of attendance at Board and committee meetings, tenure as a member of the Board, and preparation for and participation in such meetings.

 

The Company’s nomination process for new Board members is as follows:

 

 

 

Interested parties and stockholders may communicate with the Board of Directors, or the non-management directors as a group, or any individual director by sending communications to the attention of the Secretary of the Company, Alicia R. Lopez, who will forward such communications to the Executive Chairman or Lead Director. Communications may also be sent via the Company’s website: http://www.haemonetics.com/site/content/investor/complaint-handling.asp.

 

The Company’s Code of Business Conduct, Governance Principles and the Charters of the Audit, the Compensation, and the Nominating and Governance committees may be viewed on the Company’s website at http://www.haemonetics.com/site/content/investor/corp_gov.asp and printed copies can be obtained by contacting the Secretary at the Company’s headquarters.

 

The Board has determined that each of the directors who has served since the beginning of fiscal 2010, with the exception of Mr. Nutter and Mr. Concannon, has no material relationship with the Company and is independent within the meaning of the Securities and Exchange Commission and the New York Stock Exchange director independence standards in effect.

 

 

Pursuant to the Articles of Organization of the Company, the Board of Directors is divided into three classes, with each class being as nearly equal in number as possible. One class of directors is elected each year for a term of three years and until their successors shall be duly elected and qualified or until their death, resignation or removal. The terms of Susan Bartlett Foote, Pedro P. Granadillo and Mark W. Kroll, Ph.D. are expiring at this annual meeting.

 

The persons named in the accompanying proxy will vote, unless authority is withheld, for the election of the nominees named below. If any such nominees should become unavailable for election, which is not anticipated, the persons named in the accompanying proxy will vote for such substitutes as the Board of Directors may recommend. Should the Board of Directors not recommend a substitute for any nominee, the proxy will be voted for the election of the remaining nominees. The nominees are not related to each other or to any executive officer of the Company or its subsidiaries.

 

The Board of Directors believes election of Susan B. Foote, Pedro P. Granadillo and Mark W. Kroll, Ph.D Directors of the Company for the ensuing 3 years is in the best interests of the Company and its shareholders and recommends a vote FOR such nominees.

 

 

 

The following table sets forth, as of May 28, 2010, certain information with respect to beneficial ownership of the Company’s common stock by: (i) each person known by the Company to own beneficially more than five percent of the Company’s common stock; (ii) each of the Company’s directors and nominees and each of the executive officers named in the Summary Compensation Table in this Proxy Statement; and (iii) all directors and executive officers as a group.

 

 

 

 

 

Section 16(a) of the Securities Exchange Act of 1934 (the “Act”) requires the Company’s directors, officers and persons who own more than 10% of the Company’s common stock to file with the Securities and Exchange Commission and the New York Stock Exchange reports concerning their ownership of the Company’s common stock and changes in such ownership. Copies of such reports are required to be furnished to the Company. To the Company’s knowledge, based solely on a review of copies of such reports furnished to the Company during or with respect to the Company’s most recent fiscal year, all Section 16(a) filing requirements applicable to persons who were, during the most recent fiscal year, officers or directors of the Company or greater than 10% beneficial owners of its common stock were complied with except for a Form 4 on one transaction for Christopher Lindop, which was not timely filed.

 

The Board has adopted a policy and procedures for the disclosure, review, approval or ratification of any transaction in which the Company or one of its subsidiaries is a participant and in which any “related person” (director, executive officer or their immediate family members, or shareholders owing 5% or more of the Company’s outstanding stock) has a direct or indirect material interest. The policy requires that transactions involving a related person be reviewed and approved in advance. The Board of Directors reviews the transaction in light of the best interests of the Company and determines whether or not to approve the transaction. The policy requires that officers, directors and employees of the Company report proposed related party transactions to the Company’s General Counsel, who will bring the proposed transaction to the attention of the Board of Directors. The Company is not aware of any transaction required to be reported under Item 404(a) of Regulation S-K promulgated by the Securities and Exchange Commission since the beginning of fiscal 2010 where the foregoing policies and procedures did not require review, approval or ratification of such transaction or where such policies and procedures were not followed.

 

As stated in the Company’s compensation philosophy, risk is a key consideration of the Compensation Committee in the development and design of compensation programs and policies. In the first quarter of fiscal year 2011, with the assistance of Management, the Compensation Committee reviewed the potential for the Company’s compensation programs and policies to have a material adverse effect on the Company. A process was developed to assess the potential risks and mitigating factors in the Company’s compensation plans, including the following considerations:

 

 

In the process of our compensation risk assessment, multiple factors were identified that mitigate potential unnecessary risk-taking, including:

 

 

The Compensation Committee will continue to be proactive in monitoring compensation risk, and to assess the potential risks of compensation programs and policies during the design and approval process. In addition, the Committee will conduct an annual compensation risk assessment to monitor ongoing compensation plans.

 

Overview

 

At Haemonetics Corporation, our executive team is accountable for and takes ownership of the short and long-term performance of the Company within a culture that requires ethical behavior and transparency. The executive compensation programs are designed to foster this result. The following Compensation Discussion and Analysis describes:

 

 

Compensation Philosophy and Objectives

 

The Company utilizes a documented compensation philosophy statement as a guideline for developing, reviewing and administering executive compensation programs. The statement is reviewed annually for continued appropriateness and updated accordingly. Our compensation philosophy drives three major objectives utilized in designing compensation programs:

 

 

As a result of the economic climate and the increased focus on the potential relationship between adverse risk and compensation plans, the Compensation Committee determined that compensation risk should become a factor in the design of our compensation plans. Therefore, in January 2010, the Compensation Committee updated the Compensation Philosophy to reflect this objective. Going forward, in the development and design of any compensation program or policy, risk will be a key consideration taken into account by the Compensation Committee. Furthermore, the Committee performed a compensation risk assessment in the first quarter of fiscal 2011, as discussed in the section titled Compensation Risk Statement.

 

To achieve the objectives of our Compensation Philosophy, the executive compensation program utilizes a combination of salary, annual cash bonuses and long-term incentives which are provided through a combination of stock options and restricted stock units. In addition, the Company provides employee benefits that are consistent with local practices and competitive markets. We do not provide any executive perquisites.

Overview of Compensation Practices

 

Role of the Compensation Committee

 

The Compensation Committee is appointed by the Board of Directors to discharge the Board’s responsibilities relating to compensation of the Company’s senior management. The Committee has overall responsibility for evaluating and approving the Company’s compensation philosophy, plans, policies and programs related to the chief executive officer and direct reports to this position.

 

Role of the Compensation Consultant

 

To apprise the Committee on the most recent changes to executive compensation and advise them on best practices, the Committee engages an executive compensation consultant. The consultant regularly attends Committee meetings to provide input on executive compensation, including competitive benchmarking analyses, long-term incentive grant strategy, discussing trends and preparing for future regulatory changes. In fiscal year 2010, the Committee utilized Pearl Meyer & Partners LLC in this capacity. The consultant is engaged by the Committee to work exclusively on Committee authorized projects. The consultant provides no other services to the Company.

 

Role of Management

 

Management provides the Committee with information in order to enable it to fulfill its responsibilities, including full transparency relative to Company financial targets and results, individual executive performance assessments, details related to achievements versus objectives and demonstrated leadership competencies. Management formulates recommendations relative to senior management compensation, other than for the chief executive officer, for Committee review and approval. The determination of compensation for the chief executive officer is not recommended by Management. Management implements and communicates decisions related to executive compensation and keeps the Committee abreast of issues and concerns relative to the Company’s ability to attract, motivate and retain the executive talent required to grow the business. It also shares analyses on compensation costs, performance metrics and other information which the Committee may request in order to carry out its role.

 

Compensation Determinations

 

With counsel from the consultant and support from Management, the Committee evaluates several different factors in establishing and maintaining the Company’s executive compensation programs and making executive compensation decisions:

 

1)  Market competitiveness through the use of a peer group and survey data,

 

2)  Individual performance and potential,

 

3)  Financial and corporate performance against company goals,

 

4)  Internal equity, and

 

5)  Analysis of compensation cost.

 

Benchmarking

 

In fiscal 2010, the Company utilized market data provided by the consultant to benchmark the competitiveness of our executive compensation program. The market data provided by the consultant were comprised of two components:

 

 

The market data for our executive positions reflect a composite of published information from our peer group and survey data. Positions residing outside the United States are compared with positions in the country in which the executive is operating for regional appropriateness. This peer group and survey data provide important information on the market for executive talent at similar companies and is used by the Committee to assist in determining an appropriate range for executive pay. However, it is not the only consideration. Performance of the individual as it relates to overall corporate results, the individual’s potential, internal equity, and our internal cost structure are other factors analyzed to determine appropriate pay levels.

 

In establishing the peer group, an appropriate list of companies is provided by the compensation consultant and reviewed annually by the Committee and Management. The primary criteria used to select the peer group are:

 

1.  Product/service similarity

 

2.  Revenues of approximately 1/2X–2X those of the Company

 

3.  Market capitalization of approximately 1/3X–3X that of the Company

 

The consultant provided recommendations for updating the peer group for fiscal 2010 to reflect ownership and/or business model changes (i.e. acquisition, divestitures, etc.). As a result of this assessment, the Committee approved the removal of four firms from the peer group due to acquisitions (Biosite, Inc.; Cytyc Corp.; PolyMedica Corp.; VIASYS Healthcare. Inc.). To replace the firms that were removed from the peer group and to ensure continued statistical reliability, the Committee also approved the addition of three firms to the Peer Group for fiscal 2010 (Illumina, Inc.; Integra Lifesciences Holdings Corp.; Myriad Genetics, Inc.).

 

The peer group approved by the Compensation Committee for fiscal year 2010 is detailed below:

 

 

This peer group differs from the peer groups used in the corporate performance graph contained in our annual report on Form 10-K. The Committee believes that the S&P 500 Index and the S&P Health Care Equipment Index contain many companies which are significantly different in size and scope from the Company. The inclusion of these companies could have the effect of distorting the Committee’s understanding of the market for executive talent. As a result, the Committee has used a more targeted sampling of companies that are closer in size and scope to the Company.

 

Evaluating Executive Performance

 

Consistent with the performance period of the broader organization executive performance was reviewed by the Compensation Committee in July. The performance evaluation is based on factors such as:

 

 

 

 

The chief executive officer provides a performance rating to the Committee for each executive and a merit increase recommendation, where appropriate. Merit increases may be in the form of base salary adjustments or an enhancement in short-term incentive pay opportunity to achieve the appropriate balance between fixed and performance-based pay. Annual merit increases are not guaranteed. Overall corporate performance is evaluated in conjunction with any decision to provide merit increases.

 

Similarly, executive compensation levels are reviewed at the July Compensation Committee meeting. Salary changes related to promotions may be addressed by the Committee closer to the time of the promotion.

 

Compensation levels for the executive officers named in the Summary Compensation Table other than the CEO and the Executive Chairman of the Board are recommended by the chief executive officer and approved annually by the Compensation Committee at the July Committee meeting. The Committee reviews and approves merit recommendations and evaluates total cash compensation levels based on market competitiveness and short and long term performance of the individuals. Any adjustment to salary or bonus target is discussed and approved by the Committee. Long-term incentive compensation for all named executive officers, other than the Executive Chairman, is determined by the Committee in late October in conjunction with our succession planning process. The Executive Chairman is eligible to receive long-term incentive compensation equal in amount and form to other members of the Board of Directors.

 

Components of Haemonetics’ Executive Compensation Program

 

Total Compensation

 

Total compensation levels are targeted at the median of the market, with the desire to pay above the median range for exceptional corporate and individual performance. Performance below expectations results in actual pay levels below the median of the market.

 

To promote a high performance culture that results in shareholder value growth, compensation programs are aligned with three scopes of performance:

 

1.  Overall company performance

 

2.  Business unit/regional performance

 

3.  Individual performance

 

Performance within each element is assessed against pre-determined performance measures, both financial and non-financial, that support corporate goals and increased shareholder value.

 

The amounts attributed to base salary, annual bonus and long-term incentives are determined based on market norms combined with our desire to align pay with the best interests of shareholders. While there is no rigid formula to determine pay mix, our current policy is to balance the short and long-term focus of our compensation elements in order to reward short-term performance while emphasizing long-term value creation. These objectives are achieved by placing considerable weight on long-term, equity

based compensation while also offering enough cash and short-term compensation to attract and retain executive talent. We use market data from our peer group to guide the analysis of the appropriate mix of cash, bonus and long-term compensation. The Committee analyzes this pay mix annually to determine if any changes are necessary.

 

Base Salary

 

Base salary is provided to compensate for individual technical and leadership competencies required for a specific position and to provide economic security. The target base salary level will vary based on the field in which each executive operates, the scope of each position, and the experience and qualifications the individual brings to the role. The market level is analyzed annually in accordance with our compensation philosophy as discussed above. Actual base salary levels are a function of the target market for a specific position, individual performance of each executive, experience and qualifications of the individual, and an assessment of internal equity amongst peers.

 

Base salaries can increase through the merit process based on results associated with the individual’s performance rating or as a result of changes in roles and responsibility that result in a position taking on a larger scope. Executives are reviewed annually against ten established leadership competencies and individual performance versus goals established at the start of each fiscal year. Performance review results are determined by the CEO and reviewed by the Compensation Committee. Merit increases are approved by the Compensation Committee.

 

Annual Incentive Program

 

The annual incentive program is a cash bonus component of executive compensation and is designed to provide incentives for executives to execute on the key performance metrics for any given fiscal year. All of our Named Executive Officers are eligible to participate in the annual incentive program with the exception of the Executive Chairman.

 

The program is designed to emphasize three elements of performance, specifically:

 

 

In concert with the realignment of our corporate leadership structure (described in more detail in the section titled “Compensation of the Chief Executive Officer and other Named Executive Officers”), the goal weighting for our eligible Named Executive Officers (other than the CEO) was modified in fiscal 2010 to provide a greater emphasis on corporate objectives. In fiscal 2009, 70% of stated potential cash bonus was dependent upon achievement of corporate revenue and operating income goals while 30% was dependant on business unit/regional or individual goals. For fiscal 2010 these weightings were shifted to 80% dependant upon corporate financial goals and 20% on business unit/regional or individual goals, consistent with the weightings for our chief executive officer. For executives without direct responsibility for product sales, individual goals relate to specific objectives established at the beginning of the fiscal year. As a result of this goal weighting, the size of payments made to senior executives is largely determined by overall Company financial performance.

 

Payments are generally made under this program only when threshold levels of corporate revenue and operating income are met. In the event that corporate performance falls short of threshold expectations, the Committee has the discretion, in light of overall Company performance, to provide for payments to the executives. The total amount of money available for payments is determined by the Company’s financial performance.

 

The number and type of performance targets included in the plan and specific performance levels for each target are determined annually at the beginning of the fiscal year based on the focus for that

fiscal year. To reinforce profitability, the ratio of revenue to operating income is weighted more heavily toward operating income. For fiscal year 2010, the weighting of performance metrics were as follows:

 

Corporate Component: 80% of target bonus

 

 

And

 

Business unit/Regional Component: 20% of target bonus

 

 

Or

 

Individual Component: 20% of target bonus

 

 

The following is an example of how the corporate portion of the bonus would be paid. The same calculation would be utilized to determine the business unit/regional component of the plan. The maximum payout percentage for the individual component of the plan is 100%.

 

The calculation is as follows:

 

[Target Bonus]  X  [Percentage of Bonus Aligned with the Corporate Portion of the Plan]  X  [Bonus Payout Percentage at a given performance level] = [Corporate Portion of Annual Bonus].

 

Bonus targets at 100% achievement of corporate and business unit/regional or individual goals are aligned with the mid-range of the market for each position and overachievement would result in payment above the average for the market.

 

The table below details the threshold, target, and maximum performance levels for the corporate portion of the annual bonus.

 

 

 

Long-Term Incentive Program

 

The Company’s long-term incentive program provides incentives to grow shareholder value, reward long-term corporate performance, and promote employee commitment and retention through stock ownership while also carefully managing compensation expense and dilution. At the executive level, where individual performance is most closely aligned with the financial performance of the business, the objectives of this program are:

 

 

 

In support of our pay for performance philosophy, special long-term cash or equity awards that vest over time have also been used to recognize and reward the performance of specific individuals and the importance of their role to the long-term strategy of the business.

 

For fiscal year 2010, grants were delivered in the form of stock options and time-vested restricted stock units, each having its own role in the total compensation offered.

 

 

 

 

 

In allocating RSUs, an RSU is deemed to be equivalent to four stock options. This does not necessarily reflect the valuation of the RSUs for purposes of determining stock-based compensation expense.

 

Grants were provided to a select group of executives and Vice Presidents one level below executives, based on their importance to our corporate strategy. A small pool of long-term incentive awards continues to be available to recognize and reward key employees below these levels with the objective of long-term retention. The weighting of stock options and RSUs depends on the executive’s ability to directly affect shareholder value; the more direct the influence, the more stock options are used. The ratio of stock options to RSUs for the Executive Chairman, Executive Council and Operating Committee is detailed below:

 

 

For Named Executive Officers other than the Executive Chairman, grant values were determined using a value-based model that takes into account market competitiveness, specific roles, individual performance and potential and the resulting compensation expense. We target the mid-range of the market in determining the value of long-term incentive grants.

 

The Executive Chairman received an equity grant with a grant value equal to the equity grants awarded to members of the Company’s Board of Directors. For fiscal 2010, this value was $130,000.

 

Grant values are translated into a number of stock options and restricted stock units based on the Black Scholes value on the date of grant. For example, an Executive Council grant of $300,000 would be translated into stock options and restricted stock units as follows:

 

Example Grant Assumptions:
Grant value =$300k
Black Scholes Value = $19.00

Value provided in stock options = $300k * 80% = $240k; Value provided in RSUs = $300k * 20% = $60k

 

 

Other than grants to the Executive Chairman, employee stock option and RSU awards generally vest 25% per year over four years. In the case of the Executive Chairman (and non-employee members of the Board of Directors), stock option and RSU awards fully vest on the one-year anniversary of the date of grant. Stock options must be exercised within seven years of the date of grant, after which they are forfeited. The exercise price of all stock options is the grant date fair market value, which is the average of the high and low trading price of stock on the date of grant. Details of the grant awards are provided in the accompanying tables beginning on page 30.

 

Executive Benefits and Perquisites

 

Executives are provided a competitive benefits program that consists of health, life insurance, disability, and retirement benefits on the same basis as non-executive employees. Currently, there are no benefit programs or special perquisites set up for the exclusive use of executives.

 

Retirement Benefits

 

United States-based executives are eligible to participate in the Company’s tax-qualified 401(k) plan for United States-based employees. Their salary and annual incentive awards are treated as eligible pay under the Company 401(k) plan. The Company does not currently maintain any defined benefit pension or non-qualified plans for United States based executives. Outside the United States, retirement plans are determined based on local practices in the country of operation.

 

Compensation of the Chief Executive Officer and other Named Executive Officers

 

Leadership Structure Realignment

 

In connection with the Board of Directors naming Brian Concannon to succeed Brad Nutter as our President and Chief Executive Officer, our leadership structure was realigned to better reflect that of a rapidly growing global organization. In the past, the Company utilized the Operating Committee and Corporate Leadership Team as the primary mechanisms to run the Company. In February 2009, the following operating structures were assembled to plan and implement our business:

 

 

Each Named Executive Officer other than the Executive Chairman is a participant in each of the three groups described above. The Executive Chairman is not a member of any of these groups. Membership in the above groups impacts participation in the Company’s Executive Share Ownership Program as well as coverage by change in control agreements.

 

Chief Executive Officer Compensation

 

On April 2, 2009, Mr. Concannon was elected to the Company’s Board of Directors and appointed to his new positions. The Chief Executive generally has three components to his compensation: base

salary, annual incentive plan payment and equity compensation. All three components are dependent on the Company’s performance.

 

On April 2, 2009, the Company’s Board of Directors set Mr. Concannon’s bonus targets and base salary for fiscal 2010. In determining Mr. Concannon’s total cash compensation and long-term incentive compensation, the Board considered external market data, the Company’s performance, the compensation of the previous CEO, and past equity awards. At the close of each fiscal year, the Board of Directors evaluates the chief executive officer’s performance based upon the level of achievement of Company financial goals and performance versus individual goals and makes compensation decisions accordingly.

 

Mr. Concannon received an annual salary of $550,000 and was eligible for a target bonus of $412,500. In addition, the Board also approved a grant of options for the purchase of an aggregate of 32,845 shares of the Company’s common stock and granted 2,053 restricted stock units under the 2005 Long-Term Incentive Compensation Plan for Mr. Concannon. All such options and restricted stock units vest at the rate of 25% per year over the 4 years following the grant date. All of such options were granted at an exercise price of $55.37 per share.

 

Consistent with the annual incentive plan, Mr. Concannon’s fiscal 2010 annual incentive had 80% of his potential payment determined by the corporate portion of the plan and 20% based on his individual goals. In deciding whether to make annual incentive payments to Mr. Concannon and the other executive officers, the Committee considered the Company’s overall performance and results in relationship to the performance goals set in April 2009. With respect to revenue and operating income, results were achieved by 97.6% and 98.0% respectively compared with target performance metrics for fiscal year 2010. The Company’s financial performance resulted in 70% payment for the corporate revenue component and 90% for the corporate operating income component of the Plan. The weighted average payout for this portion of the plan is 84%.

 

Mr. Concannon’s corporate performance payment was calculated as follows:

 

[Target Bonus]  X  [Percentage of Bonus Aligned with the Corporate Portion of the Plan]  X  [Bonus Payout Percentage at a given performance level] = [Corporate Portion of Annual Bonus].

 

For Mr. Concannon this equals:

 

$412,500 X 80% X 84% = $277,200

 

Mr. Concannon’s non-financial goals were:

 

 

The Board of Director’s evaluation of Mr. Concannon’s completion of these goals was 99% completion. The individual goal component of the plan is funded based on operating income achievement. For FY10 the individual component was funded at 90%. As a result, the calculation of the personal portion of his bonus calculation is as follows:

 

$412,500 X 20% X 90% X 99% = $73,508

 

Mr. Concannon’s total payment was $350,708.

 

In addition, Mr. Concannon received a long-term incentive award in October in accordance with our standard grant timing worth $1,545,700; 80% distributed as stock options and 20% distributed as restricted stock units under the Company’s 2005 Long-Term Incentive Compensation Plan. The options and restricted stock units vest at the rate of 25% per year over the four years following the grant date, October 27, 2009, provided Mr. Concannon remains an employee of the Company. The actual number

of stock options and restricted stock units were determined based on the Black Scholes Value on the effective date of October 27, 2009.

 

The Company also entered into a new change in control agreement with Mr. Concannon at the time of his promotion. Under the agreement, if Mr. Concannon’s employment is terminated or he suffers a material diminution of compensation or responsibilities after a change in control, he will be entitled to 2.99 times his then base salary and target bonus. He will also be entitled to receive a payment equal to the cost of providing his medical, dental, life and disability insurance coverage for a period of 3 years, and outplacement services. The agreement does not provide cash payments immediately upon a change in control, but instead requires a “double trigger;” a change in control followed by (i) elimination of Mr. Concannon’s full time position, and (ii) a failure to offer to employ him in a comparable or better position in the then current location on a full-time basis at comparable or better rate of pay. An excise tax gross up provision is not contained within Mr. Concannon’s change in control agreement.

 

Under the agreement, the vesting of Mr. Concannon’s equity awards granted on and after April 2, 2009 which vest solely by reason of continued employment with the Company will be accelerated by a change in control in two circumstances. One, if the successor corporation refuses to assume or continue the equity awards or to substitute similar equity awards for those outstanding immediately prior to the change in control, then those equity awards vest. Two, if Mr. Concannon is eligible for the severance described above after an acquisition where the successor corporation does assume or continue the equity awards or substitutes a similar award, then those equity awards vest. For purposes of the agreement, a change of control is defined as a person or group acquiring 35% or more of the Company’s stock, a sale of substantially all the assets of the Company to an unrelated person, and certain mergers, reorganizations, consolidations and share exchanges.

 

Executive Chairman Compensation

 

As noted above, Mr. Nutter stepped down as President and Chief Executive Officer of the Company on April 2, 2009 and assumed the role of Executive Chairman of the Board of Directors. In this capacity, Mr. Nutter remains a regular employee of the Company on a part-time basis. Mr. Nutter’s compensation as Executive Chairman consists of base salary and long-term incentive compensation. In determining Mr. Nutter’s fiscal 2010 compensation, the Board of Directors considered external market data, compensation of the Board of Directors, and Mr. Nutter’s ongoing role with the Company.

 

On April 2, 2009 the Board of Directors set Mr. Nutter’s base salary for fiscal 2010 at $300,000 and determined that Mr. Nutter would no longer be eligible for the annual incentive plan. In addition, the Board decided that Mr. Nutter would be eligible for equity on the same basis and frequency as the non-employee Board members. For fiscal 2010, Mr. Nutter received an equity grant worth $130,000 distributed as 80% stock options and 20% RSUs. This equates to a grant of 367 RSUs and of 5,879 options to purchase common stock. Both the RSUs and options will fully vest on the one-year anniversary of the date of grant.

 

Other Executive Officers

 

Each of the other executive officers named in the Summary Compensation Table below had three components to their fiscal year 2010 compensation: base salary, annual incentive plan payment and long-term incentive compensation. All three components are dependent on the Company’s financial performance and the named executive officer’s respective individual performance.

 

With respect to fiscal year 2010, executive officers other than Mr. Concannon and Mr. Nutter were awarded merit increases to their base salary based on their individual and business unit performance, amount and timing of last base salary increase, and the market competitiveness of their current compensation.

 

In October 2009, the Committee approved grants of equity under the Company’s 2005 Long-Term Incentive Compensation Plan to each of the following named executive officers: Mr. Allen, Mr. Gordon,

Mr. Lindop, and Ms. Lopez. These equity grants were made consistent with our equity compensation policies and reflect the Committee’s consideration of individual achievement, the market for executives of similar experience and responsibility, the size of past grants, and expense and dilution considerations.

 

Annual bonus payments were approved in June 2010 aligned with the Compensation Committee decision discussed in the Annual Incentive section of the document and in the discussion of Mr. Concannon’s compensation. Furthermore, with respect to individual performance objectives each executive officer was evaluated against individual goals related to the following corporate MBOs:

 

 

Executive Share Ownership Program

 

To strengthen the alignment between the long-term interests of executives and stockholders, the Company maintains an executive share ownership program. This program covers the CEO, the Executive Council, the Operating Committee, other Vice President level leaders, and the Board of Directors.

 

In October 2009 and January 2010 the Compensation Committee approved several updates to the Executive Share Ownership Program in recognition of our realigned leadership team, market trends, and analysis by our consultant. These changes included:

 

 

      Prior Guidelines

 

 

      Current Guidelines

 

 

Participants must have an ownership level equal to a multiple of base salary (or cash retainer in the case of Board members) as detailed in the table below. Shares that satisfy the ownership requirement are as follows:

 

 

As of the last analysis all Named Executive Officers and Directors were in compliance or within the grace period. The grace period is defined as five years from the date of initial participation in the Executive Share Ownership Program. As of the effective date of the Compensation Committee changes, those executives whose ownership guidelines increased as a result of the changes noted above will be allowed an additional 2.5 years to reach the ownership guidelines from the effective date of the modified agreements.

 

Equity Grant Practices

 

All equity grants are determined and delivered in accordance with a formal policy. The policy describes the award determination, the process utilized to gain approval for awards and award timing. Annual grant dates and all other grants are aligned with the date on which the Committee approves the grants and grant timing is in accordance with the policy as described below.

 

Determination of Option Grant Prices

 

The base price of options is always the fair market value on the date of grant, in accordance with our long-term incentive policy. Under the 2005 Long-Term Incentive Compensation Plan fair market value is the average of the high and low trading prices on the date of grant. The differences between the closing price and this computation are disclosed in the Grants of Plan-Based Awards table.

 

Timing of Regular Equity Grants

 

Grants are typically provided upon hire based on the need to attract key talent at the executive level, and as part of the annual grant cycle. The Company does not generally utilize equity on an ad-hoc basis to reward individual performance. New hire grants are approved at a regularly scheduled Compensation Committee meeting following the hire date of an individual. The Committee reviews the grant details including the grant amount, the role of the executive, and the background of the executive in making the approval decision. The Committee does not delegate approval of new grants to Management. If the grant is an option grant, the grant value is translated into the number of options based on the Black Scholes value on the date of grant (the date of the Committee meeting) and the exercise price of the option is the fair market value of the stock on the date of the Committee meeting.

 

The timing of the annual grant is in October of each year. Long-term incentive grants are never timed to correlate with specific business events.

 

Severance Benefits

 

The Company provides change in control agreements to members of senior management in order to provide executive leadership retention in the event of, or contemplation of, a change in control of the Company and provide executives with financial protection in case of loss of employment. Historically,

separate agreements have existed with all members of senior management regarding a change in control. However, in recognition of evolving market trends and governance best practices, the Company initiated a reduction in both the number of executives covered by change-in-control agreements and the benefits offered by these agreements in fiscal 2010. These changes include the following:

 

 

These agreements do not provide cash payments immediately upon a change in control, but instead require a “double trigger;” a change in control followed by (i) elimination of the executive’s full time position, and (ii) a failure to offer to employ the executive in a comparable or better position in the then current location on a full-time basis at comparable or better rate of pay. See “Potential Payments upon Termination or Change in Control” for additional information.

 

In general, we do not provide employment agreements to members of Senior Management in the U.S. other than the agreements covering change in control. We may occasionally make exceptions to this practice in the case of acquisitions or to be consistent with prevailing local labor practices outside the U.S.

 

In fiscal 2010, the only Named Executive Officer with an employment agreement was Mr. Gordon, consistent with prevailing labor practices in Switzerland. In the case of involuntary termination, Mr. Gordon’s employment agreement provides for a 4-month notice period. Mr. Gordon is entitled to payment of his base salary during this period whether or not he is asked to work until the end of his notice period.

 

Impact of Tax and Accounting on Compensation

 

Deductibility of Compensation

 

Internal Revenue Code Section 162(m) limits the amount the Company can deduct for non-performance based compensation to $1,000,000 for those named executive officers listed in the Summary Compensation Table. In fiscal 2010, all compensation paid to such officers was fully deductible. Although the Company has not adopted a formal policy, it is the Compensation Committee’s intent to compensate the executive team with payments that are deductible under the Internal Revenue Code.

 

Stock-Based Compensation Expense

 

The Company began recognizing stock-based compensation expense under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 (formerly, FASB Statement 123R) beginning in April, 2006. In determining the appropriate fiscal 2010 long-term incentive grant levels the Company sought to balance its long-term incentive goals with the need to reduce shareholder dilution and manage stock compensation expense. To strike this balance the Committee analyzes stock compensation expense as a percentage of revenue and its impact on earnings, and basic and diluted earnings per share.

 

Recapture Provision

 

To further align the executive compensation program with the interests of shareholders and our culture of ethical behavior, the Committee approved the addition of a recapture provision to the annual incentive plan. Under this provision, if the Company is required to make an accounting restatement due

to a material non-compliance with any financial reporting requirement under the securities laws as a result of misconduct, executives would be required to return any bonus payment to the extent permitted by governing law, to the degree that such payment was based on the achievement of financial results which were adjusted in the restatement. This same treatment may be extended to non-executive participants, where applicable, and to any employee whose actions violated the Haemonetics Code of Business Conduct.

 

The Compensation Committee of the Board of Directors of Haemonetics Corporation has reviewed and discussed with Management the Compensation Discussion and Analysis contained in this Proxy Statement and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended April 3, 2010 for filing with the Securities and Exchange Commission.

 

THE COMPENSATION COMMITTEE

 

Pedro P. Granadillo, Chairman
Susan Bartlett Foote
Ronald L. Merriman

 

The following table summarizes the compensation of the Named Executive Officers for the fiscal years ended April 3, 2010, March 28, 2009, and March 29, 2008. The Named Executive Officers are the Company’s Chief Executive Officer, Executive Chairman of the Board, Chief Financial Officer, and three other most highly compensated executive officers ranked by their total compensation in the table below. The Executive Chairman served as our Principal Executive Officer (President and Chief Executive Officer) through April 2, 2009, necessitating his inclusion as a Named Executive Officer for fiscal 2010.

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2010 Change in Control Program Changes

 

The Compensation Committee engaged the consultant to complete a competitive review of change in control agreements and provisions in the competitive market place in January 2009. The Committee utilized the information provided in this analysis to assist in the design of the change in control agreement for Mr. Concannon upon his appointment to President and CEO. The Committee also thought it appropriate at this time to review the agreements of our other executives and to address emerging market trends and best practices. With the endorsement of the Committee, the executive team agreed to modify their own change in control agreements as follows:

 

Executive Council—

 

 

 

Operating Committee—

 

 

 

Change in Control Benefits Summary

 

As of April 3, 2010 the change in control agreements provide that covered executives, including all Named Executive Officers other than Mr. Nutter, shall be entitled to the following:

 

 

For purposes of the agreements, a Change of Control is defined as a person or group acquiring 35% or more of the Company’s stock, a sale of substantially all the assets of the Company to an unrelated person, and certain mergers, reorganizations, consolidations and share exchanges.