UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to Section 240.14a-12

 

WATERS CORPORATION

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

(Set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 2, 2009

 

Dear Stockholder:

 

On behalf of the Board of Directors of Waters Corporation (“Waters” or the “Company”), I cordially invite you to attend the Annual Meeting of Stockholders (the “Meeting”) of the Company to be held at Waters Corporation, 34 Maple Street, Milford, Massachusetts 01757 on May 12, 2009 at 11:00 a.m., local time.

 

The notice of Meeting, Proxy Statement and proxy card from Waters are enclosed. You may also read the notice of Meeting, the Proxy Statement and Annual Report on the Internet at http://www.proxydocs.com/wat.

 

In 2008, Waters adopted the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the Internet. We believe that this e-proxy process expedites stockholders’ receipt of proxy materials, lowers the costs and reduces the environmental impact of our annual meeting. On April 2, 2009, we mailed to stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement and Annual Report and vote by Internet. The Notice contains instructions on how you can (i) receive a paper copy of the Proxy Statement and Annual Report, if you only received a Notice by mail, or (ii) elect to receive your Proxy Statement and Annual Report over the Internet.

 

The matters scheduled to be considered at the Meeting are (i) to elect directors to serve for the ensuing year and until their successors are elected, (ii) to approve the Company’s 2009 Employee Stock Purchase Plan, (iii) to approve the Company’s Management Incentive Plan, (iv) to ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009 and (v) to consider and act upon any other matters which may properly come before the Meeting or any adjournment thereof. These matters are more fully explained in the Proxy Statement that you are encouraged to read in its entirety.

 

The Company’s Board of Directors values and encourages stockholder participation at the Meeting. It is important that your shares be represented, whether or not you plan to attend the Meeting. Please take a moment to vote on the Internet, by telephone, or sign, date and return your proxy card in the envelope provided even if you plan to attend the Meeting.

 

We hope you will be able to attend the Meeting.

 

Sincerely,

 

 

Douglas A. Berthiaume

Chairman, President and

Chief Executive Officer

 

 

 

WATERS CORPORATION

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

Notice is hereby given that the Annual Meeting of Stockholders (the “Meeting”) of Waters Corporation (“Waters” or the “Company”) will be held at Waters Corporation, 34 Maple Street, Milford, Massachusetts 01757 on May 12, 2009 at 11:00 a.m., local time, for the following purposes:

 

 

In accordance with the provisions of the Company’s bylaws, the Company’s Board of Directors has fixed the close of business on March 18, 2009 as the record date for the determination of the holders of Common Stock entitled to notice of and to vote at the Meeting.

 

The Proxy Statement and Annual Report and the means to vote by Internet are available at http://www.proxydocs.com/wat.

 

By order of the Board of Directors

 

 

Mark T. Beaudouin

Vice President

General Counsel and Secretary

 

Milford, Massachusetts

April 2, 2009

TABLE OF CONTENTS

 

 

Notice of Electronic Availability of Proxy Statement and Annual Report

 

As permitted by the Securities and Exchange Commission (“SEC”) rules, Waters Corporation is making this Proxy Statement and its Annual Report available to its stockholders electronically via the Internet. On April 2, 2009, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this Proxy Statement and our Annual Report and vote by Internet. If you received the Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and Annual Report electronically or to receive a printed version in the mail. The Notice also instructs you on how you may submit your proxy over the Internet or by mail.

 

Important Notice Regarding Availability of Proxy Materials:

 

The Proxy Statement and Annual Report are available at http://www.proxydocs.com/wat.

 

Whether or not you expect to attend the Meeting in person, we urge you to vote your shares by phone, via the Internet, or by signing, dating, and returning the enclosed proxy card at your earliest convenience. This will ensure the presence of a quorum at the Meeting. Promptly voting your shares will save us the expense and extra work of additional solicitation. Submitting your proxy now will not prevent you from voting your stock at the Meeting if you want to do so, as your vote by proxy is revocable at your option.

 

To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the Meeting in person. Stockholders have three options for submitting their votes: (1) via the Internet, (2) by phone or

(3) by mail, using a paper proxy card. If you have Internet access, we encourage you to record your vote on the Internet. It is convenient for you, and it saves the Company significant postage and processing costs. In addition, when you vote via the Internet or by telephone prior to the Meeting date, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted. Refer to your Notice, or the email you received for electronic delivery of the Proxy Statement for further instructions on voting.

 

 

If you vote your proxy by Internet or by telephone, please do NOT mail back the proxy card. You can access, view and download this year’s Proxy Statement and Annual Report at http://www.proxydocs.com/wat.

WATERS CORPORATION
34 Maple Street
Milford, Massachusetts 01757

 

 

PROXY STATEMENT
Annual Meeting of Stockholders
May 12, 2009, 11:00 a.m.

 

 

This Proxy Statement is being furnished by the Board of Directors (the “Board”) of Waters Corporation (“Waters” or the “Company”), in connection with the Board’s solicitation of proxies (each a “Proxy” and, collectively, “Proxies”), for use at the 2009 Annual Meeting of Stockholders (the “Meeting”) to be held on May 12, 2009 at 11:00 a.m., local time, at the Company’s headquarters located at 34 Maple Street, Milford, Massachusetts 01757. Solicitation of Proxies, which is being made by the Board, may be made through officers and regular employees of the Company by telephone or by oral communications with stockholders following the original solicitation. No additional compensation will be paid to officers and regular employees for such Proxy solicitation. The Company has hired the Altman Group, Inc. to do a broker solicitation for a fee of $4,500, plus reasonable out-of-pocket expenses. Expenses incurred in connection with the solicitation of Proxies will be borne by the Company.

 

VOTING MATTERS

 

The representation in person or by Proxy of a majority of the outstanding shares of common stock of the Company, par value $.01 per share (the “Common Stock”), entitled to vote at the Meeting is necessary to provide a quorum for the transaction of business at the Meeting. Shares can only be voted if a stockholder is present in person, has voted via the Internet or by telephone, or is represented by a properly signed Proxy. Each stockholder’s vote is very important. Whether or not you plan to attend the Meeting in person, please vote over the Internet or sign and promptly return the enclosed Proxy card, which requires no additional postage if mailed in the United States. All signed and returned Proxies will be counted towards establishing a quorum for the Meeting, regardless of how the shares are voted.

 

Shares represented by Proxy will be voted in accordance with your instructions. You may specify how you want your shares to be voted by voting on the Internet, by telephone, or marking the appropriate box on the Proxy card. If your Proxy card is signed and returned without specifying how you want your shares to be voted, your shares will be voted in favor of the proposals made by the Board, and as the individuals named as Proxy holders on the Proxy deem advisable on all other matters as may properly come before the Meeting.

 

Any stockholder voting by Proxy has the power to revoke the Proxy prior to its exercise either by voting by ballot at the Meeting, by executing a later dated Proxy or by delivering a signed written notice of the revocation to the office of the Secretary of the Company at 34 Maple Street, Milford, Massachusetts 01757 before the Meeting begins. The Proxy will be voted at the Meeting if the signer of the Proxy was a stockholder of record on March 18, 2009 (the “Record Date”).

 

Representatives of the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, are expected to be present at the Meeting. They will have the opportunity to make statements if they desire to do so and will be available to respond to appropriate questions.

 

As of the Record Date, there were 96,406,901 shares of Common Stock outstanding and entitled to vote at the Meeting. Each outstanding share of Common Stock is entitled to one vote. This Proxy Statement and form of Proxy is first being made available to the stockholders on or about April 2, 2009. A list of the stockholders entitled to vote at the Meeting will be available for inspection at the Meeting and for ten days prior to the meeting at the Company’s headquarters for proper purposes relating to the Meeting.

MATTERS TO BE ACTED UPON

 

 

Nine members of the Board (the “Directors”) are to be elected at the Meeting, each to hold office until his or her successor is elected and qualified or until his or her earlier resignation, death or removal. It is intended that the Proxies in the form enclosed with this Proxy Statement will be voted for the nominees set forth below unless stockholders specify to the contrary in their Proxies or specifically abstain from voting on this matter.

 

The following information pertains to the nominees, their principal occupations for at least the last five-years, certain directorships and their ages as of April 2, 2009.

 

Douglas A. Berthiaume, 60, has served as Chairman of the Board since February 1996 and has served as President, Chief Executive Officer and a Director of the Company since August 1994 (except from January 2002 to March 2003, during which time he did not serve as President). From 1990 to 1994, Mr. Berthiaume served as President of the Waters Chromatography Division of Millipore Corporation, the predecessor business of the Company, which was purchased in 1994. Mr. Berthiaume is the Chairman of the Children’s Hospital Trust Board, and a trustee of the Children’s Hospital Medical Center, The University of Massachusetts Amherst Foundation, and a director of Genzyme Corporation.

 

Joshua Bekenstein, 50, has served as a Director of the Company since August 1994. He is a Managing Director of Bain Capital, LLC, where he has worked since its inception in 1984. Mr. Bekenstein is a director of Bombardier Recreational Products, Inc., Toys R’Us, Bright Horizons Family Solutions, Inc., Dollarama, Michaels Stores, Inc. and Burlington Coat Factory Warehouse Corporation.

 

Michael J. Berendt, Ph.D., 60, has served as a Director of the Company since March 1998. Dr. Berendt is the President and Chief Executive Officer of Aegera Therapeutics Inc., a position he assumed in March 2006. From August 2004 to December 2005, Dr. Berendt served as Managing Director of Research Corporation Technologies. From November 2000 to August 2004, Dr. Berendt served as Managing Director of AEA Investors. Dr. Berendt also worked for 18 years, from 1982 to 2000, in the pharmaceutical industry where he served in a number of senior management positions including Senior Vice President of Research for the Pharmaceutical Division of Bayer Corporation, and a Group Director of Drug Discovery at Pfizer, Inc. Dr. Berendt has served as a director of Onyx Pharmaceuticals, Myriad Genetics, Inc., Catalyst Biosciences and Northstar Neuroscience.

 

Edward Conard, 52, has served as a Director of the Company since August 1994. Mr. Conard is an independent director and investor. He was a Managing Director of Bain Capital, LLC from March 1993 to December 31, 2007. Mr. Conard was previously a Director of Wasserstein Perella and Company, an investment banking firm that specializes in mergers and acquisitions, and a Vice President of Bain & Company heading up the firm’s operations practice area. Mr. Conard is a director of Unisource Worldwide, Inc., Broder Brothers and Sensata Technologies, Inc.

 

Laurie H. Glimcher, M.D., 57, has served as a Director of the Company since January 1998. Dr. Glimcher has been Irene Heinz Given Professor of Immunology at the Harvard School of Public Health and Professor of Medicine at Harvard Medical School since 1991. Dr. Glimcher is a director of Bristol-Myers Squibb Company. She is a Fellow of the American Academy of Arts and Sciences and a member of the National Academy of Sciences and the Institutes of Medicine of the National Academy of Sciences.

 

Christopher A. Kuebler, 55, has served as a Director of the Company since May 2006. Mr. Kuebler served as Chairman and CEO of Covance Inc., and its predecessor companies from November 1994 to December 2004. He served as Chairman during 2005. Prior to joining Covance, Mr. Kuebler spent nearly 20 years in the pharmaceutical industry, at Abbott Laboratories, Squibb Inc. and Monsanto Health Care. Mr. Kuebler is a director of Nektar Therapeutics.

 

William J. Miller, 63, has served as a Director of the Company since January 1998. Mr. Miller is an independent director and investor. From April 1996 to November 1999, Mr. Miller served as Chief Executive Officer and Chairman of the Board of Directors of Avid Corporation, where from September 1996 to January 1999 he served as President. From March 1992 to September 1995, Mr. Miller served as Chief Executive Officer of Quantum Corporation. From May 1992 to September 1995, Mr. Miller served as a member of the Board of Directors

of Quantum Corporation and from September 1993 to August 1995, he served as Chairman of the Board of Directors. From 1981 to March 1992, he served in various positions at Control Data Corporation, most recently as Executive Vice President and President, Information Services. Mr. Miller is a director of Nvidia Corporation, Digimarc Corporation, Glu Mobile Inc., and Overland Storage, Inc.

 

JoAnn A. Reed, 53, has served as a Director of the Company since May 2006. Ms. Reed is an advisor to the Chief Executive Officer of Medco Health Solutions, Inc. She served as Senior Vice President, Finance and Chief Financial Officer of Medco Health Solutions from 2002 to March 2008. From 1992 to 2002 she served as Senior Vice President, Finance. She joined Medco Containment Services, Inc. in 1988. Her prior experience includes CBS, Inc., Aetna/American Re-insurance Co., Standard and Poor’s, and Unisys/Timeplex. Ms. Reed is a director of American Tower and a trustee of St. Mary’s College of Notre Dame.

 

Thomas P. Salice, 49, has served as a Director of the Company since July 1994. Mr. Salice is a Managing Member of SFW Capital Partners, LLC, a position he assumed in January 2005. From June 1989 to December 2004 Mr. Salice served in a variety of capacities with AEA Investors, Inc. including Managing Director, President and Chief Executive Officer and most recently as Vice-Chairman from October 2002 through 2004. Mr. Salice is a Director of Mettler-Toledo International, Inc.

 

Required Vote: Recommendation of the Board of Directors

 

With respect to the election of Directors of the Company, a nominee for director shall be elected to the Board by a majority vote (i.e. the votes cast for such nominee’s election exceed the votes cast against such nominee’s election), except that, Directors will be elected by plurality vote at any meeting of stockholders for which the number of nominees exceeds the number of directors to be elected. If an incumbent director fails to be re-elected by a majority vote when such a vote is required and offers to resign, and if that resignation is not accepted by the Board, such director shall continue to serve until the next annual meeting and until his or her successor is duly elected, or his or her earlier resignation or removal. If an incumbent director’s resignation is accepted by the Board, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board, in its sole discretion, may fill any resulting vacancy. Shares for which authority to vote for the election of a nominee is withheld (so-called “Abstentions”) and shares with respect to which a broker or representative does not vote on a particular matter because it does not exercise its discretionary voting authority on that matter (so-called “Broker Non-Votes”) will be counted as present for the purpose of determining whether a quorum is present but not be treated as shares voted for any nominee and therefore will not have an effect on the determination of whether a nominee has been elected.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NOMINEE FOR DIRECTOR SET FORTH ABOVE.

 

 

We are requesting that the stockholders vote in favor of approving the Company’s 2009 Employee Stock Purchase Plan (the “ESPP”) which was adopted by the Board on February 27, 2009. A copy of the ESPP is attached as Exhibit A to this Proxy Statement and is incorporated herein by reference. We encourage you to read the ESPP in its entirety. The ESPP provides an incentive to, and encourages stock ownership by, all eligible employees of the Company and participating subsidiaries so that they may share in our growth by acquiring or increasing their share ownership in the Company. The ESPP is designed to encourage eligible employees to remain in our employ. It is intended that the ESPP constitute an “employee stock purchase plan” within the meaning of Section 423 of the Code.

 

Under the ESPP, eligible executive officers and employees who wish to do so may purchase Company common stock through payroll deductions. The ESPP authorizes the issuance of shares of Company common stock to eligible executive officers and employees up to an aggregate of the sum of: (i) seven hundred fifty thousand (750,000), plus (ii) 116,456, the number of shares reserved for issuance pursuant to the Company’s 1996 Employee Stock Purchase Plan (the “Prior Plan”) but not issued thereunder as of April 1, 2009. The Company intends to discontinue use of the Prior Plan after the current plan period, which is scheduled to end on March 31, 2009.

The ESPP may be administered by the Compensation and Management Development Committee of the Board (the “Compensation Committee”) or by the Board directly. The Compensation Committee, has the discretion, subject to the provisions of the ESPP, to make or to select the manner of making all determinations with respect to options granted under the ESPP. Further, the Compensation Committee has complete authority to interpret the ESPP, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the ESPP.

 

The ESPP will be implemented through a series of purchase periods called “plan periods.” Each plan period begins on the first business day of each January, April, July and October and ends on the last business day of the following March, June, September and December, respectively. An eligible employee will be granted an option at the beginning of the plan period, and can accumulate money to pay the exercise price for the option by electing to have payroll deductions taken from each payroll during a plan period of an amount between 1% and 15% of his or her compensation. At the end of each plan period, the option will be exercised by applying the employee’s accumulated payroll deductions to the purchase of Common Stock. The exercise price paid by the employee will be the lesser of 90% of the fair market value of the Common Stock at the beginning of the plan period or 100% of the fair market value of the Common Stock at the end of the plan period.

 

Employees of the Company or a participating subsidiary are eligible to participate in the ESPP if we employ them for at least 20 hours per week and at least five months per year. Currently, approximately five executive officers and 3,696 employees are eligible to participate in the ESPP. However, no employee shall be granted an option under the ESPP if, immediately after the grant, the employee would own stock, including any outstanding options to purchase stock, equaling 5% or more of the total voting power or value of all classes of our stock. In addition, the ESPP provides that no employee may be granted an option if the option would permit the employee to purchase stock under all of our employee stock purchase plans in an amount that exceeds $25,000 of the fair market value of such stock for each calendar year in which the option is outstanding.

 

In the event of a dissolution or liquidation of the Company, the plan period then in progress will terminate. In the event of another significant corporate transaction such as a merger or consolidation of us with and into another person or entity or the sale of transfer of all or substantially all of our assets, each right to purchase stock under the ESPP will be assumed, or an equivalent right will be substituted by, the successor corporation. In the event that the successor corporation refuses to assume each purchase right or to substitute an equivalent right, any ongoing offering period will be shortened so that employees’ rights to purchase stock under the ESPP are exercised prior to the transaction, unless the employee has withdrawn.

 

The Board has the power to amend or terminate the ESPP and to change or terminate plan periods as long as any action does not adversely affect any outstanding rights to purchase stock; provided, however, that the Board may amend or terminate the ESPP or a plan period even if it would adversely affect outstanding options in order to avoid our incurring adverse accounting charges or if the Board determines that termination of the ESPP and/or plan period is in our best interest and the best interest of our stockholders.

 

The ESPP will continue in effect until terminated by the Board.

 

The dollar value of benefits that will be received by any employee or group of employees in the ESPP is not determinable due to the voluntary nature of the ESPP and the variables involved in the calculation of any such benefits (including our stock price). In 2008, 773 employees, including three executive officers, participated in the Prior Plan and received $226,954 in benefits under the Prior Plan (measured as the difference between the price paid for shares of our Common Stock purchased under the Prior Plan and the market value of such Common Stock on the date of such purchase). In 2008, we have raised approximately $3,392,674 of additional capital through sales of Common Stock pursuant to the Prior Plan.

 

The following is a brief and general discussion of the United States federal income tax consequences to recipients of awards granted under the ESPP. This summary is not comprehensive and is based upon laws and regulations in effect on April 1, 2009. Such laws and regulations are subject to change. This summary is intended for the information of stockholders considering how to vote and not as tax guidance to participants in the ESPP. Employees participating in the ESPP should consult their own tax advisors as to the tax consequences of participation.

An employee will not have to report taxable income either upon receipt of an option under the ESPP or upon exercise of the option. An employee may have to report income upon the sale of shares acquired by exercising the option, and the employee will be taxed on such income in the same way as any other compensation for services. The amount of taxable income that an employee must report depends upon the employee’s specific circumstances, as follows. If an employee sells his or her shares within two years after the date he or she received the option, or within one year after he or she exercised the option, the employee will have to report as compensation income the difference between the value of the shares at the date of exercise and the amount the employee paid for the shares. If an employee sells his or her shares more than two years after the date he or she received the option, and more than one year after he or she exercised the option, the employee will have to report as compensation income the lesser of: (i) the value of the shares at the sale date minus the option exercise price, or (ii) the value of the shares at the grant date minus the option exercise price. In addition, an employee may also have a capital gain or loss upon sale of the shares. The amount of gain or loss will be measured by the difference between the amount received from the sale of the shares and the employee’s basis in the shares. An employee’s basis in the shares is the exercise price paid for the shares plus the amount of compensation income reported in connection with the sale of the shares.

 

For purposes of the foregoing summary, we assumed that no option under the ESPP will be considered “deferred compensation” as that term is defined for purposes of recent federal tax legislation governing nonqualified deferred compensation arrangements, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or, if any option was considered to any extent to constitute deferred compensation, its terms would comply with the requirements of that legislation (in general, by limiting any flexibility in the time of payment). If an option includes deferred compensation, and its terms do not comply with the requirements of the legislation, then any deferred compensation component of an option under the ESPP will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a 20% additional tax.

 

Although the foregoing summarizes the essential features of the ESPP, it is qualified in its entirety by reference to the full text of the ESPP as attached. We rely on the Prior Plan and the ESPP, and our employees’ ability to purchase stock of the Company thereunder, as an essential part of the benefits package necessary to attract and retain qualified and experienced employees. The Board believes that adoption of the ESPP is essential to permit the Company to continue to provide long-term equity based incentives to present and future employees and to align employees’ interests with those of the Company’s stockholders

 

Approval of the proposal to adopt the ESPP will require an affirmative vote of a majority of the outstanding shares of Common Stock of the Company represented in person or by proxy at the Meeting and entitled to vote. Abstentions and Broker Non-Votes will be counted as present for the purpose of determining whether a quorum is present and will be treated as shares present and entitled to vote, but will not be treated as an affirmative vote in favor of the proposal and therefore will have the effect of a vote against the proposal.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE THE COMPANY’S 2009 EMPLOYEE STOCK PURCHASE PLAN

 

 

We are requesting that the stockholders vote in favor of approving the Company’s Management Incentive Plan (the “MIP”) which was adopted by the Compensation Committee on December 10, 2008 and approved by the Board on February 27, 2009. A copy of the MIP is attached as Exhibit B to this Proxy Statement and is incorporated herein by reference. We encourage you to read the MIP in its entirety. By voting in favor of this proposal, you will be voting to approve the material terms of the MIP for purposes of qualifying awards thereunder as performance-based compensation under Section 162(m) of the Code.

 

The purposes of the MIP are to (i) align the interests of eligible employees with the Company’s stockholders, (ii) motivate eligible employees to achieve annual financial and operating targets, (iii) provide increasing levels of incentive plan payout opportunity consistent with increasing levels of annual financial performance, (iv) enhance individual accountability for goal achievement and align employee interests and objectives worldwide, and (v) attract and retain key employees.

The MIP may be administered by the Compensation Committee of the Board or by the Board directly. The Compensation Committee has the discretion, subject to the provisions of the MIP, to make or to select the manner of making all determinations with respect to the MIP. Further, the Compensation Committee has complete authority to interpret the MIP, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable for the administration of the MIP.

 

Executive officers and employees of the Company and its affiliates are eligible to participate in the MIP, subject to designation by the Compensation Committee. Five executive officers and 240 employees are currently eligible to participate in the MIP. MIP participants will be eligible to receive awards as determined by the Compensation Committee in its sole discretion, and will receive payments pursuant to awards based upon the degree of achievement of performance goals.

 

Amounts which would be payable in the future under the MIP cannot be determined because they are contingent upon the attainment of pre-established performance goals, the outcome of which is substantially uncertain at the time the performance goals are established. Similarly, as the performance goals established by the Compensation Committee pursuant to the MIP are applicable only to a specific year, the amount that would have been paid in the prior fiscal year to eligible participants in the MIP is not determinable.

 

Qualified performance-based awards are awards which include performance criteria intended to satisfy Section 162(m) of the Code. Section 162(m) of the Code limits the Company’s federal income tax deduction for compensation to certain specified senior executives to $1 million, but excludes from that limit “performance-based compensation.” Accordingly, qualified performance-based awards will be subject to satisfaction of one of the following criteria (the “Performance Criteria”), either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or affiliate, either individually, alternatively, or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Compensation Committee in the award: cash flow (before or after dividends); earnings per share (including, without limitation, earnings before interest, taxes, depreciation and amortization); stock price; return on equity; stockholder return or total stockholder return; return on capital (including without limitation return on total capital or return on invested capital); return on investment; return on assets or net assets; market capitalization; economic value added; debt leverage (debt to capital); revenue; sales or net sales; backlog; income, pre-tax income or net income; operating income or pre-tax profit; operating profit, net operating profit or economic profit; gross margin, operating margin or profit margin; return on operating revenue or return on operating assets; cash from operations; operating ratio; operating revenue; market share improvement; general and administrative expenses; or customer service.

 

No payment or other amount will be available to a recipient of a qualified performance-based award except upon the Compensation Committee’s determination that a particular goal or goals established by the Compensation Committee for the criteria (from among those specified above) selected by the Compensation Committee have been satisfied. The maximum qualified performance-based award payment to any one participant for a performance period is $5,000,000.

 

Generally, if a participant’s employment with the Company or any affiliate is terminated for any reason prior to the last day of a performance period, then the participant will forfeit the award and will not become entitled to any payment thereunder. If, however, a participant’s employment is terminated during the performance period due to death, disability or retirement, then the Committee may, in its sole discretion and only to the extent permitted by the terms of the MIP, authorize the Company to make payment, in full or on a prorated basis, pursuant to an award.

 

In the event of any corporate action (including but not limited to a merger or consolidation of the Company with or into another entity, a sale, transfer, or other disposition of all or substantially all of the Company’s assets to one or more other persons in a single transaction or series of related transactions, a liquidation or dissolution of the Company, a reorganization, a recapitalization, a reclassification, a stock dividend, a stock split, a reverse stock split, or other similar distribution), the Compensation Committee may make such adjustment of outstanding awards and their terms, if any, as it, in its sole discretion, may deem equitable and appropriate in the circumstances. In addition, the Compensation Committee may make adjustments in the terms and conditions of, and the Performance Criteria included in awards in recognition of unusual or nonrecurring events (including, without limitation, the events

described above) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Compensation Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the MIP.

 

Generally the Board may amend or modify the MIP at any time subject to the rights of holders of outstanding awards on the date of amendment or modification.

 

The following is a brief and general discussion of the United States federal income tax consequences to recipients of awards granted under the MIP. This summary is not comprehensive and is based upon laws and regulations in effect on April 1, 2009. Such laws and regulations are subject to change. This summary is intended for the information of stockholders considering how to vote and not as tax guidance to participants in the MIP. Participants in the MIP should consult their own tax advisors as to the tax consequences of participation.

 

A participant will generally recognize ordinary income on receipt of payment in satisfaction of an award. In general, whenever a participant is required to recognize ordinary income in connection with an award, the Company will be entitled to a corresponding tax deduction. However, the Company will not be entitled to deductions in connection with awards under the MIP to certain senior executive officers to the extent that the amount of deductible income in a year to any such officer, together with his or her other compensation from the Company exceeds the $1 million limitation of Section 162(m) of the Code. Compensation which qualifies as “performance-based” is not subject to this limitation, however.

 

For purposes of the foregoing summary, we assumed that no award under the MIP will be considered “deferred compensation” as that term is defined for purposes of recent federal tax legislation governing nonqualified deferred compensation arrangements, Section 409A of the Code, or, if any award were considered to any extent to constitute deferred compensation, its terms would comply with the requirements of that legislation (in general, by limiting any flexibility in the time of payment). If an award includes deferred compensation, and its terms do not comply with the requirements of the legislation, then any deferred compensation component of an award under the MIP will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a 20% additional tax.

 

Although the foregoing summarizes the essential features of the MIP, it is qualified in its entirety by reference to the full text of the MIP as attached.

 

Approval of the proposal to approve the MIP will require an affirmative vote of a majority of the outstanding shares of Common Stock of the Company represented in person or by proxy at the Meeting and entitled to vote. Abstentions and Broker Non-Votes will be counted as present for the purpose of determining whether a quorum is present and will be treated as shares present and entitled to vote, but will not be treated as an affirmative vote in favor of the proposal and therefore will have the effect of a vote against the proposal.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO APPROVE THE COMPANY’S MANAGEMENT INCENTIVE PLAN

 

The Audit Committee of the Board has selected PricewaterhouseCoopers LLP, an independent registered public accounting firm, to audit the books, records and accounts of the Company for the fiscal year ending December 31, 2009. In accordance with a vote of the Audit Committee and as approved by the Board, this selection is being presented to the stockholders for ratification at the Meeting.

 

The affirmative vote of the majority of the shares present at the Meeting in person or represented by Proxy and entitled to vote on the matter is required to approve the proposal. Abstentions and Broker Non-Votes will be counted as present for the purpose of determining whether a quorum is present and will be treated as shares present and entitled to vote, but will not be treated as an affirmative vote in favor of the proposal and therefore will have the effect of a vote against the proposal. Ratification by stockholders is not required. If this Proposal 4 is not approved

by the stockholders, the Audit Committee does not intend to change the appointment for fiscal year 2009, but will consider the stockholder vote in selecting an independent registered public accounting firm for fiscal year 2010.

 

Fees

 

The aggregate fees for the fiscal years ended December 31, 2008 and December 31, 2007 by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, were as follows:

 

 

Audit Fees — consists of fees for the audit of the Company’s financial statements, review of the interim condensed consolidated financial statements included in quarterly reports, assistance with review of documents filed with the SEC, and services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements, and attest services, except those not required by statute or regulation.

 

Audit-Related Fees — consists of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees”. These services include employee benefit plan audits, acquisition-related services, attest services not required by statute or regulation, and accounting consultations and reviews for various matters.

 

Tax Related Fees — consists of fees for tax compliance and planning services. Tax compliance fees include fees for professional services related to international tax compliance and preparation. Tax planning fees consist primarily of fees related to the impact of acquisitions and restructuring on international subsidiaries.

 

All Other Fees — consists of fees for all other permissible services other than those reported above.

 

The Audit Committee approved 100% of the services listed under the preceding captions “Audit-Related Fees,” “Tax Related Fees” and “All Other Fees.” The Audit Committee’s pre-approval policies and procedures are described in its report set forth in this Proxy Statement.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

 

The Board does not know of any other business to be presented at the Meeting. If any other matters properly come before the Meeting, however, it is intended that the persons named in the enclosed form of Proxy will vote said Proxy in accordance with their best judgment.

 

The Board held five meetings during the year ended December 31, 2008. The Board has determined that each Director other than Mr. Berthiaume, the Company’s Chairman, President and Chief Executive Officer, has no material relationship with the Company and otherwise qualifies as “independent” under applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under the Corporate Governance section below. Mr. Berthiaume has certified to the New York Stock Exchange as of June 5,

2008 that he is not aware of any violation by the Company of the New York Stock Exchange’s Corporate Governance Listing Standards.

 

The Nominating and Corporate Governance Committee currently consists of Dr. Michael J. Berendt (Chairman), Dr. Laurie H. Glimcher, and Mr. Thomas P. Salice. The responsibilities of the Nominating and Corporate Governance Committee include the recruitment and recommendation of candidates for the Board. The Nominating and Corporate Governance Committee may, as it deems appropriate, give consideration to any candidates suggested by the stockholders of the Company. The Nominating and Corporate Governance Committee also develops and recommends to the Board the Corporate Governance Guidelines for the Company. The charter of the Nominating and Corporate Governance Committee, which sets forth all of the committee’s functions, is available at the Company’s website at http://www.waters.com under the caption Governance. Each member of the Nominating and Corporate Governance Committee is independent under the SEC rules and applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under the Corporate Governance section below.

 

The Audit Committee, which currently consists of Mr. Thomas P. Salice (Chairman), Mr. Edward Conard, Mr. William J. Miller and Ms. JoAnn A. Reed, oversees the activities of the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP. The Audit Committee meets the definition of “Audit Committee” as defined in Section 3(a)(58) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee recommends the engagement of the independent registered public accounting firm, and performs certain other functions pursuant to its charter, a copy of which is available at the Company’s website at http://www.waters.com under the caption Governance. Each member of the Audit Committee is independent under the applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under the Corporate Governance section below.

 

The Compensation Committee, which currently consists of Mr. William J. Miller (Chairman), Mr. Joshua Bekenstein, Mr. Christopher A. Kuebler and Mr. Thomas P. Salice, approves the compensation of executives of the Company, makes recommendations to the Board with respect to standards for setting compensation levels and administers the Company’s incentive plans, consistent with its charter, which is available at the Company’s website at http://www.waters.com under the caption Governance. Each member of the Compensation Committee is independent under the applicable listing standards of the New York Stock Exchange and the Company’s independence criteria, which are summarized under the Corporate Governance section below.

 

During fiscal year 2008, each of the Company’s Directors attended in excess of 75% of the aggregate of the meetings of the Board and the meetings of committees of the Board of which such Director was a member. During fiscal year 2008, the Compensation Committee met three times, the Audit Committee met seven times and the Nominating and Corporate Governance Committee met two times. The Company does not have a formal policy, but encourages Director attendance at annual stockholder meetings. All Directors attended the 2008 annual meeting.

 

Annual Evaluation

 

During 2008, the Nominating and Corporate Governance Committee of the Board conducted its annual comprehensive evaluation of the Board and each of its Audit, Nominating and Corporate Governance and Compensation Committees (the “Committees”). The evaluation, in the form of a questionnaire, was circulated to all members of the Board and Committees in November 2008. The Company’s General Counsel received all of the questionnaires, compiled the results and circulated them to the Board and each Committee for discussion and analysis in January and February 2009. It is the intention of the Nominating and Corporate Governance Committee to continue to engage in this process annually.

 

Related Party Transactions Policy

 

During 2007 the Board adopted a Related Party Transactions Policy, which covers “Interested Transactions” between a “Related Party” or parties and the Company. An Interested Transaction is a transaction or arrangement in

which the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year and in which the Company and/or any Related Party may have an interest. A Related Party includes an executive officer, director or nominee for election as a director of the Company, any holder of more than a 5% beneficial interest in the Company, any immediate family member of any of the foregoing or any firm, corporation or entity in which any of the foregoing persons is employed or is a general partner or principal or in which such person or persons collectively have a 10% or greater beneficial ownership interest.

 

Pursuant to the policy, the General Counsel has the responsibility for identifying potential Interested Transactions and determining whether a proposed transaction or relationship is an Interested Transaction reportable to the Nominating and Corporate Governance Committee for consideration at its next regularly scheduled meeting. The Nominating and Corporate Governance Committee will review the material facts of all such transactions and report its recommendations to the Board who shall either approve or disapprove the Interested Transaction.

 

The Nominating and Corporate Governance Committee and the Board have reviewed and determined that certain categories of Interested Transactions are deemed to be pre-approved or ratified (as applicable) by the Board under the terms of the Policy. These are: (a) the employment and compensation arrangements of executive officers required to be reported in the Company’s proxy statement; (b) Director compensation required to be reported in the Company’s proxy statement; (c) ordinary course charitable contributions periodically reviewed by the Compensation Committee of the Company; and (d) ordinary course business transactions conducted on an “arm’s length” basis with each of Genzyme Corporation (of which Mr. Berthiaume is a director) and Bristol-Myers Squibb Corporation (of which Dr. Glimcher is a director).

 

Equity Ownership Guidelines

 

Increasingly, stockholders of public companies are focusing on the amount of equity ownership by directors and officers of the companies in which they invest. In order to more closely align the interests of the Company’s stockholders with those of management, the Company has minimum stock ownership guidelines for Directors and the Company’s executive officers. These guidelines, which were implemented in February 2004, provide for the accumulation by the Chief Executive Officer of Common Stock equal to five times his base salary over a three year period, which requirement also applies to any successor to the Chief Executive Officer. Additionally, members of the Company’s Executive Committee, Messrs. Caputo, Ornell, Beaudouin and Ms. Rae, are each required to accumulate Common Stock of the Company equal to two times their base salary over a five year period. If an executive officer does not achieve his or her ownership guideline within the three or five year periods, respectively, a disposition guideline will be applied. The disposition guideline requires that, upon subsequent exercise of a stock option, 50% of the executive’s net after tax profit from such exercise must be retained in shares of Common Stock until the stock ownership guideline is achieved. An executive officer who achieves the ownership guideline and subsequently falls out of compliance will have 12 months to again achieve compliance before the disposition guideline on stock option exercises is again applied. Pursuant to the guidelines, members of the Board are required to accumulate a minimum of 5,000 shares of common stock of the Company over a five year period. For purposes of accumulation of minimum stock ownership, grants of restricted stock by the Company to such executives or to members of the Board apply towards satisfaction of the guidelines.

 

Lead Director

 

Also in 2004, the Board elected a “lead director” to preside over executive sessions of the non-management Directors of the Board and to provide a focal point for and to facilitate communication among non-management Directors, Company management and Company stockholders. In May 2004, the Board elected Thomas P. Salice as the Company’s lead director.

 

Majority Voting

 

In 2006, following a review of public company trends and corporate governance practices, the Nominating and Corporate Governance Committee recommended and the Board approved majority voting for Directors and the by-laws of the Company were appropriately amended. The description of the Company’s majority voting provisions can be found under “Proposal 1. Election of Directors” herein.

Guidelines and Code of Conduct

 

The Board has adopted Corporate Governance Guidelines, a Code of Business Conduct and Ethics for employees, executive officers and Directors and a “whistleblower” policy regarding the treatment of complaints on accounting, internal accounting controls and auditing matters. All of these documents are available on the Company’s website at http://www.waters.com under the caption Governance and a copy of any of them may be obtained, without charge, upon written request to the Company, c/o Secretary, 34 Maple Street, Milford, MA 01757.

 

Board Candidates

 

With respect to potential candidates to serve on the Board, the Nominating and Corporate Governance Committee considers suggestions from a variety of sources, including stockholders. Any nominations of candidates, together with appropriate biographical information, should be submitted to the Company, c/o Secretary, 34 Maple Street, Milford, MA 01757.

 

The Nominating and Corporate Governance Committee believes that candidates for service as a Director of the Company should meet certain minimum qualifications. In selecting Directors, the Board seeks individuals who are highly accomplished in their respective fields, with superior educational and professional credentials. Candidates should satisfy the Company’s independence criteria, which are part of its Corporate Governance Guidelines and summarized below, the applicable listing standards of the New York Stock Exchange, and should have demonstrated experience in organizational leadership and management. Candidates for Director should also be of the highest moral and ethical character and integrity, consistent with the standards established by the Company.

 

The Company has a process for identifying and selecting candidates for Board membership. Initially, the Chairman/CEO, the Nominating and Corporate Governance Committee or other Board members identifies a need to either expand the Board with a new member possessing certain specific characteristics or to fill a vacancy on the Board. A search is then undertaken by the Nominating and Corporate Governance Committee, working with recommendations and input from Board members, members of senior management, professional contacts, external advisors, nominations by stockholders and/or the retention of a professional search firm, if necessary. An initial slate of candidates is identified that will satisfy the criteria for Board membership and is presented to the Nominating and Corporate Governance Committee for review. Upon review by the Nominating and Corporate Governance Committee, a series of interviews of one or more candidates is conducted by the Chairman/CEO and at least one member of the Nominating and Corporate Governance Committee. During this process, the full Board is informally apprised of the status of the search and its input is solicited.

 

Upon identification of a final candidate, the entire Nominating and Corporate Governance Committee will meet to consider the credentials of the candidate and thereafter, if approved, will submit the candidate for approval by the full Board.

 

Board/Director Independence

 

The Company’s Corporate Governance Guidelines also include criteria adopted by the Board to assist it in making determinations regarding the independence of its members. The criteria, summarized below, are consistent with the New York Stock Exchange listing standards regarding director independence. To be considered independent, the Board must determine that a director does not have a material relationship, directly or indirectly, with the Company. A director will not be considered independent if he or she, or an immediate family member, has been within the last three years:

 

 

 

In addition, a director will be not considered independent if he or she, or an immediate family member, has been an executive officer of a tax-exempt entity that receives contributions in any fiscal year from the Company exceeding the greater of $1 million or 2% of its gross revenues. A director also will not be considered independent if he or she has an immediate family member who is a current employee of an internal or external auditor of the Company who participates in such firm’s audit, assurance or tax compliance practice.

 

The Board has determined that each Director, other than Mr. Berthiaume, the Company’s Chairman, President and Chief Executive Officer, has no material relationship with the Company and otherwise qualifies as “independent” under applicable listing standards of the New York Stock Exchange.

 

Board Communications

 

With respect to communications with the Board on general matters, stockholders and interested parties may communicate directly with the lead director or with the non-management Directors as a group by writing to Waters Corporation, c/o Secretary, 34 Maple Street, Milford, Massachusetts 01757. Any such communication should include the name and return address of the stockholder, the specific Director or Directors to whom the contact is addressed and the nature or subject matter of the contact. All communication will be sent directly to the appropriate Board member.

 

During 2008, the Audit Committee of the Board, in conjunction with management and PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, focused on the following items:

 

 

During 2008, the Company continued its comprehensive efforts with respect to on-going compliance with the internal controls requirements of Section 404 of the Act. In 2008, in addition to PricewaterhouseCoopers LLP, the Company again retained Ernst &Young LLP to assist in elements of continuing compliance with Section 404 of the Act. The compliance project itself was managed primarily by the Company’s Director of Internal Audit in conjunction with the Company’s Chief Financial Officer and its Corporate Controller. During 2008, the Audit Committee received regular and detailed briefings from the Company’s Director of Internal Audit and PricewaterhouseCoopers LLP on the progress of the Company’s efforts to comply with Section 404 and on developments within the SEC and the Public Company Accounting Oversight Board with respects to modifications to Section 404. On February 27, 2009, PricewaterhouseCoopers LLP reported to the Audit Committee that it had identified no material weaknesses in the Company’s internal controls over financial reporting as of December 31, 2008.

 

The Board has adopted a written charter setting out more specifically the functions that the Audit Committee is to perform. The charter is reviewed on an annual basis by the Committee and the Committee is advised as to any corporate governance developments which may warrant charter amendments. No such charter amendments were made in 2008. The charter is available at the Company’s website at http://www.waters.com under the caption Governance.

 

The Audit Committee held seven meetings during the fiscal year ended December 31, 2008. The Committee reviewed on a quarterly basis, with members of the Company’s management team, the Company’s quarterly and annual financial results prior to the release of earnings and the filing of the Company’s quarterly and annual financial statements with the SEC. The Board has determined that each of the four current members of the Audit Committee — Mr. Salice (Chairman), Mr. Conard, Mr. Miller and Ms. Reed — is an “audit committee financial expert” as defined under applicable rules and regulations of the SEC and has “accounting or related financial management expertise” within the meaning of the New York Stock Exchange rules. Company management has primary responsibility for the financial statements and reporting processes. The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, audits the annual financial statements and is responsible for expressing an opinion on their conformity with generally accepted accounting principles.

 

The Audit Committee has adopted the following guidelines regarding the engagement of PricewaterhouseCoopers LLP to perform non-audit services for the Company.

 

Company management will submit to the Audit Committee for approval the list and fees of non-audit services that it recommends the Committee engage its independent registered public accounting firm to provide from time to time during the fiscal year. Company management and the Company’s independent registered public accounting firm will each confirm to the Audit Committee that each non-audit service on the list is permissible under all applicable legal requirements. The Audit Committee will, in its discretion, either approve or disapprove both the list of permissible non-audit services and the fees for such services. The Audit Committee will be informed routinely as to the non-audit services actually provided by the Company’s independent registered public accounting firm pursuant to this pre-approval process as well as new non-audit services requesting approval.

To ensure prompt handling of unexpected matters, the Audit Committee delegates to its Chairman the authority to amend or modify the list of approved permissible non-audit services and fees. The Chairman will report action taken to the Audit Committee at the next Audit Committee meeting.

 

PricewaterhouseCoopers LLP must ensure that all audit and non-audit services provided to the Company have been pre-approved by the Audit Committee.

 

The Committee hereby reports for the fiscal year ended December 31, 2008 that:

 

 

Based on the items reported above, on February 27, 2009, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 for filing with the SEC. The recommendation was accepted by the Board on the same date.

 

 

The following table sets forth information as of December 31, 2008 about shares of Common Stock outstanding and available for issuance under the Waters 2003 Equity Incentive Plan.

 

 

The Company’s 2003 Equity Incentive Plan is intended to encourage ownership of Common Stock by employees and directors of the Company and its affiliates to provide additional incentive for them to promote the success of the Company’s business. The Plan is administered by the Company’s Compensation Committee who has the discretion to determine the employee or director to receive an award, the form of the award and any acceleration or extension of an award. Awards under the Plan include Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights and Stock Grants. No more than one million (1,000,000) shares of Common Stock may be issuable to any one person in any one calendar year pursuant to awards under the Plan.

 

The Compensation Committee currently consists of Mr. Joshua Bekenstein, Mr. Christopher A. Kuebler, Mr. William J. Miller (Chairman), and Mr. Thomas P. Salice. No member of the Company’s Compensation Committee was an officer or employee of the company or serves as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving as members of the Waters’ Board or its Compensation Committee.

 

Compensation Discussion and Analysis

 

Objectives of Waters Executive Compensation Program

 

It is the philosophy of the Board’s Compensation Committee that the Waters executive compensation program be both performance and market-based, and that a significant portion of compensation should be allocated to short and long-term variable performance-based compensation instruments. The objectives of the Company’s executive compensation program are aligned with the Committee’s philosophy and are as follows:

 

 

What is the Waters Executive Compensation Program designed to reward?

 

Throughout this Compensation Discussion and Analysis, those persons who served as (i) our principal executive officer during the year ended December 31, 2008, (ii) our principal financial officer during the year ended December 31, 2008 and (iii) our other three most highly compensated executive officers for the year ended December 31, 2008 are covered by the discussed compensation programs. The compensation programs described below apply in many cases to larger groups of the Company’s employees other than the five executive officers.

 

The compensation program is designed to motivate and reward executives for sustained high levels of achievement of the Company’s financial and operating objectives. It is the Company’s general intent to provide base salaries that are less than the market median for similarly situated executives in comparable firms, and to provide annual incentive target awards that are at or slightly above the market median. In aggregate, these two components, less than median base salaries and at or slightly greater than median incentives, provide a target total cash compensation opportunity that approximates the median of the market for achieving target performance goals. Actual base salaries may vary from this generally targeted position based on the performance, tenure, experience and contributions of the individual. Actual incentives will vary with the performance of the Company. Actual total cash can be less than or greater than the median of the market, based on these factors. We believe that the structure of our total cash compensation effectively aligns executives interests with stockholders interests by placing emphasis on the achievement of annual financial and operating objectives.

 

Sustained high levels of annual achievement of diluted earnings per share (“E.P.S.”) growth goals drive long-term stockholder value and the Company’s compensation program is designed to reward the creation of stockholder value through the annual Management Incentive Plan and the use of stock options. E.P.S. growth goals are utilized in the annual Management Incentive Plan and are based on E.P.S. reported in accordance with generally accepted accounting principles (“GAAP”). Annual E.P.S. results may be adjusted to exclude certain charges and credits, net of tax, including but not limited to purchased intangibles amortization, restructuring, litigation, asset and equity investment impairments and other items considered unusual or one-time. The Compensation Committee reviews and approves the annual adjusted E.P.S. (“non-GAAP E.P.S.”) for purposes of measuring E.P.S. growth goal achievement. The Compensation Committee considers these items non-operational transactions and not directly related to the ongoing operations of the Company and therefore utilizes non-GAAP E.P.S. goals in the annual Management Incentive Plan for executive officers.

 

Stock options align executive compensation with stockholder interests because options only provide value to the executive if the stock price increases over time. The value of Waters’ stock option grants enhances the competitive position of the executive’s total direct compensation (base salary, annual bonus and stock options) and further increases the orientation of total compensation toward performance-based instruments. The Compensation Committee reviews competitive market data in determining the value of executive stock option grants. Consistent

with this performance-oriented compensation philosophy, performance-based compensation instruments comprise 70% or more of the total compensation (including benefits) for each of the named executive officers as outlined in the Summary Compensation Table.

 

What are the elements of executive compensation?

 

There are three key elements of executive compensation: base salary, senior management incentive bonus, and long-term performance-based awards. Although the amount of each element of compensation for each executive officer differs based on position-specific market data, the criticality of the executive position to the business and the executive’s level of contribution, competitive compensation for their respective positions and other individual factors, the overall structure and compensation elements utilized are consistent for the Chief Executive Officer (“CEO”) and all other executive officers.

 

Base Salary

 

The base salaries for executive officers are reviewed annually by the Compensation Committee. Individual salaries are based upon a combination of factors including past individual performance and experience, Company performance, scope of responsibility, competitive salary levels and an individual’s potential for making contributions to future Company performance. The Compensation Committee considers all these factors in determining base salary increases and does not assign a specific weighting to any individual factor.

 

At the end of fiscal 2007, the Committee considered the factors listed above in determining the 2008 salary levels for executive officers, including the Company’s 2007 non-GAAP E.P.S. growth of 20%, which exceeded the 15% target set by the Committee in February 2007. In addition, the competitive analysis, the details of which are described in a later section of this Proxy Statement indicated that on average the base salaries for executive officers fell at the 30th percentile of the competitive market for their respective positions. In December 2007, the Committee approved base salary increases for executive officers for fiscal year 2008 that ranged between 5.0% and 9.8%. The base salaries in effect for 2008 for all executive officers remain at or below the 50th percentile for their respective positions, which is consistent with our philosophy to emphasize performance-based pay.

 

Consistent with prior years, the Committee reviewed the above factors as well as the achievement of 20% non-GAAP E.P.S. growth in the review of executive base salaries at the end of fiscal 2008. Due to economic conditions at the end of fiscal 2008 and the projections for Company performance in 2009, the Committee, with agreement of the Company’s executive officers, did not increase executive base salaries for fiscal year 2009.

 

Annual Incentive

 

The Management Incentive Plan is the annual incentive plan for executive officers, senior executives, and other key employees of the Company. The Committee establishes performance targets at the beginning of each fiscal year for executive officers. Executive officers then establish performance targets for the remaining participants. Achievement of 100% of the performance target is required for an incentive payout equal to 100% of the incentive plan target. The 2008 target payouts for Messrs. Berthiaume, Caputo, Ornell, Beaudouin and Ms. Rae are, as a percentage of base salary, 100%, 90%, 60%, 60% and 40%, respectively. The 2009 target payouts for Messrs. Berthiaume, Caputo, Ornell, Beaudouin and Ms. Rae are, as a percentage of base salary, 100%, 90%, 75%, 60% and 40%, respectively. The threshold payouts are 25% of the target payout, and are payable upon achievement of threshold performance. Performance below the threshold level results in no payout. The plan also provides for a maximum payout amount of $5,000,000 which was established to comply with the maximum payout requirements of Section 162(m) of the Code.

 

The Committee has historically established Management Incentive Plan targets for executive officers based on E.P.S. growth over the prior year. The Management Incentive Plan is designed to provide increasing levels of bonus payout to the executive consistent with increasing levels of E.P.S. growth. The Committee evaluates the results of the Company’s performance against previously established targets in order to determine the individual bonuses for the executive officers under the Management Incentive Plan. For the 2008 fiscal year, the Committee established a 15% non-GAAP E.P.S. growth target over 2007. In addition, the Committee established a minimum threshold

operating income performance requirement. In fiscal year 2008, the Company exceeded the threshold operating income requirement and achieved 20% non-GAAP E.P.S. growth. Non-GAAP E.P.S. for 2008 was $3.30 and excluded purchased intangible amortization, restructuring charges, a litigation provision, an out-of-period correction associated with software capitalization and amortization, and a tax charge associated with restructuring certain legal entities. Non-GAAP E.P.S. for 2007 was $2.75 and excluded purchased intangible amortization and a one-time charge associated with the freezing of pay credit accruals under the Company’s U.S. defined benefit pension plan. This above target Company performance in 2008 resulted in above target payouts for Messrs. Berthiaume, Caputo, Ornell, Beaudouin and Ms. Rae equal to 200%, 180%, 125%, 125% and 80% of base salary, respectively, under the Management Incentive Plan for fiscal year 2008. These bonus amounts for above target performance are consistent with the Compensation Committee’s philosophy to provide greater bonus opportunity for higher levels of performance. Over the past five years, the Company has achieved non-GAAP E.P.S. growth that has ranged from 10% to 26% and has exceeded 15% growth in four of the past five years. The Compensation Committee has established a 15% E.P.S. growth target and similar operating income threshold measures for fiscal year 2009.

 

Long-Term Performance-Based Awards

 

The Compensation Committee considers and grants stock options to executive officers and other senior executives to align the interests of these executives with those of Waters’ stockholders. We believe that stock options provide strong alignment between stockholders and these executives because the value of a stock option to an executive is directly related to the stock price appreciation delivered to stockholders over time. Conversely, poor stock price performance provides no stock option value to the executive.

 

In 2005, the Compensation Committee reviewed and evaluated in detail various long-term incentive instruments with a compensation consultant, Pearl Meyer & Partners. Based on this analysis, the Compensation Committee determined that non-qualified stock options (“NSO”) most effectively meet Waters’ objectives for using performance oriented equity instruments for executive officers and senior executives. Below the senior executive level, the Company’s primary objective for long-term equity compensation is the retention of key talent. Relying in part on advice from Pearl Meyer & Partners, the Committee also determined that restricted stock units (“RSU’s”) were the most effective long-term incentive instrument to meet its objective of retention for these employees. Waters has chosen not to employ restricted stock units for the senior management group to date.

 

It was the intention of the Compensation Committee to grant 125,000 NSO’s to Mr. Berthiaume in 2008. As in the prior three years, Mr. Berthiaume declined to be considered for an option grant in 2008. The Compensation Committee expects to consider Mr. Berthiaume for future stock option grants.

 

The Committee considered the operational and financial performance of the Company during fiscal year 2008, individual performance and competitive market data in determining NSO grants for Messrs. Ornell, Caputo, Beaudouin and Ms. Rae. In addition to these factors, the Committee also considers dilution, share usage and Statement of Financial Accounting Standard No. 123(R) “Share-Based Payment” (“SFAS 123(R)”) expense in determining the number of options to grant to executives. These factors were considered collectively without a specific weighting assigned to any one factor. The NSO’s were granted under the Waters Corporation 2003 Equity Incentive Plan based on the closing price of the Common Stock on the grant date, December 10, 2008. These options will vest at 20% per year for five years, and have a ten-year term. The five-year vesting schedule supports both the long-term focus of this element of compensation and Waters’ objective to retain senior executives.

 

Perquisites and Benefits

 

The Company does not offer any perquisites for the exclusive benefit of executive officers.

 

Senior executives are eligible to participate in compensation and benefit plans that are generally offered to other employees, such as the Waters Employee Investment Plan (the “401(k) Plan”), Employee Stock Purchase Plan, health and insurance plans. They are also eligible to participate in the Waters 401(k) Restoration Plan (the “401(k) Restoration Plan”) that is available to all employees who meet certain minimum earnings eligibility

criteria. The Waters 401(k) Restoration Plan is described in more detail in the Non-Qualified Deferred Compensation table and narrative section of this Proxy Statement.

 

Change in Control/Severance Agreements

 

Messrs. Berthiaume, Caputo, Ornell, Beaudouin and Ms. Rae (the “Executive Committee”) are each party to an Executive Change of Control/Severance Agreement, which is described in detail in the Payments Upon Termination or Change of Control section of this Proxy Statement.

 

The Company provides Change in Control/Severance Agreements for Executive Committee and key senior executives to ensure continuity of executive management in the event of a change in control of the Company, and to provide transition income for executives so that executives can evaluate a potential change in control in the best interests of the Company and stockholders. In addition, under the terms and conditions of the named executive officers’ stock option agreements issued under the 1996 Long Term Performance Incentive Plan and the 2003 Equity Incentive Plan, in the event of a change in control, all of their outstanding and unvested stock options will fully accelerate and become fully exercisable. The terms of these agreements are more fully described in the Payments Upon Termination or Change of Control section herein.

 

Why does Waters choose to pay each element?

 

Each element of executive compensation addresses specific objectives of the program and together they meet the overall objectives of the Waters executive compensation program. The mix of short-term cash incentives and long-term equity incentives focuses executives on achievement of annual financial and operating objectives that drive long-term shareholder value. The Company does not target a specific mix of compensation between short-term and long-term vehicles. The Company does consider multiple factors, including the competitive market, Company and individual performance.

 

Base salaries are important in attracting and retaining senior executives and other key employees. It is Waters’ general intent to set base salaries slightly below market median levels relative to the market for comparable positions and to consider the base salary amount in conjunction with the annual target incentive bonus amount.

 

The purpose of the Management Incentive Plan is to motivate executive officers, senior executives and other employees to achieve the annual E.P.S. growth and operating targets established at the beginning of the fiscal year. This element of compensation is important in meeting the objective of allocating a significant portion of annual compensation to variable performance-based compensation.

 

Long-term equity based compensation awards are designed to motivate senior executives and other key employees to contribute to the Company’s long-term growth of stockholder value and to align executives’ compensation with the growth in Waters’ stock price.

 

The Waters 401(k) Restoration Plan and the Waters Retirement Restoration Plan are designed to restore the benefits, matching contributions and compensation deferral that are limited by IRS benefit and compensation maximums. Effective December 31, 2007, future pay credit accruals to the Retirement Restoration Plan on behalf of senior executives were discontinued and no further pay credit accruals will be made on or after January 1, 2008. These plans are described more fully in the narrative that accompanies the Pension table and the Non-Qualified Deferred Compensation table in this Proxy Statement.

 

How does Waters determine the amount of each compensation element?

 

Compensation Committee Role

 

In determining the overall structure of the compensation elements, the Compensation Committee reviews the competitive market and compensation practice data as provided by Pearl Meyer & Partners and as described in detail below. The Compensation Committee also reviews the compensation package in total to ensure that the total

compensation package emphasizes performance-based compensation elements and is designed to meet the overall objectives of the executive compensation program.

 

The Compensation Committee considers a range of factors in determining the amount of each compensation element for each executive officer. The range of factors includes Company performance, individual performance and experience, competitive compensation levels, the competitive markets, scope of responsibility and an individual’s potential for making future contributions to the Company.

 

Competitive Market Assessment

 

Competitive market data is an important component in determining the amount of compensation for each element and each executive. The Compensation Committee utilizes an outside consultant, Pearl Meyer & Partners, to provide advice on the structure of executive compensation as well as competitive data on base salary, total cash compensation, and long-term incentives. In addition, the Compensation Committee reviews the total compensation package for an executive from the perspective of total direct compensation, which includes base, actual bonus and the value of the long-term incentive grant.

 

Pearl Meyer & Partners and the Compensation Committee utilize multiple sources to review the competitive marketplace for each executive. Sources include surveys such as the Hewitt Executive Compensation Survey and the CHiPS Executive and Senior Management Total Compensation Survey, as well as a core peer group of 13 publicly traded firms within the life sciences and analytical instrument industry with generally similar revenues and market capitalization as Waters. The median revenue for the peer group for the four quarters ending September 30, 2008 is $2,028,000,000 and the median market capitalization as of November 5, 2008 is $2,864,000,000.

 

Peer Group Companies:

 

 

Two companies in the 2007 peer group were excluded from the 2008 peer group due to acquisitions. Applied Biosystems was excluded from the 2008 peer group due to its merger with Invitrogen. The new company, Life Technologies, will be evaluated in the future for inclusion in the peer group. Dade Behring Holdings was excluded due to its acquisition by Siemens. Data from the survey sources and the peer companies are combined to develop a primary market composite. The Hewitt Executive Compensation Survey provides a general industry perspective based on revenue scope for each executive position. The CHiPS Executive and Senior Management Total Compensation Survey provides a high technology perspective based on revenue for each executive position.

 

In addition, the Compensation Committee considers data from a broader group of 18 high technology companies with median revenues for the four quarters ending September 30, 2008 of $1,721,000,000 and market capitalization as of November 5, 2008 of $3,803,000,000.

High Technology Group Companies:

 

 

Four companies that were in the high technology group in 2007 were excluded from the 2008 high technology peer group due to acquisitions. These companies include Applied Biosystems, Cognos, Dade Behring Holdings and Respironics. The Compensation Committee, with management, reviews the appropriateness of the peer group and the high technology group each year.

 

Management’s Role in Executive Compensation

 

The Compensation Committee approves all compensation decisions for the executive officers. In discharging its responsibility with regard to the compensation of the Company’s CEO and other executive officers, the Compensation Committee utilizes the services of Pearl Meyer & Partners as an outside compensation consultant. The Vice President of Human Resources also provides the Compensation Committee with information and analysis on the Company’s executive compensation programs, as requested. Mr. Berthiaume provides the Compensation Committee with his assessment of the performance of the Company and other executive officers, and makes recommendations for the compensation of other executive officers. The Compensation Committee makes all decisions with respect to the compensation of the CEO and other executive officers. No executive officer makes any decision on any element of his/her own compensation.

 

Role of the Compensation Consultant

 

The Compensation Committee utilizes the services of Pearl Meyer & Partners as an outside compensation consultant. Pearl Meyer & Partners participates in Compensation Committee meetings and executive sessions and provides the Compensation Committee with information and advice on executive and director compensation such as competitive market assessments, trends, best practices and plan design.

 

Stock Ownership Guidelines

 

The importance of ownership in Waters’ stock by its executive officers is emphasized through ownership guidelines that require the CEO to acquire and retain Common Stock equal to five times his base salary over a three-year period. Additionally, the remaining members of the Company’s Executive Committee are required to acquire and retain Common Stock equal to two times their base salary over a five-year period. If an executive officer does not achieve his or her ownership guideline within the three or five year periods, respectively, a disposition guideline will be applied. The disposition guideline requires that, upon subsequent exercise of a stock option, 50% of the executive’s net after tax profit from such exercise be retained in shares of Waters Common Stock until the stock ownership guideline is achieved. An executive officer who achieves the ownership guideline and subsequently falls out of compliance will have 12 months to again achieve compliance before the disposition guideline on stock option exercises is applied. These guidelines were originally approved in February, 2004 and amended to include the stock option exercise disposition guideline in January, 2009. The ownership guidelines have been met by Mr. Berthiaume, Mr. Caputo and Mr. Ornell. Mr. Beaudouin and Ms. Rae are in the process of meeting their ownership requirement.

Stock Option Grant Practices

 

It has been the consistent practice of the Committee to grant stock options to senior executives annually at the Compensation Committee’s December meeting. Grant prices are established based on the closing price of the Common Stock on the date of grant.

 

Tax and Accounting Implications

 

Waters considers all the tax and accounting aspects of the compensation instruments utilized by the Company in determining the most efficient method to use in delivering executive compensation. This includes, but is not limited to, Section 162(m) of the Code. Section 162(m) generally limits the tax deduction available to public companies for annual compensation paid to senior executives in excess of $1 million unless the compensation qualifies as performance-based. The Compensation Committee believes that payments under the Management Incentive Plan and equity grants under the 2003 Equity Incentive Plan qualifies as performance-based compensation. It is the Company’s intent to qualify plans for full deductibility to the extent that it is consistent with the Company’s overall compensation objectives.

 

How does each element and Waters’ decision regarding that element fit into the Company’s overall compensation objectives and affect decisions regarding other elements of compensation?

 

The Compensation Committee considers the effectiveness of each element of compensation in meeting the Company’s overall objectives for executive compensation as well as the competitive marketplace for each element of compensation. In addition, the Compensation Committee reviews the combined total of all compensation elements, or total direct compensation, in order to appropriately position total direct compensation relative to both the marketplace and the Company’s objectives. The Compensation Committee also believes that it is important to provide meaningful reward and recognition opportunities to executive officers irrespective of the potential gains the executive may realize from prior awards.

The table below summarizes the total compensation paid to or earned by our Chief Executive Officer, Chief Financial Officer and the three other most highly paid executive officers for the fiscal years ended December 31, 2008, 2007 and 2006, respectively.

 

Summary Compensation Table

 

 

 

The table below sets forth the range of potential payouts under the Management Incentive Plan and specifies the grant of stock option awards to the Company’s executive officers in the last fiscal year.

 

Grants of Plan-Based Awards Fiscal Year 2008

 

 

 

 

 

Narrative Disclosure to the Summary Compensation Table and the Grants of PlanBased Awards Table

 

The non-equity incentive plan award payments, column (g) of the Summary Compensation Table, were earned under the Company’s Management Incentive Plan during fiscal 2006, 2007 and 2008, respectively. These incentive payments, which are above the target payout as disclosed in column (d) in the Grants of Plan-Based Awards Table, were based on exceeding the threshold requirements for operating income and the above target achievement of the fiscal year E.P.S. goals. The estimated future payouts under the non-equity incentive plan awards in columns (c), (d) and (e) of the Grants of Plan-Based Awards Table represent the threshold, target and maximum payouts respectively for fiscal year 2008 under the Company’s Management Incentive Plan.

 

The NSO awards listed in column (j) of the Grants of Plan-Based Awards Table were granted pursuant to the Waters Corporation 2003 Equity Incentive Plan. These 2008 stock option awards were granted at a meeting of the Compensation Committee held on December 10, 2008. The exercise price of $41.20 is equal to the closing market price of the Common Stock on December 10, 2008. All stock option grants to Messrs. Caputo, Ornell, and Beaudouin and Ms. Rae vest at 20% per year for five years and have a ten-year term. There have been no re-pricings or modifications of stock option awards for executive officers.

 

There were no discretionary or guaranteed bonus payments to executive officers in 2008. Salary comprises less than 23% of the total compensation for each executive officer and supports the Company’s emphasis on performance oriented compensation.

 

Messrs. Berthiaume, Caputo, Ornell, Beaudouin and Ms. Rae do not have employment agreements with the Company. However, each is a party to an Executive Change of Control/Severance Agreement with the Company as discussed in the Payments Upon Termination or Change of Control section of this Proxy Statement.

The table below sets forth the outstanding equity awards classified as exercisable and un-exercisable for each of the Company’s executive officers as of December 31, 2008.

 

Outstanding Equity Awards at Fiscal Year-End 2008

 

			Option Awards															Stock Awards
																								Equity			Equity
									Equity															Incentive			Incentive Plan
									Incentive															Plan Awards:			Awards:
									Plan												Market			Number of			Market or
									Awards									Number			Value of			Unearned			Payout Value
			Number of			Number of			Number of									of Shares			Shares or			Shares,			of Unearned
			Securities			Securities			Securities									or Units			Units of			Units or			Shares, Units
			Underlying			Underlying			Underlying			Option						of Stock That			Stock			Other Rights			or Other
			Unexercised			Unexercised			Unexercised			Exercise			Option			Have Not			That			That Have			Rights That
			Options (#)			Options (#)			Unearned			Price			Expiration			Vested			Have Not			Not Vested			Have Not
Name			Exercisable			Unexercisable			Options (#)			($)			Date			(#)			Vested ($)			(#)			Vested ($)
(a)			(b)			(c)			(d)			(e)			(f)			(g)			(h)			(i)			(j)
Douglas A. Berthiaume Chairman, President and Chief Executive Officer			120,000			30,000			—			$47.12			12/8/2014			—			—			—			—
			150,000			0			—			$32.12			12/11/2013			—			—			—			—
			150,000			0			—			$36.25			12/12/2011			—			—			—			—
			100,000			0			—			$72.06			12/7/2010			—			—			—			—
			140,000			0			—			$23.06			12/9/2009			—			—			—			—
			0			100,000			—			$41.20			12/10/2018			—			—			—			—
			17,000			68,000			—			$77.94			12/11/2017			—			—			—			—
Arthur G. Caputo Executive Vice President and President, Waters Division			40,000			60,000			—			$49.31			12/13/2016			—			—			—			—
			60,000			40,000			—			$38.99			12/2/2015			—			—			—			—
			100,000			25,000			—			$47.12			12/8/2014			—			—			—			—
			100,000			0			—			$32.12			12/11/2013			—			—			—			—
			60,000			0			—			$21.39			12/30/2012			—			—			—			—
			50,000			0			—			$72.06			12/7/2010			—			—			—			—
			0			40,000			—			$41.20			12/10/2018			—			—			—			—
			6,800			27,200			—			$77.94			12/11/2017			—			—			—			—
John A. Ornell Vice President Finance and Administration and Chief Financial Officer			16,000			24,000			—			$49.31			12/13/2016			—			—			—			—
			24,000			16,000			—			$38.99			12/2/2015			—			—			—			—
			40,000			10,000			—			$47.12			12/8/2014			—			—			—			—
			50,000			0			—			$32.12			12/11/2013			—			—			—			—
			40,000			0			—			$21.39			12/30/2012			—			—			—			—
			60,000			0			—			$36.25			12/12/2011			—			—			—			—
			40,000			0			—			$72.06			12/7/2010			—			—			—			—
			0			40,000			—			$41.20			12/10/2018			—			—			—			—
			6,800			27,200			—			$77.94			12/11/2017			—			—			—			—
Mark T. Beaudouin Vice President, General Counsel and Secretary			16,000			24,000			—			$49.31			12/13/2016			—			—			—			—
			24,000			16,000			—			$38.99			12/2/2015			—			—			—			—
			40,000			10,000			—			$47.12			12/8/2014			—			—			—			—
			30,000			0			—			$32.12			12/11/2013			—			—			—			—
			10,000			0			—			$21.05			4/1/2013			—			—			—			—
			0			30,000			—			$41.20			12/10/2018			—			—			—			—
			5,000			20,000			—			$77.94			12/11/2017			—			—			—			—
Elizabeth B. Rae Vice President Human Resources			12,000			18,000			—			$49.31			12/13/2016			—			—			—			—
			18,000			12,000			—			$38.99			12/2/2015			—			—			—			—
			12,000			3,000			—			$47.12			12/8/2014			—			—			—			—
			3,000			0			—			$32.12			12/11/2013			—			—			—			—
			4,500			0			—			$36.25			12/12/2011			—			—			—			—
			6,000			0			—			$72.06			12/7/2010			—			—			—			—

 

 

The table below sets forth certain information regarding stock option awards exercised for the Company’s executive officers during the last fiscal year.

 

Option Exercises and Stock Vested Fiscal Year 2008

 

 

 

The table below sets forth certain information regarding payments or other benefits in connection with retirement of the Company’s executive officers.

 

Pension Benefits Fiscal Year 2008

The present value of the accumulated benefit is calculated in accordance with Statement of Financial Accounting Standard No. 87 “Employers Accounting for Pensions”. Please refer to footnotes in the Company’s Annual Report for the fiscal year ended December 31, 2008 for the Company’s policy and assumptions made in the valuation of this accumulated benefit.

 

The Waters Retirement Plan (“Retirement Plan”) is a U.S. defined benefit cash balance plan for eligible U.S. employees. The Waters Retirement Restoration Plan (“Retirement Restoration Plan”) is a U.S. un-funded, non-qualified plan which restores the benefits under the Waters Retirement Plan that are limited by Internal Revenue Service benefit and compensation maximums. As a cash balance plan, each participant’s benefit is determined based on annual pay credits and interest credits which are made to each participant’s notional account. Effective December 31, 2007, future pay credits to the Retirement and Retirement Restoration Plans on behalf of senior executives were discontinued and no further pay credits will be made on or after January 1, 2008. Interest credits will continue to apply. Interest credits are based on the one-year constant maturity Treasury Bill rate on the first business day in November of the preceding plan year plus 0.5%, subject to a 5.0% minimum and a 10.0% maximum rate.

 

A participant is not vested in the Retirement and Retirement Restoration Plans until completion of five years of service at which time the employee becomes 100% vested. The normal retirement age under the plans is age 65. Messrs. Berthiaume and Caputo are currently eligible for early retirement under the Retirement Plan and Retirement Restoration Plan. Under these plans, early retirement is defined as attainment of age 62 with at least 10 years of service. However, former participants of the Millipore Retirement Plan (a former parent company of Waters) are eligible for early retirement upon attainment of age 55 with at least 10 years of service. Messrs. Berthiaume and Caputo are former Millipore Retirement Plan participants.

 

The valuation method and material assumptions used in calculating the benefit reported in column (d) are disclosed in the Company’s Annual Report for the fiscal year ended December 31, 2008.

 

The table below summarizes the deferred compensation in the last fiscal year for the Company’s executive officers.

 

Non-Qualified Deferred Compensation Fiscal Year 2008