Proxy

Proxy
ILLUMINA INC (ILMN)
DEF 14A
Definitive proxy statements
Filed on 03/24/2011
Filed Period 05/10/2011
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant x
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))
x Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Under Rule 14a-12
Illumina, Inc.
(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):
x No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
o
o
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:
Table of Contents
9885 Towne Centre
Drive
San Diego, California 92121
March 24, 2011
Dear Stockholder:
You are cordially invited to participate in the 2011 Annual Meeting of Stockholders of Illumina, Inc., which will be held on
Tuesday, May 10, 2011, at 9:00 a.m. Pacific Time. We are very pleased that this year's annual meeting will be our second completely
virtual meeting of stockholders.
To participate, vote, or submit questions during the annual meeting via live webcast, please visit
www.virtualshareholdermeeting.com/ilmn2011. You will not be able to attend the annual meeting in person.
We are also pleased to be furnishing our proxy materials to stockholders primarily over the Internet. We believe this process will
expedite stockholders' receipt of the materials, lower the costs of our annual meeting, and conserve natural resources. On or about
March 24, 2011, we will mail to our stockholders a notice containing instructions on how to access our 2011 Proxy Statement and our
2010 Annual Report on Form 10-K and how to vote by phone or online. The notice also will include instructions on how you can receive
a paper copy of the proxy materials, including the notice of annual meeting, 2011 Proxy Statement, and proxy card. If you received
your proxy materials by mail, the notice of annual meeting, 2011 Proxy Statement, and proxy card from our Board of Directors were
enclosed. If you received your proxy materials via e-mail, the e-mail contained voting instructions and links to the 2011 Proxy
Statement and 2010 Annual Report on Form 10-K on the Internet. We encourage you to read our 2010 Annual Report on Form 10-K,
which includes information on our operations, products, and services, as well as our audited financial statements.
At this year's annual meeting, the agenda includes the following items:
Agenda Item
Board Recommendation
Election of three director nominees
FOR
Ratification of Ernst & Young LLP as our independent
registered public accounting firm
FOR
Advisory vote on executive compensation
FOR
Advisory vote on the frequency of holding an advisory
vote on executive compensation
FOR, EVER
Please refer to the 2011 Proxy Statement for detailed information on each of the proposals and the annual meeting. Your vote is
important, and we strongly urge you to cast your vote. We encourage you to vote promptly, even if you plan on participating in the
meeting via live webcast.
Sincerely,
Jay T. Flatley
President and Chief Executive Officer
TABLE OF CONTENTS
Page
NOTICE OF ANNUAL MEETING
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
INTERNET AVAILABILITY OF PROXY MATERIALS
PARTICIPATING IN THE ANNUAL MEETING
ABOUT THE 2011 ANNUAL MEETING
COMPANY INFORMATION AND MAILING ADDRESS
PROPOSAL NO. 1: ELECTION OF DIRECTORS
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PROPOSAL NO. 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL NO. 4: ADVISORY VOTE ON THE FREQUENCY OF HOLDING AN ADVISORY VOTE ON EXECUTIVE
COMPENSATION
INFORMATION ABOUT DIRECTORS
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Board of Directors
Attendance at Meetings
Corporate Governance
Board Leadership Structure
Board's Role in Risk Oversight
Committees of the Board of Directors
Compensation Committee Interlocks and Insider Participation
Code of Ethics
DIRECTOR NOMINATION
Criteria for Board Membership
Process for Identifying and Evaluating Nominees
Stockholder Nominees
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
DIRECTOR AND EXECUTIVE OFFICER STOCK OWNERSHIP POLICY
DIRECTOR COMPENSATION
Cash Compensation
Equity Compensation
Additional Benefits
Non-Employee Director Compensation
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
EXECUTIVE OFFICERS
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy and Objectives
Use of Market Data and Benchmarking
Role of the Compensation Committee
Components and Analysis of Fiscal 2010 Executive Compensation
Tax and Accounting Considerations
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION
Summary Compensation Table
Grants of Plan-Based Awards Table
Outstanding Equity Awards at Fiscal Year-End Table
Option Exercises and Stock Vested Table
Nonqualified Deferred Compensation for Fiscal 2010
EQUITY COMPENSATION PLAN INFORMATION
AUDIT COMMITTEE REPORT
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Fees Paid to Ernst & Young LLP
Pre-Approval Policies and Procedures
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
STOCKHOLDER PROPOSALS FOR OUR 2012 ANNUAL MEETING
HOUSEHOLDING
WHERE YOU CAN FIND MORE INFORMATION
1
2
2
2
3
9
10
12
13
14
15
19
19
19
19
20
20
21
23
24
24
24
24
25
25
26
26
27
27
28
28
30
32
32
33
33
34
35
43
44
44
44
45
46
47
47
48
48
50
50
50
50
51
51
51
51
52
Table of Contents
9885 Towne Centre
Drive
San Diego, California 92121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TIME AND DATE
9:00 a.m. (Pacific Time) on Tuesday, May 10, 2011
PLACE
Online only at: www.virtualshareholdermeeting.com/ilmn2011
You will not be able to attend the annual meeting in person.
MEETING
ADMISSION
To participate, vote, or submit questions during the annual meeting via live webcast, please
visit www.virtualshareholdermeeting.com/ilmn2011 and be sure to have your 12-digit control
number (included in your Notice of Internet Availability of Proxy Materials).
AGENDA
(1) Elect the two director nominees named in the 2011 Proxy Statement to hold office for three
years until the 2014 annual meeting of stockholders;
(2) Elect the one director nominee named in the 2011 Proxy Statement to hold office for two years
until the 2013 annual meeting of stockholders;
(3) Ratify the appointment of Ernst & Young LLP as our independent registered public accounting
firm for the fiscal year ending January 1, 2012;
(4) Hold an advisory vote on executive compensation;
(5) Hold an advisory vote on the frequency of holding an advisory vote on executive compensation;
and
(6) Transact such other business as may properly come before the meeting and any adjournment or
postponement thereof.
RECORD DATE
March 14, 2011
VOTING
Please vote as soon as possible to record your vote promptly, even if you plan to participate in the
meeting via live webcast. Your broker will NOT be able to vote your shares with respect to the
election of directors if you have not given your broker specific instructions to do so. We strongly
encourage you to vote. You have three options for submitting your vote before the annual meeting:
•
•
•
Internet;
Phone; or
Mail.
WHETHER OR NOT YOU PLAN TO PARTICIPATE IN THE MEETING VIA LIVE WEBCAST,
PLEASE CAST YOUR VOTE AS PROMPTLY AS POSSIBLE. THIS WILL HELP ENSURE THE
PRESENCE OF A QUORUM.
By Order of the Board of Directors
Christian G. Cabou
Secretary
San Diego, California
March 24, 2011
Senior Vice President, General Counsel &
Table of Contents
ILLUMINA, INC.
9885 Towne Centre Drive
San Diego, California 92121
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 10, 2011
We are providing these proxy materials in connection with Illumina, Inc.'s 2011 Annual Meeting of Stockholders. The Notice of
Internet Availability of Proxy Materials, this proxy statement, any accompanying proxy card or voting instruction card, and our 2010
Annual Report on Form 10-K were first made available to stockholders on or about March 24, 2011. This proxy statement contains
important information for you to consider when deciding how to vote on each of the matters to be acted upon at the annual meeting.
Please read it carefully.
INTERNET AVAILABILITY OF PROXY MATERIALS
We are furnishing proxy materials to our stockholders primarily on the Internet rather than mailing printed copies of those
materials to each stockholder. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed
copy of the proxy materials unless you request one. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to
how you may access and review the proxy materials and cast your vote via the Internet or by telephone. If you received a Notice of
Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, please follow the
instructions included in the Notice of Internet Availability of Proxy Materials. Other stockholders, in accordance with their prior requests,
have received e-mail notification of how to access our proxy materials and vote via the Internet, or have been mailed paper copies of
our proxy materials and proxy card or vote instruction form. If you have previously elected to receive our proxy materials electronically,
you will continue to receive these materials via e-mail unless you elect otherwise.
This proxy statement and our 2010 Annual Report on Form 10-K are available at www.proxyvote.com. In addition, if you have
not received a paper copy of our proxy materials and would like to receive one for the annual meeting or for future stockholder
meetings, you may request copies as follows:
•
•
•
By telephone: call 1-800-579-1639 free of charge and follow the instructions;
By Internet: go to www.proxyvote.com and follow the instructions; or
By e-mail: send an e-mail message to [email protected] Please send a blank e-mail and put the 12-digit
control number located in your Notice of Internet Availability of Proxy Materials in the subject line.
PARTICIPATING IN THE ANNUAL MEETING
We will be hosting the annual meeting live via Internet webcast. You will not be able to attend the meeting in person. A
summary of the information you need to attend the meeting online is provided below:
•
•
•
Any stockholder can listen to the meeting and participate live via webcast at www.virtualshareholdermeeting.com/
ilmn2011
Webcast will begin at 9:00 a.m., Pacific Time, on May 10, 2011
Stockholders may vote and submit questions during the meeting via live webcast
2
Table of Contents
•
•
•
•
•
Please have your 12-digit control number to enter the meeting
If you do not have your 12-digit control number, you will be able to listen to the meeting only — you will not
be able to vote or submit questions during the meeting
Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock
ownership, are posted at www.virtualshareholdermeeting.com/ilmn2011
Questions regarding how to connect and participate via the Internet will be answered by calling 1-866-451-3782 on
the day before the meeting and the day of the meeting
Webcast replay of the meeting will be available until 11:59 p.m., Eastern Time, on May 9, 2012 at
www.virtualshareholdermeeting.com/ilmn2011
ABOUT THE 2011 ANNUAL MEETING
Can I attend the annual meeting?
We will be hosting the 2011 annual meeting live via the Internet. You will not be able to attend the meeting in person. Any
stockholder can listen to and participate in the annual meeting live via the Internet at www.virtualshareholdermeeting.com/
ilmn2011. The webcast will start at 9:00 a.m., Pacific Time, on May 10, 2011. Stockholders may vote and submit questions
while connected to the annual meeting on the Internet.
What do I need in order to be able to participate in the annual meeting online?
You will need the 12-digit control number included on your Notice of Internet Availability of Proxy Materials or your proxy card (if
you received a printed copy of the proxy materials) in order to be able to vote your shares or submit questions during the meeting.
Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at
www.virtualshareholdermeeting.com/ilmn2011. If you do not have your 12-digit control number, you will be able to listen to
the meeting only — you will not be able to vote or submit questions during the meeting.
What is the purpose of the annual meeting?
At our annual meeting, stockholders will act upon the matters described in this proxy statement. In addition, following the meeting,
management will report on the performance of our company and respond to questions from stockholders.
What am I voting on at the annual meeting?
Stockholders will be asked to vote on four proposals. The proposals are to:
(1)
(2)
(3)
Elect the two director nominees named in this proxy statement to hold office for three years until the 2014 annual
meeting of stockholders and elect the one director nominee named in this proxy statement to hold office for two years
until the 2013 annual meeting of stockholders;
Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year
ending January 1, 2012;
Hold an advisory vote on executive compensation; and
3
Table of Contents
(4) Hold
an advisory vote on the frequency of holding an advisory vote on executive compensation.
Could other matters be decided at the annual meeting?
Our bylaws require that we receive advance notice of any proposal to be brought before the annual meeting by our stockholders,
and we have not received notice of any such proposals. If any other matter were to come before the annual meeting, the proxy holders
appointed by the Board of Directors will have the discretion to vote on those matters for you.
What is the recommendation of the Board on each of the matters scheduled to be voted on at the annual meeting?
The Board of Directors recommends that you vote:
•
•
•
•
FOR each of the nominees to the Board of Directors (Proposal 1),
FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm
for the 2011 fiscal year (Proposal 2);
FOR the approval, on an advisory basis, of the compensation of the "named executive officers" as disclosed in this
proxy statement (Proposal 3); and
FOR the approval, on an advisory basis, of an annual advisory vote on executive compensation (Proposal 4).
Who can vote?
You can vote your shares of common stock if our records show that you owned the shares on the record date of March 14, 2011.
At the close of business on the record date, there were outstanding and entitled to vote 127,953,250 shares of common stock. You get
one vote for each share of common stock that you hold. Only holders of our common stock as of the record date are entitled to notice
of and to vote on some or all of the matters listed in this proxy statement and the accompanying Notice of Annual Meeting of
Stockholders. The stock transfer books will not be closed between the record date and the date of the meeting. A list of stockholders
entitled to vote at the annual meeting will be available for examination at our principal executive offices at the address listed above for
a period of 10 days prior to the annual meeting, and during the annual meeting such list will be available for examination at
www.virtualshareholdermeeting.com/ilmn2011.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Stockholders of Record. You are a stockholder of record if at the close of business on the record date your shares were
registered directly in your name with Computershare Trust Company, N.A., our transfer agent.
Beneficial Owner. You are a beneficial owner if at the close of business on the record date your shares were held by a brokerage
firm or other nominee and not in your name. Being a beneficial owner means that, like most of our stockholders, your shares are held
in "street name." As the beneficial owner, you have the right to direct your broker or nominee how to vote your shares by following the
voting instructions your broker or other nominee provides. If you do not provide your broker or nominee with instructions on how to vote
your shares, your broker or nominee will be able to vote your shares with respect to some of the proposals, but not all. Please see
"What if I did not specify how my shares are to be voted?" below for additional information.
4
Table of Contents
How do I vote and what are the voting deadlines?
Stockholders of Record. If you are a stockholder of record, there are several ways for you to vote your shares.
•
•
•
•
Via the Internet. You may vote at www.proxyvote.com, 24 hours a day, seven days a week. You will need the 12digit control number included on your Notice of Internet Availability of Proxy Materials or your proxy card (if you
received a printed copy of the proxy materials). Votes submitted through the Internet must be received by 11:59 p.m.,
Eastern Time, on May 9, 2011.
By Telephone. You may vote using a touch-tone telephone by calling 1-800-690-6903, 24 hours a day, seven days a
week. You will need the 12-digit control number included on your Notice of Internet Availability of Proxy Materials or
your proxy card (if you received a printed copy of the proxy materials). Votes submitted by telephone must be
received by 11:59 p.m., Eastern Time, on May 9, 2011.
By Mail. If you received printed proxy materials, you may submit your vote by completing, signing, and dating each
proxy card received and returning it in the prepaid envelope. Sign your name exactly as it appears on the proxy card.
Proxy cards submitted by mail must be received no later than May 9, 2011 to be voted at the annual meeting.
During the Annual Meeting. Instructions on how to vote while participating in our annual meeting live via the
Internet are posted at www.virtualshareholdermeeting.com/ilmn2011.
The Internet and telephone voting procedures described above, which comply with Delaware law, are designed to authenticate
stockholders' identities, to allow stockholders to vote their shares, and to confirm that their instructions have been properly recorded.
Beneficial Owners. If you are a beneficial owner of your shares, you should have received a Notice of Internet Availability of Proxy
Materials or voting instructions from the broker or other nominee holding your shares. You should follow the instructions in the Notice
of Internet Availability of Proxy Materials or voting instructions provided by your broker or nominee in order to instruct your broker or
other nominee on how to vote your shares. The availability of telephone and Internet voting will depend on the voting process of the
broker or nominee. Shares held beneficially may not be voted during our annual meeting.
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a full set of printed proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission, or the SEC, we are making this proxy statement
available to our stockholders electronically via the Internet. On or about March 24, 2011, we will mail the Notice of Internet Availability
of Proxy Materials to our stockholders who held shares at the close of business on the record date, other than those stockholders who
previously requested electronic or paper delivery of communications from us. The Notice of Internet Availability of Proxy Materials
contains instructions on how to access an electronic copy of our proxy materials, including this proxy statement and our 2010 Annual
Report on Form 10-K. The Notice of Internet Availability of Proxy Materials also contains instructions on how to request a paper copy of
the proxy statement. We believe that this process will allow us to provide you with the information you need in a timely manner, while
conserving natural resources and lowering the costs of printing and distributing our proxy materials.
What does it mean if I receive more than one proxy card or Notice of Internet Availability of Proxy Materials?
If you receive more than one proxy card or Notice of Internet Availability of Proxy Materials, your shares are registered in more
than one name or are registered in different accounts. To make certain all of
5
Table of Contents
your shares are voted, please follow the instructions included on the Notice of Internet Availability of Proxy Materials on how to access
each proxy card and vote each proxy card over the Internet or by telephone. If you received paper proxy materials by mail, please
complete, sign, and return each proxy card to ensure that all of your shares are voted.
Can I vote my shares by filling out and returning the Notice of Internet Availability of Proxy Materials?
No. The Notice of Internet Availability of Proxy Materials only identifies the items to be voted on at the annual meeting. You
cannot vote by marking the Notice of Internet Availability of Proxy Materials and returning it. The Notice of Internet Availability of Proxy
Materials provides instructions on how to cast your vote. For additional information please see "How do I vote and what are the voting
deadlines?" above.
Can I revoke or change my vote after I submit my proxy?
Stockholders of Record. If you are a stockholder of record, you may revoke or change your vote at any time before the final vote
at the annual meeting by:
•
•
•
•
signing and returning a new proxy card with a later date;
submitting a later-dated vote by telephone or via the Internet — only your latest Internet or telephone proxy received
by 11:59 p.m., Eastern Time, on May 9, 2011 will be counted;
participating in the annual meeting live via the Internet and voting again; or
delivering a written revocation to our Corporate Secretary at Illumina, Inc., 9885 Towne Centre Dr., San Diego,
California 92121, before the annual meeting.
Beneficial Owners. If you are a beneficial owner of your shares, you must contact the broker or other nominee holding your
shares and follow their instructions for revoking or changing your vote.
What will happen if I do not vote my shares?
Stockholders of Record. If you are the stockholder of record and you do not vote by proxy card, by telephone, via the Internet
before the annual meeting, or during the annual meeting via live webcast, your shares will not be voted at the annual meeting.
Beneficial Owners. If you are the beneficial owner of your shares, your broker or nominee may vote your shares only on those
matters on which it has discretion to vote. Under the rules of the New York Stock Exchange, or NYSE, your broker or nominee does
not have discretion to vote your shares on non-routine matters such as Proposals 1, 3, and 4. However, your broker or nominee does
have discretion to vote your shares on routine matters such as Proposal 2. The broker's inability to vote on non-discretionary matters
for which the broker has not received instructions from the beneficial owner is referred to as a "broker non-vote." Please see "What is a
broker non-vote'?" below for more information.
What is a "broker non-vote"?
The NYSE has rules that govern brokers who have record ownership of listed company stock (including stock such as ours that is
listed on The NASDAQ Global Select Market) held in brokerage accounts for their clients who beneficially own the shares. Under these
rules, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares on certain
matters ("discretionary matters") but do not have discretion to vote uninstructed shares as to certain other matters ("non-discretionary
matters"). A broker may return a proxy card on behalf of a beneficial owner from whom the broker has not received instructions that
casts a vote with regard to discretionary matters but expressly states that the broker is not voting as to non-discretionary matters.
Under current NYSE interpretations, Proposals 1, 3, and 4 are considered a non-discretionary matter and Proposal 2 is considered a
discretionary matter.
6
Table of Contents
What is the effect of a broker non-vote?
Broker non-votes will be counted for purposes of calculating whether a quorum is present at the annual meeting, but will not be
counted for purposes of determining the number of votes present in person or represented by proxy and entitled to vote with respect to
a particular proposal. Thus, a broker non-vote will not impact our ability to obtain a quorum and will not otherwise affect the outcome of
the vote on a proposal that requires a plurality of votes cast (Proposal 1) or the approval of a majority of the votes present in person or
represented by proxy and entitled to vote (Proposals 2, 3, and 4).
How is a quorum obtained, and why is a quorum required?
We will hold the annual meeting if a quorum is present. A quorum will be present if holders of a majority of the outstanding shares
of common stock entitled to vote on a matter at the annual meeting are present or represented by proxy at the meeting. As of the close
of business on the record date, we had 127,953,250 shares of common stock outstanding and entitled to vote at the annual meeting,
meaning that 63,976,626 shares of common stock must be represented in person or by proxy to have a quorum. If a quorum is not
present at the annual meeting, the meeting may be adjourned from time to time until a quorum is obtained. If you submit a proxy, your
shares will be counted to determine whether we have a quorum even if you abstain or fail to provide voting instructions on any of the
proposals described in this proxy statement and listed on the proxy card. If your shares are held in the name of a nominee, and you do
not tell the nominee how to vote your shares, these shares will be counted for purposes of determining the presence or absence of a
quorum for the transaction of business.
How many votes are required to approve each proposal?
Broker
Discretionary
Votes
that
Proposal
Vote Required
May be Cast
Proposal 1 — Election of
Plurality of votes cast
The For all nominees
Withhold as to all nominees
the three director nominees three directors who receive the
named in this proxy
most votes will be elected
statement
For all nominees except those specific nominees
from whom you Withhold your vote
A withhold vote will have the same effect as an
abstention
However, neither an abstention nor a withhold vote
will affect the outcome of the election
7
Voting
Allowed?
No
Table of Contents
Broker
Discretionary
Votes
that
Voting
Proposal
Vote Required
May be Cast
Allowed?
Proposal 2 — Ratification of Majority of the shares entitled to vote and For
Against
Abstain
If Yes
the appointment of Ernst & present in person or represented by proxy you abstain from voting on this proposal,
Young LLP as our
the abstention will have the same effect as
independent registered
an against vote
public accounting firm for
the fiscal year ending
January 1, 2012
Proposal 3 — Advisory vote Majority of the shares entitled to vote and For
Against
Abstain
No
on executive compensation present in person or represented by proxy
If you abstain from voting on this proposal,
the abstention will have the same effect as
an against vote
Proposal 4 — Advisory vote
on the frequency of holding
an advisory vote on
executive compensation
Majority of the shares entitled to vote and For Every Year For Every Two Years For No
present in person or represented by proxy Every Three Years
Abstain
If
If none of the frequency alternatives (one you abstain from voting on this proposal,
year, two years, or three years) receive a the abstention will have the same effect as
majority vote, we will consider the
not voting at all on this proposal
frequency that receives the highest number
of votes by stockholders to be the
frequency that has been selected by
stockholders, on an advisory basis
How can I find the voting results of the annual meeting?
Preliminary results will be announced at the annual meeting. Final results also will be published in a current report on Form 8-K to
be filed with the SEC within four business days after the annual meeting. If the official results are not available at that time, we will
provide preliminary voting results in the Form 8-K and will provide the final results in an amendment to the Form 8-K as soon as they
become available.
Who is making and paying for this proxy solicitation?
This proxy is solicited on behalf of the Board of Directors. We will pay the cost of distributing this proxy statement and related
materials. Our officers may solicit proxies by mail or telephone. Upon request, we will provide copies of these materials to banks,
brokers, fiduciaries, custodians, and other nominees that hold shares on behalf of beneficial owners so that they may forward the
materials to the beneficial owners. We may, if appropriate, retain an independent proxy solicitation firm to assist us in soliciting proxies.
If we do retain a proxy
8
Table of Contents
solicitation firm, we would pay such firm's customary fees and expenses, which fees would be expected to be approximately $10,000,
plus expenses.
Is my vote confidential?
Proxy cards and voting tabulations that identify individual stockholders are mailed or returned directly to Broadridge Financial
Solutions and handled in a manner that protects your voting privacy. Your vote will not be disclosed EXCEPT:
•
•
•
as needed to permit Broadridge Financial Solutions to tabulate and certify the vote;
as required by law; or
in limited circumstances such as a proxy contest in opposition to the Board of Directors.
In addition, all comments written on the proxy card or elsewhere will be forwarded to management, but your identity will be kept
confidential unless you ask that your name be disclosed.
COMPANY INFORMATION AND MAILING ADDRESS
We were incorporated in California in April 1998 and reincorporated in Delaware in July 2000. Our principal executive offices are
located at 9885 Towne Centre Drive, San Diego, California 92121. Our telephone number is (858) 202-4500. Our website address is
www.illumina.com.
References in this proxy statement to "Illumina," "Company," "we," "us," and "our" refer to Illumina, Inc. and our consolidated
subsidiaries, unless the context requires otherwise. Information on our website is not intended to be incorporated into this proxy
statement.
9
Table of Contents
PROPOSAL 1:
ELECTION OF DIRECTORS
General
Our certificate of incorporation and bylaws provide for a classified Board of Directors consisting of three classes of directors with
staggered three-year terms. The Board of Directors currently consists of the following nine directors, having terms expiring at the
respective annual meeting of stockholders noted below:
2011 Annual Meeting
Daniel M. Bradbury
Gerald Möller, Ph.D.
Roy A. Whitfield
2012 Annual Meeting
A. Blaine Bowman
Karin Eastham, CPA
Jay T. Flatley
William H. Rastetter, Ph.D.
2013 Annual Meeting
Paul C. Grint, M.D.
David R. Walt, Ph.D.
Election of Two Directors to Hold Office for Three Years until the 2014 Annual Meeting of Stockholders
Upon the recommendation of the Nominating/Corporate Governance Committee, the Board of Directors has nominated for
election at the annual meeting the following slate of two nominees to hold office for three years until the annual meeting of stockholders
in the year 2014 and until their successors are duly elected and qualified:
Ø
Ø
Daniel M. Bradbury
Roy A. Whitfield
Election of One Director to Hold Office for Two Years until the 2013 Annual Meeting of Stockholders
Upon the recommendation of the Nominating/Corporate Governance Committee, the Board of Directors has nominated for
election at the annual meeting the following nominee to hold office for two years until the annual meeting of stockholders in the year
2013 and until his successor is duly elected and qualified:
Ø
Gerald Möller, Ph.D.
Dr. Möller was appointed to the Board of Directors in July 2010 to fill a newly created position. In accordance with our Corporate
Governance Guidelines, any new director appointed to fill a newly created position on the Board of Directors is assigned to a particular
class of directors and is required to stand for election by our stockholders at the first annual meeting of stockholders following such
appointment, whether or not the other members of the class of directors to which he or she was appointed are otherwise standing for
election at such annual meeting. At the time of his appointment, Dr. Möller was assigned to the same class of directors composed of
Drs. Grint and Walt. Accordingly, Dr. Möller is standing for election at the annual meeting to hold office for two years until the annual
meeting of stockholders in the year 2013 and until his successor is duly elected and qualified.
Additional Information
For more information about each nominee and each of the other directors serving on our Board of Directors, please see
"Information about Directors." Each of the nominees is currently serving as a director. The nominees have agreed to serve if elected,
and management has no reason to believe that such nominees will be unable to serve. In the event any nominee is unable or declines
to serve as a director at the time of the annual meeting, the proxies will be voted for any nominees who may be designated by the
present Board of Directors to fill the vacancy. The persons named in the form of proxy card attached to this proxy statement intend to
vote such proxy for the election of each of the three nominees named above, unless the stockholder indicates on the proxy that the
vote should be withheld from any or all of the nominees.
10
Table of Contents
Vote Required for Approval
A plurality of the votes of the shares present in person or represented by proxy at the annual meeting and entitled to vote on the
election of directors is required for the election of directors. The three nominees receiving the highest number of affirmative votes of the
shares entitled to vote at the annual meeting will be elected to the Board of Directors. You may not vote for more individuals than the
number nominated. In addition, stockholders may not cumulate votes in the election of directors.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE DIRECTOR NOMINEES SET FORTH ABOVE
11
Table of Contents
PROPOSAL 2:
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firm to audit our
consolidated financial statements for the fiscal year ending January 1, 2012, and the Board of Directors has determined that it would
be desirable to request that the stockholders ratify such appointment. Before selecting Ernst & Young, the Audit Committee considered
the firm's qualifications as independent registered public accountants and concluded that, based on Ernst & Young's prior performance
and its reputation for integrity and competence, it was qualified. The Audit Committee also considered whether any non-audit services
performed for us by Ernst & Young would impair Ernst & Young's independence and concluded that they did not. Even if the selection
is ratified, the Audit Committee, in its sole discretion, may change the appointment at any time during the fiscal year if it determines
that such a change would be in our best interests and that of our stockholders.
A representative of Ernst & Young is expected to be present at the annual meeting, will have an opportunity to make a statement
if he or she desires to do so, and is expected to be available to respond to appropriate questions.
Vote Required for Approval
Stockholder ratification is not required for making such appointment for the fiscal year ending January 1, 2012 because the Audit
Committee has responsibility for the appointment of our independent registered public accountants. The appointment is being
submitted for ratification with a view toward soliciting the opinion of stockholders, which opinion will be taken into consideration in
future deliberations. No determination has been made as to what action the Board of Directors or the Audit Committee would take if
stockholders did not approve the appointment.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
12
Table of Contents
PROPOSAL 3:
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required by Rule 14a-21(a) of the Securities Exchange Act of 1934, we are seeking an advisory vote on the compensation of
the named executive officers as disclosed in the section of this proxy statement titled "Executive Compensation." Stockholders are
being asked to vote on the following advisory resolution:
RESOLVED, that the compensation paid to Illumina's named executive officers, as disclosed pursuant to Item 402
of Regulation S-K, including the
Compensation Discussion and Analysis, compensation tables, and narrative
discussion is hereby APPROVED.
We urge stockholders to read the "Compensation Discussion and Analysis" beginning on page 32 of this proxy statement, which
describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our
compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative,
appearing on pages 44 through 47, which provide detailed information on the compensation of our named executive officers. The
Board of Directors and the Compensation Committee believe that the policies and procedures articulated in the "Compensation
Discussion and Analysis" are effective in achieving our goals and that the compensation of our named executive officers reported in
this proxy statement has contributed to our recent and long-term success.
Vote Required for Approval
The advisory resolution set forth above, commonly referred to as a "say-on-pay" resolution, is non-binding on the Board of
Directors. Although non-binding, the board and the Compensation Committee will review and consider the voting results when making
future decisions regarding executive compensation. Approval of the advisory resolution set forth above requires the affirmative "FOR"
vote of a majority of the shares entitled to vote and present in person or represented by proxy.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
"FOR" THE FOREGOING RESOLUTION TO APPROVE, ON AN ADVISORY
BASIS,
THE COMPENSATION OF ILLUMINA'S NAMED EXECUTIVE
OFFICERS
13
Table of Contents
PROPOSAL 4:
ADVISORY VOTE ON THE FREQUENCY OF HOLDING
AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to Rule 14a-21(b) of the Securities Exchange Act of 1934, we are asking stockholders to vote on whether future
advisory votes on executive compensation should occur every year, every two years, or every three years pursuant to the following
advisory resolution:
RESOLVED, that the voting choice of once every year, once every two years, or
once every three years that
receives the highest number of votes cast in connection with this resolution will be considered to be the frequency
preferred by stockholders on an advisory basis for Illumina to hold a nonbinding vote to approve the
compensation of the named executive officers.
The Board of Directors has determined that holding an advisory vote on executive compensation every year (annually) is the
most appropriate policy for Illumina at this time, and recommends that stockholders vote for the Company to hold annual advisory
votes on executive compensation. In formulating its recommendation, the board considered that an annual advisory vote on executive
compensation will allow our stockholders to provide us with their direct input on our compensation philosophy, policies, and practices
as disclosed in our proxy statement every year. Additionally, an annual advisory vote on executive compensation is consistent with our
desire to seek input from, and engage in discussions with, our stockholders on corporate governance matters and our executive
compensation philosophy, policies, and practices. We understand that our stockholders may have different views as to what is the best
approach for Illumina, and we look forward to hearing from our stockholders on this proposal.
Vote Required for Approval
The vote is advisory and non-binding. The Board of Directors will consider the outcome, along with other relevant factors, in
determining how often to conduct advisory votes on executive compensation. Notwithstanding the board's recommendation and the
outcome of the stockholder advisory vote, the board may in the future decide to conduct advisory votes on a more or less frequent
basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to
compensation programs. Approval of the advisory resolution set forth above with respect to holding an advisory vote once every year,
once every two years, or once every three years, as applicable, requires the affirmative vote of a majority of the shares entitled to vote
and present in person or represented by proxy for one of the foregoing options. If none of the frequency alternatives (one year, two
years, or three years) receive a majority vote, we will consider the frequency that receives the highest number of votes to be the
frequency that has been selected by stockholders, on an advisory basis.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE,
ON AN ADVISORY BASIS, FOR THE ADVISORY VOTE ON
COMPENSATION OF NAMED EXECUTIVE OFFICERS TO OCCUR
ONCE EVERY YEAR
14
Table of Contents
INFORMATION ABOUT DIRECTORS
The following table sets forth the names, ages, and positions of our directors as of March 24, 2011. Our directors' respective
backgrounds and a discussion of the specific experience, qualifications, attributes, or skills of our directors that led the Board of
Directors to conclude that each such person should serve as director are described following the table.
Name
William H. Rastetter, Ph.D.(1)(2)(3)
Jay T. Flatley
A. Blaine Bowman(1)
Daniel M. Bradbury(1)(2)
Karin Eastham, CPA(1)(3)
Paul C. Grint, M.D.(2)
Gerald Möller, Ph.D.(4)
David R. Walt, Ph.D.(3)
Roy A. Whitfield(2)
(1)
(2)
(3)
(4)
Age
62
58
64
49
61
53
67
58
57
Position with Company
Chairman of the Board
Director; President and Chief Executive Officer
Director
Director
Director
Director
Director
Director
Director
Member of the Audit Committee
Member of the Compensation Committee
Member of the Nominating/Corporate Governance Committee
Member of the Diagnostics Advisory Committee
William H. Rastetter, Ph.D., has been a director since November 1998 and Chairman of the Board since January 2005.
Dr. Rastetter is a co-founder of Receptos, Inc., a privately-held drug discovery and development company, and has been serving as
Chairman of the Board since 2009. Dr. Rastetter has also been serving as a partner of Venrock Associates, a venture capital company
since August 2006. From 2007 to 2009, Dr. Rastetter was Chief Executive Officer and the Executive Chairman of Apoptos, Inc., a
privately-held oncology research and development company, which was acquired by Receptos in 2009. At the end of 2005,
Dr. Rastetter retired as the Executive Chairman of Biogen Idec Inc., a biopharmaceutical company. He had served in this position since
the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. He served as Chief Executive Officer of IDEC
Pharmaceuticals, a biotechnology company, from 1986 to 2003 and as chairman of its Board of Directors from 1996 to 2003.
Additionally, he served as President of IDEC Pharmaceuticals from 1986 to 2002, and as Chief Financial Officer from 1988 to 1993.
From 1982 to 1986, Dr. Rastetter served in various positions at Genentech, Inc., a biotechnology company, and previously he was an
associate professor at the Massachusetts Institute of Technology. Dr. Rastetter serves as a director of Neurocrine Biosciences, Inc., a
NASDAQ-listed biopharmaceutical company focused on neurological and endocrine diseases and disorders. Dr. Rastetter holds a B.S.
in Chemistry from the Massachusetts Institute of Technology and received his M.A. and Ph.D. in Chemistry from Harvard University.
In selecting Dr. Rastetter as a past nominee for election to the Board of Directors, the board considered, among other things,
Dr. Rastetter's scientific and technical expertise combined with his business experience in leading rapidly growing companies in the life
science industry. Our continued growth is dependent on scientific and technical advances, and the Board of Directors believes that
Dr. Rastetter offers both strategic and technical insight into the risks and opportunities associated with our business. In addition,
Dr. Rastetter's board and executive leadership experience at other life sciences companies provides valuable strategic and
governance insight to the Board of Directors as a whole.
Jay T. Flatley has served as our President, Chief Executive Officer, and a director since October 1999. Prior to joining Illumina,
Mr. Flatley was co-founder, President, Chief Executive Officer, and a director of Molecular Dynamics, Inc., a NASDAQ-listed life
sciences company focused on genetic discovery and analysis, from 1994 until its sale to Amersham Pharmacia Biotech Inc. in 1998.
He served in various other positions with that company from 1987 to 1994. From 1985 to 1987, Mr. Flatley was Vice President of
Engineering and Vice President of Strategic Planning at Plexus Computers, a UNIX computer company. Mr. Flatley is also
15
Table of Contents
member of the Keck Graduate Institute Board of Trustees. Mr. Flatley holds a B.A. in Economics from Claremont McKenna College
and a B.S. and M.S. in Industrial Engineering from Stanford University.
In selecting Mr. Flatley as a past nominee for election to the Board of Directors, the board considered, among other things,
Mr. Flatley's experience in leading and managing our remarkable growth and development over the past 10 years. The Board of
Directors believes that Mr. Flatley, through his long experience with the Company and his prior executive and board experience with
Molecular Dynamics, Inc., contributes to the board's understanding of the needs of our customers, the markets in which we compete,
and the risks and opportunities associated with our product development and technological advances.
A. Blaine Bowman has been a director since January 2007. Mr. Bowman was formerly the Chairman, President, and Chief
Executive Officer, and is currently a director, of Dionex Corporation, a NASDAQ-listed manufacturer of analytical instruments.
Mr. Bowman retired as President and Chief Executive Officer of Dionex in 2002 and as Chairman of the Board in 2005. He joined
Dionex in 1977 and was named President and Chief Executive Officer in 1980. Before joining Dionex, Mr. Bowman was a management
consultant with McKinsey & Company, a management consulting firm, and a product engineer with Motorola Semiconductor Products
Division, a communication equipment company. Mr. Bowman also serves as a director of Cell Biosciences, Inc., a privately-held life
sciences company focused on protein research through the use of nanoproteomics. He also served as a past director of Molecular
Devices Corporation, a NASDAQ-listed supplier of instruments and consumables for life science researchers, from 1985 until its sale in
2007, and of Solexa, Inc. from 2006 until its sale to Illumina in 2007. Mr. Bowman received his B.S. in Physics from Brigham Young
University and an M.B.A. from Stanford University.
In selecting Mr. Bowman as a past nominee for election to the Board of Directors, the board considered, among other things,
Mr. Bowman's understanding of highly technical manufacturing processes associated with scientific instruments, his business
leadership experience, and his deep understanding of operational financial issues. We design and manufacture our products, many of
which are sophisticated scientific instruments used by scientists and researchers. The Board of Directors believes that Mr. Bowman
contributes to the board's understanding of the needs of our customers and the risks associated with our manufacturing processes. In
addition, Mr. Bowman's experience as a management consultant and chief executive officer of a scientific equipment manufacturer
contributes to the board's strategic understanding and review of our business opportunities. Mr. Bowman also served as a director of
Solexa, Inc. at the time we acquired Solexa, and through this position he gained an understanding of the DNA sequencing market,
which is our fastest growing market, and associated product development issues.
Daniel M. Bradbury has been a director since January 2004. Mr. Bradbury has been serving as the Chief Executive Officer of
Amylin Pharmaceuticals, Inc., a NASDAQ-listed biopharmaceutical company, since March 2007, as President and a board member of
Amylin since June 2006, and as Amylin's Chief Operating Officer from 2003 to June 2006. He previously served as Executive Vice
President from 2000 until his promotion in 2003. He joined Amylin in 1994 and held officer-level positions in Corporate Development
and Marketing since that time. From 1984 to 1994, Mr. Bradbury held a number of sales and marketing positions at SmithKline
Beecham Pharmaceuticals, a drug manufacturer. Mr. Bradbury serves as a board member of BIOCOM, the Keck Graduate Institute's
Board of Trustees, and the San Diego Regional Economic Development Corporation. Mr. Bradbury is a member of the Royal
Pharmaceutical Society of Great Britain and serves on the UCSD Rady School of Management's Advisory Council, the University of
Miami's Innovation Corporate Advisory Council, and the University of Miami's Diabetes Research Institute Corporate Advisory Council.
He received a Bachelor of Pharmacy from Nottingham University and a Diploma in Management Studies from Harrow and Ealing
Colleges of Higher Education.
In selecting Mr. Bradbury as a nominee for election to the Board of Directors, the board considered, among other things,
Mr. Bradbury's management and governance experience in the biopharmaceutical industry gained primarily through his involvement in
leading the continuing growth and development of Amylin, a rapidly growing, global biopharmaceutical company. The Board of
Directors believes that Mr. Bradbury contributes to the board's understanding of the risks and opportunities faced by a rapidly growing
global business. In addition, Mr. Bradbury's experience successfully commercializing pharmaceutical products
16
Table of Contents
contributes to the board's understanding of the risks and opportunities associated with new product development in an industry
regulated by the U.S. Food and Drug Administration.
Karin Eastham, CPA, has been a director since July 2004. Ms. Eastham currently provides consulting and executive coaching to
companies in the healthcare industry in addition to serving on the boards of directors for several life science companies. From May
2004 to September 2008, she served as Executive Vice President and Chief Operating Officer, and as a member of the Board of
Trustees, of Burnham Institute for Medical Research, a non-profit corporation engaged in basic biomedical research. From 1999 to
2004, Ms. Eastham served as Senior Vice President, Finance, Chief Financial Officer and Secretary of Diversa Corporation, a
biotechnology company. She previously held similar positions with CombiChem, Inc., a computational chemistry company, and Cytel
Corporation, a biopharmaceutical company. Ms. Eastham also held several positions, including Vice President, Finance, at Boehringer
Mannheim Corporation, a biopharmaceutical company, from 1976 to 1988. Ms. Eastham also serves as a director for Amylin
Pharmaceuticals, Inc., Genoptix, Inc., a NASDAQ-listed provider of specialized diagnostic laboratory services, Geron Corporation, a
NASDAQ-listed biopharmaceutical company, and Trius, Inc., a NASDAQ-listed biopharmaceutical company. Ms. Eastham also served
as a past director of Tercica, Inc., a NASDAQ-listed biopharmaceutical company, from 2003 until its sale in 2008, and SGX
Pharmaceuticals, Inc., a NASDAQ-listed biopharmaceutical company, from 2005 until its sale in 2008. Ms. Eastham received a B.S.
and an M.B.A. from Indiana University and is a Certified Public Accountant and a Certified Director.
In selecting Ms. Eastham as a past nominee for election to the Board of Directors, the board considered, among other things,
Ms. Eastham's understanding of biomedical research institutions combined with her business leadership and finance experience. A
significant portion of our customers are biomedical research institutions, and the Board of Directors believes that Ms. Eastham
provides the board with greater insight into the needs of such institutions. Ms. Eastham also contributes to the board's understanding
of governance and strategy for life sciences companies through her experience as a director in our industry. Additionally,
Ms. Eastham's extensive senior management experience in the biopharmaceutical industry, particularly in key corporate finance and
accounting positions, also provide the appropriate skills to serve on our Board of Directors.
Paul C. Grint, M.D., has been a director since April 2005. Dr. Grint is currently President of Cerexa, Inc., a wholly-owned
subsidiary of Forest Laboratories, Inc., a pharmaceutical company. Prior to joining Cerexa, Dr. Grint served as Senior Vice President at
Forest Research Institute, Inc., the scientific development subsidiary of Forest Laboratories, Inc. Prior to joining Forest Laboratories,
from 2006 to 2008 Dr. Grint was Chief Medical Officer at Kalypsys Inc., a biopharmaceutical company, and during 2006 he was Senior
Vice President and Chief Medical Officer at Zephyr Sciences, Inc, a biopharmaceutical company. He has held similar executive
positions at Pfizer Inc., IDEC Pharmaceuticals Corporation, and Schering-Plough Corporation. Dr. Grint began his pharmaceutical
career at the Wellcome Research Laboratories in the UK and received his medical degree from the University of London, St.
Bartholomew's Hospital Medical College in London. He is a Fellow of the Royal College of Pathologists, a member of numerous
professional and medical societies, and the author or co-author of over 50 publications.
In selecting Dr. Grint as a past nominee for election to the Board of Directors, the board considered, among other things,
Dr. Grint's product development expertise gained from more than 20 years of experience in biologics and small molecule drug
development, marked by the successful development of numerous commercial products in the fields of infectious disease,
immunology, and oncology, combined with his understanding of the markets that we serve. Our continued growth is dependent on
developing and commercializing new products and services for both the research and clinical markets. The Board of Directors believes
that Dr. Grint contributes to the board's understanding of the needs of research and clinical customers and the risks and opportunities
associated with new product development.
Gerald Möller, Ph.D., has been a director since July 2010. Dr. Möller is currently an advisor at HBM Bio Ventures AG, a Swiss
investment firm focusing on biotechnology, emerging pharmaceutical, medical technology, and related industries. Previously, Dr. Möller
spent 23 years at Boehringer Mannheim in Germany, Japan, and the United States, where he held a number of leadership positions,
including president of
17
Table of Contents
Decentralized Diagnostics, president of Advanced Diagnostics and Biochemicals, and chief executive officer of Boehringer Mannheim
Therapeutics. In 1995 he became chief executive officer of the worldwide Boehringer Mannheim Group. Following Boehringer's
acquisition by Roche, Dr. Möller became head of Global Development and Strategic Marketing, Pharmaceuticals, and a member of the
Executive Committee at Hoffmann LaRoche. In addition to Illumina, Dr. Möller sits on several life sciences and diagnostics boards,
including Morphosys AG, a Frankfurt Stock Exchange-listed biotechnology company focusing on developing the next generation of fully
human antibodies, Bionostics, Inc., a privately-held developer and manufacturer of calibrators and quality control products for diabetes
diagnostics test systems, and Vivacta Limited, a privately-held medical diagnostics company. Dr. Möller also is chairman of the
Foundation for Innovative New Diagnostics (FIND), a product development and implementation partnership financed in part by the
Bill & Melinda Gates Foundation. He holds a Ph.D. in physical chemistry from the University of Kiel in Germany.
In selecting Dr. Möller as a nominee for election to the Board of Directors, the board considered, among other things, Dr. Möller's
product development and diagnostics expertise gained from more than 30 years of leadership and strategic experience at global
pharmaceutical and life science companies. The Board of Directors believes that Dr. Möller's diagnostics experience, in particular,
contributes to the board's understanding of the growing diagnostics market and the opportunity and an risks associated with such
market.
David R. Walt, Ph.D., is one of our founders and has been a director and Chairman of our Scientific Advisory Board since June
1998. Dr. Walt has been the Robinson Professor of Chemistry at Tufts University since 1995 and has been a Howard Hughes Medical
Institute Professor since 2006. Dr. Walt is a Member of the National Academy of Engineering, a Fellow of the American Institute of
Medical and Biological Engineers, and a Fellow of the American Association for the Advancement of Science. Dr. Walt has published
over 200 papers and is named as an inventor or co-inventor of over 40 patents, many of which are directed to our micro-array
products. He also serves as a board member for Quanterix, Inc., a privately-held company focused on single molecule analysis for
clinical diagnostics. Dr. Walt holds a B.S. in Chemistry from the University of Michigan and received his Ph.D. in Chemical Biology from
SUNY at Stony Brook.
In selecting Dr. Walt as a past nominee for election to the Board of Directors, the board considered, among other things,
Dr. Walt's scientific and technical expertise combined with his understanding of the markets that we serve. Our continued growth is
dependent on scientific and technical advances, and the Board believes that Dr. Walt offers both strategic and technical insight into the
risks and opportunities associated with our business. In addition, Dr. Walt's academic and research experience provides the Board of
Directors with valuable insight into the needs of our customers, many of which are scientific research institutions, and the opportunities
associated with serving the research market.
Roy A. Whitfield has been a director since January 2007. Mr. Whitfield is the former Chairman of the Board and Chief Executive
Officer of Incyte Corporation (formerly Incyte Genomics), a NASDAQ-listed drug discovery and development company he co-founded
in 1991. From 1993 to 2001, Mr. Whitfield served as its Chief Executive Officer and, from November 2001 until his retirement in June
2003, as its Chairman. Mr. Whitfield remains on the board of Incyte Corporation. From 1984 to 1989, Mr. Whitfield held senior
operating and business development positions with Technicon Instruments Corporation, a medical instrumentation company, and its
predecessor company, Cooper Biomedical, Inc., a biotechnology and medical diagnostics company. Earlier, Mr. Whitfield spent seven
years with the Boston Consulting Group's international consulting practice. In addition to serving on the Incyte Board, he is a director of
Nektar Therapeutics, a NASDAQ-listed clinical-stage biopharmaceutical company, and he served as a past director of Solexa, Inc.
from 2006 until its sale to Illumina in 2007. Mr. Whitfield received a B.S. in Mathematics from Oxford University and an M.B.A. from
Stanford University.
In selecting Mr. Whitfield as a nominee for election to the Board of Directors, the board considered, among other things,
Mr. Whitfield's management and governance experience in the biotechnology and genomics industries gained primarily through his
involvement in leading the growth and development of Incyte Corporation. The Board of Directors believes that Mr. Whitfield
contributes to the board's
18
Table of Contents
understanding of the risks and opportunities faced by a rapidly growing global business. In addition, Mr. Whitfield's experience as a
management consultant contributes to the board's strategic understanding and review of our business opportunities. Mr. Whitfield also
served as a director of Solexa, Inc. at the time we acquired Solexa, and through this position he gained an understanding of the DNA
sequencing market, which is our fastest growing market, and associated product development issues.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Board of Directors
Our business is managed under the direction of the Board of Directors. Our certificate of incorporation and bylaws provide for a
classified Board of Directors consisting of three classes of directors with staggered three-year terms. The board has determined that a
majority of the members of the board, specifically Mr. Bradbury, Mr. Bowman, Ms. Eastham, Dr. Grint, Dr. Möller, Dr. Rastetter,
Dr. Walt, and Mr. Whitfield, are independent directors under the rules of The NASDAQ Global Select Market.
The Board of Directors intends to hold executive sessions of the non-management directors following each regularly scheduled
in-person meeting of the Board of Directors. Executive sessions do not include any employee directors of the Company. At its
meetings during the fiscal year ended January 2, 2011 ("fiscal 2010"), the Board of Directors regularly met in executive sessions of
non-employee directors.
The Board of Directors has adopted Corporate Governance Guidelines outlining its duties. These guidelines can be viewed on
our website at www.illumina.com by clicking on "Company," then "Investor Relations," and then on "Corporate Governance." The
Board of Directors meets regularly to review significant developments affecting the Company and to act on matters requiring Board of
Directors' approval. The Board of Directors held eight formal meetings during fiscal 2010 and acted six times by written consent. Board
members are requested to make attendance at board and board committee meetings a priority, to come to meetings prepared having
read any materials provided to the Board of Directors prior to the meeting, and to participate actively in the meetings.
Attendance at Meetings
During fiscal 2010, each director attended, in person or by telephone, at least 75% of the total number of meetings of both the
Board of Directors and board committees on which such director served during the period. Board members are invited to attend our
annual meetings of stockholders, but they are not required to do so. We reimburse the travel expenses of any director who travels to
attend the annual meetings. Five members of the Board of Directors attended our 2010 annual meeting of stockholders.
Corporate Governance
The Board of Directors and our management believe that good corporate governance is an important component in enhancing
investor confidence in the Company and increasing stockholder value. The imperative to continue to develop and implement best
practices throughout our corporate governance structure is fundamental to our strategy to enhance performance by creating an
environment that increases operational efficiency and ensures long-term productivity and growth. Sound corporate governance
practices also ensure alignment with stockholder interests by promoting fairness, transparency, and accountability in business activities
among employees, management, and the Board of Directors.
We maintain a corporate governance page on our website that includes key information about our corporate governance
initiatives, including our Corporate Governance Guidelines, Code of Ethics, and charters for each of the committees of the Board of
Directors, including the Audit Committee, the Compensation Committee, the Nominating/Corporate Governance Committee, and the
Diagnostics Advisory Committee. The corporate governance page can be found on our website at www.illumina.com by clicking on
"Company," then "Investor Relations," and then on "Corporate Governance."
19
Table of Contents
Board Leadership Structure
We separate the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two
roles. Our Chief Executive Officer is responsible for setting the strategic direction for the Company and its day-to-day leadership and
performance, while the Chairman of the Board provides guidance to the Chief Executive Officer, reviews the schedules and agendas
for board meetings, and presides over meetings of the full board. The Board of Directors believes that this leadership structure is best
for the Company at the current time, as it appropriately balances the need for the Chief Executive Officer to run the Company on a
day-to-day basis with significant involvement and authority vested in an outside independent board member. In addition, the Board of
Director believes that there are advantages to having an independent Chairman for matters such as communications and relations
between the board, the Chief Executive Officer, and other senior management; in assisting the board in reaching consensus on
particular strategies and policies; and in facilitating robust director, board, and Chief Executive Officer evaluation processes. Under our
Corporate Governance Guidelines, our independent Chairman is responsible for:
•
•
•
•
reviewing the schedules and agendas for board meetings as determined and prepared by the Chief Executive Officer;
participating as an observer on any board committee on which he or she is not a member, if appropriate;
discussing the results of the Chief Executive Officer's performance evaluation with the Compensation Committee and,
together with the Chair of the Compensation Committee, with the independent members of the board; and
conveying to the Chief Executive Officer, together with the Chair of the Compensation Committee, the results of the Chief
Executive Officer's performance evaluation.
In performing the duties described above, our independent Chairman is expected to consult with the Chairs of the appropriate
board committees and solicit their participation in order to avoid diluting the authority and responsibilities of such Committee Chairs.
Board's Role in Risk Oversight
Risk Oversight Generally
The Board of Directors is responsible for overseeing our risk management. To assist its oversight function, the board has
delegated many risk oversight functions to the Audit Committee. Under its charter, the Audit Committee is responsible for providing
advice to the board with respect to our risk evaluation and mitigation processes, including, in particular, the processes utilized by
management for identifying, evaluating, and mitigating strategic, financial, operational, regulatory, and external risks inherent in our
business. The Audit Committee also oversees our internal audit function. In addition to the Audit Committee's work in overseeing risk
management, our full board regularly engages in discussions of the most significant risks that we face and how these risks are being
managed, and the board receives reports on risk management from our senior officers and outside consultants engaged to provide an
enterprise-level review of the risks facing the Company.
Our senior executives provide the Board of Directors and its committees with regular updates about our strategies and objectives
and the risks inherent within them at board and committee meetings and in regular reports. Board and committee meetings also
provide a venue for directors to discuss issues of concern with management. The Board of Directors and committees call special
meetings when necessary to address specific issues or matters that should be addressed before the next regularly scheduled meeting.
In addition, our directors have access to our management at all levels to discuss any matters of interest, including those related to risk.
Those members of management most knowledgeable of the issues attend board meetings to provide additional insight into items being
discussed, including risk exposures. In addition, the Company's
20
Table of Contents
General Counsel and the Company's Chief Financial Officer report directly to our President and Chief Executive Officer, providing him
with visibility to our risk profile. The Board of Directors believes that the work undertaken by the Audit Committee, together with the
work of the full board and the President and Chief Executive Officer, enables the board to effectively oversee our risk management
function.
Compensation Programs
The Compensation Committee, together with senior management, also reviews compensation programs and benefits plans
affecting employees generally (in addition to those applicable to our executive officers), and we have concluded that our compensation
policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. We also believe
that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond our ability to effectively
identify and manage significant risks; are compatible with effective internal controls and our risk management practices; and are
supported by the oversight and administration of the Compensation Committee with regard to executive compensation programs.
Committees of the Board of Directors
The Board of Directors has four standing committees to facilitate and assist the board in the execution of its responsibilities.
These committees are currently the Audit Committee, the Compensation Committee, the Nominating/Corporate Governance
Committee, and the Diagnostics Advisory Committee. In accordance with The NASDAQ Global Select Market listing standards, all of
the committees are composed solely of non-employee, independent directors. Charters for each committee are available on our
website at www.illumina.com by first clicking on "Company," then "Investor Relations," and then on "Corporate Governance." The
charter of each committee is also available in print to any stockholder who requests it.
21
Table of Contents
Audit Committee
Members:
A. Blaine Bowman, Chairperson
Daniel M. Bradbury
Karin Eastham, CPA
William H. Rastetter, Ph.D.
Number of Meetings in Fiscal 2010:
9
Purpose and Functions:
Oversees our accounting and financial reporting processes and audits of our financial
statements on behalf of the Board of Directors and provides advice with respect to our
risk evaluation and mitigation processes.
To monitor and advise the board on:
• the integrity of our financial statements and disclosures;
• the independent auditor's qualifications and independence;
• the performance of internal and independent audit functions;
• the adequacy of the our internal controls;
• our compliance with legal and regulatory requirements; and
• the processes utilized by management for identifying, evaluating, and mitigating
strategic, financial, operational, regulatory, and external risks inherent in our
business.
Financial Experts:
The Board of Directors has unanimously determined that all Audit Committee members
are financially literate under current NASDAQ listing standards, and at least one
member has financial sophistication under NASDAQ listing standards. In addition, the
Board of Directors has unanimously determined that all Audit Committee members
qualify as an "audit committee financial expert" under SEC rules and regulations.
Designation as an "audit committee financial expert" is an SEC disclosure requirement
and does not impose any additional duties, obligations, or liability on any person so
designated.
Compensation Committee
Members:
Roy A. Whitfield, Chairperson
Daniel M. Bradbury
Paul C. Grint, M.D.
William H. Rastetter, Ph.D.
Number of Meetings in Fiscal 2010:
6
Purpose and Functions:
To discharge the responsibilities of the Board of Directors with respect to compensation
matters for our executive officers and other employees and consultants.
To report annually to our stockholders on executive compensation matters.
To administer our equity and other compensation plans.
To take or cause to be taken such other actions and address such other matters as the
Board of Directors may from time to time authorize the committee to undertake.
22
Table of Contents
The Chief Executive Officer may not participate in or be present during any deliberations or determinations of the Compensation
Committee regarding his compensation or individual compensation objectives.
Mr. Flatley, our President and Chief Executive Officer, has been delegated limited authority to grant, without any further action
required by the Compensation Committee, stock options and restricted stock units to any employee who has a title below the rank of
"Senior Vice President," who is not designated as a "Section 16 Officer," and who does not report directly to him. The purpose of this
delegation of authority is to enhance the flexibility of equity administration and to facilitate the timely grant of equity awards to nonmanagement employees, particularly new employees, within specified limits approved by the Compensation Committee. At least
annually, Mr. Flatley reports to the Compensation Committee on his exercise of this delegated authority during the preceding
12 months.
Nominating/Corporate Governance Committee
Members:
Karin Eastham, CPA, Chairperson
William H. Rastetter, Ph.D.
David R. Walt, Ph.D.
Number of Meetings in Fiscal 2010:
6
Purpose and Functions:
To identify individuals qualified to serve as members of the Board of Directors.
To select nominees for election as directors of the Company.
To evaluate the performance of the Board of Directors.
To develop and recommend to the Board of Directors corporate governance
guidelines.
To provide oversight with respect to corporate governance and ethical conduct.
Diagnostics Advisory Committee
Members:
Gerald Möller, Ph.D., Chairperson
Number of Meetings in Fiscal 2010:
0 (the committee was formed in the fourth quarter of fiscal 2010)
Purpose and Functions:
To periodically review and advise the Board of Directors on the strategic
direction and objectives of our diagnostics business, including providing
understanding, clarification, and validation of the fundamental strategy of the
diagnostics business (and its positioning and impact on our overall corporate
strategy) in order to enable the board to make informed business decisions.
The committee is also responsible for identifying and discussing with the Board
of Directors significant emerging trends and issues related, or of relevance, to
the strategic goals and objectives of our diagnostics business.
Compensation Committee Interlocks and Insider Participation
Our executive compensation program has been administered by the Compensation Committee of our Board of Directors. None of
the members of the Compensation Committee has been an officer or employee of ours. None of our current executive officers has ever
served as a member of a board of directors or
23
Table of Contents
compensation committee of any other entity that has or has had one or more executive officers serving as a member of our Board of
Directors or Compensation Committee during fiscal 2010.
Code of Ethics
We have adopted a code of ethics that applies to all of our directors, officers, and employees, including our principal executive
officer and principal financial officer. This code of ethics is reviewed on an annual basis and modified as deemed necessary. Our code
of ethics is available for download from our website, www.illumina.com, by first clicking on "Company," then "Investor Relations," and
then on "Corporate Governance." A copy of the Code of Ethics may also be obtained free of charge, from us upon a request directed to
Illumina, Inc., 9885 Towne Centre Dr., San Diego, California 92121, Attention: Investor Relations. We will disclose within four business
days any substantive changes in or waivers of the Code of Ethics granted to our principal executive officer, principal financial officer,
principal accounting officer, or controller, or persons performing similar functions, by posting such information on our website as set
forth above rather than by filing a Form 8-K with the SEC.
DIRECTOR NOMINATION
Criteria for Board Membership
The Board of Directors has delegated to the Nominating/Corporate Governance Committee the responsibility for reviewing and
recommending to the board nominees for director. In accordance with our Corporate Governance Guidelines, the Nominating/
Corporate Governance Committee, in evaluating board candidates, considers factors such as depth and breadth of experience,
wisdom, integrity, ability to make independent analytical inquiries, understanding of our business environment, and willingness to
devote adequate time to board duties, all in the context of an assessment of the needs of the board at the time. The Nominating/
Corporate Governance Committee seeks to ensure that at least a majority of directors are independent under the rules of The
NASDAQ Global Select Market, that members of our Audit Committee meet the financial literacy and sophistication requirements
under the rules of The NASDAQ Global Select Market, and at least one of them qualifies as an "audit committee financial expert" under
the rules of the SEC.
The Nominating/Corporate Governance Committee's objective is to maintain a board of individuals of the highest personal
character, integrity, and ethical standards, and that reflects a range of professional backgrounds and skills relevant to our business.
For each of the nominees to the board, the biographies shown above highlight the experiences and qualifications that were viewed as
being among the most important by the Nominating/Corporate Governance Committee in concluding that the nominee should serve as
a director of the Company. The Nominating/Corporate Governance Committee considers diversity as one of many, but not dispositive,
factors in identifying nominees for director, including personal characteristics such as race and gender, as well as diversity in the
experience and skills that contribute to the board's performance of its responsibilities in the oversight of a complex and highlycompetitive global business. The Nominating/Corporate Governance Committee does not assign specific weights to particular criteria
and no particular criterion is necessarily applicable to all prospective nominees.
Process for Identifying and Evaluating Nominees
The Nominating/Corporate Governance Committee believes we are well-served by our current directors. In the ordinary course,
absent special circumstances or a material change in the criteria for board membership, the Nominating/Corporate Governance
Committee will re-nominate incumbent directors who continue to be qualified for board service and are willing to continue as directors.
If an incumbent director is not standing for re-election, or if a vacancy on the board occurs between annual stockholder meetings, the
Nominating/Corporate Governance Committee will seek out potential candidates for board appointment who meet the criteria for
selection as a nominee and have the specific qualities or skills being sought. In addition, from time to time the board may seek to
expand its ranks to bring in new board members with
24
Table of Contents
special skills and/or experience relevant and useful to us at our particular stage of development. Director candidates will be selected
based on input from members of our Board of Directors, our senior management, and, if the Nominating/Corporate Governance
Committee deems appropriate, a third-party search firm. The Nominating/Corporate Governance Committee will evaluate each
candidate's qualifications and check relevant references; in addition, such candidates will be interviewed by at least one member of the
Nominating/Corporate Governance Committee. Candidates meriting serious consideration will meet with all members of the Board of
Directors. Based on this input, the Nominating/Corporate Governance Committee will evaluate which of the prospective candidates is
qualified to serve as a director and whether the committee should recommend to the board that this candidate be appointed to fill a
current vacancy on the board or presented for the approval of the stockholders, as appropriate.
Stockholder Nominees
The Nominating/Corporate Governance Committee will consider written proposals from stockholders for nominees for director
under the same criteria described above but, based on those criteria, may not necessarily recommend those nominees to the Board of
Directors. Any such nominations should be submitted to the Nominating/Corporate Governance Committee, via the attention of our
Secretary, and should include the following information:
•
•
•
all information relating to such nominee that is required to be disclosed pursuant to the Securities Exchange Act of 1934
(including such person's written consent to a background check, to being named in the proxy statement as a nominee,
and to serving as a director, if elected);
the names and addresses of the stockholders making the nomination and the number of shares of our common stock that
are owned beneficially and of record by such stockholders; and
appropriate biographical information and a statement as to the qualification of the nominee, including the specific
experience, qualifications, attributes, or skills of the nominee, demonstrating the relevance and usefulness to our
company of such experience, qualifications, attributes, and/or skills at our particular stage of development.
Nominations should be submitted in the timeframe described in our Bylaws and under the caption "Stockholder Proposals for our
2012 Annual Meeting" below.
From time to time, we have retained and may in the future retain the services of an independent third-party search firm to assist
the Nominating/Corporate Governance Committee in identifying and evaluating potential candidates.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
All interested parties who wish to communicate with the Board of Directors or any of the non-management directors may do so by
sending a letter to the Corporate Secretary, Illumina, Inc., 9885 Towne Centre Dr., San Diego, California 92121, and should specify the
intended recipient or recipients. All such communications will be forwarded to the appropriate director or directors for review, except for
spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or
patently offensive or otherwise inappropriate material.
In addition, you may send, in an envelope marked "Confidential," a written communication to the Chair of the Audit Committee,
via the attention of our Corporate Secretary, at Illumina, Inc., 9885 Towne Centre Dr., San Diego, California 92121. All such envelopes
will be delivered unopened to the Chairperson of our Audit Committee.
25
Table of Contents
DIRECTOR AND EXECUTIVE OFFICER STOCK OWNERSHIP POLICY
The Board of Directors, acting on the recommendation of the Compensation Committee, has adopted stock ownership guidelines
that are applicable to each of our non-employee directors, each of our executive officers who is subject to restrictions of Section 16 of
the Securities Exchange Act of 1934, and each of our officers having a title of "Senior Vice President" or above. Under the ownership
guidelines each individual subject to the guidelines is expected to own and hold shares of our common stock having an aggregate
value at least equal to:
•
•
with respect to non-employee directors, three times the annual cash retainer paid to non-employee directors for serving
as a director, without regard to committee or chairperson assignments; and
with respect to executive officers, such executive officer's base salary.
Under the ownership guidelines, each individual subject to the guidelines is required to achieve compliance with the applicable
ownership levels set forth above within three years from the date such individual director or officer first became subject to the
guidelines, which is typically the later of when such individual joined the Company or March 8, 2010 (the effective date of the
ownership guidelines).
Unvested shares of restricted stock, unvested restricted stock units (RSUs), and unexercised stock options do not count towards
satisfaction of the ownership guidelines.
During such time as a covered officer or director is not in compliance with his or her applicable ownership guidelines, such officer
or director:
•
•
is required to retain an amount equal to 100% of the net shares of common stock received as a result of the vesting of
restricted stock or RSUs ("net shares" are those shares that remain after shares are sold or netted to pay withholding
taxes); and
may not establish a qualified trading plan (i.e., a Rule 10b5-1 trading program) or modify an existing qualified trading plan
to increase the number of shares of our common stock to be sold under such plan (under our Insider Trading Policy our
directors and executive officers may only sell shares of our common stock pursuant to a qualified trading plan).
DIRECTOR COMPENSATION
Our directors play a critical role in guiding our strategic direction and overseeing the management of the Company. Ongoing
developments in corporate governance and financial reporting have resulted in an increased demand for such highly qualified and
productive public company directors. The many responsibilities and risks and the substantial time commitment of being a director of a
public company require that we provide adequate incentives for our directors' continued performance by paying compensation
commensurate with our directors' workload. Our non-employee directors are compensated based upon their respective levels of board
participation and responsibilities, including service on board committees. Directors who are our employees, such as Mr. Flatley, receive
no separate compensation for their services as directors.
Our director compensation is overseen by the Compensation Committee, which makes recommendations to the Board of
Directors on the appropriate amount and structure of our programs in light of then-current competitive practice. The Compensation
Committee typically receives advice and recommendations from a compensation consultant with respect to its determination on
director compensation matters.
We use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board of
Directors.
26
Table of Contents
Cash Compensation
Annual Retainer
During fiscal 2010, each of our non-employee directors was eligible to receive an annual cash retainer of $50,000, and the
Chairman of the Board was eligible to receive an additional $20,000. In January 2011, the Compensation Committee determined not to
make any changes to the foregoing annual retainers for the fiscal year ending on January 1, 2012.
Committee Fees
In addition, during fiscal 2010 each of our non-employee directors serving on one or more board committee was eligible to
receive the applicable fees set forth below.
Audit Committee
Chairperson
Member
Fiscal 2010 Board Committee Fees ($)
Nominating/Corporate
Governance Committee
Compensation Committee
25,000
15,000
15,000
10,000
12,500
7,000
Diagnostics
Advisory Committee
7,000
N/A(1)
(1) The Diagnostics Advisory Committee has only one member, who is also the Chairperson.
In January 2011, the Compensation Committee determined not to make any changes to the foregoing applicable fees for the
fiscal year ending on January 1, 2012.
Equity Compensation
Annual Awards
In connection with our 2010 annual meeting of stockholders, each of our non-employee directors received a stock option grant of
13,500 shares and an award of 1,800 restricted stock units, or RSUs, in each case granted under our Amended and Restated 2005
Stock and Incentive Plan. These annual awards vest on the earlier of (i) the one year anniversary of the grant date of the option or
award and (ii) the date immediately preceding the date of the annual meeting of our stockholders for the year following the year of
grant of the option or award.
In January 2011, the Board of Directors, acting on the recommendation of the Compensation Committee, determined to reduce
by 20% the annual equity award that non-employee directors are eligible to receive in order to reflect the increase in our stock price
during fiscal 2010. Accordingly, for the fiscal year ending on January 1, 2012, non-employee directors will be eligible to receive stock
option grants of 10,800 shares and awards of 1,440 RSUs, which grant or award is to be made automatically on the date of each
annual stockholder meeting, with a stock option exercise price equal to the fair market value of our common stock on the grant date.
Both the stock options and the RSUs will vest on the earlier of (i) the one year anniversary of the grant date of the option or award and
(ii) the date immediately preceding the date of the annual meeting of our stockholders for the year following the year of grant of the
option or award.
Awards Upon First Joining the Board of Directors
Upon first joining the Board of Directors, each non-employee director is eligible to receive a one-time stock option grant of
28,000 shares and an award of 4,000 RSUs, which grant or award is to be made automatically on the date the individual is elected a
director, whether by stockholder approval or appointment by the board, with a stock option exercise price equal to the fair market value
of our common stock on the grant date. Both the stock options and the RSUs will vest over four years, with 25% vesting at the end of
the each of the four years following the grant date of the option or award.
27
Table of Contents
Additional Benefits
Directors who receive RSUs are given the opportunity, at the time they execute award agreements providing for the RSU grant, to
elect to receive, at the time the RSU vests, a portion of the award in cash rather than in shares in order to enable the director to satisfy
his or her obligation to pay the federal income tax that becomes due at the time of such vesting.
In addition to the cash and equity compensation described above, we reimburse our non-employee directors for their expenses
incurred in connection with attending board and committee meetings. We do not provide directors with additional compensation for
attending board or committee meetings.
Non-Employee Director Compensation
The following table summarizes the total compensation paid by the Company to the non-employee directors for the fiscal year
ended January 2, 2011.
Name(1)
William H. Rastetter
A. Blaine Bowman
Daniel M. Bradbury
Karin Eastham
Paul C. Grint
Gerald Möller
David R. Walt
Roy A. Whitfield
Fees
Earned or
Paid
in Cash
($)(2)
102,000
75,000
69,725
109,078
33,512(6)
25,385(7)
62,000
98,512
Stock
Awards
($)(3)(4)
77,076
77,076
77,076
77,076
77,076
171,240
77,076
77,076
Option
Awards
($)(3)(5)
273,139
273,139
273,139
273,139
273,139
566,378
273,139
273,139
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
Non-Equity
Incentive Plan
Compensation
($)
—
—
—
—
—
—
—
—
All Other
Compensation
($)
—
—
—
—
—
—
—
—
Total
($)
—
—
—
—
—
—
—
—
452,215
425,215
419,940
459,293
443,727
763,003
412,215
448,727
(1) Jay T. Flatley, our President and Chief Executive Officer, is not included in this table as he is our employee and receives no
additional compensation for his service as a director. The compensation received by Mr. Flatley as our employee is shown in the
Summary Compensation Table on page 44.
(2) Includes cash received in lieu of stock at the time that an RSU award vests. Please see "Additional Benefits" above.
(3) This reflects the grant date fair value of awards granted during fiscal 2010. Assumptions used in the calculation of these amounts
are included in Note 1 to our audited consolidated financial statements for fiscal 2010, included in our Annual Report on Form 10-K
filed with the SEC on February 28, 2011.
(4) Each of the directors, other than Dr. Möller, received an award of 1,800 RSUs on May 12, 2010 (the date of our 2010 annual
meeting of stockholders), with a per share value of $42.82 (the closing price of our common stock on NASDAQ on May 12, 2010).
Dr. Möller joined the board on July 1, 2010 and received an award of 4,000 RSUs with a per share value of $42.81 (the closing price
of our common stock on NASDAQ on July 1, 2010).
(5) Each of the directors, other than Dr. Möller, received a stock option award for 13,500 shares on May 12, 2010 (the date of our 2010
annual meeting of stockholders), with a per share exercise price of $42.82 (the closing price of our common stock on NASDAQ on
May 12, 2010). Dr. Möller joined the board on July 1, 2010 and received a stock option award for 28,000 shares with a per share
exercise price of $42.81 (the closing price of our common stock on NASDAQ on July 1, 2010).
(6) Dr. Grint waived fees payable in cash for board and committee service totaling $60,000.
(7) Dr. Möller joined the board on July 1, 2010.
28
Table of Contents
The following table shows the total number of unvested RSUs and total stock options held by each of our non-employee directors
as of January 2, 2011:
Name
Stock Options Outstanding
Vested
Unvested
Unvested RSUs
Outstanding
William H. Rastetter
A. Blaine Bowman
Daniel M. Bradbury
Karin Eastham
Paul C. Grint
Gerald Möller
David R. Walt
Roy A. Whitfield
1,800
1,800
1,800
1,800
1,800
4,000
1,800
1,800
29
312,000
84,456
142,000
122,000
106,000
—
162,000
84,456
13,500
13,500
13,500
13,500
13,500
28,000
13,500
13,500
Table of Contents
STOCK OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the number of shares of our common stock beneficially owned by each of our directors and director
nominees and each executive officer named in the Summary Compensation Table (the "Named Executive Officers"), and by all of our
directors, director nominees, and executive officers as a group.
The information set forth below is as of February 28, 2011 and is based upon information supplied or confirmed by the named
individuals. The address of each person named in the table below is c/o Illumina, Inc., 9885 Towne Centre Dr., San Diego, California
92121.
Name of Beneficial Owner
Jay T. Flatley(3)
Christian O. Henry
Christian G. Cabou(4)
Tristan B. Orpin
Mostafa Ronaghi
William H. Rastetter
A. Blaine Bowman
Daniel M. Bradbury
Karin Eastham
Paul C. Grint
Gerald Möller
David R. Walt(5)
Roy A. Whitfield
All directors, director nominees, and executive
officers as a group (14 persons, including those
directors and executive officers named above)
Common Stock
Beneficially Owned
(Excluding Stock
Options)(1)
Stock Options
Exercisable Within
60 Days of
February 28, 2011
Total Common
Stock Beneficially
Owned(1)
Percent of
Common Stock(2)
283,826
7,136
10,459
15,337
2,964
90,680
4,000
2,000
2,400
2,400
—
1,101,046
2,400
1,768,437
246,670
62,061
242,145
194,394
122,000
84,456
48,000
82,000
76,000
—
162,000
58,000
2,052,263
253,806
72,520
257,482
197,358
212,680
88,456
50,000
84,400
78,400
—
1,263,046
60,400
1.6%
*
*
*
*
*
*
*
*
*
*
*
*
1,523,027
3,203,977
4,732,744
3.6%
* Represents beneficial ownership of less than one percent (1%) of the issued and outstanding shares of common stock.
(1) Includes shares of stock beneficially owned as of February 28, 2011. Also includes restricted stock units, or RSUs, vesting within
60 days of February 28, 2011. An RSU represents a conditional right to receive one share of our common stock at a specified future
date.
(2) Percentage ownership is based on 127,890,706 shares of common shares of common stock outstanding on February 28, 2011.
(3) Includes 15,000 shares owned by Mr. Flatley's children.
(4) Includes 1,000 shares for which Mr. Cabou shares voting power with his spouse.
(5) Includes 82,960 shares owned by Dr. Walt's spouse.
30
Table of Contents
The following table sets forth, as of February 28, 2011, the amount of beneficial ownership of each beneficial owner of more than
five percent of our common stock:
Name and Address of Beneficial Owner
FMR LLC(2)
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc.(3)
100 E. Pratt Street
Baltimore, MD 21202
BlackRock, Inc.(4)
40 East 52nd Street
New York, NY 10022
Sands Capital Management, LLC(5)
1101 Wilson Blvd.
Suite 2300
Arlington, VA 22209
Morgan Stanley(6)
1585 Broadway
New York, NY 10036
Prudential Financial, Inc.(7)
751 Broad Street
Newark, NJ 07102
Common Stock
Percent of
Beneficially Owned Common Stock(1)
18,984,485
12,861,180
9,478,201
9,055,831
8,285,535
7,496,586
14.8%
10.1%
7.4%
7.1%
6.5%
5.9%
(1) Percentage ownership is based on 127,890,706 shares of common shares of common stock outstanding on February 28, 2011.
(2) This information is based on a Schedule 13G/A filed with the SEC on February 14, 2011. FMR LLC reports that it has sole voting
power with respect to 219,620 shares and sole dispositive power with respect to 18,984,485 shares. We understand that Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR LLC and an investment adviser, is the beneficial
owner of 18,764,865 shares as a result of acting as investment adviser to various investment companies (the "Fidelity Funds"). We
understand that the number of shares owned by Fidelity Funds included 311,606 shares resulting from the assumed conversion of
certain warrants. We understand that Edward C. Johnson, III, and FMR LLC, through its control of Fidelity, and the Fidelity Funds
each has sole power to dispose of the 18,764,865 shares owned by the Fidelity Funds. We understand that neither FMR LLC nor
Edward C. Johnson, III, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Fidelity Funds' Boards of Trustees. Fidelity carries out the voting of the shares under
written guidelines established by the Fidelity Funds' Boards of Trustees.
(3) This information is based on a Schedule 13G/A filed with the SEC on February 10, 2011. These securities are owned by various
individual and institutional investors, which T. Rowe Price Associates, Inc. serves as an investment adviser with power to direct
investments and/or sole power to vote the securities. For the purposes of the reporting requirements of the Securities Exchange Act
of 1934, T. Rowe Price Associates, Inc. is deemed to be a beneficial owner of such securities; however, T. Rowe Price Associates,
Inc. expressly disclaims that it is, in fact, the beneficial owner of such securities..
(4) This information is based on a Schedule 13G filed with the SEC on February 4, 2011.
(5) This information is based on a Schedule 13G/A filed with the SEC on February 14, 2011. Sands Capital Management, LLC reports
that it has sole voting power with respect to 5,997,426 shares and sole dispositive power with respect to 9,055,831 shares and that
such shares are beneficially owned by clients of Sands Capital Management, LLC.
(6) This information is based on a Schedule 13G/A filed with the SEC on February 9, 2011. Morgan Stanley reports that it has sole
voting power with respect to 8,090,145 shares and sole dispositive power with respect to 8,285,535 shares. We understand that the
shares being reported on by Morgan Stanley as a parent holding company are owned, or may be deemed to be beneficially owned,
by Morgan Stanley Investment Management Inc., an investment adviser and a wholly-owned subsidiary of Morgan Stanley.
(7) This information is based on a Schedule 13G filed with the SEC on February 8, 2011. Prudential Financial, Inc. has sole voting and
sole dispositive power over 119,931 shares, shared voting power over 4,128,787 shares, and shared dispositive power over
7,376,655 shares, which are held for the benefit of its clients by its separate accounts, externally managed accounts, registered
investment companies, subsidiaries and/or other affiliates. Prudential indirectly owns 100% of equity interests of Jennison
Associates LLC. As a result, Prudential may be deemed to have shared dispositive power over the 7,469,676 shares reported on
Jennison Associates LLC's Schedule 13G filed with the SEC on February 11, 2011. Jennison Associates LLC does not file jointly
with Prudential, as such, shares included in Jennison Associates LLC's Schedule 13G may also be included in the shares reported
in the Schedule 13G filed by Prudential Financial, Inc.
31
Table of Contents
EXECUTIVE OFFICERS
The following table sets forth the names, ages, positions, and business experience during the past five years of our executive
officers as of March 24, 2011:
Jay T. Flatley, age 58
President & Chief Executive Officer
• 1999 – present: present position
• Joined Illumina 1999
Christian G. Cabou, age 61
Senior Vice President, General Counsel & Secretary
• 2006 – present: present position
• 2001 – 2006: general counsel for GE Global Research, General Electric Company's advanced industrial research and development
industrial laboratories
• Joined Illumina 2006
Gregory F. Heath, Ph.D., age 53
Senior Vice President & General Manager, Diagnostics
• 2008 – present: present position
• 2004 – 2008: senior vice president for Roche Molecular Systems, Inc., responsible for its global molecular diagnostics business
(2006-2008), global marketing and business development (2005-2006), and global product marketing (2004-2005)
• Joined Illumina 2008
Christian O. Henry, age 43
Senior Vice President, Chief Financial Officer & General Manager, Life Sciences
• 2010 – present: present position
• 2009 – 2010: Senior Vice President, Corporate Development & Chief Financial Officer
• 2006 – 2009: Senior Vice President and Chief Financial Officer
• 2005 – 2006: Vice President and Chief Financial Officer
• 2003 – 2005: chief financial officer for Tickets.com, a publicly traded, online ticket provider that was acquired by Major League
Baseball Advanced Media, LP
• Joined Illumina 2005
Tristan B. Orpin, age 45
Senior Vice President & Chief Commercial Officer
• 2010 – present: present position
• 2007 – 2010: Senior Vice President, Commercial Operations
• 2002 – 2007: Vice President of Worldwide Sales
• Joined Illumina 2002
Mostafa Ronaghi, Ph.D., age 42
Senior Vice President & Chief Technology Officer
• 2008 – present: present position
• 2002 – 2008: principal investigator at Stanford University, where Dr. Ronaghi focused on the development of novel tools for
molecular diagnostic applications
• 2007 – 2008: chairman and chief scientific officer for Avantome, Inc., a privately-held sequencing company co-founded by
Dr. Ronaghi and acquired by Illumina in 2008
• Joined Illumina 2008
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee of the Board of Directors determines the compensation for our executive officers. The
Compensation Committee considers, adopts, reviews, and revises executive officer compensation plans, programs, and guidelines,
and reviews and determines all components of each executive officer's compensation. Compensation programs, and the compensation
components, for the President and Chief Executive Officer are, additionally, subject to approval by the Board of Directors. The
Compensation Committee also consults with management and Illumina's employee rewards and benefits group regarding both
executive and non-executive employee compensation plans and programs, including administering our equity incentive plans.
This section of the proxy statement explains how our executive compensation programs are designed and operate with respect to
Illumina's "named executive officers," who are the CEO, CFO, and the three other most highly compensated executive officers in a
particular year. For fiscal 2010, our named executive officers are:
• Jay T. Flatley — President & Chief Executive Officer
• Christian O. Henry — Senior Vice President, Chief Financial Officer & General Manager, Life Sciences
32
Table of Contents
•
•
•
Christian G. Cabou — Senior Vice President, General Counsel & Secretary
Tristan B. Orpin — Senior Vice President & Chief Commercial Officer
Mostafa Ronaghi — Senior Vice President & Chief Technology Officer
Compensation Philosophy and Objectives
Our executive compensation and benefit programs aim to encourage our executive officers to continually pursue strategic
opportunities, while effectively managing our day-to-day operations. Specifically, we have created a compensation package that
combines short- and long-term components (cash and equity, respectively) at the levels we believe are most appropriate to motivate
and reward our executive officers. The Compensation Committee and our management believe that the proportion of at-risk,
performance-based compensation should rise as an employee's level of responsibility increases.
Our executive compensation program is designed to achieve four primary objectives:
•
•
•
•
attract, retain, and reward executives who contribute to our success;
provide economic incentives for executives to achieve business objectives by linking executive compensation with our
overall performance;
strengthen the relationship between executive pay and stockholder value through the use of long-term compensation; and
reward individuals for their specific contributions to our success.
Use of Market Data and Benchmarking
We strive to set executive compensation at competitive levels. This involves, among other things, establishing compensation
levels that are generally consistent with levels at other companies with which we compete for talent.
During fiscal 2010, the Compensation Committee retained Radford, an Aon Hewitt Company, as the Compensation Committee's
advisor reporting directly to the Chairperson. The Compensation Committee maintains sole authority to retain and determine the work
to be performed by Radford. During fiscal 2010, the Compensation Committee directed Radford to conduct a comprehensive formal
review and analysis of our executive compensation and incentive programs relative to competitive benchmarks. This review consisted
of a benchmarking analysis of our executive compensation philosophy and practices against prevailing market practices of identified
peer group companies and broader industry trends. The analysis included the review of the total direct compensation (inclusive of
salary, cash bonuses, and equity awards) of our executive officers. It was based on an assessment of market trends covering available
public information in addition to proprietary data provided by Radford. The peer group was developed considering companies within the
industry that have similar business challenges and complexities where we might recruit and lose executive talent.
The Compensation Committee considered a number of factors in defining the peer group, including industry competitors of similar
revenue range, growth rates, employee size, and market capitalization range that we believe reflects the market for talent and
stockholder investment. Many of the industry competitors are located in our geographical area, which reflects high-cost of living areas
and therefore impacts rate of pay.
33
Table of Contents
The following companies made up the compensation peer group for fiscal 2010:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Affymetrix, Inc.
Alere Inc.
Beckman Coulter, Inc.(1)
The Cooper Companies, Inc.
Edwards Lifesciences Corporation
Gen-Probe, Incorporated
Hologic, Inc.
IDEXX Laboratories, Inc.
Intuitive Surgical, Inc.
Life Technologies Corporation
National Instruments Corporation
PerkinElmer, Inc.
QIAGEN N.V.
ResMed Inc.
Varian, Inc.(2)
Waters Corporation
(1) On February 7, 2011, Beckman Coulter, Inc. announced its pending sale to Danaher Corporation.
(2) In July 2010, the Compensation Committee removed Varian, Inc. from the compensation peer group in light of its sale to Agilent
Technologies, Inc.
We target our total direct compensation for executive officers at between the 50th and 60th percentile of compensation paid to
executives within our compensation peer group. We may deviate from these general target levels to reflect the executive's experience,
the executive's sustained performance level, and market factors as deemed appropriate by the Compensation Committee. The
Compensation Committee reviews the information prepared by management from the Radford assessment, reviews each component
of an executive's compensation during the current year and prior years ("tally sheets"), and considers an executive's contribution to the
achievement of our strategic goals and objectives, the executive's overall compensation, and other factors to determine the appropriate
level and mix of compensation. An executive's compensation is not determined by formula but, instead, in comparison to market and
within our company to positions with similar responsibility and impact on operations.
Role of the Compensation Committee
The Compensation Committee has overall responsibility for approving and evaluating our executive officer compensation plans,
policies, and programs. The Board of Directors has determined that each member of the Compensation Committee is independent
within the meaning, and meets the requirements, of Rule 16b-3 of the Securities Exchange Act of 1934 and the rules of The NASDAQ
Global Select Market. The Compensation Committee functions under a written charter, which was adopted by the Board of Directors.
The charter is reviewed annually and updated as appropriate. A copy of the charter is available on our website at www.illumina.com by
clicking on "Company," then "Investor Relations," and then on "Corporate Governance."
The primary responsibilities of the Compensation Committee are to:
•
•
•
•
recommend to the Board of Directors the amount and form of compensation to be paid to our Chief Executive Officer,
taking into account the results of the Board of Director's annual performance evaluation of the Chief Executive Officer;
review and approve the amount and form of compensation to be paid to our other executive officers and senior, nonexecutive employees;
exercise oversight of our compensation practices for all other non-executive employees; and
administer our equity compensation plans.
The Compensation Committee meets as often as it considers necessary to perform its duties and responsibilities. The
Compensation Committee held six meetings during fiscal 2010, and it has held two meetings so far in 2011 to review and finalize
compensation elements related to fiscal 2010. The Chairperson works with the Chief Executive Officer and the Vice President of
Human Resources to establish the meeting agenda in advance of each meeting. The Compensation Committee typically meets with
the Chief Executive Officer, Chief Financial Officer, General Counsel, Vice President of Human Resources, our external counsel, and,
on occasion, with an independent compensation consultant retained by the Compensation Committee.
34
Table of Contents
When appropriate, such as when the Compensation Committee is discussing or evaluating compensation for the Chief Executive
Officer, the Compensation Committee meets in executive session without management. The Compensation Committee receives and
reviews materials in advance of each meeting. These materials include information that the independent compensation consultant and
management believe will be helpful to the Compensation Committee, as well as materials that the Compensation Committee has
specifically requested, including benchmark information, historical compensation data, performance metrics and criteria, the Board of
Directors' assessment of our performance against our goals, and the Chief Executive Officer's assessment of each executive's
performance against pre-determined, individual objectives.
Components and Analysis of Fiscal 2010 Executive Compensation
For fiscal 2010, the principal elements of our executive compensation program are summarized in the following table and
described in more detail below.
Key
Features
Compensation Element Objective
Designed to Reward
Specific to Executives
Base Salary
To provide a competitive, Experience, expertise,
Adjustments are based on an individual's current
fixed level of cash
knowledge of the industry, (and expected) future performance, base pay
compensation for the
duties, scope of
relative to our compensation peer group, and
executive officers
responsibility, and
internal equity
sustained (and expected)
performance
Performance-Based Cash To encourage and
Success in achieving
Annual performance-based cash compensation is
Compensation
reward executive
annual results
based on a formula that includes achievement of
officers' contributions in
corporate revenue and operating income goals and
achieving strong
achievement of individual performance goals
financial and operational
results by meeting or
exceeding established
goals
Long-Term Equity
To retain executive
Success in achieving long- Grants typically consist of both stock options and
Compensation
officers and to align their term results
RSUs
Stock options generally vest monthly over
interests with those of
a four-year period
RSUs vest 15% on the first
our stockholders in order
anniversary of the grant date, 20% on the second
to increase overall
anniversary of the grant date, 30% on the third
stockholder value
anniversary of the grant date, and 35% on the fourth
anniversary of the grant date
Given our rapid
growth and continued high growth profile, a majority
of our executive officers' compensation has been
delivered, and is expected to be delivered, through
long-term equity awards
35
Table of Contents
Base Salary
Base salary is the primary fixed component of our executive compensation program. In general, executive officers with the
highest level of responsibility have a lower percentage of their compensation fixed as base salary and a higher percentage of their
compensation at risk. Base salary represented a relatively small percentage of total compensation (15% in 2010) for the named
executive officers, as set forth in the Summary Compensation Table.
Salary levels are considered as part of our annual executive performance review process, as well as upon promotion or other
material change in job responsibility. The Chief Executive Officer makes recommendations to the Compensation Committee for base
salary changes for executive officers (excluding himself) based on performance and current pay relative to market practices for
executive officers, other than himself. The Compensation Committee reviews these recommendations, makes any adjustments it
considers necessary, and then approves the salary changes. The Compensation Committee recommends to the Board of Directors the
base salary for our Chief Executive Officer based on performance and his current pay relative to other chief executives in our peer
group. The Compensation Committee believes that increases to base salary should reflect the executive's performance for the
preceding year and pay level relative to similar positions in our peer group. Base salary increases also reflect anticipated future
contributions of the executive.
Fiscal 2010 Base Salaries
As illustrated in the table below, the average salary increase for all named executive officers in fiscal 2010, other than for
Mr. Henry, was 3.7%. This reflects the fact that, generally, salaries of such named executive officers were competitive in relation to our
compensation peer group when measured at the 60th percentile. Mr. Henry received a 9.6% increase in his base salary for 2010 in
recognition of Mr. Henry's increased responsibilities serving as our Chief Financial Officer while at the same time overseeing our
corporate development functions during 2009, in addition to becoming General Manager of our Life Sciences business unit in February
2010.
Named Executive Officer Position
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
President & Chief Executive Officer
Senior Vice President, Chief Financial Officer & General Manager, Life
Sciences
Senior Vice President, General Counsel & Secretary
Senior Vice President & Chief Commercial Officer
Senior Vice President & Chief Technology Officer
2009 Base
Salary ($)
2010 Base
Salary ($)
% Increase
725,000
750,000
3.4%
377,300
353,900
366,800
325,000
413,600
368,100
379,600
338,000
9.6%
4.0%
3.5%
4.0%
Performance-Based Cash Compensation
In general, annual cash bonuses are paid out under our Variable Compensation Plan, or VCP. The VCP is an "at-risk" bonus
compensation program designed to foster a performance-oriented culture, where individual performance is aligned with organizational
objectives. The VCP provides guidelines for the calculation of annual non-equity, incentive-based compensation, subject to the
Compensation Committee's oversight and modification. Any executive officer that is hired during the year on or prior to October 1st is
eligible to participate in the VCP for that year. Any bonus received by such executive is prorated based on the amount of time the
executive officer served during the plan year.
Target Amounts and Weighted Components
For fiscal 2010, the Compensation Committee established target cash bonus amounts under the VCP, calculated as a
percentage of each executive officer's base salary. For our President and Chief Executive Officer, Mr. Flatley, the target cash bonus
amount as a percentage of his base salary was increased from
36
Table of Contents
85% to 100% for fiscal 2010 (as compared to 2009). The Compensation Committee determined that an increased percentage of the
chief executive officer's cash compensation should be "at-risk" and moved the target bonus percentage closer to comparable positions
of scope and responsibility when measured against our compensation peer group. For each of the other named executive officers, the
target cash bonus amount as a percentage of base salary was 55%, which remained unchanged for fiscal 2010 as compared to 2009.
Under the VCP, the target cash bonus amount is divided into three separate components with the following weighting (as a % of
the target cash bonus amount):
•
•
•
50% based on the achievement of corporate revenue objectives (the "revenue VCP target");
30% based on the achievement of corporate operating income objectives (the "operating income VCP target"); and
20% based on the achievement of individual performance objectives (the "individual performance VCP target").
The Compensation Committee and the Board of Directors approve minimum, threshold, target, and maximum levels for each
component of the revenue and operating income VCP targets. Payments of the applicable component of the annual cash bonus
amounts are based upon the achievement of such objectives for the year. No payouts are earned for a component if the minimum level
is not achieved. Target and threshold levels represent a range of our desired level of performance that the Compensation Committee
and the Board of Directors believe are both attainable and practical based on a realistic estimate of our future financial performance.
Maximum levels are designed to motivate and reward realistically achievable superior performance.
At the beginning of each year, the Chief Executive Officer develops corporate objectives focused primarily on financial
performance and other critical corporate goals, such as new product introductions, market penetration, infrastructure investments, and
consistency of operating results. The corporate objectives are based on our annual operating plan, which is approved by the Board of
Directors in January of each year. In addition, the Chief Executive Officer, together with each executive eligible to participate in the
VCP, develops a corresponding set of objectives to measure individual performance for the year. The corporate and individual
objectives for all named executive officers are reviewed by the Compensation Committee, and both the Compensation Committee and
the Board of Directors approve the corporate objectives and the individual objectives for the Chief Executive Officer.
Shortly following completion of the fiscal year, the Compensation Committee and the Board of Directors assess our performance
against each of the revenue and operating income VCP targets, comparing the actual fiscal year results to the pre-determined
minimum, threshold, target, and maximum levels for each objective, and an overall percentage amount for the corporate financial
objectives is calculated. The Compensation Committee (and the Board of Directors with respect to the Chief Executive Officer) also
reviews the performance of each named executive officer against such officer's individual objectives, and an overall percentage
amount for the individual performance objectives is calculated. Although the operation of the VCP is largely formulaic, the
Compensation Committee and the Board of Directors can use their discretion when determining the pay for our executive officers and
also when assessing the attainment of individual and corporate performance goals.
Revenue VCP Target
For fiscal 2010, each executive had the potential to earn up to a maximum of 130% of the revenue VCP target based on the
Company's performance against the following fiscal 2010 revenue objectives (with the
37
Table of Contents
bonus amount calculated as a linear ratio for points between the minimum, threshold, target, and maximum):
Minimum
Revenue Objective ($ in millions)
% of Revenue VCP Target Paid
Threshold
755.0
50%
Target
784.0
95%
Maximum
825.0
100%
850.0
130%
Operating Income VCP Target
For fiscal 2010, each executive had the potential to earn up to a maximum of 130% of the operating income VCP target based on
the Company's performance against the following fiscal 2010 operating income objectives (with the bonus amount calculated as a
linear ratio for points between the minimum, threshold, target, and maximum):
Minimum
Operating Income Objective ($ in millions)(1)
% of Operating Income VCP Target Paid
190.0
50%
Threshold
Target
211.0
95%
Maximum
243.0
100%
250.0
130%
(1) Operating income is defined as the income from operations that excludes stock compensation expense, merger related charges,
interest and other revenue and income tax expense.
Example Calculation
We have included a hypothetical example to demonstrate the calculation. For example, assume Executive A's base salary for
fiscal 2010 was $400,000 and that Executive A's target cash bonus amount as a percentage of base salary was set at 55%.
Executive's A's target bonus amount would be $220,000 (i.e., 55% x $400,000). Assuming that Executive A exceeded or outperformed
all of his or her individual performance goals, Executive A's actual bonus under the minimum, threshold, target, and maximum financial
objective levels could range from between $44,000 and $272,800 and would be determined as follows:
Below
At
At
Minimum ($) Minimum ($) Threshold ($)
Revenue VCP Target
(50% x $220,000 = $110,000)
Operating Income VCP Target
(30% x $220,000 = $66,000)
Individual Performance VCP Target (20% x $220,000 = $44,000)
Total
—
—
44,000
44,000
55,000
33,000
44,000
132,000
104,500
62,700
44,000
211,200
At Target ($)
110,000
66,000
44,000
220,000
At
or
Greater
than
Maximum ($)
143,000
85,800
44,000
272,800
Performance-Based Cash Compensation Payments
The Compensation Committee met on December 13, 2010 and January 27 and January 31, 2011 to review fiscal 2010 corporate
and executive goal performance, make determinations for fiscal 2010 performance-based incentive cash compensation awards based
on the performance reviews, and establish the fiscal 2011 executive compensation plan.
38
Table of Contents
The following table presents the performance-based cash compensation opportunities as a percentage of base salary and the
actual amounts earned by each named executive officer for fiscal 2010:
Named Executive Officer
2010 Target
Bonus as a % of
Base Salary
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
Actual Bonus
Payout ($)(1)(2)
100%
55%
55%
55%
55%
Actual Bonus Payout
as a % of Base
Salary(1)(2)
922,500
277,526
246,995
258,887
224,939
123%
67%
67%
68%
67%
(1) These bonuses were paid in February 2011 and reflect fiscal 2010 revenue and operating income that in each case exceeded the
maximum financial objectives established for the fiscal 2010 VCP. Accordingly, the revenue VCP component (50% of target bonus)
paid out at its maximum level of 130.0% and the operating income VCP component (30% of target bonus) paid out at its maximum
level of 130.0%. The individual performance VCP component (20% of target bonus) was determined based on achievement of preestablished individual performance objectives.
Performance-based cash compensation awards made to named executive officers under the VCP for performance in fiscal 2008
and 2009 are reflected in the column titled "Non-Equity Incentive Plan Compensation" of the Summary Compensation Table on
page 44. These bonuses were paid in February 2009 and February 2010, respectively.
Long-Term Equity Compensation
The Compensation Committee believes it is appropriate to align the interests of executives with those of stockholders.
Accordingly, we award long-term incentives to reward performance and align executives with long-term stockholder interests by
providing executives with an ownership stake in the Company, encouraging sustained long-term performance, and providing an
important retention element to their compensation program. We believe that one of the most effective ways to accomplish this objective
is to provide executive officers with a substantial economic interest in the long-term appreciation of our stock price through equity
grants in the form of stock options and restricted stock units, or RSUs. In keeping with our compensation philosophy to tie executive
pay to stockholder value creation, executives realize value through stock options only to the extent that our stock price increases.
RSUs also provide a long-term incentive for executives to remain with us, but do not have an exercise price and accordingly provide
some amount of value to recipients regardless of our stock price. During 2010, we awarded approximately 18.5% of our total equity
grants to our named executive officers in the form of RSUs as measured by the grant date fair value of the awards.
Determination of Long-Term Equity Compensation
To determine the value for long-term incentives granted to an executive each year, we consider the following factors:
•
•
•
•
•
•
the proportion of long-term incentives relative to base pay;
the executive's impact on Company performance and ability to create value;
long-term business objectives;
awards made to executives in similar positions within our compensation peer group of companies;
the market demand for the executive's particular skills and experience;
the amount granted to other executives in comparable positions at the Company;
39
Table of Contents
•
•
the executive's demonstrated performance over the past few years; and
the executive's leadership performance.
In addition, the new hire equity grant made to an executive officer upon first joining the Company is based primarily on
competitive conditions applicable to the executive officer's specific position. The Compensation Committee also considers the number
and type of equity awards owned by executive officers in comparable positions, including the executive's prior position. Subsequent
equity grants to executive officers are generally considered and, if appropriate, awarded in connection with their annual performance
review each January. Such subsequent grants serve to maintain a competitive position for us relative to new opportunities that may
become available to our executive officers and to enhance the retention features of the program.
Stock Options
New Hire Awards. Stock options for newly-hired executives may be granted under our New Hire Stock and Incentive Plan or
under our 2005 Stock and Incentive Plan, in each case on the date employment with us commences. New hire stock options granted
prior to March 30, 2008 vest over a five-year period, with 20% of the options vesting on the first anniversary of the grant date and the
remaining options vesting monthly over the next 48 months. New hire stock options granted on or after March 30, 2008 vest over a
four-year period, with 25% of the options vesting on the first anniversary of the grant and the remaining options vesting monthly over
the next 36 months. Each of the options has a maximum term of ten years, measured from the applicable grant date, subject to earlier
termination if the optionee's service with us ceases.
Subsequent Awards. Stock options granted to executives subsequent to hiring are granted under our 2005 Stock and Incentive
Plan. Prior to 2008, stock options granted under the 2005 Stock and Incentive Plan to executives subsequent to hiring vested monthly
over a five-year period. Effective January 1, 2008, the Compensation Committee changed the vesting schedule for stock options to
monthly vesting over a four-year period. Each of the options has a maximum term of ten years, measured from the applicable grant
date, subject to earlier termination if the optionee's service with us ceases.
Restricted Stock Units
Effective January 1, 2008, long-term equity compensation packages to executives have included grants of RSUs. RSUs for
newly-hired executives may be granted under our New Hire Stock and Incentive Plan or under our 2005 Stock and Incentive Plan, in
each case on the date employment with us commences. RSUs granted to executives subsequent to hiring are granted under our 2005
Stock and Incentive Plan. Whether awarded at the time of hire or subsequently, RSUs vest 15% on the first anniversary of the grant
date, 20% on the second anniversary of the grant date, 30% on the third anniversary of the grant date, and 35% on the fourth
anniversary of the grant date. Vesting in all cases is subject to the individual's continued service to us through the vesting date.
40
Table of Contents
Fiscal 2010 Long-Term Equity Compensation
The following table presents the long-term equity compensation awarded to each named executive officer based on grant date
fair value and as a multiple of base salary for fiscal 2010:
Named Executive Officer
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
Stock Options
(Grant Date Fair
Value) ($)(1)
4,007,025
1,226,617
1,226,617
1,226,617
1,226,617
RSUs
(Grant Date Fair
Value) ($)(1)
907,500
277,800
277,800
277,800
277,800
Total ($)
Multiple of
2010 Base Salary
4,914,525
1,504,417
1,504,417
1,504,417
1,504,417
6.6
3.6
4.1
4.0
4.5
(1) Messrs. Henry, Cabou, Orpin, and Ronaghi, each of whom are "Senior Vice Presidents," received the same equity award on
January 27, 2010, consisting of a stock option award for 67,500 shares and an RSU award of 7,500 shares.
Compensation Mix
The following table shows the mix of base salary, cash bonus, and long-term equity compensation for our named executive
officers for fiscal 2010:
Amount ($)
Base Salary
Annual Cash Bonus(1)
Long-Term equity Compensation(2)
Total
Percent
2,244,839
1,930,847
10,932,193
15,107,879
15%
13%
72%
100%
(1) Bonuses were earned during fiscal 2010 and were paid in February 2011.
(2) Reflects the grant date fair value of awards granted during fiscal 2010. Assumptions used in the calculation of these amounts are
included in Note 1 to our audited consolidated financial statements for fiscal 2010, included in our Annual Report on Form 10-K filed
with the SEC on February 28, 2011.
Change-in-Control Benefits
Our executive management and other employees have built Illumina into the successful enterprise that it is today. We believe that
the interests of stockholders will be best served if the interests of our executive management are aligned with them, and providing
change-in-control benefits may eliminate, or at least reduce, the reluctance of executive management to pursue potential change in
control transactions that may be in the best interests of stockholders. As such, we provide change-in-control severance benefits to
certain of our executive officers, including each of Messrs. Flatley, Henry, Cabou, Orpin, and Ronaghi. The initial term of all
change-in-control severance agreements expired in August 2009, after which the agreements automatically renew annually for
additional one year periods unless a notice of non-extension is provided by either party.
For purposes of these benefits, in general, a change in control is deemed to occur in any of the following circumstances:
•
•
•
any merger or consolidation in which we are not the surviving entity;
the sale of all or substantially all of our assets to any other person or entity;
the acquisition of beneficial ownership of a controlling interest in the outstanding shares of our common stock by any
person or entity;
41
Table of Contents
•
•
a contested election of our directors as a result of which or in connection with which the persons who were directors before
such election or their nominees cease to constitute a majority of the Board of Directors; or
any other event specified by the Board of Directors.
Under the change-in-control severance agreements, the executive would receive benefits if he were terminated within two years
following the change of control either:
•
•
by the Company other than for "cause," which is defined in each change-in-control severance agreement to include
repeated failure or refusal to materially perform his duties that existed immediately prior to the change of control, conviction
of a felony or a crime of moral turpitude, or engagement in an act of malfeasance, fraud, or dishonesty that materially
damages our business; or
by the executive on account of "good reason," which is defined in each change-in-control severance agreement to include
certain reductions in the executive's annual base salary, bonus, position, title, responsibility, level of authority, or reporting
relationships that existed immediately prior to the change of control, or a relocation, without the executive's written
consent, of the executive's principal place of business by more than 35 miles from the executive's principal place of
business immediately prior to the change of control.
Pursuant to the change-in-control severance agreements, if a covered termination of the executive's employment occurs in
connection with a change in control, then, with the exception of the Chief Executive Officer, the executive is generally entitled to the
following benefits:
•
•
•
•
•
•
a severance payment equal to one year of the executive's annual base salary plus the greater of (a) the executive's thencurrent annual target bonus or other target incentive amount or (b) the annual bonus or other incentive paid or payable to
the executive for the most recently completed fiscal year;
a lump sum payment of the executive's earned but unpaid compensation;
payments of the executive's group health insurance coverage premiums under COBRA law, including coverage for
executive's eligible dependents enrolled immediately prior to termination, for a maximum period of one year; however, our
obligation to pay such premiums ceases immediately upon the date the executive becomes covered under any other group
health plan;
continuance of the executive's indemnification rights and liability insurance for a maximum of one year following
termination;
automatic vesting of the executive's unvested stock options and equity or equity-based awards; and
certain professional outplacement services consistent with the executive's position for up to two years following
termination.
Our Chief Executive Officer is entitled to a severance payment equal to twice the sum of his annual base salary and the greater of
his target or most recently paid or payable target bonus or other target incentives and 24 months of continued certain medical and
other benefits in addition to the benefits previously described for the other named executive officers.
The change-in-control severance agreements provide that each executive's total change-in-control payment may be reduced in
the event such payment is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, and
such a reduction would provide a greater after-tax benefit for the executive. Additionally, change-in-control benefits are subject to
limitations under IRC
42
Table of Contents
Section 280G "golden parachute" provisions. A full analysis of the financial impact of these limitations will be performed based on the
facts and circumstances in the event a change in control were to occur.
Based upon a hypothetical change of control date of December 31, 2010, the last trading day of fiscal 2010, the change-in-control
benefits for our named executive officers would have been as follows:
Change in Control Benefit
Severance
Calculated from
Base Salary ($)
Name
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
1,500,000
413,600
368,100
379,600
338,000
Severance
Calculated from
Bonus ($)
1,500,000
227,480
202,455
208,780
185,000
Medical and
Dental
Benefits ($)
53,992
21,904
14,677
21,904
19,000
Fair Market Value
of Accelerated
Equity
Compensation
($)(1)
22,331,289
8,156,757
7,369,964
6,686,186
4,421,381
Total ($)
25,385,281
8,819,741
7,955,196
7,296,470
4,947,381
(1) Fair market value of accelerated equity compensation includes the value of unvested and accelerated stock options and RSUs as of
December 31, 2010. The value of the stock options was calculated by multiplying the number of accelerated options by the
difference between the exercise price and the closing price of our common stock on December 31, 2010. The value of the RSUs is
based on the number of outstanding shares that would not ordinarily have vested December 31, 2010 multiplied by the applicable
closing share price on that date.
Other Benefits and Perquisites
We do not provide pension arrangements or post-retirement health coverage for our executives or employees, other than the
change-in-control severance benefits previously discussed. Otherwise, we provide to our executives medical and other benefits that
are generally available to other full-time employees, including dental, vision, and group term life insurance, AD&D premiums, a 401(k)
plan, and an Employee Stock Purchase Plan. Our discretionary contributions to the 401(k) plan on behalf of each employee
participating in the plan are set at up to 50% of the first 6% of employees' contributions to the plan, based on our meeting certain
financial targets. Beginning in 2008, we began offering a deferred compensation plan to all employees at a Vice President level or
higher, as well as to the members of our Board of Directors. In 2009, we extended participation in this program to all U.S. employees at
a Senior Director level or higher, and in 2010 we extended participation in this program to all U.S. employees at a Director level or
higher.
All of our executive officers participated in our 401(k) plan during fiscal 2010 and received matching contributions.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of compensation payable in any tax year to the Chief
Executive Officer and the other four most highly compensated executive officers. Section 162(m) stipulates that a publicly held
company cannot deduct compensation to its top officers in excess of $1 million. Compensation that is "performance-based"
compensation within the meaning of the Internal Revenue Code does not count toward the $1 million limit. We believe that
compensation paid under the executive incentive plans is generally fully deductible for federal income tax purposes with the exception
of RSUs. However, in certain situations, the Compensation Committee may approve compensation that will not meet these
requirements in order to ensure competitive levels of total compensation for our executive officers.
43
Table of Contents
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set
forth above and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that
the Compensation Discussion and Analysis be included in this Proxy Statement.
RESPECTFULLY SUBMITTED BY THE COMPENSATION
COMMITTEE.
Roy A. Whitfield (Chairperson)
Daniel M. Bradbury
Paul C. Grint, M.D.
William H. Rastetter, Ph.D.
EXECUTIVE COMPENSATION
Summary Compensation Table
Stock
Awards ($)(1)
Option
Awards ($)(1)
Non-Equity
Incentive Plan
Compensation
($)(2)
All Other
Compensation ($)(3)
Name and Principal Position
Year
Salary ($)
Jay T. Flatley
President, Chief Executive
Officer & Director
Christian O. Henry
Senior Vice President, Chief
Financial Officer & General
Manager, Life Sciences
Christian G. Cabou
Senior Vice President,
General Counsel & Secretary
Tristan B. Orpin
Senior Vice President &
Chief Commercial Officer
Mostafa Ronaghi(5)
Senior Vice President &
Chief Technology Officer
2010
2009
2008
2010
2009
2008
749,615
749,162
647,038
410,139
390,203
343,097
907,500
839,100
844,875
277,800
296,364
324,850
4,007,025
3,599,150
4,095,022
1,226,617
1,372,847
1,574,514
922,500
498,731
604,500
277,526
159,600
313,900(4)
22,334
9,778
27,844
15,709
6,502
6,911
6,608,974
5,695,921
6,219,279
2,207,791
2,225,516
2,563,272
Total ($)
2010
2009
2008
2010
2009
2008
2010
2009
2008
367,882
366,677
336,118
379,403
380,123
351,150
337,800
—
—
277,800
237,074
297,758
277,800
237,074
297,758
277,800
—
—
1,226,617
1,098,278
1,443,305
1,226,617
1,098,278
1,443,305
1,226,617
—
—
246,995
153,600
205,601
258,887
159,200
217,620
224,939
—
—
17,260
7,659
10,015
13,118
7,644
7,671
12,411
—
—
2,136,554
1,863,288
2,292,797
2,155,825
1,882,319
2,317,504
2,079,567
—
—
(1) This reflects the grant date fair value of awards granted. Assumptions used in the calculation of these amounts are included in
Note 1 to our audited consolidated financial statements for fiscal 2010, included in our Annual Report on Form 10-K filed with the
SEC on February 28, 2011.
(2) Reflects bonuses earned during fiscal 2010, fiscal 2009, and fiscal 2008 under Illumina's Variable Compensation Plan (VCP), which
were paid in February 2011, February 2010, and February 2009, respectively. The VCP is described in the Compensation
Discussion and Analysis, under the caption "Performance-Based Incentive Cash Compensation."
(3) These amounts represent Company contributions to 401(k) plans, Company-paid physical exams, compensation paid in lieu of paid
time-off, and long term disability insurance premiums.
(4) Includes a special bonus of $100,000 in recognition of Mr. Henry's additional responsibilities as General Manager of Sequencing
during fiscal 2008.
(5) Mr. Ronaghi became a named executive officer in fiscal 2010; therefore information has been omitted for fiscal years 2009 and
2008.
44
Table of Contents
Grants of Plan-Based Awards Table
Name
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
Grant Date
1/28/2010
1/28/2010
1/27/2010
1/27/2010
1/27/2010
1/27/2010
1/27/2010
1/27/2010
1/27/2010
1/27/2010
All Other Stock
Awards: Number of
Shares of Stock or
Units (#)(1)
—
25,000
—
7,500
—
7,500
—
7,500
—
7,500
All Other Option
Awards: Number of
Securities Underlying
Options (#)(2)
225,000
—
67,500
—
67,500
—
67,500
—
67,500
—
Exercise or
Base Price of
Option
Awards ($/sh)(3)
36.30
—
37.04
—
37.04
—
37.04
—
37.04
—
Grant Date Fair
Value of Stock and
Option Awards ($)(4)
4,007,025
907,500
1,226,617
277,800
1,226,617
277,800
1,226,617
277,800
1,226,617
277,800
(1) Stock awards consist of RSUs. RSUs vest 15% on the first anniversary of the grant date, 20% on the second anniversary of the
grant date, 30% on the third anniversary of the grant date, and 35% on the fourth anniversary of the grant date.
(2) All options granted vest in equal monthly installments over four years. Vesting is subject to the individual's continued service to us
through the vesting date.
(3) The exercise price of stock options awarded is the closing market price of our common stock on The NASDAQ Global Select Market
on the date of grant.
(4) This reflects the grant date fair value of awards granted during fiscal 2010. Assumptions used in the calculation of these amounts
are included in Note 1 to our audited consolidated financial statements for fiscal 2010, included in our Annual Report on Form 10-K
filed with the SEC on February 28, 2011.
45
Table of Contents
Outstanding Equity Awards at Fiscal Year-End Table
Name
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
—
375,000
491,666
548,333
164,062
119,791
51,562
—
16,500
8,833
84,635
65,625
44,921
15,468
—
10,000
2,500
2,156
4,937
15,468
—
1,667
1,667
92,666
60,156
35,937
15,468
—
134,166
15,093
15,468
Option Awards
Number of
Securities
Underlying
Unexercised
Options
Option Exercise
(#) Unexercisable
Price ($)
—
—
8,334(3)
151,667(3)
60,938(4)
130,209(4)
173,438(4)
—
—
1,334(3)
65,000(3)
24,375(4)
48,829(4)
52,032(4)
—
25,000(5)
32,500(3)
22,344(4)
39,063(4)
52,032(4)
—
—
1,667
43,334(3)
22,344(4)
39,063(4)
52,032(4)
—
95,834(6)
16,407(4)
52,032(4)
—
4.30
10.49
20.04
33.80
27.97
36.30
—
5.23
10.49
20.04
32.49
28.45
37.04
—
13.70
20.04
32.49
28.45
37.04
—
4.54
10.49
20.04
32.49
28.45
37.04
—
44.38
28.45
37.04
Option
Expiration
Date
—
2/25/2015
1/30/2016
1/25/2017
2/1/2018
1/29/2019
1/28/2020
—
6/6/2015
1/30/2016
1/25/2017
1/29/2018
1/28/2019
1/27/2020
—
5/30/2016
1/25/2017
1/29/2018
1/28/2019
1/27/2020
—
1/20/2015
1/30/2016
1/25/2017
1/29/2018
1/28/2019
1/27/2020
—
8/4/2018
1/28/2019
1/27/2020
Number of
Shares or
Units of
Stock that
Have Not
Vested(1)
Stock Awards
Market Value of
Shares or
Units of
Stock that
Have Not
Vested ($)(2)
66,750
—
—
—
—
—
—
22,854
—
—
—
—
—
—
20,539
—
—
—
—
—
20,539
—
—
—
—
—
—
10,475
—
—
—
4,227,945
—
—
—
—
—
—
1,447,572
—
—
—
—
—
—
1,300,940
—
—
—
—
—
1,300,940
—
—
—
—
—
—
663,487
—
—
—
(1) Stock awards consist of RSUs. RSUs vest 15% on the first anniversary of the grant date, 20% on the second anniversary of the
grant date, 30% on the third anniversary of the grant date, and 35% on the fourth anniversary of the grant date.
(2) Market value of stock awards was determined by multiplying the number of unvested shares by $63.34, which was the closing
market price of our common stock on The NASDAQ Global Select Market on December 31, 2010, the last trading day of fiscal 2010.
(3) These options vest monthly over a five year period from the date of grant.
(4) These options vest monthly over a four year period from the date of grant.
(5) 20% of these options vest on the first anniversary of the grant, and the remaining options vest monthly over the next 48 months.
(6) 25% of these options vest on the first anniversary of the grant, and the remaining options vest monthly over the next 36 months.
46
Table of Contents
Option Exercises and Stock Vested Table
Name
Option Awards
Number of Shares
Acquired on Exercise (#)
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
Value Realized
on Exercise(1) ($)
325,000
155,500
186,500
163,001
—
Stock Awards
Number of Shares
Value Realized on
Acquired on Vesting (#)
Vesting ($)
14,066,610
4,028,838
4,567,371
5,409,142
—
9,500
3,563
3,084
3,084
525
351,305
130,117
112,664
112,664
19,058
(1) Value realized on exercise of option awards is computed by determining the difference between the closing market price of our
common stock on The NASDAQ Global Select Market on the dates of exercise and the exercise price per share exercised.
Nonqualified Deferred Compensation for Fiscal 2010
Name
Jay T. Flatley
Christian O. Henry
Christian G. Cabou
Tristan B. Orpin
Mostafa Ronaghi
Executive
Contributions in
Last Fiscal Year
($)(1)
250,000
225,000
—
—
—
Illumina
Contributions in
Last Fiscal Year ($)(3)
—
—
—
—
—
Aggregate Earnings
in Last Fiscal Year
($)(2)
36,100
28,020
3,154
17,480
35,624
Aggregate
Withdrawals /
Distributions ($)
146,511
59,901
—
—
—
Aggregate Balance
at Last Fiscal
Year-End ($)
—
365,779
59,195
168,328
332,876
(1) Amounts included in the Summary Compensation Table in the "Salary" and "Non-Equity Incentive Plan Compensation" columns.
(2) These amounts are not included in the Summary Compensation Table because plan earnings were not preferential or above
market.
(3) The Company made no contributions towards the deferred compensation plan for the participants in fiscal 2010 or prior years.
47
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information about shares of our common stock that may be issued under our equity compensation
plans, including compensation plans that were approved by our stockholders as well as compensation plans that were not approved by
our stockholders. Information in the table is as of January 2, 2011.
(a) Number of Securities to Be
Issued Upon Exercise of
Outstanding Options and
Rights
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
(b) Weighted-Average Exercise
Price per Share of Outstanding
Options and Rights ($)
(c) Number of Securities
Remaining Available for Future
Issuance Under Equity
Compensation Plans (Excluding
Securities Reflected
in Column (a))
13,747,033(1)
21.11(2)
23,597,489(3)
1,244,500(4)
14,991,533
37.53
22.83
N/A(5)
23,597,489
(1) Represents 10,637,801 shares issuable upon exercise of options and 3,109,232 shares issuable under restricted stock unit awards.
Options outstanding include 2,105,153 options with a weighted-average exercise price of $29.72 that were assumed in connection
with corporate acquisitions.
(2) RSUs have been excluded for purposes of computing weighted-average exercise price.
(3) Includes 7,535,584 shares available for grant under our 2005 Stock Incentive Plan and 16,061,905 shares available for grant under
our 2000 Employee Stock Purchase Plan.
(4) Represents options granted under our New Hire Stock and Incentive Plan.
(5) There is no set number of shares reserved for issuance under the New Hire Stock and Incentive Plan.
AUDIT COMMITTEE REPORT
The following report of the Audit Committee, the report of the Compensation Committee under "Compensation Committee
Report," along with statements in this proxy statement regarding the Audit Committee's charter, are not considered "soliciting material"
and are not considered to be "filed" with the SEC as part of this proxy statement. Any current or future cross-references to this proxy
statement in filings with the SEC under either the Securities Act of 1933 or the Securities Exchange Act of 1934 will not include such
reports or statements, except to the extent that we specifically incorporate it by reference in such filing.
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors and provides advice with
respect to our risk evaluation and mitigation processes. In fulfilling its oversight role, the Audit Committee monitors and advises the
Board of Directors on:
•
•
•
•
•
•
the integrity of our consolidated financial statements and disclosures;
the independent auditors' qualifications and independence;
the performance of our internal and independent audit functions;
the adequacy of our internal controls;
our compliance with legal and regulatory requirements; and
the processes utilized by management for identifying, evaluating, and mitigating strategic, financial, operational,
regulatory, and external risks inherent in our business.
The Audit Committee meets with the independent auditors, internal auditor, and our outside counsel, with and without our
management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of
our financial reporting.
48
Table of Contents
The Audit Committee, in its oversight role, has reviewed and discussed the consolidated financial statements with management
and Ernst & Young LLP, our independent auditors. Management is responsible for the preparation, presentation, and integrity of our
financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange
Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control
over financial reporting; and evaluating any change in internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, internal control over financial reporting. Ernst & Young LLP is responsible for performing an
independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements
with U.S. generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over
financial reporting.
During the course of fiscal 2010, management completed the documentation, testing, and evaluation of our system of internal
control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related
regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to
management during the process. In connection with this oversight, the Audit Committee received periodic updates from management
and Ernst & Young LLP at each regularly scheduled Audit Committee meeting. At the conclusion of the process, management provided
the Audit Committee with, and the Audit Committee reviewed, a report on the effectiveness of our internal control over financial
reporting. The Audit Committee also reviewed the report of management contained in our Annual Report on Form 10-K for the fiscal
year ended January 2, 2011 filed with the SEC, as well as Ernst & Young LLP's Reports of Independent Registered Public Accounting
Firm included in our Annual Report on Form 10-K related to its audit of (i) the consolidated financial statements and financial statement
schedule and (ii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee our efforts
related to our internal control over financial reporting and management's preparations for the evaluation for the fiscal year ending
January 1, 2012.
The Audit Committee has reviewed and discussed the consolidated audited financial statements with management, discussed
with the independent auditors the matters required to be discussed by SAS 61 (Codification of Statements of Auditing Standards), has
received the written disclosures and the letter from independent auditors required by ISB Standard No. 1, and has had discussions with
the independent auditors regarding their independence. Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the
fiscal year ended January 2, 2011 for filing with the SEC.
RESPECTFULLY SUBMITTED BY THE AUDIT COMMITTEE.
A. Blaine Bowman (Chairperson)
Daniel M. Bradbury
Karin Eastham
William H. Rastetter, Ph.D.
49
Table of Contents
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Fees Paid to Ernst & Young LLP
During the fiscal years ended January 2, 2011 and January 3, 2010, the aggregate fees billed by Ernst & Young LLP for
professional services were as follows:
Year Ended
January 2,
2011
Audit Fees
Audit-Related Fees
Tax Fees
Total
$
$
Year Ended
January 3,
2010
1,004,528
19,450
91,422
1,115,400
$
$
939,893
31,521
24,998
996,412
Audit fees consist of amounts for professional services rendered in connection with the integrated audit of our financial
statements and internal control over financial reporting, review of the interim financial statements included in quarterly reports, and
statutory audits required internationally. For the fiscal years ended January 2, 2011 and January 3, 2010, audit-related fees were
primarily incurred for accounting consultations. Tax fees for the fiscal years ended January 2, 2011 and January 3, 2010 related to
services rendered for the preparation of foreign tax filings. For the fiscal years ended January 2, 2011 and January 3, 2010, Ernst &
Young LLP did not perform any professional services other than as stated under the captions Audit Fees, Audit-Related Fees, and Tax
Fees above.
Pre-Approval Policies and Procedures
The Audit Committee, as required by the Securities Exchange Act of 1934, requires advance approval of all audit services and
permitted non-audit services to be provided by our independent registered public accountants. The Audit Committee must approve the
permitted service before the independent auditors are engaged to perform it. The services listed as Audit Fees, Audit-Related Fees,
and Tax Fees in the table above were pre-approved by our Audit Committee in accordance with this policy.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We entered into a license agreement with Tufts University in 1998 in connection with the license of patents filed by Dr. David
Walt, one of our directors. Dr. Walt is the Robinson Professor of Chemistry at Tufts University. Under that agreement, we pay royalties
to Tufts upon the commercial sale of products based on the licensed technology. Tufts University pays a portion of the royalties
received from us to Dr. Walt, the amount of which is controlled solely by Tufts University. The portion of royalties received from us that
Tufts University shared with Dr. Walt during fiscal 2010 was approximately $592,000.
In October 2009, we made a $1.95 million investment to acquire shares of Series A Preferred Stock of Helixis, Inc., a developer
of advanced nucleic acid analysis tools. Mr. Flatley, our President and Chief Executive Officer, is a director of Helixis, and he also
owns shares of stock representing less than one percent of Helixis' outstanding capital stock on a fully-diluted basis. In April 2010, we
acquired all of the outstanding capital stock of Helixis that was not already owned by the Company. The Board of Directors, with
Mr. Flatley abstaining, reviewed and approved our investment in, and subsequent acquisition of, Helixis.
All future transactions between us and our officers, directors, principal stockholders, and affiliates will be subject to approval by a
majority of the independent and disinterested members of our Board of Directors, and will be on terms determined by such members of
the Board of Directors to be no less favorable to us than could be obtained from unaffiliated third parties.
50
Table of Contents
We have entered into indemnification agreements with each of our directors and executive officers pursuant to which we have
agreed to indemnify these persons to the fullest extent permitted by law in connection with certain claims that may arise generally
relating to their acting in their capacities as our directors or executive officers.
OTHER MATTERS
As of the date of this proxy statement, we know of no other matters that will be presented for consideration at the annual meeting.
If any other matters properly come before the meeting, it is the intention of the proxy agent named in the enclosed form of proxy to vote
the shares represented as the Board of Directors may recommend. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed proxy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of our Board of Directors, our executive officers, and persons who hold more than 10% of our outstanding common
stock are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, which requires them to file
reports with respect to their ownership of, and transactions related to, our common stock and related derivative securities. Based solely
upon our review of copies of Section 16(a) reports, which we received from such persons for their transactions during fiscal 2010, we
believe that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by these individuals,
except that one Form 4 was not filed timely for each Dr. Grint and Dr. Möller.
STOCKHOLDER PROPOSALS FOR OUR 2012 ANNUAL MEETING
Stockholder proposals that are intended to be presented at our 2012 annual meeting of stockholders must be received at our
principal executive offices no later than November 24, 2011, in order to be included in the proxy statement and form of proxy relating to
that meeting, and must meet all other requirements as specified in our bylaws and Rule 14a-8 under the Securities Exchange Act of
1934. In addition, the proxy solicited by the Board of Directors for the 2012 annual meeting will confer discretionary authority to vote on
any stockholder proposal presented at that meeting, unless we receive notice of such proposal not later than February 9, 2012.
HOUSEHOLDING
Our 2010 Annual Report on Form 10-K, including our audited financial statements for fiscal 2010, is being mailed to you along
with this proxy statement. In order to reduce printing and postage costs, in certain circumstances only one annual report, proxy
statement, or Notice of Internet Availability of Proxy Materials, as applicable, will be mailed to multiple stockholders sharing an address
unless we receive contrary instructions from one or more of the stockholders sharing an address. If your household has received only
one annual report, proxy statement, or Notice of Internet Availability of Proxy Materials, as applicable, we will deliver promptly a
separate copy of the annual report, proxy statement, or Notice of Internet Availability of Proxy Materials, as applicable, to any
stockholder who sends a written or oral request to Illumina, Inc., 9885 Towne Centre Dr., San Diego, California 92121, Attention:
Corporate Secretary. If your household is receiving multiple copies of our annual reports, proxy statements, or Notices of Internet
Availability of Proxy Materials and you wish to request delivery of a single copy, you may send a written request to Illumina, Inc., 9885
Towne Centre Dr., San Diego, California 92121, Attention: Corporate Secretary.
51
Table of Contents
WHERE YOU CAN FIND MORE INFORMATION
We maintain an Internet site at www.illumina.com. We use our website as a channel of distribution of material company
information. Our website and the information posted on it or connected to it shall not be deemed to be incorporated by reference into
this proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS OF ILLUMINA, INC.
Dated: March 24, 2011
52
Table of Contents
ILLUMINA, INC.
ATTN: PETER FROMEN
9885 TOWNE CENTRE DR.
SAN DIEGO, CA 92121
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy
card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/ILMN2011
You may attend the meeting on May 10, 2011 via the Internet at www.virtualshareholdermeeting.com/ILMN2011 and vote during the meeting using the information that is printed in the box
marked by the arrow ® XXXX XXXX XXXX .
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call
and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M31245-P06902
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ILLUMINA, INC.
The
Board of Directors recommends that you vote
FOR the following:
Vote on Directors
1. Election of Directors with Terms Expiring in 2014
For
All
o
Withhold
All
For All
Except
o
To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of
the nominee(s) on the line below.
o
Nominees:
01) Daniel M. Bradbury
02) Roy A. Whitfield
Election of Director with Term Expiring in 2013
Nominee:
03) Gerald Möller, Ph.D.
Vote on Proposals
The Board of Directors recommends you vote FOR the following proposals:
For
Against Abstain
2.
To ratify the appointment of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending January 1, 2012
o
o
o
3.
Approval, on an advisory basis, of executive compensation
o
o
o
The Board of Directors recommends you vote for a "1 Year" frequency:
4.
1 Year 2 Years 3 Years Abstain
o
An advisory vote on the frequency of holding an advisory vote on executive compensation
o
o
NOTE: Such other business as may properly come before the meeting or any adjournment thereof.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint owners should each sign
personally. All holders must sign. If a corporation or partnership, please sign in full corporate or
partnership name, by authorized officer.
Signature [PLEASE SIGN WITHIN BOX]
Date
Signature (Joint Owners)
Date
o
Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
K are available at www.proxyvote.com.
The Notice and Proxy Statement and Form 10-
M31246-P06902
ILLUMINA, INC.
Annual Meeting of Stockholders
May 10, 2011 9:00 AM Pacific Time
This proxy is solicited by the Board of Directors
The stockholder(s) hereby appoint(s) Jay T. Flatley as proxy with the power to appoint his substitute, and hereby authorizes him to represent
and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of ILLUMINA, INC. that the stockholder(s) is/are
entitled to vote at the Annual Meeting of stockholder(s) to be held via live webcast at www.virtualshareholdermeeting.com/ILMN2011 at 9:00
AM Pacific Time on Tuesday, May 10, 2011, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted
in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors'
recommendations.
Continued and to be signed on reverse side
Was this manual useful for you? yes no
Thank you for your participation!

* Your assessment is very important for improving the work of artificial intelligence, which forms the content of this project

Download PDF

advertisement