SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ____) Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12 Techne Corporation (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] 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: 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: NOTICE OF ANNUAL MEETING OF SHAREHOLDERS to be held October 28, 2010 The annual meeting of shareholders (the "Annual Meeting") of Techne Corporation (the "Company") will be held at the offices of the Company, 614 McKinley Place N.E., Minneapolis, Minnesota, on Thursday, October 28, 2010, at 3:30 p.m. (Central Daylight Time), for the following purposes: 1. To set the number of members of the Board of Directors at nine (9). 2. To elect directors of the Company. 3. To approve the Company's 2010 Equity Incentive Plan. 4. To take action upon any other business that may properly come before the meeting or any adjournment thereof. Only shareholders of record shown on the books of the Company at the close of business on September 3, 2010 will be entitled to vote at the meeting or any adjournment thereof. Each shareholder is entitled to one vote per share on all matters to be voted on at the meeting. You are cordially invited to attend the meeting. Whether or not you plan to attend the meeting, please sign, date and return your Proxy in the return envelope provided as soon as possible. Your cooperation in promptly signing and returning the Proxy will help avoid further solicitation expense to the Company. This Notice, the Proxy Statement and the enclosed Proxy are sent to you by order of the Board of Directors (the "Board of Directors" or the "Board"). THOMAS E. OLAND, Chairman of the Board and President Dated: September 16, 2010 Minneapolis, Minnesota IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON OCTOBER 28, 2010: The Proxy Statement and 2010 Annual Report to Shareholders are available at www.proxyvote.com You may vote your proxy at www.proxyvote.com TECHNE CORPORATION __________ PROXY STATEMENT for Annual Meeting of Shareholders To Be Held October 28, 2010 __________ INTRODUCTION Your proxy (the "Proxy") is solicited by the Board of Directors of Techne Corporation (the "Company") for use at the Annual Meeting of Shareholders to be held on October 28, 2010 and at any adjournment thereof, for the purposes set forth in the attached Notice of Annual Meeting. A Notice of Internet Availability of Proxy Materials was mailed to certain shareholders on or about September 14, 2010. For the remaining shareholders and shareholders who had previously requested hard copies, the Notice of Annual Meeting, Proxy Statement, 2010 Annual Report to Shareholders and proxy card are being mailed on or about September 21, 2010. If you are a shareholder of record, you can vote in person at the annual meeting or by Proxy. There are two ways to vote by Proxy. You can vote over the Internet at www.proxyvote.com or if you received your proxy materials by mail, you can vote by mail by completing, signing and dating the enclosed proxy card and returning it promptly in the envelope provided. The cost of soliciting Proxies, including preparing, assembling and mailing the Proxies and soliciting material, will be borne by the Company. Directors, officers and regular employees of the Company may, without compensation other than their regular compensation, solicit Proxies personally or by telephone. Proxies not revoked will be voted in accordance with the choice specified by shareholders by means of the ballot provided on the Proxy for that purpose. Proxies which are signed but which lack any such specification will, subject to the following, be voted in favor of the proposals set forth in the Notice of Annual Meeting and in favor of the number and slate of directors proposed by the Nominations and Governance Committee of the Board of Directors and listed herein. If a shareholder abstains from voting as to any matter, then the shares held by such shareholder shall be deemed present at the meeting for purposes of determining a quorum and for purposes of calculating the vote with respect to such matter, but shall not be deemed to have been voted in favor of such matter. Abstentions, therefore, as to any proposal, other than election of directors, will have the same effect as votes against such proposal. If a shareholder withholds authority to vote for a particular director nominee, such withheld authority will not count as an affirmative vote for such nominee. Assuming that a quorum is present and proposal one is approved by shareholders, the nine candidates for election that receive a plurality of the vote of the shares present and entitled to vote in the affirmative will be elected. If a quorum is present and proposal one is not approved by shareholders, the eight candidates for election that receive a plurality of the vote of the shares present and entitled to vote in the affirmative will be elected. If a broker returns a "non-vote" Proxy, indicating a lack of voting instruction by the beneficial holder of the shares and a lack of discretionary authority on the part of the broker to vote on a particular matter, then the shares covered by such non-vote shall not be deemed present at the meeting for purposes of determining a quorum and shall not be deemed to be represented at the meeting for purposes of calculating the vote required for approval of such matter. You may revoke your Proxy by sending a written statement to that effect to the Corporate Secretary of the Company, submitting a properly signed proxy card with a later date, or filing a notice of termination of your Proxy and voting in person at the Annual Meeting. If you need directions to the Annual Meeting, please contact the Company at 612-379-8854. The mailing address of the Company's principal executive office is 614 McKinley Place N.E., Minneapolis, MN 55413. 1 OUTSTANDING SHARES AND VOTING RIGHTS The Board of Directors of the Company has fixed September 3, 2010 as the record date for determining shareholders entitled to vote at the Annual Meeting. Persons who were not shareholders on such date will not be allowed to vote at the Annual Meeting. At the close of business on September 3, 2010, 37,043,775 shares of the Company's common stock (the "Common Stock") were issued and outstanding. Such Common Stock is the only outstanding class of stock of the Company. Each share of Common Stock is entitled to one vote on each matter to be voted upon at the meeting. Holders of the Common Stock are not entitled to cumulative voting rights in the election of directors. PRINCIPAL SHAREHOLDERS The following table provides information concerning the only persons known to the Company to be the beneficial owners of more than 5% of the Company's outstanding Common Stock as of September 3, 2010: Amount and Nature of Percent Name and Address of Beneficial Owner Shares Beneficially Owned of Class - ------------------------------------ ------------------------- ---------- Morgan Stanley 4,698,770 (1) 12.7% 1585 Broadway New York, NY 10036 BlackRock, Inc. 2,034,188 (2) 5.5% 40 East 52nd Street New York, NY 10022 - -------------- (1) Morgan Stanley reported its beneficial ownership on a Schedule 13G/A filed with the SEC on February 12, 2010. The filing indicates that as of December 31, 2009, Morgan Stanley had sole voting power over 4,518,086 shares, shared voting power over no shares, sole dispositive power over 4,698,770 shares, and shared dispositive power over no shares. (2) BlackRock, Inc. reported its beneficial ownership on a Schedule 13G filed with the SEC on January 29, 2010. The filing indicates that as of December 31, 2009, BlackRock, Inc. had sole voting power over 2,034,188 shares, shared voting power over no shares, sole dispositive power over 2,034,188 shares, and shared dispositive power over no shares. MANAGEMENT SHAREHOLDINGS The following table sets forth the number of shares of the Company's Common Stock beneficially owned as of September 3, 2010, by each executive officer of the Company named in the Summary Compensation Table, by each director and by all directors and executive officers (including the named executive officers) as a group. Shares beneficially owned by Mr. Oland constitute 4.2% of total shares outstanding. Each other individual beneficially owns less than one percent of total shares outstanding plus shares subject to options exercisable by him or her. As a group, officers and directors beneficially own 7.0% of total shares outstanding plus shares subject to options exercisable by them. 2 Name of Director or Number of Shares Executive Officer Beneficially Owned (1) - --------------------------------- ----------------------- Thomas E. Oland 1,547,711 (2) Roger C. Lucas, Ph.D. 26,456 (3)(4)(5) Howard V. O'Connell 180,629 (3)(4)(6) Randolph C. Steer, M.D., Ph.D. 15,000 (3)(4)(7) Robert V. Baumgartner 37,000 (3)(4)(8) Charles A. Dinarello, M.D. 26,500 (3)(4)(7) Karen A. Holbrook, Ph.D. 25,000 (3)(4)(7) John L. Higgins 15,000 (3)(4)(7) Roeland Nusse, Ph.D. 5,000 (3)(4)(7) Gregory J. Melsen 30,645 (9) Marcel Veronneau 57,491 (10) Officers and directors as a group (11 persons) 2,587,081 (11) - ----------- (1) Unless otherwise indicated, the person listed as the beneficial owner has sole voting and sole investment power over outstanding shares. Shares beneficially owned includes shares subject to options that are currently outstanding and exercisable and options that are currently outstanding and will become exercisable within 60 days of September 3, 2010. (2) Includes 1,181,420 shares owned directly, 91,811 shares held by the Techne Corporation and Affiliates Stock Bonus Plan (the "Stock Bonus Plan") for Mr. Oland's account, 68,556 shares held by Thomas Oland and Associates and 205,924 shares held by the Thomas Oland and Associates Profit Sharing Plan and Trust. Does not include 627,865 shares held by the Stock Bonus Plan for accounts of employees other than Mr. Oland, which are included in the group total in the above table. Including such 627,865 shares, Mr. Oland, a director of the Company, beneficially owns 2,175,576 shares or 5.9% of total shares outstanding. (3) Does not include 719,676 shares held by the Stock Bonus Plan. All 719,676 shares held by the Stock Bonus Plan are held for the benefit of employees of the Company. No shares in the Stock Bonus Plan are held for the benefit of any outside directors of the Company. The 719,676 shares are included in the total of officers and directors as a group. The Company's Board of Directors, acting by majority vote, currently directs the Trustee, Marshall and Ilsley Trust Company, N.A. as to the voting of such shares. (4) Does not include a stock option to purchase 5,000 shares which will be granted on and will become exercisable as of the date of the Annual Meeting pursuant to the 1998 Nonqualified Stock Option Plan if the individual is re- elected as a director of the Company. If shareholders approve Proposal No. 3, the nonqualified stock options will be granted under the 2010 Equity Incentive Plan. (5) Includes 1,456 shares owned directly and 25,000 shares subject to stock options. (6) Includes 127,629 shares owned by trusts and 53,000 shares subject to options held by trusts of which Mr. O'Connell is a trustee and beneficiary. (7) All shares subject to stock options. (8) Includes 2,000 shares owned directly and 35,000 shares subject to stock options. (9) Includes 542 shares held by the Stock Bonus Plan for Mr. Melsen's account and 30,103 shares subject to stock options. (10) Includes 31,600 shares owned directly, 6,674 shares held by the Stock Bonus Plan for Mr. Veronneau's account and 19,217 shares subject to stock options. (11) Includes 719,676 shares held by the Stock Bonus Plan as to which the Company's Board of Directors directs the voting and 248,820 shares which may be purchased pursuant to stock options. 3 ELECTION OF DIRECTORS (Proposals #1 and #2) General Information The bylaws of the Company provide that the number of directors shall be determined by the shareholders at each Annual Meeting. The Nominations and Governance Committee of the Board of Directors recommended to the Board of Directors that the number of directors be set at nine and that the individuals named in the table below be elected. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE THAT THE NUMBER OF DIRECTORS BE SET AT NINE AND THAT THE INDIVIDUALS NAMED IN THE TABLE BELOW BE ELECTED. Under applicable Minnesota law and the Company's bylaws, approval of the proposal to set the number of directors at nine requires the affirmative vote of the holders of the greater of (1) a majority of the voting power of the shares represented in person or by proxy at the Annual Meeting with authority to vote on such matter or (2) a majority of the voting power of the minimum number of shares that would constitute a quorum for the transaction of business at the Annual Meeting. A plurality of votes cast is required for the election of directors. In the election of directors, each Proxy will be voted for each of the nominees listed below unless the Proxy withholds a vote for one or more of the nominees. Each person elected as a director shall serve for a term of one year or until his or her successor is duly elected and qualified. All of the nominees are members of the present Board of Directors. All directors, except Dr. Nusse, were elected to the Board of Directors by the shareholders. If any of the nominees should be unable to serve as a director by reason of death, incapacity or other unexpected occurrence, the Proxies solicited by the Board of Directors shall be voted by the proxy representatives for such substitute nominee as is selected by the Nominations and Governance Committee, or, in the absence of such selection, for such fewer number of directors as results from such death, incapacity or other unexpected occurrence. The following table provides certain information with respect to the nominees for director. Current Position(s) Name Age with Company - ----------------------- --- ----------------------------- Thomas E. Oland 69 Chairman of the Board, Chief Executive Officer President, Treasurer and Director Roger C. Lucas, Ph.D. 67 Vice Chairman and Director Howard V. O'Connell 80 Lead Director Randolph C. Steer, M.D., Ph.D. 60 Director Robert V. Baumgartner 54 Director Charles A. Dinarello, M.D. 67 Director Karen A. Holbrook, Ph.D. 67 Director John L. Higgins 40 Director Roeland Nusse, Ph.D. 60 Director Mr. Oland has been a Director, Chairman of the Board, Chief Executive Officer, President and Treasurer of the Company since 1985. Mr. Oland received his bachelor's degree in accounting from the University of Minnesota - - Duluth. Mr. Oland joined R&D Systems, Inc. (now a wholly-owned subsidiary of the Company) as President in July 1982. From 1977 to 1982, Mr. Oland was the founder and President of Thomas Oland and Associates, a management consulting firm of which R&D Systems was a client. Previous to founding Thomas Oland and Associates, Mr. Oland worked for nine years in the Management Consulting Division of Touche Ross. Among other attributes, skills and qualifications, the Board believes Mr. Oland is qualified to serve as a Director of the Company because his thorough and extensive knowledge of the Company's operations, values and culture, as well as his deep understanding of the issues and complexities the Company faces, make Mr. Oland a valuable director with critical analytical and strategic skills. 4 Dr. Lucas, Ph.D. has been Vice Chairman and Senior Scientific Advisor to the Company's Board since 1995 and a Director since 1985. He holds a bachelor's degree in biology from St. Mary's College in Winona, Minnesota, and a Ph.D. in physiology/biochemistry from the Illinois Institute of Technology. He was a recipient of the National Institutes of Health Pre- and Post-doctoral fellowships and also served as Assistant Professor of Biochemistry at the State University of New York, Medical School. Dr. Lucas is also currently a board member of Envoy Medical Corporation, ChemoCentryx, Inc. and Discovery Genomics, Inc. Dr. Lucas joined R&D Systems in 1980 as Head of Research. In 1985 he founded the Company's Biotechnology Division. From 1985 to 1995, Dr. Lucas was Chief Scientific Officer, Executive Vice President and Secretary of the Company. Among other attributes, skills and qualifications, the Board believes Dr. Lucas is qualified to serve as a Director of the Company because of his scientific background, particularly given his experience as Chief Scientific Officer of R&D Systems, Inc., and his knowledge of the Company and its markets. Mr. O'Connell has served on the Company's Board since 1985 and as Lead Director since 2010. Mr. O'Connell has been a private investor since 1990. From 1969 to 1990, he served as Chairman, President and Treasurer of John G. Kinnard and Company, Incorporated, a securities broker-dealer. Among other attributes, skills and qualifications, the Board believes Mr. O'Connell is qualified to serve as a Director of the Company because of his over 40 years of management and strategic experience as a successful investor, entrepreneur and executive. Dr. Steer, M.D., Ph.D. has served on the Company's Board since 1990. Dr. Steer received his undergraduate degree in physiology and Ph.D. in pathobiology from the University of Minnesota and his medical degree from the Mayo Medical School. Dr. Steer has served as President and Chief Operating Officer of Capstone Therapeutics Corp. (formerly OrthoLogic Corp.), a biotechnology company, since 2006. In the past five years, Dr. Steer also served as a director of BioCryst Pharmaceuticals, Inc. and MSO Holdings, Inc. Dr. Steer was a consultant to the pharmaceutical and biotechnology industries from 1989 to 2006 where he advised companies in business development, medical marketing and regulatory and clinical affairs. His prior experience includes service as Associate Director of Medical Affairs at Marion Laboratories and as Medical Director at Ciba Consumer Pharmaceuticals. Among other attributes, skills and qualifications, the Board believes Dr. Steer is qualified to serve as a Director of the Company because his medical and scientific backgrounds and his knowledge of the pharmaceutical and biotechnology industries provide valuable strategic insight. Mr. Baumgartner has served on the Company's Board since 2003. Mr. Baumgartner received a bachelor's degree in business administration from Notre Dame. Mr. Baumgartner has served as Chief Executive Officer and Director of the Center for Diagnostic Imaging, Inc., an operator of diagnostic imaging centers, since 2001. Prior to 2001, he held numerous executive positions, including as Chief Executive Officer and Director of American Coating International, President and Chief Executive Officer of First Solar and President of the Apogee Glass Group. He began his professional career at KPMG, LLC, an international accounting firm. Mr. Baumgartner currently serves on the board of Carestream Health, Inc. Among other attributes, skills and qualifications, the Board believes Mr. Baumgartner is qualified to serve as a Director of the Company because his extensive finance and general business background provides valuable strategic management and financial oversight skills. Dr. Dinarello, M.D. has served on the Company's Board since 2005. Dr. Dinarello received his medical degree from Yale University and his clinical training at the Massachusetts General Hospital. Dr. Dinarello is presently Professor of Medicine and Immunology at the University of Colorado School of Medicine in Aurora, Colorado. Previously he was Professor of Medicine and Pediatrics at Tufts University School of Medicine and a staff physician at the New England Medical Center Hospital in Boston. In 1998, Dr. Dinarello was elected to the United States National Academy of Sciences. Dr. Dinarello is considered one of the founding fathers of cytokine biology. For his research in the field, Dr. Dinarello has won numerous awards: the Novartis Prize in Immunology (2010), the Paul Ehrlich Prize (2010), the Bonsfils- Staton Award (2010), the Royal Swedish Academy of Sciences Crafoord Prize in Polyarthritis (2009) and the Albany Medical Center Prize in Medical and Biomedical Research (the largest U.S. prize in medicine) (2009). Dr. Dinarello has also served as Acting Chief Executive Officer of Omni Bio Pharmaceutical, Inc. since 2009. Among other attributes, skills and qualifications, the Board believes Dr. Dinarello is qualified to serve as a Director of the Company because of his distinguished scientific background and his extensive experience with research organizations. 5 Dr. Holbrook, Ph.D. has served on the Company's Board since 2007. Dr. Holbrook earned her bachelor's and master's degrees in zoology from the University of Wisconsin-Madison. She earned a Ph.D. in biological structure from the University of Washington School of Medicine where she pursued postdoctoral training in the Department of Medicine, Division of Dermatology. Dr. Holbrook has served as Vice President for Research and Innovation, University of South Florida, since 2007. She served as President of The Ohio State University from 2002 to 2007. Dr. Holbrook previously served as senior vice president for academic affairs and provost at The University of Georgia, as well as professor of cell biology and adjunct professor of anatomy and cell biology and medicine at the Medical College of Georgia. Before that, Dr. Holbrook served at the University of Florida at Gainesville as vice president for research and dean of the Graduate School, as well as professor of anatomy and cell biology and medicine (dermatology). Her earlier academic career was spent as a professor of biological structure and medicine at the University of Washington School of Medicine where she gained a national reputation for her expertise in human fetal skin development and genetic skin disease and was a National Institutes of Health (NIH) Merit awardee. She also served as associate dean for scientific affairs. Dr. Holbrook also serves on several non-profit boards, such as the American Association for the Advancement of Science and the Association of American Medical Colleges, among many others. In the past five years, Dr. Holbrook also served as a director for Huntington Bancshares Incorporated. Among other attributes, skills and qualifications, the Board believes Dr. Holbrook is qualified to serve as a Director of the Company because her scientific background and academic leadership provide valuable executive management and strategic insight. Mr. Higgins has served on the Company's Board since 2009. He graduated Magna Cum Laude with a bachelor's degree from Colgate University. Mr. Higgins has been President and Chief Executive Officer of Ligand Pharmaceuticals Incorporated since January 2007 and has been a member of Ligand's Board of Directors since March 2007. From 1997 until joining Ligand, Mr. Higgins was with Connetics Corporation, a specialty pharmaceutical company, as its Chief Financial Officer, and also served as Executive Vice President, Finance and Administration and Corporate Development at Connetics from January 2002 until its acquisition by Stiefel Laboratories, Inc. in December 2006. Mr. Higgins was previously a member of the executive management team at BioCryst Pharmaceuticals, Inc., a biopharmaceutical company. Currently, he is a Director of BioCryst and serves as Chairperson of its Audit Committee. Before joining BioCryst in 1994, Mr. Higgins was a member of the healthcare banking team of Dillon, Read & Co. Inc., an investment banking firm. Mr. Higgins also serves as Chairman of CoMentis, Inc, a biopharmaceutical company, and has served as a director of numerous public and private companies. Among other attributes, skills and qualifications, the Board believes Mr. Higgins is qualified to serve as a Director of the Company due to his combination of biopharmaceutical business, accounting and finance experience as well as his executive management experience, particularly with public companies. Dr. Nusse, Ph.D. has served on the Company's Board since May 2010. Dr. Nusse earned a bachelor's degree in biology in from the University of Amsterdam and a doctorate in molecular biology from the Netherlands Cancer Institute in 1980. He did his postdoctoral fellowship at the University of California, San Francisco. Dr. Nusse has served as Chairman of the Department of Developmental Biology at Stanford University since 2007. Dr. Nusse has been a professor or associate professor in the Department of Developmental Biology at Stanford University and an investigator at the Howard Hughes Medical Institute since 1990. He has also been the chair of the Department of Developmental Biology at Stanford since 2007. Dr. Nusse was previously at the Netherlands Cancer Institute (Amsterdam, The Netherlands) as a staff scientist and ultimately head of the Department of Molecular Biology. Dr. Nusse was elected to the United States National Academy of Sciences in April 2010. Dr. Nusse was previously named a member of the European Molecular Biology Organization in 1988, a member of the Royal Dutch Academy of Sciences in 1997 and a member of the American Academy of Arts and Sciences in 2001. Among other attributes, skills and qualifications, the Board believes Dr. Nusse is qualified to serve as a Director of the Company because his scientific research and academic background provide valuable strategic insight, including insight into the Company's customers and markets. 6 PROPOSAL NO. 3: 2010 EQUITY INCENTIVE PLAN The Company is asking its shareholders to approve the Company's 2010 Equity Incentive Plan (the "2010 Plan") under which 3,000,000 shares of the Company's Common Stock will be reserved for issuance. The Board has approved the 2010 Plan, subject to approval from shareholders at the Annual Meeting. Our named executive officers have an interest in this proposal. The Company designed the 2010 Plan to facilitate the continued use of incentive and nonqualified stock option awards, which are currently provided under separate plans, and to permit the use of other types of awards. The 2010 Plan will replace the 1997 Incentive Stock Option Plan (the "1997 Plan"), which permitted awards of incentive stock options, and the 1998 Nonqualified Stock Option Plan (the "1998 Plan"), which permitted awards of nonqualified stock options. Consequently, the 2010 Plan will permit awards of both incentive and nonqualified stock options, as well as awards of restricted stock, restricted stock units, performance shares, performance units and stock appreciation rights (collectively referred to as an "Award" or "Awards"). The Board of Directors intends that all future options will be granted under the 2010 Plan. Therefore, if the shareholders approve the 2010 Plan, no further options will be granted under either the 1997 Plan or the 1998 Plan; however, any options outstanding under these plans will remain subject to their terms and conditions. In addition, any shares reserved for the 1997 Plan or the 1998 Plan not currently subject to outstanding options or not issued upon the exercise of such options will not be used for the grant of any future options. The 1997 Plan currently has 126,797 shares reserved for options currently outstanding and 2,322,089 shares available for grant. The 1998 Plan currently has 307,170 shares reserved for options currently outstanding and 749,688 shares available for grant. If the shareholders do not approve the 2010 Plan, future stock options will continue to be granted under the 1997 Plan and the 1998 Plan. Description of Plan A general description of the 2010 Plan is set forth below, but this description is qualified in its entirety by reference to the full text of the 2010 Plan, a copy of which is attached as Appendix A to this proxy statement. Purpose. The purpose of the 2010 Plan is to promote the success of the Company by facilitating the employment and retention of competent personnel and by furnishing incentives to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company will depend to a large degree. Administration. The 2010 Plan is administered by the Board of Directors or a committee appointed by the Board (the "Administrator"). Any committee appointed by the Board to administer the 2010 Plan shall consist of at least two non-employee directors (as defined in Rule 16b-3, or any successor provision, of the General Rules and Regulations under the Securities Exchange Act of 1934). Currently, the Board has appointed the Executive Compensation Committee (the "Committee") to administer the 2010 Plan. The 2010 Plan gives broad powers to the Administrator to administer and interpret the 2010 Plan, including the authority: (i) to establish rules for the administration of the 2010 Plan; (ii) to select the individuals to be granted Awards ("Participants"); and (iii) to prescribe the particular form and conditions of each Award granted. Term. Incentive stock options may be granted under the 2010 Plan for a period of 10 years from the date of adoption of the 2010 Plan by the Board. Other Awards may be granted pursuant to the Plan from time to time after the effective date of the Plan and until the Plan is discontinued or terminated by the Administrator. Eligibility. All officers, directors, employees, consultants and advisors of the Company or any affiliate are eligible to receive Awards pursuant to the 2010 Plan. As of September 3, 2010, the Company and its subsidiaries had approximately 730 employees (of which three are named executive officers) and eight non-employee directors. 7 Shares Available. The maximum aggregate number of shares of Common Stock reserved and available for Awards to Participants is 3,000,000. If any Awards granted under the 2010 Plan expire or terminate prior to exercise or otherwise lapse, or if any Awards are settled in cash, the shares subject to such portion of the Award are available for subsequent grants of Awards. Further, shares of stock used to pay the exercise price under any Award or used to satisfy any tax withholding obligation attributable to any Award, whether withheld by the Company or tendered by the Participant, will continue to be reserved and available for Awards granted under the 2010 Plan. The total number of shares and the exercise price per share of Common Stock that may be issued pursuant to outstanding Awards are subject to adjustment by the Board upon the occurrence of a stock dividend, stock split, consolidation, or a similar event in which the Company receives no consideration. The Board may also provide for the protection of Participants in the event of a merger, liquidation, reorganization, divestiture (including a spin-off) or similar transaction. Amendment. The Board may from time to time suspend or discontinue the 2010 Plan or revise or amend it in any respect; provided, however, that no such revision or amendment may impair the terms and conditions of any outstanding Award to the material detriment of the Participant without the consent of the Participant except as authorized in the event of merger, consolidation or liquidation of the Company. Further, the 2010 Plan may not, without any required approval of the shareholders, be amended in any manner that will (a) materially increase the number of shares subject to the 2010 Plan except as provided in the case of stock splits, consolidations, stock dividends or similar events; (b) change the designation of the class of employees eligible to receive Awards; (c) decrease the price at which options will be granted; (d) materially increase the benefits accruing to Participants under the 2010 Plan; or (e) cause incentive stock options to fail to meet the requirements of Code Section 422. Types of Awards Available Under the Plan Options. Options granted under the 2010 Plan may be either "incentive" stock options within the meaning of Section 422 of the Internal Revenue Code (the "Code") or "nonqualified" stock options that do not qualify for special tax treatment of Code Section 422. When an option is granted under the 2010 Plan, the Administrator, in its discretion, specifies the option price and the number of shares of Common Stock which may be purchased upon exercise of the option. However, the exercise price of an incentive stock option may not be less than 100% of the fair market value of the Company's Common Stock on the date of grant, or 110% of the fair market value of the Company's Common Stock on the date of grant if granted to a 10% or greater Company shareholder. The exercise price of a nonqualified stock option also may not be less than the fair market value of the Company's Common Stock on the date of grant, unless otherwise determined by the Administrator. The closing sale price of the Company's Common Stock as reported by Nasdaq on September 3, 2010 was $60.00 per share. The Administrator will establish the term during which the option may be exercised and whether the option will be exercisable immediately, in stages or otherwise; provided, however, that the term of an incentive stock option generally may not exceed ten years from the date of grant. Moreover, the Administrator may also determine the effect that the termination of a Participant's relationship with the Company may have on the exercisability of an option. Each incentive or nonqualified stock option granted under the 2010 Plan is generally nontransferable during the lifetime of the Participant; however, a nonqualified stock option may, if permitted by the Administrator, be transferred to certain family members, family limited partnerships and family trusts. Participants may pay for shares upon exercise of options in cash, with a personal or certified check, with Common Stock of the Company valued at the stock's then fair market value, or through a broker-assisted cashless exercise. In no event may a Participant be granted stock options or stock appreciation rights covering in the aggregate more than 100,000 shares of Common Stock, subject to adjustment as described above; provided, however, that a share of stock subject to a stock appreciation right that is granted in tandem with an option shall count as one share against this limitation. In addition, each non-employee director will automatically be granted a nonqualified stock option to purchase 5,000 shares of Common Stock on the date of such director's election or re-election to the Board, which option will be immediately exercisable in full. 8 Restricted Stock Awards and Restricted Stock Unit Awards. The 2010 Plan also permits awards of restricted stock and restricted stock units. The Administrator will determine the number of shares covered by each restricted stock and restricted stock unit award granted under the 2010 Plan, and may also, in its discretion, establish continued employment, achievement of performance criteria, or other conditions that must be satisfied for the risks of forfeiture on restricted stock and restricted stock units to lapse. A restricted stock award or restricted stock unit award may not be transferred by a Participant until the risks of forfeiture have lapsed. Restricted stock units may be paid in cash or in shares of the Company's Common Stock, or any combination thereof, in the Administrator's discretion. In no event shall a Participant be granted restricted stock awards, or, to the extent payable in or measured by the value of shares of Common Stock, restricted stock unit awards during any fiscal year of the Company covering in the aggregate more than 100,000 shares of Common Stock, subject to adjustment as described above. Performance Share Awards and Performance Unit Awards. The Administrator is also authorized to grant performance share and performance unit awards under the 2010 Plan. Performance share awards generally provide the Participant with the opportunity to receive shares of the Company's Common Stock and performance units generally provide recipients with the opportunity to receive cash awards, but only if certain performance criteria are achieved over specified performance periods. A performance share award or performance unit award may not be transferred by a Participant except by will or the laws of descent and distribution. To the extent payable in or measured by the value of shares of Common Stock, in no event shall a Participant be granted performance awards during any fiscal year of the Company covering in the aggregate more than 100,000 shares of Common Stock. Stock Appreciation Rights. The 2010 Plan permits awards of stock appreciation rights, which may be granted independent of or in tandem with a previously or contemporaneously granted stock option, as determined by the Administrator. The Administrator will determine the term of the stock appreciation right and how it will become exercisable. Generally, upon the exercise of a stock appreciation right, the Participant will receive cash, shares of Common Stock, or some combination thereof, having a value equal to the excess of (i) the fair market value of a specified number of shares of the Company's Common Stock, over (ii) a specified exercise price. If the stock appreciation right is granted in tandem with a stock option, the exercise of the stock appreciation right will generally cancel a corresponding portion of the option, and, conversely, the exercise of the stock option will cancel a corresponding portion of the stock appreciation right. A stock appreciation right may not be transferred by a Participant except by will or the laws of descent and distribution. In no event shall a Participant be granted options or stock appreciation rights during any fiscal year of the Company covering in the aggregate more than 100,000 shares of Common Stock, subject to adjustment as provided above; provided, however, that a share of stock subject to stock appreciation right that is granted in tandem with an option shall count as one share against this limitation. Federal Income Tax Consequences of the Plan Options. Nonqualified stock options granted under the 2010 Plan are not intended to and do not qualify for favorable tax treatment available to incentive stock options under Code Section 422. Generally, no income is taxable to the Participant (and the Company is not entitled to any deduction) upon the grant of a nonqualified stock option. When a nonqualified stock option is exercised, the Participant generally must recognize compensation taxable as ordinary income equal to the difference between the option price and the fair market value of the shares on the date of exercise. The Company normally will receive a deduction equal to the amount of compensation the Participant is required to recognize as ordinary income and must comply with applicable tax withholding requirements. 9 Incentive stock options granted under the 2010 Plan are intended to qualify for favorable tax treatment to the Participant under Code Section 422. Under Code Section 422, no taxable income is reportable by the Participant when the incentive stock option is granted. Moreover, if the Participant has been an employee of the Company at all times from the date of grant until three months before the exercise date, the Participant generally will recognize no taxable income when the incentive stock option is exercised. The alternative minimum tax may be applicable in the year of exercise, however, depending upon the Participant's individual circumstances. If the Participant does not dispose of shares acquired upon exercise for a period of two years from the grant date and one year after the exercise date, the Participant will report any gain upon sale of the shares as capital gain. However, if the Participant disposes of the shares prior to expiration of the two- or one-year holding periods described above, the Participant will be deemed to have received compensation taxable as ordinary income in the year of the early sale in an amount equal to the lesser of the difference between the fair market value of the Company's Common Stock on the date of exercise (or the sale price, if less) and the exercise price of the shares. The Company ordinarily is not entitled to any income tax deduction upon the grant or exercise of an incentive stock option, but may be entitled to an income tax deduction in an amount equal to the ordinary income recognized by the Participant in the event of an early sale of shares. Restricted Stock Awards. Generally, no income is taxable to the Participant in the year a restricted stock award is granted. Instead, the Participant will recognize compensation taxable as ordinary income equal to the fair market value of the shares in the year in which the transfer restrictions lapse. Alternatively, if the Participant makes a "Section 83(b) Election," the Participant will, in the year that the restricted stock award is granted, recognize compensation taxable as ordinary income equal to the fair market value of the shares on the date the restricted stock award is granted. Unless limited by Code Section 162(m), as discussed below, the Company generally will receive a deduction equal to the amount of compensation the Participant is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements. Restricted Stock Unit Awards. A Participant will recognize compensation taxable as ordinary income equal to the value of the shares of Common Stock or cash received in the year that the restricted stock units vest. Unless limited by Code Section 162(m), as discussed below, the Company generally will receive a deduction equal to the amount of compensation the Participant is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements. Performance Share and Performance Unit Awards. A Participant will recognize compensation taxable as ordinary income equal to the value of the shares of Common Stock or the cash received, as the case may be, in the year that the Participant receives payment. Unless limited by Code Section 162(m), as discussed below, the Company generally will receive a deduction equal to the amount of compensation the Participant is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements. Stock Appreciation Rights. Generally, a Participant will recognize compensation taxable as ordinary income equal to the value of the shares of Common Stock or the cash received in the year that the stock appreciation right is exercised. Unless limited by Code Section 162(m), as discussed below, the Company generally will receive a deduction equal to the amount of compensation the Participant is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements. Section 162(m) of the Code Special rules limit the deductibility of compensation paid to the Company's Chief Executive Officer and to each of the Company's three other most highly compensated executive officers (excluding the Chief Financial Officer). Under Section 162(m) of the Code, the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, the Company can preserve the deductibility of certain compensation in excess of $1,000,000 for performance-based compensation if the conditions of Section 162(m) are met. These conditions include (i) obtaining shareholder approval of the Plan; (ii) placing limits on the size of Awards an individual can receive; and (iii) establishing performance criteria that must be met before the Award will vest or be paid. The Plan has been designed to permit the Plan Administrator to grant certain awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting the Company to continue to receive a federal income tax deduction in connection with such awards. 10 For purposes of the 2010 Plan, the performance criteria that must be met before an Award will vest or be paid may be any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to a designated comparison group, in each case as specified by the Committee: (i) revenue, (ii) net income, (iii) earnings per share, (iv) return on equity, (v) return on assets, (vi) increase in revenue, (vii) increase in share price or earnings, (viii) return on investment, or (ix) increase in market share. The performance goal applicable to an Award will be selected by the Committee and established not later than 90 days after the commencement of the period of service to which the performance goal relates, and while the outcome is substantially uncertain; provided, however, that no performance goal shall be established after 25% of the period of service has elapsed. The Committee shall certify the extent to which any performance goal has been satisfied, and the amount payable as a result thereof, prior to the payment, settlement or vesting of any Award that is intended to satisfy the requirements of Code Section 162(m). In determining the amounts earned by a Participant pursuant to such an Award, the Committee, in its discretion, will have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance on a formula or discretionary basis, or any combination thereof. By approving the 2010 Plan, shareholders will be approving, among other things, the eligibility requirements for participation by employees in the 2010 Plan; the performance criteria on which specific goals applicable to certain Awards would be based; and the limits on the number of shares which may be awarded to Participants under the 2010 Plan. Awards to be Granted Awards under the 2010 Plan are subject to the Administrator's discretion, and, therefore, future grants of Awards and the number of Awards that a Participant may receive cannot be determined at this time. As of September 3, 2010, no Awards have been granted under the 2010 Plan. Vote Required Approval of the 2010 Plan requires the affirmative vote of the holders of the greater of (1) a majority of the voting power of the shares represented in person or by proxy at the Annual Meeting with authority to vote on such matter or (2) a majority of the voting power of the minimum number of shares that would constitute a quorum for the transaction of business at the Annual Meeting. The effect of an abstention is the same as that of a vote against the proposal. Unless you indicate otherwise, your proxy will vote "FOR" the proposal. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL. 11 CORPORATE GOVERNANCE Code of Ethics and Business Conduct and Financial Fraud Hotline The Company has adopted a Code of Ethics and Business Conduct, which is applicable to all directors, officers and employees of the Company. A copy is available for review at the Company's website, www.techne-corp.com. The Company sponsors a financial fraud hotline that is available to all employees, is operated on a confidential basis by a third party, and is supervised with full powers of investigation by the Audit Committee of the Board of Directors. Board Independence The Board has determined that all of the Company's non-employee directors are "independent" as such term is defined in applicable law and regulations of the Securities and Exchange Commission and Nasdaq. Mr. Oland is not independent based on his service as the Company's Chief Executive Officer and President. In making its independence determinations, the Board reviewed transactions and relationships between the director, or any member of his or her immediate family, and the Company and its subsidiaries based on information provided by the director, Company records and publicly available information. Board Leadership Structure Currently, the Company's Chief Executive Officer, Mr. Oland, also serves as Chairman of the Board of Directors. The Company's Board has determined that this structure is the most effective leadership structure for the Company. The Board believes that Mr. Oland is the director best situated to identify strategic opportunities for the Company and to focus the activities of the Board due to his full-time commitment to the business and his long tenure with the Company. The Board also believes that Mr. Oland's dual roles as Chairman of the Board and Chief Executive Officer promotes effective execution of the Company's business strategy and facilitates information flow between management and the Board. The Board has determined that maintaining the independence of a majority of directors helps maintain the Board's independent oversight of management and ensures that the appropriate level of independence is applied to all Board decisions. In addition, The Audit, Executive Compensation and Nominations and Governance Committees each consist entirely of independent directors. In July 2010, the Board appointed Mr. Howard O'Connell to be the Lead Director. Mr. O'Connell has been a member of the Board since 1985. His duties and responsibilities are determined by the Nominations and Governance Committee of the Board, and include, but are not limited to, presiding at executive sessions of the Board and working with the Chairman to set Board agendas. Risk Oversight Risk is an integral part of Board and committee deliberations throughout the year. The Company's Board administers its risk oversight function directly and through its committees. The Audit Committee has oversight responsibility with respect to the Company's financial risk assessment and financial risk management. The Audit Committee meets regularly with management and the Company's independent auditors to review the Company's risk exposures, the potential financial impact those risks may have on the Company, the steps management takes to address those risks, and how management monitors emerging risks. With respect to the Company's compensation plans and programs, the Executive Compensation Committee structures such plans and programs to balance risk and reward, while mitigating the incentive for excessive risk taking by the Company's officers and employees. The Executive Compensation Committee has concluded that the Company's compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. The Nominations and Governance Committee oversees the management of risks associated with the composition and independence of the Company's Board. The full Board has oversight responsibility for all other risks, such as strategic, technology and operational risks, 12 Directors' Meetings and Committees The Board has scheduled meetings each quarter prior to the Company's quarterly earnings release and may from time-to-time hold additional meetings. During fiscal 2010, the Board held four meetings. While a director during fiscal 2010, each director attended 75% or more of the total number of meetings of the Board and of Committees of which he or she was a member. Executive sessions of independent directors, meetings of outside directors without any member of management present, are held in conjunction with regularly scheduled meetings of the Board. It is the policy of the Company that all directors should attend the Company's annual meeting of shareholders. All then incumbent members did attend the annual meeting in 2009. The Company's Board of Directors has three standing Committees, the Audit Committee, the Executive Compensation Committee and the Nominations and Governance Committee. All members of all Committees are "independent" as such term is defined in applicable law and regulations of the Securities and Exchange Commission and Nasdaq. In addition all members of the Audit Committee meet the additional independence standards applicable to its members. The Company also has a Scientific Subcommittee which was formed to advise the Board regarding research strategies, the scientific merit of technology or products involved in licensing and acquisition opportunities and emerging science and technology issues, as well as meet with and mentor key scientific employees. Members of the Scientific Subcommittee are Dr. Dinarello (Chair) and Drs. Steer, Holbrook and Nusse. The Audit Committee, whose members are Mr. Baumgartner (Chair), Mr. O'Connell, Dr. Steer, Mr. Higgins and Mr. Herbert (through October 2009), operates under a written charter established by the Company's Board of Directors. A copy of the charter is available for review at the Company's website, www.techne-corp.com. The Audit Committee is responsible for the appointment and supervision of the Company's independent registered public accounting firm and for reviewing the Company's internal audit procedures, the quarterly and annual financial statements of the Company and the results of the annual audit. The Audit Committee also pre-approves all related party transactions, establishes and oversees the implementation of the Company's cash investment policy and monitors the Company's financial fraud hotline. The Board of Directors has determined that for fiscal 2010 all Audit Committee members are "audit committee financial experts" as such term is defined in Section 407 of the Sarbanes-Oxley Act, and all such members are "independent" under applicable law and regulations of the SEC and Nasdaq. The Audit Committee met six times during fiscal 2010. The Committee's report is included in this Proxy Statement. The Executive Compensation Committee, whose members are Dr. Steer (Chair), Mr. O'Connell, Mr. Baumgartner, Mr. Higgins and Mr. Herbert (through October 2009), determines compensation for executive officers of the Company. The Committee operates under a written charter. A copy of the charter is available for review at the Company's website, www.techne-corp.com. The Executive Compensation Committee establishes both overall policies for executive compensation and reviews the performance of the executive officers. The Committee works with Mr. Oland, the Chief Executive Officer of the Company, to establish performance goals for the other executive officers and, acting independently, establishes the performance goals for Mr. Oland. The Committee determines the annual base compensation of all officers and awards bonuses, both cash and equity, to all officers based on performance. The Committee met four times during fiscal 2010. The Committee's report is included in this Proxy Statement. The Nominations and Governance Committee, chaired by Dr. Holbrook, is composed of all "independent" directors, currently all directors except Mr. Oland. The Committee operates under a written charter. A copy of the charter is available for review at the Company's website, www.techne- corp.com. The functions of the Committee are to recruit well-qualified candidates for the Board, select persons to be proposed in the Company's proxy statement for election as directors at annual meetings of shareholders, and establish governance standards and procedures to support and enhance the performance and accountability of management and the Board. The Nominations and Governance Committee assesses the appropriate size of the Board of Directors, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominations and Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Committee through current members of the Board of Directors, professional search firms, shareholders or other persons and may be considered at any point during the year. Dr. Nusse, who was appointed to the Board in May 2010, was someone whom the Board was familiar with through Dr. Nusse's scientific reputation prior to his consideration by the Nominations and Governance Committee. 13 The Nominations and Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. Candidates for the Board are considered and selected on the basis of outstanding achievement in their professional careers, experience, wisdom, personal and professional integrity, their ability to make independent, analytical inquiries, and their understanding of the business environment. Candidates must have the experience and skills necessary to understand the principal operational and functional objectives and plans of the Company, the results of operations and financial condition of the Company, and the position of the Company in its industry. Candidates must have a perspective that will enhance the Board's strategic discussions and be capable of and committed to devoting adequate time to Board duties. While the Company does not have a formal diversity policy for board membership, the Company seeks directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board of Directors' deliberations and decisions. The Nominations and Governance Committee considers, among other factors, diversity with respect to perspectives, backgrounds, skills and experience in its evaluation of candidates for board membership. Such diversity considerations are discussed by the Committee in connection with the general qualifications of each potential nominee. The Committee will consider all nominees for director recommended by shareholders of the Company, applying the same criteria as is used for nominees recommended by other sources. Recommendations may be sent to the Committee at the Company's address: 614 McKinley Place N.E., Minneapolis, MN 55413. The Committee met once during fiscal 2010. The Committee, meeting as part of the July 2010 Board meeting, has recommended to shareholders the re-election of the incumbent directors of the Company. Compensation Committee Interlocks and Insider Participation None of the members of the Executive Compensation Committee was an officer or employee of the Company during fiscal 2010, or was formerly an officer of the Company. None of the members of the Executive Compensation Committee had any relationship requiring disclosure as a related party transaction. No executive officer of the Company during fiscal 2010, served on the Compensation Committee or the board of any company that employed any member of the Company's Executive Compensation Committee or Board of Directors. Related Party Transactions In accordance with the Audit Committee Charter, the Audit Committee reviews and approves all related party transactions involving our directors and executive officers or their immediate family members to determine whether such transactions meet applicable legal requirements and are appropriately disclosed in the Proxy. In the course of its review and approval of a related party transaction, the Committee considers the material terms of the transaction, the importance of the transaction to the related person, the importance of the transaction to the Company, whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company and any other matters the Committee deems appropriate. During fiscal 2010, Mr. Oland's daughter, Paige Jensen, Ph.D., J.D., served as the Company's Associate General Counsel. Dr. Jensen was originally hired by the Company after approval by the Executive Compensation Committee. Dr. Jensen's base salary for fiscal 2010 was $117,000. The Company also provided medical and other benefits generally available to all Company employees. During fiscal 2010, Dr. Jensen exercised stock options approved and granted by the Executive Compensation Committee in fiscal 2005. Dr. Jensen sold the shares exercised at a net gain of approximately $58,000. Dr. Jensen is not an executive officer of the Company. Shareholder Communications with Directors Shareholders may communicate directly with the Board of Directors. All communications should be directed to the Company at 614 McKinley Place N.E., Minneapolis, MN 55413, and should prominently indicate on the outside of the envelope that it is intended for the Board of Directors, for non-management directors, or for a particular director. Unless other distribution is specified, the communication will be forwarded to the entire Board. The communication will not be opened before being forwarded to the intended recipient, but it will go through normal security procedures. 14 Compensation of Directors Directors who are not employees of the Company were compensated for the year ended June 30, 2010 as follows: Fees Earned or Paid in Option Cash (1) Awards (2) Total ----------- --------- -------- Roger C. Lucas, Ph.D. $25,000 $99,500 $124,500 Howard V. O'Connell 27,000 99,500 126,500 Randolph C. Steer, M.D., Ph.D. 27,000 99,500 126,500 Robert V. Baumgartner 27,000 99,500 126,500 Charles A. Dinarello, M.D. 25,000 99,500 124,500 Karen A. Holbrook, Ph.D. 25,000 99,500 124,500 John L. Higgins 27,000 99,500 126,500 G. Arthur Herbert (3) 8,333 0 8,333 Roeland Nusse, Ph.D. (4) 2,100 178,100 180,200 - ------------ (1) Amounts consist of the annual retainer and meeting fees for services as members of the Company's Board of Directors. For further information concerning such fees, see information following this table. (2) Amounts represent the total fair value of equity-based compensation for stock option awards granted in fiscal 2010 calculated in accordance with the Financial Accounting Standards Board's Accounting Standards Codification (ASC) Topic 718. Assumptions used in the calculation of these amounts are described in Note I to the Company's audited financial statements for the fiscal year ended June 30, 2010, included in the Company's Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on August 27, 2010. Pursuant to the Company's 1998 Nonqualified Stock Option Plan, each of the above directors, with the exception of Dr. Nusse, received an automatic option grant for 5,000 shares of Company Common Stock on the date of the 2009 Annual Shareholder Meeting. Dr. Nusse received options to purchase 10,000 shares of the Company's Common Stock upon his appointment to the Board in fiscal 2010 of which 5,000 vested in fiscal 2010 and 5,000 will vest in fiscal 2011. As of June 30, 2010, the following non-employee directors held options to purchase the following number of shares of the Company's Common Stock: Dr. Lucas - 35,000; Dr. Steer - 15,000; Mr. Baumgartner - 35,000; Dr. Dinarello - 26,500; Dr. Holbrook - 25,000; Mr. Higgins - 15,000; Dr. Nusse - 10,000. Family trusts, of which Mr. O'Connell is a trustee and beneficiary, held options to purchase 53,000 shares as of June 30, 2010. (3) Mr. Herbert did not stand for re-election at the fiscal 2009 Annual Meeting and therefore his term of office as a Director of the Company expired on that date. (4) The Company's R&D Systems, Inc. subsidiary paid Dr. Nusse $24,000 in fiscal 2010 for scientific consulting in addition to his director fees. Fees for non-employee directors include $25,000 per year for service on the Board and Committees of the Board. Directors are paid an additional $1,000 for each meeting of the Board other than its regularly scheduled quarterly meetings and for each meeting of a Committee on which the director serves other than Committee meetings held in conjunction with a meeting of the full Board. If appointed to the Board or retired during the fiscal year, the non-employee director receives a prorated annual fee. 15 Under the Company's 1998 Nonqualified Stock Option Plan, non-employee directors automatically receive options to purchase 5,000 shares of Company Common Stock upon each re-election to the Board. The options have a term of 10 years and vest immediately. Upon initial election or appointment to the Board, new non-employee directors receive options, which vest immediately, for 5,000 shares of the Company's Common Stock prorated based on the time remaining until the next annual meeting of shareholders. Dr. Nusse, at the Executive Compensation Committee's discretion, received options to purchase 10,000 shares of the Company's Common Stock upon his appointment to the Board in fiscal 2010. The grant included the automatic pro rata grant of 3,000 shares and an additional discretionary grant of 7,000 in recognition of his qualifications, including his esteemed scientific background and experience. Half of the options vested immediately upon his appointment to the Board and the remaining 5,000 options vest on the first anniversary date of his appointment. All non-employee directors elected at the Company's 2010 Annual Meeting of Shareholders will receive options to purchase 5,000 shares of Common Stock with an exercise price equal to the fair market value on the date of the 2010 Annual Meeting. EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS Executive Compensation Committee Report The Executive Compensation Committee of the Board of Directors is responsible for reviewing and approving total compensation programs and levels for the Company's Chief Executive Officer and its executive officer group, which includes the named executive officers shown in the Summary Compensation Table below. The Committee's responsibilities are specified in the Executive Compensation Committee Charter. The Committee reviewed and discussed the Executive Compensation Discussion and Analysis below with management. Based on the Committee's review and its discussions with management, the Committee recommended to the Board of Directors that the Executive Compensation Discussion and Analysis be included in the Company's Proxy Statement for the 2010 Annual Meeting. Randolph C. Steer, M.D., Ph.D. (Chair) Howard V. O'Connell Robert V. Baumgartner John L. Higgins Members of the Executive Compensation Committee 16 Overview The Executive Compensation Committee of the Board of Directors is responsible for establishing the compensation programs of the Company's Chief Executive Officer and other executive officers, including but not limited to the executive officers named in the summary compensation table of this Proxy Statement (the "named executive officers"). The Committee participates in the consideration and employment of prospective executive officers of the Company. The Committee also administers the Company's stock option plans and has the authority to grant options to purchase shares of the Company's Common Stock, and to determine all terms and conditions of such options. Compensation Objectives The Executive Compensation Committee has designed the compensation packages of the Company's executive officers to achieve the following objectives: - to recruit and retain highly qualified executive officers by offering overall compensation that is competitive with that offered for comparable positions in the local market; - to motivate executives to achieve important business and individual performance objectives and to reward them when such goals are met; and - to align the interest of executive officers with the long-term interest of shareholders through participation in the Company's stock option plans. The Executive Compensation Committee is responsible for assuring that compensation for the executive officers is consistent with the Company's compensation philosophy. The Executive Compensation Committee reviews the compensation philosophy and trends in the local market to ensure that the executive compensation program is competitive and attracts and retains talented management, motivates the executives to achieve short term and long term corporate objectives, and aligns the motivation and interests of the executives with the interests of the Company's shareholders. The Executive Compensation Committee also administers the Company's equity-based compensation and performance-based bonus plan for the executive officers. The Executive Compensation Committee reviews and approves each executive's base pay, bonus, and equity incentives annually. The Committee views the various components of its compensation program as related, but distinct. Although the Executive Compensation Committee does review and consider total compensation for each executive officer as a whole, it does not believe that significant compensation derived from one component should necessarily negate or reduce compensation from other components. The Committee determines the appropriate level for each compensation component based on overall compensation objectives. The Executive Compensation Committee has not adopted any policies or guidelines for allocating compensation among the different elements of the compensation program. The Company's Executive Compensation Committee has not historically retained a compensation consultant in connection with its decisions and did not utilize consultants in establishing fiscal 2010 executive compensation. The Executive Compensation Committee also does not compare the compensation of the Company's executives to any industry peer group because the Company's competitors are either privately-held or subsidiaries or divisions of large publicly-held companies that have complex and substantially more generous executive compensation programs for their executive officers. Although the Executive Compensation Committee uses local comparative data from a variety of industries to evaluate base salaries and total compensation, it is not a material component of its decision-making process. This comparative data is derived from locally-published business journals and newspaper reports that annually measure and rank compensation levels of chief executive and financial officers for public companies of various industries in the Company's geographical region. 17 At the beginning of each fiscal year, the Executive Compensation Committee assesses the base compensation and the potential compensation that the named executive officers could earn by achieving the Company's financial targets and their individual personal goals. As part of this assessment, the Chief Executive Officer makes recommendations to the Executive Compensation Committee regarding the base compensation to be paid to the executive officers that report to him. Such recommendations take into account internal pay equity, position within an internal compensation range, changes in responsibilities, local compensation levels for similar positions in all industries and duties and other factors the Chief Executive Officer considers important in establishing competitive compensation for the executives that report to him. Among these other factors is a philosophy that there should be a reasonable relationship between executive salaries and the average employee or mid-level manager salaries within an organization; the percentage increase in base salary for executives should not be greater than the percentage increase paid to a company's other employees; executive bonuses should be based on performance; and incentives should be long-term equity based arrangements that are tied to the long-term improvements in financial results and appreciation in the Company's stock price. In making the final decisions regarding the type and amount of compensation to be paid to the named executive officers, the Executive Compensation Committee not only considers the Chief Executive Officer's recommendations but also conducts an independent review of local comparative data for all industries, considers internal pay equity and responsibilities and makes its own assessment as to the type and amount of compensation to be paid. The Executive Compensation Committee does not target a particular percentile range for the base salaries or total compensation for the Company's named executive officers, but typically approves compensation that is conservative compared to local data among a variety of industries. The Company's compensation for its executives has been historically among the lowest among local public companies, including many that are smaller and less profitable than the Company. The Executive Compensation Committee feels that the compensation is, nevertheless, competitive due to the benefits and equity incentive plans available to all of the Company's employees. Although the Executive Compensation Committee considers the compensation levels implied by comparative data derived from locally published executive compensation reports, such comparative data is only one factor considered in the overall compensation decision-making process and is not a material factor. The Company's Chief Executive Officer waived an increase in his base compensation for fiscal years 2007 through 2009. No increase in base compensation was given to any named executive officer for fiscal 2010 as a result of a company-wide freeze on salary increases for all employees with annual salaries over $100,000. Role of the Chief Executive Officer in Compensation Decisions During meetings with the Executive Compensation Committee held each year, the Company's President and Chief Executive Officer presents to the Committee recommendations regarding compensation for the executive officers (other than himself). The Committee discusses the recommendations and accepts or adjusts them, in whole or in part. The executive officers are not present during the Committee's final discussion and determination of their compensation. Elements of the Compensation Program The Company's executive compensation program is comprised of base salaries, annual performance bonuses comprised of both cash and stock option components, and various benefits, including the Company's Profit Sharing and Savings Plan and Stock Bonus Plan in which all qualified employees of the Company participate. In addition, the Executive Compensation Committee from time to time may award special cash bonuses or stock options related to non- recurring, extraordinary performance. The Executive Compensation Committee typically also awards stock options upon retention of a new executive officer. Base salary. A competitive base salary is provided to each executive officer recognizing the skills and experience each individual brings to the Company, the length of time with the Company and the performance contributions each makes. Salaries are reviewed on an annual basis and are made in connection with annual performance reviews. In July 2010, the Executive Compensation Committee approved base salaries of $290,000 for Mr. Melsen and $185,000 for Mr. Veronneau for fiscal 2011. Mr. Oland waived an increase in his base compensation for fiscal 2011 and will again receive annual base compensation of $254,100. 18 Performance-based bonus plan. Under the Company's Executive Officer's Incentive Bonus Plan put into effect for fiscal 2010, each executive officer may earn a potential cash bonus of up to 40% of his or her annual salary. The eligible cash bonus each executive officer could earn for fiscal 2010 was: Mr. Oland - $101,640, Mr. Melsen - $110,000 and Mr. Veronneau - $67,000. In addition to the cash bonuses, each executive officer earns stock options with a fair value equal to the amount of his cash bonus. The plan provides that 70% of the executive officers cash bonus is based upon the percentage of increase in consolidated revenues and net earnings from the prior fiscal year and 30% of the bonus is based upon achievement of qualitative personal goals set for each named executive officer. The Executive Compensation Committee believes this bonus plan focuses the executives on sustaining high quality revenue growth, bringing new products to market, increasing market share and expanding market presence, as well as balancing increased research and development with expense control. The Company's fiscal 2010 consolidated revenues and net earnings were $269 million and $ 110 million, respectively, increases of 1.93% and 4.31%, respectively, from fiscal 2009. A weighting factor of 0.5 is applied to the consolidated revenue increase and a weighting factor of 1.0 is applied to the consolidated net earnings increase in calculating the cash portion of the executive officers bonus. The Executive Compensation Committee has, therefore, determined that based on the Company's consolidated results, each executive officer earned a cash bonus of 5.28% of his base salary for fiscal 2010. As the 5.28% bonus equates to 70% of the total cash bonus for fiscal 2010, the maximum cash bonus percentage for fiscal 2010 was 7.54% (5.28% cash bonus from financial results / 70% = 7.54%). Therefore, the maximum cash bonus each executive officer could earn based on achievement of 100% of his personal goals is 2.26% of his base salary (7.54% total cash bonus less 5.28% cash bonus from financial results). The personal goals for the named executive officers are generally qualitative in nature and position-specific. These personal goals are established annually by the Executive Compensation Committee taking into account each executive's responsibilities at the Company and the recommendations of the Chief Executive Officer as to the executives who report to him. Following each fiscal year end, the Executive Compensation Committee assesses the achievement of the personal goals by each named executive officer, which assessment includes the recommendations of the Chief Executive Officer as to the achievement of the personal goals of the executives who report to him. The personal goals set for fiscal 2010 for Mr. Oland related to: - accomplishment of the Company's strategic objectives; - succession planning; - leadership development; and - personnel matters Mr. Oland waived any cash bonus for fiscal 2010. The personal goals set for fiscal 2010 for Mr. Melsen related to: - objectives within the information systems function, including transition of departmental leadership, improvement of service levels and reduction in consulting costs; - the management of BiosPacific, Inc., the Company's sales subsidiary that services diagnostic customers, including succession planning and achievement of financials goals; - objectives within the research and development function, including administrative support, analysis of economic opportunities and communication and enhancement of knowledge regarding Company products and processes; and - objectives within the accounting and finance and facilities functions, including leadership development and operational efficiencies The Executive Compensation Committee, with input from the Chief Executive Officer, determined that Mr. Melsen met 80% of his personal goals and, therefore, earned an additional cash bonus of 1.80% of his base salary (80% of personal goals achieved times 2.26%). Mr. Melsen's total cash bonus for fiscal 2010 was $19,478 (7.08% of his base salary of $275,000). 19 The personal goals set for fiscal 2010 for Mr. Veronneau related to the management of the Company's Hematology Division, including: - the achievement of division revenue and pre-tax earnings and gross margin targets of $17.5 million, $5.9 million, and 72.6%, respectively; - the introduction of new hematology products; - the improvement of quality control programs; - regulatory compliance; and - personnel matters The Executive Compensation Committee, with input from the Chief Executive Officer of the Company, determined that Mr. Veronneau met 83% of his personal goals and, therefore, earned an additional cash bonus of 1.87% of his base salary (83% of personal goals achieved times 2.26%). Mr. Veronneau's total cash bonus for fiscal 2010 was $11,978 (7.15% of his base salary of $167,500). In addition to the above cash bonuses, each executive officer earns stock options with a fair value equal to the amount of his cash bonus. The number of options each executive officer receives is calculated based on his cash bonus divided by the fair value of the options on the date of grant, calculated in accordance with FASB ASC Topic 718. The stock option grant date is the date the Executive Compensation Committee determines the officer's cash bonus amount based on financial results and the achievement of individual qualitative personal goals. The stock options vest immediately with an exercise price equal to the closing price of the Company's stock on the date of grant. The stock options earned for fiscal 2010 were granted to the executive officers on July 30, 2010 under the Company's 1997 Incentive Stock Option Plan and 1998 Nonqualified Stock Option Plan. The fair value of the stock options on the grant date was determined to be $9.35 per share. Therefore, Mr. Melsen was granted stock options for 2,083 shares of stock ($19,478 cash bonus divided by $9.35) and Mr. Veronneau was granted stock options for 1,281 shares of stock ($11,978 cash bonus divided by $9.35). The exercise price of the stock options are $58.40 per share. Other compensation. The Company provided medical and insurance benefits to its executive officers, which are the same as those generally available to all Company employees. The Company has a Profit Sharing and Savings Plan and a Stock Bonus Plan in which all qualified employees, including executive officers, participate subject to statutory limitations on contributions for highly compensated individuals. The amount of the Company's contribution to the plans is based on the increase in revenues and after tax earnings from the prior fiscal year. For fiscal 2010, the profit sharing percentage was approximately 1.70%. The Company contributed to each of the Profit Sharing and Savings Plan and the Stock Bonus Plan an amount equal to 0.85% of total gross wages, respectively. The contribution to the Stock Bonus Plan is in the form of Company common stock. The Company does not provide any other significant perquisites or executive benefits to its named executive officers. Accounting and Tax Treatment The Company accounts for equity-based compensation paid to employees under FASB ASC Topic 718, which requires the Company to estimate and record an expense over the service period of an option award. Thus, the Company may record an expense in one year for awards granted in earlier years. Accounting rules also requires the recording of cash compensation as an expense at the time the obligation is accrued. Section 162(m) of the Internal Revenue Code of 1986 generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to a company's chief executive officer and three other most highly-paid executive officers (other than its chief financial officer). Qualifying performance-based compensation will not be subject to the deduction limitation if certain requirements are met. Because the potential amount of base salary and non-equity-based incentive compensation that the executive officers can earn is less than $1 million, Section 162(m) has not been material to the Executive Compensation Committee decisions. 20 Summary Compensation Table The named executive officers received the following compensation for the fiscal years ended June 30, 2010, 2009 and 2008: Non-Equity Incentive All Other Name and Fiscal Option Plan Com- Compen- Principal Position Year Salary(1) Awards(2) pensation(3) sation(4) Total - ------------------ ------ --------- --------- ------------ -------- -------- Thomas E. Oland, 2010 $254,100 $ 0(5) $ 0(5) $ 4,156 $258,256 President and CEO 2009 254,100 0(5) 0(5) 7,772 261,872 2008 254,100 0(5) 0(5) 35,878 289,978 Gregory J. Melsen, 2010 275,000 350,078(6) 19,478 4,156 648,712 Vice President - 2009 275,000 2,150(7) 12,705(7) 7,772 297,627 Finance and CFO 2008 260,000 12,981 47,320 35,878 356,179 Marcel Veronneau, 2010 167,500 122,178(6) 11,978 3,365 305,021 Vice President - 2009 167,500 5,231 30,887 6,964 210,582 Hematology 2008 160,000 8,385 30,560 30,112 229,057 Operations - ---------- (1) Includes amounts deferred under the Company's Profit Sharing and Savings Plan, a qualified deferred compensation plan under section 401(k) of the Internal Revenue Code. (2) Amounts shown above represent the total fair value of equity-based compensation for stock option awards earned in the respective fiscal year under the Company's Executive Officer's Incentive Bonus Plan and other stock options awards granted during the respective fiscal year. Stock options earned under the Executive Officer's Incentive Bonus Plan are granted in the following fiscal year. The fair value of the stock options is determined pursuant to ASC Topic 718. Assumptions used in the calculation of the fair value of the stock options are described in Note I to the Company's audited financial statements for the fiscal year ended June 30, 2010, included in the Company's Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on August 27, 2010. (3) Represents cash bonuses earned under the Company's Executive Officer's Incentive Bonus Plan in the respective fiscal year that were determined and paid in the subsequent fiscal year. (4) For each individual the amounts for fiscal 2010 and 2009 reflect profit sharing for fiscal 2010 and 2009, respectively, contributed in the following fiscal year to the Profit Sharing and Savings Plan (as to one-half) and contributed in the following fiscal year to the Stock Bonus Plan in the form of shares of the Company's Common Stock (as to one-half). For each individual the amount for fiscal 2008 reflects profit sharing for fiscal 2008 contributed in fiscal 2009 to the Profit Sharing and Savings Plan (as to one- third) contributed in fiscal 2009 to the Stock Bonus Plan in the form of shares of the Company's Common Stock (as to one-third), and paid in cash in fiscal 2009 (as to one-third). (5) Mr. Oland waived his cash and stock option bonus under the Company's Executive Officer's Incentive Bonus Plan. (6) Includes the fair value of stock options granted in April, 2010 to Mr. Melsen (30,000 shares at a fair value of $330,600) and Mr. Veronneau (10,000 shares at a fair value of $110,200), The options for Mr. Melsen vest 25% in each of fiscal 2011-2014 and the options for Mr. Veronneau vest 50% in each of fiscal 2011 and 2012. (7) Mr. Melsen waived approximately 74% of his earned bonus, or that portion of his bonus relating to the achievement of corporate financial objectives. 21 Grants of Plan-Based Awards The following table sets forth certain information with respect to grants of plan-based awards for the named executive officers earned in fiscal 2010 under the Company's Executive Officer's Incentive Bonus Plan.