SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

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Ultralife Corporation

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ULTRALIFE CORPORATION
2000 Technology Parkway
Newark, New York 14513

 

April 28, 2011

 

To Our Shareholders:

 

You are cordially invited to attend the Annual Meeting of Shareholders of Ultralife Corporation on Tuesday, June 7, 2011 at 10:30 A.M. at our corporate offices, 2000 Technology Parkway, Newark, New York 14513.

 

This year, for the first time, we are providing our proxy materials over the Internet. Accordingly, we are mailing to many of our shareholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of our Proxy Statement and our 2010 Annual Report to Shareholders. The Notice of Internet Availability of Proxy Materials contains instructions about how to access those documents and vote online. The Notice of Internet Availability of Proxy Materials also contains instructions about how each of our shareholders can also receive a paper copy of our proxy materials, including the Proxy Statement, our 2010 Annual Report to Shareholders and a form of proxy card or voting instruction card. By taking advantage of this distribution process, we will not only conserve natural resources, but we will also reduce our costs of printing and distributing proxy materials.

 

We hope that you will be able to attend this year’s Annual Meeting.

 

Very truly yours,

 

Michael D. Popielec

President and Chief Executive Officer

ULTRALIFE CORPORATION
2000 Technology Parkway
Newark, New York 14513

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 7, 2011

 

Notice is hereby given that the 2011 Annual Meeting of Shareholders of Ultralife Corporation will be held on Tuesday, June 7, 2011 at 10:30 A.M. at our corporate offices, 2000 Technology Parkway, Newark, New York 14513 for the following purposes:

 

1. to elect eight directors for a term of one year and until their successors are duly elected and qualified;

 

2. to approve an advisory resolution on executive compensation;

 

3. to conduct an advisory vote on the frequency of future advisory votes on executive compensation;

 

4. to approve an amendment to our Amended and Restated 2004 Long-Term Incentive Plan, including an increase in the number of authorized shares under the plan and an amendment to the annual limitation set forth in the plan;

 

5. to ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011; and

 

6. to transact such other business as may properly come before the meeting and any adjournments thereof.

 

Only shareholders of record of our Common Stock, par value $.10 per share, at the close of business on April 12, 2011 are entitled to receive notice of, and to vote at and attend our Annual Meeting. Your vote is important. Whether or not you plan to attend our Annual Meeting, we hope that you will vote as soon as possible. If you received only a Notice of Internet Availability of Proxy Materials by mail, you may vote your shares at the Internet site address listed on your Notice of Internet Availability. You may also request a paper copy of our proxy materials by visiting the Internet site address listed on your Notice of Internet Availability, by calling the toll-free number or by sending an e-mail to the e-mail address listed on your Notice of Internet Availability. If you received a paper copy of the proxy materials by mail, you may vote your shares by proxy by doing any one of the following: vote at the Internet site address listed on your proxy or voting instruction card; call the toll-free number listed on your proxy or voting instruction card; or sign, date and return in the pre-addressed envelope provided the enclosed proxy or voting instruction card.

 

By Order of the Board of Directors

 

Bradford T. Whitmore

Chair of the Board of Directors

 

Dated: April 28, 2011

 

TABLE OF CONTENTS

 

 

IMPORTANT

 

REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING, WE ENCOURAGE YOU TO VOTE IN ANY OF THE MANNERS DESCRIBED IN THIS PROXY STATEMENT. WE ALSO ENCOURAGE BENEFICIAL OWNERS TO FOLLOW THE INSTRUCTIONS PROVIDED BY YOUR BROKER REGARDING HOW TO VOTE. YOUR BROKER CANNOT VOTE YOUR SHARES FOR DIRECTOR NOMINEES OR FOR PROPOSALS 2, 3 AND 4 UNLESS YOU PROVIDE YOUR BROKER WITH VOTING INSTRUCTIONS.

 

ULTRALIFE CORPORATION

2000 Technology Parkway

Newark, New York 14513

(315) 332-7100

 

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

JUNE 7, 2011

 

INFORMATION CONCERNING SOLICITATION AND VOTING

 

We are furnishing this proxy statement to our shareholders in connection with our Board of Directors’ solicitation of proxies for use at our 2011 Annual Meeting of Shareholders, which we refer to in this proxy statement as the Meeting, to be held on Tuesday, June 7, 2011, at 10:30 A.M. and at any adjournments thereof. The Meeting will be held at our corporate offices, 2000 Technology Parkway, Newark, New York 14513.

 

In accordance with rules and regulations adopted by the U.S. Securities & Exchange Commission (“SEC”), instead of mailing a printed copy of our proxy materials to each shareholder of record, we are now furnishing proxy materials to our shareholders on the Internet. If you received only a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request a copy. Instead, the Notice of Internet Availability will instruct you how to access and review the proxy materials over the Internet. The Notice of Internet Availability of Proxy Materials will also instruct you as to how you may submit your proxy over the Internet. If you received only a Notice of Internet Availability by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting those materials included in the Notice of Internet Availability.

 

The Notice of Internet Availability of Proxy Materials is first being sent to our shareholders on or about April 28, 2011 and our proxy materials are also first being made available to our shareholders on April 28, 2011.

 

You may vote by proxy or in person at the Meeting. If you received only a Notice of Internet Availability by mail, you may vote your shares on line by proxy at the Internet site address listed on your Notice of Internet Availability. You may also request a paper copy of our proxy materials by visiting the Internet site address listed on your Notice of Internet Availability, by calling the toll-free number or by sending an e-mail to the e-mail address listed on your Notice of Internet Availability. If you received a paper copy of the proxy materials by mail, you may vote your shares by proxy by doing any one of the following: vote at the Internet site address listed on your proxy or voting instruction card; call the toll-free number listed on your proxy or voting instruction card; or mail your signed and dated proxy or voting instruction card to our tabulator in the self-addressed envelope provided. Even if you plan to attend the Meeting in person, we recommend that you vote by proxy prior to the Meeting. You can always change your vote as described below.

 

When a proxy card is returned properly signed and dated, the shares represented thereby will be voted in accordance with the shareholder’s directions. If the proxy is signed, dated and returned without choices having been specified, the shares will be voted FOR the election of each director-nominee named therein, FOR the other proposals

identified therein and in favor of a frequency of every three years for future advisory votes on executive compensation.

 

You may receive more than one Notice of Internet Availability or more than one paper copy of the proxy materials, including multiple paper copies of this proxy statement and multiple proxy or voting instruction cards, depending on how you hold your shares. For example, if you hold your shares in more than one brokerage account, you may receive a separate Notice of Internet Availability, a separate e-mail or a separate voting instruction card for each brokerage account in which you hold your shares. If you are a shareholder of record and your shares are registered in more than one name, you may receive more than one Notice of Internet Availability, more than one e-mail or more than one proxy card. To vote all of your shares by proxy, you must vote at the Internet site address listed on your Notice of Internet Availability, proxy or voting instruction card; call the toll-free number listed on your proxy or voting instruction card; or sign, date and return each proxy card and voting instruction card that you receive.

 

If for any reason any of the nominees for election as directors become unavailable for election, discretionary authority may be exercised by the proxies to vote for substitute nominees proposed by our Board of Directors. A shareholder has the right to revoke a previously granted proxy at any time before it is voted by filing with our Corporate Secretary a written notice of revocation, or a duly executed later-dated proxy, or by requesting return of the proxy at the Meeting and voting in person.

 

We will bear the cost of soliciting proxies. In addition to the solicitation of proxies by use of the mails, some of our officers, directors and regular employees, without extra remuneration, may solicit proxies personally or by telephone, telefax or similar transmission. We may decide to retain the services of a proxy solicitation firm if we believe it is appropriate under the circumstances. We will reimburse record holders for expenses in forwarding proxies and proxy soliciting material to the beneficial owners of the shares held by them.

 

Only shareholders of record at the close of business on April 12, 2011 are entitled to notice of, and to vote at, the Meeting. As of April 12, 2011, there were 17,289,114 shares of our Common Stock, par value $.10 per share, issued and outstanding, each entitled to one vote per share at the Meeting.

 

A majority of the outstanding shares of our Common Stock, represented in person or by proxy at the Meeting, will constitute a quorum for the transaction of all business. For purposes of determining whether a quorum is present, shareholders of record who are present at the Meeting in person or by proxy are considered to be present at the Meeting.

 

The table below shows the vote required at the Meeting to approve each of the proposals described in this proxy statement, assuming the presence of a quorum:

 

 

 

Shares that abstain from voting on one or more proposals to be acted on at the Meeting are considered to be present for the purpose of determining whether a quorum exists. Abstentions will have no effect on the election of directors; however, abstentions will have the effect of voting against the other proposals set forth in this proxy statement, because abstentions are deemed to be present and entitled to vote but do not count toward the affirmative vote required to approve the proposal.

 

If you own your shares through a broker and do not provide your broker with specific voting instructions, your broker will have the discretion under the rules governing brokers who have record ownership of shares that they hold in street name for their clients to vote your shares on routine matters but not otherwise. As a result of new rules applicable to director elections after January 10, 2010, brokers may no longer vote shares they hold as nominee in their discretion in the election of directors or other non-routine matters. As a result, your broker may exercise discretion to vote your shares only with respect to the ratification of the selection of our independent registered public accounting firm, because that is considered a routine matter. If you want your broker-owned shares to be counted in the election of directors and with respect to Proposals 2, 3 and 4, you must provide instructions to your broker on how to vote your shares.

 

A broker non-vote occurs when shares held by a broker are not voted on a non-routine proposal because the broker has not received voting instructions from the beneficial owner and the broker lacks discretionary authority to vote the shares in the absence of such instructions. Shares subject to broker non-votes are considered to be present for the purpose of determining whether a quorum exists and thus count towards satisfying the quorum requirement but are not counted for purposes of determining the number of shares entitled to vote on non-routine matters. A broker non-vote will have no effect on the election of directors or Proposals 2, 3 and 4 since they are not counted for purposes of determining the number of shares entitled to vote.

 

Our Board of Directors currently has eight directors, all of whom have been nominated to serve for an additional one year term. If elected, each director standing for election shall serve until the next Annual Meeting of Shareholders and until his or her successor shall have been elected and qualified. The names of, and certain information with respect to, the persons nominated for election as directors are presented below.

 

 

Our Board of Directors has approved the above-named nominees for directors. Our Board of Directors recommends a vote FOR all of these nominees.

 

Pursuant to the General Corporation Law of the State of Delaware, the state under which we were organized, and our By-laws, our business, property and affairs are managed by or under the direction of our Board of Directors. Members of our Board of Directors are kept informed of company business through discussions with our President and Chief Executive Officer and other corporate officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees.

 

Our Board of Directors has determined that all of our directors (other than Michael D. Popielec, who serves as our President and Chief Executive Officer) are “independent” for purposes of the listing standards of the Nasdaq Stock Market. Our Board of Directors has also determined that the Chair of the Board of Directors should be an independent director. We believe that the segregation of the roles of Board Chair and President and Chief Executive Officer ensures better overall governance of our company and provides meaningful checks and balances regarding our overall performance. This structure allows our President and Chief Executive Officer to focus on our business while the Board Chair leads our Board of Directors in establishing corporate policy and complying with heightened regulatory scrutiny.

 

Our Board of Directors has four standing committees: an Audit and Finance Committee, a Governance Committee, a Compensation and Management Committee, and a Strategy and Corporate Development Committee (formerly the Mergers and Acquisitions Committee). During 2010, our Board of Directors held 12 meetings and the

committees of our Board of Directors held a total of 33 meetings, two of which were non-mandatory, uncompensated status meetings of the Audit and Finance Committee. During 2010, General (Ret.) Daniel W. Christman served as our Board Chair until his retirement effective March 24, 2010. Upon General (Ret.) Christman’s retirement from our Board of Directors, our Board elected Bradford T. Whitmore as Board Chair. As Board Chair, Mr. Whitmore served as a non-voting ex-officio member of all of our Board committees. Each director attended at least 75% of the aggregate of: (1) the total number of meetings of the Board; and (2) the total number of meetings held by all committees of the Board on which he or she served.

 

Our Board of Directors has adopted a charter for each of the four standing committees that addresses the composition and function of each committee and has also adopted Corporate Governance Principles that address the composition and function of the Board of Directors. These charters and Corporate Governance Principles are available on our website at http://investor.ultralifecorp.com under the subheading “Corporate Governance.” Pursuant to our Corporate Governance Principles, it is our policy that directors retire from service at the Annual Meeting following a director’s 70th birthday.

 

Our Board of Directors has determined that all of the directors who serve on these committees are “independent” for purposes of the listing standards of the Nasdaq Stock Market, and that the members of the Audit and Finance Committee are also “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, which we refer to in this proxy statement as the Exchange Act. Our Board of Directors based these determinations primarily on a review of the responses of the directors to questions regarding employment, compensation history, affiliations and family and other relationships, and on follow-up discussions.

 

The current members of the Audit and Finance Committee are Thomas L. Saeli (Chair), Patricia C. Barron and Robert W. Shaw II. This committee selects our independent registered public accounting firm and has oversight responsibility for reviewing the scope and results of the independent registered public accounting firm’s annual examination of our financial statements and the quality and integrity of those financial statements. Further, the committee reviews the qualifications and independence of the independent registered public accounting firm, and meets with our financial management, including our Internal Audit Manager, and the independent registered public accounting firm to review matters relating to internal accounting controls, our accounting practices and procedures and other matters relating to our financial condition. The Audit and Finance Committee met 15 times during 2010, with two of those meetings being non-mandatory, uncompensated status meetings.

 

Our Board of Directors has determined that each of the members of the Audit and Finance Committee is “financially literate” in accordance with the listing standards of the Nasdaq Stock Market. In addition, our Board of Directors has determined that Mr. Saeli qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K.

 

The current members of the Governance Committee are Patricia C. Barron (Chair), Steven M. Anderson and James A. Croce. This committee reviews the performance and compensation of our directors, makes recommendations to our Board of Directors for membership and committee assignments and for the compensation of our directors, and manages the annual evaluation of the performance of our President and Chief Executive Officer. The Governance Committee met six times during 2010.

 

The Governance Committee identifies potential nominees for directors based on its own research for appropriate candidates as well as on recommendations received by directors or from shareholders as described below. On occasion, the Governance Committee will retain an executive search firm to assist in the identification of potential director nominees. The committee will also evaluate information provided by the National Association of Corporate Directors about prospective Board candidates. The evaluation process and the factors considered in undertaking that evaluation are set forth under the caption “Shareholder Recommendations for Director Nominations” on page 9.

The Governance Committee also has overall responsibility for assessing and managing our exposure to various risks.

 

The current members of the Compensation and Management Committee are Ranjit C. Singh (Chair), Steven M. Anderson and James A. Croce. The Compensation and Management Committee has general responsibility for determining the compensation of officers elected by our Board of Directors, granting stock options and restricted stock awards and otherwise administering our equity compensation plans, and approving and administering any other compensation plans or agreements. Our Restated 2004 Long-Term Incentive Plan, which we refer to in this proxy statement as the Restated LTIP, is administered by the Compensation and Management Committee. The Compensation and Management Committee met seven times during 2010.

 

The current members of the Strategy and Corporate Development Committee are Robert W. Shaw II (Chair), Thomas L. Saeli and Ranjit C. Singh. The Strategy and Corporate Development Committee is responsible for working with management to develop corporate strategy and for identifying and evaluating acquisition opportunities. The Strategy and Corporate Development Committee met five times during 2010.

 

As noted above, the Governance Committee considers and establishes procedures regarding recommendations for nomination to our Board of Directors, including nominations submitted by shareholders. Such recommendations, if any, should be sent to Corporate Secretary, Ultralife Corporation, 2000 Technology Parkway, Newark, New York 14513. Any recommendations submitted to the Corporate Secretary should be in writing and should include any supporting material the shareholder considers appropriate in support of that recommendation, but must include the information that would be required under the rules of the SEC in a proxy statement soliciting proxies for the election of such candidate and a signed consent of the candidate to serve as a director, if elected. The Governance Committee evaluates all potential candidates in the same manner, regardless of the source of the recommendation.

 

Based on the information provided to the Governance Committee, it will make an initial determination whether to conduct a full evaluation of a candidate. The Governance Committee considers the composition and size of the existing Board of Directors, along with other factors, in making its determination to conduct a full evaluation of a candidate. As part of the full evaluation process, the Governance Committee may conduct interviews, obtain additional background information and conduct reference checks of candidates. The Governance Committee may also ask the candidate to meet with management and other members of our Board of Directors. In evaluating a candidate, our Board of Directors, with the assistance of the Governance Committee, takes into account a variety of factors as described in our Corporate Governance Principles, including the particular experience, attributes and skills that would qualify the candidate to serve as a director. The criteria for selection to our Board of Directors include character and leadership skills, general business acumen and executive experience; knowledge of strategy, finance, relations between business and government, internal business — all to ensure an active Board of Directors whose members work well together and possess the collective knowledge and expertise required. Our Governance Committee reviews the qualifications of any candidate with those of its current directors to augment and complement the skill sets of our current Board members. We believe that it is important for our Board of Directors to be comprised of individuals with diverse backgrounds, skills and experiences. Although we do not have a formal diversity policy and identify qualified potential candidates without regard to any particular classification, we believe that the breadth of experience and qualifications of our Board members promotes Board diversity.

 

Our policy is that all of the directors, absent special circumstances, should attend our Annual Meeting of Shareholders. A regular meeting of the Board of Directors is typically scheduled in conjunction with the Annual Meeting of Shareholders. All directors attended last year’s Annual Meeting of Shareholders.

 

Our Corporate Governance Principles require our Board of Directors to meet in executive session regularly by requiring our independent directors to have at least four regularly-scheduled meetings per year without management present. Our Board of Directors met in executive session 15 times during 2010. In addition, our standing committees meet in executive session on a regular basis.

 

Shareholders interested in communicating directly with our Board of Directors as a group or individually may do so in writing to our Corporate Secretary, Ultralife Corporation, 2000 Technology Parkway, Newark, New York 14513. The Corporate Secretary will review all such correspondence and forward to our Board of Directors a summary of that correspondence and copies of any correspondence that, in his opinion, deals with the functions of the Board of Directors or that he otherwise determines requires their attention. Directors may at any time review a log of all correspondence received by us that is addressed to members of the Board of Directors and request copies of any such correspondence. Any concerns relating to accounting, internal controls or auditing matters will be brought to the attention of the Audit and Finance Committee and handled in accordance with the procedures established by the Audit and Finance Committee with respect to such matters.

 

We have a Code of Ethics applicable to all employees, including our Principal Executive Officer and our Principal Financial Officer (who is also our Principal Accounting Officer), and, to the extent it applies to their activities, all members of our Board of Directors. Our Code of Ethics incorporates the elements of a code of ethics specified in Item 406 of Regulation S-K and also complies with the Nasdaq Stock Market requirements for a code of conduct. Shareholders can find a link to this Code of Ethics on our website at http://investor.ultralifecorp.com under the subheading “Corporate Governance.” We intend to post amendments to or waivers (whether expressed or implied) from the Code of Ethics (to the extent applicable to our Principal Executive Officer or Principal Financial Officer) at the same location on our website as the Code of Ethics.

 

Our Code of Ethics emphasizes our commitment to conducting business in a legal and ethical manner and encourages prompt and confidential reporting of any suspected violations of law or the Code of Ethics. As part of our Code of Ethics, directors and employees are expected to make business decisions and to take actions based upon the best interests of our company and not based upon personal relationships or benefits. Any potential conflict of interest, and any transaction or relationship involving our officers or directors that could give rise to a conflict of interest, must be reviewed and resolved by our Governance Committee.

 

We have adopted written policies and procedures for the review and approval or ratification of any “related party transaction,” defined by us as any transaction, or proposed transaction, in excess of $120,000 between us and any of our executive officers, directors or director nominees. The policy provides that each related party transaction must be reviewed by our Audit and Finance Committee. The committee reviews the relevant facts and circumstances of the transaction, including if the transaction is on terms comparable to those that could be obtained in arms-length dealings with an unrelated third party and the extent of the related party’s interest in the transaction, taking into account the conflicts of interest and corporate opportunity provisions of our Code of Ethics, and either recommends that the Board of Directors approve or disapprove the related party transaction. We will disclose all required related party transactions in our filings with the SEC. To our knowledge, no reportable transaction existed during 2010, and there are currently no such proposed transactions.

 

Our management team is responsible for assessing and managing our exposure to various risks. We have an enterprise risk management process to identify, assess and manage the most significant risks facing our company. Our Governance Committee has general responsibility to review management’s risk management process, including the policies and guidelines used by management to identify, assess and manage our exposure to risk. Our Audit and Finance Committee has oversight responsibility for financial risks. Our management reviews these

financial risks with our Audit and Finance Committee regularly and reviews the risk management process, as it affects financial risks, with our Audit and Finance Committee on an on-going basis.

 

Our Compensation and Management Committee evaluates the extent to which our compensation policies expose us to risk that could threaten the value of our company.

 

In 2010,

 

 

The Compensation and Management Committee has reviewed our incentive compensation arrangements to determine whether the risks related to the design and operation of our compensation plans and programs, if present, were reasonably likely to have a material adverse effect on our company. We have concluded that such arrangements do not encourage excessive risk taking and are not reasonably likely to have a material adverse effect on our company.

 

We use a combination of cash compensation and stock-based incentive compensation to attract and retain qualified candidates to serve on our Board of Directors. Our practice is to resurvey our peer group companies every two to three years to ascertain whether our overall director compensation is appropriate and balanced. If we perceive that there has been a major change in our company or the market, we may conduct a more frequent survey. In setting director compensation, we consider the amount of time that directors spend fulfilling their duties to us, the skill-level required by members of our Board of Directors, and, based on an independent review by our external compensation consultant and other publicly available director compensation data, the compensation paid to directors in similar sized organizations in our industry. Our program remains designed to deliver annual director compensation at approximately the median of companies in similar industries and of similar size.

 

Through June 30, 2010, each non-employee director received a $3,000 quarterly retainer, and the Board Chair received a $5,000 quarterly retainer. Each non-employee director also received $1,000 for each board meeting attended whether a regularly scheduled meeting or a specially called meeting, and regardless of whether attendance was in person or by telephone. Each non-employee director also received $750 for each meeting of the four standing committee meetings attended as a committee member, whether in person or by telephone. The Chair of the Audit and Finance Committee received a $2,500 quarterly retainer, the Chair of the Compensation and Management Committee received a $2,000 quarterly retainer and the Chairs of the Governance and the Strategy and Corporate Development Committees received a $1,250 quarterly retainer.

 

At its June 8, 2010 meeting, our Board of Directors modified our cash compensation for directors by terminating the payment of cash meeting fees to each director for each Board and committee meeting attended. Instead, effective July 1, 2010, each non-employee director receives an annual cash retainer of $20,000, except for the Board Chair, who receives an annual cash retainer of $28,000. In addition, each director who is a member

of a Board committee receives an additional cash retainer for such committee service as summarized in the table below.

 

 

Annual retainers for both committee members and committee chairs are paid quarterly in cash. For Board and committee service during 2010, we paid our directors an aggregate $264,964.

 

Our Board of Directors did not modify our equity compensation program for directors, which continues to provide each director with an annual award of shares of our Common Stock without any restrictions. The aggregate value of the award for each non-employee director is $40,000 and the aggregate value of the award for the Board Chair is $66,000. Our directors are elected annually in June of each year. Accordingly, these grants of Common Stock to our current directors were scheduled for four equal installments on August 15, 2010, November 15, 2010, February 15, 2011 and May 15, 2011. In order to receive an installment of Common Stock, a director must be a current member of our Board of Directors on the scheduled installment payment date. To determine the number of shares of Common Stock to award based on this valuation, the value of each quarterly award, which is $10,000 for each director other than the Board Chair and $16,500 for the Board Chair, is divided by the volume weighted average price (“VWAP”) of the Common Stock on the grant date of the award. On August 15, 2010, each incumbent non-employee director received 2,172 shares of Common Stock and the Board Chair received an additional 1,362 shares of Common Stock. On November 15, 2010, each incumbent non-employee director received 1,544 shares of Common Stock and the Board chair received an additional 1,003 shares of Common Stock. On February 15, 2011, each incumbent non-employee director received 2,529 shares of Common Stock and the Board Chair received an additional 1,643 shares.

 

Our directors also have stock ownership guidelines which require them to hold 2,000 shares. Directors have two years to achieve the required ownership. Furthermore, until the required stock ownership guidelines are met, directors are required to hold at least 50% of all vested after-tax shares and 50% of shares received on exercise of stock options. Currently, all of our non-employee directors meet the share ownership guidelines.

 

The table below summarizes the compensation paid by us to our non-employee directors for their service during the fiscal year ended December 31, 2010.

 

 

 

 

 

As required by the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, which is referred to in this proxy statement as Dodd-Frank, we are asking our shareholders to approve an advisory resolution on our executive compensation as reported in this proxy statement. As described in the Compensation Discussion and Analysis on pages 16 through 27 of this proxy statement, our Compensation and Management Committee has structured our executive compensation program to achieve the following objectives: pay for performance; align the interests of our executive officers with those of our shareholders; and attract, retain and motivate talented individuals. Our compensation programs are designed to reward our Named Executive Officers, as defined on page 16, for the achievement of both short-term and long-term strategies and operational goals while promoting enhanced shareholder return. At the same time, our compensation programs are designed to avoid encouraging unnecessary or excessive risk-taking by our Named Executive Officers.

 

We direct our shareholders to our Compensation Discussion and Analysis on pages 16 through 27 of this proxy statement which sets forth the principles of our executive compensation programs and the policies and procedures that implement those policies. We encourage our shareholders to read this information carefully, as well as the Summary Compensation Table and other related compensation tables and narratives which follow the Compensation Discussion and Analysis.

 

The vote on this advisory resolution is not intended to address any specific component of our executive compensation. It is meant to address the overall compensation of our Named Executive Officers as described in this proxy statement.

 

In accordance with recently-adopted Rule 14a-21(a) of the Exchange Act and as a matter of good corporate governance, we are asking our shareholders to approve the following advisory resolution at the Meeting:

 

Resolved, that the shareholders of Ultralife Corporation (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the proxy statement for the Company’s 2011 Annual Meeting of Shareholders.

 

This advisory resolution, commonly referred to as a “Say-on-Pay” resolution is non-binding on our company and our Board of Directors. Although it is non-binding, the Board of Directors and the Compensation and Management Committee will review and consider the voting results when making future decisions regarding our executive compensation program and policies.

 

Our Board of Directors recommends a vote FOR the approval of the advisory resolution on executive compensation.

 

As also required by Dodd-Frank and pursuant to recently adopted Rule 14a-21(b) of the Exchange Act, we are asking our shareholders to vote on an advisory basis on whether future advisory votes on executive compensation of the nature reflected in Proposal 2 above should occur every year, every two years or every three years.

 

After careful consideration and dialogue with our shareholders, various proxy advisory organizations and various institutional shareholder representative organizations, our Board of Directors has determined that holding an advisory vote on executive compensation every three years is the most appropriate policy for us at this time, and recommends that shareholders vote for future advisory votes on executive compensation to occur every three years. Our executive compensation programs are designed to promote a long-term connection between pay and performance. Our Board of Directors believes that providing our shareholders with the ability to vote for advisory votes on executive compensation every three years will give them the best opportunity to evaluate in context how our

executive compensation programs are working. Our Board of Directors also recognizes that we are required to make, and our shareholders expect to see, annual executive compensation disclosures. As the Say-on-Pay advisory vote is something new to us this year, holding a three-year advisory vote on executive compensation will provide us with appropriate feedback on our compensation disclosures without overemphasizing short-term analysis of programs that have significant long-term components. It should be noted, however, that because the advisory Say-on-Pay vote occurs after compensation for the current year has already been initiated and because the different elements of our executive compensation program are, in some instances, long-term in nature and are coordinated with our short-term incentives, it may well not be appropriate or advisable to alter our executive compensation programs as a result of any year’s Say-on-Pay advisory vote by the time of the following year’s Annual Meeting of Shareholders.

 

This advisory vote on the frequency of future Say-on-Pay votes is non-binding on our company and our Board of Directors. Shareholders will be able to specify one of four choices for this proposal on the proxy card or voting instruction card: one year, two years, three years or abstain. Shareholders are cautioned that they are not voting to approve or disapprove the recommendation of our Board of Directors. Although the vote is non-binding, the Board of Directors and our Compensation and Management Committee will carefully review the voting results. Notwithstanding the recommendation of the Board of Directors and the outcome of the shareholder advisory vote, the Board of Directors may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors not known to the Board of Directors at this time.

 

The Board of Directors recommends that shareholders vote to conduct future advisory votes on executive compensation on a three-year basis.

 

This Compensation Discussion and Analysis, which we refer to as CD&A, provides information about the compensation programs for our President and Chief Executive Officer, our former President and Chief Executive Officer, our Chief Financial Officer and Treasurer, our next two most highly compensated executive officers employed at the end of 2010, our former Executive Vice President of Business Operations and our former Vice President, Corporate Communications Officer, to whom we refer collectively as our “Named Executive Officers.” This CD&A includes our compensation philosophy and the objectives of our executive compensation programs, descriptions of each of the elements of our executive compensation programs and the basis for the compensation decisions we made during 2010. Our Named Executive Officers for 2010 are:

 

 

Our compensation philosophy is designed by our Compensation and Management Committee, referred to in this CD&A as the Committee, to align the interests of our Named Executive Officers with those of our shareholders by rewarding performance that enhances the long-term objective of increasing shareholder value. Our executive compensation programs are designed to motivate our Named Executive Officers to achieve strong financial,

operational and strategic performance and to provide a link between the amounts earned by our Named Executive Officers and the creation of shareholder value.

 

Despite a difficult economic environment, we substantially improved our operating performance during the last completed fiscal year. As described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, our fiscal 2010 financial results were strong relative to our fiscal 2009 results. The following table highlights the year-over-year comparison of the key financial metric that we used in evaluating our performance for the purpose of making compensation decisions in 2010:

 

 

We use operating profit for purposes of determining achievement under our annual Short-Term Incentive Plan, referred to in this proxy statement as the STIP. Operating profit is a non-GAAP measure that is calculated by modifying operating income (as defined under GAAP) to exclude incentive compensation expenses and asset impairment charges associated with our Energy Services business.

 

Our fiscal 2010 financial performance, along with the individual performance of our Named Executive Officers, served as key factors in making compensation decisions for 2010, including the following:

 

 

Our executive compensation programs contain other key components and features that are designed to reinforce our pay-for-performance philosophy. For example:

 

 

We encourage you to read this CD&A for a detailed discussion and analysis of our executive compensation programs, including information about the 2010 compensation of our Named Executive Officers.

 

Our compensation philosophy is designed to align the interests of our Named Executive Officers with those of our shareholders by rewarding performance that enhances the long-term objective of increasing shareholder value. The Committee establishes specific annual, long-term and strategic goals and rewards Named Executive Officers for performance that meets or exceeds those goals. In addition, we expect our Named Executive Officers to work to these objectives while maintaining the highest ethical standards.

 

We design our executive compensation programs to attract, retain and motivate talented individuals, and to motivate them to achieve strong financial, operational and strategic performance. In particular:

 

 

To this end, the Committee reviews our executive compensation program annually to assess if we are able to attract and retain talented executives, and to ensure that the total compensation paid to our executives, including our Named Executive Officers, is fair, reasonable, competitive and, where appropriate, performance-based. The Committee also ensures that our total compensation is linked to our ability to meet our annual financial and non-financial goals, and longer term, to drive strong levels of shareholder return.

 

The following table identifies the various individuals and groups who participated in the compensation-setting process for 2010, as well as their responsibilities in connection with such participation.

 

 

The Committee believes that the compensation of our Named Executive Officers should be generally consistent with pay practices at comparable companies, in order to attract and retain top management talent. Each year, the Committee reviews the executive compensation practices of a group of public companies in our industry that it determines to be our peers based on their revenue and market capitalization. The data for 2010 basically utilized the same peer group that was established by DolmatConnell for 2009 to include companies of similar size within our industry. The peer group we used for establishing our 2010 executive compensation programs for our Named Executive Officers was comprised of the following companies:

 

 

Peer group data for our 2010 executive compensation programs was obtained through Equilar, which is an executive compensation data provider that provides benchmark data on publicly held companies on executive compensation, equity grants and compensation practices. If peer group data is not available on a specific Named Executive Officer’s position, we use a composite of published executive compensation surveys.

 

The Committee uses the peer group executive compensation data as a “market check” only. While the target compensation levels for our Named Executive Officers are not set to correspond to a specific level of market competitiveness, the Committee’s general approach has been to align compensation with the 50th percentile of our peer group. In addition, the Committee exercises significant discretion and judgment in determining individual

compensation target levels and actual amounts paid based on its overall understanding of the labor market for executive leadership, our specific needs and each Named Executive Officer’s individual circumstances.

 

The 2010 total compensation package for our Named Executive Officers consisted of the following primary components:

 

 

Base Salary

 

The President and Chief Executive Officer reviews the performance of the other Named Executive Officers and then recommends base salary adjustments, if any, to the Committee. In turn, the Committee independently reviews, adjusts where appropriate and approves the base salary adjustments, if any, based upon the subjective discretion of the Committee. In its executive session, the Committee reviews and recommends to the full Board of Directors any

base salary adjustment for the President and Chief Executive Officer. If changes to base salaries are recommended and approved, the changes in the base salary are effective during the 1st quarter of the following calendar year.

 

The Committee typically reviews base salary levels from peer group companies and other published executive compensation surveys (if required) on an annual basis. The Committee has endeavored to better align executive salaries with the market, moving them toward approximately the 50th percentile of our peer group, since base salaries for our executive officers have been significantly below market norms for comparable companies. In addition to looking at the peer group and other published executive compensation surveys, salaries for executives are determined based upon the following factors:

 

 

Due to overall company performance during fiscal year 2009 and the difficulty of the global economic crisis and recession, none of our Named Executive Officers received a base salary increase that was effective during 2010. In December 2010, the President and Chief Executive Officer recommended to the Committee that base salary increases be given to Messrs. Fain and Comerford in February 2011. The merit increases were approved by the Committee based on company and individual performance and also in consideration of the fact that both were positioned well below the 50th percentile of our peer group as established at the end of 2008. Mr. Fain’s salary increased from $240,000 to $250,000 and Mr. Comerford’s salary was changed from $210,000 to $231,000. Following their respective increases in base salary, Messrs. Fain and Comerford’s base salaries still remain below the 50th percentile of our peer group.

 

Short-Term Incentive Plan

 

Typically, we establish a short-term incentive plan each fiscal year, which provides the Named Executive Officers an opportunity to receive an annual cash payment in addition to their base salaries. The short-term incentive plan is designed to place “at risk” a significant portion of the annual total cash compensation of the Named Executive Officers by linking the amount of compensation that can be achieved under the plan with our financial performance. We believe that the STIP is a key component of maintaining a competitive executive compensation program because it motivates our Named Executive Officers to achieve our short-term financial and strategic objectives while making progress towards our longer term growth.

 

Setting Threshold, Target and Maximum STIP Levels

 

Initially, based on the recommendation from the President and Chief Executive Officer, the Committee establishes threshold, target and maximum bonus levels for each Named Executive Officer, which is expressed as a percentage of his base salary. The percentages are determined by the position of the Named Executive Officers within the organization and based upon the review of peer data and other published executive compensation surveys if peer data is not available. The threshold level is the minimum level of performance required before any amount would be earned under the STIP. The Committee also establishes a maximum bonus level under the STIP. For 2010, that maximum bonus level was two times the target bonus level.

 

Generally, the Committee sets the target bonus level such that, assuming achievement of the corporate financial metric(s), the combined base salary and annual STIP opportunity for our Named Executive Officers will be at or near the 50th percentile for comparable executives at the companies in our peer group or from published executive

compensation surveys if peer group data is not available. For the 2010 STIP, the threshold, target and maximum levels under the STIP were as follows:

 

 

 

 

Establishing the STIP Performance Metrics

 

Normally, at the December Committee meeting, based on the recommendation from the President and Chief Executive Officer, the Committee identifies financial metrics that will be used for the STIP for the following calendar year. The metrics are normally finalized in January after the annual operating plan has been approved.

 

For purposes of setting 2010 executive compensation, the Committee, based on recommendations from our President and Chief Executive Officer, changed its approach to the STIP for certain Named Executive Officers. In prior years, the STIP for certain Named Executive Officers was based on a combination of individual goals and the achievement of our approved operating plan, and for the President and Chief Executive Officer and the Chief Financial Officer and Treasurer, the STIP was based solely on achievement of the operating plan. In setting 2010 executive compensation, the recommendation was made by the President and Chief Executive Officer and approved by the Committee that all Named Executive Officers would have their STIP based on our operating plan financial goals only. The threshold, target and maximum performance levels under the 2010 STIP were as follows:

 

 

If our operating profits were not above $4,589,000, then no cash bonus would be paid to any of the Named Executive Officers for 2010 performance. Compensation would only begin to be earned under the STIP if our operating profits exceeded $4,589,000. Fifteen percent of every dollar of operating profit that we achieved in excess of $4,589,000 would go into a bonus pool for potential distribution to the participants on a pro-rata basis based on their specific percentage of participation. Once the target operating profit of $7,909,667 was reached, STIP participants would be eligible to receive their target bonus payout. Once the target bonus payout has been met, then the bonus pool would be funded by 7% of each dollar in additional operating profit for potential distribution to participants on a pro-rata basis. At an operating profit of $15,695,095, the Named Executive Officers could receive their maximum STIP bonus of two times their target bonus amount.

 

Since the targeted cash bonus for most of the companies in our peer group is based on the achievement of the approved operating plan for those companies, the Committee believes that the approach adopted for 2010 is a more conservative approach appropriate to the way that our operating plan was constructed, in line with our current position and designed to reward performance that exceeds our operating plan targets. It also has the effect of getting all of our Named Executive Officers focused on the same common company-wide goals. The Committee also added an additional performance metric that if a bonus was earned for 2010, we must be profitable each quarter or the bonus pool would be reduced by 10%.

STIP Payments

 

While the decisions to make STIP payouts as well as the amounts earned under the STIP are made at the sole discretion of the Committee, in making such determinations, the Committee relies on the recommendations from our President and Chief Executive Officer for all other Named Executive Officers. The Committee makes recommendations to the full Board for the STIP payout (if any) for the President and Chief Executive Officer. In December 2010, the Committee recommended to the Board of Directors that the $14,000,000 non-cash impairment associated with the Energy Services business be excluded from the STIP financial results calculations. This was approved by the Board of Directors. Based on our overall 2010 financial results of an operating profit of $7,878,500, STIP payments were made to the eligible Named Executive Officers for 2010. We were profitable for each quarter in 2010, and, therefore, the amounts earned under the STIP were not reduced by 10%. The chart below shows the STIP payment made for the Named Executive Officers for 2010 performance.

 

 

 

 

Long-Term Incentive Compensation

 

We use equity awards to motivate our Named Executive Officers to increase the long-term value of our Common Stock and align the interests of our Named Executive Officers with those of our shareholders. Long-term equity incentive awards are intended to further our success by ensuring that sustainable value creation is a key factor in our Named Executive Officers’ management of the business and to help retain executives over time.

 

Long-term equity incentive compensation may consist of awards of stock options, performance-vested restricted shares and time-vested restricted shares that vest over a multi-year period. This design approach helps align the interests of our Named Executive Officers with those of our shareholders in seeing long-term increases in the value of equity instruments. We use stock options as one of our long-term incentives because, in addition to providing our executive officers with the opportunity to develop a stock ownership stake in our company, they result in compensation only to the extent that the market price of our Common Stock increases over the term of the stock option.

 

The size and form of these equity awards is determined by the Committee with recommendations from the President and Chief Executive Officer for the other Named Executive Officers. If the equity awards recommended for the Named Executive Officers exceed 10,000 shares, the awards will be recommended for approval by the Committee and must be approved by the full Board of Directors. The Committee also recommends to the full Board any equity awards for the President and Chief Executive Officer.

 

Generally, the Committee bases the overall long-term incentive compensation around the mid-point (50th percentile) of those companies in our peer group. As with other compensation components, however, the Committee can modify this target either upward or downward based on the Committee’s subjective evaluation of the long-term value of the individual Named Executive Officer to us.

 

In recognition of our current market capitalization and to better align management with the goals of our shareholders, the Committee decided for 2010 not to provide additional equity compensation in the form of either time-based stock awards or performance-based stock awards for the Named Executive Officers or the other

executives. Instead, the Committee approved only stock options, as more fully described below, in the belief that when granted with an exercise price at or above the current market price, stock options represent the best incentive to our Named Executive Officers to act in a manner designed to improve our market value and to reward our Named Executive Officers only if the market value increases over the term of the stock option. The Committee determines the value of long-term equity incentive compensation to be granted to each Named Executive Officer based on factors including the individual’s level of responsibility with our company and the results of the Committee’s annual evaluation of the individual’s performance, and then utilizes the peer group compensation data as a check on the competitiveness of the level of compensation.

 

Typically, equity awards are granted in the regularly scheduled December Committee meeting. As was previously disclosed in our proxy statement for our 2010 Annual Meeting of Shareholders, as a component of the 2010 executive compensation program, in December 2009 the Committee granted options to purchase shares of our Common Stock under our Restated LTIP to certain of our executive officers. The options that were granted have a seven-year term, vest over a three-year period in equal installments and have an exercise price of $3.9085 per share. Mr. Kavazanjian received an option to purchase 23,500 shares; Mr. Fain and Mr. Evans each received an option to purchase 33,000 shares; Mr. Comerford received an option to purchase 24,000 shares; and Mr. Cirin and Mr. Hanna each received an option to purchase 12,000 shares.

 

In addition, on January 13, 2010, the Committee recommended to the Board of Directors, and it was approved by the Board, that Mr. Kavazanjian receive an additional seven-year option under our Restated LTIP, which vests over a three-year period in equal installments, for 26,500 shares at an exercise price of $4.7761 per share.

 

In December 2010, as a component of the 2011 executive compensation program, the Committee granted options to purchase shares of our Common Stock under our Restated LTIP to certain Named Executive Officers. The options that were granted have a seven-year term, vest over a three-year period in equal installments and have an exercise price of $6.9061 per share. Mr. Fain received an option to purchase 25,000 shares; Mr. Comerford received an option to purchase 20,000 shares; and Mr. Hanna received an option to purchase 10,000 shares.

 

Retirement Benefits

 

We provide to all active employees a tax-qualified 401(k) plan that provides for both employer and employee contributions. Employees may defer annually to the plan up to the IRS limits. We provide a company match of 50% of an employee’s deferrals, up to a maximum of 4% of the employee’s annual salary.

 

Perquisites and Other Personal Benefits

 

We provide our Named Executive Officers with perquisites and other personal benefits that we and the Committee believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to our Named Executive Officers.

 

The aggregate incremental costs of the personal benefits provided to our Named Executive are included in the “All Other Compensation” column of the 2010 Summary Compensation Table.

 

Mr. Popielec became our President and Chief Executive Officer effective December 30, 2010. Most recently, Mr. Popielec was employed by Carlisle Companies, Inc. of Charlotte, North Carolina, as its Group President, Applied Technologies, in 2008 and 2009 and as its Group President, Diversified Components, from 2005 to 2007. Prior to that, from 2003 to 2005, Mr. Popielec held various positions at Danka Business Systems, PLC and for 17 years prior to Danka, he held various positions at General Electric Company, including President and Chief Executive Officer of GE Power Controls, Industrial Systems in Europe from 2000 to 2002. After his tenure at Carlisle Companies, Inc., Mr. Popielec was engaged in special projects and consulting to both public and private companies. Mr. Popielec received his B.S. in Mechanical Engineering from Michigan State University in 1985.

 

The search committee of the Board of Directors, working with a retained search firm specializing in the placement of chief executive officers, conducted an extensive search that included interviews of a large number of

qualified individuals and after careful consideration selected Mr. Popielec as our new President and Chief Executive Officer given his extensive sales and marketing background and his 25 years in growing domestic and international industrial businesses.

 

The compensation package offered Mr. Popielec reflects competitive market data provided by Equilar and the search firm retained in connection with the chief executive officer search. Based on this data, the search committee of the Board of Directors determined that the total compensation target was within the range provided to chief executives in companies of comparable size and operations to Ultralife Corporation. This was also confirmed by reviewing the peer company data from the Equilar executive compensation database. Mr. Popielec’s compensation structure includes a significant equity component designed to incentivize him to effectively manage our company’s growth strategy. The Board of Directors and the Committee believe that the success or failure of these initiatives will be reflected in our share price and Mr. Popielec’s reward will be commensurate with the results experienced by the shareholders.

 

Annual Cash Compensation

 

We have set Mr. Popielec’s base annual salary at $450,000. Mr. Popielec is also eligible to receive an annual cash bonus outside of the STIP if we exceed certain performance metrics to be agreed upon no later than January 31 of the year for which the bonus applies. For 2011, and each year thereafter, Mr. Popielec’s annual cash bonus target shall not be less than 75% of his 2011 Base Salary.

 

Long-Term Equity Incentive Compensation

 

Long-term equity incentive compensation is a significant component of Mr. Popielec’s compensation package. Under his employment agreement, Mr. Popielec received the following options to purchase shares of our Common Stock:

 

 

In addition, Mr. Popielec received three additional stock options, each of which is conditioned upon shareholder approval of an amendment to our Restated LTIP at the Meeting. The stock options detailed below are subject to shareholder approval to increase the number of shares available under the Restated LTIP and to increase the limitation on the maximum options issuable to an employee in a given year. If such approval is not obtained, such options shall be null and void. As detailed below, most of these stock options were granted with an exercise price substantially above the grant date fair market value of our Common Stock.

 

Relocation Benefits

 

Under his employment agreement, Mr. Popielec is also entitled to the following relocation benefits:

 

 

Mr. Popielec will also be entitled to receive the retirement, fringe and other personal benefits generally provided to our senior executives, in accordance with the terms of such arrangements.

 

We have employment agreements with Messrs. Popielec and Comerford that contain change in control and severance provisions. These potential benefits provide these Named Executive Officers with important protections that we believe are necessary to attract and retain executive talent while, at the same time, requiring certain terminations following a change in control before any severance compensation is paid. In addition, Messrs. Fain and Hanna, as well as several members of our senior management team, are currently covered by a short-term severance and change-in-control benefit. This special benefit was put in place by the Board of Directors to alleviate any concerns that key management employees might have with their future employment opportunities with us following the retirement of Mr. Kavazanjian, and the search for a new President and Chief Executive Officer. This special benefits package is not intended to be a permanent benefit, was initially put in place for a period of one year and will be reviewed by the Committee on an annual basis.

 

The severance provisions of the employment agreements and the short-term severance and change-in-control benefit are intended to address competitive concerns by providing the Named Executive Officers with compensation that may alleviate the uncertainty of having to leave for another employer or foregoing other opportunities. The change in control provisions are intended to allow us to rely upon the Named Executive Officers continued employment and objective advice, without concern that a Named Executive Officer might be distracted by the personal uncertainties and risks created by an actual or proposed change in control. The terms of these arrangements are summarized below under the headings “Employment Arrangements” and “Potential Payments upon Termination or Change in Control.”

 

On May 24, 2010, we entered into an addendum to the employment agreement with Mr. Kavazanjian. This addendum gave either Mr. Kavazanjian or us the right to terminate his employment agreement by giving the other party written notice. Pursuant to the terms of this addendum, Mr. Kavazanjian notified us of his decision to retire effective February 7, 2011. Mr. Kavazanjian ceased being our President and Chief Executive Officer on December 30, 2010, when Mr. Popielec assumed the position. Upon his retirement, Mr. Kavazanjian was entitled to certain benefits discussed more fully below on page 37 under the section “Potential Payments upon Termination and/or a Change in Control.”

 

In order to better align the interests of executive officers and shareholders, several years ago the Committee implemented stock ownership and retention guidelines for executive officers. The stock ownership requirements for executive officers are as follows:

 

For 2010, the Committee established the presumed share price at $9.59 per share, which was based on the volume weighted average price of our Common Stock for the two-year period ended December 31, 2009. Each year the Committee will establish a new presumed share price for the following year based on the volume weighted average price of our Common Stock for the preceding two-year period. Executive officers have three years to achieve the required holdings. Additionally, there are shareholding requirements which require that until the share ownership guidelines are met, executive officers must hold at least 50% of all vested restricted share grants (on an after tax basis) and 50% of shares received on exercise of stock options.

 

For 2010, our Named Executive Officers, with the exception of Mr. Popielec, who became our President and Chief Executive Officer on December 30, 2010, have either met or are on target to meet their applicable stock ownership guidelines. The Committee is currently reviewing the Named Executive Officer Stock Ownership Guidelines for 2011 to ensure that best practices are being used.

 

Deductibility of Executive Compensation

 

As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Code which provides that we may not deduct compensation of more than $1,000,000 that is paid to certain individuals. We believe that compensation paid under the executive compensation plans is fully deductible for federal income tax purposes. However, in certain situations, the Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for our executive officers.

 

Accounting for Stock-Based Compensation

 

Beginning on January 1, 2006, we began accounting for stock-based payments, including stock options and restricted stock awards, in accordance with the requirements of SFAS 123(R), now referred to as ASC 718.

 

The Compensation and Management Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation and Management Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

 

The Compensation and Management Committee:

 

Ranjit C. Singh, Chair

 

Steven M. Anderson

 

James A. Croce

 

The following table sets forth information concerning the compensation awarded to, paid to or earned by the Named Executive Officers for all services in all capacities to us and our subsidiaries during 2008, 2009 and 2010:

 

 

 

 

 

 

 

The following table sets forth information concerning grants of plan-based awards to the Named Executive Officers during 2010:

 

 

 

The following table sets forth information concerning the number of shares underlying exercisable and non-exercisable options outstanding at December 31, 2010 and unvested restricted stock awards outstanding at December 31, 2010 for our Named Executive Officers.