UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

 
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

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o		Soliciting Material Pursuant to §240.14a-12

EXIDE TECHNOLOGIES

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 9, 2008

 

 

To our Stockholders:

 

The 2008 annual meeting of stockholders of Exide Technologies will be held at the Hilton Garden Inn Atlanta North Alpharetta at 4025 Windward Plaza Drive, Alpharetta, Georgia 30005, on Tuesday, September 9, 2008, beginning at 9:00 a.m., local time. At the meeting, the holders of our outstanding common stock will act on the following matters:

 

(1) The election of nine directors;

 

(2) The ratification of the appointment of our independent auditors for fiscal 2009; and

 

(3) Any other matters that properly come before the meeting.

 

All holders of record of shares of our common stock (NASDAQ: XIDE) at the close of business on July 11, 2008 are entitled to vote at the meeting and any postponements or adjournments of the meeting.

 

The enclosed proxy statement describes the proposals set forth above in more detail. We urge you to read the proxy statement carefully before you decide how to vote.

 

You are cordially invited to attend the meeting. Please note that due to space limitations, stockholders may only bring one guest. Admission to the meeting will be on a first-come, first-served basis. Registration will begin at 8:00 a.m., local time, and seating will begin at 8:30 a.m., local time. Each stockholder may be asked to present valid, government-issued picture identification, such as a driver’s license or passport. Stockholders holding stock in brokerage accounts (“street name” holders) will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras (including cellular phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the meeting.

 

By order of the Board of Directors,

 

 

July 28, 2008

 

 

 

 

TABLE OF CONTENTS

 

 

 

13000 DEERFIELD PARKWAY
BUILDING 200
ALPHARETTA, GEORGIA 30004

 

 

PROXY STATEMENT, DATED JULY 28, 2008

 

 

 

The Board of Directors of Exide Technologies (the “Board”) is soliciting proxies from its stockholders to be voted at the annual meeting of stockholders to be held on Tuesday, September 9, 2008, beginning at 9:00 a.m., local time, at the Hilton Garden Inn Atlanta North Alpharetta at 4025 Windward Plaza Drive, Alpharetta, Georgia 30005, and at any postponements or adjournments of the meeting. This proxy statement contains information related to the annual meeting. This proxy statement, a proxy card and our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 are being mailed to stockholders on or about July 25, 2008. The fiscal year ended March 31, 2008 is referred to as “fiscal 2008” in this proxy statement. Unless the context indicates otherwise, the “Company,” “Exide,” “we” or “us” refers to Exide Technologies and its subsidiaries.

 

Stockholders as of the close of business on July 11, 2008, which is referred to as the “Record Date,” are entitled to vote at our annual meeting of stockholders, which will be held on September 9, 2008. As a stockholder, you are invited to attend the annual meeting and are requested to vote on the items of business described in this proxy statement. We are required by law to distribute these proxy materials to all stockholders as of the Record Date. This proxy statement provides notice of the annual meeting of stockholders, describes the proposals presented for stockholder action and includes information required to be disclosed to stockholders. The accompanying proxy card enables stockholders to vote on the matters without having to attend the annual meeting in person.

 

Only stockholders of record at the close of business on the Record Date are entitled to receive notice of, and to participate in, the annual meeting. If you were a stockholder of record on the Record Date, you will be entitled to vote all of the shares that you held on that date at the meeting, or any postponements or adjournments of the meeting.

 

You will be entitled to one vote for each outstanding share of our common stock you own as of the Record Date. As of the Record Date, there were 75,315,740 shares of our common stock outstanding and eligible to vote.

 

Subject to space availability, all stockholders as of the Record Date, or their duly appointed proxies, may attend the meeting, and each may be accompanied by one guest. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration will begin at 8:00 a.m., local time and seating will begin at 8:30 a.m., local time. If you attend, please note that you may be asked to present valid, government-issued picture identification, such as a driver’s license or passport. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the meeting.

 

Please also note that if you hold your shares in “street name” (that is, through a broker, bank or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the Record Date and check in at the registration desk at the meeting.

 

Please let us know if you plan to attend the meeting by marking the appropriate box on the enclosed proxy card or, if you vote by telephone or Internet, indicating your plans when prompted.

 

The presence or representation at the meeting, in person or by proxy, of the holders of a majority of the aggregate voting power of the common stock outstanding on the Record Date will constitute a quorum, permitting the conduct of business at the meeting. As of the Record Date, 75,315,740 shares of common stock, representing the same number of votes, were outstanding. Accordingly, the presence of the holders of common stock representing at least 37,657,871 votes will be required to establish a quorum.

 

Proxies received by us but marked as abstentions, votes withheld and broker non-votes will be included in the calculation of the number of votes considered to be present at the meeting.

 

Shares held in your name as the stockholder of record (that is, if your shares are registered directly in your name with our transfer agent) may be voted by you in person at the annual meeting. Shares held by you beneficially in “street name” through a broker, bank or other nominee may be voted by you in person at the annual meeting only if you obtain a legal proxy from the broker, bank or other nominee that holds your shares giving you the right to vote the shares.

 

Whether you hold shares directly as the stockholder of record or beneficially in “street name,” you may direct how your shares are voted without attending the annual meeting. If you are a stockholder of record you must complete and properly sign and date the accompanying proxy card and return it to us and it will be voted as you direct. A postage pre-paid envelope is included for your use. If you are a stockholder of record and attend the meeting, you may deliver your completed proxy card in person at that time. If you hold shares beneficially in “street name,” you may vote by submitting voting instructions to your broker, bank or other nominee.

 

If you are a stockholder of record, you may vote by telephone, or over the Internet, by following the instructions included with your proxy card. If your shares are held beneficially in “street name,” please check your proxy card or contact your broker, bank or other nominee to determine whether you will be able to vote by telephone or over the Internet. The deadline for voting by telephone or over the Internet is 11:59 p.m., local time, on September 8, 2008.

 

Yes. If you are a stockholder of record, you may revoke or change your vote at any time before the proxy is exercised by filing with our Corporate Secretary, 13000 Deerfield Parkway, Building 200, Alpharetta, Georgia 30004, a notice of revocation or a duly executed proxy bearing a later date or by attending the annual meeting and voting in person. For shares you hold beneficially in “street name” through a broker, bank or other nominee, you may change your vote by submitting new voting instructions to your broker, bank or other nominee or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares, by attending the meeting and voting in person. In either case, the powers of the proxy holders will be suspended if you attend the meeting in person and so request, although attendance at the meeting will not by itself revoke a previously granted proxy.

 

Votes will be counted and certified by the Inspectors of Election, who are employees of American Stock Transfer & Trust Company (“AST”), our transfer agent. If you are a stockholder of record, your signed proxy card is returned directly to AST for tabulation. If you hold your shares beneficially in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will return one proxy card to AST on behalf of its clients.

 

Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board. The Board’s recommendation is set forth together with the description of each item in this proxy statement. In summary, the Board recommends a vote FOR each of the proposals.

 

To our knowledge and the knowledge of management, stockholders will vote only on the matters described in this proxy statement. However, if any other matters properly come before the meeting, the persons named as proxies for stockholders will vote on those matters in the manner they consider appropriate. See “Stockholder Proposals and Director Nominations for 2009 Annual Meeting.”

 

Election of Directors.  The affirmative vote of a plurality of the votes cast at the meeting is required for the election of directors (Proposal 1). A properly executed proxy marked “withhold authority” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.

 

Ratification of Appointment of Independent Auditors.  For the ratification of the appointment of our independent auditors for fiscal 2009 (Proposal 2), the affirmative vote of the holders of a majority of the votes cast in person or represented by proxy, and entitled to vote on the item will be required for approval.

 

A properly executed proxy marked “abstain” with respect to any matter will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect of a negative vote.

 

In the election of directors, you may vote “FOR” all or some of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. You may not cumulate your votes for the election of directors.

For the other items of business, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you elect to “ABSTAIN,” the abstention has the same effect as a vote “AGAINST.” If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items.

 

If you hold your shares in “street name” through a broker, bank or other nominee rather than directly in your own name, then your broker, bank or other nominee is considered the stockholder of record, and you are considered the beneficial owner of your shares. We have supplied copies of our proxy statement of stockholders to the broker, bank or other nominee holding your shares of record, and they have the responsibility to send it to you. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares at the annual meeting. The broker, bank or other nominee that is the stockholder of record for your shares is obligated to provide you with a voting instruction card for you to use for this purpose. If you hold your shares in a brokerage account but you fail to return your voting instruction card to your broker, your shares may constitute “broker non-votes.” Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered present and entitled to vote on that proposal. If a quorum is present at the annual meeting, the persons receiving the greatest number of votes will be elected to serve as directors. As a result, broker non-votes will not affect the outcome of the voting on the election of directors (Proposal 1). The approval of the ratification of the appointment of our independent auditors (Proposal 2) requires the affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote on the proposal. A broker non-vote is treated as not being entitled to vote on the matter and, therefore, is not counted for purposes of determining whether the proposal has been approved.

 

If you are a beneficial owner and your broker, bank or other nominee holds your shares in its name, it is permitted to vote your shares on the election of directors (Proposal 1) and the ratification of the appointment of our independent auditors (Proposal 2), even if the broker, bank or other nominee does not receive voting instructions from you.

 

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive.

 

We intend to announce the preliminary voting results at the annual meeting and publish the final results in our quarterly report on Form 10-Q for the quarter ending September 30, 2008.

 

The Board currently consists of nine directors. The Nominating and Corporate Governance Committee recommended to the Board, and the Board approved the nomination of each of the nominees below for election to serve a one-year term set to expire at the 2009 annual meeting of stockholders and until their successors are duly elected and qualified. Our Board expects that all of the nominees will be able and willing to serve as directors. If any nominee is not available to serve as a director at the time of the annual meeting, the persons named on the proxy will vote for another candidate nominated by our Board, or our Board may reduce the number of directors. As discussed under the heading, “Corporate Governance — Board of Directors Committees and Meetings,” and the rules and regulations of the Securities and Exchange Commission (the “SEC”), our Board has determined that each of the director nominees below, except Gordon A. Ulsh, is an “independent director” as defined in the listing standards of The NASDAQ Global Market, as currently in effect. The Board determined that Mr. Lash’s employment with Tontine Associates, LLC, did not impair his independence under The NASDAQ Marketplace Rules (the “NASDAQ Rules”).

 

Each of the nominees named below is currently a member of our Board and was elected at our 2007 Annual Meeting. Biographical information about each director nominee, as of July 7, 2008, appears below.

 

Director Nominees

 

Herbert F. Aspbury

Director since 2006

 

Mr. Aspbury, 63, is an investor and advisor at Private Client Resources LLC, a privately held company founded in 2001, which provides consolidated financial information for high wealth investment managers and their clients. Since 2002, Mr. Aspbury has also served as an Adjunct Professor at the Fisher Graduate School of International Business of the Monterrey Institute of International Studies and has been a frequent guest lecturer in Cornell University’s Joint MBA program with Queens University of Canada. Mr. Aspbury retired from Chase Manhattan Bank in 2000 where he served in a number of capacities, most recently as the London-based Managing Director and Regional Executive for Europe, Africa and the Middle East. Mr. Aspbury was a member of Chase’s Management Committee. Mr. Aspbury also served in a number of capacities with Chemical Bank until its merger with Chase Manhattan. Mr. Aspbury serves as Chairman of the Board of Trustees of Villanova University and previously chaired the University’s Audit & Finance Committee. Mr. Aspbury is also a director of the Royal Oak Foundation, the U.S. arm of Britain’s National Trust, and served as Chairman from 2004 through 2007. Mr. Aspbury is Chairman of the Finance Committee and a member of the Audit Committee.

 

Michael R. D’Appolonia

Director since 2004

 

Mr. D’Appolonia, 59, currently serves as President and Chief Executive Officer of Kinetic Systems, Inc., a global provider of process and mechanical solutions to the electronics, solar and biopharmaceutical industries. From 2001 through 2005, Mr. D’Appolonia was President of Nightingale & Associates, LLC, a global management consulting firm providing financial and operational restructuring services to both publicly and privately held middle-market companies. In his consulting capacity, Mr. D’Appolonia served as an executive officer of a number of companies including Cone Mills Corporation, Moll Industries, Inc., McCulloch Corporation, Ametech, Inc., Halston Borghese, Inc. and Simmons Upholstered Furniture Inc. Mr. D’Appolonia is a member of the Board of Directors of Kinetic Systems Inc., and was a member of the Board of Directors of The Washington Group International, Inc., prior to that company’s sale in November 2007. Mr. D’Appolonia is Chairman of the Compensation Committee.

 

David S. Ferguson

Director since 2005

 

Mr. Ferguson, 63, is the principal of DS Ferguson Enterprises, LLC, a retail consulting business. From September 2000 through July 2003, Mr. Ferguson served as President and Chief Executive Officer of

Wal*Mart Europe. Prior to that, he was President and Chief Executive Officer of Wal*Mart Canada from February 1996 to September 2000. Mr. Ferguson was President and Chief Operating Officer as well as a director of Stuarts Department Stores from August 1994 through October 1995. Mr. Ferguson is a member of the Board of Directors of the Empire Company Limited, the parent company of Sobeys Inc., a Canadian grocery chain and is a member of the Dean’s Advisory Board of the Business School at Morehouse College. Mr. Ferguson is currently on the Board of Advisors of Miller Zell, Inc. Mr. Ferguson is a member of the Compensation Committee and the Nominating and Corporate Governance Committee.

 

Paul W. Jennings

Director since 2006

 

Mr. Jennings, 51, is President and Chief Executive Officer of Innospec Inc., an international specialty chemicals company headquartered in England. From November 2002 through his appointment as CEO, Mr. Jennings served as Innospec’s Executive Vice President and Chief Financial Officer. Mr. Jennings previously served as CFO of Griffin LLC, a joint venture between Griffin Corporation and Dupont and, from 1986 to 1999, held the positions of CFO and Vice President of Finance for various divisions and regions of Courtaulds plc, working in the United States, Europe and Singapore. Mr. Jennings is a member of the Nominating and Corporate Governance Committee.

 

Joseph V. Lash

Director since 2007

 

Mr. Lash, 45, has been employed by Tontine Associates, LLC, a Greenwich, Connecticut-based investment firm, since July 2005. Tontine Associates, LLC is an affiliate of Jeffrey L. Gendell, the beneficial owner of 31.5% of our common stock as described in a Form 4 filed by Mr. Gendell on November 11, 2007. Prior to that, Mr. Lash was a Senior Managing Director of Conway, Del Genio, Gries & Co., LLC, a financial advisory firm from April 2002 to July 2005. From June 1998 to April 2001, Mr. Lash was a Managing Director of JP Morgan Chase & Co., a financial services firm. Mr. Lash also serves as a director of Integrated Electrical Services, Inc., an electrical contracting services provider, and Neenah Foundry Company, a metals casting manufacturer. Mr. Lash is a member of the Finance Committee.

 

John P. Reilly

Director since 2004

 

Mr. Reilly, 64, is the retired Chairman, President and Chief Executive Officer of Figgie International. Mr. Reilly has more than thirty years of experience in the automotive industry, where he has served as President and CEO of a number of automotive suppliers, including Stant Corporation and Tenneco Automotive. He has also held leadership positions at the former Chrysler Corporation and Navistar, and has served as President of Brunswick Corporation. Mr. Reilly is currently on the Board of Directors of Material Sciences Corporation, Marshfield Door Systems, Inc. and Timken Company. Mr. Reilly serves as Chairman of the Board of Directors and a member of the Compensation Committee.

 

Michael P. Ressner

Director since 2004

 

Mr. Ressner, 59, is a retired Nortel Networks executive who, between 1981 and 2003, served in a number of senior financial and operational management positions. Mr. Ressner was an Adjunct Professor of Applied Financial Management at North Carolina State University between 2002 and 2004. He has been an adviser within the College of Management at North Carolina State University since 2004. Mr. Ressner currently serves as a member of the Board of Directors for the following companies: Entrust, Inc., Magellan Health Services, Inc. and Tekelec, Inc. Mr. Ressner is Chairman of the Audit Committee and a member of the Finance Committee.

Gordon A. Ulsh

Director since 2005

 

Mr. Ulsh, 62, is our President and Chief Executive Officer. Mr. Ulsh was appointed to his current position in April 2005. From 2001 until March 2005, Mr. Ulsh was Chairman, President and Chief Executive Officer of FleetPride Inc., the nation’s largest independent aftermarket distributor of heavy-duty truck parts. Prior to joining FleetPride in 2001, Mr. Ulsh worked with Ripplewood Equity Partners, providing analysis of automotive industry segments for investment opportunities. Earlier, he served as President and Chief Operating Officer of Federal-Mogul Corporation in 1999 and as head of its Worldwide Aftermarket Division in 1998. Prior to Federal-Mogul, he held a number of leadership positions with Cooper Industries, Inc., including Executive Vice President of its automotive products segment. Mr. Ulsh joined Cooper’s Wagner Lighting business unit in 1984 as Vice President of Operations, following 16 years in manufacturing and engineering management at Ford Motor Company. Mr. Ulsh currently serves as a member of the Board of Directors of OM Group, Inc.

 

Carroll R. Wetzel

Director since 2005

 

Mr. Wetzel, 65, most recently served as non-executive Chairman of the Board of Directors of Safety Components International, Inc., a supplier of automotive airbag fabric and cushions and technical fabrics from 2000 to 2005. Previously, from 1988 to 1996, Mr. Wetzel served as co-head of the Merger and Acquisition Group at the Chase Manhattan Bank and previously served as a managing director of Dillon Read & Co., Inc. and Smith Barney, and served as Vice Chairman and lead director at Arch Wireless from 2001 through 2002. Mr. Wetzel currently serves on the Board of Directors of Brinks Company. Mr. Wetzel is Chairman of the Nominating and Corporate Governance Committee and a member of the Audit Committee and the Finance Committee.

 

The Board recommends that the stockholders vote FOR the election of each of the director nominees named above.

 

 

The Audit Committee selects our independent auditors. This proposal is put before the stockholders because, though the stockholder vote is not binding on the Audit Committee, the Board believes that it is good corporate practice to seek stockholder ratification of the Audit Committee’s appointment of the independent auditors. If the appointment of PricewaterhouseCoopers LLP (“PwC”) is not ratified, the Audit Committee will evaluate the basis for the stockholders’ vote when determining whether to continue the firm’s engagement, but may ultimately determine to continue the engagement of the firm or another audit firm without re-submitting the matter to stockholders. Even if the appointment of PwC is ratified, the Audit Committee may in its sole discretion terminate the engagement of the firm and direct the appointment of another independent auditor at any time during the year.

 

We expect that representatives of PwC will attend the 2008 annual meeting and that they will have the opportunity to respond to appropriate questions from stockholders to make a statement if they desire to do so.

 

There are no relationships between our executives, directors and PwC.

Fees of Independent Public Accountants for Fiscal 2008 and 2007

 

The following table presents fees for professional services rendered by PwC for the audit of our annual financial statements and internal control over financial reporting for fiscal 2008 and fiscal 2007, together with any fees for audit-related services and tax services rendered by PwC for fiscal 2008 and fiscal 2007.

 

 

 

 

Pre-Approval Policies

 

All audit, audit-related and tax services were pre-approved by the Audit Committee, which concluded that the provision of such services by PwC was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s charter provides that individual engagements must be separately approved. The policy also requires specific approval by the Audit Committee if total fees for audit-related and tax services would exceed total fees for audit services in any fiscal year. The policy authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services.

 

Pursuant to the Audit Committee charter, the Audit Committee must approve all audit engagement fees other significant compensation to be paid to the independent auditor and the terms of such engagement. Additionally, the Audit Committee must pre-approve any non-audit services to be provided by the independent auditor.

 

The Board recommends that the stockholders vote FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors for fiscal 2009.

 

OTHER MATTERS

 

As of the date of this proxy statement, we know of no business that will be presented for consideration at the 2008 annual meeting other than the items referred to above. If any other matter is properly brought before the meeting for action by stockholders, proxies in the enclosed form returned to us will be voted in accordance

with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the best judgment of the proxy holders.

 

We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our integrity in the marketplace. We have adopted a Code of Ethics and Business Conduct for directors, officers (including the principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions) and all of our employees (the “Code of Ethics”). We have also adopted Corporate Governance Guidelines, which, in conjunction with our Certificate of Incorporation, Bylaws and committee charters, form the framework for our governance. Our Corporate Governance Guidelines and Code of Ethics are available on the Investor Relations page of our website http://www.exide.com. We will post on this website any amendments to the Code of Ethics or waivers of the Code of Ethics for directors and executive officers and will disclose waivers of the Code in a Current Report on Form 8-K. Stockholders may request free printed copies of the Code of Ethics from:

 

Exide Technologies
13000 Deerfield Parkway
Building 200
Alpharetta, Georgia 30004
Attn: Corporate Secretary

 

The members of the Board on the date of this proxy statement, and the committees of the Board on which they currently serve, are identified below.

 

 

The Board met nine times during fiscal 2008. With the exception of Mr. Jennings, each director attended at least 75% of all meetings of the Board and committees on which he served. Under our Corporate Governance Guidelines, each director is expected to attend Board meetings on a regular basis. Board members are encouraged, but not required, to attend the annual meeting of stockholders. With the exception of Mr. Jennings, all Board members attended the 2007 Annual Meeting.

 

The Board has Audit, Nominating and Corporate Governance, Compensation and an ad-hoc Finance Committees. Each of the committees operates under a written charter adopted by the Board. All of the committee charters are available on the Investor Relations page of our website at http://ir.exide.com/committees.cfm. A free printed copy of each of these charters is available to any stockholder who requests it from the address listed under the heading “Governance of the Company.”

 

Our Corporate Governance Guidelines require that at least a majority of Board members qualify as independent under the applicable NASDAQ Rules and the applicable rules and regulations of the SEC. Each year, the Board reviews information provided by the directors (each of who is a nominee) and any other relevant information and, based on this information, makes an affirmative determination as to each director’s independence. After considering the NASDAQ Rules and Rule 10A-3(b)(1) under the Act, the Board determined that the following directors are independent: Messrs. Reilly, Aspbury, D’Appolonia, Ferguson, Jennings, Lash, Ressner and Wetzel. Gordon A. Ulsh, due to his employment with the Company, is not considered an independent director.

 

In making its determination, the Board determined that Mr. Lash’s employment with Tontine Associates, LLC, did not impair his independence. Tontine Associates, LLC is a beneficial owner of more than 5% of our common stock.

 

The Company has entered into indemnity agreements with each of its directors and executive officers that provide for defense and indemnification against any judgment or costs assessed against them in the course of their service to us, as well as for the advancement of expenses and contribution in the event of joint liability.

 

In particular, the indemnification agreements provide contractual indemnification for the indemnitee that is meant to supplement the indemnification provided by our organizational documents. The indemnification agreements provide that we will indemnify and hold harmless each indemnitee, to the fullest extent permitted by law, against any and all expenses and losses, and any local or foreign stamp duties or taxes imposed as a result of the actual or deemed receipt of any payments under the indemnity agreement, that are paid or incurred by the indemnitee in connection with such proceeding. We will indemnify and hold harmless any indemnitee for all expenses paid or incurred by indemnitee in connection with each successfully resolved claim, issue or matter on which indemnitee was successful. The indemnification agreements further provide that we will not provide indemnification for any proceeding initiated or brought voluntarily by the indemnitee

against us or our directors, officers or employees, or for any accounting of profits made from the purchase and sale by the indemnitee of our securities.

 

The indemnification agreements also provide that we will advance, to the fullest extent permitted by law, to the indemnitee any and all expenses paid or incurred by indemnitee in connection with any proceeding (whether prior to or after its final disposition), provided that the indemnitee is otherwise entitled to indemnification under the indemnification agreement.

 

The agreements do not permit indemnification for acts or omissions for which indemnification is not permitted under Delaware law.

 

Audit Committee

 

The Audit Committee met seven times during fiscal 2008. The purpose of the Audit Committee is to assist the Board in overseeing the accounting and financial reporting processes and the audits of our financial statements. The Audit Committee’s primary duties and responsibilities are to:

 

 

In August 2007, the Board determined that all of the members of the Audit Committee are independent within the meaning of Rule 10A-3(b)(1) under the Securities Exchange Act of 1934 (the “Exchange Act”), the applicable listing standards of The NASDAQ Rules and our Corporate Governance Guidelines. The Board has determined that Mr. Ressner, the chair of the Audit Committee, is qualified as an audit committee financial expert within the meaning of SEC rules, and that he has financial sophistication within the meaning of the applicable NASDAQ Rules.

 

The report of the Audit Committee is included herein under the heading “Report of the Audit Committee.” The charter of the Audit Committee is available on our website listed above.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee met five times during fiscal 2008. The primary purpose of the Nominating and Corporate Governance Committee is to assist the Board in identifying qualified individuals to serve as directors on the Board. To that end, the Nominating and Corporate Governance Committee has the following duties, among others:

 

 

In August 2007, the Board determined that all of the members of the Nominating and Corporate Governance Committee are independent within the meaning of the applicable NASDAQ Rules, the applicable rules and regulations of the SEC and our Corporate Governance Guidelines.

 

The Committee has set forth in its charter, qualities it seeks in individuals to be nominated to the Board. These qualities include a high degree of leadership experience in business or administrative activities, breadth of knowledge about issues affecting us and the ability and willingness to contribute special competencies to Board activities. These, and other individual attributes, including personal integrity and loyalty to Exide and concern for its success and welfare, are more fully described in the Committee’s charter which is available on the Investor Relations page of our website at http://www.ir.exide.com/committees.cfm. The Nominating and Corporate Governance Committee also reviews annually the process for succession plans for our CEO and the CEO’s direct reports.

 

Compensation Committee

 

The Compensation Committee met nine times during fiscal 2008. The purpose of the Compensation Committee is to assist the Board in fulfilling its oversight responsibilities with respect to compensation. The Compensation Committee’s primary duties and responsibilities include:

 

 

In August 2007, the Board determined that all of the members of the Compensation Committee are independent within the meaning of the applicable NASDAQ Rules, the applicable rules and regulations of the SEC and our Corporate Governance Guidelines.

 

Finance Committee

 

The Finance Committee conducted seven meetings during fiscal 2008. The purpose of the Finance Committee is to assist the Board in reviewing and making recommendations to the Board regarding our senior debt financing facility and alternatives thereto, and regarding any other appropriate matters at the request of the Board on an ad-hoc basis.

 

During fiscal 2007, the Compensation Committee was comprised of Messrs. D’Appolonia, Ferguson and Reilly, none of whom:

 

 

There were no interlocking relationships between any of the Compensation Committee’s members and the Company’s executive officers during fiscal 2008.

 

The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding any general statement contained in any such filing incorporating this proxy statement by reference, except to the extent we specifically incorporate this Report by reference therein.

 

Purpose

 

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. The purpose, authority and responsibilities of the Audit Committee are specified in its charter, which most recently was revised in fiscal 2008, and is available on our website at http://ir.exide.com/committees.cfm. The composition of the Audit Committee and the function of the Audit Committee are described in further detail on page 11 of this proxy statement under the caption Audit Committee.

 

Independent Public Accountant Communications

 

The Committee discussed with the independent public accountants, PricewaterhouseCoopers LLP, matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication with Audit Committees), including management judgments and accounting estimates, as well as whether there were any significant audit adjustments, any disagreements with management or any difficulties encountered in performing the audit. The Committee also discussed with its independent public accountants matters relating to its independence, which discussion included a review of the firm’s audit and non-audit fees, as the fees may be modified or supplemented from time to time. In connection with such discussions, the Committee received and reviewed the written disclosures and letter from its independent public accountants required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as adopted by the Public Company Accounting Oversight Board. The Committee met separately at least quarterly with its independent public accountants, without management present.

 

Internal Controls

 

During fiscal 2008, the Committee discussed with management its assessment of the effectiveness of our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and whether any deficiencies existed. The Committee also discussed with the Company’s independent public accountants its evaluation of management’s assessment of our internal controls.

 

Review of Periodic Reports

 

The Committee reviewed and discussed with management and the independent public accountants each of our quarterly and annual reports for fiscal 2008, including our audited financial statements, which review included a discussion regarding accounting principles, practices and judgments. The Committee also reviewed and discussed with management the earnings press releases accompanying such quarterly and annual reports.

 

Audited Financial Statements

 

As a result of its review of the audited financial statements, as well as its discussions with management and the independent public accountants, the Committee recommended to the Board and the Board approved the inclusion of our audited consolidated financial statements in our Annual Report on Form 10-K for fiscal 2008 for filing with the SEC.

 

Members of the Audit Committee

 

Michael P. Ressner, Chairman

Herbert F. Aspbury

Carroll R. Wetzel

 

We refer you to our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 for additional information regarding fiscal 2008 results discussed in the Executive Summary of this report. We also refer you to our Report on Form 8-K, dated June 9, 2008, for a reconciliation of Adjusted EBITDA to the income or loss reported under generally accepted accounting principles.

 

Executive Summary

 

The Compensation Discussion and Analysis report in this proxy statement provides a detailed explanation on how our compensation programs are designed with respect to our named executive officers. Although not described in significant detail in this report, the actions of the Compensation Committee of the Board (the “Committee”) for our other executive officers are consistent with the materials contained in this report. Significant objectives of our compensation program include the following:

 

 

Over the last two fiscal years, the Committee has attempted to design total compensation for the named executive officers that would provide opportunities for significant compensation if the Company achieved significant improvements in financial performance. The Committee believes that the Company’s financial performance has demonstrated significant year-over-year improvement over the last two fiscal years, and that the short-term cash incentive award and long-term equity award payments made for fiscal 2008 performance are appropriate in light of the improved performance. Our year-over-year improvements generally placed us between the 75th and 95th percentiles when measured against our peer companies’ year-over-year improvement. The peer companies are described in more detail on page 17 of this proxy statement.

 

The following table includes key financial performance indicators over the past three fiscal years.

 

 

 

 

The Committee believes that the compensation program and performance goals set for fiscal 2009 will provide appropriate economic incentives for the named executive officers to continue to drive improvements in our financial performance and stockholder value.

 

Compensation Committee Overview

 

The Committee is required by its charter to consist of no fewer than three independent directors, who are annually recommended by the Nominating and Corporate Governance Committee and approved by the Board. The Board evaluates the Committee members’ independence in accordance with standards established by The NASDAQ Marketplace Rules. The Committee is presently comprised of three directors: Michael R. D’Appolonia (Chair), David S. Ferguson and John P. Reilly (Chairman of the Board). Generally, the Committee meets at least quarterly. During fiscal 2008, the Committee met a total of nine times.

Compensation Committee Activities

 

The Committee’s responsibilities include reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer (“CEO”) and, based on the evaluation of the CEO’s performance against these goals and objectives, recommending the CEO’s compensation to the Board. The Committee is also responsible for approving the compensation for all named executive officers and certain other key employees, overseeing the administration of our compensation and benefits plans, including both our short-term cash incentive and long-term equity incentive compensation plans, and making recommendations to the Board regarding director compensation.

 

The Committee’s responsibilities are enumerated in full detail in the Committee’s charter, which is reviewed annually. The charter, originally adopted on May 12, 2004, was amended and approved by the Board on November 2, 2005. The charter was most recently amended on March 22, 2007, principally to address additional responsibilities related to completion of the Compensation Discussion and Analysis for each year’s proxy statement. A copy of the charter can be found under the Investor Relations page of our website: http://ir.exide.com/committees.cfm.

 

Role of Executive Officers in Compensation Decisions

 

Annually, the CEO, in consultation with the Executive Vice President — Human Resources and Communications (“EVP-HR”), makes recommendations to the Committee regarding any adjustments to base salary for named executive officers based on the CEO’s assessments of each named executive officer and market data for similarly positioned executives. Materials supporting the recommendations, including market survey data, any peer group analysis and salary history for named executive officers are provided to the Committee for its review and consideration in consultation with the Committee’s independent compensation consultant. The CEO and EVP-HR attend the Committee’s meetings to present their recommendations regarding base salary adjustments. The Committee reviews with the CEO and EVP-HR any such recommendations and approves or alters the proposed base salary adjustments. The Committee also considers annual short-term cash incentive compensation and long-term equity incentive compensation for named executive officers based, in part, on recommendations from the CEO. The CEO is not present when the Committee reviews the CEO’s compensation.

 

In addition, the Committee delegates to the Benefits Administration Committee and the Benefits Investment Committee, each comprised of members of senior management, responsibilities related to administration, management and oversight of our various health and welfare plans and pension plans, respectively, for our global employees. The Committee also delegates its responsibility to the EVP-HR for administration of our 2004 Stock Incentive Plan (the “2004 Plan”), including responsibilities relating to preparing foreign sub-plans to comply with foreign tax laws for non-U.S. participants, monitoring the awards outstanding to provide the Committee with sufficient information regarding remaining shares available under the 2004 Plan and adopting and issuing award agreements.

 

Independent Compensation Consultants

 

When analyzing various components of named executive officer compensation, the Committee has engaged independent compensation consultants regarding prevailing market conditions. During the first half of fiscal 2008, the Committee retained AON Consulting (“AON”) to serve as the Committee’s independent compensation consultant. As a result of change in the Company’s AON representatives during the early part of fiscal 2008, on October 29, 2007, the Committee entered into a retention agreement with Watson Wyatt (“WW”) to serve as the Committee’s independent compensation consultant for the remainder of fiscal 2008 and fiscal 2009. Although the Company’s management has utilized WW to provide consulting advice regarding the design of sales team incentive plans and tools for designing a global job classification system, the Committee believes that WW provides independent advice concerning named executive officer compensation.

 

Upon request of the Committee, the independent compensation consultant provides market data regarding metrics for the Committee’s review of the CEO’s base salary, annual short-term cash incentive compensation

and long-term equity incentive compensation. The independent compensation consultant will periodically coordinate with the Company’s EVP-HR regarding compensation packages for proposed new named executive officers and other senior personnel, as well as providing metrics for evaluating and scaling long-term equity incentive compensation for all named executive officers. The independent compensation consultant, through international affiliations, also provides the Committee recommendations concerning market survey data for any non-U.S. named executive officers. The independent compensation consultant also provides benchmarking data to assist the Committee in evaluating and recommending changes to director compensation. Pursuant to the terms of the consulting agreement, the independent compensation consultant reports directly to the Committee and acts at the Committee’s request.

 

The fees for the independent compensation consultant are paid directly by the Company pursuant to the Committee’s charter. The Committee annually reviews the retention of its independent compensation consultant.

 

Philosophy Regarding Executive Compensation

 

The Committee’s primary objective is to design and implement an executive compensation program that attracts, motivates and retains a strong leadership team, and that rewards named executive officers based upon achievement of the Company’s financial objectives and long-term stockholder value. A core strategy of the executive compensation program is to link each named executive officer’s compensation to the Company’s overall performance, the performance of the named executive officer’s division and the performance of individual named executive officers. The Committee believes that performance-based compensation, including both short-term cash incentive and long-term equity incentive compensation, rather than base salary, should represent the largest portion of total compensation for the named executive officers.

 

The elements of named executive officer compensation are based, in part, on Company objectives, as well as external competitive market analysis that uses a variety of sources, including compensation data compiled by the independent compensation consultant. The Committee utilizes base salary, short-term cash incentive compensation and annual grants of long-term compensation, principally in the form of equity, to provide total annual compensation to our named executive officers that generally range between the 50th and 75th percentiles based on market survey data. Short-term cash incentive compensation, which typically provides a target payout between 50% and 125% of a named executive officer’s base salary, is based on a combination of division and consolidated corporate results. Similarly, long-term compensation, which typically provides a target value between 125% and 300% of a named executive officer’s base salary, is based on performance of the Company’s common stock so as to align such compensation with overall stockholder value. The Committee considers each named executive officer’s annual performance, scope of responsibility, relative position in the corporate structure and relevant market and peer group data in setting and periodically adjusting annual compensation. The Committee uses the same approach with regard to the Company’s other executives.

 

The Committee’s independent compensation consultant provides compensation data for named executive officers using general market data, as well as peer group data. The criteria for the selection of the peer group include industry, size (based on top line revenue and number of employees), and financial performance metrics. During fiscal 2008, the Committee evaluated the Company’s peer group and made a number of changes to reflect companies with median revenues and industry focus more closely aligned with the Company. Although included in the peer group, data from Dana Holding and Dura Automotive is often

unavailable, as both organizations have been involved in bankruptcy proceedings. The companies comprising the peer group for fiscal 2008 are listed below:

 

 

The Committee uses peer company data to evaluate the appropriateness of the components of our compensation program, including the following: director compensation; the allocation of various forms of long-term compensation awards; and the type of financial metrics used for short-term cash incentive awards and long-term equity compensation awards. We use this data so that the components of our compensation program are competitive with those of our peer group. Using the criteria discussed above, the Committee periodically reviews and evaluates, with assistance from its independent compensation consultant, the appropriateness of the companies comprising the peer group.

 

In addition to our peer group data, the EVP-HR utilizes the following database tool to benchmark base salary and total cash compensation for our named executive officers: 2007-2008 Top Management Compensation Calculator by Watson Wyatt Data Services. Because the database includes compensation market data on a number of companies from a number of different industries, the market analysis involves evaluating the database information based on the following: type of industry; global geographic scope; headcount; and revenues.

 

Compensation Policies

 

Stock Ownership Guidelines

 

In October 2007, the Committee recommended and the Board approved stock ownership guidelines (“Ownership Guidelines”). The Ownership Guidelines were adopted, in part, to demonstrate the Company’s commitment to investors, employees, customers and vendors, by requiring named executive officers, certain other selected members of senior management and non-employee directors to maintain a significant holding in the Company’s common stock. Pursuant to the Ownership Guidelines, the CEO, other named executive officers and other selected members of senior management, are required to achieve and maintain certain levels of beneficial ownership in the Company’s common stock based on a multiple of their annual base salary. The Committee consulted with its independent compensation consultant in an effort to design Ownership Guidelines consistent with those of the Company’s peer group. Non-employee directors are also required to maintain stock ownership at levels based on their annual cash retainer. The Ownership Guidelines are as follows:

 

•		Chief Executive Officer		5 Times Annual Base Salary
•		Executive Vice Presidents
		Division Presidents		3 Times Annual Base Salary
		Section 16 Officers
•		Other Members of Senior Management		1.5 Times Annual Base Salary
•		Non-Employee Board Members		3 Times Annual Cash Retainer

 

The Board set December 31, 2012 as the initial deadline for achieving the required stock ownership levels.

Elements of Compensation

 

Our executive compensation program consists of:

 

 

A description of each of the compensation program elements follows.

 

Base Salary

 

The Committee adheres to the principal that base salary should represent a key component of a named executive officer’s total compensation. In order to hire and retain highly qualified candidates, the Committee generally sets base salaries for named executive officers at or above the prevailing median base salary of similarly situated executives based on market survey data. The market survey data reports are often customized based on a variety of factors including the following: type of industry; global geographic scope; headcount; and revenues. Consequently, base salaries for named executive officers are generally targeted between the 50th and 75th percentile of current market rates based on market survey data. However, the Committee may set a named executive officer’s base salary below the median based on years of experience, current compensation, the scope of responsibility when compared to positions contained in market data and the Committee’s ability to target appropriate future base salary increases so that the named executive officer can achieve base salary between the 50th and 75th percentiles based on market survey data over a period of years.

 

The Committee establishes, and subsequently modifies, each named executive officer’s base salary through an evaluation of several factors, including individual performance, current market conditions, years of experience, industry specific experience, national and local salaries for comparable positions (internally and externally), level of responsibility and the recommendations of the CEO and EVP-HR. Each year, the Committee, based, in part, on the review of information obtained from its independent compensation consultant and the CEO and EVP-HR’s recommendation, reviews and modifies, as deemed appropriate, the base salaries for the Company’s named executive officers other than the CEO. In conjunction with evaluations submitted by Board members, the Committee reviews and modifies, as deemed appropriate, the base salary for the CEO, and recommends to the Board any proposed change to the CEO’s base salary.

 

In December 2007, the Committee reviewed Mr. Ulsh’s expiring employment agreement. Based on prior performance evaluations, the Company’s financial performance since Mr. Ulsh’s retention in April 2005 and market data provided by its independent compensation consultant, the Committee recommended an increase in Mr. Ulsh’s base salary as part of a proposed amended employment agreement. On January 30, 2008, the Board approved an amended and restated employment agreement (the “Amended Agreement”), which increased Mr. Ulsh’s base salary from $900,000 to $950,000 effective April 1, 2008, placing him at the 75th percentile when compared to chief executive officers within the Company’s peer group. Mr. Ulsh’s salary will increase to $1,000,000, effective April 1, 2009. The Committee and Board determined that Mr. Ulsh’s base salary, when compared to the salaries of the Company’s other named executive officers, appropriately reflects his greater global responsibilities for the Company’s operational and strategic oversight.

 

Two adjustments were also made to Edward J. O’Leary’s base salary during fiscal 2008. Mr. O’Leary’s base salary was increased from $325,000 to $375,000, effective May 1, 2007, while he was serving as President — Transportation Americas, in recognition of the significant improvement in the division’s performance during the prior fiscal year and placed him between the 50th and 75th percentiles when compared to market survey data. Upon his appointment as Chief Operating Officer (“COO”) on August 22, 2007, Mr. O’Leary’s base salary was increased to $485,000 to reflect the additional responsibilities. While Mr. O’Leary’s total compensation places him between the 50th and 75th percentiles based on market survey data, Mr. O’Leary’s base salary is slightly below the 50th percentile based on market survey data.

During fiscal 2008, the Committee also took action with regard to Phillip A. Damaska’s base salary. On January 30, 2008, the Board promoted Mr. Damaska to Executive Vice President and Chief Financial Officer (“CFO”) effective April 1, 2008. In recognition of the promotion and increased responsibilities, the Committee approved an increase in Mr. Damaska’s base salary from $291,000 to $350,000. Mr. Damaska’s base salary is below the 50th percentile, providing opportunities for future base salary increases.

 

On June 5, 2008, the Committee approved an increase in Mitchell S. Bregman’s base salary from $320,000 to $332,800, effective June 1, 2008. The increase was based on Mr. Bregman’s performance during fiscal 2008. No other adjustments to the base salaries of other named executive officers were made in fiscal 2008.

 

The Committee believes the base salaries for our COO and CFO should be higher than the salaries for other non-CEO named executive officers due to the global responsibilities of both positions. The base salaries for other named executive officers fall within a general common range and adequately represent differences in respective individual and division performance.

 

Short-Term Cash Incentive Compensation

 

The Committee believes that short-term cash incentive compensation that is based on performance, through the achievement of division and corporate goals, is an important component of overall executive cash compensation. Target short-term cash incentive compensation is established annually as part of the review of total compensation. For the named executive officers, the Committee generally establishes annual short-term cash incentive compensation at 50% of base salary. Mr. Ulsh’s employment agreement in effect for fiscal 2008 established target short-term cash incentive compensation at 100% of base salary. In accordance with the Amended Agreement, Mr. Ulsh’s target short-term cash incentive compensation was increased to 125% of base salary for his fiscal 2009 award. The Committee believes that the significantly higher target for the CEO is appropriate in light of his level of responsibility, as well as to ensure that the CEO’s annual total cash compensation is competitive based on market survey data.

 

Pursuant to the terms of his employment agreement executed in 2006, Francis M. Corby, Jr.’s target short-term cash incentive compensation for fiscal 2008 was increased to 100% of base salary. As a result of his appointment as COO and increased responsibilities, Mr. O’Leary’s fiscal 2009 target short-term cash incentive compensation was increased to 65% of base salary. Further, the Committee may, from time to time, approve lump sum payments to new employees upon their retention or to existing employees, including the named executive officers, upon assumption of additional responsibilities.

 

On March 21, 2007, the Committee approved for all other named executive officers, and on March 22, 2007, the Board approved for Mr. Ulsh, a fiscal 2008 short-term cash incentive plan (the “EP Plan”). The fiscal 2008 EP Plan provides cash awards that are based on economic profit (“EP”). EP is defined as earnings before interest, taxes, depreciation and annual amortization (“Adjusted EBITDA”), as such term is defined in the Company’s senior secured credit facility, less cash taxes and a capital charge of 2% per month on capital employed (defined as the sum of trade accounts receivable, inventory and fixed assets less trade accounts payable) to generate such Adjusted EBITDA.

 

Under the fiscal 2008 EP Plan, eligible division employees began earning award credit once his or her division reached the threshold of 80% of actual fiscal 2007 EP. For fiscal 2008, eligible employees could earn an award of 100% of an individual’s targeted cash incentive award if the division and the Company achieved an EP at a specified level above the average of the actual and target fiscal 2007 EP levels. For each of the named executive officers serving as division presidents, EP awards were weighted 75% based on their division’s EP performance and 25% for consolidated corporate EP performance. For the other named executive officers, awards were weighted 100% on consolidated corporate EP results. If any division’s results fell below the minimum threshold of 80% of the division’s actual fiscal 2007 EP, any payment to such division’s employees would be limited to the corporate portion of the EP Plan, assuming the consolidated corporate results reached 80% of actual fiscal 2007 EP. Payments above target are uncapped.

Payments under the Company’s fiscal 2008 EP Plan did not occur until June 12, 2008, after the audit of the Company’s financial statements was complete. On a consolidated basis, the Company target corporate EP was set at a level that required a 24.3% improvement over the actual EP achieved in fiscal 2007. Actual consolidated corporate fiscal 2008 EP results represented a 31% improvement over fiscal 2007 EP and resulted in payouts above target. Threshold, target and actual fiscal 2008 EP payouts to the Company’s named executive officers are as follows:

 

 

 

 

On May 15, 2008, the Board approved for the CEO and the Committee approved for other named executive officers an award formula for the fiscal 2009 EP Plan. Under the fiscal 2009 EP Plan, the definition of EP remains unchanged. Named executive officers begin accruing credit towards target awards upon achievement of thresholds set by the Committee of 80% of actual fiscal 2008 EP for that named executive officer’s division, and with regard to corporate named executive officers, 80% of actual fiscal 2008 consolidated corporate EP. At threshold, each named executive officer will receive 80% of his individual target award. The named executive officers can earn an award of 100% of the individual’s award if the division and the Company achieve a set target, which is determined by taking the average of actual fiscal 2008 division EP (or consolidated corporate EP for non-division named executive officers) and target fiscal 2008 division EP, and adding an improvement factor, which is calculated as the greater of 20% of a division’s fiscal 2008 Adjusted EBITDA or actual fiscal 2008 EP. Payments above target are uncapped. The Committee approved consolidated corporate target performance levels that are consistent with the Company’s fiscal 2009 operating budget. The Committee believes that the consolidated corporate target, as well as target performance levels for our divisions will require significant improvement when compared to fiscal 2008 financial results.

 

Based, in part, on Industrial Energy Europe’s actual EP results falling below the division’s fiscal 2008 threshold EP, the Committee adjusted the formula for Mr. Campbell’s award under the 2009 EP Plan. Pursuant to the fiscal 2009 EP Plan, Mr. Campbell will begin earning award credit once the Industrial Energy Europe division reaches actual fiscal 2008 EP results. For each 1% improvement from actual fiscal 2008 EP up to target, Mr. Campbell will receive 1% of his target short-term cash incentive compensation award. This adjusted formula was also implemented for one other division that achieved actual EP below fiscal 2008 threshold EP.

The threshold and target 2009 EP Plan payouts to the Company’s named executive officers are as follows:

 

 

 

 

Long-Term Equity Incentive Compensation

 

In 2004, the Company sought and received approval from its stockholders for the creation of the 2004 Plan. As originally designed, the 2004 Plan permitted the award of options, restricted stock and performance unit awards, the latter being payable in cash or stock. In December 2006, the Board amended the 2004 Plan to provide for the award of restricted stock units (“RSU”). The Committee oversees the administration of the 2004 Plan.

 

The Committee believes that long-term equity incentive compensation issued under the 2004 Plan should be a significant element of total compensation for the Company’s named executive officers because it is designed to align management’s performance with long-term stockholder value, principally through the issuance of equity securities.

 

Long-term equity incentive compensation is based, in part, on recommendations from the Company’s independent compensation consultant and comparative market data and peer group data. The Committee’s determination of the amount and relative weight of equity awards as part of total compensation is also based on the philosophy that, in light of the current number of outstanding shares of common stock, average annual equity awards to management should not exceed 1.2% of that total to avoid diluting the holdings of non-employee stockholders. Consequently, the Committee may vary the type and amount of long-term equity compensation to preserve this ratio and avoid equity award rates that would prematurely exhaust the 2004 Plan’s reserve of stock and options available for future awards. Additionally, the Committee, based upon the recommendation of the CEO, may provide interim awards of long-term equity to employees in recognition of extraordinary contributions.

 

Long-term incentive awards have generally been established at 250% of base salary for the CEO and at 125% of base salary for the Company’s other named executive officers, subject to annual review by the Committee. These targets, when combined with base salary and short-term cash incentive compensation targets, are intended to provide total compensation to the named executive officers between the 50th and 75th percentiles based on market survey data. For fiscal 2008 and fiscal 2009, Mr. Ulsh’s long-term equity incentive compensation award was increased to 300% of base salary, and with regard to fiscal 2009, Mr. O’Leary’s long-term equity incentive compensation award was increased to 150% of base salary because of the additional global responsibilities of the COO. Mr. Ulsh’s long-term equity incentive award is set significantly higher than the other named executive officers as a result of his global responsibilities and to ensure total compensation near the 75th percentile based on market survey data.

 

The relative weighting of equity and cash within the long-term incentive plan is based on various factors, including the number of remaining shares (options, restricted stock and RSUs) available for grant under the 2004 Plan and the anticipated vesting rate for previous grants. The Committee has included a cash component

in the annual long-term incentive compensation grants when, in light of the prevailing price of the Company’s common stock on The NASDAQ Global Market, issuance solely of equity would disproportionately reduce the number of remaining options, restricted stock and RSUs available for grant under the 2004 Plan.

 

Initial awards under the 2004 Plan were issued in October 2004, contingent upon stockholder approval of the 2004 Plan, which occurred at the Company’s 2005 Annual Meeting. The awards provided an allocation of 75% options and 25% restricted stock. The allocation was recommended by the Committee’s independent compensation consultant in consultation with the EVP-HR, after reviewing anticipated award vesting rates and the Committee’s desire to grant various forms of equity compensation with relative weight that best accomplish the goals of employee retention and alignment of senior management’s objectives with long-term stockholder return.

 

For fiscal 2006, the Committee, after review with its independent compensation consultant, determined that an allocation of 25% options, 15% restricted shares and 60% performance unit cash awards would appropriately balance the goals of maximizing long-term stockholder value, compensating named executive officers and preserving a sufficient number of shares available under the 2004 Plan for future grants without the need for stockholder approval. In fiscal 2007, as a result of the stockholders’ approval of amendments to the 2004 Plan, the Committee adjusted the mix of cash and equity under the 2004 Plan to 50% options, with restricted stock and performance unit cash awards at 25% each. For the fiscal 2008 grants, the Committee reviewed the amount of shares remaining in the 2004 Plan and determined not to grant performance unit cash awards. Accordingly, awards granted in March 2007 as part of fiscal 2008 compensation, were equally weighted between stock options and RSUs. The Committee granted RSUs in lieu of restricted stock in order to provide participants with the possibility of deferring ordinary income tax until full vesting of all such units. The RSUs vest ratably over a five-year period, but stock certificates will not be issued until the end of the full vesting period.

 

On May 15, 2008, the Board approved for the CEO and the Committee approved for other named executive officers, fiscal 2009 long-term equity incentive compensation awards. For the CEO, the Board approved an award of 300% of base salary equally weighted between three types of awards: options, RSUs and a performance unit cash award. The value of each award type is equal to 100% of the CEO’s fiscal 2009 base salary and will vest on the later of June 30, 2010 or June 30, 2011 if Mr. Ulsh and the Board agree to extend his employment term for an additional year. The performance unit cash award requires the Company to meet an Adjusted EBITDA target for the fiscal year ended March 31, 2010. Payment of the performance unit cash award will only be made after conclusion of the performance period as follows: (1) 80% of the performance unit award upon achievement of 75% of the target, (2) 100% of the performance unit award upon achievement of 100% of the target and (3) up to 200% of the performance unit award upon achievement of 130% of the target. In setting the threshold and target Adjusted EBITDA at levels consistent with the Company’s long-term strategic plan that require year-over-year improvement, the Board will retain the ability to use discretion to reduce Mr. Ulsh’s award if certain non-financial goals and objectives are not achieved. The Committee recommended a performance unit award for Mr. Ulsh in order to preserve the number of shares available under the 2004 Plan for future grants, as well as to provide the Company with the benefits of corporate tax deductibility under Section 162(m) of the Internal Revenue Code.

 

With regard to other named executive officers, the Committee reviewed the amount of shares remaining in the 2004 Plan and determined that the fiscal 2009 long-term equity incentive compensation awards should provide for an allocation of 75% options and 25% restricted stock in order to facilitate the goal of limiting the aggregate number of shares issued under annual grants. The Committee awarded restricted stock to the other named executive officers and all other U.S. 2004 Plan participants. The Committee awarded RSUs to non-U.S. 2004 Plan participants, as such form of stock award can provide tax advantages in such foreign jurisdictions. The fiscal 2009 RSU grants will vest ratably over five years.

 

Options

 

The Committee views the granting of stock options as an integral element of the equity-based award program. Under the 2004 Plan, options vest over a three-year period and must be exercised within ten years of

the grant date. An option’s value increases or decreases in connection with fluctuations in the price of the Company’s common stock. Consequently, the Committee views such awards as aligning executives’ interests with long-term stockholder return.

 

The number of options granted is based, in part, on the theoretical value of the options. The Committee uses the Black-Scholes Valuation Model (“BSVM”), a common fair value model. The BSVM uses a complex calculation designed to provide the theoretical value of an option at the date of grant. The BSVM calculates a probability distribution of future stock prices at a future exercise date by using an expected return equal to the risk-free rate of return. The return varies with the volatility of the security calculated as of the date of grant. Probability-weighted future payouts are then discounted back to present day dollars based on a risk-free rate of return. The parameters used in valuations include:

 

•		Volatility:		The tendency of the market price of the security underlying the option to fluctuate either up or down.
•		Risk Free Rate:		The theoretical rate of return attributed to an investment with zero risk.
•		Term:		The expected life of a stock option held by a Company employee before exercise or cancellation.
•		Grant Price:		Market value of stock price on day stock option was granted.

 

Historically, the Committee did not set the exercise price of stock options as of the grant date of the award. Rather, based on the formula in the Company’s Warrant Agreement, dated May 5, 2004, the Committee determined that options under the 2004 Plan must be granted with an exercise price based on the average closing price of the Company’s common stock for the ten trading days prior to the date of grant. The actual exercise price for options could therefore be greater than, equal to or less than the stock price on the date of grant. For a number of option grants, the exercise price was lower than the closing price on the grant date.

 

In an effort to comply with the provisions of Section 409A of the Internal Revenue Code of 1986 (“409A”), on January 31, 2008, the Board approved amendments to the option awards granted to non-employee directors and named executive officers where the exercise price was lower than the closing price of the Company’s common stock on the grant date. Under the amended option award agreements, the exercise price was increased to the closing price of the Company’s common stock on the grant date. The Board determined that each non-employee director and named executive officer would receive cash payments with respect to each amended option in an amount determined by multiplying (1) the amount by which the grant date exercise price exceeds the original exercise price by (2) the number of shares of the Company’s common stock underlying the amended option award agreement. Payments will be made on the last payroll date of each quarter in which any amended options vest if the named executive officer remains in the Company’s service through the vesting date. However, no accrued cash payments will be made to any named executive officer until January 2009 to comply with Section 409A. Each non-employee director elected to forego such cash payments.

Affected option awards and the cash payments to be made to the named executive officers are as follows:

 

 

Restricted Stock

 

The Committee includes shares of restricted stock as a component of annual long-term equity incentive awards. The Committee has traditionally determined that the issuance of restricted stock should represent a smaller percentage of the overall equity award than options. The Committee believes restricted stock is a useful tool for employee retention and established a five-year vesting schedule for such awards. The Committee has traditionally used the average closing price of the Company’s common stock for the ten trading days prior to the date of grant to establish the number of shares of restricted stock awarded to participants. In an effort to comply with Section 409A, effective August 22, 2007, the number of shares of restricted stock or RSUs has been based on the average closing price of the Company’s common stock for the ten trading days prior to the date of grant, but in no event has been less than the closing price of the Company’s common stock on the grant date.

 

On June 4, 2007, the Committee recommended, and on June 5, 2007, the Board approved an interim award of 20,000 shares of restricted stock to Mr. Corby in recognition of his contributions during the Company’s senior debt refinancing and the September 2006 equity rights offering. Additionally, on June 29, 2007, the Committee approved an interim award of 3,500 shares of restricted stock to Mr. Damaska in recognition of his contributions during the Company’s senior debt refinancing.

 

Restricted Stock Units

 

In December 2006, the Board approved amendments to the 2004 Plan, permitting it to award RSUs. The RSUs allow participants to defer the recognition of ordinary income associated with long-term equity incentive compensation awards until all RSUs have fully vested. In March 2007, the Committee awarded RSUs to 2004 Plan participants as part of compensation for the 2008 fiscal year. The awards vest ratably over a five-year period, but shares of common stock will not be delivered to the employees until the end of the full vesting period. If the recipient’s employment with the Company terminates prior to the end of the five-year period, the employee will receive stock certificates for any vested RSUs. As noted above, RSUs were also provided to non-U.S. 2004 Plan participants for the fiscal 2009 grants.

 

Performance Unit Awards

 

Performance unit awards provide named executives officers with the opportunity to receive cash compensation upon the satisfaction of specific financial objectives established by the Committee for a specified performance period.

 

The Committee believes that, where possible, long-term incentive compensation awards should be weighted toward the issuance of equity. However, in fiscal 2006, the Committee evaluated the number of

shares remaining in the Company’s 2004 Plan, and concluded that a sufficient number of shares would likely not be available for future equity awards unless cash awards were a significant component of that year’s long-term incentive compensation grants. Accordingly, the Committee determined that a performance award payable in cash would be necessary, and that such award would comprise 60% of the fiscal 2006 long-term incentive compensation award.

 

For the fiscal 2006 grants, as a result of review of financial data projections provided by management, the Committee established specific performance goals based on Adjusted EBITDA and return on assets (“ROA”) associated with the performance unit awards. Payment of the performance unit cash award was contingent on the achievement of targets for the period ended March 31, 2008. The Committee established a target award and performance level, a threshold performance level at which 40% of the target award would be paid, a stretch performance level at which 150% of the target award would be paid and a maximum performance level at which 200% of the target award level would be paid.

 

In setting the Adjusted EBITDA and ROA targets, the Committee received advice from its independent compensation consultant, regarding the expected relationship of Adjusted EBITDA growth during the performance period to anticipated appreciation in market capitalization and the resulting increase in stockholder value, as well as the proposed performance targets and award payouts against companies in its peer group.

 

The Company’s 2004 Plan limited any cash performance unit award to $2,000,000. Consequently, Mr. Ulsh’s award was capped at $2,000,000, even though achievement of the maximum level of Adjusted EBITDA and ROA targets could have resulted in Mr. Ulsh achieving a payout of $2,400,000. The Committee set target Adjusted EBITDA and ROA at $235,000,000 and 1.61%, respectively. Threshold levels were set at 85% of target. Based on audited financial results for fiscal 2008, the Company’s Adjusted EBITDA was $244.1 million, or 103.8% of target. However, the ROA fell below the threshold level, resulting in no payment for that portion of the award. The threshold, target and actual payouts for the fiscal 2006 performance unit awards, were as follows:

 

 

 

 

In fiscal 2007, the Committee reduced the cash component to 25% of the total long-term incentive award because stockholders had previously approved a proposal to increase the number of shares in the 2004 Plan permitting the Committee to provide a higher percentage of equity within the long-term incentive compensation. The Committee established Adjusted EBITDA and ROA targets for the period ending March 31, 2009, which, if met, are expected to generate significant stockholder returns in relation to the performance unit cash

payments. The targets were established by an extrapolation of the fiscal 2006 targets. The threshold, target and maximum payouts for the fiscal 2007 performance unit awards are as follows:

 

 

 

 

The Committee did not include performance unit awards as a component of its fiscal 2008 long-term equity incentive grants. With the exception of Mr. Ulsh’s award, the Committee did not grant performance unit cash awards as part of the fiscal 2009 long-term equity compensation award.

 

Personal Benefits and Perquisites

 

The Company’s named executive officers are provided with disability insurance and life insurance equal to 150% of base salary consistent with the Company sponsored program provided to other covered employees. These insurance benefits are also provided to all of the Company’s other U.S. salaried employees.

 

Named executive officers are also provided with health insurance, the cost of which is substantially assumed by the Company, consistent with the Company sponsored program provided to other covered employees and their families. Employee contributions for individual and family coverage are set annually by the Benefits Administration Committee. Medical evacuation insurance is provided for the Company’s named executive officers, as well as to other senior level employees with significant international travel. This benefit is extended to the spouse of a named executive officer if the executive is on a long-term assignment living outside his or her home country.

 

Named executive officers receive a monthly automobile allowance between $750 and $1,000.

 

The Company maintains a membership at a country club near the Company’s headquarters. Messrs. Ulsh and O’Leary have use of this membership so that they can entertain clients, conduct business development activities and for employee recognition.

 

Post-Termination Compensation

 

401(k) Plan

 

The Company maintains an employee funded 401(k) plan under which the Company matches up to 50% of the employee’s contributions to the 401(k) plan up to the first 6% of such employee’s base salary, subject to the maximum contribution levels established by the IRS. The Company’s matching contributions vest ratably over five-years. Effective January 1, 2008, the Company amended its 401(k) plan to create a safe harbor plan for all salaried workers, as well as hourly workers not subject to collective bargaining agreements, to provide for Company contributions equal to 3% of the employee’s annual base salary, regardless of whether the employee contributes to the 401(k) plan. As a result of the limited participation of those employees eligible to participate in the 401(k) plan, the safe harbor plan was adopted so that individuals defined as “highly compensated employees” under applicable IRS and the United States Department of Labor standards, could make the maximum individual contributions to their 401(k) accounts. The new Company contributions, which

are made at the time of each bi-weekly pay period and are allocated pursuant to the employees’ existing investment elections, are 100% vested at the time of the contribution.

 

Cash Balance and Pension Plans

 

The Company also maintains a Cash Balance Plan, under which the Company contributed to the Cash Balance Plan 5% of each U.S. employees’ annual base salary. Contributions to an employee’s Cash Balance Plan vest equally over five years. The Company’s contributions to the Cash Balance Plan were frozen as of May 15, 2006. The Committee will continue to evaluate the Cash Balance Plan based on future competitive market conditions for employee compensation.

 

GNB Industrial, which the Company acquired in 2000, operated a pension plan. Mr. Bregman participated in the plan while an employee of GNB. This plan is managed by the Company but additional contributions to the plan were frozen as of December 31, 2000.

 

Employment Agreements and Severance Arrangements

 

The Committee recommends to the Board any retention and severance agreement for the Company’s CEO and approves such agreements for other named executive officers. The Company currently has formal employment agreements only with Mr. Ulsh and Mr. Corby that establish, among other compensation, the terms of any severance arrangements. The Committee has not authorized employment agreements with any other named executive officers, but may authorize severance agreements with other executives upon their departure from the Company. While the Company seeks to obtain non-competition and non-solicitation agreements when negotiating these severance agreements, such matters are left to the discretion of management in negotiating the individual terms of a separation agreement.

 

Gordon A. Ulsh Employment Agreement

 

Mr. Ulsh’s initial employment agreement provided for grants of stock options and restricted stock under the Company’s 2004 Plan. Unvested options and restricted stock were to be forfeited upon termination of employment. At the time of the commencement of Mr. Ulsh’s employment with the Company, he received equity awards consisting of 80,000 options and 100,000 shares of restricted stock, which vested equally over three years.

 

Mr. Ulsh’s employment agreement also provides compensation upon various termination events in exchange for a general release of claims. Upon resignation for good reason or termination by the Company without cause, Mr. Ulsh would receive the following: (1) earned but unpaid salary and unused vacation, (2) earned but unpaid short-term cash incentive awards from the fiscal year prior to the fiscal year in which termination occurs, (3) a pro-rated portion of the current fiscal year’s short-term cash incentive award (based on the number of days employed during such fiscal year) at the time the short-term cash incentive award is customarily paid, (4) a lump sum payment equal to 200% of the sum of annual base salary and target cash incentive award, (5) reimbursement of reasonable business expenses incurred up to the date of termination, and (6) COBRA premiums until the earlier of 18 months following termination and the time at which Mr. Ulsh is no longer eligible for such COBRA benefits. Reduction in base salary, short-term cash incentive award or benefits that qualify as good reason would not be used to calculate the compensation due to Mr. Ulsh.

 

In the event Mr. Ulsh’s employment is terminated for cause or he resigns without good reason, Mr. Ulsh’s severance is limited to earned but unpaid salary and unused vacation, earned but unpaid short-term cash incentive award from the fiscal year prior to the fiscal year in which termination occurs and unreimbursed reasonable business expenses measured up to the date of termination. If Mr. Ulsh’s termination is the result of permanent disability or death, he or his estate would receive all of the foregoing payments, as well as any short-term cash incentive awards earned pro rata through the date of termination.

 

Mr. Ulsh’s agreement also includes a confidentiality agreement, as well as provisions governing non-competition and non-solicitation of employees, clients and customers for two years following the date of termination.

Pursuant to Mr. Ulsh’s employment agreement, “good reason” is defined as: (1) a material adverse change in the executive’s title, role, or responsibilities, which shall include his failure to be elected as a member of the Board, (2) a reduction in base salary or other fixed compensation or failure to pay or provide such compensation within 30 days when due, (3) a requirement that the executive report to anyone other than the Board, or (4) a material adverse change in any pension, medical, health, savings, life insurance, or accident or disability plan, except for changes affecting all senior executives.

 

On January 31, 2008, the Company and Mr. Ulsh executed the Amended Agreement, which provides for a twenty-seven month employment period from April 1, 2008 through June 30, 2010. The employment period can be extended for an additional twelve months by mutual agreement of the parties no later than December 31, 2009.

 

The Amended Agreement increases Mr. Ulsh’s base salary to $950,000 for the period April 1, 2008 through March 31, 2009 and no less than $1,000,000 for the period April 1, 2009 through June 30, 2010. Mr. Ulsh’s target under the Company’s short-term cash incentive plan was also increased to 125% of base salary during the term of the Amended Agreement.

 

The Amended Agreement accelerates the dates on which certain incentive awards previously granted under the 2004 Plan vest and become non-forfeitable. Previously awarded shares of restricted stock that have not yet vested will vest and become non-forfeitable on June 30, 2010, and previously awarded RSUs that have not yet vested will vest and become non-forfeitable on the last day of Mr. Ulsh’s employment. Future awards of options, restricted stock and RSUs will vest and become nonforfeitable on the last day of Mr. Ulsh’s employment. In each case, subject to a limited exception in the event of Mr. Ulsh’s death or disability, any unrestricted share certificates will be issued six months after any restricted stock or RSU awards become non-forfeitable. All outstanding options will be exercisable for a period of three years following the last day of Mr. Ulsh’s employment.

 

Francis M. Corby, Jr. Employment Agreement

 

In conjunction with his planned retirement at the end of fiscal 2008, Mr. Corby’s employment agreement terminated at the end of its term effective March 31, 2008. Pursuant to his employment agreement, Mr. Corby received the following: (1) all awards of options and restricted shares vested at or before his retirement date, and he will be permitted until March 31, 2009 to exercise these vested options; (2) a $150,000 end-of-employment bonus payment; (3) his fiscal 2008 EP Plan award; and (4) reimbursement of moving expenses. In exchange for the extension of the exercise periods for his vested options to one year from his retirement date, Mr. Corby agreed to provide up to fifty hours of consulting services for the period beginning April 1, 2008 and ending March 31, 2009. The Company agreed to reimburse Mr. Corby for reasonably documented travel and other expenses incurred in providing such consulting services.

 

Other Severance Arrangement

 

The Company’s other named executive officers are generally provided severance in an amount equal to twelve months salary paid over a twelve month period following the date of termination of employment for any reason other than a “for cause” termination.

 

Incentive Plans

 

The Company’s named executive officers, as well as all other employees who receive grants of options and restricted stock under the Company’s 2004 Plan, are provided with protections in the event of a change in control of the Company, as defined in the 2004 Plan. Pursuant to the various award agreements provided to employees, all unvested options and restricted shares will fully vest if, in connection with or within twelve months following the consummation of a change in control, an employee is involuntarily terminated by the successor company or business. Additionally, regardless of whether named executive officers are terminated upon a change in control, any performance cash award will be paid at the achievement level at the time of the change in control prorated by the portion of the performance period in which the named executive officer worked.

Tax and Accounting Considerations

 

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any fiscal year to the corporation’s chief executive officer and the four other most highly compensated executive officers as of the end of any fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met.

 

The Committee generally designs components of executive compensation to ensure full deductibility. The Committee believes, however, that stockholder interests are best served by not restricting the Committee’s discretion and flexibility in crafting compensation programs, even though such programs may result in certain non-deductible compensation expenses. Accordingly, the Committee has, from time to time, approved elements of compensation for certain officers that are not fully deductible, and may do so in the future in appropriate circumstances.

 

Beginning on April 1, 2006, the Company began accounting for stock-based compensation, including awards made under the 2004 Plan, in accordance with Statement of Financial Accounting Standards No. 123R “Share Based Payment” (“FAS 123R”).

 

The Compensation Committee has reviewed and discussed the above Compensation Discussion and Analysis with the Company’s management. Based on the review and discussions, the Compensation Committee recommended to the Company’s Board that the Compensation Discussion and Analysis be included in the proxy statement.

 

Members of the Compensation Committee

 

Michael R. D’Appolonia (Chair)

David S. Ferguson

John P. Reilly

 

 

 

 

The following table describes each component of the All Other Compensation column in the Summary Compensation Table.

 

 

 

 

 

The following table provides information regarding equity and non-equity awards granted to the named executive officers in fiscal 2008.

 

 

 

 

This table provides information on the current holding of stock options, restricted stock and restricted stock units for the named executive officers.

 

 

 

 

 

The following table provides information for the named executive officers, on (1) stock option exercises during fiscal 2008, including the number of shares acquired upon exercise and the value realized and (2) the number of shares acquired upon the vesting of stock awards and the value realized. No stock options were exercised by our named executive officers in fiscal 2008.

 

 

 

 

 

The table below sets forth information on the pension benefits for the named executive officers.

 

 

 

 

Directors who are employees receive no additional compensation or retirement benefits for serving on the board or its committees. In fiscal 2008, we provided the following annual compensation to directors who are not employees:

 

 

 

 

Each non-employee director receives an annual cash retainer of $50,000 payable prospectively in quarterly cash installments. Additionally, the Chairman of the Board receives an annual retainer of $90,000 payable prospectively in quarterly installments. The Chairman of the Audit Committee and Compensation Committee receive an additional annual cash retainer of $15,000. The Chairman of the Finance Committee receives an additional annual cash retainer of $10,000. The additional annual cash retainer paid to the Chairman of the Nominating and Corporate Governance Committee is $10,000. Each member of the Board also receives $1,500 for each Board or committee meeting attended in person and $1,000 for each board or committee meeting attended telephonically. Effective August 22, 2007, the Board approved an increase in annual non-employee director equity compensation to $70,000, of which $40,000 would be comprised of restricted stock units and $30,000 comprised of stock options. The restricted stock units become non-forfeitable at the conclusion of the director’s annual service, but stock certificates will not be issued until retirement from the Board.

 

On August 22, 2007, the directors were awarded one-time grants of options to purchase 5,941 shares of common stock at $7.59 per share and 5,270 RSUs. The value of both awards was based on the closing price of the Company’s common stock on the grant date or the average closing price of our stock over the ten trading days prior to the date of grant, whichever was greater. The options have a one-year vesting period. The RSUs become non-forfeitable after one year, but share certificates will not be issued to the director until his service on the Board is completed.

Directors who are also employees of our company receive no additional compensation for service as a director. Additionally, we do not provide retirement benefits to non-employee directors under any current program.

 

The tables and narratives describe the potential payments to each named executive officer upon termination. In accordance with SEC rules, all information described in this section is presented as if a triggering event occurred on March 31, 2008, with the exception of information regarding Mr. Corby, who retired effective March 31, 2008 and in accordance with his employment agreement. Therefore, these tables exclude Mr. Corby. For additional information regarding Mr. Corby’s compensation upon termination, see page 28 of our CD&A.