Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by
the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
þ
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to §240.14a-12
PULSE ELECTRONICS CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
o
Fee paid previously with preliminary materials.
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
Our annual shareholders meeting will be held on Wednesday,
May 18, 2011, at 10 AM (PDT) at the offices of Pulse
Electronics Corporation at 12220 World Trade Drive,
San Diego, CA92128. At the meeting, we plan to ask you to:
1)
Approve amendments to our Articles of Incorporation and By-Laws
to provide for plurality voting in contested director elections;
2) Elect six directors for a one year term;
3) Provide an advisory vote on executive compensation;
4) Provide an advisory vote on the frequency of holding an
advisory vote on executive compensation; and
5)
Transact any other business as may properly come before the
meeting.
If you were a shareholder at the close of business on
March 4, 2011, you may vote at the meeting.
As you may know, Bel Fuse Inc. has indicated that it intends to
propose two alternative director nominees for election at the
annual meeting in opposition to the nominees recommended by your
Board of Directors. We urge you to vote for the nominees
recommended by your Board of Directors — C. Mark
Melliar-Smith, Howard C. Deck, Ralph E. Faison, Justin C. Choi,
Steven G. Crane and Lawrence P. Reinhold — using the
WHITE proxy card. If you receive a proxy card from Bel Fuse, we
urge you not to return that proxy card.
By order of the Board of Directors,
Brian E. Morrissey
Corporate Secretary
San Diego, California
April , 2011
Please
Vote — Your vote is important.
Please return the enclosed proxy as soon as possible in the
envelope provided.
This proxy statement is distributed on behalf of our Board of
Directors. We are sending it to you to solicit
proxies for voting at our 2011 annual meeting. The meeting will
be held at the offices of Pulse Electronics Corporation, 12220
World Trade Drive, San Diego, CA92128. The meeting is
scheduled for Wednesday, May 18, 2011, at 10 AM (PDT).
If necessary, the meeting may be continued at a later time. This
proxy statement, the proxy card and a copy of our annual report
have been mailed
by ,
2011 to our shareholders of record as of March 4, 2011. Our
annual report includes our consolidated financial statements for
2009 and 2010.
The following section includes answers to questions that are
frequently asked about the voting process.
Q: How many votes can I cast?
A: Holders of common stock as of March 4, 2011
are entitled to one vote per share on all proposals considered
at the annual meeting. In the election of directors, you may
cumulate your votes.
Q: What is cumulative voting?
A: For the election of directors, cumulative voting
means that you can multiply the number of votes to which you are
entitled by the total number of directors to be elected. You may
then cast the whole number of votes for one candidate or
distribute them among any two or more candidates in any
proportion. Unless you indicate otherwise on the proxy card,
Ralph E. Faison and Drew A. Moyer, the proxies, will be able to
vote cumulatively for the election of directors. If you want to
vote in person and use cumulative voting for electing directors,
you must notify the chairman of the annual meeting prior to
voting.
Q: How do I vote?
A: You may vote by telephone, over the Internet or
by signing, dating and returning your WHITE proxy card in the
postage-paid envelope provided. If you are a registered
shareholder or have a legal proxy from your custodian, you may
vote in person at the meeting.
Q: How do I vote if I hold shares in the Pulse
Electronics 401(k) plan?
A: If you are a participant in our 401(k) plan, the
enclosed WHITE proxy card will serve to direct Fidelity
Management Trust Company, as trustee of our 401(k) plan,
how to vote the shares of our common stock attributable to your
individual account. Fidelity will vote shares as instructed by
participants. If you do not provide voting directions to
Fidelity by p.m. [Eastern] Time
on ,
2011, the shares attributable to your account will be voted in
the same proportion as votes received from other participants in
the 401(k) plan.
Q: What vote is necessary to approve each of the
proposals?
A: Approval of proposal 1, the amendments to
our Articles of Incorporation and Bylaws, requires the
affirmative vote of a majority of the votes cast on the
proposal. An abstention or a broker non-vote is not a vote cast
and will not affect the number of votes required to approve the
proposal.
1
For the election of directors in proposal 2, each director
will be elected by the vote of the majority of votes cast with
respect to that director nominee, unless the election of
directors is contested and proposal 1 is approved at the
meeting. If the election of directors is contested and
proposal 1 is approved at the meeting, the director
nominees receiving the highest number of votes, up to the number
of directors to be elected, will be elected (a plurality vote).
We believe the election of directors at the meeting may be
contested.
For proposal 3, our shareholders will have an advisory vote
on executive compensation. Because the vote is advisory, it will
not be binding on our Board of Directors. However, the Board of
Directors and the Compensation Committee will consider the
result of the vote when making future decisions regarding our
executive compensation policies and practices.
For proposal 4, our shareholders will have an advisory vote
on the frequency of future advisory votes on executive
compensation. Shareholders may vote for such advisory votes to
occur every one, two or three years, or may abstain from voting.
The vote is advisory and therefore not binding on our Board of
Directors. However, the Board of Directors will consider the
result of the vote in determining the frequency of future
advisory votes on executive compensation.
Q: Are proxy materials available on the
Internet?
A: Yes. Please see the notice below:
Important
notice regarding the availability of proxy materials
for the annual shareholder meeting to be held on May 18,2011.
Q: What if I receive proxy materials from Bel
Fuse?
A: Bel Fuse Inc. has notified us that it intends to
propose alternative director nominees for election at the annual
meeting in opposition to the nominees recommended by your Board
of Directors. As a result, you may receive proxy solicitation
materials sent on behalf of Bel Fuse, including an opposition
proxy statement and a proxy card. We urge you not to return any
proxy card provided by Bel Fuse. Nominations made by Bel Fuse
are NOT endorsed by your Board of Directors.
In order to vote for the nominees recommended by your Board of
Directors — Justin C. Choi, Steven G. Crane, Lawrence
P. Reinhold, C. Mark Melliar-Smith, Howard C. Deck and Ralph E.
Faison — you should use the WHITE proxy card delivered
to you along with these proxy materials.
Your Board of Directors recommends that you DO NOT sign or
return any proxy card that may be provided to you by Bel Fuse.
Voting against or withholding authority from the Bel Fuse
nominees on the Bel Fuse proxy card is not the same as voting
for the nominees recommended for election by your Board of
Directors.
If you vote using a proxy card provided to you by Bel Fuse, you
may change your vote by using the WHITE proxy card to vote by
telephone or internet, or by signing, dating and returning the
WHITE proxy card in the postage-paid envelope provided. ONLY
YOUR LATEST DATE PROXY WILL BE COUNTED.
Q: How will the proxies be voted?
A: Proxies signed and received in time will be voted
in accordance with your directions. Unless otherwise directed,
the shares will be voted for the amendments to our
Articles of Incorporation and By-Laws, for the election
of the nominated directors recommended by the Board of
Directors, for the advisory vote on executive
compensation and for a one year frequency on holding an
advisory vote on executive compensation.
The granting of a proxy by return of a signed proxy card or
voting instruction card without providing instructions about
cumulative voting will give the designated proxy holders
discretionary authority to exercise cumulative voting. In
exercising cumulative voting, the proxy holders may cast the
shareholder’s votes in favor of the election of some or all
of the nominees in the discretion of the proxy holders, except
that none of the shareholder’s votes will be cast for any
nominee the shareholder has given instructions to vote against
or abstain
C:
2
from voting. If a shareholder does not wish to grant the proxy
holders authority to cumulate the shareholder’s votes in
the election of directors, the shareholder must state this
objection on the shareholder’s proxy card or voting
instruction card, as applicable.
If you later wish to revoke your proxy, you may do so by
notifying our Corporate Secretary in writing prior to the vote
at the meeting. If you timely revoke your proxy by notifying our
Corporate Secretary in writing, you can still vote in person at
the meeting.
Q: What constitutes a quorum?
A: The holders of a majority of our outstanding
shares entitled to vote, present in person or by proxy,
represent a quorum for the conduct of business at the annual
meeting. Abstentions are counted as present for establishing a
quorum so long as the shareholder has executed a valid proxy or
is physically present at the meeting.
Q: What is the impact of broker non-votes and
abstentions?
A: Broker non-votes are proxies where the broker or
nominee does not have discretionary authority to vote shares on
the matter. Under the rules that govern brokers and nominees who
have record ownership of shares that are held in “street
name” for account holders (who are the beneficial owners of
the shares), brokers typically have the discretion to vote such
shares on routine matters, but not on non-routine matters. If a
broker has not received voting instructions from an account
holder and does not have discretionary authority to vote shares
on a particular item, a “broker non-vote” occurs.
Abstentions and broker non-votes have no effect on the outcome
of the vote for the election of directors or on the votes to
approve the amendments to our Articles of Incorporation and
By-Laws because only the number of votes cast is relevant. We
believe that all of the agenda proposals are non-routine matters
under New York Stock Exchange rules and brokers will not have
discretionary authority. Accordingly, if an account holder does
not provide its broker with voting instructions, a broker
non-vote will occur on these agenda proposals.
Q: How many shares are outstanding?
A: There are 41,618,607 shares of common stock
entitled to vote at the annual meeting. This was the number of
shares outstanding on March 4, 2011. There are no other
classes of stock outstanding and entitled to vote.
Q: Who pays for soliciting the proxies?
A: Pulse will pay the cost of soliciting proxies for
the annual meeting, including the cost of preparing, assembling
and mailing the notice, proxy card and proxy statement. We may
solicit proxies by mail, over the Internet, telephone,
facsimile, through brokers and banking institutions, or by our
officers and regular employees. We have retained Innisfree
M&A Incorporated to aid in the solicitation of proxies from
individuals, brokers, bank nominees and other institutional
holders for a fee of $200,000 plus expenses.
C:
DISCUSSION
OF MATTERS FOR VOTING
Proposal 1 —
Amendments to our Articles of Incorporation and By-Laws to adopt
a plurality voting standard for contested director
elections
Factual
Background
Our Board recommends that shareholders approve amendments to our
Amended and Restated Articles of Incorporation and Amended and
Restated By-Laws to provide for the election of directors by
plurality voting in a contested election of directors. Under our
current governing documents, each person nominated for election
as a director must be elected by a majority of the votes cast
for that nominee. This requirement currently applies to both
uncontested and contested director elections. The proposed
amendment would not affect the majority vote requirement for
uncontested director elections.
A majority of the votes cast for the election of a director
nominee means the number of votes cast for the nominee’s
election exceeds the number of votes cast against the
nominee’s election. In the case of a contested election
where there are more director nominees than open positions for
director, majority voting could result in a
3
failed election with no nominee being elected at a shareholders
meeting. In those circumstances, under Pennsylvania law, an
incumbent director who is not reelected would nonetheless
continue in office because no successor has been elected.
To address this situation, the Board has approved amendments to
our Amended and Restated Articles of Incorporation and to our
By-Laws to provide for an exception to the majority voting
requirement in the case of a contested director election. In the
case of a contested director election, the directors would be
elected by a plurality of the votes cast. Under plurality
voting, the nominees receiving the highest number of votes up to
the number of directors to be elected would be elected.
The Board believes that a plurality voting standard is more
appropriate for contested director elections and is consistent
with modern corporate governance trends and the policy of major
shareholder advisory firms.
Proposed
Amendments
With the approval of our shareholders, the following resolutions
will be adopted to provide for plurality voting in contested
director elections:
1. The adoption of an amendment to the Amended and Restated
Articles of Incorporation of the Company is hereby approved to
add a new Article NINTH to read as follows:
NINTH: Each director shall be elected
by the vote of the majority of the votes cast with respect to
the director at any meeting for the election of directors at
which a quorum is present, provided that if the number of
nominees exceeds the number of directors to be elected, then the
nominees receiving the highest number of votes up to the number
of directors to be elected shall be elected. For purposes of
this Article, a majority of the votes cast means that the number
of shares voted “for” a director nominee must exceed
the number of votes cast “against” that director
nominee (excluding abstentions).
2. The Amended and Restated By-Laws are hereby amended by
revising Section 9 of Article II to read as follows
(proposed new text is underlined and proposed deleted text is
stricken):
Section 9. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for
each share having voting power held by such shareholder, but no
proxy shall be voted on or after three years from its date,
unless coupled with an interest, and, except where the transfer
books of the corporation have been closed or a date has been
fixed as a record date for the determination of its shareholders
entitled to vote, transferees of shares which are transferred on
the books of the corporation within ten days next preceding the
date of such meeting shall not be entitled to vote at such
meeting. In each election for directors, every shareholder
entitled to vote shall have the right, in person or by proxy, to
multiply the number of votes to which he may be entitled by the
total number of directors to be elected in the same election,
and he may cast the whole number of such votes for one candidate
or he may distribute them among any two or more
candidates.All candidates receiving a majority of the
votes cast shall be elected.Each director shall be
elected by the vote of the majority of the votes cast with
respect to the director at any meeting for the election of
directors at which a quorum is present, provided that if the
number of nominees exceeds the number of directors to be
elected, then the nominees receiving the highest number of votes
up to the number of directors to be elected shall be elected.
For purposes of this Article, a majority of the votes cast means
that the number of shares voted “for” a director
nominee must exceed the number of votes cast “against”
that director nominee (excluding abstentions).
THE BOARD
OF DIRECTORS HAS UNANIMOUSLY APPROVED THE FOREGOING
AMENDMENTS AND RECOMMENDS A VOTE “FOR”
PROPOSAL 1
If approved, the amendment to our By-Laws will become
immediately effective and the amendment to our Amended and
Restated Articles of Incorporation will become effective upon
filing of Articles of Amendment with the Pennsylvania Secretary
of State. We intend to make such filing promptly after the
approval of this proposal at the meeting and, if necessary,
prior to the election of directors at the meeting.
4
Proposal 2 —
Election of Directors
There are three classes of directors on the Board of Directors.
The only difference between each class is when they were elected
and when their terms expire. The terms of the directors in
Class I (C. Mark Melliar-Smith and Howard Deck) and
Class II (Daniel M. Moloney and Ralph E. Faison) are
expiring at this meeting. The terms of the directors in
Class III (Edward M. Mazze and John E. Burrows) will
expire in 2012. Mr. Moloney has not been nominated for
election at this meeting. Any director elected at this meeting,
or any subsequent meeting in the future, will be elected to a
one-year term. There is no limit to the number of terms a
director may serve.
We have nominated the following current directors for election
at this meeting:
•
Howard C. Deck
•
Ralph E. Faison
•
C. Mark Melliar-Smith
We have also nominated the following persons for election, who
have not previously served as directors:
•
Justin C. Choi
•
Steven G. Crane
•
Lawrence P. Reinhold
Votes on proxy cards will be cast “FOR” all six
(6) of the nominees for director, unless you indicate
otherwise on your proxy card. However, as noted above, the
persons designated as proxies may cumulate their votes. If any
of our nominees are unable or unwilling to serve as director, we
may nominate another person in place of him.
THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” ALL OF THE
ABOVE NOMINEES
Proposal 3 —
Advisory Vote on Executive Compensation
We are providing our shareholders with the opportunity to cast
an advisory vote on the compensation of the executive officers
named in the summary compensation table of this proxy statement
(our “named executive officers” or “NEOs”).
We believe that it is appropriate to seek the views of our
shareholders on the design and effectiveness of our executive
compensation program. This resolution is required by
Section 14A of the Securities Exchange Act of 1934. While
our Board intends to carefully consider the shareholder vote
resulting from this proposal, the final vote will not be binding
on us and is advisory in nature.
Our goal for the executive compensation program is to attract,
motivate and retain a talented and experienced team of
executives who will provide leadership for success in increasing
the value of the Company for shareholders. We seek to accomplish
this goal in a way that rewards performance and is aligned with
shareholders’ long-term interests. We believe that our
executive compensation program, which emphasizes
performance-based compensation and was changed significantly
over the last year, achieves this goal and is now strongly
aligned with the long-term interests of our shareholders.
The compensation discussion and analysis, beginning on page 18
of this proxy statement, describes our executive compensation
program and the decisions made by the Compensation Committee in
2010 in more detail. Highlights of the program include the
following:
•
Our CEO’s total compensation reflects a significant portion
of compensation in the form of stock option awards. These
options generally require four years to fully vest and have no
value unless the market price of our stock increases, which
significantly aligns our CEO’s interests with our
shareholders’ interests.
•
The named executive officers, other than the CEO, receive
regular, long-term equity awards in the form of stock options
and restricted stock. Stock options require four years to fully
vest and restricted stock requires three years to vest. We
believe these awards ensure that a significant portion of our
named executive officers’ compensation is linked to
long-term stock price performance.
5
•
Cash compensation (base salary and annual performance-based cash
bonus award) levels for the other named executive officers are
set at median market levels generally provided by comparable
companies. We do not have a long-term cash compensation program
for our named executive officers.
Further changes that our Compensation Committee made to our
executive compensation program in 2010 include the following
actions, each of which was completed with the assistance of
independent and external executive compensation consultants:
•
Terminated a supplemental executive retirement plan which we
refer to as a SERP, which existed for many years but was no
longer deemed to be effective in achieving the objectives of our
executive compensation program.
•
Designed and implemented a new incentive compensation plan, the
Pulse Electronics Corporation Annual and Long-Term Incentive
Plan, for all our named executives other than the CEO. This
action eliminated our Short-Term Incentive Plan
(“STIP”) and implemented the use of annual incentive
targets for each position. Previously under the STIP,
performance targets and potential payouts were semi-annual and
quarterly.
•
Included claw back provisions in our CEO’s employment
agreement.
Each of the named executive officers is employed at-will and is
expected to demonstrate exceptional personal performance in
order to continue serving as a member of the executive team. We
believe the compensation program for the named executive
officers is instrumental in helping us achieve strong financial
performance. We request shareholder approval of the compensation
for our named executive officers as disclosed according to the
SEC’s compensation disclosure rules. This disclosure
includes the Compensation Discussion and Analysis, the
compensation tables and the narrative disclosures that accompany
the compensation tables.
As an advisory vote, this proposal is not binding. However, the
Compensation Committee, which is responsible for designing and
administering our executive compensation program, and the Board
of Directors value the opinions expressed by shareholders in
their vote on this proposal and will consider the outcome of the
vote when making future compensation decisions for our named
executive officers.
THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”
PROPOSAL 3
Proposal 4 —
Advisory Vote on Frequency of Executive Compensation
Vote
Section 14A of the Securities Exchange Act requires that we
ask you as our shareholders to vote on how frequently we should
conduct a vote on a proposal similar to Proposal 3
regarding executive compensation. When voting on this proposal,
you have the option of choosing every year, every two years or
every three years, and you can also choose to abstain from
voting on this matter.
After careful consideration, the Board of Directors has
determined that holding an advisory vote on executive
compensation every year is the most appropriate policy at this
time. We recommend that you vote for future advisory votes on
executive compensation to occur every year. While our executive
compensation programs are designed to promote a long-term
connection between pay and performance, the Board of Directors
believes that holding an annual advisory vote on executive
compensation provides us with more direct and immediate feedback
on our compensation programs. Similarly, the Board of Directors
believes that an annual advisory vote on executive compensation
is consistent with our practice of seeking input and engaging in
dialogue with our shareholders on corporate governance matters.
This advisory vote on the frequency of future advisory votes on
executive compensation is non-binding on the Board of Directors.
As noted above, shareholders will be able to specify one of four
choices for this proposal on the proxy card — one
year, two years, three years or abstain — and this
vote is not a vote to either approve or disapprove the Board of
Directors’ recommendation. Although the vote is
non-binding, the Board of Directors intends to carefully review
the voting results. In addition, the Board of Directors may in
the future decide to conduct advisory votes on a more or less
frequent basis and may vary its practice based on factors such
as discussions with shareholders and the adoption of material
changes to our compensation programs.
THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE TO HOLD AN ADVISORY VOTE
ON EXECUTIVE COMPENSATION EVERY YEAR
6
Proposal 5 —
Other Business
The Board does not know of any other matters to come before the
meeting. However, if additional matters are presented at the
meeting, the enclosed proxy confers discretionary authority with
respect to those matters.
C:
PERSONS
OWNING MORE THAN FIVE PERCENT OF OUR STOCK
The following table describes persons we know to have beneficial
ownership of more than 5% of our common stock at March 4,2011. Our knowledge is based on reports filed with the
Securities and Exchange Commission by each person or entity
listed below. Beneficial ownership refers to shares of common
stock that are held directly or indirectly by the owner. No
other classes of stock are outstanding.
C:
C:
Name and Address
Amount and Nature of
Percent
of Beneficial Owner
Beneficial Ownership
of Class
Ameriprise Financial, Inc.
145 Ameriprise Financial Center Minneapolis, MN55474
Of the 3,152,897 shares reported as beneficially owned by
Ameriprise Financial, it has shared voting power over
2,466,932 shares and shared dispositive power over all
3,152,897 shares with its subsidiary Columbia Management
Investment Advisers, LLC. This information is based on a
Schedule 13G filed on February 11, 2011.
(2)
Of the 3,098,478 shares reported as beneficially owned by
BlackRock, it has both sole voting power and sole dispositive
power over all 3,098,478 shares. This information is based
on a Schedule 13G/A filed on February 8, 2011.
(3)
Of the 2,716,939 shares reported as beneficially owned by
Royce and Associates, it has both sole voting power and sole
dispositive power over all 2,716,939 shares. This
information is based on a Schedule 13G/A filed on
January 20, 2011.
(4)
Of the 2,611,381 shares reported as beneficially owned by
Wells Fargo, it has sole voting power over 1,853,938 shares
and sole dispositive power over 2,611,181 shares. This
information is based on a Schedule 13G/A filed on
January 20, 2011.
7
C:
STOCK
OWNED BY DIRECTORS AND OFFICERS
The following table describes the beneficial ownership of common
stock by each of our named executive officers, directors and
nominees, and our named executive officers and directors as a
group, at March 4, 2011:
Amount and Nature of
Percent
Name
Beneficial Ownership(1)
of Class
Alan H. Benjamin
102,697
(3)
*
John E. Burrows, Jr.
46,067
(2)
*
Justin C. Choi
0
0
Steven G. Crane
0
0
Howard C. Deck
19,084
(2)
*
Ralph E. Faison
0
*
Edward M. Mazze
43,187
(2)
*
Michael J. McGrath
46,806
(2)
*
C. Mark Melliar-Smith
36,317
(2)
*
Drew A. Moyer
113,083
(4)
*
Lawrence P. Reinhold
0
0
Roger Shahnazarian
77,761
(2)
*
Directors and executive officers as a group (14 people)
654,229
1.48
%
*
Less than one percent (1%).
(1)
Includes shares with restrictions and forfeiture risks under our
restricted stock plan. Owners of restricted stock have the same
voting and dividend rights as our other shareholders except they
do not have the right to sell or transfer the shares until the
applicable restricted period has ended. See “Compensation
Discussion and Analysis — Long-Term Equity
Incentives” on page 18.
(2)
All shares are directly owned by the officer or director.
(3)
Includes shares directly owned and shares owned by a trust of
which Mr. Benjamin is a trustee.
(4)
Includes shares directly owned and shares owned jointly with
spouse.
8
C:
DIRECTORS
AND EXECUTIVE OFFICERS
Identification
of Directors, Nominees and Executive Officers
The following table describes each person nominated for election
to the Board of Directors, each director whose term will
continue after the annual meeting, and each executive officer.
Our executive officers are appointed to their offices annually.
Name
Age
Position
Alan H. Benjamin
51
Senior Vice President and Chief Operating Officer
John E. Burrows, Jr.
63
Director
Justin C. Choi
45
Director (nominee)
Steven G. Crane
54
Director (nominee)
Howard C. Deck
54
Director
John R. D. Dickson
56
Senior Vice President, Human Resources and Chief Information
Officer
Ralph E. Faison
52
President, Chief Executive Officer and Chairman,
Michael P. Ginnetti
34
Chief Accounting Officer and Corporate Controller
John A. Houston
65
Senior Vice President, Sales and Marketing
Edward M. Mazze
70
Director
Michael J. McGrath
45
Vice President, Treasury and Tax
C. Mark Melliar-Smith
65
Director
Brian E. Morrissey
37
Vice President of Law and Corporate Secretary
Drew A. Moyer
46
Senior Vice President and Chief Financial Officer
Lawrence P. Reinhold
51
Director (nominee)
Roger Shahnazarian
50
Senior Vice President, Production Operations
There are no family relationships between any officers or
directors. There are no arrangements or understandings between
any officers or directors and another person which would provide
for the other person to become an officer or director.
Background
and Qualifications of Officers and Nominees
Alan H. Benjamin has served as our Senior Vice President
since May 2008 and as our Chief Operating Officer since November
2010. Mr. Benjamin was President of our subsidiary Pulse
Electronics, Inc. (formerly Pulse Engineering, Inc.) from March
2008 until September 2010. He was Chief Operating Officer of
Pulse Electronics, Inc. from January 2007 until March 2008,
Senior Vice President from 2005 until 2007, and Vice President
from 1998 until 2005. Prior to joining Pulse, Mr. Benjamin
worked in various marketing, sales and engineering positions for
Hewlett-Packard and Pacific Data Products. He holds a Bachelor
of Science degree in Electrical Engineering from Duke University
and is a graduate of Harvard’s Advanced Management Program.
John E. Burrows, Jr. has served as a director of our
Company since 1994 and is currently lead director of the board.
He is an Operating Partner with the venture capital firm,
Element Partners of Radnor, PA, and CEO of one of Element’s
portfolio companies, Energex, Inc. From 1995 to 2007, he was the
President and CEO of SPI Holding Co., a global producer of
specialty chemicals and drug delivery systems. He is also a
director of Vyteris, Inc., a producer of drug delivery systems
and Kingsbury, Inc., a manufacturing company. He holds a degree
in Aerospace Engineering from Georgia Tech and an MBA from the
University of Virginia.
Mr. Burrows brings to the Board significant leadership
experience gained through serving as Chief Executive Officer in
multiple companies. He also provides extensive global
manufacturing and operational experience, and understands the
complexities of international markets and leading a global
organization.
Justin C. Choi, a nominee for director, is the Executive
Vice President, General Counsel and Secretary of TrustWave
Holdings, Inc., a leading provider of on-demand data compliance
solutions that enable organizations of
9
all sizes to efficiently and cost effectively achieve and
maintain compliance with regulatory requirements and industry
standards. From 2006 to 2007, he was the Senior Vice President,
General Counsel and Secretary at Andrew Corporation, a NASDAQ
company and global manufacturer of electronic components for the
wireless industry that operated in 25 countries. Prior to then,
Mr. Choi had been an attorney with the law firm Paul
Hastings, Senior Counsel at Lucent Technologies, and Vice
President of Law, Corporate and Securities with Avaya, a
spin-off of Lucent Technologies. He holds a J.D. degree from
Northwestern University School of Law and a B.A. from The Johns
Hopkins University.
Mr. Choi has substantial experience in corporate governance
and best practices for boards of directors for publicly traded
companies, and in the legal affairs of publicly traded
technology companies. He also brings substantial transactional
experience, including mergers and acquisitions.
Steven G. Crane, a nominee for director, is the Chief
Financial Officer of ModusLink Global Solutions, Inc., a NASDAQ
company providing customized supply chain management services to
the world’s leading high technology companies. From 1999 to
2007, he was with Interactive Data Corporation, most recently as
subsidiary President, FT Interactive Data from 2006 to 2007 and,
prior to that, as its Chief Financial Officer responsible for
all aspects of the company’s financial functions from 1999
to 2006. He holds a Masters of International Management degree
from the Thunderbird Graduate School of International Management
and a B.S. in mechanical engineering from Tulane University.
As the Chief Financial Officer of ModusLink, Mr. Crane has
the experience of leading the financial management of a global
public company and he understands the challenges of managing
complex global organizations. Having been president of a
company, he also brings leadership and operational expertise to
our Board.
Howard C. Deck has served as a director of our company
since October 2008. He is President and Chief Executive Officer
of Icynene, Inc., a privately held manufacturer of spray
polyurethane foam insulation products. From 2004 until 2009 he
was President of CertainTeed Corporation’s Insulation Group
(a unit of Paris-based Compagnie de Saint-Gobain), a
manufacturer of fiber glass insulation products. During his
15 years at Saint-Gobain, he also headed the company’s
Precision Abrasives business in North America and was President
of its worldwide Superabrasives and Composite Materials
businesses. He holds a Master of Science in mechanical
engineering from Purdue University and a Masters of Business
Administration from Harvard Business School and has extensive
international financial experience as well.
Mr. Deck brings to the board extensive executive-level
leadership and manufacturing experience as President and Chief
Executive Officer of a manufacturing company, past President of
a unit of one of the world’s largest materials groups, as
well as other leadership and management roles during his
15 years at Saint-Gobain. Serving in these roles, he also
gained significant expertise in global markets.
John R. D. Dickson has served as Senior Vice President
and Chief Information Officer of Pulse Electronics Corporation
since March 2011. Prior to joining Pulse, Mr. Dickson
served as Senior Vice President and Chief Information Officer of
Andrew Corporation and held numerous management positions in
engineering, business development, and sales and marketing, as
well as business unit management and operations. Prior to
joining Andrew Corporation in 1975, he was employed by Ferranti
Electronics as a radar antenna design engineer. He holds a
Higher National Diploma in physics from Napier University,
Edinburgh, Scotland.
Ralph E. Faison has served as our Chief Executive Officer
since January 2011 and became Chairman of our board in March
2011. From February 2003 to December 2007, Mr. Faison
served as Chief Executive Officer of Andrew Corporation, a
public company and manufacturer of communications equipment and
systems. From June 2002 to December 2007, Mr. Faison also
served as President and a director of Andrew Corporation. From
June 2002 to February 2003, Mr. Faison served as a Chief
Operating Officer of Andrew Corporation. From June 2001 to June
2002, he served as President and Chief Executive Officer of
Celiant Corporation, a manufacturer of power amplifiers and
wireless radio frequency systems, which was acquired by Andrew
Corporation in June 2002. From October 1997 to June 2001,
Mr. Faison was vice president of the New Ventures Group at
Lucent Technologies, a communications service provider, and from
1995 to 1997 he was vice president of advertising and brand
management at Lucent Technologies. Prior to joining Lucent,
Mr. Faison held various positions at AT&T, a voice
10
and data communications company, including as vice president and
general manager of AT&T’s wireless business unit and
manufacturing vice president for its consumer products unit in
Bangkok, Thailand. He is a current member of the Board of
Directors of NETGEAR, Inc. and BLINQ Networks. Mr. Faison
received a B.B.A. degree in marketing from Georgia State
University and a M.S. degree in management as a Sloan Fellow
from Stanford University
As the only management representative on the board,
Mr. Faison provides an insider’s perspective about the
business and on the strategic direction of the company to board
discussions. He also brings to the board strong executive
leadership and management vision, as well as public company
board experience.
Michael P. Ginnetti is our Chief Accounting Officer and
Corporate Controller, responsible for all accounting,
controlling and financial reporting activities. Since joining
the company in 2001, Mr. Ginnetti has served in various
management positions including Director of Corporate Accounting
and Reporting. In addition, Mr. Ginnetti chairs the
Compliance and Disclosure Committee. Previously, he was employed
by Arthur Andersen LLP. Mr. Ginnetti earned a B.S. degree
in accounting from the Pennsylvania State University in 1998 and
a Masters of Business Administration from Temple University in
2005. He is a Certified Public Accountant.
John A. Houston has been Senior Vice President of Pulse
Electronics Corporation since November 2010. Mr. Houston
has 37 years of experience in worldwide manufacturing,
distribution and engineering of high technology products. He is
responsible for global sales and marketing. Since joining Pulse
in 1982, Mr. Houston held positions including Senior Vice
President of the Network, Wireless and Power Products Group,
Senior Vice President of the Business Groups and Vice President
of the North American Business Unit. His responsibilities
included marketing, engineering, development, manufacturing,
sales and customer service. He has also held numerous positions
at leading manufacturing companies including Philips and
Corning. Mr. Houston holds a B.S. degree in Civil
Engineering from State University of New York at Buffalo.
Dr. Edward M. Mazze has served as a director of our
company since 1985. He is Distinguished University Professor of
Business Administration at the University of Rhode Island. He
was the Dean of the College of Business Administration and
holder of the Alfred J. Verrecchia-Hasbro Inc. Leadership Chair
in Business at the University of Rhode Island from 1998 to 2006.
Dr. Mazze is a member of the Board of Directors of
Washington Trust Bancorp, Inc. and Ocean State Business
Development Authority. He also served as Chairman and Chief
Executive Officer of the William Penn Bank in Philadelphia and
as a Member of the Panel of Bankruptcy Trustees, United States
Department of Justice. Dr. Mazze received BBA and MBA
degrees in Marketing and International Business from the City
University of New York and a Ph.D. degree in business
administration from the Pennsylvania State University.
Dr. Mazze brings to the board significant leadership and
business expertise in marketing, international business and
corporate governance. He has served on other corporate boards,
the boards of colleges and non-profit organizations and has held
federal and state government appointments. Dr. Mazze has
served as chair and as a member of audit and compensation
committees of other corporations.
Michael J. McGrath is Vice President, Treasury and Tax,
responsible for developing and managing our global treasury and
tax strategies. In this role, he oversees the Company’s
cash and investments, debt and financial instruments, currency
and other financial risks, real estate and insurance.
Mr. McGrath also oversees all worldwide tax planning,
accounting and compliance activities, along with the investment
and compliance functions of the Company’s retirement plans.
In addition, Mr. McGrath is our Ethics Officer and chairs
the Compliance and Ethics Committee. Before joining the Company
in 1998, he held various positions at KPMG LLP and
Deloitte & Touche LLP. Mr. McGrath earned a J.D.
from Temple University’s Beasley School of Law and a B.S.
degree in accounting from The College of New Jersey. He is an
attorney licensed in the State of New Jersey and the
Commonwealth of Pennsylvania and is also a Certified Public
Accountant. Mr. McGrath is also currently serving as
President of the Philadelphia chapter of Tax Executives
Institute, Inc.
C. Mark Melliar-Smith has served as a director of
Pulse Electronics Corporation since January 2002. He is the
President of Multi-Strategies Consulting, a consulting and
investment company located in Austin, Texas, which specializes
in early stage
start-up
companies in the high technology sector. He is also the Chief
Executive Officer of Molecular Imprints, which manufactures
semiconductor process equipment. From January 2002 to October
2003,
11
Mr. Melliar-Smith was a Venture Partner with Austin
Ventures, a venture capital firm. From 1997 through 2001,
Mr. Melliar-Smith was the President and Chief Executive
Officer of International SEMATECH, a research and development
consortium for the integrated circuit industry.
Mr. Melliar-Smith also serves as a director of Power One
Inc. and Molecular Imprints, Inc. He holds BS and PhD degrees in
Chemistry from Southampton University, UK as well as an MBA from
Rockhurst College, Kansas City.
Mr. Melliar-Smith brings to the board extensive executive
management and financial experience, having served in the
capacity of President of a consulting company, Chief Executive
Officer of a manufacturing company, a Venture Partner with a
venture capital firm and President and CEO of a research and
development consortium. Mr. Melliar-Smith, who holds an MBA
and a PhD, is also a valuable contributor to the technology
vision of the Company, as President of a consulting company
which specializes in
start-up
high-tech companies. Having also served on the compensation and
audit committees of other companies’ boards,
Mr. Melliar-Smith provides valuable perspective. He has
accounting or related financial management expertise, as defined
by the NYSE listing standards.
Brian E. Morrissey has served as our Vice President of
Law and Corporate Secretary since April 2011. He oversees the
Company’s worldwide legal function which is responsible for
providing counsel on corporate, transactional, litigation,
employment, governance, intellectual property, regulatory and
other legal matters. Prior to joining the Company in 2004,
Mr. Morrissey was an attorney with McCausland,
Keen & Buckman. He served a Judicial Clerkship with
the Honorable Bernard A. Moore of the Commonwealth of
Pennsylvania Court of Common Pleas, 38th Judicial District.
Mr. Morrissey earned his bachelor’s degree from St.
Joseph’s University and graduated from Villanova University
School of Law where he was an editor of the Villanova Law Review
and elected to the Order of the Coif.
Drew A. Moyer has served as our Senior Vice President and
Chief Financial Officer since August 2004. Mr. Moyer also
served as our Interim Chief Executive Officer and President from
August 2010 until January 2011. He was President of our
electrical contacts segment, which was sold in 2010, from 2006
until 2009; our Vice President from May 2002 until August 2004;
Secretary from January 1997 until August 2004 and May 2008
through March 2011; and Corporate Controller and Chief
Accounting Officer from May 1995 until August 2004.
Mr. Moyer joined Pulse in 1989 and was previously employed
by Ernst & Young LLP. He holds a Bachelor’s
degree in accounting from Temple University and an MBA in
Finance and International Business from Drexel University. He is
a Certified Public Accountant.
Lawrence P. Reinhold, a nominee for director, is the
Executive Vice President, Chief Financial Officer and a Director
of Systemax Inc., a NYSE listed company that sells personal
computers and supplies, consumer electronics and industrial
products through branded web sites, direct mail, and retail
stores in North America and Europe, as well as designs and
manufactures personal computers, computer components and other
products. From 2002 to 2005, he served as Executive Vice
President and Chief Financial Officer of Greatbatch, Inc., a New
York Stock Exchange listed multinational developer and
manufacturer of electronic components used in implantable
medical devices. Prior to that, he was the Executive Vice
President and Chief Financial Officer of Critical Path, Inc., a
multinational enterprise application software company, and was
with PricewaterhouseCoopers for 18 years, first as a staff
accountant and eventually became the firm’s managing
partner for its Technology, Information, Communications,
Entertainment & Media practice in the Midwest.
Mr. Reinhold is a CPA and a member of the American
Institute of CPAs and Finance Executives International. He holds
an MBA and a B.S./B.A. from San Diego State University.
Mr. Reinhold brings to the Board extensive experience in
the electronics industry, having served in an executive
leadership capacity in this industry for almost ten years. He
also brings public accounting experience to the Board as a
certified public accountant and has a substantial background in
the management of finance, legal, human resources, risk
management, IT, internal audit, corporate development, and
strategic planning functions. His experience at Systemax brings
knowledge of design, engineering and contract manufacturing
operations in Asia.
Roger Shahnazarian has served as our Senior Vice
President of Production Operations since November 2010.
Mr. Shahnazarian has been with Pulse in various managerial,
manufacturing, engineering and quality roles in four countries
during the past 24 years, including Senior Vice President
of Sales. Previously, he was the Senior Vice President of
Manufacturing Operations from 1997 to 2000. He has a Bachelor of
Science in Electrical Engineering and a Masters of Science in
Electrical Engineering from Rensselaer Polytechnic Institute,
and an MBA from the University of San Diego. Prior to
Pulse, Mr. Shahnazarian was with TRW in the Corporate New
York Stock Exchange and Manufacturing Intern Program.
12
C:
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines and Statement of Principles
Policy
Our Corporate Governance Guidelines and our Statement of
Principles Policy are available on our website:
www.pulseelectronics.com. They are also available in print to
any shareholder who requests them. Our Statement of Principles
Policy is intended to be a code of business conduct and ethics
for directors, officers and employees, within the meaning of the
NYSE listing standards and SEC rules.
Independent
Directors
Our Corporate Governance Guidelines provide that a majority of
our directors must be independent. In determining the
independence of our directors, our board has adopted the
NYSE’s tests for independence as provided in the NYSE
listing standards. With the exception of Messrs. Faison and
Moloney, none of our directors has any material relationship
with Pulse Electronics Corporation and all are independent
within the NYSE’s definition. Mr. Faison is not
independent because he is our Chief Executive Officer and
Mr. Moloney, who has not been nominated for election at
this meeting, is not independent because he is our former Chief
Executive Officer.
Board
Policies and Procedures
We have adopted a number of policies and procedures to
strengthen the independence of our directors and to improve
their ability to maximize Pulse’s value to you as
shareholders. These policies include:
(1) a requirement that all directors purchase not less than
$100,000 of our common stock during his or her term as director.
This is based on cost at the time of purchase or award. Shares
received as part of director’s fees count in the
calculation of shares purchased since they are received in
exchange for services and also constitute ordinary income to the
director on which
he/she is
responsible for income taxes. We do not reimburse directors for
any portion of taxes due on these shares. When a director has
purchased shares of common stock with a cost basis of $100,000,
there is no further obligation to acquire additional shares and
the director is deemed to have made a meaningful investment in
our company. However, directors are encouraged to continue to
purchase common stock to clearly align their interests to those
of the shareholders in a material way; and
(2) a requirement that, in an uncontested election, any
nominee for director who receives a greater number of votes
“Against” from his or her election than votes
“For” such election will, promptly following
certification of the shareholder vote, submit to the board a
letter of resignation for consideration by the Governance
Committee. After taking into consideration the recommendation of
the Governance Committee, our board will determine whether to
accept the director’s resignation. The determination of the
board and the reasons therefore will be made publicly available.
Certain
Relationships and Related Transactions
Under our Statement of Principles Policy, conflicts of interest
and/or
self-dealing between any employee and the Company are
prohibited. Therefore, no employee may have a financial interest
(as defined in this policy) in any transaction in which the
Company is involved. In addition, no employee may retain for him
or herself an opportunity that is available to the Company. Any
such financial interest must be disclosed to the Ethics Officer
and any conflict of interest, self-dealing or corporate
opportunity involving an employee must be disclosed to our Chief
Executive Officer who will, in turn, bring this matter to the
attention of the Audit Committee of our Board of Directors. A
conflict of interest self-dealing or personal use of a corporate
opportunity may be waived only by our Board of Directors and any
such waiver will be promptly disclosed to our shareholders.
Compensation
Committee Interlocks and Insider Participation
Mr. Burrows and Mr. Deck served as members of the
Compensation Committee during the fiscal year 2010. Alan E.
Barton and David H. Hofmann also served as members of the
Compensation Committee until Mr. Barton resigned from the
board in March 2010 and Mr. Hofmann retired from the board
in May 2010. None of the members of the Compensation Committee
is or has ever served as an officer or employee of the Company
or any of its
13
subsidiaries. None of our executive officers served as a member
of the Board of Directors or compensation committee of any
entity that has one or more of its executive officers serving as
a member of our Board of Directors or Compensation Committee.
Board
Meetings
The board held ten meetings in 2010, including regularly
scheduled and special meetings. With the exception of
Mr. Moloney, no director attended fewer than 75% of the
total board meetings and committee meetings of which the
director was a member during the period that he served.
Mr. Moloney, whose term will expire and has not been
nominated for election at the annual meeting, attended seven of
the ten board meetings.
Board
Leadership Structure
We do not have a formal policy regarding the separation of the
roles of Chief Executive Officer and Chairman of the Board.
Mr. Papada held both of these positions during the first
three months of 2010. Mr. Faison now holds both of these
positions. Our Corporate Governance Guidelines provide that at
each meeting of the Board of Directors, time will be set aside
for independent directors to meet separately from management.
Mr. Burrows presides over and is the lead director at all
executive sessions of non-management directors. Our Board of
Directors believes that this structure provides the most
efficient and effective leadership model while also providing
effective oversight of the Company. We believe that having a
Chief Executive Officer/Chairman with extensive knowledge of our
company gained through his
day-to-day
role in our operations enhances his ability to interact with
both the Board of Directors and management and to communicate
and implement business strategies developed with their guidance.
In the Board’s view, its current structure, which includes
a lead independent director and, assuming that the nominees are
all elected, seven independent directors out of a total of eight
directors, provides effective oversight of risk management and
corporate governance issues.
Communications
with the Board
The Board of Directors has implemented a process for
shareholders and interested parties to send written, oral or
e-mail
communications to the non-management directors or the Audit
Committee of the Board in an anonymous fashion. This process is
further described on our website: www.pulseelectronics.com.
Director
Attendance at Annual Meetings
While we do not have a formal policy regarding attendance by
members of the board at our annual meeting, we have always
strongly encouraged our directors to attend our annual meeting
and will continue to do so. In 2010, all of our directors
attended our annual meeting of shareholders.
Committees
Our Board of Directors has three standing committees: audit,
compensation and governance. The Board has determined that each
director who serves on these committees is independent, as
defined in applicable NYSE listing standards and SEC rules. The
current members of each committee are:
Audit
Compensation
Governance
C. Mark Melliar-Smith, Chairman
John E. Burrows, Jr., Chairman
Edward M. Mazze, Chairman
John E. Burrows
Howard C. Deck
Howard C. Deck
Edward M. Mazze
The responsibilities of each committee are set forth in its
respective written charter. Each committee has a written
charter, as approved by our Board of Directors, and each charter
is available in print to any shareholder who requests them and
may be found on our website: www.pulseelectronics.com. The
material responsibilities of each committee are summarized below.
14
Compensation
Committee
The Compensation Committee
•
manages the formal process by which the board determines our
Chief Executive Officer’s annual and long-term equity
compensation;
•
determines the salary and short term incentive compensation of
our Chief Executive Officer and submits the recommended amounts
and determination criteria to the board for approval;
•
prepares and distributes to the board, a “tally sheet”
including all elements of CEO compensation and benefits for the
current year as well as two previous years;
•
evaluates all components of executive officer compensation to
ensure they are competitive, are aligned with our objectives and
are properly structured to recruit, retain, incentivize and
reward performance;
•
approves new executive compensation plans and recommends action
to the board;
•
approves any changes in executive compensation plans, policies,
metrics and standards;
•
reviews payouts and distribution of all cash and equity-based
compensation plans for executives in the incentive compensation
plan;
•
reviews the fees of independent directors and submits
recommendations to the full board for approval;
•
for key executives, other than our Chief Executive Officer,
evaluates and ensures that management development and succession
plans, programs and processes are in place;
•
retains and terminates compensation consultants or other outside
advisors as it deems necessary or appropriate for the purpose of
assisting the committee in the evaluation of director, CEO or
senior executive compensation;
•
oversees the preparation of the Compensation Discussion and
Analysis included in our annual proxy statement; and
•
establishes annual goals and objectives for the committee and
performs an annual self-evaluation of the performance of the
committee.
During 2010, the Compensation Committee held five meetings.
Governance
Committee
The Governance Committee
•
develops, with the board, the annual board objectives and
ensures that each board committee has annual objectives;
•
conducts an annual review, with full board input, of performance
against the board objectives and ensures that each board
committee reports its performance to the board;
•
conducts the director self evaluation process;
•
identifies and recommends to the board qualified individuals to
serve as directors. The Governance Committee has the authority
to engage, as needed, search firms and to approve fees and terms
as appropriate;
•
recommends nominees to the shareholders, consistent with our
bylaws, for election as directors;
•
recommends an appropriate on-boarding process for new directors
and recommends appropriate opportunities for director continuing
education;
•
periodically reviews, with the Chairman, the meeting frequency,
structure and membership of the board and board committees;
•
facilitates full board involvement in Chief Executive Officer
and key executive succession plans by developing and managing
the process;
•
considers and reports to the board on emerging and relevant
issues and trends in corporate governance and makes
recommendations as appropriate; and
15
•
periodically reviews, with the Chairman, our governance
guidelines and policies to ensure they meet our needs and are
compliant with all material regulations.
During 2010, the Governance Committee held two meetings.
The Governance Committee selects nominees to the board whom it
believes have skills, background and experience that can be of
assistance to management in guiding our business. The committee
believes that members of the board should have experience sets
and skills largely complementary to one another. In filling
board openings, the committee has typically, but not always,
engaged an independent search firm to assist in identifying
candidates with the requisite skills required of a board member
in general as well as any specific skills believed to be
required of an individual given the Company’s strategic
plans. While we do not have a written policy for board
membership, our Board of Directors seeks directors who represent
a mix of backgrounds and experiences that will enhance the
quality of the board’s deliberations and decisions. The
Governance Committee considers, among other factors, diversity
with respect to viewpoint, skills, experience and community
involvement in its evaluation of candidates for board
membership. These considerations are discussed by the Governance
Committee in connection with the general qualifications of each
potential nominee.
The committee, together with the board, is responsible for
evaluating overall board performance. The board typically
conducts an annual formal evaluation of its performance and
goals attainment. The Governance Committee determines the
process for this evaluation.
The committee will consider nominees recommended by a
shareholder, but always reserves the right not to accept
nominations that do not represent the best interests of
shareholders. A shareholder may nominate individuals to serve as
directors at the annual meeting by complying with the advance
notice provisions in our Amended and Restated Bylaws.
Messrs. Choi, Crane and Reinhold were nominated by the
committee with the assistance of a third-party search firm
engaged to identify and screen highly qualified individuals. Our
CEO, Mr. Faison, referred the search firm to Mr. Choi
who went through the regular candidate screening process before
being nominated.
Audit
Committee
The Audit Committee
•
reviews the financial reporting process to ensure the integrity
of the company’s consolidated financial statements,
including, without limitation, review of the company’s
Annual Report on
Form 10-K
and Quarterly Reports on
Form 10-Q,
as filed with the Securities and Exchange Commission;
•
evaluates the independent auditor’s qualifications and
independence;
•
evaluates the performance of the company’s internal audit
function and independent auditors;
•
assesses the processes relating to the determination and
mitigation of risks and the maintenance of an effective control
environment; and
•
reviews the processes to monitor compliance with laws and
regulations and our Statement of Principles.
The committee has separate regularly scheduled executive
sessions with our independent auditors, senior management and
General Auditor. During 2010, the Audit Committee held nine
meetings.
In accordance with NYSE requirements, our Audit Committee is
primarily responsible for overseeing the Company’s risk
management processes on behalf of the full Board, including the
impact of risk on our financial position and the adequacy of our
risk-related internal controls. The Audit Committee receives
regular reports from management regarding the Company’s
assessment of risks. The Audit Committee reports to the full
Board of Directors, which also considers the Company’s risk
profile. The full Board of Directors focuses on the most
significant risks facing the Company and the Company’s risk
management strategies for these issues. The Board endeavors to
match these identified risks to the overall level of risk
management which the Board deems appropriate from time to time.
While the board oversees the Company’s risk management
strategies, company management is responsible for
day-to-day
risk management processes. We believe this division of
responsibilities is the most effective approach for addressing
the risks facing our company.
Our Board has determined that each member of the Audit Committee
is financially literate, as defined by the NYSE listing
standards. This conclusion is based upon each of their
backgrounds and experience. In addition, the
16
Board has determined that C. Mark Melliar-Smith, Chairman of the
Audit Committee, has accounting or related financial management
expertise, as defined by the NYSE listing standards. However,
based upon the Board’s interpretation of
Item 407(d)(5) of
Regulation S-K,
it has also determined that no member of the Audit Committee
meets the literal definition of an audit committee financial
expert. While there is no official guidance on the
interpretation of Item 407(d)(5), our Board interprets it
to be more restrictive than its counterpart definition in the
NYSE listing standards. Keeping in mind the ever changing nature
and increasing complexity of public company accounting rules,
the Board believes that the requirements of this definition can
be satisfied only by someone who (1) is a certified public
accountant and (2) maintains a broad and deep current
working knowledge of the application of current accounting
literature and practices in a business of the type and
complexity of that of the Company. Therefore, while the Board
fully endorses the effectiveness of our Audit Committee, we
conclude that its membership does not include an audit committee
financial expert within our understanding of the current meaning
of Item 407(d)(5) of
Regulation S-K.
The Board has determined that by satisfying the requirements of
the NYSE listing standards with a member of the audit committee
that has “financial management expertise,” and taking
into account the background and experience of the other members
of the Audit Committee, our Audit Committee has the financial
expertise necessary to effectively fulfill the duties and the
obligations of the Audit Committee. However, to further
strengthen the financial expertise of our Audit Committee, we
have nominated Mr. Crane and Mr. Reinhold with the
understanding that they will each meet the definition of an
audit committee financial expert.
Audit
Committee Report
Management is responsible for producing our financial statements
and for implementing and assessing our financial reporting
process, including our system of internal control over financial
reporting. KPMG LLP is responsible for performing an independent
audit of our consolidated financial statements and issuing
reports and opinions on the consolidated financial statements.
The Audit Committee’s responsibility is to assist the Board
of Directors in its oversight of our consolidated financial
statements.
The Audit Committee provided oversight on the progress and
results of our testing of internal control over financial
reporting. The Audit Committee also reviewed with management and
the independent auditors the scope of the annual audit and audit
plans, the results of internal and external audit examinations,
the quality of our financial reporting, our process for legal
and regulatory compliance and other matters.
In fulfilling the above responsibilities, the Audit Committee of
the Board of Directors has:
1. reviewed and discussed the audited consolidated
financial statements for the fiscal year ended December 31,2010 with our management;
2. discussed with our independent auditors the matters
required to be discussed by the Statement on Auditing Standards
No. 61, as amended (AICPA, Professional Standards, Vol. 1.
AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T;
3. received the written disclosures and the letter from our
independent auditors required by applicable requirements of the
Public Company Accounting Oversight Board regarding the
independent accountant’s communications with the Audit
Committee concerning independence, as the same were in effect on
the date of our consolidated financial statements; and
4. discussed with our independent auditors their
independence.
Based on the review and discussions referred to in the items
above, the Audit Committee recommended to the Board of Directors
that the audited consolidated financial statements for the
fiscal year ended December 31, 2010 be included in Pulse
Electronics Corporation’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010.
Members of the Audit Committee
C. Mark Melliar-Smith, Chairman
John E. Burrows
Edward M. Mazze
17
C:
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
This compensation discussion and analysis describes our
compensation philosophy, policies and practices for our Chief
Executive Officer, Chief Financial Officer, and other named
executive officers in the summary compensation table on
page 29. The executives named in the summary compensation
table are collectively referred to as NEOs. We refer to this
compensation discussion and analysis as the CD&A.
The principal elements of our executive compensation program
which are discussed in greater detail below include base salary,
annual cash incentives, long-term equity incentives, retirement
benefits and severance benefits. We strive to align the
interests of our executives with those of our shareholders.
The Compensation Committee of our Board of Directors is
comprised entirely of independent directors and is responsible
for establishing and administering our executive compensation
policies and practices. We refer to the Compensation Committee
as the “Committee” in this CD&A.
Objectives
of Our Executive Compensation Program
We have the following objectives for our executive compensation
program:
•
attract and retain talented and experienced executives;
•
motivate and reward executives whose performance is important to
our growth, profitability and success;
•
align the interests of our NEOs and shareholders by motivating
NEOs to accomplish objectives which we believe will increase
shareholder value;
•
provide a competitive compensation package which is heavily
weighted towards
pay-for-performance;
•
motivate NEOs to work collaboratively;
•
make our short-term cash incentives dependent upon annual
performance; and
•
compensate our NEOs for managing our business to meet our
long-term objective of increasing shareholder value.
Design
of our Executive Compensation Program
Our executive compensation program is designed to reward
performance. Our short-term cash incentive program is structured
so that payouts are dependent on the level of achievement
against planned financial target, including revenue, net
operating profit, and earnings per share. The targets are set
annually by our Board of Directors during our annual planning
cycle. In addition to rewarding performance, our long-term
equity incentives are designed to encourage continued future
service. Our mix of short-term and long-term compensation is
designed to promote a balance between the short-term and
long-term goals of the Company and our shareholders. In
addressing one of its goals for 2010, the committee undertook a
comprehensive review of all aspects of the executive
compensation program. It made changes determined to be necessary
to achieve the overall objectives of the executive compensation
program, particularly in aligning the program with the interests
of our shareholders. These changes are described on
pages 19 and 20.
Elements
of Compensation
Our compensation program for NEOs consists of base salary,
annual cash incentives, long-term equity incentives in the form
of restricted stock and stock options, retirement benefits,
severance benefits and certain perquisites as well as other
benefits that are generally available to all of our salaried
employees. Prior to 2010, our cash incentives were earned and
paid on a semi-annual basis. The committee implemented an
interim short-term incentive plan for 2010 while a new plan was
being developed in connection with our compensation consultants
for 2011 and beyond. A description of the 2010 interim plan is
on page 21.
18
Our CEO regularly attends committee meetings and plays a
significant role in the determination of each element of
incentive compensation for the NEOs. The CEO’s compensation
must be approved by our Board of Directors. During 2010, Pay
Governance LLC was engaged to advise our Compensation Committee
on matters related to recruiting a new CEO. The Committee also
worked with Pay Governance in designing our new incentive
compensation program effective in 2011 and obtaining market
compensation data for NEOs.
We compare our executives’ base salary and incentive
compensation against data from purchased compensation studies,
paid compensation consultants, surveys and databases. In
individual cases, the committee may look at survey data with
respect to an element of compensation for an NEO position
standing alone. This might relate to a promotion, an increase in
duties or a perceived discrepancy between a current salary and a
market rate of pay. These comparisons are used as one factor in
the determination of compensation. We believe data of this type
is most useful in evaluating base salary, as base salary data is
usually extracted directly from proxy statements. However, we do
not view such data as inherently reliable for cash incentive
compensation given the large variety of incentive compensation
plans in use and the lack of data regarding reasons for
incentive payouts. We expect that we will continue to purchase
studies, surveys and databases on an as needed basis. The
compensation data we have purchased in the past was compiled
from similarly sized publicly traded companies in the
electronics and electrical industries.
Although we review total compensation for each NEO, we do not
believe that compensation derived from one component should
negate, reduce or increase compensation from other components.
We establish base salary targets at approximately the market
midpoint for NEOs performing similar duties at comparable
companies. We determine the appropriate level annually for each
component of compensation based on a number of factors including
compensation studies, survey and database information that we
periodically purchase, our own assessment of internal equity and
consistency, executive retention considerations, market factors,
individual performance, levels of responsibility, expected
future contributions, expected and actual company performance,
and the competitive environment for NEOs. Through 2010, we did
not utilize compensation bands or specific allocations for types
or amounts of incentive compensation. The key determinant for
cash incentive compensation is the performance of the Company
and executives in the most recent period for which cash
incentive compensation is being determined.
Prior to 2010, the key determinants for equity incentive
compensation were the overall number of shares which the Company
could afford to issue in any period, the past performance of the
Company and the NEOs and the degree to which we believed that we
should incentivize NEOs to remain with the Company over the next
several years.
Since 2010 was a transition year of our executive compensation
program, equity incentive compensation awards in 2010 were a
hybrid of plans and philosophy existing prior to 2010 and a new
design effective for January 2011 and beyond. This is further
explained below in the section entitled “Long-Term Equity
Incentives” below.
In reviewing compensation for Mr. Papada, our CEO through
March 2010, the Board of Directors also reviewed an annual
summary sheet which set forth:
•
cash compensation, equity compensation and total compensation
for each of the three preceding fiscal years;
•
other benefits received in the last two years;
•
annual benefits upon retirement, including the supplemental
retirement plan, 401(k) plan and supplemental savings plan;
•
the current value of all shares of restricted stock awarded to
him since the beginning of his employment; and
•
his total benefit or payout in the event of a termination
without cause, resignation for good reason or a change in
control.
During 2010 our Compensation Committee made significant changes
to our executive compensation program. These changes were made
with the assistance of external independent executive
compensation consultants and were
19
completed to improve the alignment of our executive compensation
with shareholder interests. These changes included the following:
•
Issued stock options for a portion of long-term equity incentive
compensation to better align executive compensation with
increases in shareholder value. Previously, equity awards were
made exclusively with restricted stock. Under the new incentive
plan for 2011, 60% of equity awards to NEOs will be in the form
of stock options that will have no value to executives unless
our share price increases.
•
Terminated a supplemental executive retirement plan which we
refer to as a SERP, which existed for many years at the company
and was no longer deemed to be effective in achieving the
objectives of our executive compensation program.
•
Designed and implemented a new incentive compensation plan for
all named executives other than the CEO. Our new plan is called
the Pulse Electronics Annual and Long Term Incentive Plan.
•
Included claw back provisions in the CEO’s employment
agreement. Under these provisions, the CEO is required to repay
to the Company incentive awards in the event that the financial
results upon which they were based are found to be inaccurate.
Base
Salary
We review base salaries for our CEO and the other NEOs annually
to determine if a change is appropriate. If appropriate, changes
are effective in July. We also review base salaries upon a
promotion or other change in job responsibility or
circumstances. In 2011, we expect to review the base salaries of
certain NEOs in relation to cost of living differences between
Trevose, PA and San Diego, CA, if an NEO relocates to
San Diego in connection with the consolidation of our
corporate headquarters there. While we have not formally
established salaries based on external data, we periodically
obtain compensation data. We use this information in our annual
review of base salaries for our executives. We also review data
on base salary percentage increases projected for various
industries based on inflation data and expected industrial
sector performance. We strive to set base salaries at or near
the market median of companies approximately our size in revenue
and market category. Variations often occur after considering
the experience level of the individual, the geographic market
for a particular position and other factors. For 2010, we
believe that the base salaries of our NEOs were generally at or
near the targeted percentile. The benchmark used is base salary
for the United States national average for the electronic coils
and transformers industry for companies ranging in revenue size
from $500 million to $1.0 billion. Data reviewed for
setting base salary did not identify the names of the components
companies included in the survey.
In reviewing the base salaries of Mr. Papada,
Mr. Moloney, Mr. Moyer, Mr. Benjamin,
Mr. Shahnazarian, and Mr. McGrath, the committee
evaluated the compensation data described above, the
responsibilities and demands of each executive and the financial
and economic realities that the Company faced. The Committee
decided to increase the base salary of NEOs during 2010
following the absence of an increase in 2009. Furloughs and
other cost-savings measures, such as the suspension of the
401(k) match and contributions to the Supplemental Savings Plan,
which reduced NEOs compensation, were implemented at the Company
during 2009 and 2010. Base salary increases in 2010, effective
July 1, were: 5% for Mr. Moyer, 3% for
Mr. Benjamin, 3% for Mr. Shahnazarian, and 3% for
Mr. McGrath. The base salaries paid to our named executive
officers in 2010 are set forth below in the “Summary
Compensation Table.” We believe that the base salary paid
to each of our named executive officers during 2010 achieved our
executive compensation objectives.
Mr. Moloney resigned as CEO on August 1, 2010, and
Mr. Moyer was appointed Interim CEO and President. During
his service period as Interim CEO, Mr. Moyer was paid
$25,000 per month in base salary in addition to his salary as
CFO, a position he continued to hold while serving as Interim
CEO. Mr. Moyer was also our Corporate Secretary during 2010.
20
Cash
Incentives
The interim short-term incentive plan for 2010 was designed to
provide incentive compensation to company executives for
exceeding our operating profit plan as updated in the spring of
2010. This interim plan did not provide for incentive awards at
the plan level or below. The plan provided for funding a pool
using the following formula:
•
20% of the first $3 million of the actual net operating
profit in excess of $18.3 million
•
30% of the next $4 million of the actual net operating
profit in excess of $21.3 million
•
40% of the next $2 million of the actual net operating
profit in excess of $25.3 million
Net operating profit was defined as consolidated net operating
profit excluding severance, asset impairments and other special
charges related to actions which the committee believed were
important to simplify and restructure the Company and position
it for future growth and profitability. The planned level of net
operating profit for the period March 27, 2010 to
December 31, 2010 was $18.3 million and the actual net
operating profit was $21.3 million. This nine-month period
was the period covered by the interim plan. Under the interim
plan, the formula described above was applied to the operating
profit in excess of the planned level and an amount of $610,000
was paid under the plan. The maximum amount that could have been
earned using the formula described above was $2.6 million.
The earned amount of $610,000 was allocated to 61 participants
at approximately 30% of base salary during the incentive period
for officers, and 10% for director level positions. Each
participant’s award was then reduced proportionately to
result in a total funding of $610,000. The incentives paid to
our NEOs under this plan were $57,857 to Mr. Benjamin,
$40,318 to Mr. Shahnazarian, and $39,674 to
Mr. McGrath. As Interim CEO during 2010, Mr. Moyer did
not participate in the interim plan. Instead, specific goals and
weighted cash incentive amounts were defined by the Committee
for Mr. Moyer at the beginning of his tenure as Interim
CEO. These goals, target awards, achievements and total payments
of $156,251 are summarized below. Mr. Moyer’s tenure
as Interim CEO ended on January 5, 2011, when
Mr. Ralph E. Faison was named as our CEO.
Mr. Moyer’s goals provided for an award of up to
$260,417 with the achievement of goals weighted as follows:
•
75% of his goals were financial metrics consisting of third and
fourth quarter revenue of $115.4 million and
$111.7 million, respectively; third and fourth quarter net
operating profit of $7.1 million and $5.6 million,
respectively; third and fourth quarter earnings per share of
$0.12 and $0.05, respectively; and third and fourth quarter free
cash flow of $9.2 million and $11.2 million,
respectively.
•
The remaining 25% of his goals related to the development and
implementation of a wireless recovery plan for revenue and net
operating profit, the design and implementation of new incentive
compensation plans in connection with the Compensation
Committee, the completion of an updated analysis regarding
optimal capital structure following the divestiture of AMI
Doduco, completion of the integration of Pulse and Technitrol
into a single company, and the analyses and updating of our
corporate governance structure.
The CEO employment agreements we entered into with
Mr. Moloney and Mr. Faison provide for the Company to
recover cash incentives in the event that incentive awards are
later determined to be based on misleading or restated financial
performance metrics. However, we have not adopted a formal or
informal policy on whether we would attempt to recover cash
incentives paid to other NEOs to the extent our consolidated
financial statements are subsequently restated or adjusted and
the restatement or adjustment would result in the financial
target not being met.
The prior Short-Term Incentive Plan was implemented in 1999, and
was in effect through 2009. We referred to this plan as the
STIP. Under the STIP, executives named by the committee were
eligible to receive cash awards semi-annually based upon the
achievement of financial targets established by the Board of
Directors. In 2008 and 2009, each of the NEOs participated in
the STIP. The financial targets were economic profit, net
operating profit and earnings per share. Economic profit
reflects after-tax operating income less the imputed cost of
capital. Earnings per share reflects our after-tax net profit on
a per-share basis. Net operating profit represents earnings
before interest, taxes and other non-operating and non-recurring
items of the relevant business segment or the company as a whole.
21
Long-Term
Equity Incentives
General
We have an Incentive Compensation Plan which we refer to as the
ICP. We use this plan to incentivize key employees to continue
in the service of the company, to attract and retain key
employees, and to encourage and reward performance, which is
consistent with shareholder objectives. The committee
administers the ICP and has authority to develop and implement
forms of long-term incentive compensation for key employees.
Under the ICP, we established the 2001 Stock Option Plan and the
Restricted Stock Plan II. Although the ICP does not require the
committee to issue restricted stock, stock options or other
equity awards, we believe the issuance of such awards helps
ensure our executives are motivated over the long-term to
respond to the Company’s business challenges and
opportunities as owners and not just as employees. We also
believe that it helps us achieve our compensation program
objectives, including aligning the interests of our executives
with the interests of our shareholders.
In 2010, the committee adopted a number of changes to our
previous practices regarding long-term equity incentives.
Restricted stock awards were granted in May 2010 in a manner
similar to prior years. Mr. Moyer received an award of
28,000 restricted shares, Mr. Benjamin received 28,000
restricted shares, Mr. Shahnazarian received 15,000
restricted shares and Mr. McGrath received 12,000
restricted shares.
In connection with studies by our compensation consultant and
design of the new Pulse Electronics Annual and Long-Term
Incentive Plan for 2011, market-based targets were established
for long-term equity incentives for each NEO position. After
these were established in October 2010, the committee reviewed
the restricted stock award granted to each NEO earlier in the
year and compared the total value of each award to the
established target levels of annual long-term incentive
compensation for each executive position. The difference between
the value of the 2010 restricted stock award and the target
long-term incentive compensation value became the basis for
granting stock option awards in October 2010 in order to achieve
the target level of long-term equity compensation and the
objectives of the executive compensation program. The targets
established for total annual long-term equity incentives are
stated as a percentage of base salary. These are 50% for the COO
and CFO and 35% for other NEOs, except for the CEO. Our
CEO’s long-term incentive compensation is discussed
separately below. Option grants were issued to Mr. Moyer
for 6,812 shares (based solely on his position as CFO),
Mr. Benjamin for 7,515 shares, Mr. Shahnazarian
for 1,000 shares and Mr. McGrath for
6,943 shares. The stock options vest equally over
4 years starting on the first anniversary of the date of
grant and are exercisable for shares of our common stock at an
exercise price of $4.75 per share. The practice of issuing
annual stock option awards to executives was new in 2010. Prior
to 2010, no NEO had received an annual stock option award from
the Company.
The Company has no formal requirements relating to executive
stock ownership. From time to time, the committee has considered
requiring certain senior managers to hold a certain value of
equity in the Company and considered the equity holdings of the
senior managers, including the NEOs, at such time. The committee
plans to review the equity holdings of participants periodically.
Long-Term
Equity Incentives Awarded to Executives Other Than the
CEO
The method for determining the 2010 long term equity awards for
Mr. Moyer, Mr. Benjamin, Mr. Shahnazarian and
Mr. McGrath was based on a target level for each position
as described above. Prior to 2010, the committee, in
consultation with our CEO, determined the number of shares of
restricted stock that would be available for issuance to senior
management, excluding the CEO, under the RSP II. In making its
determination, the committee considered the Company’s
projected profits based on the annual business plan approved by
the Board of Directors, what was reasonable from our
shareholders’ perspective for expense and dilution, and the
total cost of related cash payments made to cover the
recipient’s Federal tax liability. The committee then
allocated the total number of shares of restricted stock that
would be available for grant to each of our business units and
our corporate staff for that year. At a subsequent point during
the fiscal year, the committee, in consultation with the CEO,
reviewed the financial results for the first half of our fiscal
year and the business plan for the remainder of the year to
determine whether any changes should be made to the number of
shares of restricted stock granted to other NEOs.
22
In reaching its decisions, the committee took into account the
recommendations of the CEO, evaluated whether and to what extent
the executive had met his or her individual performance goals,
the executive’s contributions and expected future
contributions, considered awards of restricted stock made to the
individual in prior years, discussed external market factors and
reviewed other compensation received by the executive that year.
In making its RSP II awards in 2009, the committee considered
the size of the prior awards made to each NEO, changes in
responsibilities in 2009, and the overall impact of the award to
the NEO’s total compensation. The committee also noted that
no executive had received a salary increase in 2009 or a STIP
payment during the previous three semi-annual periods.
The shares of restricted stock awarded to each NEO are described
below in the Grants of Plan-Based Awards Table. All shares are
subject to the three-year service vesting requirement under the
RSP II and do not have performance requirements. Vesting of
restricted stock is accelerated in certain events of termination
and in the event of a change in control of the Company.
Long-Term
Equity Incentives Awarded to the CEO
The CEO Annual and Long-Term Equity Process that was in place
prior to Mr. Papada’s retirement in 2010 had two parts:
•
an annual equity incentive which was determined by the degree to
which he achieved annual, objectively determinable by the Board,
non-financial goals as agreed upon by the Board and
Mr. Papada.
•
a long-term equity incentive which was determined by the degree
to which the Board determined that Mr. Papada had created
long-term value for the various constituents of the Company over
rolling three-year periods. The process involved reviewing the
Company’s achievements over the prior three years against a
number of objective criteria.
At the beginning of each year, the Board of Directors determined
the maximum number of shares the CEO could earn in his annual
equity incentive with a maximum of 15,000 shares and for
his long term equity incentive up to 12,000 shares, for a
maximum of 27,000 shares per year. At such time, the
performance criteria were established. The CEO’s long-term
equity award was based on the Board’s judgment regarding
how the Company had progressed over rolling three-year periods
relative to established performance criteria as described in our
RSP II as amended from time to time.
In January of each year, the CEO and the Board agreed on
non-financial goals for the year. In 2009, the CEO’s goals
were as follows: to do whatever was reasonably necessary to
complete the CEO succession by April 2010; to stabilize the
Company’s balance sheet through means he thought
appropriate; to refinance the Company’s funded debt as he
determined was necessary; and to bring expenses into line with
revenues as the recession continued to deepen.
At the end of each year, the Board determined to what degree
(from 0 to 100%) the CEO objectively achieved his annual goals
and earned his annual equity incentive for the year and to what
extent he achieved his long term goals and earned his annual
long-term equity award. To the extent earned, the restricted
stock was then issued at a future date chosen by the Board
following the Board’s determination. Any shares of
restricted stock earned by Mr. Papada had a one year
vesting period from the date of grant.
The Board reviewed Mr. Papada’s performance in
September 2009 and concluded that all of his short term goals
were met and agreed to award him 15,000 shares for the CEO
short term equity award on December 31, 2009. The Board
reviewed his long term equity award in December 2009 and
concluded that no award should be made. Accordingly,
Mr. Papada received 15,000 shares of restricted stock
in 2009, all of which vested immediately upon his retirement in
March 2010.
Severance
and Termination Benefits
Severance benefits contained in the employment agreements with
Mr. Moyer, Mr. Benjamin, and Mr. McGrath are
described below in the section, “Executive Employment
Arrangements.” Mr. Shahnazarian does not have an
employment agreement. We entered into an employment agreement
with Mr. Faison in January 2011 and may enter
23
into similar agreements or provide similar benefits to other
executives in the future. Severance benefits provided to
executives may include a lump sum payment, continuation of
salary, health insurance and other benefits for a specified
period of time, as well as accelerated vesting of restricted
stock and stock options.
The RSP II provides for accelerated vesting of restricted stock
awards upon certain events of termination of employment. If an
employee dies, becomes totally disabled or retires on or after
his normal retirement date prior to the expiration of the three
year vesting requirement, then the three year vesting
requirement ends and the shares are fully vested. In addition,
the Company will pay a cash award to cover the employee’s
estimated federal income tax liability. If an employee elects to
retire before his normal retirement date but after his early
retirement date or has employment terminated by the Company
other than for cause prior to the expiration of the three year
vesting requirement, then the employee is entitled to pro-rata
vesting of the shares and related cash award. If the employee
resigns or is terminated for cause prior to the vesting date,
any unvested shares revert back to the Company and the employee
has no further rights or interest in the shares. In the case of
termination of employment other than for cause or an
employee’s resignation, the committee may adjust the award
up or down in its sole discretion, taking into account factors
it determines to be relevant.
Our stock option plan also provides for accelerated vesting of
stock options upon certain events of termination of employment
in a manner similar to the vesting under the RSP II. The period
of exercisability is normally limited to 60 days following
termination. This is extended to one year if the termination is
due to disability, two years following early retirement, and six
months following a participant’s death. In the case of
death, the options may be exercised by the participant’s
estate, representative or descendant. In no event can the period
be extended later than the option expiration date.
Retirement
Plans
Qualified
Retirement Plan
We maintained a qualified defined benefit pension plan until
December 31, 2010, when we froze the plan. We refer to this
as the retirement plan and this plan was for employees who were
not covered by the Pulse Engineering, Inc. 401(k) Retirement
Savings Plan. Mr. Papada, Mr. Moyer, and
Mr. McGrath participated in the Retirement Plan during
2008, 2009 and 2010. Mr. Benjamin and Mr. Shahnazarian
did not because they were covered by the Pulse Engineering, Inc.
401(k) Retirement Savings Plan. We make contributions to the
retirement plan based upon actuarial calculations and the salary
and service of each participant. Pension benefits depend on the
employee’s final average salary and years of credited
service. The final average salary is the highest average base
salary over three consecutive years during the
10-year
period prior to termination of employment or the date of
retirement or, if sooner, the
10-year
period ending December 31, 2010.
Upon reaching normal retirement date, a participant is entitled
to receive annually upon retirement a single life annuity
payable in equal monthly installments as follows:
• For a participant with 30 or more years of credited
service:
•
27.5% of the participant’s final average compensation plus
18.75% of the participant’s final average compensation in
excess of “covered compensation”; or if greater
•
$2,400.
•
For a participant with less than 30 years of credited
service, the annual amount of retirement benefit determined
above multiplied by a fraction, the numerator of which is equal
to his years of credited service and the denominator of which is
30.
As an alternative to receiving benefits in the form of a single
life annuity, the participant may elect in writing to receive
benefits in one of the following optional forms:
•
Life annuity in level monthly payments, with either 60, 120 or
180 months certain. These payments are made to the
participant for life and continue to a beneficiary of the
participant for any period after the participant’s death
and before expiration of the months certain.
24
•
Joint and survivor annuity continuing for life in level monthly
payments to the participant and thereafter for life in level
monthly payments to a designated beneficiary, if surviving, at
either 50%, 75% (for plan years beginning on or after
January 1, 2008) or 100% (as stated in the election)
of the payments to the participant.
•
If the lump sum present value of a participant’s benefits
does not exceed $7,000, he or she may elect to receive his
benefits in a lump sum payment.
After attainment of the early retirement date, a participant may
elect early retirement in which event he shall be entitled to
either of the following:
•
Commencing at normal retirement date, a single life annuity
determined in accordance with the above formula for normal
retirement, based on years of credited service, or
•
Commencing at any time between the participant’s early
retirement date and normal retirement date, a single life
annuity determined as above, but reduced by
1/15
for each of the first 5 years and
1/30
for each of the next 5 years by which the payments commence
prior to normal retirement date.
Early retirement date of a participant means the first day of
the calendar month coincident with or next following the date
such participant attains age 55 and completes 5 years
of vested service. However, vested service is not determined
until the last day of the plan year in which such participant
completes 5 years of vested service.
Normal retirement date of a participant means the later of
age 65 or the fifth anniversary of the date the participant
commenced participation in the Retirement Plan.
Nonqualified
Supplemental Retirement Plan
Prior to its termination in 2010, we maintained the nonqualified
Technitrol, Inc. Supplemental Retirement Plan, which we refer to
as the Supplemental Retirement Plan or SERP. This plan
supplemented benefits of employees who participated in both our
Qualified Defined Benefit Pension Plan and the STIP.
Mr. Papada, Mr. Moyer and Mr. McGrath
participated in this plan.
On December 24, 2008, the SERP was amended primarily to
comply with the requirements of Section 409A of the
Internal Revenue Code and related regulations and other
guidance. The plan was amended and restated effective as of
December 31, 2004 for amounts accrued and vested as of
December 31, 2004. We refer to this as the Pre-409A Plan.
For amounts accrued and vested under the plan after
December 31, 2004, the plan was amended and restated
effective as of January 1, 2009. We refer to this as the
409A Plan. On July 9, 2009, our Board terminated the 409A
Plan because the sale of the Company’s MedTech subsidiaries
in June 2009 was a change in control under Section 409A. No
further benefits accrued under the plan after such date. In
connection with the termination of the 409A Plan, participants,
including Mr. Papada, Mr. Moyer and Mr. McGrath
and seven other present and former employees, received lump sum
payments of the benefits due to them under the plan. Payments
were made from the trust established under the Technitrol, Inc.
Grantor Trust Agreement dated July 5, 2006.
The termination of the 409A Plan had no effect on the trust or
the Pre-409A Plan. Benefits under the Pre-409A Plan continued to
be funded by the trust. The trust was irrevocable and was
subject to the claims of creditors in the event of insolvency.
Payment of benefits under the Pre-409A Plan was subject to the
Agreement for Settlement of Benefits under the Pre-409A SERP.
This agreement was entered into as of September 24, 2009
with Mr. Papada, Mr. Moyer, Mr. McGrath and other
employees who actively participated in the Pre-409A Plan. The
agreement clarified interpretations of the Pre-409A Plan
regarding its change of control provisions. The agreement also
addressed the timing and terms of Mr. Papada’s
retirement and consolidated various contracts with
Mr. Papada regarding his employment and retirement. In
accordance with the terms of the agreement, Mr. Papada,
Mr. Moyer, Mr. McGrath and other employees received
lump sum payments of the benefits due to them under the plan.
Benefits paid under the Pre-409A Plan depended upon the
employee’s final average compensation and years of credited
service. Final average compensation was defined as the
employee’s base salary and cash bonus (not in excess of 75%
of base salary in the calendar year in which it was paid) during
the highest 3 consecutive calendar years out of the last 10
calendar years.
25
Under the Pre-409A Plan, a participant who retired on or after
the normal retirement age with 20 or more years of service was
entitled to receive annually a single life annuity (payable in
equal monthly installments) equal to the difference between:
•
45% of final average compensation, and
•
the amount of the participant’s accrued benefits (in the
form of a straight life annuity) under the Technitrol, Inc.
Retirement Plan as of the date of retirement.
For a participant with less than 20 years of service, the
annual amount of retirement benefit was multiplied by a
fraction, with the numerator equal to his years of service and
the denominator equal to 20.
Under the Pre-409A Plan, normal retirement age was defined as
the later of age 65 or the fifth anniversary of
participation in the Technitrol, Inc. Retirement Plan. A
participant who retired on or after his or her early retirement
date, and prior to the normal retirement age, was entitled to
receive the following:
•
If a participant had 20 or more years of service, a single life
annuity was determined by the formula used for normal retirement
above, based on years of service at termination. The benefit
determined under the formula using 45% of final average
compensation was reduced by 5% per year when payments began
before age 62. The offset benefit determined under the
Technitrol Inc. Retirement Plan was reduced by the early
retirement reduction provisions of the plan. If payments began
on or after age 62, the benefit calculated as 45% of final
average compensation was not reduced.
•
If a participant had less than 20 years of service, a
single life annuity benefit was determined under the normal
retirement benefit above for a participant with less than
20 years of service, based on years of service and reduced
by
1/15
for each of the first five years, and
1/30
for each of the next five years for the time that payments
commenced prior to normal retirement age. Under the Pre-409A
Plan, early retirement date meant the first day of the calendar
month coincident with or the next month following the date the
participant attained age 55 and completed five years of
vesting service.
As an alternative to receiving benefits under the Pre-409A Plan
in the form of a single life annuity, a participant could have
elected to receive benefits in one of the following optional
forms:
•
a life annuity in level monthly payments, with either 60, 120 or
180 months certain. Payments would be made to the
participant for life and would continue to be paid to the
designated beneficiary of the participant for the period after
the participant’s death and before expiration of the months
certain.
•
a joint and survivor annuity continuing for life, in level
monthly payments to the participant and thereafter for life in
level monthly payments to a beneficiary, elected at either 50%
or 100% of the payments to the participant.
In the event of a change in control, the Supplemental Retirement
Plan provided for accelerated vesting of benefits and a lump sum
payment, as further discussed below under “Change in
Control.” For a definition of change in control under the
Supplemental Retirement Plan, see “Potential Payments Upon
Termination or Change in Control” below.
401(k)
Plans
Through December 31, 2010, employees of the
Company — previously named Technitrol, Inc. —
could participate in the Technitrol, Inc. 401(k) Retirement
Savings Plan. Employees of the Company’s subsidiary, Pulse
Engineering, Inc., could participate in the Pulse Engineering,
Inc. 401(k) Plan. On December 31, 2010, the two 401(k)
plans were merged into a single plan. This plan is now called
the Pulse Electronics Corporation 401(k) Retirement Savings
Plan. Mr. Moyer, Mr. Moloney, Mr. Papada and
Mr. McGrath participated in the Technitrol 401(k) Plan
during 2010. The Technitrol 401(k) Plan permitted employees of
Technitrol to set aside a portion of their income for retirement
savings. The plan provided a discretionary match. Historically,
the match was equal to 100% of the first 4% of eligible
compensation set aside by an employee up to the statutory
maximum. However, during most of 2009 and the first three months
of 2010, the company match under the Technitrol 401(k) Plan was
suspended. Mr. Benjamin and Mr. Shahnazarian
participated in the Pulse Engineering, Inc. 401(k) Plan during
26
2010. The Pulse Engineering, Inc. 401(k) Plan permitted
employees of Pulse Engineering, Inc. to set aside a portion of
their income for retirement savings. This plan also provided a
discretionary match. Historically, the match under this plan was
equal to 100% of the first 6% of eligible compensation set aside
by an employee up to the statutory maximum. However, during most
of 2009, and the first three months of 2010, the company match
under the Pulse Engineering, Inc. 401(k) plan was suspended. The
participation of the NEOs in these plans is on the same terms as
other participants in the 401(k) plans. Leased employees,
employees covered by a collective bargaining agreement (unless
the agreement provided that the bargaining unit members were
eligible to participate) and temporary employees could not
participate in either plan. The Company announced that its match
would be restored on a gradual basis beginning with the second
quarter of 2010 and the restoration was completed in the first
quarter of 2011.
Supplemental
Savings Plan
We maintain the Pulse Electronics Corporation Supplemental
Savings Plan for those U.S. employees, including the NEOs,
earning a base salary in excess of the maximum salary covered by
our qualified 401(k) plan. This maximum is set annually by the
IRS. Under the Supplemental Savings Plan, we may make matching
contributions on behalf of participants who made the maximum
permitted elective deferrals to our tax-qualified 401(k) plan
for the year equal to the excess of
•
the matching contributions that they would have received under
our tax-qualified 401(k) plans for the year if the Internal
Revenue Code limits on compensation and elective deferrals were
not applicable and if they had made elective deferrals of 4% of
their compensation (or 6% of compensation if they participated
in the Pulse Engineering, Inc. 401(k) Plan), over
•
the amount of the matching contributions actually made for them
for the year under our tax-qualified 401(k) plans.
Participants are 100% vested immediately in the Company’s
contributions. In addition, participants in the Supplemental
Savings Plan have the right to defer up to 20% of their
compensation (as defined under the Plan) per calendar year;
however, any deferred contribution in excess of 4% (or 6% for
Pulse Engineering, Inc.) of the participant’s compensation
for the applicable period is not considered for company matching
contributions. Participants may elect to invest their accounts
in a number of third party mutual funds offered by the
plan’s administrator. Participants may not make withdrawals
from their account during their employment, except that a
participant may apply to the administrator of the plan to
withdraw some or all of his account if such withdrawal is made
on account of an unforeseeable emergency under Section 409A
of the Internal Revenue Code.
The Supplemental Savings Plan generally provides that the
Company may make employer contributions to the accounts of
participants in any amount, as determined by the Company in its
sole discretion from time to time. The Company is not required
to treat all participants in the same manner in determining such
contributions. Because the company match under the tax-qualified
401(k) plans was suspended during 2009, the Company decided not
to make contributions to any participant’s supplemental
savings plan account for 2009. We expect to make contributions
to NEO accounts in 2011 related to 2010 compensation.
Under our Supplemental Savings Plan, distributions begin in the
month after termination or death of the participant. However, if
the participant is terminated for cause, he or she forfeits all
contributions made by the Company. At the election of the
participant, distributions can be made as a lump sum or under an
installment plan up to ten years.
Change
in Control
In the event of a change in control, our Restricted Stock Plan
II, 2001 Stock Option Plan and Supplemental Savings Plan provide
for certain benefits to participants. For the definition of
“change in control” under such plans, see
“Potential Payments Upon Termination or Change in
Control” below.
Our Restricted Stock Plan II provides that in the event
there is a change in control, the restriction period for any
shares granted under the plan terminates and all shares vest
100% and are distributed to employees accompanied by the
applicable cash awards intended to cover the estimated federal
income tax liability. Our 2001 Stock Option Plan
27
provides that in the event there is a change of control, all
options are immediately fully vested and exercisable. The
committee may elect to pay cash to participants in this case in
an amount equal to the excess of the market value of the common
stock over the exercise price of the options. Under the
Company’s Supplemental Savings Plan, upon a change in
control all participants have a nonforfeitable right to receive
the entire amount of their account balances under the plan and
all amounts must be paid as soon as administratively practicable.
Perquisites
and Other Benefits
Our executives are eligible to participate in all of our
employee benefit plans, such as medical, dental, vision, group
life insurance and disability insurance, and our 401(k) plan.
NEOs participate in these benefit plans on the same basis as our
other employees. Certain NEOs receive additional benefits
including higher amounts of life insurance and a company
provided car. Mr. Moyer receives reimbursement for club
membership dues to The Union League of Philadelphia which is
used primarily for company-related activities.
We do not own or lease a company airplane and do not employ
company drivers in the United States. We do not own or utilize
company-sponsored apartments or other living accommodations. Our
NEOs are required to fly in commercial aircraft and to stay in
hotels where we have negotiated favorable rates. These are the
same accommodations used by other company employees.
Tax
and Accounting Implications
Deductibility
of Executive Compensation
Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of compensation in excess of
$1 million paid to certain executive officers, including
the NEOs, unless certain specific and detailed criteria are
satisfied. We believe that it is often desirable and in our best
interest to deduct compensation payable to our executive
officers. Therefore, we consider the anticipated tax treatment
to our company and to our executive officers when we review and
establish compensation programs and payments. While no assurance
can be given that compensation will be fully deductible under
Section 162(m), we will continue to manage our executive
compensation program to preserve the related federal income tax
deductions. Individual exceptions may however occur in order to
ensure competitive levels of compensation for our executive
officers.
Nonqualified
Deferred Compensation
The American Jobs Creation Act of 2004 and related regulations
changed the tax rules applicable to nonqualified deferred
compensation arrangements. We believe we are operating in good
faith compliance with these statutory and regulatory provisions,
which were effective January 1, 2005, as they may relate to
the Supplemental Savings Plan and other nonqualified deferred
compensation arrangements. We expect to manage our nonqualified
deferred compensation arrangements in accordance with these
statutory and regulatory provisions. However, no assurance can
be given that our compensation arrangements will remain
compliant if these provisions are amended in the future. Also,
certain individual exceptions may be necessary in order to
ensure competitive levels of compensation for our executive
officers.
C:
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the Board of Directors has
reviewed and discussed the compensation discussion and analysis
required by Item 402(b) of
Regulation S-K
with management and, based upon such review and discussions, the
Compensation Committee recommended to the Board of Directors
that the compensation discussion and analysis be included in
this proxy statement.
Members of the Compensation Committee
John E. Burrows, Jr., Chairman
Howard Deck
28
C:
SUMMARY
COMPENSATION TABLE
The table below summarizes the total compensation paid to, or
earned by, each of the named executive officers (NEOs) for the
fiscal year ended December 31, 2010 and, where applicable,
the fiscal years ended December 25, 2009 and
December 26, 2008. This table includes information for
Daniel M. Moloney and James M. Papada, both of whom are no
longer officers of the Company. Mr. Papada retired from the
Company effective in March 2010, and Mr. Moloney resigned
in August 2010. The employment agreements we have with our NEOs
are discussed in further detail under the heading
“Executive Employment Arrangements.” Our NEOs
participate in the Company’s compensation plans which are
described above under the heading “Compensation Discussion
and Analysis.”
Change in
Pension
Value and
Non-Equity
Nonqualified
Stock
Option
Incentive Plan
Deferred
All Other
Awards
Awards
Compensation
Compensation
Compensation
Name and Principal
Salary
Bonus
($)
($)
($)
Earnings
($)
Total
Position
Year
($)
($)
(1)
(2)
(3)
($)(4)
(5)
($)
Drew A. Moyer,
2010
$
466,285
—
$
144,900
$
17,439
$
156,251
$
0
$
657,133
$
1,442,008
Interim Chief Executive
2009
$
339,900
—
$
133,850
—
—
$
94,490
$
2,001,541
$
2,569,781
Officer, Chief Financial
2008
$
347,604
—
$
142,080
—
—
$
88,832
$
99,384
$
677,900
Officer (PEO & PFO)
Daniel Moloney,
2010
$
279,688
$
300,000
—
—
—
N/A
$
216
$
579,904
Chief Executive Officer and President (served as CEO
March-August 2010)
James M. Papada, III,
2010
$
258,400
—
—
—
—
$
0
$
9,518,428
$
9,776,828
Chief Executive Officer
2009
$
707,200
—
$
65,700
—
—
$
0
$
2,504,506
$
3,277,406
and President (served as
2008
$
719,649
—
$
65,326
—
$
200,000
$
1,044,672
$
84,048
$
2,113,695
CEO Jan-March 2010)
Alan H. Benjamin,
2010
$
391,632
—
$
105,000
$
19,238
$
57,857
N/A
$
61,957
$
635,684
Senior Vice President
2009
$
325,951
—
$
150,550
—
—
N/A
$
104,963
$
581,464
2008
$
352,378
—
$
213,120
—
—
N/A
$
131,658
$
697,156
Roger Shahnazarian,
2010
$
252,572
—
$
56,250
$
2,560
$
40,318
N/A
$
46,690
$
398,390
Senior Vice President, Production Operations
Michael J. McGrath,
2010
$
243,323
—
$
45,000
$
17,774
$
39,674
$
0
$
145,215
$
490,986
Vice President, Treasury/ Tax
(1)
These amounts reflect the fair market value (closing price of
our shares of common stock on the New York Stock Exchange on the
date of grant) of the shares of common stock granted to our NEOs.
With respect to Mr. Moyer, the 2010 amount reflects the
value of 28,000 shares granted on May 24, 2010 when
our stock closed at $3.75 per share plus the value of
10,000 shares granted on July 31, 2010 when our stock
closed at $3.99 per share. The 2009 amount reflects the value of
8,000 shares granted on October 26, 2009 when our
stock closed at $8.35 per share plus the value of
15,000 shares granted on May 5, 2009 when our stock
closed at $4.47 per share. The 2008 amount reflects the value of
6,000 shares granted on April 23, 2008 when our stock
closed at $23.68 per share.
With respect to Mr. Papada, who retired in March 2010, the
2009 amount reflects the value of 15,000 shares granted on
December 31, 2009 when our stock closed at $4.38 per share.
The 2008 amount reflects the value of 17,800 shares granted
on January 2, 2009 when our stock closed at $3.67 per share.
With respect to Mr. Benjamin, the 2010 amount reflects the
value of 28,000 shares granted on May 24, 2010 when
our stock closed at $3.75 per share. The 2009 amount reflects
the value of 10,000 shares granted on October 26, 2009
when our stock closed at $8.35 per share plus the value of
15,000 shares granted on May 5, 2009 when our stock
closed at $4.47 per share. The 2008 amount reflects the value of
9,000 shares granted on April 23, 2008 when our stock
closed at $23.68 per share.
With respect to Mr. McGrath, the 2010 amount reflects the
value of 12,000 shares granted on May 24, 2010 when
our stock closed at $3.75 per share.
29
With respect to Mr. Shahnazarian, the 2010 amount reflects
the value of 15,000 shares granted on May 24, 2010
when our stock closed at $3.75 per share.
(2)
This amount represents the grant date fair value of stock
options calculated using the provisions of ASC 718 except
that no estimates of forfeitures have been taken into account.
See note 11 to the notes to consolidated financial
statements set forth in Pulse Electronics Corporation’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 for the
assumptions made in determining ASC 718 grant date fair
values.
(3)
These amounts reflect the cash incentive awards to the named
individuals under the Interim Short Term Incentive Plan for 2010
and the Short Term Incentive Plan (STIP) for previous years, but
do not include STIP awards paid during a year for the prior year.
(4)
These amounts reflect the actuarial increase in the present
value of the named executive officer’s benefits under our
qualified Retirement Plan and our non-qualified Supplemental
Retirement Plan. For Mr. Papada, Mr. Moyer and
Mr. McGrath, there was no increase for 2010. In fact the
value decreased by $4,450,307, $432,020, and $80,970,
respectively, due to lump-sum payments made from the Technitrol,
Inc. Grantor Trust under our Pre-409A Plan and subsequent
termination of the plan on October 20, 2010. The
assumptions used to calculate the actuarial present values were
the same as those used to measure the liabilities for the
financial disclosures for the retirement plans as of each
year-end, with the exception of the pre-retirement decrements
and assumed retirement age. Pre-retirement decrements were not
used for the purpose of these calculations. The discount rate
used for the calculations was 5.80% as of 12/31/2007, 6.20% as
of 12/31/2008, 6.0% as of 12/31/2009 (except for
Mr. Papada’s Pre-409A Plan benefit for which the rate
used was 4.25% and Mr. Moyer’s and
Mr. McGrath’s pre-409A Plan benefit for which the rate
used was 3.20% as of 12/31/2009) and 5.40% as of 12/31/2010. The
mortality table used was the RP 2000 table projected to 2012,
with blended rates for white/blue collar and active/retired
participants, sex distinct (except for Mr. Papada’s
pre-409A SERP benefits for which the mortality table used was
the RP 2000 annuitant, generational mortality for males and for
Mr. Moyer’s and Mr. McGrath’s pre-409A SERP
benefits for which the mortality table used was the RP
2000 employee mortality for males without collar
adjustment). Calculations were completed at the
participant’s earliest unreduced retirement age based on
the participant’s eligibility as of 12/31/2007, 12/31/2008,
12/31/2009 and 12/31/2010, respectively, except
Mr. Papada’s present value was calculated as of
12/31/2010 based on the 50% joint and survivor annuity he is
currently receiving. No named executive officer received
preferential or above-market earnings on deferred compensation.
(5)
For Mr. Moyer, the 2010 amount consists of (i) a
matching contribution of $131 for the 401(k) plan,
(ii) payment of a $314 life insurance premium, (iii) a
cash award of $78,023 to cover federal income tax liability for
restricted stock awarded in 2010, (iv) payment of $563,665
from the Technitrol, Inc. Grantor Trust under our Pre-409A Plan
and (vi) various miscellaneous perquisites of approximately
$15,000. The 2009 amount consists of (i) a matching
contribution of $523 for the 401(k) plan, (ii) payment of a
$293 life insurance premium, (iii) a cash award of $72,073
to cover federal income tax liability with respect to shares of
restricted stock awarded in 2009, (iv) a payment of
$1,908,948 from the Technitrol, Inc. Grantor Trust due to a
change in control as defined under the 409A Plan, (v) a
contribution of $4,707 under the Supplemental Savings Plan and
(vi) various miscellaneous perquisites of approximately
$15,000. The 2008 amount consists of (i) a matching
contribution of $9,200 for the 401(k) plan, (ii) payment of
a $450 life insurance premium, (iii) a cash award of
$76,504 to cover federal income tax liability with respect to
shares of restricted stock awarded in 2008, (iv) a matching
contribution of $3,230 under the Supplemental Savings Plan and
(v) various miscellaneous perquisites of approximately
$10,000. The perquisites for 2010, 2009 and 2008 include a
health club membership (the same as given to all other Pulse
employees), company-provided automobile and membership dues to
The Union League of Philadelphia.
For Mr. Moloney, the 2010 amount consists of payment of
$216 life insurance premium.
For Mr. Papada, the 2010 amount consists of (i) $422
in life insurance premium, (ii) $9,339,118 from the
Technitrol, Inc. Grantor Trust in connection with the
termination of the Company’s Pre-409A Plan,
(iii) $143,888 to cover federal income tax liability with
respect to the shares of restricted stock awarded in 2010, and
(iv) various miscellaneous perquisites, including title to
his automobile, which total approximately $35,000. The 2009
amount consists of (i) a matching contribution of $1,088 in
the Pulse Electronics Corporation 401(k) Retirement Savings
Plan, (ii) payment of a $1,457 life insurance premium,
(iii) $81,719
30
to cover federal income tax liability for shares of restricted
stock awarded in 2009, (iv) $2,123,656 from the Technitrol,
Inc. Grantor Trust due to a change in control as defined under
the 409A Plan, (v) a contribution of $19,586 pursuant to
the Supplemental Savings Plan, (vi) a non-STIP cash award
of $267,000 and (vii) various miscellaneous perquisites of
approximately $10,000. The 2008 amount consists of (i) a
matching contribution of $9,200 in the Pulse Electronics
Corporation 401(k) Retirement Savings Plan, (ii) payment of
a $988 life insurance premium, (iii) $46,342 to cover
federal income tax liability for 17,800 shares of
restricted stock granted in January 2009 for 2008 performance,
(iv) a matching contribution of $17,518 for the
Supplemental Savings Plan and (v) various miscellaneous
perquisites of approximately $10,000.
For Mr. Benjamin, the 2010 amount consists of (i) a
matching contribution of $4,836 in the Pulse Electronics
Corporation 401(k) Plan, (ii) $583 life insurance premium
and (iii) a cash award of $56,538 to cover federal income
tax liability for restricted stock awarded in 2010. The 2009
amount consists of (i) a matching contribution of $727 for
the Pulse Engineering, Inc. 401(k) Plan, (ii) $96,400 to
cover federal income tax liability for restricted stock awarded
in 2009 and (iii) a contribution of $7,331 for the
Supplemental Savings Plan. The 2008 amount consists of
(i) a matching contribution of $13,800 for the 401(k) Plan,
(ii) $114,756 to cover federal income tax liability for
restricted stock awarded in 2008 and (iii) a matching
contribution of $3,102 for the Supplemental Savings Plan.
For Mr. McGrath, the 2010 amount consists of (i) a
matching contribution of $1,699 for the 401(k) Retirement
Savings Plan, (ii) payment of a $328 life insurance
premium, (iii) $500 for opting out of Pulse’s medical
coverage, and (iii) $142,688 from the Technitrol, Inc.
Grantor Trust in connection with the termination of the
Company’s Pre-409A Plan.
For Mr. Shahnazarian, the 2010 amount consists of
(i) a matching contribution of $6,126 for the 401(k) Plan,
(ii) $502 life insurance premium and (iii) $40,062 to
cover federal income tax liability for restricted stock awarded
in 2010.
C:
GRANTS OF
PLAN-BASED AWARDS TABLE
The table below summarizes the grants of plan-based awards to
each of the NEOs for the fiscal year ended December 31,2010. The compensation plans under which the grants were made
are generally described above under the heading
“Compensation Discussion and Analysis.”
Mr. Moloney resigned on August 1, 2010, at which time
all of the 360,000 options granted under his Employment
Agreement on March 22, 2010 were cancelled.
(3)
These shares were awarded under our Restricted Stock Plan II, as
amended and restated as of March 1, 2010. The shares will
vest upon expiration of the third anniversary of the award
provided the officer is an employee on such date.
31
(4)
These shares were awarded under our Restricted Stock Plan II, as
amended and restated as of March 1, 2010. The shares will
vest upon expiration of the first anniversary of the award
provided the officer is an employee on such date.
(5)
These options were awarded under our 2001 Employee Stock Option
Plan, as amended and restated on March 1, 2010. The grants
vest equally over four years starting on the first anniversary
date after the grant.
(6)
For a restricted stock grant, the stock award values were
calculated by multiplying the closing price of our common stock
on the New York Stock Exchange on the date of the grant by the
number of shares awarded. Dividends are paid on restricted stock
to the extent dividends are declared on shares of our common
stock. The option award values were calculated using the
provisions of Accounting Standards Codification
(“ASC”) 718, Compensation-Stock Compensation except
that no estimates of forfeitures have been taken into
account.
C:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END TABLE
The table below summarizes the outstanding equity awards of each
of the NEOs for the fiscal year ended December 31, 2010.
Option Awards
Stock Awards
Market
Number of
Number of
Number of
Value of
Securities
Securities
Shares or
Shares or
Underlying
Underlying
Units of
Units of
Unexercised
Unexercised
Stock That
Stock That
Options
Options
Option
Option
Have Not
Have Not
Exercisable
Unexercisable
Exercise
Expiration
Vested
Vested
Name
(#)
(#)(1)
Price ($)
Date
(#)
($)(6)
Drew A. Moyer
0
6,812
$
4.75
10/27/2017
67,000
(2)
$
356,440
Alan H. Benjamin
0
7,515
$
4.75
10/27/2017
62,000
(3)
$
329,840
Roger Shahnazarian
0
1,000
$
4.75
10/27/2017
36,500
(4)
$
194,180
Michael J. McGrath
0
6,943
$
4.75
10/27/2017
26,000
(5)
$
138,320
(1)
All of the option awards in this table were granted to the NEOs
under the Company’s 2001 Employee Stock Option Plan, as
amended and restated March 1, 2010. The grants vest equally
over four years starting on the first anniversary date after the
grant, therefore 25% will vest on October 27, 2011, 25% on
October 27, 2012, 25% on October 27, 2013, and 25% on
October 27, 2014.
The market values were computed by multiplying the number of
unvested shares by $5.32, which was the per share closing price
of our common stock on the New York Stock Exchange on
December 31, 2010.
32
C:
OPTION
EXERCISES AND STOCK VESTED TABLE
The following table provides information regarding amounts
realized on restricted stock awards that vested during 2010.
There were no option exercises during 2010.
These shares vested to Mr. Moyer, Mr. Benjamin,
Mr. McGrath and Mr. Shahnazarian on April 26,2010.
(3)
These values were computed by multiplying the number of vested
shares by the per share closing price of our common stock on the
New York Stock Exchange on the vesting date.
C:
PENSION
BENEFITS TABLE
The following table sets forth the present accumulated value of
benefits that NEOs are entitled to receive under the Technitrol,
Inc. Retirement Plan and their years of credited service under
that plan. The terms of the Retirement Plan are generally
described above under the heading “Compensation Discussion
and Analysis.”
Mr. Benjamin and Mr. Shahnazarian do not participate
in the Technitrol, Inc. Retirement Plan.
(3)
The Company has no formal policy with regard to granting extra
years of credited service.
(4)
The assumptions used to calculate these values are discussed in
the Summary Compensation Table.
33
C:
NONQUALIFIED
DEFERRED COMPENSATION TABLE
The following table provides information regarding our
Supplemental Savings Plan for our NEOs in 2010. The terms are
generally described above under the heading “Compensation
Discussion and Analysis”.
Executive
Aggregate
Contributions
Company
Aggregate
Balance at
in Last
Contributions in
Aggregate Earnings
Withdrawals/
Last Fiscal
Fiscal Year
Last Fiscal Year
in Last Fiscal Year
Distributions
Year-End
Name
($)
($)(1)
($)(2)
($)
($)
James M Papada, III
—
—
—
$
143,888
(3)
—
Daniel Moloney
—
—
—
—
—
Drew A. Moyer
—
—
$
2,614
—
$
15,443
Alan H. Benjamin
—
—
$
2,687
—
$
17,401
Roger Shahnazarian
—
—
—
—
$
627
Michael J. McGrath
—
—
—
—
—
(1)
Due to changes within the Company’s 401(k) plan including
suspending the company match, we did not make contributions to
the Supplemental Savings Plan in 2010. Supplemental savings
contributions will resume for the 2011 plan year.
(2)
Earnings are determined by investment options selected by the
NEO. Earnings from these investments are not reported as
compensation in the Summary Compensation Table.
(3)
Mr. Papada withdrew the total aggregate of his funds under
the Supplemental Savings Plan in connection with his retirement
from the Company.
34
C:
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The tables below reflect potential payments we would have been
required to make to our NEOs given various scenarios if the
officer’s employment had been terminated or a change in
control had occurred on December 31, 2010. This was the
last day of our most recently completed fiscal year. The amounts
shown are estimates. Actual amounts payable to an executive
under each scenario can only be determined at the time the event
occurs. The amounts reflected do not include payments or
benefits which are provided generally to salaried employees upon
termination of employment, death or disability, including the
following:
•
accrued pay and vacation time;
•
regular pension benefits under the Technitrol, Inc. Retirement
Plan;
•
distributions of plan balances under the Company’s 401(k)
Retirement Savings Plans; and
•
disability payments under the Company’s long-term
disability insurance policy when an employee’s employment
is terminated due to complete disability (payments equal 60% of
base salary up to a maximum of $8,000 per month, subject to
reductions from certain sources of income, until the disability
ends or the executive reaches age 65, unless the disability
occurs after age 61 in which event the maximum period of
payment is extended beyond age 65 according to a schedule
set forth in the plan).
Drew
A. Moyer
The following table shows the estimated payments that would have
been made to Mr. Moyer had his employment been terminated
or a change in control occurred on December 31, 2010. For
purposes of this table, when we use the term “change in
control” we assume that the triggering event is sufficient
to meet the definitions of change in control under
Mr. Moyer’s employment agreement, our 2001 Stock
Option Plan, Supplemental Savings Plan and RSP II Plan. For a
description of Mr. Moyer’s employment arrangements,
see below under the heading “Executive Employment
Agreements.” All payments to be made to Mr. Moyer upon
termination of his employment are conditioned on his execution
of a general release under which Mr. Moyer must release us
from any and all claims relating to his employment or otherwise,
except for certain obligations of the Company that continue
after his termination.
Termination by the
Company w/o Cause
or by Mr. Moyer
Termination for
Complete
Change in
Benefit
Resignation
For Good Reason
Cause
Disability
Death
Control
RSP II
0
$
356,440
(2)
0
$
356,440
(6)
$
356,440
(6)
$
356,440
(6)
Severance
0
$
937,125
(3)
0
0
0
0
Stock Options
0
$
3,883
(2)(9)
0
0
0
$
3,883
(8)(9)
Supplemental Savings
$
15,443
(1)
$
15,443
(1)
0
$
15,443
(1)
$
15,443
(1)
$
15,443
(1)
Insurance Premiums
0
$
25,000
(4)
0
0
0
0
Life Insurance
0
0
0
0
$
200,000
(7)
0
Benefits and Perquisites
0
$
105,000
(5)
0
0
0
0
TOTAL
$
15,443
$
1,442,891
0
$
371,883
$
571,883
$
375,766
(1)
This amount reflects Mr. Moyer’s balance in the
Supplemental Savings Plan at December 31, 2010.
Mr. Moyer is entitled to the balance under this plan upon
retirement or termination of employment other than for cause. If
terminated for cause, Mr. Moyer must forfeit the
Company’s contributions to the plan.
(2)
Per the terms of Mr. Moyer’s employment agreement
(further described below under the section entitled
“Executive Employment Arrangements”), upon termination
without cause or by Mr. Moyer for good reason, all shares
of restricted stock and all stock options which are held by
Mr. Moyer and not yet vested would be immediately vested.
Therefore, the amounts in the table reflect the respective value
of the shares of restricted stock and of options that would have
vested to Mr. Moyer had his employment been terminated by
the Company without cause or by Mr. Moyer for good reason
on December 31, 2010.
35
(3)
This amount reflects 2.625 times Mr. Moyer’s base
salary that pursuant to his employment agreement Mr. Moyer
would have been entitled to receive had his employment been
terminated by the Company without cause or by Mr. Moyer for
good reason on December 31, 2010.
(4)
This amount reflects the estimated cost of 18 months of
future health and life insurance premiums and future dues for a
health club membership and 12 months of outplacement
services that Mr. Moyer would have been entitled to receive
pursuant to his employment agreement had his employment been
terminated by the Company without cause or by Mr. Moyer for
good reason on December 31, 2010.
(5)
This amount reflects the estimated value of the title to
Mr. Moyer’s automobile and a one time equity award
Mr. Moyer would be entitled to receive pursuant to his
employment agreement had his employment been terminated by the
Company without cause or by Mr. Moyer for good reason on
December 31, 2010.
(6)
According to the terms of our RSP II, a participant is entitled
to full vesting of any unvested shares of restricted stock upon
a complete disability, death or a change in control of the
Company. Accordingly, the amount in the table reflects the value
on December 31, 2010 of 67,000 unvested shares of
restricted stock that would become fully vested upon a complete
disability, death or change in control.
(7)
This amount reflects the life insurance proceeds that under the
Company sponsored life insurance plan would have become payable
to Mr. Moyer’s estate had he died on December 31,2010.
(8)
According to the terms of our 2001 Stock Option Plan, upon a
change in control of the Company, all options shall be
immediately exercisable and fully vested.
(9)
At the discretion of the Executive Compensation Committee,
Mr. Moyer may receive cash in an amount equal to the excess
of the market value of the common stock subject to the options
over the exercise price of such shares, in exchange for the
cancellation of such options. The market value of our common
stock on December 31, 2010 was $5.32 and the exercise price
of these 6,812 shares was $4.75 per share for a difference
of $0.57 per share.
Alan
H. Benjamin
The following table shows the estimated payments that would have
been made to Mr. Benjamin had his employment been
terminated or a change in control of the Company occurred on
December 31, 2010. For purposes of this table, when we use
the term “change in control” we assume that the
triggering event is sufficient to meet the definitions of change
in control under Mr. Benjamin’s employment agreement
and our 2001 Stock Option Plan, Supplemental Savings Plan and
RSP II Plan. For a description of Mr. Benjamin’s
employment arrangements, see below under the heading
“Executive Employment Agreements.” All payments to be
made to Mr. Benjamin upon termination of his employment are
conditioned on his execution of a general release pursuant to
which Mr. Benjamin must release the Company from any and
all claims relating to his employment or otherwise, except for
certain obligations of the Company that continue after his
termination.
Termination by the
Company w/o Cause
or by Mr. Benjamin
Termination for
Complete
Change in
Benefit
Resignation
For Good Reason
Cause
Disability
Death
Control
RSP II
0
$
329,840
(2)
0
$
329,840
(5)
$
329,840
(5)
$
329,840
(5)
Severance
0
$
1,028,034
(3)
0
0
0
0
Stock Options
0
0
0
0
0
$
4,284
(6)
Supplemental Savings
$
17,401
(1)
$
17,401
(1)
0
$
17,401
(1)
$
17,401
(1)
$
17,401
(1)
Insurance Premiums
0
$
25,000
(4)
0
0
0
0
TOTAL
$
17,401
$
1,400,275
0
$
347,241
$
347,241
$
351,525
(1)
This amount reflects Mr. Benjamin’s balance in the
Supplemental Savings Plan at December 31, 2010.
Mr. Benjamin is entitled to the balance under this plan
upon retirement or termination of employment other than for
cause. If terminated for cause, Mr. Benjamin must forfeit
the Company’s contributions to the plan.
36
(2)
Per the terms of Mr. Benjamin’s employment agreement
(further described below under the section entitled
“Executive Employment Arrangements”), upon termination
without cause or by Mr. Benjamin for good reason, all
shares of restricted stock which are held by Mr. Benjamin
and not yet vested would be immediately vested. Therefore, the
amounts in the table reflect the respective value of the shares
of restricted stock that would have vested to Mr. Benjamin
had his employment been terminated by the Company without cause
or by Mr. Benjamin for good reason on December 31,2010.
(3)
This amount reflects 2.625 times Mr. Benjamin’s base
salary that according to his employment agreement
Mr. Benjamin would have been entitled to receive had his
employment been terminated by the Company without cause or by
Mr. Benjamin for good reason on December 31, 2010.
(4)
This amount reflects the estimated cost of 18 months of
future health and life insurance premiums and future dues for a
health club membership and 12 months of outplacement
services that Mr. Benjamin would have been entitled to
receive according to his employment agreement had his employment
been terminated by the Company without cause or by
Mr. Benjamin for good reason on December 31, 2010.
(5)
According to the terms of our RSP II, a participant is entitled
to full vesting of any unvested shares of restricted stock upon
a complete disability, death or a change in control of the
Company. Accordingly, the amount in the table reflects the value
on December 31, 2010 of 62,000 unvested shares of
restricted stock that would become fully vested upon a complete
disability, death or change in control.
(6)
According to the terms of our 2001 Stock Option Plan, upon a
change in control of the Company, all options become immediately
exercisable and fully vested. At the discretion of the Executive
Compensation Committee, Mr. Benjamin may receive cash in an
amount equal to the excess of the market value of the common
stock subject to the options over the exercise price of such
shares, in exchange for the cancellation of such options. The
market value of our common stock on December 31, 2010 was
$5.32 and the exercise price of these shares was $4.75 per share
for a difference of $0.57 per share.
Michael
J. McGrath
The following table shows the estimated payments that would have
been made to Mr. McGrath had his employment been terminated
or a change in control occurred on December 31, 2010. For
purposes of this table, when we use the term “change in
control” we assume that the triggering event is sufficient
to meet the definitions of change in control under
Mr. McGrath’s employment agreement, our 2001 Stock
Option Plan and our RSP II Plan (for these definitions, see
below under the heading “Definition of Change in Control
and Other Terms”). For a description of
Mr. McGrath’s employment arrangement, see below under
the heading “Executive Employment Agreements.” All
payments to be made to Mr. McGrath upon termination of his
employment are conditioned on his execution of a general release
pursuant to which Mr. McGrath must release us from any and
all claims relating to his employment or otherwise, except for
certain obligations of the Company that continue after his
termination.
Termination by the
Company w/o Cause
or by Mr. McGrath
Termination for
Complete
Change in
Benefit
Resignation
For Good Reason
Cause
Disability
Death
Control
RSP II
0
$
138,320
(1)
0
$
138,320
(5)
$
138,320
(5)
$
138,320
(5)
Severance
0
$
243,323
(2)
0
0
0
0
Stock Options
0
$
3,958
(3)
0
0
0
$
3,958
(6)
Insurance Premiums
0
$
10,000
(4)
0
0
0
0
TOTAL
0
$
395,601
0
$
138,320
$
138,320
$
142,278
(1)
Per the terms of Mr. McGrath’s employment agreement
(further described below under the section entitled
“Executive Employment Arrangements”), upon termination
without cause or by Mr. McGrath for good reason, all shares
of restricted stock which are held by Mr. McGrath and not
yet vested would be immediately vested. Therefore, the amounts
in the table reflect the respective value of the shares of
restricted stock that would have vested to Mr. McGrath had
his employment been terminated by the Company without cause or
by Mr. McGrath for good reason on December 31, 2010.
Mr. McGrath may also be entitled to a cash award to cover
federal income tax liability with respect to the shares of
restricted stock.
37
(2)
This amount reflects 12 months of Mr. McGrath’s
base salary that Mr. McGrath would have been entitled to
receive pursuant to his employment agreement had his employment
been terminated by the Company without cause or by
Mr. McGrath for good reason on December 31, 2010.
(3)
The amount in the table reflects the intrinsic value of 6,943
options that would become fully vested pursuant to
Mr. McGrath’s employment agreement upon termination of
Mr. McGrath’s employment without cause or for good
reason.
(4)
This amount reflects the estimated cost of 12 months of
outplacement services that Mr. McGrath would have been
entitled to receive pursuant to his employment agreement had his
employment been terminated by the Company without cause or by
Mr. McGrath for good reason on December 31, 2010.
(5)
According to the terms of our RSP II, a participant is entitled
to full vesting of any unvested shares of restricted stock upon
a complete disability, death or a change in control of the
Company. Accordingly, the amount in the table reflects the value
on December 31, 2010 of 26,000 unvested shares of
restricted stock that would become fully vested upon a complete
disability, death or change in control. Mr. McGrath may
also be entitled to a cash award to cover federal income tax
liability with respect to the shares of restricted stock.
(6)
According to the terms of our 2001 Stock Option Plan, upon a
change in control of the Company, all options shall be
immediately exercisable and fully vested. At the discretion of
the Executive Compensation Committee, Mr. McGrath may
receive cash in an amount equal to the excess of the market
value of the common stock subject to the options over the
exercise price of such shares, in exchange for the cancellation
of such options. The market value of our common stock on
December 31, 2010 was $5.32 and the exercise price of these
shares was $4.75 per share for a difference of $0.57 per share.
Roger
Shahnazarian
The following table shows the estimated payments that could have
been made to Mr. Shahnazarian had his employment been
terminated or a change in control of the Company occurred on
December 31, 2010. For purposes of this table, when we use
the term “change in control” we assume that the
triggering event is sufficient to meet the definitions of change
in control under our 2001 Stock Option Plan, Supplemental
Savings Plan and RSP II Plan (for these definitions, see below
under the heading “Definition of Change in Control and
Other Terms”).
Termination by the
Company w/o Cause
or by Mr. Shahnazarian
Termination for
Complete
Change in
Benefit
Resignation
For Good Reason
Cause
Disability
Death
Control
RSP II
0
$
78,248
(2)
0
$
194,180
(4)
$
194,180
(4)
$
194,180
(4)
Severance
0
$
252,572
(3)
0
0
0
0
Supplemental Savings
$
627
(1)
$
627
(1)
0
$
627
(1)
$
627
(1)
$
627
(1)
Stock Options
0
0
0
0
0
$
570
(5)
TOTAL
$
627
$
331,447
0
$
194,807
$
194,807
$
195,377
(1)
This amount reflects Mr. Shahnazarian’s balance in the
Supplemental Savings Plan at December 31, 2010.
Mr. Shahnazarian is entitled to the balance under this plan
upon retirement or termination of employment other than for
cause. If terminated for cause, Mr. Shahnazarian must
forfeit the Company’s contributions to the plan.
(2)
The amount in the table reflects the value of the
36,500 shares of restricted stock that would have vested to
Mr. Shahnazarian had his employment been terminated by the
Company without cause or by Mr. Shahnazarian for good
reason on December 31, 2010.
(3)
This amount reflects 12 months of
Mr. Shahnazarian’s base salary that
Mr. Shahnazarian would have been entitled to receive had
his employment been terminated by the Company without cause or
by Mr. Shahnazarian for good reason on December 31,2010.
(4)
According to the terms of our RSP II, a participant is entitled
to full vesting of any unvested shares of restricted stock upon
a complete disability, death or a change in control of the
Company. Accordingly, the amount in the table reflects the value
of 36,500 unvested shares of restricted stock that would become
fully vested upon a complete disability, death or change in
control.
38
(5)
According to the terms of our 2001 Stock Option Plan, upon a
change in control of the Company, all options shall be
immediately exercisable and fully vested. At the discretion of
the Executive Compensation Committee, Mr. Shahnazarian may
receive cash in an amount equal to the excess of the market
value of the common stock subject to the options over the
exercise price of such shares, in exchange for the cancellation
of such options. The market value of our common stock on
December 31, 2010 was $5.32 and the exercise price of these
shares was $4.75 per share for a difference of $0.57 per share.
Definition
of Change in Control and Other Terms
At our 2010 Annual Meeting, our shareholders approved an
amendment to our 2001 Stock Option Plan and Restricted Stock
Plan II so that the term “change in control”
means the occurrence of any of the following events:
(1) any person other than the Company or any of its
subsidiaries is or becomes the “beneficial owner”
directly or indirectly of securities of Pulse Electronics
Corporation representing more than 50% of the combined voting
power of our then outstanding securities; or
(2) the consummation of any consolidation or merger of the
Company in which Pulse Electronics Corporation is not the
continuing or surviving corporation or pursuant to which the
Company’s voting common stock would be converted into cash,
securities
and/or other
property, other than a merger of the Company in which holders of
the common stock immediately prior to the merger have
substantially the same proportionate ownership of voting shares
of the surviving corporation immediately after the merger as
they had in the common stock immediately before the
merger; or
(3) any sale, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company; or
(4) the Company’s shareholders or Board of Directors
approves the liquidation or dissolution of the Company.
Under our Supplemental Savings Plan and 2001 Stock Option Plan,
as amended, the term “cause” has the meaning set forth
in any unexpired employment or severance agreement between the
participant and the Company or a subsidiary. In the absence of
any such agreement (which is described below under the heading
“Executive Employment Agreements”), the term
“cause” means (A) the continued and willful
failure of the employee to follow the lawful orders of
his/her
direct superior, (B) violation by the employee of a
published rule or regulation of the Company or a provision of
our Statement of Principles (in effect from time to time) or
(C) conviction of a crime which renders the employee unable
to perform
his/her
duties effectively; provided that in the case of (A) or
(B), the Company has given the employee written notice of the
action or omission which the Company believes to constitute
“cause” and the employee has had 30 calendar days to
cure such action or omission.
Under our Restricted Stock Plan II, as amended, the term
“cause” shall have the meaning set forth in any
unexpired employment or severance agreement between the
participant and the Company or a subsidiary. In the absence of
any such agreement and pursuant to Mr. McGrath’s
employment agreement, the term “cause” means
(A) the continued and willful failure of the employee to
follow the lawful orders of
his/her
direct superior, (B) violation by the employee of a
material published rule or regulation of the Company or a
provision of our Statement of Principles (in effect from time to
time) or (C) conviction of a crime which renders the
employee unable to perform
his/her
duties effectively; provided that in the case of (A) or
(B), the Company has given the employee written notice of the
action or omission which Pulse believes to constitute cause and
the employee has had 30 calendar days to cure such action or
omission.
Under Mr. Moyer’s employment agreement (which is
described below under the heading “Executive Employment
Arrangements”), the term “cause” means any of the
following:
(a) the occurrence of gross negligence or willful
misconduct which is materially injurious to the Company and
which, if susceptible of cure, is not cured within thirty
(30) days after notice to Mr. Moyer which cites with
reasonable particularity the actions or omissions believed to
constitute such gross negligence or willful misconduct;
(b) conviction of or the entry of a pleading of guilty or
nolo contendere to any felony, unless the Board of Directors
concludes in good faith that such event does not render
Mr. Moyer unable to
39
effectively perform his duties as Chief Financial Officer or
materially and adversely affect the Company’s reputation or
ongoing business activities; or (c) misappropriation of the
Company’s funds or other dishonesty which in the good faith
opinion of the Board of Directors, renders Mr. Moyer unable
to effectively manage the Company or materially and adversely
affects the Company’s reputation or ongoing business
activities; and
the term “good reason” means:
(a) a material change in Mr. Moyer’s authority,
duties or responsibilities, other than an end to
Mr. Moyer’s “Interim Service Agreement”
(b) the failure of the Company or the board to act in good
faith with respect to the Agreement or the failure to perform
its material obligations under the Agreement which have not been
cured within twenty (20) days after written notice from
Mr. Moyer setting forth the acts or omissions alleged to
constitute such a failure with reasonable particularity, or
(c) any actual reduction in Mr. Moyer’s annual
base salary or (d) the Company requiring Mr. Moyer to
be based at any office or location which is located more than
25 miles from Trevose, PA, or (e) failure to be
included in any benefit plan in which all other senior similarly
situated executives participate.
Under Mr. Benjamin’s employment agreement (which is
described below under the heading “Executive Employment
Arrangements”), the term “cause” means any of the
following:
(a) gross negligence or willful misconduct which is
materially injurious to Pulse Electronics, Inc. or the Company
and which, if susceptible of cure, is not cured within thirty
(30) days after notice to Mr. Benjamin which cites
with reasonable particularity the actions or omissions believed
to constitute such gross negligence or willful misconduct;
(b) conviction of or the entry of a pleading of guilty or
nolo contendere to any felony, unless the Board of Directors
concludes in good faith that such event does not render
Mr. Benjamin unable to effectively perform his duties or
materially and adversely affect the Company’s or Pulse
Electronics’ reputation or ongoing business activities; or
(c) misappropriation of the Company’s funds or other
dishonesty which in the good faith opinion of the Board of
Directors, renders Mr. Benjamin unable to effectively
manage Pulse Electronics, Inc. or materially and adversely
affects Pulse Electronics’ or the Company’s reputation
or ongoing business activities; and
the term “good reason” means:
(a) a material change in Mr. Benjamin’s
authority, duties or responsibilities, (b) the failure of
the Company, Pulse Electronics, Inc., or the Board of Directors
to act in good faith with respect to Mr. Benjamin’s
employment agreement or the failure to perform its material
obligations under the employment agreement which have not been
cured within twenty days after written notice from
Mr. Benjamin setting forth the acts or omissions alleged to
constitute such a failure with reasonable particularity,
(c) any actual reduction in Mr. Benjamin’s annual
base salary, (d) the Company requiring Mr. Benjamin to
be based at any office or location which is located more than
25 miles from Pulse Electronics’ current headquarter
office in San Diego, CA, or (e) failure to be included
in any benefit plan in which all other senior similarly situated
executives of the Company participate.
C:
EXECUTIVE
EMPLOYMENT ARRANGEMENTS
Drew
A. Moyer
Mr. Moyer entered into an amended and restated agreement
with us on December 8, 2010. The Agreement provides that
Mr. Moyer’s employment will terminate upon the
earliest of the following events: (a) death or retirement;
(b) total disability; (c) termination of his
employment by Pulse for cause; (d) termination of
employment by Pulse for any reason other than cause;
(e) termination of employment by Mr. Moyer for good
reason, which includes a material change in his authority,
duties or responsibilities; or (f) termination of
employment by Mr. Moyer for any reason other than good
reason, including voluntary retirement.
The Agreement provides that upon death, or voluntary retirement
after Mr. Moyer turns the age of 62, Mr. Moyer or his
estate is to be paid in a lump sum (i) the unpaid portion
of his base salary through the end of the month in which
termination occurs; (ii) any bonus (commensurate with those
paid to other executives) for bonus
40
period in which termination occurs pro-rated to the date of
termination; and (iii) any other benefits to which he was
entitled as an employee
and/or
pursuant to his compensation arrangement as further described
below, which were then due but unpaid.
In the event of termination of Mr. Moyer’s employment
due to complete disability, Mr. Moyer is entitled to the
benefits indicated in the preceding paragraph, plus the benefits
payable under our long-term disability plan.
In the event Mr. Moyer is terminated by Pulse for cause (as
defined above) or Mr. Moyer terminates his employment
without good reason (as defined above), Mr. Moyer will be
paid in a lump sum (i) the unpaid portion of his base
salary through the effective date of termination and
(ii) any other benefits to which he is entitled as an
employee
and/or
pursuant to his compensation arrangement as further described
below, which are then due but unpaid.
In the event Mr. Moyer is terminated by Pulse without cause
or Mr. Moyer terminates his employment with good reason (as
defined above), all shares of restricted stock granted to him
will immediately vest. In addition, Mr. Moyer will be paid
in a lump sum (i) the unpaid portion of his base salary
through the effective date of termination; (ii) an amount
equal to 2.625 times his base salary; (iii) any other
benefits to which he is entitled as an employee
and/or
pursuant to his compensation arrangement as further described
below, which are then due but unpaid; and (iv) health and
life insurance benefits as he was receiving them on the date of
termination, along with his health club membership, for
18 months.
The Agreement also contains a non-competition and
non-solicitation provision prohibiting Mr. Moyer, during
the term of his employment and for 18 months after
termination of employment, either directly or indirectly from,
among other things, (i) engaging, directly or indirectly,
anywhere in the world, in the manufacture, assembly, design,
distribution or marketing of any product or equipment
substantially similar to or in competition with any product
which at any time during Mr. Moyer’s employment or the
immediately preceding twelve month period was manufactured, sold
or distributed by Pulse or any subsidiary of Pulse or any
product or equipment which Pulse or any subsidiary was
developing during such period for future manufacture, sale or
distribution; (ii) being or becoming a stockholder,
partner, owner, officer, director or employee or agent of, or a
consultant to or give financial or other assistance to any
person or entity considering engaging in any such activities or
so engaged; (iii) seeking to procure orders from or do
business with any of Pulse’s customers, in competition with
Pulse; (iv) soliciting any person who is an employee of
Pulse; (v) seeking to contract with any person or entity
who Pulse has contracted to manufacture or supply products,
materials or services, in such a way as to adversely affect or
interfere with Pulse’s business; or (vi) engaging in
any effort to induce any of Pulse’s customers, consultants,
employees or associates or any of its affiliates to take any
action which might be disadvantageous to Pulse or its
affiliates; except that Mr. Moyer shall not be prohibited
from owning, as a passive investor, in the aggregate not more
than 5% of the outstanding publicly traded stock of any
corporation so engaged.
Mr. Moyer is eligible to participate in our 2001 Stock
Option Plan, Restricted Stock Plan II, Annual and Long-Term
Incentive Compensation Plan and Supplemental Savings Plan. These
plans are discussed in further detail under the heading
“Compensation Discussion and Analysis”.
During his service in 2010 as Interim Chief Executive Officer,
Mr. Moyer also received compensation according to an
agreement with us dated July 31, 2010. This agreement
provided for a special salary supplement of $25,000 per month
during his period of service as Interim Chief Executive Officer
in addition to his salary Mr. Moyer was receiving as our
Chief Financial Officer. In lieu of any other cash bonus
opportunity for 2010, the agreement made Mr. Moyer eligible
for a cash bonus target of 100% of the salary actually paid to
Mr. Moyer for the period beginning August 1, 2010 and
ending December 31, 2010. Mr. Moyer was granted
10,000 shares of restricted stock upon signing the
agreement.
Alan
H. Benjamin
Mr. Benjamin entered into an agreement with the Company on
July 22, 2009. The Agreement provides that
Mr. Benjamin’s employment will terminate upon the
earliest of any of the following events: (a) his death;
(b) his complete disability; (c) termination of his
employment by the Company for cause; (d) termination of
employment by the Company for any reason other than cause;
(e) termination of employment by Mr. Benjamin for good
reason,
41
which includes a material change in his authority, duties or
responsibilities; or (f) termination of employment by
Mr. Benjamin for any reason other than good reason,
including voluntary retirement.
The Agreement provides that upon death, or voluntary retirement
after Mr. Benjamin turns the age of 62, Mr. Benjamin
or his estate is to be paid in a lump sum (i) the unpaid
portion of his base salary through the end of the month in which
termination occurs; (ii) any bonus (commensurate with those
paid to other executives) for the six month bonus period in
which termination occurs pro-rated to the date of termination;
and (iii) any other benefits to which he was entitled as an
employee
and/or
pursuant to his compensation arrangement as further described
below, which were then due but unpaid.
In the event of termination of Mr. Benjamin’s
employment due to complete disability, Mr. Benjamin is
entitled to the benefits indicated in the preceding paragraph,
plus the benefits payable under our long-term disability plan.
In the event Mr. Benjamin is terminated by the Company for
cause (as defined above) or Mr. Benjamin terminates his
employment without good reason (as defined above),
Mr. Benjamin will be paid in a lump sum (i) the unpaid
portion of his base salary through the effective date of
termination and (ii) any other benefits to which he is
entitled as an employee
and/or
pursuant to his compensation arrangement as further described
below, which are then due but unpaid.
In the event Mr. Benjamin is terminated by the Company
without cause or Mr. Benjamin terminates his employment for
good reason (as defined above), all shares of restricted stock
granted to him will immediately vest. In addition,
Mr. Benjamin will be paid in a lump sum (i) the unpaid
portion of his base salary through the effective date of
termination; (ii) an amount equal to 2.625 times his base
salary; (iii) any other benefits to which he is entitled as
an employee
and/or
pursuant to his compensation arrangement as further described
below, which are then due but unpaid; and (iv) health and
life insurance benefits as he was receiving them on the date of
termination, along with his health club membership, for eighteen
months.
The Agreement also contains a non-competition and
non-solicitation provision prohibiting Mr. Benjamin, during
the term of his employment and for eighteen months after
termination of employment, either directly or indirectly from,
among other things, (i) engaging, directly or indirectly,
anywhere in the world, on behalf of certain entities in the
manufacture, assembly, design, distribution or marketing of any
product or equipment substantially similar to or in competition
with any product which at any time during
Mr. Benjamin’s employment or the immediately preceding
twelve month period was manufactured, sold or distributed by
Pulse Engineering, Inc. or any subsidiary or any product or
equipment which Pulse Engineering, Inc. or any subsidiary was
developing during such period for future manufacture, sale or
distribution; (ii) soliciting any person who is an employee
of the Company or Pulse Engineering, Inc.; (iii) engaging
in any effort to induce any customers, associates, consultants
or employees of the Pulse Engineering, Inc. or the Company or
any of their affiliates to take any action which might be
disadvantageous to Pulse Engineering, Inc. or the Company or any
of their affiliates.
In addition, the Agreement provides that in the event that any
compensation or remuneration paid to Mr. Benjamin by the
Company is deemed to be “excess parachute payments”
within the meaning of Section 280G of the Internal Revenue
Code and as a result Mr. Benjamin is subject to excess tax
with respect to such payments, the Company will pay him, in
addition to any other payments or benefits to which he is
otherwise entitled, an amount that, taking into account any
income or excess taxes payable with respect to such payment,
would result in Mr. Benjamin receiving the amount he would
have received initially if excess taxes were not imposed on such
payment deemed to be excess parachute payments.
Mr. Benjamin is eligible to participate in our 2001 Stock
Option Plan, Restricted Stock Plan II, Annual and Long-Term
Incentive Compensation Plan and Supplemental Savings Plan. These
plans are discussed in further detail under the heading
“Compensation Discussion and Analysis.”
Michael
J. McGrath
Mr. McGrath entered into an amended and restated agreement
with us on December 8, 2010. The Agreement provides that in
the event Pulse relocates Mr. McGrath’s job to a new
place of employment more than 30 miles from Trevose,
Pennsylvania, then he will be entitled to choose one of the
following options: (i) accept a similar position at the new
location with appropriate market compensation to be determined
at such time and the assistance of Pulse’s
42
customary relocation plan for his move or (ii) terminate
his employment and accept the severance benefits set forth in
the paragraph below.
In the event that Pulse terminates his employment other than for
cause, Mr. McGrath is entitled to the following severance
benefits: (i) payment of his base salary in effect on his
termination date for a period of 12 months from his
termination date, (ii) after such 12 month period,
provided he has been actively seeking employment for a position
comparable in scope of responsibility and overall compensation,
continued payment of his base salary for up to an additional
6 months unless and until he obtains new employment,
(iii) vesting of his outstanding stock option awards at
100% subject to the terms and conditions of Pulse’s
Stock Option Plan, (iv) vesting of his outstanding RSP II
awards at 100% subject to the terms and conditions of the
RSP II, and (v) reasonable expenses of outplacement
services from an agency of his choice reasonably satisfactory to
Pulse for a period not to exceed 12 months from
commencement of such services. In order to receive the above
severance benefits, Mr. McGrath must release Pulse and its
related entities from all claims and demands. Mr. McGrath
is also eligible for the continuation of medical benefits during
the applicable severance period, and COBRA benefits thereafter
as permitted by law.
Mr. McGrath is eligible to participate in our 2001 Stock
Option Plan, Restricted Stock Plan II, Annual and Long-Term
Incentive Compensation Plan and Supplemental Savings Plan. These
plans are discussed in further detail under the heading
“Compensation Discussion and Analysis.”
C:
DIRECTOR
COMPENSATION
We use a combination of cash and stock compensation to attract
and retain qualified candidates to serve on our Board. In
setting director compensation, we consider the significant
amount of time that directors expend in fulfilling their duties
to the Company as well as the skill level required of members of
the Board.
All directors are required to purchase not less than $100,000 of
our common stock (based on cost at the time of purchase or
award) during his or her initial three years on the Board.
Shares received as part of director’s fees count in the
calculation of shares “purchased” since they are
received in exchange for services and constitute ordinary income
to the director on which
he/she is
responsible for income taxes. We do not reimburse directors for
any portion of taxes due on these shares. When a director has
purchased shares of common stock with a cost basis of $100,000,
there is no further obligation to acquire additional shares and
the director is deemed to have made a meaningful investment in
our common stock. However, directors are encouraged to continue
to purchase common stock to clearly align their interests to
those of the shareholders in a material way.
We pay our non-employee directors an annual cash retainer of
$44,000. Chairpersons of the Audit, Compensation and Governance
Committees are paid an additional $25,000, $10,000 and $9,000,
respectively. Members of the Audit, Compensation and Governance
Committees (other than the Chair persons of such committees) are
paid an additional $14,000, $3,000 and $3,000, respectively. The
Lead Director received an additional retainer fee of $25,000.
Mr. Papada and Mr. Moloney were employee directors
during the year 2010 and received no additional compensation as
directors. The following table provides information regarding
amounts paid to each of our non-employee directors for 2010.
Fees Earned or
Paid in Cash
Stock Awards
Total
Name
($)
($)
($)
Alan E. Barton(2)
$
14,000
—
$
14,000
John E. Burrows
$
80,917
$
40,000
(1)
$
120,917
Howard C. Deck
$
49,250
$
40,000
(1)
$
89,250
David H. Hofmann(3)
$
25,666
—
$
25,666
Edward M. Mazze
$
64,750
$
40,000
(1)
$
104,750
C. Mark Melliar-Smith
$
69,000
$
40,000
(1)
$
109,000
(1)
According to our Board of Directors’ stock plan, each
non-employee director receives shares of common stock equal to
$40,000 using the fair market value (closing price of the
Company’s common stock as reported by the
43
New York Stock Exchange) of the common stock on the business day
immediately preceding the date of grant. These shares are not
subject to a vesting requirement.
(2)
Mr. Barton resigned from the Board in March 2010.
(3)
Mr. Hofmann retired from the Board in May 2010.
C:
SHAREHOLDER
PROPOSALS
Under the rules of the SEC, eligible shareholders may submit
proposals for inclusion in the proxy statement for our 2012
annual meeting. Shareholder proposals must be submitted in
writing and must be received by the Corporate Secretary at the
address provided previously in this proxy statement
by ,
2011 for them to be considered for inclusion in the 2012 proxy
statement.
Under our bylaws, you may present proposals in person at the
2012 annual meeting if you are a shareholder entitled to vote.
The Corporate Secretary must receive any proposals to be
presented, which will not be included in next year’s proxy
statement, no earlier
than ,
2011 and not later
than ,
2011. If next year’s annual meeting is held after
April 30, 2012, any such proposals may be submitted no
later than 90 days before the meeting date, unless the
Company publicly announces the date of the 2012 annual meeting
less than 90 days before the meeting date, in which case
the Corporate Secretary must receive any such proposals no later
than ten days after such public announcement. Proposals received
after the deadline, including any proposal nominating a person
as a director, may not be presented at the 2012 annual meeting.
Any shareholder submitting a proposal must also comply with the
notice requirements contained in our bylaws.
C:
AUDIT AND
OTHER FEES PAID TO INDEPENDENT ACCOUNTANT
We have entered into an engagement letter with KPMG that sets
forth the terms by which KPMG performs audit services for us.
The engagement letter is subject to alternative dispute
resolution procedures and an exclusion of punitive damages. KPMG
was our principal accountant for the year 2010. The principal
accountant for the year 2011 will be selected and retained by
our Audit Committee following a review of the 2011 audit scope
requirements and related issues. The selection of the principal
accountant will be made in accordance with the Audit Committee
Charter and its planned agenda in 2011. A representative of KPMG
will attend the annual meeting to answer your questions. He or
she will have the opportunity to make a statement.
44
Audit
Fees
For the fiscal year ended December 31, 2010, the aggregate
fees billed by KPMG for professional services rendered for the
audit of our annual financial statements and the review of the
financial statements included in our Quarterly Reports on
Form 10-Q
filed during the fiscal year ended December 31, 2010 were
$2,154,815.(1) The fees for these services for the year ended
December 25, 2009 were $2,475,000. These figures include
services related to Sarbanes-Oxley compliance.
Audit-Related
Fees
For the fiscal year ended December 31, 2010, the aggregate
fees billed by KPMG for audits of financial statements of
certain employee benefit plans were $100,000.(1) The fees for
these services for the fiscal year ended December 25, 2009
were $95,000. In addition, for the fiscal year ended
December 31, 2010, fees billed by KPMG for services related
to agreed upon procedures relative to our divestiture of AMI
Doduco were $12,500. No such services were performed during the
fiscal year ended December 25. 2009.
Tax
Fees
For the fiscal year ended December 31, 2010, the aggregate
fees billed by KPMG for tax consultation and tax compliance
services (except services related to audits) were
$135,200.(1)
The fees for these services for the fiscal year ended
December 25, 2009 were $172,370.
All Other
Fees
For the fiscal years ended December 31, 2010 and
December 25, 2009, there were no fees billed by KPMG for
services other than those described above.
Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Auditors
Our Audit Committee pre-approves all audit and permissible
non-audit services provided by KPMG. All services performed for
2010 were pre-approved by the committee.
Section 16(a) of the Securities Exchange Act of 1934
requires officers and directors, and persons who own more than
10 percent of our shares outstanding, to file reports of
ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and ten percent holders
must furnish us with copies of all forms that they file.
Based on a review of the copies of these forms that have been
provided to us, or written representation that no forms were
required, we believe that there were no late filings in 2010.
C:
(1) Fees
are estimated, pending completion of all work and actual
currency exchange rates in effect at time of billing.
C:
45
C:
Appendix A
INFORMATION
CONCERNING PARTICIPANTS
IN THE COMPANY’S SOLICITATION OF PROXIES
The following tables (“Directors and Nominees” and
“Officers and Employees”) set forth the name, business
address and present principal occupation or employment, and the
name, principal business and address of any corporation or other
organization in which their employment is carried on, of our
directors, nominees, officers and employees who, under the rules
of the SEC, are considered to be “participants” in our
solicitation of proxies from our shareholders in connection with
our Annual Meeting.
Directors
and Nominees
The principal occupations of our directors and nominees who are
considered “participants” in our solicitation of
proxies, and the principal business of the corporation or other
organization employing them, are set forth under the section
above titled “Directors and Executive Officers - Background
and Qualification of Officers and Nominees” in this Proxy
Statement. The name and business addresses of the organization
of employment of our directors and nominees are as follows:
Name
Business Address
John E. Burrows, Jr.
*
Justin C. Choi
*
Steven G. Crane
*
Howard C. Deck
*
Ralph E. Faison
*
Edward M. Mazze
*
Lawrence P. Reinhold
*
C. Mark Melliar-Smith
*
*
c/o Pulse
Electronics Corporation 12220 World Trade Drive San Diego,
CA92128
Officers
and Employees
The principal occupations of our executive officers and
employees who are considered “participants” in our
solicitation of proxies are set forth below. The principal
occupation refers to such person’s position with us, and
the business address is
c/o Pulse
Electronics Corporation, 12220 World Trade Drive,
San Diego, CA92128.
Name
Principal Occupation
Alan H. Benjamin
Senior Vice President and Chief Operating Officer
Ralph E. Faison
President, Chief Executive Officer and Chairman
Michael P. Ginnetti
Chief Accounting Officer and Corporate Controller
James Jacobson
Director of Investor Relations
Drew A. Moyer
Senior Vice President and Chief Financial Officer
Information
Regarding Ownership of the Company’s Securities by
Participants
The shares of our stock beneficially owned, directly or
indirectly, as of March 4, 2011 by our directors, nominees
and named executive officers are set forth in the section above
titled “Stock Owned by Directors and Officers” in this
Proxy Statement. The shares of our stock beneficially owned or
held as of March 4, 2011 by Michael Ginnetti were 20,372.
These shares include shares with restrictions and forfeiture
risks under our restricted stock plan.
A-1
Information
Regarding Transactions in the Company’s Securities by
Participants
The following table sets forth all transactions that may be
deemed purchases and sales of shares of our common stock by the
individuals who are considered “participants” between
March 22, 2009 and March 22, 2011. Except as described
in this Appendix A or this Proxy Statement, shares of our
common stock owned of record by each participant are also
beneficially owned by such participant. Unless otherwise
indicated, all transactions were in the public market and none
of the purchase price or market value of those shares is
represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities.
Name
Date
# of Shares
Transaction Footnote
Drew A. Moyer
2/15/2011
1,200
(4
)
1/26/2011
10,305
(2
)
1/26/2011
39,746
(3
)
10/27/2010
6,812
(3
)
7/31/2010
10,000
(2
)
5/24/2010
28,000
(2
)
1/20/2010
1,400
(4
)
10/28/2009
8,000
(2
)
5/5/2009
15,000
(2
)
Michael P. Ginnetti
1/26/2011
3,642
(2
)
1/26/2011
14,048
(3
)
10/27/2010
2,167
(3
)
9/10/2010
8,000
(3
)
5/24/2010
10,000
(2
)
10/28/2009
3,500
(2
)
5/5/2009
1,500
(2
)
Alan H. Benjamin
1/26/2011
10,406
(2
)
1/26/2011
40,136
(3
)
10/27/2010
7,515
(3
)
5/24/2010
28,000
(2
)
10/28/2009
10,000
(2
)
5/5/2009
15,000
(2
)
Ralph E. Faison
1/5/2011
325,000
(3
)
1/5/2011
325,000
(3
)
John E. Burrows, Jr.
9/9/2010
2,000
(1
)
5/19/2010
9,280
(2
)
7/13/2009
9,804
(2
)
Howard C. Deck
5/19/2010
9,280
(2
)
7/13/2009
9,804
(2
)
Edward M. Mazze
5/19/2010
9,280
(2
)
7/13/2009
9,804
(2
)
C. Mark Melliar Smith
5/19/2010
9,280
(2
)
7/13/2009
9,804
(2
)
(1)
Acquired — open market purchase of common stock
(2)
Acquired — grant of restricted stock or restricted
stock units
(3)
Acquired — grant of stock options
(4)
Disposition — gift of common stock
Miscellaneous
Information Regarding Participants
Other than as disclosed in this Appendix A or this Proxy
Statement, none of the participants (i) beneficially owns
(within the meaning of
Rule 13d-3
under the Exchange Act), directly or indirectly, any shares or
other securities of our company or any of our subsidiaries or
(ii) has purchased or sold any of such securities within
the past two years. Except as disclosed in this Appendix A
or this Proxy Statement, none of the participants’
associates
A-2
beneficially owns, directly or indirectly, any of our
securities. Other than as disclosed in this Appendix A or
this Proxy Statement, neither we nor any of the participants has
any substantial interests, direct or indirect, by security
holding or otherwise, in any matter to be acted upon at the
Annual Meeting. Except for the convertible notes we issued on
December 22, 2009, which are described in our annual report
on
Form 10-K
for the year ended December 31, 2010, neither we nor our
participants are or have been within the past year a party, to
any contract, arrangement or understanding with any person with
respect to any of our securities, including, but not limited to,
joint ventures, loan or option agreements, puts or calls,
guarantees against loss or guarantees of profit, division of
losses or profits or the giving or withholding of proxies. None
of us, the participants or any of their associates has had or
will have a direct or indirect material interest in any
transaction or series of similar transactions since the
beginning of our last fiscal year or any currently proposed
transactions, or series of similar transactions, to which we or
any of our subsidiaries was or is to be a party in which the
amount involved exceeds $120,000.
Other than as disclosed in this Appendix A or this Proxy
Statement, none of us, any of the participants or any of their
associates has any arrangements or understandings with any
person with respect to any future employment by us or our
affiliates or with respect to any future transactions to which
we or any of our affiliates will or may be a party.
Other than as disclosed in this Appendix A or this Proxy
Statement, no person, other than our directors, executive
officers or director nominees acting solely in those capacities,
is a party to an arrangement or understanding pursuant to which
a nominee of election as director is proposed to be elected.
A-3
PLEASE VOTE TODAY! SEE REVERSE SIDE FOR THREE EASY WAYS TO VOTE. PLEASE DETACH PROXY CARD HERE
AND SIGN, DATE AND RETURN IN THE POSTAGE-PAID ENVELOPE PROVIDED PULSE ELECTRONICS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS—MAY 18, 2011 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS WHITE PROXY The undersigned hereby appoints Ralph E. Faison and Drew A. Moyer, and each
of them, as proxies of the undersigned, each with the power to appoint his substitute, and hereby
authorizes both of them, or either one if only one be present, to represent and vote, as designated
on the reverse hereof, all the Common Stock, $0.125 par value per share, of Pulse Electronics
Corporation held of record by the undersigned or with respect to which the undersigned is entitled
to vote or act at the Annual Meeting of Stockholders to be held on , 2011 at [a.m.]/[p.m.], local
time, or any adjournment or postponement thereof. This proxy will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will be voted FOR
Proposal 1, FOR ALL of the nominees recommended by the Board of Directors of Pulse Electronics
Corporation for Director listed in Proposal 2, FOR Proposal 3 and a 1 Year Frequency in Proposal 4.
The proxy holder will have the right to cumulate votes and cast such votes in favor of the election
of some or all of the director nominees in their sole discretion. Additionally, the votes entitled
to be cast by the undersigned will be cast in the discretion of the proxy holder on any other
business as may properly come before the Annual Meeting. By executing this Proxy, the undersigned
hereby revokes all prior proxies that the undersigned has given with respect to the Annual Meeting
and any adjournment or postponement thereof. YOUR VOTE IS VERY IMPORTANT-— PLEASE VOTE TODAY
(Continued and to Be Signed On Reverse Side)
YOUR VOTE IS IMPORTANT Please take a moment now to vote your shares of Pulse Electronics
Corporation 2011 Annual Meeting of Shareholders. YOU CAN VOTE TODAY IN ONE OF THREE WAYS: 1. Vote
by Telephone—Please call toll-free at 1-866-855-9695 on a touch-tone telephone and follow the
simple recorded instructions. Your vote will be confirmed and cast as you directed. (Toll-free
telephone voting is available for residents of the U.S. and Canada only. If outside the U.S. or
Canada, call 1-215-521-1350.) OR 2. Vote by Internet—Please access
https://www.proxyvotenow.com/puls and follow the simple instructions on the screen. Please note you
must type an “s” after http. You may vote by telephone or Internet 24 hours a day, 7 days a week.
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner
as if you had executed a proxy card. OR 3. Vote by Mail—If you do not have access to a touch-tone
telephone or to the Internet, please complete, sign, date and return the proxy card in the envelope
provided to: Pulse Electronics Corporation, c/o Innisfree M&A Incorporated, FDR Station, P.O. Box
5156, New York, NY10150-5156. THE BOARD OF DIRECTORS OF PULSE ELECTROINCS CORPORATION RECOMMENDS
YOU VOTE FOR PROPOSAL 1, FOR ALL OF THE NOMINEES IN PROPOSAL 2, FOR PROPOSAL 3 AND 1 YEAR IN
PROPOSAL 4. Nominees: (01) C. Mark Melliar-Smith, (02) Howard C. Deck, (03) Ralph E. Faison, (04)
Justin C. Choi, (05) Steven G. Crane, (06) Lawrence P. Reinhold To vote against any nominee(s),
mark “For All Except” and write the number(s) of the nominee(s) on the line below. 5. Transact any
other business as may properly come before the meeting. PLEASE DETACH PROXY CARD HERE AND SIGN,
DATE AND RETURN IN THE POSTAGE PAID ENVELOPE PROVIDED votes as in this example using dark ink only.
THE BOARD OF DIRECTORS OF PULSE ELECTROINCS CORPORATION RECOMMENDS YOU VOTE FOR PROPOSAL 1, FOR ALL
OF THE NOMINEES IN PROPOSAL 2, FOR PROPOSAL 3 AND 1 YEAR IN PROPOSAL 4. FOR AGAINST ABSTAIN 1.
Approve amendments to our Articles of Incorporation and By-Laws to provide for plurality voting in
contested director elections. 2. Elect six directors for a one year term. FOR ALL AGAINST ALL FOR
ALL EXCEPT Nominees: (01) C. Mark Melliar-Smith, (02) Howard C. Deck, (03) Ralph E. Faison, (04)
Justin C. Choi, (05) Steven G. Crane, (06) Lawrence P. Reinhold To vote against any nominee(s),
mark “For All Except” and write the number(s) of the nominee(s) on the line below. 3. Provide an
advisory vote on executive compensation. 4. Provide an advisory vote on the frequency of holding
and advisory vote on executive compensation. 5. Transact any other business as may properly come
before the meeting. FOR AGAINST ABSTAIN 1 YEAR FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN 2 YEARS 3
YEARS ABSTAIN 5. Transact any other business as may properly come before the meeting. Date , 2011
Signature Signature (if jointly held) Title(s) if any Please sign this Proxy exactly as name
appears on this card. When shares are are held by joint tenants, both parties should sign. If you
are signing as attorney, trustee, guardian, or in another fiduciary capacity please give your full
title. If a corporation must sign, please sign in full corporate name by its President or another
authorized officer. If a partnership must sign, please sign in partnership name by an authorized
person.
Dates Referenced Herein and Documents Incorporated by Reference
