UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.   )

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Teleflex Incorporated

(Name of Registrant as Specified In Its Charter)

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155 South Limerick Road, Limerick, Pennsylvania 19468

 

 

Notice of Annual Meeting of Stockholders

To Be Held on April 26, 2011

 

 

March 25, 2011 

 

TO THE STOCKHOLDERS OF TELEFLEX INCORPORATED:

 

The annual meeting of stockholders (the “Annual Meeting”) of Teleflex Incorporated will be held on Tuesday, April 26, 2011 at 11:00 a.m., local time, at the company’s facility located at 2400 Bernville Road, Reading, Pennsylvania, 19605, for the following purposes:

 

1. To elect four directors to serve on our Board of Directors for a term of three years or until their successors have been duly elected and qualified;

 

2. To vote upon a proposal to approve the Teleflex Incorporated 2011 Executive Incentive Plan;

 

3. To hold an advisory vote on the compensation of our named executive officers;

 

4. To hold an advisory vote on whether the advisory vote on the compensation of our named executive officers should be held every one, two or three years;

 

5. To vote upon a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2011 fiscal year; and

 

6. To transact such other business as may properly come before the meeting.

 

Our Board of Directors has fixed Monday, March 14, 2011 as the record date for the Annual Meeting. This means that owners of our common stock at the close of business on that date are entitled to receive notice of, and to vote at, the Annual Meeting.

 

STOCKHOLDERS ARE REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES OR CANADA. YOU MAY ALSO VOTE BY TELEPHONE BY CALLING TOLL FREE 1-800-PROXIES (776-9437), OR VIA THE INTERNET AT WWW.VOTEPROXY.COM.

 

By Order of the Board of Directors,

 

LAURENCE G. MILLER, Secretary

 

 

PLEASE VOTE — YOUR VOTE IS IMPORTANT

 

TABLE OF CONTENTS

 

TELEFLEX INCORPORATED
155 South Limerick Road
Limerick, Pennsylvania 19468

 

 

PROXY STATEMENT

 

 

This proxy statement is furnished to stockholders in connection with the solicitation of proxies by the Board of Directors of Teleflex Incorporated (the “Company”) for use at the Company’s annual meeting of stockholders (the “Annual Meeting”) to be held on Tuesday, April 26, 2011, 11:00 a.m. local time, at the Company’s facility located at 2400 Bernville Road, Reading, Pennsylvania, 19605. The proxies may also be voted at any adjournment or postponement of the Annual Meeting. Only stockholders of record at the close of business on March 14, 2011, the record date for the meeting, are entitled to vote. Each owner of record on the record date is entitled to one vote for each share of common stock held. On the record date, the Company had 40,228,724 shares of common stock outstanding.

 

This proxy statement and the enclosed form of proxy are being mailed to stockholders on or about March 25, 2011. A copy of the Company’s 2010 Annual Report is provided with this proxy statement.

 

The Company will pay the cost of solicitation of proxies. In addition to this mailing, proxies may be solicited, without extra compensation, by our officers and employees, by mail, telephone, facsimile, electronic mail and other methods of communication. The Company reimburses banks, brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in forwarding solicitation materials to the beneficial owners of the Company’s common stock.

 

Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to be Held on April 26, 2011

 

This proxy statement, the accompanying Notice of Annual Meeting, proxy card and our 2010 Annual Report are available at http://www.teleflex.com/ProxyMaterials.

 

 

It is your way of legally designating another person to vote for you. That other person is called a “proxy.” If you designate another person as your proxy in writing, the written document is called a “proxy” or “proxy card.”

 

 

It is a document required by the Securities and Exchange Commission (the “SEC”) that contains information about the matters that stockholders will vote upon at the Annual Meeting. The proxy statement also includes other information required by SEC regulations.

 

 

A quorum is the minimum number of stockholders who must be present at the Annual Meeting or voting by proxy in order to conduct business at the meeting. A majority of the outstanding shares, whether present in person or represented by proxy, will constitute a quorum at the Annual Meeting. Shares represented by proxies marked to “abstain” from voting for a proposal or to “withhold” voting for one or more nominees and broker non-votes, as well as proxies submitted without an indication of voting preferences, are counted for purposes of determining the presence of a quorum.

 

 

A broker “non-vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.

 

 

To be elected at the meeting, a director nominee must receive the affirmative vote of a majority of the votes cast. For this purpose, a majority of the votes cast means that the number of votes cast in favor of a director nominee must exceed the number of votes cast against that director nominee. Abstentions and broker non-votes will have no effect on the vote.

 

Approval of each of the other proposals requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote. Abstentions are counted as votes against a proposal, while broker non-votes will not be included in the vote count and will have no effect on the vote. Because the advisory vote on the frequency of the advisory vote on compensation of our named executive officers entails three choices (one, two or three years), it is possible that none of the alternatives will receive a majority vote. In that case, the Board of Directors nevertheless will consider the stockholder preferences indicated by the vote.

 

 

You may vote through any of the following methods:

 

 

The shares represented by a proxy will be voted in accordance with the instructions you provide in the proxy card or that you submit via telephone or the internet, unless the proxy is revoked before it is exercised. Any proxy card which is signed and returned without any markings indicating how you

wish to vote will be counted as a vote FOR the election of the director nominees described in this proxy statement, FOR the approval of the Teleflex Incorporated 2011 Executive Incentive Plan, FOR the approval, on an advisory basis, of the compensation of our named executive officers, for the approval, on an advisory basis, of holding the advisory vote on the compensation of our named executive officers every TWO years and FOR the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2011.

 

If your shares are held by a broker, bank or other holder of record, please refer to the instructions it provides for voting your shares. If you want to vote those shares in person at the Annual Meeting, you must bring a signed proxy from the broker, bank or other holder of record giving you the right to vote the shares.

 

 

You may revoke your proxy at any time before the proxy is exercised by submitting a notice of revocation or submitting an executed proxy card bearing a later date to the Secretary of Teleflex at our principal executive offices, at 155 South Limerick Road, Limerick, Pennsylvania 19468. You also may revoke your proxy by attending the Annual Meeting in person and voting by ballot. Attendance at the Annual Meeting will not by itself revoke a previously granted proxy.

 

Our Board of Directors (the “Board”) currently consists of ten members divided into three classes, with one class being elected each year for a three-year term. At the Annual Meeting, four directors will be elected for terms expiring at our Annual Meeting of Stockholders in 2014 or until their successors are duly elected and qualified. The Board, upon the recommendation of the Governance Committee, has nominated George Babich, Jr., William R. Cook, Stephen K. Klasko and Benson F. Smith for election to the Board for three-year terms. Each nominee is a continuing director who previously was elected by our stockholders.

 

Our bylaws generally require that in order to be elected in an uncontested election of directors, a director nominee must receive a majority of the votes cast with respect to that director’s election (for this purpose, a majority of the votes cast means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee). Each of our director nominees is currently serving on the Board. If a nominee who is currently serving as a director is not re-elected, Delaware law provides that the director would continue to serve on the board of directors as a “holdover director.” Under our Bylaws and Corporate Governance Principles, the Board will not nominate for director any incumbent director unless the director has submitted in writing his or her irrevocable resignation as a director, which would be effective if the director does not receive the required majority vote and the Board accepts the resignation. Generally, if an incumbent director does not receive the required majority vote, our Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether to take other action. The Board would act on the resignation, generally within 90 days from the date that the election results were certified. The Board’s decision and an explanation of any determination with respect to the director’s resignation will be disclosed promptly in a current report on Form 8-K filed with the SEC.

 

Our goal is to assemble a Board that operates cohesively and works with management in a constructive way so as to deliver long term stockholder value. In addition, the Board believes it operates best when its membership reflects a diverse range of experiences and areas of expertise. To this end, the Board seeks to identify in each candidate areas of knowledge or experience that would expand or complement the Board’s existing expertise in overseeing a company such as ours. Our Corporate Governance Principles provide that directors are expected to possess the highest character and integrity and to have business, professional, academic, government or other experience which is relevant to our business and operations. In evaluating nominees for election to the Board, our Board and Governance Committee consider diversity principally from the standpoint of differences in occupational experience, education, skills, race, gender and national origin. However, there is no set list of qualities or areas of expertise used by the Board in its analysis because the inquiry assesses the attributes each particular candidate could bring to the Board in light of the then-current make-up of the Board. We believe our current directors possess valuable experience in a variety of areas necessary to guide Teleflex in the best interests of the stockholders. Information regarding each of our nominees and continuing directors is set forth below.

 

Nominees for election to the Board of Directors — Terms expiring in 2014

 

 

 

The persons named in the enclosed proxy intend to vote properly executed proxies for the election of Messrs. Babich, Cook, Klasko and Smith. In the unlikely event that any nominee becomes unable or unwilling to stand for election, the proxies may be voted for one or more substitute nominees designated by the Board, or the Board may decide to reduce the number of directors.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE ELECTION OF ALL NOMINEES.

The following individuals currently serve as directors in the two other classes. Their terms will end at the Annual Meetings in 2012 and 2013, respectively.

 

Terms expiring in 2012

 

 

Terms expiring in 2013

 

 

Our Corporate Governance Principles, including guidelines for the determination of director independence, the operations, structure and meetings of the Board, the committees of the Board and other matters relating to our corporate governance, are available on the Investors page of our website, www.teleflex.com. Also available on the Investors page are other corporate governance documents, including the Code of Ethics, the Code of Ethics for Chief Executive Officer and Senior Financial Officers, the Charter of the Audit Committee, the Charter of the Governance Committee and the Charter of the Compensation Committee. You may also request these documents in print form by contacting us at Teleflex Incorporated, 155 South Limerick Road, Limerick, Pennsylvania 19468, Attention: Secretary. Any amendments to, or waivers of, the codes of ethics will be disclosed on our website promptly following the date of such amendment or waiver.

 

The Board has affirmatively determined that George Babich, Jr., Patricia C. Barron, William R. Cook, Jeffrey A. Graves, Stephen K. Klasko, Sigismundus W.W. Lubsen, Stuart A. Randle, Harold L. Yoh III and James W. Zug are independent within the meaning of the rules of the New York Stock Exchange (the “NYSE”). All of the independent directors meet the categorical standards set forth in the Corporate Governance Principles described below, which were adopted by the Board to assist it in making determinations of independence. The Board has further determined that the members of the Audit Committee, the Compensation Committee and the Governance Committee are independent within the meaning of NYSE rules, and that the members of the Audit Committee meet the additional independence requirements of the NYSE applicable to Audit Committee members.

 

To assist the Board in making independence determinations, the Board has adopted the following categorical standards. The Board may determine that a director is not independent notwithstanding that none of the following categorical disqualifications apply. However, if any of the following categorical disqualifications apply to a director, he or she may not be considered independent:

 

 

In 2006, the Board established the position of Lead Director. The Lead Director is an independent director of the Board whose duties and responsibilities include:

 

The independent directors of the Board have the authority to make decisions concerning the Lead Director, including the power to appoint and remove the Lead Director and the authority to modify the Lead Director’s duties and responsibilities. The Lead Director is appointed annually by the independent directors of the Board. Mr. Cook, who was initially elected to the position in 2006, continues to serve as our Lead Director.

 

The positions of Chairman and Chief Executive Officer are combined at Teleflex. We believe that our Chief Executive Officer is best situated to serve as Chairman because he is the director most familiar with our business and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. Moreover, our Chief Executive Officer is able to effectively communicate Board strategy to the other members of management and efficiently implement Board directives.

 

In order to provide independent oversight and input, all of the other directors on our Board are independent. Our Chief Executive Officer is not a member of any committee of the Board, and the independent directors regularly meet in executive sessions outside the presence of management and under the leadership of our Lead Director, as discussed in more detail below under “Executive Sessions of Non-Management Directors.” The role and responsibilities afforded the Lead Director further enhance the Board’s ability to evaluate management performance and otherwise fulfill its

oversight responsibilities. Our Chief Executive Officer consults with the Lead Director on the proposed agendas for Board and committee meetings in order to make sure that key issues and concerns of the Board are addressed.

 

Directors who are not executive officers or otherwise employed by us or any of our subsidiaries, who we refer to as the “non-management directors,” meet regularly in accordance with a schedule adopted at the beginning of each year and on such additional occasions as a non-management director may request. Such meetings are held in executive session, without the presence of any directors who are executive officers. The Lead Director presides over such meetings.

 

Stockholders or other interested persons wishing to communicate with members of the Board should send such communications to Teleflex Incorporated, 155 South Limerick Road, Limerick, Pennsylvania 19468, Attention: Secretary. These communications will be forwarded to specified individual directors, or, if applicable, to all the members of the Board as deemed appropriate. Stockholders or other interested persons may also communicate directly and confidentially with the Lead Director, the non-management directors as a group or the Chairman or other members of the Audit Committee through the Teleflex Ethics Hotline at 1-866-490-3413 or, via the Internet, at www.teleflexethicsline.com.

 

The Board held seven meetings in 2010. Each of the directors attended at least seventy-five percent of the total number of meetings of the Board and the Board committees of which the director was a member during 2010. The Board does not have a formal policy concerning attendance at its Annual Meeting of Stockholders, but encourages all directors to attend. All of the Board members, other than Ms. Barron, attended the 2010 Annual Meeting of Stockholders.

 

The Board has established a Governance Committee, a Compensation Committee and an Audit Committee.

 

Governance Committee

 

The Governance Committee is responsible for identifying qualified individuals for Board membership and recommending individuals for nomination to the Board and its committees. In addition, the Governance Committee reviews and makes recommendations to the Board as to the size and composition of the Board and Board committees and eligibility criteria for Board and Board committee membership. The Governance Committee also is responsible for developing and recommending to the Board corporate governance principles and overseeing the evaluation of the Board and management.

 

The Governance Committee considers candidates for Board membership. Our Corporate Governance Principles provide that directors are expected to possess the highest character and integrity, and to have business, professional, academic, government or other experience which is relevant to our business and operations. In addition, directors must be able to devote substantial time to our affairs. The charter of the Governance Committee provides that in evaluating nominees, the Governance Committee should consider the attributes set forth above. Under our Corporate Governance Principles, a director must retire from the Board at the expiration of his or her term following attainment of age 70, except in special circumstances that must be described in a resolution adopted by the Board requesting such director to defer retirement.

 

The Governance Committee will consider recommendations for director candidates from stockholders. Stockholders can recommend candidates for nomination by delivering or mailing written recommendations to Teleflex Incorporated, 155 South Limerick Road, Limerick, Pennsylvania 19468, Attention: Secretary. In order to enable consideration of the candidate in connection with our 2012

Annual Meeting, a stockholder must submit the following information by no later than January 27, 2012:

 

In considering any candidate proposed by a stockholder, the Governance Committee will reach a conclusion based on the criteria described above. The Governance Committee may seek additional information regarding the candidate. After full consideration, the stockholder proponent will be notified of the decision of the Governance Committee. The Governance Committee will consider all potential candidates in the same manner regardless of the source of the recommendation.

 

The current members of the Governance Committee are Ms. Barron and Messrs. Cook, Klasko and Lubsen. Ms. Barron currently serves as the chair of the Governance Committee. The Governance Committee held three meetings in 2010.

 

Compensation Committee

 

The duties and responsibilities of the Compensation Committee include, among others, the following:

 

The current members of the Compensation Committee are Messrs. Graves, Randle and Yoh. Mr. Graves currently serves as the chair of the Compensation Committee. The Compensation Committee held five meetings in 2010.

Audit Committee

 

The Audit Committee has responsibility to assist the Board in its oversight of the following matters, among others:

 

The Audit Committee has sole authority to appoint, retain, compensate, evaluate and terminate the independent registered public accounting firm, and reviews and approves in advance all audit and lawfully permitted non-audit services performed by the independent registered public accounting firm. In addition, the Audit Committee periodically meets separately with management, our independent auditors and our own internal auditors. The Audit Committee also periodically discusses with management our policies with respect to risk assessment and risk management.

 

Stockholders may contact our Audit Committee to report complaints about our accounting, internal accounting controls or auditing matters by writing to the following address: Teleflex Incorporated, 155 South Limerick Road, Limerick, Pennsylvania 19468, Attention: Audit Committee. Stockholders can report their concerns to the Audit Committee anonymously or confidentially.

 

The current members of the Audit Committee are Messrs. Cook, Babich and Zug. Mr. Zug currently serves as the chair of the Audit Committee. The Audit Committee held eight meetings in 2010. The Board has determined that each of the Audit Committee members is an “audit committee financial expert” as that term is defined in SEC regulations.

 

The Board, acting principally through the Audit Committee, is actively involved in the oversight and management of risks that could affect us. It fulfills this function largely through its oversight of our annual company-wide risk assessment process, which is designed to identify our key strategic, operational, compliance and financial risks, as well as to identify steps to mitigate and manage each risk. The risk assessment process is conducted by our Business Ethics and Compliance Committee, or “BECC,” which is comprised of several members of Teleflex senior management. The BECC directs our compliance officers to survey and conduct interviews of several of our key business leaders, functional heads and other managers to identify and discuss the key risks of Teleflex, including the potential magnitude and likelihood of each risk. As part of this process, the senior executive responsible for managing the risk, the potential impact of the risk and management’s initiatives to manage the risk are identified and discussed. After receiving a report of the risk assessment results from the compliance officers, the BECC reviews and discusses the results with the Audit Committee. Thereafter, the Audit Committee provides the full Board with an overview of the risk assessment process, the key risks identified and measures being taken to address those risks. Due to the dynamic nature of risk, the overall status of our enterprise risks are updated periodically during the course of each year and reviewed with the Audit Committee. We believe this process facilitates the Board’s ability to fulfill its oversight responsibilities of our risks.

 

The Compensation Committee oversees the review and assessment of our compensation policies and practices. We use a number of approaches to mitigate excessive risk taking in designing our compensation programs, including significant weighting towards long-term incentive compensation, emphasis on qualitative goals in addition to quantitative metrics in our incentive programs and maintenance of equity ownership guidelines. We believe the risks arising from our compensation

policies and practices for our employees are not reasonably likely to have a material adverse effect on our company.

 

Directors who are also employees of ours receive no additional compensation for their service as directors. Non-management directors receive an annual cash retainer of $25,000, which is payable in equal monthly installments. In addition, non-management directors are paid the following equity based compensation under our stock compensation plans:

 

 

The non-management directors also receive a fee for each Board meeting attended of $2,000 for meetings attended in person and $1,000 for participation by telephone. Members of our Audit, Compensation and Governance Committees receive an additional fee of $1,000 for each committee meeting attended, whether in person or by telephone. In addition, the Lead Director receives an annual restricted stock award having a market value of $20,000 on the grant date. The chairpersons of our Audit, Compensation and Governance Committees receive an additional annual fee of $12,500, $7,500 and $7,500, respectively.

 

We provide the non-management directors with $100,000 of life insurance and $100,000 of accidental death or dismemberment coverage during their service on the Board. We do not provide any pension benefits to the non-management directors.

 

The table below summarizes the compensation paid to non-management directors during the fiscal year ended December 31, 2010.

 

 

 

 

In February 2008, our Board established stock ownership guidelines for our non-management directors to further align the interests of our directors with those of our stockholders. The ownership guidelines require our non-management directors to own shares of our common stock, shares of restricted stock and shares underlying stock options with an aggregate value equal to two times the annual compensation paid to our directors. Directors have until the later of February 2013 or five years from the date they are first elected to the Board to meet the required ownership level.

 

The guidelines applicable to each of our non-management directors at December 31, 2010, and the directors’ progress towards achieving the required stock ownership value, are shown on the following table:

 

 

 

 

The Audit Committee oversees and reviews with the full Board any issues with respect to the Company’s financial statements, our internal control over financial reporting, the structure of our legal and regulatory compliance, the performance and independence of our independent registered public accounting firm and the performance of our internal audit function. Management has primary responsibility for preparing our consolidated financial statements and for our financial reporting process. Management also has the responsibility to assess the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm, PricewaterhouseCoopers LLP, is responsible for expressing an opinion on (i) whether our financial statements present fairly, in all material respects, our financial position and results of operations in accordance with generally accepted accounting principles and (ii) the effectiveness of our internal control over financial reporting.

 

The Audit Committee maintains oversight of our internal audit function by reviewing the appointment and replacement of our director of internal auditing and periodically meets with the director of internal auditing to receive and review reports of the work of our internal audit department. The Audit Committee meets with management on a regular basis to discuss any significant matters, internal audit recommendations, policy or procedural changes, and risks or exposures, if any, that may have a material effect on our financial statements.

 

The Audit Committee has:

 

 

Based on the review and discussions referred to above, the Audit Committee recommended to our Board, and the Board has approved, the inclusion of the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010, for filing with the SEC.

 

AUDIT COMMITTEE

 

 

 

In this Compensation Discussion and Analysis, we address the compensation paid or awarded to our executive officers listed in the Summary Compensation Table that follows this discussion. We refer to these executive officers as our “named executive officers.”

 

Compensation Objectives

 

Our executive compensation program is designed principally to promote the achievement of specific annual and long-term goals by our executive management team and to align our executives’ interests with those of our stockholders. In this regard, the components of the compensation program for our executives, including the named executive officers, are intended to meet the following objectives:

 

 

We fashioned the components of our 2010 executive compensation program to meet these objectives as follows:

 

 

Role of Compensation Committee, Chief Executive Officer and Compensation Consultant

 

The Compensation Committee of our Board of Directors is responsible for the oversight of our executive compensation program. In 2010, the Compensation Committee made all decisions concerning compensation awarded to our executive officers, other than Jeffrey P. Black, our former Chairman, Chief Executive Officer and President. Determinations concerning Mr. Black’s compensation were made by the independent members of our Board of Directors upon the recommendation of the Compensation Committee.

 

In 2010, Mr. Black, with the assistance of our human resources department, provided statistical data to the Compensation Committee to assist it in determining appropriate compensation levels for our executives. He also provided the Compensation Committee with recommendations as to components of the compensation of our executives. Mr. Black did not make recommendations as to his own compensation. While the Compensation Committee utilizes this information, and considered Mr. Black’s observations with regard to other executive officers, the ultimate decisions regarding executive compensation are made by the Compensation Committee.

In late 2009, our Compensation Committee engaged an independent compensation consultant, Frederic W. Cook & Co., Inc., which we refer to below as “FW Cook.” FW Cook provided several recommendations for changes to our process for determining executive compensation, including changes relating to the determination of competitive compensation. These changes are described below under “Determination of Compensation.” FW Cook also assessed compensation levels of our executive officers relative to external market rates determined in accordance with the process changes recommended by FW Cook and assisted in the design of our annual incentive program for 2010.

 

Determination of Compensation

 

Introduction

 

By the beginning of 2010, we had substantially implemented our strategy to become a medical device company. In 2009, our Medical Segment represented over 77 percent of our revenues from continuing operations and over 90 percent of our segment operating profit. As a result, towards the end of 2009, the Compensation Committee conducted a review of our compensation program to determine appropriate modifications to address the change in our operations. With the assistance of FW Cook, the Compensation Committee adjusted its methodology for determining executive compensation, as described below.

 

Change in Peer Group

 

In December 2009, the Compensation Committee, following a recommendation of FW Cook, determined that it was appropriate to change our peer group. The peer group previously was utilized as a secondary point of evaluation to validate compensation decisions that were based principally on data derived from several published compensation surveys. Due to the fact that we had become principally a provider of medical devices, the Compensation Committee determined it would be appropriate to change the composition of our peer group to include only companies in the medical industry. The companies in the new peer group selected by the Compensation Committee are the following:

 

 

Change in Survey Data

 

Prior to 2009, the Compensation Committee periodically referenced reports by a compensation consultant that included compensation data derived from several published compensation surveys. These surveys provided information regarding compensation paid to functionally comparable executives, either by manufacturing companies or by a general industry grouping of companies. In December 2009, based on a recommendation by FW Cook, the Compensation Committee determined to change the focus of the data it utilized from surveys of traditional manufacturing and general industry companies to a survey focused on life sciences companies in conjunction with a survey of general industry companies. Specifically, the Compensation Committee selected the Radford Life Sciences Survey and the Hewitt Executive Survey. The Compensation Committee determined to provide equal weighting to the two surveys because, in addition to medical device and medical supply companies, the Radford Life Sciences survey included several drug development organizations that were engaged in operations significantly different from ours.

Use of Peer Group as a Primary Reference Point for Executive Compensation Decisions

 

Prior to 2010, we used the data derived from one or more general industry surveys as the primary reference point for executive compensation decisions. Our peer group was used as a secondary point of evaluation to validate compensation decisions. In addition, prior to 2008, our peer group was used in connection with a performance-based long-term cash incentive award, which we replaced in 2008 with restricted stock awards.

 

In December 2009, the Compensation Committee, based on a recommendation of FW Cook, determined to use peer group data as a primary reference point for executive compensation determinations, together with the survey data. In reaching this decision, the Compensation Committee considered that the new peer group includes companies that we deemed to be most similar to our company among the various companies reflected in the data reviewed in connection with executive compensation decisions.

 

Change in Determination of Competitive Compensation

 

Prior to 2009, we generally sought to position executive salaries to approximate the median of salaries paid to comparable executives by the companies in the survey data we used at the time, while positioning direct compensation, which includes salaries and the target amount of annual bonus and long-term compensation, to approximate the 65th percentile of total direct compensation paid by those companies.

 

In January 2010, FW Cook provided data regarding our position with respect to several financial and other metrics as compared to the companies in our new peer group. The comparisons, which were based on the most recently reported four quarter data available to FW Cook, indicated our percentile ranking with regard to each of the metrics as follows:

 

 

Based on our position relative to the peer group companies, FW Cook recommended that the Compensation Committee define a competitive market compensation rate to be between the median and the 75th percentile of the new peer group companies, noting that revenue and market capitalization are the most widely used measures of size in determining competitive compensation. FW Cook also advised that these measures should be supplemented by reference to net income and number of employees to provide additional insight into comparative profitability and organizational complexity.

 

Consistent with FW Cook’s analysis of our size relative to the peer group companies and its recommendations, the Compensation Committee determined to change our compensation philosophy generally to position our executive compensation target levels between the median and 75th percentile of companies referenced in the comparative data reviewed by the Compensation Committee. This range will provide more flexibility to the Compensation Committee in structuring executive compensation. However, this range is intended to serve only as a guideline in setting and adjusting our compensation programs, and, as was the case in some respects in 2010, actual amounts of compensation that we pay to our executives may be more or less than the competitive range in any given year.

 

Determinations with respect to 2010 compensation reflect the changes in methodology described above.

Salaries

 

Base salary ranges for our executives are determined based on each executive’s position and responsibility and are typically considered annually as part of our performance review process. In addition, salary reviews may occur at other times due to events such as a promotion or other change in job responsibility.

 

Based on these considerations, the Compensation Committee approved salary increases of three to four percent for executives other than Mr. Black and Mr. Meier. Mr. Meier joined our Company in 2010, and his salary reflected the employment terms we negotiated with him. Mr. Black’s salary was maintained at the 2009 level.

 

Annual Executive Incentive Compensation

 

General

 

We provide annual cash incentive opportunities to subject a meaningful amount of an executive’s total cash compensation to the achievement of business performance objectives. Under our annual incentive plan, 80 percent of the target award opportunity is based on corporate or business segment financial performance measures, while the remaining 20 percent of the target award opportunity is based on individual performance. We have weighted the annual incentive awards largely to the financial performance measures because we believe that emphasizing corporate or business segment financial performance encourages a unified commitment by our executives to performance that we believe directly affects stockholder value. As described below, we added additional financial performance measures to further encourage a unified commitment by our executives.

 

2010 Award Components

 

In determining the performance measures to be used in 2010, we sought to add some degree of consistency between the performance measures used for our named executive who do not have responsibility for a separate business segment, and those who have direct responsibility for a business segment. Therefore, we added performance measures designed to provide an incentive for all executives with regard to our company-wide performance, and more generally to encourage the collective commitment of our executives to achievement of performance that affects both segment and corporate performance.

 

In 2010, the performance measures under our annual incentive program for our named executive officers who did not have principal responsibility for a specific business segment, namely Messrs. Black, Meier and Miller, were as follows:

 

 

 

Some of the performance measures described in this section were subject to adjustment if we engaged in acquisitions. Since we made no acquisitions in 2010, no such adjustments were necessary.

 

We added the corporate revenue measure in 2010 because we believe that our success going forward will, to a meaningful extent, be dependent on our ability to generate sales growth in our core operations, particularly in our Medical segment, which is by far our largest segment. Therefore, we believe an incentive to achieve core revenue growth should apply not only to executives with direct responsibilities for operation of a segment, but also to those of our executives without segment responsibility. Moreover, we believe that the addition of a revenue-based performance measure will help solidify the unified commitment of our executives towards achievement of stated revenue goals. We excluded divestitures and foreign currency translation from this performance measure because we wanted to focus on the growth of our ongoing, core business, without giving effect to currency fluctuations that can detract from the effectiveness of this measure in reflecting our “core growth,” as defined in our earnings releases and public filings.

 

We use EPS as a performance measure because we believe that a fundamental objective of an executive officer is to significantly increase stockholder value, and for a large, well established manufacturing enterprise such as ours, EPS is a key metric affecting share price and, thus, stockholder value. We excluded restructuring and other special charges from our calculation of EPS because such charges are not contained within our principal earnings guidance and adjusted results reported to investors. We adjusted the target and actual amount of EPS to exclude the effect of divestitures because they are extraordinary events that do not reflect the day-to-day management of our business and are generally not a part of our annual planning process. Similarly, to the extent not reflected in our annual business plan, we excluded debt refinancing and other transactions affecting our capital structure because these are events that can distort the utility of the performance measure as a reflection of management’s overall performance if they were not taken into account in establishing the EPS target.

 

We use cash flow from continuing operations as a performance measure because we believe it is an important indicator of our ability to service indebtedness, make capital expenditures and provide flexibility with regard to the pursuit of other operating initiatives. We excluded the effect of divestitures and certain debt financing and other transactions affecting our capital structure from this measure for the reasons stated above with respect to the EPS measure.

 

We include individual performance as a performance measure in order to focus our executives on their individual performance and our corporate performance outside of the financial context, including, for example, achievement with respect to compliance and regulatory initiatives. Performance under this measure is determined based upon satisfaction of individual performance objectives that are established at the beginning of the relevant fiscal year. Evaluation of the satisfaction of these objectives is conducted under our annual performance review process.

 

For Messrs. Waaser and Northfield, who had direct responsibility with respect to our Medical segment, the criteria under our 2010 annual incentive program were as follows:

 

 

 

We included segment revenue because we wanted to emphasize the importance of sales growth with respect to our Medical segment core operations. We applied the adjustments to this performance measure described above for the same reasons as were applicable to the corporate revenue performance measure.

 

We believe that PBFI is a reliable overall measure of the performance of a business segment. Therefore, we believe that a significant portion of the financial performance-based component for an executive who is responsible for a business segment should be based on this measure. We excluded the impact of restructuring and other special charges, and businesses divested during the year for the reasons stated above with respect to corporate EPS. We excluded the impact of foreign currency fluctuations from PBFI because it is a factor that generally is outside of the control of our executives with principal responsibility for individual business segments.

 

We included asset velocity index as a performance measure in order to emphasize the importance of effective utilization of our cash resources and other working capital items. Executives with responsibility for individual business segments are most directly involved in managing these assets; therefore, we applied this performance measure to them. We applied an assumed foreign currency translation rate because, as noted above with respect to PBFI, foreign currency translation is a factor that generally is outside of the control of our executives with principal responsibility for individual business segments. We excluded the impact of divestitures because we wanted our executives to focus on cash management of our ongoing core business.

 

We added corporate EPS, which relates to our company-wide performance and not merely segment performance, in 2010. We took this action because we believe all participants in the annual incentive program should have a stake in the performance of our company as a consolidated entity.

 

We included individual performance as a performance criteria for Messrs. Waaser and Northfield for the same reasons as are applicable to our executive officers who do not principally have responsibility for a specific business segment. Performance under this measure is determined using the same process as is applicable to the other named executive officers.

 

For Mr. Suddarth, who had direct responsibility with respect to the Aerospace and Commercial segments, his award was based on consolidated Aerospace and Commercial segment results. The weighting of performance measures is set forth below. The performance measures, as applied to the Aerospace and Commercial segments, are defined in the same manner as described above for Messrs. Waaser and Northfield with respect to the Medical segment:

 

 

 

As was the case for all other named executive officers, 20 percent of Mr. Suddarth’s total target award was based on the achievement of individual performance objectives.

 

The differences in weighting for the Aerospace and Commercial Segments, as compared to the Medical Segment, were based on our disparate strategies for the segments. As we have announced publicly, we intend to become exclusively a medical device company, so the Aerospace and Commercial segments are not part of our long-term strategy. Accordingly, the achievement of core revenue growth for the Aerospace and Commercial segments, while somewhat important, is less important to the performance of these segments than continued effective cash utilization of the segments’ working capital and their overall financial performance. We also included the corporate EPS measure because, as is the case with regard to the Medical segment, we believe that the Aerospace and Commercial segment participants in our annual incentive plan should have a stake in the performance of our corporation as a consolidated entity. We included individual performance for Mr. Suddarth for the same reasons as are applicable to our other named executive officers. Performance under this measure is determined using the same process as is applicable to the other named executive officers.

 

With respect to each of the financial performance measures, an executive’s incentive payout could range from a minimum of 50 percent to a maximum of 200 percent of the target payout, depending on the percentage variance from the target amount of the performance measure. The percentage of target performance that would entitle a participant to a minimum or maximum payout with respect to each measure is shown in the following table (percentages are approximate).

 

 

2010 Executive Incentive Compensation Targets and Awards

 

The target award payable to a named executive officer for 2010 if the target financial performance-based objectives were achieved and 100 percent of the individual performance award

opportunity was paid is equal to a percentage of the executive’s salary, as shown on the following table:

 

 

 

 

The following table provides information for each named executive officer regarding the applicable performance measures, target awards for each performance measure and actual payments with respect to each performance measure based on actual performance in 2010:

 

 

 

For 2010, the individual performance objectives established for Mr. Black included achievement of our financial and growth targets, development and execution of our strategic plan, achievement of certain critical objectives, which included objectives related to the FDA compliance efforts of our Medical Segment, development and execution of our organization strategy and structure in connection with our portfolio transition, investor relations and communications efforts related to our strategy and support for our Board of Directors. The individual performance objectives established for each of our other named executive officers included various matters related to their specific functions, including matters relating to the development and implementation of our overall strategy and, with respect to our Medical Segment executives, efforts related to our regulatory compliance initiatives.

 

Based on the applicable levels of achievement described above, aggregate payments to the named executive officers were as follows:

 

 

The actual award payments to our named executive officers in respect of the financial performance measures are reflected in the “Non-Equity Incentive Compensation” column of the Summary Compensation Table, while amounts paid in respect of the individual performance measure are reflected in the “Bonus” column of the Summary Compensation Table.

 

Equity Incentive Compensation

 

Our equity incentive compensation program is designed to promote achievement of corporate goals, encourage the growth of stockholder value, enable participation in our long-term growth and profitability and to serve as an incentive for continued employment. As has been the case in prior years, the equity incentive compensation opportunity established for each of our named executive officers was designed to be equivalent to 150 percent to 300 percent of a named executive officer’s salary. The resulting value of equity incentive compensation fell within the competitive range of median to 75th percentile of companies referenced in comparative data reviewed by the Compensation Committee and also reflected contributions of each position to the organization’s objectives, individual performance and other factors. We refer to this percentage of salary as the “equity incentive

percentage.” The 2010 equity incentive percentage for each named executive officer and the dollar amount of the executive’s equity compensation opportunity was as follows:

 

 

 

 

Our equity incentive compensation for 2010 included stock options and restricted stock awards. We designed these components and the weighting of our equity compensation to align the interests of our named executive officers to our stockholders by providing an incentive to our executives to achieve performance that should have a favorable impact on the value of our common stock.

 

In 2010, we continued to allocate 65 percent of the equity incentive award to stock options because we believed that stock price appreciation should be the principal determinant of the economic return received by our executives from equity compensation, and absent such appreciation, stock options would have no value. The remaining 35 percent of the equity award was allocated to restricted stock awards, which we granted to provide a retention incentive for our executives and an incentive to increase stockholder value.

 

We routinely evaluate and consider the type of awards granted under our equity incentive program and may, in the future, decide that other types of awards provide appropriate incentives to promote our then current goals and objectives.

 

Stock Option Awards

 

In accordance with the equity award allocation described above, we granted stock options to our named executive officers in 2010 based upon 65 percent of the total equity incentive compensation opportunity. Using a Black-Scholes methodology, we valued the stock options at $10.16 per underlying share.

 

As a result of these computations, the named executive officers received stock options for the respective numbers of underlying shares set forth below in the Grants of Plan-Based Awards table under the column heading, “All Other Option Awards: Number of Securities Underlying Options.” The dollar amount for option awards shown in the Summary Compensation Table generally reflects the aggregate grant date fair value of the award determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation — Stock Compensation,” which we refer to below as “ASC Topic 718.” See note 4 to the Summary Compensation Table for further information.

 

Stock options awarded under the equity incentive compensation program are granted in the first quarter of each year, effective on the third business day after we announce our financial results for the preceding year, and have an exercise price equal to the closing price of our common stock on the effective date of grant. Our options generally vest in equal annual increments on the first three anniversaries of the effective date of grant. We believe that these vesting terms, together with the restricted stock component of our equity incentive program, provide our executives with a meaningful

incentive for continued employment. For additional information regarding stock option terms, see the footnotes accompanying the Grants of Plan-Based Awards table.

 

Restricted Stock Awards

 

In 2010, we granted restricted stock awards to our named executive officers based upon 35 percent of the total equity incentive compensation opportunity. We valued the restricted stock at $52.74 per underlying share.

 

As a result of these computations, the named executive officers received restricted stock awards for the respective numbers of underlying shares set forth below in the Grants of Plan-Based Awards table under the column heading, “All Other Stock Awards: Number of Shares of Stock or Units.” The dollar amount for restricted stock awards shown in the Summary Compensation Table generally reflects the aggregate grant date fair value of the award determined in accordance with ASC Topic 718. See note 3 to the Summary Compensation Table for further information.

 

Restricted stock awards under the equity incentive program are granted in the first quarter of each year, effective on the same date as the effective date of stock option grants, and vest in their entirety on the third anniversary of the date of grant. As noted above, we believe that these vesting terms, together with the stock option component of our equity incentive program, provide our executives with meaningful incentive for continued employment. For additional information regarding restricted stock award terms, see the footnotes accompanying the Grants of Plan-Based Awards table.

 

Personal Benefits

 

We provide our named executive officers with personal benefits that we believe are appropriate as part of a competitive compensation package designed to attract and retain highly skilled executives. We periodically review the levels of perquisites and other personal benefits provided to our named executive officers. The personal benefits provided to our named executive officers include a company car, life insurance coverage and, with respect to our Chief Executive Officer, personal use of our corporate aircraft. Additional information regarding these benefits is provided in the Summary Compensation Table and the accompanying footnotes.

 

Employment of Richard A. Meier

 

In January 2010, we appointed Richard A. Meier our Executive Vice President and Chief Financial Officer. Under the terms of employment that we negotiated with Mr. Meier, he received an annual base salary of $500,000 in 2010. In addition, Mr. Meier’s target award opportunity under our annual incentive program is equal to 80 percent of his annual base salary, and his equity incentive percentage under our equity compensation program is equal to 200 percent of his annual base salary. The Compensation Committee also granted Mr. Meier a special equity award of stock options to purchase 33,833 shares of our common stock, which will vest in three equal annual installments, and 3,511 shares of restricted stock, which will vest in their entirety on the third anniversary of the grant date. These grants, which were separate from grants made to Mr. Meier under our equity incentive compensation program described above, are reflected in the Grants of Plan-Based Awards table. While we referenced industry data in structuring Mr. Meier’s compensation, the final terms of his compensation were arrived at through negotiation.

 

Resignation of Jeffrey P. Black

 

On January 30, 2011, Jeffrey P. Black resigned by mutual agreement with the Board as our Chairman, President and Chief Executive Officer and as a member of our board of directors. As described in more detail below under “Potential Payments Upon Termination or Change of Control,” we agreed to pay Mr. Black an amount equivalent to the amount payable to him under his employment agreement in connection with a termination of employment other than for cause.

Employment of Benson F. Smith

 

Effective upon Mr. Black’s resignation, the Board appointed Benson A. Smith to serve as our Chairman, President and Chief Executive Officer. We agreed to pay Mr. Smith an annual base salary of $800,000, as well as a one-time signing bonus of $100,000. In addition, he will participate in our 2011 annual incentive plan with a target award opportunity equal to 150% of his annual base salary, and also will receive an annual equity incentive grant with an equity incentive compensation opportunity equal to 250% of his annual base salary (comprised 65% of stock options and 35% of restricted stock). The annual equity grants will be subject to vesting terms in accordance with our equity incentive program vesting terms, as described above under “Equity Incentive Compensation.” We also have agreed to enter into executive severance and change-in-control agreements with Mr. Smith on substantially similar terms to those provided to our executives other than Mr. Black. See “Potential Payments Upon Termination or Change of Control” for a description of the severance and change of control agreements. The terms of Mr. Smith’s compensation were determined by our Compensation Committee, with the assistance of FW Cook, based upon reference to survey and peer group data.

 

Resignation of Kevin K. Gordon

 

Kevin K. Gordon, our former Chief Financial Officer, resigned effective January 15, 2010. Mr. Gordon did not participate in any of our 2010 incentive programs, but, in accordance with rules of the Securities and Exchange Commission, is listed as a named executive officer, and included in the tabular disclosures below.

 

We have several plans and agreements addressing compensation for our named executive officers that accrue value as the executive continues to work for us, provide special benefits upon certain types of termination events and provide retirement benefits. These plans and agreements were designed to be a part of a competitive compensation package that would encourage our executives to remain employed by us. Not all plans apply to each named executive officer, and the participants are indicated in the discussion below.

 

Executive Severance Arrangements

 

The severance agreements we have entered into with each of our named executive officers, other than Mr. Black, provide payments and other benefits to the named executive officers if, outside of the context of a change in control, we terminate their employment without cause or they terminate employment for “good reason.” The severance compensation for each of the named executive officers other than Mr. Black consists of continued payment of the executive’s base salary during a “severance compensation period” that ranges from 18 to 24 months following termination, depending on the length of the executive’s employment. In some circumstances, the executive also may receive payment of a pro rated amount of the annual incentive award the executive would have been entitled to receive for the year in which his employment terminated. In addition, the executive is entitled to receive continued health insurance for up to the full severance compensation period, as well as certain additional benefits. We believe that these severance arrangements provide a competitive benefit that enhances our ability to retain capable executive officers. See “Potential Payments Upon Termination or Change in Control” for additional information.

 

Mr. Black’s employment agreement entitled him to receive continuation of his base salary, an additional amount equal to 100% of his base salary, health insurance and other benefits for a three-year period if we terminated his employment without cause or if Mr. Black were to terminate his employment for good reason (as defined in the agreement), other than in connection with a change of control (as defined in the agreement). As stated above, in connection with Mr. Black’s resignation as our Chairman, President and Chief Executive Officer in January 2011, we agreed to pay him an amount equivalent to the amount payable to him under his employment agreement in connection with

a termination of employment other than for cause. See “Potential Payments Upon Termination or Change in Control” for additional information.

 

In addition, Mr. Waaser’s termination as President of our Medical Segment in August 2010 entitled him to receive severance compensation in accordance with the terms of his severance agreement. See “Potential Payments Upon Termination or Change in Control” for additional information.

 

Change in Control Arrangements

 

We have change in control agreements with each of our currently employed named executive officers, which provide for payments and other benefits to the executive if we terminate the executive’s employment for any reason other than disability or cause, or if the executive terminates employment for “good reason,” within two years following a change in control. For a more detailed discussion of these arrangements, see “Potential Payments Upon Termination or Change in Control,” below. If an executive, other than Mr. Smith or Mr. Meier, becomes liable for payment of any excise tax under Section 4999 of the Internal Revenue Code with respect to any payment received in connection with a change in control, we will make an additional tax gross-up payment to the executive. This payment is designed so that, after payment of all excise taxes and any other taxes payable in respect of the additional payment, the executive will retain the same amount as if no excise tax had been imposed. See “Tax Considerations” below for further information regarding the additional payment. Effective in 2009, we determined to no longer include the additional payment provisions in change of control agreements with persons who become executive officers.

 

We entered into the change in control arrangements so that our executives can focus their attention and energies on our business during periods of uncertainty that may occur due to a potential change in control. In addition, we want our executives to support a corporate transaction involving a change in control that is in the best interests of our stockholders, even though the transaction may have an effect on the executive’s continued employment with us. We believe these arrangements provide an important incentive for our executives to remain with us.

 

Retirement Benefits

 

We provide certain retirement benefits to our executive officers that also are offered to our other employees. In addition, we maintain certain supplemental plans for our executives that are intended to promote tax efficiency and replace the benefit opportunities lost due to regulatory limits on broad-based tax-qualified plans.

 

Defined Benefit Arrangements

 

Through 2008, we provided retirement benefits primarily through a combination of defined benefit and defined contribution arrangements. The defined benefits principally were provided under the Teleflex Incorporated Retirement Income Plan, or “TRIP,” which was a tax qualified defined benefit plan designed to provide benefits to all salaried employees following retirement based upon a formula relating to years of service and annual compensation. In addition, we maintained a Supplemental Executive Retirement Plan, or “SERP,” which was a non-qualified defined benefit plan designed to provide benefits for executives to the extent that their compensation could not be taken into account under the TRIP because their compensation exceeded limits imposed under the Internal Revenue Code. See the Pension Benefits — 2010 table and accompanying narrative, and “Potential Payments Upon Termination or Change in Control” for additional information.

 

Effective December 31, 2008, we “froze” future benefit accruals under the TRIP and the SERP. In lieu of the benefits offered under the TRIP, we amended our 401(k) Plan to provide for an enhanced company matching contribution, effective as of January 1, 2009. Specifically, participants now are eligible to receive a 100 percent matching contribution with respect to the first five percent of eligible compensation contributed by the participant. In addition, the SERP was replaced with a non-qualified

defined contribution arrangement under our Deferred Compensation Plan, which is described below under “Deferred Compensation Plan.” Each of our named executive officers currently participates in the 401(k) Plan. We took these measures to eliminate uncertainty in planning for and funding defined benefit obligations, to provide a more cost-effective way of providing competitive retirement benefits to employees, and to provide a benefit that can be retained by a participant to the extent it is accrued at the time the employee ceases to be employed by Teleflex.

 

Deferred Compensation Plan

 

We maintain a Deferred Compensation Plan, which is a non-qualified plan under which executives may defer certain amounts of their annual and long-term incentive compensation. Salary deferral elections are made annually by eligible executives in respect of salary amounts to be earned in the following year. In addition, participants receive our matching contribution of up to three percent of their annual cash compensation with respect to amounts deferred by the participants into the Deferred Compensation Plan. Participants may direct the investment of deferred amount into a fixed interest fund or one or more notional funds.

 

In connection with the termination of the SERP, we amended our Deferred Compensation Plan, effective January 1, 2009, to add additional company contributions in lieu of future benefit accruals under the SERP. These non-elective company contributions are made to each participant’s account and are equal to five percent of the participant’s annual cash compensation, less the maximum matching contribution the participant was eligible to receive under our 401(k) Plan. In addition, upon our termination of the SERP, we contributed an amount equal to the present value of each active participant’s account in the SERP at December 31, 2008 into an account maintained for the active participants under the Deferred Compensation Plan.

 

Each of our currently employed named executive officers participates in the Deferred Compensation Plan. See the “Non-qualified Deferred Compensation — 2010” table for additional information.

 

Section 162(m) of the Internal Revenue Code limits to $1 million the deductibility for federal income tax purposes of annual compensation paid by a publicly held company to its chief executive officer and other executives named in the Summary Compensation Table, unless certain conditions are met. To the extent feasible, we structure executive compensation to preserve deductibility for federal income tax purposes. In this regard, our stock compensation plans are designed to preserve, to the extent otherwise available, the deductibility of income realized upon the exercise of stock options. Moreover, our Executive Incentive Plan, under which the financial metrics for our annual incentive program are established, is designed to facilitate the deductibility of the non-discretionary portion of annual bonus awards under Section 162(m). Nevertheless, we retain the discretion to authorize compensation that may not be deductible. The compensation paid to Mr. Black in 2010 exceeded the deductible limit by approximately $342,866. In addition, it is possible that some portion of compensation paid to our executives in future years will be non-deductible, particularly if a change in control occurs.

 

As noted above, under our change in control arrangements, we will make an additional payment to our executives, other than Messrs. Smith and Meier, if payments to the executives resulting from a change in control are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. It is possible that a change in control could result in our making additional payments to our executives. As noted above, we will not provide for these payments in change of control agreements with persons who become executive officers in the future.

 

In February 2008, our Board established stock ownership guidelines for our named executive officers and other executives to further align the interests of management with those of our

stockholders and to further encourage long-term performance. The ownership guidelines are expressed in terms of the stock ownership value, including value attributable to shares in our 401(k) plan, restricted stock and stock options held by the executive, as a multiple of that executive’s base salary, as follows:

 

 

Executives who are subject to the ownership guidelines have until the later of February 2013 or five years after the date of their appointment or promotion as an executive officer to satisfy the required stock ownership value. The guidelines applicable to each of our currently employed named executive officers at December 31, 2010, and the named executive officer’s progress towards achieving the required stock ownership value, are shown on the following table:

 

 

 

 

The Compensation Committee of the Company has reviewed and discussed with management the Compensation Discussion and Analysis. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and, through incorporation by reference, in our Annual Report on Form 10-K for the year ended December 31, 2010.

 

 

 

The following table sets forth compensation information with respect to the Company’s former Chief Executive Officer, current and former Chief Financial Officers and each of the four other most highly compensated executive officers during 2010, determined in accordance with SEC regulations, for the fiscal years ended December 31, 2010, 2009 and 2008. These individuals are referred to in this Proxy Statement as the “named executive officers.”

 

 

 

 

						Deferred				Life
		401(k)				Compensation				Insurance				Severance
Name		Contributions				Contributions				Premiums				Compensation				Perquisites(a)
Mr. Black		$	12,250			$	65,394			$	13,064				–			$	76,658
Mr. Meier		$	12,250			$	22,917			$	1,717				–			$	206,176
Mr. Waaser		$	12,250			$	18,242			$	942			$	168,050			$	11,745
Mr. Miller		$	12,250			$	27,888			$	1,319				–			$	26,698
Mr. Northfield		$	12,250			$	22,728			$	942				–			$	36,017
Mr. Suddarth		$	12,250			$	18,553			$	942				–				–
Mr. Gordon		$	972			$	623			$	117				–			$	391

 

 

 

 

The following table sets forth information regarding our grants of plan based awards to the named executive officers during the fiscal year ended December 31, 2010. Mr. Gordon resigned as our Executive Vice President and Chief Financial Officer in January 2010 and, as such, did not receive any plan based awards in 2010.

 

 

 

 

The following table sets forth information with respect to the outstanding stock options and unvested restricted stock held by each named executive officer, other than Messrs. Waaser and Gordon, on December 31, 2010. Messrs. Waaser’s and Gordon’s employment with us terminated in August 2010 and January 2010, respectively. As a result, all of their unvested options and restricted stock awards were forfeited upon their termination and all vested options that remained unexercised within 90 days after their termination were cancelled.