SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Ultralife Batteries, Inc.
-----------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
-----------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[X] No fee required
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pursuant to Exchange Act Rule: 0-11:______
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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(4) Date Filed:
ULTRALIFE BATTERIES, INC.
2000 TECHNOLOGY PARKWAY
NEWARK, NEW YORK 14513
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 5, 2001
Notice is hereby given that the 2001 Annual Meeting of Stockholders (the
"Meeting") of Ultralife Batteries, Inc. (the "Company") will be held on
Wednesday, December 5, 2001 at 10:30 A.M. at the Chase Conference Center, 270
Park Avenue, 11th Floor, New York, New York 10017 for the following purposes:
1. To elect directors for a term of one year and until their successors
are duly elected and qualified.
2. To approve and ratify the selection of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending June 30, 2002.
3. To transact such other business as may properly come before the Meeting
and any adjournments thereof.
Only stockholders of record of Common Stock, par value $.10 per share, of
the Company at the close of business on October 10, 2001 are entitled to receive
notice of, and to vote at and attend the Meeting. If you do not expect to be
present, you are requested to fill in, date and sign the enclosed Proxy, which
is solicited by the Board of Directors of the Company, and to return it promptly
in the enclosed envelope. In the event you decide to attend the Meeting in
person, you may, if you desire, revoke your proxy and vote your shares in
person.
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 2001, which includes the Company's Form 10-K, is enclosed.
By Order of the Board of Directors
Arthur M. Lieberman
Chairman of the Board of Directors
Dated: October 26, 2001
================================================================================
IMPORTANT
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED
TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
================================================================================
Page 2
ULTRALIFE BATTERIES, INC.
2000 TECHNOLOGY PARKWAY
NEWARK, NEW YORK 14513
(315) 332-7100
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 5, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
This proxy statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of Ultralife Batteries, Inc.
(the "Company") for use at the 2001 Annual Meeting of Stockholders (the
"Meeting") to be held on Wednesday, December 5, 2001 at 10:30 A.M. and at any
adjournments thereof. The Meeting will be held at the Chase Conference Center,
270 Park Avenue, 11th Floor, New York, New York 10017.
When a proxy is returned properly signed, the shares represented thereby
will be voted in accordance with the stockholder's directions. If the proxy is
signed and returned without choices having been specified, the shares will be
voted FOR the election of each director-nominee named herein, and FOR each of
the other proposals identified herein. If for any reason any of the nominees for
election as directors shall become unavailable for election, discretionary
authority may be exercised by the proxies to vote for substitute nominees
proposed by the Board of Directors of the Company. A stockholder has the right
to revoke a previously granted proxy at any time before it is voted by filing
with the Secretary of the Company a written notice of revocation, or a duly
executed later-dated proxy, or by requesting return of the proxy at the Meeting
and voting in person.
Only stockholders of record at the close of business on October 10, 2001
are entitled to notice of, and to vote at, the Meeting. As of October 10, 2001,
there were 12,578,186 shares of the Company's Common Stock, par value $.10 per
share ("Common Stock"), outstanding, each entitled to one vote per share at the
Meeting.1 A majority of the outstanding shares of Common Stock, represented in
person or by proxy at the Meeting, will constitute a quorum for the transaction
of all business. Pursuant to the provisions of the Delaware General Corporation
Law, directors shall be elected by a plurality of the votes cast by the holders
of shares of Common Stock present in person or represented by proxy at the
Meeting and entitled to vote at the Meeting. Because directors are elected by a
plurality of the votes cast, withholding authority to vote with respect to one
or more nominees will have no effect on the outcome of the election, although
such shares would be counted as present for purposes of determining the
existence of a quorum. Similarly, any broker non-votes (which occur when shares
held by brokers or nominees for beneficial owners are voted on some matters but
not on others in the absence of instructions from the beneficial owner) are not
considered to be votes cast and therefore would have no effect on the outcome of
the election of directors, although they would be counted for quorum purposes.
The affirmative vote of holders of a majority of the shares of Common Stock
represented at the Meeting and entitled to vote on the proposal to ratify the
Company's auditors is required for approval of that proposal. Accordingly,
abstentions and any broker non-votes, since they are considered to be
represented at the Meeting, would have the same effect as votes cast against
that proposal.
The cost of solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by use of the mails, some of the
officers, directors and regular employees of the Company,
----------
1 Prior to subtraction of 27,250 treasury shares and 231,980 shares out of
700,000 shares owned by Ultralife Taiwan, Inc., a Taiwanese venture of which
the Company owns approximately 33%.
Page 3
without extra remuneration, may solicit proxies personally or by telephone,
telefax or similar transmission. The Company will reimburse record holders for
expenses in forwarding proxies and proxy soliciting material to the beneficial
owners of the shares held by them.
The approximate date on which the enclosed form of proxy and this proxy
statement are first being sent to stockholders of the Company is November 7,
2001.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently has eight directors, seven of whom are
running for reelection and one of whom, Daniel W. Christman, was appointed by
the Board of Directors on August 29, 2001 to fill the vacancy left by Richard A.
Hansen, who resigned from the Board of Directors on June 29, 2001. Directors are
elected by a plurality of the votes cast by the stockholders of the Company at a
stockholders meeting at which a quorum of shares is represented. Each director
shall serve until the next annual meeting of stockholders and until the
successors of such directors shall have been elected and qualified. The names
of, and certain information with respect to, the persons nominated for election
as directors are presented on the following pages.
Present Principal Occupation and
Name Age Employment History
---- --- ----------------------------------------
Arthur M. Lieberman 66 Mr. Lieberman has been a director since
March 1991 and Chairman of the Board
since January 1999. Mr. Lieberman is a
founder of, and since 1981 has been the
senior partner of, Lieberman & Nowak, a
legal firm specializing in intellectual
property law which for many years has
represented clients in the battery
industry and related fields. Lieberman &
Nowak has represented the Company in
connection with certain intellectual
property matters.
John D. Kavazanjian 50 Mr. Kavazanjian was elected as the
Company's President and Chief Executive
Officer effective July 12, 1999 and as a
director on August 25, 1999. Prior to
joining the Company, Mr. Kavazanjian
worked for Xerox Corporation from 1994
in several capacities, most recently as
Corporate Vice President, Chief
Technology Officer, Document Services
Group.
Joseph C. Abeles 86 Mr. Abeles, a founder of the Company,
has been a director and Treasurer since
March 1991. Mr. Abeles, formerly a
director of Power Conversion, Inc., is a
private investor and currently serves as
a director emeritus of Intermagnetics
General Corporation ("IGC") and
Bluegreen Corporation (formerly Patten
Corporation), and also currently serves
as a director of a number of other
companies.
Joseph N. Barrella 55 Mr. Barrella, one of the founders of the
Company and a director, has held
strategic positions throughout the
Company's existence. Mr. Barrella has
been Senior Vice President of Business
Development since December 1998. Mr.
Barrella has been involved in the
development and manufacture of lithium
batteries for more than 25 years. He
holds a number of patents relating to
lithium battery designs and has authored
several publications relating to battery
technology.
Page 4
Carl H. Rosner 72 Mr. Rosner, a director of the Company
since January 1992, is the Chairman of
IGC. Mr. Rosner has been Chairman of IGC
since its formation and was President
and Chief Executive Officer until May
31, 1999.
Ranjit Singh 48 Mr. Singh has been a director of the
Company since August 2000. He serves as
a consultant to the software and mobile
services industries. Most recently, he
was President and Chief Operating
Officer of ContentGuard, a spinoff of
Xerox Corporation that is jointly owned
with Microsoft. ContentGuard develops
and markets digital property rights
software. Before joining ContentGuard
earlier in 2000, Mr. Singh worked for
Xerox as a corporate Senior Vice
President in various assignments related
to software businesses. Mr. Singh joined
Xerox in 1997, having come from Citibank
where he was Vice President of Global
Distributed Computing. Prior to that, he
was a principal at two start-up
companies and also held executive
positions at Data General and Digital
Equipment Corporation.
Patricia C. Barron 57 Ms. Barron has been a director of the
Company since September 2000. Ms. Barron
is a Professor at the Stern School of
Business, New York University, where she
focuses on issues of corporate
governance, the role and
responsibilities of Boards of Directors
and leadership. Professor Barron teaches
in the MBA and Executive Education
programs, is on the Advisory Board of
the Berkeley Center for Entrepreneurial
Studies, and is a Senior Fellow of the
Center for Digital Economy Research. In
addition to her work at the Stern
School, Professor Barron serves as a
Director on the Boards of Aramark
Corporation, and United Services
Automobile Association. Prior to joining
the Stern School, Professor Barron had a
28-year career in business. She was an
Associate at McKinsey and Company and
then moved to Xerox Corporation where
she became a Corporate Officer and held
the positions of Chief Information
Officer, President, Office Products
Division, and President, Xerox
Engineering Systems.
Daniel W. Christman 58 Mr. Christman was appointed by the Board
of Directors in August of this year to
fill the vacancy left by Richard A.
Hansen. He is currently the Executive
Director of the Kimsey Foundation in
Washington, D.C. Prior to that, he was
Superintendent for the U.S. Military
Academy in West Point, New York from
1996 until July 2001. He currently
serves as a director of United Services
Automobile Association, an insurance
mutual corporation.
The Board of Directors has unanimously approved the above-named nominees
for directors. The Board of Directors recommends a vote FOR all of these
nominees.
BOARD OF DIRECTORS
The Board of Directors met five times during the fiscal year ended June
30, 2001. Except for Richard A. Hansen, during the fiscal year ended June 30,
2001, all of the members of the Board attended at least 75% of the aggregate of:
(1) the total number of meetings of the Board (held during the period for
Page 5
which such person has been a director; and (2) the total number of meetings held
by all committees of the Board on which such member served.
Each director receives a $750 monthly retainer as well as $750 for each
Board meeting attended; subject to the provision that the meeting compensation
is reduced by 50% if the director participates by conference call. In addition,
each director receives an option at the end of each calendar quarter to purchase
1,500 shares of Common Stock. This option vests immediately with a term of five
years from the date of grant and is granted at an exercise price equal to the
closing price of the Common Stock on the date of grant. Effective February 24,
1999, the Board revised the Board compensation policy prospectively so that the
$750 paid monthly and for each Board meeting attended is not paid to directors
who are also employed by the Company. In addition, the Board has agreed to pay
Mr. Lieberman at the rate of $15,000 per annum for acting as Chairman of the
Board.
COMMITTEES OF THE BOARD
The Board has established three standing committees to assist it in
carrying out its responsibilities: the Compensation and Stock Option Committee,
the Audit Committee and the Executive Committee.
The members of the Compensation and Stock Option Committee are currently
Joseph C. Abeles (Chair) and Patricia C. Barron. Richard A. Hansen was a member
until he resigned as a director on June 29, 2001. The Compensation and Stock
Option Committee has general responsibility for recommending to the Board
remuneration for the Chairman and determining the remuneration of other officers
elected by the Board, granting stock options and otherwise administering the
Company's stock option plans, and approving and administering any other
compensation plans or agreements.
The members of the Audit Committee are Carl H. Rosner (Chair), Ranjit
Singh and Patricia C. Barron. This committee has oversight responsibility for
reviewing the scope and results of the independent auditors' annual examination
of the Company's financial statements, meeting with the Company's financial
management and the independent auditors to review matters relating to internal
accounting controls, the Company's accounting practices and procedures and other
matters relating to the financial condition of the Company, and recommending to
the Board of Directors the appointment of the independent auditors.
The members of the Executive Committee are Joseph C. Abeles (Chair),
Arthur M. Lieberman, Carl H. Rosner and John D. Kavazanjian. This committee is
responsible for overseeing such matters as the Board of Directors determines
from time to time.
The Board does not have a Nominating Committee. The Board itself reviews
and recommends qualified candidates to the Board for election as directors of
the Company. The Board will consider persons whom stockholders recommend as
candidates for election as Company directors. Stockholders may submit names of
qualified candidates along with detailed information on their backgrounds to the
Company's Secretary for referral to the Board for consideration.
Each committee member receives $500 for each committee meeting attended;
subject to the provision that the meeting compensation is reduced by 50% if the
committee member participates by conference call. In addition, each committee
chair receives $2,500 per annum.
Page 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the beneficial
ownership of shares of the Company's Common Stock as of September 30, 2001 by
(i) each person known by the Company to beneficially own more than five percent
of the outstanding shares of Common Stock, (ii) each director and certain named
executive officers of the Company, and (iii) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the persons
named in this table have sole voting power with respect to all shares of Common
Stock owned based upon information provided to the Company by the directors,
officers and principal stockholders and their addresses are the address of the
Company.
Number of Shares Percent
Beneficially Beneficially
Name Owned Owned (20)
--------------------------------------- ----------------- ------------
State of Wisconsin Investment Board(1) 2,218,600 18.01%
Daeg Partners LLP(2) 1,659,830 13.47%
Intermagnetics General Corporation
("IGC")(3) 897,053 7.28%
Dimensional Fund Advisors Inc.(4) 727,300 5.90%
Ultralife Taiwan, Inc.(5) 700,000 5.68%
Joseph C. Abeles(6) 330,000 2.68%
Joseph N. Barrella(7) 297,000 2.41%
Daniel W. Christman(8) 1,500 *
John D. Kavazanjian(9) 248,500 2.02%
Arthur M. Lieberman(10) 114,900 *
Carl H. Rosner(11) 44,000 *
Ranjit Singh(12) 7,500 *
Patricia C. Barron(13) 10,200 *
Peter F. Comerford(14) 12,200 *
Eric R. Dix(15) 20,000 *
Robert W. Fishback(16) 13,000 *
William A. Schmitz(17) 12,300 *
Julius M. Cirin(18) 18,800 *
Nancy C. Naigle 0 *
All directors and executive
officers as a group (19 persons)(19) 1,129,900 9.17%
----------
* Less than 1%
1. With an address at P.O. Box 7842, Madison, Wisconsin 53707. Based on
Amendment No. 6 to Form 13G filed August 10, 2001.
2. With an address at 100 Park Avenue, New York, New York 10017. Based on
Form 13G filed September 5, 2001.
3. With an address at 450 Old Niskayuna Rd., Latham, NY 12210-0461. Based
on Amendment No. 6 to Form 13D filed March 17, 2000. Includes 2,000 shares
beneficially owned and options to purchase 42,000 shares which may be exercised
within 60 days of September 30, 2001 by Carl H. Rosner. Mr. Rosner is the
Chairman of Intermagnetics General Corporation ("IGC"). Therefore, IGC may be
deemed to share voting and investment power with respect to the shares and
shares issuable upon the exercise of options held by Mr. Rosner. IGC disclaims
beneficial ownership of the shares and shares issuable upon the exercise of
options owned by Mr. Rosner.
4. With an address at 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401. Based on Form 13F filed June 30, 2001.
5. With an address at 2-3 Industry E. Rd II, Science-Based Industrial
Park, Hsinchu, Taiwan, Republic of China. The Company owns approximately 41% of
this venture and has the right to nominate half of the directors.
6. Includes 39,000 shares subject to options which may be exercised by Mr.
Abeles within 60 days of September 30, 2001, 12,000 shares owned by Abeles
Associates Inc. and 25,000 shares held by
Page 7
the estate of Mr. Abeles' spouse, as to which Mr. Abeles disclaims beneficial
ownership. Excludes 853,053 shares beneficially owned by IGC. Mr. Abeles is a
director emeritus of IGC and therefore may be deemed to share voting and
investment power with respect to the shares held by IGC. Mr. Abeles disclaims
beneficial ownership of the shares owned by IGC.
7. Includes 178,000 shares subject to options which may be exercised by
Mr. Barrella within 60 days of September 30, 2001.
8. Includes 1,500 shares subject to options which may be exercised by Mr.
Christman within 60 days of September 30, 2001.
9. Includes 243,500 shares subject to options which may be exercised by
Mr. Kavazanjian within 60 days of September 30, 2001.
10. Includes 42,000 shares subject to options which may be exercised by
Mr. Lieberman within 60 days of September 30, 2001 and 51,500 shares held by the
Arthur M. Lieberman P.C. profit sharing plan.
11. Includes 42,000 shares subject to options which may be exercised by
Mr. Rosner within 60 days of September 30, 2001. Does not include 853,053 shares
owned by IGC. Mr. Rosner is the Chairman of IGC and therefore may be deemed to
share voting and investment power with respect to the shares held by IGC. Mr.
Rosner disclaims beneficial ownership of the shares owned by IGC.
12. Includes 7,500 shares subject to options which may be exercised by Mr.
Singh within 60 days of September 30, 2001.
13. Includes 6,000 shares subject to options which may be exercised by Ms.
Barron within 60 days of September 30, 2001.
14. Includes 11,200 shares subject to options which may be exercised by
Mr. Comerford within 60 days of September 30, 2001.
15. Includes 20,000 shares subject to options which may be exercised by
Mr. Dix within 60 days of September 30, 2001.
16. Includes 13,000 shares subject to options which may be exercised by
Mr. Fishback within 60 days of September 30, 2001.
17. Includes 9,000 shares subject to options which may be exercised by Mr.
Schmitz within 60 days of September 30, 2001 and 300 shares held by Mr. Schmitz'
wife.
18. Includes 18,800 shares subject to options which may be exercised by
Mr. Cirin within 60 days of September 30, 2001.
19. Includes 631,500 shares subject to options which may be exercised by
the named directors and executive officers within 60 days of September 30, 2001.
Does not include 853,053 shares owned directly by IGC, of which Mr. Rosner is
the Chairman and Mr. Abeles a director emeritus, and does not include 700,000
shares owned by Ultralife Taiwan, Inc., a Taiwanese venture of which the Company
owns 33%.
20. Based on 12,578,186 issued shares less 27,250 treasury shares and less
231,980 shares out of 700,000 shares owned by Ultralife Taiwan, Inc., a venture
of which the Company owns approximately 33% and has the right to nominate half
of the directors.
Section 16(a) Reporting
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Page 8
Executive officers, directors and greater than ten-percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) reports they file. To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company during the fiscal year ended
June 30, 2001, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with,
except as follows: (1) Ms. Patricia C. Barron was late in filing a Form 3
regarding her status as a reporting person; (2) Ms. Barron was late in reporting
a purchase in March 2001; and (3) Mr. Abeles was late in reporting purchases
made in March 2001.
Page 9
EXECUTIVE COMPENSATION
The names of, and certain information with respect to the Company's
executive officers who are not also directors, are presented on the following
pages.
Present Principal Occupation and
Name Age Employment History
---- --- ----------------------------------------
Peter F. Comerford 44 Mr. Comerford was named Vice President
of Administration and General Counsel on
July 1, 1999 and was elected Secretary
of the Company in December 2000. He
joined the Company in May of 1997 as
Senior Corporate Counsel and was
appointed Director of Administration and
General Counsel in December of that
year. Prior to joining the Company, Mr.
Comerford was a practicing attorney for
approximately fourteen years having
worked primarily in municipal law
departments including the City of
Niagara Falls, New York where he served
as the Corporation Counsel. Mr.
Comerford has a B.A. from the State
University of New York at Buffalo, an
MBA from Canisius College and a J.D.
from the University of San Diego School
of Law.
Eric R. Dix 43 Mr. Dix, currently Vice President and
General Manager, Rechargeable Batteries,
joined the Company as Vice President of
Technology in February 1999. Before
then, Mr. Dix worked for Micron
Communications Corporation from October
1996, as Technical Marketing Manager and
as Director, Battery Operations. From
June 1995 until October 1996, Mr. Dix
was Vice President, Marketing for
Moltech Corporation, a lithium
rechargeable battery company. Mr. Dix
has an MBA from Santa Clara University
and a B.S. in Chemistry from the
University of Northern Iowa.
Robert W. Fishback 45 Mr. Fishback joined the Company in
December 1998 as Corporate Controller.
He became Vice President of Finance and
Chief Financial Officer in October 1999.
Prior to joining the Company, Mr.
Fishback served as Controller-Shared
Services for ITT Industries, a
diversified manufacturing company, from
1997 to 1998. From 1995 to 1997, he was
Director-Corporate Accounting for Goulds
Pumps Inc., a manufacturer of industrial
and commercial pumps. From 1983 to 1995,
Mr. Fishback served in various
managerial capacities in finance and
operations with Frontier Corporation, a
provider of local and long-distance
telecommunications services. He is a CPA
and has an MBA in finance from the State
University of New York at Buffalo. His
undergraduate degree in accounting is
from Grove City College.
William A. Schmitz 39 Mr. Schmitz, currently Vice President
and General Manager, Primary Batteries,
joined the Company in December 1999 as
Vice President, Manufacturing. Before
Page 10
this, Mr. Schmitz worked for Bausch &
Lomb from 1985 to 1999 in several
positions, most recently as Director,
New Product Development in the Eyewear
Division from 1995 to 1999. Mr. Schmitz
has an M.S. in Operations Management
from the University of Rochester and a
B.S. in Mechanical Engineering from the
Rochester Institute of Technology.
Julius M. Cirin 48 Mr. Cirin, a battery industry veteran
and currently Vice President, Corporate
Marketing, joined the Company as
Director of Marketing in March 1991 at
the Company's founding. Prior to this,
Mr. Cirin served as Quality Assurance
Manager for Eastman Kodak Company in the
Ultra Technologies Division from 1986 to
1989. From 1979 to 1986, Mr. Cirin
worked at Duracell USA in several
product and process engineering and
quality management positions. Mr. Cirin
has a B.S. in Marketing Management from
St. John Fisher College in Rochester,
New York.
Nancy C. Naigle 53 Ms. Naigle joined the Company in January
of 2001 as Vice President of Worldwide
Sales. Previously she was employed at
Xerox Corporation for 20 years, most
recently as Vice President, General
Manager, Software Solutions Business
Group after serving as Vice President,
Sales and Marketing, Internet and
Software Solutions. Ms. Naigle has both
a B.A. and a Master's degree in English
and Mathematics from the University of
Texas in Arlington, and earned an MBA
from the University of Dallas.
The individuals named in the following tables include, as of June 30,
2001, the Company's Chief Executive Officer and any other individual who served
as Chief Executive Officer during the fiscal year ending June 30, 2001 and the
four other most highly compensated executive officers of the Company whose
salary and bonus exceeded $100,000 ("Named Executive Officers").
The following table sets forth information concerning the annual and
long-term compensation of the Named Executive Officers for all services in all
capacities to the Company and its subsidiary during the Company's fiscal years
ended June 30, 2001, 2000 and 1999:
Page 11
Summary Compensation Table
All Other
Annual Compensation Long Term Compensation Compensation ($)
-------------------------- ----- ------------------------------------ --------------------------------------- -------------------
Other Annual Restricted
Name and Principal Compensation($) Stock Awards Underlying LTIP
Position Year Salary($) Bonus($) (1) ($) Options/SARs Payouts($)
-------------------------- ----- ---------- -------- ---------------- -------------- ------------ ---------- -------------------
John D. Kavazanjian 2001 $299,998 $0 $27,001 $0 6,000 $0 $0
President and Chief 2000 288,960 50,000 17,502 0 506,000 0 0
Executive Officer 1999 -- -- -- -- -- -- --
Joseph N. Barrella 2001 $196,725 $0 $20,544 $0 6,000 $0 $0
Senior Vice President of 2000 172,439 0 37,427 0 56,000 0 0
Business Development 1999 170,389 0 37,593 0 6,000 0 0
Eric R. Dix 2001 $149,605 $0 $16,135 $0 75,000 $0 $0
Vice President and 2000 127,616 0 22,665 0 50,000 0 0
General Manager, 1999 43,846 0 3,607 0 25,000 0 0
Rechargeable
Manufacturing
Robert W. Fishback 2001 $129,423 $0 $13,616 $0 0 $0 $0
Vice President of 2000 101,202 10,000 14,700 0 25,000 0 0
Finance and Chief 1999 42,836 0 4,329 0 15,000 0 0
Financial Officer
William A. Schmitz 2001 $124,647 $0 $15,620 $0 0 $0 $0
Vice President and 2000 57,942 0 4,858 0 45,000 0 0
General Manager, 1999 -- -- -- -- -- -- --
Primary Manufacturing
(1) The amounts reported in this column are categorized in the following
table.
John D. Joseph N. Robert W. William A.
Kavazanjian(1) Barrella Eric R. Dix(2) Fishback(3) Schmitz (4)
--------------- -------- -------------- ----------- -----------
Insurance
2001 $9,993 $13,320 $12,351 $9,871 $12,410
2000 11,040 11,425 10,465 8,175 4,858
1999 -- 8,509 3,607 4,329 --
Automobile
2001 $7,500 $0 $0 $0 $0
2000 6,000 7,824 0 4,000 0
1999 -- 8,517 0 0 --
Directors Fees
2001 $0 $0 $0 $0 $0
2000 0 13,187 0 0 0
1999 -- 10,125 0 0 --
401(k) Plan(5)
2001 $9,855 $7,862 $4,199 $4,149 $4,364
2000 462 4,991 1,059 2,525 0
1999 -- 5,942 0 0 --
(1) Mr. Kavazanjian joined the Company in July 1999.
(2) Mr. Dix joined the Company in February 1999.
(3) Mr. Fishback joined the Company in December 1998.
(4) Mr. Schmitz joined the Company in December 1999.
(5) Represents the Company's matching grants to the employees' 401(k)
Plan accounts for fiscal years ended June 30, 2001, 2000 and 1999.
Page 12
The following table sets forth information concerning options granted to
the Named Executive Officers during the Company's fiscal year ended June 30,
2001:
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value at Assumed Annual
Rates of
Individual Grants Stock Price Appreciation for Option Term (1)
----------------------------------------------------------------- --------------------------------------------------
Shares % Price Exp Date 0% Stock 5% Stock 5% Dollar 10% Stock 10% Dollar
(11) (12) Price Price Gain (13) Price Gain (13)
----- ----- --------- ----- ---------
John D. Kavazanjian 1,500 (2) 0.49% $10.06 9/29/05 $10.06 $12.84 $4,170 $16.21 $9,215
President and Chief 1,500 (3) 0.49% 5.50 12/29/05 5.50 7.02 2,279 8.86 5,037
Executive Officer 1,500 (4) 0.49% 6.94 3/30/06 6.94 8.85 2,875 11.17 6,353
1,500 (5) 0.49% 6.50 6/29/06 6.50 8.30 2,694 10.47 5,952
Joseph N. Barrella 1,500 (6) 0.49% $10.06 9/29/05 $10.06 $12.84 $4,170 $16.21 $9,215
Senior Vice 1,500 (7) 0.49% 5.50 12/29/05 5.50 7.02 2,279 8.86 5,037
President of 1,500 (8) 0.49% 6.94 3/30/06 6.94 8.85 2,875 11.17 6,353
Business 1,500 (9) 0.49% 6.50 6/29/06 6.50 8.30 2,694 10.47 5,952
Development
Eric R. Dix 75,000 (10) 4.88% $7.38 12/5/06 $7.38 $9.89 $188,115 $13.07 $426,770
Vice President and
General Manager
Rechargeable
Batteries
1. There is no assurance that the value realized by an employee will be at or
near the amount estimated using this model. These amounts rely on assumed
future stock price movements that cannot be predicted accurately.
2. Vested on the date of grant, September 29, 2000.
3. Vested on the date of grant, December 29, 2000.
4. Vested on the date of grant, March 30, 2001.
5. Vested on the date of grant, June 29, 2001.
6. Vested on the date of grant, September 29, 2000.
7. Vested on the date of grant, December 29, 2000.
8. Vested on the date of grant, March 30, 2001.
9. Vested on the date of grant, June 29, 2001.
10. Granted on December 5, 2000, with options to purchase 15,000 shares each
vesting on December 5, 2001, 2002, 2003, 2004, and 2005, respectively.
11. 307,100 total number of options were granted to employees.
12. Fair market value of stock at date of grant.
13. Fair market value of stock at end of actual option term assuming annual
compounding at the stated rate, less the option price.
The following table sets forth certain information concerning the number
of shares of Common Stock acquired upon the exercise of stock options during the
Company's fiscal year ended June 30, 2001 and the number and value at June 30,
2001 of unexercised stock options to purchase shares of Common Stock held by the
Named Executive Officers.
Page 13
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of Unexercised Value of Unexercised in the
Shares Value Options/SARs at FY-End Money Options/SARs at
Acquired on Realized (#) FY-End ($)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
------------------------- -------------- ----------- ------------------------- -----------------------------
John D. Kavazanjian 0 $0 152,000/360,000 $189,493/$472,320
President and Chief
Executive Officer
Joseph N. Barrella 0 $0 173,000/60,000 $1,500/$0
Senior Vice President
of Business Development
Eric R. Dix 0 $0 20,000/130,000 $13,750/$20,625
Vice President and
General Manager,
Rechargeable Batteries
Robert W. Fishback 0 $0 11,000/29,000 $11,874/$30,621
Vice President of
Finance and Chief
Financial Officer
William A. Schmitz 0 $0 9,000/36,000 $1,500/$6,000
Vice President and
General Manager,
Primary Manufacturing
(1) Market value of Company's Common Stock at exercise or year-end, minus the
exercise price.
The Company has no long-term incentive plan. Consequently, there have been
no qualifying awards during the fiscal year ended June 30, 2001. Also, the
Company has no employee pension plans to which it makes contributions, except as
described below under "401(k) Plan".
Employment Arrangements
In connection with the hiring of Mr. Kavazanjian as the Company's
President and Chief Executive Officer effective July 12, 1999, the Company
agreed to pay him a salary of $300,000 per annum and a signing bonus of $50,000.
Additionally, the Company granted Mr. Kavazanjian an option to purchase 500,000
shares of Common Stock for $5 3/16 per share, exercisable until July 12, 2005.
The option vests 50,000 shares at issue and 90,000 shares on July 12, 2000,
2001, 2002, 2003 and 2004. The Company agreed that if it terminated Mr.
Kavazanjian during the first three years of employment, except for cause, Mr.
Kavazanjian will be entitled to one year's severance. In addition, any options
which otherwise would vest at the next annual date after termination will vest
on the termination date.
In December of 2000, as an inducement to employment, the Company granted
Mr. Dix an option to purchase 75,000 shares of Common Stock for $7.38 per share,
exercisable until December 5, 2006. The option vests 15,000 shares on December
5, 2001, 2002, 2003, 2004 and 2005. The Company agreed that if it terminated Mr.
Dix, except for cause, Mr. Dix will be entitled to one year's severance. In
addition, any options which otherwise would vest at the next annual date after
termination will vest as scheduled, and all vested options will be exercisable
within one year after termination.
In addition to the above compensation, in accordance with the Company's
revised Board compensation policy, each outside Board member receives a $750
monthly retainer as well as $750 for each Board meeting attended; subject to the
provision that the meeting compensation is reduced by 50% if the director
participates by conference call. In addition, commencing June 30, 1993, each
director receives an option, at the end of each calendar quarter to purchase
1,500 shares of Common Stock. This option is granted to each director on the
last day of the calendar quarter. It vests immediately with a term
Page 14
of five years from the date of grant and is granted at a purchase price equal to
the closing price of the Common Stock on the date of grant.
401(k) Plan
The Company established a profit sharing plan under Sections 401(a) and
401(k) of the Code (the "401(k) Plan"), effective as of June 1, 1992. The 401(k)
plan was amended effective as of January 1, 1994. All employees in active
service who have completed 1,000 hours of service or were participating in the
401(k) Plan as of January 1, 1994, not otherwise covered by a collective
bargaining agreement (unless such agreement expressly provides that those
employees are to be included in the 401(k) Plan), are eligible to participate in
the 401(k) Plan. Eligible employees may direct that a portion of their
compensation, up to a maximum of 17% (in accordance with all IRS limitations in
effect on January 1, 1998) be withheld by the Company and contributed to their
account under the 401(k) Plan.
In April 1996, the Board of Directors authorized a Company matching
contribution up to a maximum of 1 1/2% of an employee's annual salary for the
calendar year ended December 31, 1996 and 3% for subsequent calendar years. In
January 2001, the matching contribution was raised to a maximum of 4%. The
Company made contributions of $172,857, $157,422 and $249,912, for the fiscal
years ending June 30, 1999, 2000 and 2001, respectively.
All 401(k) contributions are placed in a trust fund to be invested at the
trustee's discretion, except that the Company may designate that the funds be
placed and held in specific investment accounts managed by an investment manager
other than the trustee. Amounts contributed to employee accounts by the Company
or as compensation reduction payments, and any earnings or interest accrued on
employee accounts, are not subject to federal income tax until distributed to
the employee, and may not be withdrawn (absent financial hardship) until death,
retirement or termination of employment.
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION
Overview
Compensation determinations are made by the Company's Compensation and
Stock Option Committee. The Company seeks to provide executive compensation that
will support the achievement of the Company's financial goals while attracting
and retaining talented executives and rewarding superior performance.
The Company seeks to provide an overall level of compensation to the
Company's executives that is competitive within the Company's industry and with
other companies of comparable size and complexity. Compensation in any
particular case may vary from the industry average on the basis of annual and
long-term Company performance as well as individual performance. The
Compensation and Stock Option Committee will exercise its discretion to set
compensation where, in its judgment, external, internal or individual
circumstances warrant it.
In general, the Company compensates its executive officers through a
combination of salary and stock option awards. Additionally, the Company's
executives are eligible to participate in or receive benefits under an employee
benefit plan made available by the Company to its executives and/or employees.
Salary
Of the primary elements of executive compensation set forth above, salary
is the least affected by the Company's performance, although it is very much
dependent on individual performance. The
Page 15
Company believes that salaries paid to its executives are competitive with
industry norms. The salary levels and annual increases of all executive officers
of the Company must be approved by the Compensation and Stock Option Committee.
Salary levels for executives are determined by progress made in the operational
and functional areas for which they are responsible as well as the overall
profitability of the Company.
Executives' salaries are reviewed annually. The timing and amount of any
increase to executives both depend upon (i) the performance of the individual
and, to a lesser extent, (ii) the financial performance of the Company.
Stock Options
Stock options are designed to provide long-term incentives and rewards,
tied to the price of the Company's Common Stock. Given the vagaries of the stock
market, stock price performance and financial performance are not always
consistent. The Compensation and Stock Option Committee believes that stock
options, which provide value to the participants only when the Company's
stockholders benefit from stock price appreciation, are an appropriate
complement to the Company's overall compensation policies. Plan as well as
non-plan awards are made to executive officers of the Company. The decision to
award stock options to an executive is based upon such considerations as the
executive's position with the Company and is designed to be competitive for
individuals at that level. The Compensation and Stock Option Committee
administers the Company's stock option plans and non-plan stock options to
executives of the Company.
Employee Benefit Plans
Executives of the Company are each entitled to participate in or receive
benefits under any pension plan, profit-sharing plan, life insurance plan,
health insurance plan or other employee benefit plan made available by the
Company to its executives and employees. Currently, the Company provides medical
insurance for its executive officers and has established the 401(k) Plan. All
executive officers and employees are eligible to participate in the 401(k) Plan.
Chief Executive Officer
Mr. Kavazanjian joined the Company in July 1999, entering into an
employment agreement with the Company, the principal terms of which are
described earlier in this Proxy Statement. In reviewing the performance of the
Chief Executive Officer, the Compensation and Stock Option Committee considers
the scope and complexity of his job during the past year, progress made in
planning for the future development and growth and return on assets of the
Company.
Compensation and Stock Option Committee
Joseph C. Abeles
Patricia C. Barron
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Stock Option Committee,
currently consisting of Mr. Abeles and Ms. Barron, deliberate on issues
concerning executive compensation. Richard A. Hansen was a member until he
resigned as a director on June 29, 2001. Mr. Abeles acts as the Company's
Treasurer. Mr. Abeles is a director emeritus of IGC and a member of IGC's
Compensation Committee.
Page 16
PERFORMANCE GRAPH
The following graph compares the cumulative return to holders of the
Company's Common Stock for the period commencing June 30, 1996 through the
fiscal year ended June 30, 2001 with the NASDAQ National Market Index and the
NASDAQ Electrical Components Index for the same period. The comparison assumes
$100 was invested on June 30, 1996 in the Company's Common Stock and in each of
the comparison groups, and assumes reinvestment of dividends. The Company paid
no dividends during the comparison period.
[Graph depicted as a Bar Chart]
--------------------------------------------------------------------------------
6/28/96 6/30/97 6/30/98 6/30/99 6/30/00 6/30/01
ULBI 78 64 47 30 62 46
US NASDAQ 128 156 206 296 437 185
Elect. Components 106 174 172 306 759 265
--------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of independent directors and operates
under a written charter adopted by the Audit Committee and the Board. A copy of
the Audit Committee's charter is attached to this Proxy Statement as Appendix A.
Management has the primary responsibility for the Company's financial
statements and the reporting process, including the system of internal controls.
Arthur Andersen LLP, the independent accountants for the Company, is responsible
for performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Audit Committee acts only in an oversight capacity. The
Audit Committee relies on the work and assurances of the Company's management,
which has the primary responsibility for financial statements and reports, and
of the independent auditors, who, in their report, express an opinion on the
conformity of the Company's annual financial statements to generally accepted
accounting principles.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent accountants. The Audit Committee discussed with
the independent accountants matters required to be discussed by Statement on
Auditing Standards No. 61 "Communication With Audit Committees".
Page 17
The independent accountants provided to the Audit Committee the written
disclosures required by the Independence Standards Board Standard No. 1
"Independence Discussion With Audit Committees". The Audit Committee discussed
with the accountants the accountants' independence.
The Audit Committee discussed with the Company's independent accountants
the plans for their audit. The Audit Committee met with the independent
accountants, with and without management present, and discussed the results of
their examinations, their evaluations of the Company's internal controls, and
the quality of the Company's financial reporting.
In reliance on these reviews and discussions, and the report of the
independent auditors, the Audit Committee has recommended to the Board of
Directors, and the Board has approved, that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended June 30,
2001, for filing with the Securities and Exchange Commission.
The following fees were paid to Arthur Andersen LLP for services rendered
in fiscal 2001:
Audit Fees - The aggregate fees billed by Arthur Andersen LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended June 30, 2001, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year, were $99,000.
Financial Information Systems Design and Implementation Fees - Arthur Andersen
LLP did not render professional services relating to financial information
systems design and implementation for the fiscal year ended June 30, 2001.
All Other Fees - The aggregate fees billed by Arthur Andersen LLP for services
rendered to the Company, other than the services described above for the fiscal
year ended June 30, 2001 were $51,000. The vast majority of these fees relate to
tax preparation fees and certain financial advisory services in support of the
Company.
The Audit Committee has reviewed the above fees for non-audit services and
believes such fees are compatible with the independent accountants'
independence.
The Audit Committee has recommended to the Board, and the Board has
approved, the election of Arthur Andersen LLP as the Company's independent
accountants for fiscal 2002.
Carl H. Rosner, Chair
Patricia C. Barron
Ranjit Singh
Page 18
Proposal 2
Approve and Ratify Auditors
The firm of Arthur Andersen LLP, certified public accountants, served as
the independent auditors of the Company for the fiscal year ended June 30, 2001.
In addition to the audit of the June 30, 2001 financial statements, the Company
engaged Arthur Andersen LLP to perform certain services for which it was paid
professional fees. The Audit Committee of the Board of Directors considered the
possible effect of such professional services on the independence of Arthur
Andersen LLP and approved such services prior to their being rendered.
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending June 30, 2002. This selection
will be presented to the stockholders for their approval at the Meeting. The
Board of Directors recommends a vote in favor of the proposal to approve and
ratify this selection, and the persons named in the enclosed proxy (unless
otherwise instructed therein) will vote such proxies FOR this proposal. If the
stockholders do not approve this selection, the Board of Directors will
reconsider its choice.
The Company has been advised by Arthur Andersen LLP that a representative
will be present at the Meeting and will be available to respond to appropriate
questions. In addition, the Company intends to give such representative an
opportunity to make any statements if he or she should so desire.
The Board of Directors recommends a vote in favor of the proposal to
approve and ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending June 30, 2002, and, unless
otherwise indicated therein, the shares represented by the enclosed properly
executed proxy will be voted FOR such proposal.
Other Matters
The Board of Directors does not intend to present, and has not been
informed that any other person intends to present, any matters for action at the
Meeting other than those specifically referred to in this proxy statement. If
any other matters properly come before the Meeting, it is intended that the
holders of the proxies will act in respect thereof in accordance with their best
judgment.
In order to be eligible for inclusion in the Company's proxy materials for
the next year's Annual Meeting of Stockholders, any stockholder proposal (other
than the submission of nominees for directors) must be received by the Company
at its principal offices not later than the close of business on June 27, 2002.
A representative of Arthur Andersen LLP, the Company's principal
accountant, plans to be present at the Meeting, will have the opportunity to
make a statement, and is expected to be available to respond to questions.
The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 2001, as filed with the SEC, is included in the Annual Report to
Stockholders which accompanies this Proxy Statement.
October 26, 2001 By Order of the Board of Directors
Arthur M. Lieberman
Chairman of the Board of Directors
Page 19
PROXY
ULTRALIFE BATTERIES, INC.
Annual Meeting of Stockholders on December 5, 2001
Proxy solicited on behalf of the Board of Directors
The undersigned hereby appoints each of John D. Kavazanjian and Peter F.
Comerford as the undersigned's proxy, with full power of substitution, to vote
all of the undersigned's shares of Common Stock in Ultralife Batteries, Inc.
(the "Company") at the Annual Meeting of Stockholders of the Company to be held
on December 5, 2001 at 10:30 A.M. local time, at the Chase Conference Center,
270 Park Avenue, 11th Floor, New York, New York 10017, or at any adjournment, on
the matters described in the Notice of Annual Meeting and Proxy Statement and
upon such other business as may properly come before such meeting or any
adjournments thereof, hereby revoking any proxies heretofore given.
(Continued and to be signed on the reverse side)
|X| Please mark your votes as in this example using dark ink only.
Each properly executed proxy will be voted in accordance with
specifications made on the reverse side hereof. Unless authority to vote for one
or more of the nominees is specifically withheld according to the instructions,
a signed Proxy will be voted FOR the election of the named nominees for
directors and, unless otherwise specified, FOR the other proposal listed herein
and described in the accompanying proxy statement.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
check the box to vote "FOR" all nominees and strike a line through the nominee's
name in the list below.)
1. Election of Directors.
For all nominees Withhold Authority to vote
. listed below for all nominees listed below
|_| |_|
Nominees: Joseph C. Abeles
Joseph N. Barrella
Patricia C. Barron
Daniel W. Christman
John D. Kavazanjian
Arthur M. Lieberman
Carl H. Rosner
Ranjit Singh
2. Proposal to ratify Arthur Andersen LLP as the Company's independent
auditors.
|_| FOR
|_| AGAINST
|_| ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournments
thereof.
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Annual Meeting and Proxy Statement dated October 26, 2001, describing
more fully the proposals set forth herein.
Page 20
------------------------------ Date: _____________________, 2001
Signature
------------------------------ Date: _____________________, 2001
Signature if held jointly
Sign exactly as set forth herein. If signed as executor, administrator,
trustee or guardian, indicate the capacity in which you are acting. Proxies by
corporations should be signed by a duly authorized officer and bare corporate
seal. Please sign and return the proxy card promptly in enclosed envelope.
Page 21
Appendix A
Ultralife Batteries, Inc.
Audit Committee of the Board of Directors
I. Purpose
The primary function of the Audit Committee ("Committee") is to assist the
Board of Directors in fulfilling its oversight responsibilities by
reviewing: the financial information of Ultralife Batteries, Inc. and its
subsidiaries (the "Company") which will be provided to stockholders and
others; adequacy of the systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established; and the Company's auditing, accounting and financial
reporting processes. Consistent with this function, the Committee should
encourage management to engage in continuous improvement of, and should
foster adherence to, the Company's policies, procedures and practices at
all levels.
Generally, the Committee's primary duties and responsibilities are to: (a)
serve as an independent and objective party to monitor the Company's
financial reporting processes and internal control systems, (b) review and
appraise the audit efforts of the Company's independent accountants and
its internal accounting staff, (c) review and monitor areas of risk that
could have a material impact on the Company, and (d) provide an open
avenue of communication among the independent accountants, financial and
senior management, and the Board of Directors.
II. Membership Requirements
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent. An Independent
Director shall refer to a person other than an officer or employee of the
Company or its subsidiaries or any other person having a relationship, which
in the opinion of the Company's directors, would interfere with the exercise
of independent judgment in carrying out the responsibilities of a member of
the Audit Committee. The following persons shall NOT be considered an
Independent Director:
a) a director employed by the Company for the current year and any of
the past three years;
b) a director who accepted from the Company $60,000 during the previous
fiscal year, other than (i) compensation for board service, (ii)
benefits under a tax-qualified retirement plan or (iii) benefits
under non-discretionary compensation;
c) a director who is a member of the immediate family of an individual
who, over the last three years was employed by the Company as an
executive officer. Immediate family, as used herein includes:
spouse, parents, siblings, children, mother and father in-laws,
brother and sister-in-laws, son and daughter-in-laws and anyone who
resides in the home of such individual;
d) a director who is a partner in, a controlling shareholder of, or an
executive officer of any for-profit corporation to which the Company
made or received as payments (other than in the form of equity
investments) an amount that exceeded 5% of the Company's
consolidated gross revenues for that year or $200,000, whichever is
more, in any of the past three years; and
Page 22
e) a director who is employed as an executive of another entity where
any of the Company's executives serve on that entity's compensation
committee.
The Committee may, under exceptional and limited circumstances, act in the
best interests of the Company and its stockholders by appointing a
Committee member who is not an Independent Director, provided however, the
member shall not be a current employee or an immediate family member of an
employee. In such an instance, the Board shall disclose in its annual
proxy statement the nature of the relationship and the reason(s) for
appointing such individual as a Committee member.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices, and at least one member of the Committee
shall have accounting or related financial management expertise. In
carrying out their Audit Committee responsibilities, members of the
Committee are not providing any expert or special assurance as to the
Company's financial statements or any professional certification as to the
outside auditor's work. Committee members may enhance their familiarity
with finance and accounting by participating in educational programs
conducted by the Company or an outside consultant.
The members of the Committee shall be elected by the Board at the
Company's Annual Meeting of the Board or until their successors shall be
duly elected and qualified. The Committee will be chaired by an
Independent Director appointed by the Board.
III. Duties and Responsibilities
The Audit Committee's duties and responsibilities are as follows:
a) Review and reassess the adequacy of the Committee's charter and the
actions of the committee in fulfilling its charter on an annual
basis.
b) Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its
subsidiaries, with the understanding that the independent auditors
are ultimately accountable to the Board and the Audit Committee.
c) Meet with independent auditors and financial management of the
Company to review the scope and associated fees of the proposed
audit for the current year and the audit procedures to be utilized,
and at the conclusion thereof review such audit, including any
comments or recommendations of the independent auditors.
d) Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to
determine that the independent auditors are satisfied with the
disclosure and content of the financial statements to be presented
to the shareholders. Any changes in accounting principles should be
reviewed.
e) Review with the independent auditors and the Company's financial and
accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company, and elicit any
recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed controls
or procedures are desirable. Particular emphasis should be given to
the adequacy of such internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or
otherwise improper. Further, the Committee periodically should
review Company policy statements to determine their adherence to an
appropriate code of conduct.
f) Review the scope and results of the Company's internal audit plans
and procedures.
Page 23
g) Provide sufficient opportunity for the internal and independent
auditors to meet with the members of the Committee without members
of management present. Among the items to be discussed in these
meetings are the independent auditor's evaluation of the Company's
financial, accounting, and auditing personnel, and the cooperation
that the independent auditors received during the course of the
audit.
h) Ensure that the Committee receives a formal written statement from
the independent auditor delineating all relationships between the
auditor and the Company regarding any relationships or services that
would potentially impact the independence or objectivity of the
auditor. The Committee shall take, or recommend that the full Board
take, any appropriate action to oversee the independence of the
independent auditor.
i) Review and monitor the status of contingent liabilities (including
legal proceedings and tax status), legislative and regulatory
developments, and other areas of risk that could materially impact
the Company.
j) Direct and supervise investigations into matters within the scope of
the Committee's duties.
k) Submit the minutes of all meetings of the Committee to, or discuss
the matters discussed at each Committee meeting with, the Board.
l) Carry out such other duties and responsibilities as may be assigned
to the Committee by the Board.
Page 24