| | |
(4) | | Restricted shares vest in three equal installments on April 18, 2007, 2008 and 2009. |
|
(5)(6) | | RestrictedThese performance-based restricted shares were scheduled to vest in four equal installments on January 11, 2007, 2008, 2009February 25, 2010 subject to achievement of specified financial performance metrics. Achievement of the specified performance metrics was not met and these performance-based shares were forfeited on February 25, 2010. |
|
(6) | | Restricted shares vest in three equal installments on January 16, 2007, 2008 and 2009. |
|
(7) | | RestrictedThese performance-based restricted shares are scheduled to vest on July 23, 2009. |
|
(8) | | Performance shares vest on April 18, 2008March 2, 2011 subject to achievement of specified financial performance metrics. |
|
(9) | | Performance shares vest on July 23, 2009 subject to achievement of specified financial performance metrics. |
Option Exercises and Stock Vested for Fiscal Year 2006
| | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | | |
| | Number of Shares
| | Value Realized on
| | Number of Shares
| | Value Realized on
| | |
Name | | Acquired on Exercise | | Exercise | | Acquired on Vesting | | Vesting | | |
|
John C. Corey | | | — | | | | — | | | | 37,500 | | | $ | 256,875 | | | | | |
Gerald V. Pisani | | | 59,000 | | | $ | 165,485 | | | | 36,034 | | | | 214,042 | | | | | |
George E. Strickler | | | — | | | | — | | | | — | | | | — | | | | | |
Edward F. Mosel | | | — | | | | — | | | | 6,184 | | | | 46,317 | | | | | |
Mark J. Tervalon | | | — | | | | — | | | | 3,092 | | | | 23,100 | | | | | |
Thomas A. Beaver | | | — | | | | — | | | | 3,092 | | | | 23,100 | | | | | |
2009
| | Stock Awards | |
| | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) | |
| | | | | | |
John C. Corey | | | 131,131 | | | $ | 573,004 | |
George E. Strickler | | | 49,315 | | | | 236,090 | |
Mark J. Tervalon | | | 22,705 | | | | 105,729 | |
Thomas A. Beaver | | | 17,172 | | | | 77,409 | |
Vincent F. Suttmeier | | | 17,172 | | | | 77,409 | |
NonqualifedNonqualified Deferred Compensation for Fiscal Year 20062009
| | | | | | | | | | | | |
| | Executive
| | | | |
| | Contributions in
| | Aggregate Earnings
| | Aggregate Balance
|
Name | | Last FY | | in Last FY | | at Last FYE |
|
John C. Corey | | | — | | | | — | | | | — | |
Gerald V. Pisani | | | — | | | | — | | | | — | |
George E. Strickler | | | — | | | | — | | | | — | |
Edward F. Mosel | | $ | 60,380 | | | $ | 767 | | | $ | 61,147 | |
Mark J. Tervalon | | | 8,833 | | | | 188 | | | | 9,021 | |
Thomas A. Beaver | | | — | | | | — | | | | — | |
| | Aggregate Earnings in Last FY ($) | | | Aggregate Balance at Last FYE ($) | |
| | | | | | |
John C. Corey | | $ | 21,202 | | | $ | 513,563 | |
George E. Strickler | | | - | | | | - | |
Mark J. Tervalon | | | 454 | | | | 10,996 | |
Thomas A. Beaver | | | - | | | | - | |
Vincent F. Suttmeier | | | - | | | | - | |
Potential Change in Control and Tervalon deferred a portionOther Post-Employment Payments
In July 2007, we entered into an Amended and Restated Change in Control Agreement (the “CIC Agreement”) with each NEO and certain other senior management employees. Our change in control agreements were designed to provide for continuity of their salaries during 2006 which is includedmanagement in the Summary Compensation Table.event of change in control of the Company. We think it is important for our executives to be able to react neutrally to a potential change in control and not be influenced by personal financial concerns. We believe our arrangements are consistent with market practice. For our NEOs, we set the level of benefits at two times base salary and average incentive award (described in detail below) to remain competitive with our select peer group. Finally, all payments under the CIC Agreement are conditioned on a non-compete, non-solicitation and non-disparagement agreement. The CIC Agreements replaced and superseded change in control agreements we previously entered into with these employees. The Committee determined that amending and restating prior agreements was necessary to comply with recently adopted final regulation under Section 409A of the Code, to add a non-competition clause for our protection, to address ambiguity in the prior agreements and to add a conditional gross up of any excise tax imposed under Section 280G of the Code. In December 2008, we amended the CIC Agreement to comply with the requirements of Revenue Ruling 2008-13, which requires that all payments to executive to be based on actual results for performance-based payments.
We believe that the CIC Agreements should compensate executives displaced by a change in control and not serve as an incentive to increase personal wealth. Therefore, our CIC Agreements are “double trigger” arrangements. In order for the executives to receive the payments and benefits set forth in the agreement, both of the following must occur:
| · | a change in control of the Company; and |
| · | the Company separates NEO from service, other than in the case of a termination for cause, within two years of the change in control; or |
| · | NEO separates from service for good reason (defined as material reduction in NEO’s title, responsibilities, power or authority, or assignment of duties that are materially inconsistent to previous duties, or material reduction in NEO’s compensation and benefits, or require NEO to work from any location more than 100 miles from previous location) within two years of the change in control. |
If the events listed above occur and the executive delivers a release to the Company, the Company will be obligated to provide the following to the executive:
| · | two times the greater of the NEO’s annual base salary at the time of a triggering event or at the time of the occurrence of a change in control; |
| · | two times the greater of the NEO’s average annual incentive award over the last three completed fiscal years or the last five completed fiscal years; |
| · | an amount equal to the pro rata amount of annual incentive compensation the NEO would have been entitled to at the time of a triggering event calculated based on the performance goals that were achieved in the year in which the triggering event occurred; |
| · | continued life and health insurance benefits for twenty-four months following termination; and |
| · | a gross-up payment to provide the NEO with an amount, on an after-tax basis, equal to any excise taxes payable by the NEO under tax laws in connection with payments described above. However, if the NEO’s total payments described above fall above the 280G limit (within the meaning of Section 280G of the Code) by 110% or less, then the total payments will be reduced to avoid triggering excise tax. |
Upon a change in control as defined in the LTIP, the restricted common shares included on the “Outstanding Equity Awards at Year-End” table that are not performance-based vest and are no longer subject to forfeiture; the performance-based restricted common shares included on the “Outstanding Equity Awards at Year End” table vest and are no longer subject to forfeiture based on target achievement levels.
In October 2009, the Company adopted the Officers’ and Key Employees’ Severance Plan (the “Severance Plan”). The named executive officers covered under the Severance Plan include Messrs. Strickler, Tervalon, and Beaver. If a covered executive is terminated by the Company without cause, the Company will be obligated under the Severance Plan to pay the executive’s salary for 12 months (18 months in the case of the Chief Financial Officer, Mr. Strickler) and continue health and welfare benefits coverage over the same period of time. Mr. Corey’s severance protection is provided in his employment agreement as described above.
No severance is payable if the NEO’s employment is terminated for “cause,” if they resign, or upon death.
Value of Payment Presuming Hypothetical December 31, 2009 Termination Date
Cash CompensationAssuming the events described in the table below occurred on December 31, 2009, each NEO would be eligible for the following payments and benefits:
| | | | | | | | | | | Change in Control and NEO resigns for Good Reason or is Terminated without Cause | | | | | | | |
John C. Corey | | | | | | | | | | | | | | | | | | |
Base Salary | | $ | - | | | $ | 1,280,000 | | | $ | - | | | $ | 1,280,000 | | | $ | 160,000 | | | $ | - | |
Annual Incentive Award | | | - | | | | 815,400 | | | | - | | | | 815,400 | | | | - | | | | - | |
Long-term Incentive Award | | | - | | | | 217,674 | | | | 783,628 | | | | 783,628 | | | | 217,674 | | | | 217,674 | |
Retention Award | | | - | | | | 640,000 | | | | - | | | | 640,000 | | | | - | | | | - | |
Unvested and Accelerated Restricted Shares | | | - | | | | 1,193,005 | | | | 2,530,368 | | | | 2,530,368 | | | | 472,124 | | | | 472,124 | |
Unvested and Accelerated Performance Shares | | | - | | | | - | | | | 1,042,457 | | | | 1,042,457 | | | | 794,424 | | | | 794,424 | |
Deferred Compensation Plan | | | 513,563 | | | | 513,563 | | | | - | | | | 513,563 | | | | 513,563 | | | | 513,563 | |
Health & Welfare Benefits | | | - | | | | 63,026 | | | | - | | | | 63,026 | | | | - | | | | - | |
Tax Gross-Up | | | - | | | | - | | | | - | | | | 2,094,512 | | | | - | | | | - | |
Total | | $ | 513,563 | | | $ | 4,772,668 | | | $ | 4,356,453 | | | $ | 9,762,954 | | | $ | 2,157,785 | | | $ | 1,997,785 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
George E. Strickler | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | $ | - | | | $ | 496,125 | | | $ | - | | | $ | 661,500 | | | $ | - | | | $ | - | |
Annual Incentive Award | | | - | | | | - | | | | - | | | | 319,166 | | | | - | | | | - | |
Long-term Incentive Award | | | - | | | | 62,863 | | | | 226,306 | | | | 226,306 | | | | 62,863 | | | | 62,863 | |
Retention Award | | | - | | | | 330,750 | | | | - | | | | 330,750 | | | | - | | | | - | |
Unvested and Accelerated Restricted Shares | | | - | | | | 357,607 | | | | 743,415 | | | | 743,415 | | | | 148,665 | | | | 148,665 | |
Unvested and Accelerated Performance Shares | | | - | | | | - | | | | 291,023 | | | | 291,023 | | | | 219,892 | | | | 219,892 | |
Deferred Compensation Plan | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Health & Welfare Benefits | | | - | | | | 28,455 | | | | - | | | | 37,940 | | | | - | | | | - | |
Tax Gross-Up | | | - | | | | - | | | | - | | | | 635,046 | | | | - | | | | - | |
Total | | $ | - | | | $ | 1,275,800 | | | $ | 1,260,744 | | | $ | 3,245,146 | | | $ | 431,420 | | | $ | 431,420 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Mark J. Tervalon | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | $ | - | | | $ | 292,000 | | | $ | - | | | $ | 584,000 | | | $ | - | | | $ | - | |
Annual Incentive Award | | | - | | | | - | | | | - | | | | 229,600 | | | | - | | | | - | |
Long-term Incentive Award | | | - | | | | 37,975 | | | | 136,709 | | | | 136,709 | | | | 37,975 | | | | 37,975 | |
Retention Award | | | - | | | | 146,000 | | | | - | | | | 146,000 | | | | - | | | | - | |
Unvested and Accelerated Restricted Shares | | | - | | | | 211,221 | | | | 444,734 | | | | 444,734 | | | | 85,595 | | | | 85,595 | |
Unvested and Accelerated Performance Shares | | | - | | | | - | | | | 184,705 | | | | 184,705 | | | | 141,405 | | | | 141,405 | |
Deferred Compensation Plan | | | 10,995 | | | | 10,995 | | | | - | | | | 10,995 | | | | 10,995 | | | | 10,995 | |
Health & Welfare Benefits | | | - | | | | 18,675 | | | | - | | | | 37,351 | | | | - | | | | - | |
Tax Gross-Up | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Total | | $ | 10,995 | | | $ | 716,866 | | | $ | 766,148 | | | $ | 1,774,094 | | | $ | 275,970 | | | $ | 275,970 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Thomas A. Beaver | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | $ | - | | | $ | 274,500 | | | $ | - | | | $ | 549,000 | | | $ | - | | | $ | - | |
Annual Incentive Award | | | - | | | | - | | | | - | | | | 246,218 | | | | - | | | | - | |
Long-term Incentive Award | | | - | | | | 30,203 | | | | 108,731 | | | | 108,731 | | | | 30,203 | | | | 30,203 | |
Retention Award | | | - | | | | 137,250 | | | | - | | | | 137,250 | | | | - | | | | - | |
Unvested and Accelerated Restricted Shares | | | - | | | | 169,604 | | | | 355,445 | | | | 355,445 | | | | 69,828 | | | | 69,828 | |
Unvested and Accelerated Performance Shares | | | - | | | | - | | | | 149,116 | | | | 149,116 | | | | 114,398 | | | | 114,398 | |
Deferred Compensation Plan | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Health & Welfare Benefits | | | - | | | | 6,823 | | | | - | | | | 13,646 | | | | - | | | | - | |
Tax Gross-Up | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Total | | $ | - | | | $ | 618,380 | | | $ | 613,292 | | | $ | 1,559,406 | | | $ | 214,429 | | | $ | 214,429 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Vincent F. Suttmeier | | | | | | | | | | | | | | | | | | | | | | | | |
Base Salary | | $ | - | | | $ | - | | | $ | - | | | $ | 434,000 | | | $ | - | | | $ | - | |
Annual Incentive Award | | | - | | | | - | | | | - | | | | 146,280 | | | | - | | | | - | |
Long-term Incentive Award | | | - | | | | 17,364 | | | | 62,510 | | | | 62,510 | | | | 17,364 | | | | 17,364 | |
Unvested and Accelerated Restricted Shares | | | - | | | | 102,381 | | | | 209,663 | | | | 209,663 | | | | 45,050 | | | | 45,050 | |
Unvested and Accelerated Performance Shares | | | - | | | | - | | | | 91,001 | | | | 91,001 | | | | 70,626 | | | | 70,626 | |
Deferred Compensation Plan | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Health & Welfare Benefits | | | - | | | | - | | | | - | | | | 3,301 | | | | - | | | | - | |
Tax Gross-Up | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Total | | $ | - | | | $ | 119,745 | | | $ | 363,174 | | | $ | 946,755 | | | $ | 133,040 | | | $ | 133,040 | |
DIRECTORS’ COMPENSATION
Cash Compensation
Each non-employee director who is not an employee of the Company receives a retainer of $35,000 per year for beingserving as a director $1,000of the Company, $1,500 for attending each meeting of the Board of Directors and $500$750 for participating in each telephonic meeting of the Board of Directors. The non-executive Chairman receives twice the annual retainer and Board meeting fees ofthan the other directors. There is no additional fee received for attending committee meetings unless such meeting takes place on a day other than the same day as a meeting of the Board of Directors, in which case committeeCommittee members receive $1,000 for attending such meetings and $500 when the meetings are held telephonically.for participating in telephonic meetings. The Audit Committee chairman receives additional compensation of $7,500$10,000 per year and the Compensation Committee chairmanand Nominating and Corporate Governance Committee chairperson each receives additional compensation of $4,000$5,000 per year. Additionally, in 2009, directors were paid an additional cash award granted to supplement the fair value of the annual grant of restricted shares due to the depressed market value of our common shares and the number of shares available under the Directors’ Plan at the time of grant. Directors who are also employees of the Company are not paid any director’s fee.additional compensation for serving as a director. The Company reimbursesout-of-pocket expenses incurred by all directors in connection with attending Board of Directors’ and committee meetings.
23
Equity Compensation
Pursuant to the Directors’ Restricted Shares Plan, non-employee directors are eligible to receive awards of restricted common shares. In 2006, each non-employee director who served on the Board of Directors2009, Messrs. Draime, Epstein, Jacobs, Linehan and Ms. Korth were granted 7,300 restricted common shares; Mr. Lasky was granted 6,90014,600 restricted common shares and Messrs. Kaplan and Schlather were granted 4,152 restricted common shares. The restrictions for those shares will lapselapsed on August 24, 2007.March 9, 2010.
Deferred Compensation
A non-employee director may elect to have all or a portion of his or her retainer fees, meeting fees and equity compensation deferred until a future date pursuant to the Stoneridge, Inc. Outside Directors’ Deferred Compensation Plan. Directors may elect to defer receipt of the compensation for three or five years from the last day of the calendar year in which it was deferred or until the date the Directordirector separates from service with the Company.service. Amounts related to deferred cash compensation earn interest at a rate equal to the prime rate plus one percentage point, compounded quarterly. Distributions of deferred compensation may be made in onea lump sum payment, five equal, annual installments or ten equal, annual installments. In December 2009, the Stoneridge, Inc. Outside Directors’ Deferred Compensation Plan was terminated.
Director Compensation Table
| | Fees Earned or Paid in Cash ($) | | | | | | | |
| | | | | | | | | |
Jeffrey P. Draime | | $ | 85,083 | | | $ | 12,556 | | | $ | 97,639 | |
Sheldon J. Epstein | | | 66,397 | | | | 12,556 | | | | 78,953 | |
Douglas C. Jacobs | | | 93,899 | | | | 12,556 | | | | 106,455 | |
Ira C. Kaplan | | | 61,776 | | | | 21,881 | | | | 83,657 | |
Kim Korth | | | 88,366 | | | | 12,556 | | | | 100,922 | |
William M. Lasky | | | 175,666 | | | | 25,112 | | | | 200,778 | |
Earl L. Linehan | | | 64,680 | | | | 12,556 | | | | 77,236 | |
Paul J. Schlather | | | 62,276 | | | | 21,881 | | | | 84,157 | |
| | | | | | | | | | | | | | | | |
| | Fees Earned
| | | Stock
| | | All Other
| | | | |
| | or Paid
| | | Awards
| | | Compensation
| | | | |
Name | | in Cash | | | (2) | | | (3) | | | Total | |
|
Richard E. Cheney | | $ | 48,500 | | | $ | 25,750 | | | | — | | | $ | 74,250 | |
Avery S. Cohen | | | 50,000 | | | | 25,750 | | | | — | | | | 75,750 | |
John C. Corey(1) | | | 1,458 | | | | — | | | | — | | | | 1,458 | |
D. M. Draime | | | — | | | | — | | | $ | 36,511 | | | | 36,511 | |
Jeffrey P. Draime | | | 44,500 | | | | 25,750 | | | | 123,747 | | | | 193,997 | |
Sheldon J. Epstein | | | 55,500 | | | | 25,750 | | | | — | | | | 81,250 | |
Douglas C. Jacobs | | | 49,500 | | | | 25,750 | | | | — | | | | 75,250 | |
Kim Korth | | | 7,992 | | | | — | | | | — | | | | 7,992 | |
William M. Lasky | | | 54,992 | | | | 25,750 | | | | — | | | | 80,742 | |
Earl L. Linehan | | | 51,000 | | | | 25,750 | | | | — | | | | 76,750 | |
| | |
(1) | | John C. Corey served as a Director in 2006 until he accepted the position of President and Chief Executive Officer with the Company on January 16, 2006. |
|
(2) | | The amounts included in the “Stock Awards” column represent compensation costs recognized by the Company in 2006 related to non-optionfair value at grant date of restricted shares awards to directors, computed in accordance with SFAS 123R.FASB ASC Topic 718. For a discussion of the valuation assumptions, see Note 7 to our consolidated financial statements included in our annual reportAnnual Report onForm 10-K for the year ended December 31, 2006. The grant date fair value of stock awards granted to each Director in 2006, computed in accordance with SFAS 123R, was $58,581. |
|
(3) | | The amounts included in the “All Other Compensation” column represent the aggregate incremental cost to the Company of personal use of the Company airplane. The aggregate incremental cost is determined on a per flight basis and includes the variable costs for repairs, maintenance, inspections, fuel, landing and storage fees, pilot-related travel costs and other miscellaneous variable costs and also includes tax deduction disallowance. A different value attributable to personal use of the Company airplane (as calculated in accordance with Internal Revenue Service guidelines) is included as compensation to the director, for which he is responsible for paying income taxes on such amount. Included on theW-2 of Mr. D.M. Draime was $19,535, and included on the Form 1099 to the estate of the late D.M. Draime was $22,511, for personal use of the Company airplane by Mr. D. M. Draime and certain other family members. Included on the Form 1099 of Mr. Jeffrey P. Draime was $16,674 for personal use of the Company airplane.2009. |
24
Compensation Committee Report
We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K and, based on the review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee
Earl L. Linehan, Chairman
Richard E. Cheney
Kim Korth
William M. Lasky
OTHER INFORMATION
ShareholdersShareholder’s Proposals for 20082011 Annual Meeting of Shareholders
Proposals of shareholders intended to be presented, pursuant toRule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), at the Company’s 20082011 Annual Meeting of Shareholders must be received by the Company at Stoneridge, Inc., 9400 East Market Street, Warren, Ohio 44484, on or before December 12, 2007,20, 2010, for inclusion in the Company’s proxy statement and form of proxy relating to the 20082011 Annual Meeting of Shareholders. In order for a shareholder’s proposal outside ofRule 14a-8 under the Exchange Act to be considered timely within the meaning ofRule 14a-4(c) of the Exchange Act, such proposal must be received by the Company at the address listed in the immediately preceding sentence not later than February 25, 2008.March 6, 2011.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and owners of more than 10% of the Company’s common shares, to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of the Company’s common shares and other equity securities. Executive officers, directors and owners of more than 10% of the common shares are required by SEC regulations to furnish the Company with copies of all forms they file pursuant to Section 16(a).
To the Company’s knowledge, based solely on the Company’s review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 2006,2009, all Section 16(a) filing requirements applicable to the Company’s executive officers, directors and greater-than-10%more than 10% beneficial owners were complied with, except for George E.Messrs. Strickler who inadvertently failed to fileand Tervalon each filed late one Form 4 reportingrelated to two transactions and Messrs. Beaver, Corey, Sloan and Suttmeier each filed late one transaction on a timely basis.Form 4 related to one transaction.
Other Matters
If the enclosed proxy card is executed and returned to us, the persons named in it will vote the common shares represented by that proxy at the meeting. The form of proxy permits specification of a vote for the election of directors as set forth under “Election of Directors” above, the withholding of authority to vote in the election of directors, or the withholding of authority to vote for one or more specified nominees. When a choice has been specified in the proxy, the common shares represented will be voted in accordance with that specification. If no specification is made, those common shares will be voted at the meeting to elect directors as set forth under “Election of Directors” above, and FOR the proposals (i) to ratify the appointment of Ernst & Young as the Company’s independent auditors for the year ending December 31, 2007, to approve the adoption of the AIP, and2010; (ii) to approve the amendment to the Code of Regulations.LTIP; and (iii) to approve the amendment to the Directors’ Plan.
The holders of shares of a majority of the common shares outstanding on the record date, present in person or by proxy, shall constitute a quorum for the transaction of business to be considered at the Annual Meeting of Shareholders. Under Ohio law and the Company’s Amended and Restated Articles of Incorporation, as amended, broker non-votes and abstaining votes will not be counted in favor of or against any nominee but will be counted as present for purposes of determining whether a quorum has been achieved at the meeting andmeeting. Abstentions will, in effect, be votes against the aforementionedproposals relating to the ratification of Ernst & Young and approval of the amendments to the LTIP and Directors’ Plan. Broker non-votes will not be considered votes cast on the Ernst & Young ratification proposal or the proposals to approve the amendments to the LTIP and Directors’ Plan and, therefore, will not have a positive or negative effect on the outcome of those proposals. Director nominees who receive the greatest number of affirmative votes will
25
be elected directors. The proposals to approve the ratification of Ernst & Young and to approve the adoption of the AIP and the amendmentamendments to the Code of RegulationsLTIP and Directors’ Plan must receive the affirmative vote of a majority of the Company’s common shares presentcast at the meeting. All other matters to be considered at the meeting require for approval the favorable vote of a majority of the common shares votedcast at the meeting in person or by proxy (or such different percentage as established by applicable law). If any other matter properly comes before the meeting, the persons named in the proxy will vote thereon in accordance with their judgment. The Company does not know of any other matter that willmay be presented for action at the meeting and the Company has not received any timely notice that any of the Company’s shareholders intend to present a proposal at the meeting.
| By order of the Board of Directors, |
| |
| ROBERT M. LOESCH, |
| Secretary |
AVERY S. COHEN,
Secretary
Dated: April 9, 2007
26
APPENDIX A20, 2010
APPENDIX A
STONERIDGE, INC. ANNUAL
AMENDED AND RESTATED
LONG-TERM INCENTIVE PLAN, AS AMENDED
SectionSECTION 1. PurposePurpose; Definitions.
The purpose of the Stoneridge, Inc. (the “Company”) AnnualAmended and Restated Long-Term Incentive Plan (the “Plan”) is to provide an opportunity to the Company’s (and the Company’s Subsidiaries’enable Stoneridge, Inc. (the “Company”) officers and other key employees selected by the Committee (definedits Subsidiaries (as defined below) to earn annual incentive or bonus awards in order to motivate those persons to put forth maximum efforts toward the growth, profitabilityattract, retain and successreward key employees of the Company and of its Subsidiaries (defined below) and to encouragestrengthen the mutuality of interests between those employees and the Company’s shareholders by offering such individuals to remainemployees equity or equity-based incentives thereby increasing their proprietary interest in the employCompany’s business and enhancing their personal interest in the Company’s success.
For purposes of the Company or a Subsidiary. Awards for participating employees underPlan, the Plan shall depend upon corporate and individual performance measuresfollowing terms are defined as determined by the Committee (defined below) for the Performance Year (defined below).follows:
Section 2. (a) “AwardDefinitions” means any award of Stock Options, Restricted Shares, Deferred Shares, Share Purchase Rights, Share Appreciation Rights or Other Share-Based Awards under the Plan.
In this Plan document, unless the context clearly indicates otherwise, words in the masculine gender shall be deemed to include a reference to the female gender, any term used in the singular also shall refer to the plural, and the following terms, when capitalized, shall have the meaning set forth in this Section 2:
(a) “Award” means a potential cash benefit payable or cash benefit paid to a person in accordance with the terms and conditions of the Plan.
(b) “Beneficiary” means the person or persons designated in writing by the Grantee as his or her beneficiary in respect of an Award; or, in the absence of an effective designation, or if the designated person or persons predecease the Grantee, the Grantee’s Beneficiary shall be the person or persons who acquire by bequest or inheritance the Grantee’s rights in respect of an Award. In order to be effective, a Grantee’s designation of a Beneficiary must be on file with the Company before the Grantee’s death. Any such designation may be revoked and a new designation substituted therefor at any time before the Grantee’s death.
(c) “Board of Directors” or “Board”” means the Board of Directors of the Company.
(c) “Cause” means, unless otherwise provided by the Committee, (i) “Cause” as defined in any Individual Agreement to which the participant is a party, or (ii) if there is no such Individual Agreement or if it does not define Cause:
(1) misappropriation of funds from the Company or dishonesty in the course of fulfilling the participant’s employment duties;
(2) conviction of a felony;
(3) commission of a crime or act or series of acts involving moral turpitude;
(4) commission of an act or series of acts of dishonesty that are materially inimical to the best interests of the Company;
(5) breach of any material term of an employment agreement, if any;
(6) willful and repeated failure to perform the duties associated with the participant’s position, which failure has not been cured within thirty (30) days after the Company gives notice thereof to the participant; or
(7) failure to cooperate with any Company investigation or with any investigation, inquiry, hearing or similar proceedings by any governmental authority having jurisdiction over the participant or the Company.
The Committee shall, unless otherwise provided in an Individual Agreement with the participant, have the sole discretion to determine whether “Cause” exists, and its determination shall be final.
(d) “Code”Change in Control” has the meaning set forth in Section 11(b).
(e) “Change in Control Price” has the meaning set forth in Section 11(d).
(f) “Code” means the Internal Revenue Code of 1986, as amended from time to time.time, and any successor thereto.
(e) (g) “Committee”Committee” means the Compensation Committee appointed by the Board for the purposereferred to in Section 2 of administering the Plan. The Committee shall consist of three members of the Board of Directors each of whom shall qualify, at the time of appointment and thereafter, as an “outside director” within the meaning of Section 162(m) of the Code (or a successor provision of similar import), as in effect from time to time.
(h) “Company”Company” means Stoneridge, Inc., an Ohio corporation, or any successor corporation.
(g) (i) “Covered Executive”Deferred Shares” means an individual who is determined by the Committee to be reasonably likely to be a “covered employee” under Section 162(m)Award of the Code as ofright to receive Shares at the end of the Company’s taxable year for which an Awarda specified deferral period granted pursuant to the individual will be deductible and whose Award would exceed the deductibility limits under Section 162(m) if such Award is not Performance-Based Compensation.7.
(h) (j) “Disability” or “Disabled”Disability” means having a totalpermanent and permanenttotal disability as defined in Section 22(e)(3) of the Code.
(k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(l) “Fair Market Value” means, as of a given date (in order of applicability): (i) the closing price of a Common Share on the principal exchange on which the Common Shares are then trading, if any, on the day immediately prior to such date, or if Common Shares were not traded on the day previous to such date, then on the next preceding trading day during which a sale occurred; or (ii) if Common Shares are not traded on an exchange but are quoted on NASDAQ or a successor quotation system, (A) the last sale price (if Common Shares are then listed as a National Market Issue under the NASD National Market System) or (B) if Common Shares are not then so listed, the mean between the closing representative bid and asked prices for Common Shares on the day previous to such date as reported by NASDAQ or such successor quotation system; or (iii) if Common Shares are not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for Common Shares, on the day previous to such date, as determined in good faith by the Committee; or (iv) if Common Shares are not publicly traded, the fair market value established by the Committee acting in good faith.
(m) “Grantee”Incentive Stock Option” means any Stock Option intended to be and designated as, and that otherwise qualifies as, an “Incentive Stock Option” within the meaning of Section 422 of the Code or any successor section thereto.
(n) “Individual Agreement” means an officeremployment or key employee ofsimilar agreement between a participant and the Company or a Subsidiary to whomone of its Subsidiaries.
(n) “Non-Employee Director” has the meaning set forth in Section 16 of the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission (the “Commission”).
(o) “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
(p) “Other Share-Based Awards” means an Award has been granted under the Plan.pursuant to Section 10 that is valued, in whole or in part, by reference to, or is otherwise based on, Shares.
(j) (q) “Performance Objective” meansOutside Director” has the goal or goals identified by the Committee that will resultmeaning set forth in an Award if the target for the Performance Year is satisfied.
(k) “Performance Year” means the then current fiscal year of the Company.
(l) “Performance-Based Compensation” means compensation that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder.
(m) “Retirement” means voluntary resignation from the employ of the Company after reaching the age of 64 or as otherwise preapproved by the Committee.
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(n) “Subsidiary” means a corporation, association, partnership, limited liability company, joint venture, business trust, organization, or business of which the Company directly or indirectly through one or more intermediaries owns at least fifty percent (50%) of the outstanding capital stock (or other shares of beneficial interest) entitled to vote generally in the election of directors or other managers of the entity.
Section 3. (r) “PlanAdministration” means the Stoneridge, Inc. Amended and Restated Long-Term Incentive Plan, as amended from time to time.
(a) (s) “Potential Change in Control” has the meaning set forth in Section 11(c).
(t) “Restricted Shares” means an Award of Shares that is granted pursuant to Section 6 and is subject to restrictions.
(u) “Section 16 Participant” means a participant under the Plan who is then subject to Section 16 of the Exchange Act.
| (v) | “Shares” means the Common Shares, without par value, of the Company. |
(w) “Share Appreciation Right” means an Award of a right to receive an amount from the Company that is granted pursuant to Section 9.
(x) “Stock Option” or “Option” means any option to purchase Shares (including Restricted Shares and Deferred Shares, if the Committee so determines) that is granted pursuant to Section 5.
(y) “Share Purchase Right” means an Award of the right to purchase Shares that is granted pursuant to Section 8.
(z) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in that chain. For purposes of Section 409A of the Code and the regulations thereunder “at least 50%” is to be used instead of “at least 80%” in applying the tests to determine whether a corporation is a service recipient.
SECTION 2. Administration.
The Plan shall be administered by the Committee. Compensation Committee of the Board or such other committee authorized by the Board to administer the Plan (the “Committee”), or absent the Committee, the full Board. The Committee shall consist of not less than three directors of the Company all of whom shall be Outside Directors, Non-Employee Directors and Independent Directors (as defined by the listing standards of the NYSE if the Company’s Shares are traded on the New York Stock Exchange). Those directors shall be appointed by the Board and shall serve as the Committee at the pleasure of the Board.
The Committee shall have all the powers vested in it by the terms offull power to interpret and administer the Plan such powers to includeand full authority (within the limitations described herein) to select the personsindividuals to be granted Awards under the Plan, to determine the time whenwhom Awards will be granted to determine whether performance objectives and other conditions for earning Awards have been met, to determine whether Awards will be paid at the end of the Performance Year, and to determine whether anthe type and amount of any Awards to be granted to each participant, the consideration, if any, to be paid for any Awards, the timing of any Awards, the terms and conditions of any Award or payment of an Award should be reduced or eliminated. The Committee is authorized, subject to the remaining provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration ofgranted under the Plan, and to make such determinationsthe terms and interpretations and to take such action in connectionconditions of the related agreements that will be entered into with the Plan and any Awards granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Committee shall be binding and conclusive on all persons participating in the Plan and their legal representatives.
(b) The Committee may not delegate to any individual the authority to make determinations concerning that individual’s own Awards, or the Awards of any Covered Executive or any executive officer (as defined pursuant to the Securities Exchange Act of 1934). Except as provided in the preceding sentence, asparticipants. As to the selection of and grant of Awards to Granteesparticipants who are not Covered Executives or executive officers of the Company or any Subsidiary or Section 16 Participants, the Committee may delegate its responsibilities to members of the Company’s management in a manner consistent with applicable law and provided that such participant’s compensation is not subject to the limitations of Section 162(m) of the Code. References herein to the
The Committee shall includehave the authority to adopt, alter and repeal such rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any delegate described under this paragraph, except where the context or the regulations under Code Section 162(m) otherwise require.
(c) The Committee, or any person to whom it has delegated duties as described herein, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may haveAward issued under the Plan (including such legal(and any agreements relating thereto); to direct employees of the Company or other counsel, consultants,advisors to prepare such materials or perform such analyses as the Committee deems necessary or appropriate; and agents as it may deem desirable forotherwise to supervise the administration of the Plan)Plan.
Any interpretation or administration of the Plan by the Committee, and may rely upon any opinion or computation received from any such counsel, consultant, or agent. Expenses incurredall actions and determinations of the Committee, shall be final, binding and conclusive on the Company, its shareholders, Subsidiaries, affiliates, all participants in the engagementPlan, their respective legal representatives, successors and assigns, and all persons claiming under or through any of such counsel, consultant,them. No member of the Board or agentof the Committee shall be paid byincur any liability for any action taken or omitted, or any determination made, in good faith in connection with the Company.Plan.
SECTION 3. Shares Subject to the Plan.
(a) Aggregate Shares Subject to the Plan. Subject to adjustment as provided in Section 4. 3(c), the total number of Shares reserved and available for Awards under the Plan is 3,000,000, pursuant to which the maximum number of Shares which may be issued subject to Incentive Stock Options is 500,000. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares.Eligibility
(b) Forfeiture or Termination of Awards of Shares. If any Shares subject to any Award granted hereunder are forfeited or an Award otherwise terminates or expires without the issuance of Shares, the Shares subject to that Award shall again be available for distribution in connection with future Awards under the Plan as set forth in Section 3(a), unless the participant who had been awarded those forfeited Shares or the expired or terminated Award has theretofore received dividends or other benefits of ownership with respect to those Shares. For purposes hereof, a participant shall not be deemed to have received a benefit of ownership with respect to those Shares by the exercise of voting rights or the accumulation of dividends that are not realized because of the forfeiture of those Shares or the expiration or termination of the related Award without issuance of those Shares.
(c) Adjustment. In the event of any merger, reorganization, consolidation, recapitalization, share dividend, share split, combination of shares or other change in corporate structure of the Company affecting the Shares, such substitution or adjustment shall be made in the aggregate number of Shares reserved for issuance under the Plan, in the number and option price of Shares subject to outstanding options granted under the Plan, in the number and purchase price of Shares subject to outstanding Share Purchase Rights granted under the Plan, in the number of Share Appreciation Rights granted under the Plan, in the number of underlying Shares granted under the Plan will be based on, and in the number of Shares subject to Restricted Share Awards, Deferred Share Awards and any other outstanding Awards granted under the Plan as may be approved by the Committee, in its sole discretion; but the number of Shares subject to any Award shall always be a whole number. Any fractional Shares shall be eliminated.
(d) Annual Award Limit. No participant may be granted Stock Options or other Awards under the Plan with respect to an aggregate of more than 400,000 Shares (subject to adjustment as provided in Section 3(c) hereof) during any calendar year.
SECTION 4. Eligibility.
Grants may be made from time to time to those officers and other key employees of the Company who are designated by the Committee in its sole and exclusive discretion. Eligible persons may include, but shall not necessarily be limited to, officers and key employees of the Company and any Subsidiary; however, Stock Options intended to qualify as Incentive Stock Options shall be granted only to eligible persons while actually employed by the Company or a Subsidiary. The Committee may grant Awards undermore than one Award to the Plansame eligible person. No Award shall be granted to any eligible person during any period of time when such eligible person is on a leave of the Company’s (and the Company’s Subsidiaries’) officers and key employees as it shall select for participation pursuant to Section 3 above.absence.
SECTION 5. Stock Options.
Section 5.(a) Grant. Awards; Limitations onStock Options may be granted alone, in addition to or in tandem with other Awards
(a) Each Award granted under the Plan or cash awards made outside the Plan. The Committee shall represent an amount payable in cash bydetermine the Companyindividuals to whom, and the Grantee upon achievementtime or times at which, grants of one or moreStock Options will be made, the number of a combination of Performance Objectives in a Performance Year, subject to allShares purchasable under each Stock Option, and the other terms and conditions of the Stock Option in addition to those set forth in Sections 5(b) and 5(c). Any Stock Option granted under the Plan andshall be in such form as the Committee may from time to such other terms and conditions astime approve.
Stock Options granted under the Plan may be specified byof two types which shall be indicated on their face: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Subject to Section 5(c) hereof, the Committee. TheCommittee shall have the authority to grant to any participant Incentive Stock Options, Non-Qualified Stock Options or both types of AwardsStock Options.
(b) Terms and Conditions. Options granted under the Plan shall be evidenced by Award letters inan agreement (“Option Agreements”), shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(1) Option Price. The option price per share of Shares purchasable under a form approvedNon-Qualified Stock Option or an Incentive Stock Option shall be determined by the Committee at the time of grant and shall be not less than 100% of the Fair Market Value of the Shares at the date of grant (or, with respect to an Incentive Stock Option, 110% of the Fair Market Value of the Shares at the date of grant in the case of a participant who at the date of grant owns Shares possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or Subsidiary corporations (as determined under Sections 424(d), (e) and (f) of the Code)).
(2) Option Term. The term of each Stock Option shall be determined by the Committee and may not exceed ten years from the date the Option is granted (or, with respect to an Incentive Stock Options, five years in the case of a participant who at the date of grant owns Shares possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or Subsidiary corporations (as determined under Sections 424(d), (e) and (f) of the Code)).
(3) Exercise. Stock Options shall be exercisable at such time or times and shall be subject to time which shall contain thesuch terms and conditions as shall be determined by the Committee of a Grantee’s Award;at or after grant; but, except as provided however, that in Section 5(b)(6) and Section 11, unless otherwise determined by the event of any conflict between the provisions of the Plan and any Award letters, the provisions of the Plan shall prevail. An AwardCommittee at or after grant, no Stock Option shall be determined by multiplyingexercisable prior to six months and one day following the Grantee’s target percentagedate of base salarygrant. If any Stock Option is exercisable only in installments or only after specified exercise dates, the Committee may waive, in whole or in part, such installment exercise provisions, and may accelerate any exercise date or dates, at any time at or after grant based on such factors as the Committee shall determine, in its sole discretion.
(4) Method of Exercise. Subject to any installment exercise provisions that apply with respect to any Stock Option, and the six-month and one day holding period set forth in Section 5(b)(3), a Performance YearStock Option may be exercised in whole or in part, at any time during the Option period, by applicable factors and percentages basedthe holder thereof giving to the Company written notice of exercise specifying the number of Shares to be purchased.
That notice shall be accompanied by payment in full of the Option price of the Shares for which the Option is exercised, in cash or Shares or by check or such other instrument as the Committee may accept. The value of each such Share surrendered or withheld shall be 100% of the Fair Market Value of the Shares on the achievementdate the option is exercised.
No Shares shall be issued on an exercise of Performance Objectives,an Option until full payment has been made. A participant shall not have rights to dividends or any other rights of a shareholder with respect to any Shares subject to an Option unless and until the discretionparticipant has given written notice of exercise, has paid in full for those Shares, has given, if requested, the Committeerepresentation described in Section 15(a) and those Shares have been issued to him.
(5) Non-Transferability of Options. No Stock Option shall be transferable by any participant other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Code or the Employment Retirement Income Security Act of 1974, as amended) except that, if so provided in Section 6 hereof.
(b) The maximum amount ofthe Option Agreement, the participant may transfer without consideration the Option, other than an Award grantedIncentive Stock Option, during the participant’s lifetime to any one Grantee in respect of a Performance Year shall not exceed $2.0��million. This maximum amount limitation shall be measured at the time of settlement of an Award under Section 7.
(c) Annual Performance Objectives shall be based on the performance of the Company, one or more members of its Subsidiaries or affiliates,the participant’s family, to one or more of its units or divisionsand/or the individualtrusts for the Performance Year. The Committee shall usebenefit of one or more of the following business criteriaparticipant’s family, or to establish Performance Objectives for
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Grantees: increase in net sales; pretax income before allocationa partnership or partnerships of corporate overhead and bonus; operating profit; net working capital; earnings per share; net income; attainment of division, group or corporate financial goals; return on shareholders’ equity; return on assets; attainment of strategic and operational initiatives; attainment of one or more specific and measurable individual strategic goals; appreciation in or maintenancemembers of the priceparticipant’s family, or to a charitable organization as defined in Section 501(c)(3) of the Company’s common shares; increaseCode, provided that the transfer would not result in market share; gross profits; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; comparisons with various stock market indices; or reductions in costs. The Performance Objective forthe loss of any Grantee shall be sufficiently specific that a third party having knowledgeexemption under Rule 16b-3 of the relevant facts could determine whetherExchange Act with respect to any Option. The transferee of an Option will be subject to all restrictions, terms and conditions applicable to the objective is met;Option prior to its transfer, except that the Option will not be further transferable by the transferee other than by will or by the laws of descent and the outcome under the Performance Objective shall be substantially uncertain when the Committee establishes the objective.distribution.
| (6) | Termination of Employment. |
Section 6. (i) Termination by DeathGrant of Awards
(a) The Committee shall grant Awards. Subject to Sections 5(b)(3) and 5(c), if any Grantees who are Covered Executives not later than 90 days after the commencement of the Performance Year. If a Covered Executive is initially employed byparticipant’s employment with the Company or aany Subsidiary after the beginningterminates by reason of death, any Stock Option held by that participant shall become immediately and automatically vested and exercisable. If termination of a Performance Year, the Committeeparticipant’s employment is due to death, then any Stock Option held by that participant may grant an Award to that Covered Executivethereafter be exercised for a period of two years (or with respect to an Incentive Stock Option, for a period of service following the Covered Executive’s date of hire, provided that no more than twenty-five percent (25%) of the relevant serviceone year) (or such other period has elapsed when the Committee grants the Award and the Performance Objective otherwise satisfies the requirements applicable to the Covered Executive. The Committee shall select Grantees other than Covered Executives for participation in the Plan and shall grant Awards to such Grantees at such times as the Committee may determine. In granting an Award,specify at grant) from the Committee shall establishdate of death. Notwithstanding the termsforegoing, in no event will any Stock Option be exercisable after the expiration of the Award, includingoption period of such Option. The balance of the Performance Objective and the maximum amount that willStock Option shall be paid (subjectforfeited if not exercised within two years (or one year with respect to the limit in Section 5) if the Performance Objective is achieved. The Committee may establish different payment levels under an Award based on different levels of achievement under the Performance Objective.Incentive Stock Options).
(b) After the end of each Performance Year, the Committee shall determine the amount payable to each Grantee in settlement of the Grantee’s Award for the Performance Year. The Committee, in its discretion, may reduce the maximum payment established when the Award was granted, or may determine to make no payment under the Award. The Committee, in its discretion, may increase the amount payable under the Award (but not to an amount greater than the limit in Section 5) to a Grantee who is not a Covered Executive. The Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m) of the Code, prior to the settlement of each Award granted to a Covered Executive, that the Performance Objectives and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied.
(c) The Committee may adjust or modify Awards or terms(ii) Termination by Reason of Awards (1) in recognition of unusual or nonrecurring events affectingDisability. Subject to Sections 5(b)(3) and 5(c), if a participant’s employment with the Company or any business unit, or the financial statements or results thereof, or in responseSubsidiary terminates by reason of Disability, any Stock Option held by that participant shall become immediately and automatically vested and exercisable. If termination of a participant’s employment is due to changes in applicable laws (including tax, disclosure, and other laws), regulations, accounting principles, or other circumstances deemed relevantDisability, then any Stock Option held by that participant may thereafter be exercised by the Committee, (2)participant or by the participant’s duly authorized legal representative if the participant is unable to exercise the Option as a result of the participant’s Disability, for a period of two years (or with respect to any Grantee whose position or duties with the Company change during a Performance Year, or (3) with respect to any person who first becomes a Grantee after the first day of the Performance Year; provided, however, that no adjustment to an Award granted to a Covered Executive shall be authorized or made if, and to the extent that, such authorization or the making of such adjustment would contravene the requirements applicable to Performance-Based Compensation.
Section 7. Settlement of Awards
(a) Except as provided in this Section 7, each Grantee shall receive payment of a cash lump sum in settlement of his or her Award, in the amount determined in accordance with Section 6. Such payment shall be made on the fifteenth (15th) day of the third (3rd) month following the Performance Year. No Award to a Covered ExecutiveIncentive Stock Option, for a Performance Year commencing after December 30, 2006, shall be settled untilperiod of one year) (or such other period as the shareholders of the Company have approved the Plan in a manner that satisfies the requirements of Section 162(m) of the Code.
(b) Each Grantee shall have the right to defer his or her receipt of part, or all, of any payment due in settlement of an Award under and in accordance with the terms and conditions of the Stoneridge, Inc. Employees’ Deferred Compensation Plan unless otherwise specified by the Committee. In the event that a Grantee exercises his or her right to defer under this Section 7(b), then any Award so deferred shall be subject to the terms and conditions of the Stoneridge, Inc. Employees’ Deferred Compensation Plan as ofCommittee may specify at grant) from the date of such deferral election.termination of employment; and if the participant dies within that two-year period (or such other period as the Committee may specify at or after grant), any unexercised Stock Option held by that participant shall thereafter be exercisable by the estate of the participant (acting through its fiduciary) for the duration of the two-year period from the date of that termination of employment. Notwithstanding the foregoing, in no event will any Stock Option be exercisable after the expiration of the option period of such Option. The balance of the Stock Option shall be forfeited if not exercised within two years (or one year with respect to Incentive Stock Options).
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Section 8. (iii) Termination for Cause. Unless otherwise determined by the Committee at or after the time of Employmentgranting any Stock Option, if a participant’s employment with the Company or any Subsidiary terminates for Cause, any unvested Stock Options will be forfeited and terminated immediately upon termination and any vested Stock Options held by that participant shall terminate 30 days after the date employment terminates. Notwithstanding the foregoing, in no event will any Stock Option be exercisable after the expiration of the option period of such Option. The balance of the Stock Option shall be forfeited.
Except as(iv) Other Termination. Unless otherwise provided indetermined by the Committee at or after the time of granting any written agreement betweenStock Option, if a participant’s employment with the Company and a Grantee, including but not limited to a deferral election under the Stoneridge, Inc. Deferred Compensation Plan, if a Grantee ceases to be employed by the Company after the beginning of a Performance Year, but prior to the date an Award is settled in accordance with Section 7,or any Subsidiary terminates for any reason other than death, Disability or Retirement,for Cause, all Stock Options held by that participant shall thereupon terminate three months after the date employment terminates. Notwithstanding the foregoing, in no event will any Stock Option be exercisable after the expiration of the option period of such Option. The balance of the Stock Option shall be forfeited.
(v) Leave of Absence. In the event a participant is granted a leave of absence by the Company or any Subsidiary to enter military service or because of sickness, the participant’s employment with the Company or such Subsidiary will not be considered terminated, and the participant shall be deemed an employee of the Company or such Subsidiary during such leave of absence or any extension thereof granted by the Company or such Subsidiary. Notwithstanding the foregoing, in the case of an Incentive Stock Option, a leave of absence of more than three months will be viewed as a termination of employment unless continued employment is guaranteed by contract or statute.
(c) Incentive Stock Options. Notwithstanding Sections 5(b)(5) and (6), an Incentive Stock Option shall be exercisable by (i) a participant’s authorized legal representative (if the participant is unable to exercise the Incentive Stock Option as a result of the participant’s Disability) only if, and to the extent, permitted by Section 422 of the Code and (ii) by the participant’s estate, in the case of death, or authorized legal representative, in the case of Disability, no later than ten years from the date the Incentive Stock Option was granted (in addition to any other restrictions or limitations that may apply). Anything in the Plan to the contrary notwithstanding, no term or provision of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the participants affected, to disqualify any Incentive Stock Option under such Section 422 or any successor section thereto.
SECTION 6. Restricted Shares.
(a) Grant. Restricted Shares may be issued alone, in addition to or in tandem with other Awards under the Plan or cash awards made outside the Plan. The Committee shall determine the individuals to whom, and the time or times at which, grants of Restricted Shares will be made, the number of Restricted Shares to be awarded to each participant, the price (if any) to be paid by the participant (subject to Section 6(b)), the date or dates upon which Restricted Share Awards will vest and the period or periods within which those Restricted Share Awards may be subject to forfeiture, and the other terms and conditions of those Awards in addition to those set forth in Section 6(b).
The Committee may condition the grant of Restricted Shares upon the attainment of specified performance goals or such other factors as the Committee may determine in its sole discretion.
(b) Terms and Conditions. Restricted Shares awarded under the Plan shall be subject to the following terms and conditions and such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. A participant who receives a Restricted Share Award shall not have any rights with respect to that Award, unless and until the participant has executed an agreement evidencing the Award in the form approved from time to time by the Committee and has delivered a fully executed copy thereof to the Company, and has otherwise complied with the applicable terms and conditions of that Award.
(1) The purchase price (if any) for Restricted Shares shall be determined by the Committee at the time of grant.
(2) Awards of Restricted Shares must be accepted by executing a Restricted Share Award agreement and paying the price (if any) that is required under Section 6(b)(1).
(3) Each participant receiving a Restricted Share Award shall be issued a stock certificate in respect of those Restricted Shares. The certificate shall be registered in the name of the participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the Award.
(4) The Committee shall require that the stock certificates evidencing such Restricted Shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Shares Award the participant shall have delivered to the Company a stock power, endorsed in blank, relating to the Shares covered by that Award.
(5) Subject to the provisions of this Plan and the Restricted Share Award agreement, during a period set by the Committee commencing with the date of any Award (the “Restriction Period”), the participant shall not be permitted to sell, transfer, pledge, assign or otherwise encumber the Restricted Shares covered by that Award. The Restriction Period shall not be less then six months and one day in duration (“Minimum Restriction Period”) unless otherwise determined by the Committee at the time of grant. Subject to these limitations and the Minimum Restriction Period requirements, the Committee, in its sole discretion, may provide for the lapse of such Performance Yearrestrictions in installments and may accelerate or waive such restrictions, in whole or in part, based on service, performance or such other factors and criteria as the Committee may determine, in its sole discretion.
(6) Except as provided in this Section 6(b)(6), Section 6(b)(5) and Section 6(b)(7) the participant shall have, with respect to the Restricted Shares awarded, all of the rights of a shareholder of the Company, including the right to vote the Shares, and the right to receive any dividends. The Committee, in its sole discretion, as determined at the time of an Award, may require the payment of cash dividends to be deferred and subject to forfeiture and, if the Committee so determines, reinvested, subject to Section 15(f), in additional Restricted Shares to the extent Shares are available under Section 3, or otherwise reinvested. Unless the Committee or Board determines otherwise, Share dividends issued with respect to Restricted Shares shall be forfeited. Iftreated as additional Restricted Shares that are subject to the same restrictions and other terms and conditions that apply to the Shares with respect to which such cessationdividends are issued.
(7) No Restricted Shares shall be transferable by a participant other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Code or the Employment Retirement Income Security Act of 1974, as amended) except that, if so provided in the Restricted Shares Agreement, the participant may transfer without consideration the Restricted Shares during the participant’s lifetime to one or more members of the participant’s family, to one or more trusts for the benefit of one or more of the participant’s family, to a partnership or partnerships of members of the participant’s family, or to a charitable organization as defined in Section 501(c)(3) of the Code, provided that the transfer would not result in the loss of any exemption under Rule 16b-3 of the Exchange Act with respect to any Restricted Shares. The transferee of Restricted Shares will be subject to all restrictions, terms and conditions applicable to the Restricted Shares prior to its transfer, except that the Restricted Shares will not be further transferable by the transferee other than by will or by the laws of descent and distribution.
(8) Unless otherwise determined by the Committee at or after the time of granting any Restricted Shares, if a participant’s employment results fromwith the Company or any Subsidiary terminates by reason of death, any Restricted Shares held by such Grantee’sparticipant shall thereupon vest and all restrictions thereon shall lapse.
(9) Unless otherwise determined by the Committee at or after the time of granting any Restricted Shares, if a participant’s employment with the Company or any Subsidiary terminates by reason of Disability, any Restricted Shares held by such participant shall thereupon vest and all restrictions thereon shall lapse.
(10) Unless otherwise determined by the Committee at or after the time of granting any Restricted Shares, if a participant’s employment with the Company or any Subsidiary terminates for any reason other than death or Disability, the Restricted Shares held by that participant that are unvested or Retirement,subject to restriction at the time of termination shall thereupon be forfeited.
SECTION 7. Deferred Shares.
(a) Grant. Deferred Shares may be awarded alone, in addition to or in tandem with other Awards granted under the Plan or cash awards made outside the Plan. The Committee shall determine the individuals to whom, and the time or times at which, Deferred Shares shall be awarded, the number of Deferred Shares to be awarded to any participant, the duration of the period (the “Deferral Period”) during which, and the conditions under which, receipt of the Shares will be deferred, and the other terms and conditions of the Award in addition to those set forth in Section 7(b).
The Committee may condition the grant of Deferred Shares upon the attainment of specified performance goals or such other factors as the Committee shall determine, in its sole discretion and in such manner as it may deem reasonable, subject to Section 9, the extent to which the Performance Objectives for the Performance Year or portion thereof completed at the date of cessation of employment have been achieved, and the amount payable in settlement of the Award based on such determinations. The Committee may base such determination on the performance achieved for the full year, in which case its determination may be deferred until following the Performance Year. Such determinations shall be set forth in a written certification, as specified in Section 6. Such Grantee or his or her Beneficiary shall be entitled to receive a lump sum cash settlement of such Award at the earliest time such payment may be made without causing the payment to fail to be deductible by the Company under Section 162(m) of the Code.discretion.
Section 9. (b) Terms and ConditionsStatus. Deferred Share Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of Awards Under Section 162(m)the Plan, as the Committee shall deem desirable:
It is the intent of the Company that Awards granted to Covered Executives(1) The purchase price for Performance Years commencing after December 30, 2006,Deferred Shares shall constitute Performance-Based Compensation, ifbe determined at the time of settlementgrant by the Grantee remains a Covered Executive. Accordingly,Committee. Subject to the Plan shall be interpreted in a manner consistent with Section 162(m) of the Code and the regulations thereunder. If any provisionprovisions of the Plan relatingand the Award agreement referred to a Covered Executivein Section 7(b)(8), Deferred Share Awards may not be sold, assigned, transferred, pledged or any Award letter evidencing such an Award to a Covered Executive does not comply with, or is inconsistent with,otherwise encumbered during the provisions of Section 162(m)(4)(C)Deferral Period. At the expiration of the Code orDeferral Period (or the regulations thereunder (including Treasury Regulation § 1.162-27(e) or its succession provisions) for Performance-Based Compensation, such provisionElective Deferral Period referred to in Section 7(b)(8), when applicable), stock certificates shall be construed or deemed amendeddelivered to the extent necessaryparticipant, or his legal representative, for the Shares covered by the Deferred Share Award. The Deferral period applicable to conform to such requirements.any Deferred Share Award shall not be less than six months and one day (“Minimum Deferral Period”).
Section 10. Transferability(2) Unless otherwise determined by the Committee at the time of grant, amounts equal to any dividends declared during the Deferral Period with respect to the number of Shares covered by a Deferred Share Award will be paid to the participant currently, or deferred and deemed to be reinvested in additional Deferred Shares, or otherwise reinvested, all as determined by the Committee, in its sole discretion, at the time of the Award.
Awards and any other benefit payable under, or interest in, this Plan are not(3) No Deferred Shares shall be transferable by a Grantee except upon a Grantee’s deathparticipant other than by will or by the laws of descent and distribution and shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any such attempted action shall be void.
Section 11. Withholding
All payments relating to an Award, whether at settlement or resulting from any further deferral or issuance of an Award under another plan of the Company in settlement of the Award, shall be net of any amounts required to be withheld pursuant to applicable federal, state and local tax withholding requirements.
Section 12. Tenure
A Grantee’s right, if any, to continue to serve the Company as a Covered Executive, officer, employee, or otherwise, shall not be enlarged or otherwise affected by his or her designation as a Grantee or any other event under the Plan.
Section 13. No Rights to Participation or Settlement
Nothingqualified domestic relations order (as defined in the Plan shall be deemed to give any eligible employee any right to participate inCode or the Plan except upon determination of the Committee. Until the Committee has determined to settle an Award under Section 7, a Grantee’s selection to participate, the grant of an Award, and other events under the Plan shall not be construed as a commitment that any Award will be settled under the Plan. The foregoing notwithstanding, the Committee may authorize legal commitments with respect to Awards under the terms of an employment agreement or other agreement with a Grantee, to the extent of the Committee’s authority under the Plan, including commitments that limit the Committee’s future discretion under the Plan, but in all cases subject to Section 9.
A-4
Section 14. Unfunded Plan
Grantees shall have no right, title, or interest whatsoever in or to any specific assets of the Company, or to any investments that the Company may make to aid in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Grantee, Beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company. The Company shall not be required to establish any special or separate fund, or to segregate any assets, to assure payment of such amounts. The Plan is not intended to be subject to the EmployeeEmployment Retirement Income Security Act of 1974, as amended.amended) except that, if so provided in the Deferred Shares Agreement, the participant may transfer without consideration the Deferred Shares during the participant’s lifetime to one or more members of the participant’s family, to one or more trusts for the benefit of one or more of the participant’s family, to a partnership or partnerships of members of the participant’s family, or to a charitable organization as defined in Section 501(c)(3) of the Code, provided that the transfer would not result in the loss of any exemption under Rule 16b-3 of the Exchange Act with respect to any Deferred Shares. The transferee of Deferred Shares will be subject to all restrictions, terms and conditions applicable to the Deferred Shares prior to its transfer, except that the Deferred Shares will not be further transferable by the transferee other than by will or by the laws of descent and distribution.
Section 15. Other Compensatory Plans and Arrangements
Nothing in(4) Unless otherwise determined by the Plan shall precludeCommittee at the time of granting any Grantee from participation in any other compensation or benefit plan of the Company or its Subsidiaries. The adoption of the Plan and the grant of Awards hereunder shall not precludeDeferred Shares, if a participant’s employment by the Company or any Subsidiary terminates by reason of death, any Deferred Shares held by that participant shall thereafter vest and any restrictions shall lapse.
(5) Unless otherwise determined by the Committee at the time of granting any Deferred Shares, if a participant’s employment by the Company or any Subsidiary terminates by reason of Disability, any Deferred Shares held by that participant shall thereafter vest and any restrictions shall lapse.
(6) Unless otherwise determined by the Committee at the time of granting any Deferred Share Award, if a participant’s employment by the Company or any Subsidiary terminates for any reason other than death or Disability, all Deferred Shares held by such participant which are unvested or subject to restriction shall thereupon be forfeited.
(7) A participant may elect to further defer receipt of a Deferred Share Award (or an installment of an Award) for a specified period or until a specified event (the “Elective Deferral Period”), subject in each case to the Committee’s approval and the terms of this Section 7 and such other terms as are determined by the Committee, all in its sole discretion. Subject to any exceptions approved by the Committee, such election may be made only if and to the extent permitted and in accordance with Section 409A of the Code.
(8) Each such Award shall be confirmed by, and subject to the terms of, a Deferred Share Award agreement evidencing the Award in the form approved from paying anytime to time by the Committee.
SECTION 8. Share Purchase Rights.
(a) Grant. Share Purchase Rights may be granted alone, in addition to or in tandem with other compensation apart fromAwards granted under the Plan including compensation for services or cash awards made outside the Plan. The Committee shall determine the individuals to whom, and the time or times at which, grants of Share Purchase Rights will be made, the number of Shares which may be purchased pursuant to the Share Purchase Rights, and the other terms and conditions of the Share Purchase Rights in respectaddition to those set forth in Section 8(b). The Shares subject to the Share Purchase Rights must be purchased at the Fair Market Value of performancesuch Shares on the date of grant. Subject to Section 8(b) hereof, the Committee may also impose such forfeiture or other terms and conditions as it shall determine, in its sole discretion, on such Share Purchase Rights or the exercise thereof.
Each Share Purchase Right Award shall be confirmed by, and be subject to the terms of, a Performance Year forShare Purchase Rights Agreement which an Award has been made. If an Award to a Covered Executiveshall be in form approved by the Committee.
(b) Terms and Conditions. Share Purchase Rights may contain such additional terms and conditions not be settled underinconsistent with the terms of the Plan however (for example, becauseas the Covered Executive hasCommittee shall deem desirable and shall generally be exercisable for such period as shall be determined by the Committee. However, Share Purchase Rights granted to Section 16 Participants shall not achievedbecome exercisable earlier than six months and one day after the Performance Objectivegrant date. Share Purchase Rights shall not be transferable by a participant other than by will or because shareholders have not approvedby the Plan), neitherlaws of descent and distribution.
SECTION 9. Share Appreciation Rights.
(a) Grant. Share Appreciation Rights may be granted in connection with all or any part of an Option. Share Appreciation Rights may be exercised in whole or in part at such times under such conditions as may be specified by the Company nor a Subsidiary may payCommittee in the participant’s Option Agreement.
(b) Terms and Conditions. The following terms and conditions will apply to all Share Appreciation Rights that are granted in connection with Options:
(1) Rights. Share Appreciation Rights shall entitle the participant, upon exercise of all or any part of the AwardShare Appreciation Rights, to surrender to the Covered Executive outsideCompany unexercised, that portion of the Plan.underlying Option relating to the same number of Shares as is covered by the Share Appreciation Rights (or the portion of the Share Appreciation Rights so exercised) and to receive in exchange from the Company an amount equal to the excess of (x) the Fair Market Value, on the date of exercise, of the Shares covered by the surrendered portion of the underlying Option over (y) the exercise price of the Shares covered by the surrendered portion of the underlying Option. The Committee may limit the amount that the participant will be entitled to receive upon exercise of the Share Appreciation Right.
(2) Surrender of Option. Upon the exercise of the Share Appreciation Right and surrender of the related portion of the underlying Option, the Option, to the extent surrendered, will not thereafter be exercisable. The underlying Option may provide that such Share Appreciation Rights will be payable solely in cash. The terms of the underlying Option shall provide a method by which an alternative fair market value of the Shares on the date of exercise shall be calculated based on the following: the closing price of the Shares on the national exchange on which they are then traded on the business day immediately preceding the day of exercise.
(3) Exercise. In addition to any further conditions upon exercise that may be imposed by the Committee, the Share Appreciation Rights shall be exercisable only to the extent that the related Option is exercisable, except that in no event will a Share Appreciation Right held by a Section 16 Participant be exercisable within the first six months after it is awarded even though the related Option is or becomes exercisable, and each Share Appreciation Right will expire no later than the date on which the related Option expires. A Share Appreciation Right may be exercised only at a time when the Fair Market Value of the Shares covered by the Share Appreciation Right exceeds the exercise price of the Shares covered by the underlying Option.
(4) Method of Exercise. Share Appreciation Rights may be exercised by the participant’s giving written notice of the exercise to the Company, stating the number of Share Appreciation Rights the participant has elected to exercise and surrendering the portion of the underlying Option relating to the same number of Shares as the number of Share Appreciation Rights elected to be exercised.
(5) Payment. The manner in which the Company’s obligation arising upon the exercise of the Share Appreciation Right will be paid will be determined by the Committee and shall be set forth in the participant’s Option Agreement. The Committee may provide for payment in Shares or cash, or a fixed combination of Shares or cash, or the Committee may reserve the right to determine the manner of payment at the time the Share Appreciation Right is exercised. Shares issued upon the exercise of a Share Appreciation Right will be valued at their Fair Market Value on the date of exercise.
SECTION 10. Other Share-Based Awards.
Section 16. (a) GrantDuration, Amendment. Other Awards of Shares and Termination of Plan
No Awardother Awards that are valued, in whole or in part, by reference to, or are otherwise based on, Shares, including, without limitation, performance shares, convertible preferred shares, convertible debentures, exchangeable securities, and Share Awards or options valued by reference to Book Value or subsidiary performance, may be granted alone, in addition to or in tandem with other Awards granted under the Plan or cash awards made outside of the Plan.
At the time the Shares or Other Share-Based Awards are granted, the Committee shall determine the individuals to whom and the time or times at which such Shares or Other Share-Based Awards shall be awarded, the number of Shares to be used in computing an Award or which are to be awarded pursuant to such Awards, the consideration, if any, to be paid for such Shares or Other Share-Based Awards, and all other terms and conditions of the Awards in addition to those set forth in Section 10(b). The Committee will also have the right, at its sole discretion, to settle such Awards in Shares, Restricted Shares or cash in an amount equal to then value of the Shares or Other Share-Based Awards.
The provisions of Other Share-Based Awards need not be the same with respect to each participant.
(b) Terms and Conditions. Other Share-Based Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(1) Subject to the provisions of this Plan and the Award agreement referred to in Section 10(b)(5) below, Shares awarded or subject to Awards made under this Section 10 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the Shares are issued, or, if later, the date on which any applicable restriction, performance, holding or deferral period or requirement is satisfied or lapses. All Shares or Other Share-Based Awards granted under this Section 10 shall be subject to a minimum holding period (including any applicable restriction, performance and/or deferral periods ) of six months and one day (“Minimum Holding Period”).
(2) Subject to the provisions of this Plan and the Award agreement and unless otherwise determined by the Committee at the time of grant, the recipient of an Other Share-Based Award shall be entitled to receive, currently, interest or dividends with respect to the number of Shares covered by the Award, as determined at the time of the Award by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested.
(3) Subject to the Minimum Holding Period, any Other Share-Based Award and any Shares covered by any such Award shall vest or be forfeited to the extent, at the times and subject to the conditions, if any, provided in the Award agreement, as determined by the Committee, in its sole discretion.
(4) In the event of the participant’s Disability or death, or in cases of special circumstances, the Committee may, in its sole discretion, waive, in whole or in part, any or all of the remaining limitations imposed hereunder or under any related Award agreement (if any) with respect to any part or all of any Performance Year commencingAward under this Section 10, provided that the Minimum Holding Period requirement may not be waived, except in case of a participant’s death.
(5) Each Award shall be confirmed by, and subject to the terms of, an agreement or other instrument evidencing the Award in the form approved from time to time by the Committee, the Company and the participant.
(6) Shares (including securities convertible into Shares) issued on a bonus basis under this Section 10 shall be issued for no cash consideration. Shares (including securities convertible into Shares) purchased pursuant to a purchase right awarded under this Section 10 shall bear a price of at the Fair Market Value of the Shares on the date of grant. The purchase price of such Shares, and of any Other Share-Based Award granted hereunder, or the formula by which such price is to be determined, shall be fixed by the Committee at the time of grant.
(7) In the event that any “derivative security, ” as defined in Rule 16a-1(c) (or any successor thereof) promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, is awarded pursuant to this Section 10 to any Section 16 Participant, such derivative security shall not be transferable other than by will or by the laws of descent and distribution.
SECTION 11. Change In Control Provision.
(a) Impact of Event. Notwithstanding any other provisions hereof or in any agreement to the contrary, in the event of: (i) a “Change in Control” as defined in Section 11(b) or (ii) a “Potential Change in Control” as defined in Section 11(c), the following acceleration and valuation provisions shall apply:
(1) Any Stock Options awarded under the Plan not previously exercisable and vested shall become fully exercisable and vested;
(2) Any Share Appreciation Rights shall become immediately exercisable;
(3) The restrictions applicable to any Restricted Shares Awards, Deferred Shares, Share Purchase Rights and Other Share-Based Awards shall lapse and such Shares and Awards shall be deemed fully vested; and
(4) The value of all outstanding Awards, in each case to the extent vested, shall, unless otherwise determined by the Committee in its sole discretion at or after December 31, 2011 (ifgrant but prior to any Change in Control or Potential Change in Control, be cashed out on the basis of the “Change in Control Price” as defined in Section 11(d) as of the date of such Change in Control or such Potential Change in Control is determined to have occurred;
(b) Definition of Change in Control. For purposes of Section 11(a), a “Change in Control” means the occurrence of any of the following: (i) the Board or shareholders of the Company approve a consolidation or merger that results in the shareholders of the Company immediately prior to the transaction giving rise to the consolidation or merger owning less than 50% of the total combined voting power of all classes of stock entitled to vote of the surviving entity immediately after the consummation of the transaction giving rise to the merger or consolidation; (ii) the Board or shareholders of the Company approve the sale of substantially all of the assets of the Company or the liquidation or dissolution of the Company; (iii) any person or other entity (other than the Company or a Subsidiary or any Company employee benefit plan (including any trustee of any such plan acting in its capacity as trustee)) purchases any Shares (or securities convertible into Shares) pursuant to a tender or exchange offer without the prior consent of the Board of Directors, or becomes the beneficial owner of securities of the Company representing 25% or more of the voting power of the Company’s 2011 fiscal year does not end on December 31outstanding securities; or (iv) during any two-year period, individuals who at the beginning of such period constitute the entire Board of Directors cease to constitute a majority of the Board of Directors, unless the election or the nomination for election of each new director is approved by at least two-thirds of the directors then still in office who were directors at the beginning of that period.
(c) Definition of Potential Change in Control. For purposes of Section 11(a), a “Potential Change in Control” means the happening of any one of the following:
(1) The approval by the shareholders of the Company of an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 11(b); or
(2) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or a Subsidiary or any Company employee benefit plan (including any trustee of any such plan acting in its capacity as trustee)) of securities of the Company representing 15% or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this sentencePlan.
(d) Change in Control Price. For purposes of this Section 11, “Change in Control Price,” means the actual datehighest price per share paid in any transaction reported on the New York Stock Exchange Composite Index (or, if the Shares are not then traded on the New York Stock Exchange, the highest price paid as reported for any national exchange on which the Shares are then traded) or paid or offered in any bona fide transaction related to a Change in Control or Potential Change in Control of the endCompany, at any time during the 60-day period immediately preceding the occurrence of the Company’s 2011 fiscal yearChange in Control (or, when applicable, the occurrence of the Potential Change in Control event).
SECTION 12. Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award Agreement (as may be amended pursuant to Section 13 hereof), payments to be made by the Company, a Subsidiary upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Shares, other Awards or other property, and may be substitutedmade in a single payment or transfer or in installments; provided, however, that settlement in other than Shares must be authorized by the applicable Award Agreement. The settlement of any Award may be accelerated and cash paid in lieu of Shares in connection with such settlement; provided, however, that settlement in cash must be authorized by the applicable Award Agreement. The acceleration of any Award that does not result in a cash settlement must also be authorized by the applicable Award Agreement. If and to the extent permitted by and in accordance with Section 409A of the Code and the regulations thereunder, installment or deferred payments may be required by the Committee or permitted at the election of the participant on terms and conditions approved by the Committee, including without limitation the ability to defer awards pursuant to any deferred compensation plan maintained by the Company, a Subsidiary. Payments may include, without limitation, provisions for December 31, 2011).the payment or crediting of a reasonable interest rate on installment or deferred payments or other amounts in respect of installment or deferred payments denominated in Shares.
SECTION 13. Amendments and Termination.
The Board may at any time, in its sole discretion, amend, alter or discontinue the Plan, but no such amendment, alteration or discontinuation shall be made that would (i) impair the rights of a participant under an Award theretofore granted, without the participant’s consent, or (ii) require shareholder approval under any applicable law, rule, regulation or listing standard of an exchange or market on which the Shares are listed and/or traded, unless such shareholder approval is received. The Company shall submit to the shareholders of the Company for their approval any amendments to the Plan which are required by Section 16 of the Exchange Act or the rules and regulations thereunder, or Section 162(m) of the Code, or the listing standards of an exchange or market on which the Shares are listed and/or traded to be approved by the shareholders.
The Committee may at any time, in its sole discretion, amend the terms of any Award, but no such amendment shall be made that would impair the rights of a participant under an Award theretofore granted, without the participant’s consent; nor shall any such amendment be made which would make the applicable exemptions provided by Rule 16b-3 under the Exchange Act unavailable to any Section 16 Participant holding the Award without the participant’s consent.
Subject to the above provisions, the Board shall have all necessary authority to amend the Plan to clarify any provision or to take into account changes in applicable securities and tax laws and accounting rules, as well as other developments.
SECTION 14. Unfunded Status of Plan.
The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a participant by the Company, nothing contained herein shall give that participant any rights that are greater than those of a general creditor of the Company.
SECTION 15. General Provisions.
(a) The Committee may require each participant acquiring Shares pursuant to an Award under the Plan to represent to and agree with the Company in writing that the participant is acquiring the Shares without a view to distribution thereof. The certificates for any such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.
All Shares or other securities delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any certificates for those Shares to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from timeadopting other or additional compensation arrangements, subject to time (either retroactivelyshareholder approval if such approval is required, and such arrangements may be either generally applicable or prospectively),applicable only in specific cases.
(c) Neither the adoption of the Plan, nor its operation, nor any document describing, implementing or referring to the Plan, or any part thereof, shall confer upon any participant under the Plan any right to continue in the employ, or as a director, of the Company or any Subsidiary, or shall in any way affect the right and may suspendpower of the Company or any Subsidiary to terminate the employment, or service as a director, of any participant under the Plan at any time providedwith or without assigning a reason therefor, to the same extent as the Company or any Subsidiary might have done if the Plan had not been adopted.
(d) For purposes of this Plan, a transfer of a participant between the Company and its Subsidiaries shall not be deemed a termination of employment.
(e) No later than the date as of which an amount first becomes includable in the gross income of the participant for federal income tax purposes with respect to any award under the Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state or local taxes or other items of any kind required by law to be withheld with respect to that amount. Subject to the following sentence, unless otherwise determined by the Committee, withholding obligations may be settled with Shares, including unrestricted Shares previously owned by the participant or Shares that are part of the Award that gives rise to the withholding requirement. Notwithstanding the foregoing, any such actionright by a Section 16 Participant to elect to settle any tax withholding obligation with Shares that are part of an Award must be set forth in the agreement evidencing the Award or be approved by the Committee, in its sole discretion. The obligations of the Company under the Plan shall be subject to shareholder approval ifconditional on those payments or arrangements and the Company and its Subsidiaries shall, to the extent requiredpermitted by law, have the right to ensure that compensationdeduct any such taxes from any payment of any kind otherwise payable to the participant. Shares withheld by, or otherwise remitted to, the Company to satisfy a participant’s tax withholding obligations upon the lapse of restrictions on Restricted Shares or the exercise of Options or Share Appreciation Rights granted under the Plan or upon any other payment or issuance of shares under the Plan will qualify as Performance-Based Compensation, or as otherwise maynot be requiredavailable for the use of new awards under applicable law.the Plan.
(f) The actual or deemed reinvestment of dividends in additional Restricted Shares (or in Deferred Shares or other types of Awards) at the time of any dividend payment shall be permissible only if sufficient Shares are available under Section 17. Governing Law3 for such reinvestment (taking into account then outstanding Stock Options, Share Purchase Rights and other Plan Awards).
(g) The Plan, all Awards granted hereunder,made and actions taken in connection herewiththereunder and any agreements relating thereto shall be governed by and construed in accordance with the laws of the State of Ohio (regardless of the law that might otherwise govern under applicable Ohio principles of conflict of laws).Ohio.
Section 18. Effective Date
The Plan shall be effective as of December 31, 2006; provided, however, that Awards(h) All agreements entered into with participants pursuant to the Company’s officers granted for Performance Years commencing after December 30, 2006,Plan shall be subject to the Plan.
(i) The provisions of Awards need not be the same with respect to each participant.
(j) In the event that an Award granted pursuant to the Plan shall constitute “non-qualified deferred compensation” within the meaning of Section 409A of the Code, the terms of the Plan as they apply to such Award shall be interpreted to comply with Section 409A of the Code. To the extent that an Award which is subject to Section 409A shall be payable to a participant who is a “specified employee” on account of his “separation from service” as such terms are defined in Section 409A and the Treasury regulations thereunder, such payment shall not occur until the date which is six (6) months and one (1) day after the participant’s separation from service.
SECTION 16. Shareholder Approval; Effective Date of Plan.
The Company’s Amended and Restated Long-Term Incentive Plan, as amended, was adopted by the Board of Directors on February 15, 2010, and is subject to the approval by the holders of the Company’s outstanding Shares, in accordance with applicable law and the listing standards of the New York Stock Exchange. This Amended and Restated Long-Term Incentive Plan, as amended, will become effective on the date of such shareholder approval. The amendment, among other things, adds 1,500,000 Shares to the Plan in Section 3 bringing the total Shares available for issuance pursuant to the Plan to 3,000,000.
SECTION 17. Term of Plan.
No Award shall be granted pursuant to the Plan on or after April 24, 2016, but Awards granted prior to such date may extend beyond that date.
APPENDIX B
STONERIDGE, INC.
AMENDED
DIRECTORS’ RESTRICTED SHARES PLAN
1. Purpose of Plan.
The purpose of this Amended Directors’ Restricted Shares Plan (the “Plan”) of Stoneridge, Inc., an Ohio corporation (the “Company”), is to advance the interests of the Company and its shareholders by providing Eligible Directors (as defined in Section 3, below) with (a) an opportunity to participate in the Company’s future prosperity and growth and (b) an incentive to increase the value of the Company based on the Company’s performance, development, and financial success. These objectives will be promoted by granting to Eligible Directors restricted Common Shares, without par value, of the Company (the “Restricted Shares”).
2. Administration of Plan.
The Plan will be administered by the Board of Directors (the “Board”). The Board shall have the power and authority to: (a) approve the grant of Restricted Shares to Eligible Directors (such Eligible Directors, “Participants”); (b) approve the terms and conditions, not inconsistent with the terms hereof, of any grant of Restricted Shares, including without limitation time and performance restrictions, and approve the form of Restricted Shares Grant Agreement (as defined in Section 5, below); (c) adopt, alter, and repeal such administrative rules, guidelines, and practices governing the Plan as it shall, from time to time, deem advisable; (d) interpret the terms and provisions of the Plan and any agreements relating thereto; and (e) take any other actions the Board considers appropriate in connection with, and otherwise supervise the administration of the Plan, all in a manner consistent with the other provisions of the Plan.
3. Participants in Plan.
The persons eligible to receive Restricted Shares under the Plan shall be those directors of the Company who are not employees or officers (provided, however, such person may be the Secretary) of the Company or any subsidiary of the Company (any such person, an “Eligible Director”).
4. Shares Subject to Plan.
The maximum aggregate number of Common Shares that may be issued under the Plan as Restricted Shares shall be 500,000 Common Shares, without par value (the amendment to the Plan adds an additional 200,000 Common Shares to the Plan, which originally had authorized a total of 300,000 Common Shares). The shares that may be issued under the Plan may be authorized but unissued shares or issued shares reacquired by the Company and held as Treasury Shares. In the event of a reorganization, recapitalization, share split, share dividend, combination of shares, merger, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company, the Company will make such adjustments as it deems appropriate in the number and kind of Common Shares reserved for issuance under the Plan. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation, all Restricted Shares that were granted hereunder and that are outstanding on the date of such event shall immediately vest and no longer be subject to forfeiture on the date of such event.
5. Grant, Issuance of Restricted Shares.
The Restricted Shares issued by the Company in connection with the Restricted Share grants made under the Plan shall be authorized by the Board and shall be made in accordance with, and subject to the terms of a written agreement (the “Restricted Shares Grant Agreement”) in the form approved by the Board from time to time. To be effective, any such Restricted Shares Grant Agreement, shall be signed by an officer of the Company authorized by the Board, and signed by the Participant, set forth the terms and other conditions to which the award of Restricted Shares is subject, if any, the period of time that the Restricted Shares are subject to forfeiture, if any, and state that such Restricted Shares are subject to all the terms and conditions of the Plan and such other terms and conditions, not inconsistent with the Plan, as the Board may approve. The date on which the Board approves the granting of the Restricted Shares shall be deemed to be the date on which the Restricted Shares are granted for all purposes, unless the Board otherwise specifies in its approval.
The Board may, in its sole discretion, provide in the written agreement that the forfeiture period with respect to the Restricted Shares may lapse upon a Participant’s death or disability or upon a Change in Control or Potential Change of Control (both defined in Section 11, below) of the Company. Any Restricted Shares issued under the Plan, so long as subject to forfeiture (a) shall not be sold, transferred, assigned, pledged, hypothecated, anticipated, alienated, encumbered or charged, whether voluntarily, involuntarily or by operation of law (collectively, “Transferred”) and (b) shall be forfeited to the Company in the event a Participant to whom such Restricted Shares are awarded voluntarily ceases to be a director during the period of time, if any, specified by the Board. Restricted Shares awarded under the Plan will be issued in the name of the Participant to whom awarded and held by the Company (or the Company’s agent) during such period of time that the Restricted Shares are subject to forfeiture. At the time the award is made the Participant may be asked to execute one or more blank stock powers and deliver the same to the Company so that any shares which are forfeited may be cancelled.
6. Termination of Status as an Eligible Director.
If a Participant’s status as an Eligible Director terminates for any reason (including death, disability (as defined by the Board from time to time, in its sole discretion), resignation, refusal to stand for reelection or failure to be elected) then unless otherwise determined by the Board, to the extent any grant of Restricted Shares held by such Participant is not vested (i.e., no longer subject to forfeiture) as of the date of such termination, such Restricted Shares shall automatically be forfeited on such date.
7. Withholding Tax.
The Company, at its option, shall have the right to require the Participant to pay the Company the amount of any taxes which the Company is required to withhold with respect to such Restricted Shares or, in lieu of such payment, to retain or sell without notice a number of such Restricted Shares sufficient to cover the amount required to be so withheld. The Company, at its option, shall have the right to deduct from all dividends paid with respect to Restricted Shares the amount of any taxes which the Company is required to withhold with respect to such dividend payments. The obligations of the Company under the Plan shall be conditional on such payment or other arrangements acceptable to the Company.
8. Securities Law Restrictions.
No right under the Plan shall be exercisable and no Restricted Shares shall be delivered under the Plan except in compliance with all applicable federal and state securities laws and regulations. The Company shall not be required to deliver any Restricted Shares or other securities under the Plan prior to such registration or other qualification of such shares under any state or federal law, rule, or regulation as the Board shall determine to be necessary or advisable, in its sole discretion.
Unless such shares have been registered under the Securities Act of 1933, as amended (the “1933 Act”), the Restricted Shares Grant Agreement evidencing the award of Restricted Shares shall contain a representation in form approved by the Board that such Restricted Shares are not being acquired with a view to resale or distribution and will not be sold or otherwise transferred by the Participant, except in compliance with the 1933 Act and the rules and regulations thereunder and any applicable state securities laws. The Board may impose such other restrictions on the Restricted Shares as it may deem advisable. Share certificates issued in connection with awards of Restricted Shares under the Plan shall bear such legends and statements as the Board shall deem advisable to assure compliance with federal and state securities laws and regulations and any other restriction imposed by the Board on such awards.
9. Term of Plan.
This Plan shall continue until terminated by the Board. The Board shall have the unrestricted right to amend, modify, suspend or terminate the Plan at any time; provided, however, the Board may not modify the terms of any outstanding awards evidenced by executed Restricted Shares Grant Agreements.
10. Shareholders Rights.
Participants to whom Restricted Shares have been issued under the Plan shall have the rights of shareholders with respect to the Company’s Common Shares so long as no forfeiture event has occurred, except that the Restricted Shares may not be Transferred during the forfeiture period.
11. Change in Control.
(a) Accelerated Vesting.
Notwithstanding any provision of this Plan or any Restricted Shares Grant Agreement to the contrary, if a Change in Control or a Potential Change in Control (each as defined below) occurs, then all Restricted Shares theretofore granted and not fully vested shall thereupon become vested (i.e., shall no longer be subject to forfeiture)
(b) Definition of Change in Control.
For purposes of the Plan, a “Change in Control” means the happening of any of the following:
(i) When any “person,” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the 1934 Act, but excluding the Company, any subsidiary of the Company, any employee benefit plan sponsored or maintained by the Company or any subsidiary of the Company (including any trustee of such plan acting as trustee), any person who is a shareholder of the Company on the effective date of this Plan (an “Existing Shareholder”), and any affiliate of an Existing Shareholder directly or indirectly becomes the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act) of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;
(ii) When, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death or disability to constitute at least a majority of the Board; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors, either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this Section 11(b)(ii); or
(iii) The occurrence of a transaction not recommended by the Board requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary of the Company through purchase of assets, by merger, or otherwise.
Provided, however, further that a change in control shall not be deemed to be a Change in Control for purposes of this Plan if the Board had approved such change prior to either (A) the commencement of any of the events described in Section 11(b)(i), (ii), (iii), or Section 11(c)(i) of this Plan, or (B) the commencement by any person other than the Company of a tender offer for Company Common Shares.
(c) Definition of Potential Change in Control.
For purposes of the Plan, a “Potential Change in Control” means the happening of any one of the following:
(i) The approval by the shareholders of the Company of an agreement by the Company, the consummation of which would result in a Change in Control of the Company as defined in Section 11(b), above; or
(ii) The acquisition of beneficial ownership of the Company, directly or indirectly, by any entity, person, or group (other than the Company, a subsidiary of the Company, any Company employee benefit plan (including any trustee of such plan acting as such trustee), an Existing Shareholder, or an affiliate of an Existing Shareholder) representing 5% or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of the Plan.
12. Acceleration of Rights.
The Board shall have the authority, in its discretion, to accelerate the time of vesting of Restricted Shares whenever it may determine that such action is appropriate by reason of changes in applicable tax or other laws or other changes in circumstances occurring after the award of the Restricted Shares.
13. Interpretation, Amendment or Termination of Plan.
The interpretation by the Board of any provision of the Plan or of any terms contained in any Restricted Shares Grant Agreement executed in connection with a grant of Restricted Shares under the Plan shall be final and conclusive upon all Participants under the Plan. The Board, without further action on the part of the shareholders of the Company, may from time to time alter, amend, or suspend the Plan or may at any time terminate the Plan; provided that no such action shall adversely affect any Participant’s rights with respect to an annual meetingoutstanding issuance of Restricted Shares then held by such Participant without such Participant’s consent. No member of the Board will incur any liability for any action taken or admitted, or any special meeting of shareholdersdetermination made, in good faith in connection with the Plan.
14. Government Regulations.
Notwithstanding any provision of the Company before settlement of Awards grantedPlan or any Restricted Shares Grant Agreement executed pursuant to the Company’s officers for the year ending December 31, 2007, so that compensation will qualify as Performance-Based Compensation; provided, further, thatPlan, the Company’s 2006 fiscal year ends on December 30, 2006obligations under the Plan and any change to the Company’s fiscal year so that the Company’s fiscal yearsuch agreement shall be set as the calendar year would mean that the Plan would be effective on January 1, 2007, instead of December 31, 2006. In addition, the Board may determinesubject to submit the Planall applicable laws, rules, and regulations and to shareholders for reapproval at such time, if any,approvals as may be required in orderby any governmental or regulatory agencies, including without limitation any stock exchange on which the Company’s Common Shares may then be listed.
15. Governing Law.
The Plan shall be construed and governed by the laws of the State of Ohio.
16. Effective Date.
The Plan, as amended (changing the number of Common Shares that compensationmay be issued under the Plan shall qualify as Performance-Based Compensation.
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