UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Stoneridge, Inc.
(Name of Registrant asAs Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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![[GRAPHIC MISSING]](https://files.docoh.com/DEF 14A/0001144204-09-019577/logo_stoneridge.jpg){kind=logo}
STONERIDGE, INC.
9400 East Market Street
Warren, Ohio 44484
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
We will hold the 20082009 Annual Meeting of Shareholders of Stoneridge, Inc. on Monday, May 5, 2008,4, 2009, at 10:11:00 a.m. Eastern Time, at the Grand Pavilion at the Avalon Inn located at 9519 East Market Street, Warren,Sheraton Cleveland Airport Hotel, 5300 Riverside Drive, Cleveland, Ohio 44484.
The purpose of the Annual Meeting is to consider and vote on the following matters:
| (1) | Election of seven directors, each for a term of one year; |
| Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
| (3) | Proposal to approve the Stoneridge, Inc. Long-Term Cash Incentive Plan; and |
| (4) | Any others matters properly brought before the meeting. |
Only shareholders of record at the close of business on March 21, 2008,20, 2009, are entitled to notice of and to vote at the meeting or any adjournment thereof. Shareholders are urged to complete, sign and date the enclosed proxy and return it in the enclosed envelope.
By order of the Board of Directors,
ROBERT M. LOESCH,
Secretary
Dated: April 8, 2009
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 4, 2009:
This proxy statement and the Company’s 2008
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY
STONERIDGE, INC.
PROXY STATEMENT
The Board of Directors of Stoneridge, Inc. (the “Company”) is sending you this proxy statement to ask for your vote as a Stoneridge shareholder on certain matters to be voted on at the Annual Meeting of Shareholders. The Annual Meeting of Shareholders will be held on Monday, May 5, 2008,4, 2009, at 10:11:00 a.m. Eastern Time, at the Grand Pavilion at the Avalon Inn located at 9519 East Market Street, Warren,Sheraton Cleveland Airport Hotel, 5300 Riverside Drive, Cleveland, Ohio 44484.44135. The Board of Directors is mailing this proxy statement and the accompanying notice and proxy to you on or about April 4, 2008.
Annual Report; Internet Availability
A copy of the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 20072008, is enclosed with this proxy statement. Additionally, this Proxy Statement and our Annual Report to Shareholders for the fiscal year ended December 31, 20072008 are available on our web site at www.stoneridge.com.
Solicitation of Proxies
The Board of Directors is making this solicitation of proxies and the Company will pay the cost of the solicitation. The Board of Directors has retained Georgeson Inc., at an estimated cost of $8,000, to assist the Company in the solicitation of proxies from brokers, nominees, institutions and individuals. In addition to solicitation of proxies by mail by Georgeson Inc., the Company’s employees may solicit proxies by telephone, facsimile or electronic mail.
Proxies; Revocation of Proxies
The shares represented by your proxy will be voted in accordance with the instructions as indicated on your proxy. In the absence of any such instructions, they will be voted to elect the director nominees set forth under “Election of Directors,” and FOR the ratification of the independent public accountants.accountants and FOR the approval of the Long-Term Cash Incentive Plan. Your presence at the Annual Meeting of Shareholders, without more, will not revoke your proxy. However, you may revoke your proxy at any time before it has been exercised by signing and delivering a later-dated proxy or by giving notice to the Company in writing at the Company’s address indicated on the attached Notice of Annual Meeting of Shareholders or in the open meeting.
Voting Eligibility
Only shareholders of record at the close of business on the record date, March 21, 2008,20, 2009, are entitled to receive notice of the Annual Meeting of Shareholders and to vote the common shares that they held on the record date at the meeting. On the record date, the Company’s voting securities outstanding consisted of 24,669,60825,178,440 common shares, without par value, each of which is entitled to one vote on each matter properly brought before the meeting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table describes certain information regarding the beneficial ownership of the Company’s common shares as of February 15, 2008,20, 2009, by: (a) the Company’s directors and nominees for election as directors; (b) each other person who is known by the Company to own beneficially more than 5% of the Company’s outstanding common shares; (c) the executive officers named in the Summary Compensation Table; and (d) the Company’s executive officers and directors as a group.
 | | | ||||||
| Name of Beneficial Owner | Number of Shares Beneficially Owned(1) | Percent of Class | ||||||
| C. M. Draime(2) | 5,650,000 | 22.9 | % | |||||
| Jeffrey P. Draime(3) | 3,025,930 | 12.3 | ||||||
| Dimensional Fund Advisors LP(4) | 1,495,247 | 6.1 | ||||||
| KPR Capital Management, LLC(5) | 1,439,531 | 5.8 | ||||||
| John C. Corey(6) | 575,161 | 2.3 | ||||||
| Earl L. Linehan(7) | 309,179 | 1.3 | ||||||
| Sheldon J. Epstein(8) | 62,735 | * | ||||||
| William M. Lasky(9) | 43,100 | * | ||||||
| Douglas C. Jacobs(10) | 22,600 | * | ||||||
| Kim Korth(11) | 10,500 | * | ||||||
| Ira C. Kaplan | — | * | ||||||
| Paul J. Schlather | — | * | ||||||
| George E. Strickler(12) | 163,197 | * | ||||||
| Thomas A. Beaver(13) | 127,153 | * | ||||||
| Mark J. Tervalon(14) | 102,935 | * | ||||||
| Martin Malmvik(15) | 17,825 | * | ||||||
| All Executive Officers and Directors as a Group (11 persons) | 4,460,315 | 18.1 | % | |||||
| Number of | ||||||||
| Shares | Percent | |||||||
| Beneficially | of | |||||||
Name of Beneficial Owner | Owned(1) | Class | ||||||
| C.M. Draime(2) | 5,650,000 | 23.3 | % | |||||
| Jeffrey P. Draime(3) | 3,020,530 | 12.5 | ||||||
| Huntington National Bank(4) | 2,052,142 | 8.5 | ||||||
| Dimensional Fund Advisors LP(5) | 2,048,368 | 8.5 | ||||||
| KPR Capital Management, LLC(6) | 2,010,333 | 8.3 | ||||||
| John C. Corey(7) | 421,811 | 1.7 | ||||||
| Earl L. Linehan(8) | 303,779 | 1.3 | ||||||
| Avery S. Cohen(9) | 92,779 | * | ||||||
| Sheldon J. Epstein(10) | 79,971 | * | ||||||
| William M. Lasky(11) | 32,300 | * | ||||||
| Douglas C. Jacobs(12) | 17,200 | * | ||||||
| Kim Korth(13) | 5,100 | * | ||||||
| Thomas A. Beaver(14) | 140,039 | * | ||||||
| George E. Strickler(15) | 118,847 | * | ||||||
| Mark J. Tervalon(16) | 85,400 | * | ||||||
| Vincent F. Suttmeier(17) | 61,874 | * | ||||||
| All Executive Officers and Directors as a Group (12 persons) | 4,379,630 | 18.1 | % | |||||
| * | Less than 1%. |
| (1) | Unless otherwise indicated, the beneficial owner has sole voting and investment power over such shares. |
| (2) | Represents 5,650,000 common shares held in trust for the benefit of the estate of the late |
| (3) | Represents 1,010,595 common shares held in trust for the benefit of Jeffrey P. Draime, of which Mr. Draime is trustee, 1,964,735 common shares held in trust for the benefit of Draime family members, of which Mr. Draime is trustee, |
| (4) | According to a Schedule 13G filed with the Securities and Exchange Commission (“SEC”) | |
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| (5) | According to a Schedule 13G filed with the SEC by KPR Capital Management LLC, all common shares are held by clients of KPR Capital Management LLC and those clients have granted KPR Capital Management LLC investment discretion over portfolio investments, including |
| (6) | Represents 10,000 common shares that Mr. Corey has the right to acquire upon exercise of share options, |
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| (7) | Represents 26,500 common shares that Mr. Linehan has the right to acquire upon the exercise of share options, |
| (8) | Represents |
| (9) | Represents 10,000 common shares that Mr. Lasky has the right to acquire upon the exercise of share options, |
| (10) | Represents |
| (11) | Represents |
| (12) | Represents |
| (13) | Represents 20,000 common shares that Mr. Beaver has the right to acquire upon the exercise of share options, |
| (14) | Represents 4,000 common shares that Mr. Tervalon has the right to acquire upon the exercise of share options, |
| (15) | Represents |
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PROPOSAL ONE: ELECTION OF DIRECTORS
In accordance with the Company’s Code of Regulations, the number of directors has been fixed at seven. At the Annual Meeting of Shareholders, you will elect seven directors to hold office until the Company’s next Annual Meeting of Shareholders and until their successors are elected and qualified. The Board of Directors proposes that the nominees describedidentified below all of whom are currently serving as directors, be elected to the Board of Directors. John C. Corey, the Company’s President and Chief Executive Officer, has an employment agreement with the Company, which provides that, during the term of the agreement, Mr. Corey shall be entitled to be nominated for election to the Board of Directors. At the Annual Meeting of Shareholders, the common shares represented by proxies, unless otherwise specified, will be voted for the election of the seven nominees hereinafter named.
The director nominees are identified in the following table. If for any reason any of the nominees is not a candidate when the election occurs (which is not expected), the Board of Directors expects that proxies will be voted for the election of a substitute nominee designated by the Board of Directors. The following information is furnished with respect to each person nominated for election as a director.
The Board of Directors recommends that you vote “FOR” the following nominees.
Nominees for Election at the Annual Meeting of Shareholders
| | | | |||||
Name and Age | Principal Occupation | Period of Service as a Director | Expiration of Term for Which Proposed | |||||
| John C. Corey | President and Chief Executive Officer of the Company | 2004 to date | 2010 | |||||
| Jeffrey P. Draime | Owner of Silent Productions, a concert promotions company, and Owner of QSL Columbus, QSL Dayton, a restaurant franchise | 2005 to date | ||||||
| 2010 | ||||||||
| Douglas C. Jacobs | Executive Vice | 2004 to date | 2010 | |||||
54 | Managing Partner of Benesch, Friedlander, Coplan & Aronoff LLP, a law firm | — | 2010 | |||||
| Kim Korth | President of IRN, Inc., an international automotive consulting firm | 2006 to date | 2010 | |||||
| William M. Lasky | 2004 to date | 2010 | ||||||
| 2010 | ||||||||
Each of the nominees for election as a director has engaged in the principal occupation or activity indicated for at least five years, except for the following:
Mr. Corey was the President and Chief Executive Officer of Safety Components International (a supplier of air bags and components) from October 2000 until January 2006. On January 16, 2006, Mr. Corey was appointed President and Chief Executive Officer of the Company.
Mr. Jacobs, a former partner of the accounting firm Arthur Andersen LLP, was Vice President-Finance,President — Finance, Chief Financial Officer and Treasurer of the Cleveland Browns from 1999 to 2001, when he became the organization’s Executive Vice President-Finance,President — Finance, Chief Financial Officer and Treasurer until December 2005. In January 2006, Mr. Jacobs became Executive Vice President-FinancePresident — Finance and Chief Financial Officer of Brooklyn NY Holdings LLC, a privately held investment advisory company established to manage the assets of a family and family trust, includingwhich includes the Cleveland Browns.
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Mr. Lasky served as Chairman, Chief Executive Officer and President of JLG Industries, Inc., a diversified construction and industrial equipment manufacturer, from January 2001 until December 2006.
Mr. Schlather was a partner at PricewaterhouseCoopers LLP serving as co-head to the Private Client Service group from August 2002 until his retirement in June 2008.
Directorships
Mr. Corey is a director and chairman of the board of directors of Haynes International, Inc. (a producer of metal alloys). Mr. Jacobs is a director of Standard Pacific Corporation (a national residential home builder in southern California), serving as chairman of its audit committee and as a member of its nominating and corporate governance committee. Mr. Lasky is a director and chairman of the board of directors of Accuride Corporation (a manufacturer and supplier of commercial vehicle components) serving as a member of its compensation committee and as chairman of its nominating and corporate governance committee.
CORPORATE GOVERNANCE
Corporate Governance Documents and Committee Charters
The Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers and the charters of the Board of Directors’ Compensation, Audit, and Nominating and Corporate Governance committees are posted on our web site atwww.stoneridge.com. Written copies of these documents will be available to any shareholder upon request. Requests should be directed to Investor Relations at the Company’s address listed on the Notice of Annual Meeting of Shareholders.
Corporate Ethics Hotline
The Company established a corporate ethics hotline as part of the Company’s Whistleblower Policy and Procedures to allow persons to lodge complaints about accounting, auditing and internal control matters, and to allow an employee to lodge a concern, confidentially and anonymously, about any accounting and auditing matter. Information about lodging such complaints or making such concerns known is contained in the Company’s Whistleblower Policy and Procedures, which is posted on our web site atwww.stoneridge.com.
Director Independence
The New York Stock Exchange (“NYSE”) rules require listed companies to have a Board of Directors comprised of at least a majority of independent directors. Under the NYSE rules, a director qualifies as “independent” upon the affirmative determination by the Board of Directors that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The Board of Directors has determined that the following directors and nominees for election of director are independent:
| | | ||
| Jeffrey P. Draime | Ira C. Kaplan | Earl L. Linehan * | ||
| Sheldon J. Epstein * | Kim Korth | |||
| Douglas C. Jacobs | William M. Lasky |
| * | Not standing for election at the Annual Meeting of Shareholders |
The Board of Directors has not adopted categorical standards of independence. In making the independence determinations, the Board considered that Ms. Korth’s automotive consulting company IRN, Inc., was engaged by a division of the Company to provide consulting advice in the spring and summer of 2008. The amounts paid to Ms. Korth’s company were below the threshold that would (i) trigger disclosure under the heading “Transactions with Related Persons” or (ii) disqualify Ms. Korth from being independent under the NYSE’s rules. In addition, the Board also considered the prior relations of Mr. Kaplan and Mr. Schlather to Mr. Draime. Mr. Kaplan has from time to time represented Mr. Draime as his legal counsel. Mr. Schlather, while a partner at PricewaterhouseCoopers LLP, provided certain tax advice to Mr. Draime’s family.
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The Board of Directors
In 2007,2008, the Board of Directors held fourteennine meetings and took action by unanimous written consent on one occasion.two occasions. The Company’s policy is that directors attend the Annual Meeting of Shareholders. All directors attended the 20072008 Annual Meeting of Shareholders. Mr. Lasky has been appointed as the presiding director by the non-management directors to preside at the executive sessions of the non-management and independent directors. It is the Board of Directors’ practice to have the non-management directors meet regularly in executive session and to have the independent directors meet at least once a year in executive session.
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Committees of the Board
The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. The committees are the Compensation Committee, the Audit Committee and the Nominating and Corporate Governance Committee. Each member of the Compensation, Audit, and Nominating and Corporate Governance committees is independent as defined under the listing standards of the NYSE. The table below shows the composition of the Board’s committees:
| | | ||
| Compensation Committee | Audit Committee | Nominating and Corporate | ||
Governance Committee | ||||
| Kim Korth | Sheldon J. | Sheldon J. Epstein | ||
| William M. Lasky | Douglas C. Jacobs | William M. | ||
| Earl L. | William M. Lasky | Earl L. Linehan |
| * | Committee Chairperson |
Compensation Committee
This committee held eightsix meetings during 2007.2008. The Compensation Committee is responsible for establishing and reviewing our compensation philosophy and programs with respect to our executive officers, approving executive officer compensation and benefits and recommending to the Board the approval, amendment and termination of incentive compensation and equity-basedequity based plans and certain other compensation matters, including director compensation. Recommendations regarding compensation of other officers are made to the Compensation Committee by our Chief Executive Officer.Officer (“CEO”). The Compensation Committee can exercise its discretion in modifying any amount presented by our Chief Executive Officer.CEO. The Compensation Committee regularly reviews tally sheets that detail the total compensation obligations to each of our executive officers. The Compensation Committee has retained Towers Perrin, an independent outside compensation consulting firm, to advise on all matters related to executive and director compensation. Specifically, Towers Perrin provides relevant market data, current trends in executive and director compensation and advice on program design. In accordance with its charter, the Compensation Committee may delegate power and authority as it deems appropriate for any purpose to a subcommittee of not fewer than two members.
Audit Committee
This committee held nine meetings during 2007.2008. Information regarding the functions performed by the Audit Committee is set forth in the “Audit Committee Report,” included in this proxy statement. The Board of Directors has determined that each Audit Committee member is financially literate under the current listing standards of the NYSE. The Board of Directors also determined that Mr. Epstein qualifies as an “audit committee financial expert” as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002. In addition, under the Sarbanes-Oxley Act of 2002 and the NYSE rules mandated by the SEC, members of the audit committee must have no affiliation with the issuer, other than their Board seat, and receive no compensation in any capacity other than as a director or committee member. Each member of the Audit Committee meets this additional independence standard applicable to audit committee members of NYSE listed companies.
Nominating and Corporate Governance Committee
This committee held one meetingtwo meetings in 2007.2008. The purpose of the Nominating and Corporate Governance Committee is to evaluate and recommend candidates for election as directors, make recommendations concerning the size and composition of the Board of Directors, develop and implement the Company’s corporate governance policies and assess the effectiveness of the Board of Directors.
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Nominations and Nomination Process
It is the policy of the Nominating and Corporate Governance Committee to consider individuals recommended by shareholders for membership on the Board of Directors. If a shareholder desires to recommend an individual for membership on the Board of Directors, then that shareholder must provide a written notice (the “Recommendation
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In addition, in order for a recommendation to be considered by the Nominating and Corporate Governance Committee, the Recommendation Notice must contain, at a minimum, the following:
The Nominating and Corporate Governance Committee determines, and periodically reviews with the Board of Directors, the desired skills and characteristics for directors as well as the composition of the Board of Directors as a whole. This assessment considers the directors’ qualifications and independence, as well as diversity, age, skill and experience in the context of the needs of the Board of Directors. At a minimum, directors should share the values of the Company and should possess the following characteristics: high personal and professional integrity; the ability to exercise sound business judgment; an inquiring mind; and the time available to devote to Board of Directors’ activities and the willingness to do so. In addition to the foregoing considerations, generally with respect to nominees recommended by shareholders, the Nominating and Corporate Governance Committee will evaluate such recommended nominees considering the additional information regarding them contained in the Recommendation Notices. When seeking candidates for the Board of Directors, the Nominating and Corporate Governance Committee may solicit suggestions from incumbent directors, management and third-party search firms. Ultimately, the Nominating and Corporate Governance Committee will recommend to the Board of Directors prospective nominees who the Nominating and Corporate Governance Committee believes will be effective, in conjunction with the other members of the Board of Directors, in collectively serving the long-term interests of the Company’s shareholders.
The Nominating and Corporate Governance Committee recommended to the Board of Directors each of the nominees identified in “Election of Directors” on page 4. The nominees Ira C. Kaplan and Paul J. Schlather were recommended to the Nominating and Corporate Governance Committee as candidates for
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election to the Board of Directors by Jeffrey P. Draime, a Company shareholder and current member of the Board of Directors (see “Security Ownership of Certain Beneficial Owners and Management” and “Proposal One: Election of Directors”).
Compensation Committee Interlocks and Insider Participation
None of the members of the Board’s Compensation Committee has served as one of our officers or employees at any time. Additionally, no “CompensationCompensation Committee interlocks”interlocks existed during 2007.
Communications withWith the Board of Directors
The Board of Directors believes that it is important for interested parties to have a process to send communications to the Board of Directors. Accordingly, persons who wish to communicate with the Board of Directors may do so by sending a letter to the Secretary of the Company at Stoneridge, Inc., 9400 East Market Street, Warren, Ohio 44484. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Board Communication” or “Director Communication.” All such letters must identify the author and clearly state whether the intended recipients are all members of the Board of Directors or certain specified individual directors
7
Transactions withWith Related Persons
There were no reportable transactions involving related persons in Warren, Ohio. The Company leases office space in Hunters Square. The Company pays all maintenance, tax and insurance costs related to the operation of the office. Lease payments made by the Company to HSI through September 2007 were $256,500. The Company will continue to make lease payments as required under the lease agreement, which terminates in December 2009. The Company believes the terms of the lease are no less favorable to it than would be the terms of a third-party lease.
Review and Approval of Transactions withWith Related Persons
The Board has adopted a written statement of policy with respect to related party transactions. Under the policy, a related party transaction is a transaction required to be disclosed pursuant to Item 404 ofRegulation S-K or any other similar transaction involving the Company and the Company’s subsidiaries and any Company employee, officer, director, 5% shareholder or an immediate family member of any of the foregoing if the dollar amount of the transaction or series of transactions exceeds $25,000. A related party transaction will not be prohibited merely because it is required to be disclosed or because it involves related parties. Pursuant to the policy, such transactions are presented to the Nominating and Corporate Governance Committee for evaluation and approval by the committee, or if the committee elects, by the full Board of Directors. If the transaction is determined to involve a related party, the Nominating and Corporate Governance Committee will either approve or disapprove the proposed transaction. Under the policy, in order to be approved, the proposed transaction must be on terms that are fair to the Company and are comparable to market rates, where applicable.
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PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR
ENDING DECEMBER 31, 2008
The Audit Committee of the Board of Directors intends to appointcurrently anticipates appointing Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm for the year endedending December 31, 2008.2009. For 2008 Ernst & Young has been regularlywas engaged by us to audit our annual financial statements and to perform audit-related and tax services. Representatives of Ernst & Young are expected to be present at the Annual Meeting of Shareholders, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
The Board of Directors seeks an indication from shareholders of their approval or disapproval of the Audit Committee’s intendedanticipated appointment of Ernst & Young as the Company’s independent registered public accounting firm for the 20082009 fiscal year. The submission of this matter for approval by shareholders is not legally required. The Board of Directors, however, believes that the submission is an opportunity for the shareholders to provide feedback to the Board of Directors on an important issue of corporate governance. If the shareholders do not approve the appointment of Ernst & Young, the appointment of the Company’s independent registered public accounting firm will be re-evaluated by the Audit Committee but will not require the Audit Committee to appoint a different accounting firm.
The Board of Directors recommends that you vote “FOR” Proposal Two.
Service Fees Paid to the Independent Registered Public Accounting Firm
The following table sets forth the aggregate audit fees billed by and paid to Ernst & Young by fee category for the fiscal years ended December 31, 20072008 and 2006.2007. The Audit Committee has considered the scope and fee arrangements for all services provided by Ernst & Young, taking into account whether the provision of non-audit-related services is compatible with maintaining Ernst & Young’s independence.
| | | ||||||
| 2008 | 2007 | |||||||
| Audit Fees | $ | 1,692,784 | $ | 1,731,227 | ||||
| Tax Fees | 482,130 | 102,434 | ||||||
| All Other Fees | 13,677 | 11,732 | ||||||
| Total | $ | 2,188,591 | $ | 1,845,393 | ||||
| 2007 | 2006 | |||||||
| Audit Fees | $ | 1,731,227 | $ | 1,646,111 | ||||
| Audit-Related Fees | — | 3,000 | ||||||
| Tax Fees | 102,434 | 93,007 | ||||||
| All Other Fees | 11,732 | 21,764 | ||||||
| Total | $ | 1,845,393 | $ | 1,763,882 | ||||
Audit Fees. Audit fees include fees associated with the annual audit of the Company’s financial statements, including the assessmentaudit of the effectiveness of the Company’s internal control over financial reporting as integrated with the annual audit of the Company’s financial statements, the quarterly reviews of the financial statements included in the Company’sForm 10-Q filings, statutory and regulatory audits and general assistance with the implementation of new regulatory pronouncements.
Tax Fees. Tax fees primarily relate to tax audits, tax compliance, tax consulting and both domestic and international tax planning.
All Other Fees. All other fees relate to regulatory reviews.
Pre-Approval Policy
The Audit Committee’s policy is to approve in advance all audit and permitted non-audit services to be performed for the Company by its independent registered public accounting firm. Pre-approval is generally provided for up to one year, is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee also pre-approves particular services on acase-by-case basis. In accordance with this policy, the Audit Committee has delegated pre-approval authority to the Chairman of the Audit Committee. The Chairman may pre-approve services and then inform the Audit Committee at the next scheduled meeting.
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Audit Committee Report
In accordance with its written charter, the Audit Committee assists the Board of Directors in fulfilling its responsibility relating to corporate accounting, reporting practices of the Company, and the quality and integrity of the financial reports and other financial information provided by the Company to any governmental body or to the public. Management is responsible for the financial statements and the reporting process, including the system of internal controls. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the audited financial statements with U.S. generally accepted accounting principles. The Audit Committee is comprised of three directors, all of whom are “independent” for audit committee purposes under the current listing standards of the NYSE.
In discharging its oversight responsibility as to the audit process, the Audit Committee reviewed and discussed the audited financial statements of the Company for the year ended December 31, 2007,2008, with the Company’s management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements. The Audit Committee reviewedalso discussed with the Company’s independent registered public accounting firm, Ernst & Young, its judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by Public Company Accounting Oversight Board in Rule 3600T.3200T. The Audit Committee also obtained a formalhas received the written statementdisclosures and letter from Ernst & Young that described all relationships between Ernst & Young andrequired by the Company that might bear on Ernst & Young’s independence consistent with Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees, as adopted byapplicable requirements of the Public Company Accounting Oversight Board in Rule 3600T.regarding Ernst & Young’s communication with the Audit Committee concerning independence. The Audit Committee discussed Ernst & Young’s independence with Ernst & Young any relationships that might impact Ernst & Young’s objectivity and independence and satisfied itself as to Ernst & Young’s independence.Young. The Audit Committee also considered whether the provision of non-audit services by Ernst & Young is compatible with maintaining Ernst & Young’s independence. Management has the responsibility for the preparation of the Company’s financial statements and Ernst & Young has the responsibility for the examination of those statements.
The Audit Committee discussed with the Company’s internal auditor and Ernst & Young the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditor and Ernst & Young, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal control, and the overall quality of the Company’s financial reporting.
Based on the above-referenced review and discussions with management, the internal auditor and Ernst & Young, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in its Annual Report onForm 10-K for the year ended December 31, 2007,2008, for filing with the SEC.
The Audit Committee
Sheldon J. Epstein, Chairman
Douglas C. Jacobs
William M. Lasky
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PROPOSAL THREE: APPROVAL OF THE COMPANY’S
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Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), annual compensation in excess of $1 million paid to the Company’s CEO and the three other highest paid executive officers is not deductible by the Company for federal income tax purposes. However, “performance-based compensation” is excluded from the $1 million deduction limit. For compensation to qualify as “performance-based compensation” under Code Section 162(m) certain conditions must be met, including shareholder approval of the material terms of the arrangement under which the compensation is paid.
For 2009, the awards under the LTCIP provide recipients with the right to receive cash after three years depending on the Company’s actual earnings per share (“EPS”) performance for a performance period comprised of the 2009, 2010 and 2011 fiscal years. The Company believes that linking potential long-term compensation to performance ties the executive officers’ overall compensation to returns to shareholders, which aligns executive officers’ interests with the Company’s shareholders’ interests. For 2009 grants, the performance period EPS performance target was established from the Company’s budgeted EPS with a 10% annual growth factor for years two and three. Minimum EPS was established at 50% of target and maximum EPS was established at 150% of target. The LTCIP shall continue until such time as it is terminated by the Board of Directors. However, awards to the Company’s officers and key employees granted for performance years commencing after December 31, 2008 shall be subject to approval of the shareholders of the Company before settlement of the awards so that compensation will qualify as performance-based compensation under Code Section 162(m).
Depending upon the Company’s EPS performance over the performance period as well as continued employment, the threshold, target and maximum amount that may be earned by the named executive officers, by all executive officers as a group and by all participating non-executive officer employees as a group under the LTCIP for awards made on March 8, 2009 are as follows:
| | | | |||||||||
| Threshold | Target | Maximum | ||||||||||
| John C. Corey | $ | 391,814 | $ | 783,628 | $ | 1,175,442 | ||||||
| George E. Strickler | 113,153 | 226,306 | 339,459 | |||||||||
| Mark J. Tervalon | 68,355 | 136,709 | 205,064 | |||||||||
| Thomas A. Beaver | 54,366 | 108,731 | 163,097 | |||||||||
| Martin Malmvik | 6,670 | 13,339 | 20,009 | |||||||||
| Executive Officers as a Group(1) | 627,688 | 1,255,374 | 1,883,062 | |||||||||
| Non-Executive Officer Employees as a Group(2) | 305,507 | 611,000 | 916,507 | |||||||||
| (1) | Includes 4 persons. |
| (2) | Includes 22 persons. |
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The LTCIP is an unfunded plan and no provision will be made with respect to the segregating of assets by the Company for payment of benefits under the LTCIP. Income generally will not be recognized upon the grant of an award to a participant under the LTCIP. Upon payment in respect to any earned awards, the recipient generally will be required to include as taxable income in the year of the receipt an amount equal to the amount of cash received. All payments are intended to comply with the provisions of Section 409A of the Code.
Approval LTCIP
The affirmative vote of a majority of the votes cast in person or by proxy by shareholders represented and entitled to vote at the Annual Meeting of Shareholders is required for approval of the LTCIP. Broker non-votes will not be treated as votes cast and will not have a positive or negative effect on the outcome of the proposal. Abstention will be treated as votes cast and, consequently, will have the same effect as votes against the proposal. No compensation will be paid under the LTCIP to any covered employee (as defined in Code Section 162(m)) if the plan is not approved by the shareholders.
Recommendation of the Board of Directors
The Board believes that the LTCIP is in the best interests of the Company and its shareholders. Accordingly, the Board recommends a vote FOR the approval of the LTCIP.
Summary of the Material Provisions of the LTCIP
Below is a summary of the material terms of the LTCIP. The summary does not purport to be complete and is qualified in its entirety by reference to the full text of the LTCIP, a copy of which is attached as Appendix A to this proxy statement:
| | |
| Purpose | The purposes of the LTCIP are to (i) provide incentive compensation to officers and other key employees of the Company and its subsidiaries based on the achievement of performance goals designated by the Compensation Committee (the “Committee”); (ii) advance the interests of the Company and its shareholders by attracting and retaining highly competent officers and key employees; and (iii) motivate such persons to act in the long-term best interests of the Company and its shareholders. | |
| Administration of the LTCIP | The Committee will administer the LTCIP. The Committee will be comprised solely of “outside directors,” within the meaning of Code Section 162(m), and NYSE independent directors. The Committee’s responsibilities pursuant to the LTCIP will include (i) selecting the participants; (ii) determining the date awards are to be made; (iii) determining whether performance goals and other payment criteria have been satisfied; (iv) determining when awards should be paid; and (v) determining whether the amount of the awards should be reduced. The Committee also will have the powers necessary to administer the LTCIP, including the power to make rules and regulations, the power to interpret the LTCIP, and the power to delegate certain of its powers and responsibilities. | |
| Eligible Persons | Officers and other key employees of the Company or its subsidiaries. There are approximately 25 officers and key employees eligible to participate in the LTCIP. | |
| Awards | An award is an amount payable in cash to a participant if one or more performance objectives are met at the end of the three year performance period, and if any other specified terms or conditions are satisfied. The Committee determines the amount of each award, the specific performance objectives that must be met for the award to be payable, and any other terms and conditions for the award. | |
| Maximum Award | $3 million in any three year performance period, with a potential new three year performance period commencing every year. The maximum amounts with respect to the named executive officers for the 2009 grant under the LTCIP are set forth above. |
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| | |
| Reduction and Increase of Awards | Notwithstanding the attainment of the performance measures with respect to an award made under the LTCIP or anything herein to the contrary, in all cases, the Committee shall have the sole and absolute discretion to reduce the amount of any payment with respect to any award that would otherwise be made to any participant or to decide that no payment shall be made. | |
| Establishment of Performance Objectives | The Committee will establish performance measures for awards to “covered employees” (as defined in Code Section 162(m)) from the list set out below. | |
| Types of Performance Objectives | Performance measures established by the Committee may be based on one or more of the following criteria: increase in net sales; pretax income before allocation 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 maintenance of the price of the Company’s common shares; increase 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. | |
| Termination of Employment and Change in Control | A participant shall not earn his or her award if he or she voluntarily terminates his or her employment or is terminated for cause during the performance period. If during the performance period a participant terminates employment during a fiscal year because of death, disability, or normal retirement (subject to conditions) the participant will earn a pro rata portion of the incentive compensation to the date of termination subject to the achievement of the performance measures at the end of the performance period. Unless otherwise provided for in a grant agreement, awards shall be earned at target in the event of a change in control of the Company. For 2009 awards the grant agreement provides that in the event of a change in control the amount earned shall be subject to the achievement of performance measured at the end of the performance period. | |
| Amendment or Termination of the LTCIP | The Board may amend or terminate the Plan as it shall deem advisable in the exercise of its sole and absolute discretion; provided, however, that no such amendment may adversely affect the rights granted to a participant with respect to an outstanding award without the consent of such participant. | |
| Shareholder Reapproval of the LTCIP | Since the LTCIP permits the Committee to change the targets under the performance goals from year to year, pursuant to regulations promulgated under Code Section 162(m), the material terms of the performance objectives must be reapproved by the shareholders five years after initial shareholder approval to maintain the exemption from deductibility limits. |
The Board of Directors recommends that you vote “FOR” Proposal Three.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Philosophy and Objectives
Our Company’s compensation programs for executive officers are designed to attract, retain, motivate and reward talented executives who will advance our strategic, operational and financial objectives and thereby enhance shareholder value. The primary objectives of our compensation programs for executive officers are to:
| Create a compensation structure under which a substantial portion of total compensation is based on achievement of corporate, divisional or personal | ||
We have established a fundamental commitment to formulate the components of our compensation program under a “pay-for-performance” methodology. To this end, a substantial portion of our executive officers’ annual and long-term compensation is tied to quantifiable measures of the Company’s financial performance and specific goals established for each individual and therefore may not be earned if targeted performance is not achieved.
We have fashioned the various components of our 20072008 compensation payments and awards to meet our objectives as follows:
| | |||
Type of Compensation | Objective Addressed | |||
| Base Salary | Competitive compensation | |||
| Annual incentive plan awards | Competitive compensation, retention and performance incentives | |||
| Equity-based awards | Competitive compensation, retention and performance incentives | |||
| Benefits and perquisites | Competitive compensation | |||
Mix of Compensation
Our executive compensation is based on our “pay-for-performance” philosophy, which emphasizes executive performance measures that correlate closely with the achievement of both shorter-term performance objectives and longer-term shareholder value. To this end, a substantial portion of our executive officers’ annual and long-term compensation is at-risk. The portion of compensation at-risk increases with the executive officer’s position level. This provides more upside potential and downside risk for more senior positions because these roles have greater influence on the performance of the Company as a whole. For 2007,2008, an average of approximately 40% of our named executive officers’ (“NEO”) cash compensation shown in our Summary Compensation Table consisted of performance-based compensation.
Determination of Compensation
Based on the foregoing objectives, we have structured the Company’s executive officers’ compensation to provide adequate competitive compensation to attract and retain executive officers, to motivate them to achieve our strategic goals and to reward the executive officers for achieving such goals. The Compensation Committee (the “Committee”) has retained the services of Towers Perrin, an outside compensation consultant, to assist the Committee to fulfill various aspects of its charter. During fiscal year 2007,2008, Towers Perrin assisted the Committee with: keeping it appraised about relevant trends and technical developments during its meetings, providing consulting advice regardingchange-in-control agreements long-term incentive arrangements and providing market data for the Chief Executive Officer (“CEO”)CEO position and other executive officers. Additionally, recommendations and evaluations from the CEO are considered by the Committee when setting the compensation of the other executive officers. The annual evaluation of the CEO by the Board of Directors is considered by the Committee when establishing the compensation of the CEO.
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A significant percentage of total compensation is allocated to incentives as a result of the philosophy mentioned above. There is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation. Rather, the Committee reviews competitive market pay information provided by Towers Perrin to determineand considers the Company’s historical compensation practices in determining the appropriate level and mix of incentive compensation for each executive position.
Compensation Benchmarking and Peer Group
For 2008 compensation decisions, we considered general market movements derived from compensation data based on general industry data produced from Towers Perrin’s 2007 executive compensation database for base salary, annual incentive and long-term equity-based incentive compensation. The general movements, as well as the CEO’s recommendations, were the primary basis for changes to the competitive compensation levels in 2008. For 2008 compensation decisions, the Committee did not commission a full Towers Perrin executive compensation report as the Committee had done in setting the 2007 compensation. However, when reviewing 2007 competitive market levels, we considered compensation data based on general industry data derived from Towers Perrin’s 2006 and Watson Wyatt’s 2006/2007 executive compensation database for base salary, annual incentive and long-term equity-based incentive compensation. Because of the variance in size among the companies included in the database, regression analysis was used to adjust the compensation data for differences in company revenues. This adjusted value was used by the Committee as the basis of comparison of compensation for our executive officers in establishing 2007 compensation. In addition to this, the CEO and Chief Financial Officer (“CFO”) compensation was compared to data from a group of peer companies for determining the reasonableness and competitiveness of 2007 compensation. The Company reviews and recommends to the Committee, and the Committee approves, the selected companies included in the peer group analysis regularly to ensure it remains an appropriate benchmark for us. Our peer group for 2007 compensation analysis included the following companies in the electronic and motor vehicle parts manufacturing sector:
| | | | |||||||
| Amphenol | Esterline Technologies | Accuride | Gentex | |||||||
| Thomas & Betts | Standard Motor Products | Gentek | Sypris Solutions | |||||||
| Modine Manufacturing | Commercial Vehicle Group | Graco | Titan International | |||||||
| Ametek, Inc | Technitrol | Aftermarket Technology | ||||||||
| AVX | Shiloh Industries | CTS | Methode Electronics | |||||||
| Nu Horizon Electronics Group |
The peer group companies’ revenues range from $400 million to $1,400 million. Our revenue falls slightly below the median of this peer group. The peer group used for the compensation analysis is generally not the same as the peer group index in the Performance Graph included in the Annual Report to Shareholders. The peer group index is used because the Committee believes the investment community views the index as most comparable with our Company when reviewing our financial performance.
Elements of Compensation
The principal elements of compensation of our executive officers are:
| Annual cash incentive awards; | ||
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Although all executive officers are eligible to participate in the same compensation and benefit programs, our CEO isMr. Corey and Mr. Malmvik are the only executive officerNEOs whose pay is governed by an employment agreement. The terms of Mr. Corey’s and Mr. Malmvik’s employment agreementagreements are described under “Employment Agreements.”
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Base Salaries
We use base salary as the foundation of our compensation program for our executive officers. We use base compensation in determining the percentage of it to be used for awards of annual cash incentive compensation and long-term equity incentive awards. The base salary is set at competitive market levels to attract and retain our executive officers. Base salary levels for our executive officers are set on the basis of the executive’s responsibilities, current general industry and competitive market data, as discussed above. In each case, due consideration is given to personal factors, such as the individual’s experience, competencies, performance and contributions, and to external factors, such as salaries paid to similarly situated executive officers by like-sized companies. The Committee considers the evaluation and recommendation of the CEO in determining the base salary of the other executive officers. The Committee approves all executive officer base salaries for the next calendar year at its December meeting to become effective January 1. Executive officers base salaries remain fixed throughout the year unless a promotion or other change in responsibilities occurs.
Annual Incentive Awards
Our executive officers participate in the Annual Incentive Plan (“AIP”) which provides for annual cash payments based on achievement of specific financial and personal goals. We strongly believe that a substantial portion of each executive’s overall compensation should be tied to quantifiable measures of financial performance. In December 2006,2007, the Committee approved the Company’s 20072008 AIP targets and metrics. The AIP targets are expressed as a percentage of the executive officer’s base salary and are typically established based on competitive market data for each position.
The AIP is comprised of financial performance metrics and achievement of personal goals. The financial performance metrics portion is comprised of two elements: (1) operating profit — 50%; and (2) return on invested capital — 50%. The individual personal goals established for fiscal year 20072008 were specific and measurable. Financial performance targets were set from the Company’s 20072008 operating plan and were intended to be aggressive but achievable based on industry conditions known at the time they were established. The allocation between financial performance and personal performance differs based on the executive’s responsibilities; our CEO and CFO are measured on consolidated financial performance and individual performance, while the other executive officers are measured on consolidated financial performance, their respective business unit’s financial performance and individual performance. The following table indicates the 20072008 target, the performance allocation and the achievement for the following NEOs:
| | | | | | |||||||||||||||
| AIP Target (Percent of Base Salary) | Consolidated Financial Performance | Business Unit Financial Performance | Personal Performance | AIP Achievement (Percent of Target) | ||||||||||||||||
| John C. Corey | 80 | % | 70 | % | — | 30 | % | 94 | % | |||||||||||
| George E. Strickler | 55 | % | 70 | % | — | 30 | % | 107 | % | |||||||||||
| Thomas A. Beaver | 45 | % | 60 | % | 20 | % | 20 | % | 123 | % | ||||||||||
| Mark J. Tervalon | 45 | % | 60 | % | 20 | % | 20 | % | 120 | % | ||||||||||
| Martin Malmvik | 29 | % | 50 | % | 30 | % | 20 | % | 128 | % | ||||||||||
| AIP | ||||||||||||||||||||||
| Consolidated | Business Unit | Achievement | ||||||||||||||||||||
| AIP Target (Percent | Financial | Financial | Personal | (Percent of | ||||||||||||||||||
| of base salary) | Performance | Performance | Performance | target) | ||||||||||||||||||
| John C. Corey | 80 | % | 70 | % | — | 30 | % | 110 | % | |||||||||||||
| George E. Strickler | 55 | % | 70 | % | — | 30 | % | 122 | % | |||||||||||||
| Thomas A. Beaver | 45 | % | 60 | % | 30 | % | 10 | % | 140 | % | ||||||||||||
| Mark J. Tervalon | 45 | % | 60 | % | 30 | % | 10 | % | 107 | % | ||||||||||||
| Vincent F. Suttmeier | 45 | % | 50 | % | 40 | % | 10 | % | 122 | % | ||||||||||||
For each performance element, specific levels of achievement for minimum, target and maximum level were set. At target, 100% payout is achieved for each element of the plan; at maximum, 200% payout is achieved, while at minimum, 50% payout is achieved. Below the minimum target, no incentive compensation is earned. The AIP prorates incentive compensation earned between the minimum and maximum levels. The personal performance assessment of Mr. Corey was determined by the Committee. The personal performance assessment of each other executive officer was recommended by Mr. Corey and approved by the Committee. The payment of compensation under the 20072008 plan was subject to our overall performance and appears in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
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Long-Term Equity-Based Incentive Awards
Under the Company’s Long-Term Incentive Plan (“LTIP”), all executive officers may be granted share options, restricted shares and other equity-based awards. The Company believesWe believe that equity awards are a valuable motivation and retention tool and provide a long-term performance incentive to management. The Company has granted
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Performance-Based Restricted SharesShares.. We believe that linking restricted common share grants to performance ties our executive officers’ overall compensation to returns to shareholders, which aligns our executive officers’ interests with our shareholders’ interests. The performance-based restricted common shares granted to our executive officers are subject to forfeiture based on the Company’s actual earnings per share (“EPS”) performance over a three-year period when compared to minimum, target and maximum EPS amounts over the same period. For 20072008 grants, the performance period EPS was established from our budgeted EPS with a 10% annual growth factor for years two and three. Minimum EPS was established at 80% of target and maximum EPS was established at 120% of target. These metrics are intended to be aggressive but achievable based on industry conditions known at that time. Provided the executive officer remains employed, and depending on EPS performance, the amount of shares no longer subject to forfeiture prorates between minimum and maximum shares. Actual EPS performance below the minimum level results in the forfeiture of all shares. The performance-based restricted common shares awarded in 20072008 are included in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns of the Grants of Plan-Based Awards table.
Time-Based Restricted SharesShares.. The Company also views long-term equity-based incentives as an important tool for retaining executive talent. If the executive officer remains an employee at the end of the vesting period, the time-based restricted common shares will vest and no longer be subject to forfeiture on that date. The time-based restricted common shares awarded in 20072008 are included in the “All Other Stock Awards” column of the Grants of Plan-Based Awards table.
Timing of GrantsGrants.. It is the intent of the Committee to approve the restricted shares grant awards under the LTIP at the first regular meeting of the year; awards were granted at the FebruaryMarch 2008 meeting for 2007.2008. As a general practice, restricted share grant awards under the LTIP are approved only once a year unless a situation arises whereby a compensation package is approved for a newly hired or promoted executive officer and equity-based compensation is a component.
Perquisites
The Company provides executive officers with perquisites the Company and the Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites provided to executive officers.
Perquisites that are provided to executive officers are different by individual and could include an auto allowance, fully paid premiums for healthcare coverage, relocation allowances and country club dues. Incremental costs of the perquisites listed above for the NEOs are included in the “All Other Compensation” column of the Summary Compensation Table.
Employment Agreements
In early 2006, the Company entered into a negotiated employment agreement with Mr. Corey that provided for a base salary of $525,000; a guaranteed bonus for fiscal year 2006 of at least $250,000;$525,000, participation in the annual incentive plan at a target of 70% of base salary; relocation benefits; a monthly car allowance; reimbursement of country club dues and a one-time initiation fee; reimbursement of Mr. Corey’s premium on his life insurance policy; participation in the Company’s customary benefit plans and reimbursement of out-of-pocket expenses not to exceed $5,000 per covered family member
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on an annual basis. Mr. Corey was awarded 150,000 restricted common shares under the Company’s Long-Term Incentive Plan. The shares vestLTIP, which vested over three years and are no longer subject to forfeiture 25% on January 16, 2006 and 25% on each January 16, 2007, 2008, and 2009. We entered into this agreement with Mr. Corey
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In January 2007, in accordance with Swedish practices, the Company entered into an employment agreement with Mr. Malmvik that provided for a base salary of $232,725; additional monthly contribution to a pension plan of $1,480; car allowance in accordance with company policy and a bonus program per company policy.
The Company has not entered into employment agreements with any other NEO.
Termination and Change in Control Payments
The Company has entered into change in control agreements with our executive officers.NEOs, except for Mr. Malmvik. These agreements are designed to promote stability and continuity of senior management, both of which are in the best interest of Stoneridge and our shareholders. Our termination and change in control provisions for the NEOs are summarized below under “Potential Change in Control and Other Post-Employment Payments.”
Deferred Compensation
Executive officers, as well as other key employees, may elect to have all or a portion of their base salary, annual incentive and equity-based compensation deferred until a future date pursuant to the Stoneridge, Inc. Employees’ Deferred Compensation Plan. This plan provides participants with a cost-effective tool to save for retirement or another specific financial need. Employees 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 employee separates from 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 one lump sum payment, five equal, annual installments or ten equal, annual installments.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (“IRC”), generally disallows a tax deduction to public companies for compensation over $1,000,000in excess of $1 million that is paid to a company’s CEO and the other NEOs. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met.
The Committee believes that it is generally in the Company’s best interest to attempt to structure performance-based compensation, including performance share award grants and annual incentive awards, to NEOs who may be subject to Section 162(m) in a manner that satisfies the statute’s requirements. Currently, all annual compensation is designed to be deductible under Section 162(m); however, in the future, the Committee may determine that it is appropriate to pay compensation which is not deductible. In its discretion under the AIP in determining the Company’s achievement for 2008, the Committee excluded the effect of the after-tax non-cash goodwill impairment and the related non-cash deferred tax asset valuation allowance charge from the Company’s 2008 results. As a result, the AIP compensation paid to Mr. Corey for 2008 may not qualify as performance-based compensation. However, because of the deferred tax valuation allowance charge, the loss of any deduction under Section 162(m) had no effect on the Company’s financial result under Generally Accepted Accounting Principles.
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Accounting Treatment of Compensation
As one of many factors, the Committee considers the financial impact in determining the amount of and allocation of the different pay elements, including Statement of Financial Accounting Standards No. 123(R),Share-Based Payment (“SFAS 123(R)”),Share Based Payments, implications of the long-term incentives.
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
Kim Korth
William M. Lasky
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The following table provides information regarding the compensation of our Chief Executive Officer, our Chief Financial Officer, and our threetwo most highly compensated personsexecutive officers and the next most highly compensated person for 2007.2008.
| | | | | | | | |||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||
| John C. Corey President & Chief Executive Officer | 2008 | $ | 640,000 | $ | — | $ | 849,896 | $ | 480,768 | $ | 85,679 | $ | 2,056,343 | |||||||||||||||
| 2007 | 610,000 | — | 631,775 | 537,532 | 86,467 | 1,865,774 | ||||||||||||||||||||||
| 2006 | 505,527 | 250,000 | (2) | 793,735 | 116,495 | 234,174 | 1,899,931 | |||||||||||||||||||||
| George E. Strickler Executive Vice President, Chief Financial Officer & Treasurer | 2008 | 330,750 | — | 272,717 | 194,359 | 35,325 | 833,151 | |||||||||||||||||||||
| 2007 | 315,000 | — | 176,179 | 211,625 | 30,397 | 733,201 | ||||||||||||||||||||||
| 2006 | 292,341 | — | 84,486 | 117,677 | 26,511 | 521,015 | ||||||||||||||||||||||
| Mark J. Tervalon Vice President & President of the Stoneridge Electronics Division | 2008 | 292,000 | — | 154,850 | 157,943 | 22,368 | 627,161 | |||||||||||||||||||||
| 2007 | 278,250 | — | 108,781 | 128,336 | 45,280 | 560,647 | ||||||||||||||||||||||
| 2006 | 254,912 | (1) | — | 67,701 | 110,492 | 17,054 | 450,159 | |||||||||||||||||||||
| Thomas A. Beaver Vice President of Global Sales & Systems Engineering | 2008 | 274,500 | — | 121,723 | 151,565 | 30,902 | 578,690 | |||||||||||||||||||||
| 2007 | 267,800 | — | 89,650 | 168,352 | 26,765 | 552,567 | ||||||||||||||||||||||
| 2006 | 260,000 | — | 61,708 | 137,046 | 17,662 | 476,416 | ||||||||||||||||||||||
| Martin Malmvik Vice President & Managing Director of Stoneridge Electronics OEM | 2008 | 250,050 | — | 23,597 | 136,191 | 33,657 | 443,495 | |||||||||||||||||||||
| 2007 | 232,725 | — | 22,071 | 88,853 | 30,582 | 374,231 | ||||||||||||||||||||||
| 2006 | 205,054 | — | 14,458 | 60,344 | 26,775 | 306,631 | ||||||||||||||||||||||
| Non-Equity | ||||||||||||||||||||||||||||
| Stock | Incentive Plan | All Other | ||||||||||||||||||||||||||
| Name and | Awards | Compensation | Compensation | |||||||||||||||||||||||||
Principal Position | Year | Salary | Bonus | (3) | (4) | (5) | Total | |||||||||||||||||||||
| John C. Corey | 2007 | $ | 610,000 | $ | — | $ | 631,775 | $ | 537,532 | $ | 86,467 | $ | 1,865,774 | |||||||||||||||
President & Chief Executive Officer | 2006 | 505,527 | 250,000 | (2) | 793,735 | 116,495 | 234,174 | 1,899,931 | ||||||||||||||||||||
| George E. Strickler | 2007 | 315,000 | — | 176,179 | 211,625 | 30,397 | 733,201 | |||||||||||||||||||||
Executive Vice President, Chief Financial Officer & Treasurer | 2006 | 292,341 | — | 84,486 | 117,677 | 26,511 | 521,015 | |||||||||||||||||||||
| Mark J. Tervalon | 2007 | 278,250 | — | 108,781 | 128,336 | 45,280 | 560,646 | |||||||||||||||||||||
Vice President & President of the Stoneridge Electronics Division | 2006 | 254,912 | (1) | — | 67,701 | 110,492 | 17,054 | 450,159 | ||||||||||||||||||||
| Thomas A. Beaver | 2007 | 267,800 | — | 89,650 | 168,352 | 26,765 | 552,567 | |||||||||||||||||||||
Vice President of Global Sales & Systems Engineering | 2006 | 260,000 | — | 61,708 | 137,046 | 17,662 | 476,416 | |||||||||||||||||||||
| Vincent F. Suttmeier | 2007 | 213,000 | — | 76,372 | 116,985 | 13,510 | 419,867 | |||||||||||||||||||||
Vice President & General Manager of Stoneridge Pollak | 2006 | 206,004 | — | 58,488 | 41,375 | 12,140 | 318,008 | |||||||||||||||||||||
| (1) | Mr. Tervalon elected to defer $8,833 of his 2006 salary. |
| (2) | Mr. Corey elected to defer 50% of his 2006 bonus. |
| (3) | The amounts included in the “Stock Awards” column represent the compensation cost recognized in each year related to non-option stock awards, as described in SFAS 123(R). For a discussion of valuation assumptions, see Note 7 to our consolidated financial statements included in our |
| (4) | The amount shown for each NEO in the “Non-Equity Incentive Plan Compensation” column is attributable to an annual incentive award earned in the fiscal year listed, but paid in the subsequent fiscal year. Mr. Corey has elected to defer 50% of his 2007 and 2006 annual incentive award when paid. Mr. Tervalon elected to defer 10% of his 2006 annual incentive award when paid. |
| (5) | The amounts shown for |
| | | | | | | | | | | | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | |||||||||||||||||||||||||||||||||
| Auto Allowance | 401(k) Contribution | Pension Contribution | Life Insurance | Gross-Up on Life Insurance | Healthcare Costs | Gross-Up on Healthcare Costs | Group Term Life Insurance | Club Dues | Other | Total | ||||||||||||||||||||||||||||||||||
| Mr. Corey | $ | 14,400 | $ | 10,022 | $ | — | $ | 14,056 | $ | 9,900 | $ | 6,629 | $ | 4,669 | $ | 7,524 | $ | 15,565 | $ | 2,914 | $ | 85,679 | ||||||||||||||||||||||
| Mr. Strickler | 9,000 | 11,783 | — | — | — | — | — | 4,847 | 5,895 | 3,800 | 35,325 | |||||||||||||||||||||||||||||||||
| Mr. Tervalon | — | 12,948 | — | — | — | — | — | 240 | 5,380 | 3,800 | 22,368 | |||||||||||||||||||||||||||||||||
| Mr. Beaver | 14,400 | 14,199 | — | — | — | — | — | 1,032 | — | 1,271 | 30,902 | |||||||||||||||||||||||||||||||||
| Mr. Malmvik | 15,472 | — | 18,185 | — | — | — | — | — | — | — | 33,657 | |||||||||||||||||||||||||||||||||
| Gross Up | Group | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Up | on | Gross | Term | |||||||||||||||||||||||||||||||||||||||||||||
| Auto | 401(k) | Life | on Life | Healthcare | Healthcare | Up on | Life | Club | ||||||||||||||||||||||||||||||||||||||||
| Allowance | Contribution | Insurance | Insurance | Costs | Cost | Relocation | Relocation | Insurance | Dues | Other | Total | |||||||||||||||||||||||||||||||||||||
| Mr. Corey | $ | 14,400 | $ | 10,125 | $ | 14,056 | $ | 9,900 | $ | 16,292 | $ | 11,475 | $ | — | $ | — | $ | 7,524 | $ | — | $ | 2,695 | $ | 86,467 | ||||||||||||||||||||||||
| Mr. Strickler | 9,000 | 9,325 | — | — | — | — | — | — | 2,993 | 5,498 | 3,581 | 30,397 | ||||||||||||||||||||||||||||||||||||
| Mr. Tervalon | — | 10,521 | — | — | — | — | 9,158 | 6,092 | 608 | 15,537 | 3,364 | 45,280 | ||||||||||||||||||||||||||||||||||||
| Mr. Beaver | 14,400 | 9,864 | — | — | — | — | — | — | 1,336 | — | 1,165 | 26,765 | ||||||||||||||||||||||||||||||||||||
| Mr. Suttmeier | — | 9,945 | — | — | — | — | — | — | 1,365 | 400 | 1,800 | 13,510 | ||||||||||||||||||||||||||||||||||||
20
16
Grants of Plan-Based Awards for 2007
2008 | | | | | | | | | | |||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||
| John C. Corey | $ | 256,000 | $ | 512,000 | $ | 1,024,000 | ||||||||||||||||||||||||||||||
| 3/2/08 | 31,650 | 63,300 | 94,950 | 58,400 | $ | 1,651,580 | ||||||||||||||||||||||||||||||
| George E. Strickler | 90,956 | 181,913 | 363,825 | |||||||||||||||||||||||||||||||||
| 3/2/08 | 9,150 | 18,300 | 27,450 | 16,900 | 477,650 | |||||||||||||||||||||||||||||||
| Mark J. Tervalon | 65,700 | 131,400 | 262,800 | |||||||||||||||||||||||||||||||||
| 3/2/08 | 5,500 | 11,000 | 16,500 | 10,200 | 287,559 | |||||||||||||||||||||||||||||||
| Thomas A. Beaver | 61,763 | 123,525 | 247,050 | |||||||||||||||||||||||||||||||||
| 3/2/08 | 4,400 | 8,800 | 13,200 | 8,100 | 229,401 | |||||||||||||||||||||||||||||||
| Martin Malmvik | 35,734 | 71,469 | 142,937 | |||||||||||||||||||||||||||||||||
| 3/2/08 | 750 | 1,500 | 2,250 | 1,400 | 39,311 | |||||||||||||||||||||||||||||||
| All Other | ||||||||||||||||||||||||||||||||||||
| Stock Awards: | Grant Date | |||||||||||||||||||||||||||||||||||
| Number of | Fair Value | |||||||||||||||||||||||||||||||||||
| Estimated Future Payouts Under | Estimated Future Payouts Under | Shares | of Stock | |||||||||||||||||||||||||||||||||
| Non-Equity Incentive Plan Awards(1) | Equity Incentive Plan Awards(2) | of Stock | and Option | |||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units (3) | Awards (4) | |||||||||||||||||||||||||||
| John C. Corey | $ | 244,000 | $ | 488,000 | $ | 976,000 | n/a | |||||||||||||||||||||||||||||
| 2/25/07 | 26,200 | 52,400 | 78,600 | 52,400 | $ | 1,575,930 | ||||||||||||||||||||||||||||||
| George E. Strickler | 2/25/07 | 86,625 | 173,250 | 346,500 | 7,000 | 14,000 | 21,000 | 14,000 | n/a 233,081 | |||||||||||||||||||||||||||
| Mark J. Tervalon | 2/25/07 | 62,607 | 125,213 | 250,426 | 4,750 | 9,500 | 14,250 | 9,500 | n/a 285,713 | |||||||||||||||||||||||||||
| Thomas A. Beaver | 2/25/07 | 60,255 | 120,510 | 241,020 | 3,875 | 7,750 | 11,625 | 7,750 | n/a 233,081 | |||||||||||||||||||||||||||
| Vincent F. Suttmeier | 2/25/07 | 47,925 | 95,850 | 191,700 | 2,500 | 5,000 | 7,500 | 5,000 | n/a 150,375 | |||||||||||||||||||||||||||
| (1) | The amounts shown reflect awards granted under the Company’s |
| (2) | The amounts shown reflect grants of performance-based restricted shares (“PBRS”) under the Company’s |
| (3) | The amounts shown reflect grants of time-based restricted shares (“TBRS”) under the Company’s |
| (4) | The amounts included in “Fair Value of Awards” column represent the aggregate grant date fair value of the awards computed in accordance with SFAS 123(R). For a discussion of valuation assumptions, see Note 7 to our consolidated financial statements included in our |
1721
Outstanding Equity Awards at Year-End
| | | | | | | | |||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have Not Vested (#) | Market Value of Shares or Units of Stock that have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have Not Vested ($)(1) | |||||||||||||||||||||
| John C. Corey | 10,000 | $ | 15.725 | 5/10/2014 | 37,500 | (4) | $ | 171,000 | 82,500 | (8) | $ | 376,200 | ||||||||||||||||
| 55,000 | (5) | 250,800 | 78,600 | (9) | 358,416 | |||||||||||||||||||||||
| 52,400 | (6) | 238,944 | 94,950 | (10) | 432,972 | |||||||||||||||||||||||
| 58,400 | (7) | 266,304 | ||||||||||||||||||||||||||
| George E. Strickler | — | — | — | 5,000 | (3) | 22,800 | 41,250 | (8) | 188,100 | |||||||||||||||||||
| 27,500 | (5) | 125,400 | 21,000 | (9) | 95,760 | |||||||||||||||||||||||
| 14,000 | (6) | 63,840 | 27,450 | (10) | 125,172 | |||||||||||||||||||||||
| 16,900 | (7) | 77,064 | ||||||||||||||||||||||||||
| Mark J. Tervalon | 4,000 | 10.385 | 2/4/2013 | 1,425 | (2) | 6,498 | 18,750 | (8) | 85,500 | |||||||||||||||||||
| 12,500 | (5) | 57,000 | 14,250 | (9) | 64,980 | |||||||||||||||||||||||
| 9,500 | (6) | 43,320 | 16,500 | (10) | 75,240 | |||||||||||||||||||||||
| 10,200 | (7) | 46,512 | ||||||||||||||||||||||||||
| Thomas A. Beaver | 20,000 | 10.385 | 2/4/2013 | 1,425 | (2) | 6,498 | 13,875 | (8) | 63,270 | |||||||||||||||||||
| 9,250 | (5) | 42,180 | 11,625 | (9) | 53,010 | |||||||||||||||||||||||
| 7,750 | (6) | 35,340 | 13,200 | (10) | 60,192 | |||||||||||||||||||||||
| 8,100 | (7) | 36,936 | ||||||||||||||||||||||||||
| Martin Malmvik | 1,000 | 14.72 | 4/15/2009 | 350 | (2) | 1,596 | 3,525 | (8) | 16,074 | |||||||||||||||||||
| 2,350 | (5) | 10,716 | 2,250 | (9) | 10,260 | |||||||||||||||||||||||
| 1,500 | (6) | 6,840 | 2,250 | (10) | 10,260 | |||||||||||||||||||||||
| 1,400 | (7) | 6,384 | ||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
| Equity Incentive | ||||||||||||||||||||||||||||
| Equity Incentive | Plan Awards: | |||||||||||||||||||||||||||
| Plan Awards: | Market or | |||||||||||||||||||||||||||
| Number | Payout Value | |||||||||||||||||||||||||||
| Number of | Number of | Market Value | of Unearned | of Unearned | ||||||||||||||||||||||||
| Securities | Shares or | of Shares | Shares, Units | Shares, Units | ||||||||||||||||||||||||
| Underlying | Units of Stock | or Units | or Other | or Other | ||||||||||||||||||||||||
| Unexercised | Option | Option | That | of Stock That | Rights That | Rights That | ||||||||||||||||||||||
| Options | Exercise | Expiration | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||
Name | Exercisable | Price | Date | Vested | Vested(1) | Vested | Vested(1) | |||||||||||||||||||||
| John C. Corey | 10,000 | $ | 15.725 | 5/10/2014 | 75,000 | (4) | $ | 603,000 | 82,500 | (8) | $ | 663,300 | ||||||||||||||||
| 55,000 | (5) | 442,200 | 78,600 | (9) | 631,944 | |||||||||||||||||||||||
| 52,400 | (6) | 421,296 | ||||||||||||||||||||||||||
| George E. Strickler | — | — | — | 7,500 | (3) | 60,300 | 41,250 | (8) | 331,650 | |||||||||||||||||||
| 27,500 | (5) | 221,100 | 21,000 | (9) | 168,840 | |||||||||||||||||||||||
| 14,000 | (6) | 112,560 | ||||||||||||||||||||||||||
| Mark J. Tervalon | 4,000 | 10.385 | 2/4/2013 | 2,850 | (2) | 22,914 | 10,700 | (7) | 86,028 | |||||||||||||||||||
| 12,500 | (5) | 100,500 | 18,750 | (8) | 150,750 | |||||||||||||||||||||||
| 9,500 | (6) | 76,380 | 14,250 | (9) | 114,570 | |||||||||||||||||||||||
| Thomas A. Beaver | 2,000 | 14.720 | 4/15/2009 | 2,850 | (2) | 22,914 | 10,700 | (7) | 86,028 | |||||||||||||||||||
| 3,000 | 5.125 | 1/9/2011 | 9,250 | (5) | 74,370 | 13,875 | (8) | 111,555 | ||||||||||||||||||||
| 20,000 | 7.925 | 2/8/2012 | 7,750 | (6) | 62,310 | 11,625 | (9) | 93,465 | ||||||||||||||||||||
| 20,000 | 10.385 | 2/4/2013 | ||||||||||||||||||||||||||
| Vincent F. Suttmeier | 2,500 | 7.820 | 7/28/2010 | 2,850 | (2) | 22,914 | 10,700 | (7) | 86,028 | |||||||||||||||||||
| 4,000 | 7.925 | 2/8/2012 | 9,250 | (5) | 74,370 | 13,875 | (8) | 111,555 | ||||||||||||||||||||
| 2,000 | 10.385 | 2/4/2013 | 5,000 | (6) | 40,200 | 7,500 | (9) | 60,300 | ||||||||||||||||||||
| (1) | Based on the closing price of the Company’s common shares on December 31, |
| (2) |
| (3) | ||
| (4) | Time-based restricted shares vest on January 16, |
| (5) |
| (6) |
| (7) |
| (8) |
| (9) |
| (10) | Performance-based restricted shares vest on March 2, 2011 subject to achievement of specified financial performance metrics. |
22
Option Exercises and Stock Vested for 2007
| Stock Awards | ||||||||
| Number of Shares | Value Realized on | |||||||
Name | Acquired on Vesting | Vesting | ||||||
| John C. Corey | 37,500 | $ | 344,250 | |||||
| George E. Strickler | 2,500 | 22,225 | ||||||
| Mark J. Tervalon | 3,091 | 38,502 | ||||||
| Thomas A. Beaver | 3,091 | 38,502 | ||||||
| Vincent F. Suttmeier | 2,525 | 31,528 | ||||||
18
2008
| | | | | ||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
| John C. Corey | — | $ | — | 37,500 | $ | 266,625 | ||||||||||
| George E. Strickler | — | — | 2,500 | 18,525 | ||||||||||||
| Mark J. Tervalon | — | — | 4,225 | 59,158 | ||||||||||||
| Thomas A. Beaver | 25,000 | 215,185 | 4,225 | 59,158 | ||||||||||||
| Martin Malmvik | — | — | 2,000 | 28,000 | ||||||||||||
Nonqualified Deferred Compensation for Fiscal Year 20072008
| | | | |||||||||
| Name | Executive Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Balance at Last FYE ($) | |||||||||
| John C. Corey | $ | 268,766 | $ | 26,820 | $ | 492,361 | ||||||
| George E. Strickler | — | — | — | |||||||||
| Mark J. Tervalon | — | 671 | 10,542 | |||||||||
| Thomas A. Beaver | — | — | — | |||||||||
| Martin Malmvik | — | — | — | |||||||||
| Executive | ||||||||||||
| Contributions in | Aggregate Earnings | Aggregate Balance | ||||||||||
Name | Last FY | in Last FY | at Last FYE | |||||||||
| John C. Corey | $ | 183,247 | $ | 13,528 | $ | 196,775 | ||||||
| George E. Strickler | — | — | — | |||||||||
| Mark J. Tervalon | — | 849 | �� | 9,871 | ||||||||
| Thomas A. Beaver | — | — | — | |||||||||
| Vincent F. Suttmeier | — | — | — | |||||||||
Mr. Corey deferred a portion of his bonus and annual incentive payment earned in 2006,2007, paid in 2007.
Potential Change in Control and Other Post-Employment Payments
In July 2007, we entered into an Amended and Restated Change in Control Agreement (the “CIC Agreement”) with each NEO, except Mr. Malmvik, and certain other senior management employees. Our change in control agreements were designed to provide for continuity of management in the 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. We set the level of benefits at two times base 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 no-compete, non-solicitation and non-disparagement agreement. The change in control 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 IRCCode Section 409A, 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 IRCCode Section 280G.
We believe that the CIC Agreements should compensate executives displaced by a change in control and not serve as an incentive to increase an executive’s 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 triggering event: |
23
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 average annual incentive award over the last three completed fiscal years or the last five completed fiscal years; | ||
19
Upon a change in control as defined in the LTIP, the restricted common shares included on the Outstanding“Outstanding Equity Awards at Year-EndYear-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“Outstanding Equity Awards at Year EndEnd” table vest and are no longer subject to forfeiture based on target achievement levels.
No severance is payable if the NEO’s employment is terminated for “cause,” if they resign, or if they die.
Value of Payment Presuming Hypothetical December 31, 20072008 Termination Date
Assuming the events described in the table below occurred on December 31, 2007,2008, each NEO would be eligible for the following payments and benefits:
| | | | | | |||||||||||||||
| Resignation | Termination Without Cause | Change in Control and NEO Resigns for Good Reason or is Terminated Without Cause | Disability | Death | ||||||||||||||||
| John C. Corey | ||||||||||||||||||||
| Base Salary | $ | — | $ | 1,280,000 | $ | 1,280,000 | $ | 160,000 | $ | — | ||||||||||
| Annual Incentive Award | — | 923,197 | 1,018,300 | — | — | |||||||||||||||
| Unvested and Accelerated Restricted Shares | — | 593,02 | 31,103,205 | 421,800 | 421,800 | |||||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 527,592 | 428,231 | 428,231 | |||||||||||||||
| Deferred Compensation Plan | 492,361 | 492,361 | 492,361 | 492,361 | 492,361 | |||||||||||||||
| Health & Welfare Benefits | — | 60,656 | 60,656 | — | — | |||||||||||||||
| Tax Gross-Up | — | — | — | — | — | |||||||||||||||
| Total | $ | 492,361 | $ | 3,349,237 | $ | 4,482,114 | $ | 1,502,392 | $ | 1,342,392 | ||||||||||
| Change in Control | ||||||||||||||||||||
| Termination | and NEO resigns for | |||||||||||||||||||
| Without | Good Reason or is | |||||||||||||||||||
John C. Corey | Resignation | Cause | Terminated without Cause | Disability | Death | |||||||||||||||
| Base Salary | $ | — | $ | 1,220,000 | $ | 1,220,000 | $ | 152,500 | $ | — | ||||||||||
| Annual Incentive Award | — | 904,027 | 1,075,064 | — | — | |||||||||||||||
| Unvested and Accelerated Restricted Shares | — | 928,837 | 1,466,496 | 301,500 | 301,500 | |||||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 863,496 | 325,837 | 325,837 | |||||||||||||||
| Deferred Compensation Plan | 196,775 | 196,775 | 196,775 | 196,775 | 196,775 | |||||||||||||||
| Health & Welfare Benefits | — | 58,608 | 58,608 | — | — | |||||||||||||||
TaxGross-Up | — | — | 1,421,233 | — | — | |||||||||||||||
| Total | $ | 196,775 | $ | 3,308,247 | $ | 6,301,672 | $ | 976,612 | $ | 824,112 | ||||||||||
24
| Change in Control | ||||||||||||||||
| Termination | and NEO resigns for | |||||||||||||||
| Without | Good Reason or is | |||||||||||||||
George E. Strickler | Resignation | Cause | Terminated without Cause | Disability or Death | ||||||||||||
| Base Salary | $ | — | $ | — | $ | 630,000 | $ | — | ||||||||
| Annual Incentive Award | — | — | 423,250 | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 195,967 | 393,960 | 20,100 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 333,660 | 135,667 | ||||||||||||
| Deferred Compensation Plan | — | — | — | — | ||||||||||||
| Health & Welfare Benefits | — | — | 33,053 | — | ||||||||||||
TaxGross-Up | — | — | 665,116 | — | ||||||||||||
| Total | $ | — | $ | 195,967 | $ | 2,479,039 | $ | 155,767 | ||||||||
| | | | | ||||||||||||
| Resignation | Termination Without Cause | Change in Control and NEO Resigns for Good Reason or is Terminated Without Cause | Disability or Death | |||||||||||||
| George E. Strickler | ||||||||||||||||
| Base Salary | $ | — | $ | — | $ | 661,500 | $ | — | ||||||||
| Annual Incentive Award | — | — | 405,984 | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 184,229 | 377,180 | 136,800 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 147,288 | 163,204 | ||||||||||||
| Deferred Compensation Plan | — | — | — | — | ||||||||||||
| Health & Welfare Benefits | — | — | 35,518 | — | ||||||||||||
| Tax Gross-Up | — | — | 496,535 | — | ||||||||||||
| Total | $ | — | $ | 184,229 | $ | 2,124,005 | $ | 300,004 | ||||||||
| Thomas A. Beaver | ||||||||||||||||
| Base Salary | $ | — | $ | — | $ | 549,000 | $ | — | ||||||||
| Annual Incentive Award | — | — | 304,643 | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 72,331 | 150,580 | 48,678 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 75,468 | 66,719 | ||||||||||||
| Deferred Compensation Plan | — | — | — | — | ||||||||||||
| Health & Welfare Benefits | — | — | 13,608 | — | ||||||||||||
| Tax Gross-Up | — | — | — | — | ||||||||||||
| Total | $ | — | $ | 72,331 | $ | 1,093,299 | $ | 115,397 | ||||||||
| Mark J. Tervalon | ||||||||||||||||
| Base Salary | $ | — | $ | — | $ | 559,446 | $ | — | ||||||||
| Annual Incentive Award | — | — | 264,514 | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 91,802 | 193,367 | 63,498 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 93,480 | 86,319 | ||||||||||||
| Deferred Compensation Plan | 10,541 | 10,541 | 10,541 | 10,541 | ||||||||||||
| Health & Welfare Benefits | — | — | 34,929 | — | ||||||||||||
| Tax Gross-Up | — | — | — | — | ||||||||||||
| Total | $ | 10,541 | $ | 102,343 | $ | 1,156,277 | $ | 160,358 | ||||||||
| Martin Malmvik | ||||||||||||||||
| Base Salary | $ | — | $ | 500,099 | $ | — | $ | — | ||||||||
| Annual Incentive Award | — | — | — | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 16,174 | 33,065 | 12,312 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 13,680 | 14,709 | ||||||||||||
| Deferred Compensation Plan | — | — | — | — | ||||||||||||
| Health & Welfare Benefits | — | 67,314 | 67,314 | — | ||||||||||||
| Tax Gross-Up | — | — | — | — | ||||||||||||
| Total | $ | — | $ | 583,587 | $ | 114,059 | $ | 27,021 | ||||||||
25
20
| Change in Control | ||||||||||||||||
| Termination | and NEO resigns for | |||||||||||||||
| Without | Good Reason or is | |||||||||||||||
Thomas A. Beaver | Resignation | Cause | Terminated without Cause | Disability or Death | ||||||||||||
| Base Salary | $ | — | $ | — | $ | 535,600 | $ | — | ||||||||
| Annual Incentive Award | — | — | 240,933 | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 75,335 | 159,594 | 11,457 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 193,764 | 103,941 | ||||||||||||
| Deferred Compensation Plan | — | — | — | — | ||||||||||||
| Health & Welfare Benefits | — | — | 13,448 | — | ||||||||||||
TaxGross-Up | — | — | — | — | ||||||||||||
| Total | $ | — | $ | 75,335 | $ | 1,143,339 | $ | 115,398 | ||||||||
| Change in Control | ||||||||||||||||
| Termination | and NEO resigns for | |||||||||||||||
| Without | Good Reason or is | |||||||||||||||
Mark J. Tervalon | Resignation | Cause | Terminated without Cause | Disability or Death | ||||||||||||
| Base Salary | $ | — | $ | — | $ | 556,500 | $ | — | ||||||||
| Annual Incentive Award | — | — | 242,329 | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 91,576 | 199,794 | 11,457 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 233,964 | 120,182 | ||||||||||||
| Deferred Compensation Plan | 9,871 | 9,871 | 9,871 | 9,871 | ||||||||||||
| Health & Welfare Benefits | — | — | 32,442 | — | ||||||||||||
TaxGross-Up | — | — | 427,305 | — | ||||||||||||
| Total | $ | 9,871 | $ | 101,447 | $ | 1,702,205 | $ | 141,510 | ||||||||
| Change in Control | ||||||||||||||||
| Termination | and NEO resigns for | |||||||||||||||
| Without | Good Reason or is | |||||||||||||||
Vincent F. Suttmeier | Resignation | Cause | Terminated without Cause | Disability or Death | ||||||||||||
| Base Salary | $ | — | $ | — | $ | 426,000 | $ | — | ||||||||
| Annual Incentive Award | — | — | 130,864 | — | ||||||||||||
| Unvested and Accelerated Restricted Shares | — | 69,192 | 137,484 | 11,457 | ||||||||||||
| Unvested and Accelerated Performance Shares | — | — | 171,654 | 97,799 | ||||||||||||
| Deferred Compensation Plan | — | — | — | — | ||||||||||||
| Health & Welfare Benefits | — | — | 3,544 | — | ||||||||||||
TaxGross-Up | — | — | — | — | ||||||||||||
| Total | $ | — | $ | 69,192 | $ | 869,546 | $ | 109,256 | ||||||||
21
Directors’ Compensation
Cash Compensation
Each director who is not an employee of the Company receives a retainer of $35,000 per year for being a director, $1,000$1,500 for attending each meeting of the Board of Directors and $500$750 for each telephonic meeting of the Board of Directors. The non-executive Chairman receives twice the annual retainer and Board meeting fees than 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. The Audit Committee chairman receives additional compensation of $7,500$10,000 per year and the Compensation Committee and Nominating and Corporate Governance chairman each receives additional compensation of $4,000$5,000 per year. In addition in 2007,2008, the chairperson of a Board special committee received additional compensation of $70,000 per year.$70,000. Directors who are also employees of the Company are not paid additional compensation for serving as a director. The Company reimburses out-of-pocket expenses incurred by all directors in connection with attending Board of Directors’ and committee meetings.
Equity Compensation
Pursuant to the Directors’ Restricted Shares Plan, non-employee directors are eligible to receive awards of restricted common shares. In 2007,2008, each non-employee director who served on the Board of Directors was granted 5,100 restricted common shares except for Mr. Lasky who was granted 10,2005,400 restricted common shares. The restrictions for those shares lapsed on February 26, 2008.
Deferred Compensation
A non-employee director may elect to have all or a portion of theirhis or her retainer fees, meeting fees and equity compensation deferred until a future date pursuant to the Stoneridge, Inc. Outside Directors’ Deferred Compensation Plan. Directors may elect to defer receipt of the compensation for three or five years from the last day of the calendar year in which it was deferred or until the date the director separates from service. Amounts related to deferred cash compensation earn interest at a rate equal to the prime rate plus one percentage point, compounded quarterly. Distributions of deferred compensation may be made in one lump sum payment, five equal, annual installments or ten equal, annual installments.
Director Compensation Table
| | | | |||||||||
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||
| Avery S. Cohen | $ | 15,865 | $ | 82,848 | $ | 98,713 | ||||||
| Jeffrey P. Draime | 46,750 | 59,399 | 106,149 | |||||||||
| Sheldon J. Epstein | 62,750 | 59,399 | 122,149 | |||||||||
| Douglas C. Jacobs | 60,250 | 59,399 | 119,649 | |||||||||
| Kim Korth | 128,750 | 59,399 | 188,149 | |||||||||
| William M. Lasky | 114,000 | 118,796 | 232,796 | |||||||||
| Earl L. Linehan | 66,000 | 59,399 | 125,399 | |||||||||
| Fees Earned | Stock | |||||||||||
| or Paid | Awards | |||||||||||
Name | in Cash | (1) | Total | |||||||||
| Avery S. Cohen | $ | 51,500 | $ | 50,278 | $ | 101,778 | ||||||
| Jeffrey P. Draime | 45,500 | 50,278 | 95,778 | |||||||||
| Sheldon J. Epstein | 59,000 | 50,278 | 109,278 | |||||||||
| Douglas C. Jacobs | 65,500 | 50,278 | 115,778 | |||||||||
| Kim Korth | 117,583 | 50,278 | 167,861 | |||||||||
| William M. Lasky | 109,500 | 100,555 | 210,055 | |||||||||
| Earl L. Linehan | 66,000 | 50,278 | 116,278 | |||||||||
| (1) | The amounts included in the “Stock Awards” column represent compensation costs recognized by the Company in |
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OTHER INFORMATION
Shareholders Proposals for 20092010 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 20092010 Annual Meeting of Shareholders must be received by the Company at Stoneridge, Inc., 9400 East Market Street, Warren, Ohio 44484, on or before December 1, 2008,2, 2009, for inclusion in the Company’s proxy statement and form of proxy relating to the 20092010 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 12, 2009.
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, 2007,2008, all Section 16(a) filing requirements applicable to the Company’s executive officers, directors and greater-than-10% beneficial owners were complied with, except that Mr. Edward F. Mosel was late in filingTervalon filed one Form 4 relatingrelated 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 proposal to ratify the appointment of Ernst & Young as the Company’s independent auditors for the year ending December 31, 2008.
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 proposalproposals relating to the ratification of Ernst & Young.Young and approval of the LTCIP. Broker non-votes will not be considered votes cast on the Ernst & Young and the LTCIP proposals 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 be elected directors. The proposals to approve the ratification of Ernst & Young and the LTCIP 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 will 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
Dated: April 4,8, 2009
27
APPENDIX A
STONERIDGE, INC. LONG-TERM CASH INCENTIVE PLAN
1.Purposes. The purposes of this Long-Term Cash Incentive Plan (the “Plan”), as established by Stoneridge, Inc., an Ohio corporation (the “Company”), are (i) to provide incentive compensation to officers and other key employees of the Company and its subsidiaries based on the achievement of performance goals designated by the Compensation Committee of the Board of Directors (“Committee”), (ii) to advance the interests of the Company and its shareholders by attracting and retaining highly competent officers and key employees, and (iii) to motivate such persons to act in the long-term best interests of the Company and its shareholders. It is the intent of the Company that Long-Term Cash Incentive Awards granted to Covered Employee for Performance Periods commencing after December 31, 2008, shall constitute Performance-Based Compensation, if at the time of settlement the Participant remains a Covered Employee. Accordingly, the Plan shall be interpreted in a manner consistent with Section 162(m) of the Internal Revenue Code (the “Code”) and the regulations thereunder. If any provision of the Plan relating to a Covered Employee or any award agreement evidencing such an award to a Covered Employee does not comply with, or is inconsistent with, the provisions of Section 162(m)(4)(C) of the Code or the regulations thereunder (including Treasury Regulation § 1.162-27(e) or its succession provisions) for Performance-Based Compensation, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.
2.Certain Definitions. For purposes of the Plan, the following capitalized terms shall have the respective meanings set forth below. Capitalized terms not defined herein shall have the respective meanings specified in the Plan.
(a) “Affiliate” means a direct or indirect subsidiary of the Company.
(b) “Agreement” means a written agreement between the Company and the recipient of a Long-Term Cash Incentive Award hereunder setting forth the terms and conditions of such Long-Term Cash Incentive Award.
(c) “Beneficiary” means the person appointed by a Participant’s written designation to receive payment with respect to any Long-Term Cash Incentive Awards held by such Participant upon the death of the Participant, subject to the following provisions. A Beneficiary designation shall become effective only when filed in writing with the Company during the Participant’s lifetime on a form prescribed by the Company. The spouse of a married Participant domiciled in a community property jurisdiction shall join in any designation of a Beneficiary other than such spouse. The filing with the Company of a new Beneficiary designation shall cancel all previously filed Beneficiary designations. If a Participant fails to designate a Beneficiary, or if the designated Beneficiary dies before the Participant, then the Participant’s administrator, legal representative or similar person shall be deemed to be the Beneficiary of such Participant.
(d) “Cause” means a determination by the Company of the Participant’s
(1) intentional misappropriation of funds from the Company;
(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 this 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;
23A-1
(e) “Change in Control” means during Participant’s employment with the Company, at any time:
(1) the Board of Directors 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 equity securities entitled to vote of the surviving entity immediately after the consummation of the transaction giving rise to the merger or consolidation;
(2) the Board of Directors 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;
(3) any person or other entity (other than the Company or a subsidiary of the Company or any the Company employee benefit plan (including any trustee of any such plan acting in its capacity as trustee)) purchases any common shares (or securities convertible into common 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 35% or more of the voting power of the Company’s outstanding securities; provided, however, any acquisition of 35% or more of the voting power of the Company’s outstanding securities resulting, directly or indirectly, from the sale or sales by members of the family of D.M. Draime, including, but not limited to, the spouse of D.M. Draime and D.M. Draime’s lineal descendants and their spouses and trusts for the benefit of any of the foregoing, with the prior consent of the Company’s Board of Directors shall not be a Change in Control; or
(4) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the Company’s Board of Directors (together with any new directors whose (x) election by the Company’s Board of Directors or (y) nomination for election by the Company’s shareholders was (prior to the date of the proxy or consent solicitation relating to such nomination) approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of the directors then in office.
(f) “Committee” means the Compensation Committee appointed by the Board for the purpose 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.
(g) “Covered Employee” means an individual who is determined by the Committee to be reasonably likely to be a “covered employee” under Section 162(m) of the Code as of the end of the Company’s taxable year for which an Award 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.
(h) “Exchange Act” means the Securities Exchange Act of 1934, as amended, then in effect, or any successor federal statute of substantially similar effect.
(i) “Long-Term Cash Incentive Award” means an award conferring a right, contingent upon the attainment of specified Performance Measures within a specified Performance Period, to receive cash, as determined by the Committee or as evidenced in the Agreement relating to such Long-Term Cash Incentive Award.
(j) “Participant” means a person holding an outstanding Long-Term Cash Incentive Award granted under the Plan.
(k) “Performance Measures” means the performance measure or measures designated by the Committee pursuant to the terms of the Plan as a condition to the earning of a Long-Term Cash Incentive Award granted hereunder.
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(l) “Performance Period” means a period of time covering performance over a three year period as designated by the Committee with respect to which the Performance Measures applicable to a Long-Term Cash Incentive Award shall be measured.
(m) “Permanent Disability” means a sickness or disability extending for more than three (3) consecutive months as a result of which the Participant is unable to perform his or her duties for the Company or an affiliate, as applicable, in the required and customary manner and that will continue for not less than an additional three (3) months, as determined by the Company in its sole discretion.
(n) “Vesting Date” means the date on which the Long-Term Cash Incentive Award awarded to a Participant, subject to the achievement of Performance Measures during the Performance Period, shall be earned and vest, as set forth in the Agreement.
3.Administration.
(a) The Plan shall be administered by the Committee. The Committee shall have all the powers vested in it by the terms of the Plan, such powers to include authority (within the limitations described herein) to select the persons to be granted Long-Term Cash Incentive Awards under the Plan, to determine the time when Long-Term Cash Incentive Awards will be granted, to determine whether performance objectives and other conditions for earning such awards have been met, to determine whether such awards will be paid at the end of the Performance Period, and to determine whether such an 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 of the Plan and to make such determinations and interpretations and to take such action in connection 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 Long-Term Cash Incentive Awards, or the Long-Term Cash Awards of any Covered Employee within the meaning of Section 162(m) of the Code or who, in the Committee’s judgment, is likely to be a Covered Employee at any time during the applicable Performance Period, or any executive officer (as defined pursuant to the Exchange Act). Except as provided in the preceding sentence, as to the selection of and grant of Long-Term Cash Incentive Awards to Participants who are not Covered Employees or executive officers of the Company, 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 Committee shall include any delegate described under this paragraph, except where the context or the regulations under Section 162(m) of the Code 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 have under the Plan (including such legal or other counsel, consultants, and agents as it may deem desirable for the administration of the Plan) and may rely upon any opinion or computation received from any such counsel, consultant, or agent. Expenses incurred in the engagement of such counsel, consultant, or agent shall be paid by the Company. No member of the Board of Directors or Committee, and neither the President and Chief Executive Officer nor any other person to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and each such person shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Articles of Incorporation and/or Code of Regulations) and under any directors’ and officers’ liability insurance that may be in effect from time to time.
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Terms Of Long-Term Cash Incentive Awards
1.Eligibility. The Committee may grant Long-Term Cash Incentive Awards under the Plan to such of the Company’s (and the Company’s subsidiaries’) officers and key employees as it shall select. For purposes of the Plan, references to employment by the Company shall also mean employment by an affiliate or subsidiary. A grant of a Long-Term Incentive Cash Award to any person shall not entitle such person to an additional grant of Long-Term Incentive Cash Awards at any subsequent time.
2.Terms of Long-Term Cash Incentive Awards.
(a)In General. Long-Term Cash Incentive 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 advisable.
(b)Amount of Long-Term Cash Incentive Award and Performance Measures.
(i) The Agreement shall set forth the amount of the Long-Term Cash Incentive Award and a description of the Performance Measures and the Performance Period applicable to such Long-Term Incentive Cash Award, as determined by the Committee in its discretion.
(ii) Each Long-Term Cash Incentive Award granted under the Plan shall represent an amount payable in cash by the Company to the Participant upon achievement of one or more of a combination of Performance Measures in a Performance Period, subject to all other terms and conditions of the Plan and to such other terms and conditions as may be specified by the Committee. The grant of Long-Term Cash Incentive Awards under the Plan shall be evidenced by an Agreement in a form approved by the Committee from time to time which shall contain the terms and conditions, as determined by the Committee, of a Participant’s award; provided, however, that in the event of any conflict between the provisions of the Plan and any Agreement, the provisions of the Plan shall prevail. The maximum amount of a Long-Term Cash Incentive Award granted to any one Participant in respect of a Performance Period shall not exceed $3.0 million.
(iii) The Performance Measures for any Performance Period shall be based on the performance of the Company, one or more of its subsidiaries or affiliates, one or more of its units or divisions and/or the individual for the Performance Period. The Committee shall use one or more of the following business criteria to establish Performance Objectives for Participants: increase in net sales; pretax income before allocation 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 maintenance of the price of the Company’s Common Shares; increase 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 for any Participant shall be sufficiently specific that a third party having knowledge of the relevant facts could determine whether the objective is met; and the outcome under the Performance Objective shall be substantially uncertain when the Committee establishes the objective.
(c)Vesting.
(i)General. Except as otherwise provided in the Agreement and subject to all other requirements of the Plan, any Long-Term Cash Incentive Award that is earned pursuant to the terms of the Agreement shall become vested as of the Vesting Date set forth in the Agreement, provided that the Participant holding such Long-Term Incentive Cash Award remains continuously employed by the Company through the Vesting Date.
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(ii)Termination by Reason of Death or Permanent Disability. Except as otherwise provided in the Agreement, if the Participant’s employment with the Company terminates by reason of death or Permanent Disability in the case of a Long-Term Cash Incentive Award relating to a pending Performance Period, the Participant or the Participant’s Beneficiary, as the case may be, shall be entitled to a pro rated award payment based on the date of death or Permanent Disability in the Performance Period. Such payment shall be conditioned on the actual achievement of the Performance Measures during the Performance Period and shall not occur until the Vesting Date.
(iii)Termination by Reason Other than Voluntary Termination by Participant, Death, Permanent Disability or Cause. Except as otherwise provided in the Agreement, if the Participant’s employment with the Company terminates for any reason, other than voluntary termination by Participant, death, Permanent Disability, Cause or Retirement, in the case of a Long-Term Incentive Cash Award relating to a pending Performance Period, the Performance Period shall continue through the last day thereof and the Participant shall be entitled to a pro rated award payment. Such pro rated award payment shall be equal to the value of the award at the end of the Performance Period based on the actual performance during the Performance Period multiplied by a fraction, the numerator of which shall equal the number of days such Participant was employed with the Company during the Performance Period and the denominator of which shall equal the number of days in the Performance Period.
(iv)Termination by Reason of Retirement. Except as otherwise provided in the Agreement, if the Participant’s employment with the Company terminates due to retirement in the case of a Long-Term Cash Incentive Award relating to a pending Performance Period, the Participant shall be entitled to a pro rated award payment based on the date of Retirement in the Performance Period. Such payment shall be conditioned on (i) the actual achievement of the Performance Measures during the Performance Period and shall not occur until the Vesting Date and (ii) the Participant (a) being 63 or older at the time of retirement, (b) having provided written notice to the Compensation Committee of the intent to retire at least one year prior to the retirement date, and (c) having executed prior to retirement a customary one year non-competition agreement with the Company.
(v)Termination by Reason of Voluntary Termination by Participant or Cause. Except as otherwise provided in the Agreement, if the Participant’s employment with the Company is terminated voluntarily by Participant or is terminated by the Company for Cause, the Participant’s Long-Term Cash Incentive Award that are unvested as of the date of termination, shall not vest or be earned.
(d)Payment. After the end of each Performance Period, the Committee shall determine the amount payable to each Participant in settlement of the Participant’s Award for the Performance Period. 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 Participant who is not a Covered Employee. 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 Employee, that the Performance Objectives and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied. A Participant holding a Long-Term Cash Incentive Award which has been earned and vested shall receive, no later than the March 15th occurring immediately after the year in which the Vesting Date occurs, a lump sum cash payment from the Company in an amount equal, as determined by the Committee, to the Long-Term Cash Incentive Award which was earned and became vested as of such Vesting Date, subject to the deduction of taxes and other amounts pursuant to Section 3.4 of the Plan. All payments under this Plan are intended to be exempt from Section 409A of the Code as “short-term deferrals,” within the meaning of Treasury regulations promulgated under Section 409A of the Code.
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(e) The Committee may adjust or modify Long-Term Cash Incentive Awards or terms of such awards (1) in recognition of unusual or nonrecurring events affecting the Company or any business unit, or the financial statements or results thereof, or in response to changes in applicable laws (including tax, disclosure, and other laws), regulations, accounting principles, or other circumstances deemed relevant by the Committee, (2) with respect to any Participant whose position or duties with the Company change during a Performance Period, or (3) with respect to any person who first becomes a Participant after the first day of the Performance Year; provided, however, that no adjustment to an Long-Term Cash Incentive Award granted to a Covered Employee 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 under Section 162(m) of the Code.
(f)Committee Discretion. Notwithstanding the attainment of the Performance Measures with respect to a Long-Term Cash Incentive Award or anything herein to the contrary, in all cases, the Committee shall have the sole and absolute discretion to reduce the amount of any payment with respect to any Long-Term Cash Incentive Award that would otherwise be made to any Participant or to decide that no payment shall be made.
General
1.Effective Date and Term of Plan. The Plan shall be effective as of March 8, 2009, and shall continue until such time as it is terminated by the Board; provided, however, that Long-Term Cash Incentive Awards to the Company’s officers and key employees granted for Performance Years commencing after December 31, 2008, shall be subject to approval of the shareholders of the Company at an annual meeting or any special meeting of shareholders of the Company before settlement of Long-Term Cash Incentive Awards granted to the Company’s officers or key employees for the years ending on or after December 31, 2011, so that compensation will qualify as Performance-Based Compensation under Section 162(m) of the Code. In addition, the Board may determine to submit the Plan to shareholders for reapproval at such time, if any, as may be required in order that compensation under the Plan shall qualify as Performance-Based Compensation.
2.Amendments. The Board may amend or terminate the Plan as it shall deem advisable in the exercise of its sole and absolute discretion; provided, however that no such amendment may adversely affect the rights granted to a Participant with respect to an outstanding Long-Term Cash Incentive Award pursuant to its related Agreement without the consent of such Participant.
3.Non-Transferability. No Long-Term Cash Incentive Award or any rights thereunder shall be transferable other than by will or the laws of descent and distribution or pursuant to any Beneficiary designation procedures as may approved by the Committee for such purpose. Except as permitted by the preceding sentence, no Long-Term Cash Incentive Award hereunder shall be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt by the holder of a Long-Term Cash Incentive Award to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of such Long-Term Cash Incentive Award, such Long-Term Cash Incentive Award and all rights thereunder shall immediately become null and void.
4.Tax and Other Withholding. The Company shall have the right to deduct from any amounts paid pursuant to the Plan (or from other compensation payable by the Company to the Participant) all federal, state, local and other taxes and any other amounts which may be required under law or elected by the Participant to be withheld or paid in connection with the settlement of a Long-Term Cash Incentive Award or any other payment made hereunder.
5.Change in Control. Except as otherwise provided in the Agreement, upon the occurrence of a Change in Control in the case of a Long-Term Cash Incentive Award relating to a pending Performance Period such award shall immediately vest and no longer be subject to risk of not being earned and the Company shall immediately pay the award in an amount equal to the value of the target award set forth in the Agreement. Such award shall be paid as soon as practicable, and in no event more than seven days (7) days, after the date of the Change in Control.
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6.No Right of Participation or Employment. No person shall have any right to participate in the Plan or to be granted Long-Term Cash Incentive Awards under the Plan. Neither the Plan nor any Agreement relating to a Long-Term Cash Incentive Award granted hereunder shall confer upon any person any right to be employed, reemployed or continue employment by the Company or any Affiliate of the Company or affect in any manner the right of the Company or any Affiliate of the Company to terminate the employment of any person with or without notice at any time for any reason without liability hereunder. Nothing herein shall confer any right or benefit or any entitlement to any benefit on any Participant unless and until a benefit is actually vested pursuant to the Plan. The adoption and maintenance of the Plan shall not be deemed to constitute a contract of employment or otherwise between the Company or any of its affiliates and any Participant, or to be a consideration for or an inducement or condition of any employment. Neither the provisions of the Plan nor any action taken by the Company or the Board of Directors or the Committee pursuant to the provisions of the Plan shall be deemed to create any trust, express or implied, or any fiduciary relationship between or among the Company, the Board of Directors or Committee, any member of the Board or Committee, or any employee, former employee or beneficiary thereof.
7.Unfunded Arrangement. The Plan shall at all times be entirely unfunded and no provision shall at any time be made with respect to segregating assets of the Company for payment of any benefit hereunder. No holder of a Long-Term Cash Incentive Award shall have any interest in any particular assets of the Company or any of its affiliates by reason of the right to receive a benefit under the Plan and any such holder shall have only the rights of an unsecured creditor of the Company with respect to any rights under the Plan.
8.Governing Law. This Plan, each Long-Term Cash Incentive Award granted hereunder and its related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Ohio and construed in accordance therewith without giving effect to principles of conflicts of laws.
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| | |
STONERIDGE, INC. | PROXY |
The Proxies will vote as specified above,below, or if a choice is not specified, they will vote FOR the nominees listed in proposal 1
and FOR proposal 2.
| 1. | Nominees for election as directors, each to serve until the next |
| | | | |||
| John C. Corey Kim Korth | Jeffrey P. Draime William M. Lasky | Paul J. |
| Kaplan | ||||||
o FOR all nominees listed above (except as marked to the contrary below) | o WITHHOLD AUTHORITY to vote for all nominees listed above | |||||
INSTRUCTIONS: To withhold authority to vote for any particular nominee, write
that nominee’s name on the line provided below:
| 2. | Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, |
| | | ||
| o FOR | o AGAINST | o ABSTAIN |
| 3. | Approval of the Stoneridge, Inc. Long-Term Cash Incentive Plan: |
| | | ||
| o FOR | o AGAINST | o ABSTAIN |
| 4. | On such other business as may properly come before the meeting. |
(CONTINUED ON REVERSE SIDE)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints John C. Corey, George E. Strickler and William M. Lasky, and each of them, attorneys and proxies of the undersigned, with full power of substitution, to attend the Annual Meeting of Shareholders of Stoneridge, Inc., to be held at the Grand Pavilion at the Avalon Inn located at 9519 East Market Street, Warren,Sheraton Cleveland Airport Hotel, 5300 Riverside Drive, Cleveland, Ohio 44484,44135, on Monday, May 5, 2008,4, 2009, at 10:11:00 a.m. Eastern Time, or any adjournment thereof, and to vote the number of common shares of Stoneridge, Inc. which the undersigned would be entitled to vote, and with all the power the undersigned would possess if personally present.
Receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement dated April 4, 2008,8, 2009 is hereby acknowledged.
Dated: , 2009
Signature(s)
Please sign exactly as your name appears hereon, indicating, where proper, official position or representative capacity.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPEENVELOPE.