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.
EXECUTIVE COMPENSATION
“RESOLVED that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
Because the vote is advisory, it will not be binding upon the Board or the Compensation Committee. The Board and the Compensation Committee value the opinions of our shareholders and will take into account the outcome of the vote when considering future executive compensation arrangements.
The affirmative vote of a majority of the shares of Company common shares present or represented by proxy and voting at the annual meeting will constitute approval of this non-binding resolution. If you own common shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your common shares so that your vote can be counted on this proposal. Abstentions will have the same effect as votes against the proposal. Broker non-votes will not be considered common shares present and entitled to vote on this proposal and will not have a positive or negative effect on the outcome of this proposal.
The Board of Directors recommends that you vote FOR Proposal Three.
PROPOSAL FOUR: SAY ON PAY FREQUENCY
The Dodd-Frank Act also requires the Company to seek a non-binding advisory shareholder vote every six years regarding the frequency (annually, every other year, or every three years) at which the Company will ask its shareholders to provide the advisory vote on executive compensation.
After careful consideration, the Board recommends that future advisory votes on executive compensation occur every three years because this frequency is consistent with our long-term approach to executive compensation. Components of the Company’s long-term incentive plans are measured over a three-year performance period; a three-year cycle will provide sufficient time for shareholders to evaluate the effectiveness of the Company’s short- and long-term compensation strategies.
As an advisory vote, this proposal is non-binding. The Board and the Compensation Committee value the opinions of our shareholders and understand that executive compensation is an important matter, and they will consider the outcome of the vote when making future decisions on the frequency of the Company’s executive compensation advisory votes.
Shareholders may cast their votes in favor of one year, two years or three years or abstain from voting on this proposal. The choice selected by the most shareholders will be deemed the shareholders’ choice on frequency of the Company’s executive compensation advisory vote. If you own common shares through a bank, broker or other holder of record, your must instruct your bank, broker or other holder of record how to vote in order for them to vote your common shares so that your vote can be counted on this proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
The Board of Directors recommends a vote of THREE YEARS on Proposal Four.
PROPOSAL FIVE: APPROVAL OF THE COMPANY’S AMENDED ANNUAL INCENTIVE PLAN
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), annual compensation in excess of $1 million paid to the Company’s chief executive officer and the four other highest compensated executive officers (collectively, the “Covered Executives”) is not deductible by the Company for federal income tax purposes. However, “performance-based compensation” is exempt from the $1 million deduction limit. For compensation to qualify as “performance-based compensation” under Internal Revenue 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. In addition, shareholders must reapprove the material terms every five years. On October 30, 2006, the Board adopted a written Annual Incentive Plan (the “AIP”), subject to shareholder approval. The AIP provides that the executive officers and other key employees selected by the Compensation Committee are eligible to receive annual bonuses, payable in cash based on the level of attainment of Company and individual performance goals over one-year performance periods. The AIP was initially approved by shareholders on May 7, 2007 and permits awards to be granted through December 31, 2011. The Amended AIP will be effective January 1, 2012, extends the term of the AIP for five years and is now being submitted for reapproval by the shareholders.
Vote Required for Approval
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 Amended AIP. 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. Abstentions 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 Amended AIP to Covered Executives if it is not approved by the shareholders. In the event that the Amended AIP is not approved by shareholders, payments made to certain of the Company’s executive officers outside the Amended AIP may not be deductible for federal income tax purposes under Section 162(m) of the Internal Revenue Code.
Summary of the Material Provisions of the Amended AIP
Below is a summary of the significant terms of the Amended AIP. The summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended AIP, a copy of which is attached as Appendix A to this proxy statement:
| Purpose | | To promote the growth, profitability and success of the Company by providing performance incentives for selected executive officers and key employees. |
Administration of the Amended AIP | | The Compensation Committee (the “Committee”) will administer the Amended AIP. The Committee will be comprised solely of “outside directors,” within the meaning of Internal Revenue Code Section 162(m), and NYSE independent directors. The Committee’s responsibilities pursuant to the Amended AIP 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 awards should be reduced. The Committee also will have the powers necessary to administer the Amended AIP, including the power to make rules and regulations, the power to interpret the Amended AIP, and the power to delegate certain of its powers and responsibilities. |
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| Eligible Persons | | Officers and other key employees of the Company or its subsidiaries; approximately 150 persons. |
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| Awards | | An award is an amount payable in cash to a participant if one or more performance objectives are met during the fiscal year, 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 | | $2,000,000 per year to any employee who is selected to participate in the Amended AIP. |
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| Reduction and Increase of Awards | | The Committee may reduce the amount payable to any participant and increase the amount payable to any participant who is not a Covered Executive. In the case of any Covered Executive, the Committee may not increase the amount an individual is eligible to receive as calculated on the basis of the level of Company performance under the pre-established performance objectives. |
| | |
| Establishment of Performance Objectives | | The Committee may establish performance objectives for awards to Covered Executives from the list set out below Except in the case of mid-year hires, the Committee must designate performance objectives for awards to Covered Executives in writing during the first 90 days of the fiscal year, while the attainment of each designated objective is still uncertain. Performance objectives for other participants may consist of any measure selected by the Committee in its discretion at any time. |
| | |
| Types of Performance Objectives | | Performance objectives established by the Committee may be based on one or more of the following criteria applicable to the Company, one or more of its subsidiaries, units, divisions or the grantee: 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 | | A participant forfeits his award if he terminates his employment during the performance year or after the performance year but prior to payment for reasons other than death or disability. If a participant terminates employment during a fiscal year or after the performance year but prior to payment because of death or disability, the Committee shall decide the amount which will be paid under the award, and when such payment will be made. |
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| Amendment or Termination of the Amended AIP | | The Board of Directors may amend, modify or terminate the Amended AIP in any manner at any time without the consent of any participant. |
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| Term | | No award may be granted under the Amended AIP for a performance year starting after December 31, 2016. |
| | |
Shareholder Reapproval of the Amended AIP | | Since the Amended AIP permits the Committee to select the performance criteria and to establish the targets for the performance goals each year, pursuant to regulations promulgated under Internal Revenue Code Section 162(m), the material terms of the performance objectives must be reapproved by the shareholders five years after the initial shareholder approval was obtained in order to maintain the exemption from deductibility limits under Code Section 162(m). |
The Board of Directors recommends that you vote FOR Proposal Five.
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’ Audit, Compensation, and Nominating and Corporate Governance committees are posted on our website at www.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 website at www.stoneridge.com.
Director Independence
The 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 has determined that the following directors and nominees for election of director are independent:
| Jeffrey P. Draime | Kim Korth |
| Douglas C. Jacobs | William M. Lasky |
| Ira C. Kaplan | Paul J. Schlather |
The Board has not adopted categorical standards of independence. In making the independence determinations, the Board considered the prior relations of Mr. Kaplan and Mr. Schlather to Mr. Draime and that in his capacity as a shareholder in 2009, Mr. Draime recommended the nomination of Mr. Kaplan and Mr. Schlather. Mr. Kaplan’s firm 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.
The Board of Directors’ Role in Risk Oversight
It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to the Company. The Board has oversight responsibility of the processes established to report and monitor systems for material risks applicable to the Company. The Audit Committee regularly reviews enterprise-wide risk management, which includes treasury risks (commodity pricing, foreign exchange rates, and credit and debt exposures), financial and accounting risks, legal and compliance risks, and other risk management functions. The Compensation Committee considers risks related to the attraction and retention of talent and related to the design of compensation programs and arrangements. The full Board considers strategic risks and opportunities and regularly receives reports from management on risk and from the committees regarding risk oversight in their areas of responsibility.
Compensation Policies and Risk
The Company’s policies and overall compensation practices for all employees do not create risks that are reasonably likely to have a material adverse affect on the Company. Generally speaking, the compensation policies are consistent for all business units of the Company.
Additionally, incentives are not designed, and do not create, risks that are reasonably likely to have a material adverse affect on the Company as all incentives reward growth and profitability. The Company’s various incentive programs are based on consistent growth and continued profitability of the Company, relying, for example, on the total return on investment, operating profit and total shareholder return. As such, they do not encourage employees to take risks in order to receive incentive compensation, nor are they reasonably likely to have a material adverse effect on the Company.
The Board of Directors
In 2010, the Board held 19 meetings and took action by unanimous written consent on two occasions. In 2010, each Board member attended at least 75% of the meetings of the Board and of the committees on which he or she serves. The Company’s policy is that directors are to attend the Annual Meeting of Shareholders. All of our current directors attended the 2010 Annual Meeting of Shareholders. Mr. Lasky has been appointed as the lead independent director by the independent directors to preside at the executive sessions of the independent directors. It is the Board’s practice to have the independent directors meet regularly in executive session. All directors, except Mr. Corey, the Company’s President and Chief Executive Officer (“CEO”), are independent.
Leadership of the Board
The Board does not have a policy regarding the separation of the roles of CEO and Chairman of the Board as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. At this time, the Board has determined that having an independent director serve as Chairman is in the best interest of the Company’s shareholders. This structure ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas and establishing Board priorities and procedures. Further, this structure permits the Company’s President and CEO to devote more time to focus on the strategic direction and management of the Company’s day-to-day operations.
Committees of the Board
The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. These committees are the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. Each member of the Audit, Compensation, 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:
Audit Committee | | Compensation Committee | | Nominating and Corporate Governance Committee |
| Douglas C. Jacobs* | | Jeffrey P. Draime | | Jeffrey P. Draime |
| Ira C. Kaplan | | Douglas C. Jacobs | | Ira C. Kaplan |
| William M. Lasky | | Kim Korth* | | Kim Korth |
| Paul J. Schlather | | William M. Lasky | | William M. Lasky* |
* Committee Chairperson
Audit Committee.
This committee held eight meetings during 2010. Information regarding the functions performed by the Audit Committee is set forth in the “Audit Committee Report,” included in this Proxy Statement. The Board has determined that each Audit Committee member is financially literate under the current listing standards of the NYSE. The Board also determined that Mr. Jacobs and Mr. Schlather each qualify 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.
Compensation Committee.
This committee held five meetings during 2010. 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; recommending to the Board the approval, amendment and termination of incentive compensation and equity-based plans; and certain other compensation matters, including director compensation. Recommendations regarding compensation of other officers are made to the Compensation Committee by our CEO. The Compensation Committee can exercise its discretion in modifying any amount presented by our CEO. The Compensation Committee regularly reviews tally sheets that detail the total compensation obligations to each of our executive officers. During 2010, the Compensation Committee retained Total Rewards Strategies to provide compensation related consulting services. Specifically, the compensation consultants provided 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.
Nominating and Corporate Governance Committee.
This committee held two meetings in 2010. The purpose of the Nominating and Corporate Governance Committee is to evaluate the qualifications of director nominees, to recommend candidates for election as directors, to make recommendations concerning the size and composition of the Board, to develop and implement the Company’s corporate governance policies and to assess the effectiveness of the Board.
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. If a shareholder desires to recommend an individual for membership on the Board, then that shareholder must provide a written notice (the “Recommendation Notice”) to the Secretary of the Company at Stoneridge, Inc., 9400 East Market Street, Warren, Ohio 44484, on or before January 15 for consideration by the committee for that year’s election of directors at the Annual Meeting of Shareholders.
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 name and address, as they appear on the Company’s books, and telephone number of the shareholder making the recommendation, including information on the number of common shares owned and date(s) acquired, and if such person is not a shareholder of record or if such common shares are owned by an entity, reasonable evidence of such person’s ownership of such shares or such person’s authority to act on behalf of such entity; |
| · | the full legal name, address and telephone number of the individual being recommended, together with a reasonably detailed description of the background, experience and qualifications of that individual; |
| · | a written acknowledgment by the individual being recommended that he or she has consented to the recommendation and consents to the Company undertaking an investigation into that individual’s background, experience and qualifications in the event that the Nominating and Corporate Governance Committee desires to do so; |
| · | any information not already provided about the person’s background, experience and qualifications necessary for the Company to prepare the disclosure required to be included in the Company’s proxy statement about the individual being recommended; |
| · | the disclosure of any relationship of the individual being recommended with the Company or any of its subsidiaries or affiliates, whether direct or indirect; and |
| · | the disclosure of any relation of the individual being recommended with the shareholder, whether direct or indirect, and, if known to the shareholder, any material interest of such shareholder or individual being recommended in any proposals or other business to be presented at the Company’s Annual Meeting of Shareholders (or a statement to the effect that no material interest is known to such shareholder). |
The Nominating and Corporate Governance Committee determines, and periodically reviews with the Board, the desired skills and characteristics for directors as well as the composition of the Board 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. 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 activities and the willingness to do so. The Nominating and Corporate Governance Committee does not have a formal policy specifically focusing on the consideration of diversity; however, diversity is one of the many factors that the Nominating and Corporate Governance Committee considers when identifying candidates and making its recommendations to the Board. 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, 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 prospective nominees who the Nominating and Corporate Governance Committee believes will be effective, in conjunction with the other members of the Board, in collectively serving the long-term interests of the Company’s shareholders.
The Nominating and Corporate Governance Committee recommended to the Board each of the nominees identified in "Election of Directors" starting on page 5.
Compensation Committee Interlocks and Insider Participation
None of the members of the Board’s Compensation Committee have served as one of our officers at any time or as an employee during 2010. Additionally, no Compensation Committee interlocks existed during 2010.
Communications with the Board of Directors
The Board believes that it is important for interested parties to have a process to send communications to the Board. Accordingly, persons who wish to communicate with the Board 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 or certain specified individual directors (such as the lead independent director or non-management directors as a group). The Secretary will make copies of all such letters and circulate them to the appropriate director or directors. The directors are not spokespeople for the Company and responses or replies to any communication should not be expected.
Transactions with Related Persons
There were no reportable transactions involving related persons in 2010.
Review and Approval of Transactions with 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 of Regulation S-K or any other similar transaction involving the Company or 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. 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.
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:
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| | • · | Attractattract and retain executive officers by providing a compensation package that is competitive with that offered by similarly situated companies; |
|
| | • · | Createcreate a compensation structure under which a substantial portion of total compensation is based on achievement of personal and corporate/division performance goals; and |
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| | • · | Alignalign total compensation with the objectives and strategies of our business and shareholders. |
We have established a fundamental commitment to formulate the components of our compensation program under a “pay-for-performance” methodology.pay-for-performance ideology. 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 fashionedestablished the various components of our 20072010 compensation payments and awards to meet our objectives as follows:
| | Objective Addressed |
Type of Compensation | | Competitive Compensation | | Performance Objective | | Retention |
| | | | | | |
Type of Compensation
Base salary | | Objective Addressed
|
|
Base Salaryü | | Competitive compensation | | |
| Annual incentive plan awards | | Competitive compensation, retention and performance incentivesü | | ü | | |
| Long-term cash incentive plan awards | | ü | | ü | | ü |
| Equity-based awards | | Competitive compensation, retention and performance incentivesü | | ü | | ü |
| Benefits and perquisites | | Competitive compensationü | | | | |
| Retention awards | | | | | | ü |
Mix of Compensation
Our executive compensation is based on our “pay-for-performance”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, an average
Total Target Compensation
Total target compensation is the value of approximately 40%the compensation package that is intended to be delivered if performance goals are met. Actual compensation depends on the annual and long-term incentive compensation payout levels based upon the applicable performance achievement and, for long-term awards, the price of our named executive officers’common shares. The following charts show the weighting of each element of total target compensation for the CEO and the other Named Executive Officers (“NEO”NEOs”) cash, excluding the one-time retention awards paid in 2010. These charts illustrate our pay-for-performance philosophy, as annual and long-term incentive compensation shown in our Summary Compensation Table consistedcomprises the majority of performance-basedtotal target 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 outsideindependent compensation consultant to assist the Committee to fulfill various aspects of its charter. During fiscal year 2007, Towers Perrin assisted2010, the Committee with:retained Total Rewards Strategies to assist the Committee with the following: keeping it appraised about relevant trends and technical developments during its meetings,meetings; providing consulting advice regardingchange-in-control agreements long-term incentive and change in control arrangements; providing peer group analysis; 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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Our executive officers receive two forms of annual cash compensation -– base salary and annual incentive awards -– which together constitute an executive officer’s total annual cash compensation.compensation; however, in 2010, our NEO’s also received one-time cash payments in connection with retention awards made in 2009. Please note that “total annual cash compensation,” as discussed in this Compensation Discussion and Analysis, differs from the “Total Compensation” column of the Summary Compensation Table on page 16,26, which includes long-term incentive, perquisites and other forms of compensation valued on a basis consistent with financial statement reporting requirements. The levels of base salary and annual incentive awards for our executive officers are established annually under a program intended to maintain parity with the competitive market for executive officers in comparable positions. OurTypically, our executive compensation levels are designed to be generally aligned with the 50th50th - 75th percentile of competitive market levels for each position.
A significantlarge percentage of total compensation is allocated to incentives as a result ofbased on 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 determineour compensation consultant and considers the Company’s historical compensation practices in determining the appropriate level and mix of incentive compensation for each executive position.
Compensation Benchmarking and PeerComparator Group
When reviewing competitive market levels, we considered compensation data based on general industry data derived from Towers Perrin’s 2006The comparator group is comprised of some of our direct competitors 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 broader 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:industries that the Committee believes is representative of the labor market from which we recruit executive talent. Factors used to select the comparator group of companies include industry segment, revenue, profitability, number of employees and market capitalization. The Committee reviews the comparator group annually.
The companies in the comparator group used to determine 2010 executive compensation were:
| | | | |
AmphenolAccuride | | Esterline Technologies | | GentexPulse Electronics |
Thomas & BettsAmetek | | Gentek | | Shiloh Industries |
| Amphenol | | Gentex | | Standard Motor Products | | Sypris Solutions |
Modine Manufacturing | | Commercial Vehicle Group | | Titan International |
Ametek, IncATC Technology Corp | | Graco | | Aftermarket Technology |
AVX | | Shiloh Industries | | Methode Electronics |
Accuride | | CTS | | Superior Industries International |
GentekAVX | | TechnitrolMethode Electronics | | Sypris Solutions |
| Commercial Vehicle Group | | Modine Manufacturing | | Thomas & Betts |
| CTS | | Nu HorizonHorizons Electronics Group | | Titan International |
The peer group companies’ revenues range from $400 million to $1,400 million. Our revenue falls slightly belowIn 2009, the median of this peer group. The peer group usedsales revenue for the compensation analysis is generally not the same as the peercomparator group index in the Performance Graph included in the Annual Report to Shareholders. The peer group index is used becausewas $579 million while our revenue was $475 million.
Total Reward Strategies provides the Committee believeswith the investment community views50th and 75th percentiles of the indexcomparator group for base salary, cash bonus, long-term incentives and total overall compensation. The Committee uses the 50th percentile as most comparablea primary reference point when determining compensation targets for each element of pay and adjusts each element of pay to reflect competitive market conditions. The objective of the executive compensation program is to provide overall compensation between the 50th and 75th percentiles of pay practices of the comparator group of companies. Actual target pay for an individual may be more or less than the 50th percentile based on the Committee’s evaluation of the individual’s performance and potential. Consistent with ourthe Committee’s philosophy of pay-for-performance, incentive payments can exceed target levels only if overall Company when reviewing our financial performance.targets are exceeded and will fall below target levels if overall financial goals are not achieved.
Elements of Compensation
The principal elements of compensation of our executive officers are:for 2010 were the following:
| | • · | Annual cash incentive awards; |
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| | • · | Long-term cash-based incentive awards; |
| · | Long-term equity-based incentive awards; and |
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| | • · | Benefits and perquisites.perquisites; and |
| · | One-time retention award made in 2009 paid in 2010. |
Although all executive officers are eligible to participate in the same compensation and benefit programs, our CEO is the only executive officer whose payMr. Corey has compensation that is governed by an employment agreement. The terms of Mr. Corey’s employment agreement 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. The annual cash incentive compensation awards and long-term incentive awards are based on a percentage of base compensation. 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, the 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 towhich become effective January 1. Executive officers base salaries remain fixed throughout the year unless a promotion or other change in responsibilities occurs. For 2010, to continue to manage costs in an uncertain economic environment, the Company delayed salary increases for employees for three months. The NEOs’ salary increases were delayed in line with this policy and became effective on April 1. The “Salary” column of the Summary Compensation Table lists the NEO’s base salary for 2010.
Annual Incentive Awards
Our executive officers participate in the Annual Incentive Plan (“AIP”) which provides for annual cash payments based on the 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,January 2010, the Committee approved the Company’s 20072010 AIP targets and metrics. The AIP targets are expressed as a percentage of the executive officer’s base salary and are typically established based onsalary. Per our competitive compensation review, it was determined that our existing percentages fell within competitive market datatargets; therefore, no changes to the AIP percentages were implemented for each position.2010.
The 2010 AIP is comprised of consolidated financial performance metrics and achievement of personal goals.for all participants. The financial performance elements, weighting, target metrics portion is comprised of two elements: (1) operating profit — 50%; and (2) returnachievement are summarized as follows:
| | | Weight | | | Target Metric | | | Achievement | |
| Operating profit | | | 35 | % | | $ | 13.4 million | | | | 200 | % |
| Return on invested capital | | | 20 | % | | | 4.02 | % | | | 200 | % |
| Free cash flow | | | 20 | % | | $ | (26.3) million | | | | 200 | % |
| Sales growth | | | 25 | % | | $ | 150.0 million | | | | 200 | % |
The financial performance target metrics were based on invested capital — 50%. The individual goals established for fiscal year 2007 were specific and measurable. Financial performance targets were set from the Company’s 2007 operating2010 business 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 differsUnder the 2010 AIP, the minimum level for achievement for each metric was based on the executive’s responsibilities; our CEO and CFO are measured on consolidated financial performance and individual performance,80% of target while the other executive officers are measuredmaximum level was based on consolidated financial performance, their respective business unit’s financial performance and individual performance.130% of target. The following table indicatesprovides the 20072010 AIP target the performance allocationas a percent of base salary, as a dollar amount and the dollar achievement for the following NEOs:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | AIP
| | |
| | | | | | | Consolidated
| | Business Unit
| | | | | | Achievement
| | |
| | | AIP Target (Percent
| | | | Financial
| | Financial
| | Personal
| | | | (Percent of
| | | Target (Percent of Base Salary) | | | Target | | | Achieved | |
| | | of base salary) | | | | Performance | | Performance | | Performance | | | | target) | | | | | | | | | | |
| John C. Corey | | | 80 | % | | | | 70 | % | | | — | | | | 30 | % | | | | 110 | % | | | 80 | % | | $ | 528,000 | | | $ | 1,056,000 | |
| George E. Strickler | | | 55 | % | | | | 70 | % | | | — | | | | 30 | % | | | | 122 | % | | | 55 | % | | | 189,200 | | | | 378,400 | |
| Mark J. Tervalon | | | | 45 | % | | | 135,315 | | | | 270,630 | |
| Thomas A. Beaver | | | 45 | % | | | | 60 | % | | | 30 | % | | | 10 | % | | | | 140 | % | | | 45 | % | | | 126,585 | | | | 253,170 | |
| Mark J. Tervalon | | | 45 | % | | | | 60 | % | | | 30 | % | | | 10 | % | | | | 107 | % | |
| Vincent F. Suttmeier | | | 45 | % | | | | 50 | % | | | 40 | % | | | 10 | % | | | | 122 | % | |
| Michael D. Sloan | | | | 45 | % | | | 101,250 | | | | 202,500 | |
For each performance element,metric, specific levels of achievement for minimum, target and maximum level were set.set as described above. At target, 100% payout is achieved for each element of the plan; at maximum, 200% payout is achieved, whileachieved; and 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 20072010 plan was subject to our overall performance and appearsis included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
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 believesUnder the Long-Term Cash Incentive Plan (“LTCIP”), all executive officers may be granted awards payable in cash. We believe that equitylong-term incentive awards are a valuable motivation and retention tool and provide a long-term performance incentive to management. The Company has granted
13
restricted common shares to executive officers since 2004. Prior to that,long-term award is calculated based on the Company had awarded share options as part of our incentive compensation programs. The determinationfair value of the numbershares, shares equivalent or cash at the time of restricted shares awarded is based on expected share valuegrant as a percentage of base salary. The percentages are typically representative of the competitive market data obtained during the annual compensation review process described above. For 2010, the Committee determined that in order to remain competitive in the overall compensation packages, the long-term incentive awards should approximate the 75th percentile of market. The expected sharesawards are subject to adjustment based on differences in the scope of the executive officer’s responsibilities, performance and ability. We believe that
The Company views long-term equity-based incentives as an important tool for retaining talentedexecutive talent. For 2010, we granted to our executive officers is keytime-based restricted common shares under the LTIP equal to our business; therefore, we allocatethe equivalent of 50% of the restricted share award tofair value calculation discussed above. If the executive officer remains an employee at the end of the three year vesting period, the time-based restricted shares.common shares will vest and no longer be subject to forfeiture on that date. The remaining 50%grant date fair value of the restricted share award is allocated to performance-based shares to incentivize performance.
Performance-Based Restricted Shares. We believe that linkingtime-based restricted common share grantsshares is included in the “Stock Awards” column of the Summary Compensation Table. The time-based restricted common shares awarded in 2010 are included in the “All Other Stock Awards” column of the Grants of Plan-Based Awards table.
The Company also views long-term performance-based incentives as key to performance tieslinking our executive officers’ overall compensation to returns to shareholders, which aligns our executive officers’ interests with our shareholders’ interests. Theshareholder return. For 2010, we granted performance-based restricted common shares grantedshare awards under the LTIP to our executive officers targeting approximately 25% of the long-term incentive fair value calculation discussed above. The awards are subject to forfeiture based on our total shareholder return (“TSR”) over a three year period, when compared to TSR for a Peer Group of companies over the same period. If the Company’s TSR is equal to the 50th percentile of the Peer Group TSR performance, the target number of common shares will vest and no longer be subject to forfeiture. If the Company’s TSR is less than the 25th percentile (minimum) of the Peer Group TSR performance, all common shares will be forfeited and if the Company’s TSR is equal to the 75th percentile (maximum) or greater of the Peer Group TSR performance, all common shares will vest and no longer be subject to forfeiture. Provided the executive officer remains employed, and depending on TSR performance, the number of common shares no longer subject to forfeiture prorates between the 25th and 75th percentile. The 2010 Peer Group is comprised of the following companies:
| ATC Technology Corp | Gentex | Pulse Electronics |
| AVX | Graco | Shiloh Industries |
| Commercial Vehicle Group | Methode Electronics | Standard Motor Products |
| CTS | Modine Manufacturing | Superior Industries International |
| Esterline Technologies | Nu Horizons Electronics | Thomas & Betts |
| | Titan International |
Also for 2010, we granted performance-based awards under the LTCIP to our executive officers targeting approximately 25% of the long-term incentive fair value calculation discussed above. The awards are payable in cash equivalent to the number of shares earned at the fair market value of our common shares on the date of vesting (“Phantom Shares”). The awards are subject to forfeiture based on our actual annual earnings per share (“EPS”) performance over a three-yearthree year period, when compared to minimum, target and maximum annual EPS amounts over the same period. For 2007the 2010 grants, the annual performance period target EPS was established from our budgeted EPS with a 10%or will be set using the Company Board approved annual growth factor for years two and three.budget. Minimum EPS was or will be established at 80%50% of target and maximum EPS was or will be established at 120%150% of target. Thesetarget for each annual performance period. The annual EPS target for the 2010 performance period was established at a target of $(0.25). The metrics are intended to be aggressive but achievable based on industry conditions known at that time.the time they are set. Provided the executive officer remains employed, and depending on annual EPS performance, the amountnumber of sharesPhantom Shares no longer subject to forfeiture prorates between minimum and maximum shares.amounts. Actual EPS performance below the minimum level results in no earned shares for the forfeitureannual performance period. The amount of all shares.cash paid out at the end of the service and performance period will equal the number of Phantom Shares earned times the current fair value of the Company common shares at the date of vesting. For the 2010 annual performance period, achievement was at the maximum level. The performance-based restricted commonperformance–based phantom shares awarded in 20072010 are included in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns of the Grants of Plan-Based Awards table.
Time-Based Restricted Shares. 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 2007 are included in the “All Other Stock Awards” column of the Grants of Plan-Based Awards table.23
Timing of Grants. It is the intent of the Committee
The Committee’s practice has been to approve the restricted shares grant awards under the LTIP and LTCIP at the first regular meeting of the year; awardscalendar year. Awards in 2010 were granted at the FebruaryMarch 2010 meeting, for 2007.the first regularly scheduled meeting. As a general practice, restricted share grant awards under the LTIP and LTCIP 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.
PerquisitesIncluded in “Stock Awards” in the Summary Compensation Table for 2008 are equity-based performance awards granted under the LTIP. The amounts disclosed represent the fair value computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 at the date of grant. When the awards were granted, the financial performance target levels were intended to be aggressive but achievable based on information known at the time. The subsequent economic and industry downturn negatively affected the financial performance of the Company. This has resulted in no performance-based restricted common shares being earned under the 2008 performance-based awards.
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. IncrementalThe 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 minimum 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 minimum 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 healthcare expenses not to exceed $5,000 per covered family member on an annual basis. Mr. Corey was awarded 150,000 restricted common shares under the Company’s Long-Term Incentive Plan. The shares vest 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
14
to address conditions of his employment when he joined Stoneridge in 2006 and to provide some security upon accepting this new position.
In addition, if Mr. Corey is terminated by the Company without cause, the Company will be obligated to provide as severance the same compensation and benefits described below under “Potential Change in Control and Other Post-Employment Payments.”
The Company has not entered into employment agreements with any other NEO.
Severance Plan
The Company adopted the Officers’ and Key Employees’ Severance Plan (the “Severance Plan”) in October 2009. The NEOs covered under the Severance Plan include Messrs. Strickler, Tervalon, Beaver and Sloan. If a covered executive is terminated by the Company without cause, the Company will be obligated under the Severance Plan to pay the executive’s salary for 12 months (18 months in the case of the Chief Financial Officer, Mr. Strickler) and continue health and welfare benefits coverage over the same period of time. Mr. Corey’s severance protection is provided in his employment agreement as described below under “Potential Change in Control and Other Post-Employment Payments.”
Retention Agreements
In October 2009, the Company entered into letter agreements to serve as one-time retention awards with the NEOs. The Committee deemed it to be in the best interest of the Company to provide an incentive to retain the current executive team in granting the retention awards. When granted, the awards were based on a year’s base salary for Mr. Corey and Mr. Strickler and half of a year’s base salary for Messrs. Tervalon, Beaver and Sloan. Under the letter agreements, because each NEO remained employed through October 5, 2010, he received a payment: $640,000 for Mr. Corey; $330,750 for Mr. Strickler; $146,000 for Mr. Tervalon; $137,250 for Mr. Beaver; and $101,750 for Mr. Sloan. The retention award is included in the “All Other Compensation” column of the Summary Compensation Table.
Termination and Change in Control Payments
The Company has entered into change in control agreements with our executive officers.NEOs and certain other senior management employees. 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
ExecutiveThrough December 2009, executive officers, as well as other key employees, maycould 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 toolDue to save for retirement or another specific financial need. Employees may elect to defer receipt ofminimal participation, in December 2009, the compensation for three or five years fromCompany terminated 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.Employees’ Deferred Compensation Plan.
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 $1.0 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 whowhose compensation 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.
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)”)FASB ASC Topic 718 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 thethat 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 |
|
| Kim Korth, Chairwoman |
| Jeffrey P. Draime |
| Douglas C. Jacobs |
| William M. Lasky |
Earl L. Linehan, Chairman
Kim Korth
William M. Lasky
15
Summary Compensation Table
The following table provides information regarding the compensation of our Chief Executive Officer, our Chief Financial Officer, and our three most highly compensated personsexecutive officers for 2007.2010.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 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 | |
Name and Principal Position | | Year | | Salary ($) | | | Stock Awards ($)(1) | | | Non-Equity Incentive Plan Compensation ($)(2) | | | All Other Compensation ($)(3) | | | Total ($) | |
| | | | | | | | | | | | | | | | | | |
| John C. Corey | | 2010 | | $ | 655,000 | | | $ | 1,296,116 | | | $ | 1,056,000 | | | $ | 707,557 | | | $ | 3,714,673 | |
| President & Chief | | 2009 | | | 615,439 | | | | 304,372 | | | | 204,800 | | | | 71,799 | | | | 1,196,410 | |
| Executive Officer | | 2008 | | | 640,000 | | | | 1,310,709 | | | | 480,768 | | | | 85,679 | | | | 2,517,156 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| George E. Strickler | | 2010 | | | 340,688 | | | | 432,500 | | | | 378,400 | | | | 353,335 | | | | 1,504,923 | |
| Executive Vice President, | | 2009 | | | 324,430 | | | | 87,907 | | | | 72,765 | | | | 27,290 | | | | 512,392 | |
| Chief Financial Officer & Treasurer | | 2008 | | | 330,750 | | | | 379,104 | | | | 194,359 | | | | 35,325 | | | | 939,538 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Mark J. Tervalon | | 2010 | | | 298,525 | | | | 289,948 | | | | 270,630 | | | | 153,199 | | | | 1,012,302 | |
| Vice President & President | | 2009 | | | 283,987 | | | | 53,091 | | | | 52,560 | | | | 21,995 | | | | 411,633 | |
| of the Stoneridge Electronics Division | | 2008 | | | 292,000 | | | | 228,324 | | | | 157,943 | | | | 22,368 | | | | 700,635 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Thomas A. Beaver | | 2010 | | | 279,600 | | | | 238,740 | | | | 253,170 | | | | 154,508 | | | | 926,018 | |
| Vice President of Global | | 2009 | | | 269,221 | | | | 42,244 | | | | 49,410 | | | | 20,985 | | | | 381,860 | |
| Sales & Systems Engineering | | 2008 | | | 274,500 | | | | 182,013 | | | | 151,565 | | | | 30,902 | | | | 638,980 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Michael D. Sloan | | 2010 | | | 219,790 | | | | 166,080 | | | | 202,500 | | | | 105,312 | | | | 693,682 | |
| Vice President & President | | 2009 | | | 203,500 | | | | 22,769 | | | | 36,630 | | | | 3,291 | | | | 266,190 | |
| of the Stoneridge Control Devices Division | | 2008 | | | 202,972 | | | | 51,101 | | | | 61,813 | | | | 11,558 | | | | 327,444 | |
| | |
(1) | | Mr. Tervalon elected to defer $8,833 of his 2006 salary. |
| |
(2) | | Mr. Corey elected to defer 50% of his 2006 bonus. |
|
(3) | (1) | The amounts included in the “Stock Awards” column represent the compensation cost recognizedgrant date fair value of common share awards computed in each year related to non-option stock awards, as described in SFAS 123(R) .accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 7 to our consolidated financial statements included in our annual reportAnnual Report onForm 10-K for the year ended December 31, 2007. Please see2010. For 2010, time- and performance-based common share awards were issued to our NEOs. The performance-based awards were expected to vest and no longer be subject to forfeiture at the Grantstarget level when granted. For 2009, all common share awards issued to the NEOs were time-based and amounts included in the above table are the maximum earnable under the award. For 2008, time- and performance-based common share awards were issued to our NEOs. The performance-based awards were expected to vest and no longer be subject to forfeiture at the target levels when granted. The following table summarizes grant date fair value of Plan-Based Awardsthe time-and performance-based awards as well as the maximum award that could be earned under the performance-based grants for 2007 table for more information regarding the stock awards granted in 2007.2008 common share awards: |
| | | Time Based | | | Target Performance Based | | | Maximum Performance Based | |
| Mr. Corey | | $ | 628,968 | | | $ | 681,741 | | | $ | 1,022,612 | |
| Mr. Strickler | | | 182,013 | | | | 197,091 | | | | 295,637 | |
| Mr. Tervalon | | | 109,854 | | | | 118,470 | | | | 177,705 | |
| Mr. Beaver | | | 87,237 | | | | 94,776 | | | | 142,164 | |
| Mr. Sloan | | | 47,388 | | | | 50,619 | | | | 75,929 | |
Please see the “Grants of Plan-Based Awards for 2010” table for more information regarding the restricted common share awards granted in 2010.
| |
(4) | (2) | The amount shown for each NEO in the “Non-Equity Incentive Plan Compensation” column is attributable to an annual incentive award earned under the AIP 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.listed. |
| |
(5) | (3) | The amounts shown for 20072010 in the “All Other Compensation” column are comprised of the following: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | 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 | |
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| | | Auto Allowance | | | Life Insurance | | | Gross-Up on Life Insurance | | | Healthcare Costs | | | Gross-Up on Healthcare Costs | | | Group Term Life Insurance | | | Club Dues | | | Retention Award | | | Health Insurance Premium | | | Total | |
| Mr. Corey | | $ | 14,400 | | | $ | 14,056 | | | $ | 9,900 | | | $ | 7,917 | | | $ | 5,576 | | | $ | 7,524 | | | $ | 5,174 | | | $ | 640,000 | | | $ | 3,010 | | | $ | 707,557 | |
| Mr. Strickler | | | 9,000 | | | | - | | | | - | | | | - | | | | - | | | | 4,847 | | | | 5,000 | | | | 330,750 | | | | 3,738 | | | | 353,335 | |
| Mr. Tervalon | | | - | | | | - | | | | - | | | | - | | | | - | | | | 240 | | | | 1,374 | | | | 146,000 | | | | 5,585 | | | | 153,199 | |
| Mr. Beaver | | | 14,400 | | | | - | | | | - | | | | - | | | | - | | | | 1,032 | | | | - | | | | 137,250 | | | | 1,826 | | | | 154,508 | |
| Mr. Sloan | | | - | | | | - | | | | - | | | | - | | | | - | | | | 552 | | | | - | | | | 101,750 | | | | 3,010 | | | | 105,312 | |
Grants of Plan-Based Awards for 20072010
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | 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
| | | | | 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 | | | | |
Name | | Grant Date | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | or Units (3) | | Awards (4) | | | Grant Date | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | Shares of Stock or Units (#)(3) | | | Stock and Option Awards ($)(4) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| John C. Corey | | | | | | $ | 244,000 | | | $ | 488,000 | | | $ | 976,000 | | | | | | | | | | | | | | | | | | | | n/a | | | | | $ | 264,000 | | | $ | 528,000 | | | $ | 1,056,000 | | | | | | | | | | | | | | | | |
| | | | 2/25/07 | | | | | | | | | | | | | | | | 26,200 | | | | 52,400 | | | | 78,600 | | | | 52,400 | | | $ | 1,575,930 | | | 2/14/2010 | | | | | | | | | | | | | | | 32,850 | | | | 65,700 | | | | 98,550 | | | 121,600 | | | $ | 1,296,116 | |
| | | | | | | | | | | | | | | | | | | 27,950 | | | | 55,900 | | | | 83,850 | | | | | | | | 386,828 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| George E. Strickler | | |
2/25/07 | | | | 86,625 | | | | 173,250 | | | | 346,500 | | | |
7,000 | | | |
14,000 | | | |
21,000 | | | |
14,000 | | | | n/a
233,081 | | | | | | 94,600 | | | | 189,200 | | | | 378,400 | | | | | | | | | | | | | | | | | | | | | |
| | | | 2/14/2010 | | | | | | | | | | | | | | | 10,950 | | | | 21,900 | | | | 32,850 | | | | 40,600 | | | | 432,500 | |
| | | | | | | | | | | | | | | | | | | 9,350 | | | | 18,700 | | | | 28,050 | | | | | | | | 129,404 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark J. Tervalon | | |
2/25/07 | | | | 62,607 | | | | 125,213 | | | | 250,426 | | | |
4,750 | | | |
9,500 | | | |
14,250 | | | |
9,500 | | | | n/a
285,713 | | | | | | 67,658 | | | | 135,315 | | | | 270,630 | | | | | | | | | | | | | | | | | | | | | |
| | | | 2/14/2010 | | | | | | | | | | | | | | | 7,350 | | | | 14,700 | | | | 22,050 | | | | 27,200 | | | | 289,948 | |
| | | | | | | | | | | | | | | | | | | 6,250 | | | | 12,500 | | | | 18,750 | | | | | | | | 86,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Thomas A. Beaver | | |
2/25/07 | | | | 60,255 | | | | 120,510 | | | | 241,020 | | | |
3,875 | | | |
7,750 | | | |
11,625 | | | |
7,750 | | | | n/a
233,081 | | | | | | 63,293 | | | | 126,585 | | | | 253,170 | | | | | | | | | | | | | | | | | | | | | |
| Vincent F. Suttmeier | | |
2/25/07 | | | | 47,925 | | | | 95,850 | | | | 191,700 | | | |
2,500 | | | |
5,000 | | | |
7,500 | | | |
5,000 | | | | n/a
150,375 | | |
| | | | 2/14/2010 | | | | | | | | | | | | | | | 6,050 | | | | 12,100 | | | | 18,150 | | | | 22,400 | | | | 238,740 | |
| | | | | | | | | | | | | | | | | | | 5,150 | | | | 10,300 | | | | 15,450 | | | | | | | | 71,276 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Michael D. Sloan | | | | | | 50,625 | | | | 101,250 | | | | 202,500 | | | | | | | | | | | | | | | | | | | | | |
| | | | 2/14/2010 | | | | | | | | | | | | | | | 4,200 | | | | 8,400 | | | | 12,600 | | | | 15,600 | | | | 166,080 | |
| | | | | | | | | | | | | | | | | | | 3,600 | | | | 7,200 | | | | 10,800 | | | | | | | | 49,824 | |
| | |
| (1) | | The amounts shown reflect awards granted under the Company’s 2007 Annual Incentive Plan.2010 AIP. In December 2006,2009, the Compensation Committee approved 2007the 2010 target AIP awards expressed as a percentage of the executive officer’s 20072010 approved base salary, and individual and Company performance measures for the purpose of determining the amount paid out under the AIP for each executive officer for the year ended December 31, 2007. The amount shown in the “target” column represents the target percentage of each executive officer’s 2007 base salary. The amount shown in the “maximum” column represents the maximum amount payable under the AIP, which is 200% of the target amount shown. The amount shown in the “threshold” column represents the amount payable under the AIP if only the minimum level of company and personal performance is attained, which is 50% of the target amount shown.2010. Please see Compensation Discussion and Analysis —– Annual Incentive PlanAwards for more information regarding the Company’s AIP2010 awards and performance measures. |
| |
| (2) | | The amounts shown reflect grants of performance-basedmade under the Company’s LTIP and LTCIP. Performance-based restricted common shares (“PBRS”) were granted under the Company’s Long-Term Incentive Plan.LTIP and are listed first in the table. The amount of PBRS that vest and are no longer subject to forfeiture will be determined on the third anniversary of the date of grant (assuming the grantee is still employed on that date) based on cumulative earnings per share between January 1, 2007total shareholder return of the Company compared to that of a defined peer group. Phantom shares were granted under the LTCIP and December 31, 2009. The amounts shownare listed second in the “target” column represent thosetable. The amount of phantom shares that vest and are no longer subject to forfeiture will be determined on the third anniversary of PBRS grantedthe grant date (assuming the grantee is still employed on that date) based on the Company’s EPS performance. The phantom shares will vest if performance targets are attained. Each amount shownbe paid out in cash equivalent to the “maximum” column represents the maximum amountnumber of shares that will vest under each grant, which is 150%at the fair market value of the target shown. Each amount shown inCompany’s common shares on the “threshold” column represents the minimum amountdate of shares that will vest under each grant if the minimum level of performance is attained, which is 50% of the target amount shown.vesting. Please see Compensation Discussion &and Analysis —– Long-Term Equity-Based Incentive Awards for more information regarding the PBRS.Awards. |
| |
| (3) | | The amounts shown reflect grants of time-based restricted common shares (“TBRS”) under the Company’s Long-Term Incentive Plan.LTIP. The TBRS granted on February 25, 200714, 2010 will vest and no longer be subject to forfeiture on the third anniversary of the date of grant (assuming the grantee is still employed on that date). |
| |
| (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).FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 7 to our consolidated financial statements included in our annual reportAnnual Report on Form10-K for the year ended December 31, 2007.2010. |
17
Outstanding Equity Awards at Year-End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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
| | | Option Awards | | | Stock Awards | |
Name | | Exercisable | | Price | | Date | | Vested | | Vested(1) | | Vested | | Vested(1) | | | 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 | | | | 75,000 | (4) | | $ | 603,000 | | | | 82,500 | (8) | | $ | 663,300 | | | | 10,000 | | | $ | 15.725 | | | 5/10/2014 | | | | 58,400 | (2) | | $ | 922,136 | | | | 94,950 | (5) | | $ | 1,499,261 | |
| | | | | | | | | | | | | | | | 55,000 | (5) | | | 442,200 | | | | 78,600 | (9) | | | 631,944 | | | | | | | | | | | | | | | 170,040 | (3) | | | 2,684,932 | | | | 98,550 | (6) | | | 1,556,105 | |
| | | | | | | | | | | | | | | | 52,400 | (6) | | | 421,296 | | | | | | | | | | | | | | | | | | | | | | | 121,600 | (4) | | | 1,920,064 | | | | 83,850 | (7) | | | 1,323,992 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| George E. Strickler | | | — | | | | — | | | | — | | | | 7,500 | (3) | | | 60,300 | | | | 41,250 | (8) | | | 331,650 | | | | - | | | | - | | | | - | | | | 16,900 | (2) | | | 266,851 | | | | 27,450 | (5) | | | 433,436 | |
| | | | | | | | | | | | | | | | 27,500 | (5) | | | 221,100 | | | | 21,000 | (9) | | | 168,840 | | | | | | | | | | | | | | | | 49,110 | (3) | | | 775,447 | | | | 32,850 | (6) | | | 518,702 | |
| | | | | | | | | | | | | | | | 14,000 | (6) | | | 112,560 | | | | | | | | | | | | | | | | | | | | | | | | 40,600 | (4) | | | 641,074 | | | | 28,050 | (7) | | | 442,910 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark J. Tervalon | | | 4,000 | | | | 10.385 | | | | 2/4/2013 | | | | 2,850 | (2) | | | 22,914 | | | | 10,700 | (7) | | | 86,028 | | | | 4,000 | | | | 10.385 | | | 2/4/2013 | | | | 10,200 | (2) | | | 161,058 | | | | 16,500 | (5) | | | 260,535 | |
| | | | | | | | | | | | | | | | 12,500 | (5) | | | 100,500 | | | | 18,750 | (8) | | | 150,750 | | | | | | | | | | | | | | | | 29,660 | (3) | | | 468,331 | | | | 22,050 | (6) | | | 348,170 | |
| | | | | | | | | | | | | | | | 9,500 | (6) | | | 76,380 | | | | 14,250 | (9) | | | 114,570 | | | | | | | | | | | | | | | | 27,200 | (4) | | | 429,488 | | | | 18,750 | (7) | | | 296,063 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Thomas A. Beaver | | | 2,000 | | | | 14.720 | | | | 4/15/2009 | | | | 2,850 | (2) | | | 22,914 | | | | 10,700 | (7) | | | 86,028 | | | | 20,000 | | | | 10.385 | | | 2/4/2013 | | | | 8,100 | (2) | | | 127,899 | | | | 13,200 | (5) | | | 208,428 | |
| | | | 3,000 | | | | 5.125 | | | | 1/9/2011 | | | | 9,250 | (5) | | | 74,370 | | | | 13,875 | (8) | | | 111,555 | | | | | | | | | | | | | | | | 23,600 | (3) | | | 372,644 | | | | 18,150 | (6) | | | 286,589 | |
| | | | 20,000 | | | | 7.925 | | | | 2/8/2012 | | | | 7,750 | (6) | | | 62,310 | | | | 11,625 | (9) | | | 93,465 | | | | | | | | | | | | | | | | 22,400 | (4) | | | 353,696 | | | | 15,450 | (7) | | | 243,956 | |
| | | | 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 | | |
| Michael D. Sloan | | | | - | | | | - | | | | - | | | | 4,400 | (2) | | | 69,476 | | | | 7,050 | (5) | | | 111,320 | |
| | | | 4,000 | | | | 7.925 | | | | 2/8/2012 | | | | 9,250 | (5) | | | 74,370 | | | | 13,875 | (8) | | | 111,555 | | | | | | | | | | | | | | | | 12,720 | (3) | | | 200,849 | | | | 12,600 | (6) | | | 198,954 | |
| | | | 2,000 | | | | 10.385 | | | | 2/4/2013 | | | | 5,000 | (6) | | | 40,200 | | | | 7,500 | (9) | | | 60,300 | | | | | | | | | | | | | | | | 15,600 | (4) | | | 246,324 | | | | 10,800 | (7) | | | 170,532 | |
| | |
| (1) | | Based on the closing price of the Company’s common shares on December 31, 20072010 ($8.04)15.79), as reported on the New York Stock Exchange. |
| |
| (2) | | RestrictedThese time-based restricted common shares vest in two equal installmentsvested on April 18, 2008 and 2009.March 2, 2011. |
| |
| (3) | | Restricted shares vest in three equal installments on January 11, 2008, 2009 and 2010. |
|
(4) | | Restricted shares vest in two equal installments on January 16, 2008 and 2009. |
|
(5) | | RestrictedThese time-based restricted common shares vest on July 23, 2009.March 8, 2012. |
| |
(6)(4) | | RestrictedThese time-based restricted common shares vest on February 25, 2010.14, 2013. |
| |
(7)(5) | | PerformanceThese performance-based restricted common shares were scheduled to vest on April 18, 2008March 2, 2011 subject to achievement of specified financial performance metrics. Achievement of the specified performance metrics was not met and these performance-based common shares were forfeited on March 2, 2011. |
| (6) | These performance-based restricted common shares are scheduled to vest on February 14, 2013 subject to achievement of specified financial performance metrics. |
| |
(8)(7) | | PerformanceThese phantom shares are scheduled to vest on July 23, 2009February 14, 2013 subject to achievement of specified financial performance metrics. |
|
(9) | | Performance shares vest on February 25, 2010 subject to achievement of specified financial performance metrics. |
Option Exercises and Stock Vested for 20072010
| | | | | | | | | | |
| | | Stock Awards | | |
| | | Number of Shares
| | Value Realized on
| | | Stock Awards | |
Name | | Acquired on Vesting | | Vesting | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) | |
| | | | | | | |
| John C. Corey | | | 37,500 | | | $ | 344,250 | | | | 52,400 | | | $ | 420,510 | |
| George E. Strickler | | | 2,500 | | | | 22,225 | | | | 16,500 | | | | 134,850 | |
| Mark J. Tervalon | | | 3,091 | | | | 38,502 | | | | 9,500 | | | | 76,238 | |
| Thomas A. Beaver | | | 3,091 | | | | 38,502 | | | | 7,750 | | | | 62,194 | |
| Vincent F. Suttmeier | | | 2,525 | | | | 31,528 | | |
| Michael D. Sloan | | | | 5,000 | | | | 40,125 | |
18
NonqualifedNonqualified Deferred Compensation for Fiscal Year 20072010
| | | | | | | | | | | | | | |
| | | Executive
| | | | | | |
| | | Contributions in
| | Aggregate Earnings
| | Aggregate Balance
| | |
Name | | Last FY | | in Last FY | | at Last FYE | | | Aggregate Earnings in Last FY ($) | | | Aggregate Withdrawals/ Distributions ($) | | | Aggregate Balance at Last FYE ($) | |
| | | | | | | | | | |
| John C. Corey | | $ | 183,247 | | | $ | 13,528 | | | $ | 196,775 | | | $ | 22,115 | | | $ | 535,678 | | | $ | - | |
| George E. Strickler | | | — | | | | — | | | | — | | | | - | | | | - | | | | - | |
| Mark J. Tervalon | | | — | | | | 849 | | �� | | 9,871 | | | | 473 | | | | 11,469 | | | | - | |
| Thomas A. Beaver | | | — | | | | — | | | | — | | | | - | | | | - | | | | - | |
| Vincent F. Suttmeier | | | — | | | | — | | | | — | | |
| Michael D. Sloan | | | | - | | | | - | | | | - | |
Mr. Corey deferred a portion of his bonus and annual incentive payment earned in 2006, 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 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. WeFor our NEOs, we set the level of benefits at two times base salary and average incentive award (described in detail below) to remain competitive with our select peer group. Finally, all payments under the CIC Agreement are conditioned on a no-compete,non-compete, non-solicitation and non-disparagement agreement. The change in control agreementsCIC 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 IRC Section 409A of the Code, to add a non-competition clause for our protection, to address ambiguity in the prior agreements and to add a conditional gross up of any excise tax imposed under IRC Section 280G.280G of the Internal Revenue Code. In December 2008, we amended the CIC Agreement to comply with the requirements of Revenue Ruling 2008-13, which requires that all payments to an executive be based on actual results for performance-based payments.
We believe that the CIC Agreements should compensate executives displaced by a change in control and not serve as an incentive to increase 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 change in control of the Company; and |
|
| | |
| | • · | the Company separates NEO from service, other than in the case of a termination for cause, within two years of the change in control; or |
|
| | • · | NEO separates from service for good reason (defined as material reduction in NEO’s title, responsibilities, power or authority, or assignment of duties that are materially inconsistent to previous duties, or material reduction in NEO’s compensation and benefits, or require NEO to work from any location more than 100 miles from previous location) within two years of the change in control. |
If the events listed above occur and the executive delivers a release to the Company, the Company will be obligated to provide the following to the executive:
| | |
| | • · | two times the greater of the NEO’s annual base salary at the time of a triggering event or at the time of the occurrence of a change in control; |
|
| | • · | two times the greater of the NEO’s average annual incentive award over the last three completed fiscal years or the last five completed fiscal years; |
|
| | • · | an amount equal to the pro rata amount of annual incentive compensation the NEO would have been entitled to at the time of a triggering event calculated based on the assumptionperformance goals that 100% personal and Company goals were achieved;achieved in the year in which the triggering event occurred; |
|
| | • · | continued life and health insurance benefits for twenty-four months following termination; and |
19
| | |
| | • · | agross-up payment to provide the NEO with an amount, on an after-tax basis, equal to any excise taxes payable by the NEO under tax laws in connection with payments described above. However, if the NEO’s total payments described above fall above the 280G limit (within the meaning of IRC Section 280G)280G of the Code) by 110% or less, then the total payments will be reduced to avoid triggering excise tax. |
Upon a change in control as defined in the LTIP, the restricted common shares included on the Outstanding“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.
In October 2009, the Company adopted the Officers’ and Key Employees’ Severance Plan (the “Severance Plan”). The named executive officers covered under the Severance Plan include Messrs. Strickler, Tervalon, Beaver and Sloan. If a covered executive is terminated by the Company without cause, the Company will be obligated under the Severance Plan to pay the executive’s salary for 12 months (18 months in the case of the Chief Financial Officer, Mr. Strickler) and continue health and welfare benefits coverage over the same period of time. Mr. Corey’s severance protection is provided in his employment agreement as described above.
No severance is payable if the NEO’s employment is terminated for “cause,” if they resign, or if they die.upon death.
Value of Payment Presuming Hypothetical December 31, 20072010 Termination Date
Upon resignation, no payments are due to any NEO in the table below. Assuming the events described in the table below occurred on December 31, 2007,2010, each NEO would be eligible for the following payments and benefits:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | 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 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | 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 | |
| | | | | | | | | | | | | | | | | |
| | | Termination Without Cause | | | Non-Termination Change in Control | | | Change in Control and NEO Resigns for Good Reason or is Terminated Without Cause | | | Disability | | | Death | |
| John C. Corey | | | | | | | | | | | | | | | |
| Base Salary | | $ | 1,320,000 | | | $ | - | | | $ | 1,320,000 | | | $ | 165,000 | | | $ | - | |
| Annual Incentive Award | | | 1,161,045 | | | | - | | | | 1,161,045 | | | | - | | | | - | |
| Long-term Incentive Award | | | 478,884 | | | | 783,628 | | | | 783,628 | | | | 478,884 | | | | 478,884 | |
| Unvested and Accelerated Restricted Common Shares | | | 3,071,692 | | | | 5,527,132 | | | | 5,527,132 | | | | 1,482,155 | | | | 1,482,155 | |
| Unvested and Accelerated Performance Common Shares | | | 560,011 | | | | 2,919,571 | | | | 2,919,571 | | | | 1,503,998 | | | | 1,503,998 | |
| Health & Welfare Benefits | | | 55,937 | | | | - | | | | 55,937 | | | | - | | | | - | |
| Tax Gross-Up | | | - | | | | - | | | | 1,626,114 | | | | - | | | | - | |
| Total | | $ | 6,647,569 | | | $ | 9,230,331 | | | $ | 13,393,427 | | | $ | 3,630,037 | | | $ | 3,465,037 | |
| | | | | | | | | | | | | | | | | | | | | |
| George E. Strickler | | | | | | | | | | | | | | | | | | | | |
| Base Salary | | $ | 516,000 | | | $ | - | | | $ | 688,000 | | | $ | - | | | $ | - | |
| Annual Incentive Award | | | - | | | | - | | | | 430,349 | | | | - | | | | - | |
| Long-term Incentive Award | | | 138,298 | | | | 226,306 | | | | 226,306 | | | | 138,298 | | | | 138,298 | |
| Unvested and Accelerated Restricted Common Shares | | | 912,867 | | | | 1,683,372 | | | | 1,683,372 | | | | 453,831 | | | | 453,831 | |
| Unvested and Accelerated Performance Common Shares | | | 186,972 | | | | 930,031 | | | | 930,031 | | | | 459,884 | | | | 459,884 | |
| Health & Welfare Benefits | | | 17,953 | | | | - | | | | 23,938 | | | | - | | | | - | |
| Tax Gross-Up | | | - | | | | - | | | | 465,827 | | | | - | | | | - | |
| Total | | $ | 1,772,090 | | | $ | 2,839,709 | | | $ | 4,447,823 | | | $ | 1,052,013 | | | $ | 1,052,013 | |
| | | | | | | | | | | | | | | | | | | | | |
| Mark J. Tervalon | | | | | | | | | | | | | | | | | | | | |
| Base Salary | | $ | 300,700 | | | $ | - | | | $ | 601,400 | | | $ | - | | | $ | - | |
| Annual Incentive Award | | | - | | | | - | | | | 320,755 | | | | - | | | | - | |
| Long-term Incentive Award | | | 83,544 | | | | 136,709 | | | | 136,709 | | | | 83,544 | | | | 83,544 | |
| Unvested and Accelerated Restricted Common Shares | | | 563,561 | | | | 1,058,877 | | | | 1,058,877 | | | | 590,546 | | | | 590,546 | |
| Unvested and Accelerated Performance Common Shares | | | 125,259 | | | | 603,178 | | | | 603,178 | | | | 289,308 | | | | 289,308 | |
| Health & Welfare Benefits | | | 17,094 | | | | - | | | | 34,189 | | | | - | | | | - | |
| Tax Gross-Up | | | - | | | | - | | | | 280,702 | | | | - | | | | - | |
| Total | | $ | 1,090,158 | | | $ | 1,798,764 | | | $ | 3,035,810 | | | $ | 963,398 | | | $ | 963,398 | |
| | | | | | | | | | | | | | | | | | | | | |
| Thomas A. Beaver | | | | | | | | | | | | | | | | | | | | |
| Base Salary | | $ | 281,300 | | | $ | - | | | $ | 562,600 | | | $ | - | | | $ | - | |
| Annual Incentive Award | | | - | | | | - | | | | 302,763 | | | | - | | | | - | |
| Long-term Incentive Award | | | 66,447 | | | | 108,731 | | | | 108,731 | | | | 66,447 | | | | 66,447 | |
| Unvested and Accelerated Restricted Common Shares | | | 451,673 | | | | 854,239 | | | | 854,239 | | | | 481,595 | | | | 481,595 | |
| Unvested and Accelerated Performance Common Shares | | | 103,159 | | | | 492,648 | | | | 492,648 | | | | 234,394 | | | | 234,394 | |
| Health & Welfare Benefits | | | 6,293 | | | | - | | | | 12,586 | | | | - | | | | - | |
| Tax Gross-Up | | | - | | | | - | | | | - | | | | - | | | | - | |
| Total | | $ | 908,872 | | | $ | 1,455,618 | | | $ | 2,333,567 | | | $ | 782,436 | | | $ | 782,436 | |
| | | | | | | | | | | | | | | | | | | | | |
| Michael D. Sloan | | | | | | | | | | | | | | | | | | | | |
| Base Salary | | $ | 225,000 | | | $ | - | | | $ | 450,000 | | | $ | - | | | $ | - | |
| Annual Incentive Award | | | - | | | | - | | | | 200,629 | | | | - | | | | - | |
| Long-term Incentive Award | | | 35,830 | | | | 58,631 | | | | 58,631 | | | | 35,830 | | | | 35,830 | |
| Unvested and Accelerated Restricted Common Shares | | | 260,188 | | | | 516,649 | | | | 516,649 | | | | 315,800 | | | | 315,800 | |
| Unvested and Accelerated Performance Common Shares | | | 71,845 | | | | 320,537 | | | | 320,537 | | | | 141,935 | | | | 141,935 | |
| Health & Welfare Benefits | | | 12,830 | | | | - | | | | 25,660 | | | | - | | | | - | |
| Tax Gross-Up | | | - | | | | - | | | | 138,711 | | | | - | | | | - | |
| Total | | $ | 605,693 | | | $ | 895,817 | | | $ | 1,710,817 | | | $ | 493,565 | | | $ | 493,565 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | 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 | |
| | | | | | | | | | | | | | | | | |
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Directors’ Compensation
DIRECTORS’ COMPENSATION
Cash Compensation
Each non-employee director who is not an employee of the Company receives a retainer of $35,000 per year for beingserving as a director $1,000of the Company, $1,500 for attending each meeting of the Board of Directors and $500$750 for participating in each telephonic meeting of the Board of Directors.Board. 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.for participating in telephonic meetings. The Audit Committee chairman receives additional compensation of $7,500$10,000 per year and the Compensation Committee chairmanand Nominating and Corporate Governance Committee chairperson each receives additional compensation of $4,000$5,000 per year. In additionBeginning in 2007,2009, directors were paid an additional cash award granted to supplement the chairpersonfair value of the annual grant of restricted common shares due to the depressed market value of our common shares and the number of shares available under the Directors’ Restricted Shares Plan at the date of grant. The final payment of this award occurred in 2010. Additionally in 2010, two members of a Board special committee received additional compensation of $70,000 per year.each in connection with their work on a special project. Directors who are also employees of the Company are not paid additional compensation for serving as a director. The Company reimburses out-of-pocket expenses incurred by all directors in connection with attending Board of Directors’ and committee meetings.
Equity Compensation
Pursuant to the Directors’ Restricted Shares Plan, non-employee directors are eligible to receive awards of restricted common shares. In 2007, each non-employee director who served on the Board of Directors2010, Mr. Lasky was granted 5,10015,880 restricted common shares except for Mr. Lasky who wasand all other directors were granted 10,2007,940 restricted common shares. The restrictions for those common shares lapsed on February 26, 2008.14, 2011.
DeferredDirector Compensation Table
| Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) (1) | | | Total ($) | |
| | | | | | | | | | |
| Jeffrey P. Draime | | $ | 69,361 | | | $ | 54,945 | | | $ | 124,306 | |
| Douglas C. Jacobs | | | 83,361 | | | | 54,945 | | | | 138,306 | |
| Ira C. Kaplan | | | 67,233 | | | | 54,945 | | | | 122,178 | |
| Kim Korth | | | 143,611 | | | | 54,945 | | | | 198,556 | |
| William M. Lasky | | | 143,222 | | | | 109,890 | | | | 253,112 | |
| Paul J. Schlather | | | 136,483 | | | | 54,945 | | | | 191,428 | |
A non-employee director may elect to have all or a portion of their 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
| | | | | | | | | | | | | |
| | | 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 2007 related to non-optionsfair value at grant date of restricted common share awards to directors, computed in accordance with SFAS 123(R).FASB ASC Topic 718. For a discussion of the valuation assumptions, see Note 7 to our consolidated financial statements included in our annual reportAnnual Report onForm 10-K for the year ended December 31, 2007. The grant date fair value of stock awards granted in 2007, computed in accordance with SFAS 123(R), was $120,666 for Mr. Lasky and $60,333 for each other director.2010. |
22
ShareholdersOTHER INFORMATION
Shareholder’s Proposals for 20092012 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 20092012 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, 2008,14, 2011, for inclusion in the Company’s proxy statement and form of proxy relating to the 20092012 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, 2009.24, 2012.
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, 2007,2010, all Section 16(a) filing requirements applicable to the Company’s executive officers, directors and greater-than-10%more than 10% beneficial owners were complied with, except that Mr. Edward F. Mosel wasCorey and Mr. Tervalon each filed late in filing one Form 4 relatingrelated to one transaction.
Other Matters
If the enclosed proxy card is executed and returned to us via mail, telephone or Internet, 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, to elect three years with respect to the advisory vote on conducting future advisory votes on executive compensation, and FOR the proposalproposals (i) to ratify the appointment of Ernst & Young as the Company’s independent auditors for the year ending December 31, 2008.2011; (ii) to approve of the advisory resolution on executive compensation; and (iii) to approve the Amended AIP.
Director nominees who receive the greatest number of affirmative votes will be elected directors and the choice selected by the most shareholders will be deemed the shareholders’ choice on the frequency of the Company’s executive compensation advisory vote. Broker non-votes and abstaining votes will be counted as “present” for purposes of determining whether a quorum has been achieved at the meeting, but will not be counted in favor of or against any nominee. The voting standards for each of the other known matters to be considered at the meeting are set forth within the above proposals. All other matters to be considered at the meeting require for approval the favorable vote of a majority of the shares entitled to vote and represented at the meeting in person or by proxy.
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 and will, in effect, be votes against the proposal relating to the ratification of Ernst & Young. Director nominees who receive the greatest number of affirmative votes will be elected directors. The proposals to approve the ratification of Ernst & Young must receive the affirmative vote of a majority of the Company’s common shares present 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 voted at the meeting in person or by proxy (or such different percentage as established by applicable law).
If any other matter properly comes before the meeting, the persons named in the proxy will vote thereon in accordance with their judgment. The Company does not know of any other matter that willmay be presented for action at the meeting and the Company has not received any timely notice that any of the Company’s shareholders intend to present a proposal at the meeting.
| By order of the Board of Directors, |
|
| ROBERT M. LOESCH, |
| Secretary |
Dated: April 12, 2011
APPENDIX A
STONERIDGE, INC.
AMENDED ANNUAL INCENTIVE PLAN
Section 1. Purpose
The purpose of the Stoneridge, Inc. (the “Company”) Annual Incentive Plan, as amended, (the “Plan”) is to provide an opportunity to the Company’s (and the Company’s Subsidiaries’) officers and other key employees selected by the Committee (defined below) to earn annual incentive or bonus awards in order to motivate those persons to put forth maximum efforts toward the growth, profitability and success of the Company and its Subsidiaries (defined below) and to encourage such individuals to remain in the employ of the Company or a Subsidiary. Awards for participating employees under the Plan shall depend upon corporate and individual performance measures as determined by the Committee (defined below) for the Performance Year (defined below).
Section 2. Definitions
In this Plan, unless the context clearly indicates otherwise, words in the masculine gender shall be deemed to include a reference to the female gender, any term used in the singular also shall refer to the plural, and the following terms, when capitalized, shall have the meaning set forth in this Section 2:
(a) “Award” means a potential cash benefit payable or cash benefit paid to a person in accordance with the terms and conditions of the Plan.
(b) “Beneficiary” means the person or persons designated in writing by the Grantee as his or her beneficiary in respect of an Award; or, in the absence of an effective designation, or if the designated person or persons predecease the Grantee, the Grantee’s Beneficiary shall be the person or persons who acquire by bequest or inheritance the Grantee’s rights in respect of an Award. In order to be effective, a Grantee’s designation of a Beneficiary must be on file with the Company before the Grantee’s death. Any such designation may be revoked and a new designation substituted therefor at any time before the Grantee’s death.
(c) “Board of Directors” or “Board” means the Board of Directors of the Company.
(d) “Code” means the Internal Revenue Code of 1986, as amended from time to time.
(e) “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.
AVERY S. COHEN,
Secretary(f) “Company” means Stoneridge, Inc.
Dated: April 4, 2008
(g) “Covered Executive” 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.
23
(h) “Disability” or “Disabled” means having a total and permanent disability as defined in Section 22(e)(3) of the Code.
(i) “Grantee” means an officer or key employee of the Company or a Subsidiary to whom an Award has been granted under the Plan.
(j) “Performance Objective” means the goal or goals identified by the Committee that will result in an Award if the target for the Performance Year is satisfied.
(k) “Performance Year” means the then current fiscal year of the Company.
(l) “Performance-Based Compensation” means compensation that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations thereunder.
(m) “Subsidiary” means a corporation, association, partnership, limited liability company, joint venture, business trust, organization, or business of which the Company directly or indirectly through one or more intermediaries owns at least fifty percent (50%) of the outstanding capital stock (or other shares of beneficial interest) entitled to vote generally in the election of directors or other managers of the entity.
Section 3. 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 Grantees under the Plan, to determine the time when Awards will be granted, to determine whether performance objectives and other conditions for earning Awards have been met, to determine whether Awards will be paid at the end of the Performance Year, and to determine whether an Award or payment of an Award should be reduced or eliminated. The Committee is authorized, subject to the 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 Awards, or the Awards of any Covered Executive or any executive officer (as defined pursuant to the Securities Exchange Act of 1934). Except as provided in the preceding sentence, as to the selection of and grant of Awards to Grantees who are not Covered Executives 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 Code Section 162(m) otherwise require.
(c) The Committee, or any person to whom it has delegated duties as described herein, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may 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.
Section 4. Eligibility
The Committee may grant Awards under the Plan to such of the Company’s (and the Company’s Subsidiaries’) officers and key employees as it shall select for participation pursuant to Section 3 above.
Section 5. Awards; Limitations on Awards
(a) Each Award granted under the Plan shall represent an amount payable in cash by the Company to the Grantee upon achievement of one or more of a combination of Performance Objectives in a Performance Year, 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 Awards under the Plan shall be evidenced by Award letters 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 Grantee’s Award; provided, however, that in the event of any conflict between the provisions of the Plan and any Award letter, the provisions of the Plan shall prevail. An Award shall be determined by multiplying the Grantee’s target percentage of base salary with respect to a Performance Year by applicable factors and percentages based on the achievement of Performance Objectives, subject to the discretion of the Committee as provided in Section 6 hereof.
(b) The maximum amount of an Award granted to any one Grantee in respect of a Performance Year shall not exceed $2.0 million. This maximum amount limitation shall be measured at the time of settlement of an Award under Section 7.
(c) Annual Performance Objectives shall be based on the performance of the Company, one or more of its Subsidiaries or affiliates, one or more of its units or divisions and/or the individual for the Performance Year. The Committee may use one or more of the following business criteria to establish Performance Objectives for each Grantee: 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 labor or material costs or the Committee may use one or more other business criteria that apply to a Grantee, a business unit, the Company or a subsidiary or any combination thereof. The Performance Objective for any Grantee 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.
Section 6. Grant of Awards
(a) The Committee shall grant Awards to any Grantee who is a Covered Executive not later than 90 days after the commencement of the Performance Year. If a Covered Executive is initially employed by the Company or a Subsidiary after the beginning of a Performance Year, the Committee may grant an Award to that Covered Executive with respect to a period of service following the Covered Executive’s date of hire, provided that no more than twenty-five percent (25%) of the relevant service period has elapsed when the Committee grants the Award and the Performance Objective otherwise satisfies the requirements applicable to the Covered Executive. The Committee shall select Grantees other than Covered Executives for participation in the Plan and shall grant Awards to such Grantees at such times as the Committee may determine. In granting an Award, the Committee shall establish the terms of the Award, including the Performance Objectives and the maximum amount that will be paid (subject to the limit in Section 5) if the Performance Objectives are achieved. The Committee may establish different payment levels under an Award based on different levels of achievement under the Performance Objectives.
(b) After the end of each Performance Year, the Committee shall determine the amount payable to each Grantee in settlement of the Grantee’s Award for the Performance Year. The Committee, in its discretion, may reduce the maximum payment established when the Award was granted, or may determine to make no payment under the Award. The Committee, in its discretion, may increase the amount payable under the Award (but not to an amount greater than the limit in Section 5) to a Grantee who is not a Covered Executive. The Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m) of the Code, prior to the settlement of each Award granted to a Covered Executive, that the Performance Objectives and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied.
(c) The Committee may adjust or modify Awards or terms of 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 Grantee whose position or duties with the Company change during a Performance Year, or (3) with respect to any person who first becomes a Grantee after the first day of the Performance Year; provided, however, that no adjustment to an Award granted to a Covered Executive shall be authorized or made if, and to the extent that, such authorization or the making of such adjustment would contravene the requirements applicable to Performance-Based Compensation.
Section 7. Settlement of Awards
Except as provided in this Section 7, each Grantee shall receive payment of a cash lump sum in settlement of his or her Award, in the amount determined in accordance with Section 6. Such payment shall be made on or before the fifteenth (15th) day of the third (3rd) month following the Performance Year. No Award to a Covered Executive for a Performance Year commencing after December , 31, 2011, shall be settled until the shareholders of the Company have reapproved the Plan in a manner that satisfies the requirements of Section 162(m) of the Code.
Section 8. Termination of Employment
Except as otherwise provided in any written agreement between the Company and a Grantee, if a Grantee ceases to be employed by the Company prior to the end of a Performance Year for any reason other than death, or Disability, any Award for such Performance Year shall be forfeited. If such cessation of employment results from such Grantee’s death or Disability, the Committee shall determine, in its sole discretion and in such manner as it may deem reasonable, subject to Section 9, the extent to which the Performance Objectives for the Performance Year or portion thereof completed at the date of cessation of employment have been achieved, and the amount payable in settlement of the Award based on such determinations. The Committee may base such determination on the performance achieved for the full year, in which case its determination may be deferred until following the Performance Year. Such determinations shall be set forth in a written certification, as specified in Section 6. Such Grantee or his or her Beneficiary shall be entitled to receive a lump sum cash settlement of such Award at the earliest time such payment may be made without causing the payment to fail to be deductible by the Company under Section 162(m) of the Code.
Section 9. Status of Awards Under Section 162(m)
It is the intent of the Company that Awards granted to Covered Executives for Performance Years commencing after December 31, 2011, shall constitute Performance-Based Compensation, if at the time of settlement the Grantee remains a Covered Executive. Accordingly, the Plan shall be interpreted in a manner consistent with Section 162(m) of the Code and the regulations thereunder. If any provision of the Plan relating to a Covered Executive or any Award letter evidencing such an Award to a Covered Executive 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.
Section 10. Transferability
Awards and any other benefit payable under, or interest in, this Plan are not transferable by a Grantee except upon a Grantee’s death by will or the laws of descent and distribution, and shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any such attempted action shall be void.
Section 11. Withholding
All payments relating to an Award, whether at settlement or resulting from any further deferral or issuance of an Award under another plan of the Company in settlement of the Award, shall be net of any amounts required to be withheld pursuant to applicable federal, state and local tax withholding requirements.
Section 12. Tenure
A Grantee’s right, if any, to continue to serve the Company as a Covered Executive, officer, employee, or otherwise, shall not be enlarged or otherwise affected by his or her selection as a Grantee or any other event under the Plan.
Section 13. No Rights to Participation or Settlement
Nothing in the Plan shall be deemed to give any eligible employee any right to participate in the Plan except upon determination of the Committee. Until the Committee has determined to settle an Award under Section 7, a Grantee’s selection to participate, the grant of an Award, and other events under the Plan shall not be construed as a commitment that any Award will be settled under the Plan. The foregoing notwithstanding, the Committee may authorize legal commitments with respect to Awards under the terms of an employment agreement or other agreement with a Grantee, to the extent of the Committee’s authority under the Plan, including commitments that limit the Committee’s future discretion under the Plan, but in all cases subject to the provisions of Section 9.
Section 14. Unfunded Plan
A Grantee shall have no right, title, or interest whatsoever in or to any specific assets of the Company, nor to any investments that the Company may make to aid in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Grantee, Beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company. The Company shall not be required to establish any special or separate fund, or to segregate any assets, to assure payment of such amounts. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
Section 15.Other Compensatory Plans and Arrangements
Nothing in the Plan shall preclude any Grantee from participation in any other compensation or benefit plan of the Company or its Subsidiaries. The adoption of the Plan and the grant of Awards hereunder shall not preclude the Company or any Subsidiary from paying any other compensation apart from the Plan, including compensation for services or in respect of performance in a Performance Year for which an Award has been made. If an Award to a Covered Executive may not be settled under the terms of the Plan, however (for example, because the Covered Executive has not achieved the Performance Objective or because shareholders have not approved the Plan), neither the Company nor a Subsidiary may pay any part of the Award to the Covered Executive outside the Plan.
Section 16.Duration, Amendment and Termination of Plan
After reapproval of the Plan at the 2011 Annual Meeting of Shareholders, no Award may be granted in respect of any Performance Year commencing after December 31, 2016 (if the Company’s 2016 fiscal year does not end on December 31 then for purposes of this sentence the actual date of the end the of Company’s 2016 fiscal year shall be substituted for December 31, 2016).
The Board may amend the Plan from time to time (either retroactively or prospectively), and may suspend or terminate the Plan at any time, provided that any such action shall be subject to shareholder approval if and to the extent required to ensure that compensation under the Plan will qualify as Performance-Based Compensation, or as otherwise may be required under applicable law.
Section 17.Governing Law
The Plan, Awards granted hereunder, and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Ohio (regardless of the law that might otherwise govern under applicable Ohio principles of conflict of laws).
Section 18.Effective Date
The Plan was initially effective as of December 31, 2006 and approved by the Company’s shareholders at the 2007 Annual Meeting of Shareholders. The Plan, as amended, shall be effective as of December 31, 2011; provided the Company’s shareholders reapprove the Plan at the 2011 Annual Meeting of Shareholders. 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.
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STONERIDGE, INC.
| | PROXYIMPORTANT ANNUAL MEETING INFORMATION |
The Proxies will vote as specified above, 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 annual meeting of shareholders and until his successor has been duly elected and qualified: |
| | | Electronic Voting Instructions |
| | You can vote by Internet or telephone! |
| | Available 24 hours a day, 7 days a week! |
| | Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. |
| | VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. |
| | Proxies submitted by the Internet or telephone must be received by 1:00 a.m., EDT, on May 9, 2011. |
| | Vote by Internet |
| | • Log on to the Internet and go to |
| | www.envisionreports.com/SRI |
| | • Follow the steps outlined on the secured website. |
| | Vote by telephone |
| | • Call toll free 1-800-652-VOTE (8683) within the USA, |
| | US territories & Canada any time on a touch tone |
| | telephone. There is NO CHARGE to you for the call. |
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. | x | | • Follow the instructions provided by the recorded message. |
Annual Meeting Proxy Card
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
| A | Proposals — The Proxies will vote as specified below, or if a choice is not specified, they will vote FOR the nominees listed in proposal 1 and FOR proposals 2, 3 and 5 and “Three Years” on proposal 4. |
| 1. Election of Directors: | 01 - John C. Corey | 02 - Jeffrey P. Draime | 03 - Douglas C. Jacobs | 04 - Ira C. Kaplan |
| 05 - Kim Korth | 06 - William M. Lasky | 07 - Paul J. Schlather | |
| ¨ | Mark here to vote FOR all nominees |
| ¨ | Mark here to WITHHOLD vote from all nominees |
| | | 01 | 02 | 03 | 04 | 05 | 06 | 07 |
| o | For All EXCEPT - To withhold a vote for one or more nominees, mark the box to the left and the corresponding numbered box(es) to the right. | ¨ | ¨ | ¨ | ¨ | ¨ | ¨ | ¨ |
| | | | For | Against | Abstain | | | | | | For | Against | Abstain |
| 2. | Ratification of Ernst & Young LLP: | | ¨ | ¨ | ¨ | | | 3. | Advisory resolution on executive compensation: | | ¨ | ¨ | ¨ |
| | | | | | | | | | | | | | |
| 4. | Advisory vote on the frequency of the advisory vote on executive compensation: | | 1 Yr o | | 3 Yrs o | Abstain o | | 5. | Approval of Amended Annual Incentive Plan: | | o | o | o |
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| 6. | On such other business as may properly come before the meeting. | | | | | | | | | | | | |
Change of Address — Please print new address below.
| C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as your name appears hereon, indicating, where proper, official position or representative capacity.
| Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. |
/ / | | | | |
John C. Corey
Kim Korth | | Jeffrey P. Draime
William M. Lasky | | Sheldon J. Epstein
Earl L. Linehan | | Douglas C. Jacobs |
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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, 2008. |
3. | | On such other business as may properly come before the meeting. |
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.(CONTINUED ON REVERSE SIDE)
Proxy — STONERIDGE, INC.
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, 2008,9, 2011, 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, 2008,12, 2011 is hereby acknowledged.
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Dated | | | | , 2008 |
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Signature(s) |
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Please sign exactly as your name or names appear hereon, indicating, where proper, official position or representative capacity. |
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE
