The table below sets forth certain information, as of July 19, 2019,12, 2022, regarding our executive officers. | | | | | | | | | | | | | | |
| Name | | | | Age | | | | Capacities in Which Served |
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J. Joseph ("Joe")Joe Bergera | | 5558 | | Chief Executive Officer, President and Director |
Andrew SchmidtDouglas L. Groves | | 5760 | | Chief Financial Officer, Senior Vice President of Finance and Secretary |
Joe BoissyTodd Kreter | | 5562 | | Chief Marketing Officer |
James Chambers | | 53 | | Senior Vice President and General Manager, Agriculture and Weather Analysis |
Todd Kreter | | 59 | | Senior Vice President and General Manager, Roadway Sensors |
Ramin Massoumi | | 46 | | Senior Vice President and General Manager, Transportation SystemsChief Technology Officer |
The following is a brief description of the capacities in which the above persons have served the Company and their business experience during at least the past five years. The biography of Mr. Bergera appears earlier in this proxy statement. See "Proposal 1:“Proposal 1: Election of Directors."”
Andrew SchmidtDouglas L. Groves has served as ourSenior Vice President and Chief Financial Officer since he joined on December 4, 2019. Mr. Groves has more than 30 years of Finance,unique and highly valuable experience. Most recently, he served as Vice President, Chief Financial Officer and Secretary since March 2015.Treasurer of Ducommun, Inc., through June 2019, having joined the company in January 2013. Through December 2012, he held the position of Corporate Vice President and Chief Information Officer at Beckman Coulter, following a series of financial roles at the company beginning in January 1998. Beckman Coulter was acquired by Danaher Corporation in February 2011. Prior to joining us,Beckman Coulter, Mr. Schmidt served as the Chief Financial OfficerGroves was corporate controller of a privately held civil engineering firm and Corporate Secretary of Smith Micro Software, Inc., a publicly-held provider of wirelesssenior auditor and mobility software solutions from 2005 to May 2014. Prior to joining Smith Micro,consultant at Deloitte & Touche. Mr. Schmidt held CFO roles for several other public companies, including Genius Products,Groves holds an entertainment company, and Mad Catz Interactive, a provider of console video game accessories. He also served as Vice President (Finance) of Peregrine Systems, a publicly-held provider of enterprise level software. Mr. Schmidt holds a B.B.A. degree in FinanceM.B.A. from the University of TexasSouthern California and an M.S.a B.S. degree in Accountancy from San DiegoCalifornia State University.University, Long Beach.Joseph BoissyTodd Kreter has served as ourwas appointed Senior Vice President and Chief MarketingTechnology Officer since January 2017.on June 1, 2022. Prior to that, Mr. BoissyKreter served as Chief Marketing Officer of Vendavo, Inc. (acquired by Francisco Partners in October 2014), a provider of margin and profit optimization solutions, from September 2013 to November 2016. Prior to that, he served as the Chief Marketing Officer at 3VR Inc., a video intelligence solutions provider, from October 2011 to September 2013. From February 2002 to October 2011, he served in various management positions at ILOG, Inc. (acquired by IBM in July 2008), a provider of business rule management systems, with his last position as Vice President ILOG Worldwide Marketing, an IBM company. Mr. Boissy was Vice President Program Management, Credient at SunGard Trading & Risk Systems Inc., a provider of financial software solutions and services, from 2000 to 2002, and from 1997 to 2000, he served in management positions in product development, support and product management, most recently as the Vice President Product Marketing, with Infinity Financial Technology, Inc., a financial trading and risk management software solutions provider that was acquired by SunGard in October 1997. Prior to Infinity, Mr. Boissy was Director Product Development at Diagram Financial Software, Inc. (now part of Thomson Reuters) from 1993 to 1997. Mr. Boissy holds a B.S. degree in Electrical Engineering from the Lebanese University (Lebanon) and a M.S. degree in Computer Science and Data Analytics from the University of Paris XI (France).James Chambers has served as our Senior Vice President and General Manager, Agriculture and Weather Analytics since August 2017. Prior to that, Mr. Chambers served as Chief Executive OfficerAdvanced Sensors Technologies. From May 2014 until May 31, 2022, he held the title of Observant, Inc. (acquired by Jain Irrigation, Inc. in February 2017), a provider of agricultural in-field hardware and cloud based applications for precision farm water management, from February 2016 to February 2017. From June 2013 to February 2016, he served as Director of Marketing at Bayer CropScience, a company specializing in agriculture, and lifesciences. Prior to that, Mr. Chambers served in various key management positions at divisions of Deere & Company, including John Deere Water
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(acquired by FIMI Opportunity Funds in June 2014), a provider of integrated Ag water management solutions, most recently as Director of Global Product Management and Marketing and then as the Director of Global Technology Solutions, from August 2010 to May 2013, and John Deere Agri Services, Inc. (acquired by Constellation Software, Inc. in January 2011), a provider of software solutions for the agricultural supply chain, most recently as the General Manager for the Specialty Crop Business Unit and then as the Director of Marketing, from June 2006 to August 2010. From January 2003 to June 2006, he was Global Business Manager at Valent BioSciences Corporation, a provider of technologies and products for the agricultural, public health, forestry and household markets, and from March 2001 to January 2003, he was Director of Global Sales and Marketing with AgraQuest (acquired by Bayer CropScience in July 2012), a supplier of biological pest management solutions. From 1989 to 2001, Mr. Chambers served in various management positions at Monsanto Company, a provider of agriculture products for farmers, most recently as Business Development Manager and Financial Analyst, then as Marketing Manager Animal Productivity and Market and Sales Manager. Mr. Chambers holds a B.S. degree in Agriculture Business Management and Economics from The Ohio State University.
Todd Kreter has served as our Senior Vice President and General Manager, Roadway Sensors since May 2014.Sensors. Mr. Kreter served as our Senior Vice President, Sensors Development and Operations from May 2009 to May 2014 and as Vice President of Engineering from November 2007 to May 2009. Prior to joining us, Mr. Kreter served in a number of executive positions at Quantum Corporation, most recently as the VP Global Services from 2004 to January 2007, where he managed the company'scompany’s worldwide customer service organization. Mr. Kreter holds a B.S. degree in Mechanical Engineering from California State University, Fullerton.
EXECUTIVE COMPENSATIONAND OTHER INFORMATION
Executive Compensation
The following is a summary of the compensation policies, plans and arrangements for our executive officers. This summary should be read in conjunction with the Summary Compensation Table and related disclosures set forth below. We are eligible to, and have chosen to, comply with the executive compensation disclosure rules applicable to a “smaller reporting company,” as defined in the applicable SEC rules, but we have voluntarily included additional disclosure about our executive compensation program to help our stockholders understand our executive compensation program. This section discusses the principles underlying our compensation policies for the officers named in the “Summary Compensation Table” below. We refer to these individuals as our “named executive officers” or “NEOs” for Fiscal 2022:
•Joe Bergera, our Chief Executive Officer, President and Director;
•Douglas L. Groves, our Chief Financial Officer, Senior Vice President of Finance and Secretary;
•Todd Kreter, currently our Senior Vice President and Chief Technology Officer, who served as our Senior Vice President & General Manager, Advanced Sensors Technologies during Fiscal 2022s; and
•Ramin Massoumi, our Senior Vice President & General Manager, Consulting Solutions, who served as such until December 31, 2021.
Fiscal 2022 Business Results Summary
We are a provider of smart mobility infrastructure management solutions. Municipalities, government agencies, and other transportation infrastructure providers use our solutions to monitor, visualize, and optimize mobility infrastructure to help ensure roads are safe, travel is efficient, and communities thrive. During another year of navigating the COVID-19 pandemic and the challenges it has brought to our everyday lives, we made progress across a range of financial and strategic dimensions in Fiscal 2022, despite significant global supply chain disruptions and associated materials price variances. Key financial results include:
•Fiscal 2022 total revenue of $133.6 million, up 14% year over year;
•Net loss from continuing operations of $6.9 million, or $(0.16) per share due to a second quarter noncash project write-off and increased costs related to global supply chain disruptions;
•Adjusted EBITDA(1) of $4.5 million, a $3.0 million decrease year over year due to global supply chain disruptions and associated increased costs; and
•Total net bookings for Fiscal 2022 of $155.4 million, up 28% year over year(2).
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(1)Adjusted EBITDA is adjusted income (loss) from continuing operations before interest, taxes, depreciation, amortization, stock-based compensation expense, project loss reserves, and executive severance and transition costs. For more information, refer to Non-GAAP Financial Measures and to the Consolidated Financial Statements, included on page 28 in Part II, Item 7 of the Company’s Annual Report on Form 10-K for Fiscal 2022.
(2)Net bookings is an operational measure representing the total dollar value of all definitive contracts executed during the relevant period, net of cancellations of previously authorized contract funding.
Impacts of COVID-19 on Iteris
The COVID-19 pandemic has servedhad an unprecedented impact on the U.S. economy as federal, state and local governments react to this public health crisis with travel restrictions, quarantines and “stay-at-home” orders. In turn, the uncertainties caused by these events and actions created various disruptions to our vendors, our employees and customers and negatively affected customer sentiment in general. We did not experience any facility closures in Fiscal 2022, but we did experience supply chain disruptions and work delays on certain projects. Should such delays become protracted or worsen, the impacts of the COVID-19 pandemic could further impact our business, results of operations and financial condition. Given the uncertainties of the COVID-19 pandemic, the Company has taken certain actions to preserve its liquidity, manage cash flow and strengthen its financial flexibility. Such actions include, but are not limited to, reducing our discretionary spending, reducing capital expenditures, implementing restructuring activities, and reducing payroll costs, including employee furloughs, pay freezes and pay cuts.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in the United States. The CARES Act provides relief to U.S. corporations through financial assistance programs and modifications to certain income tax provisions. The Company is applying certain beneficial provisions of the CARES Act, including the payroll tax deferral and the alternative minimum tax acceleration. For more information, refer to Note 6, Income Taxes, to the Consolidated Financial Statements, included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for Fiscal 2022.
Fiscal 2022 Executive Compensation Results Overview
The named executive officer compensation plan is composed of three elements: base salary, short-term annual incentive, and long-term equity incentives. The base salaries reflect the market for similar roles at similar companies. The short-term incentives program has specific targets tied to the Company’s annual financial performance. The long-term incentives consist of a mix between stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”). The inclusion of RSUs and PSUs in our long-term incentive program was new for Fiscal 2021, as the Company granted only stock options prior to Fiscal 2021.
Below is a summary of the results of our executive compensation program for Fiscal 2022:
•Base Salaries. In the first half of Fiscal 2022, after reviewing pay governance guidelines, receiving guidance from the Compensation Committee’s compensation consultant, FW Cook, reviewing prevailing compensation practices, evaluating recent Company performance, comparison to prior years’ payouts, and impacts of the COVID-19 pandemic, the Compensation Committee approved base salary increases for the named executive officers for Fiscal 2022. These increases averaged 3.2% for our named executive officers.
•Annual Incentives. Our named executive officers’ target bonuses for Fiscal 2022 remained generally unchanged from the target bonus levels in place during Fiscal 2021. Messrs. Bergera and Groves’ annual bonus performance metrics were Iteris revenue and Iteris Adjusted EBITDA. Because Messrs. Kreter and Massoumi led a business unit, Mr. Kreter for Advanced Sensors Technologies and Mr. Massoumi for Consulting Solutions, each had four metrics, including Iteris revenue, Iteris Adjusted EBITDA, their respective business unit revenue and business unit contribution margin. The annual cash performance bonuses for the named executive officers in Fiscal 2022 were earned at 56% of target for Mr. Bergera; 56% for Mr. Groves; and 67% for Mr. Kreter. Mr. Massoumi ceased to serve as our Senior Vice President and General Manager, Transportation Systems since March 2015.Consulting Solutions on December 31, 2021 and therefore was not eligible for a bonus for Fiscal 2022. The corporate bonus objectives for Messrs. Bergera and Groves paid out below target on both the Iteris revenue target and the Adjusted EBITDA metric. Mr. Massoumi joinedKreter’s bonus paid out below target on both Advanced Sensors Technologies revenue and Advanced Sensors Technologies contribution margin metric (in addition to under performance against the Iteris revenue and Adjusted EBITDA). Individual performance against management performance objectives is also considered in 1998determining the final annual bonus payouts. See “Fiscal 2022 Cash-Based Bonus Plan” table below for further details about results of our annual cash-based bonus program for Fiscal 2022.
•Long-Term Incentives. Commencing in Fiscal 2021, in response to stockholder feedback, the Company updated its long-term incentive compensation program to incorporate the use of PSUs for 25% of the long-term opportunity. The remaining portion consisted of 50% in stock options and served25% in RSUs. PSUs are earned based on the Company’s average revenues per share and cash flow from operations performance, as well as the Company’s total stockholder return (“rTSR”) relative to the Russell 2000. See “Fiscal 2022 Long-Term Incentive Awards” below for further details about updates to the executive compensation plan for Fiscal 2022.
Characteristics of our Executive Compensation Programs
Our executive compensation programs include a number of practices intended to align the interests of management and our stockholders.
| | | | | | | | |
What We Have | | What We Do Not Have |
Ø We have approximately 68% of target direct compensation for the chief executive officer (and 53% of the other named executive officers) that is performance-based or is at-risk Ø We have a performance-based long term incentive plan that utilizes PSUs, RSUs, and stock options Ø We have a clawback policy for incentive compensation Ø We have stock ownership guidelines for executive officers and directors Ø We have an independent compensation consultant to advise our Compensation Committee Ø We make ongoing stockholder outreach efforts to obtain input on our compensation practices | | ü We do not provide 280G excise tax gross-ups ü We do not provide any pension or supplemental retirement benefits ü We do not provide for any “single trigger” equity vesting for equity awards ü We prohibit repricing options without shareholder approval ü We prohibit granting stock options with an exercise price below 100% of fair market value ü We do not provide any perquisites |
Impact of 2021 Say-on-Pay Vote
The most recent stockholder advisory vote on named executive officer compensation required under the SEC rules was held on September 9, 2021. Approximately 87.4% of the total votes cast on such proposal (which excluded broker non-votes) were in favor of the compensation of our named executive officers. Based on the Board’s commitment to continue to strengthen the compensation plan for the Company’s named executive officers, the Compensation Committee evaluated and managerial positions priormodified elements of the Company’s compensation plan to better align management’s long-term incentive compensation with stockholder interests. Specifically, the Company determined that, commencing in Fiscal 2021, a portion of long-term incentive compensation will be granted in the form of PSUs, earned based on the achievement of certain financial performance and total stockholder return metrics. Prior to implementing these changes to our long-term incentive compensation, the Company invited several of its largest stockholders to provide comments on the proposed changes and ultimately finalized the plan structure taking into account investor feedback.
As the Company continues to grow and mature, the Compensation Committee will continue to make appropriate adjustments to our management team’s long-term incentive compensation. Currently, based on the voting preference of the Company’s stockholders, advisory votes on executive officer compensation will be conducted every year. The Compensation Committee will continue to take into account each such advisory vote in order to determine whether any subsequent changes to the promotionCompany’s executive compensation programs and policies would be warranted to reflect any stockholder concerns reflected in those advisory votes.
Compensation Philosophy and Objectives
Our executive compensation plans and arrangements are overseen and administered by our Compensation Committee, which is comprised entirely of independent directors as determined in accordance with applicable Nasdaq and SEC rules. Our philosophy is to provide our named executive officers with compensation that will motivate and retain them, provide them with meaningful incentives to achieve and exceed short-term and long-term corporate objectives set by our Compensation Committee, and align their long-term interests with those of our stockholders. Based on this philosophy, the compensation programs for our named executive officers are designed to achieve the following primary objectives:
•establish a compensation structure that is competitive enough to attract, retain and motivate outstanding executive talent;
•ensure that any cash incentive compensation programs for our named executive officers are aligned with our corporate strategies and business objectives by tying the potential payouts under such programs to the achievement of key strategic, financial and operational goals; and
•utilize long-term equity awards to align interests between our named executive officers and stockholders.
Annual Review of Cash and Equity Compensation; Role of Compensation Consultant
We conduct an annual review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers to ensure that compensation is structured appropriately to achieve our objectives. We review
each component of compensation as related but distinct. Although the Compensation Committee reviews total compensation, it has not adopted any formal guidelines for allocating total compensation between cash and equity compensation. We determine the appropriate level of each compensation component based in part, but not exclusively, on our retention goals and short-term and long-term objectives.
This review generally occurs in the first quarter of each fiscal year at which time the Compensation Committee establishes executive officer base salaries for the following fiscal year, reviews and approves any bonus awards and programs, establishes the performance objectives for our cash based bonus plan, and may grant equity compensation to the executive officers to ensure their interests are aligned with our stockholders and for retention.
In Fiscal 2022, the Compensation Committee retained the services of an independent compensation consulting firm, FW Cook, to advise on directors and named executive officer compensation. FW Cook provided the Compensation Committee with market data and analysis of our total direct compensation for such directors and named executive officer positions as compared with the competitive market. FW Cook reports only to the Compensation Committee and did not perform any other work for the Company during Fiscal 2022 beyond its services related to director and named executive officer compensation. As provided in its charter, the Compensation Committee has the authority to determine the scope of FW Cook’s services and may terminate their engagement at any time.
As part of the review process, our Chief Executive Officer provides our Compensation Committee with recommendations as to the base salary, cash bonus potential and long-term equity incentive awards for each of our executive officers other than himself based on that officer’s level of responsibility, individual performance and contribution to the attainment of our strategic corporate objectives and market data. Our Compensation Committee takes the Chief Executive Officer’s recommendations into consideration in setting named executive officer compensation, but retains complete discretionary authority to make all compensation-related decisions for our named executive officers. Our Compensation Committee makes its compensation decisions with respect to the Chief Executive Officer on the basis of relevant market data furnished by a variety of sources and its subjective assessment of individual performance and contributions to our overall corporate performance. Any decisions regarding our Chief Executive Officer’s compensation are made without such officer present.
Peer Groups
The Compensation Committee benchmarks our compensation programs to a peer group, which consists of publicly-traded technology companies in the applications software, systems software, and technology hardware industry categories, that are similar in size, as measured by revenues and market capitalization.
As of June 1, 2020, when the peer group was last assessed for Fiscal 2022, the peer revenues ranged from $44 million to $281 million, with a median of $139 million, which compared to Iteris’ revenues of $114 million. Market capitalization on July 1, 2020 for the peers ranged from $16 million to $1.1 billion, with a median of $191 million, which compared to Iteris’ market capitalization of $198 million.
The Fiscal 2022 peer group consisted of the following companies:
| | | | | | | | |
| •Agilysys, Inc. •AutoWeb, Inc. •Clearfield, Inc. •Digi International Inc. •Digital Turbine, Inc. •EMCORE Corporation •Intevac, Inc. •IntriCon Corporation •KVH Industries, Inc. •Majesco •MobileIron, Inc. | •Napco Security Technologies, Inc. •OneSpan Inc. •PCTEL, Inc. •Perceptron, Inc. •RealNetworks, Inc. •SeaChange International, Inc. •Telenav, Inc. •TransAct Technologies Incorporated •Upland Software, Inc. •Zix Corporation |
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The Compensation Committee evaluates our compensation program versus that of the peer companies with respect to both individual pay levels as well as the structure of the program. The Compensation Committee uses this data primarily to ensure that our executive compensation program as a whole is competitive. Market data is one of several factors that is used to evaluate compensation levels. Other factors may include individual and company performance, experience in the role, responsibility level, and internal equity.
Compensation Components and Structure
We utilize three main components in structuring compensation programs for our named executive officers:
| | | | | |
Pay Component | Rationale and Value to Stockholders |
Base Salary | •Only fixed compensation element in the executive compensation program •Recruit and retain executive talent and provide an element of economic security from year-to-year •Reflects competitive market conditions |
Performance-Based Cash Bonus (Short-Term Incentive Program) | •Motivates achievement of strategic priorities for the fiscal year as measured by financial and operational metrics •Diversified group of metrics to drive growth and stockholder value |
Equity Incentive Awards (Options, RSUs and PSUs)(1) | •Encourages focus on long-term stockholder value creation (and PSUs link compensation to achievement of specified corporate financial performance objectives) •Aligns to stockholders' interests •Provides long-term retention incentive of our executive talent |
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(1)Historically, the long-term incentive compensation for our named executive officers was largely in the form of stock options. Commencing in Fiscal 2021, the long-term incentive compensation component for our named executive officers consist of stock options, RSUs and PSUs. See “Fiscal 2022 Long-Term Incentive Awards” below for further details about updates to the executive compensation plan for Fiscal 2022.
Our Compensation Committee allocates a substantial portion of each named executive officer’s total compensation to performance and long-term incentive compensation as a result of the philosophy described above. While the Compensation Committee does establish specific performance criteria for its cash-based bonus plan each year, there is no formal pre-established policy for the allocation of compensation between cash and non-cash components or between short-term and long-term components, and there are no pre-established ratios between the compensation of our Chief Executive Officer and that of the other named executive officers. Instead, our Compensation Committee determines the compensation of each named executive officer annually based on its review of the market data, its subjective analysis of that individual’s performance and contribution to our financial performance and the other factors identified in the “Annual Review of Cash and Equity Compensation” section above to determine the appropriate level and balance of total compensation. We believe that this approach allows us to tailor compensation for each named executive officer to attract, retain and motivate that executive officer within the parameters of our compensation philosophy.
Base Salaries.Base salaries are set at levels that are intended to recognize the experience, skills, knowledge and responsibilities required of all of our named executive officers. Each named executive officer’s base salary level is typically reviewed on an annual basis and adjustments may be made to the individual’s base salary on the basis of his current position, most recentlyor her level of performance, the overall performance of the Company and the various compensation trends in our industry.
In June 2021, the Compensation Committee reviewed the base salaries of the named executive officers and established the base salaries for such officers for Fiscal 2022 as set forth below:
| | | | | | | | |
Named Executive Officer | | Fiscal 2022 Annual Base Salary |
Joe Bergera | | $445,000 |
Douglas L. Groves | | 412,500 |
Todd Kreter | | 300,000 |
Ramin Massoumi(1) | | 287,500 |
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(1)Mr. Massoumi ceased to serve as our Senior Vice President of Business Development from June 2011and General Manager, Consulting Solutions on December 31, 2021.
Fiscal 2022 Cash-Based Bonus Plan (“2022 Bonus Plan”).Our named executive officers are eligible to March 2015. Throughout his career, his focus has beenreceive an annual cash-based bonus under our 2022 Bonus Plan. Each year, our Compensation Committee establishes the performance objectives to be attained and the target bonuses payable based on the applicationlevel of advanced technologiesattainment of the specified goals, which generally include the Company’s revenues and Adjusted EBITDA for the fiscal year, the revenues and contribution margin of such officer’s business unit, and personal objectives set for each officer (“MBOs”). We define “contribution margin” as the business unit’s adjusted operating income without corporate expense allocations. The adjusted operating income of each business unit is calculated on a non-GAAP basis to exclude amortization, depreciation, stock-based compensation, and goodwill impairment charge, if any. For Fiscal 2022 the Compensation Committee approved using Adjusted EBITDA as a corporate performance objective, which is adjusted income (loss) from continuing operations before interest, taxes, depreciation, amortization, stock-based compensation expense, executive severance and transition costs, and fair value adjustment related to TrafficCast’s opening balance inventory. For more information, refer to Non-GAAP Financial Measures and to the Consolidated Financial Statements, included on page 28 in Part II, Item 7 of the Company’s Annual Report on Form 10-K for Fiscal 2022.”
The corporate and business unit performance targets and the actual achievement of such objectives for Fiscal 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Components | | Threshold | | Target | | Maximum | | Actual | | % Attained |
Corporate Revenue | | $108,411 | | | $135,514 | | | $162,617 | | | $133,572 | | | 99 | % |
Corporate Adjusted EBITDA | | 7,566 | | | 9,457 | | | 11,348 | | | 4,469 | | | 47 | % |
Advanced Sensors Technologies Revenue | | 52,493 | | | 65,616 | | | 78,739 | | | 64,070 | | | 98 | % |
Advanced Sensors Technologies Contribution Margin | | 20,071 | | | 25,089 | | | 30,106 | | | 21,250 | | | 85 | % |
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Under the Fiscal 2022 plan, if performance is below the “Threshold” goal amounts shown above, no bonus would be payable for that particular objective. If performance exceeds the “Maximum” goal amounts above, the NEOs could earn up to a maximum of 200% of their target opportunity for that particular objective. The combined maximum potential payout of the defined bonus elements is 160%. When combined with the 20% for personal objectives, the total maximum payouts for NEOs are 180%. Payouts in between the Threshold and Maximum levels above would be determined using linear interpolation.
Mr. Bergera’s Fiscal 2022 MBOs included, among other things, achieving certain divestiture and post-divestiture integration objectives, and executing on other strategic transformation activities. The Compensation Committee determined Mr. Bergera successfully executed on his MBOs, resulting in a 90% payout of the MBO’s portion of his Fiscal 2022 annual bonus.
Mr. Groves’ Fiscal 2022 MBOs included certain strategic transformation initiatives, enhancing our investor communication, building capabilities in the traffic managementaccounting organization, attainment of certain expense reductions, and certain contributions to strategic financial planning for the Company. The Compensation Committee determined Mr. Groves successfully executed on his MBOs, and determined Mr. Groves earned 91.2% of the MBOs portion of his Fiscal 2022 annual bonus.
Mr. Kreter’s Fiscal 2022 MBOs included the development and enhancement of certain solutions, achievement of new customer and market development activities in the Advanced Sensors Technologies business unit, and has led projects throughoutachievement of certain
bookings targets. The Compensation Committee determined Mr. Kreter successfully executed on his MBOs, resulting in an 84.4% payout of the United States and the Middle East. MBOs portion of his Fiscal 2022 annual bonus.
Mr. Massoumi ceased to serve as our Senior Vice President and General Manager, Consulting Solutions on December 31, 2021 and did not receive any bonus under our 2022 Bonus Plan.
The Compensation Committee typically meets near the end of the first fiscal quarter of each year to evaluate each NEO’s achievement of their respective MBOs and annual bonuses are typically paid out as soon as practicable thereafter.
The performance objectives, target bonus and actual bonus for each of our named executive officers for Fiscal 2022 were as follows:
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Named Executive Officer | | Performance Objectives Allocation (%) | | 2022 Target Bonus ($) | | 2022 Actual Bonus ($) | | % of Target Awarded (%) |
Joe Bergera | | | | $333,750 | | | $186,900 | | | 56 | % |
Corporate Revenue | | 40 | | | | | | |
Corporate Adjusted EBITDA | | 40 | | | | | | |
MBOs | | 20 | | | | | | |
Douglas L. Groves | | | | 206,250 | | | 116,013 | | | 56 | % |
Corporate Revenue | | 40 | | | | | | |
Corporate Adjusted EBITDA | | 40 | | | | | | |
MBOs | | 20 | | | | | | |
Todd Kreter | | | | 165,000 | | | 110,413 | | | 67 | % |
Advanced Sensors Technologies Revenue | | 25 | | | | | | |
Advanced Sensors Technologies Contribution Margin | | 25 | | | | | | |
Corporate Revenue | | 15 | | | | | | |
Corporate Adjusted EBITDA | | 15 | | | | | | |
MBOs | | 15 | | | | | | |
Cross Sell | | 5 | | | | | | |
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Equity Compensation.Our equity award program is one of our vehicles for offering long-term incentives to our named executive officers and providing an inducement for long-term retention. Our equity component also servesaligns the interests of our named executive officers with those of our stockholders and focuses their attention on the creation of stockholder value in the form of stock price appreciation. We believe that the equity-based compensation provides our named executive officers with a direct interest in our long-term performance and creates an ownership culture that establishes a mutuality of interests between our named executive officers and our stockholders. We have had no program, plan or practice pertaining to the timing of equity awards to named executive officers coinciding with the release of material non-public information.
Historically, to reward and retain our named executive officers in a manner that best aligns employees’ interests with stockholders’ interests, we have used stock options as the primary incentive vehicles for long-term compensation. We believe that stock options are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance. Because executives are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time. The exercise price of each stock option grant is the fair market value of our common stock on the grant date, as determined under our equity plan. Stock option awards generally vest in four equal annual installments over a four-year period, subject to continuous service through each vesting date. From time to time, our Compensation Committee may, however, determine that a different vesting schedule is appropriate.
Fiscal 2022 Long-Term Incentive Awards. Commencing with Fiscal 2021, in response to stockholder feedback and consultation with FW Cook, the Compensation Committee decided to rebalance management’s long-term incentive compensation to include a mix of stock options (50%), RSUs (25%), and PSUs (25%) (with percentages measured based on the awards’ grant date values, assuming target level achievement of applicable performance goals in the case of PSUs), as follows:
•50% of the long-term incentive compensation for our named executive officers was granted in the form of stock options, which will vest in accordance with the standard four-year vesting schedule described above.
•25% of the long-term incentive compensation for our named executive officers was granted in the form of RSUs, which will vest over three years, with 50% of such RSUs vesting on the second anniversary of the grant date and 50% of such
RSUs vesting on the third anniversary of the grant date. Each RSU represents a contingent right to receive one share of the Company’s common stock if vesting is satisfied.
•25% of the long-term compensation for our named executive officers was granted in the form of PSUs. Each PSU represents a contingent right to receive one share of the Company’s common stock if vesting is satisfied. The number of PSUs that vest at the end of each three-year performance period will depend, in part, on the Company’s average revenues per share and cash flow from operations performance during the three-year performance period and, in part, on the Company’s rTSR relative to the Russell 2000 over the three-year performance period. Executives will receive payment with respect to the PSUs, in the form of shares of the Company’s common stock, at the conclusion of the performance period, upon establishment of final performance results.
•Between 0% and 160% of the PSUs will be eligible to vest based on average annual performance during the three-year performance period relative to the revenues per share and cash flow from operations objectives to be established by the Compensation Committee at the beginning of each year. In addition, the final PSU vesting based on the revenues per share and cash flow from operations performance will be subject to a modifier between .75x-1.25x based on the Company’s rTSR relative to the Russell 2000 during the performance period, for a maximum achievement percentage of 200% of the “target” number of PSUs.
For purposes of the PSUs granted in Fiscal 2022, the performance metrics for Fiscal 2022, the first year in the three-year performance period, were as follows: cash flow from operations — threshold, $5,840,000; target, $7,300,000; and maximum, $8,760,000, and revenues per share — threshold, $2.91; target, $3.23; and maximum, $3.55; Our actual performance for Fiscal 2022 for cash flow used in operations was $5,593,000, resulting in a 0% achievement compared to the target. Our actual performance for Fiscal 2022 for revenues per share was $3.16, resulting in a 98% achievement compared to the target. These achievement levels for Fiscal 2022 will be used to determine our average performance for the three-year performance period ending March 31, 2023 for purposes of determining the final vesting of the PSUs.
Typically, the Compensation Committee provides grant guidelines to our Chief Executive Officer, who in turn will make recommendations back to the Compensation Committee regarding the number of shares to be granted to our executive officers (other than himself). See “Fiscal 2022 Grant of Plan-Based Awards” table below for the Fiscal 2022 awards made to our named executive officers.
Benefit Plans
Section 401(k) Plan.We make available a tax-qualified retirement plan that provides eligible employees, including our executive officers, with an opportunity to save for retirement on a tax-advantaged basis. Participants are able to defer a portion of their eligible compensation, subject to applicable annual limits under the Internal Revenue Code of 1986, as amended (the “Code”). Pre-tax contributions are allocated to each participant’s individual account and may be invested in selected alternative investments according to the participant’s direction. We do currently make a matching contribution under the 401(k) plan up to a maximum of 4% of the employee’s base salary. Such matching contribution is at the discretion of the Board and is typically evaluated on an annual basis.
Health and Welfare Benefits.Our named executive officers are eligible to participate in all our employee benefit plans, including our medical, dental, vision, group life and disability insurance plans, in each case on the same basis as other employees. We believe that these health and welfare benefits help ensure that we have a productive and focused workforce through reliable and competitive health and other benefits.
Perquisites.We do not provide significant perquisites or personal benefits to our named executive officers.
Post-Employment Compensation
For a summary of the material terms and conditions of our post-employment compensation arrangements, see “— Potential Payments upon Termination or Change in Control” below.
Incentive Compensation Clawback Policy
In July 2020, the Board adopted a Clawback Policy (the “Clawback Policy”) to create and maintain a culture that emphasizes integrity and accountability, and that reinforces the Company’s pay-for-performance compensation philosophy. Under the Clawback Policy, the Compensation Committee may direct the Company to seek to recover incentive compensation awarded or paid to an executive officer or other employee of the Company deemed subject to the Clawback Policy (“covered persons”) for a fiscal period if the Company must subsequently restate its financial statements.
The Clawback Policy is in addition to any recovery rights provided under applicable law. The Board continues to monitor regulatory developments and intends to further review and revise the Clawback Policy, if necessary, to comply with any final regulations issued for the purpose of implementing the requirements of the Dodd-Frank Act.
Stock Ownership Guidelines
The Board has adopted stock ownership guidelines for the Company’s non-employee directors and executive officers. See “Director Compensation” above for a description of these guidelines.
Compensation Risk Assessment
The Compensation Committee has evaluated our compensation programs and policies as generally applicable to our employees to ascertain any potential material risks that may be created by the compensation programs. The Compensation Committee concluded that our compensation policies and practices, taken as a lecturerwhole, are not reasonably likely to have a material adverse impact on our business or our financial condition. The following compensation design features help minimize the incentives for excessive risk-taking and keeps our named executive officers focused on the creation of upper division courseslong-term, sustainable value for our stockholders:
•Our base pay programs consist of generally competitive salary rates that represent a reasonable portion of total compensation and provide a reliable level of income on transportation engineering, ITSa regular basis, which decreases incentive on the part of our executives to take unnecessary or imprudent risks;
•To further ensure that the interests of our named executive officers are aligned with those of our stockholders, commencing with Fiscal 2021, a portion of executive officer long-term incentive compensation was awarded as equity subject to performance- and multi-modal operationtime-based vesting requirements. RSUs and PSUs will vest and settle over a three-year period, as applicable — in the case of RSUs, 50% vesting after two years and remaining vesting after completion of three years, and in the case of PSUs, cliff-vesting based on achievement of applicable performance goals at Universitythe end of California, Irvine. Mr. Massoumi holds a B.S. degreethree-year performance period.
•A portion of each executive’s incentive compensation opportunity is tied to long-term incentive compensation that emphasizes sustained performance over time. This reduces any incentive to take risks that might increase short-term compensation at the expense of longer term results;
•Annual equity awards have multi-year vesting which aligns the long-term interests of our executives with those of our stockholders and, again, discourages the taking of short-term risk at the expense of long-term performance; and
•Each officer has multiple performance objectives, some of which relate to the Company as a whole, which is more difficult for an officer to manipulate.
Tax Deductibility of Executive Compensation
The Compensation Committee considers the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in Civil Engineeringany taxable year for “covered employees.” While we consider the tax deductibility of each element of executive compensation as a factor in our overall compensation program, the compensation committee, however, retains the discretion to approve compensation that may not qualify for the compensation deduction if, considering all applicable circumstances, it would be in our best interest for such compensation to be paid without regard to whether it may be tax deductible.
Accounting for Stock-Based Compensation
Under FASB ASC 718, we are required to estimate the grant date “fair value” for each grant of equity award using various assumptions. This calculation is performed for accounting purposes and reported in the compensation tables in this proxy statement, even though recipients may never realize any value from their awards. ASC 718 also requires us to recognize the Universitycompensation cost of California, Irvine,stock-based awards in our income statements over the period that an M.S. degreeemployee is required to render service in Engineering fromexchange for the Universityaward.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the discussion and analysis of California, Berkeley,the compensation of our named executive officers as disclosed in this proxy statement. Based on this review and an M.B.A. fromdiscussion, the University of Southern California.Compensation Committee has recommended to the Board that the discussion and analysis be included in the Annual Report and this proxy statement.
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Thomas L. Thomas (Chairman) Laura L. Siegal Dennis W. Zank |
Executive Compensation Tables Summary Compensation Table
The following table shows information regarding the compensation earned for the fiscal years ended March 31, 2019, 20182022, 2021 and 20172020 by (i) our Chief Executive Officer, and (ii) our two other most highly compensated executive officers (other than our Chief Executive Officer) who were serving as executive officers as of March 31, 2019.2022. The officers listed below are collectively referred to as the "named“named executive officers"officers” or "NEOs"“NEOs” in this proxy statement. | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Fiscal Year | | Salary | | Bonus | | Stock Awards(1) | | Non-Equity Incentive Plan Compensation(2) | | All Other Compensation(3) | | Total | |
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Joe Bergera | | | 2019 | | $ | 412,894 | | $ | — | | $ | 421,425 | | $ | 137,280 | | $ | 17,118 | | $ | 988,716 | |
Chief Executive Officer | | | 2018 | | | 396,648 | | | — | | | 649,328 | | | 180,000 | | $ | 8,848 | | | 1,234,825 | |
and President | | | 2017 | | | 399,816 | | | — | | | 328,362 | | | 354,000 | (4) | | 3,594 | | | 1,085,772 | |
Andrew Schmidt | | | 2019 | | | 358,670 | | | — | | | 159,205 | | | 71,775 | | | 12,792 | | | 602,442 | |
Chief Financial Officer, | | | 2018 | | | 346,138 | | | 15,000 | (5) | | 259,731 | | | 94,035 | | | 8,683 | | | 723,587 | |
Vice President of Finance and Secretary | | | 2017 | | | 346,790 | | | — | | | 164,181 | | | 161,970 | | | 8,118 | | | 681,059 | |
James Chambers | | | 2019 | | | 282,399 | | | — | | | 188,085 | | | 131,890 | | | 10,385 | | | 612,759 | |
Senior Vice President and General Manager, Agriculture and Weather Analytics | | | 2018 | | | 195,322 | (6) | | — | | | 322,425 | | | 65,541 | | | 5,616 | | | 589,904 | |
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Name and Principal Position | | Fiscal Year | | Salary(1) | | | Stock Awards(2) | | Option Awards(2) | | Non-Equity Incentive Plan Compensation(3) | | All Other Compensation(4) | | Total |
Joe Bergera Chief Executive Officer and President | | 2022 | | $443,706 | | | $373,068 | | $260,000 | | $186,900 | | $20,846 | | $1,284,520 |
| 2021 | | 432,030 | | | 254,388 | | 323,125 | | 448,275 | | 11,200 | | 1,469,018 |
| 2020 | | 430,314 | | | — | | 634,300 | | 180,155 | | 11,351 | | 1,256,120 |
Douglas L. Groves Chief Financial Officer, Senior Vice President of Finance and Secretary | | 2022 | | 411,586 | | | 152,637 | | 130,000 | | 116,013 | | 13,846 | | 824,082 |
| 2021 | | 401,947 | | | 82,723 | | 117,500 | | 280,000 | | 11,200 | | 893,370 |
| 2020 | | 121,617 | (5) | | — | | 489,540 | | 37,333 | | 4,800 | | 653,290 |
Todd Kreter Senior Vice President and General Manager, Advanced Sensors | | 2022 | | 300,154 | | | 113,071 | | 97,500 | | 110,413 | | 15,168 | | 636,306 |
| 2021 | | 291,690 | | | 57,715 | | 82,250 | | 232,462 | | 11,200 | | 675,317 |
| 2020 | | 295,890 | | | — | | 177,604 | | 103,895 | | 11,187 | | 588,576 |
Ramin Massoumi(6) Senior Vice President and General Manager, Roadway Sensors | | 2022 | | 210,809 | | | 63,271 | | — | | — | | 136,861 | (7) | 410,941 |
| 2021 | | 280,785 | | | 57,715 | | 82,250 | | 149,959 | | 11,200 | | 581,909 |
| 2020 | | 279,688 | | | — | | 177,604 | | 136,531 | | 10,262 | | 604,084 |
(1)For Fiscal 2021, Mr. Groves deferred a portion of his salary under the Company’s Non-Qualified Deferred Compensation Plan. For Fiscal 2022, Messrs. Bergera, Groves and Massoumi, each deferred a portion of their salaries under the Company’s Non-Qualified Deferred Compensation Plan. These amounts for Fiscal 2022 are reflected in the Non-Qualified Deferred Compensation Table and in the Salary column.
(2)The dollar amounts shown represent the grant date fair value of equity awards, including RSUs, PSUs, and stock options granted during the applicable fiscal year determined in accordance with ASC 718.
Under ASC 718, the grant date fair value of the stock options is determined pursuant to the Black-Scholes-Merton option pricing formula. The grant date fair value of the RSUs is based on the closing price per share of our common stock on the date of grant. The fair value of our performance stock unit awards is estimated on the grant date using a Monte Carlo simulation model.
With respect to the PSUs granted during Fiscal 2021 and Fiscal 2022, the number of PSUs that are eligible to vest will be determined, in part, based on average annual achievement relative to revenues per share and cash flow from operations objectives for each one-year period of the PSU awards’ three-year performance period, ending March 31, 2023 and 2024, respectively. These revenues per share and cash flow from operations objectives will be set annually for each one-year performance period. The number of PSUs that vest at the end of the three-year performance period ending March 31, 2023 will also depend, in part, on the Company’s rTSR relative to the Russell 2000 over the three-year performance period. Between 0% and 160% of the PSUs will be eligible to vest based on average annual performance during the three-year performance period relative to the revenues per share and cash flow from operations objectives to be established by the Compensation Committee at the beginning of each year. The final PSU vesting based on the revenues per share and cash flow from operations performance will be subject to a modifier between .75x-1.25x based on the Company’s rTSR relative to the Russell 2000 during the performance period, for a maximum achievement percentage of 200% of the “target” number of PSUs. In accordance with SEC rules and ASC 718, due to the annual setting of performance goals under the PSUs granted during Fiscal 2021 and Fiscal 2022, ASC 718 requires the grant date value to be calculated with respect to one-third of the total PSUs in each year of the three-year performance period. SEC rules require presentation that is consistent with ASC 718, and so the grant date fair value of the PSUs included in this column for Fiscal 2021 and Fiscal 2022 each represent the grant date fair value for one-third of the PSU award eligible to vest based on Fiscal 2023 performance. In accordance with ASC Topic 718, the grant date fair value of the PSUs was calculated using the Monte Carlo simulation which utilizes the stock volatility, dividend yield and market correlation of the Company and the Company’s peer group. For the PSU awards granted during Fiscal 2021, such inputs consisted of:
(a) an expected term that was based on the actual three-year term of the award; (b) a risk-free interest rate of 0.17% derived from the yield on U.S. government bonds of appropriate term from the U.S. Department of Treasury; (c) a dividend yield of 0.00% because we do not currently issue a dividend; (d) stock price volatility for Iteris of 55.48% based on an analysis of the historical stock price volatility of the Company and stock price volatility of 59.87% for the Russell 2000 Index based on the 2.75 years preceding the date of grant to conform to the term of the awards; and (e) initial TSR performance of 38.11% based on the actual historical TSR performance for the Company and the Russell 2000 Index. The valuation method resulted in each PSU being valued at $5.47 on June 30, 2020, the date of the grant, or 115.04% of the stock price on such date. The grant date fair values reflected in the table above for the NEOs reflect the one-third of the PSU award eligible to vest based on Fiscal 2021 performance, calculated by multiplying the $5.47 per share by one-third of the “target” number of PSUs. Assuming performance at the maximum level, the “maximum” grant date fair value of the one-third of the PSU award eligible to vest based on Fiscal 2021 performance, calculated by multiplying the $5.47 per share by one-third of the “maximum” number of PSUs, is as follows: $140,061 for Mr. Bergera; $45,397 for Mr. Groves; $31,777 for Mr. Kreter; and $31,777 for Mr. Massoumi. For the PSU awards granted during Fiscal 2022, such inputs consisted of: (a) an expected term that was based on the actual three-year term of the award; (b) a risk-free interest rate of 0.27% derived from the yield on U.S. government bonds of appropriate term from the U.S. Department of Treasury; (c) a dividend yield of 0.00% because we do not currently issue a dividend; (d) stock price volatility for Iteris of 56.82% based on an analysis of the historical stock price volatility of the Company and stock price volatility of 62.12% for the Russell 2000 Index based on the 2.81 years preceding the date of grant to conform to the term of the awards; and (e) initial TSR performance of 3.13% based on the actual historical TSR performance for the Company and the Russell 2000 Index. The valuation method resulted in each PSU being valued at $7.26 on June 10, 2021, the date of the grant, or 111.69% of the stock price on such date. The grant date fair values reflected in the table above for the NEOs reflect the one-third of the PSU award eligible to vest based on Fiscal 2022 performance, calculated by multiplying the $7.26 per share by one-third of the “target” number of PSUs. Assuming performance at the maximum level, the “maximum” grant date fair value of the one-third of the PSU award eligible to vest based on Fiscal 2022 performance, calculated by multiplying the $7.26 per share by one-third of the “maximum” number of PSUs, is as follows: $165,712 for Mr. Bergera; $60,258 for Mr. Groves; $42,181 for Mr. Kreter; and $42,181 for Mr. Massoumi.
For a discussion of valuation assumptions used in the calculations, see Note 810 of Notes to Consolidated Financial Statements, included in Part II, Item 8 in the Annual Report.Report on Form 10-K for Fiscal 2022. See also our discussion of stock-based compensation under "Management's Discussion and Analysisin Note 1 of Notes to Consolidated Financial Condition and Results of Operations—Critical Accounting Policies and Estimates"Statements on page 52 in Part II, Item 78 in the Annual Report. The options have an exercise price equal to the closing sales price of our common stock as of the grant date and vest in equal annual installments over four years and are not exercisable until vested.
(2)Report on Form 10-K for Fiscal 2022.
(3)The amounts shown in this column constitute the cash bonuses paid to each named executive officer based on the attainment of certain pre-established management objectives. These awards are discussed in further detail under "Fiscal 2019“Fiscal 2022 Cash-Based Bonus Plan" below.
(3)Except as otherwise noted, represents SectionPlan” above.
(4)Consists of 401(k) plan employer contributions paid by us.
(4)Pursuant to his employment agreement,
(5) Mr. Bergera was eligible for a bonus of up to $300,000 for Fiscal 2016, of which $150,000 was a signing bonus payable on January 31, 2016, provided that Mr. Bergera was employed by the Company as of such date, and the remaining $150,000 was payable pursuant to the Company's 2017 Bonus Plan based on his achievement of certain pre-established criteria.
(5)Represents a discretionary cash bonus.
(6)Mr. ChambersGroves was hired in August 2017December 4, 2019 at an annual salary of $275,000.$400,000. The Fiscal 20182020 salary represents the amount earned by Mr. ChambersGroves from his hire date through the end of Fiscal 2018.2020.
(6)Mr. Massoumi ceased to serve as our Senior Vice President and General Manager, Consulting Solutions on December 31, 2021.
(7)Consists of 401(k) plan employer contributions paid by us, as well as amounts paid pursuant to Mr. Massoumi's Severance Agreement (defined below), consisting of base salary of $70,770, COBRA reimbursement of $3,465, outplacement services of $2,500, and accrued paid time off of $46,777. See "Severance Agreement with Ramin Massoumi" under "Potential Payments upon Termination of Employment and Change in Control" below.
Fiscal 20192022 Grant of Plan-Based Awards
Table The table below sets forth information with respect to awards granted to the named executive officers under our annual non-equity incentive compensation plan and our 2016 Omnibus Incentive
Table of Contents
Plan in Fiscal 2019,2022, which constitute all of the plan-based awards granted to our named executive officers in Fiscal 2019.
2022.
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| | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | | Number of Securities Underlying Options or Stock Units (#) | |
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| | Grant Date Fair Value of Awards ($)(2) | |
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Name | | Grant Date | | Threshold ($) | | Target ($)(1) | | Maximum ($)(1) | | Awards ($/share) | |
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Joe Bergera | | | 12/10/2018 | | $ | — | | $ | 312,000 | | $ | 468,000 | | | 250,000 | | $ | 4.16 | | $ | 421,405 | |
Andrew Schmidt | | | 12/10/2018 | | | — | | | 163,125 | | | 244,688 | | | 100,000 | | | 4.16 | | | 159,197 | |
James Chambers | | | 12/10/2018 | | | — | | | 156,063 | | | 234,095 | | | 70,000 | | | 4.16 | | | 131,104 | |
| | | 06/11/2018 | | | — | | | — | | | — | | | 25,000 | | | 4.85 | | | 56,987 | |
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Name | | Grant Date | Description | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#)(4) | | Exercise or Base Price of Option Awards ($/share) | | Grant Date Fair Value of Stock and Option Awards ($)(5) |
| Threshold ($) | | Target ($) | | Maximum ($) | | Threshold ($) | | Target ($) | | Maximum ($) | | | | |
Joe Bergera | | 7/8/2022 | Cash Bonus | | $ | — | | | $333,750 | | | $600,750 | | | $— | | | $— | | | $— | | | $— | | | $— | | | $— | | | $— | |
| | 6/10/2021 | PSU | | — | | | — | | | — | | | — | | | 11,413 | | | 22,826 | | | — | | | — | | | — | | | 82,858 | |
| | 11/18/2021 | RSU | | — | | | — | | | — | | | — | | | — | | | — | | | 24,900 | | (3) | — | | | — | | | 124,500 | |
| | 11/18/2021 | Options | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 100,000 | | | 5.00 | | | 260,320 | |
Douglas L. Groves | | 7/8/2022 | Cash Bonus | | — | | | 206,250 | | | 371,250 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 6/10/2021 | PSU | | — | | | — | | | — | | | — | | | 4,150 | | | 8,300 | | | — | | | — | | | — | | | 30,129 | |
| | 11/18/2021 | RSU | | — | | | — | | | — | | | — | | | — | | | — | | | 12,450 | | (3) | — | | | — | | | 62,250 | |
| | 11/18/2021 | Options | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 50,000 | | | 5.00 | | | 130,160 | |
Todd Kreter | | 7/8/2022 | Cash Bonus | | | | 165,000 | | | 297,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 6/10/2021 | PSU | | — | | | — | | | — | | | — | | | 2,905 | | | 5,810 | | | — | | | — | | | — | | | 21,090 | |
| | 11/18/2021 | RSU | | — | | | — | | | — | | | — | | | — | | | — | | | 9,960 | | (3) | — | | | — | | | 49,800 | |
| | 11/18/2021 | Options | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 37,500 | | | 5.00 | | | 97,620 | |
Ramin Massoumi(6) | | 6/10/2021 | PSU | | — | | | — | | | — | | | — | | | 2,905 | | | 5,810 | | | — | | | — | | | — | | | 21,090 | |
_______________________
(1)Reflects the potential amount payable (not the actual amount payable) upon achievement of the management objectives described under the heading "Fiscal 2019“Fiscal 2022 Cash-Based Bonus Plan"Plan” above.
(2)These PSUs were granted under the 2016 Omnibus Incentive Plan. The number of PSUs that are eligible to vest will be determined, in part, based on average annual achievement relative to revenues per share and cash flow from operations objectives for each one-year period of the PSU awards’ three- year performance period ending March 31, 2023. These revenues per share and cash flow from operations objectives will be set annually for each one-year performance period. The number of PSUs that vest at the end of the three-year performance period ending March 31, 2023 will also depend, in part, on the Company’s rTSR relative to the Russell 2000 over the three-year performance period. Between 0% and 160% of the PSUs will be eligible to vest based on average annual performance during the three-year performance period relative to the revenues per share and cashflow from operations objectives to be established by the Compensation Committee at the beginning of each year. The final PSU vesting based on the revenues per share and cash flow from operations performance will be subject to a modifier between .75x-1.25x based on the Company’s rTSR relative to the Russell 2000 during the performance period, for a maximum achievement percentage of 200% of the “target” number of PSUs. In accordance with SEC rules and ASC 718, due to the annual setting of performance goals under the PSUs granted during Fiscal 2022, ASC 718 requires the grant date value to be calculated with respect to one-third of the total PSUs in each year of the three-year performance period. SEC rules require presentation that is consistent with ASC 718, and amounts shown at “target” represent one-third of the total “target” number of PSUs granted during Fiscal 2022 at “target” levels. Named executive officers will receive payment with respect to the PSUs, in the form of shares of the Company’s common stock, at the conclusion of the performance period, upon establishment of final performance results. The vesting of equity awards held by the named executive officers is subject to each named executive officer’s continued service with the Company, and is subject to acceleration under certain circumstances as discussed under the heading “Potential Payments upon Termination of Employment and Changing in Control” below.
(3)These RSUs were granted under the 2016 Omnibus Incentive Plan and vest fifty-percent (50%) after two (2) years from the vesting commencement date, and fifty-percent (50%) after the third (3rd) year from the vesting commencement date, upon named executive officer’s completion of each year of continued service with the Company. The vesting of equity awards held by the named executive officers is subject to each officer’s continued service with the Company, and is subject to acceleration under certain circumstances as discussed under the heading “Potential Payments upon Termination of Employment and Changing in Control” below.
(4)All options vest in four equal installments following the date of grant. The vesting of equity awards held by the named executive officers is subject to each officer’s continued service with the Company, and is subject to acceleration under certain circumstances as discussed under the heading “Potential Payments upon Termination of Employment and Change in Control” below.
(5)The dollar amounts shown represent the grant date fair value of stock optionsequity awards granted during the applicable fiscal year determined pursuantin accordance with ASC 718. With respect to the Black-Scholes-Merton option pricing formula.PSUs granted during Fiscal 2021 and Fiscal 2022, the number of PSUs that are eligible to vest will be determined based on average annual achievement relative to revenues per share and cash flow from operations objectives for each one-year period of the PSU awards’ three-year performance period. These revenues per share and cash flow from operations objectives will be set annually for each one-year performance period. In accordance with SEC rules and ASC 718, due to the annual setting of performance goals under the PSUs granted during Fiscal 2022, ASC 718 requires the grant date value to be calculated with respect to one-third of the total PSUs in each year of the three-year performance period. SEC rules require presentation that is consistent with ASC 718, and so the grant date fair value of the PSUs included in this column for Fiscal 2021 and Fiscal 2022 each represent the grant date fair value for one-third of the PSU award eligible to vest based on Fiscal 2021 performance and Fiscal 2022 performance, respectively. For a discussion of valuation assumptions used in the calculations, see footnote (1) to the Summary Compensation Table and Note 810 of Notes to Consolidated Financial Statements, included in Part II, Item 8 ofin the Company's Annual Report.Report on Form 10-K for Fiscal 2022. See also our discussion of stock-based compensation under "Management's Discussion and Analysisin Note 1 of Notes to Consolidated Financial Condition and Results of Operations—Critical Accounting Policies and Estimates"Statements on page 52 in Part II, Item 78 in the Company's Annual Report on Form 10-K for Fiscal 2022.
(6)Mr. Massoumi ceased to serve as our Senior Vice President and General Manager, Consulting Solutions on December 31, 2021. Mr. Massoumi's PSUs were forfeited due to Mr. Massoumi's ceasing to serve as an employee of the Annual Report.Company.
Outstanding Equity Awards at 20192022 Fiscal Year End
The following table sets forth the outstanding equity awards held by each named executive officer as of March 31, 2019. None of the NEOs held outstanding RSUs at the end of Fiscal 2019.2022.
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| | Option Awards(1) | |
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Name | | Number of Securities Underlying Outstanding Options (#) Exercisable | | Number of Securities Underlying Outstanding Options (#) Unexercisable | | Option Exercise Price ($) | | Option Grant Date | | Option Expiration Date | |
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Joe Bergera | | | 1,012,500 | | | 337,500 | | $ | 2.38 | | | 09/23/15 | | | 09/22/25 | |
Chief Executive Officer, President | | | 75,000 | | | 75,000 | | | 4.91 | | | 03/03/17 | | | 03/02/27 | |
and Director | | | 62,500 | | | 187,500 | | | 5.52 | | | 02/16/18 | | | 02/15/28 | |
| | | — | | | 225,000 | | | 4.16 | | | 12/10/18 | | | 12/09/28 | |
Andrew Schmidt | | | 100,000 | | | — | | | 1.79 | | | 03/16/15 | | | 03/15/25 | |
Chief Financial Officer, Vice President of | | | 56,250 | | | 18,750 | | | 2.37 | | | 11/02/15 | | | 11/01/25 | |
Finance and Secretary | | | 37,500 | | | 37,500 | | | 4.91 | | | 03/03/17 | | | 03/02/27 | |
| | | 25,000 | | | 75,000 | | | 5.52 | | | 02/16/18 | | | 02/15/28 | |
| | | — | | | 85,000 | | | 4.16 | | | 12/10/18 | | | 12/09/28 | |
James Chambers | | | 25,000 | | | 75,000 | | | 5.90 | | | 08/17/17 | | | 08/16/27 | |
Senior Vice President and | | | 6,250 | | | 18,750 | | | 5.52 | | | 02/16/18 | | | 02/15/28 | |
General Manager, Agriculture and | | | — | | | 25,000 | | | 4.85 | | | 06/11/18 | | | 06/10/28 | |
Weather Analytics | | | — | | | 70,000 | | | 4.16 | | | 12/10/18 | | | 12/09/28 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards(1) | | Stock Awards |
Name | | Number of Securities Underlying Outstanding Options (#) Exercisable | | Number of Securities Underlying Outstanding Options (#) Unexercisable | | Option Exercise Price ($) | | Option Grant Date | | 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 (4) | | 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 |
J. Joseph (“Joe”) Bergera Chief Executive Officer, President and Director | | 1,150,000 | | | — | | | $2.38 | | | 09/23/15 | | 09/22/25 | | | | | | | | |
| 150,000 | | | — | | | 4.91 | | | 03/03/17 | | 03/02/27 | | | | | | | | |
| 250,000 | | | — | | | 5.52 | | | 02/16/18 | | 02/15/28 | | | | | | | | |
| 168,750 | | | 56,250 | | | 4.16 | | | 12/10/18 | | 12/09/28 | | | | | | | | |
| 125,000 | | | 125,000 | | | 5.10 | | | 12/09/19 | | 12/08/29 | | | | | | | | |
| 34,375 | | | 103,125 | | | 4.80 | | | 11/16/20 | | 11/15/30 | | | | | | | | |
| — | | | 100,000 | | | 5.00 | | | 11/18/21 | | 11/17/31 | | | | | | | | |
| | | | | | | | | | | 63,308(2) | | 188,658(4) | | | | |
| | | | | | | | | | | | | | | 72,646(3) | | 216,485(4) |
| | | | | | | | | | | | | | | | | | |
Douglas L. Groves Chief Financial Officer, Senior Vice President of Finance and Secretary | | 100,000 | | | 100,000 | | | 4.92 | | | 12/04/19 | | 12/03/29 | | | | | | | | |
| 12,500 | | | 37,500 | | | 4.80 | | | 11/16/20 | | 11/15/30 | | | | | | | | |
| — | | | 50,000 | | | 5.00 | | | 11/18/21 | | 11/17/31 | | | | | | | | |
| | | | | | | | | | | 24,899(2) | | 74,199(4) | | | | |
| | | | | | | | | | | | | | | 24,899(3) | | 74,199(4) |
| | | | | | | | | | | | | | | | | | |
Todd Kreter(2) Senior Vice President and General Manager of Advanced Sensor Technologies | | 75,000 | | | — | | | 4.91 | | | 03/03/17 | | 03/02/27 | | | | | | | | |
| 75,000 | | | — | | | 5.52 | | | 02/16/18 | | 02/15/28 | | | | | | | | |
| 45,000 | | | 15,000 | | | 4.16 | | | 12/10/18 | | 12/09/28 | | | | | | | | |
| 35,000 | | | 35,000 | | | 5.10 | | | 12/09/19 | | 12/08/29 | | | | | | | | |
| 8,750 | | | 26,250 | | | 4.80 | | | 11/16/20 | | 11/15/30 | | | | | | | | |
| — | | | 37,500 | | | 5.00 | | | 11/18/21 | | 11/17/31 | | | | | | | | |
| | | | | | | | | | | 18,674(2) | | 55,649(4) | | | | |
| | | | | | | | | | | | | | | 17,429(3) | | 51,938(4) |
| | | | | | | | | | | | | | | | | | |
Ramin Massoumi(5) Senior Vice President and General Manager, Consulting Solutions | | 75,000 | | | — | | | 4.91 | | | 03/03/17 | | 03/02/27 | | | | | | | | |
| 75,000 | | | — | | | 5.52 | | | 02/16/18 | | 02/15/28 | | | | | | | | |
| 44,999 | | | 15,001 | | | 4.16 | | | 12/10/18 | | 12/09/28 | | | | | | | | |
| 35,000 | | | 17,500 | | | 5.10 | | | 12/09/19 | | 12/08/29 | | | | | | | | |
| 8,750 | | | 8,750 | | | 4.80 | | | 11/16/20 | | 11/15/30 | | | | | | | | |
| | | | | | | | | | | 4,357(2) | | 12,984(4) | | | | |
(1)All options vest in four equal annual installments following the date of grant. The vesting of equity awards held by the named executive officers is subject to each officers continued service with the Company, and is subject to acceleration under certain circumstances as discussed under the heading "Potential Payments upon Termination of Employment and Change in Control" below.
Table of Contents
Fiscal 2019 Option Exercises and Stock Vesting Table
No options were exercised by the NEOs and no stock awards issued with a vesting period vested during Fiscal 2019.
“Potential Payments upon Termination of Employment and Change in Control
” below.
(2)Each RSU represents the right to receive one share of our common stock if vesting is satisfied. These RSUs were granted under the 2016 Omnibus Incentive Plan and vest fifty-percent (50%) after two (2) years from the vesting commencement date, and fifty-percent (50%) after the third (3rd) year from the vesting commencement date, upon named executive officer’s completion of each year of continued service with the Company. The vesting of equity awards held by the named executive officers is subject to each officer’s continued service with the Company, and is subject to acceleration under certain circumstances as discussed under the heading “Potential Payments upon Termination of Employment and Changing in Control” below. Vested shares are issued as soon as practicable after the applicable vesting date.
(3)Each PSU represents the right to receive one share of our common stock if vesting is satisfied. The number of PSUs that vest at the end of the three-year performance period ending March 31, 2023 will depend, in part, on the Company’s average revenues per share and cash flow from operations performance during the three-year performance period and, in part, on the Company’s rTSR relative to the Russell 2000 over the three-year performance period. Executives will receive payment with respect to the PSUs, in the form of shares of the Company’s common stock, at the conclusion of the performance period, upon establishment of final performance results. Between 0% and 160% of the PSUs will be eligible to vest based on average annual performance during the three-year performance period relative to the revenues per share and cash flow from operations objectives to be established by the Compensation Committee at the beginning of each year. In addition, the final PSU vesting based on the revenues per share and cash flow from operations performance will be subject to a modifier between .75x-1.25x based on the Company’s rTSR relative to the Russell 2000 during the performance period, for a maximum achievement percentage of 200% of the “target” number of PSUs. The PSUs are reflected in the table above at “target” performance levels. The vesting of equity awards held by the named executive officers is subject to each officer’s continued service with the Company, and is subject to acceleration under certain circumstances as discussed under the heading “Potential Payments upon Termination of Employment and Change in Control” below.
(4)The dollar value is based on the closing sales price of our common stock on the last business day of Fiscal 2022, $2.98.
(5)Mr. Massoumi ceased to serve as our Senior Vice President and General Manager, Consulting Solutions on December 31, 2021. Pursuant to his Severance Agreement (defined below), all of Mr. Massoumi's outstanding options will continue vesting for up to twelve (12) months from the date he ceased his employment with the Company in consideration of making himself available for consulting services during such period. See "Iteris, Inc. Executive Severance Plan" under "Potential Payments upon Termination of Employment and Change in Control" below.
Fiscal 2022 Option Exercises and Stock Vesting Table
The following table provides information regarding option exercises of awards held by the named executive officers during Fiscal 2022.
| | | | | | | | | | | |
| Option Awards |
Name | | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) |
Joe Bergera | 84,915 | $393,306 |
Douglas L. Groves | — | — |
Todd Kreter | 49,829 | 229,184 |
Ramin Massoumi(2) | | — | — |
(1) Value realized is determined by multiplying (i) the amount by which the market price of a common share on the date of exercise exceeded the exercise price by (ii) the number of shares for which the options were exercised.
(2) Mr. Massoumi ceased to serve as our Senior Vice President and General Manager, Consulting Solutions on December 31, 2021.
Non-Qualified Deferred Compensation for Fiscal 2022
Deferred Compensation Plan. Effective October 1, 2020, the Company adopted the Iteris, Inc. Non-Qualified Deferred Compensation Plan (the “DC Plan”). The DC Plan consists of two plans, one that is intended to be an unfunded arrangement for eligible key employees who are part of a select group of management or highly compensated employees of the Company within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, and one for the benefit of nonemployee members of our Board of Directors. Key employees, including our executive officers, and our nonemployee directors who are notified regarding their eligibility to participate and delivered the DC Plan enrollment materials are eligible to participate in the DC Plan. Under the DC Plan, we will provide participants with the opportunity to make annual elections to defer up to 75% of their base salary, up to
100% of their annual bonus, and up to 100% of any RSU or PSU awards. Our nonemployee directors may elect to defer up to 100% of their eligible cash compensation and equity awards. A participant is always 100% vested in his or her own elective cash deferrals and any earnings thereon.
Elective deferrals of equity awards are credited to a bookkeeping account established in the name of the participant with respect to an equivalent number of shares of our common stock, and such credited shares are subject to the same vesting conditions as are applicable to the equity award subject to the election. The Company established a rabbi trust to finance our obligations under the DC Plan with corporate-owned life insurance policies on participants, and the assets held within this trust are subject to the claims of the Company’s creditors.
Under the DC Plan, we will be obligated to deliver on a future date deferred cash compensation credited to the participant’s account, adjusted for any positive or negative investment results from the investment alternatives selected by the participant under the DC Plan, or with respect to deferrals of equity awards, an issuance of shares of our common stock. These obligations are unfunded, unsecured general obligations of the Company and rank in parity with other unsecured and unsubordinated indebtedness of us, subject to the claims of our general creditors. However, deferrals of equity awards under the DC Plan are deemed rights to receive an issuance of our common stock and may not be deemed allocated to any investment fund.
A participant’s rights under the Plan are not transferable except upon death of the participant.
With respect to the portion of the bookkeeping account allocated to an investment fund, each account will be payable in cash. The portion of the bookkeeping account allocated to deferrals of equity awards will be payable in an issuance of shares of our common stock.
Payments will be distributed in connection with either the participant’s separation of service or a selected specified distribution date or dates, depending upon the distribution election made by the participant at the time of deferral. However, if a participant’s service with us terminates prior to the selected specified distribution date or dates, payment will instead be made or commence in connection with such separation from service. A participant’s account balance may be distributed in a lump sum or, if elected by a participant, in up to 15 substantially equal installments (up to 5 annual installments for any distributions in respect of equity award accounts); however, any distribution upon a separation from service prior to attaining age 55 will be paid in a lump sum, regardless of the payment timing elected. If a participant’s service terminates with us due to death, all of a participant’s accounts will become immediately payable in a single lump sum. In addition, participants may be entitled to receive payments through certain unforeseeable emergency withdrawals. Payments scheduled to be made under the Plan may be otherwise delayed or accelerated only upon the occurrence of certain specified events that comply with the requirements of Section 409A of the Code.
A committee appointed by our board of directors administers the Plan. We docan amend or terminate the Plan at any time, but no such action shall unilaterally reduce a participant’s account balance without his or her consent prior to the date of such action. However, we may adopt any amendments to the Plan that we deem necessary or appropriate to preserve the intended tax treatment of the Plan benefits or to otherwise comply with the requirements of Section 409A of the Code and related guidance.
The following table shows the non-qualified deferred compensation activity for each named executive officer during Fiscal 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Executive Contributions in Last Fiscal Year ($) (1) | | Aggregate Earnings in Last Fiscal Year (2) | | Aggregate Withdrawals /Distributions ($) | | Aggregate Balance at Last Fiscal Year End ($) |
Joe Bergera | $89,655 | | $(534) | | $— | | $89,121 |
Douglas L. Groves | 426,995 | | (303) | | — | | 426,692 |
Todd Kreter | — | | — | | — | | — |
Ramin Massoumi (3) | 37,490 | | (540) | | — | | 36,950 |
1.Amounts included in the Summary Compensation Table in the “Salary” and “Non-Equity Incentive Plan Compensation” columns for Fiscal 2022.
2.No above market or preferential earnings are provided under the DC Plan because the investment choices available under such plans are identical to the investment choices available in the 401(k) Plan, which is a qualified plan. Consequently, none of the earnings reported in this table are included in the Summary Compensation Table set forth above.
3.Massoumi ceased to serve as our Senior Vice President and General Manager, Consulting Solutions on December 31, 2021.
The DC Plan provides investment options amongst which participants make investment allocations that provide the basis on which gains and losses are attributed to account balances under the plan, and such options may change from time to time. The investment options under the DC Plan and their rates of return for the period from April 1, 2021 through March 31, 2022, which represents the period of time during which cash deferrals were first deferred under the DC Plan.
| | | | | | | | | | | |
Name of Investment Option | | Rate of Return (%) |
AB Discovery Growth Fund I | | | (18.19) | % |
AB Large Cap Growth Fund Class Z | | | (12.59) | % |
American Balanced Fund Class R6 | | | (3.94) | % |
American Century Midcap Val I | | | 2.39 | % |
American EuroPacific Growth R6 | | | (12.24) | % |
American New Perspective | | | (9.96) | % |
Dodge & Cox Stock Fund | | | 1.01 | % |
Invesco Developing Markets Fund R6 | | | (15.68) | % |
Janus Henderson Triton Fund I | | | (9.47) | % |
JP Morgan Mid Cap Val Fund R6 | | | (0.96) | % |
Principal Real Estate SEC Fund I | | | (5.19) | % |
T. Rowe Price 2005 Retirement I | | | (4.53) | % |
T. Rowe Price 2010 Retirement I | | | (4.75) | % |
T. Rowe Price 2015 Retirement I | | | (4.82) | % |
T. Rowe Price 2020 Retirement I | | | (4.98) | % |
T. Rowe Price 2025 Retirement I | | | (5.37) | % |
T. Rowe Price 2030 Retirement I | | | (5.92) | % |
T. Rowe Price 2035 Retirement I | | | (6.28) | % |
T. Rowe Price 2040 Retirement I | | | (6.60) | % |
T. Rowe Price 2045 Retirement I | | | (6.75) | % |
T. Rowe Price 2050 Retirement I | | | (6.76) | % |
T. Rowe Price 2055 Retirement I | | | (6.74) | % |
T. Rowe Price 2060 Retirement I | | | (6.74) | % |
T. Rowe Price Retirement Bal I | | | (4.28) | % |
Vanguard 500 Index Fund | | | (4.61) | % |
Vanguard Grow And Inc Fund | | | (3.90) | % |
Vanguard Small Cap Index Fund | | | (5.74) | % |
Vanguard Total Int Stock Index | | | (6.08) | % |
Victory Sycamore Small Comp R6 | | | (4.77) | % |
Fidelity Advisor Gov't Income M | | | (5.51) | % |
Loomis Sayles Core Plus Cl N | | | (5.36) | % |
PIMCO Real Return Fund Cl Inst | | | (3.03) | % |
Templeton Global Bond Fund R6 | | | 1.14 | % |
Goldman Sachs Stable Value Ct | | | 0.31 | % |
Potential Payments upon Termination of Employment and Change in Control
The Company does not currently have any employment contractsagreements or change in control arrangements in effect with any of our named executive officers other than the agreements described below. We provide incentives suchIn addition, our NEOs may be eligible for certain payments upon a
termination or a change in control under the DC Plan, as salary, benefits, option grants and RSUs to attract and retain executive officers and other key associates. further described above under “Non-Qualified Deferred Compensation for Fiscal 2022.”
Equity Award Vesting
The plan administrator of the 2007 Omnibus Incentive Plan and 2016 Omnibus Incentive Plan has the discretion to determine whether outstanding equity awards held by our NEOs are to vest upon a qualifying termination of employment following certain changes in control of the Company, or upon sucha change in control, but weour equity plans do not provide for any automatic "single trigger"“single trigger” acceleration of equity awards upon a change in control.
Options granted to our named executive officers are eligible for accelerated vesting under certain circumstances. In the event of an executive’s termination due to death or permanent disability, a pro-rata portion of the options shall vest on the date of such termination. In addition, if an executive’s employment is terminated by us other than for misconduct or the executive resigns for good reason (each such term as defined in the 2016 Omnibus Incentive Plan), in each case within eighteen (18) months following the effective date of a change in control, (otherthen such additional number of options shall vest as of the date of termination as is equal to the number of options as would have vested during the two (2) year period following the date of termination had the executive remained employed by us or our successor during such period.
RSUs granted to our named executive officers are eligible for accelerated vesting under certain circumstances. In the event of an executive’s termination due to death or permanent disability, a pro-rata portion of the RSUs shall vest on the date of such termination. In addition, if an executive’s employment is terminated by us other than for misconduct or the option grant receivedexecutive resigns for good reason (each such term as defined in the 2016 Omnibus Incentive Plan), in each case within eighteen (18) months following the effective date of a change in control, then such additional number of RSUs shall vest as of the date of termination as is equal to the number of RSUs as would have vested during the two (2) year period following the date of termination had the executive remained employed by Dr. Dalyus or our successor during such period.
PSUs granted to our named executive officers are also eligible for accelerated vesting under certain circumstances. In the event of an executive’s termination due to death or permanent disability prior to a change in control, a pro-rata portion of the PSUs shall vest on the date of such termination based on our actual performance relative to the performance metrics applicable to the PSUs through such date. Upon a change in control, a number of PSUs will remain eligible to vest on the last day of the three-year performance period as is determined based on our actual performance relative to the performance metrics applicable to the PSUs through the date of such change in control, subject to the executive’s continued employment through such date. However, if an executive’s employment is terminated by us other than for misconduct or the executive resigns for good reason (each such term as defined in the 2016 Omnibus Incentive Plan), or in the event of an executive’s termination due to death or permanent disability in each case within eighteen (18) months following the effective date of the change in control, then such additional number of PSUs shall vest as of the date of termination as is equal to the number of PSUs as would have vested during the two-year period following the date of termination had the executive remained employed by us or our successor during such period.
Iteris, Inc. Executive Severance Plan
The Iteris, Inc. Executive Severance Plan (the “Severance Plan”) was adopted on February 5, 2018 and amended and restated effective on June 4, 2019 (the “Severance Plan”). Each individual employed by the Company or its subsidiary, who is an officer subject to Section 16 of the Exchange Act, and who is not otherwise covered by an employment agreement that includes severance terms (the “Eligible Employees”), is eligible to receive severance payments under the Severance Plan upon certain qualifying terminations of employment.
The Severance Plan provides Eligible Employees with severance payments in the event that an Eligible Employee’s employment with the Company or its subsidiaries is terminated either (a) by the Company without Cause not in connection with his service as a non-employee director). Other than as notedChange in this section, there is no agreementControl (“Non-CIC Qualifying Termination”) or policy(b) if in connection with or within 12 months following a Change in Control, which, would automatically entitle any named executive officerfor Eligible Employees employed by that business, includes a divestiture of a material business, by the Eligible Employee for Good Reason (as such terms are defined in the Severance Plan) or by the Company without Cause (a “CIC Qualifying Termination”).
Non-CIC Qualifying Termination. Upon a Non-CIC Qualifying Termination, an Eligible Employee will receive the following:
•A cash payment equal to the Eligible Employee’s annual base salary, payable in substantially equal installment payments over the one-year period following termination, in accordance with the Company’s normal payroll practices; and
•Reimbursement for the Eligible Employee’s monthly COBRA premiums for the 12-month period following termination or until the Eligible Employee receives substantially similar medical coverage from another employer.
•CIC Qualifying Termination.Upon a CIC Qualifying Termination, an Eligible Employee will receive the following:
•A cash payment equal to the Eligible Employee’s annual base salary, payable in a lump sum on the next payroll date after the 61st day following termination; and
•Reimbursement for the Eligible Employee’s monthly COBRA premiums for the 12-month period following termination, or until the Eligible Employee receives substantially similar medical coverage from another employer.
The severance payments are subject to the Eligible Employee’s execution of a severance agreement within 60 days following termination that includes a release of claims and certain non-solicitation, confidentiality, and non-disparagement restrictions.
The Company may amend or terminate the Severance Plan at any other compensation astime by providing at least 90 days’ advance written notice to each Eligible Employee, provided that no such amendment or termination that has the effect of reducing or diminishing the right of any Eligible Employee will be effective unless one year’s advance written notice is provided to Eligible Employees, and such amendment or termination will not be effective if a result of such officer's termination. Agreement with Joe Bergera In connection with his hiring, we entered into an employment agreement with Joe Bergera, our Chief Executive Officer, dated September 8, 2015, pursuant to which Mr. Bergera will receive an annual base salary of $385,000, which may be increased from time to time at the discretion of the Compensation Committee. Mr. Bergera will also be eligible to participate in our executive bonus plan as then in effect and his potential bonus for each year will be established annually by the Board or a committee of the Board, provided that the bonus potential for Fiscal 2016 was $300,000, of which $150,000 was a signing bonus payable on January 31, 2016 provided that Mr. Bergera was employed by the Company as of such date.Board. The agreement is for an initial term of three years and will renewrenews for successive one yearone-year periods until September 2025 unless either we or Mr. Bergera provide written notice of non-renewal at least 30 days prior to the end of the initial term or renewal term, as applicable. Pursuant to the agreement,
If Mr. Bergera also received an option grant under our 2007 Omnibus Incentive Plan to purchase up to 1,350,000 shares of our common stock (the "Option"). The Option vests in equal annual installments over four years and has an exercise price equal to the closing sales price of our common stock on the date of grant of the Option. If during the initial term of the agreement or any renewal term, Mr. Bergera's’s employment with the Company is terminated without Cause (as such term is defined in the agreement), during the term of the agreement, Mr. Bergera will be entitled to receive (i) salary continuation payments for 12 months following his termination, (ii) a lump sum payment equal to the pro-rated portion of his target bonus established by the Compensation Committee for the fiscal year in which his employment is terminated, and (iii) reimbursement for the cost of COBRA coverage for a period of up to 12 months following the termination. If Mr. Bergera is terminated without Cause or resigns for Good Reason within 12 months following a Change in Control (as such terms are defined in the agreement) (such termination or resignation, a "CIC Termination"“CIC Termination”), Mr. Bergera will be entitled to receive (i) a lump sum payment equal to 125% of his base salary as then in effect, (ii) a lump sum payment equal to the pro-rated portion of his target bonus established by the Compensation Committee for the fiscal year in which the CIC Termination occurs, and (iii) reimbursement for the cost of COBRA coverage for a period of up to 12 months following the CIC Termination, and (iv) acceleration of the vesting of the Option.Termination. In addition, upon termination of his employment due to death, Mr. Bergera'sBergera’s estate or beneficiaries will be entitled to receive salary continuation paymentsa lump sum payment in the aggregate equal to 50% of his then current base salary.
Table of Contents We entered into an employment agreement dated March 9, 2015 with Andrew Schmidt, our Chief Financial Officer,
On December 30, 2021, in connection with his hiring. Mr. Massoumi’s departure, the Company and Mr. Massoumi entered into a severance and release agreement (the “Severance Agreement”).Pursuant to this agreement,the Severance Agreement, the Company agreed to pay to Mr. Schmidt will receive an annualMassoumi a severance package consisting of the following (i) Mr. Massoumi’s base salary of $325,000, which may be increased from time to time at the discretion of the Board or the Compensation Committee. He will also be eligible to participatecurrently approximately $287,500, less applicable taxes and withholding, paid in our executive bonus plan as thenequal installments for a 12-month period in effect and his potential bonus for each year will be established annually by the Board or the Compensation Committee, provided that the bonus potential for Fiscal 2016 was to be $125,000. The agreement has an initial term of two years and will renew for successive one year periods until March 2025 unless either the Company or Mr. Schmidt provides written notice of non-renewal at least 30 days prior to the end of the initial term or renewal term, as applicable. The agreement was amended on June 12, 2017 and provides that if Mr. Schmidt's employmentaccordance with the Company is terminated without Cause or in connection with a Change in Control (as such terms are defined in the agreement), Mr. Schmidt will be entitled to salary continuation payments for 12 months following his termination of his annual base salary as then in effect. In addition, Mr. Schmidt will be entitled to receive’s normal payroll practices, (ii) COBRA premiums reimbursement for the costup to a 12-month period, and (iii) continued vesting of COBRA coverageall outstanding Company equity awards for a period of up to 12 months in consideration of making himself available for consulting services during such period.
Potential Payments upon Termination of Employment and Change in Control Table
The following table illustrates an estimated amount of compensation or other benefits potentially payable to each of our named executive officers as of March 31, 2022 that could be triggered upon termination of such termination.named executive officer’s employment under various scenarios. We entered into an incentive agreementhave assumed that all salary payments or any expenses the executive may be due have been paid currently. The amounts shown assume that such termination (and in the case of a change in control, the change in control) was effective as of March 31, 2022, and, a retention bonus agreement, both effective June 4, 2019, with James Chambers, our Senior Vice President and General Manager, Agriculture and Weather Analytics. Pursuant to the retention bonus agreement, Mr. Chambers will receive a one-time cash award of $426,000 if he is still employed by us on June 4, 2021. The paymenttherefore, are estimates of the cash bonus will accelerate if Mr. Chambers' employment is terminated without "Cause" or by Mr. Chambers for "Good Reason," as those terms are definedamounts that would have been paid to such named executive officers upon their termination. The value of equity award acceleration reflected in the retention bonus agreement. In addition, pursuant totable below was calculated using the incentive bonus agreement, if we achieve certain strategic business goals while he remains employed by us, Mr. Chambers will receive a cashclosing price of $2.98 per share of our common stock on March 31, 2022. The value for option awards is calculated as the difference between the closing price of our common stock of $2.98 on March 31, 2022 and the exercise price per share of the award equal to 0.9 times his base salary or 1.5 times his base salary.
Iteris, Inc. Executive Severance Plan
The Iteris, Inc. Executive Severance Plan was adopted on February 5, 2018 and amended and restated effective on June 4, 2019 (the "Severance Plan"). Each individual employedmultiplied by the Company or its subsidiary, who is annumber of shares vesting. Actual amounts to be paid can only be determined at the time of such named executive officer subject’s termination from the Company. These benefits do not include any amounts with respect to Section 16 of the Exchange, and who is not otherwise covered by an employment agreement that includes severance terms (the "Eligible Employees"), is eligible to receive severance paymentsfully vested benefits under the SeveranceDC Plan, which are described above under “Non-Qualified Deferred Compensation for Fiscal 2022” or our 401(k) Plan.
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| | No Change in Control | | Change in Control | |
| | Termination Without Cause or for Good Reason ($) | Death ($)(1) | Disability ($)(2) | | Termination Without Cause or for Good Reason ($) | Death ($)(1) | Disability ($)(2) | |
Joe Bergera | | | | | | | | | |
Cash Severance (3) | | $778,750 | $222,500 | $111,250 | | $890,000 | $222,500 | $111,250 | |
Medical Benefits (4) | | 13,048 | 13,048 | 13,048 | | 13,048 | 13,048 | 13,048 | |
Equity Award Acceleration (5) | | — | 143,849 | 143,849 | | 405,143 | 368,042 | 368,042 | |
Estimated Total | | $791,798 | $379,397 | $268,147 | | $1,308,191 | $603,590 | $492,340 | |
| | | | | | | | | |
Douglas L. Groves | | | | | | | | | |
Cash Severance (3) | | $412,500 | $— | $— | | $412,500 | $— | $— | |
Medical Benefits (4) | | 13,858 | — | — | | 13,858 | — | — | |
Equity Award Acceleration (5) | | — | 49,554 | 49,554 | | 148,398 | 129,848 | 129,848 | |
Estimated Total | | $426,358 | $49,554 | $49,554 | | $574,756 | $129,848 | $129,848 | |
| | | | | | | | | |
Todd Kreter | | | | | | | | | |
Cash Severance (3) | | $300,000 | $— | $— | | $300,000 | $— | $— | |
Medical Benefits (4) | | 8,231 | — | — | | 8,231 | — | — | |
Equity Award Acceleration (5) | | — | 35,138 | 35,138 | | 111,297 | 92,747 | 92,747 | |
Estimated Total | | $308,231 | $35,138 | $35,138 | | $419,528 | $92,747 | $92,747 | |
1.Only Mr. Bergera is entitled to cash termination benefits upon certain qualifying terminationsdeath. Amount includes 50% of employment. Eligible Employees for the purposes of the Severance Plan is limited to a select group of management or highly compensated employees within the meaning of the Employee Retirement Income Security Act of 1974, as amended. The Severance Plan provides Eligible Employees with severance payments in the event that an Eligible Employee's employment with the Company or its subsidiaries is terminated either (a) by the Company without Cause not in connection with a Change of Control ("Non-CIC Qualifying Termination") or (b) if in connection with or within 12 months following a Change of Control, which, for Eligible Employees employed by that business, includes a divestiture of a material business, by the Eligible Employee for Good Reason (as such terms are defined in the Severance Plan) or by the Company without Cause (a "CIC Qualifying Termination").
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Non-CIC Qualifying Termination. Upon a Non-CIC Qualifying Termination, an Eligible Employee will receive the following:
•A cash payment equal to the Eligible Employee'sMr. Bergera’s annual base salary payable under his employment agreement. Each named executive officer is also eligible for certain accelerated vesting of outstanding equity awards in substantially equal installment payments over the one-year period followingevent of death or permanent disability, as described in the narrative preceding this table.
2.Only Mr. Bergera is entitled to cash termination benefits upon Disability (as defined in accordance with the Company's normal payroll practices;Mr. Bergera’s employment agreement). Amounts assume continuation of base salary and benefit continuation coverage by Mr. Bergera for a total of one hundred twenty (120) days.
3.
•ReimbursementCalculation of cash severance benefits for the Eligible Employee's monthlyvarious termination scenarios is described in the narrative preceding this table. Only Mr. Bergera is entitled to a pro-rated portion of his target bonus established by the Compensation Committee.4.Calculated based on the premiums payable to elect benefit continuation coverage by the named executive officer pursuant to COBRA premiumsfor twelve (12) months and for the 12-month period following termination or untilactual level of group medical, dental and vision coverage in effect as of March 31, 2022.
5.Each named executive officer is also eligible for certain accelerated vesting of outstanding equity awards in the Eligible Employee receives substantially similar medical coverage from another employer. CIC Qualifying Termination. Upon a CIC Qualifying Termination, an Eligible Employee will receive the following:
•A cash payment equal to the Eligible Employee's annual base salary, payable in a lump sum on the next payroll date after the 61st day following termination; and
•Reimbursement for the Eligible Employee's monthly COBRA premiums for the 12-month period following termination, or until the Eligible Employee receives substantially similar medical coverage from another employer.
The severance payments are subject to the Eligible Employee's executionevent of a severance agreementtermination without cause or resignation for good reason within 60 days18 months following termination that includes a releasechange in control as described in the narrative preceding this table. The acceleration of claims and certain non-solicitation, confidentiality, and non-disparagement restrictions.
The Company may amend or terminateoutstanding PSUs held by our named executive officers was assumed to be at “target” levels for purposes of the Severance Plan at any time by providing at least 90 days' advance written notice to each Eligible Employee, provided that no such amendment or termination that has the effect of reducing or diminishing the right of any Eligible Employee will be effective unless one year's advance written notice is provided to Eligible Employees, and such amendment or termination will not be effective if a Change of Control occurs during the one-year notice period.
foregoing tables.
Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, we can indemnify our directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act. Our certificate of incorporation and bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by law, and our bylaws require us to advance litigation expenses upon receipt of an undertaking by the director or officer. If it is ultimately determined that the director or officer is not entitled to indemnification, the director or officer is required to repay such advances. The bylaws further provide that rights conferred under such bylaws do not exclude any other right such persons may have or acquire under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Our certificate of incorporation provides that, pursuant to Delaware law, our directors shall not be liable for monetary damages for breach of the directors'directors’ fiduciary duty of care to us and our stockholders. This provision in the certificate of incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director'sdirector’s duty of loyalty to us or our stockholders, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director'sdirector’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws.
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We have entered into agreements to indemnify certain of our directors and officers in addition to the indemnification provided for in our certificate of incorporation and bylaws. These agreements, among other things, indemnify such directors and officers for certain expenses (including attorneys'attorneys’ fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in the right of the Company, on account of services as a director or officer of Iteris, or as a director or officer of any other company or enterprise to which the person provides services at our request.
EQUITY COMPENSATION PLAN INFORMATION Generally Available Benefit Plans
Section 401(k) Plan. We make available a tax-qualified retirement plan that provides eligible employees, including our executive officers, with an opportunity to save for retirement on a tax-advantaged basis. Participants are able to defer a portionThe following table summarizes information as of their eligible compensation, subject to applicable annual limits under the Internal Revenue Code of 1986, as amended (the "Code"). Pre-tax contributions are allocated to each participant's individual account and may be invested in selected alternative investments according to the participant's direction. We do currently make a matching contribution under the 401(k) plan up to a maximum of 4% of the employee's base salary. Such matching contribution is at the discretion of the Board and is typically evaluated on an annual basis.
Employee Stock Purchase Plan. We maintain an employee stock purchase plan (the "ESPP"), which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code, to promote stock ownership by our employees. The ESPP was approved by our stockholders in November 2017, and 1,000,000 shares of common stock have been reserved for issuance under the ESPP. Under the ESPP, eligible employees are able to acquireMarch 31, 2022 regarding shares of our common stock that may be issued under our equity compensation plans, including the 2007 Omnibus Incentive Plan, the 2016 Omnibus Incentive Plan, ESPP and the Inducement Plan. Other than the Inducement Plan, each of these plans has been approved by accumulating funds through payroll deductions.our stockholders.
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Plan Category | | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | (c) Number of Securities Remaining Available for Future Issuance Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
Equity compensation plans approved by security holders | | 6,310,782 | | (1) | | $ | 4.08 | | | 3,891,780 | | (2) |
Equity compensation plans not approved by security holders(3) | | 179,914 | | | | $ | 2.98 | | | 120,086 | | |
Table(1) Includes 5,847,269 shares subject to outstanding stock option awards, 429,084 shares subject to outstanding RSU awards and 114,974 shares subject to outstanding PSUs (at “target” performance levels), as of ContentsMarch 31, 2022.
(2)Compensation Discussion and Analysis
The following is a summaryIncludes 625,004 shares remaining available for issuance under the ESPP as of March 31, 2022, of which 625,004 shares were eligible to be purchased pursuant to the compensation policies, plans and arrangements for our executive officers. This summary should be readoffering period in effect on such date.
(3)On December 4, 2020, the Board of Directors approved the Inducement Plan in conjunction with the Summary Compensation Table and related disclosures set forth below. WeTrafficCast acquisition. The terms of the Inducement Plan are eligiblesubstantially similar to and have chosen to, complythe terms of the Company’s 2016 Omnibus Incentive Plan with the executive compensation disclosure rules applicable to a "smaller reporting company," as defined in the applicable SEC rules. This section discusses the principles underlying our compensation policies for our executive officers who are named in the "Summary Compensation Table" below, who we refer to as our "named executive officers" or "NEOs" for Fiscal 2019 and who include the following executive officers:•Joe Bergera, our Chief Executive Officer, President and Director;
•Andrew Schmidt, our Chief Financial Officer, Vice President of Finance and Secretary; and
•James Chambers, our Senior Vice President and General Manager, Agriculture and Weather Analytics.
Compensation Philosophy and Objectives
Our executive compensation plans and arrangements are overseen and administered by our Compensation Committee, which is comprised entirely of independent directors as determined in accordance with applicable Nasdaq and SEC rules. The Compensation Committee operates under a written charter adopted and reviewed annually by our Board. A copy of this charter is available on our website under our investor relations page on our website at www.Iteris.comexception that incentive stock options may not be granted under the heading "Corporate Governance." Our philosophy is to provide our named executive officers with compensation that will motivate and retain them, provide them with meaningful incentives to achieve and exceed short-term and long-term corporate objectives setInducement Plan. The Inducement Plan was adopted by our Compensation Committee, and align their long-term interests with those of our stockholders. Based on this philosophy, the compensation programs for our named executive officers are designed to achieve the following primary objectives:
•establish a compensation structure that is competitive enough to attract, retain and motivate outstanding executive talent;
•ensure that any cash incentive compensation programs for our named executive officers are aligned with our corporate strategies and business objectives by tying the potential payouts under such programs to the achievement of key strategic, financial and operational goals; and
•utilize long-term equity awards to align interests between our named executive officers and stockholders.
Impact of 2016 Say-on-Pay Vote
The most recent stockholder advisory vote on executive officer compensation required under the federal securities laws was held on December 15, 2016. Approximately 81.5% of the total votes cast on such proposal (which excluded broker non-votes) were in favor of the compensation of the named executive officers, as that compensation was disclosed in the various compensation tables and narrative that appeared in the Company's proxy statement dated November 21, 2016. Based on that high level of stockholder approval, the Compensation Committee decided not to make any material changes to the Company's compensation philosophies, policies and practices for the Fiscal 2019 compensation of the named executive officers. Currently, based on the voting preference of the Company's stockholders, advisory votes on executive officer compensation will be conducted every three years. Depending on the results of Proposal 3, and if the policy is determined in accordance with the Board's current "three years" recommendation, the next say-on-pay vote would be held at the 2022 annual meeting of stockholders. The Compensation Committee will continue to take into account each such advisory vote in order to determine whether any subsequent changes to the Company's executive compensation
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programs and policies would be warranted to reflect any stockholder concerns reflected in those advisory votes.
Annual Review of Cash and Equity Compensation
We conduct an annual review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers to ensure that compensation is structured appropriately to achieve our objectives. We review each component of compensation as related but distinct. Although the Compensation Committee reviews total compensation, it has not adopted any formal guidelines for allocating total compensation between cash and equity compensation. We determine the appropriate level of each compensation component based in part, but not exclusively, on our retention goals and short-term and long-term objectives.
This review generally occurs in the first quarter of each fiscal year at which time the Compensation Committee establishes executive officer base salaries for the following fiscal year, reviews and approves any bonus awards and programs, establishes the performance objectives for our cash based bonus plan, and may grant equity compensation to the executive officers to ensure their interests are aligned with our stockholders and for retention. In Fiscal 2019, the Compensation Committee retained the services of an independent compensation consulting firm, FW Cook, to advise on executive compensation. This consultant provided the Compensation Committee with market data and analysis of our total direct compensation for such executive officer positions as compared with the competitive market. FW Cook reports only to the Compensation Committee and has not performed any other work for the Company since being retained as an independent consultant to the Compensation Committee. As provided in its charter, the Compensation Committee has the authority to determine the scope of FW Cook's services and may terminate their engagement at any time.
In setting executive compensation, the Compensation Committee takes into account a number of factors, including the nature and scope of the named executive officer's responsibilities, his or her individual performance level and contribution to the achievement of our corporate objectives, the experience level of the executive, the recommendations of our Chief Executive Officer for each individual's compensation package (other than his own) and the compensation trends in the industry.
As part of the review process, our Chief Executive Officer provides our Compensation Committee with recommendations as to the base salary, cash bonus potential and long-term equity incentive awards for each of our executive officers other than himself based on that officer's level of responsibility, individual performance and contribution to the attainment of our strategic corporate objectives and market data. Our Compensation Committee takes the Chief Executive Officer's recommendations into consideration in setting named executive officer compensation, but retains complete discretionary authority to make all compensation-related decisions for our named executive officers. Our Compensation Committee makes its compensation decisions with respect to the Chief Executive Officer on the basis of relevant market data furnished by a variety of sources and its subjective assessment of individual performance and contributions to our overall corporate performance. Any decisions regarding our Chief Executive Officer's compensation are made without such officer present.
Compensation Components and Structure
We utilize three main components in structuring compensation programs for our named executive officers:
•Base salary, which is the only fixed compensation element in the executive compensation program and is primarily used to recruit and retain executive talent and provide an element of economic security from year to year;
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•Performance-based cash bonuses that are primarily designed to reward achievement of financial and operational goals; and
•Equity incentive awards designed to ensure long-term retention of our executive talent and align their interests with those of our stockholders.
We view each component of compensation as related but distinct. It is the practice of our Compensation Committee to allocate a substantial portion of each named executive officer's total compensation to performance and long-term incentive compensation as a result of the philosophy described above. While the Compensation Committee does establish specific performance criteria for its cash-based bonus plan each year, there is no formal pre-established policy for the allocation of compensation between cash and non-cash components or between short-term and long-term components, and there are no pre-established ratios between the compensation of our Chief Executive Officer and that of the other named executive officers. Instead, our Compensation Committee determines the compensation of each named executive officer annually based on its review of the market data, its subjective analysis of that individual's performance and contribution to our financial performance and the other factors identified in the "Annual Review of Cash and Equity Compensation" section above to determine the appropriate level and balance of total compensation. We believe that this approach allows us to tailor compensation for each named executive officer to attract, retain and motivate that executive officer within the parameters of our compensation philosophy.
Base Salaries. Base salaries are set at levels that are intended to recognize the experience, skills, knowledge and responsibilities required of all of our named executive officers. Each named executive officer's base salary level is typically reviewed on an annual basis and adjustments may be made to the individual's base salary on the basis of his or her level of performance, the overall performance of the Company and the various compensation trends in our industry.
In July 2018, the Compensation Committee reviewed the base salaries of the named executive officers and established the base salaries for Fiscal 2019 for such officers as is set forth below:
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Named Executive Officer | | Fiscal 2019 Annual Base Salary | |
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Joe Bergera | | $ | 416,000 | |
Andrew Schmidt | | | 362,500 | |
James Chambers | | | 283,750 | |
Fiscal 2019 Cash-Based Bonus Plan ("2019 Bonus Plan"). Our named executive officers are eligible to receive an annual cash-based bonus under our 2019 Bonus Plan. Each year, our Compensation Committee establishes the performance objectives to be attained and the target bonuses payable based on the level of attainment of the specified goals, which generally include the Company's revenues and operating income for the fiscal year, the revenues and contribution margin of such officer's business unit, and personal objectives set for each officer ("MBOs"). We define "contribution margin" as the business unit's operating income without corporate expense allocations. Corporate operating income and the operating income of each business unit is calculated on a non-GAAP basis to exclude amortization, depreciation, stock-based compensation, goodwill impairment charge, if any, and such other non-cash items that the Compensation Committee, in its sole discretion, believes are not directly indicative of the performance of the Company and the business units.
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The corporate and business unit performance targets and the actual achievement of such objectives for Fiscal 2019 were as follows:
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Performance Components | | No Bonuses At or Below | | Target | | Maximum | | Actual | | % Attained | |
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Corporate Revenue | | $ | 85,899 | | $ | 107,374 | | $ | 128,849 | | $ | 99,123 | | | 92.3 | % |
Corporate Operating Income | | | (200 | ) | | — | | | 201 | | | (3,725 | ) | | 0.0 | |
Roadway Sensors Revenue | | | 41,235 | | | 51,544 | | | 61,853 | | | 43,492 | | | 84.4 | |
Roadway Sensors Contribution Margin | | | 8,774 | | | 10,968 | | | 13,162 | | | 7,011 | | | 63.9 | |
Transportation Systems Revenue | | | 43,585 | | | 54,481 | | | 65,377 | | | 49,815 | | | 91.4 | |
Transportation Systems Contribution Margin | | | 6,390 | | | 7,987 | | | 9,584 | | | 5,907 | | | 74.0 | |
Agriculture and Weather Analytics Revenue | | | 4,736 | | | 5,920 | | | 7,104 | | | 5,816 | | | 98.2 | |
Agriculture and Weather Analytics Contribution Margin | | | (8,008 | )) | | (6,673 | ) | | (5,338 | ) | | (5,024 | ) | | 132.8 | |
If our performance for Fiscal 2019 exceeded the Company and business unit performance targets set for bonus purposes, the NEOs could have earned an additional bonus of up to 50% of the target bonus award that was not based upon achieving individual objectives. The full 50% additional bonus would have been earned by the NEOs if the Company had achieved the performance goals set forth under the "Maximum" column above. If the Company had achieved performance that was less than the goals set forth under the "Maximum" column but more than the amounts set forth under the "Target" column, the additional bonus payable would have been proportional, or based on the level of the Maximum goal achieved when measured from the Target amount. For example, if the performance had exceeded the Target goal by 25% of the difference between the Maximum and Target amounts, then 25% of the 50% additional bonus relating to such performance goal would have been payable.
The Compensation Committee typically meets near the end of the first fiscal quarter of each year to evaluate each NEO's achievement of their respective MBOs and annual bonuses are typically paid out as soon as practicable thereafter.
The performance objectives, target bonus and actual bonus for each of our named executive officers for Fiscal 2019 were as follows:
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Named Executive Officer | | Performance Objectives Allocation (%) | | 2019 Target Bonus ($) | | 2019 Actual Bonus ($) | | % of Target Awarded (%) | |
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Joe Bergera | | | | | $ | 312,000 | | $ | 137,280 | | | 44 | % |
Corporate Revenue | | | 40 | % | | | | | | | | | |
Corporate Operating Income | | | 40 | | | | | | | | | | |
MBOs | | | 20 | | | | | | | | | | |
Andrew Schmidt | | | | | | 163,125 | | | 71,775 | | | 44 | |
Corporate Revenue | | | 40 | | | | | | | | | | |
Corporate Operating Income | | | 40 | | | | | | | | | | |
MBOs | | | 20 | | | | | | | | | | |
James Chambers | | | | | | 156,063 | | | 131,890 | | | 85 | |
Agriculture and Weather Analytics Revenue | | | 30 | | | | | | | | | | |
Agriculture and Weather Analytics Contribution Margin | | | 20 | | | | | | | | | | |
Corporate Revenue | | | 15 | | | | | | | | | | |
Corporate Operating Income | | | 15 | | | | | | | | | | |
MBOs | | | 20 | | | | | | | | | | |
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See "Fiscal 2019 Grant of Plan-Based Awards" above for additional information on Fiscal 2019 cash bonuses.
Equity Compensation. Our equity award program is the primary vehicle for offering long-term incentives to our named executive officers and providing an inducement for long-term retention. Our equity component also aligns the interests of our named executive officers with those of our stockholders and focuses their attention on the creation of stockholder value in the form of stock price appreciation. The Compensation Committee uses both stock options and RSUs as part of the Company's long-term incentive program for named executive officers, and the relative allocation of such instruments may vary from time to time. We believe that the equity-based compensation provides our named executive officers with a direct interest in our long-term performance and creates an ownership culture that establishes a mutuality of interests between our named executive officers and our stockholders.
Typically, the Compensation Committee provides grant guidelines to our Chief Executive Officer, who in turn will make recommendations back to the Compensation Committee regarding the number of options to be granted to our executive officers. See "Fiscal 2019 Grant of Plan-Based Awards" above for the Fiscal 2019 awards.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the discussion and analysis of the compensation of our named executive officers as disclosed in this proxy statement under the heading "Compensation Discussion and Analysis." Based on this review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in the Annual Report and this proxy statement.
| | |
| | Kevin Daly, Ph.D.
Scott E. Deeter
Thomas L. Thomas (Chairman)
|
Compensation Risk Assessment
The Compensation Committee has evaluated our compensation programs and policies as generally applicable to our employees to ascertain any potential material risks that may be created by the compensation programs. The Compensation Committee concluded that our compensation policies and practices, taken as a whole, are not reasonably likely to have a material adverse impact on our business or our financial condition. The following compensation design features help minimize the incentives for excessive risk-taking:
•Our base pay programs consist of generally competitive salary rates that represent a reasonable portion of total compensation and provide a reliable level of income on a regular basis, which decreases incentive on the part of our executives to take unnecessary or imprudent risks;
•A portion of each executive's incentive compensation opportunity is tied to long-term incentive compensation that emphasizes sustained performance over time. This reduces any incentive to take risks that might increase short-term compensation at the expense of longer term results;
•Annual equity awards have multi-year vesting which aligns the long-term interests of our executives with those of our stockholders and, again, discourages the taking of short-term risk at the expense of long-term performance; and
•Each officer has multiple performance objectives, some of which relate to the Company as a whole, which is more difficult for an officer to manipulate.
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PROPOSAL 2: ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, stockholders have the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers. Commonly known as a "say-on-pay" vote, this proposal gives our stockholders the opportunity to express their views on our executive compensation policies and programs and the compensation paid to the named executive officers.
We are asking our stockholders to indicate their support of the compensation of our named executive officers, as described in this proxy statement by approving the following resolution at the Annual Meeting:
"RESOLVED, that the compensation paid to the Company's named executive officers, as disclosed in the Company's proxy statement for the 2019 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion, is hereby approved."
The Board of Directors recommends a vote FOR approval of the advisory resolution because it believes that the Company's executive compensation policies and practices are effective in achieving the Company's goals of attracting, retaining, and motivating highly talented executives, rewarding sustained financial and operating performance, and aligning the executives' interests with those of the stockholders.
The vote on this proposal is advisory and therefore not binding on the Company, the Board of Directors or the Compensation Committee. Although the vote is non-binding, the Board of Directors and the Compensation Committee will review and consider the voting results in future decisions regarding executive compensation.
Stockholder Approval
The affirmative vote of a majoritywithout stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.
The Board initially reserved 300,000 shares of the Company’s common stock presentfor issuance pursuant to awards granted under the Inducement Plan. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to an employee who has not previously been an employee or represented by proxy and entitled to vote at the Annual Meeting, will be required for approval of this proposal. Recommendationmember of the Board or any parent or
subsidiary, or following a bona fide period of Directors
The Board of Directors recommends that the stockholders vote "FOR" the advisory resolution approving the compensation of our named executive officers as disclosed in this proxy statement.
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PROPOSAL 3: ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
Section 14A of the Exchange Act also requires us to provide stockholders with the opportunity to indicate at least once every six years, on an advisory basis, their preference as to the frequency of future advisory votes on the compensation of our named executive officers. Accordingly, we are asking stockholders to vote on whether future say-on-pay votes should occur every year, every two years or every three years. Stockholders also may abstain from voting on this proposal.
We believe that once every three years is the optimal frequency for say-on-pay votes for the Company. Our executive compensation programs are designed to promote a long-term connection between pay and performance and a three-year cycle will provide stockholders with sufficient time to evaluate the effectiveness of our overall compensation philosophy, policies and practices in the context of our long-term business results, and avoid over emphasizing short-term variations. A vote every three years will also provide sufficient time for the Board of Directors and the Compensation Committee to consider the results of the advisory vote and to implement any changes to our compensation practices and for the stockholders to observe and evaluate the impact of any changes to our executive compensation policies and practices, that have occurred since the last advisory vote on executive compensation, before stockholders must evaluate the effectiveness of such changes in conjunction with our related business results. Accordingly, the Board of Directors recommends that the stockholders vote for a frequency of every three years for future advisory votes on the compensation of our named executive officers.
Although this vote is advisory and not binding, the Board of Directors and the Compensation Committee will take into consideration the outcome of the vote in setting a policy with respect to the frequency of future advisory votes on executive compensation. However, when considering the frequency of future advisory votes on executive compensation, the Board of Directors and the Compensation Committee may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by our stockholders. If the policy is determined in accordance with the Board's current recommendation, the next say-on-pay vote would he held at the 2022 annual meeting of stockholders.
Stockholder Approval
Stockholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. There is no threshold vote that must be obtained for this proposal. The Company will consider the frequency that receives the highest number of votes by stockholders to be the frequency that is preferred by stockholders.
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote for every "three years" as the preferred frequency for advisory votes on the compensation of our named executive officers.
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PROPOSAL 4: STOCKHOLDER PROPOSAL ON LONG-TERM INCENTIVE COMPENSATION POLICY
The following stockholder proposal has been submitted to the Company for action at the Annual Meeting by Matthew Sweeny, Managing Partner, Laughing Water Capital, LP. Laughing Water Capital LP's address is 32 Westminster Road, Rockville Centre, NY 11570. Laughing Water Capital, LP has represented that it holds at least $2,000 market value of our Common Stock.
All statements contained in the stockholder proposal and supporting statement below are the sole responsibility of the stockholder, and appear exactly as received by us. Neither Iteris nor the Board accepts any responsibility for the content of the proposal or supporting statement, which are included here in accordance with applicable proxy rules and regulations.
Stockholder Proposal
"Long-Term Incentive Compensation Policy
Resolved, that the shareholders of Iteris Inc. ("Iteris" or "Company") hereby request that the company develop a portfolio approach to management's long-term incentive compensation, whereby a portion of long-term incentive compensation is in the form of Restricted Stock, a portion of long-term incentive compensation is in the form of Performance Units based on Total Shareholder Return ("TSR"), and a portion of long-term incentive compensation is in the form of Performance Units based on a relevant measure of capital efficiency, such as return on invested capital.
Supporting Statement
As long-term shareholders of Iteris, we believe that properly aligned management incentives are essential to long-term success for all stakeholders. At present, long-term incentive compensation for Iteris management is in the form of Restricted Stock and options. We note that this approach to long-term incentive compensation appears to be out of touch with best practices. For example, according to a survey completed by Frederick W. Cook & Co, the compensation consultant retainednon-employment by the Company 90%or a parent or subsidiary, and only if he or she is granted such award in connection with his or her commencement of surveyed companies utilizeemployment with the Company or a portfolio approachsubsidiary and such grant is an inducement material to long-term incentive compensation,his or her entering into employment with 55% of this compensation being linked to performancethe Company or such subsidiary. No future awards 60% of companies using two or more performance metrics, and 91% of companies using a 3 year measurement period. TSR is the most prevalent metric, with almost all companies measuring TSR in relation to a relevant index. We further note that surveys completed by Institutional Shareholder Services indicate that 82% of investors prefer a measure of capital efficiency, such as return on invested capital, return on equity, or return on assets, be included in determining realization of long-term performance awards.
Adopting a portfolio approach to management's long-term incentive compensation where ultimate realization of a portion of long-term incentive compensation is linked to TSR in relation to a relevant index and some measure of capital efficiency will properly align management compensation with our company's long-term performance, for the benefit of all stake holders.
PLEASE VOTE "FOR" THIS PROPOSAL"
The foregoing proposal, which is advisory in nature, would constitute a recommendation to the Board if approved by the stockholders. Our Compensation Committee and Board will consider the voting results on this proposal in their future deliberations regarding the Company's executive compensation program.
Stockholder Approval
The affirmative vote of a majority of the common stock, present or represented by proxy and entitled to vote at the Annual Meeting, will be required for approval of this proposal.
issued under the Inducement Plan.
Recommendation of the Board
Our Board has carefully considered the stockholder proposal and has determined not to make a recommendation either in favor of or opposed to the proposal.
It is important to note that our compensation philosophy is to provide our management with compensation that will motivate and retain them, provide them with meaningful incentives to achieve and exceed short-term and long-term corporate objectives set by our Compensation Committee, and align their long-term interests with those of our stockholders. Following that philosophy, our Compensation Committee carefully considers various potential metrics and objectives in determining how to measure Company and executive officer performance for incentive compensation purposes. Additionally, we understand from FW Cook that the survey mentioned above is of the largest companies in the S&P 500 and does not represent the practice of our peer group.
The stockholder proposal gives you as a stockholder the opportunity to cast a non-binding vote. While the resolution is non-binding and will not, by itself, cause a change to management's long-term compensation policy, the stockholders' response to this proposal will be taken into consideration by the Board when making future decisions about management's long-term compensation policy. While our Board has determined not to make a recommendation either in favor of or opposed to the stockholder proposal, we would consider the results of the vote on this matter in setting compensation metrics in the future.
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PROPOSAL 5:3: RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The accounting firm of Deloitte && Touche LLP ("Deloitte"(“Deloitte”) has been engaged by our Audit Committee to serve as our independent registered public accounting firm for the fiscal year ending March 31, 2020.2023. Deloitte has been our principal independent registered public accounting firm since October 2015. Information regarding the services provided to us by Deloitte during Fiscal 20192022 and Fiscal 20182021 is set forth below under the heading entitled "Matters“Matters Related to Independent Registered Public Accounting Firm."”
We are asking our stockholders to ratify the selection by the Audit Committee of Deloitte as our independent registered public accounting firm to audit our consolidated financial statements for Fiscal 20202023 and to perform other appropriate services. Although stockholder ratification of the selection of Deloitte as our independent registered public accounting firm is not required by our bylaws or otherwise, we are submitting the appointment of Deloitte to our stockholders for ratification at the Annual Meeting as a matter of good corporate governance and to provide a means by which our stockholders may communicate their opinion to the Audit Committee. In the event that the stockholders fail to ratify the appointment, the Audit Committee will reconsider its selection. Even if the selection is ratified, the Audit Committee, in its sole discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the committee feels that such a change would be in the best interests of the Company and our stockholders. A representative of Deloitte is expected to be present at the Annual Meeting, and that representative will have the opportunity to make a brief presentation to the stockholders if he or she so desires and is expected to be available to respond to appropriate questions from stockholders. The affirmative vote of a majority of the common stock, present or represented by proxy and entitled to vote at the Annual Meeting, will be required for ratification of the selection of Deloitte as our independent registered public accounting firm for Fiscal 2020.2023.
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote "FOR"“FOR” the ratification and approval of the selection of Deloitte && Touche LLP as our independent registered public accounting firm for Fiscal 2020.2023.
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MMATTERS RELATEDATTERS RELATED TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Fees Paid to Independent Registered Public Accounting Firm
The following table sets forth the fees we have paid to Deloitte in the following categories and amounts during Fiscal 20192022 and Fiscal 2018:2021:
| | | | | | | | | | | | | | |
| | Year Ended March 31, |
Fee Category | | 2022 | | 2021 |
Audit fees | | $1,028,214 | | | $1,010,220 | |
Audit related fees | | 43,895 | | | 91,985 | |
Tax fees | | — | | | — | |
All other fees | | — | | | — | |
Total fees | | $1,072,109 | | | $1,102,205 | |
| | | | | | | |
| | Year Ended March 31, | |
---|
Fee Category | | 2019 | | 2018 | |
---|
Audit fees | | $ | 914,000 | | $ | 916,000 | |
Audit related fees | | | 30,000 | | | 190,000 | |
Tax fees | | | — | | | — | |
All other fees | | | — | | | — | |
| | | | | | | |
Total fees | | $ | 944,000 | | $ | 1,106,000 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Audit Fees.Audit fees consist of fees billed for professional services rendered in connection with the audit of our overhead rate and the audit of our annual consolidated financial statements for the applicable fiscal year and review of our consolidated financial statements included in our quarterly reports on Form 10-Q, Annual Report on Form 10-K (and 10-K/A) and other regulatory filings for such fiscal year.
Audit Related Fees.Audit related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements but are not reporting under "Audit“Audit Fees."” Audit related fees for Fiscal 20192022 were related to the adoptionreview of ASC 842. Audit related fees billed for Fiscal 2018 were related to the review our registration statements on Form S-3 and Form S-8 as well asand a subscription to Deloitte’s Accounting Research Tool. Audit related fees for Fiscal 2021 were related to the adoptionTrafficCast acquisition and the review of ASC 606.our registration statements on Form S-8 and Form S-3 and a subscription to Deloitte’s Accounting Research Tool.
Tax Fees.Tax fees consist of fees were billed for professional services for tax compliance, tax advice and tax planning. There were no tax fees billed by Deloitte for Fiscal 20192022 or Fiscal 2018.2021.
All Other Fees.There were no fees were billed by Deloitte in Fiscal 20192022 or Fiscal 20182021 for any other services. Audit Committee Pre-Approval Policies and Procedures All engagements for services by Deloitte or other independent registered public accountants are subject to prior approval by the Audit Committee;Committee; however, de minimis, non-audit services may instead be approved in accordance with applicable SEC rules. The prior approval of the Audit Committee was obtained for all services provided by Deloitte for Fiscal 20192022 and Fiscal 2018.2021.
The Audit Committee reviewed and discussed the services rendered by Deloitte during Fiscal 2019,2022, as well as the fees paid for such services, and has determined that the provision of such services by Deloitte, and the fees paid for such services, were compatible with maintaining Deloitte'sDeloitte’s independence. The following is the report of the Audit Committee with respect to the audited consolidated financial statements for the fiscal year ended March 31, 2019 included2022 included in the Annual Report.
Our management is responsible for the Company'sCompany’s financial reporting process, including its systems of internal control over financial reporting, and for the preparation of its financial statements in accordance with generally accepted accounting principles. Our independent registered public accounting firm, Deloitte, is responsible for performing an independent audit of our consolidated financial statements and issuing opinions on the conformity of those audited financial statements with United
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States generally accepted accounting principles ("GAAP"(“GAAP”) and the effectiveness of our internal control over financial reporting. The role and responsibility of the Committee is to monitor and oversee these financial processes on behalf of the Board.
The members of the Audit Committee are not employees of Iteris and are not, nor do they represent themselves to be, accountants or auditors by profession, and they do not undertake to conduct auditing or accounting reviews or procedures. Therefore, in performing the Audit Committee'sCommittee’s oversight role, the Audit Committee necessarily must rely on management'smanagement’s representations that it has maintained appropriate accounting and financial reporting principles and policies, and appropriate internal control over financial reporting and disclosure controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations, and that the Company'sCompany’s financial statements have been prepared with integrity and objectivity and in conformity with GAAP, and on the representations of our independent registered public accounting firm included in its reports on the Company'sCompany’s financial statements.
In this context, the Audit Committee hereby reports as follows: 1. The Audit Committee has reviewed and discussed our consolidated audited financial statements with our management. 2. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, "Communications“Communications with Audit Committees,"” as adopted by the Public Company Accounting Oversight Board (the "PCAOB"“PCAOB”). 3. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm'sfirm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent registered public accounting firm its independence. 4. Based on the review and discussions referred to above in this report, the Audit Committee recommended to the Company'sCompany’s Board, and the Board approved, that the consolidated audited financial statements be included in our Annual Report on Form 10-K for the year ended March 31, 20192022 for filing with the SEC. | | |
| | Submitted by the Audit Committee of the Board of Directors: |
|
|
Scott E. DeeterDirectors: Gerard M. Mooney
Mikel H. WilliamsLaura L. Siegal Dennis W. Zank (Chairman) |
The information contained in the foregoing Audit Committee Report is not "soliciting material"“soliciting material” and is not deemed filed with the SEC. Such report is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof, and irrespective of any general incorporation language in any such filing.
SSTOCK OWNERSHIPTOCK OWNERSHIP OF CERTAINBENEFICIAL OWNERSCERTAIN BENEFICIAL OWNERS AND MANAGEMENT
MANAGEMENT
The following table sets forth, as of July 19, 2019,12, 2022, the number and percentage ownership of our common stock by (i) all persons known to us to beneficially own more than 5% of the outstanding common stock, (ii) each of the named executive officers, (iii) each of our directors, and (iv) all of our executive officers and directors as a group. To our knowledge, except as otherwise indicated, each of the persons named in this table has sole voting and investment power with respect to the common stock shown as beneficially owned, subject to community property and similar laws, where applicable.
| | | | | | | | | | | | | | |
| | Common Stock |
Name and Address of Beneficial Owner(1) | | Amount and Nature of Beneficial Ownership(2) | | Percent of Class(2) |
Samjo Capital, LLC, Samjo Management, LLC and Andrew N. Wiener(3) | | 2,534,000 | | | 6% |
Cowen Prime Advisors LLC(4) | | 2,349,950 | | | 5.5 |
Joe Bergera(5) | | 1,980,841 | | | 4.7 |
Douglas L.Groves(6) | | 133,598 | | | * |
Todd Kreter(7) | | 272,361 | | | * |
Ramin Massoumi(8) | | 300,920 | | | * |
Gerard M. Mooney(9) | | 67,982 | | | * |
Laura L. Siegal(10) | | 57,041 | | | * |
Thomas L. Thomas(11) | | 205,042 | | | |
Dennis W. Zank(12) | | 39,049 | | | |
All executive officers and directors as a group (8 persons)(13) | | 3,056,834 | | | 7.2% |
| | | | | | | |
| | Common Stock | |
---|
Name and Address of Beneficial Owner(1) | | Amount and Nature of Beneficial Ownership(2) | | Percent of Class(2) | |
---|
Joe Bergera(3) | | | 1,154,301 | | | 2.78 | |
Andrew Schmidt(4) | | | 218,750 | | | * | |
James Chambers(5) | | | 62,500 | | | * | |
Kevin C. Daly, Ph.D.(6) | | | 506,781 | | | 1.25 | |
Scott E. Deeter(7) | | | 22,009 | | | * | |
Gerard M. Mooney(8) | | | 63,549 | | | * | |
Laura L. Siegal(9) | | | 24,548 | | | * | |
Thomas L. Thomas(10) | | | 147,549 | | | * | |
Mikel H. Williams(11) | | | 93,549 | | | * | |
All executive officers and directors as a group (12 persons)(12) | | | 2,606,268 | | | 6.15 | % |
_______________________(1) The address of each of the directors and officers is 1700 Carnegie Avenue,1250 S. Capital of Texas Hwy., Bldg. 1, Suite 100, Santa Ana, CA 92705.330, Austin, TX 78746.
(2) Based on 40,488,70642,577,415 shares of common stock outstanding as of July 19, 2019.12, 2022. Shares of common stock subject to options or warrants which are exercisable within 60 days of July 19, 201912, 2022 are deemed to be beneficially owned by the person holding such options or warrants for the purpose of computing the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage of any other person. Other than as described in the preceding sentence, shares issuable upon exercise of outstanding options and warrants are not deemed to be outstanding for purposes of this calculation. In addition to the shares held in the individual'sindividual’s name, the number of shares indicated also includes shares held for the benefit of the named person under our 401(k) plan.
(3) Pursuant to a Schedule 13G filed on February 7, 2022 with the SEC, Samjo Capital, LLC reported that through the following beneficial owners the following voting power: (1) Samjo Capital, LLC has shared voting power with respect to 2,525,000 shares, (2) Samjo Management, LLC has shared voting power with respect to 2,525,000 shares, and (3) Andrew N. Wiener has shared voting power with respect to 2,525,000 shares, sole voting power with respect to 9,000 shares, and sole dispositive power with respect to 9,000 shares. Mr. Wiener is the sole Managing Member of Samjo Capital, LLC and Samjo Management, LLC. The address for Samjo Capital, LLC is 599 Lexington Avenue, 27th Floor, New York, NY 10022.
(3)
(4) Pursuant to a Schedule 13G filed on February 9, 2022 with the SEC, Cowen Prime Advisors LLC reported that, through its various clients, it has shared dispositive power with respect to 2,349,950. The address for Cowen Prime Advisors is 599 Lexington Avenue, Floor 21, New York, NY 10022.
(5) Consists of (i) 4,301102,716 shares held directly by Mr. Bergera and (ii) 1,150,5001,878,125 shares issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after July 19, 2019.12, 2022.
(4)
(6) Consists of 218,750(i) 15,000 shares held in a trust, of which Mr. Groves is a trustee, (ii) 6,098 shares held in the ESPP, and (iii) 112,500 shares issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after July 19, 2019.12, 2022.
(5)
(7) Consists of 62,500(i) 33,303 shares held directly by Mr. Kreter, (ii) 308 shares held in an individual retirement account by Mr. Kreter, and (iii) 238,750 shares issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after July 19, 2019.12, 2022.
(6)
(8) Consists of (i) 420,16527,996 shares held directly by the Daly Family Trust,Mr. Massoumi, (ii) 31,624 shares held in a trust, of which Dr. DalyMr. Massoumi is a trustee, (ii) 6,113(iii) 2,551 shares are held by Dr. Daly's IRA, (iii) 100 shares held by Dr. Daly's spouse,in Mr. Massoumi’s 401(k) plan, and (iv) 60,000238,749 shares issuable upon exercise of options
that are currently exercisable or will become exercisable within 60 days after July 19, 2019,12, 2022. Mr. Massoumi ceased to serve as our Senior Vice President and (v) 9,615General Manager, Consulting Solutions on December 31, 2021.
(9) Consists of (i) 53,357 shares held directly by Mr. Mooney and (ii) 14,625 shares subject to RSUs that vest within 60 days after July 19, 2019.12, 2022.
Table of Contents(7)- (10) Consists of (i)
12,39442,416 shares held directly by Mr. DeeterMs. Siegal and (ii) 9,61514,625 shares subject to RSUs that vest within 60 days after July 19, 2019.12, 2022.
(8)
(11) Consists of (i) 13,934 shares held directly by Mr. Mooney, (ii) 40,000 shares issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after July 19, 2019, and (iii) 9,615 shares subject to RSUs that vest within 60 days after July 19, 2019.
(9)Consists of (i) 14,933 shares held directly by Ms. Siegal and (ii) 9,615 shares subject to RSUs that vest within 60 days after July 19, 2019.
(10)Consists of (i) 20,78873,271 shares held directly by Mr. Thomas, (ii) 117,146 shares held by Mr. Thomas'sThomas’s Trust, and (iii) 9,61514,625 shares subject to RSUs that vest within 60 days after July 19, 2019.12, 2022.
(11)
(12) Consists of (i) 5,78824,424 shares held directly by Mr. Williams,Zank and (ii) 10,000 shares held by Mr. Williams' IRA, (iii) 8,146 shares held by Mr. Williams' family trust, (iii) 60,000 shares issuable upon exercise of options that are currently exercisable or will become exercisable within 60 days after July 19, 2019, and (iv) 9,61514,625 shares subject to RSUs that vest within 60 days after July 19, 2019.12, 2022.
(12)
(13) Includes (i) 1,851,2502,468,124 shares issuable upon exercise of options held by the executive officers and directors as a group that are currently exercisable or will become exercisable within 60 days after July 19, 201912, 2022 and (ii) 57,69058,500 shares subject to RSUs held by the executive officers and directors as a group that vest within 60 days of July 19, 2019.12, 2022.
ENVIRONMENTAL, SOCIAL, GOVERNANCE AND RELATED MATTERS
We believe that leadership in ethical, environmental, social, governance and related matters will have a positive impact on our business, employees, customers and communities we serve. Accordingly, we adopted policies that help us to implement these standards.
Code of Ethics and Business Conduct
Our Board has adopted a Code of Ethics and Business Conduct (“Code of Ethics”), which applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) and employees. The full text of our Code of Ethics is available under the “Corporate Governance” heading on the Investor Relations section of our website at www.iteris.com. We will also provide an electronic or paper copy of the Code of Ethics, free of charge, upon request made to our Corporate Secretary. If any substantive amendments are made to our Code of Ethics, or if any waiver (including any implicit waiver) of any provision of the Code of Ethics is granted that is required to be disclosed under the rules of the SEC, such amendment or waiver will be disclosed at the same location on our website, or, if required, in a current report on Form 8-K.
In March 2022, our Board adopted updates to our Code of Ethics to empower our directors, officers and employees to be responsible for carrying out and monitoring compliance to our Code of Ethics by reporting known or suspected illegal or unethical behavior without retaliation. Directors and officers are to report such behaviors to the Chair of our Audit Committee and employees (not directors or officers) are to report such behaviors to our Board of Directors or appropriate management representative. Complaints, concerns or questions pertaining to accounting, internal accounting controls or auditing matters, or financial fraud, securities fraud or other securities law violations are to be reported to our Board of Directors or to members of our Audit Committee. Additional methods to anonymously report these behaviors is provided in our Code of Ethics, which is staffed by a third-party company operating 24 hours a day, 7 days a week. We have a policy of non-retaliation and abide by federal and state laws providing legal protection to certain types of whistleblowers. We believe our Code of Ethics help foster an ethical workplace and culture of integrity as well as promote the high standards of ethical conduct we value.
Environmental, Social and Governance Practices
Environmental, social and governance (“ESG”) practices are becoming increasingly important to our stockholders, customers, and employees and our Board supports Iteris in pursuing thriving communities. In June 2020, our Board adopted an Environmental Policy Statement and Human Rights Policy to further our commitment to continually improve how Iteris operates. In January 2022, our Board expanded the Environmental Policy Statement by ratifying its support of environmental goals of the United Nations Global Compact. In November 2020, our Board ratified our Occupational Health and Safety Policy Statement to support safety practices and maintaining a healthy work environment. In December 2020, our Board ratified our Policy Statement Against Trafficking in Persons and Slavery to instill a climate of full compliance with laws concerning prohibitions of trafficking in persons, including implementing a standard annual mandatory training program on anti-slavery and human trafficking to employees. In November 2021, our Board ratified updates to the Policy Statement Against Trafficking in Persons and Slavery by adding onboard and bi-annual training programs and awareness education and initiatives, including how to identify signs of violations of human rights, such as slavery and human trafficking. In addition to and among other updates, Iteris is committed to respecting the rights of all people, with a careful focus on marginalized or underrepresented groups, including women, people with disabilities, and racial or ethnic minorities. In addition to the foregoing, it is our intent to further our commitment by conducting regular climate risk assessments in support of disclosure, such as any potential various natural disasters. The full text of our Environmental Policy, Human Rights Policy, Occupational Health and Safety Policy, and Statement Against Trafficking in Persons and Slavery are available under the “Corporate Governance” heading on the Investor Relations section of our website at www.iteris.com.
As a global leader in smart mobility infrastructure management, we work with public and private-sector partners to increase the efficiency of mobility, which has the benefit of reducing carbon emissions, all as part of our commitment to a cleaner, healthier and more sustainable future. By reducing delays and stops as part of traffic signal timing projects, improving the efficiency of public transit via signal priority programs, reducing time spent roadside for heavy-emitting commercial freight vehicles during inspection, to name just a few examples, our industry-leading portfolio of smart mobility infrastructure management solutions is currently helping cities and states to reduce their carbon footprint. In February 2022, we released a Sustainability White Paper to illustrate our commitment to the advancement of the transition to carbon-free mobility in our services and solutions. The full text of our Sustainability White Paper is available under the “Overview” heading on the Investor Relations section of our website at www.iteris.com.
In March 2022, we released our Fiscal 2022 ESG Report in response to feedback from our investors and other stakeholders. Our Fiscal 2022 ESG Report provides information about our key ESG principles, including environmental stewardship, social responsibility in people and culture, and excellence in corporate governance. The full text of our Fiscal 2022 ESG Report is available under the “Overview” heading on the Investor Relations section of our website at www.iteris.com.
Supply Chain Responsibility
We are committed to advancing supply chain responsibility by reducing risk, improving product quality, and raising overall performance of our suppliers. In furtherance of this commitment, in December 2020 our Board ratified our Conflict Minerals Policy Statement to support preventing profits from the sale of tantalum, tin, tungsten, and gold from funding conflict in the Democratic Republic of the Congo and adjoining countries. The full text of our Conflict Minerals Policy Statement is available under the “Corporate Governance” heading on the Investor Relations section of our website at www.iteris.com.
Diversity and Inclusion
Consistent with our core values, we promote diversity and inclusion in every aspect of our business. We are an equal opportunity employer and make employment decisions on the basis of merit. We are focused on being an employer of choice of all talent, where employees feel like they belong. We administer all phases of our employment practices without regard to race, ethnicity, religious creed, color, national origin, ancestry, disability, sex, gender, gender identity, gender expression, sexual orientation, transgender identity, age, military or veteran status, or any other consideration made unlawful by law. Additionally, as a contractor for the United States Government, we develop and implement an affirmative action plan to (1) assess our inclusion of women, members of minority groups, protected veterans, and individuals with disabilities into our workforce, (2) establish goals for increased inclusion and (3) implement strategies to reach those goals. In furtherance of these values, our Board has adopted the Diversity and Inclusion Policy to promote encourage, and develop our employees to their full potential and utilize their unique talents. The full text of our Diversity and Inclusion Policy is available under the “Corporate Governance” heading on the Investor Relations section of our website at www.iteris.com.
In furthering the Diversity and Inclusion Policy, we are committed to provide transparent disclosure with the goal to increasing gender and ethnic/racial diversity throughout the Company, including among our leadership ranks. The Company intends to continue monitoring women and racial and ethnic minorities in order to track its trend over time and enable our stockholders to track the progress that we make in advancing diversity in our workforce. At the conclusion of Fiscal 2022, women represented 30% of our total employee base and 27% of our management and executive employee base. Racial and ethnic minorities represented 40% of our total employee base and 36% of management and our executive employee base.
Investment in our Employees
There are several programs we implemented and maintain for the financial and educational well-being of our employees and their families. For example, we have an Employee Stock Purchase Plan (“ESPP”), which provides employees with the opportunity to share in the ownership of Iteris and its performance through the purchase of shares of the Company’s stock. ESPP allows eligible employees to accumulate contributions through after-tax payroll deductions to purchase shares of Iteris stock at a 5% discount. Our 401(k) plan has an 93.0% participation rate among eligible employees, with annual training and monthly educational sessions held at each Iteris location.
We continue to invest in employee development and engagement for the benefit of our employees and Iteris. For example, we offer a comprehensive training program that includes online, on-demand training; classroom-based technical training and certification; and classroom-based leadership training and individualized coaching. The leadership training and individualized coaching is facilitated by an independent management consulting firm. In Fiscal 2022, there were 15 graduates from the leadership training and coaching program, and we anticipate a similar number of graduates in Fiscal 2023. We track various metrics, including employee retention to measure the impact of our employee development and engagement programs. Therefore, we are voluntarily disclosing, and currently plan to continue to disclose going forward, the Company's turnover rate metric to routinely track and guide the Company's retention activities, as necessary. The Company's total turnover rate for Fiscal 2022 was 23.5% and the turnover rate of our professional staff was 18%.
ADDITIONAL MATTERS
Certain Transactions with Related Persons
Since April 1, 2017,2021, other than the agreements and transactions described in "Executive“Executive Compensation and Other Matters"Matters” above, and the transactions described below, there has not been, nor is there any proposed transaction, where we (or any of our subsidiaries) were or will be a party in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two fiscal years and in which any director, director nominee, executive officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. We previously subleased office space to Maxxess Systems, Inc. ("Maxxess"), one of our former subsidiaries that we sold in September 2003. The sublease terminated in September 2007, at which time Maxxess owed us an aggregate of $274,000. Maxxess executed a promissory note for such amount, which was subsequently amended and restated on July 23, 2013 and on August 11, 2016. The amended and restated note bears interest at a rate of 6% per annum, compounded annually, with accrued interest payable annually on the first business day of each calendar year. When authorized by the Company, Maxxess may pay down the balance of this note by providing consulting services to Iteris. We have previously fully reserved for amounts owed to us by Maxxess and the outstanding principal balance remains fully reserved. As of March 31, 2019, approximately $146,000 of the original principal balance was outstanding and payable to Iteris. Maxxess is currently owned by an investor group that includes, among others, one former Iteris director, who has not been a director of Iteris since September 2013, and one existing director of Iteris, who currently owns less than 2% of Maxxess' capital stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of a registered class of our securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on
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a review of copies of such forms received with respect to Fiscal 2019 and the written representations received from certain reporting persons that no other reports were required, we believe that all directors, officers and persons who own more than 10% of our common stock have complied with the reporting requirements of Section 16(a).
Annual Report
A copy of our Annual Report, (excluding the exhibits thereto)including our Annual Report on Form 10-K for Fiscal 2022, accompanies the proxy materials being mailed to all stockholders. The Annual Report is not incorporated into this proxy statement and is not considered proxy solicitation material. Stockholders may obtain a copy of theour Annual Report on Form 10-K and any of our other filings with the SEC, without charge, by writing to Investor Relations, Iteris, Inc., 1700 Carnegie Avenue,1250 S. Capital of Texas Hwy., Bldg. 1, Suite 100, Santa Ana, California 92705.330, Austin, Texas 78746. The Annual Report (including the exhibits thereto) is also available on the SEC'sSEC’s website at www.sec.gov. Delivery of Documents to Stockholders Sharing an Address
Some street name holders of our common stock may be "householding"“householding” our proxy statements and annual reports, which means that we will deliver only one copy of our proxy statement and annual report to multiple stockholders who share the same address (if they appear to be members of the same family), unless we have received instructions to the contrary. This procedure reduces our printing costs,and mailing costs and related fees. Upon request, we will promptly deliver a separate copy of either document to you if you write us at our corporate offices at Iteris, Inc., 1700 Carnegie Avenue,1250 S. Capital of Texas Hwy., Bldg. 1, Suite 100, Santa Ana, CA 92705, Attention:330, Austin, TX 78746, Attention: Corporate Secretary.Secretary, Telephone: (512) 716-0808. You may also contact us or your Nominee if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future. Deadline for Receipt of Stockholder Proposals
Stockholders may present proposals for action at a future meeting or nominate persons for the election of directors only if they comply with the requirements of the proxy rules established by the SEC and our bylaws. Pursuant to Rule 14a-8 of the Exchange Act, some stockholder proposals may be eligible for inclusion in our proxy statement for the 20202023 Annual Meeting of Stockholders (the "2020“2023 Annual Meeting"Meeting”). Stockholder proposals that are intended to be presented at our 20202023 Annual Meeting and included in the proxy statement, form of proxy and other proxy solicitation materials related to that meeting must be received by us not later than March 31, 2020.17, 2023.
If a stockholder wishes to submit a proposal which is not intended to be included in our proxy statement under Rule 14a-8 of the Exchange Act, or wishes to nominate a person as a candidate for election to the Board, the proposal or nomination must be received by us on or between May 15, 202011, 2023 and June 14, 2020.10, 2023. If the date of the 20202023 Annual Meeting of Stockholders is called for a date that is not within 30 days before or after the anniversary date of the 20202022 Annual Meeting of Stockholders, (a situation that we do not anticipate), then the stockholder must submit any such proposal or nomination not later than the close of business of the 10th day following the earlier of (i) the day on which the notice of the meeting was mailed or (ii) public disclosure of the date of such meeting is first made. Stockholders are advised to review our bylaws which contain these advance notice requirements with respect to advance notice of stockholder proposals and director nominations. In addition, with respect to any proposal that a stockholder presents at the 20202023 Annual Meeting that is not submitted for inclusion in our proxy materials pursuant to Rule 14a-8 under the Exchange Act, the proxy solicited by the Board for such annual meeting will confer discretionary voting authority to vote on such stockholder proposal to the extent permitted under Rule 14a-4 under the Exchange Act. Stockholder proposals must be in writing and should be addressed to our Corporate Secretary, at our principal executive offices at 1700 Carnegie Avenue,1250 S. Capital of Texas Hwy., Bldg. 1, Suite 100, Santa Ana, California 92705.330, Austin, TX 78746. It is
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recommended that stockholders submitting proposals direct them to our Corporate Secretary and utilize certified mail, return receipt requested in order to provide proof of timely receipt. The presiding officer of the 20192022 Annual Meeting reserves the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with these and other applicable requirements, including conditions set forth in our bylaws and conditions established by the SEC. The Board is not aware of any other matter which will be presented for action at the Annual Meeting other than the matters set forth in this proxy statement. If any other matter requiring a vote of the stockholders arise, it is intended that the proxy holders will vote the shares they represent as the Board may recommend. Discretionary authority with respect to such other matters is granted by the execution of the enclosed proxy card. | | | | | | | | |
| | THE BOARD OF DIRECTORS OF ITERIS, INC. |
Austin, Texas July 15, 2022 | | |
Santa Ana, California
July 29, 2019
MMMMMMMMMMMM MMMMMMMMMMMMMMM ITERIS, INC. C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 received by 1:00 a.m. PDT, on September 12, 2019 Online GIof ntoo welwewct.reonnviicsivoontrienpgo, rts.com/ITI or scan delete QR code and control # the QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/ITI Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Board of Directors makes no recommendation for the stockholder proposal (Proposal 4). + 1. Election of Directors: 01 - Joe Bergera For Against Abstain For Against Abstain For Against Abstain 02 - Kevin C. Daly, Ph.D. 03 - Scott E. Deeter 04 - Gerard M. Mooney 05 - Laura L. Siegal 06 - Thomas L. Thomas 07 - Mikel H. Williams For Against Abstain For Against Abstain 2. To approve, by advisory vote, the compensation of our named executive officers. 3. To approve, by advisory vote, the frequency of conducting future advisory votes on the compensation of our named executive officers. 4. To approve, by advisory vote, the Stockholder Proposal on Long-Term Incentive Compensation Policy. 5. To ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2020 Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMM C 1234567890 J N T 2 3 6 7 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 7 4 B M 4 033TBC MMMMMMMMM B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. A Proposals – The Board of Directors recommends a vote “FOR” the nominees listed in Proposal 1, “FOR” Proposals 2, 3 and 5, and the 2019 Annual Meeting Proxy Card1234 5678 9012 345
2019 Annual Meeting Admission Ticket 2019 Annual Meeting of Iteris, Inc. Shareholders September 12, 2019, 10:00 am PT 1700 Carnegie Avenue, Suite 100 Santa Ana, CA 92705 Upon arrival, please present this admission ticket and photo identification at the registration desk. Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.envisionreports.com/ITI q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Notice of 2019 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — September 12, 2019 The undersigned stockholder of ITERIS, INC. (“Iteris” or the “Company”) hereby appoints JOE BERGERA and ANDREW SCHMIDT, and each of them, proxies of the undersigned, each with full power to act without the other and with power of substitution, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held on September 12, 2019 at 10:00 a.m. Pacific Time, at the Company’s offices located at 1700 Carnegie Avenue, Suite 100, Santa Ana, CA, 92705, and at any adjournments or postponements thereof, and to vote all shares of common stock of the Company held of record by the undersigned on July 19, 2019, with all the powers the undersigned would possess if personally present, in accordance with the instructions on this proxy. The undersigned hereby revokes any other proxy to vote at such Annual Meeting of Stockholders and hereby ratifies and confirms all that said proxies, and each of them, may lawfully do by virtue hereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS INDICATED OR, IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED “FOR” THE ELECTIONTABLE OF THE NOMINEES NAMED IN PROPOSAL 1, “FOR” EACHCONTENTS