SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Exchange Act of 1934 (Amendment No. )
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[X] Definitive Proxy Statement
[_] Definitive Additional Materials
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Stoneridge, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing fee (Check the appropriate box):
[X] No fee required.
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STONERIDGE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
To our Shareholders:
The 2002 annual meeting of shareholders of Stoneridge, Inc. will be held at
600 Golf Drive, Warren, Ohio 44483, on Monday, May 13, 2002, at 10:00 a.m.,
local time, for the following purposes:
1. To elect eight directors, each for a term of one year;
2. To consider a proposal to approve the adoption of the Directors'
Share Option Plan;
3. To receive reports at the meeting. No action constituting approval
or disapproval of the matters referred to in the reports is
contemplated; and
4. To consider any other matters that properly come before the meeting.
Only shareholders of record at the close of business on March 21, 2002, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
Shareholders are urged to complete, date and sign the enclosed proxy and
return it in the enclosed envelope. The principal address of Stoneridge, Inc.
is 9400 East Market Street, Warren, Ohio 44484.
By order of the Board of Directors,
AVERY S. COHEN,
Secretary
Dated: April 3, 2002
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY
STONERIDGE, INC.
PROXY STATEMENT
----------------
Our Board of Directors is sending you this proxy statement to ask for your
vote as a Stoneridge shareholder on certain matters to be voted on at the
annual meeting of shareholders. The annual meeting of shareholders will be
held at 600 Golf Drive, Warren, Ohio 44483, on Monday, May 13, 2002, at 10:00
a.m., local time. We are mailing this proxy statement and the accompanying
notice and proxy to you on or about April 3, 2002.
Annual Report. A copy of our Annual Report to Shareholders for the fiscal
year ended December 31, 2001, is enclosed with this proxy statement.
Solicitation of Proxies. Our Board of Directors is making this solicitation
of proxies and we will pay the cost of the solicitation. We have retained
Georgeson Shareholder, at an estimated cost of $4,500, to assist us in the
solicitation of proxies from brokers, nominees, institutions and individuals.
In addition to solicitation of proxies by mail by Georgeson Shareholder, our
employees may solicit proxies by telephone, facsimile or electronic mail.
Proxies; Revocation of Proxies. The shares represented by your proxy will be
voted in accordance with the instructions as indicated on your proxy. In the
absence of any such instructions, they will be voted to elect the director
nominees set forth under "Election of Directors" and FOR Proposal One. Your
presence at the annual meeting of shareholders, without more, will not revoke
your proxy. However, you may revoke your proxy at any time before it has been
exercised by signing and delivering a later-dated proxy or by giving notice to
us in writing at our address indicated on the attached Notice of Annual
Meeting of Shareholders, or in open meeting.
Voting Eligibility. Only shareholders of record at the close of business on
the record date, March 21, 2002, are entitled to receive notice of the annual
meeting of shareholders and to vote the common shares that they held on the
record date at the meeting. On the record date, our voting securities
outstanding consisted of 22,397,311 common shares, without par value, each of
which is entitled to one vote at the meeting.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table describes certain information regarding the beneficial
ownership of our common shares as of February 25, 2002, by: (a) our directors
(all of whom are also nominees for director); (b) each other person who is
known by us to own beneficially more than 5% of our outstanding common shares;
(c) our chief executive officer and the four other most highly compensated
executive officers named in the Summary Compensation Table; and (d) our
executive officers and directors as a group.
Number of
Shares Percent
Beneficially of
Name of Beneficial Owner(1) Owned Class
- --------------------------- ------------ -------
D.M. Draime(2)........................................... 5,666,172 25.3%
FMR Corp.(3)............................................. 2,242,600 10.0
Cloyd J. Abruzzo(4)...................................... 2,037,703 9.1
Jeffrey P. Draime(5)..................................... 2,009,541 9.0
Dimensional Fund Advisors Inc.(6)........................ 1,952,700 8.7
Scott N. Draime(7)....................................... 1,880,179 8.4
Second National Bank of Warren(8)........................ 1,363,656 6.1
Avery S. Cohen(9)(10).................................... 547,002 2.4
Sheldon J. Epstein(10)(11)............................... 422,022 1.9
Richard E. Cheney(12).................................... 34,271 *
C.J. Hire................................................ 5,000 *
Richard G. LeFauve....................................... 3,000 *
Earl L. Linehan.......................................... 180,079 *
Gerald V. Pisani(13)..................................... 531,719 2.4
Kevin P. Bagby(14)....................................... 97,079 *
Thomas Beaver(15)........................................ 48,579 *
All Executive Officers and Directors as a Group (13
persons)................................................ 9,573,378 42.7%
- --------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power over such shares.
(2) Represents 5,641,172 common shares held in trust for the benefit of D.M.
Draime, of which Mr. Draime is trustee, and 25,000 common shares held in
trust for the benefit of Draime family members, of which Mr. Draime is
trustee. The address of D.M. Draime is 9400 East Market Street, Warren,
Ohio 44484.
(3) According to a Schedule 13G filed with the Securities and Exchange
Commission by FMR Corp., all common shares are owned by clients of FMR
Corp. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(4) Represents 299,590 common shares held in trust for the benefit of Cloyd
J. Abruzzo of which Mr. Abruzzo is trustee, an aggregate of 1,390,856
common shares held in trust for the benefit of D.M. Draime's children and
grandchildren of which Mr. Abruzzo is trustee, 200,000 common shares that
Mr. Abruzzo has the right to acquire upon the exercise of share options,
and 147,257 common shares that Mr. Abruzzo owned directly. The address of
Cloyd J. Abruzzo is 9400 East Market Street, Warren, Ohio 44484.
(5) Represents 886,114 common shares held in trust for the benefit of Jeffrey
P. Draime of which Jeffrey P. Draime is trustee, 1,090,427 common shares
held in trust for the benefit of Scott N. Draime's and Rebecca Gang's
children, of which Jeffrey P. Draime is trustee, and 33,000 common shares
owned by Jeffrey P. Draime directly. The address of Jeffrey P. Draime is
9400 East Market Street, Warren, Ohio 44484.
(6) According to a Schedule 13G filed with the Securities and Exchange
Commission by Dimensional Fund Advisors, all common shares are owned by
advisory clients of Dimensional Fund Advisors. Dimensional Fund Advisors
has disclaimed beneficial ownership of all such securities. The address
of Dimensional Fund Advisors is 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401.
2
(7) Represents 818,240 common shares held in trust for the benefit of Scott
N. Draime of which Scott N. Draime is trustee, 477,339 common shares held
in trusts for the benefit of Jeffrey P. Draime's children of which Scott
N. Draime is trustee, and 584,600 common shares owned by Scott N. Draime
directly. The address of Scott N. Draime is 1209 Cerrito Grande, El Paso,
Texas 79912.
(8) Represents shares held in trusts for the benefit of Draime family
members, of which Second National Bank of Warren is trustee. The address
of the Second National Bank of Warren is 108 Main Avenue SW, Warren, Ohio
44481.
(9) Includes 124,480 common shares held under the Ohio Transfer to Minors Act
for the benefit of William M. Draime and John A. Draime, of which Mr.
Cohen is trustee, and 49,079 common shares that Mr. Cohen owns directly.
(10) Includes 373,443 common shares held in separate trusts for the benefit of
Scott N. Draime, Jeffrey P. Draime and Rebecca M. Gang, of which Mr.
Cohen and Mr. Epstein are co-trustees.
(11) Includes 1,500 common shares owned by Mr. Epstein's wife, and 47,079
common shares owned by Mr. Epstein directly.
(12) Represents 500 common shares owned by Mr. Cheney's wife, and 33,771
common shares owned by Mr. Cheney directly.
(13) Represents 169,545 common shares held in trust for the benefit of Gerald
V. Pisani of which Mr. Pisani is trustee, 185,120 common shares held in
separate trusts for the benefit of Mr. Pisani's children of which Mr.
Pisani's wife is trustee, 100,000 common shares that Mr. Pisani has the
right to acquire upon the exercise of share options, and 77,054 common
shares owned by Mr. Pisani directly.
(14) Represents 50,000 common shares that Kevin P. Bagby has the right to
acquire upon the exercise of share options, and 47,079 common shares
owned by Mr. Bagby directly.
(15) Represents 2,000 common shares that Thomas Beaver has the right to
acquire upon the exercise of share options, and 46,579 common shares
owned by Mr. Beaver directly.
3
ELECTION OF DIRECTORS
In accordance with our Code of Regulations, the number of directors has been
fixed at eight. At the annual meeting of shareholders, you will elect eight
directors to hold office until our next annual meeting of shareholders and
until their successors are elected and qualified. The Board of Directors
proposes that the nominees described below, all of whom are currently serving
as directors, be re-elected to the Board of Directors. At the annual meeting
of shareholders, the shares represented by proxies, unless otherwise
specified, will be voted for the election of the eight nominees hereinafter
named.
The director nominees are identified in the following table. If for any
reason any of the nominees is not a candidate when the election occurs (which
is not expected), the Board of Directors expects that proxies will be voted
for the election of a substitute nominee designated by management. The
following information is furnished with respect to each person nominated for
election as a director.
The Board recommends that you vote "FOR" the following nominees.
Nominees for Election at the Annual Meeting
Expiration
Period of of Term
Principal Occupation and Service as a for Which
Name and Age Business Experience Director Proposed
------------ ------------------------ ------------ ----------
Cloyd J. Abruzzo............... President, Chief 1990 to date 2003
51 Executive Officer,
Assistant Treasurer of
the Company
Richard E. Cheney.............. Retired Chairman of Hill 1988 to date 2003
80 & Knowlton, Inc., a
public relations firm
Avery S. Cohen................. Partner, Baker & 1988 to date 2003
65 Hostetler LLP, a law
firm
D.M. Draime.................... Chairman of the Board of 1988 to date 2003
68 Directors, Assistant
Secretary of the Company
Sheldon J. Epstein............. Principal, Gaintner, 1988 to date 2003
63 Bandler & Reed, P.L.C.,
an independent public
accounting firm
C.J. Hire...................... Retired President and 1999 to date 2003
72 Chief Executive Officer
of Hi-Stat Manufacturing
Co., Inc, an automobile
parts manufacturer
Richard G. LeFauve............. Retired President of GM 1999 to date 2003
67 University and retired
Senior Vice President of
GM
Earl L. Linehan................ President, Woodbrook 1988 to date 2003
60 Capital Inc., a venture
capital and investment
firm
Each of the nominees for election as a director has engaged in the principal
occupation or activity indicated for at least five years, except (1) Mr. Hire
was the president and chief executive officer of Hi-Stat Manufacturing Co.,
Inc., from 1969 until our acquisition of Hi-Stat on December 31, 1998, (2) Mr.
LeFauve was the president of GM University and the senior vice president of GM
from April 1997 until his retirement in January 1999 and was the chief
executive officer and president of the Saturn subsidiary of GM and the group
executive of small car production of GM's North American Operations from 1994
until April 1997, and (3) Mr. Epstein was the managing member of Epstein,
Woods & Dwyer, P.L.C., an independent public accounting firm, from 1994 until
June 1999.
Mr. Abruzzo is a director of Second National Bank of Warren. Mr. Cheney is a
director of Rowe Furniture, Inc., and Chattem, Inc. Mr. LeFauve is a director
of Harley-Davidson, Inc.
4
Our Board of Directors has appointed an audit committee, a compensation
committee and an executive committee. The Board of Directors does not have a
finance or nominating committee. The audit committee is comprised of Messrs.
Epstein, Linehan and Hire. The compensation committee is comprised of Messrs.
Cheney, Linehan and LeFauve. The executive committee is comprised of Messrs.
Abruzzo, Cohen, Draime, Linehan and LeFauve.
The audit committee makes recommendations to the Board of Directors
concerning the engagement of independent public accountants for the Company,
reviews with the independent public accountants the plans and results of audit
engagements, approves professional services provided by the independent public
accountants, reviews the independence of the independent public accountants,
considers the range of audit and nonaudit fees, reviews the independent public
accountants' management letters and our responses, reviews the adequacy of our
internal accounting controls, and reviews major accounting or reporting
changes.
The compensation committee reviews employment, development, reassignment and
compensation matters involving corporate officers and other executive level
employees, including issues related to salary, bonus and incentive
arrangements. The compensation committee also administers our Long-Term
Incentive Plan.
The executive committee, during the intervals between the meetings of the
Board of Directors, possesses and may exercise all of the powers of the Board
of Directors in the management of our business and affairs, except as
otherwise provided (i) by law, (ii) in our Amended and Restated Articles of
Incorporation, as amended, or in our Code of Regulations, or (iii) by action
of the Board of Directors.
In 2001, our Board of Directors held five meetings and took action by
unanimous written consent on four occasions. In 2001, the audit committee and
the compensation committee both held two meetings, and the executive committee
met once. In 2001, each member of the Board of Directors attended at least 75%
of the meetings of the Board of Directors and of the committees on which he
serves.
Directors' Compensation. Each director, who is not an employee of ours,
receives $20,000 per year for being a director, $1,000 for attending each
meeting of the Board of Directors and $500 for each telephonic meeting of the
Board of Directors. There is no additional fee received for attending
committee meetings unless such meeting takes place on a day other than the
same day as a meeting of the Board of Directors, in which case committee
members receive $1,000 for attending such meetings. Directors who are also
employees of ours are not paid any director's fee. We reimburse out-of-pocket
expenses incurred by all directors in connection with attending Board of
Directors and committee meetings. Each non-employee director also received an
option to purchase 10,000 shares at a price equal to the fair market value of
the common shares on the date of grant. These option grants to non-employee
directors were made on May 7, 2001 at an exercise price of $8.40. These
options expire in ten years and become exercisable in one year.
Compensation Committee Report
Introduction. The compensation committee (the "Committee") is responsible
for determining the compensation to be paid to our executive officers and
administering our Long-Term Incentive Plan.
The Committee's philosophy with respect to the compensation of our executive
officers is (1) to provide a competitive total compensation package that
enables us to attract and retain qualified executives and align their
compensation with our overall business strategies and, (2) to provide each
executive officer with a significant economic stake in our success.
To this end, the Committee determines executive compensation with a focus on
compensating executive officers based on their responsibilities and
performance as well as our performance. The primary components of our
executive compensation program are (1) base salaries and certain other annual
compensation, (2) bonuses, and (3) share options. The overall objectives of
this strategy are to attract and retain the best possible executive talent, to
motivate our executives to achieve the goals inherent in our business
strategy, to link executive and shareholder interests through equity-based plans
and, finally, to provide a compensation package that recognizes individual
contributions and overall business results.
5
Each year the Committee conducts a review of our executive compensation
program. In connection with the review of compensation for 2001, the Committee
considered comprehensive reports prepared by Ernst & Young LLP. The reports
assessed our compensation program and compared our executive compensation to a
peer group of public corporations. In setting our executive officers' overall
2001 compensation, the Committee reviewed and considered the Ernst & Young
reports in determining base salaries for 2001 as well as 2001 bonus awards.
The Committee reviews the selection of peer companies used for compensation
analysis. The peer groups used for compensation analysis are generally not the
same as the peer group index in the Performance Graph included in this proxy
statement. The Committee believes that our most direct competitors for
executive talent are not necessarily all of the companies that would be
included in a peer group established for comparing shareholder returns. This
year's compensation reviews permitted an evaluation of the link between our
performance and our executive compensation in the context of the compensation
programs of other companies as well as the performance of the Company.
The Committee determines the compensation of the most highly compensated
corporate executives, including the individuals whose compensation is detailed
in this proxy statement, and sets policies for and reviews the compensation
awarded to other highly compensated corporate executives. This is designed to
ensure consistency throughout the executive compensation program. In reviewing
the individual performance of the executives whose compensation is detailed in
this proxy statement (other than Mr. Abruzzo and Mr. Draime), the Committee
takes into account the views of Mr. Abruzzo and Mr. Draime.
Base Salaries and Other Annual Compensation. After review and discussion of
the Ernst & Young reports, the Committee set salary levels for our executive
officers on the basis of the executives' responsibilities. However, in each
case, due consideration is given to personal factors, such as the individual's
experience and record and the responsibility associated with his position.
Also considered are external factors, such as salaries paid to similarly
situated executive officers by peer companies and prevailing conditions in the
geographic area where the executive's principal services will be performed. In
the case of executive officers with responsibility for a particular business
unit, that unit's financial results are also considered.
Annual adjustments to each executive officer's salary are determined based
on the foregoing factors but with due consideration also being given to
prevailing economic conditions, to the relationship of such adjustments to
those being given to other employees, to the performance of the executive's
duties and responsibilities and to other individual performance-related
criteria that may be relevant with respect to such executive officer at the
time. Finally, the Committee, where appropriate, also considers non-financial
performance measures. These include increase in market share, manufacturing
efficiency gains, improvements in product quality and improvements in
relations with customers, suppliers and employees.
In determining the appropriate levels for Mr. Abruzzo's 2001 base salary and
bonus, the Committee considered the same factors that it considers when fixing
compensation levels for our other executive employees and sought to achieve
the same corporate goal. Mr. Abruzzo was granted a base salary of $400,000 for
2001.
Bonuses. Our executive officers are eligible for annual cash bonuses.
Bonuses are viewed as a reward for individual contributions to our performance
and are based not only on our short-term results but also on the investments
for the future growth of our business. In addition, consideration is given to
the achievement of selected financial goals (i.e., operating performance,
asset management and business growth development) and progress in meeting
other long-term objectives and the executive's leadership role in these
activities. The Committee usually makes bonus awards toward the end of the
year or shortly thereafter. However, for 2001, after giving due consideration
to the Company's performance and the Ernst & Young Report dated October 2001
(the "2001 E&Y Report"), and recognizing that 2001 was a particularly
difficult year for the Company and the Company's industry and that the Company
has taken and is taking measures to strengthen its financial position, including
temporary wage freezes for employees, the Committee chose not to follow the
recommendations contained in the 2001 E&Y Report and elected not to award Mr.
Abruzzo a bonus for 2001.
6
The Committee continues to recognize Mr. Abruzzo's leadership, the longevity of
his service to Stoneridge and the Committee's belief that Mr. Abruzzo is an
excellent representative of Stoneridge to the public by virtue of his stature in
the industry and the community.
Share Options. All of our executive officers are eligible to receive options
to purchase our common shares under the Long-Term Incentive Plan. We believe
that share option grants are a valuable motivating tool and provide a long-
term incentive to management. Share option grants reinforce long-term goals by
providing the proper nexus between the interests of management and the
interests of our shareholders. The Committee granted Mr. Abruzzo 116,000 share
options in 2001.
Conclusion. Through the programs described above, a very significant portion
of our executive compensation is linked directly to individual and company
performance and share price appreciation. The Committee intends to continue
the policy of linking executive compensation to performance and returns to
shareholders, recognizing that the fluctuations of the business cycle from
time to time may result in an imbalance for a particular period.
Richard E. Cheney
Earl L. Linehan
Richard G. LeFauve
Audit Committee Report
The Board of Directors adopted a written charter for the audit committee
(the "Audit Committee") on June 14, 2000. In accordance with its written
charter, the Audit Committee assists the Board of Directors in fulfilling its
responsibility relating to corporate accounting, reporting practices of the
Company, and the quality and integrity of the financial reports and other
financial information provided by the Company to any governmental body or to
the public. Management is responsible for the financial statements and the
reporting process, including the system of internal controls. The independent
auditors are responsible for expressing an opinion on the conformity of the
audited financial statements with generally accepted accounting principles.
Our Audit Committee is comprised of three directors, who are not officers of
the Company. They are all considered "independent" under the listing standards
of the New York Stock Exchange.
In discharging its oversight responsibility as to the audit process, the
Audit Committee reviewed and discussed the audited financial statements of the
Company for the year ended December 31, 2001, with the Company's management.
The Audit Committee discussed the matters required to be discussed by SAS 61,
as modified or supplemented, with the independent accountants. The Audit
Committee also obtained a formal written statement from the independent
accountants that described all relationships between the independent
accountants and the Company that might bear on the accountant's independence
consistent with Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committee," as amended or supplemented. The Audit
Committee discussed with the independent accountants any relationships that
might impact their objectivity and independence and satisfied itself as to the
accountants' independence. The Audit Committee also considered whether the
provision of non-audit services by Arthur Andersen is compatible with
maintaining Arthur Andersen's independence. Management has the responsibility
for the preparation of the Company's financial statements, and the independent
accountants have the responsibility for the examination of those statements.
7
Based on the above-referenced review and discussions with management and the
independent accountants, the Audit Committee recommended to the Board of
Directors that the Company's audited financial statements be included in its
Annual Report on Form 10-K for the year ended December 31, 2001, for filing
with the Securities and Exchange Commission.
Sheldon J. Epstein
Earl L. Linehan
C.J. Hire
8
EXECUTIVE COMPENSATION
The table below describes the compensation paid for the last three fiscal
years to our chief executive officer and the four other most highly
compensated executive officers. We sometimes refer to the people listed in the
table below as our "named executive officers."
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
------------------------- ---------------------
Number of
Other Annual Restricted Securities All Other
Name and Principal Fiscal Salary Compensation Shares Underlying Compensation
Position Year ($) Bonus ($) ($) ($) Option (#) ($)
------------------ ------ -------- --------- ------------ ---------- ---------- ------------
Cloyd J. Abruzzo............... 2001 $400,000 -- -- -- 116,000 $ 420(1)
President and 2000 350,000 425,000 -- -- 25,000 420(1)
Chief Executive Officer 1999 324,000 550,000 -- -- -- 1,297(1)
D.M. Draime.................... 2001 200,000 -- -- -- -- 2,316(1)
Chairman of the 2000 200,000 100,000 -- -- -- 2,316(1)
Board of Directors 1999 200,000 200,000 -- -- -- 5,211(1)
Gerald V. Pisani............... 2001 250,000 -- -- -- 59,000 1,204(1)
Vice President and President, 2000 230,000 175,000 -- -- 15,000 1,204(1)
Stoneridge Engineered 1999 216,000 230,000 -- -- -- 2,891(1)
Products Group
Kevin P. Bagby................. 2001 210,000 -- -- -- 31,000 420(1)
Vice President and 2000 185,000 145,000 -- -- 10,000 274(1)
Chief Financial 1999 170,000 190,000 -- -- -- 1,199(1)
Officer
Thomas A. Beaver............... 2001 185,000 -- -- -- 3,000 274(1)
Vice President, Sales 2000 170,000 70,000 -- -- -- 243(1)
and Marketing 1999 141,716 44,660 -- -- 2,000 --
- --------
(1) Represents the aggregate amount of term life insurance premiums paid by
the Company.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal In-the-Money Options
Acquired on Value Year-End (#) at Fiscal Year-End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------ ------------------------- -------------------------
Cloyd J. Abruzzo........ -- -- 200,000 / 141,000 -- 0 -- / $493,100
D.M. Draime............. -- -- -- / -- -- 0 -- / -- 0 --
Gerald V. Pisani........ -- -- 100,000 / 74,000 -- 0 -- / 253,725
Kevin P. Bagby.......... -- -- 50,000 / 41,000 -- 0 -- / 136,025
Thomas A. Beaver........ -- -- 2,000 / 3,000 -- 0 -- / 11,925
9
Option Grants in Last Fiscal Year
Individual Grants
-----------------------
Potential
Realized
Value at Assumed
Annual Rates of
Percentage of Stock
Total Options Price
Granted to Appreciation For
Employees Exercise Option Term(3)
Options Fiscal Price Expiration -----------------
Name Granted(1) Year(2) ($/Share) Date 5% 10%
---- ---------- ------------- --------- ------------- -------- --------
Cloyd J. Abruzzo........ 116,000 38.10% $5.125 January, 2011 $373,900 $947,500
D.M. Draime............. -- -- -- -- -- --
Gerald V. Pisani........ 59,000 19.38% $5.125 January, 2011 190,200 481,900
Kevin P. Bagby.......... 31,000 10.18% $5.125 January, 2011 99,900 253,200
Thomas A. Beaver........ 3,000 0.99% $5.125 January, 2011 9,700 24,500
- --------
(1) Options are not exercisable during the first two years after the date of
grant.
(2) Based on 304,500 options granted to all employees during the fiscal year.
(3) These amounts are based on hypothetical appreciation rates of 5% and 10%
and are not intended to forecast the actual future appreciation of the
Company's shares. No gain to optionees is possible without an actual
increase in the price of the Company's shares, which would benefit all of
the Company's shareholders. All calculations are based on a ten-year
option period.
Change of Control Agreements
Messrs. Abruzzo, Bagby, Beaver and Pisani have each entered into an
agreement with us that guarantees we will pay to each of them two years of
continued compensation (including bonuses) and benefits upon a change of
control regardless of whether they remain employed by us. A change of control
shall be deemed to have occurred if any shareholder or group of shareholders
acquires more of our common shares than are owned by D.M. Draime and his
direct descendants and trusts for the benefit of D.M. Draime and his direct
descendants.
Compensation Committee Interlocks and Insider Participation
Messrs. Cheney, LeFauve and Linehan are the members of our compensation
committee. There are no compensation committee interlocks.
Certain Relationships and Related Transactions
Hunters Square. D.M. Draime is a 50% owner of Hunters Square, Inc., an Ohio
corporation ("HSI"), which owns Hunters Square, an office complex and shopping
mall located in Warren, Ohio. We lease office space in Hunters Square for use
as the headquarters of our Alphabet Group. We pay all maintenance, tax and
insurance costs related to the operation of the office. Lease payments made by
us to HSI in 2001 were $357,500. We will continue to make lease payments as
required under the lease agreement, which terminates in December 2009.
Industrial Development Associates LP. Earl Linehan and D.M. Draime, as
limited partners, own 11.81% and 10.00%, respectively, of Industrial
Development Associates ("IDA"), a Maryland limited partnership real estate
development company in which we are a 30% general partner. We have lease
agreements with IDA pursuant to which we lease two facilities located in
Mebane, North Carolina, until February 28, 2002 and March 31, 2004. We are
responsible for all maintenance, taxes and insurance related to the operation
of the facilities. In 2001, we made lease payments to IDA of $180,500.
Northern Precision Machine Products, Inc. C. J. Hire's son owns 20% of
Northern Precision Machine Products, Inc. ("NPMP"), a supplier of ours. In
2001, we purchased $1,754,000 of components from NPMP.
Relationship with Counsel. Avery S. Cohen, one of our directors, is a
partner in Baker & Hostetler LLP, a law firm which has served as general
outside counsel for us since 1993 and is expected to continue to do so in the
future.
10
Performance Graph
Set forth below is a line graph comparing the cumulative total return of a
hypothetical investment in our common shares with the cumulative total return
of hypothetical investments in the New York Stock Exchange Market Index and the
Media General Financial Services, Inc.--Industry Group 333 (Automotive Parts)
Index based on the respective market price of each investment at October 10,
1997 (the date of our initial public offering), December 31, 1997, December 31,
1998, December 31, 1999, December 31, 2000, and December 31, 2001, assuming in
each case an initial investment of $100 on October 10, 1997, and reinvestment
of dividends.
[CHART]
10/10/97 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
----------------------------------------------------------------------
Stoneridge, Inc. 100.0 80.00 113.75 77.19 33.75 45.50
----------------------------------------------------------------------
Auto Parts 100.0 94.35 96.27 81.55 65.61 82.80
----------------------------------------------------------------------
NYSE Market Index 100.0 103.07 122.65 134.30 137.50 125.25
11
Proposal One--Adoption of Directors' Share Option Plan
Summary of the Plan
. The purpose of the Directors' Share Option Plan (the "Plan") is to advance
the interests of the Company and its shareholders by providing Eligible
Directors (all non-employee directors) with an opportunity to participate
in the Company's future prosperity and growth and an incentive to increase
the value of the Company based on the Company's performance, development,
and financial success.
. The Plan will be administered by the Board of Directors (the "Board"). The
Board will have the power and authority to approve the grant of options to
Eligible Directors, approve the terms and conditions, adopt, alter, and
repeal such administrative rules, guidelines, and practices governing the
Plan as it shall, from time to time, deem advisable, interpret the terms
and provisions of the Plan, any Options granted and any related agreements,
and take any other actions the Board considers appropriate.
. The maximum aggregate number of Shares that may be issued under the Plan
shall be 500,000 Shares. The Shares that may be issued under the Plan may
be authorized but unissued Shares or issued Shares reaquired by the Company
and held as Treasury Shares.
. Each Option granted under the Plan will be authorized by the Board and will
be evidenced by a written agreement (the "Share Option Agreement") in the
form approved by the Board, which will be dated as of the date on which the
Option is granted, will be signed by an officer of the Company, will be
signed by the Participant, and will describe the Option and state that the
Option is subject to all the terms and conditions of the Plan.
. Each Option becomes exercisable pursuant to the vesting terms of that
Option. The Board will determine, at its discretion, the vesting period for
each Option and it will be specified in the applicable Share Option
Agreement.
. The exercise price of a share option granted under the Plan may not be less
than 100% of the fair market value of our common shares on the date the
option is granted.
. Each Option will expire 10 years from the date the Option was granted.
. The Plan is not qualified under Section 401(a) of the Code and is not
subject to the provisions of the Employee Retirement Income Security Act of
1974.
. The Plan provides for vesting, exercise or forfeiture of rights granted
under the Plan on death, disability, termination of status as an Eligible
Director or a change of control.
. The Board of Directors may modify, suspend or terminate the Plan as long as
it does not impair the rights thereunder of any participant.
If this proposal is approved, the total number of common shares authorized
under the Plan would represent approximately 2.0% of our outstanding common
shares.
Vote Required for Approval
The affirmative vote of a majority of our common shares present at the
annual meeting of shareholders, either in person or by properly executed
proxy, is required to approve Proposal One.
Under Ohio law and our Amended and Restated Articles of Incorporation, as
amended, abstentions and broker non-votes, if any, with respect to Proposal
One will, in effect, be votes against the proposal.
The Board of Directors recommends that you vote FOR Proposal One.
12
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Proposals of shareholders intended to be presented, pursuant to Rule 14a-8
under the Securities Exchange Act of 1934 (the "Exchange Act"), at our 2003
annual meeting of shareholders must be received by us at 9400 East Market
Street, Warren, Ohio 44484, on or before December 3, 2002, for inclusion in
our proxy statement and form of proxy relating to the 2003 annual meeting of
shareholders. In order for a shareholder's proposal outside of Rule 14a-8
under the Exchange Act to be considered timely within the meaning of Rule 14a-
4(c) of the Exchange Act, such proposal must be received by us at the address
listed in the immediately preceding sentence not later than February 12, 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers, and owners of more than 10% of our common shares, to file with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of our common
shares and other equity securities. Executive officers, directors and owners
of more than 10% of the common shares are required by SEC regulations to
furnish our Company with copies of all forms they file pursuant to Section
16(a).
To our knowledge, based solely on our review of the copies of such reports
furnished to us and written representations that no other reports were
required, during the fiscal year ended December 31, 2001, all Section 16(a)
filing requirements applicable to its executive officers, directors and
greater-than-10% beneficial owners were complied with.
OTHER MATTERS
We have not selected our independent accountants for the current fiscal
year. The audit committee of the Board of Directors will make this selection
later in the year. Representatives of Arthur Andersen LLP ("Arthur Andersen"),
which served as our independent public accountants during 2001, are expected
to be present at the annual meeting of shareholders, will have an opportunity
to make a statement if they so desire, and will be available to respond to
appropriate questions.
Audit Fees
The aggregate fees billed for professional services rendered by Arthur
Andersen for the audit of the Company's annual financial statements for the
year ended December 31, 2001, and for Arthur Andersen's reviews of the
financial statements included in the Company's Forms 10-Q filed with the
Securities and Exchange Commission during 2001 were $309,000.
Financial Information Systems Design and Implementation Fees
Arthur Andersen performed no services and therefore billed no fees relating
to operating or supervising the operation of the Company's information systems
or local area network or for designing or implementing the Company's financial
information management systems during 2001.
All other fees
The aggregate fees billed for other services rendered to the Company by
Arthur Andersen in 2001 were $221,000, including tax-related services and
other professional services.
If the enclosed proxy is executed and returned to us, the persons named in
it will vote the shares represented by that proxy at the meeting. The form of
proxy permits specification of a vote for the election of directors as set
forth under "Election of Directors" above, the withholding of authority to
vote in the election of directors, or the withholding of authority to vote for
one or more specified nominees.
13
In addition, the form of proxy permits specification of a vote for, against or
to abstain on Proposal One. When a choice has been specified in the proxy, the
shares represented will be voted in accordance with that specification. If no
specification is made, those shares will be voted at the meeting to elect
directors as set forth under "Election of Directors" above and for Proposal One.
Under Ohio law and our Amended and Restated Articles of Incorporation, as
amended, broker non-votes and abstaining votes will not be counted in favor of
or against any nominee. Director nominees who receive the greatest number of
affirmative votes will be elected directors. If any other matter properly comes
before the meeting, the persons named in the proxy will vote thereon in
accordance with their judgment. We do not know of any other matter that will be
presented for action at the meeting and we have not received any timely notice
that any of our shareholders intend to present a proposal at the meeting.
By order of the Board of Directors,
AVERY S. COHEN,
Secretary
Dated: April 3, 2002
14
STONERIDGE, INC.
P R O X Y
The undersigned hereby appoints Cloyd J. Abruzzo, Kevin P. Bagby and Avery S.
Cohen, and each of them, attorneys and proxies of the undersigned, with full
power of substitution, to attend the annual meeting of shareholders of
Stoneridge, Inc. to be held at 600 Golf Drive, Warren, Ohio 44483, on Monday,
May 13, 2002, at 10:00 a.m., local time, or any adjournment thereof, and to
vote the number of common shares of Stoneridge, Inc. which the undersigned
would be entitled to vote, and with all the power the undersigned would possess
if personally present, as follows:
1. FOR (except as noted below), or WITHHOLD AUTHORITY to vote for,
the following nominees for election as directors, each to serve until the next
annual meeting of the shareholders and until his successor has been duly
elected and qualified: Cloyd J. Abruzzo, Richard E. Cheney, Avery S. Cohen,
D.M. Draime, Sheldon J. Epstein, C.J. Hire, Richard G. LeFauve and Earl L.
Linehan.
(INSTRUCTION: To withhold authority to vote for any particular nominee, write
that nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
2. FOR, ABSTAIN, or AGAINST the proposal to approve the adoption
of the Directors' Share Option Plan.
3. On such other business as may properly come before the meeting.
The Proxies will vote as specified above, or if a choice is not specified,
they will vote FOR the nominees listed in Item 1 and FOR the proposal listed in
Item 2.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
Receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement
dated April 3, 2002, is hereby acknowledged.
Dated ____________ , 2002
_________________________
_________________________
_________________________
Signature(s)
(Please sign exactly as
your name or names
appear hereon,
indicating, where
proper, official
position or
representative
capacity.)