Exhibit 10.1
ITRON, Inc.
Amended by the Compensation
Committee of the Board of
Directors on February 16, 2005,
August 1, 2005, February 15, 2006
and February 22, 2007
This document constitutes part of a prospectus for securities that have been
registered under the Securities Exchange Act of 1933, as amended, and
supplements a Plan Summary dated May 9, 2006 for the Itron, Inc. Amended and
Restated 2000 Stock Incentive Plan.
Purpose
Long-term incentives serve to align, motivate and reward executives for their
contributions to the long-term financial success and growth of Itron, Inc.
("Itron" or the "Company"). The objectives for the Long-Term Performance Plan
(or "LTPP") are to:
o Provide a greater long-term orientation and competitiveness to total
compensation for Itron executives, by establishing a performance-based
component, paid out in restricted stock unit awards for shares of Itron
common stock ("RSUs");
o Align individual executive rewards with shareholder value over a long-term
period, based on the achievement of predetermined annual objectives whose
achievement will be rewarded with RSUs to be vested after a three-year
waiting period; and
o Enable Itron to meet competitive total compensation needs in attracting and
retaining critical executive talent.
Overview
The Long-Term Performance Plan provides performance share awards that are
contingent on the attainment of annual performance goals. The length of each
performance period will be one year, unless the Compensation Committee of the
Board of Directors provides otherwise. At the beginning of the performance
period, goals are established which are designed to measure the degree of
business success over the timeframe. The Compensation Committee reviews and
approves goals that are recommended by management. At the end of the period,
performance against the goals is assessed and payouts are determined.
Business results for Itron will be measured over the performance period. Payouts
will be in RSUs and, unless the Compensation Committee determines otherwise in
its sole discretion with respect to an award granted to a particular
participant, awards will vest at the end of a three-year period. This vesting
period will both serve as an executive retention tool and tie executive
performance to shareholder value.
Eligibility
Eligibility for the plan will include senior management and key executives who
impact organization-wide results. Actual participation will be based on
recommendation by the Chief Executive Officer and approval by the Compensation
Committee. Current plan participants are recapped in the attached Appendix I.
Other executives may be eligible for future awards, upon recommendation of the
Chief Executive Officer and approval by the Compensation Committee. The tier
structure set forth on Appendix I and Appendix II may be changed at the
recommendation of the Chief Executive Officer and the approval of the
Compensation Committee of the Board of Directors.
Participation in the Long-Term Performance Plan for a given period will not be
construed to confer a right to participate in the plan in any subsequent period,
or the right to continue in the Company's employment.
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Award Opportunities
Award opportunities, denominated in units of Itron common stock, will be
established for each executive at the beginning of the performance period.
Target awards ("LTPP Target Awards") will be calculated as a percentage of base
salary that is in existence at the beginning of the performance period, with the
resulting dollar amount converted to a rounded number of units of Itron common
stock based on the fair market value (closing price) of Itron's common stock on
the first business day of the performance period. In addition, threshold and
maximum award levels will be established as a percent of the LTPP Target Award.
The number of RSUs to be awarded will increase or decrease as performances goes
beyond or falls short of the performance objectives for that performance period.
Annually, Itron establishes a budget for the coming year. Goals, financial and
otherwise, as established in the budget do not necessarily reflect the same
goals that will be used for the LTPP.
Performance Measurement
At the beginning of each performance period, the Chief Executive Officer will
recommend and communicate the specific range of performance objectives for the
Company to the Compensation Committee. The goals and the key performance factors
will be reviewed and approved by the Compensation Committee.
Performance Measures
Performance objectives will be set on the basis of corporate plans for the
following performance period, condition of the utility industry and competitive
performance in the market place. In the process of determining appropriate LTPP
goals, consideration will be given to proposed acquisitions, financing and other
major issues that could have material impact on the financial performance of the
Company. Typical performance measures may include but are not limited to:
Revenue Growth, Earnings Growth, Cash Flow, Return on Capital Employed, Net
Operating Profit after Tax, Normalized Earnings per Share or a combination of
measures.
Performance Weighting
Corporate performance will determine 100% of the award for some plan
participants. Performance for other organization levels, i.e. business unit,
product group, etc., may also be included.
Performance/Payout Relationship
A range of performance levels -- including threshold, target, and maximum -- and
associated payouts will be established at the beginning of the performance
period. As well, in any performance period performance hurdles could be
established. At the end of each performance period, Itron's actual performance
against the goals established for that performance period will be assessed and
the resulting payouts determined.
Payouts will be linearly interpolated for performance achievement between the
indicated levels. The Compensation Committee may use discretion to set threshold
levels and determine final award payouts.
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Non-GAAP Results
In calculating performance attainment, Non-Gaap results will generally be used.
Non-GAAP results, as defined, will be GAAP numbers adjusted for IPR&D,
amortization of intangibles, restructuring charges and other extraordinary
events subject to approval by the Compensation Committee of the Board.
Adjustments to GAAP for the purpose of Non-GAAP results will be discussed with
the Compensation Committee at the time of the event and confirmed by the
Compensation Committee at its next scheduled meeting.
Payouts
Final payouts will be announced as soon after the end of the performance period
as practical, and be in the form of RSUs with a three-year cliff vesting period.
An RSU provides the right to receive one share of Itron common stock (at a
specified future date), subject to vesting restrictions. As RSUs vest,
participants receive stock certificates evidencing their ownership of shares.
Additionally, participants may elect to defer receipt of the RSU shares until a
future date (through the Executive Deferred Compensation Plan, if available) in
order to defer federal income taxation.
New Participants
An employee hired into an eligible position during a performance period may
begin participation in the subsequent performance period or, at the
recommendation of the Chief Executive Officer and approval by the Compensation
Committee, in the ongoing performance period. New participants permitted to join
an ongoing performance period will be eligible to receive a prorated payout
based on the number of full months worked during the performance period (rounded
down to the nearest whole number of RSUs). New participants in the plan will be
nominated by the Chief Executive Officer and approved by the Compensation
Committee.
Changes in Employment
Participants who terminate employment during a performance period for any reason
including termination for Cause (as defined in the Company's Amended and
Restated 2000 Stock Incentive Plan), voluntary termination, discharge by the
Company, death, disability, or retirement will forfeit their award payment for
that performance period.
Unless the Compensation Committee determines otherwise in its sole discretion
with respect to an award granted to a particular participant, participants who,
during a vesting period for RSUs issued in connection with a prior performance
period, terminate employment for any reason, except termination for Cause, will
vest in a pro-rata portion of their RSUs based on the number of full months
worked during the vesting period for the RSUs (rounded to down to the nearest
whole number of RSUs). Participants who are terminated for Cause will forfeit
their entire unvested award payment(s).
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Change-of-Control
All outstanding awards will be accelerated and paid out at maximum levels
immediately prior to a change-of-control of the Company and payout will be in
the form of fully vested shares of Itron common stock. In addition, any
outstanding unvested RSUs issued in connection with a prior performance period
will accelerate in full immediately prior to a change-of-control of the Company.
"Change-of-control" will be consistent with the language in the Company's
standard change of control agreements in effect at the time.
Tax Consequences
Participants will not be deemed to receive income at the time an award is
granted. Likewise, participants will not be deemed to receive income at the time
an award is paid in RSUs. However, participants will generally recognize taxable
ordinary income when unrestricted shares are received upon vesting of the RSUs
(or upon distribution if the RSUs have been deferred), in an amount equal to the
excess of the fair market value of the shares at such time over the amount, if
any, paid for the shares.
The Company will be entitled to a deduction at the same time and in the same
amount as a participant recognizes ordinary income, subject to certain
limitations on deductions for compensation under Section 162(m) of the Code.
This is only a brief summary of the U.S. federal income tax laws and regulations
that apply to an award under the plan. Participants should not rely on this
summary for a complete statement of such laws and regulations. The tax laws and
regulations are complex and are subject to legislative changes. In addition,
circumstances peculiar to certain individuals may change the usual income tax
results. FOR THESE REASONS, PARTICIPANTS SHOULD CONSULT A TAX ADVISOR TO
DETERMINE THE INCOME TAX CONSEQUENCES OF AN AWARD UNDER THE PLAN.
Governance
Senior management and the Compensation Committee will be responsible for the
administration and governance of the plan. The decisions of the Committee shall
be conclusive and binding on all participants.
Amendment, Modification, or Termination of the Plan
Itron, by action of its Board of Directors and/or Compensation Committee,
reserves the right to amend, modify, or terminate the plan at any time.
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