SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x
Filed by a party other than the Registrant
¨Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to § 240.14a-12 |
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. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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STONERIDGE, INC.
9400 East Market Street
Warren, Ohio 44484
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
We will hold the 2011our 2013 Annual Meeting of Shareholders of Stoneridge, Inc. on Monday, May 9, 2011,6, 2013, at 11:00 a.m. Eastern Time, at the Sheraton Cleveland Airport Marriott Hotel, 5300 Riverside Drive,4277 West 150thStreet, Cleveland, Ohio 44135.
The purpose of the Annual Meeting is to consider and vote on the following matters:
| 1. | Election of |
| 2. | Ratification of the appointment of Ernst & Young LLP; |
| 3. | An advisory vote on executive compensation; |
| 4. |
| 5. | Proposal to approve |
| 6. | Any other matters properly brought before the meeting. |
Only shareholders of record at the close of business on April 1, 2011,2013, are entitled to notice of and to vote at the meeting or any adjournment thereof. Shareholders are urged to complete, sign and date the enclosed proxy and return it in the enclosed envelope or to vote by telephone or Internet.
| By order of the Board of Directors, | |
  | |
| ROBERT M. LOESCH, | |
| Secretary | |
Dated: April 12, 2011
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 9, 2011:
This Proxy Statement and the Company’s 20102012 Annual Report to Shareholders are also available atwww.edocumentview.com/sri.
YOUR VOTE IS IMPORTANT.
PLEASE SUBMIT YOUR PROXY BY COMPLETING AND MAILING THE ENCLOSED PROXY CARD
STONERIDGE, INC.
PROXY STATEMENT
The Board of Directors (the “Board”) of Stoneridge, Inc. (the “Company”) is sending you this Proxy Statement to ask for your vote as a Stoneridge shareholder on certain matters to be voted on at theour Annual Meeting of Shareholders to be held on Monday, May 9, 2011,6, 2013, at 11:00 a.m. Eastern Time, at the Sheraton Cleveland Airport Hotel, 5300 Riverside Drive,Marriott, 4277 West 150th Street, Cleveland, Ohio 44135. This Proxy Statement and the accompanying notice and proxy will be mailed to you on or about April 12, 2011.
Annual Report; Internet Availability
A copy of the Company’sour Annual Report to Shareholders for the fiscal year ended December 31, 2010,2012, is enclosed with this proxy statement.Proxy Statement. Additionally, this Proxy Statement and our Annual Report to Shareholders for the fiscal year ended December 31, 20102012 are available atwww.edocumentview.com/sri.
Solicitation of Proxies
The Board of Directors (“Board”) is making this solicitation of proxies and the Companywe will pay the cost of the solicitation. The Company hasWe have retained Georgeson Inc., at an estimated cost of $8,000, to assist in the solicitation of proxies from brokers, nominees, institutions and individuals. In addition to the solicitation of proxies by mail by Georgeson Inc., the Company’sour employees may solicit proxies by telephone, facsimile or electronic mail.
Proxies; Revocation of Proxies
The common 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 (a) elect the director nominees set forth under “Election of Directors”; (b) ratify the appointment of Ernst & Young LLP as the Company’sour independent registered public accounting firm for 2011;2013; (c) approve the compensation paid to the Company’sour Named Executive Officers; (d) approve “every three years” regarding the frequency of a shareholder vote onamendment to the compensation of the Named Executive Officers;Stoneridge Amended and Restated Long-Term Incentive Plan; and (e) approve the Amended Annual Incentiveamendment to the Stoneridge Directors’ Restricted Shares Plan. Your presence at the Annual Meeting of Shareholders, without more,further action, will not revoke your proxy. However, you may revoke your proxy at any time before it has been exercised by signing and delivering a later-dated proxy or by giving notice to the Company in writing at the Company’sour address indicated on the attached Notice of Annual Meeting of Shareholders or in the open meeting. If you hold your Company common shares in “street name”, in order to change or revoke your voting instructions you must follow the specific voting directions provided to you by your bank, broker or other holder of record.
Voting Eligibility
Only shareholders of record at the close of business on the record date, April 1, 2011,2013, are entitled to receive notice of the Annual Meeting of Shareholders and to vote the common shares held on the record date at the meeting. On the record date, the Company’sour outstanding voting securities consisted of 25,598,61728,489,315 common shares, without par value, each of which is entitled to one vote on each matter properly brought before the meeting.
Voting Procedures
If you are a record holder:
| · | You may vote by mail: complete and sign your proxy card and mail it in the enclosed, prepaid and addressed envelope. |
| · | You may vote by telephone: call toll-free 1-800-652-VOTE (8683) on a touch-tone phone and follow the instructions. You will need your proxy card available if you vote by telephone. |
| · | You may vote by Internet: accesswww.envisionreports.com/sriand follow the instructions. You will need your proxy card available if you vote by Internet. |
| · | You may vote in person at the meeting, however, you are encouraged to vote by |
If you are a “street name” holder:
| · | You must vote your common shares through the procedures established by your bank, broker, or other holder of record. Your bank, broker, or other holder of record has enclosed or otherwise provided a voting instruction card for you to use in directing the bank, broker, or other holder of record how to vote your common shares. |
| · | You may vote at the meeting, however, to do so you will first need to ask your bank, broker or other holder of record to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting and hand it in with a signed ballot that you can request at the meeting. You will not be able to vote your common shares at the meeting without a legal proxy and signed ballot. |
| 2 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of the Company’sour common shares as of March 4, 2011,February 28, 2013, by: (a) the Company’sour directors and nominees for election as directors; (b) each other person who is known by the Companyus to own beneficially more than 5% of the Company’sour outstanding common shares; (c) the executive officers named in the Summary Compensation Table; and (d) the Company’sall of our executive officers and directors as a group.
| Number of | ||||||||
| Shares | Percent | |||||||
| Beneficially | of | |||||||
| Name of Beneficial Owner | Owned (1) | Class | ||||||
Wellington Management Company LLP (2) | 2,266,670 | 8.9 | % | |||||
BlackRock, Inc. (3) | 1,444,926 | 5.6 | ||||||
Dimensional Fund Advisors LP (4) | 1,321,647 | 5.2 | ||||||
FMR LLC (5) | 1,305,637 | 5.1 | ||||||
John C. Corey (6) | 833,188 | 3.3 | ||||||
Jeffrey P. Draime (7) | 421,694 | 1.6 | ||||||
George E. Strickler (8) | 259,551 | 1.0 | ||||||
Thomas A. Beaver (9) | 191,134 | * | ||||||
Mark J. Tervalon (10) | 170,399 | * | ||||||
William M. Lasky (11) | 81,180 | * | ||||||
Michael D. Sloan (12) | 72,798 | * | ||||||
Paul J. Schlather (13) | 51,317 | * | ||||||
Douglas C. Jacobs (14) | 43,700 | * | ||||||
Kim Korth (15) | 21,540 | * | ||||||
Ira C. Kaplan (16) | 15,892 | * | ||||||
| All Executive Officers and Directors as a Group (11 persons) | 2,162,393 | 8.5 | % | |||||
| Name of Beneficial Owner | Number of Shares Beneficially Owned(1) | Percent Of Class | ||||||
| Wellington Management Company, LLP(2) | 2,936,795 | 10.3 | % | |||||
| The Goldman Sachs Group, Inc. (3) | 2,255,221 | 7.9 | ||||||
| BlackRock, Inc.(4) | 1,574,248 | 5.5 | ||||||
| Hartford Series Fund, Inc.(5) | 1,439,685 | 5.1 | ||||||
| Investment Counselors of Maryland, LLC(6) | 1,437,750 | 5.1 | ||||||
| John C. Corey(7) | 1,116,285 | 3.9 | ||||||
| Jeffrey P. Draime(8) | 396,604 | 1.4 | ||||||
| George E. Strickler(9) | 371,292 | 1.3 | ||||||
| Thomas A. Beaver(10) | 244,748 | * | ||||||
| William M. Lasky(11) | 103,970 | * | ||||||
| Richard P. Adante(12) | 97,900 | * | ||||||
| Kevin B. Kramer(13) | 85,200 | * | ||||||
| Paul J. Schlather(14) | 82,967 | * | ||||||
| Douglas C. Jacobs(15) | 60,850 | * | ||||||
| Ira C. Kaplan(16) | 33,042 | * | ||||||
| Kim Korth(17) | 22,990 | * | ||||||
| George S. Mayes, Jr.(18) | 11,510 | * | ||||||
| All Executive Officers and Directors as a Group (15 persons) | 2,766,268 | 9.7 | % | |||||
_______________________
* Less than 1%.
| (1) | Unless otherwise indicated, the beneficial owner has sole voting and investment power over such common shares. |
| (2) | According to a Schedule 13G filed with the Securities and Exchange Commission (“SEC”) by Wellington Management Company, LLP, in its capacity as investment advisor, it may be deemed to beneficially own the common shares which are held of record by clients of Wellington Management Company, LLP. The address of Wellington Management Company, LLP is 280 Congress Street, Boston, Massachusetts 02210. |
| (3) | According to a Schedule 13G filed with the SEC by The Goldman Sachs Group, Inc., the filing reflects the securities beneficially owned by certain operating units (collectively the “Goldman Sachs Reporting Units”) of Goldman Sachs Group, Inc. and its subsidiaries and affiliates. The Goldman Sachs Reporting Units disclaims beneficial ownership of the securities beneficially owned by (i) any client accounts with respect to which the Goldman Sachs Reporting Units or their employees have voting or investment discretion or both, or with respect to which there are limits on their voting or investment authority or both and (ii) certain investment entities of which Goldman Sachs Reporting Units act as the general partner, managing general partner or other manager, to the extent interests in such entities are held by persons other than the Goldman Sachs Reporting Units. The address of The Goldman Sachs Group, Inc. is 200 West Street, New York, New York 10282. |
| (4) | According to a Schedule 13G filed with the SEC by BlackRock, Inc. The address of BlackRock, Inc. is 40 East 52nd Street, New York, New York 10022. |
| (5) | According to a Schedule 13G filed with the SEC by |
| (6) | According to a Schedule 13G filed with the SEC by Investment Counselors of Maryland, LLC, all |
| (7) | Represents 10,000 common shares that Mr. Corey has the right to acquire upon the exercise of share options, |
| (8) | Represents |
| (9) | Represents |
| (10) | Represents |
| (11) | Represents 10,000 common shares that Mr. Lasky has the right to acquire upon the exercise of share options, |
| (12) | Represents |
| (13) | Represents |
| (14) | Represents 11,510 restricted common shares, which are subject to forfeiture, |
| (15) | Represents |
| (16) | Represents |
| (17) | Represents |
| (18) | Represents 11,510 restricted common shares, which are subject to forfeiture. |
| 4 |
PROPOSAL ONE: ELECTION OF DIRECTORS
In accordance with the Company’s Amended and Restated Code of Regulations, the number of directors has been fixed at seven.eight. At the Annual Meeting of Shareholders, youshareholders will elect seveneight directors to hold office until the Company’sour next Annual Meeting of Shareholders and until their successors are elected and qualified. The Board proposes that the nominees identified below be elected to the Board. John C. Corey, the Company’s President and Chief Executive Officer, has an employment agreement with the Company, which provides that, during the term of the agreement, Mr. Corey shall be entitled to be nominated for election to the Board. At theour Annual Meeting of Shareholders, the common shares represented by proxies, unless otherwise specified, will be voted for the election of the seveneight nominees hereinafter named.
The director nominees are identified below. If for any reason any of the nominees is not a candidate when the election occurs (which is not expected), the Board expects that proxies will be voted for the election of a substitute nominee designated by the Board. The following information is furnished with respect to each person nominated for election as a director.
The Board of Directors recommends that you vote FOR the following nominees.
Nominees to Serve for a One-Year Term Expiring in 2012
| John C. Corey | Mr. Corey, | |
Since 2004 Mr. Corey has served as a director and Chairman of the Board of Haynes International, Inc., a producer of metal alloys. Mr. Corey serves on the board of the Motor and Equipment Manufacturers Association, an organization that represents motor vehicle parts suppliers, and was a past Chairman of the Board of Directors for the Original Equipment Suppliers Association, an organization dedicated to supporting and promoting automotive suppliers. | ||
In addition to his professional experience described above, the Company believes that Mr. Corey should serve as a director because he has successfully guided companies through restructuring initiatives and executed performance and | ||
| Jeffrey P. Draime | Mr. Draime, | |
Mr. Draime |
| Douglas C. Jacobs | Mr. Jacobs, | |
Mr. Jacobs has served as a director of Standard Pacific Corporation, a national residential home builder in southern California, since 1998 and serves as Chairman of the Audit Committee and a member of the Nominating and Corporate Governance Committee. Mr. Jacobs is a member of the boards of SureFire, Inc., a manufacturer of high-performance flashlights, weapon-mounted lights and other tactical equipment, and M/G Transport Services LLC, a barge line and inland waterways carrier. | ||
Mr. Jacobs qualifies as an audit committee financial expert due to his extensive background in accounting and finance built through his career in public accounting. In addition to his professional and accounting experience described above, the Company believes that Mr. Jacobs should serve as a director because he provides valuable business experience and judgment to the Board which strengthens the Board’s collective qualifications, skills and experience. | ||
| Ira C. Kaplan | Mr. Kaplan, | |
Mr. Kaplan has counseled clients in governance and business matters in his role at the law firm. In addition to his legal and management experience described above, the Company believes that Mr. Kaplan should serve as a director because he brings thoughtful analysis, sound judgment and insight to best practices to the Board, in addition to his professional experiences, which strengthens the Board’s collective qualifications, skills and experience. | ||
| Kim Korth | Ms. Korth, | |
Ms. Korth is a member of the boards of Shape Corporation, a manufacturer of automotive bumper and impact energy management systems, Burke E. Porter Machinery Company, a manufacturer of automotive test systems, | ||
| Ms. Korth has several decades of experience in corporate governance issues, organizational design, and development of strategies for growth and improved financial performance for automotive suppliers. In addition to the knowledge and experience described above, the Company believes that Ms. Korth should serve as a director because she provides insight to industry trends and expectations to the Board which strengthens the Board’s collective qualifications, skills and experience. |
| William M. Lasky | Mr. Lasky, | |
Since 2011 Mr. Lasky | ||
| vehicles. In addition to his professional experience described above, the Company believes that Mr. Lasky should serve as a director because he provides in-depth industry knowledge, business acumen and leadership to the Board which strengthens the Board’s collective qualifications, skills and experience. | ||
| George S. Mayes, Jr. | Mr. Mayes, 54, was elected to the Board in 2012. Mr. Mayes was appointed Executive Vice President and Chief Operating Officer of Diebold, Inc., a provider of integrated self-service delivery and security systems and services, in 2013. Prior to that, he served as Executive Vice President of Operations from 2008, as Senior Vice President, Supply Chain Management from 2006-2008, and as Vice President, Global Manufacturing upon joining Diebold, Inc. in 2005. Mr. Mayes has extensive experience in lean manufacturing and Six Sigma processes and has managed manufacturing facilities in Canada, Mexico, France, Hungary, Brazil, China, Poland, Italy and the United States. The Company believes that Mr. Mayes should serve as a director because he provides in depth knowledge of manufacturing theories and operations, business acumen and leadership to the Board which strengthens the Board’s collective qualifications, skills and experience. | |
| Paul J. Schlather | Mr. Schlather, | |
Mr. Schlather qualifies as an audit committee financial expert due to his extensive background in accounting and finance built through his career in public accounting. In addition to his professional and accounting experience described above, the Company believes that Mr. Schlather should serve as a director because he provides financial analysis and business acumen to the Board which strengthens the Board’s collective qualifications, skills and experience. |
PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
The Audit Committee of the Board currently anticipates appointing Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm for the year ending December 31, 2011.2013. For 2010,2012, Ernst & Young was engaged by us to audit our annual financial statements and to perform audit-related and tax services. Representatives of Ernst & Young are expected to be present at the Annual Meeting of Shareholders, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
The Board seeks an indication from our shareholders of their approval or disapproval of the Audit Committee’s anticipated appointment of Ernst & Young as the Company’sour independent registered public accounting firm for the 20112013 fiscal year. The submission of this matter for approval by shareholders is not legally required, however, the Board believes that the submission is an opportunity for the shareholders to provide feedback to the Board on an important issue of corporate governance. If theour shareholders do not approve the appointment of Ernst & Young, the appointment of the Company’sour independent registered public accounting firm will be re-evaluated by the Audit Committee but will not require the Audit Committee to appoint a different accounting firm. If theour shareholders do approve the appointment of Ernst & Young, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of the Company and its shareholders. Approval of thethis proposal to ratify the selection of Ernst & Young as our independent registered public accounting firm requires the affirmative vote of a majority of the common shares present in person or by proxy and entitled to be voted on the proposal at theour Annual Meeting of Shareholders. Abstentions will have the same effect as votes against the proposal. Broker non-votes will not be considered common shares present and entitled to vote on the proposal and will not have a positive or negative effect on the outcome of this proposal, however, there should be no broker non-votes on this proposal because brokers should have the discretion to vote uninstructed common shares on this proposal.
The Board of Directors recommends that you vote FOR Proposal Two.
Service Fees Paid to the Independent Registered Public Accounting Firm
The following table sets forth the aggregate fees billed by and paid to Ernst & Young by fee category for the fiscal years ended December 31, 20102012 and 2009.2011. The Audit Committee has considered the scope and fee arrangements for all services provided by Ernst & Young, taking into account whether the provision of non-audit-related services is compatible with maintaining Ernst & Young’s independence.
| 2010 | 2009 | |||||||
| Audit Fees | $ | 1,606,726 | $ | 1,551,937 | ||||
| Tax Fees | 284,033 | 501,029 | ||||||
| All Other Fees | 11,760 | 10,167 | ||||||
| Total Fees | $ | 1,902,519 | $ | 2,063,133 | ||||
| 2012 | 2011 | |||||||
| Audit Fees | $ | 1,454,846 | $ | 1,735,620 | ||||
| Tax Fees | 463,896 | 580,600 | ||||||
| Total Fees | $ | 1,918,742 | $ | 2,316,220 | ||||
Audit Fees.
Audit fees include fees associated with the annual audit ofTax Fees.
Tax feesPre-Approval Policy
The Audit Committee’s policy is to approve in advance all audit and permitted non-audit services to be performed for the Company by its independent registered public accounting firm. Pre-approval is generally provided for up to one year, is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee also pre-approves particular services on a case-by-case basis. In accordance with this policy, the Audit Committee has delegated pre-approval authority to the Chairman of the Audit Committee. The Chairman may pre-approve services and then inform the Audit Committee at the next scheduled meeting.
All services provided by Ernst & Young during fiscal year 2010,2012, as noted in the previous table, were authorized and approved by the Audit Committee in compliance with the pre-approval policies and procedures described previously.
Audit Committee Report
In accordance with its written charter, the Audit Committee assists the Board in fulfilling its responsibility relating to corporate accounting, our reporting practices, of the Company, and the quality and integrity of the financial reports and other financial information provided by the Companyus to any governmental body or to the public. Management is responsible for the financial statements and the financial reporting process, including the system of internal controls. The independent registered public accounting firm is responsible for expressing an opinionconducting audits and reviews on the conformity of theour audited financial statements in accordance with generally accepted accounting principles.principles and audits of our internal control over financial reporting. The Audit Committee is comprised of fourfive directors, each of whom is “independent” for audit committee purposes under the current listing standards of the New York Stock Exchange (“NYSE”).
In discharging its oversight responsibility as to the audit process, the Audit Committee reviewed and discussed theour audited financial statements of the Company for the year ended December 31, 2010,2012, with the Company’s management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements. The Audit Committee also discussed with the Company’sour independent registered public accounting firm, Ernst & Young, the matters required to be discussed by Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has received the written disclosures and letter from Ernst & Young required by the applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young’s communication with the Audit Committee concerning independence. The Audit Committee discussed Ernst & Young’s independence with Ernst & Young. The Audit Committee also considered whether the provision of non-audit services by Ernst & Young is compatible with maintaining Ernst & Young’s independence. Management has the responsibility for the preparation of the Company’sour financial statements and Ernst & Young has the responsibility for the examination of those statements.
The Audit Committee discussed with the Company’sour internal auditor and Ernst & Young the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditoraudit director and Ernst & Young, with and without management present, to discuss the results of their examinations, their evaluations of the Company’sour internal controls, and the overall quality of the Company’s financial reporting.
Based on the above-referenced review and discussions with management, the internal auditoraudit director and Ernst & Young, the Audit Committee recommended to the Board, and the Board approved, that the Company’s audited financial statements be included in itsthe Company’s Annual Report on Form 10-K for the year ended December 31, 2010,2012, for filing with the SEC.
| The Audit Committee | |
| Douglas C. Jacobs, Chairman | |
| Ira C. Kaplan | |
| William M. Lasky | |
| George S. Mayes, Jr. | |
| Paul J. Schlather |
PROPOSAL THREE: SAY ON PAY
The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enables ourCompany provides its shareholders with the opportunity to cast an annual advisory non-binding vote to approve on an advisory (non-binding) basis, the compensation of ourits Named Executive Officers as disclosed in this Proxy Statement. Pursuantpursuant to Section 14Athe SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables) (a “say-on-pay proposal”). The Company believes that it is appropriate to seek the views of shareholders on the design and effectiveness of the Securities Exchange Act, we are including in these proxy materials a non-binding shareholder vote on ourCompany’s executive compensation. As described below incompensation program.
At the “Compensation Discussion and Analysis” sectionCompany’s 2012 Annual Meeting of Shareholders, approximately 94% of the votes cast supported the say-on-pay proposal. The Compensation Committee believes this Proxy Statement, beginning on page 19, ouraffirmed shareholders’ support of the Company’s approach to executive compensation.
The Company’s goal for its executive compensation program is designed to attract, motivate, and retain high qualitya talented, entrepreneurial and creative team of executives andwho will provide leadership for the Company’s success in competitive markets. The Company seeks to align the interest of management with the interest of shareholders by rewarding both short- and long-termaccomplish this goal in a way that rewards performance and is based on a pay-for-performance philosophy.
Base compensation is aligned to be competitive in the industry in which we operate. Incentive compensation (cash and equity) generally represents 65-75% of each executive officer’s target compensation opportunity, with long-term incentives representing the majority of compensation. Targets for incentive compensation are based on clear financial goals and increasing shareholder value. The Compensation Committee retains the services of an independent consultant to advise on competitive compensation and compensation practices.
The Board recommends that shareholders vote for the following resolution:
“RESOLVED that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
Because the vote is advisory, it will not be binding upon the Board or the Compensation Committee. The Board and the Compensation Committee value the opinions of our shareholders and will take into account the outcome of the vote when considering future executive compensation arrangements.
The affirmative vote of a majority of the shares of Company common shares present or represented by proxy and voting at the annual meeting will constitute approval of this non-binding resolution. If you own common shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your common shares so that your vote can be counted on this proposal. Abstentions will have the same effect as votes against the proposal. Broker non-votes will not be considered common shares present and entitled to vote on this proposal and will not have a positive or negative effect on the outcome of this proposal.
The Board of Directors recommends that you vote FOR Proposal Three.
| 10 |
PROPOSAL FOUR: SAY ON PAY FREQUENCY
The Dodd-Frank Act also requiresAmended and Restated Long-Term Incentive Plan, as amended (“LTIP”) was, upon the approval and recommendation of the Board of Directors, in accordance with applicable law and listing rules of the NYSE, approved by the Company’s shareholders at the 2006 Annual Meeting of Shareholders. An amendment to the LTIP increasing the number of common shares available for issuance under the LTIP to 3,000,000 and other technical changes was approved by the Company’s shareholders at the 2010 Annual Meeting of Shareholders. Currently, the LTIP authorizes the issuance of 3,000,000 common shares. On February 5, 2013, the Board of Directors approved an amendment (subject to shareholder approval) to the LTIP to increase by an additional 1,500,000 common shares the number of common shares available for issuance.
The Company is seeking shareholder approval of the LTIP, as amended, because additional shares available for issuance under the LTIP will assist the Company in achieving its goal of promoting long-term growth and profitability by enabling the Company to seek a non-binding advisory shareholder vote every six years regardingattract, retain and reward key employees and, therefore, align the frequency (annually, every other year, or every three years) at which the Company will ask its shareholders to provide the advisory vote on executive compensation.
Currently, there are 3,000,000 common shares reserved for issuance pursuant to grants or awards under the LTIP. At the end of 2012, grants for 2,517,450 common shares had been made, 454,512 of those common shares have been forfeited and therefore available for grants, under the LTIP. In February 2013, grants for 800,650 common shares were made and 247,950 common shares were forfeited leaving 384,362 common shares available for issuance as grants under the LTIP.
Description of Amendment
The amendment to the LTIP will increase the number of common shares available for issuance by 1,500,000 to bring the total common shares available for issuance to 4,500,000.
Summary of the LTIP
Federal Tax Consequences
The following summary of the federal income tax consequences applicable to options awarded under the LTIP is only a general summary of the applicable provisions of the Code and regulations promulgated thereunder as in effect on the date of this proxy statement. The actual federal, state, local and foreign tax consequences to the participant may vary depending upon his or her particular circumstances.
Incentive Stock Options
An incentive stock option results in no taxable income to the participant or a deduction to the Company at the time it is granted through December 31, 2011.or exercised. However, the excess of the fair market value of the shares acquired over the option price is an item of adjustment in computing the alternative minimum taxable income of the participant. If the participant holds the shares received as a result of an exercise of an incentive stock option for at least two years from the date of the grant and one year from the date of exercise, then the gain realized on disposition of the shares (generally the amount received in excess of the option price) is treated as a long-term capital gain. If the shares are disposed of during this period, however (i.e., a “disqualifying disposition”), then the participant will include in income, as compensation for the year of the disposition, an amount equal to the excess, if any, of the fair market value of the shares on the date of exercise of the option over the option price (or, if less, the excess of the amount realized upon disposition over the option price). The Amended AIPexcess, if any, of the sale price over the fair market value on the date of exercise will be effective January 1, 2012, extendseither a long-term or a short-term capital gain depending on whether the termparticipant has held the shares for more than one year. In such case, the Company will be entitled to a deduction, in the year of such a disposition, for the amount includible in the participant’s income as compensation. The participant’s basis in the shares acquired upon exercise of an incentive stock option is equal to the option price paid, plus any amount includible in his or her income as a result of a disqualifying disposition.
If an incentive stock option is exercised by tendering previously owned common shares, the following generally will apply: a number of new shares equal to the number of previously owned common shares tendered will be considered to have been received in a tax-free exchange; the participant’s basis and holding period (except for the disqualifying disposition period) for such number of new common shares will be equal to the basis and holding period of the AIP for five years and is now being submitted for reapprovalpreviously owned common shares exchanged. To the extent that the number of common shares received exceeds the number of common shares surrendered, no taxable income will be realized by the shareholders.
| 13 |
Non-qualified Stock Options
Provided that the exercise price is not less than the market value of a share at grant, a non-qualified stock option results in no taxable income to the participant or deduction to the Company at the time it is granted. A participant exercising such an option will, at that time, realize taxable compensation in the amount of the difference between the option price and the then market value of the shares. Subject to the applicable provisions of the Code, the Company will be allowed a deduction for federal income tax purposes in the year of exercise in an amount equal to the taxable compensation recognized by the participant.
The participant’s basis in such common shares is equal to the sum of the option price plus the amount includible in his or her income as compensation upon exercise. Any gain (or loss) upon subsequent disposition of the common shares will be a long-term or short-term gain (or loss), depending upon the holding period of the common shares.
If a non-qualified option is exercised by tendering previously owned common shares, the following generally will apply: a number of new common shares equal to the number of previously owned shares tendered will be considered to have been received in a tax-free exchange; the participant’s basis and holding period for such number of new common shares will be equal to the basis and holding period of the previously owned common shares exchanged. The participant will have compensation income equal to the fair market value on the date of exercise of the number of new common shares received in excess of such number of exchanged common shares; the participant’s basis in such excess common shares will be equal to the amount of such compensation income; and the holding period in such common shares will begin on the date of exercise.
Restricted Shares
A participant will not recognize any taxable income upon the grant of restricted common shares unless the participant makes a voluntary election to recognize income at grant under Section 83(b) of the Code. Upon the expiration of a restriction period for restricted common shares, whether such period lapses due to the satisfaction of certain pre-established performance criteria or due solely to the lapse of time, the participant will recognize compensation income and the Company will be entitled to a deduction equal to the value of the common shares that the participant receives.
Code Section 162(m)
Under Section 162(m) of the Code, the Company’s allowable federal income tax deduction for compensation paid to certain of the Company’s executive officers is limited to $1.0 million per year per officer. “Performance-based compensation” is generally excluded from this deduction limit. The amount includible in income of a participant on exercise of a nonqualified stock option under the LTIP is intended to qualify as performance-based compensation under Section 162(m) and the regulations thereunder, which require the LTIP to have been approved by the shareholders.
Vote Required for Approval
The affirmative vote of a majority of the votes cast in person or by proxy by shareholders represented and entitled to vote at the Annual Meeting of Shareholders is required for approval of the Amended AIP.LTIP. Broker non-votes will not be treated as votes cast and will not have a positive or negative effect on the outcome of the proposal. Abstentions will be treated as votes cast and, consequently, will have the same effect as votes against the proposal. No compensation will be paid under
The Board of Directors recommends that you vote FOR Proposal Four.
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PROPOSAL FIVE: APPROVAL OF AN AMENDMENT TO THE STONERIDGE AMENDED
DIRECTORS’ RESTRICTED SHARES PLAN
The Amended Directors’ Restricted Shares Plan (“Directors’ Plan”) was, upon the Amended AIP to Covered Executives if it is notapproval and recommendation of the Board of Directors, in accordance with the applicable law and the listing rules of the NYSE, approved by the shareholders. InCompany’s shareholders at the event that2005 Annual Meeting of Shareholders. An amendment to the Amended AIP is notDirectors’ Plan increasing the number of common shares to 500,000 available for issuance under the Directors’ Plan was approved by the Company’s shareholders payments madeat the 2010 Annual Meeting of Shareholders. Currently the Director’s Plan authorizes the issuance of 500,000 common shares. On February 5, 2013, the Board of Directors approved an amendment (subject to certainshareholder approval) to the Directors’ Plan to increase by an additional 200,000 common shares the number of common shares available for issuance.
The Company is seeking approval of the Company’s executive officers outsideDirectors’ Plan, as amended, because the Amended AIP may not be deductibleadditional common shares available for federal income tax purposesissuance under Section 162(m)the Directors’ Plan will assist the Company in achieving its goal of promoting growth and profitability. The description of the Internal Revenue Code.Directors’ Plan, as amended, is subject to and qualified by (i) Appendix B to this Proxy Statement (which contains a copy of the Directors’ Plan amendment that increases the number of common shares authorized for issuance) and (ii) a copy of the Directors’ Plan (prior to the amendment), which is available atwww.sec.gov
Currently, there are 500,000 common shares reserved for issuance pursuant to grants or awards under the Directors’ Plan. At the end of 2012, grants for 354,964 common shares had been made under the Directors’ Plan. In February 2013, grants for 80,570 restricted common shares were made leaving 64,466 common shares available for issuance and grants under the Directors’ Plan.
Description of the Amendment
The amendment to the Directors’ Plan will increase the number of common shares available for issuance by 200,000 to bring the total common shares available for issuance to 700,000.
Summary of the Material ProvisionsDirectors’ Plan
If this proposal is qualified in its entirety by reference toapproved, the full texttotal number of common shares authorized under the Directors’ Plan would represent approximately 2% of our outstanding common shares.
Vote Required for Approval
The affirmative vote of a majority of the Amended AIP,votes cast in person or by proxy by shareholders represented and entitled to vote at the Annual Meeting of Shareholders is required for approval of the Directors’ Plan. Broker non-votes will not be treated as votes cast and will not have a copypositive or negative effect on the outcome of which is attachedthe proposal. Abstentions will be treated as Appendix A to this proxy statement:
The Board of Directors recommends that you vote FOR Proposal Five.
CORPORATE GOVERNANCE
Corporate Governance Documents and Committee Charters
The Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers and the charters of the Board of Directors’ Audit, Compensation, and Nominating and Corporate Governance committees are posted on our website atwww.stoneridge.com. Written copies of these documents will beare available without charge to any shareholder upon request. Requests should be directed to Investor Relations at the Company’sour address listed on the Notice of Annual Meeting of Shareholders.
Corporate Ethics Hotline
We established a corporate ethics hotline as part of the Company’sour Whistleblower Policy and Procedures to allow persons to lodge complaints about accounting, auditing and internal control matters, and to allow an employee to lodge a concern, confidentially and anonymously, about any accounting and auditing matter. Information about lodging such complaints or making such concerns known is contained in the Company’sour Whistleblower Policy and Procedures, which is posted on our website atwww.stoneridge.com.
Director Independence
The NYSE rules require listed companies to have a Board of Directors comprised of at least a majority of independent directors. Under the NYSE rules, a director qualifies as “independent” upon the affirmative determination by the Board of Directors that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The Board has not adopted categorical standards of independence. The Board has determined that the following directors and nominees for election of director are independent:
| Jeffrey P. Draime | Kim Korth | George S. Mayes, Jr. |
| Douglas C. Jacobs | William M. Lasky | Paul J. Schlather |
| Ira C. Kaplan |
| 16 |
The Board of Directors’ Role in Risk Oversight
It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to the Company. The Board has oversight responsibility of the processes established to report and monitor systems for material risks applicable to the Company.us. The Audit Committee regularly reviews enterprise-wide risk management, which includes treasury risks (commodity pricing, foreign exchange rates, and credit and debt exposures), financial and accounting risks, legal and compliance risks, and other risk management functions. The Compensation Committee considers risks related to the attraction and retention of talent and related to the design of compensation programs and arrangements. The full Board considers strategic risks and opportunities and regularly receives reports from management on risk and from the committees regarding risk oversight in their areas of responsibility.
Compensation Policies and Risk
Our policies and overall compensation practices for all employees do not create risks that are reasonably likely to have a material adverse affect on the Company. Generally speaking, theThe compensation policies are generally consistent for all of our business units of the Company.
In addition, incentives are not designed, and do not create, risks that are reasonably likely to have a material adverse affecteffect on the Company as all incentives reward growth and profitability. The Company’sOur various incentive programs are based on our consistent growth and continued profitability, of the Company, relying, for example, on the total return on investment, operating profit and total shareholder return. As such, they do not encourage employees to take risks to the detriment of our results in order to receive incentive compensation, nor are they reasonably likely to have a material adverse effect on the Company.
The Board of Directors
In 2010,2012, the Board held 19 meetings and took action by unanimous written consent on two occasions. In 2010, eachseven meetings. Each Board member attended at least 75% of the meetings of the Board and of the committees on which he or she serves. The Company’sOur policy is that directors are to attend the Annual Meeting of Shareholders. All of our current directors, except Mr. Mayes, who had not yet been elected as a director, attended the 20102012 Annual Meeting of Shareholders. Mr. Lasky has been appointed as the lead independent director by the independent directors to preside at the executive sessions of the independent directors. It is the Board’s practice to have the independent directors meet regularly in executive session. All directors, except Mr. Corey, the Company’s President and Chief Executive Officer (“CEO”), are independent.
Leadership of the Board
The Board does not have a formal policy regarding the separation of the roles of CEO and Chairman of the Board as the Board believes it is in the best interestsinterest of the Company and our shareholders to make that determination based on the position and direction of the Company and the membership of the Board. At this time, the Board has determined that having an independent director serve as Chairman is in the best interest of the Company’sCompany and our shareholders. This structure ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas and establishing Board priorities and procedures. Further, this structure permits the Company’sour President and CEO to devote more time to focus on the strategic direction and management of the Company’sour day-to-day operations.
Committees of the Board
The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. These committees are the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. Each member of the Audit, Compensation, and Nominating and Corporate Governance Committees is independent as defined under the listing standards of the NYSE. The table below shows the composition of the Board’s committees:
Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | |||
| Douglas C. | * | Jeffrey P. Draime | Jeffrey P. Draime | ||
| Ira C. Kaplan | Douglas C. Jacobs | Ira C. Kaplan | |||
| William M. Lasky | Kim | * | Kim Korth | ||
| George S. Mayes, Jr. | William M. Lasky | * | |||
| Paul J. Schlather |
___________________
* Committee Chairperson
Audit Committee
.This committee held eightnine meetings during 2010.in 2012. Information regarding the functions performed by the Audit Committee is set forth in the “Audit Committee Report,” included in this Proxy Statement. The Board has determined that each Audit Committee member is financially literate under the current listing standards of the NYSE. The Board also determined that Mr. Jacobs and Mr. Schlather each qualify as an “audit committee financial expert” as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002. In addition, under the Sarbanes-Oxley Act of 2002 and the NYSE rules mandated by the SEC, members of the audit committee must have no affiliation with the issuer, other than their Board seat, and receive no compensation in any capacity other than as a director or committee member. Each member of the Audit Committee meets this additional independence standard applicable to audit committee members of NYSE listed companies.
Compensation Committee.
This committee held fivefour meetings during 2010.in 2012. The Compensation Committee is responsible for establishing and reviewing our compensation philosophy and programs with respect to our executive officers; approving executive officer compensation and benefits; recommending to the Board the approval, amendment and termination of incentive compensation and equity-based plans; and certain other compensation matters, including director compensation. Recommendations regarding compensation of other officers are made to the Compensation Committee by our CEO. The Compensation Committee can exercise its discretion in modifying any amount presented by our CEO. The Compensation Committee regularly reviews tally sheets that detail the total compensation obligations to each of our executive officers. During 2010,2012, the Compensation Committee retained Total Rewards Strategies LLC to provide compensation related consulting services. Specifically, the compensation consultantsconsultant provided relevant market data, current trends in executive and director compensation and advice on program design. In accordance with its charter, the Compensation Committee may delegate power and authority as it deems appropriate for any purpose to a subcommittee of not fewer than two members.
Nominating and Corporate Governance Committee
.This committee held two meetings in 2010.2012. The purpose of the Nominating and Corporate Governance Committee is to evaluate the qualifications of director nominees, to recommend candidates for election as directors, to make recommendations concerning the size and composition of the Board, to develop and implement the Company’sour corporate governance policies and to assess the effectiveness of the Board.
Nominations and Nomination Process
It is the policy of the Nominating and Corporate Governance Committee to consider individuals recommended by shareholders for membership on the Board. If a shareholder desires to recommend an individual for membership on the Board, then that shareholder must provide a written notice (the “Recommendation Notice”) to the Secretary of the Company at Stoneridge, Inc., 9400 East Market Street, Warren, Ohio 44484, on or before January 15 for consideration by the committee for that year’s election of directors at the Annual Meeting of Shareholders.
In order for a recommendation to be considered by the Nominating and Corporate Governance Committee, the Recommendation Notice must contain, at a minimum, the following:
| · | the name and address, as they appear on the Company’s books, and telephone number of the shareholder making the recommendation, including information on the number of common shares owned and date(s) acquired, and if such person is not a shareholder of record or if such common shares are owned by an entity, reasonable evidence of such person’s ownership of such shares or such person’s authority to act on behalf of such entity; |
| · | the full legal name, address and telephone number of the individual being recommended, together with a reasonably detailed description of the background, experience, and qualifications of that individual; |
| · | a written acknowledgment by the individual being recommended that he or she has consented to the recommendation and consents to the Company undertaking an investigation into that individual’s background, experience, and qualifications in the event that the Nominating and Corporate Governance Committee desires to do so; |
| · | any information not already provided about the person’s background, experience and qualifications necessary for |
| · | the disclosure of any relationship of the individual being recommended with |
| · | the disclosure of any relation of the individual being recommended with the shareholder, whether direct or indirect, and, if known to the shareholder, any material interest of such shareholder or individual being recommended in any proposals or other business to be presented at |
The Nominating and Corporate Governance Committee determines, and periodically reviews with the Board, the desired skills and characteristics for directors as well as the composition of the Board as a whole. This assessment considers the directors’ qualifications and independence, as well as diversity, age, skill, and experience in the context of the needs of the Board. At a minimum, directors should share theour values of the Company and should possess the following characteristics: high personal and professional integrity; the ability to exercise sound business judgment; an inquiring mind; and the time available to devote to Board activities and the willingness to do so. The Nominating and Corporate Governance Committee does not have a formal policy specifically focusing on the consideration of diversity; however, diversity is one of the many factors that the Nominating and Corporate Governance Committee considers when identifying candidates and making its recommendations to the Board. In addition to the foregoing considerations, generally with respect to nominees recommended by shareholders, the Nominating and Corporate Governance Committee will evaluate such recommended nominees considering the additional information regarding them contained in the Recommendation Notices. When seeking candidates for the Board, the Nominating and Corporate Governance Committee may solicit suggestions from incumbent directors, management and third-party search firms. Ultimately, the Nominating and Corporate Governance Committee will recommend to the Board prospective nominees who the Nominating and Corporate Governance Committee believes will be effective, in conjunction with the other members of the Board, in collectively serving the long-term interests of our shareholders.
Regarding the Company’s shareholders.
The Nominating and Corporate Governance Committee recommended to the Board each of the nominees identified in "Election of Directors" starting on page 5.
Compensation Committee Interlocks and Insider Participation
None of the members of the Board’s Compensation Committee have served as one of our officers at any time or as an employee during 2010.2012. Additionally, no Compensation Committee interlocks existed during 2010.
Communications with the Board of Directors
The Board believes that it is important for interested parties to have a processthe ability to send communications to the Board. Accordingly, persons who wish to communicate with the Board may do so by sending a letter to the Secretary of the Company at Stoneridge, Inc., 9400 East Market Street, Warren, Ohio 44484. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Board Communication” or “Director Communication.” All such letters must identify the author and clearly state whether the intended recipients are all members of the Board or certain specified individual directors (such as the lead independent director or non-management directors as a group). The Secretary will make copies of all such letters and circulate them to the appropriate director or directors. The directors are not spokespeople for the Company and responses or replies to any communication should not be expected.
Transactions with Related Persons
There were no reportable transactions involving related persons in 2010.
Review and Approval of Transactions with Related Persons
The Board has adopted a written statement of policy with respect to related party transactions. Under the policy, a related party transaction is a transaction required to be disclosed pursuant to Item 404 of Regulation S-K or any other similar transaction involving the Company or the Company’s subsidiaries and any Company employee, officer, director, 5% shareholder or an immediate family member of any of the foregoing if the dollar amount of the transaction or series of transactions exceeds $25,000. A related party transaction will not be prohibited merely because it is required to be disclosed or because it involves related parties. Pursuant to the policy, such transactions are presented to the Nominating and Corporate Governance Committee for evaluation and approval by the committee, or if the committee elects, by the full Board. If the transaction is determined to involve a related party, the Nominating and Corporate Governance Committee will either approve or disapprove the proposed transaction. Under the policy, in order to be approved, the proposed transaction must be on terms that are fair to the Company and are comparable to market rates, where applicable.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
2012 Overview
During 2012, the actions of the Compensation Committee (the “Committee”) and our pay-for-performance philosophy functioned such that compensation actually earned by our executives reflected the performance of the Company in an economic environment that continues to be challenging. Highlights from our 2012 performance are as follows:
| · | On December 31, 2011, we increased our ownership in an existing joint venture, PST Eletrônica Ltda. (“PST”), resulting in a controlling interest. As a result, PST became a consolidated subsidiary in our 2012 financial results, however, PST’s financial results were excluded from our 2012 incentive compensation targets; |
| · | Net sales excluding PST failed to meet our expectations by approximately $92.0 million. Our lower sales were the result of a significant volume decrease from a large North American customer in our Wiring segment and lower European commercial vehicle product sales in our Electronics segment. These sales decreases were partially offset by an increase due to higher volume in our served markets in our Control Devices segment; |
| · | We reduced our outstanding debt by $65.7 million and maintained a cash and cash equivalents balance of $44.6 million at year end by using the cash flows we generated along with existing cash balances; and |
| · | We adjusted our overall cost structure and improved our labor productivity to partially offset the $92 million decline in net sales, however, we were not able to generate operating income to meet our 2012 expectations. |
As a result:
| · | Our executive officers did not receive base salary increases in 2012; |
| · | Achievement for the consolidated metrics under the annual incentive award was limited to the free cash flow metric as we were not able to completely offset the decreased sales with cost reductions and improved productivity to meet the operating profit or return on invested capital metrics as established for 2012. As a result, our executives earned 25% of their annual incentive target based only on the achievement of the free cash flow component of their consolidated results based targets. See “Annual Incentive Awards”; and |
| · | No amounts were earned for the 2012 performance period of the long-term incentive awards granted in 2010, 2011 and 2012 as our actual earnings per share did not meet or exceed the threshold as established for 2012. These awards typically have a three year vesting period with annual performance targets. See “Long-Term Incentive Awards.” |
Compensation Philosophy and Objectives
Our Company’s compensation programs for executive officers are designed to attract, retain, motivate, and reward talented executives who will advance our strategic, operational and financial objectives and thereby enhance shareholder value. The primary objectives of our compensation programs for executive officers are to:
| · | attract and retain talented executive officers by providing a compensation package that is competitive with that offered by similarly situated companies; |
| · | create a compensation structure under which a substantial portion of total compensation is based on achievement of performance goals; and |
| · | align total compensation with the objectives and strategies of our business and shareholders. |
We have a commitment to formulate the components of our compensation program under a pay-for-performance ideology. To this end, aphilosophy. A substantial portion of our executive officers’ annual and long-term compensation is tied to quantifiable measures of the Company’s financial performance and therefore maywill not be earned if targeted performance is not achieved.
We established the various components of our 20102012 compensation payments and awards to meet our objectives as follows:
| Objective Addressed | ||||||
Type of Compensation | Competitive Compensation | Performance Objective | Retention | |||
| Base salary | ü | |||||
| Annual incentive plan awards | ü | ü | ||||
| Equity-based awards | ü | ü | ü | |||
| Benefits and perquisites | ü | |||||
Mix of Compensation
Our executive compensation is based on our pay-for-performance philosophy, which emphasizes executive performance measures that correlate closely with the achievement of both shorter-term performance objectives and longer-term shareholder value. To this end, aA substantial portion of our executive officers’ annual and long-term compensation is at-risk. The portion of compensation at-risk increases with the executive officer’s position level. This provides more upside potential and downside risk for more senior positions because these roles have greater influence on theour performance of the Company as a whole.
Total Target Compensation
Total target compensation is the value of the compensation package that is intended to be delivered if performance goals are met. Actual compensation depends on the annual and long-term incentive compensation payout levels based upon the applicable performance achievement and, for long-term awards, the price of our common shares. The following charts show the weighting of each element of total target compensation for the CEO and the other Named Executive Officers (“NEOs”NEO”), excluding the one-time retention awards paid in 2010.. These charts illustrate our pay-for-performance philosophy, as annual and long-term incentive compensation comprises the majority of total target compensation.
Determination of Compensation
Based on the foregoing objectives, we have structured the Company’sour executive officers’ compensation to provide adequate competitive compensation to attract and retain executive officers, to motivate them to achieve our strategic goals and to reward the executive officers for achieving such goals. The Compensation Committee (the “Committee”) has retained the services ofhistorically retains an independent compensation consultant to assist the Committee to fulfill various aspects of its charter. During 2010,Committee. For 2012, the Committee retained Total Rewards Strategies LLC (“TRS”) to assist the Committee with the following: keeping it appraised about relevant trends and technical developments during its meetings; providing consulting advice regarding long-term incentive and change in control arrangements; providing peer group analysis; and providing market data for the CEO position and other executive officers. Additionally, recommendations and evaluations from the CEO are considered by the Committee when setting the compensation of the other executive officers. The annual evaluation of the CEO by the Board is considered by the Committee when establishing the compensation of the CEO.
Our executive officers receive two forms of annual cash compensation – base salary and an annual incentive awardsaward – which together constitute an executive officer’s total annual cash compensation; however, in 2010, our NEO’s also received one-time cash payments in connection with retention awards made in 2009.compensation. Please note that “total annual cash compensation,” as discussed in this Compensation Discussion and Analysis, differs from the “Total Compensation” column of the Summary Compensation Table on page 26,29, which includes long-term incentive, perquisites and other forms of compensation valued on a basis consistent with financial statement reporting requirements. The levels of base salary and the annual incentive awardsaward for our executive officers are established annually under a program intended to maintain parity with the competitive market for executive officers in comparable positions. Typically, ourOur executive compensation levels are designed to be generally aligned with the 50th - 75th percentile of competitive market levels for each position.
A large percentage of total compensation is allocated to incentives based on the philosophy mentioned above.incentive-based. There is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation. Rather, the Committee reviews competitive market paycompensation information provided by our compensation consultant and considers the Company’s historical compensation practices in determining the appropriate level and mix of incentive compensation for each executive position.
Compensation Benchmarking and Comparator Group
The comparator group is comprised of some of our direct competitors and a broader group of companies in the electronic and motor vehicle parts manufacturing industries that the Committee believes is representative of the labor market from which we recruit executive talent. Factors used to select the comparator group of companies include industry segment, revenue, profitability, number of employees and market capitalization. The Committee reviews and approves the comparator group annually.
The companies in the comparator group used to determine 2010in 2012 executive compensation decisions were:
| Accuride | Drew Industries | Modine Manufacturing | ||
| Altra Holdings | Encore Wire | Richardson Electronics | ||
| American Axle | EnPro Industries | Spartan Motors | ||
| AMETEK | Esterline Technologies | |||
| Standard Motor Products | ||||
| Gentex | Superior Industries International | |||
| Graco | ||||
| Commercial Vehicle Group | Kaydon | Thomas & Betts | ||
| CTS | KEMET | Titan International | ||
| Dana | Littelfuse | Trimas | ||
| Dorman Products | Meritor | Wabash National |
In 2009,2011, the median sales revenue for the comparator group was $579$960 million while our revenue was $475$765 million.
TRS provides the Committee with the 50thand 75th percentiles of the comparator group for base salary, cash bonus, long-term incentives and total overall compensation. The Committee uses the 50th percentile as a primary reference point the 50th percentile when determining compensationbase salary and annual incentive targets forand the 75th percentile when determining long-term incentive targets; each element of pay and adjusts each element of payis adjusted to reflect competitive market conditions. The objectivegoal of the executive compensation program is to provide overall compensation between the 50th and 75th percentiles of pay practices of the comparator group of companies. Actual target pay for an individual may be more or less than the 50th percentilereferenced percentiles based on the Committee’s evaluation of the individual’s performance and potential. Consistent with the Committee’s philosophy of pay-for-performance, incentive payments can exceed target levels only if overall Company financial targets are exceeded and will fall below target levels if overall financial goals are not achieved.
Consideration of Shareholder Advisory Vote on Executive Compensation
At our 2012 Annual Meeting of Shareholders, our shareholders approved our compensation advisory resolution with more than 94% of the votes cast approving the 2011 executive compensation described in our 2012 Proxy Statement. The Committee believes the shareholders vote affirms the Company’s approach to executive compensation and decided not to materially alter our compensation policies and programs for 2012.
Elements of Compensation
The principal elements of compensation of our executive officers for 20102012 were the following:
| · | Base salary; |
| · | Annual cash incentive |
| · | Long-term equity-based incentive awards; and |
| · | Benefits and |
Although all executive officers are eligible to participate in the same compensation and benefit programs, only Mr. Corey has compensation that is governed by an employment agreement. The terms of Mr. Corey’s employment agreement are described under “Employment Agreements.”
Base Salaries
We use base salary as the foundation of our compensation program for our executive officers. The annual cash incentive compensation awards and long-term incentive awards are based on a percentage of base compensation. The base salary is set at competitive market levels to attract and retain our executive officers. Base salary levels for our executive officers are set on the basis of the executive’s responsibilities, the current general industry and competitive market data, as discussed above. In each case, due consideration is given to personal factors, such as the individual’s experience, competencies, performance and contributions, and to external factors, such as salaries paid to similarly situated executive officers by like-sized companies. The Committee considers the evaluation and recommendation of the CEO in determining the base salary of the other executive officers. The Committee generally approves all executive officer base salaries for the next calendar year at its December meeting which become effective January 1.1 of the following year. Executive officers base salaries remain fixed throughout the year unless a promotion or other change in responsibilities occurs. For 2010, to continue to manage costs in an uncertain economic environment, the Company delayed salary increases for employees for three months. The NEOs’ salary increases were delayed in line with this policy and became effective on April 1. The “Salary” column of the Summary Compensation Table lists the NEO’s base salary for 2010.
Annual Incentive Awards
Our executive officers participate in theour Annual Incentive Plan (“AIP”) which provides for annual cash payments based on the achievement of specific financial goals. We believeAs described above, the Company believes that a substantial portion of each executive’s overall compensation should be tied to quantifiable measures of financial performance. In January 2010,March 2012, the Committee approved a revision to the Company’s 20102012 AIP targets and metrics.metrics which had originally been approved in February 2012. The AIP targets are expressed as a percentage of the executive officer’s base salary. Per our competitive compensation review it was determined thatand focus on incentive-based compensation, the target percentages for our existing percentages fell within competitive market targets; therefore, no changes toNEOs were increased 5% each for 2012.
For 2012, the structure of our AIP percentages were implemented for 2010.
| Weight | Target Metric | Achievement | ||||||||||
| Operating profit | 35 | % | $ | 13.4 million | 200 | % | ||||||
| Return on invested capital | 20 | % | 4.02 | % | 200 | % | ||||||
| Free cash flow | 20 | % | $ | (26.3) million | 200 | % | ||||||
| Sales growth | 25 | % | $ | 150.0 million | 200 | % | ||||||
| Weight | Target Metric | Achievement | ||||||||||
| For our CEO & CFO: | ||||||||||||
| Consolidated Metrics: | ||||||||||||
| Operating profit | 43 | % | $52.7 million | 0 | % | |||||||
| Return on invested capital | 29 | % | 14.07 | % | 0 | % | ||||||
| Free cash flow | 28 | % | $25.8 million | 25 | % | |||||||
| For our Other NEOs: | ||||||||||||
| Consolidated Metrics: | ||||||||||||
| Operating profit | 30 | % | $52.7 million | 0 | % | |||||||
| Return on invested capital | 20 | % | 14.07 | % | 0 | % | ||||||
| Free cash flow | 20 | % | $25.8 million | 25 | % | |||||||
| Division Specific Metrics: | ||||||||||||
| Mr. Beaver: | ||||||||||||
| Sales growth | 10 | % | $175.0 million | 200 | % | |||||||
| Sales diversification | 10 | % | $100.0 million | 200 | % | |||||||
| Profit improvement initiatives | 10 | % | $6.0 million | 200 | % | |||||||
| Mr. Kramer: | ||||||||||||
| Operating income | 20 | % | $38.3 million | 0 | % | |||||||
| Free cash flow | 5 | % | $19.2 million | 0 | % | |||||||
| Sales growth | 5 | % | $65.0 million | 200 | % | |||||||
| Mr. Adante: | ||||||||||||
| Operating improvements | 30 | % | Various | 78 | % | |||||||
The consolidated financial performance target metrics were based on the Company’s 2010our 2012 business plan and were intended to be aggressive but achievable based on industry conditions known at the time they were established. Under the 20102012 AIP, the minimum level for achievement for each metricthe consolidated financial metrics was based on 80% of target while the maximum level was based on 130% of target. The divisional target metrics were based on plans or initiatives as developed during our 2012 budget process and established metrics were designed to be challenging but achievable. The following table provides the 20102012 AIP target as a percent of base salary, as a dollar amount and the dollar achievement for theour NEOs:
Target (Percent of Base Salary) | Target | Achieved | ||||||||||
| John C. Corey | 80 | % | $ | 528,000 | $ | 1,056,000 | ||||||
| George E. Strickler | 55 | % | 189,200 | 378,400 | ||||||||
| Mark J. Tervalon | 45 | % | 135,315 | 270,630 | ||||||||
| Thomas A. Beaver | 45 | % | 126,585 | 253,170 | ||||||||
| Michael D. Sloan | 45 | % | 101,250 | 202,500 | ||||||||
| Target Percent of Base Salary | Target | Achieved | ||||||||||
| John C. Corey | 90 | % | $ | 630,000 | $ | 156,757 | ||||||
| George E. Strickler | 65 | % | 232,375 | 57,820 | ||||||||
| Thomas A. Beaver | 50 | % | 143,500 | 111,094 | ||||||||
| Kevin B. Kramer | 50 | % | 100,000 | 27,419 | ||||||||
| Richard P. Adante | 45 | % | 101,250 | 41,176 | ||||||||
For each performance metric, specific levels of achievement for minimum, target, and maximum were set as described above. At target, 100% payout is achieved for each element of the plan; at maximum, 200% payout is achieved; and at minimum, 50% payout is achieved. Below the minimum target, no incentive compensation is earned. The AIP prorates incentive compensation earned between the minimum and maximum levels. The payment of compensation under the 20102012 plan was subject to our overall performance and is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
Long-Term Incentive Awards
Under theour Long-Term Incentive Plan (“LTIP”), all executive officers may be granted share options, restricted shares and other equity-based awards. Under theour Long-Term Cash Incentive Plan (“LTCIP”), all executive officers may be granted awards payable in cash. We believe that long-term incentive awards are a valuable motivation and retention tool and provide a long-term performance incentive to management. The long-term award isawards are calculated based on the fair value of the shares, shares equivalent or cash at the time of grant as a percentage of base salary. grant. In 2012, all long-term awards were granted under the LTIP.
The percentages are typically representative of the competitive market data obtained during the annual compensation review process described above. For 2010,2012, the Committee determinedreaffirmed that in order to remain competitive in the overall compensation packages, the long-term incentive awards should approximate the 75th percentile of market.comparative market data. The expected awards are subject to adjustment based on differences in the scope of the executive officer’s responsibilities, performance and ability.
Long-term equity-based incentives asare an important tool for retaining executive talent. For 2010,2012, we granted to our executive officers time-based restricted common shares under the LTIP equal to the equivalent of 50%60% of the fair value calculation discussed above.based on the75th percentile of comparative market data. If the executive officer remains an employee at the end of the three year vesting period, the time-based restricted common shares will vest and no longer be subject to forfeiture on that date. The grant date fair value of the time-based restricted common shares is included in the “Stock Awards” column of the Summary Compensation Table. The time-based restricted common shares awarded in 20102012 are included in the “All Other Stock Awards” column of the Grants of Plan-Based Awards table.
Long-term equity-based incentives are also views long-term performance-based incentives as key to linking our executive officers’ overall compensation to shareholder return. For 2010,2012, we granted performance-based restricted common share awards under the LTIP to our executive officers targeting approximately 25%20% of the long-term incentive fair value calculation discussed above.based on the 75th percentile of comparative market data. The awards are subject to forfeiture based on our total shareholder return (“TSR”) over a three year period, when compared to TSR for a Peer Group of companies over the same period. If the Company’sour TSR is equal to the 50th percentile of the Peer Group TSR performance, the target number of common shares will vest and no longer be subject to forfeiture. If the Company’sour TSR is less than the 25th percentile (minimum) of the Peer Group TSR performance, all common shares will be forfeited and if the Company’sour TSR is equal to the 75th percentile (maximum) or greater of the Peer Group TSR performance, all common shares will vest and no longer be subject to forfeiture. Provided the executive officer remains employed, and depending on TSR performance, the number of common shares no longer subject to forfeiture prorates between the 25th and 75th percentile. The 20102012 Peer Group for TSR is comprised of a subset of companies from the executive compensation comparator group and is comprised of the following companies:
| Esterline Technologies | Modine Manufacturing | |
| American Axle & Manufacturing | Gentex | |
| Commercial Vehicle Group | ||
| Superior Industries International | ||
| Littelfuse | Titan International | |
| EnPro Industries | Meritor, Inc. |
In 2012 we also granted performance-based restricted common share awards under the LTCIPLTIP to our executive officers targeting approximately 25%20% of the long-term incentive fair value calculation discussed above. The awards are payable in cash equivalent to the number of shares earned at the fair market value of our common sharesbased on the date75th percentile of vesting (“Phantom Shares”).comparative market data. The awards are subject to forfeiture based on our actual annual earnings per share (“EPS”) performance over a three year period, when compared to minimum, target and maximum annual EPS amounts over the same period. For the 20102012 grants, the annual performance period target EPS was or will be set using the Companyour Board approved annual budget.budget at the first regular meeting of each year in the performance period. Minimum EPS was or will beis established at 50% of target and maximum EPS was or will beis established at 150% of target for each annual performance period. The annual EPS target for the 20102012 performance period was established at a target of $(0.25).$1.35. The metrics are intended to be aggressive but achievable based on industry conditions known at the time they are set. Provided the executive officer remains employed, and depending on annual EPS performance, the number of Phantom Sharescommon shares no longer subject to forfeiture prorates between minimum and maximum amounts. Actual EPS performance below the minimum level results in no earned shares for the annual performance period. The amount of cash paid out at the end of the service and performance period will equal the number of Phantom Shares earned times the current fair value of the Company common shares at the date of vesting. For the 20102012 annual performance period, achievement was atbelow the maximumminimum level. The performance–based phantomperformance-based restricted common shares awarded in 20102012 are included in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns of the Grants of Plan-Based Awards table.
The Committee’s practice has been to approve the long-term incentive awards under the LTIP and LTCIP at the first regular meeting of the calendar year. Awards in 20102012 were granted at the March 2010February 2012 meeting, the first regularly scheduled meeting. As a general practice, awards under the LTIP and LTCIPlong-term incentive plans are approved once a year unless a situation arises whereby a compensation package is approved for a newly hired or promoted executive officer and equity-based compensation is a component.
Perquisites
We provide executive officers with perquisites the Companywe and the Committee believe are reasonable and consistent with its overall compensation program to better enable the Companyus to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites provided to executive officers.
Perquisites that are provided to executive officers are different by individual and could include an auto allowance, fully paid premiums for healthcare coverage, and country club dues. The incremental costs of the perquisites listed above for the NEOs are included in the “All Other Compensation” column of the Summary Compensation Table.
Employment Agreements
In early 2006, the Companywe entered into a negotiated employment agreement with Mr. Corey that provided for a minimum base salary of $525,000, participation in the annual incentive plan at a minimum target of 70% of base salary; a monthly car allowance; reimbursement of country club dues and a one-time initiation fee; reimbursement of Mr. Corey’s premium on his life insurance policy; participation in the Company’s customary benefit plans and reimbursement of out-of-pocket healthcare expenses not to exceed $5,000 per covered family member on an annual basis. In addition, if Mr. Corey is terminated by the Company without cause, the Company will be obligated to provide as severance the same compensation and benefits described below under “Potential Change in Control and Other Post-Employment Payments.”
The Company has not entered into an employment agreementsagreement with any other NEO.
Severance Plan
We adopted the Officers’ and Key Employees’ Severance Plan (the “Severance Plan”) in October 2009. The NEOs covered under the Severance Plan include Messrs.Mr. Strickler Tervalon, Beaver and Sloan.Mr. Beaver. If a covered executive is terminated by the Companyus without cause, the Companywe will be obligated under the Severance Plan to pay the executive’s salary for 12 months (18 months in the case of the Chief Financial Officer, Mr. Strickler) and continue health and welfare benefits coverage over the same period of time. Mr. Corey’s severance protection is provided in his employment agreement as described below under “Potential Change in Control and Other Post-Employment Payments.”
Termination and Change in Control Payments
We have entered into change in control agreements with our NEOsMr. Corey, Mr. Strickler, Mr. Beaver and certain other senior management employees. These agreements are designed to promote stability and continuity of senior management, both of which are in the best interest of Stoneridge and our shareholders. Our termination and change in control provisions for the NEOs are summarized below under “Potential Change in Control and Other Post-Employment Payments.”
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation in excess of $1.0 million that is paid to a company’s CEO and the other NEOs. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met.
The Committee believes that it is generally in the Company’sour best interest to attempt to structure performance-based compensation, including performance share award grants and annual incentive awards, to NEOs whose compensation may be subject to Section 162(m) of the Code in a manner that satisfies the statute’s requirements. Currently, all annualperformance-based compensation is designed to be deductible under Section 162(m); of the Code; however, in the future, the Committee may determine that it is appropriate to pay performance-based compensation which is not deductible.
Accounting Treatment of Compensation
As one of many factors, the Committee considers the financial impact in determining the amount of and allocation of the different pay elements, including FASB ASC Topic 718 implications of the long-term incentives.
Share Ownership Guidelines
In February 2013, the Committee approved share ownership guidelines for our executive officers to enhance the linkage between the interests of our executive officers and those of our shareholders. These guidelines provide that the CEO, CFO and other executive officers must retain Company common shares equal in market value to five, four and three times, respectively, of their annual base salaries. The executive officers have a five year accumulation period from implementation, hire, or promotion to achieve compliance and are restricted from selling any common shares earned under a Company equity-based compensation plan until their ownership guideline has been reached.
Compensation Committee Report
We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on that review and discussion, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
| The Compensation Committee | |
| Kim Korth, Chairwoman | |
| Jeffrey P. Draime | |
| Douglas C. Jacobs | |
| William M. Lasky |
| 28 |
Summary Compensation Table
The following table provides information regarding the compensation of our Chief Executive Officer, our Chief Financial Officer, and our three most highly compensated executive officers for 2010.
Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||
| John C. Corey | 2010 | $ | 655,000 | $ | 1,296,116 | $ | 1,056,000 | $ | 707,557 | $ | 3,714,673 | |||||||||||
| President & Chief | 2009 | 615,439 | 304,372 | 204,800 | 71,799 | 1,196,410 | ||||||||||||||||
| Executive Officer | 2008 | 640,000 | 1,310,709 | 480,768 | 85,679 | 2,517,156 | ||||||||||||||||
| George E. Strickler | 2010 | 340,688 | 432,500 | 378,400 | 353,335 | 1,504,923 | ||||||||||||||||
| Executive Vice President, | 2009 | 324,430 | 87,907 | 72,765 | 27,290 | 512,392 | ||||||||||||||||
| Chief Financial Officer & Treasurer | 2008 | 330,750 | 379,104 | 194,359 | 35,325 | 939,538 | ||||||||||||||||
| Mark J. Tervalon | 2010 | 298,525 | 289,948 | 270,630 | 153,199 | 1,012,302 | ||||||||||||||||
| Vice President & President | 2009 | 283,987 | 53,091 | 52,560 | 21,995 | 411,633 | ||||||||||||||||
| of the Stoneridge Electronics Division | 2008 | 292,000 | 228,324 | 157,943 | 22,368 | 700,635 | ||||||||||||||||
| Thomas A. Beaver | 2010 | 279,600 | 238,740 | 253,170 | 154,508 | 926,018 | ||||||||||||||||
| Vice President of Global | 2009 | 269,221 | 42,244 | 49,410 | 20,985 | 381,860 | ||||||||||||||||
| Sales & Systems Engineering | 2008 | 274,500 | 182,013 | 151,565 | 30,902 | 638,980 | ||||||||||||||||
| Michael D. Sloan | 2010 | 219,790 | 166,080 | 202,500 | 105,312 | 693,682 | ||||||||||||||||
| Vice President & President | 2009 | 203,500 | 22,769 | 36,630 | 3,291 | 266,190 | ||||||||||||||||
| of the Stoneridge Control Devices Division | 2008 | 202,972 | 51,101 | 61,813 | 11,558 | 327,444 | ||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||
| John C. Corey | 2012 | $ | 700,000 | $ | 1,615,216 | $ | 156,757 | $ | 90,164 | $ | 2,562,137 | |||||||||||||
| President & Chief | 2011 | 700,000 | 2,088,904 | - | 74,949 | 2,863,853 | ||||||||||||||||||
| Executive Officer | 2010 | 655,000 | 1,296,116 | 1,056,000 | 707,557 | 3,714,673 | ||||||||||||||||||
| George E. Strickler | 2012 | 357,500 | 497,982 | 57,820 | 32,260 | 945,562 | ||||||||||||||||||
| Executive Vice President, | 2011 | 357,500 | 774,916 | - | 31,801 | 1,164,217 | ||||||||||||||||||
| Chief Financial Officer & | 2010 | 340,688 | 432,500 | 378,400 | 353,335 | 1,504,923 | ||||||||||||||||||
| Treasurer | ||||||||||||||||||||||||
| Thomas A. Beaver | 2012 | 287,000 | 359,094 | 111,094 | 27,287 | 784,475 | ||||||||||||||||||
| Vice President & President | 2011 | 287,000 | 343,764 | 77,490 | 25,314 | 733,568 | ||||||||||||||||||
| of Global Sales | 2010 | 279,600 | 238,740 | 253,170 | 154,508 | 926,018 | ||||||||||||||||||
| Kevin B. Kramer(4) | 2012 | 200,000 | 337,330 | 27,419 | 113,833 | 678,582 | ||||||||||||||||||
| Vice President & President | ||||||||||||||||||||||||
| of the Stoneridge Wiring Division | ||||||||||||||||||||||||
| Richard P. Adante(5) | 2012 | 225,000 | 334,360 | 41,176 | 8,909 | 609,445 | ||||||||||||||||||
| Vice President of Operations | 2011 | 140,788 | - | - | 2,655 | 143,443 | ||||||||||||||||||
___________________
| (1) | The amounts included in the “Stock Awards” column represent the grant date fair value of common share awards computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, |
Time Based | Target Performance Based | Maximum Performance Based | ||||||||||
| Mr. Corey | $ | 628,968 | $ | 681,741 | $ | 1,022,612 | ||||||
| Mr. Strickler | 182,013 | 197,091 | 295,637 | |||||||||
| Mr. Tervalon | 109,854 | 118,470 | 177,705 | |||||||||
| Mr. Beaver | 87,237 | 94,776 | 142,164 | |||||||||
| Mr. Sloan | 47,388 | 50,619 | 75,929 | |||||||||
| (2) | The amount shown for each NEO in the “Non-Equity Incentive Plan Compensation” column is attributable to an annual incentive award earned under the AIP in the fiscal year listed. |
| (3) | The amounts shown for |
| Auto Allowance | 401(k) Match | Group Term Life Insurance | Club Dues | Health Insurance Premium | Life Insurance Including Gross-up | Healthcare Costs Including Gross-up | Recruiting Bonus | Total | ||||||||||||||||||||||||||||
| Mr. Corey | $ | 14,400 | $ | 7,500 | $ | 10,859 | $ | 6,000 | $ | 1,978 | $ | 23,956 | $ | 25,471 | $ | - | $ | 90,164 | ||||||||||||||||||
| Mr. Strickler | 9,000 | 7,500 | 5,267 | 5,000 | 5,493 | - | - | - | 32,260 | |||||||||||||||||||||||||||
| Mr. Beaver | 14,400 | 7,500 | 2,704 | - | 2,683 | - | - | - | 27,287 | |||||||||||||||||||||||||||
| Mr. Kramer | - | 3,750 | 1,012 | 856 | 8,215 | - | - | 100,000 | 113,833 | |||||||||||||||||||||||||||
| Mr. Adante | - | 2,813 | 6,096 | - | - | - | - | - | 8,909 | |||||||||||||||||||||||||||
| (4) | Mr. Kramer joined our Company in May 2012. His annual salary for 2012 was $300,000. |
| (5) | Mr. Adante joined our Company in May 2011. His annual salary for 2011 was $225,000. |
| 29 |
Auto Allowance | Life Insurance | Gross-Up on Life Insurance | Healthcare Costs | Gross-Up on Healthcare Costs | Group Term Life Insurance | Club Dues | Retention Award | Health Insurance Premium | Total | |||||||||||||||||||||||||||||||
| Mr. Corey | $ | 14,400 | $ | 14,056 | $ | 9,900 | $ | 7,917 | $ | 5,576 | $ | 7,524 | $ | 5,174 | $ | 640,000 | $ | 3,010 | $ | 707,557 | ||||||||||||||||||||
| Mr. Strickler | 9,000 | - | - | - | - | 4,847 | 5,000 | 330,750 | 3,738 | 353,335 | ||||||||||||||||||||||||||||||
| Mr. Tervalon | - | - | - | - | - | 240 | 1,374 | 146,000 | 5,585 | 153,199 | ||||||||||||||||||||||||||||||
| Mr. Beaver | 14,400 | - | - | - | - | 1,032 | - | 137,250 | 1,826 | 154,508 | ||||||||||||||||||||||||||||||
| Mr. Sloan | - | - | - | - | - | 552 | - | 101,750 | 3,010 | 105,312 | ||||||||||||||||||||||||||||||
Grants of Plan-Based Awards for 2010
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 | Grant Date Fair Value of | |||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Shares of Stock or Units (#)(3) | Stock and Option Awards ($)(4) | |||||||||||||||||||||||||
| John C. Corey | $ | 264,000 | $ | 528,000 | $ | 1,056,000 | ||||||||||||||||||||||||||||
| 2/14/2010 | 32,850 | 65,700 | 98,550 | 121,600 | $ | 1,296,116 | ||||||||||||||||||||||||||||
| 27,950 | 55,900 | 83,850 | 386,828 | |||||||||||||||||||||||||||||||
| George E. Strickler | 94,600 | 189,200 | 378,400 | |||||||||||||||||||||||||||||||
| 2/14/2010 | 10,950 | 21,900 | 32,850 | 40,600 | 432,500 | |||||||||||||||||||||||||||||
| 9,350 | 18,700 | 28,050 | 129,404 | |||||||||||||||||||||||||||||||
| Mark J. Tervalon | 67,658 | 135,315 | 270,630 | |||||||||||||||||||||||||||||||
| 2/14/2010 | 7,350 | 14,700 | 22,050 | 27,200 | 289,948 | |||||||||||||||||||||||||||||
| 6,250 | 12,500 | 18,750 | 86,500 | |||||||||||||||||||||||||||||||
| Thomas A. Beaver | 63,293 | 126,585 | 253,170 | |||||||||||||||||||||||||||||||
| 2/14/2010 | 6,050 | 12,100 | 18,150 | 22,400 | 238,740 | |||||||||||||||||||||||||||||
| 5,150 | 10,300 | 15,450 | 71,276 | |||||||||||||||||||||||||||||||
| Michael D. Sloan | 50,625 | 101,250 | 202,500 | |||||||||||||||||||||||||||||||
| 2/14/2010 | 4,200 | 8,400 | 12,600 | 15,600 | 166,080 | |||||||||||||||||||||||||||||
| 3,600 | 7,200 | 10,800 | 49,824 | |||||||||||||||||||||||||||||||
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 | Grant Date Fair Value of Stock and | |||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#)(3) | Option Awards ($)(4) | |||||||||||||||||||||||||
| John C. Corey | $ | 315,000 | $ | 630,000 | $ | 1,260,000 | ||||||||||||||||||||||||||||
| 2/10/2012 | 31,400 | 62,800 | 94,200 | 94,200 | $ | 1,615,216 | ||||||||||||||||||||||||||||
| George E. Strickler | 116,188 | 232,375 | 464,750 | |||||||||||||||||||||||||||||||
| 2/10/2012 | 9,700 | 19,400 | 29,100 | 29,000 | 497,982 | |||||||||||||||||||||||||||||
| Thomas A. Beaver | 71,750 | 143,500 | 287,000 | |||||||||||||||||||||||||||||||
| 2/10/2012 | 7,000 | 14,000 | 21,000 | 20,900 | 359,094 | |||||||||||||||||||||||||||||
| Kevin B. Kramer | 50,000 | 100,000 | 200,000 | |||||||||||||||||||||||||||||||
| 5/1/2012 | 7,000 | 14,000 | 21,000 | 21,000 | 337,330 | |||||||||||||||||||||||||||||
| Richard P. Adante | 50,625 | 101,250 | 202,500 | |||||||||||||||||||||||||||||||
| 2/10/2012 | 6,500 | 13,000 | 19,500 | 19,500 | 334,360 | |||||||||||||||||||||||||||||
___________________
| (1) | The amounts shown reflect awards granted under |
| (2) | The amounts shown reflect grants |
| (3) | The amounts shown reflect grants of time-based restricted common shares |
| (4) | The amounts included in “Fair Value of Awards” column represent the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, |
Outstanding Equity Awards at Year-End
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||
| John C. Corey | 10,000 | $ | 15.725 | 5/10/2014 | 58,400 | (2) | $ | 922,136 | 94,950 | (5) | $ | 1,499,261 | ||||||||||||||||
| 170,040 | (3) | 2,684,932 | 98,550 | (6) | 1,556,105 | |||||||||||||||||||||||
| 121,600 | (4) | 1,920,064 | 83,850 | (7) | 1,323,992 | |||||||||||||||||||||||
| George E. Strickler | - | - | - | 16,900 | (2) | 266,851 | 27,450 | (5) | 433,436 | |||||||||||||||||||
| 49,110 | (3) | 775,447 | 32,850 | (6) | 518,702 | |||||||||||||||||||||||
| 40,600 | (4) | 641,074 | 28,050 | (7) | 442,910 | |||||||||||||||||||||||
| Mark J. Tervalon | 4,000 | 10.385 | 2/4/2013 | 10,200 | (2) | 161,058 | 16,500 | (5) | 260,535 | |||||||||||||||||||
| 29,660 | (3) | 468,331 | 22,050 | (6) | 348,170 | |||||||||||||||||||||||
| 27,200 | (4) | 429,488 | 18,750 | (7) | 296,063 | |||||||||||||||||||||||
| Thomas A. Beaver | 20,000 | 10.385 | 2/4/2013 | 8,100 | (2) | 127,899 | 13,200 | (5) | 208,428 | |||||||||||||||||||
| 23,600 | (3) | 372,644 | 18,150 | (6) | 286,589 | |||||||||||||||||||||||
| 22,400 | (4) | 353,696 | 15,450 | (7) | 243,956 | |||||||||||||||||||||||
| Michael D. Sloan | - | - | - | 4,400 | (2) | 69,476 | 7,050 | (5) | 111,320 | |||||||||||||||||||
| 12,720 | (3) | 200,849 | 12,600 | (6) | 198,954 | |||||||||||||||||||||||
| 15,600 | (4) | 246,324 | 10,800 | (7) | 170,532 | |||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||||||||||||||
| John C. Corey | 10,000 | $ | 15.725 | 5/10/2014 | 121,600 | (2) | $ | 622,592 | 98,550 | (5) | $ | 504,576 | ||||||||||||||||
| 74,400 | (3) | 380,928 | 83,850 | (6) | 429,312 | |||||||||||||||||||||||
| 94,200 | (4) | 482,304 | 74,400 | (7) | 380,928 | |||||||||||||||||||||||
| 94,200 | (8) | 482,304 | ||||||||||||||||||||||||||
| George E. Strickler | - | - | - | 40,600 | (2) | 207,872 | 32,850 | (5) | 168,192 | |||||||||||||||||||
| 27,600 | (3) | 141,312 | 28,050 | (6) | 143,616 | |||||||||||||||||||||||
| 29,000 | (4) | 148,480 | 27,600 | (7) | 141,312 | |||||||||||||||||||||||
| 29,100 | (8) | 148,992 | ||||||||||||||||||||||||||
| Thomas A. Beaver | 20,000 | 10.385 | 2/4/2013 | 22,400 | (2) | 114,688 | 18,150 | (5) | 92,928 | |||||||||||||||||||
| 12,200 | (3) | 62,464 | 15,450 | (6) | 79,104 | |||||||||||||||||||||||
| 20,900 | (4) | 107,008 | 12,300 | (7) | 62,976 | |||||||||||||||||||||||
| 21,000 | (8) | 107,520 | ||||||||||||||||||||||||||
| Kevin B. Kramer | - | - | - | 21,000 | (4) | 107,520 | 21,000 | (8) | 107,520 | |||||||||||||||||||
| Richard P. Adante | - | - | - | 19,500 | (4) | 99,840 | 19,500 | (8) | 99,840 | |||||||||||||||||||
___________________
| (1) | Based on the closing price of |
| (2) | These time-based restricted common shares vested on |
| (3) | These time-based restricted common shares vest on |
| (4) | These time-based restricted common shares vest on February |
| (5) | These performance-based restricted common shares were scheduled to vest on |
| (6) | These |
| (7) | These |
| (8) | These performance-based restricted common shares are scheduled to vest on February 10, 2015 subject to achievement of specified financial performance metrics. |
Option Exercises and Stock Vested for 2010
| Stock Awards | ||||||||
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||
| John C. Corey | 52,400 | $ | 420,510 | |||||
| George E. Strickler | 16,500 | 134,850 | ||||||
| Mark J. Tervalon | 9,500 | 76,238 | ||||||
| Thomas A. Beaver | 7,750 | 62,194 | ||||||
| Michael D. Sloan | 5,000 | 40,125 | ||||||
| Name | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | |||||||||
| John C. Corey | $ | 22,115 | $ | 535,678 | $ | - | ||||||
| George E. Strickler | - | - | - | |||||||||
| Mark J. Tervalon | 473 | 11,469 | - | |||||||||
| Thomas A. Beaver | - | - | - | |||||||||
| Michael D. Sloan | - | - | - | |||||||||
| Stock Awards(1) | ||||||||
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||
| John C. Corey | 170,040 | $ | 1,715,704 | |||||
| George E. Strickler | 49,110 | 495,520 | ||||||
| Thomas A. Beaver | 23,600 | 238,124 | ||||||
| Kevin B. Kramer | - | - | ||||||
| Richard P. Adante | - | - | ||||||
___________________
| (1) | The number of shares includes time-based restricted shares from the 2009 restricted share grant that vested and were no longer subject to forfeiture on March 8, 2012. The value realized on vesting was based on the average of the high and low market values as recorded on the date of vesting, March 8, 2012. |
Potential Change in Control and Other Post-Employment Payments
In July 2007,December 2011, we entered into ana 2011 Amended and Restated Change in Control Agreement (the “CIC Agreement”), eliminating the excise tax gross up payment, with each NEOcertain NEOs and certain other senior management employees. Our change in control agreements were designed to provide for continuity of management in the event of change in control of the Company. We think it is important for our executives to be able to react neutrally to a potential change in control and not be influenced by personal financial concerns. We believe our arrangements are consistent with market practice. For our NEOs covered under a CIC Agreement (Mr. Adante and Mr. Kramer have not entered into a change in control agreement nor are they currently covered under the severance plan described below), we set the level of benefits, at two times base salary and average incentive award (described in detail below)as described below, to remain competitive with our select peer group. Finally, allAll payments under the CIC Agreement are conditioned on a non-compete, non-solicitation and non-disparagement agreement. The CIC Agreements replaced and superseded change in control agreements we previously entered into with these employees. The Committee determined that amending and restating prior agreements was necessary to comply with recently adopted final regulation under Section 409A of the Code, to add a non-competition clause for our protection, to address ambiguity in the prior agreements and to add a conditional gross up of any excise tax imposed under Section 280G of the Internal Revenue Code. In December 2008, we amended the CIC Agreement to comply with the requirements of Revenue Ruling 2008-13, which requires that all payments to an executive be based on actual results for performance-based payments.
We believe that the CIC Agreements should compensate executives displaced by a change in control and not serve as an incentive to increase personal wealth. Therefore, our CIC Agreements are “double trigger” arrangements. In order for the executives to receive the payments and benefits set forth in the agreement, both of the following must occur:
| · | a change in control of the Company; and |
| · | a triggering event: |
| · | the Company separates NEO from service, other than in the case of a termination for cause, within two years of the change in control; or |
| · | NEO separates from service for good reason (defined as material reduction in NEO’s title, responsibilities, power or authority, or assignment of duties that are materially inconsistent to previous duties, or material reduction in NEO’s compensation and benefits, or require NEO to work from any location more than 100 miles from previous location) within two years of the change in control. |
If the events listed above occur and the executive delivers a release to the Company, the Companywe will be obligated to provide the following to the executive:
| · | three times the greater of the CEO or CFO’s annual base salary at the time of a triggering event or at the time of the occurrence of a change in control; |
| · | three times the greater of the CEO or CFO’s maximum annual incentive compensation he would have been entitled to at the time of a triggering event or at the occurrence of a change in control, in each case based upon the assumption that personal and company targets or performance goals were achieved in that year at the maximum level; |
| · | an amount equal to the pro rata amount of annual incentive compensation the CEO or CFO would have been entitled to at the time of a triggering event calculated based on the performance goals that were achieved in the year in which the triggering event occurred; and |
| · | continued life and health insurance benefits for twenty-four months following termination. |
If the events listed above occur and the executive delivers a release to the Company, we will be obligated to provide the following to Mr. Beaver:
| · | two times the greater of the NEO’s annual base salary at the time of a triggering event or at the time of the occurrence of a change in control; |
| · | two times the greater of the NEO’s average annual incentive award over the last three completed fiscal years or the last five completed fiscal years; |
| · | an amount equal to the pro rata amount of annual incentive compensation the NEO would have been entitled to at the time of a triggering event calculated based on the performance goals that were achieved in the year in which the triggering event occurred; and |
| · | continued life and health insurance benefits for twenty-four months following |
Upon a change in control as defined in theour LTIP, the restricted common shares included on the “Outstanding Equity Awards at Year-End” table that are not performance-based vest and are no longer subject to forfeiture; the performance-based restricted common shares included on the “Outstanding Equity Awards at Year End” table vest and are no longer subject to forfeiture based on target achievement levels.
In October 2009, the Companywe adopted the Officers’ and Key Employees’ Severance Plan (the “Severance Plan”). The named executive officersNEOs covered under the Severance Plan include Messrs.Mr. Strickler Tervalon, Beaver and Sloan.Mr. Beaver. If we terminate a covered executive is terminated by the Company without cause, the Companywe will be obligated under the Severance Plan to pay the executive’s salary for 12 months (18 months in the case of the Chief Financial Officer, Mr. Strickler) and continue health and welfare benefits coverage over the same period of time. Mr. Corey’s severance protection is provided in his employment agreement as described above.
No severance is payable if the NEO’s employment is terminated for “cause,” if they resign, or upon death.
Value of Payment Presuming Hypothetical December 31, 20102012 Termination Date
Upon resignation, no payments are due to any NEO in the table below. Assuming the events described in the table below occurred on December 31, 2010,2012, each NEO would be eligible for the following payments and benefits:
| Termination Without Cause | Non- Termination Change in Control | Change in Control and NEO Resigns for Good Reason or is Terminated Without Cause | Disability | Death | ||||||||||||||||
| John C. Corey | ||||||||||||||||||||
| Base Salary | $ | 1,400,000 | $ | - | $ | 2,100,000 | $ | 175,000 | $ | - | ||||||||||
| Annual Incentive Award | - | - | 3,780,000 | - | - | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 975,401 | 1,485,824 | 1,485,824 | 975,401 | 975,401 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 849,146 | 1,198,080 | 1,198,080 | 849,146 | 849,146 | |||||||||||||||
| Health & Welfare Benefits | 64,276 | - | 64,276 | - | - | |||||||||||||||
| Total | $ | 3,288,823 | $ | 2,683,904 | $ | 8,628,180 | $ | 1,999,547 | $ | 1,824,547 | ||||||||||
| George E. Strickler | ||||||||||||||||||||
| Base Salary | $ | 536,250 | $ | - | $ | 1,072,500 | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | 1,394,250 | - | - | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 330,834 | 497,664 | 497,664 | 330,834 | 330,834 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 287,057 | 401,408 | 401,408 | 287,057 | 287,057 | |||||||||||||||
| Health & Welfare Benefits | 22,652 | - | 30,202 | - | - | |||||||||||||||
| Total | $ | 1,176,793 | $ | 899,072 | $ | 3,396,024 | $ | 617,891 | $ | 617,891 | ||||||||||
| Thomas A. Beaver | ||||||||||||||||||||
| Base Salary | $ | 287,000 | $ | - | $ | 574,000 | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | 294,503 | - | - | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 180,152 | 284,160 | 284,160 | 180,152 | 180,152 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 157,040 | 228,352 | 228,352 | 157,040 | 157,040 | |||||||||||||||
| Health & Welfare Benefits | 7,819 | - | 15,637 | - | - | |||||||||||||||
| Total | $ | 632,011 | $ | 512,512 | $ | 1,396,652 | $ | 337,192 | $ | 337,192 | ||||||||||
| Kevin B. Kramer | ||||||||||||||||||||
| Base Salary | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | - | - | - | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 31,360 | 107,520 | 107,520 | 31,360 | 31,360 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 20,900 | 71,680 | 71,680 | 20,900 | 20,900 | |||||||||||||||
| Health & Welfare Benefits | - | - | - | - | - | |||||||||||||||
| Total | $ | 52,260 | $ | 179,200 | $ | 179,200 | $ | 52,260 | $ | 52,260 | ||||||||||
| Richard P. Adante | ||||||||||||||||||||
| Base Salary | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | - | - | - | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 29,117 | 99,840 | 99,840 | 29,117 | 29,117 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 19,405 | 66,560 | 66,560 | 19,405 | 19,405 | |||||||||||||||
| Health & Welfare Benefits | - | - | - | - | - | |||||||||||||||
| Total | $ | 48,522 | $ | 166,400 | $ | 166,400 | $ | 48,522 | $ | 48,522 | ||||||||||
| 34 |
Termination Without Cause | Non-Termination Change in Control | Change in Control and NEO Resigns for Good Reason or is Terminated Without Cause | Disability | Death | ||||||||||||||||
| John C. Corey | ||||||||||||||||||||
| Base Salary | $ | 1,320,000 | $ | - | $ | 1,320,000 | $ | 165,000 | $ | - | ||||||||||
| Annual Incentive Award | 1,161,045 | - | 1,161,045 | - | - | |||||||||||||||
| Long-term Incentive Award | 478,884 | 783,628 | 783,628 | 478,884 | 478,884 | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 3,071,692 | 5,527,132 | 5,527,132 | 1,482,155 | 1,482,155 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 560,011 | 2,919,571 | 2,919,571 | 1,503,998 | 1,503,998 | |||||||||||||||
| Health & Welfare Benefits | 55,937 | - | 55,937 | - | - | |||||||||||||||
| Tax Gross-Up | - | - | 1,626,114 | - | - | |||||||||||||||
| Total | $ | 6,647,569 | $ | 9,230,331 | $ | 13,393,427 | $ | 3,630,037 | $ | 3,465,037 | ||||||||||
| George E. Strickler | ||||||||||||||||||||
| Base Salary | $ | 516,000 | $ | - | $ | 688,000 | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | 430,349 | - | - | |||||||||||||||
| Long-term Incentive Award | 138,298 | 226,306 | 226,306 | 138,298 | 138,298 | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 912,867 | 1,683,372 | 1,683,372 | 453,831 | 453,831 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 186,972 | 930,031 | 930,031 | 459,884 | 459,884 | |||||||||||||||
| Health & Welfare Benefits | 17,953 | - | 23,938 | - | - | |||||||||||||||
| Tax Gross-Up | - | - | 465,827 | - | - | |||||||||||||||
| Total | $ | 1,772,090 | $ | 2,839,709 | $ | 4,447,823 | $ | 1,052,013 | $ | 1,052,013 | ||||||||||
| Mark J. Tervalon | ||||||||||||||||||||
| Base Salary | $ | 300,700 | $ | - | $ | 601,400 | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | 320,755 | - | - | |||||||||||||||
| Long-term Incentive Award | 83,544 | 136,709 | 136,709 | 83,544 | 83,544 | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 563,561 | 1,058,877 | 1,058,877 | 590,546 | 590,546 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 125,259 | 603,178 | 603,178 | 289,308 | 289,308 | |||||||||||||||
| Health & Welfare Benefits | 17,094 | - | 34,189 | - | - | |||||||||||||||
| Tax Gross-Up | - | - | 280,702 | - | - | |||||||||||||||
| Total | $ | 1,090,158 | $ | 1,798,764 | $ | 3,035,810 | $ | 963,398 | $ | 963,398 | ||||||||||
| Thomas A. Beaver | ||||||||||||||||||||
| Base Salary | $ | 281,300 | $ | - | $ | 562,600 | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | 302,763 | - | - | |||||||||||||||
| Long-term Incentive Award | 66,447 | 108,731 | 108,731 | 66,447 | 66,447 | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 451,673 | 854,239 | 854,239 | 481,595 | 481,595 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 103,159 | 492,648 | 492,648 | 234,394 | 234,394 | |||||||||||||||
| Health & Welfare Benefits | 6,293 | - | 12,586 | - | - | |||||||||||||||
| Tax Gross-Up | - | - | - | - | - | |||||||||||||||
| Total | $ | 908,872 | $ | 1,455,618 | $ | 2,333,567 | $ | 782,436 | $ | 782,436 | ||||||||||
| Michael D. Sloan | ||||||||||||||||||||
| Base Salary | $ | 225,000 | $ | - | $ | 450,000 | $ | - | $ | - | ||||||||||
| Annual Incentive Award | - | - | 200,629 | - | - | |||||||||||||||
| Long-term Incentive Award | 35,830 | 58,631 | 58,631 | 35,830 | 35,830 | |||||||||||||||
| Unvested and Accelerated Restricted Common Shares | 260,188 | 516,649 | 516,649 | 315,800 | 315,800 | |||||||||||||||
| Unvested and Accelerated Performance Common Shares | 71,845 | 320,537 | 320,537 | 141,935 | 141,935 | |||||||||||||||
| Health & Welfare Benefits | 12,830 | - | 25,660 | - | - | |||||||||||||||
| Tax Gross-Up | - | - | 138,711 | - | - | |||||||||||||||
| Total | $ | 605,693 | $ | 895,817 | $ | 1,710,817 | $ | 493,565 | $ | 493,565 | ||||||||||
DIRECTORS’ COMPENSATION
Cash Compensation
For 2012, the Board approved that each non-employee director of the Company receives areceive an annual retainer of $35,000 per year$70,000 for serving as aour director of the Company, $1,500 forand attending each meeting of the Board and $750 for participating in each telephonic meeting of the Board.Committee meetings. The non-executive Chairman receives twice the annual retainer and Board meeting fees thanof the other directors. Committee members receive $1,000 for attending such meetings and $500 for participating in telephonic meetings. The Audit Committee, chairman receives additional compensation of $10,000 per year and the Compensation Committee, and Nominating and Corporate Governance Committee chairperson each receives additional compensation of $10,000, $7,500, and $5,000, respectively, per year. Beginning in 2009, directors were paid an additional cash award granted to supplement the fair value of the annual grant of restricted common shares due to the depressed market value of our common shares and the number of shares available under the Directors’ Restricted Shares Plan at the date of grant. The final payment of this award occurred in 2010. Additionally in 2010, two members of a Board received additional compensation of $70,000 each in connection with their work on a special project. Directors who are also employees of the Company are not paid additional compensation for serving as a director. The Company reimbursesWe reimburse out-of-pocket expenses incurred by all directors in connection with attending Board and committeeCommittee meetings.
Equity Compensation
Pursuant to the Directors’ Restricted Shares Plan,non-employee directors are eligible to receive awards of restricted common shares. In 2010,2012, Mr. Lasky, as Chairman of the Board, was granted 15,88011,280 restricted common shares and all other directors, except Mr. Mayes, were granted 7,9405,640 restricted common shares. The restrictions for those common shares lapsed on February 14, 2011.
Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | |||||||||
| Jeffrey P. Draime | $ | 69,361 | $ | 54,945 | $ | 124,306 | ||||||
| Douglas C. Jacobs | 83,361 | 54,945 | 138,306 | |||||||||
| Ira C. Kaplan | 67,233 | 54,945 | 122,178 | |||||||||
| Kim Korth | 143,611 | 54,945 | 198,556 | |||||||||
| William M. Lasky | 143,222 | 109,890 | 253,112 | |||||||||
| Paul J. Schlather | 136,483 | 54,945 | 191,428 | |||||||||
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||
| Jeffrey P. Draime | $ | 70,000 | $ | 60,010 | $ | 130,010 | ||||||
| Douglas C. Jacobs | 80,000 | 60,010 | 140,010 | |||||||||
| Ira C. Kaplan | 70,000 | 60,010 | 130,010 | |||||||||
| Kim Korth | 77,500 | 60,010 | 137,510 | |||||||||
| William M. Lasky | 145,000 | 120,020 | 265,020 | |||||||||
| George S. Mayes, Jr. | 5,326 | - | 5,326 | |||||||||
| Paul J. Schlather | 70,000 | 60,010 | 130,010 | |||||||||
___________________
| (1) | The amounts included in the “Stock Awards” column represent fair value at grant date of restricted common share awards to directors, computed in accordance with FASB ASC Topic 718. For a discussion of the valuation assumptions, see Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, |
Share Ownership Guidelines
In December 2012, the Board approved share ownership guidelines for all non-employee directors. These guidelines provide that each director should own Company common shares equal in market value to four times the cash portion of the Board’s annual retainer. The Directors have a five year accumulation period from implementation of the guideline or appointment to the Board to achieve compliance and are restricted from selling any common shares earned under a Company equity-based compensation plan until their ownership guideline has been reached.
OTHER INFORMATION
Shareholder’s Proposals for 20122014 Annual Meeting of Shareholders
Proposals of shareholders intended to be presented, pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), at the Company’s 2012our 2014 Annual Meeting of Shareholders must be received by the Company at Stoneridge, Inc., 9400 East Market Street, Warren, Ohio 44484, on or before December 14, 2011,9, 2013, for inclusion in the Company’sour proxy statement and form of proxy relating to the 20122014 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 the Company at the address listed in the immediately preceding sentence not later than February 24, 2012.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’sour directors and executive officers, and owners of more than 10% of the Company’sour common shares, to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of the Company’sour common shares and other equity securities. Executive officers, directors and owners of more than 10% of the common shares are required by SEC regulations to furnish the Companyus with copies of all forms they file pursuant to Section 16(a).
To the Company’sour knowledge, based solely on the Company’sour review of the copies of such reports furnished to the Companyus and written representations that no other reports were required during the fiscal year ended December 31, 2010,2012, all Section 16(a) filing requirements applicable to the Company’sour executive officers, directors and more than 10% beneficial owners were complied with, except Mr. CoreyDraime, Mr. Jacobs, Mr. Kaplan, Ms. Korth, Mr. Kramer, Mr. Lasky, and Mr. TervalonSchlather each filed late one Form 4 related to one transaction.
Other Matters
If the enclosed proxy is executed and returned to us via mail, telephone or Internet, the persons named in it will vote the common shares represented by that proxy at the meeting. The form of proxy permits specification of a vote for the election of directors as set forth under “Election of Directors” above, the withholding of authority to vote in the election of directors, or the withholding of authority to vote for one or more specified nominees. When a choice has been specified in the proxy, the common shares represented will be voted in accordance with that specification. If no specification is made, those common shares will be voted at the meeting to elect directors as set forth under “Election of Directors” above, to elect three years with respect to the advisory vote on conducting future advisory votes on executive compensation, and FOR the proposals to (i) to ratify the appointment of Ernst & Young as the Company’sour independent auditors for the year ending December 31, 2011;2013; (ii) to approve of the advisory resolution on executive compensation; and (iii) to approve the amendment to the Stoneridge Amended AIP.
Director nominees who receive the greatest number of affirmative votes will be elected directors and the choice selected by the most shareholders will be deemed the shareholders’ choice on the frequency of the Company’s executive compensation advisory vote.directors. Broker non-votes and abstaining votes will be counted as “present” for purposes of determining whether a quorum has been achieved at the meeting, but will not be counted in favor of or against any nominee. The voting standards for each of the other known matters to be considered at the meeting are set forth within the above proposals. All other matters to be considered at the meeting require for approval the favorable vote of a majority of the shares entitled to vote and represented at the meeting in person or by proxy.
The holders of shares of a majority of the common shares outstanding on the record date, present in person or by proxy, shall constitute a quorum for the transaction of business to be considered at the Annual Meeting of Shareholders.
If any other matter properly comes before the meeting, the persons named in the proxy will vote thereon in accordance with their judgment. The Company doesWe do not know of any other matter that may be presented for action at the meeting and the Company haswe have not received any timely notice that any of the Company’sour shareholders intend to present a proposal at the meeting.
| By order of the Board of Directors, | |
| |
| |
| ROBERT M. LOESCH, | |
| Dated: April 8, 2013 | Secretary |
| 36 |
Appendix A
FIRST AMENDMENT
TO THE
STONERIDGE, INC.
AMENDED ANNUALAND RESTATED LONG-TERM INCENTIVE PLAN,
This First Amendment to the Stoneridge, Inc. (the “Company”) AnnualAmended and Restated Long-Term Incentive Plan, as amended (the “Plan”“Amendment”), is to provide an opportunity to the Company’s (and the Company’s Subsidiaries’) officers and other key employees selectedmade as of February 5, 2013 by the Committee (defined below) to earn annual incentive or bonus awards in order to motivate those persons to put forth maximum efforts toward the growth, profitability and success of the Company and its Subsidiaries (defined below) and to encourage such individuals to remain in the employ of the Company or a Subsidiary. Awards for participating employees under the Plan shall depend upon corporate and individual performance measures as determined by the Committee (defined below) for the Performance Year (defined below).
WHEREAS, the current LTIP, as previously approved by the Company and the Company’s shareholders, authorizes the issuance of 3,000,000 Company Common Shares under the LTIP;
WHEREAS, it is the desire of the Company.
WHEREAS, the Board approved the Amendment on February 5, 2013, subject to such ofapproval by the Company’s (and the Company’s Subsidiaries’) officers and key employees as it shall select for participation pursuant to Section 3 above.
NOW, THEREFORE, effective as of December 31, 2006 andthe date on which this Amendment is approved by the Company’s shareholders, at the 2007 Annual MeetingLTIP is amended as follows:
| 1. | Amendment to Section 3(a) of the LTIP. |
Section 3(a) of Shareholders. the LTIP is hereby amended and restated in its entirety as follows:
“Aggregate Shares Subject to the Plan. Subject to adjustment as provided in Section 3(c), the total number of Shares reserved and available for Awards under the Plan is 4,500,000, pursuant to which the maximum number of Shares which may be issued subject to Incentive Stock Options is 500,000. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares.”
| 2. | Amendment to Section 16 of the LTIP. |
Section 16 of the LTIP is hereby amended and restated in its entirety as follows:
“The Company’s Amended and Restated Long-Term Incentive Plan, as amended, was adopted by the Board of Directors on February 15, 2010, and was approved by the Company’s Shareholders on May 17, 2010, in accordance with applicable law and the listing standards of the New York Stock Exchange. On February 5, 2013 the Board of Directors approved an amendment to the Amended and Restated Long-Term Incentive Plan, as amended, to increase the number of Shares available for issuance and Awards thereunder by 1,500,000 Shares bringing the total to 4,500,000 Shares. The February 5, 2013 amendment is subject to the approval by the holders of the Company’s outstanding Shares, in accordance with applicable law and the listing standards of the New York Stock Exchange. This Amended and Restated Long-Term Incentive Plan, as amended, will become effective on the date of such shareholder approval.”
| 3. | Miscellaneous. |
| (a) | Except as amended by this Amendment, the LTIP shall remain in full force and effect. |
| (b) | Capitalized terms used but not defined in this Amendment have the respective meanings ascribed thereto in the LTIP. |
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Appendix B
FIRST AMENDMENT
TO THE
STONERIDGE, INC.
AMENDED DIRECTORS’ RESTRICTED SHARES PLAN
This First Amendment to the Stoneridge, Inc. Amended Directors’ Restricted Shares Plan (the “Amendment”), is made as of February 5, 2013 by the Board of Directors (the “Board”) of Stoneridge, Inc., an Ohio corporation (the “Company”). The Amendment will be effective for all Awards granted under the Stoneridge, Inc. Amended Directors’ Restricted Shares Plan (the “Directors’ Plan”), only after the effective date of this Amendment as described herein.
WHEREAS, the current Directors’ Plan, as previously approved by the Company and the Company’s shareholders, authorizes the issuance of 500,000 Company Common Shares under the Directors’ Plan;
WHEREAS, it is the desire of the Company to amend the Directors’ Plan, effective as of the date on which the Company’s shareholders approve this Amendment, to increase the maximum number of Common Shares that may be issued and available for grants of Restricted Shares under the Directors’ Plan;
WHEREAS, the Board approved the Amendment on February 5, 2013, subject to approval by the Company’s shareholders;
NOW, THEREFORE, effective as of the date on which this Amendment is approved by the Company’s shareholders, the Directors’ Plan is amended as follows:
| 1. | Amendment to Section 4 of the Directors’ Plan. |
Section 4 of the Directors’ Plan is hereby amended and restated in its entirety as follows:
“The maximum aggregate number of Common Shares that may be issued under the Plan as Restricted Shares shall be 700,000 Common Shares, without par value. The shares that may be issued under the Plan may be authorized but unissued shares or issued shares reacquired by the Company and held as Treasury Shares. In the event of a reorganization, recapitalization, share split, share dividend, combination of shares, merger, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company, the Company will make such adjustments as it deems appropriate in the number and kind of Common Shares reserved for issuance under the Plan. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation, all Restricted Shares that were granted hereunder and that are outstanding on the date of such event shall immediately vest and no longer be subject to forfeiture on the date of such event.”
| 2. | Amendment to Section 16 of the Directors’ Plan. |
Section 16 of the Directors’ Plan is hereby amended and restated in its entirety as follows:
“16.Effective Date.
The Plan, as amended shall be effective as(changing the number of December 31, 2011; provided the Company’s shareholders reapprove the Plan at the 2011 Annual Meeting of Shareholders. In addition, the Board may determine to submit the Plan to shareholders for reapproval at such time, if any, asCommon Shares that may be required in order that compensationissued under the Plan in Section 4 from 500,000 to 700,000) shall qualify as Performance-Based Compensation.
| 3. | Miscellaneous. |
| (a) | Except as amended by this Amendment, the Directors’ Plan shall remain in full force and effect. |
| (b) | Capitalized terms used but not defined in this Amendment have the respective meanings ascribed thereto in the Directors’ Plan. |
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| 01 | 02 | 03 | 04 | 05 | 06 | 07 | ||
| o | For All EXCEPT - To withhold a vote for one or more nominees, mark the box to the left and the corresponding numbered box(es) to the right. | ¨ | ¨ | ¨ | ¨ | ¨ | ¨ | ¨ |
| For | Against | Abstain | For | Against | Abstain | ||||||||
| 2. | Ratification of Ernst & Young LLP: | ¨ | ¨ | ¨ | 3. | Advisory resolution on executive compensation: | ¨ | ¨ | ¨ | ||||
| 4. | Advisory vote on the frequency of the advisory vote on executive compensation: | 1 Yr o | 2 Yrs o | 3 Yrs o | Abstain o | 5. | Approval of Amended Annual Incentive Plan: | o | o | o | |||
| 6. | On such other business as may properly come before the meeting. |