SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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. )
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¨ Preliminary proxy statement
x Definitive proxy statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 | ¨ Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
ITRON, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
x No fee required.
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Your prompt return of the enclosed proxy card will save the postage expense of additional mailings. Your immediate attention to these materials is greatly appreciated.
March 17, 201015, 2011
Dear Shareholder:
On behalf of the Board of Directors, I invite you to attend the Itron, Inc. 20102011 Annual Meeting of Shareholders. We hope you can join us. The annual meeting will be held:
At: | Principal Executive Offices of the Company Itron, Inc. — in the Atrium 2111 N. Molter Road Liberty Lake, Washington 99019 | |
On: | Tuesday, May | |
Time: | 8:00 a.m., local time |
For our shareholders’ convenience, we will provide a continental breakfast beginning at 7:30 a.m. At that time, shareholders will also have an opportunity to meet personally with our directors and officers to discuss any questions they may have. The annual meeting will begin promptly at 8:00 a.m.
WeThis year we are delivering our proxy materials to the majorityall of our shareholders over the Internet thereby conservingto conserve natural resources and loweringlower printing and delivery costs. On or about March 23, 2010,22, 2011, we will mail to our shareholdersyou a Notice of Internet Availability of Proxy Materials (Notice) that provides instructions on how to access via the Internet, our Notice of Annual Meeting of Shareholders, the proxy statement, and our Annual Report to Shareholders. On the date of mailing, we will make these materials accessible on the Internet according to the instructions in the Notice. The Notice also contains instructions on how to vote onlinevia the Internet or by telephone, and includes instructions on how to receive a paperprinted copy of the proxy materials by mail, if desired. On or about March 30, 2010, we expect to mail thisdesired, including a paper proxy statement andfor voting purposes. You may revoke your proxy at any time before it is voted at the enclosed proxy card to certain other shareholders of record.meeting.
Whether or not you plan to attend the annual meeting, please take the time now to read the proxy statement and vote by telephone or the Internet or(or by mail if you request printed materials) so that you are assured of an opportunity to voteparticipate in the overall governance of our Company by voting on allthe matters scheduled to come before the meeting. You may revoke your proxy at any time before it is exercised. Regardless of the number of Itron shares you own, your presence in person or by proxy is important for quorum purposes and your vote is important for proper corporate action.
Thank you for your continuing interest in Itron. We look forward to seeing you at our annual meeting.
Sincerely, |
Malcolm Unsworth |
President and Chief Executive Officer |
Itron, Inc., 2111 N. Molter Road, Liberty Lake, Washington 99019-9469; (509) 924-9900 or (800) 635-5461
ITRON, INC.
2111 N. Molter Road
Liberty Lake, Washington 99019
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 20103, 2011
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Itron, Inc. will be held at the principal executive offices of Itron, Inc., in the Atrium, at 2111 N. Molter Road, Liberty Lake, Washington, at 8:00 a.m., local time, on Tuesday, May 4, 2010,3, 2011, for the following purposes:
(1) | to elect three directors to the Itron, Inc. Board of Directors; |
(2) | to |
(3) | to |
(4) | to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the |
(5) | to transact any other business that may properly come before the annual meeting. |
The Board of Directors has established the close of business on February 26, 201025, 2011 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting.
All shareholders are cordially invited to attend the annual meeting in person.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER ANNUAL MEETING TO BE HELD ON MAY 4, 2010:3, 2011:
Our proxy statement and our Annual Report to Shareholders are available for all shareholders athttp://bnymellon.mobular.net/bnymellon/itriitri..
Your vote is very important.To ensure representation at the annual meeting, shareholders are urged to vote as promptly as possible. To vote your shares, please refer to the instructionsvoting instruction form on the proxy card or voting instruction form,website noted above, or review the section titled “Voting” beginning on page one of the accompanying proxy statement. Any shareholder attending the annual meeting may vote in person even if that shareholder has returned a proxy.
By order of the Board of Directors, |
John W. Holleran |
Corporate Secretary |
Liberty Lake, Washington
March 17, 201015, 2011
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This proxy statement is being furnished to shareholders of Itron, Inc. in connection with the solicitation by our Board of Directors of proxies for use at the 20102011 Annual Meeting of Shareholders. The meeting will be held at the principal executive offices of Itron, Inc. (Itron, or the Company), in the Atrium, at 2111 N. Molter Road, Liberty Lake, Washington, at 8:00 a.m., local time, on Tuesday, May 4, 2010,3, 2011, for the purposes listed in the accompanying Notice of Annual Meeting of Shareholders. We expect to mail this proxy statement and accompanying proxy to certainall of our shareholders on or about March 30, 2010. The majority of our shareholders will be mailed a Notice of Internet Availability of Proxy Materials, as described below, on or about March 23, 2010.22, 2011.
Internet Availability of Annual Meeting Materials
We are making ourOur proxy materials will be available over the Internet rather thanin lieu of mailing paper copies of those materials to every shareholder.our shareholders. On or about March 23, 2010,22, 2011, we will mail to the majority of our shareholders a Notice of Internet Availability of Proxy Materials (Notice) directing shareholders to the web site noted below where they can access our proxy materials and view instructions on how to vote via the Internet or by phone. The Notice will also provide instructions for obtaining paper copies of the proxy materials and a proxy card, if requested by a shareholder.
The following proxy materials are available for you to review online athttp://bnymellon.mobular.net/bnymellon/itri:
n | The Company’s Notice of Annual Meeting of Shareholders; |
n | The Company’s |
n | The Company’s Annual Report to Shareholders for the year ended December 31, |
n | Any amendments to the foregoing materials that may be required to be furnished to the shareholders by the SEC. |
MattersProposals to Be ConsideredVoted On at the Annual Meeting
At the annual meeting, we will consider and vote on the following matters:proposals:
(1) | to elect three directors to the Itron, Inc. Board of Directors for terms of three years (until |
(2) | to |
(3) | to |
(4) | to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the |
(5) | to transact any other business that may properly come before the annual meeting. |
Record Date and Outstanding Shares
Holders of record of our common stock at the close of business on February 26, 2010,25, 2011, are entitled to notice of, and to vote at, the annual meeting. On the record date, there were 40,188,85340,596,407 shares of our common stock
outstanding. Each outstanding share of our common stock will entitle its holder to one vote on each of the three directors to be elected and one vote on each other matter to be voted on at the annual meeting. Each of our directors and executive officers intends to vote or direct the vote of all shares of common stock over which he or
she has voting control in favor of (i)(a) the election of the nominees for director, (ii)(b) the adoptionadvisory approval of the Itron, Inc. 2010 Stock Incentive Plan, (iii)compensation we pay our named executive officers, (c) the adoptionadvisory approval of holding an advisory shareholder vote on an annual basis on the Itron, Inc. Executive Management Incentive Plan,compensation we pay our named executive officers, and (iv)(d) the ratification of Ernst & Young LLP as the Company’sour independent registered public accounting firm.
Each shareholder is entitled to one vote per share of common stock held on each matter to be voted on. The presence at the annual meeting, in person or by proxy, of holders of a majority of the outstanding shares of common stock on the record date will constitute a quorum. Abstentions and “broker non-votes” (shares held by a broker or nominee who does not have the authority, express or discretionary, to vote on a particular matter) on any of the proposals to be voted on will be counted only for purposes of determining the presence of a quorum.
You may vote your shares in one of several ways, depending on how you own your shares.
Registered Shareholders
VoteIf your shares are held in your name, you may vote by Internet (by going tohttp://www.proxyvoting.com/itri and following the voting instructions); or by toll-free telephone (by calling 1-866-540-5760 and following the voting instructions); or. You may also vote by mail (by using thebut only if you request paper copycopies of the proxy materials sentpursuant to you) by marking, signing, dating,the instructions in the Notice, and mailingyou mark, sign, date, and mail the enclosed proxy card enclosed with the printed material in the postage-paid envelope.envelope provided. You may also vote by attending the annual meeting.
Beneficial Shareholders
If your shares are held in the name of a broker, bank, or other nominee, follow the voting instructions on the voting instruction form provided by the holder of record, to vote your shares.
Proposal One:One – Election of Directors: eachEach nominee for director is elected by the vote of the majority of the votes cast with respect to that director’s election. Holders of common stock are not entitled to cumulative votes in the election of directors. Abstentions from voting on this matter will not be counted.Notethat brokers Brokers and other holders of record no longerdo not have discretionary voting authority (as they have in the past for uncontested director elections) to vote your shares in the election of directors, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number one to the holder of record for your shares, they willnotbe voted in the election of directors.
Proposal Two:Two – Say-on-Pay Vote (non-binding): the Itron, Inc. 2010 Stock Incentive Plan will be adopted if the number of votes cast “for” the Plan exceeds the number of votes cast “against” approvalThe affirmative vote of the Plan. We will not count anymajority of our shares whose ballot is marked as “withheld”, that are otherwise presentrepresented at the meeting, buteither in person or by proxy, is required for which there is an abstention, oradvisory (non-binding) approval of this proposal. Brokers and other holders of record do not have discretionary voting authority to which a shareholder gives no authority or direction (broker non-votes).vote your shares for this proposal, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number two to the holder of record for your shares, they willnotbe counted in the vote for proposal number two.voted on this proposal.
Proposal Three:Three – Say-When-On-Pay Vote (non-binding): This proposal asks shareholders to choose one of four options to indicate their preference on the Itron, Inc. Executive Management Incentive Plan will be adopted if the numberfrequency of future Say-on-Pay votes cast “for” the adoption(every one, two, or three years, or you may abstain from voting). Brokers and other holders of the Plan exceeds the number of votes cast “against” approval of the Plan. We willrecord do not count anyhave discretionary voting authority to vote your shares whose ballot is marked as “withheld”, that are otherwise present at the meeting but for which there is an abstention, or to which a shareholder gives no authority or direction (broker non-votes).this proposal, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number three to the holder of record for your shares, they willnotbe counted in the vote for proposal number three.voted on this proposal.
Proposal Four:Four – Ratification of Appointment of Independent Auditor: theThe appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 20102011 will be ratified if the majority of the votes
cast, either in person or by proxy, are in favor of the proposal. Abstentions from voting will not be counted. There will be no broker non-votes on the ratification of the Company’s independent registered public accounting firm because brokers who hold shares for the accounts of their clients have discretionary authority to vote such shares in this matter.
Unless contrary instructions are specified, if the proxy is completed and submitted (and not revoked) prior to the annual meeting, the shares represented by the proxy will be voted as follows: (i) FOR proposals one, through four,two and four; (ii) FOR an annual vote on future Say-on-Pay votes; and (iii) in accordance with the best judgment of the named proxies on any other matters properly brought before the annual meeting.
Shares represented at the annual meeting by properly signed proxies will be voted at the annual meeting in accordance with the instructions given in the proxy. A shareholder may revoke a proxy at any time before the vote. Mere attendance at the annual meeting will not revoke a proxy. A proxy may be revoked only by:
n | submitting a later-dated proxy for the same shares at any time before the proxy is voted; |
n | delivering written notice of revocation to the Corporate Secretary of Itron at any time before the vote; or |
n | attending the annual meetingandvoting in person. |
If you voted by telephone or the Internet and wish to change your vote, you may call the toll-free number or go to the Internet site, whichever is applicable to your earlier vote, and follow the directions for changing your vote. If the annual meeting is postponed or adjourned for any reason, at any subsequent reconvening of the annual meeting, all proxies will be voted in the same manner as the proxies would have been voted at the original convening of the annual meeting (except for any proxies that have at that time effectively been revoked or withdrawn).
We have retained The AltmanLaurel Hill Advisory Group, Inc., 1200LLC, 100 Wall Street, West, Third22nd Floor, Lyndhurst, NJ 07071,New York, NY 10005, to aid in the solicitation of proxies. We will bear the cost of such solicitation of proxies, which we estimate will be approximately $6,500 plus expenses. Proxies may be solicited by personal contact, mail, email, telephone, or facsimile. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of our common stock for their reasonable expenses in forwarding solicitation materials to the beneficial owners. Our directors, officers, and employees may also solicit proxies personally or by telephone, without additional compensation.
ITEMPROPOSAL 1 — ELECTION OF DIRECTORS
The Board of Directors (Board) is divided into three classes, with each director holding office for a three-year term or until his or her successor has been elected and qualified. At the annual meeting, three directors are to be elected for a term of three years (until 2013) or until his or her successor is duly elected and qualified. Unless authority is withheld, the persons named as proxies in the accompanying proxy card will vote for the election of the nominees listed below. If any of the nominees becomesbecome unavailable to serve, the persons named as proxies will have discretionary authority to vote for a substitute nominee.
Our Board has nominated each of the following persons for election as a director to serve until 2013.our 2014 annual meeting of shareholders. Each nominee is currently a director and has indicated that he or she is willing and able to continue to serve as a director. In addition, Mr. Eliassen is currently serving a three-year term as our Chairman of the Board.
Thomas S. GlanvilleJon E. Eliassen
Sharon L. NelsonCharles H. Gaylord, Jr.
Malcolm UnsworthGary E. Pruitt
We have concluded that each of the nominees for re-election, as well as the other directors who will continue in office, have the skills, experience, knowledge, and personal attributes that are necessary to effectively serve on our Board. As described below in their biographies and the section “Director and Director Nominee Qualifications” that follows, the qualifications of our directors and director nominees support our conclusion that each of the individuals should serve as a director in light of our current business operations and structure.
THE BOARD RECOMMENDS THAT YOU VOTEFOR
THE ELECTION OF EACH OF THE THREE NOMINEES FOR DIRECTOR.
Nominees to Serve until 2014 (Class 1)
Jon E. Eliassen(age 64)has been a director since 1987, and has served as our Chairman of the Board since January 1, 2010. He also currently serves as the president and chief executive officer of Red Lion Hotels Corporation, a NYSE traded company headquartered in Spokane, Washington, a position he has held since January 2010. Mr. Eliassen is managing director of Terrapin Capital Group, LLC, a privately-held business consulting and private equity firm. From 2003 until 2007, he was president and chief executive officer of the Spokane Area Economic Development Council, and from 1970 until 2003, he held numerous positions within Avista Corporation, a company involved in the production, transmission, and distribution of electricity and natural gas, before retiring in 2003 as senior vice president and chief financial officer, a position he had held since 1986. In addition, Mr. Eliassen is a member of the board of directors of IT Lifeline, a privately held technology company, Red Lion Hotels Corporation, and the Washington Technology Center, a state science and technology agency that facilitates and funds industry-university research collaborations.
Mr. Eliassen has an extensive background with public utilities and the utility industry in general. He contributes to our Board the knowledge gained from his association with a public utility that includes extensive financial experience with accounting, audit, strategic planning, business development, and financing strategy, as well as merger and acquisition involvement that has included due diligence processes, company and business valuation techniques, and financial analyses. In addition, Mr. Eliassen has been a principal or general partner in venture capital firms with expertise in evaluating businesses, and has several years’ experience as an expert witness before utility regulatory commissions in matters relating to financial strategy and policy, credit ratings, cost of capital, and capital structure.
Charles H. Gaylord, Jr.(age 65) has been a director since 2006. Mr. Gaylord has been a private technology investor focusing on software and communications since 1994. Until his retirement in 1994, Mr. Gaylord was executive vice president for Intuit Inc., a leading developer of personal and small business finance software
programs such as “Quicken” and “QuickBooks.” From 1990 to 1993, he served as chairman and chief executive officer of ChipSoft, Inc., the original publisher of the tax preparation software program “TurboTax”. Mr. Gaylord is a member of the board of directors and a member of the compensation committee of Proximetry Inc., a privately-held company, and a member of the advisory board of Technology Crossover Ventures I, an investment firm that invests primarily in private and public information technology companies.
During various periods from 1990 to approximately 2002, Mr. Gaylord was a member of the boards of directors and served on the compensation committees of the following public companies: Stac, Inc.; HNC Software, Inc.; Maxis, Inc.; and Retek, Inc.; and also served as a director of a number of private technology companies. His wealth of knowledge of software services, brand marketing, IT technology, and business development adds to the diverse business backgrounds of our other members of the Board.
Gary E. Pruitt(age 61) has been a director since 2006. Prior to his retirement in 2009, Mr. Pruitt was chairman and chief executive officer of Univar N.V., a chemical distribution company with distribution centers in the U.S., Canada, and Europe, from 2002 to October 2009. He had been associated with Univar and related entities since 1978 and held a variety of senior management positions within Univar and Van Waters & Rogers, Inc., which ultimately became Vopak USA Inc. Mr. Pruitt worked at Arthur Andersen & Co. as a chartered accountant from 1973 through 1977. He serves on the boards of directors of Public Storage, Inc., a NYSE traded company, Esterline Technologies Corporation, a NYSE traded technology company, and Premera Blue Cross.
Mr. Pruitt brings to the Board his experience as a chief executive officer of a multi-national company and all the business attributes required of that position, along with operational and manufacturing expertise through his various other management positions held with Univar. His public accounting financial background and other public board experiences provide strategic and global perspectives on our business as well.
Directors Continuing in Office until 2013 (Class 3)
Thomas S. Glanville(age 51)52) has been a director since 2001. Mr. Glanville has been managing partner of both Eschelon Energy Partners, LP, an energy industry private equity firm, and Eschelon Advisors, a financial and strategic consulting firm to energy/utility industry principals, since 2003. From 1999-2002, Mr. Glanville served as vice president of technology and new ventures for Reliant Energy, Inc., one of the world’s largest international energy services companies, and its affiliate, Reliant Resources, Inc. He currently serves on the boards of directors of Chroma Exploration and Production, Inc., and Strand Energy, L.L.C., boththe following privately-held oil and gas exploration and production companies. companies: Chroma Exploration and Production, Inc.; Strand Energy, L.L.C.; and Passenger Energy Partners, LLC. He is currently president of the Texas Tri-Cities branch (Houston, Austin, San Antonio) of the National Association of Corporate Directors (NACD).
Mr. Glanville brings to the Board financial expertise, industry-related experience through his association with Reliant Energy, energy sector exposure through the Eschelon entities, and technology skills that include his involvement with electric metering studies and research while he was Vice Presidentvice president of Technologytechnology for Reliant Energy. He is currently President of the Texas Tri-Cities branch of the National Association of Corporate Directors (Houston, Austin, San Antonio).
Sharon L. Nelson (age 63)(age 64) has been a director since 2003. Ms. Nelson is an attorney and served as chief of the Consumer Protection Division of the Washington State Attorney General’s Office from 2003 to 2006, and as director of the Shidler Center for Law, Commerce, and Technology at the University of Washington from 2000 to 2003. In addition, Ms. Nelson has been a consultant to both corporations and nonprofit organizations specializing in advice on public policy and regulation. In the past she has served as chair of the Washington Utilities and Transportation Commission and as president of the National Association of Regulatory Utility Commissioners. She currently isserved as a member ofcommissioner on the National Commission on Energy Policy from 2002 to 2010, and is co-chair of the U.S. China Clean Energy Forum.Forum and the State Energy Strategy Advisory Committee for the State of Washington. Previously, she served as chair of the board of directors of Consumers Union, publisher ofConsumer Reports. She also served previously as a member of the Board of Trustees of the North
American Electrical Reliability Corporation (NERC) based in Princeton, New Jersey. NERC’s members consist of the owners, operators, and users of the North American bulk electrical system. The U.S. Federal Energy Regulatory Commission granted NERC the legal authority to enforce reliability standards on users of the bulk power system.
Ms. Nelson has also served on the boards of two other public corporations, XO Telecommunications (now private) and Covad
Communications. Her experience as an executive and as a board member of other public companies, her legal education,background, and her knowledge of public policy and regulation systemsthe utility and energy regulatory environment are of great value in her role as a director of Itron.
Malcolm Unsworth(age 60)61) has been a director of Itron since December 2008, when he was appointed by the Board. He was named Presidentpresident and Chief Operating Officerchief operating officer of Itron in April 2008, and promoted to Presidentpresident and Chief Executive Officerchief executive officer in March 2009. Mr. Unsworth joined Itron in July of 2004 as Sr. Vice President, Hardware Solutions,senior vice president, hardware solutions, when Itron acquired Schlumberger Electricity Metering, a company where he spent 25 years, most recently as president of its electricity metering business. In April 2007, he was named Sr. Vice Presidentsenior vice president and Chief Operating Officerchief operating officer for Itron International (formerly known as Actaris Metering Systems, a company acquired by Itron). Mr. Unsworth also serves on the Board of Governors of NEMA – the National Electric Manufacturers Association.
As the only employee director on Itron’s Board, heMr. Unsworth possesses the specific manufacturing, industry, and technological expertise with respect to the software and hardware components of our business.
Directors Continuing in Office until 2012 (Class 2)
Michael B. Bracy (age 68)(age 69) has been a director since 1992. Until his retirement in 1997, Mr. Bracy was executive vice president, chief financial officer, and a director of NorAm Energy Corporation (NorAm), previously known as Arkla, Inc., an integrated natural gas company engaged in gathering and processing natural gas, inter-and-intra-state pipeline transportation, and retail natural gas distribution. Mr. Bracy iswas a former member of the board of directors (and chairman of the audit and conflicts committee) of TEPPCO Partners, L.P., a New York Stock Exchange (NYSE)NYSE traded public limited partnership, where he served from March 2005 until October 2009. 2009, when TEPPCO was merged into another company and no longer publicly traded.
Mr. Bracy brings extensive financial experience to the Board with his past positions as a chief financial officer with two different companies, and his prior affiliation with Chase Manhattan Bank where he managed banking and credit relationships with numerous electric and gas utilities. Also, while associated with NorAm and another previous employer, and in his role as an independent director and chairman of the audit & conflicts committee of TEPPCO, he was directly involved with the consummation of a number of mergers and acquisitions, which knowledge we believe adds additional value to Mr. Bracy’s role on our Board.
Kirby A. Dyess (age 63)(age 64) has been a director since 2006. Ms. Dyess is a principal in Austin Capital Management LLC where she invests in and assists early stage companies. Prior to forming Austin Capital Management LLC in 2003, Ms. Dyess spent 23 years in various executive and management positions at Intel Corporation where she most recently servingserved as corporateits vice president and the director of operations for Intel Capital until her retirement in December 2002. While at Intel, she also served as vice president and director of new business development and corporate vice president and director of global human resources.resources worldwide. Ms. Dyess servedserves on the board of directors of Merix Corporation,Viasystems Group Inc., a NASDAQ traded company, until February 2010 when Merix and Via Systems Inc. were merged. She has joined the board of the resulting public company VIA Systems Group Inc.whose shares are traded on NASDAQ. She also serves on the board of Complí, a privately-held company that provides compliance software to companies, and chairs the board of Prolifiq SW Inc., a privately-held enterprise software company. She alsohas served as vice president and president of the Oregon Board of Higher Education, and served on its board from 2004 to 2009. In 2009, Ms. Dyess was elected to the board of directors of Portland General Electric (PGE), a public utility whose shares are traded on NYSE.
Due to her positions at Intel Corporation, Ms. Dyess provides the Board with a strong background in technology, brand marketing, human resources, mergers and acquisitions, and business development, in addition to business innovation and R&D knowledge that she utilizes in her current association with Austin Capital Management.knowledge.
Graham M. Wilson (age 65)(age 66) has been a director since 1990. Mr. Wilson has been sole shareholder and chairman of GraWil Consultants Inc., a management and financial consultant firm, since 2002. Prior to that, he was employed by Westcoast Energy Inc., an integrated energy company, where he held the positions of executive vice president and chief financial officer, and president and CEO, Services.chief executive officer of services. Mr. Wilson also serves on the boards of directors of the following public Canadian companies: British Columbia Ferries Services Inc., Naikun Wind Energy Group Inc., and Daylight Energy Trust, and is a trustee of Hardwoods Distribution Income Trust.
A Canadian citizen, Mr. Graham has extensive financial and senior leadership experience, particularly with energy businesses such as Westcoast Energy which focuses primarily on natural gas in the U.S. and Canada. He served as Vice Presidentvice president of Financefinance for two other
public Canadian companies and currently serves on the audit committees of fivethe aforementioned four public companies.companies and on the investment committee of Fierra Axiom Infrastructure Fund in Canada. In addition, through his consulting firm, GraWil Consultants Inc., Mr. Wilson assists various business enterprises with their operations and finances. His Canadian business and financial acumen brings an international perspective to our Board.
Directors Continuing in Office until 2011 (Class 1)
Jon E. Eliassen (age 63) has been a director since 1987, and effective January 1, 2010, is serving as our Chairman of the Board. Mr. Eliassen is managing director of Terrapin Capital Group, LLC, a business consulting and private equity firm. From 2003 until 2007, he was president and chief executive officer of the Spokane Area Economic Development Council, and from 1970 until 2003, he held numerous positions within Avista Corporation, a company involved in the production, transmission, and distribution of electricity and natural gas, before retiring in 2003 as senior vice president and chief financial officer, a position he had held since 1986. He has served since 2003 on the board of directors and audit committee of Red Lion Hotels Corporation, a NYSE traded company headquartered in Spokane, Washington, and in January 2010 was appointed Interim President and CEO. In addition, Mr. Eliassen is a member of the board of directors of IT Lifeline, a privately held technology company, and the Washington Technology Center, a state science and technology agency that facilitates and funds industry-university research collaborations. Mr. Eliassen has an extensive background with public utilities and the utility industry in general. He contributes to our Board his extensive financial experience that includes accounting, audit, strategic planning, business development, and financing strategy while associated with a public utility, and merger and acquisition involvement that has included due diligence processes, company and business valuation techniques, and financial analyses. In addition, Mr. Eliassen has been a principal or general partner in venture capital firms with expertise in evaluating businesses, and has several years’ experience as an expert witness before utility regulatory commissions in matters relating to financial strategy and policy, credit ratings, cost of capital, and capital structure.
Charles H. Gaylord, Jr.(age 64) has been a director since 2006. Mr. Gaylord is a private technology investor focusing on software and communications. Until his retirement in 1994, Mr. Gaylord was executive vice president for Intuit Inc., a leading developer of personal and small business finance software programs such as “Quicken” and “QuickBooks.” From 1990 to 1993, he served as chairman and chief executive officer of ChipSoft, Inc., the original publisher of the tax preparation software program “TurboTax”. Mr. Gaylord is a member of the board of directors and a member of the compensation committee of Proximetry Inc., a privately-held company, and a member of the advisory board of Technology Crossover Ventures I, an investment firm that invests primarily in private and public information technology companies. During various periods from 1990 to approximately 2002, Mr. Gaylord was a member of the boards of directors and served on the compensation committees of the following public companies: Stac, Inc.; HNC Software, Inc.; Maxis, Inc.; and Retek, Inc.; and also served as a director of a number of private technology companies. His wealth of knowledge of software services, brand marketing, IT technology, and business development adds to the diverse business backgrounds of our other members of the Board.
Gary E. Pruitt (age 60) has been a director since 2006. From 2007 to October 2009, Mr. Pruitt was chairman and chief executive officer of Univar N.V., a chemical distribution company with distribution centers in the U.S., Canada and Europe. He retired in October from his role as CEO of Univar, and still serves as the company’s non-executive chairman. He has been associated with Univar and related entities since 1978 and has held a variety of senior management positions within Univar and Van Waters & Rogers, Inc., which ultimately became Vopak USA Inc. Mr. Pruitt worked at Arthur Andersen & Co. as a chartered accountant from 1973 through 1977. He serves on the boards of directors of Public Storage, Inc., a NYSE traded company, Esterline Technologies, a NYSE technology company, and Premera Blue Cross. He brings to the Board his experience as a chief executive officer of a multi-national company and all the business attributes required of that position, along with operational and manufacturing expertise through his various other management positions held with Univar. His public accounting financial background and other public board experiences provide strategic and global perspectives on our business as well.
Director and Director Nominee QualificationsCORPORATE GOVERNANCE
Our Corporate Governance Committee generally considers diversity as one of several factors relating to overall composition when making nominations to our Board. While we do not have a formal policy governing how diversity is considered, the Corporate Governance Committee generally considers diversity by examining the entire Board membership and, when making nominations to our Board, by reviewing the diversity of the entire Board. The Corporate Governance Committee construes Board diversity broadly to include many factors. As a result, the Corporate Governance Committee strives to ensure that our Board is represented by individuals with a variety of different opinions, perspectives, personal, professional and industry experience and backgrounds, skills, and expertise.
When the Corporate Governance Committee considers candidates to be recommended to the Board for inclusion on the slate of director nominees for the next annual meeting of shareholders, it creates a matrix for each candidate to address our criteria. In addition to the qualities described previously in the individual director biographies, the following matrix summarizes the skills and attributes of our directors and director nominees for 2010 that we believe are essential to our business:
Director Qualifications and Attributes
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We have concluded that allAudit/Finance Committee
Director Nominations by Shareholders” in this proxy statement.)
MORE INFORMATION ABOUT OUR DIRECTORS
We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on our Board. In setting director compensation, we consider the significant amount of time that directors spend in fulfilling their duties as well as the skill level required of members of the Board.
During the 2009 fiscal year, directors who were not officers of the Company received an annual retainer of $70,000,Shareholder Communications with $40,000 paid in cash and $30,000 paid in shares of our common stock. Members of the Audit/Finance Committee received an additional annual retainer of $8,000, paid in cash, and each of our committee chairs received an additional annual retainer of $10,000, paid half in cash and half in shares of our common stock.
New non-employee directors receive an initial option grant to purchase 5,000 shares of our common stock as of the date of the director’s initial election or appointment to the Board with vesting over a three-year period. Each non-employee director also receives an annual, non-qualified stock option to purchase 1,000 shares of our common stock, fully vested on the date of grant, on the first trading day of each January. These options have ten year terms. Shares of our common stock and options granted to non-employee directors that are issued as compensation are issued under our Amended and Restated 2000 Stock Incentive Plan. As part of our 2009 cost containment initiatives and at the recommendation of our Compensation Committee, the Board elected to forego the January 2009 annual stock option grants; however, such awards were reinstated and granted in January 2010.
We have adopted stock ownership guidelines for our non-employee directors. We expect our directors to purchase (or hold) shares equal to three times the annual cash retainer fee (currently $40,000) within three years from their initial appointment or election as a director. All of the non-employee directors currently hold the number of shares set forth in the guidelines, with the exception of one director who has been on the Board for three years and who is making progress towards attaining the guideline goal. In addition, we require our non-employee directors to hold the initial stock options granted to them upon their election or appointment to the Board until they are no longer active members of our Board, unless the options expire before that date.
The following table sets forth the annual compensation of our non-employee directors for 2009. Employee directors do not receive any separate compensation for their services as a director.
2009 Director Compensation Table
ITRON, INC. | ||||||||||||||
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Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (5) | Option Awards ($) (6) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||
Mike Bracy | 40,000 | 29,949 | — | — | n/a | — | 69,949 | |||||||
Kirby Dyess (1) | 45,000 | 34,904 | — | — | n/a | — | 79,904 | |||||||
Jon Eliassen (2) (3) | 53,000 | 34,904 | — | — | n/a | — | 87,904 | |||||||
Charles Gaylord | 40,000 | 29,949 | — | — | n/a | — | 69,949 | |||||||
Thomas Glanville (2) | 48,000 | 29,949 | — | — | n/a | — | 77,949 | |||||||
Sharon Nelson (2) | 48,000 | 29,949 | — | — | n/a | — | 77,949 | |||||||
Gary Pruitt | 40,000 | 29,949 | — | — | n/a | — | 69,949 | |||||||
Graham Wilson (4) | 53,000 | 34,904 | — | — | n/a | — | 87,904 |
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LEADERSHIP STRUCTURE OF THE BOARD OF DIRECTORS
Effective January 1, 2010, we modified the leadership structure of our Board so that the roles of Chairman of the Board (Chairman) and Chief Executive Officer (CEO) are separate. For the past several years, the roles of Chairman and CEO have been held by the same individual and the Company has had a Lead Independent Director. Now, the role of Chairman must be held by an independent director who meets the independence requirements of NASDAQ. The Board decided to separate the roles of Chairman and CEO for the following reasons:
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Pursuant to the Company’s Corporate Governance Guiding Principles, which may be found online at www.itron.com, the Chairman is an independent director unless the Board determines that the best interests of shareholders would otherwise be better served. The Chairman is elected by the members of the Board following the annual meeting of shareholders (or at such other time as a vacancy for the role of Chairman may occur). The Chairman serves for a term of three years (provided such director is re-elected by shareholders if his or her term as a director does not coincide with his or her term as Chairman). The Chairman does not serve more than two consecutive terms, unless the Board approves an extended term.
The Chairman has the following duties and responsibilities:
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If the Board determines that it is in the best interests of the shareholders to combine the roles of CEO and Chairman, the Board will appoint a Lead Independent Director with the duties set forth in the Corporate Governance Guiding Principles.
See “CORPORATE GOVERNANCE” in this proxy statement for additional information on our Board of Directors.
ITEM 2 — APPROVAL OF THE ITRON, INC. 2010 STOCK INCENTIVE PLAN
The Board believes it is in the best interests of the Company and its shareholders to continue offering equity-based awards to our management-level employees. See “EXECUTIVE COMPENSATION –
Executive Compensation Philosophy and we are seeking shareholder approvalObjectives
Role of the 2010 Plan at the annual meeting.Compensation Committee and Executive Officers
The Board believes the adoptionRole of the 2010 Plan is necessary because the numberCompensation Consultant; Peer Data Information
Purpose of the 2010 Plan
The purpose of the 2010 Plan is to enhance the long-term shareholder value of the Company by offering opportunities to selected persons to participate in the Company’s growth and success, and to encourage them to remain in the service of the Company and to acquire and maintain stock ownership in the Company. The 2010 Plan allows us to utilize multiple types of equity incentives and performance incentives in order to secure and retain the services of our employees, consultants and directors, and to provide long-term incentives that align the interests of award recipients with the interests of our shareholders.
The following description of the 2010 Plan is a summary and does not purport to be fully descriptive. SeeAppendix A attached to this proxy statement for a copy of the entire 2010 Plan.
Summary of the 2010 Plan
Awards. The Plan allows us to grant incentive and nonqualified stock options, stock appreciation rights (SARs), performance shares, performance units, restricted shares, restricted units, and unrestricted shares plus any dividend equivalents. Awards may be granted singly or in combination with other awards.
Stock Subject to the 2010 Plan. A maximum of 3,500,000 shares of common stock will be authorized for issuance under the 2010 Plan. Shares granted after December 31, 2009 under the Prior Plan will be counted against the authorized shares. Upon approval of the 2010 Plan by the Company’s shareholders, no further awards will be granted under the Prior Plan.
The 2010 Plan uses a “fungible share” concept where the awards of options and SARs cause one available share to be removed from the available share pool, while the award of restricted stock, restricted stock units, or other stock-based awards will be counted against the pool as 1.7 shares for each such award. Any awards granted under the Prior Plan between December 31, 2009 and the date the 2010 Plan is approved by the shareholders will be counted using the same fungible share principles against the shares that can be awarded under the 2010 Plan.
Shares covered by awards under the 2010 Plan and the Prior Plan after December 31, 2009 that are forfeited, cancelled or otherwise expire without having been exercised or settled, or that are settled by cash or other non-share consideration, become available for issuance pursuant to a new award and will be credited back to the pool at the same one share or 1.7 shares ratio used for the awards. Shares that are tendered or withheld to pay the exercise price of an award or to satisfy tax withholding obligations are not available for issuance pursuant to new awards.
Administration. Our Compensation Program
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Back Cover |
This proxy statement is being furnished to shareholders of Itron, Inc. in connection with the solicitation by our Board of Directors of proxies for use at the 2011 Annual Meeting of Shareholders. The meeting will be held at the principal executive offices of Itron, Inc. (Itron, or the Company), in the Atrium, at 2111 N. Molter Road, Liberty Lake, Washington, at 8:00 a.m., local time, on Tuesday, May 3, 2011, for the purposes listed in the accompanying Notice of Annual Meeting of Shareholders. We expect to mail to all of our shareholders a Notice of Internet Availability of Proxy Materials, as described below, on or about March 22, 2011.
Internet Availability of Annual Meeting Materials
Our proxy materials will be available over the Internet in lieu of mailing paper copies to our shareholders. On or about March 22, 2011, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials (Notice) directing shareholders to the web site noted below where they can access our proxy materials and view instructions on how to vote via the Internet or by phone. The Notice will also provide instructions for obtaining paper copies of the proxy materials and a proxy card, if requested by a shareholder.
The following proxy materials are available for you to review online athttp://bnymellon.mobular.net/bnymellon/itri:
n | The |
n | The Company’s 2011 Proxy Statement; |
n | The Company’s Annual Report to Shareholders for the year ended December 31, |
n | Any amendments to the foregoing materials that may be required to be furnished to the shareholders by the SEC. |
Proposals to Be Voted On at the Annual Meeting
At the annual meeting, we will consider and vote on the following proposals:
Plan Category | Number of Shares to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Shares Remaining Available for Issuance Under Equity Compensation Plans (excluding shares reflected in column (a)) (c) | ||||||
Equity Compensation Plans Approved by Shareholders (1) | 1,504,994 | $ | 52.93 | (2) | 780,857 | (1)(3) | |||
Equity Compensation Plans Not Approved by Shareholders | — | — | — | ||||||
Total | 1,504,994 | $ | 52.93 | (2) | 780,857 | (1)(3) | |||
(2) | to hold an advisory vote (non-binding) on
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(3) | to hold an advisory vote (non-binding) to determine shareholder preferences on whether future Say-on-Pay votes on the
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(4) | to ratify the
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(5) | to |
Record Date and Outstanding Shares
Holders of record of our common stock at the close of business on February 25, 2011, are entitled to notice of, and to vote at, the annual meeting. On the record date, there were 40,596,407 shares of our common stock
outstanding. Each outstanding share of our common stock will entitle its holder to one vote on each of the three directors to be elected and one vote on each other matter to be voted on at the annual meeting. Each of our directors and executive officers intends to vote or direct the vote of all shares of common stock over which he or she has voting control in favor of (a) the election of the nominees for director, (b) the advisory approval of the compensation we pay our named executive officers, (c) the advisory approval of holding an advisory shareholder vote on an annual basis on the compensation we pay our named executive officers, and (d) the ratification of Ernst & Young LLP as our independent registered public accounting firm.
Each shareholder is entitled to one vote per share of common stock held on each matter to be voted on. The presence at the annual meeting, in person or by proxy, of holders of a majority of the outstanding shares of common stock on the record date will constitute a quorum. Abstentions and “broker non-votes” (shares held by a broker or nominee who does not have the authority, express or discretionary, to vote on a particular matter) on any of the proposals to be voted on will be counted only for purposes of determining the presence of a quorum.
You may vote your shares in one of several ways, depending on how you own your shares.
Registered Shareholders
If your shares are held in your name, you may vote by Internet (by going tohttp://www.proxyvoting.com/itri and following the voting instructions) or by toll-free telephone (by calling 1-866-540-5760 and following the voting instructions). You may also vote by mailbut only if you request paper copies of the proxy materials pursuant to the instructions in the Notice, and you mark, sign, date, and mail the proxy card enclosed with the printed material in the postage-paid envelope provided. You may also vote by attending the annual meeting.
Beneficial Shareholders
If your shares are held in the name of a broker, bank, or other nominee, follow the voting instructions on the voting instruction form provided by the holder of record, to vote your shares.
Proposal One – Election of Directors: Each nominee for director is elected by the vote of the majority of the votes cast with respect to that director’s election. Holders of common stock are not entitled to cumulative votes in the election of directors. Abstentions from voting on this matter will not be counted. Brokers and other holders of record do not have discretionary voting authority to vote your shares in the election of directors, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number one to the holder of record for your shares, they willnot be voted in the election of directors.
Proposal Two – Say-on-Pay Vote (non-binding): The affirmative vote of the majority of our shares represented at the meeting, either in person or by proxy, is required for advisory (non-binding) approval of this proposal. Brokers and other holders of record do not have discretionary voting authority to vote your shares for this proposal, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number two to the holder of record for your shares, they willnotbe voted on this proposal.
Proposal Three – Say-When-On-Pay Vote (non-binding): This proposal asks shareholders to choose one of four options to indicate their preference on the frequency of future Say-on-Pay votes (every one, two, or three years, or you may abstain from voting). Brokers and other holders of record do not have discretionary voting authority to vote your shares for this proposal, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number three to the holder of record for your shares, they willnotbe voted on this proposal.
Proposal Four – Ratification of Appointment of Independent Auditor: The appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2011 will be ratified if the majority of the votes
cast, either in person or by proxy, are in favor of the proposal. Abstentions from voting will not be counted. There will be no broker non-votes on the ratification of the Company’s independent registered public accounting firm because brokers who hold shares for the accounts of their clients have discretionary authority to vote such shares in this matter.
Unless contrary instructions are specified, if the proxy is completed and submitted (and not revoked) prior to the annual meeting, the shares represented by the proxy will be voted as follows: (i) FOR proposals one, two and four; (ii) FOR an annual vote on future Say-on-Pay votes; and (iii) in accordance with the best judgment of the named proxies on any other matters properly brought before the annual meeting.
Shares represented at the annual meeting by properly signed proxies will be voted at the annual meeting in accordance with the instructions given in the proxy. A shareholder may revoke a proxy at any time before the vote. Mere attendance at the annual meeting will not revoke a proxy. A proxy may be revoked only by:
n | submitting a later-dated proxy for the
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n | delivering written notice of revocation to the Corporate Secretary of Itron at any time before the vote; or |
n | attending the annual meetingandvoting in
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If you voted by telephone or the Internet and wish to change your vote, you may call the toll-free number or go to the Internet site, whichever is applicable to your earlier vote, and follow the directions for changing your vote. If the annual meeting is postponed or adjourned for any reason, at any subsequent reconvening of the annual meeting, all proxies will be voted in the same manner as the proxies would have been voted at the original convening of the annual meeting (except for any proxies that have at that time effectively been revoked or withdrawn).
We have retained Laurel Hill Advisory Group, LLC, 100 Wall Street, 22nd Floor, New York, NY 10005, to aid in the solicitation of proxies. We will bear the cost of such solicitation of proxies, which we estimate will be approximately $6,500 plus expenses. Proxies may be solicited by personal contact, mail, email, telephone, or facsimile. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of our common stock for their reasonable expenses in forwarding solicitation materials to the beneficial owners. Our directors, officers, and employees may also solicit proxies personally or by telephone, without additional compensation.
PROPOSAL 1 — ELECTION OF DIRECTORS
The Board of Directors (Board) is divided into three classes, with each director holding office for a three-year term or until his or her successor has been elected and qualified. At the annual meeting, three directors are to be elected for a term of three years or until his or her successor is duly elected and qualified. Unless authority is withheld, the persons named as proxies in the proxy card will vote for the election of the nominees listed below. If any of the nominees become unavailable to serve, the persons named as proxies will have discretionary authority to vote for a substitute nominee.
Our Board has nominated each of the following persons for election as a director to serve until our 2014 annual meeting of shareholders. Each nominee is currently a director and has indicated that he is willing and able to continue to serve as a director. In addition, Mr. Eliassen is currently serving a three-year term as our Chairman of the Board.
Jon E. Eliassen
Charles H. Gaylord, Jr.
Gary E. Pruitt
We have concluded that each of the nominees for re-election, as well as the other directors who will continue in office, have the skills, experience, knowledge, and personal attributes that are necessary to effectively serve on our Board. As described below in their biographies and the section “Director and Director Nominee Qualifications” that follows, the qualifications of our directors and director nominees support our conclusion that each of the individuals should serve as a director in light of our current business operations and structure.
THE BOARD RECOMMENDS THAT YOU VOTEFOR
THE ELECTION OF EACH OF THE THREE NOMINEES FOR DIRECTOR.
Nominees to Serve until 2014 (Class 1)
Jon E. Eliassen(age 64)has been a director since 1987, and has served as our Chairman of the Board since January 1, 2010. He also currently serves as the president and chief executive officer of Red Lion Hotels Corporation, a NYSE traded company headquartered in Spokane, Washington, a position he has held since January 2010. Mr. Eliassen is managing director of Terrapin Capital Group, LLC, a privately-held business consulting and private equity firm. From 2003 until 2007, he was president and chief executive officer of the Spokane Area Economic Development Council, and from 1970 until 2003, he held numerous positions within Avista Corporation, a company involved in the production, transmission, and distribution of electricity and natural gas, before retiring in 2003 as senior vice president and chief financial officer, a position he had held since 1986. In addition, Mr. Eliassen is a member of the board of directors of IT Lifeline, a privately held technology company, Red Lion Hotels Corporation, and the Washington Technology Center, a state science and technology agency that facilitates and funds industry-university research collaborations.
Mr. Eliassen has an extensive background with public utilities and the utility industry in general. He contributes to our Board the knowledge gained from his association with a public utility that includes extensive financial experience with accounting, audit, strategic planning, business development, and financing strategy, as well as merger and acquisition involvement that has included due diligence processes, company and business valuation techniques, and financial analyses. In addition, Mr. Eliassen has been a principal or general partner in venture capital firms with expertise in evaluating businesses, and has several years’ experience as an expert witness before utility regulatory commissions in matters relating to financial strategy and policy, credit ratings, cost of capital, and capital structure.
Charles H. Gaylord, Jr.(age 65) has been a director since 2006. Mr. Gaylord has been a private technology investor focusing on software and communications since 1994. Until his retirement in 1994, Mr. Gaylord was executive vice president for Intuit Inc., a leading developer of personal and small business finance software
programs such as “Quicken” and “QuickBooks.” From 1990 to 1993, he served as chairman and chief executive officer of ChipSoft, Inc., the original publisher of the tax preparation software program “TurboTax”. Mr. Gaylord is a member of the board of directors and a member of the compensation committee of Proximetry Inc., a privately-held company, and a member of the advisory board of Technology Crossover Ventures I, an investment firm that invests primarily in private and public information technology companies.
During various periods from 1990 to approximately 2002, Mr. Gaylord was a member of the boards of directors and served on the compensation committees of the following public companies: Stac, Inc.; HNC Software, Inc.; Maxis, Inc.; and Retek, Inc.; and also served as a director of a number of private technology companies. His wealth of knowledge of software services, brand marketing, IT technology, and business development adds to the diverse business backgrounds of our other members of the Board.
Gary E. Pruitt(age 61) has been a director since 2006. Prior to his retirement in 2009, Mr. Pruitt was chairman and chief executive officer of Univar N.V., a chemical distribution company with distribution centers in the U.S., Canada, and Europe, from 2002 to October 2009. He had been associated with Univar and related entities since 1978 and held a variety of senior management positions within Univar and Van Waters & Rogers, Inc., which ultimately became Vopak USA Inc. Mr. Pruitt worked at Arthur Andersen & Co. as a chartered accountant from 1973 through 1977. He serves on the boards of directors of Public Storage, Inc., a NYSE traded company, Esterline Technologies Corporation, a NYSE traded technology company, and Premera Blue Cross.
Mr. Pruitt brings to the Board his experience as a chief executive officer of a multi-national company and all the business attributes required of that position, along with operational and manufacturing expertise through his various other management positions held with Univar. His public accounting financial background and other public board experiences provide strategic and global perspectives on our business as well.
Directors Continuing in Office until 2013 (Class 3)
Thomas S. Glanville(age 52) has been a director since 2001. Mr. Glanville has been managing partner of both Eschelon Energy Partners, LP, an energy industry private equity firm, and Eschelon Advisors, a financial and strategic consulting firm to energy/utility industry principals, since 2003. From 1999-2002, Mr. Glanville served as vice president of technology and new ventures for Reliant Energy, Inc., one of the world’s largest international energy services companies, and its affiliate, Reliant Resources, Inc. He currently serves on the boards of directors of the following privately-held oil and gas exploration and production companies: Chroma Exploration and Production, Inc.; Strand Energy, L.L.C.; and Passenger Energy Partners, LLC. He is currently president of the Texas Tri-Cities branch (Houston, Austin, San Antonio) of the National Association of Corporate Directors (NACD).
Mr. Glanville brings to the Board financial expertise, industry-related experience through his association with Reliant Energy, energy sector exposure through the Eschelon entities, and technology skills that include his involvement with electric metering studies and research while he was vice president of technology for Reliant Energy.
Sharon L. Nelson(age 64) has been a director since 2003. Ms. Nelson is an attorney and served as chief of the Consumer Protection Division of the Washington State Attorney General’s Office from 2003 to 2006, and as director of the Shidler Center for Law, Commerce, and Technology at the University of Washington from 2000 to 2003. In addition, Ms. Nelson has been a consultant to both corporations and nonprofit organizations specializing in advice on public policy and regulation. In the past she has served as chair of the Washington Utilities and Transportation Commission and as president of the National Association of Regulatory Utility Commissioners. She served as a commissioner on the National Commission on Energy Policy from 2002 to 2010, and is co-chair of the U.S. China Clean Energy Forum and the State Energy Strategy Advisory Committee for the State of Washington. Previously, she served as chair of the board of directors of Consumers Union, publisher ofConsumer Reports. She also served previously as a member of the Board of Trustees of the North
American Electrical Reliability Corporation (NERC) based in Princeton, New Jersey. NERC’s members consist of the owners, operators, and users of the North American bulk electrical system. The U.S. Federal Energy Regulatory Commission granted NERC the legal authority to enforce reliability standards on users of the bulk power system.
Ms. Nelson has also served on the boards of two other public corporations, XO Telecommunications (now private) and Covad Communications. Her experience as an executive and as a board member of other public companies, her legal background, and her knowledge of public policy and the utility and energy regulatory environment are of great value in her role as a director of Itron.
Malcolm Unsworth(age 61) has been a director of Itron since December 2008, when he was appointed by the Board. He was named president and chief operating officer of Itron in April 2008, and promoted to president and chief executive officer in March 2009. Mr. Unsworth joined Itron in July of 2004 as senior vice president, hardware solutions, when Itron acquired Schlumberger Electricity Metering, a company where he spent 25 years, most recently as president of its electricity metering business. In April 2007, he was named senior vice president and chief operating officer for Itron International (formerly known as Actaris Metering Systems, a company acquired by Itron). Mr. Unsworth also serves on the Board of Governors of NEMA – the National Electric Manufacturers Association.
As the only employee director on Itron’s Board, Mr. Unsworth possesses the specific manufacturing, industry, and technological expertise with respect to the software and hardware components of our business.
Directors Continuing in Office until 2012 (Class 2)
Michael B. Bracy(age 69) has been a director since 1992. Until his retirement in 1997, Mr. Bracy was executive vice president, chief financial officer, and a director of NorAm Energy Corporation (NorAm), previously known as Arkla, Inc., an integrated natural gas company engaged in gathering and processing natural gas, inter-and-intra-state pipeline transportation, and retail natural gas distribution. Mr. Bracy was a member of the board of directors (and chairman of the audit and conflicts committee) of TEPPCO Partners, L.P., a NYSE traded public limited partnership, from 2005 until October 2009, when TEPPCO was merged into another company and no longer publicly traded.
Mr. Bracy brings extensive financial experience to the Board with his past positions as a chief financial officer with two different companies, and his prior affiliation with Chase Manhattan Bank where he managed banking and credit relationships with numerous electric and gas utilities. Also, while associated with NorAm and another previous employer, and in his role as an independent director and chairman of the audit & conflicts committee of TEPPCO, he was directly involved with the consummation of a number of mergers and acquisitions, which knowledge we believe adds additional value to Mr. Bracy’s role on our Board.
Kirby A. Dyess(age 64) has been a director since 2006. Ms. Dyess is a principal in Austin Capital Management LLC where she invests in and assists early stage companies. Prior to forming Austin Capital Management LLC in 2003, Ms. Dyess spent 23 years at Intel Corporation where she most recently served as its vice president and the director of operations for Intel Capital until her retirement in December 2002. While at Intel, she also served as vice president and director of new business development and corporate vice president and director of human resources worldwide. Ms. Dyess serves on the board of directors of Viasystems Group Inc., a public company whose shares are traded on NASDAQ. She also serves on the board of Complí, a privately-held company that provides compliance software to companies, and chairs the board of Prolifiq SW Inc., a privately-held enterprise software company. She has served as vice president and president of the Oregon Board of Higher Education, and served on its board from 2004 to 2009. In 2009, Ms. Dyess was elected to the board of directors of Portland General Electric (PGE), a public utility whose shares are traded on NYSE.
Due to her positions at Intel Corporation, Ms. Dyess provides the Board with a strong background in technology, brand marketing, human resources, mergers and acquisitions, and business development, in addition to business innovation and R&D knowledge.
Graham M. Wilson(age 66) has been a director since 1990. Mr. Wilson has been sole shareholder and chairman of GraWil Consultants Inc., a management and financial consultant firm, since 2002. Prior to that, he was employed by Westcoast Energy Inc., an integrated energy company, where he held the positions of executive vice president and chief financial officer, and president and chief executive officer of services. Mr. Wilson also serves on the boards of directors of the following public Canadian companies: British Columbia Ferries Services Inc., Naikun Wind Energy Group Inc., and Daylight Energy Trust, and is a trustee of Hardwoods Distribution Income Trust.
A Canadian citizen, Mr. Graham has extensive financial and senior leadership experience, particularly with energy businesses such as Westcoast Energy which focuses primarily on natural gas in the U.S. and Canada. He served as vice president of finance for two other public Canadian companies and currently serves on the audit committees of the aforementioned four public companies and on the investment committee of Fierra Axiom Infrastructure Fund in Canada. In addition, through his consulting firm, GraWil Consultants Inc., Mr. Wilson assists various business enterprises with their operations and finances. His Canadian business and financial acumen brings an international perspective to our Board.
CORPORATE GOVERNANCE
The Company has adopted Corporate Governance Principles, which are available on the Company’s website,www.itron.com, by selecting “Investors” and then “Corporate Governance”.
Board Matters – Meeting Attendance
Our business, property, and affairs are managed under the direction of our Board. Members of our Board are kept informed of our business through discussions with our CEO and other officers, by reviewing materials provided to them, by visiting our offices, and by participating in meetings of the Board and its committees.
In accordance with our Corporate Governance Principles, directors are expected to attend the Company’s annual meeting of shareholders. All of our directors attended the 2009 annual meeting of shareholders. During 2009, the Board met seven times. Each of the directors attended at least 75% of the meetings of the Board and of each committee of which he or she was a member during the periods in which they were directors or members of such committees.
Also in accordance with our Corporate Governance Principles, our independent directors meet in an executive session as often as necessary, but no less than four times annually.
Effective January 1, 2010, the Board elected Jon Eliassen as our independent Chairman of the Board. Mr. Eliassen had served for several years as our lead independent director while the position of Chairman of the Board was held simultaneously by our CEO. Recently, however, the Board decided to modify the Board structure by separating the positions of Chairman and CEO which, among other things, would balance responsibilities between the two positions. See “MORE INFORMATION ABOUT OUR DIRECTORS – Leadership Structure of the Board of Directors” in this proxy statement for a further description of the duties of the Chairman and our Board’s new leadership structure. Our Corporate Governance Guiding Principles require that an Independent Lead Director must be appointed in the event the Board later determines it to be in the best interests of our shareholders to once again combine the offices of CEO and Chairman.
We have three committees to assist the Board in fulfilling its responsibilities: Corporate Governance, Audit/Finance, and Compensation. Each of the three committees operates under a written charter that has been approved by the Board. The current charters of each of the three committees are attached to this proxy statement asAppendices C, D, and E. They are also available on our website,www.itron.com, by selecting “Investors” and then “Corporate Governance”. The committee charters are reviewed annually and are updated as necessary to reflect changes in regulatory requirements and evolving oversight practices.
Corporate Governance Committee.The Corporate Governance Committee is responsible for developing and implementing our Corporate Governance Guiding Principles, evaluating the performance of our Chairman of the Board and the CEO, soliciting recommendations for candidates for the Board, determining the qualification and independence of the directors serving on the Board, making recommendations to the Board regarding candidates to serve on the Board, and reviewing and making recommendations to the Board with respect to candidates for directors proposed by shareholders. See “ITEM 1 – ELECTION OF DIRECTORS – Director and Director Nominee Qualifications” and “MORE INFORMATION ABOUT OUR DIRECTORS – Leadership Structure of the Board of Directors” in this proxy statement. The members of the Corporate Governance Committee are Graham Wilson, Gary Pruitt, Mike Bracy, and Jon Eliassen, who served as Chair during 2009, but who was replaced by Mr. Pruitt as Chair effective January 1, 2010, due to Mr. Eliassen’s election as Chairman of the Board.
The Corporate Governance Committee has determined that all of the non-employee directors of the Board are independent under SEC rules and NASDAQ listing standards. The Corporate Governance Committee held four meetings during 2009.
Audit/Finance Committee.The Audit/Finance Committee monitors our accounting practices, internal accounting controls, and financial results, and reviews at least quarterly our business financial risks to determine if management and our internal controls are identifying and mitigating risks associated with our business operations. In addition, the Committee has sole authority to retain, compensate, and terminate our independent auditors. The Audit/Finance Committee members are Sharon Nelson, Jon Eliassen, Tom Glanville, and Graham Wilson, who serves as Chair. The Corporate Governance Committee has determined that all members of the Audit/Finance Committee are independent under SEC rules and NASDAQ listing standards. The Corporate Governance Committee has also determined that all members of the Audit/Finance Committee are financially literate in accordance with the Standards of NASDAQ Rule 5605(c)(2)(A)(iv), and that Messrs. Eliassen, Glanville, and Wilson are each an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act). The Audit/Finance Committee held nine meetings during 2009.
Compensation Committee.The Compensation Committee is responsible for making recommendations to the Board for our CEO’s total annual and long-term incentive compensation and setting compensation levels for our other executive officers. It also oversees the administration of various incentive compensation and benefit plans, which includes an annual evaluation of our compensation plans and policies. In addition, the Committee performs any other functions regarding compensation that the Board may delegate. The members of the Compensation Committee are Charles Gaylord, Gary Pruitt, Mike Bracy, and Kirby Dyess, who serves as Chair. The Corporate Governance Committee has determined that all members of the Compensation Committee are independent under SEC rules and NASDAQ listing standards. The Compensation Committee held seven meetings during 2009. See “EXECUTIVE COMPENSATION – Compensation Discussion and Analysis” in this proxy statement for more information on the Compensation Committee’s responsibilities regarding the compensation of our executives.
Compensation Committee Interlocks and Insider Participation
No member of our Board’s Compensation Committee has served as an officer or employee of the Company. None of our executive officers serve as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board. None of our executive officers serve as a member of the board of directors of any other company that has an executive officer serving as a member of our Board’s Compensation Committee.
There were no related person transactionsBoard Risk Oversight
EXECUTIVE COMPENSATION
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Back Cover |
This proxy statement is being furnished to shareholders of Itron, Inc. in connection with the solicitation by our Board of Directors of proxies for use at the 2011 Annual Meeting of Shareholders. The meeting will be held at the principal executive offices of Itron, Inc. (Itron, or the Company), in the Atrium, at 2111 N. Molter Road, Liberty Lake, Washington, at 8:00 a.m., local time, on Tuesday, May 3, 2011, for the purposes listed in the accompanying Notice of Annual Meeting of Shareholders. We expect to mail to all of our shareholders a Notice of Internet Availability of Proxy Materials, as described below, on or about March 22, 2011.
Internet Availability of Annual Meeting Materials
Our proxy materials will be available over the Internet in lieu of mailing paper copies to our shareholders. On or about March 22, 2011, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials (Notice) directing shareholders to the web site noted below where they can access our proxy materials and view instructions on how to vote via the Internet or by phone. The Notice will also provide instructions for obtaining paper copies of the proxy materials and a proxy card, if requested by a shareholder.
The following proxy materials are available for you to review online athttp://bnymellon.mobular.net/bnymellon/itri:
n | The Company’s Notice of Annual Meeting of Shareholders; |
n | The Company’s 2011 Proxy Statement; |
n | The Company’s Annual Report to Shareholders for the year ended December 31, 2010 (which is not deemed to be part of the official proxy soliciting materials); and |
n | Any amendments to the foregoing materials that may be required to be |
Proposals to Be Voted On at the Annual Meeting
At the annual meeting, we will consider and vote on the following proposals:
(1) | to elect three directors to the Itron, Inc. Board of |
(2) | to hold an advisory vote (non-binding) on the compensation we pay to our named executive officers (the “Say-on-Pay” vote); |
(3) | to hold an advisory vote (non-binding) to determine shareholder preferences on whether future Say-on-Pay votes on the compensation we pay to our named executive officers should occur every one, two or three years (the “Say-When-on-Pay” vote); |
(4) | to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the 2011 fiscal year; and |
(5) | to transact any other business that may properly come before the annual meeting. |
Record Date and Outstanding Shares
Holders of record of our common stock at the close of business on February 25, 2011, are entitled to notice of, and to vote at, the annual meeting. On the record date, there were 40,596,407 shares of our common stock
outstanding. Each outstanding share of our common stock will entitle its holder to one vote on each of the three directors to be elected and one vote on each other matter to be voted on at the annual meeting. Each of our directors and executive officers intends to vote or direct the vote of all shares of common stock over which he or she has voting control in favor of (a) the election of the nominees for director, (b) the advisory approval of the compensation we pay our named executive officers, (c) the advisory approval of holding an advisory shareholder vote on an annual basis on the compensation we pay our named executive officers, and (d) the ratification of Ernst & Young LLP as our independent registered public accounting firm.
Each shareholder is entitled to one vote per share of common stock held on each matter to be voted on. The presence at the annual meeting, in person or by proxy, of holders of a majority of the outstanding shares of common stock on the record date will constitute a quorum. Abstentions and “broker non-votes” (shares held by a broker or nominee who does not have the authority, express or discretionary, to vote on a particular matter) on any of the proposals to be voted on will be counted only for purposes of determining the presence of a quorum.
You may vote your shares in one of several ways, depending on how you own your shares.
Registered Shareholders
If your shares are held in your name, you may vote by Internet (by going tohttp://www.proxyvoting.com/itri and following the voting instructions) or by toll-free telephone (by calling 1-866-540-5760 and following the voting instructions). You may also vote by mailbut only if you request paper copies of the proxy materials pursuant to the instructions in the Notice, and you mark, sign, date, and mail the proxy card enclosed with the printed material in the postage-paid envelope provided. You may also vote by attending the annual meeting.
Beneficial Shareholders
If your shares are held in the name of a broker, bank, or other nominee, follow the voting instructions on the voting instruction form provided by the holder of record, to vote your shares.
Proposal One – Election of Directors: Each nominee for director is elected by the vote of the majority of the votes cast with respect to that director’s election. Holders of common stock are not entitled to cumulative votes in the election of directors. Abstentions from voting on this matter will not be counted. Brokers and other holders of record do not have discretionary voting authority to vote your shares in the election of directors, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number one to the holder of record for your shares, they willnot be voted in the election of directors.
Proposal Two – Say-on-Pay Vote (non-binding): The affirmative vote of the majority of our shares represented at the meeting, either in person or by proxy, is required for advisory (non-binding) approval of this proposal. Brokers and other holders of record do not have discretionary voting authority to vote your shares for this proposal, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number two to the holder of record for your shares, they willnotbe voted on this proposal.
Proposal Three – Say-When-On-Pay Vote (non-binding): This proposal asks shareholders to choose one of four options to indicate their preference on the frequency of future Say-on-Pay votes (every one, two, or three years, or you may abstain from voting). Brokers and other holders of record do not have discretionary voting authority to vote your shares for this proposal, absent voting instructions from you. Therefore, if you do not provide voting instructions on proposal number three to the holder of record for your shares, they willnotbe voted on this proposal.
Proposal Four – Ratification of Appointment of Independent Auditor: The appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2011 will be ratified if the majority of the votes
cast, either in person or by proxy, are in favor of the proposal. Abstentions from voting will not be counted. There will be no broker non-votes on the ratification of the Company’s independent registered public accounting firm because brokers who hold shares for the accounts of their clients have discretionary authority to vote such shares in this matter.
Unless contrary instructions are specified, if the proxy is completed and submitted (and not revoked) prior to the annual meeting, the shares represented by the proxy will be voted as follows: (i) FOR proposals one, two and four; (ii) FOR an annual vote on future Say-on-Pay votes; and (iii) in accordance with the best judgment of the named proxies on any other matters properly brought before the annual meeting.
Shares represented at the annual meeting by properly signed proxies will be voted at the annual meeting in accordance with the instructions given in the proxy. A shareholder may revoke a proxy at any time before the vote. Mere attendance at the annual meeting will not revoke a proxy. A proxy may be revoked only by:
n | submitting a later-dated proxy for the same shares at any time before the proxy is voted; |
n | delivering written notice of revocation to the Corporate Secretary of Itron at any time before the vote; or |
n | attending the annual meetingandvoting in |
If you voted by telephone or the Internet and wish to change your vote, you may call the toll-free number or go to the Internet site, whichever is applicable to your earlier vote, and follow the directions for changing your vote. If the annual meeting is postponed or adjourned for any reason, at any subsequent reconvening of the annual meeting, all proxies will be voted in the same manner as the proxies would have been voted at the original convening of the annual meeting (except for any proxies that have at that time effectively been revoked or withdrawn).
We have retained Laurel Hill Advisory Group, LLC, 100 Wall Street, 22nd Floor, New York, NY 10005, to aid in the solicitation of proxies. We will bear the cost of such solicitation of proxies, which we estimate will be approximately $6,500 plus expenses. Proxies may be solicited by personal contact, mail, email, telephone, or facsimile. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of our common stock for their reasonable expenses in forwarding solicitation materials to the beneficial owners. Our directors, officers, and employees may also solicit proxies personally or by telephone, without additional compensation.
PROPOSAL 1 — ELECTION OF DIRECTORS
The Board of Directors (Board) is divided into three classes, with each director holding office for a three-year term or until his or her successor has been elected and qualified. At the annual meeting, three directors are to be elected for a term of three years or until his or her successor is duly elected and qualified. Unless authority is withheld, the persons named as proxies in the proxy card will vote for the election of the nominees listed below. If any of the nominees become unavailable to serve, the persons named as proxies will have discretionary authority to vote for a substitute nominee.
Our Board has nominated each of the following persons for election as a director to serve until our 2014 annual meeting of shareholders. Each nominee is currently a director and has indicated that he is willing and able to continue to serve as a director. In addition, Mr. Eliassen is currently serving a three-year term as our Chairman of the Board.
Jon E. Eliassen
Charles H. Gaylord, Jr.
Gary E. Pruitt
We have concluded that each of the nominees for re-election, as well as the other directors who will continue in office, have the skills, experience, knowledge, and personal attributes that are necessary to effectively serve on our Board. As described below in their biographies and the section “Director and Director Nominee Qualifications” that follows, the qualifications of our directors and director nominees support our conclusion that each of the individuals should serve as a director in light of our current business operations and structure.
THE BOARD RECOMMENDS THAT YOU VOTEFOR
THE ELECTION OF EACH OF THE THREE NOMINEES FOR DIRECTOR.
Nominees to Serve until 2014 (Class 1)
Jon E. Eliassen(age 64)has been a director since 1987, and has served as our Chairman of the Board since January 1, 2010. He also currently serves as the president and chief executive officer of Red Lion Hotels Corporation, a NYSE traded company headquartered in Spokane, Washington, a position he has held since January 2010. Mr. Eliassen is managing director of Terrapin Capital Group, LLC, a privately-held business consulting and private equity firm. From 2003 until 2007, he was president and chief executive officer of the Spokane Area Economic Development Council, and from 1970 until 2003, he held numerous positions within Avista Corporation, a company involved in the production, transmission, and distribution of electricity and natural gas, before retiring in 2003 as senior vice president and chief financial officer, a position he had held since 1986. In addition, Mr. Eliassen is a member of the board of directors of IT Lifeline, a privately held technology company, Red Lion Hotels Corporation, and the Washington Technology Center, a state science and technology agency that facilitates and funds industry-university research collaborations.
Mr. Eliassen has an extensive background with public utilities and the utility industry in general. He contributes to our Board the knowledge gained from his association with a public utility that includes extensive financial experience with accounting, audit, strategic planning, business development, and financing strategy, as well as merger and acquisition involvement that has included due diligence processes, company and business valuation techniques, and financial analyses. In addition, Mr. Eliassen has been a principal or general partner in venture capital firms with expertise in evaluating businesses, and has several years’ experience as an expert witness before utility regulatory commissions in matters relating to financial strategy and policy, credit ratings, cost of capital, and capital structure.
Charles H. Gaylord, Jr.(age 65) has been a director since 2006. Mr. Gaylord has been a private technology investor focusing on software and communications since 1994. Until his retirement in 1994, Mr. Gaylord was executive vice president for Intuit Inc., a leading developer of personal and small business finance software
programs such as “Quicken” and “QuickBooks.” From 1990 to 1993, he served as chairman and chief executive officer of ChipSoft, Inc., the original publisher of the tax preparation software program “TurboTax”. Mr. Gaylord is a member of the board of directors and a member of the compensation committee of Proximetry Inc., a privately-held company, and a member of the advisory board of Technology Crossover Ventures I, an investment firm that invests primarily in private and public information technology companies.
During various periods from 1990 to approximately 2002, Mr. Gaylord was a member of the boards of directors and served on the compensation committees of the following public companies: Stac, Inc.; HNC Software, Inc.; Maxis, Inc.; and Retek, Inc.; and also served as a director of a number of private technology companies. His wealth of knowledge of software services, brand marketing, IT technology, and business development adds to the diverse business backgrounds of our other members of the Board.
Gary E. Pruitt(age 61) has been a director since 2006. Prior to his retirement in 2009, Mr. Pruitt was chairman and chief executive officer of Univar N.V., a chemical distribution company with distribution centers in the U.S., Canada, and Europe, from 2002 to October 2009. He had been associated with Univar and related entities since 1978 and held a variety of senior management positions within Univar and Van Waters & Rogers, Inc., which ultimately became Vopak USA Inc. Mr. Pruitt worked at Arthur Andersen & Co. as a chartered accountant from 1973 through 1977. He serves on the boards of directors of Public Storage, Inc., a NYSE traded company, Esterline Technologies Corporation, a NYSE traded technology company, and Premera Blue Cross.
Mr. Pruitt brings to the Board his experience as a chief executive officer of a multi-national company and all the business attributes required of that position, along with operational and manufacturing expertise through his various other management positions held with Univar. His public accounting financial background and other public board experiences provide strategic and global perspectives on our business as well.
Directors Continuing in Office until 2013 (Class 3)
Thomas S. Glanville(age 52) has been a director since 2001. Mr. Glanville has been managing partner of both Eschelon Energy Partners, LP, an energy industry private equity firm, and Eschelon Advisors, a financial and strategic consulting firm to energy/utility industry principals, since 2003. From 1999-2002, Mr. Glanville served as vice president of technology and new ventures for Reliant Energy, Inc., one of the world’s largest international energy services companies, and its affiliate, Reliant Resources, Inc. He currently serves on the boards of directors of the following privately-held oil and gas exploration and production companies: Chroma Exploration and Production, Inc.; Strand Energy, L.L.C.; and Passenger Energy Partners, LLC. He is currently president of the Texas Tri-Cities branch (Houston, Austin, San Antonio) of the National Association of Corporate Directors (NACD).
Mr. Glanville brings to the Board financial expertise, industry-related experience through his association with Reliant Energy, energy sector exposure through the Eschelon entities, and technology skills that include his involvement with electric metering studies and research while he was vice president of technology for Reliant Energy.
Sharon L. Nelson(age 64) has been a director since 2003. Ms. Nelson is an attorney and served as chief of the Consumer Protection Division of the Washington State Attorney General’s Office from 2003 to 2006, and as director of the Shidler Center for Law, Commerce, and Technology at the University of Washington from 2000 to 2003. In addition, Ms. Nelson has been a consultant to both corporations and nonprofit organizations specializing in advice on public policy and regulation. In the past she has served as chair of the Washington Utilities and Transportation Commission and as president of the National Association of Regulatory Utility Commissioners. She served as a commissioner on the National Commission on Energy Policy from 2002 to 2010, and is co-chair of the U.S. China Clean Energy Forum and the State Energy Strategy Advisory Committee for the State of Washington. Previously, she served as chair of the board of directors of Consumers Union, publisher ofConsumer Reports. She also served previously as a member of the Board of Trustees of the North
American Electrical Reliability Corporation (NERC) based in Princeton, New Jersey. NERC’s members consist of the owners, operators, and users of the North American bulk electrical system. The U.S. Federal Energy Regulatory Commission granted NERC the legal authority to enforce reliability standards on users of the bulk power system.
Ms. Nelson has also served on the boards of two other public corporations, XO Telecommunications (now private) and Covad Communications. Her experience as an executive and as a board member of other public companies, her legal background, and her knowledge of public policy and the utility and energy regulatory environment are of great value in her role as a director of Itron.
Malcolm Unsworth(age 61) has been a director of Itron since December 2008, when he was appointed by the Board. He was named president and chief operating officer of Itron in April 2008, and promoted to president and chief executive officer in March 2009. Mr. Unsworth joined Itron in July of 2004 as senior vice president, hardware solutions, when Itron acquired Schlumberger Electricity Metering, a company where he spent 25 years, most recently as president of its electricity metering business. In April 2007, he was named senior vice president and chief operating officer for Itron International (formerly known as Actaris Metering Systems, a company acquired by Itron). Mr. Unsworth also serves on the Board of Governors of NEMA – the National Electric Manufacturers Association.
As the only employee director on Itron’s Board, Mr. Unsworth possesses the specific manufacturing, industry, and technological expertise with respect to the software and hardware components of our business.
Directors Continuing in Office until 2012 (Class 2)
Michael B. Bracy(age 69) has been a director since 1992. Until his retirement in 1997, Mr. Bracy was executive vice president, chief financial officer, and a director of NorAm Energy Corporation (NorAm), previously known as Arkla, Inc., an integrated natural gas company engaged in gathering and processing natural gas, inter-and-intra-state pipeline transportation, and retail natural gas distribution. Mr. Bracy was a member of the board of directors (and chairman of the audit and conflicts committee) of TEPPCO Partners, L.P., a NYSE traded public limited partnership, from 2005 until October 2009, when TEPPCO was merged into another company and no longer publicly traded.
Mr. Bracy brings extensive financial experience to the Board with his past positions as a chief financial officer with two different companies, and his prior affiliation with Chase Manhattan Bank where he managed banking and credit relationships with numerous electric and gas utilities. Also, while associated with NorAm and another previous employer, and in his role as an independent director and chairman of the audit & conflicts committee of TEPPCO, he was directly involved with the consummation of a number of mergers and acquisitions, which knowledge we believe adds additional value to Mr. Bracy’s role on our Board.
Kirby A. Dyess(age 64) has been a director since 2006. Ms. Dyess is a principal in Austin Capital Management LLC where she invests in and assists early stage companies. Prior to forming Austin Capital Management LLC in 2003, Ms. Dyess spent 23 years at Intel Corporation where she most recently served as its vice president and the director of operations for Intel Capital until her retirement in December 2002. While at Intel, she also served as vice president and director of new business development and corporate vice president and director of human resources worldwide. Ms. Dyess serves on the board of directors of Viasystems Group Inc., a public company whose shares are traded on NASDAQ. She also serves on the board of Complí, a privately-held company that provides compliance software to companies, and chairs the board of Prolifiq SW Inc., a privately-held enterprise software company. She has served as vice president and president of the Oregon Board of Higher Education, and served on its board from 2004 to 2009. In 2009, Ms. Dyess was elected to the board of directors of Portland General Electric (PGE), a public utility whose shares are traded on NYSE.
Due to her positions at Intel Corporation, Ms. Dyess provides the Board with a strong background in technology, brand marketing, human resources, mergers and acquisitions, and business development, in addition to business innovation and R&D knowledge.
Graham M. Wilson(age 66) has been a director since 1990. Mr. Wilson has been sole shareholder and chairman of GraWil Consultants Inc., a management and financial consultant firm, since 2002. Prior to that, he was employed by Westcoast Energy Inc., an integrated energy company, where he held the positions of executive vice president and chief financial officer, and president and chief executive officer of services. Mr. Wilson also serves on the boards of directors of the following public Canadian companies: British Columbia Ferries Services Inc., Naikun Wind Energy Group Inc., and Daylight Energy Trust, and is a trustee of Hardwoods Distribution Income Trust.
A Canadian citizen, Mr. Graham has extensive financial and senior leadership experience, particularly with energy businesses such as Westcoast Energy which focuses primarily on natural gas in the U.S. and Canada. He served as vice president of finance for two other public Canadian companies and currently serves on the audit committees of the aforementioned four public companies and on the investment committee of Fierra Axiom Infrastructure Fund in Canada. In addition, through his consulting firm, GraWil Consultants Inc., Mr. Wilson assists various business enterprises with their operations and finances. His Canadian business and financial acumen brings an international perspective to our Board.
Director and Director Nominee Qualifications
Our Corporate Governance Committee assists the Board in reviewing the business and personal background of each of our directors with respect to Itron’s business and business goals. Our skill criteria for our Board members includes the following: executive leadership experience; functional knowledge of technology and technology applications; international business experience; knowledge of the utility and energy industry; marketing and sales experience; financial experience gained from a chief financial officer position, a CPA or other financial reporting background; expertise in manufacturing or software services; experience as an independent board member with a public company; experience in business integrations, including mergers and acquisitions; and legal or corporate law background. In addition, we look for the following personal criteria: an effective negotiator, listener, and team player; a visionary with a strategic and global perspective; a successful leader with a proven record of accomplishments; a problem-solver; an effective decision-maker; and a person who will take a strong interest in the Company.
Our Corporate Governance Committee generally considers diversity as one of several factors relating to overall composition when making nominations to our Board. While we do not have a formal policy governing how diversity is considered, the Corporate Governance Committee generally considers diversity by examining the entire Board membership and, when making nominations to our Board, by reviewing the diversity of the entire Board. The Corporate Governance Committee construes Board diversity broadly to include many factors. As a result, the Corporate Governance Committee strives to ensure that our Board is represented by individuals with a variety of different opinions, perspectives, personal, professional and industry experience and backgrounds, skills, and expertise.
When the Corporate Governance Committee considers candidates to be recommended to the Board for inclusion on the slate of director nominees for the next annual meeting of shareholders, it creates a matrix for each candidate to address our criteria. In addition to the qualities described previously in the individual director biographies, the following matrix summarizes the skills and attributes of our directors and director nominees for 2011 that we believe are essential to our business:
Director Qualifications and Attributes
Mike Bracy | Kirby Dyess | Jon Eliassen | Charles Gaylord | Thomas Glanville | Sharon Nelson | Gary Pruitt | Malcolm Unsworth | Graham Wilson | ||||||||||||||||||||||||||||
Senior leadership/CEO/COO experience | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||
Business development experience | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||
Financial expertise/CFO | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||
Public board experience | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||
Independence | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | ||||||||||||||||||||||||||||
Industry expertise | Ö | Ö | Ö | Ö | Ö | Ö | ||||||||||||||||||||||||||||||
Industry expertise – international | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||
Operational – manufacturing expertise | Ö | Ö | ||||||||||||||||||||||||||||||||||
IT/technology/R&D/Telecom expertise | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||
Marketing/sales expertise | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||
Hardware/software services expertise | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||
Government expertise | Ö | |||||||||||||||||||||||||||||||||||
Legal expertise | Ö | |||||||||||||||||||||||||||||||||||
Mergers and Acquisitions | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||
Demonstrated integrity-personal and professional | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö |
We have concluded that all of our directors, including the nominees for re-election, have the skills, experience, knowledge, and personal attributes that are necessary to effectively serve on our Board and to contribute to the overall success of our Company. We believe that the diverse background of each of our Board members ensures that we have a Board that has a broad range of industry-related knowledge, experience, and business acumen. See also “CORPORATE GOVERNANCE – Director Nominations by Shareholders” in this proxy statement.
MORE INFORMATION ABOUT OUR DIRECTORS
During the 2010 fiscal year, directors who were not officers of the Company received an annual retainer of $90,000, with $50,000 paid in cash and $40,000 paid in shares of our common stock, with the exception of our Chairman of the Board, whose annual retainer totaled $150,000, with $80,000 paid in cash and $70,000 paid in shares of our common stock. Members of the Audit/Finance Committee received an additional annual retainer of $8,000, paid in cash, and members of our Compensation and Corporate Governance Committees received an additional annual retainer of $5,000, paid in cash. Each of our committee chairs received an additional annual retainer of $10,000, paid half in cash and half in shares of our common stock. The Chairman of the Board receives no additional retainers for serving on any of our committees.
Each non-employee director also receives annually on the first trading day of January, a non-qualified stock option to purchase shares of our common stock equal in value to $30,000, based on the fair value of our stock on the first trading day of each January. The number of options is determined by dividing the Black Scholes adjusted share price at the close of market on the first trading day of January into $30,000. For our Chairman of the Board, we annually grant a non-qualified stock option to purchase shares of our common stock equal in value to $50,000, also based on the fair value of our stock on the first trading day of January with the number of options determined in the same manner. All of these stock options are fully vested on the date of grant and have ten year terms. Shares of our common stock and options granted to non-employee directors that are issued as compensation are issued under our 2010 Stock Incentive Plan.
We have adopted stock ownership guidelines for our non-employee directors. We expect our directors to purchase (or hold) shares equal to three times the annual cash retainer fee within three years from their initial appointment or election as a director. For our Chairman of the Board, we expect him to hold shares equal to four times his cash retainer fee within three years from his appointment as Chairman.
New non-employee directors receive an initial option grant to purchase 5,000 shares of our common stock as of the date of the director’s initial election or appointment to the Board, with vesting over a three-year period.
2010 Director Compensation Table
Director Compensation | ||||||||||||||||||||||||||||
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (6) | Option Awards ($) (7) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Mike Bracy | 60,000 | 39,922 | 29,460 | — | — | — | 129,382 | |||||||||||||||||||||
Kirby Dyess (1) | 60,000 | 44,894 | 29,460 | — | — | — | 134,354 | |||||||||||||||||||||
Jon Eliassen (2) (3) | 80,000 | 69,951 | 49,109 | — | — | — | 199,060 | |||||||||||||||||||||
Charles Gaylord | 57,500 | 39,922 | 29,460 | — | — | — | 126,882 | |||||||||||||||||||||
Thomas Glanville (2) | 58,000 | 39,922 | 29,460 | — | — | — | 127,382 | |||||||||||||||||||||
Sharon Nelson (2) | 58,000 | 39,922 | 29,460 | — | — | — | 127,382 | |||||||||||||||||||||
Gary Pruitt (4) | 65,000 | 44,894 | 29,460 | — | — | — | 139,354 | |||||||||||||||||||||
Graham Wilson (2) (5) | 68,000 | 44,894 | 29,460 | — | — | — | 142,354 |
(1) | Chairman of the Compensation Committee. |
(2) | Member of the Audit/Finance Committee. |
(3) | Chairman of the Board |
(4) | Chairman of the Corporate Governance Committee. |
(5) | Chairman of the Audit/Finance Committee. |
(6) | The amounts in this column reflect the aggregate grant date fair value of the awards determined in accordance with FASB ASC Topic 718; awards are fully vested at grant. |
(7) | The amounts in this column reflect the aggregate grant date fair value of awards determined in accordance with FASB ASC Topic 718. As of December 31, 2010 the following directors had the following options outstanding: M. Bracy – 18,602; K. Dyess – 7,102; J. Eliassen – 5,337; C. Gaylord – 7,102; T. Glanville – 15,102; S. Nelson – 4,602; G. Pruitt – 7,102; G. Wilson – 20,352. |
LEADERSHIP STRUCTURE OF THE BOARD OF DIRECTORS
Effective January 1, 2010, we modified the leadership structure of our Board so that the roles of Chairman of the Board (Chairman) and Chief Executive Officer (CEO) are separate. In previous years, the roles of Chairman and CEO have been held by the same individual and the Company had a Lead Independent Director. Under our current leadership structure, the role of Chairman must be held by an independent director who meets the independence requirements of NASDAQ. The Board decided to separate the roles of Chairman and CEO to allow for a more balanced workload between the Chairman and the CEO, especially in light of the increased duties and responsibilities of the Chairman, which include the following:
n | Preside over all meetings of the Board (including executive sessions of the Board) and meetings of the shareholders; |
n | Review the agendas of each Board and committee meeting; |
n | Prepare agendas as needed for executive sessions of the independent directors; |
n | Perform the responsibilities of the Lead Independent Director as set forth in the Corporate Governance Guiding Principles; |
n | Serve as a liaison between the independent directors and the CEO; |
n | In consultation with the CEO, make recommendations to the Corporate Governance Committee as to membership of Board committees and appointment of Board committee chairs; and |
n | Perform such other duties as the Board |
Pursuant to the Company’s Corporate Governance Guiding Principles, which may be found online atwww.itron.com, the Chairman must be an independent director unless the Board determines that the best interests of shareholders would otherwise be better served. The Chairman is elected by the members of the Board following the annual meeting of shareholders (or at such other time as a vacancy for the role of Chairman may occur). The Chairman serves for a term of three years (provided such director is re-elected by shareholders if his or her term as a director does not coincide with his or her term as Chairman). The Chairman does not serve more than two consecutive terms, unless the Board approves an extended term. Our current Chairman, Jon Eliassen, is up for re-election at the 2011 annual meeting.
If the Board determines that it is in the best interests of the shareholders to combine the roles of CEO and Chairman, the Board will appoint a Lead Independent Director with the duties set forth in the Corporate Governance Guiding Principles.
See “CORPORATE GOVERNANCE” in this proxy statement for additional information on our Board of Directors.
The Board’s role in overseeing the Company’s risk is to satisfy itself, directly or through Board committees, that (i) there are adequate processes designed and implemented by Company management such that risks have been identified and are being managed, (ii) the risk management processes function as intended to ensure that Company risks are taken into account in corporate decision making, and (iii) the risk management system is designed to ensure that material risks to the Company are brought to the attention of the Board or an appropriate committee of the Board. Each of the Company’s risk management processes are reviewed periodically (but at least once a year) by either the Board or an appropriate committee. Committee chairs regularly report on committee meetings at the meetings of the full Board.
PROPOSAL 2 — APPROVAL OF EXECUTIVE COMPENSATION (Say-on-Pay)
We are asking our shareholders to approve a non-binding advisory resolution on the compensation of our named executive officers or NEOs (commonly known as “say-on-pay”) as we have described it in this proxy statement. The say-on-pay vote is required by the provisions of Section 14A (a) (1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Because your vote is advisory, it will not be binding upon the Board of Directors or the Company; however, the Board values the opinions of our shareholders and will take the outcome of the vote into consideration when determining future executive compensation arrangements.
We urge you to consider the various factors regarding compensation matters discussed at length in the Compensation Discussion and Analysis, beginning on page 18 with an Executive Summary. We believe that our executive compensation programs are reasonable, competitive, and strongly focused on pay for performance principles that will result in the creation of sustainable, long-term shareholder value. We create both short-term (annual) and long-term compensation opportunities that reward our NEOs when they deliver targeted financial results. The compensation of our NEOs varies depending upon the achievement of pre-established performance goals. Through stock ownership guidelines and equity incentives, we also align the interests of our executives with those of our shareholders and the long-term success of the Company. We believe our executive compensation policies have enabled us to attract and retain exceptional senior executives whose talent and experience have helped Itron become a leader in our industry. In addition, our Compensation Committee, which provides overall direction for our compensation programs, believes the fiscal year 2010 compensation paid to our NEOs was reasonable and appropriate, and is justified by the Company’s overall performance in 2010.
The say-on-pay vote gives you, as a shareholder, the opportunity to endorse or not endorse our NEO compensation by voting for or against the following resolution:
RESOLVED, that the shareholders of Itron, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement for the 2011 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K of the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the Executive Compensation Tables, and the accompanying footnotes and narratives within the Executive Compensation section of this proxy statement).
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR THE APPROVAL OF THE EXECUTIVE COMPENSATION OF OUR NEOS.
PROPOSAL 3 — ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION (Say-When-on-Pay)
In addition to the non-binding advisory vote on say-on-pay, Section 14A of the Exchange Act also enables our shareholders to express their preference for having a say-on-pay vote every one, two, or three years, or a shareholder may abstain from the vote. This non-binding frequency vote is required at least once every six years beginning with our 2011 annual meeting and is commonly referred to as “say-when-on-pay”.
The Board has considered the frequency of the say-on-pay vote and after considering the benefits and consequences of each option, the Board recommends submitting the say-on-pay vote to our shareholders every year. We believe an annual say-on-pay vote will provide the Board and our Compensation Committee with more frequent input from shareholders on our compensation philosophy, policies, and programs, and it will correlate the say-on-pay vote with the most recent executive compensation information presented in our proxy statement for our annual meeting. Setting a one-year period for holding this vote provides a clear, simple means for the Company to obtain information on our shareholder sentiment about our executive compensation programs.
We request your vote to determine whether the say-on-pay vote to approve the compensation of our NEOs should occur every one, two, or three years. You will be able to cast your vote on your preferred voting frequency by choosing one of the following options set forth in the following resolution and in your voting instructions or proxy card:
RESOLVED, that the shareholders of Itron, Inc. (the “Company”) determine, on an advisory basis, that the frequency with which the shareholders of the Company will have an advisory vote on the compensation of the Company’s named executive officers set forth in the Company’s proxy statement is:
Choice 1 – every year;
Choice 2 – every two years;
Choice 3 – every three years; or
Choice 4 – abstain from voting
This advisory vote on say-when-on-pay is not binding on the Company or its Board of Directors; however, the Board will take into account the results of the vote when determining the frequency of future say-on-pay votes. The frequency choice which receives the highest number of votes will be deemed the choice of the shareholders.Shareholders are not voting to approve or disapprove the Board’s recommendation. Instead, shareholders vote by choosing among the four choices set forth above and provided in the voting instructions or proxy card.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO HOLD THE ADVISORY VOTE ON EXECUTIVE COMPENSATIONEVERY YEAR.
PROPOSAL 4 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board, upon the recommendation of its Audit/Finance Committee, has selected Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for 2011, subject to ratification by our shareholders. Although not required to do so, the Board is submitting the selection of Ernst & Young LLP for ratification by the Company’s shareholders for their views on the Company’s independent registered public accounting firm and as a matter of good corporate practice. Ernst & Young LLP has advised the Company that it has no direct, nor any material indirect, financial interest in the Company or any of its subsidiaries. Representatives of Ernst & Young LLP will be present at the annual meeting to answer questions and will have the opportunity to make a statement if they desire to do so.
In the event that our shareholders fail to ratify the selection, it will be considered as a direction to the Board and the Audit/Finance Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit/Finance Committee in its discretion may select a different independent registered public accounting firm, subject to ratification by the Board, at any time during the year if it determines that such a change would be in the best interest of the Company and our shareholders.
THE BOARD RECOMMENDS THAT YOU VOTEFOR THE RATIFICATION
OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR 2011
CORPORATE GOVERNANCE
Corporate Governance Principles
The Company has adopted Corporate Governance Principles, which are available on the Company’s website,www.itron.com, by selecting “Investors” and then “Corporate Governance”.
Board Matters – Meeting Attendance
Our business, property, and affairs are managed under the direction of our Board. Members of our Board are kept informed of our business through discussions with our CEO and other officers, by reviewing materials provided to them, by visiting our offices, and by participating in meetings of the Board and its committees.
In accordance with our Corporate Governance Principles, directors are expected to attend the Company’s annual meeting of shareholders. All of our directors attended the 2010 annual meeting of shareholders. During 2010, the Board met six times. Each of the directors attended at least 83% of the meetings of the Board and 75% of the meetings of each committee of which he or she was a member during the periods in which they were directors or members of such committees.
Also in accordance with our Corporate Governance Principles, our independent directors meet in an executive session as often as necessary, but no less than four times annually.
Independent Chairman of the Board
Effective January 1, 2010, the Board elected Jon Eliassen as our independent Chairman of the Board. Mr. Eliassen had served for several years as our lead independent director while the position of Chairman of the Board was held simultaneously by our CEO. However, the Board decided to modify the Board structure by separating the positions of Chairman and CEO which, among other things, would balance responsibilities between the two positions. See also “MORE INFORMATION ABOUT OUR DIRECTORS – Leadership Structure of the Board of Directors” in this proxy statement. Our Corporate Governance Guiding Principles require that an Independent Lead Director must be appointed in the event the Board later determines it to be in the best interests of our shareholders to once again combine the offices of CEO and Chairman. Mr. Eliassen is one of the nominees for election to the Board at our 2011 annual meeting.
We have three committees to assist the Board in fulfilling its responsibilities: Corporate Governance, Audit/Finance, and Compensation. Each of the three committees operates under a written charter that has been approved by the Board. The charters are available on our website,www.itron.com, by selecting “Investors” and then “Corporate Governance”. The committee charters are reviewed annually and are updated as necessary to reflect changes in regulatory requirements and evolving oversight practices.
Corporate Governance Committee. The Corporate Governance Committee is responsible for developing and implementing our Corporate Governance Guiding Principles, evaluating the performance of our Chairman of the Board and the CEO, soliciting recommendations for candidates for the Board, determining the qualification and independence of the directors serving on the Board, making recommendations to the Board regarding candidates to serve on the Board, and reviewing and making recommendations to the Board with respect to candidates for directors proposed by shareholders. The members of the Corporate Governance Committee are Graham Wilson, Mike Bracy, Jon Eliassen, Charles Gaylord, and Gary Pruitt, who serves as Chair.
The Corporate Governance Committee has determined that all of the non-employee directors of the Board are independent under SEC rules and NASDAQ listing standards. The Corporate Governance Committee held four meetings during 2010.
Audit/Finance Committee. The Audit/Finance Committee monitors our accounting practices, internal accounting controls, and financial results, and reviews at least quarterly our business financial risks to determine if management and our internal controls are identifying and mitigating risks associated with our business operations. In addition, the Committee has sole authority to retain, compensate, and terminate our independent auditors. The Audit/Finance Committee members are Sharon Nelson, Jon Eliassen, Tom Glanville, and Graham Wilson, who serves as Chair.
The Corporate Governance Committee has determined that all members of the Audit/Finance Committee are independent under SEC rules and NASDAQ listing standards. The Corporate Governance Committee has also determined that all members of the Audit/Finance Committee are financially literate in accordance with the Standards of NASDAQ Rule 5605(c) (2) (A) (iv), and that Messrs. Eliassen, Glanville, and Wilson are each an “audit committee financial expert” as defined in Item 407(d) (5) of Regulation S-K promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act). The Audit/Finance Committee held ten meetings during 2010.
Compensation Committee. The Compensation Committee is responsible for making recommendations to the Board for our CEO’s total annual and long-term incentive compensation and setting compensation levels for our other executive officers. It also oversees the administration of various incentive compensation and benefit plans, which includes an annual evaluation of our compensation plans and policies and an annual survey of possible risks associated with the compensation structure of those plans and policies. In addition, the Committee performs any other functions regarding compensation that the Board may delegate to it. The members of the Compensation Committee are Charles Gaylord, Gary Pruitt, Mike Bracy, and Kirby Dyess, who serves as Chair.
The Corporate Governance Committee has determined that all members of the Compensation Committee are independent under SEC rules and NASDAQ listing standards. The Compensation Committee held four meetings during 2010. See “EXECUTIVE COMPENSATION – Compensation Discussion and Analysis” in this proxy statement for more information on the Compensation Committee’s responsibilities regarding the compensation of our executives.
Compensation Committee Interlocks and Insider Participation
No member of our Board’s Compensation Committee has served as an officer or employee of the Company. None of our executive officers serve as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board. None of our executive officers serve as a member of the board of directors of any other company that has an executive officer serving as a member of our Board’s Compensation Committee.
Transactions with Related Persons
There were no related person transactions required to be disclosed pursuant to Item 404(a) of Regulation S-K in fiscal year 2010. Under its charter, the Corporate Governance Committee of the Board is responsible for reviewing and approving any related person transactions.
The Board’s role in overseeing the Company’s risk is to satisfy itself, directly or through Board committees, that (i) there are adequate processes designed and implemented by Company management such that risks have been identified and are being managed, (ii) the risk management processes function as intended to ensure that Company risks are taken into account in corporate decision-making, and (iii) the risk management system is designed to ensure that material risks to the Company are brought to the attention of the Board or an appropriate committee of the Board. Each of the Company’s risk management processes are reviewed periodically (but at least once a year) by either the Board or an appropriate committee. Throughout the year, the Board and each committee spend a portion of their time reviewing and discussing specific risk topics. Committee chairs regularly
report on committee meetings at the meetings of the full Board. At least annually, the Board conducts a review of our long-term strategic plans, and at each of our quarterly meetings, our General Counsel updates the Board on material legal and regulatory matters.
The Audit/Finance Committee is responsible for reviewing our major financial risk exposures, financial reporting, internal controls, credit and liquidity risk, compliance risk, and key operational risks. It meets regularly with our independent auditors and in executive session to facilitate a full and candid discussion of risk and other issues. Our Compensation Committee is responsible for overseeing compensation risks, including assessing possible risks from our compensation plans and policies for all employees and ensuring that our executive compensation is aligned with Company performance. Our Corporate Governance Committee oversees risks related to our overall corporate governance, including Board and committee composition, Board size and structure, and our director independence. This committee is also involved with succession planning for the Board and management.
Following a review of the Company’s current risk management systems and processes, the Board has concluded that the current allocation of oversight responsibilities between the Board and its committees is adequate, provided that the committees continue to coordinate their risk oversight responsibilities, share information appropriately with the other Board members, and provide timely and adequate reports to the full Board. The Board will continually evaluate its risk oversight role.
The Company has adopted a Code of Conduct that applies to all directors, officers, and employees of the Company and any subsidiary of the Company, including the CEO and chief financial officer, and is available on the Company’s website,www.itron.com, by selecting “Investors” and then “Corporate Governance”. In addition, we have adopted policies and procedures for reporting and investigating suspected violations of the Code of Conduct. The Company intends to satisfy any future disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to or waiver from application of the code of ethics or provisions of the Code of Conduct, that applies to the CEO or the chief financial officer, by posting such information on its website,www.itron.com.
The Company has adopted a Hedging Policy that prohibits our directors, officers, and employees from entering into transactions involving our securities that are designed to hedge or offset any decrease in the market value of Itron securities. See “EXECUTIVE COMPENSATION – Anti-Hedging Policy” in this proxy statement for more information on this policy.
Director Nominations by Shareholders
In accordance with the Company’s Amended and Restated Bylaws, in order to nominate a director for election to the Board at an annual meeting of shareholders, a shareholder must deliver written notice of such nomination to the Corporate Secretary of the Company at the Company’s executive offices no fewer than 60 days nor more than 90 days prior to the date of the annual meeting (or if less than 60 days’ notice or prior public disclosure of the date of such annual meeting is given or made to the shareholders, not later than the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure was made). The notice of a shareholder’s intention to nominate a director must include:
n | the name and address of the shareholder; |
n | a representation that the shareholder is entitled to vote at the meeting at which directors will be elected; |
n | a statement of the number of shares of the Company
and the following information with respect to the person nominated by the shareholder:
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n | the consent of such nominee to
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Other directors and senior management of the Company may also recommend director nominees for consideration by the Corporate Governance Committee. The Corporate Governance Committee evaluates director nominees, including nominees that are submitted to the Company by a shareholder, taking into consideration the qualification criteria set forth under “ELECTION OF DIRECTORS – Director and Director Nominee Qualifications” in this proxy statement. In the event of a shareholder recommendation, the Corporate Governance Committee screens and evaluates the person recommended in the same manner as other candidates. In addition, the Corporate Governance Committee determines if the proposed director nominee will have sufficient time available to carry out his or her Board duties and responsibilities effectively. The Corporate Governance Committee may then recommend the director candidate to the Board for its consideration, if deemed appropriate.
Shareholder Communications with the Board
The Company’s Board provides a process whereby shareholders may contact the Board or any committee as a group or any committee chair or individual director, by email addressed toboardofdirectors@itron.com. Shareholders should clearly specify in each communication the name of the director to whom the communication is addressed. Shareholders may also write to the Board or any committee as a group or any committee chair or individual director by sending the communication to: Itron, Inc., Attn: Corporate Secretary, 2111 N. Molter Road, Liberty Lake, WA 99019. Communications may also be submitted through our website atwww.itron.com by selecting “Investors”, “Corporate Governance”, and then “Contact the Board”.
Shareholder communications are delivered directly to the Corporate Secretary of the Company, who then determines whether to forward such communications to the specified director addressees. You can access a description of the process that the Corporate Secretary uses for determining whether to forward shareholders’ communications to directors at our website,www.itron.com, by selecting “Investors”, “Corporate Governance”, and then “Contact the Board”.
Shareholders wishing to submit proposals for inclusion in the proxy statement relating to the 2012 annual shareholders meeting should follow the procedures specified under “SHAREHOLDER PROPOSALS FOR 2012”in this proxy statement. Shareholders wishing to nominate directors should follow the procedures specified under “CORPORATE GOVERNANCE –Director Nominations by Shareholders”in this proxy statement.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis describes the Company’s philosophy and objectives for its executive compensation program, explains the compensation decision-making process, and details the individual components of the total compensation we paid to our named executive officers in 2010. Our 2010 named executive officers (NEOs), as determined by SEC rules, are as follows:
n |
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The Committee agreed with management’s recommendations and these actions were implemented.
We also had a significant change in management in 2009. On March 31, 2009, Malcolm Unsworth succeeded LeRoy Nosbaum as– President and Chief Executive Officer (CEO). Mr. Nosbaum remained on the Board and served as Executive Chairman of the Board until December 31, 2009.Officer;
n |
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n | John W. Holleran – Senior Vice President, General Counsel, and Corporate Secretary; |
n | Philip Mezey – Senior Vice President and Chief Operating Officer |
n | Marcel Regnier – Senior Vice President and Chief Operating Officer |
We design our compensation programs to attract, motivate, and retain exceptional people who can drive success for our Company. Our programs provide a competitive package of annual base pay, annual cash incentives, and long-term equity based incentives. Annual and long-term incentives are based on a “pay for performance” philosophy and are directly tied to the Company’s financial performance. The following is a summary of the important aspects of our executive compensation programs:
n | In 2010, following a difficult fiscal year in 2009, the Company
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Components of Compensation Program
n | The
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n |
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n | We provide the following elements of compensation for our NEOs: (i) base salary; (ii) annual cash incentives; (iii) long-term equity-based incentives; (iv) executive deferred compensation plans for our U.S. based executives,
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n | We generally target plus or minus 15% of the median level of the market for all elements of compensation and take into account each executive’s responsibilities, experience, performance, and contributions to the Company. We believe the total compensation package must be competitive. |
n | We implement our pay for performance philosophy with an annual cash award based on the Company’s achievement of certain financial goals. For Messrs. Unsworth, Helmbrecht, and Holleran, their 2010 awards were based on total Company revenue (30%), total Company consolidated non-GAAP net |
income (40%), and total Company consolidated cash flow from operations (30%). For Messrs. Regnier and Mezey, their 2010 awards were based on total Company revenue (7.5%), revenues of their respective business segments (22.5%), total Company consolidated non-GAAP operating income (10%), non-GAAP operating income of their respective business segments (30%), and total Company consolidated cash flow from operations (30%). As a result of strong financial performance during 2010, payouts to Messrs. Unsworth, Helmbrecht, Holleran, and Mezey under the annual cash award plan were made at 200% (maximum) of their target amounts, and the award for Mr. Regnier |
n | We encourage alignment of our NEOs’ interests with those of our shareholders through the implementation of stock ownership guideline requirements and the award of equity-based long-term incentive grants. In 2010, we used a mix of equity-based compensation which, at target, consisted of 25% stock option awards vesting ratably over three years, 25% time-based restricted stock awards with a three-year ratable vesting period, and 50% performance-based restricted stock unit awards with a one-year performance period and a subsequent three-year ratable vesting period. (Mr. Regnier did not receive stock options but received more time-based restricted stock units in lieu of options because of the |
n | Each of our NEOs has entered into a Change-in-Control Agreement that provides for certain benefits if they are terminated by the Company |
Overview of Our Business Performance in 2010
At the beginning of 2010, Malcolm Unsworth, our President and Chief Executive Officer, identified three operational objectives for the Company: successfully implement our North American smart metering contracts; grow our worldwide smart metering opportunities; and improve our non-GAAP operating margins. Consistent with these operational objectives, the Committee established performance metrics and performance targets under the Company’s 2010 Executive Management Incentive Plan and the 2010 Long-Term Performance Plan which were designed to reward exceptional performance.
In 2010, we generated a record $2.26 billion in revenue, a 34% increase over revenues in 2009. We had new order bookings of $2.4 billion for a book-to-bill ratio of 1.06 to 1. Non-GAAP operating margin increased to 11.2% from 8.5% in 2009. Consolidated non-GAAP net income was a record $159.5 million, an increase of 93% over 2009. We also paid down $155 million of our debt. Finally, we generated a record $254.6 million in consolidated cash flow from operations, an increase of 81% over 2009.
Much of the growth in revenue came from sales of products and systems that are less than three years old. In 2010 we installed over 4.8 million OpenWay endpoints pursuant to our North American smart metering contracts, and we are deploying smart metering systems in a number of pilot projects throughout the world.
Overall, we had an exceptional performance in 2010 and our performance level resulted in achievement of maximum bonus payouts for Messrs. Unsworth, Mezey, Helmbrecht, and Holleran. Mr. Regnier’s bonus was above target but less than maximum because some of his performance targets related to our International business segment were not achieved. Our annual and long-term incentive payments are considerably higher than 2009 because we did not have a bonus or long-term incentive program in 2009 (with the exception of a stock option award made to Mr. Unsworth in connection with his promotion to Chief Executive Officer).
Executive Compensation Philosophy and Objectives
Itron is widely recognized as a world leader in our industry. Consequently, we strive to attract, motivate, and retain exceptional people who can continue to drive our success. We focus on creating a “pay for performance” culture, but one that does not encourage excessive or unnecessary risk-taking. We design our compensation programs to achieve the following objectives through a combination of fixed and variable cash and equity-based elements:
n | Performance– motivating performance by creating a direct link between compensation that can be earned by an executive and the Company’s performance, as measured against our pre-set financial goals; |
n | Alignment –aligning our NEOs’ interests with those of our shareholders by fostering stock ownership and including a significant portion of compensation payable with equity awards, to encourage our leaders to act as owners of the Company; and |
n | Retention– providing a competitive total compensation package of annual base pay, annual incentives, and long-term incentives so we can attract and retain qualified executives. |
Our compensation plans are also designed so that we minimize the risk that our plans and policies could create risks reasonably likely to have a materially adverse effect on the Company.
Role of Compensation Committee and Executive Officers
The Committee provides overall direction for our executive compensation plans, policies, and programs, and determines the components of compensation for each of our executive officers. Each member of the Committee qualifies as an independent director under SEC rules and NASDAQ listing standards, as well as the independence requirements established by the Board. In addition, each member is a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code (Code).
The Committee approves the compensation of our NEOs, except for our CEO, whose compensation is recommended by the Committee for approval by the Board. Pursuant to authority granted to it under its charter, the Committee has hired Frederic W. Cook & Co. as its independent consultant. Our consultant reports directly to the Committee and does not provide any additional services to management. Members of our management team typically attend meetings where executive compensation, Company and individual performances, and competitive compensation levels and practices are discussed and evaluated; however, only the Committee members are allowed to vote on decisions regarding executive compensation. The Committee also receives recommendations from the CEO regarding the compensation of our other executive officers. In addition, the Committee routinely meets in executive session to further discuss executive compensation.
Role of Compensation Consultant; Peer Data Information
To determine market-based competitive pay packages, the Committee reviews compensation paid to executives in other comparable companies with respect to base pay, annual incentive compensation, and long-term incentive opportunities. To establish a relevant group of comparable companies, we identify companies that are size appropriate (meaning that the comparable company has both revenues and a market capitalization ranging from 25% to 300% of our revenue and market capitalization), have significant international revenues like Itron, are within the same broad Standard & Poor industry classification as Itron (Technology Hardware and Equipment Industry), and who have had financial and stock performance comparable to Itron (strong earnings, cash flow, and revenue growth).
The Committee received assistance from its compensation consulting firm, Frederic W. Cook & Co., to determine a representative list of our peer or comparable companies for 2010 compensation. The Committee concluded that five companies in the peer group for 2009 compensation no longer appeared to be comparable to Itron, including Badger Meter, Inc. (revenues not comparable), Mueller Water Products, Inc. (financial performance not comparable), Quanta Services, Inc. (not in the same industry as Itron), Tecktronix, Inc.
(acquired and no longer reporting data), and Valmont Industries, Inc. (not in the same industry as Itron). Six new companies were added to the group (identified below), all of which are in the same industry classification as Itron and derive a significant part of their revenues from international sales. The list of comparable companies used by the Committee to assist it in making its 2010 compensation decisions (Comparable Companies) is set forth below. Note that the report used to determine 2010 pay included the companies listed below plus 3Com Corporation, which was later acquired and thus eliminated from the analysis prepared in the fall of 2010 that was used to set compensation for 2011.
Cooper Industries Ltd. | Trimble Navigation Limited* | |
Ametek, Inc. | Amphenol Corporation* | |
AVX Corporation* | Diebold Inc. | |
ESCO Technologies, Inc. | Esterline Technologies Corp. | |
FLIR Systems, Inc.* | Intermec, Inc.* | |
Molex, Inc. | National Instruments Corp. | |
NCR Corporation* | PerkinElmer, Inc. | |
Roper Industries, Inc. | ||
*Added in 2010 |
For each of the Comparable Companies, the Committee’s compensation consultant obtained data regarding base salaries, annual incentives, and long-term incentives from the Comparable Companies’ annual proxy statements. The Comparable Company data was supplemented with other survey information provided by our compensation consultant. This additional survey data was prepared by Radford Survey & Consulting, a unit of Aon Consulting, and provides compensation market information on more than 650 technology companies. Itron participates in this survey. The Radford survey is well-known within the technology industry, and it provides total direct compensation levels for specific executive-level positions, including base salary, annual short-term incentive compensation, and long-term incentive compensation. The survey data was narrowed to those technology companies with revenues similar to Itron’s.
The Committee uses the Comparable Company data and the supplemental survey data as a benchmark to establish competitive compensation for our executives. For each of the executives, the Committee determined the mid-point of a salary range, annual incentive target, and long-term incentive based upon the 50th percentile of the market data for the position being evaluated. Then, taking into account the experience, performance, responsibilities, and contributions to the Company of each executive, the Committee made a decision for each executive (other than the CEO) on base pay, annual incentive pay opportunity, and long-term incentive opportunity. For the CEO, the Committee made recommendations to the Board and the Board approved the compensation for the CEO.
Our consultant also provides the Committee with information related to competitive pay practices, benchmarking information regarding best practices in compensation oversight, and information related to current topics of interest to shareholders regarding executive compensation.
Components of Our Compensation Program
Total Compensation.The Committee oversees the various forms of compensation to reward performance and encourage the achievement of the Company’s near-term objectives and long-term strategic goals. Base salary provides a stable amount of fixed compensation to the executive, while annual cash incentive awards are used to reward the achievement of the Company’s annual financial performance objectives. The Committee uses long-term equity-based compensation to reward our NEOs for overall Company performance and to align a significant portion of their overall compensation with the long-term interests of our shareholders. Because of our pay-for-performance objectives, we overweight the executive’s long-term incentive opportunity towards performance-based RSUs when compared to that of our Comparable Companies. Finally, the Committee oversees severance, retirement, and other benefits intended to promote the objectives of our compensation plans.
Risk and Incentive Compensation.It is our belief that a majority of an executive’s total compensation should be variable “at risk” compensation which is tied to the Company’s financial performance. However, because performance-based incentives play a large role in our compensation program, we strive to ensure that incentives do not result in actions that may conflict with the long-term best interests of the Company and our shareholders. Therefore, the Committee evaluated all of our plans and policies in 2010 for attributes that could cause excessive risk-taking by our executives, and concluded that our programs and policies do not encourage excessive risk-taking, due to the following factors: (a) the salary component of our program is a fixed amount; (b) the majority of the compensation paid to our executives is delivered in the form of equity ownership, which aligns the interest of our executives with those of our shareholders; (c) executive officers are subject to our executive stock ownership guidelines; and (d) the annual cash-based incentive plan and long-term incentive plans are designed with risk-mitigating characteristics such as (i) maximum award payouts based on the attainment of various Company financial objectives which diversifies risks associated with a single indicator of performance, (ii) time-based restricted stock unit awards and stock options are fixed awards of shares, (iii) vesting of most equity awards occurs over three-year periods, which discourages executives from taking short-term excessive risks, and (iv) final awards are reviewed and approved by our Committee (and the Board in the case of the CEO), which is composed entirely of independent directors who have discretion under our plans to approve, modify, or eliminate any award earned. See also “CORPORATE GOVERNANCE – Board Risk Oversight” in this proxy statement.
The following charts set forth for our CEO and the other NEOs on average, the amount and percentage of the total compensation for each major element of fiscal 2010 compensation, including the percentage of fiscal 2010 direct compensation that was at risk. The amounts and percentages are based on the fiscal 2010 target levels for each element at the time of approval.
Base Salary.We believe that an executive’s compensation should have an element of their total compensation that provides a stable, base salary which enables the Company to attract, motivate, reward, and retain the executive. The Committee reviews base salaries annually, and at the time of promotions or other changes in responsibilities. In December 2009, the Committee reviewed the Comparable Company data available and in consultation with its compensation consultant, determined the 2010 salaries for our NEOs that are set forth in the “Summary Compensation Table”in this section of the proxy statement.Mr. Unsworth’s base pay was increased as a result of his performance in leading the Company through a very difficult 2009 year, from $650,000 to $750,000, which is approximately at the median of the 2010 Comparable Company data. The 2010 base salaries of the other NEOs were also increased at that time to reflect their performance and scope of responsibilities. We believe these salaries are competitive for each of our NEOs.
Annual Cash Incentives. The Committee provides the NEOs with annual variable cash compensation under the Itron Executive Management Incentive Plan (EMIP). Awards are based on the Company’s annual financial performance, excluding costs and financial effects of acquisitions and dispositions, and normalized for the effects of foreign currency translation. In the first quarter of each year, the Committee identifies objective financial performance criteria that the Company must meet for any awards to become payable under the EMIP, and establishes threshold, target, and maximum payout levels for each performance element. A target incentive payout is established for each executive, based on a percentage of the executive’s salary. Depending on the executive’s position, the performance measures in 2010 were based on the annual achievement of performance measures worldwide (the entire Company) or in the case of our two Senior Vice Presidents and Chief Operating Officers, the measures included a portion from the entire Company and a portion from the executive’s respective division, Itron International or Itron North America. If the threshold level of performance for any element of the EMIP during the performance period is not achieved, management is not entitled to any award for that element. Awards under the EMIP are paid in cash and are designed to incentivize and reward attainment of annual business and financial goals.
We use certain non-GAAP financial measures when setting performance targets because we believe they provide greater transparency and represent information that more clearly reflects the ongoing core performance of the Company in a manner that shareholders understand and consider important. We believe these measures are a better measurement of our core business. We define non-GAAP operating income as GAAP operating income, exclusive of amortization expenses related to intangible assets. We define non-GAAP net income as GAAP income that excludes amortization expenses (generally, taxes) related to intangible assets, debt placement fees, convertible debt discounts, and non-cash net loss on the extinguishment of debt. We believe these non-GAAP income metrics, when included with consolidated revenue and consolidated cash flow from operations, provide a more balanced illustration of our financial performance. In addition, by including these metrics in the EMIP, we strive to encourage performance that will drive growth in our revenue and earnings, and generate increased cash flow. For Messrs. Regnier and Mezey, their performance targets were based on worldwide consolidated non-GAAP operating income to better align the income with their business segments, but with less weight attributed to the entire Company’s metric and instead, additional operational metrics related to their respective International and North American business segments were used to more accurately measure their respective segments’ financial performances over which they have more control. Performance targets for 2010 were set at a level that represents significant improvement over the prior fiscal year. Achievement at the maximum level represents a superior performance outcome, which we believe is fully deserving of a maximum incentive payout.
The first table below shows for each NEO the fiscal 2010 financial and operational performance targets and actual results, and the second table shows the actual awards and bonus paid for each NEO’s attained results.
2010 EXECUTIVE MANAGEMENT INCENTIVE PLAN (EMIP)
Metrics, Weighting, Targets, Actual Results
Named Executive Officer | Payout Factor | Results Required to Achieve Bonus (in millions) | 2010 Actual Results (millions) | Actual 2010 Payout Factor (% of Target Bonus) | ||||||||||||||||||||||
Threshold | Target | Maximum | ||||||||||||||||||||||||
(50%) | (100%) | (200%) | ||||||||||||||||||||||||
Metrics | Weighting Factor | |||||||||||||||||||||||||
Malcolm Unsworth, Steve Helmbrecht, John Holleran | Consolidated Revenue | 30.0 | % | $ | 1,687.5 | $ | 2,009.0 | $ | 2,151.0 | $ | 2,259.3 | 200.0 | % | |||||||||||||
Consolidated Non-GAAP Net Income | 40.0 | % | $ | 82.5 | $ | 116.0 | $ | 145.0 | $ | 159.5 | 200.0 | % | ||||||||||||||
Consolidated Cash Flow from Operations | 30.0 | % | $ | 175.0 | $ | 195.0 | $ | 225.0 | $ | 254.6 | 200.0 | % | ||||||||||||||
Philip Mezey | Consolidated Revenue | 7.5 | % | $ | 1,687.5 | $ | 2,009.0 | $ | 2,151.0 | $ | 2,259.3 | 200.0 | % | |||||||||||||
Consolidated Non-GAAP Operating Income | 10.0 | % | $ | 143.6 | $ | 202.0 | $ | 236.0 | $ | 253.2 | 200.0 | % | ||||||||||||||
Consolidated Cash Flow from Operations | 30.0 | % | $ | 175.0 | $ | 195.0 | $ | 225.0 | $ | 254.6 | 200.0 | % | ||||||||||||||
North America Revenue | 22.5 | % | $ | 615.8 | $ | 828.0 | $ | 911.0 | $ | 1,177.0 | 200.0 | % | ||||||||||||||
North America Non-GAAP Operating Income | 30.0 | % | $ | 60.4 | $ | 108.0 | $ | 128.0 | $ | 218.0 | 200.0 | % | ||||||||||||||
Marcel Regnier | Consolidated Revenue | 7.5 | % | $ | 1,687.5 | $ | 2,009.0 | $ | 2,151.0 | $ | 2,259.3 | 200.0 | % | |||||||||||||
Consolidated Non-GAAP Operating Income | 10.0 | % | $ | 143.6 | $ | 202.0 | $ | 236.0 | $ | 253.2 | 200.0 | % | ||||||||||||||
Consolidated Cash Flow from Operations | 30.0 | % | $ | 175.0 | $ | 195.0 | $ | 225.0 | $ | 254.6 | 200.0 | % | ||||||||||||||
International Revenue | 22.5 | % | $ | 1,028.1 | $ | 1,091.4 | $ | 1,209.9 | $ | 1,069.7 | 83.0 | % | ||||||||||||||
International Non-GAAP Operating Income | 30.0 | % | $ | 112.7 | $ | 132.0 | $ | 150.0 | $ | 83.9 | 0.0 | % |
2010 EMIP – NEO Actual Awards
NEO | EMIP Target, % of Base Salary | Actual Payout, % of Base Salary | Cash Award | |||||||||
Malcolm Unsworth | 100 | % | 200 | % | $ | 1,500,000 | ||||||
Steve Helmbrecht | 75 | % | 150 | % | $ | 637,500 | ||||||
John Holleran | 75 | % | 150 | % | $ | 637,500 | ||||||
Philip Mezey | 75 | % | 150 | % | $ | 637,500 | ||||||
Marcel Regnier | 75 | % | 86 | % | € | 273,600 |
Long-Term Incentives. We use equity awards as long-term incentives for our NEOs to help create a strong alignment between the compensation provided to our executives and the investment objectives of our shareholders, which is to create long-term, sustainable value. In addition, vesting provisions imposed on the equity awards help retain eligible executives and reward achievement of long-term business objectives that also benefit our shareholders. When determining the size and mix of equity to be awarded, the Committee considers market data for the respective position and the scope of the individual executive’s responsibilities.
Until its termination in May 2010, our Amended and Restated 2000 Stock Incentive Plan (2000 SIP) provided for a variety of equity-based awards, including but not limited to, stock options, time-based restricted stock units, stock appreciation rights, restricted stock awards, and performance-based restricted stock units. Our 2010 Stock Incentive Plan (2010 SIP), adopted by shareholders at our 2010 annual meeting, provides for similar awards.
Stock Options. Stock options are granted with an exercise price equal to the fair market value of our common stock on the date of grant, generally provide for ratable vesting over a three-year period, and expire ten years from the date of grant.
Performance-Based Restricted Stock Units (RSUs).Performance-based RSUs are granted to provide equity award opportunities to our executives, based on the Company attaining certain annual pre-determined financial performance criteria. The criteria are established each year by the Committee pursuant to our long-term performance plan or LTPP. Once actual performance is determined, RSU awards are issued. Typically, these awards have a ratable three-year vesting period.
Time-Based RSUs. Time-based RSUs are granted as part of the executive’s compensation to reinforce our emphasis on equity ownership in the Company and to help us retain our talented leadership. Typically, these RSUs vest ratably over a period of three years.
In the first quarter of 2010, the Committee granted to our NEOs three types of long-term equity awards: stock options, time-based RSUs awarded pursuant to our 2000 SIP, and performance-based RSUs awarded under the 2010 LTPP. Target award values were based on the median of the survey data. The mix of options, time-based RSUs, and performance-based RSUs was also based on the survey data and was heavily weighted towards the performance-based RSUs in order to focus our executives on the Company’s financial performance goals for 2010. Individual award amounts for stock options were calculated based on Black-Scholes values, and award amounts for time-based RSUs and LTPP RSUs were determined based on the closing price of our common stock on the date of grant, which was February 11, 2010 for our NEOs other than our CEO ($61.56 per share), the date the awards were approved by the Committee, and February 12, 2010 for our CEO ($61.34 per share), the date the awards were approved by the Board. In February 2011, the Committee and the Board (for the CEO) reviewed our performance for 2010 and determined that long-term equity awards were earned by our NEOs under the 2010 LTPP.
The LTPP awards were issued based on the performance metrics established by the Committee and as set forth in the first table below, with actual LTPP awards issued set forth in the subsequent table.
2010 LONG-TERM PERFORMANCE PLAN (LTPP)
Metrics, Weighting, Targets, Actual Results
Named Executive Officers | Payout Factor | Results Required to Achieve LTPP (in millions) | 2010 Actual Results (millions) | Actual 2010 Payout Factor (% of Target LTPP) | ||||||||||||||||||||||
Threshold | Target | Maximum | ||||||||||||||||||||||||
(50%) | (100%) | (200%) | ||||||||||||||||||||||||
Metrics | Weighting Factor | |||||||||||||||||||||||||
Malcolm Unsworth, Steve Helmbrecht, John Holleran, Philip Mezey, and Marcel Regnier | Consolidated Revenue | 40.0 | % | $ | 1,687.5 | $ | 2,009.0 | $ | 2,151.0 | $ | 2,259.3 | 200.0 | % | |||||||||||||
Consolidated Non-GAAP Net Income | 20.0 | % | $ | 82.5 | $ | 116.0 | $ | 145.0 | $ | 159.5 | 200.0 | % | ||||||||||||||
Consolidated Cash Flow from Operations | 40.0 | % | $ | 175.0 | $ | 195.0 | $ | 225.0 | $ | 254.6 | 200.0 | % |
2010 LTPP – NEO Actual Awards
NEO | Target Award (RSUs) * | Attainment % | Actual Award (RSUs) * | |||||||||
Malcolm Unsworth | 22,100 | 200 | % | 44,200 | ||||||||
Steve Helmbrecht | 6,910 | 200 | % | 13,820 | ||||||||
John Holleran | 6,910 | 200 | % | 13,820 | ||||||||
Philip Mezey | 6,910 | 200 | % | 13,820 | ||||||||
Marcel Regnier | 6,910 | 200 | % | 13,820 |
* | Based on the closing price on the grant date; $61.34 for M Unsworth, and $61.56 for all other NEOs |
Summary. We believe the above combination of base salary, annual incentives, and long-term incentives provides a well-balanced mix of base pay, retention value, equity interest, and variable compensation, all of which support the Company’s short-term and long-term financial performance objectives while mitigating excessive risk exposure. See also “Risk and Incentive Compensation” under this section and “CORPORATE GOVERNANCE – Board Risk Oversight” in this proxy statement.
The following paragraphs describe other compensation and perquisites offered to our executives in 2010. It should be noted that we eliminated our perquisite programs in 2011. The other benefits support our overall goal to attract, motivate, and retain our key executives. See “EXECUTIVE COMPENSATION TABLES – Summary Compensation Table”in this proxy statement for specific amounts paid to our NEOs in 2010.
Executive Deferred Compensation Plan.
NEOs located in the U.S. are eligible to participate in our Executive Deferred Compensation Plan. The plan allows executives to defer up to 50% of their base salary and 50% of their annual incentive into a nonqualified account. Executives are also permitted to elect to defer an additional portion of their base salary equal to the amount of any contributions returned to them during the year from the Company’s 401(k) Plan so that such plan could satisfy the nondiscrimination requirements applicable to it. In 2010, the Company made matching contributions to the account of each participating executive at the rate of 50% of the first 6% of base salary and annual incentive deferred by the executive during that year. The executives’ account balances are adjusted for hypothetical investment earnings or losses according to the returns of the specified “measurement funds” selected by the executives. The measurement funds correspond to the mutual funds available for investment under the 401(k) Plan (but currently do not include a Company stock fund). Refer also to the narrative following the “2010 Nonqualified Deferred Compensation Table”in this section under “EXECUTIVE COMPENSATION TABLES”.
In 2010, NEOs located in the U.S. were provided an annual allowance not to exceed 3% of the executive’s base salary for:
n | Financial planning |
n | Tax preparation |
n | Legal counseling |
n | Medical costs |
n | Additional life insurance premiums |
n | Long-term disability insurance premiums |
n | Home office or security |
The Committee elected to discontinue this Plan after 2010. In lieu thereof, the base salaries of the NEOs were increased by 3%, effective January 1, 2011. No other base salary adjustments were made.
Executives located in the United States are eligible to participate in our 401(k) Plan which provides our employees, including executives, with a 50% Company match on the first 6% of compensation deferred, subject to qualified plan limits. Similarly, executives located in the United States may participate in the Company’s employee stock purchase plan, along with our other U.S. employees. For Mr. Regnier, our NEO based in Brussels, the Company makes contributions to the Itron Management Services S.A. Plan on his behalf as described in the paragraph that follows below.
We do not maintain any defined benefit or supplemental retirement programs for our NEOs, with the exception of Mr. Regnier, who resides in Belgium and whose plan is customary for executives in that country. We provide
additional benefits to Mr. Regnier while he resides in Belgium, including the use of a Company vehicle and an annual housing allowance as described in the paragraphs that follow. See also “EXECUTIVE COMPENSATION TABLES – Summary Compensation Table”in this proxy statement for more information on these benefits.
Itron International Management Services S.A. Plan – Marcel Regnier
Since his promotion in 2008 to Senior Vice President and COO – Itron International, Mr. Regnier has resided in Brussels, Belgium and has participated in the Itron International Management Services SA Plan, a supplemental Belgium group retirement, death, and disability insurance plan. The Company contributes 12% of Mr. Regnier’s base salary and Mr. Regnier defers 2% of his base salary into the Plan. The funds earn a legal minimum interest rate of 3.25%. The retirement benefit is payable in a lump sum or as an annuity at age 65. The Company contributions are allocated between retirement and death benefits, as determined by the participant. In addition, a lump sum payment equal to 100% of Mr. Marcel’s salary is payable upon total and permanent disability.
We do not have employment agreements with our executives other than with Mr. Regnier. Because Mr. Regnier resides in Belgium as a result of his position with the Company, we are required under Belgium law to document the terms of Mr. Regnier’s employment in a written agreement. Mr. Regnier’s agreement was entered into in 2008 and generally sets forth compensation and other employment provisions applicable to all of our executives. It also stipulates, however, that his base salary include payment of expenses related to Mr. Regnier’s residing in Belgium, including a cost of living allowance, a tax equalization allowance, the use of a Company car, and an allowance compensating for the differential of housing costs between his country of origin and his housing costs in Belgium. The amount of such allowances is determined by formulas established by the Belgian tax authorities. Mr. Regnier’s agreement provides that he is entitled to a severance payment equal to the payment determined under the formula prescribed by statute in Belgium (which is based on age, service, and level of remuneration), not to exceed one year’s total compensation (including bonuses), in the event his employment is involuntarily terminated other than for cause, as defined in his agreement). See also “EXECUTIVE COMPENSATION TABLES – Potential Payments upon Change-in-Control” and “Termination Payment Tables for NEOs” in this proxy statement.
In 2010 we entered into new Change-in-Control (CIC) Agreements with our executives to encourage their full attention and dedication to the Company during a change-in-control of the Company, and to provide them with reasonable compensation and benefits in the event of a change-in-control and a subsequent loss of employment. The agreements entered into in 2010 replace previously existing agreements (2009 CIC Agreements) and provide executives with substantially reduced benefits. These new agreements were discussed extensively in the Compensation Discussion and Analysis section of the 2010 proxy statement since the agreement terms were known at the time of the filing of the 2010 proxy statement. A similar discussion is provided below.
As part of the comprehensive review of the Company’s compensation plans and policies begun in August 2009 by our Compensation Committee, with advice from its compensation consultant Frederic W. Cook & Co., the Committee reviewed the 2009 CIC Agreements and concluded that significant amendments should be made to bring the contracts closer in line with current competitive practices. The Committee recognized that the benefits being provided were well above market. As a result, Itron entered into 2010 CIC Agreements with its NEOs which substantially reduce the level of severance benefits that are payable upon an involuntary termination without cause or a voluntary termination for “good reason” within a two-year period following a change in control of the Company.
Severance Benefit. The 2009 CIC Agreements for all of the NEOs provided for a severance benefit of 3 times the sum of (i) base salary, (ii) maximum annual incentive, and (iii) payout of outstanding awards received as long-term incentives for the year in which the change in control occurred. The 2010 CIC Agreements provide the CEO with a severance benefit of 3 times the sum of base salary and target annual incentive opportunity. For the other NEOs, the severance benefit is 2.5 times the sum of base salary and target annual incentive opportunity.
Itron International Management Services Plan – Marcel Regnier
Since his promotion in 2008 to Senior Vice President and COO – Itron International, Mr. Regnier resides in Brussels, Belgium and has participated in the Itron International Management Services SA Plan, a supplemental Belgium group retirement, death, and disability insurance plan. The Company contributes 12% of Mr. Regnier’s base salary and Mr. Regnier defers 2% of his base salary into the Plan. The funds earn a legal minimum interest rate of 3.25%. The retirement benefit is payable in a lump sum or as an annuity at age 65. The Company contributions are allocated between retirement and death benefits, as determined by the participant. In addition, a lump sum payment equal to 100% of Mr. Marcel’s salary is payable upon total and permanent disability.
We do not have employment agreements with our executives other than with Mr. Regnier. Because Mr. Regnier resides in Belgium as a result of his position with the Company, we are required under Belgium law to document the terms of Mr. Regnier’s employment in a written agreement. Mr. Regnier’s agreement generally sets forth compensation and other employment provisions applicable to all of our executives. It also stipulates that his base salary includes payment of expenses related to Mr. Regnier’s residing in Belgium, including a cost of living allowance, a tax equalization allowance, and an allowance compensating for the differential of housing costs between his country of origin and his housing costs in Belgium. The amount of such allowances is determined by formulas established by the Belgian tax authorities. Mr. Regnier’s agreement provides that he is entitled to a severance payment equal to the payment determined under the formula prescribed by statute in Belgium (which is based on age, service and level of remuneration), not to exceed one year’s total compensation (including bonuses), in the event his employment is involuntarily terminated other than for cause, as defined in his agreement). See“EXECUTIVE COMPENSATION TABLES” – Potential Payments upon Change in Control” and “Termination Payment Tables for NEOs”in this proxy statement.
Change in Control Agreements – 2009
We have entered into change in control agreements with each of our executives to encourage their full attention and dedication to the Company and to provide them with reasonable compensation and benefits in the event of a change in control. Under the agreements that were in effect during 2009 (2009 CIC Agreements), we and each of our executives agreed that, in the event the executive is terminated during one or two years after a change in control, depending on the executive, the executive would be entitled to certain payments and benefits. To avoid duplication of benefits, any benefits Mr. Regnier would receive under the laws of France or Belgium or any other agreement with the Company, will be offset against any benefits to be received under the change in control agreement.
In March 2010, the 2009 CIC Agreements were terminated and new agreements were entered into with the NEOs (2010 CIC Agreements). Under the new agreements, the compensation and benefits provided to the executive in the event of a change in control were substantially reduced, as described below.
Payments upon Change in Control – New 2010 Agreements
As part of the comprehensive review of the Company’s compensation plans and policies begun in August 2009 by our Compensation Committee, with advice from its compensation consultant Frederic W. Cook & Co., the Committee reviewed the 2009 CIC Agreements and concluded that significant amendments should be made to bring the contracts closer in line with current competitive practices. The Committee recognized that the benefits being provided were well above market. As a result, Itron entered into 2010 CIC Agreements with its NEOs which substantially reduce the level of severance benefits that are payable upon an involuntary termination without cause or a voluntary termination for “good reason” within a two-year period following a change in control of the Company.
Severance Benefit. The 2009 CIC Agreements for all of the NEOs provided for a severance benefit of 3 times the sum of (i) base salary, (ii) maximum annual incentive, and (iii) payout of outstanding awards received as long- term incentives for the year in which the change in control occurred. The 2010 CIC Agreements provide the CEO
with a severance benefit of 3 times the sum of base salary and target annual incentive opportunity. For the other NEOs, the severance benefit is 2.5 times the sum of base salary and target annual incentive opportunity.
Pro-Rata Annual Incentive for Year of Termination. The 2009 CIC Agreements provided for an annual incentive payment for the year of termination based on the maximum bonus opportunity, prorated for the time worked during the year of termination. The 2010 Agreements provide for a payment based on the greater of target opportunity or actual performance (as determined by the Board), prorated for the time worked during the year of termination.
Welfare Benefit Continuation. The 2009 CIC Agreements provided for 18 months of COBRA health care coverage for the NEOs and their families, and two additional years of life insurance with a tax gross-up on the life insurance premiums. The 2010 CIC Agreements provide for three years of life and disability insurance coverage (with no tax gross-up) for the CEO and 2.5 years of life and disability insurance coverage (with no tax gross-up) for the other NEOs. The 2010 CIC Agreements provide for three years of health care coverage for the CEO and his dependents and the other NEOs and their dependents would receive 2.5 years of health care coverage.
Equity Award Vesting and Acceleration. Like the 2009 CIC Agreements, the 2010 CIC Agreements provide for accelerated vesting of stock options and restricted stock or other equity-based awards at the time of the change in control. The 2009 CIC Agreements provided for accelerated vesting of performance shares at the time of the change in control with payouts based on the maximum opportunity. The 2010 CIC Agreements provide for accelerated vesting of the performance shares at the time of the change in control with payouts based on the greater of target opportunity or actual performance, as determined by the Board of Directors, prorated for the portion of the performance year as of the date of the change in control.
Excise Tax Gross-Up. The 2009 CIC Agreements provided for an excise tax gross-up if parachute payments exceed 105% of the IRS safe harbor amount. Otherwise, the payments are reduced to the safe harbor amount. The 2010 CIC Agreements likewise provide for an excise tax gross-up to the NEOs except that the tax gross-up will “sunset” after three years (i.e., the excise tax gross-up will expire by its terms three years from the date of the 2010 CIC Agreements)Agreements or in March 2013). We believe that mitigation of the cost of the excise tax is necessary to preserve the benefits to which the NEOs are entitled. However, we also recognize the negative implications sometimes construed with this benefit and as a result, we included a sunset of this benefit in the 2010 CIC Agreements.
Legal Fees. The 2009 CIC Agreements did not include a legal fees provision if the NEO had to enforce the agreement. The 2010 CIC Agreements provide that NEOs will be reimbursed for legal fees and expenses incurred in seeking to enforce the agreement.
Restrictive Covenants.The 2010 Agreements include restrictive covenants relating to non-solicitation and non-disparagement. The 2010 CIC Agreements also require a release of all claims against the Company.
The change in controlAs described, the change-in-control severance benefits for the NEOs will bewere reduced substantially under the new 2010 CIC Agreements. However,Agreements; however, the Committee believes that the 2010 CIC Agreements are in line with current competitive practices. See also “EXECUTIVE COMPENSATION TABLES – Potential Payments upon Change-in-Control” and “Termination Payment Tables for NEOs”in this proxy statement.
Stock Ownership Guidelines & Policies
InSince 2006 we adoptedhave had stock ownership guidelines to encourage our key executives to own our stock at least equal in value to twothree to four times each NEO’s base salary. The current guidelines for our NEOs are four times base salary for our CEO and Chairman of the Board, and three times base salary for all Senior Vice Presidents. Common stock, restricted stock awards, restricted stock units, and stock held in the 401(k) Plan and the Employee Stock Purchase Plan all count towards satisfaction of the guidelines; however, unexercised stock options do not. We believe that when our executives hold an equity interest in the Company, they will be less inclined to take excessive business risks. We also prohibit executives from pledging unvested equity awards as collateral for loans.
We annually review the levels of stock ownership of our executives. Because of the fluctuationexecutives, and based on a rolling 12-month average of our stock price only Mr. Nosbaum metas of the guidelines at December 31, 2009, based on a 12-month rolling average ofrecord date for our stock value of $55.74 per share (at January 4, 2010). However,2011 annual meeting, all of the other NEOs continued to make satisfactory progress in 2009 towards meeting thesehave met the guidelines.
Since a primary objective of our compensation programs is to create a strong alignment between our officers and directors and the interests of our shareholders, we consider it inappropriate for our officers and directors to engage in transactions designed to insulate them from changes in the Company’s stock price. Therefore, the Company has adopted a Hedging Policy that prohibits our directors, officers, and employees from entering into transactions that include (without limitation) equity swaps or short sales of our securities, margin accounts or pledges of our securities, and hedges or monetization transactions involving our securities that are designed to hedge or offset any decrease in the market value of Itron securities. In addition, the purchase or sale of puts, calls, options or other derivative securities based on the Company’s securities is prohibited, and our directors, officers and employees may not purchase our securities on margin or borrow against any account in which our stock is held.
Financial Restatement and Mandatory Clawbacks
We do not have any plans, policies, or agreements that specifically require recoupment of awards if performance measures are not achieved. However, underUnder Section 304 of Sarbanes-Oxley, if we are required to restate our financials due to material noncompliance with any financial reporting requirement as a result of misconduct, the CEO and CFO must reimburse the Company for (1) any bonus or other incentive-based or equity-based compensation received during the 12 months following the first public issuance or filing of the non-complying document (whichever first occurs), and (2) any profits realized from the sale of securities of the Company during those 12 months.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Financial Reform Act) requires the SEC to promulgate new rules for companies listed on national securities exchanges regarding the recoupment from executives of compensation that was “erroneously awarded” if there is an accounting restatement. Clawbacks under the Financial Reform Act will be different from the clawbacks required under Section 304 of Sarbanes-Oxley. The SEC is expected to adopt new rules in fiscal year 2011 and the Company intends to adopt a mandatory clawback policy to comply with those rules once issued.
We regularly consider the various tax and accounting implications of the compensation vehicles we use. When determining the amount of long-term incentives and equity grants to executives and employees, the compensation costs associated with the grants are reviewed, as required by Accounting Standards Codification Topic 718 (ASC 718), formerly Statement of Financial Accounting Standards No. 123(R), are reviewed..
We generally seek to maximize the tax deductibility for all elements of compensation. For example, Section 162(m) of the Code generally prohibits any publicly held corporation from taking a federal income tax deduction for compensation paid in excess of $1 million in any taxable year to the CEO and the next three highest compensated officers (other than the CFO). Under the current tax laws, exceptions are made for qualified performance-based compensation. Our annual cash-based awards payable under the EMIP, in addition to our stock options and LTPP awards, are all designed to meet the definition of performance-based compensation under Section 162(m). of the Code. The Committee retains the right to grant awards that do not qualify for the performance-based compensation exception if the Committee determines further compensation is appropriate in order to support our compensation philosophy with respect to our executives.
As noted elsewhere in this proxy statement, we intend to submit a performance-based compensation annual incentive plan (the Executive Management Incentive Plan or EMIP) for shareholder approval at the 2010 annual meeting, which is intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code. See “ITEM 3 – APPROVAL OF ITRON, INC. EXECUTIVE MANAGEMENT INCENTIVE PLAN” in this proxy statement andAppendix B to this proxy statement.
As the Committee considered executive compensation for 2010, the Committee evaluated all of the Company’s 2009 compensation plans and policies to determine whether they might encourage excessive risk-taking by our executives. The Committee concluded that our compensation programs and policies do not encourage excessive risk-taking because of the following: (a) the salary component of our program is a fixed amount; (b) the annual and long-term incentive plans are designed with the following risk-mitigating characteristics: (i) annual incentive awards and performance-based RSU awards under the LTPP are limited to a fixed maximum percentage of base salary, as specified in the incentive plan, and are based on the attainment of certain Company financial objectives which diversifies risks associated with a single indicator of performance, (ii) time-based RSU awards and stock options are fixed awards of shares, (iii) incentive awards are not tied to a specific formula that could focus executives on specific short-term results, (iv) vesting of equity awards occurs over three-year periods, which discourages executives from taking short-term excessive risks; and (v) final awards are reviewed and approved by our Committee (and the Board in the case of the CEO), which is composed entirely of independent directors who have discretion under our plans to approve, modify, or eliminate any award earned; (c) the majority of the compensation paid to our executives is delivered in the form of equity ownership, which aligns the interest of our executives with those of our shareholders; and (d) executive officers are subject to our executive stock ownership guidelines. See also “CORPORATE GOVERNANCE – Risk Oversight by the Board” in this proxy statement.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Itron’s management. Based on the review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 20102011 Proxy Statement.
Compensation Committee
Kirby Dyess, Chair
Gary Pruitt
Michael Bracy
Charles Gaylord
EXECUTIVE COMPENSATION TABLES
The following table provides information regarding compensation of the Company’s NEOs. The amounts shown include amounts deferred at the executive’sexecutives’ election. All numbers are rounded to the nearest dollar. In 2008 and 2009, we did not pay any non-equity incentive plan compensation to our NEOs, and except for an award of stock options granted to Mr. Unsworth in connection with his promotion to CEO, we did not grant any long-term equity awards in 2009.
Summary Compensation Table | |||||||||||||||||
Name and Principal Position | Year | Salary ($) | Stock Awards ($) (1) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) (2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||
Malcolm Unsworth (3) President and Chief Executive Officer | 2009 | 617,000 | 0 | 1,297,020 | 0 | 0 | 592,476 | (4) | 2,506,496 | ||||||||
2008 | 493,615 | 288,804 | 1,176,276 | 0 | 0 | 657,330 | 2,616,026 | ||||||||||
2007 | 377,423 | 341,547 | 545,234 | 372,075 | 0 | 252,881 | 1,889,160 | ||||||||||
Steve Helmbrecht Senior Vice President and CFO | 2009 | 400,000 | 0 | 0 | 0 | 0 | 16,311 | (4) | 416,311 | ||||||||
2008 | 399,615 | 196,838 | 784,184 | 0 | 0 | 31,590 | 1,412,227 | ||||||||||
2007 | 300,000 | 236,701 | 545,234 | 0 | 0 | 20,224 | 1,102,159 | ||||||||||
Philip Mezey | 2009 | 400,000 | 0 | 0 | 0 | 0 | 17,372 | (4) | 417,372 | ||||||||
Chief Operating Officer – Itron North America | 2008 | 400,000 | 187,276 | 784,184 | 0 | 0 | 25,926 | 1,397,386 | |||||||||
2007 | 370,385 | 285,216 | 545,234 | 0 | 0 | 22,336 | 1,223,171 | ||||||||||
John Holleran | 2009 | 350,000 | 0 | 0 | 0 | 0 | 12,921 | (4) | 362,921 | ||||||||
Senior Vice President and General Counsel | 2008 | 349,807 | 782,190 | 784,184 | 0 | 0 | 17,400 | 1,933,581 | |||||||||
Marcel Regnier (6) | 2009 | 438,000 | 0 | 0 | 0 | 0 | 107,039 | (4) | 545,039 | ||||||||
Senior Vice President, COO – Actaris | |||||||||||||||||
LeRoy Nosbaum (3) | 2009 | 526,538 | 0 | 0 | 0 | 0 | 23,298 | (4) | 549,836 | ||||||||
Executive Chairman/Former CEO | 2008 | 824,327 | 540,837 | 3,528,828 | 0 | 0 | 24,390 | 4,918,382 | |||||||||
2007 | 650,000 | 736,480 | 1,090,468 | 0 | 0 | 19,608 | 2,496,556 |
Summary Compensation Table | ||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Stock Awards ($) (1) (2) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
Malcolm Unsworth President and Chief Executive Officer | 2010 | 748,461 | 2,033,421 | 747,467 | 1,500,000 | 0 | 74,854 | (4) | 5,104,203 | |||||||||||||||||||||||
2009 | 617,000 | 0 | 1,297,020 | 0 | 0 | 592,476 | 2,506,496 | |||||||||||||||||||||||||
2008 | 493,615 | 288,804 | 1,176,276 | 0 | 0 | 657,330 | 2,616,026 | |||||||||||||||||||||||||
Steve Helmbrecht Senior Vice President and CFO | 2010 | 424,615 | 638,377 | 234,916 | 637,500 | 0 | 32,838 | (4) | 1,968,246 | |||||||||||||||||||||||
2009 | 400,000 | 0 | 0 | 0 | 0 | 16,311 | 416,311 | |||||||||||||||||||||||||
2008 | 399,615 | 196,838 | 784,184 | 0 | 0 | 31,590 | 1,412,227 | |||||||||||||||||||||||||
Philip Mezey Senior Vice President, COO – Itron North America | 2010 | 424,615 | 638,377 | 234,916 | 637,500 | 0 | 32,838 | (4) | 1,968,246 | |||||||||||||||||||||||
2009 | 400,000 | 0 | 0 | 0 | 0 | 17,372 | 417,372 | |||||||||||||||||||||||||
2008 | 400,000 | 187,276 | 784,184 | 0 | 0 | 25,926 | 1,397,386 | |||||||||||||||||||||||||
John Holleran | 2010 | 423,846 | 638,377 | 234,916 | 637,500 | 0 | 20,100 | (4) | 1,954,739 | |||||||||||||||||||||||
Senior Vice President, General Counsel and Corporate Secretary | 2009 | 350,000 | 0 | 0 | 0 | 0 | 12,921 | 362,921 | ||||||||||||||||||||||||
2008 | 349,807 | 782,190 | 784,184 | 0 | 0 | 17,400 | 1,933,581 | |||||||||||||||||||||||||
Marcel Regnier (5) | 2010 | 432,024 | 727,639 | 0 | 369,360 | 0 | 66,394 | (4) | 1,595,417 | |||||||||||||||||||||||
Senior Vice President, COO – Itron International | 2009 | 438,000 | 0 | 0 | 0 | 0 | 107,039 | 545,039 |
(1) | These columns reflect the aggregate grant date fair value of awards granted under our Long-Term Performance Plan and Amended and Restated 2000 Stock Incentive Plan determined in accordance with FASB ASC Topic 718. See Note |
(2) | Includes grant date fair value of 2010 Long-Term Performance Plan awards assuming target performance achievement. Grant date fair values assuming maximum performance achievement for the Long-Term Performance Plan awards would be: M.Unsworth – $2,711,228; S. Helmbrecht – $850,759; P. Mezey –$850,759; J. Holleran – $850,759 and Regnier – $850,759. |
(3) | This column reflects the cash awards earned by the NEO’s under our annual incentive program. |
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(4) | We value these benefits based on the actual costs or charges incurred by us for the benefits. The amounts shown under “All Other Compensation” consist of the following: |
Name | Financial Planning (7) | Tax Preparation (7) | Legal Counseling (7) | Medical Costs (7) | Additional Life Insurance (7) | Long-Term Disability (7) | Home Office (7) | 401(k) Company Contributions | Executive Deferred Comp. Plan Company Match (8) | Financial Planning (6) | Tax Preparation (6) | Medical Costs (6) | Additional Life Insurance (6) | Long-Term Disability (6) | Home Office (6) | 401(k) Company Contributions | ||||||||||||||||||||||||||||||||||||||
Malcolm Unsworth | $ | 3,814 | $ | 4,693 | $ | 44 | $ | 240 | $ | 3,121 | $ | 7,980 | $ | 4,879 | $ | 10,518 | $ | 65 | $ | 3,942 | $ | 7,350 | ||||||||||||||||||||||||||||||||
Steve Helmbrecht | 4,705 | 6,000 | 1,295 | 2,686 | 1,385 | 5,485 | 6,375 | 890 | 7,350 | |||||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | 3,570 | 5,997 | 1,783 | 147 | 503 | 2,603 | 2,769 | 3,500 | 6,375 | 1,466 | 101 | 1,308 | 7,350 | |||||||||||||||||||||||||||||||||||||||||
John Holleran | 4,533 | 444 | 5,250 | 271 | 2,423 | 2,320 | 3,555 | 387 | 6,375 | 113 | 7,350 | |||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
LeRoy Nosbaum | 2,845 | 260 | 7,044 | 5,640 | 5,712 | |||||||||||||||||||||||||||||||||||||||||||||||||
Name | Club Fees | Relocation Costs (9) | Housing Allowance | Cost of Living Allowance | Holiday Pay | Company Car | Travel Expenses | Expatriate Tax Reimbursement (9) | Group Insurance Retirement Contribution (10) | |||||||||||||||||||||||||||||||||||||||||||||
Malcolm Unsworth | $ | 3,366 | $ | 569,218 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | 240 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
John Holleran | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | 34,602 | 3,650 | 13,015 | 3,213 | 52,560 | |||||||||||||||||||||||||||||||||||||||||||||||||
LeRoy Nosbaum | 1,797 |
Name Malcolm Unsworth Steve Helmbrecht Philip Mezey John Holleran Marcel Regnier Executive
Deferred Comp.
Plan Company
Match (7) Housing
Allowance Cost of Living
Allowance Company
Car Expatriate Tax
Reimbursement (8) Group Insurance
Retirement
Contribution (9) $ 22,454 $ 25,646 12,738 12,738 31,995 3,375 2,867 28,157
(5) | Mr. Regnier’s compensation is paid in Euros and has been converted to US dollars ($USD) using an exchange rate of 1 Euro to 1.35 $USD. This exchange rate represents the approximate average exchange rate of 2010 Q4, and is the rate used by the Company for 2011 budgeting purposes. |
(6) | Represents amounts reimbursed by Itron under our Executive Flex Benefit Plan, which allows executives to be reimbursed for certain services not to exceed in the aggregate 3% of the executive’s base salary. Effective January 1, 2011, this Plan has been terminated. |
(7) | Deferred compensation plan details are discussed following the Nonqualified Deferred Compensation Table. |
(8) | Represents reimbursement paid in 2010 for taxes on equalization payments received for additional Belgium or US income and social taxes incurred as a result of Mr. Unsworth’s assignment in Belgium for the time he was living abroad before his promotion to President and COO (4/15/2008). |
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(9) |
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Represents Company contributions to a group insurance arrangement which provides retirement and death benefits for our executives in Belgium. |
20092010 Grants of Plan-Based Awards Table
The following table provides information regarding grants of plan-based awards to the NEOsNEOS during 2009.2010.
Grants of Plan – Based Awards | Grants of Plan – Based Awards | Grants of Plan – Based Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) (3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | All Other Option Awards: Number of Securities Underlying Options (#) (4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) (1) | Target ($) (1) | Maximum ($) (1) | Threshold (#) (2) | Target (#) (2) | Maximum (#) (2) | Threshold ($) (1) | Target ($) (1) | Maximum ($) (1) | Threshold (#) (2) | Target (#) (2) | Maximum (#) (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Malcolm Unsworth | 2/13/2009 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 50,000 | $ | 57.96 | $ | 1,297,020 | n/a | $ | 375,000 | $ | 750,000 | $ | 1,500,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||
2/12/2010 | n/a | n/a | n/a | 11,050 | 22,100 | 44,200 | n/a | n/a | n/a | $ | 1,355,614 | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/12/2010 | n/a | n/a | n/a | n/a | n/a | n/a | 11,050 | n/a | n/a | $ | 677,807 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/12/2010 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 27,530 | $ | 61.34 | $ | 747,467 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 0 | n/a | $ | 159,375 | $ | 318,750 | $ | 637,500 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | 3,455 | 6,910 | 13,820 | n/a | n/a | n/a | $ | 425,380 | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | n/a | n/a | n/a | 3,460 | n/a | n/a | $ | 212,998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 8,610 | $ | 61.56 | $ | 234,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 0 | n/a | $ | 159,375 | $ | 318,750 | $ | 637,500 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | 3,455 | 6,910 | 13,820 | n/a | n/a | n/a | $ | 425,380 | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | n/a | n/a | n/a | 3,460 | n/a | n/a | $ | 212,998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 8,610 | $ | 61.56 | $ | 234,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John Holleran | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 0 | n/a | $ | 159,375 | $ | 318,750 | $ | 637,500 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | 3,455 | 6,910 | 13,820 | n/a | n/a | n/a | $ | 425,380 | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | n/a | n/a | n/a | 3,460 | n/a | n/a | $ | 212,998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 8,610 | $ | 61.56 | $ | 234,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 0 | n/a | $ | 162,000 | $ | 324,000 | $ | 648,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||
LeRoy Nosbaum | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | 3,455 | 6,910 | 13,820 | n/a | n/a | n/a | $ | 425,380 | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | n/a | n/a | n/a | n/a | n/a | n/a | 4,910 | n/a | n/a | $ | 302,260 |
(1) |
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(2) |
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(3) | Amounts shown in this column reflect the number of time-based RSUs granted to each named executive under our Amended and Restated 2000 Stock Incentive Plan (2000 SIP). |
Amounts shown in this column reflect the number of options granted to each named executive officer under our |
(5) | Amounts shown are based on target performance achievement. |
As noted elsewhereThe non-equity incentive awards included in this proxy statementtable and reflectedalso set forth in the above two tables, in 2009 we suspended ourSummary Compensation Table represent the annual incentive and long-termcomponent of our executives’ compensation. These potential payout awards are paid in cash as a percentage of each of the NEO’s salary, based upon achievement of certain pre-determined performance plans for our NEOs, except for promotional awards that includedcriteria. For more details, refer to the grant of a stock option to Malcolm Unsworth, as shown above, upon his promotion to President and CEO in March 2009. See “Long-Term Incentives” and“Annual Incentives”under the“EXECUTIVE COMPENSATION – Compensation Discussion and Analysis”Analysis – Components of our Compensation Programs”section of thisthe proxy statement. Upon Mr. Unsworth’s promotion
The equity incentive plan awards are awards issued under the Company’s 2010 LTPP for the 2010 performance period. The awards were made in February 2011 in the form of RSUs that are subject to President and CEO, Mr. Nosbaum retired as CEO and became Executive Chairmanthree-year ratable vesting. The number of RSUs granted is determined in accordance with the Board, serving until December 31, 2009. Seepre-determined performance criteria set forth in the 2010 LTPP. For more details, refer to the “Long-Term Incentives”under the“EXECUTIVE COMPENSATION – Compensation Discussion and Analysis”Analysis – Components of our Compensation Programswith respect” section of the proxy statement. Each RSU represents one share of our common stock.
The amounts included in the ‘all other stock awards’ column represent time-based RSUs issued under the Company’s Amended and Restated 2000 Stock Incentive Plan (2000 SIP). Because of the adverse tax consequences in Belgium on stock options, Mr. Regnier received additional time-based RSUs in lieu of the options granted to modifications made to Mr. Nosbaum’s awards in connection with his retirement from the Company on December 31, 2009. He received no other benefits in connection with his retirement.NEOs. For further explanation ofdetails on the benefits paid to our NEO residing in Belgium, Marcel Regnier, see “Employment Agreements” underrefer to the “EXECUTIVE COMPENSATION – Compensation Discussion and Analysis – Employment Agreements”” section of this proxy statement.statement.
20092010 Outstanding Equity Awards at Fiscal Year End Table
The following table provides information regarding outstanding equity awards held by each NEO as of December 31, 2009.2010.
Outstanding Equity Awards At Fiscal Year End | Outstanding Equity Awards At Fiscal Year End | Outstanding Equity Awards At Fiscal Year End | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||
Grant Date | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (4) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (4) | ||||||||||||||||||||||||||||||||
4,397 | $ | 22.74 | 7/1/2014 | 7/1/2004 | 4,397 | $ | 22.74 | 7/1/2014 | |||||||||||||||||||||||||||||||||||||
5/3/2005 | 2,673 | $ | 37.40 | 5/3/2015 | |||||||||||||||||||||||||||||||||||||||||
8/7/2006 | 20,000 | $ | 48.51 | 8/7/2016 | |||||||||||||||||||||||||||||||||||||||||
5/3/2005 | 2,673 | $ | 37.40 | 5/3/2015 | 5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | ||||||||||||||||||||||||||||||||||||
8/7/2006 | 20,000 | $ | 48.51 | 8/7/2016 | 2/14/2008 | 3,136 | (2) | $ | 173,891 | ||||||||||||||||||||||||||||||||||||
2/22/2007 | 2,327 | (2) | $ | 157,235 | 5/5/2008 | 20,000 | 10,000 | $ | 95.78 | 5/5/2018 | |||||||||||||||||||||||||||||||||||
5/14/2007 | 13,334 | 6,666 | $ | 67.43 | 5/14/2017 | 2/12/2009 | 3,715 | (2) | $ | 205,997 | |||||||||||||||||||||||||||||||||||
2/14/2008 | 3,136 | (2) | $ | 211,900 | 2/13/2009 | 16,667 | 33,333 | $ | 57.96 | 2/13/2019 | |||||||||||||||||||||||||||||||||||
5/5/2008 | 10,000 | 20,000 | $ | 95.78 | 5/5/2018 | 2/12/2010 | 27,530 | $ | 61.34 | 2/12/2020 | |||||||||||||||||||||||||||||||||||
2/12/2009 | 3,715 | (2) | $ | 251,023 | 2/12/2010 | 11,050 | (3) | $ | 612,723 | ||||||||||||||||||||||||||||||||||||
2/13/2009 | 50,000 | $ | 57.96 | 2/13/2019 | 2/12/2010 | 44,200 | (5) | $ | 2,450,890 | ||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | 3/8/2004 | 2,792 | $ | 19.20 | 3/8/2014 | 3/8/2004 | 2,792 | $ | 19.20 | 3/8/2014 | |||||||||||||||||||||||||||||||||||
5/28/2004 | 2,247 | $ | 20.64 | 5/28/2014 | 5/28/2004 | 2,247 | $ | 20.64 | 5/28/2014 | ||||||||||||||||||||||||||||||||||||
12/6/2004 | 8,333 | $ | 21.18 | 12/6/2014 | 12/6/2004 | 8,333 | $ | 21.18 | 12/6/2014 | ||||||||||||||||||||||||||||||||||||
5/3/2005 | 5,000 | $ | 37.40 | 5/3/2015 | 5/3/2005 | 2,327 | $ | 37.40 | 5/3/2015 | ||||||||||||||||||||||||||||||||||||
8/7/2006 | 13,333 | $ | 48.51 | 8/7/2016 | 8/7/2006 | 13,333 | $ | 48.51 | 8/7/2016 | ||||||||||||||||||||||||||||||||||||
2/22/2007 | 2,327 | (2) | $ | 157,235 | 5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | ||||||||||||||||||||||||||||||||||||
5/14/2007 | 13,334 | 6,666 | $ | 67.43 | 5/14/2017 | 2/14/2008 | 1,459 | (2) | $ | 80,902 | |||||||||||||||||||||||||||||||||||
2/14/2008 | 1,459 | (2) | $ | 98,585 | 5/5/2008 | 13,334 | 6,666 | $ | 95.78 | 5/5/2018 | |||||||||||||||||||||||||||||||||||
5/5/2008 | 6,667 | 13,333 | $ | 95.78 | 5/5/2018 | 2/12/2009 | 2,532 | (2) | $ | 140,399 | |||||||||||||||||||||||||||||||||||
2/12/2009 | 2,532 | (2) | $ | 171,087 | 2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | ||||||||||||||||||||||||||||||||||||
2/11/2010 | 3,460 | (3) | $ | 191,857 | |||||||||||||||||||||||||||||||||||||||||
2/11/2010 | 13,820 | (5) | $ | 766,319 | |||||||||||||||||||||||||||||||||||||||||
Philip Mezey | 5/3/2005 | 5,000 | $ | 37.40 | 5/3/2015 | 5/3/2005 | 5,000 | $ | 37.40 | 5/3/2015 | |||||||||||||||||||||||||||||||||||
8/7/2006 | 16,000 | $ | 48.51 | 8/7/2016 | |||||||||||||||||||||||||||||||||||||||||
5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | |||||||||||||||||||||||||||||||||||||||||
8/7/2006 | 16,000 | $ | 48.51 | 8/7/2016 | 2/14/2008 | 2,235 | (2) | $ | 123,931 | ||||||||||||||||||||||||||||||||||||
2/22/2007 | 2,327 | (2) | $ | 157,235 | 5/5/2008 | 13,334 | 6,666 | $ | 95.78 | 5/5/2018 | |||||||||||||||||||||||||||||||||||
5/14/2007 | 13,334 | 6,666 | $ | 67.43 | 5/14/2017 | 2/12/2009 | 2,409 | (2) | $ | 133,579 | |||||||||||||||||||||||||||||||||||
2/14/2008 | 2,235 | (2) | $ | 151,019 | 2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | ||||||||||||||||||||||||||||||||||||
5/5/2008 | 6,667 | 13,333 | $ | 95.78 | 5/5/2018 | 2/11/2010 | 3,460 | (3) | $ | 191,857 | |||||||||||||||||||||||||||||||||||
2/12/2009 | 2,409 | (2) | $ | 162,776 | 2/11/2010 | 13,820 | (5) | $ | 766,319 | ||||||||||||||||||||||||||||||||||||
John Holleran | 2/22/2007 | 13,334 | 6,666 | $ | 62.52 | 2/22/2017 | 2/22/2007 | 20,000 | $ | 62.52 | 2/22/2017 | ||||||||||||||||||||||||||||||||||
5/14/2007 | 13,334 | 6,666 | $ | 67.43 | 5/14/2017 | 5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | |||||||||||||||||||||||||||||||||||
2/14/2008 | 1,459 | (2) | $ | 98,585 | 2/14/2008 | 1,459 | (2) | $ | 80,902 | ||||||||||||||||||||||||||||||||||||
5/5/2008 | 6,667 | 13,333 | $ | 95.78 | 5/5/2018 | 5/5/2008 | 13,334 | 6,666 | $ | 95.78 | 5/5/2018 | ||||||||||||||||||||||||||||||||||
8/26/2008 | 4,000 | (3) | $ | 270,280 | 8/26/2008 | 2,000 | (3) | $ | 110,900 | ||||||||||||||||||||||||||||||||||||
2/12/2009 | 2,217 | (2) | $ | 149,803 | 2/12/2009 | 2,217 | (2) | $ | 122,933 | ||||||||||||||||||||||||||||||||||||
2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | |||||||||||||||||||||||||||||||||||||||||
2/11/2010 | 3,460 | (3) | $ | 191,857 | |||||||||||||||||||||||||||||||||||||||||
2/11/2010 | 13,820 | (5) | $ | 766,319 | |||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | 1/22/2008 | 8,000 | (3) | $ | 540,560 | 5/5/2008 | 10,000 | (3) | $ | 554,500 | |||||||||||||||||||||||||||||||||||
5/5/2008 | 10,000 | (3) | $ | 675,700 | 2/12/2009 | 1,960 | (2) | $ | 108,682 | ||||||||||||||||||||||||||||||||||||
2/12/2009 | 1,960 | (2) | $ | 132,437 | 2/11/2010 | 4,910 | (3) | $ | 272,260 | ||||||||||||||||||||||||||||||||||||
2/11/2010 | 13,820 | (5) | $ | 766,319 | |||||||||||||||||||||||||||||||||||||||||
LeRoy Nosbaum | 8/7/2006 | 30,000 | $ | 48.51 | 3/31/2010 | ||||||||||||||||||||||||||||||||||||||||
5/14/2007 | 26,667 | $ | 67.43 | 12/31/2010 | |||||||||||||||||||||||||||||||||||||||||
5/5/2008 | 30,000 | $ | 95.78 | 12/31/2012 |
(1) | One third of the options granted on May |
(2) | Represents |
(3) | Represents RSUs granted under the |
(4) | Based on the closing price of our common stock on December 31, |
(5) | Represents RSUs granted under the Long-Term Performance Plan for the 2010 performance cycle, attained at maximum performance. |
20092010 Option Exercises and Stock Vested Table
The following table provides information regarding stock option exercises and shares acquired upon the vesting of stock awards by the NEOs during the 20092010 fiscal year.
Option Exercises and Stock Vested | Option Exercises and Stock Vested | Option Exercises and Stock Vested | |||||||||||||||||||||||
Name | Option Awards | Stock Awards | |||||||||||||||||||||||
Option Awards | Stock Awards | ||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | |||||||||||||||||
— | — | 2,208 | 127,468 | 2,327 | 153,722 | ||||||||||||||||||||
Steve Helmbrecht | — | — | 2,208 | 127,468 | 2,673 | 44,773 | 2,327 | 153,722 | |||||||||||||||||
Philip Mezey | — | — | 2,007 | 115,864 | 2,327 | 153,722 | |||||||||||||||||||
John Holleran | — | — | 2,000 | 107,400 | 2,000 | 108,040 | |||||||||||||||||||
Marcel Regnier | n/a | n/a | n/a | n/a | 8,000 | (3) | 512,400 | (3) | |||||||||||||||||
LeRoy Nosbaum | 90,253 | 3,465,169 | 19,368 | (3) | 1,262,181 |
(1) | Represents the difference between the exercise price and the fair market value of our common stock on the date of exercise. |
(2) | Based on the fair market value of our common stock on the vest date. |
(3) |
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20092010 Nonqualified Deferred Compensation Table
The following table provides information regarding the nonqualified deferred compensation of each of the NEOs for the 20092010 fiscal year.
Nonqualified Deferred Compensation | Nonqualified Deferred Compensation | Nonqualified Deferred Compensation | |||||||||||||||||||||||||||||
Name | Executive Contributions in Last Fiscal Year ($) (1) | Registrant Contributions in Last Fiscal Year ($) (2) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | Executive Contributions in Last Fiscal Year ($) (1) | Registrant Contributions in Last Fiscal Year ($) (2) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | |||||||||||||||||||||
Malcolm Unsworth | 82,061 | 7,980 | 103,218 | — | 581,229 | 99,545 | 22,454 | 54,304 | 757,532 | ||||||||||||||||||||||
Steve Helmbrecht | 12,000 | 1,385 | (5,763 | ) | — | 86,526 | 28,273 | 12,738 | 5,187 | 132,723 | |||||||||||||||||||||
Philip Mezey | 24,000 | 2,769 | 63,902 | — | 270,813 | 25,477 | 12,738 | 34,608 | 343,636 | ||||||||||||||||||||||
John Holleran | n/a | n/a | n/a | — | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
Marcel Regnier | n/a | n/a | n/a | — | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
LeRoy Nosbaum | n/a | n/a | n/a | — | n/a |
(1) | This deferred compensation represents amounts that are reported as compensation earned in |
(2) | These amounts have been included in theSummary Compensation Tablein the “All Other Compensation” column. |
Executive Deferred Compensation Plan
Executives located in the U.S. are eligible to participate in the Company’s Executive Deferred Compensation Plan. Under this plan, participants may defer up to 50% of their base salary and 50% of their annual incentive to a non-qualified account. Participants may also defer an additional portion of their base salary equal to the amount of any contributions returned to them during the year from the Company’s 401(k) plan so that the 401(k) plan can
satisfy the nondiscrimination requirements applicable to it. Each year,Annually, (unless suspended by the Board as it did for
the first quarter of 2009), the Company makes matching contributions to the account of each participating executive at the rate of 50% of the first 6% of base salary and annual incentive deferred by the executive during that year. Effective April 1, 2009, the Company suspended the matching contributions to both plans as part of our cost-cutting efforts in 2009.
Each participant’s account is adjusted for hypothetical investment earnings or losses based on the performance of the “measurement funds” in which the account is deemed to be invested. Participants allocate their accounts among the measurement funds available under the plan and can change their allocation at any time. These measurement funds are the same as the mutual funds offered for investment purposes under the Company’s 401(k) plan (but do not include a Company stock fund). Measurement funds are used solely to determine the amount of the hypothetical investment earnings or losses to be allocated to the participant’s account. The Company is not obligated to invest any assets in these funds.
Accounts are distributed (or commence to be distributed) to participants upon termination of employment with the Company and its affiliates. Distribution will generally be made (or commence to be made) within 90 days after termination. However, distribution will be delayed until six months after termination to the extent necessary to comply with the requirements of Internal Revenue Code Section 409A. In-service distributions are not generally permitted. However, participants may elect to withdraw amounts from their accounts prior to termination to satisfy emergency needs in the event of an unforeseeable emergency (as determined by the plan administrator).
A participant’s account will be distributed in a lump sum, unless the participant elects to have it distributed in substantially equal annual installments over a period of not more than 10 years. This election must be made at the time the participant is first eligible to participate in the plan.
Potential Payments upon Termination
Termination for Cause
Under these circumstances, theThe executive is entitled to receive any accrued and unpaid base salary through the date of termination. All options granted automatically expire when terminated for cause and all unvested time-based RSUs and all unvested awards under the LTPP and the Annual Incentive Plan will beEMIP are forfeited in the event of termination for cause.
Termination due to Death, Disability, or Retirement
Under these circumstances, theBase Salary: The executive or his or her estate is entitled to any accrued and unpaid base salary through the date of termination.
Time-based RSUs: If termination andis due to death, disability, or retirement, any unvested RSUs granted under the 2000 SIP would vest pro-rata based on the number of calendar days employed during the vesting period. For RSUs granted under the 2010 SIP, all unvested awards would be forfeited.
Stock Options: All unvested options automatically expire when termination is due to death, disability or retirement. If termination is due to death or disability, any vested stock options would remain exercisable foruntil the earlier of one year following the date of termination, or the date on which the options expire by their terms. If termination is due to retirement, any vested stock options granted prior to 2008 under the terms2000 SIP would remain exercisable until the earlier of one year following the date of termination or the date on which the options expire by their terms. For options granted in 2008 or later under the 2000 SIP, and for options granted under the 2010 SIP, if termination is due to retirement, any vested stock incentive plan.options would remain exercisable until the earlier of three years following the date of termination or the date on which the options expire by their terms.
LTPP:For awards underissued for the LTPP (a) if termination occurs (for any reason) during a2007 and 2008 performance period, the award will be forfeited, (b)periods, if termination occurs during the three-year cliff vesting period of a restricted stock award issued in 2007 for 2006 performance, the award will be forfeited, (c) if termination occurs during the three-year cliff vesting period of a restricted stock unit award issued in 2008 for 2007 performance, the award will vest pro-rata based on the number of full months’ employmentcalendar days employed during the vesting period, and (d)period. There were no LTPP awards for the 2009 performance period. For awards under the 2010 LTPP, if termination occurs during the three-year cliffperformance period by reason of death, disability, or retirement, the number of
RSUs that become eligible for vesting, based on attainment of performance goals assessed at the end of the performance period, of a restricted stock unit award issued in 2009 for 2008 performance, the award will vestbe determined pro-rata based on the number of full months’ employmentcalendar days employed during the performance period and will vest as of the date of death, disability or retirement. If termination occurs during the three-year ratable vesting period. As noted elsewhereperiod by reason of death, disability, or retirement, all unvested units will vest as of the date of termination. Vested units generally will be settled at the original vesting date set forth in this proxy statement, there was no 2009 LTPP for our executives.the award agreement, and in accordance with the provisions of Section 409A of the Code.
Annual Incentive Plan: For awards under the EMIP, participants would receive a prorated award (assuming an award is earned) based on the number of calendar days employed during the performance period and such payout, if any, will be made at the same time as the other participants.
Annual Incentive Plan:Definition of Retirement:No annual incentive bonuses were issued For purposes of stock options granted since 2008 as well as all awards granted under the 2010 SIP to executivesNEOs located in 2009.the U.S., “retirement” means the earlier of age 65 or age 55 with at least 10 years of service with Itron. For awards under the 2000 SIP, other than stock options granted in 2008 or later, “retirement” means attainment of age 65.
Voluntary Termination or Termination without Cause
Under these circumstances, theBase Salary: The executive is entitled to any accrued and unpaid base salary through the date of termination.
Time-based RSUs: All unvested RSUs are forfeited upon voluntary termination and anyor termination without cause.
Stock Options: All unvested options automatically expire due to voluntary termination or termination by the Company without cause. Any vested options would remain exercisable foruntil the earlier of 90 days following termination.termination of employment or the date on which the options expire by their terms.
LTPP:For awards underissued for the LTPP (a) if termination occurs during a2007 and 2008 performance period, the award will be forfeited, (b)periods, if termination occurs during the three-year cliff vesting period, of a restricted stock award issued in 2007 for 2006 performance, the entire award will be forfeited, (c) if termination occurs during the three-year cliff vesting period of a restricted stock unit award issued in 2008 for 2007 performance, the award will vest pro-rata based on the number of full months’ employmentcalendar days employed during the vesting period, and (d)period. There were no LTPP awards for the 2009 performance period. For awards under the 2010 LTPP, if termination occurs during the performance period or the three-year cliffratable vesting period, any unvested awards are forfeited. Vested units will be settled in accordance with the provisions of a restricted stock unit award issued in 2009 for 2008 performance,Section 409A of the award will vest pro-rata based on the number of full months’ employment during the vesting period. As noted elsewhere in this proxy statement, there was no 2009 LTPP for our executives.Code.
Annual Incentive Plan:Under these circumstances, The bonus under the bonus will2010 EMIP would be forfeited in its entirety.entirety if the NEO is not employed by the Company at the time of the payout.
Potential Payments upon Change in ControlChange-in-Control
ChangeThe following describes the material provisions of the CIC Agreements that we entered into with our NEOs in Control2010. For a comparison of these provisions to the CIC Agreements – 2009
Our change in control agreements in effect prior to 2010, refer to the “Change-in-Control Agreements” section under the “Compensation Discussion and Analysis”section of this Proxy Statement. The Agreements provide for 2009the following benefits if there is a change-in-control and the NEO’s employment is terminated by the Company without cause or by the NEO for “good reason”:
Severance Benefit. The CIC Agreements provide the CEO with eacha severance benefit of our executives provided that3 times the sum of base salary and target annual incentive opportunity established for the year in which the change-in-control occurs. For the other NEOs, the severance benefit is 2.5 times the sum of base salary and target annual incentive opportunity. The benefit is paid in cash in one lump sum.
Pro-Rata Annual Incentive for Year of Termination. The Agreements provide for a payment based on the greater of target opportunity or actual performance (as determined by the Board), prorated for the time worked during the oneyear of termination.
Welfare Benefit Continuation. The CIC Agreements provide for three years of life and disability insurance coverage (with no tax gross-up) for the CEO and 2.5 years of life and disability insurance coverage (with no tax
gross-up) for the other NEOs. The Agreements also provide for three years of health care coverage for the CEO and his dependents, while the other NEOs and their dependents would receive 2.5 years of health care coverage.
Equity Award Vesting and Acceleration. The CIC Agreements provide for accelerated vesting of stock options and restricted stock or two year period following a change in control, dependingother equity-based awards at the time of the change-in-control. There is accelerated vesting of the LTPP awards at the time of the change-in-control with payouts based on the executive,greater of target opportunity or actual performance, as determined by the executive wouldBoard, pro-rated for the portion of the performance year as of the date of the change-in-control.
Excise Tax Gross-Up. There is a provision for an excise tax gross-up if parachute payments exceed 105% of the IRS safe harbor amount, except that the tax gross-up will “sunset” in March 2013.
Legal Fees. The CIC Agreements provide that NEOs will be compensated with:reimbursed for legal fees and expenses incurred in seeking to enforce the CIC Agreement.
Restrictive Covenants. The CIC Agreements include restrictive covenants relating to non-solicitation (one-year) and non-disparagement and require a release of all claims against the Company.
Definition of Change-in-Control. For purposes of the CIC Agreements, a “change-in-control” generally consists of any of the following:
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If we terminated an executive, other than for cause, or if an executive terminated employment for good reason during the employment period, or prior to a change in control if the executive could reasonably demonstrate that such termination was at the request of a third party who had taken steps reasonably calculated to effect the change in control, or demonstrates that such termination otherwise arose in connection with or in anticipation of a change in control, then the executive would receive:
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If the executive was terminated for cause or if the executive terminated his or her employment other than for good reason, the executive would only be entitled to receive any unpaid salary due to the executive as of the date of termination and any amounts previously deferred by the executive. If the executive terminated because of death or disability, the executive would only have been entitled to receive any unpaid salary and pro-rated bonus due to the executive as of the date of termination, any amounts previously deferred by the executive, and any accrued vacation pay.
In the event that payments under the change in control agreement resulted in the imposition of excise taxes to the executive, we would pay the executive an additional amount equal to the excise tax and other related taxes; provided, however, that if reducing the amount of severance payable to the executive by up to five percent would not have subjected the executive to the excise tax, the amount of severance could have been reduced by such amount, not to exceed five percent, as would not have subjected the executive to the excise tax.
A “change in control” for purposes of these agreements generally consisted of any of the following (excluding certain related party transactions):
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ADefinition of Good Reason. For purposes of the CIC Agreements, “good reason” for termination by us for “cause”the NEO of his or her employment generally included:means any one of the following acts by the Company following a change-in-control:
n | An adverse change in the |
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n | The failure to continue to provide welfare, medical and other fringe benefits which in the |
n | The requirement for the NEO to |
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A termination for “good reason” by the named executive officer generally included any of the following actions by us without the executive’s written consent following the change in control:
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See also “Termination Payment Tables for NEOs”in this section of the proxy statement.
Regnier Severance Benefits and Change in ControlChange-in-Control Agreement
Our Senior Vice President and COO-International, Mr. Regnier, resides in Belgium, as required by his position. Under Belgium laws, Mr. Regnier may be entitled to receive severance payments determined under the formula prescribed by statute in Belgium, which is based on age, seniority, and level of remuneration at the time of termination, regardless of the reason for the termination (except for cause). Consequently, his change in controlchange-in-control agreement provides that any severance payments and benefits he receives under Belgium law, if any, will be offset against any payments or benefits he receives pursuant to his change in controlchange-in-control agreement.
Change in Control Agreements – 2010
We entered into new change in control agreements with our executives in 2010 which will substantially reduce the level of severance benefits payable to our executives upon involuntary termination without cause or voluntary termination for good reason after a change in control. See “Compensation Discussion and Analysis – Payments Upon Change in Control – New 2010 Agreements” in this proxy statement.
Amended and Restated 2000 Stock Incentive Plan (SIP) Change in ControlChange-in-Control Provisions
Our 2000 SIP (which was terminated in May 2010 and replaced with our 2010 SIP upon its approval by shareholders) contains certain provisions relating to corporate transactions. In the event of a corporate transaction that is not a related party transaction, the vesting of options and stock awards will accelerate and they will become 100% vested and exercisable. In the event of a corporate transaction that is a related party transaction, the vesting of options and stock awards will not accelerate, unless the successor company refuses to assume or substitute the awards. Under the terms of the 2000 SIP, the following events are defined as corporate transactions:
n | consummation of any merger or consolidation with or into another corporation; |
n | consummation of any sale, lease, exchange, or other transfer of all or substantially all of our outstanding securities or substantially all of our assets; or |
n | acquisition of a majority or more of our outstanding voting securities. |
See “ITEM 2 – APPROVAL OF THE ITRON, INC. 2010 STOCK INCENTIVE PLAN”Stock Incentive Plan Change-in-Control Provisionsin this proxy statement for
Our 2010 SIP contains certain provisions relating to a descriptionchange-in-control of the change in control provisionsCompany. In the event of a Change-in-Control Transaction, as defined in our 2010CIC Agreements described above, unless otherwise provided in the award agreement, generally:
(a) Each outstanding option will be assumed or an equivalent option substituted by the surviving corporation, the successor corporation or its parent corporation, as applicable (the “Successor Corporation”). Upon completion of the Change-in-Control Transaction, the assumed or substituted options become fully vested and exercisable whether or not the vesting requirements set forth in the applicable option agreement have been satisfied.
(b) The vesting of shares subject to stock awards will accelerate, and the forfeiture provisions applicable to those shares will lapse, if and to the same extent that the vesting and exercisability of outstanding options accelerate in connection with the Change-in-Control Transaction. If unvested options are to be assumed or substituted by a Successor Corporation without acceleration upon the occurrence of a Change-in-Control Transaction, the forfeiture provisions applicable to the shares subject to stock awards will continue with respect to shares of the Successor Corporation that may be issued in exchange for such shares.
(c) The vesting and payout of LTPP awards will be as provided in the award agreement with the Company, as described below.
The Plan that we are submitting for shareholder approvalAdministrator has the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, or change-in-control of the annual meeting.Company, as defined by the Plan, to take such further action as it determines to be necessary or advisable, and fair and equitable to the participants, with respect to awards.
LTPP Change in ControlChange-in-Control Provisions
All outstandingFor awards issued for the 2007 and 2008 performance awards will be accelerated at the maximum level and immediately paid in fully vested shares of our common stock prior to a change in control. Furthermore, any outstandingperiods, all unvested restricted stock or restricted stock units issued in connection with a prior performance periodRSUs will accelerate in fulland become vested immediately prior to the change-in-control. There were no LTPP awards for the 2009 performance period. For awards under the 2010 LTPP, all unvested RSUs will accelerate and become vested immediately prior to the change-in-control. If a change in control. change-in-control occurs during the performance period under the 2010 LTPP, the number of RSUs subject to the award will be the greater of (a) the target number of RSUs subject to the award or (b) the actual number of RSUs subject to the award as determined based on the attainment of the performance goals if the Plan Administrator determines that the attainment of the performance goals may be determined as of the date of the change-in-control, pro-rated based on the portion of the performance period that has elapsed between the grant date for the award and the date of the change-in-control.
The definition of change in controlchange-in-control for purposes of restricted stock awardsthose RSUs granted under the 2006 LTPP will be consistent with the definition in the standard change in control agreements that we have in effect at the time of a transaction. The definition of change in control for purposes of restricted stock units granted under the 2007 LTPP and the 2008 LTPP performance periods includes (a)is either a corporate transaction (other than a related party transaction) as defined in theour 2000 SIP, as described above, or (b) a change in controlchange-in-control as defined in the standard change in controlchange-in-control agreements that we have in effect at the time of a transaction, but in any event, the transaction must constitute a change in controlchange-in-control event within the meaning of Section 409A of the Code. We did not adoptThe definition of change-in-control for those RSUs granted under the 2010 LTPP is defined in the 2010 SIP, as described above, and the transaction must constitute a 2009 LTPP.
Time-based RSUs: In the event of a change-in-control, any unvested RSUs will accelerate and become vested immediately prior to such transaction.
Termination Payment Tables for NEOs
The tables below reflect the estimated amount of incremental compensation payable to each of our NEOs in the event of termination of employment or change in control.change-in-control. The tables do not include benefits generally available to all employees on a non-discriminatory basis or payments and benefits that the NEOs would have already earned during their employment with us, whether or not a termination or change in controlchange-in-control event had occurred. The amounts shown assume that such termination or change in controlchange-in-control was effective as of December 31, 2009.2010. The actual amounts to be paid out can only be determined at the time of such executive’s termination or upon a change in control,change-in-control, as applicable.
Malcolm Unsworth
Summary of Termination Payments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Malcolm Unsworth | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Termination Payments Malcolm Unsworth | Summary of Termination Payments Malcolm Unsworth | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits (1) | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change in Control | Termination Without Cause or by Executive for Good Reason during Post Change in Control Period | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change-in- Control | Termination Without Cause or by Executive for Good Reason Following a Change-in- Control | ||||||||||||||||||||||||||||||||||||||||
Annual Incentive (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 325,000 | $ | 325,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 481,433 | $ | 481,433 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2,925,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 4,500,000 | ||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,116 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,512 | (8) | |||||||||||||||||||||||
Accelerated Restricted Stock/Pro-rata RSUs (5) | $ | — | $ | 199,196 | $ | 199,196 | $ | 199,196 | $ | 199,196 | $ | 199,196 | $ | 620,157 | $ | 620,157 | ||||||||||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | 296,269 | $ | 296,269 | $ | 296,269 | $ | 296,269 | $ | 296,269 | $ | 992,610 | $ | 992,610 | ||||||||||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Gross-Up (7) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,724,948 |
(1) | The above table does not include amounts |
(2) |
|
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Represents three times the sum of base salary |
(5) | Represents the pro-rata vested value of RSUs granted February 14, 2008 and February 12, 2009 under the LTPP, based on |
(6) | Pursuant to our change-in-control agreement with this executive the LTPP awards outstanding as of the change-in-control will be vested at the greater of target or actual performance for the year. For 2010, the actual performance achieved was greater than target, resulting in no additional amount vesting. |
(7) | In the event that payments under the change-in-control agreement result in imposition of excise taxes to the executive, we will pay the executive an additional amount (“gross-up”) equal to the excise tax and other related taxes on the excise tax gross-up (federal and state income taxes), unless reducing the amount of severance by up to five percent would not subject the executive to the excise tax, in which case the amount of severance may be reduced by such amount. The executive pays basic federal and state income taxes incurred on payments that are not a result of the imposition of the excise tax. |
(8) | Mr. Unsworth does not subscribe to the Company’s healthcare benefits plan. |
Summary of Termination Payments Steve Helmbrecht | ||||||||||||||||||||||||||||||||
Executive Benefits (1) | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change-in- Control | Termination Without Cause or by Executive for Good Reason Following a Change-in- Control | ||||||||||||||||||||||||
Annual Incentive (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,859,375 | ||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 35,258 | ||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | 165,851 | $ | 165,851 | $ | 165,851 | $ | 165,851 | $ | 165,851 | $ | 413,158 | $ | 413,158 | ||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Gross-Up (7) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 605,028 |
(1) | The above table does not include amounts under our Executive Deferred Compensation Plan, stock option awards that are fully vested, earned salary, and accrued vacation as those items are earned and due to the employee regardless of such termination or change-in-control events. It also does not include amounts payable under life insurance coverage, our accidental death & dismemberment coverage or our business travel accident coverage, which are programs available to all employees. Under the change-in-control agreement with this executive the term is 24 months following a change-in-control and the severance payment is equal to 2.5 times the sum of the executive’s base salary and target annual bonus. Each form of payment is mutually exclusive based on the individual circumstances or events and therefore represents a single payment and should not be added together. |
(2) | Pursuant to our change-in-control agreement with this executive the annual bonus payable in the event of termination following a change-in-control is the greater of target or the actual amount earned. For 2010, the actual amount earned was greater than target, resulting in no additional amount payable. |
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, 2010 ($55.45). |
(4) | Represents 2.5 times the sum of base salary and target annual bonus. |
(5) | Represents the |
(6) | Pursuant to our change-in-control agreement with this executive the LTPP awards outstanding as of the change-in-control will be vested at the greater of target or actual performance for the |
(7) | In the event that payments under the |
Steven Helmbrecht
Summary of Termination Payments Steve Helmbrecht | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Termination Payments Phillip Mezey | Summary of Termination Payments Phillip Mezey | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits (1) | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change in Control | Termination Without Cause or by Executive for Good Reason during Post Change in Control Period | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change-in- Control | Termination Without Cause or by Executive for Good Reason Following a Change-in- Control | ||||||||||||||||||||||||||||||||||||||||
Annual Incentive (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 200,000 | $ | 200,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 933 | $ | 933 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,800,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,859,375 | ||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 18,273 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 35,258 | ||||||||||||||||||||||||
Accelerated Restricted Stock/Pro-rata RSUs (5) | $ | — | $ | 107,774 | $ | 107,774 | $ | 107,774 | $ | 107,774 | $ | 107,774 | $ | 426,907 | $ | 426,907 | ||||||||||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | 202,836 | $ | 202,836 | $ | 202,836 | $ | 202,836 | $ | 202,836 | $ | 449,367 | $ | 449,367 | ||||||||||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Gross-Up (7) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(1) | The above table does not include amounts |
(2) |
|
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Represents |
(5) | Represents the pro-rata vested value of RSUs granted February 14, 2008 and February 12, 2009 under the LTPP, based on |
(6) |
|
(7) | In the event that payments under the |
John Holleran
Summary of Termination Payments John Holleran | Summary of Termination Payments John Holleran | Summary of Termination Payments John Holleran | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits (1) | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change in Control | Termination Without Cause or by Executive for Good Reason during Post Change in Control Period | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change-in- Control | Termination Without Cause or by Executive for Good Reason Following a Change-in- Control | ||||||||||||||||||||||||||||||||||||||||
Annual Incentive (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 175,000 | $ | 175,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 34,597 | $ | 34,597 | $ | — | $ | — | $ | — | $ | — | $ | — | �� | $ | — | $ | — | $ | — | |||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,575,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,859,375 | ||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 12,768 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 24,383 | ||||||||||||||||||||||||
Accelerated Restricted Stock/Pro-rata RSUs (5) | $ | — | $ | 101,896 | $ | 101,896 | $ | 101,896 | $ | 101,896 | $ | 101,896 | $ | 518,667 | $ | 518,667 | ||||||||||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | 154,872 | $ | 154,872 | $ | 154,872 | $ | 154,872 | $ | 154,872 | $ | 506,591 | $ | 506,591 | ||||||||||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Gross-Up (7) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 796,478 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 894,483 |
(1) | The above table does not include amounts |
(2) |
|
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Represents |
(5) | Represents the pro-rata vested value of RSUs granted February 14, 2008 and February 12, 2009 under the LTPP, based on |
(6) |
|
(7) | In the event that payments under the |
Philip Mezey
Summary of Termination Payments Phillip Mezey | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Termination Payments Marcel Regnier | Summary of Termination Payments Marcel Regnier | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Benefits (1) | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change in Control | Termination Without Cause or by Executive for Good Reason during Post Change in Control Period | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change-in- Control | Termination Without Cause or by Executive for Good Reason Following a Change-in- Control | ||||||||||||||||||||||||||||||||||||||||
Annual Incentive (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 200,000 | $ | 200,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 933 | $ | 933 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,800,000 | $ | — | $ | — | $ | 432,000 | $ | 432,000 | $ | 432,000 | $ | 432,000 | $ | — | $ | 1,860,000 | ||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 18,273 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 20,432 | ||||||||||||||||||||||||
Accelerated Restricted Stock/Pro-rata RSUs (5) | $ | — | $ | 137,505 | $ | 137,505 | $ | 137,505 | $ | 137,505 | $ | 137,505 | $ | 471,030 | $ | 471,030 | ||||||||||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | 68,314 | $ | 68,314 | $ | 68,314 | $ | 68,314 | $ | 68,314 | $ | 663,182 | $ | 663,182 | ||||||||||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Gross-Up (7) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(1) | The above table does not include amounts |
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|
|
|
|
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Marcel Regnier
Summary of Termination Payments Marcel Regnier | ||||||||||||||||||||||||
Executive Benefits (1) | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change in Control | Termination Without Cause or by Executive for Good Reason during Post Change in Control Period | ||||||||||||||||
Annual Incentive (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 219,000 | $ | 219,000 | ||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 438,000 | $ | — | $ | 1,971,000 | ||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 17,923 | ||||||||
Accelerated Restricted Stock/Pro-rata RSUs (5) | $ | — | $ | 36,758 | $ | 36,758 | $ | 36,758 | $ | 36,758 | $ | 36,758 | $ | 1,348,697 | $ | 1,348,697 | ||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Gross-Up (7) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
|
(2) |
|
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) |
|
(5) | Represents the pro-rata vested value of RSUs granted February 12, 2009 under the LTPP, based on |
(6) |
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(7) |
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LeRoy Nosbaum
Mr. Nosbaum retired from the Company on December 31, 2009. In connection with his retirement, forfeiture provisions of two stock awards previously earned by Mr. Nosbaum were waived so that the full amount of the performance-based awards would vest upon his retirement. The stock awards otherwise would have fully vested on February 23, 2010 (as to 7,411 shares), and February 14, 2011 (as to 1,578 shares). As a result, he received 8,989 shares of common stock that otherwise would have been forfeited. See “Long-Term Incentives” under “Compensation Discussion and Analysis” in this proxy statement. The value of those shares, based on the fair market value of our common stock at December 31, 2009, is $607,387.
20092010 AUDIT/FINANCE COMMITTEE REPORT
The Audit/Finance Committee is composed of independent directors as defined by Rule 5605(a)(2) of the NASDAQ rules and acts under a written charter developed by the Committee.Committee and approved by the Board. Management is responsible for the Company’s internal controls and the financial reporting process. Ernst & Young LLP, the Company’s independent registered public accounting firm, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with auditing standards of the Public Company Accounting Oversight Board (United States) and for issuing a report thereon. The Committee’s responsibility is to monitor and oversee these processes on behalf of our Board of Directors.
In connection with the December 31, 20092010 financial statements, the Audit/Finance Committee hereby reports as follows:
(1) | The Audit/Finance Committee has reviewed and discussed the audited financial statements and report on internal control over financial reporting with management. |
(2) | The Audit/Finance Committee has discussed with the independent auditors the matters required by |
(3) | The Audit/Finance Committee has received the written disclosures and the letter from the auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit/Finance Committee concerning independence, and discussed with the auditors the auditors’ independence. |
(4) | Based upon these reviews and discussions, the Audit/Finance Committee has recommended to the Board of Directors and the Board has approved, that the Company’s audited financial statements be included in the Securities and Exchange Commission Annual Report on Form 10-K for the year ended December 31, |
Audit/Finance Committee
Graham Wilson, Chairman
Sharon Nelson
Jon Eliassen
Thomas Glanville
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S AUDIT FEES AND SERVICES
For the years ended December 31, 20082009 and December 31, 2009,2010, professional services were performed by Ernst & Young LLP and their respective affiliates (collectively, Ernst & Young LLP). The aggregate fees billed by Ernst & Young LLP for the years ended December 31, 20082009 and 20092010 were as follows:
Services Rendered | 2008 | 2009 | 2009 | 2010 | ||||||||||
Audit Fees (1) | $ | 6,623,713 | $ | 5,471,271 | $ | 5,471.271 | $ | 5,974,951 | ||||||
Audit-Related Fees (2) | 114,950 | 134,623 | 134,623 | 223,251 | ||||||||||
Total Audit and Audit-Related Fees | 6,738,663 | 5,605,894 | 5,605,894 | 6,198,202 | ||||||||||
Tax Fees (3) | 97,106 | 9,497 | 9,497 | 208,841 | ||||||||||
Other Fees (4) | — | — | — | 98,505 | ||||||||||
Total Fees | $ | 6,835,769 | $ | 5,615,391 | $ | 5,615,391 | $ | 6,505,548 |
(1) | Audit services include fees for professional services rendered for the audit of the Company’s annual financial statements and internal controls over financial reporting for the years ended December 31, |
(2) | Audit-related services primarily include fees for acquisition due diligence services performed during the years ended December 31, |
(3) | Tax services include fees for consultation and assistance with tax preparation and compliance during the years ended December 31, |
(4) | The Company |
The Audit/Finance Committee has considered and concluded that the non-audit services provided to the Company by Ernst & Young LLP are compatible with maintaining the auditors’ independence.
The Audit/Finance Committee has adopted policespolicies and procedures requiring that require the Company to obtain the Committee’s pre-approval of all audit and permissible non-audit services to be provided by the Company’s independent registered public accounting firm. Pre-approval is generally granted on a quarterly basis, is detailed as to the particular service or category of services to be provided, and is granted after consideration of the estimated fees for each service or category of service. Actual fees and any changes to estimated fees for pre-approved services are reported to the Committee on a quarterly basis. In 20082009 and 2009,2010, all services were pre-approved in accordance with the charter of the Audit/Finance Committee.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives certain information about our equity compensation plans in effect as of December 31, 2010.
Plan Category | Number of Shares to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Shares Remaining Available for Issuance Under Equity Compensation Plans (excluding shares reflected in column (a)) (c) | |||||||||
Equity Compensation Plans Approved by Shareholders (1) | 1,689,429 | $ | 55.21 | (2) | 3,008,319 | (1) (3) | ||||||
Equity Compensation Plans Not Approved by Shareholders | — | — | — | |||||||||
Total | 1,689,429 | $ | 55.21 | (2) | 3,008,319 | (1) (3) | ||||||
(1) | Under the provisions of the Itron 2010 Stock Incentive Plan (2010 Plan), the Company may grant stock awards, stock units, performance shares, stock appreciation rights, and performance units (collectively Awards) in addition to stock options. |
(2) | The weighted-average exercise price pertains only to outstanding options and excludes 586,166 shares issuable upon vesting of outstanding Awards. |
(3) | This number includes 2,812,078 shares available for issuance under the 2010 Plan and 196,241 shares available for issuance under the 2002 Employee Stock Purchase Plan. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information with respect to the beneficial ownership of our common stock as of February 26, 201025, 2011 by:
n | each of our directors; |
n | each of our executive officers for whom compensation is reported in this proxy statement; |
n | all of our directors and executive officers as a group; and |
n | each person that we know beneficially owns more than 5% of our common stock. |
The percentage ownership data is based on 40,188,85340,596,407 shares of our common stock outstanding as of February 26, 2010.25, 2011. Under SEC rules, beneficial ownership includes shares over which the indicated beneficial owner exercises voting and/or investment power. Shares of common stock subject to options that are currently exercisable or will become exercisable within 60 days are deemed outstanding for computing the number of shares and the percentage ownership of the person holding the option, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. Except as otherwise noted, we believe that the beneficial owners of the shares of common stock listed below have sole voting and investment power with respect to all shares beneficially owned, subject to applicable community property laws.
Shares Beneficially Owned | Shares Beneficially Owned | ||||||||||||
Name | Number | Percent | Number | Percent | |||||||||
Directors and Executive Officers: | |||||||||||||
LeRoy D. Nosbaum (1) | 194,561 | * | |||||||||||
Malcolm Unsworth (2) | 93,528 | * | |||||||||||
Philip C. Mezey (3) | 61,463 | * | |||||||||||
Steven M. Helmbrecht (4) | 73,685 | * | |||||||||||
John Holleran (5) | 54,628 | * | |||||||||||
Marcel Regnier | 27,970 | * | |||||||||||
Malcolm Unsworth (1) | 190,423 | * | |||||||||||
Philip C. Mezey (2) | 93,956 | * | |||||||||||
Steven M. Helmbrecht (3) | 106,729 | * | |||||||||||
John Holleran (4) | 87,143 | * | |||||||||||
Marcel Regnier (5) | 47,130 | * | |||||||||||
Michael B. Bracy (6) | 48,199 | * | 42,277 | * | |||||||||
Kirby Dyess (7) | 10,751 | * | 12,893 | * | |||||||||
Jon E. Eliassen (8) | 12,941 | * | 16,463 | * | |||||||||
Charles H. Gaylord, Jr. (7) | 10,749 | * | 13,077 | * | |||||||||
Thomas S. Glanville (9) | 44,912 | * | 46,990 | * | |||||||||
Sharon L. Nelson (10) | 9,654 | * | 11,732 | * | |||||||||
Gary Pruitt (11) | 8,815 | * | 14,957 | * | |||||||||
Graham M. Wilson (12) | 26,423 | * | 28,565 | * | |||||||||
All directors and executive officers as a group (15 persons) (13) | 730,675 | 1.8 | % | ||||||||||
All directors and executive officers as a group (14 persons) (13) | 785,495 | 1.9 | % | ||||||||||
Greater-Than-5% Shareholders: | |||||||||||||
BlackRock, Inc. (14) 40 East 52nd Street New York, NY 10022 | 5,121,423 | 12.76 | % | 4,113,775 | 10.18 | % | |||||||
FMR LLC (15) 82 Devonshire St. Boston, MA 02109 | 2,333,966 | 5.76 | % |
* | Less than 1%. |
(1) | Includes |
(2) | Includes |
(3) | Includes |
(4) | Includes |
(5) | 3,100 of these shares are held in the name of a company owned equally by Mr. Regnier and his spouse, who share voting and investment power over the shares. |
Includes |
Includes |
Includes |
Includes |
Includes |
Includes |
Includes |
|
(13) | Includes |
(14) | Information is based on Amendment No. |
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. SEC regulations require our officers, directors, and greater-than-10%greater than 10% shareholders to provide us with copies of all Section 16(a) forms they file.
Based solely on our review of these forms and written representations received from certain reporting persons, we believe that during 20092010 all of our executive officers, directors, and greater than 10% shareholders complied with all Section 16(a) filing requirements applicable to them.
LIST OF SHAREHOLDERS OF RECORD
A list of shareholders of record entitled to vote at the annual meeting will be available at the annual meeting and will also be available ten days prior to the annual meeting between the hours of 9:00 a.m. and 4:00 p.m., Pacific time, at the office of the Corporate Secretary, Itron, Inc., 2111 N. Molter Road, Liberty Lake, Washington 99019. A shareholder may examine the list for any legally valid purpose related to the annual meeting.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of our 20092010 Annual Report to Shareholders, which includes our financial statements for the year ended December 31, 20092010 on Form 10-K, accompanies this proxy statement. In addition, you may view the Annual Report and this proxy statement on the following website:http://bnymellon.mobular.net/bnymellon/itri
SHAREHOLDER PROPOSALS FOR 20112012
Under the SEC’s proxy rules, shareholder proposals that meet specified conditions must be included in our proxy statement and proxy for the 20112012 annual meeting. Under Exchange Act Rules 14a-5(e) and 14a-8(e), shareholders that intend to present a proposal at our 20112012 annual meeting must give us written notice of the proposal not later than November 23, 20102011 for the proposal to be considered for inclusion in our proxy materials for that meeting. In addition, shareholders who wish to submit nominations for the election of directors or proposals that will not be included in our proxy materials must do so in accordance with the advance notice provisions and other applicable requirements set forth in our Amended and Restated Bylaws. Our Amended and Restated Bylaws provide that the notice of proposals to be considered at our annual meeting must be received by Itron at least 90 days and not more than 120 days prior to the anniversary date of the prior year’s annual meeting, and that the notice of nominations for election of directors must be received at least 60 days and not more than 90 days prior to the date of our annual meeting (or if less than 60 days’ notice or prior public disclosure of the date of such annual meeting is given or made to the shareholders, not later than the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure was made). Shareholders who intend to present proposals at the 20112012 annual meeting that will not be included in our proxy materials must provide to our Corporate Secretary written notice of the business they wish to propose no later than February 3, 20112012 and no sooner than January 4, 2011,2012, assuming the annual meeting is held on May 4, 2011.3, 2012. Our timely receipt of a proposal by a qualified shareholder will not guarantee the proposal’s inclusion in our proxy materials or presentation at the 20112012 annual meeting, because there are other requirements in the proxy rules. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with all applicable requirements of the SEC’s proxy rules, state law, and our Amended and Restated Bylaws.
Shareholder proposals should be directed to the attention of our Corporate Secretary, Itron, Inc., 2111 N. Molter Road, Liberty Lake, Washington 99019.
We make available, free of charge, copies of our filings with the SEC, including this proxy statement and our Annual Report to Shareholders, upon the request of shareholders. The documents are also available for downloading or printing by going to our website atwww.itron.com, and selecting “Investors” and then “Corporate Governance”“Financial Information”. Shareholders must submit a request for printed copies by e-mail through our website atwww.itron.com, by selecting “Investors” and then “Contact Investor Relations” or by mail to the following address:
Itron, Inc. – Attention: Investor Relations
2111 N. Molter Road
Liberty Lake, Washington 99019
Appendix A
2010 STOCK INCENTIVE PLAN
Approved by the Board of Directors on February 12, 2010
Approved by the Shareholders on [ ]
SECTION 1. PURPOSE
The purpose of the Itron, Inc. 2010 Stock Incentive Plan (the “Plan”) is to enhance the long-term shareholder value of Itron, Inc., a Washington corporation (the “Company”), by offering opportunities to selected persons to participate in the Company’s growth and success, and to encourage them to remain in the service of the Company and its Related Corporations (as defined in Section 2) and to acquire and maintain stock ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth below:
“Award” means any Option, Stock Appreciation Right, Stock Award or Performance Award granted pursuant to the provisions of the Plan.
“Board” means the Board of Directors of the Company.
“Cause,” unless otherwise defined in the instrument evidencing the Award or in a written employment or services agreement between the Participant and the Company or a Related Corporation in connection with an Award, means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conviction or confession of a crime punishable by law (except minor violations), in each case as determined by the Plan Administrator, and its determination shall be conclusive and binding.
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.
“Common Stock” means the common stock, no par value per share, of the Company.
“Change in Control Transaction” has the meaning set forth in Section 16.2.1.
“Covered Employee” means a “covered employee” as that term is defined in Section 162(m) of the Code or any successor provision and any related U.S. Department of Treasury guidance.
“Disability,” unless otherwise defined by the Plan Administrator, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable, in the opinion of the Company, to perform his or her duties for the Company or a Related Corporation and to be engaged in any substantial gainful activity.
“Dividend Equivalent” has the meaning set forth in Section 10.
“Effective Date” has the meaning set forth in Section 19.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Fair Market Value” shall be as established in good faith by the Plan Administrator or (a) if the Common Stock is listed on The NASDAQ Global Select Market, the closing sales price for the Common Stock as reported by The NASDAQ Global Select Market for a single trading day or (b) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, the closing sales price for the Common Stock as such
price is officially quoted in the composite tape of transactions on such exchange for a single trading day. If there is no such reported price for the Common Stock for the date in question, then such price on the last preceding date for which such price exists shall be determinative of Fair Market Value.
“Grant Date” means the date on which the Plan Administrator completes the corporate action authorizing the grant of an Award or such later date specified by the Plan Administrator, and on which all conditions precedent to the grant have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.
“Incentive Stock Option” means an Option to purchase Common Stock granted under Section 7 with the intention that it qualify as an “incentive stock option” as that term is defined in Section 422 of the Code.
“Nonqualified Stock Option” means an Option to purchase Common Stock granted under Section 7 other than an Incentive Stock Option.
“Option” means the right to purchase Common Stock granted under Section 7.
“Option Term” has the meaning set forth in Section 7.3.
“Parent,” except as otherwise provided in Section 8.8 in connection with Incentive Stock Options, means any entity, whether now or hereafter existing, that directly or indirectly controls the Company.
“Participant” means the person to whom an Award is granted.
“Performance Award” means any Award of Performance Shares or Performance Units granted pursuant to Section 12.
“Performance Share” has the meaning set forth in Section 12.1.
“Performance Unit” has the meaning set forth in Section 12.2.
“Plan Administrator” has the meaning set forth in Section 3.1.
“Related Corporation” means any Parent or Subsidiary of the Company.
“Restricted Stock” has the meaning set forth in Section 11.1.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Stock Appreciation Right” or “SAR” has the meaning set forth in Section 9.
“Stock Award” means Unrestricted Stock, Restricted Stock or Stock Units granted under Section 11.
“Stock Unit” has the meaning set forth in Section 11.2.
“Subsidiary,” except as otherwise provided in Section 8.8 in connection with Incentive Stock Options, means any entity that is directly or indirectly controlled by the Company.
“Successor Corporation” has the meaning set forth in Section 16.2.2.
“Termination Date” has the meaning set forth in Section 7.6.
“Unrestricted Stock” has the meaning set forth in Section 11.1.
“Vesting Base Date” means the Grant Date or such other date selected by the Plan Administrator as the date from which an Award begins to vest.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board and/or a committee or committees (which term includes subcommittees) appointed by, and consisting of, two or more members of the Board who meet the independence standards set forth by the NASDAQ Global Select Market (the “Plan Administrator”). If and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in selecting the members of any committee acting as Plan Administrator, with respect to any persons subject or likely to become subject to Section 16 of the Exchange Act, the provisions regarding (a) “outside directors” as contemplated by Section 162(m) of the Code and (b) “nonemployee directors” as contemplated by Rule 16b-3 under the Exchange Act. Notwithstanding the foregoing, the Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible persons to different committees consisting of two or more members of the Board, subject to such limitations as the Board deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. To the extent consistent with applicable law, the Board may authorize one or more senior executive officers of the Company to grant Awards to designated classes of eligible persons, within the limits specifically prescribed by the Board.
3.2 Administration and Interpretation by Plan Administrator
Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Awards under the Plan, including the selection of individuals to be granted Awards, the type of Awards, the number of shares of Common Stock subject to an Award, all terms, conditions, restrictions and limitations, if any, of an Award and the terms of any instrument that evidences the Award. The Plan Administrator shall also have exclusive authority to interpret the Plan and the terms of any instrument evidencing the Award and may from time to time adopt and change rules and regulations of general application for the Plan’s administration. The Plan Administrator’s interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. In no event, however, shall the Plan Administrator have the right to (a) without shareholder approval, cancel or amend outstanding Options or SARs for the purpose of repricing, replacing or regranting such Options or SARs with an exercise price that is less than the exercise price for the original Options or SARs, except in connection with adjustments provided in Section 16.1, (b) issue an Option or SAR, or amend an outstanding Option or SAR, to provide for the grant or issuance of a new Option or SAR on exercise of the original Option or SAR, (c) purchase underwater Options or SARs for cash. The Plan Administrator may delegate ministerial duties to such of the Company’s officers as it so determines. The Plan Administrator, for purposes of determining the effect on an Award of a Company-approved leave of absence or a Participant’s working less than full-time, shall be the chief executive officer of the Company or his designee.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares
(a) Subject to adjustment from time to time as provided in Section 16.1, the number of shares of Common Stock that shall be authorized for grant under the Plan shall be 3.5 million, less one (1) share of Common Stock for every one (1) share of Common Stock that was subject to an option or stock appreciation right granted after December 31, 2009 under the Itron, Inc. Amended and Restated 2000 Stock Incentive Plan (the “Prior Plan(s)”) and 1.7 shares of Common Stock for every one (1) share of Common Stock that was subject to an award other than an option or stock appreciation right granted after December 31, 2009 under the Prior Plans.
Any shares of Common Stock that are subject to Options or SARs shall be counted against this limit as one (1) share of Common Stock for every one (1) share of Common Stock granted, and any shares that are subject to Awards other than Options or SARs shall be counted against this limit as 1.7 shares of Common Stock for every one (1) share of Common Stock granted. After the effective date of the Plan (as provided in Section 17), no awards may be granted under any Prior Plan.
(b) If (i) any shares of Common Stock subject to an Award are forfeited, an Award expires or an Award is settled for cash (in whole or in part), or (ii) after December 31, 2009 any shares of Common Stock subject to an award under the Prior Plans are forfeited, or an award under the Prior Plans expires or is settled for cash (in whole or in part), the shares of Common Stock subject to such Award or award under the Prior Plans shall, to the extent of such forfeiture, expiration or cash settlement, again be available for Awards under the Plan, in accordance with Section 4.1(d) below.
Notwithstanding anything to the contrary contained herein, the following shall not be added to the shares of Common Stock authorized for grant under Section 4.1(a) above: (x) shares of Common Stock tendered by the Participant or withheld by the Company in payment of the exercise price of an Option or an option granted under the Prior Plans, or to satisfy any tax withholding obligation with respect to an Award or an award granted under the Prior Plans, (y) shares of Common Stock subject to a SAR or a stock appreciation right granted under the Prior Plans that are not issued in connection with its stock settlement on exercise thereof, and (z) shares of Common Stock reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options or options granted under the Prior Plans.
(c) Substitute Awards granted pursuant to Section 6.3 below shall not reduce the number of shares of Common Stock authorized for grant under the Plan or the applicable limitations applicable to a Participant under Section 11(e), nor shall shares of Common Stock subject to a substitute Award again be available for Awards under the Plan to the extent of any forfeiture, expiration or cash settlement as provided in Section 4.1(b) above.
Additionally, in the event that a company acquired by the Company or with which the Company combines has shares of stock available under a pre-existing plan approved by such company’s shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Common Stock authorized for grant under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or a Related Corporation prior to such acquisition or combination.
(d) Any shares of Common Stock that again become available for grant pursuant to this Section 4.1 shall be added back as (i) one (1) share of Common Stock if such shares were subject to Options or SARs granted under the Plan or options or stock appreciation rights granted under the Prior Plans, and (ii) as 1.7 shares of Common Stock if such shares were subject to Awards other than Options or SARs granted under the Plan or awards other than options or stock appreciation rights granted under the Prior Plans.
4.2. Character of Shares
Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and employees of the Company and its Related Corporations as the Plan Administrator from time to time selects. Awards may also be made to consultants, agents, advisors and independent contractors who provide services to the Company and its Related Corporations; provided, however, that such Participants render bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
SECTION 6. AWARDS
6.1 Form and Grant of Awards
The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be made under the Plan. Such Awards may include, but are not limited to, Incentive Stock Options, Nonqualified Stock Options, SARs, Dividend Equivalents, Stock Awards and Performance Awards. Awards may be granted singly or in combination.
6.2 Settlement of Awards
The Company may settle Awards through the delivery of shares of Common Stock, the payment of a cash amount equal to the Fair Market Value of the shares of Common Stock on the date of settlement of an Award other than an Option or SAR, the granting of replacement Awards, or any combination thereof as the Plan Administrator shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine. The Plan Administrator may permit or require the deferral of any Award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred stock equivalents.
6.3 Acquired Company Awards
Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other acquired entities (“Acquired Entities”) (or the parent of the Acquired Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or stock, reorganization or liquidation (the “Acquisition Transaction”). In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants.
SECTION 7. OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock Options, which shall be appropriately designated.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as determined by the Plan Administrator. Except in the case of a substitute or assumed option pursuant to Section 6.3 above, the exercise price shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date. For Incentive Stock Options granted to a more than 10% shareholder, the Option exercise price shall be as specified in Section 8.2.
7.3 Term of Options
The term of each Option (the “Option Term”) shall be as established by the Plan Administrator or, if not so established, shall be ten years from the Grant Date. For Incentive Stock Options, the maximum Option Term shall be as specified in Sections 8.2 and 8.4.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, which provisions may be waived or modified by the Plan Administrator at any time. The Plan Administrator may adjust the vesting schedule of an Option held by a Participant who works less than “full-time” as that term is defined by the Plan Administrator (taking into consideration definitions under local law) or who takes a Company-approved leave of absence.
To the extent that an Option has vested and become exercisable, the Option may be exercised from time to time by delivery to the Company of a written stock option exercise agreement or notice, in a form and in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement, if any, and such representations and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Section 7.5. Alternatively, the Option may be exercised electronically through a third-party stock plan service provider designated by the Company and according to such procedures established by the Company. An Option may not be exercised for less than a reasonable number of shares at any one time, as determined by the Plan Administrator.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid in cash or by check or, unless the Plan Administrator in its sole discretion determines otherwise, either at the time the Option is granted or at any time before it is exercised, in any combination of:
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock already owned by the Participant having a Fair Market Value on the day prior to the exercise date equal to the aggregate Option exercise price;
(c) if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed exercise notice, together with irrevocable instructions, to (i) a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise and (ii) the Company to deliver the certificates for such purchased shares directly to such brokerage firm, all in accordance with the regulations of the Federal Reserve Board; or
(d) such other consideration as the Plan Administrator may permit.
7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, if a Participant ceases to be employed by, or to provide services to, the Company or its Related Corporations, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the date of termination of the Participant’s employment or service relationship (the “Termination Date”) shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the Termination Date shall expire upon the earliest to occur of
(i) the last day of the Option Term;
(ii) if the Participant’s Termination Date occurs for reasons other than Cause, Retirement, death or Disability, the three-month anniversary of such Termination Date; and
(iii) if the Participant’s Termination Date occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination Date.
Notwithstanding the foregoing, if the Participant dies after the Termination Date while the Option is otherwise exercisable, the portion of the Option that is vested and exercisable on such Termination Date shall expire upon the earlier to occur of (y) the last day of the Option Term and (z) the first anniversary of the date of death, unless the Plan Administrator determines otherwise.
Also notwithstanding the foregoing, in case of termination of the Participant’s employment or service relationship for Cause, the Option shall automatically expire upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise. If a Participant’s employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant’s rights under any Option likewise shall be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after a Participant’s Termination Date, any Option then held by the Participant may be immediately terminated by the Plan Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options shall be subject to the following additional terms and conditions:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.
8.2 More Than 10% Shareholders
If an individual owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations, then the exercise price per share of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option Term shall not exceed five years. The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.
8.3 Eligible Employees
Individuals who are not employees of the Company or one of its parent corporations or subsidiary corporations may not be granted Incentive Stock Options.
8.4 Term
Subject to Section 8.2, the Option Term shall not exceed ten years.
8.5 Exercisability
An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three
months after the Termination Date for reasons other than death or Disability, (b) more than one year after the Termination Date by reason of Disability, or (c) after the Participant has been on leave of absence for more than 90 days, unless the Participant’s reemployment rights are guaranteed by statute or contract.
8.6 Notification of Disqualifying Disposition
The Participant must promptly notify the Company of any disposition of the shares of Common Stock acquired upon exercise of an Incentive Stock Option that occurs prior to the expiration of the holding period required to receive the favorable tax treatment applicable to Incentive Stock Options, which period shall be set forth in the instrument evidencing the Option.
8.7 Code Definitions
For purposes of this Section 8, “parent corporation” and “subsidiary corporation” shall have the meanings attributed to those terms for purposes of Section 422 of the Code.
SECTION 9. STOCK APPRECIATION RIGHTS
The Plan Administrator is authorized to make Awards which shall entitle a Participant to exercise all or a specified portion of the Award (to the extent then exercisable pursuant to its terms) and to receive from the Company the excess of (a) the Fair Market Value of a share of Common Stock on the date of exercise over (b) the exercise price of the SAR which shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date (“Stock Appreciation Rights” or “SARs”).
SARs may be granted on such terms and conditions and subject to such restrictions (which may be based on continuous service with the Company and/or a Related Corporation or the achievement of performance goals) as the Plan Administrator shall determine, in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award. The terms, conditions and restrictions that the Plan Administrator shall have the power to determine shall include, without limitation, the conditions which must be satisfied prior to the exercise of the SAR, whether the SAR shall be payable in cash or in shares of Common Stock, and the circumstances under which forfeiture of the SAR shall occur by reason of termination of the Participant’s employment or service relationship.
The term of a SAR shall not exceed ten years.
SECTION 10. DIVIDEND EQUIVALENTS
The Plan Administrator is authorized to make Awards which shall entitle a Participant to receive credit based on dividends that would have been paid on shares of Common Stock subject to an Award if such shares had been held by Participant at the time such dividend was declared (“Dividend Equivalents”), provided, however, that Dividend Equivalents shall not be granted in connection with Options or SARs. Dividend Equivalents may be granted on such terms and conditions and subject to such restrictions as the Plan Administrator shall determine, in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the underlying Award.
SECTION 11. STOCK AWARDS
11.1 Restricted and Unrestricted Stock
The Plan Administrator is authorized to make Awards of Common Stock on such terms and conditions and subject to such restrictions (which may be based on continuous service with the Company and/or a Related Corporation or the achievement of performance goals) as the Plan Administrator shall determine, in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award (“Restricted Stock”). The terms, conditions and restrictions that the Plan Administrator shall have the power to
determine shall include, without limitation, the manner in which shares of Restricted Stock are held during the periods they are subject to restrictions and the circumstances under which forfeiture of the Restricted Stock shall occur by reason of termination of the Participant’s employment or service relationship, if any.
The Plan Administrator is also authorized to make Awards of Common Stock as described above but without imposing any restrictions (whether based on continuous service with the Company and/or a Related Corporation or the achievement of performance goals) on the shares of Common Stock subject to the Award (“Unrestricted Stock”).
11.2 Stock Units
The Plan Administrator is authorized to make Awards denominated in units of Common Stock (“Stock Units”) on such terms and conditions and subject to such restrictions (which may be based on continuous service with the Company and/or a Related Corporation or the achievement of performance goals) as the Plan Administrator shall determine, in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award. The terms, conditions and restrictions that the Plan Administrator shall have the power to determine shall include, without limitation, the conditions which must be satisfied prior to the issuance of the shares subject to the Stock Units to the Participant and the circumstances under which forfeiture of the Stock Units shall occur by reason of termination of the Participant’s employment or service relationship.
11.3 Issuance of Shares
Upon the satisfaction of any terms, conditions and restrictions prescribed in respect to a Stock Award, or upon the Participant’s release from any terms, conditions and restrictions of a Stock Award, as determined by the Plan Administrator, the Company shall release, as soon as practicable, to the Participant or, in the case of the Participant’s death, to the personal representative of the Participant’s estate or as the appropriate court directs, the appropriate number of shares of Common Stock.
11.4 Waiver of Restrictions
Notwithstanding any other provisions of the Plan, the Plan Administrator may, in its sole discretion, waive the forfeiture period and any other terms, conditions or restrictions on any Stock Award under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate; provided, however, that the Plan Administrator may not adjust performance goals for any Stock Award intended to be exempt under Section 162(m) of the Code for the year in which the Stock Award is settled in such a manner as would increase the amount of compensation otherwise payable to a Participant; and, provided further, that the number of shares subject to such waivers shall be less than 10% of the total number of shares authorized for issuance under the Plan as provided in Section 4.1.
SECTION 12. PERFORMANCE AWARDS
12.1 Performance Shares
The Plan Administrator may grant Awards of performance shares (“Performance Shares”) and designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares shall consist of a unit valued by reference to a designated number of shares of Common Stock, the value of which may be paid to the Participant by delivery of such property as the Plan Administrator shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Plan Administrator, and other terms and conditions specified by the Plan Administrator. Notwithstanding the satisfaction of any performance goals, the amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Plan Administrator shall determine in its sole discretion.
12.2 Performance Units
The Plan Administrator may grant Awards of performance units (“Performance Units”) and designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units shall consist of a unit valued by reference to a designated amount of property other than shares of Common Stock, which value may be paid to the Participant by delivery of such property as the Plan Administrator shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Plan Administrator, and other terms and conditions specified by the Plan Administrator. Notwithstanding the satisfaction of any performance goals, the amount to be paid under an Award of Performance Units may be adjusted on the basis of such further consideration as the Plan Administrator shall determine in its sole discretion.
SECTION 13. CODE SECTION 162(m) PROVISIONS
(a) Notwithstanding any other provision of the Plan, if the Plan Administrator determines at the time a Stock Award or a Performance Award is granted to a Participant who is then an officer that such Participant is, or is likely to be as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Plan Administrator may provide that this Section 13 is applicable to such Award.
(b) If a Stock Award or a Performance Award is subject to this Section 13, then the lapsing of restrictions thereon and the distribution of cash, shares of Common Stock or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Plan Administrator, which shall be based on the following business criteria, either individually, alternatively or in any combination, as reported or calculated by the Company: net earnings (either before or after interest, taxes, depreciation and/or amortization), sales or revenue, income or net income (either before or after taxes), operating income or net operating income, operating profit or net operating profit, cash flow (including, but not limited to, operating cash flow and free cash flow), economic profit (including economic profit margin), return on assets, return on capital, return on investment, return on operating revenue, return on equity or average shareholders’ equity, total shareholder return, growth in sales or return on sales, gross, operating or net profit margin, working capital, earnings per share, growth in earnings or earnings per share, price per share of Common Stock, market share, overhead or other expense reduction, growth in shareholder value relative to various indices, safety, and strategic plan development and implementation, any of which may be used to measure the performance of the Company as a whole or with respect to any business unit, Subsidiary or business segment of the Company, either individually, alternatively or in any combination, and may be measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous period results or to a designated comparison group. Such performance goals shall be set by the Plan Administrator within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder.
(c) Notwithstanding any provision of the Plan other than Section 16, with respect to any Stock Award or Performance Award that is subject to this Section 13, the Plan Administrator may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Plan Administrator may not waive the achievement of the applicable performance goals except in the case of the death or Disability of the Covered Employee.
(d) The Plan Administrator shall have the power to impose such other restrictions on Awards subject to this Section 11 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
(e) Subject to adjustment from time to time as provided in Section 16.1, no Covered Employee may be granted Options, SARs, Stock Awards or Performance Shares subject to this Section 13 in any calendar year period with
respect to more than 300,000 shares of Common Stock for such Award, except that the Company may make additional one time grants of such Awards for up to 300,000 shares to newly hired individuals, and the maximum dollar value payable with respect to Performance Units subject to this Section 13 granted to any Covered Employee in any one calendar year is $4,000,000.
SECTION 14. WITHHOLDING
The Company may require the Participant to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to the grant, vesting or exercise of any Award. Subject to the Plan and applicable law, the Plan Administrator may, in its sole discretion, permit the Participant to satisfy withholding obligations, in whole or in part, (a) by paying cash, (b) by electing to have the Company withhold shares of Common Stock (up to the minimum required U.S. federal tax withholding rate or other applicable withholding amount outside the U.S.), (c) by transferring to the Company shares of Common Stock (already owned by the Participant for the period necessary to avoid a charge to the Company’s earnings for financial reporting purposes), in such amounts as are equivalent to the Fair Market Value of the withholding obligation, or (d) by any other method set forth in the instrument evidencing the Award.
SECTION 15. ASSIGNABILITY
Awards granted under the Plan and any interest therein may not be assigned, pledged or transferred by the Participant and may not be made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the instrument evidencing the Award provides that a Participant may designate a beneficiary on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant’s death, and the Participant has made such a designation. During a Participant’s lifetime, Awards may be exercised only by the Participant. Notwithstanding the foregoing, and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit such assignment or transfer; provided, however, that any Award so assigned or transferred shall be subject to all the same terms and conditions contained in the instrument evidencing the Award.
SECTION 16. ADJUSTMENTS
16.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in the Company’s corporate or capital structure results in (a) the outstanding shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of securities of the Company or of any other corporation or (b) new, different or additional securities of the Company or of any other corporation being received by the holders of shares of Common Stock of the Company, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities subject to the Plan and the maximum number and kind of securities that may be made subject to certain Awards as set forth in Section 4.1, (ii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor, (iii) the number and kind of securities automatically granted pursuant to a formula program established under the Plan, and (iv) the maximum number of securities subject to an Award to which Section 13 applies as set forth in Section 13(e). The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding. Notwithstanding the foregoing, a Change in Control Transaction shall not be governed by this Section 16.1 but shall be governed by Section 16.2.
16.2 Change in Control Transaction
16.2.1 Definitions
“Change in Control Transaction” shall be deemed to have occurred if any of the events set forth in any one of the following paragraphs shall have occurred:
(a) any Person is or becomes the Beneficial Owner (as such term is set forth in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in Section 16.8(C)(i);
(b) a change in the composition of the Board during any two-year period such that the individuals who, as of the date of this agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board subsequent to the beginning of the two-year period, whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and provided further, however, that any such individual whose initial assumption of office occurs as a result of or in connection with an actual or threatened solicitation of proxies or consents by or on behalf of an Person other than the Board shall not be considered a member of the Incumbent Board;
(c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation immediately following which members of the Incumbent Board constitute a majority of the members of the board of directors (or similar body) of the surviving entity or, if the surviving entity is a subsidiary, any parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities; or
(d) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
For purposes of this Section 16.2.1, “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates (as such term is set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act), (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.
For clarity, a Change in Control Transaction shall not be deemed to have occurred in the event of a reorganization of the Company and/or any Related Corporations nor in the event of a reincorporation of the Company or any Related Corporation in another jurisdiction.
16.2.2 Options
In the event of a Change in Control Transaction, except as otherwise provided in the instrument evidencing the Award or in written employment or services agreement between a Participant and the Company or a Related Corporation in connection with an Award, each outstanding Option shall be assumed, continued or an equivalent option or right substituted by the surviving corporation, the successor corporation or its parent corporation, as applicable, (the “Successor Corporation”). Upon consummation of the Change in Control Transaction, the assumed or substituted Options shall automatically become fully vested and exercisable whether or not the vesting requirements set forth in the applicable option agreement have been satisfied.
In the event that the Successor Corporation refuses to assume or substitute for the Option, the Participant shall fully vest in and have the right to exercise the Option as to all of the shares of Common Stock subject thereto, including shares as to which the Option would not otherwise be vested or exercisable. If an Option will become fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control Transaction, the Plan Administrator shall notify the Participant in writing or electronically that the Option shall be fully vested and exercisable for a specified time period after the date of such notice, and the Option shall terminate upon the expiration of such period, in each case conditioned on the consummation of the Change in Control Transaction. For the purposes of this Section 16.2.2, the Option shall be considered assumed if, following the Change in Control Transaction, the option or right confers the right to purchase or receive, for each share of Common Stock subject to the Option immediately prior to the Change in Control Transaction, the consideration (whether stock, cash, or other securities or property) received in the Change in Control Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Change in Control Transaction is not solely common stock of the Successor Corporation, the Plan Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control Transaction. All Options shall terminate and cease to remain outstanding immediately following the consummation of the Change in Control Transaction, except to the extent assumed by the Successor Corporation.
16.2.3 Stock Appreciation Rights
In the event of a Change in Control Transaction, except as otherwise provided in the instrument evidencing the Award or in written employment or services agreement between a Participant and the Company or a Related Corporation in connection with an Award, each outstanding SAR shall be treated in the same manner as Options described in Section 16.2.2 above.
16.2.4 Stock Awards
In the event of a Change in Control Transaction, except as otherwise provided in the instrument evidencing the Award or in a written employment or services agreement between a Participant and the Company or a Related Corporation in connection with an Award, the vesting of shares subject to Stock Awards shall accelerate, and the forfeiture provisions applicable to such shares shall lapse, if and to the same extent that the vesting and exercisability of outstanding Options accelerate in connection with the Change in Control Transaction. If unvested Options are to be assumed, continued or substituted by a Successor Corporation without acceleration upon the occurrence of a Change in Control Transaction, the forfeiture provisions applicable to the shares subject to Stock Awards will continue with respect to shares of the Successor Corporation that may be issued in exchange for such shares.
16.2.5 Performance Awards
In the event of a Change in Control Transaction, the vesting and payout of Performance Awards shall be as provided in the instrument evidencing the Award or in a written employment or services agreement between a Participant and the Company or a Related Corporation.
16.3 Further Adjustment of Awards
Subject to Section 16.2, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable, and fair and equitable to the Participants, with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation or change in control that is the reason for such action.
16.4 Limitations
The grant of Awards shall in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
16.5 Fractional Shares
In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.
SECTION 17. AMENDMENT AND TERMINATION OF PLAN
17.1 Amendment of Plan
The Plan may be amended only by the Board in such respects as it shall deem advisable; provided, however, that to the extent required for compliance with Section 422 of the Code or any applicable law or regulation, shareholder approval shall be required for any amendment that would (a) increase the total number of shares available for issuance under the Plan, (b) modify the class of persons eligible to receive Options, or (c) otherwise require shareholder approval under any applicable law or regulation. Any amendment made to the Plan that would constitute a “modification” to Incentive Stock Options outstanding on the date of such amendment shall not, without the consent of the Participant, be applicable to such outstanding Incentive Stock Options but shall have prospective effect only.
17.2 Suspension or Termination of Plan
The Board may suspend or terminate the Plan at any time. The Plan shall have no fixed expiration date; provided, however, that no Incentive Stock Options may be granted more than ten years after the later of (a) the Plan’s adoption by the Board and (b) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code.
17.3 Consent of Participant
The suspension, amendment or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant’s consent, impair or diminish any rights or obligations under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a “modification” that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 16 shall not be subject to these restrictions.
SECTION 18. GENERAL
18.1 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written instrument that shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan.
18.2 No Individual Rights
Nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Corporation or limit in any way the right of the Company or any Related Corporation to terminate a Participant’s employment or other relationship at any time, with or without Cause.
18.3 Transfer of Employment or Service Relationship; Leaves of Absence
A Participant’s transfer of employment or service relationship between or among the Company and its Related Corporations, or a change in status from an employee to a consultant, agent, advisor or independent contractor or vice versa, shall not be considered a termination of employment or service relationship for purposes of the Plan, provided, however, that (i) written authorization of the Company’s Chief Executive Officer or a delegate of the Chief Executive Office must be obtained in order to rely on this provision, and (ii) such a transfer of employment or change in status may affect whether an Incentive Stock Option granted to Participant continues to qualify for favorable tax treatment as an Incentive Stock Option.
The effect of a Company-approved leave of absence on the terms and conditions of an Award shall be determined by the Plan Administrator, in its sole discretion.
18.4 Registration
Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under state securities laws or any non-U.S. securities laws, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made. The Company may issue certificates for shares with such legends and subject to such restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary or desirable for compliance by the Company with federal and state securities laws.
To the extent that the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
18.5 No Rights as a Shareholder
No Option, SAR, Stock Unit or Performance Unit shall entitle the Participant to any cash dividend, voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.
18.6 Compliance with Laws and Regulations
Notwithstanding anything in the Plan to the contrary, the Plan Administrator, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an “incentive stock option” within the meaning of Section 422 of the Code.
18.7 Participants in Foreign Countries
The Plan Administrator shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Corporations may operate to ensure the viability of the benefits from Awards granted to Participants employed in such countries and to meet the objectives of the Plan.
18.8 No Trust or Fund
The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.
18.9 Section 409A
To the extent that the Plan Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the written instrument evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and any written instrument evidencing any Award shall be interpreted in accordance with Section 409A of the Code and U.S. Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Plan Administrator determines that any Award may be subject to Section 409A of the Code and related U.S. Department of Treasury guidance (including such U.S. Department of Treasury guidance as may be issued after the Effective Date), the Plan Administrator may, without consent of the Participant, adopt such amendments to the Plan and the applicable written instrument evidencing the Award or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Plan Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related U.S. Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section. Notwithstanding the foregoing, the Company makes no representation or covenant to ensure that the Awards and the payment are exempt from or compliant with Section 409A of the Code and will have no liability to the Participants or any other party if the Awards or payment of the Awards that are intended to be exempt from, or compliant with, Section 409A of the Code, are not so exempt or compliant or for any action taken by the Plan Administrator with respect thereto.
18.10 Severability
If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator’s determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
18.11 Choice of Law
The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Washington without giving effect to conflict of laws principles.
SECTION 19. EFFECTIVE DATE
The Effective Date is the date on which the Plan is adopted by the Board, so long as it is approved by the Company’s shareholders at any time within 12 months of such adoption.
Appendix B
Itron, Inc.
Executive Management Incentive Plan
Effective January 1, 2010
1. Establishment, Purpose, Duration.
Itron Inc., a Washington corporation (“Company”) hereby establishes an incentive compensation plan to be known as the “Itron Executive Management Incentive Plan” (“Plan”).
The purpose of the Plan is to enhance the Company’s ability to attract and retain highly qualified executives and to provide such executives with additional financial incentives to promote the success of the Company and its Subsidiaries. Awards payable under the Plan are intended to constitute “qualified performance-based compensation” under Section 162(m) and the Plan shall be construed consistently with such intention.
The Plan shall be effective for Performance Periods beginning on or after January 1, 2010, subject to the approval of the Plan by the stockholders of the Company at the 2010 Annual Meeting of Shareholders. The Plan will remain in effect until such time as it shall be terminated by the Board or the Committee, pursuant to Section 10 herein.
2. Definitions.
The following terms, when capitalized, shall have the meanings set forth below:
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3. Administration of the Plan.
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4. Eligibility.
Eligibility under this Plan for a Performance Period is limited to Participants.
5. Form of Payment of Awards.
Payment of Awards under the Plan shall be made in cash, Shares or a combination thereof, as the Committee shall determine in its sole and absolute discretion, subject to the limitations set forth in Sections 6 and 7 herein.
6. Shares Subject to the Plan.
Award payments that are made in whole or in part in the form of Shares shall be made from the aggregate number of Shares authorized to be issued under and otherwise in accordance with the terms of Itron’s Amended and Restated 2000 Stock Incentive Plan (or any successor stock incentive plan approved by the stockholders of the Company).
7. Awards.
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8. Committee Certification and Payment of Awards.
As soon as reasonably practicable following the end of each Performance Period, the Committee shall determine in accordance with the terms of Section 7 of the Plan, the achievement of the Performance Criteria and amount of the Award to be paid to each Participant for such Performance Period. The Committee’s determinations shall be final and binding on the Company, its Subsidiaries and all Participants, and their respective successors and beneficiaries. These determinations must be certified by the Committee in writing after completion of the applicable Performance Period and before Awards for such period are paid in accordance with Section 162(m), which requirement may be satisfied by approved minutes of the Committee meeting or such other document prepared by the secretary of the meeting that satisfies the requirements under Section 162(m). An Award shall be paid to a Participant following the certification by the Committee required under this section and no later than 90 days following the close of the Performance Period with respect to which the Award relates or March 15 of the year following the year in which the Performance Period ends, if earlier.
9. Withholding of Taxes.
The Company shall have the right to deduct and/or withhold, or require a Participant to remit to the Company (or a Subsidiary), cash in an amount sufficient to satisfy any applicable tax withholding requirements applicable to an Award. Whenever Awards are to be made in cash, such payments shall be net of an amount sufficient to satisfy any applicable tax withholding requirements. Subject to such restrictions as the Committee may prescribe, a Participant may satisfy all or a portion of any tax withholding requirements relating to Awards payable in Shares by electing to have the Company withhold Shares having a Fair Market Value equal to the amount required to be withheld.
10. Amendment or Termination of the Plan.
The Board or the Committee may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that no amendment shall be effective without Board and/or shareholder approval if such approval is required to comply with Section 162(m) to maintain the qualification of the Awards as “qualified performance based compensation.”
11. No Rights to Employment.
The Plan shall not confer upon any Participant any right with respect to continuation of employment with the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate his or her employment at any time, with or without cause.
12. No Claims; No Assignment or Alienation.
No person shall have any claim to an Award under the Plan and there is no obligation for uniformity of treatment of Participants under the Plan. Except as otherwise required by applicable law, any interest, benefit, payment, claim or right of any Participant under the Plan shall not be sold, transferred, assigned, alienated, pledged, encumbered, hypothecated, or subjected to any other disposition by any Participant and shall not be subject in any manner to any claims of any creditor of any Participant or beneficiary, and any attempt to take any such action shall be null and void. During the lifetime of any Participant, payment of an Award shall only be made to such Participant.
13. General.
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Appendix C
ITRON, INC.
CORPORATE GOVERNANCE COMMITTEE CHARTER
Revised as of February 11, 2010
Purpose
The purpose of the Corporate Governance Committee of Itron, Inc. is to:
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Membership and Committee Structure
The Committee will be comprised of two or more directors as determined annually by the Board. Each director will meet the independence requirements established by the Board, NASDAQ, applicable federal and state securities laws, and any other rules or regulations applicable to the Company from time to time. If the Chairman of the Board is not an independent director under the listing standards of NASDAQ, the Board will designate the Lead Independent Director to act as the Chair of the Committee. Otherwise, the Chair of the Committee will be determined by the Board.
As the Committee deems appropriate, it may retain independent counsel, accountants, compensation consultants, and other professionals to assist the Committee without seeking Board approval with respect to the selection, fees or retention terms for any such advisors. The Committee may invite other individuals, including external advisors, whether officers/employees of the Company or not, to attend Committee meetings and provide information, analysis, and advice as it deems appropriate. Such external advisors will not have a vote.
The Committee, when appropriate, may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Board, members of the Committee, or Company officers.
Appointment and Removal of Members
The members of the Committee will be appointed by the Board. The Board may remove any member from the Committee at any time, with or without cause. The Board will designate a Committee Chair. In the absence of a member designated by the Board to serve as Committee Chair, the members of the Committee may appoint from among their number a person to preside at Committee meetings. Vacancies on the Committee may be filled through appointment by the Board at any time.
Responsibilities
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Meetings
The Committee will establish a meeting calendar annually, which will include at least four quarterly meetings for the year. The Committee may hold such other meetings as are necessary or appropriate in order for the Committee to fulfill its responsibilities. A secretary will be designated to record meeting minutes. The Committee will periodically meet in executive session absent members of the Company’s management or other persons who are not Committee members.
Any two members of the Committee will be sufficient to constitute a quorum, and a majority of a quorum will be sufficient to adopt any resolution or take any action. Meetings may be called by the Committee Chair or by any two Committee members and may be held telephonically or in person or by other communications equipment by which all persons participating can hear each other.
Appendix D
ITRON, INC.
AUDIT/FINANCE COMMITTEE CHARTER
Revised as of February 15, 2008
Purpose
The purpose of the Audit and Finance Committee (the “Committee”) of Itron, Inc. (the “Company”) is to oversee:
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The Committee shall have the sole authority and responsibility to appoint, determine funding for, oversee and, where appropriate, replace the independent auditor. The Committee shall also have all authority and resources necessary to fulfill the duties and responsibilities assigned to the Committee in this charter or otherwise assigned to it by the Board.
Membership and Committee Structure
The Committee shall be comprised of three or more directors, as determined annually by the Board on the recommendation of the Corporate Governance Committee. Each director shall meet the independence requirements established by the Board, the Nasdaq Stock Market, Inc., applicable federal and state securities laws and any other rules or regulations applicable to the Company from time to time.
As the Committee deems appropriate, it may retain independent counsel, accounting and other professionals to assist the Committee without seeking Board approval with respect to the selection, fees or terms of engagement of any such advisors. The Committee may invite, as it deems appropriate, other individuals, including external advisors, whether officers/employees of the Company or not, to attend Committee meetings and provide information, analysis and advice. Such external advisors shall not have a vote.
Financial Literacy
Each member of the Committee shall be financially literate (at a minimum, able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement). At least one Committee member shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the member’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities, and shall otherwise meet any Nasdaq Stock Market and federal and state law requirements or other applicable rules and regulations relating to financial expertise as may be applicable to the Company from time to time. In addition, at least one member of the Committee must be designated by the Board to be an “audit committee financial expert,” as defined by the Securities and Exchange Commission (“SEC”) pursuant to the Sarbanes-Oxley Act of 2002.
Service on Other Public Company Audit Committees
No member of the Committee shall serve on more than two audit committees of publicly traded companies, other than the Company, at the same time such member serves on this Committee, unless the Board determines that such simultaneous service would not impair the ability of such member to serve effectively on this Committee. If a Committee member serves on the audit committees of both a public company and a wholly owned subsidiary of such company, such service shall be counted as service on one audit committee, rather than two.
Appointment and Removal of Members
The members of the Committee shall be appointed by the Board annually. The Board may remove any member of the Committee at any time, with or without cause. The Board will designate a Committee Chair. In the absence of a member designated by the Board to serve as Committee Chair, the members of the Committee may appoint from among their number a person to preside at Committee meetings. Vacancies on the Committee may be filled through appointment by the Board at any time.
Responsibilities
General
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Documents/Reports
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Independent Auditor
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Internal Auditor
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Financial Reporting Processes
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Accounting Policies; Internal Processes; Risk Management
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Legal Compliance
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Ethics Compliance and Complaint Procedures
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Other
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Meetings
The Committee shall establish a meeting calendar annually, which shall include at least four quarterly meetings for the year. The Committee may hold such other meetings as it deems necessary or appropriate in order for the Committee to fulfill its responsibilities. A secretary shall be designated to record meeting minutes.
As part of its responsibility to foster open communications, the Committee should meet periodically, or as otherwise required, with management, internal audit personnel and the independent auditor in separate executive sessions to discuss any matter that the Committee or any of the other personnel believe warrants Committee attention. The Committee shall periodically meet in executive session absent members of the Company’s management or other persons who are not Committee members.
The Committee, when appropriate, may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Board, members of the Committee or corporate officers.
Any two members of the Committee shall be sufficient to constitute a quorum, and a majority of a quorum shall be sufficient to adopt any resolution or take any action, including the approval of reports and documents. Meetings may be called by the Chair or by any two Committee members and may be held telephonically or in person or by other communications equipment by which all persons participating can hear each other. The independent auditor shall receive notice of meetings to which the independent auditor is invited to attend in advance to allow the independent auditor the opportunity to attend.
Appendix E
ITRON, INC.
COMPENSATION COMMITTEE CHARTER
Revised as of February 11, 2010
Purpose
The purpose of the Compensation Committee of Itron, Inc. is to:
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Membership and Committee Structure
The Committee will be comprised of three or more directors, as determined annually by the Board. Each director will (a) meet the independence requirements established by the Board, NASDAQ, applicable federal and state securities laws, and any other rules and regulations applicable to the Company from time to time, (b) be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and (c) be an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code (the “Code”).
As the Committee deems appropriate, it may retain independent counsel, accountants, compensation consultants and other professionals to assist the Committee without seeking Board approval with respect to the selection, fees or retention terms for any such advisors. The Committee may invite other individuals, including external advisors, whether officers/employees of the Company or not, to attend Committee meetings and provide information, analysis and advice as it deems appropriate. Such external advisors will not have a vote.
The Committee, when appropriate, may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Board or to Company officers.
Appointment and Removal of Members
The members of the Committee will be appointed by the Board on the recommendation of the Corporate Governance Committee. The Board may remove any member from the Committee at any time, with or without cause. The Board will designate a Committee Chair. In the absence of a member designated by the Board to serve as Committee Chair, the members of the Committee may appoint from among their number a person to preside at Committee meetings. Vacancies on the Committee may be filled through appointment by the Board at any time.
Responsibilities
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Meetings
The Committee will establish a meeting calendar annually, which will include at least four quarterly meetings for the year. The Committee may hold such other meetings as are necessary or appropriate for the Committee to fulfill its responsibilities. A secretary will be designated to record meeting minutes. The Committee will periodically meet in executive session absent members of the Company’s management or other persons who are not Committee members.
Any two members of the Committee will be sufficient to constitute a quorum, and a majority of the quorum will be sufficient to adopt any resolution or take any action. Meetings may be called by the Chair or by any two Committee members and may be held telephonically or in person or by other communications equipment by which all persons participating can hear each other.
Driving Directions to Itron Annual Meeting of Shareholders:
From the West: Take Interstate 90 East to Liberty Lake, Washington Exit (No. 296). Exit the Interstate and staycontinue straight to go onto East Appleway Avenue. Proceed one mile and turn right onto North Molter Road. Turn right into Itron driveway at 2111 North Molter Road.
From the East: Take Interstate 90 West to Liberty Lake, Washington Exit (No. 296). Exit the Interstate and at stop sign, turn left onto North Harvard Rd. Proceed to stoplight and turn left onto East Appleway Avenue. Proceed one mile and turn right onto North Molter Road. Turn right into Itron driveway at 2111 North Molter Road.
For questions, call 509-924-9900.
101016CP-01101130CP-01
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to the shareholder meeting date.
| INTERNET http://www.proxyvoting.com/itri | |||
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. | ||||
| ||||
OR | ||||
TELEPHONE 1-866-540-5760 | ||||
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. | ||||
If you vote by Internet or by telephone, it is NOT necessary to mail back your voting form/proxy.
To vote by mail, mark, sign and date this form and return it in the enclosed postage-paid envelope before April | ||||
Your Internet or telephone vote authorizes Fidelity to vote your shares in the same manner as if you marked, signed and returned the enclosed voting form. |
70360-bl92770-bl
q FOLD AND DETACH HERE q
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES:
Please mark your votes as | x | |||||||||||||||||||||
1. ELECTION OF DIRECTORS | indicated in this example | |||||||||||||||||||||
FOR | AGAINST | ABSTAIN | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING: | FOR | AGAINST | ABSTAIN | ||||||||||||||||
1.1 | Jon E. Eliassen | ¨ | ¨ | ¨ | 2. | RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2011. | ¨ | ¨ | ¨ | |||||||||||||
1.2 | Charles H. Gaylord Jr. | ¨ | ¨ | ¨ | 3. | PROPOSAL TO APPROVE THE ADVISORY (NON-BINDING) RESOLUTION RELATING TO EXECUTIVE COMPENSATION. | ¨ | ¨ | ¨ | |||||||||||||
1.3 | Gary E. Pruitt | ¨ | ¨ | ¨ | THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SHAREHOLDER APPROVAL EVERY 1 YEAR. | |||||||||||||||||
1 year | 2 years | 3 years | Abstain | |||||||||||||||||||
4. | PROPOSAL TO DETERMINE (NON-BINDING) FREQUENCY OF FUTURE VOTES ON EXECUTIVE COMPENSATION. | ¨ | ¨ | ¨ | ¨ | |||||||||||||||||
I plan to attend the Annual Meeting. | ¨ | YES |
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IMPORTANT – PLEASE DATE AND SIGN BELOW | ||||||||||||||
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ABOVE BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED AND FOR THE OTHER PROPOSALS OR OTHERWISE IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS. | ||||||||||||||
Mark Here for Address Change or Comments SEE REVERSE | ¨ |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
Signature | Signature | Date |
Important notice regarding the Internet availability of proxy materials for the ShareholdersShareholder Meeting to be held on May 4, 2010.3, 2011.The Proxy Statement and the Annual Report to security holders are available at:http://bnymellon.mobular.net/bnymellon/www.proxyvoting.com/itri
q FOLD AND DETACH HERE q
PROXY
ITRON, INC.
Annual Meeting May 4, 20103, 2011
Fidelity Management Trust Company (“Fidelity”), as Trustee of the Itron, Inc. Incentive Savings Plan, has been requested to forward to you the enclosed proxy material relative to the securities held by us in your account but not registered in your name. Such securities can be voted only by Fidelity as holder of record. Fidelity will vote your securities in accordance with your wishes if you execute this form and return it promptly in the enclosed business reply envelope, or provide directions via the telephone or internet, as described elsewhere in this form. It is understood that, if you sign without otherwise marking the form, the securities will be voted as recommended by the Board of Directors on all matters to be considered at the meeting.
For this meeting, to the extent of its authority to vote securities in the absence of participant instructions, unless otherwise required by law, Fidelity will not vote any allocated shares with respect to which Fidelity does not receive timely voting directions. In order to ensure that your securities are voted as you wish, please provide your vote directions by April 30, 2010.29, 2011.
Fidelity Management Trust Company
Address Change/Comments | ||||
(Mark the corresponding box on the reverse side) | ||||
BNY MELLON SHAREOWNER SERVICES
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P.O. BOX 3550 | ||||
SOUTH HACKENSACK, NJ 07606-9250 |
(Continued and to be marked, dated and signed, on the other side) | 92770-bl |
70360-bl
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to the shareholder meeting date.
| INTERNET http://www.proxyvoting.com/itri | |||
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. | ||||
| ||||
OR | ||||
TELEPHONE 1-866-540-5760 | ||||
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. | ||||
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. | ||||
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. |
70360
q FOLD AND DETACH HERE q
Fulfillment 92770 | |||||||
q FOLD AND DETACH HERE q
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES:
Please mark your votes as | x | |||||||||||||||||||||
1. ELECTION OF DIRECTORS | indicated in this example | |||||||||||||||||||||
FOR | AGAINST | ABSTAIN | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING: | FOR | AGAINST | ABSTAIN | ||||||||||||||||
1.1 | Jon E. Eliassen | ¨ | ¨ | ¨ | 2. | RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2011. | ¨ | ¨ | ¨ | |||||||||||||
1.2 | Charles H. Gaylord Jr. | ¨ | ¨ | ¨ | 3. | PROPOSAL TO APPROVE THE ADVISORY (NON-BINDING) RESOLUTION RELATING TO EXECUTIVE COMPENSATION. | ¨ | ¨ | ¨ | |||||||||||||
1.3 | Gary E. Pruitt | ¨ | ¨ | ¨ | THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SHAREHOLDER APPROVAL EVERY 1 YEAR. | |||||||||||||||||
1 year | 2 years | 3 years | Abstain | |||||||||||||||||||
4. | PROPOSAL TO DETERMINE (NON-BINDING) FREQUENCY OF FUTURE VOTES ON EXECUTIVE COMPENSATION. | ¨ | ¨ | ¨ | ¨ | |||||||||||||||||
I plan to attend the Annual Meeting. | ¨ | YES |
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IMPORTANT – PLEASE DATE AND SIGN BELOW | ||||||||||||||
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ABOVE BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED AND FOR THE OTHER PROPOSALS OR OTHERWISE IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS. | ||||||||||||||
Mark Here for Address Change or Comments SEE REVERSE | ¨ |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
Signature | Signature | Date |
You can now access your Itron, Inc. account online.
Access your Itron, Inc. account online via Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for Itron, Inc., now makes it easy and convenient to get current information on your shareholder account.
• View account status | • View payment history for dividends | |
• View certificate history | • Make address changes | |
• View book-entry information | • Obtain a duplicate 1099 tax form |
Visit us on the web at http://www.bnymellon.com/shareowner/isdequityaccess
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
ChooseMLinkSMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect®atwww.bnymellon.com/shareowner/ |
Important notice regarding the Internet availability of proxy materials for the ShareholdersShareholder Meeting to be held on May 4, 2010.3, 2011.The Proxy Statement and the Annual Report to security holders are available at:http://bnymellon.mobular.net/bnymellon/www.proxyvoting.com/itri
q FOLD AND DETACH HERE q
ITRON, INC.
This Proxy is solicited by Itron’s Board of Directors for the Annual Meeting of
Shareholders to be held on May 4, 20103, 2011
The undersigned hereby appoint(s) Malcolm Unsworth and John W. Holleran and each of them, as proxies, with full power of substitution, to represent and vote as designated all shares of common stock of Itron, Inc. held of record by the undersigned on February 26, 2010,25, 2011, at the Annual Meeting of Shareholders of Itron to be held at the principal executive offices of Itron, Inc., 2111 N. Molter Road, - in the Atrium, Liberty Lake, Washington 99019, at 8:00 a.m., local time, on Tuesday, May 4, 2010,3, 2011, with authority to vote upon the matters listed below and with discretionary authority as to any other matters that may properly come before the meeting or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTEDFOR THE ELECTION OF ALL NOMINEES NAMED AND FOR THE OTHER PROPOSALS OR OTHERWISE IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
Address Change/Comments | ||||
(Mark the corresponding box on the reverse side) | ||||
BNY MELLON SHAREOWNER SERVICES | ||||
P.O. BOX 3550 | ||||
SOUTH HACKENSACK, NJ 07606-9250 |
Fulfillment | ||||
(Continued and to be marked, dated and signed, on the other side) | 92225 | 92770 |
Itron, Inc.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to Be Held on Tuesday, May 3, 2011
The Proxy Statement, Annual Report and other proxy materials are available at: http://www.proxyvoting.com/itri |
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.
We encourage you to access and review all of the important information contained in the proxy materials before voting.
If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before April 18, 2011 to facilitate timely delivery. | ||||
TO REQUEST PAPER COPIES OF PROXY MATERIALS: | ||||
(please reference your 11-digit control number when requesting materials) By opting out to receive printed materials, your preference for future proxy mailings will be kept on our file. | ||||
Telephone: | 1-888-313-0164 | |||
(outside of the U.S. and Canada call 201-680-6688). | ||||
Email: | shrrelations@bnymellon.com | |||
(you must reference your 11-digit control number in your email) | ||||
Internet: | http://www.proxyvoting.com/itri |
TO VOTE YOUR SHARES SEE INSTRUCTIONS ON REVERSE SIDE This is not a proxy card. You cannot use this notice to vote your shares. |
Dear Itron, Inc. Shareholder:
The 2011 Annual Meeting of Shareholders of Itron, Inc. (the “Company”) will be held at the principal executive offices of the Company, 2111 North Molter Road, Liberty Lake, Washington, on Tuesday, May 3, 2011, at 8:00 a.m. (local time).
Proposals to be considered at the Annual Meeting:
(1) | to elect three directors to the Company’s Board of Directors; |
(2) | to hold an advisory vote on executive compensation; |
(3) | to hold an advisory vote on the frequency of the advisory vote on executive compensation; |
(4) | to ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the 2011 fiscal year; and |
(5) | to transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
The Board of Directors has fixed the close of business on February 25, 2011 as the record date (the “Record Date”) for the determination of shareholders entitled to receive notice of and to vote at the Annual Meeting or any adjournment(s) thereof.
CONTROL NUMBER
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YOU REQUEST A PAPER COPY OF THE PROXY MATERIALS OR TO VOTE YOUR PROXY ELECTRONICALLY. | Š | |||||
92225 |
Shareholders of record as of the Record Date are encouraged and cordially invited to attend the Annual Meeting. Directions to attend the annual meeting where you may vote in person can be found on the back cover of the Proxy Statement.
Meeting Location:
Itron, Inc.
In the Atrium
2111 North Molter Road
Liberty Lake, Washington 99019
The following materials are available for you to review online:
the Company’s 2011 Proxy Statement (including all attachments thereto);
the Company’s Annual Report for the year ended December 31, 2010 (which is not deemed to be part of the official proxy soliciting materials); and
any amendments to the foregoing materials that are required to be furnished to stockholders.
To request a paper copy of the Proxy Materials:
(you must reference your 11-digit control number located on the reverse side of this form)
Telephone: | 1-888-313-0164 (outside of the U.S. and Canada call 201-680-6688) | |
Email: | shrrelations@bnymellon.com(you must reference your 11-digit control number in your email) | |
Internet: | http://www.proxyvoting.com/itri |
The Proxy Materials for Itron, Inc. are available to review at:
http://www.proxyvoting.com/itri
Have this notice available when you request a PAPER copy of the Proxy Materials,
when you want to view your proxy materials online
OR WHEN YOU WANT TO VOTE YOUR PROXY ELECTRONICALLY.
Use the Internet to vote your shares. On the landing page of the above website in the box labeled “To Vote Your Shares by Internet” click on “Vote Now” to access the electronic proxy card and vote your shares. Have this notice in hand when you access the website. You will need to |
70360
92225