UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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¨ | Soliciting Material under § 240.14a-12 |
ITRON, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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ITRON, INC.
2111 N. Molter Road
Liberty Lake, Washington 99019
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 1, 20148, 2015
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Itron, Inc. will be held at The Davenport Hotel in the Porter Room, at 10 South Post Street, Spokane, Washington, at 8:00 a.m., local time, on Thursday,Friday, May 1, 2014,8, 2015, for the following purposes:
(1) | to elect four directors to the Itron, Inc. Board of Directors; |
(2) | to |
(3) | to approve, on an advisory basis, the compensation of the Company’s named executive officers for the fiscal year ended December 31, |
(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 25, 2014March 4, 2015 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting or any adjournment or postponement thereof.
Members of the Company’s management will not make any formal presentation as part of the annual meeting, but will be available, in addition to all of our directors, to address questions from shareholders, as appropriate.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER ANNUAL MEETING TO BE HELD ON MAY 1, 2014:8, 2015:
Our proxy statement is attached. Financial and other information concerning Itron is contained in our Annual Report to Shareholders for the 20132014 fiscal year. The proxy statement and our Annual Report are available for all shareholders atwww.edocumentview.com/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 voting instruction form on the website noted above, or review the section titled “Quorum and Voting” beginning on page onetwo 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, |
Shannon M. Votava |
Corporate Secretary |
Liberty Lake, Washington
March 13, 201420, 2015
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PROPOSAL 3 – ADVISORY APPROVAL OF EXECUTIVE COMPENSATION (Say-on-Pay) | |||||
PROPOSAL 4 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |||||
EXECUTIVE COMPENSATION – Compensation Discussion and Analysis | |||||
Overview of Our
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Role of Compensation Committee, Compensation Consultant, and Executive Officers | |||||
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Modifications Made to Peer Companies for 2015 Compensation Decisions | 40 | ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S AUDIT FEES AND SERVICES | |||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | |||||
Appendix A | ||||
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 20142015 Annual Meeting of Shareholders. The meeting will be held in the Porter Room of The Davenport Hotel, located at 10 South Post Street, Spokane, Washington, at 8:00 a.m., local time, on Thursday,Friday, May 1, 2014,8, 2015, for the purposes listed in the accompanying Notice of Annual Meeting of Shareholders. The Company’s principal executive office is at 2111 North Molter Road, Liberty Lake, Washington 99019.
Internet Availability of Annual Meeting Materials
Our proxy materials will be available for you to access over the Internet. On or about March 20, 2014,26, 2015, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials (Notice) directing shareholders to the web site provided on the Notice 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 will be available for you to review online:
¡ | The Company’s Notice of Annual Meeting of Shareholders; |
¡ | The Company’s |
¡ | The Company’s Annual Report to Shareholders for the year ended December 31, |
¡ | Any amendments to the foregoing materials that may be required to be furnished to the shareholders by the Securities and Exchange Commission (SEC). |
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 four directors to the Itron, Inc. Board of Directors; |
(2) | to |
(3) | to approve, on an advisory basis, the compensation of the Company’s named executive officers for the fiscal year ended December 31, |
(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 25, 2014,March 4, 2015, are entitled to notice of, and to vote at, the annual meeting. On the record date, there were 39,324,20338,533,900 shares of our common stock outstanding. Each outstanding share of our common stock will entitle its holder to one vote on each of the four 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: (1) the election of the nominees for director; (2) the approvalre-approval of the Itron, Inc. Amended and Restated 2010 StockExecutive Management Incentive Plan; (3) the advisory approval of the compensation we paypaid our named executive officers;officers in 2014; and (4) 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 (Shares held in your name)
Registered shareholders can vote in person, by Internet, by telephone or by mail, by casting their vote by:as follows:
1) | Attending and voting in person at the annual meeting; |
2) | Accessing the Internet website specified in the Notice of Internet Availability and following the instructions provided on the website (or if printed copies of the proxy materials were requested, as specified in the printed proxy card); |
3) | Calling the telephone number specified in the Notice of Internet Availability and voting by following the instructions provided on the phone line (or if copies of the proxy materials were requested, as specified in the printed proxy card); or |
4) | Requesting a printed proxy card and completing, signing, dating and promptly mailing the proxy card in the envelope provided. |
Beneficial Shareholders (Shares held in the name of a broker, bank or other holder of record on your behalf)
If your shares are held in the name of a broker, bank, or other nominee or holder of record, follow the voting instructions on the voting instruction form provided to you by the holder of record to vote your shares.
Proposal One—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 are a beneficial shareholder and 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 – Itron, Inc. Amended and Restated 2010 StockExecutive Management Incentive Plan: The Itron, Inc. Amended and Restated 2010 StockExecutive Management Incentive Plan (Plan) will be adoptedre-approved if the number of votes cast “for” the Plan exceeds the number of votes cast “against” approval of the Plan. 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 on the approval of the Itron, Inc. Amended and Restated 2010 Stock Incentive Plan, absent voting instructions from you. Therefore, if you are a beneficial shareholder and do not provide voting instructions on proposal number two to the holder of record for your shares, they willnotbe counted in the vote for this proposal.
Proposal Three—Three – 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 and eligible toadvisory (non-binding) vote on this proposal will be approved if the number of votes cast “for” the proposal is required forexceeds the advisory (non-binding)number of votes cast “against” approval of this
the proposal. 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 for this proposal, absent voting instructions from you. Therefore, if you are a beneficial shareholder and do not provide voting instructions on proposal number three to the holder of record for your shares, they willnotbe counted in the vote for this proposal.
Proposal Four—Four – Ratification of Appointment of Independent Auditor: The appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 20142015 will be ratified if the majority of the votes cast are in favor of the proposal. Abstentions from voting on this matter will not be counted. Brokers and other holders of recorddohave discretionary authority to vote shares on this matter. Therefore, there will be no broker non-votes on the ratification of the Company’s independent registered public accounting firm.
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 all four proposals; and (ii) 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:
¡ | submitting a later-dated proxy for the same shares at any time before the proxy is voted; |
¡ | delivering written notice of revocation to the Corporate Secretary of Itron at any time before the vote; or |
¡ | 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).
WeFor the 2015 annual meeting, we have retained Innisfree M&A Incorporated to aid in the solicitation of proxies. We will bear the cost of such solicitation of proxies, which we estimate will be approximately $10,000, 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, one director, who was elected to the Board effective March 1, 2015 as a Class 1 director, will be elected for a term of two years or until his successor is duly elected and qualified, and three directors will be elected as Class 2 directors for terms of three years or until their respective successors are duly elected and qualified. Unless authority is withheld, the persons named as proxies 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 the following persons for election to the Board. Each nominee is currently a director and has indicated that he or she is willing and able to continue to serve as a director.
Class 2 (to serve until the 2018 annual meeting)
Kirby A. Dyess
Philip C. Mezey
Daniel S. Pelino
Class 1 (to serve until the 2017 annual meeting)
Jon E. Eliassen
Charles H. Gaylord, Jr.
Gary E. Pruitt
Michael V. PulliTimothy M. Leyden
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 FOUR NOMINEES FOR DIRECTOR.
Appointment of New DirectorDirectors by the Board – Increase in Size of Board
Effective JanuaryNovember 1, 2014, the Board elected Michael V. PulliDaniel S. Pelino to the Board, which increased the number of directors serving on our Board from nineten to eleven. Subsequently, Michael V. Pulli resigned from the Board effective December 31, 2014, so the number of directors was reduced back to ten. In February 2015, the Board elected Timothy M. Leyden to the Board effective March 1, 2015, which increased the Board again to eleven members. As stated above, both Mr. Pulli is a nomineePelino and Mr. Leyden are nominees for election by the shareholders at the 20142015 Annual Meeting.See also “Retiring Director – Reduction in Size of Board”.
Nominee to Serve until 2017 (Class 1)
Jon E. Eliassen (age 67)Timothy M. Leydenhas been(age 63) was elected as a director since 1987 and has served as our Chairman ofby the Board since Januaryeffective March 1, 2010. He recently retired on2015. Since 1983 and until his retirement as CFO in September 30, 2013, as the president, chief executive officer2014, Mr. Leyden served in various management and member of the Board of Directors of Red Lion Hotelsleadership roles at Western Digital Corporation, a New York Stock Exchange (NYSE) tradedNASDAQ company headquartered in Spokane, Washington, a position he had held since January 2010. From 2003 until 2007, Mr. Eliassen was president(WDC) and chief executive officerindustry-leading developer and manufacturer of the Spokane Area Economic Development Council,storage solutions for digital content. Those leadership roles included financial, accounting, manufacturing and from 1970 until 2003, he held numerous positions within Avista Corporation, a company involvedinformation technology functions at WDC and its subsidiaries. WDC has manufacturing facilities in the production, transmission,U.S., China, Japan, Malaysia, the Philippines, Singapore 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 ITL, Inc., a privately held technology company, and was a member of the Board of Red Lion Hotels Corporation from September 2003 to September 2013.
In addition to his experience as President and CEO of a NYSE traded hospitality company, 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,Thailand, as well as mergersales offices worldwide. Mr. Leyden left WDC for the period between 2000 and acquisition involvement that has included due diligence processes,2007, during which time he initially served as a consultant principal for PRTM, an operational consulting company, followed by CFO positions for multiple divisions of Sage Software USA, a subsidiary of Sage Software PLC and provider of business valuation techniques,management software and financial analyses.services. Upon his return to WDC in 2007, Mr. Leyden served as Executive Vice President, Finance and CFO until 2010 and as COO from 2010 to 2012. In addition,2012, after WDC acquired HGST, Inc., WDC was organized into a parent company with two operating subsidiaries, HGST and WD. Mr. Eliassen has been a principal or general partner in venture capital firms with expertise in evaluating businesses and has several years’ experienceLeyden then served as an expert witness before utility regulatory commissions in matters relating to financial strategy and policy, credit ratings, costPresident of capital, and capital structure.the WD
subsidiary, from 2012 to 2013, and subsequently served as CFO of the parent company, WDC, from 2013 until he retired. For a period following his retirement, Mr. Leyden served as advisor to his successor and other WDC executive management until January 2015.
A native of Ireland, Mr. Leyden brings to the Board a mix of financial and operational experience (in hardware and software industries), in addition to a background that includes mergers and acquisitions and integration experience related to the assimilation of acquired companies into both WDC and Sage Software. His prior experience with overseeing global manufacturing, engineering, marketing, and sales operations, when combined with his financial and accounting background, add a depth of international insight to the Board.
Nominees to Serve until 2018 (Class 2)
Charles H. Gaylord, Jr.Kirby A. Dyess(age (age 68) has been a director since 2006. Mr. Gaylord has beenMs. Dyess is a private technology investor focusing on softwareprincipal in Austin Capital Management LLC where she invests in and communications since 1994. Until hisassists 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 corporate vice president and as director of operations for Intel Capital, until her 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.; andDecember 2002. While at Intel, she also served as avice president and director of a number of private technology companies. His wealth of knowledge of software services, brand marketing, IT technology, andnew business development adds to the diverse business backgroundsand corporate vice president and director of our other members of the Board.
Gary E. Pruitt (age 64) has been a director since 2006. From 2002 until his retirement in 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 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 currentlyhuman resources worldwide. Ms. Dyess serves on the board of Premera Blue Cross, anddirectors of Viasystems Group Inc., a public company whose shares are traded on NASDAQ. She also serves on the boardsboard 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 the following NYSE traded companies: Public Storage, Inc.; Esterline Technologies Corporation;New York Stock Exchange (NYSE).
Due to her positions at Intel Corporation and PS Business Parks, Inc.her more recent due diligence and investment in numerous early stage technology companies, 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 research and development knowledge.
Philip C. Mezey(age 55) was President and Chief Operating Officer (COO) of Itron’s Energy segment from March 2011 until December 31, 2012, and effective January 1, 2013, he was elected our President and Chief Executive Officer and a member of our Board of Directors. Mr. Mezey joined Itron in March 2003 as Managing Director of Software Development for Itron’s Energy Management Solutions Group as part of Itron’s acquisition of Silicon Energy Corp., where he had most recently served as its Senior Vice President of Product Development and Strategy. Mr. Mezey was promoted to Group Vice President and Manager of Software Solutions in 2004. In 2005, he became Sr. Vice President Software Solutions, and in 2007 Mr. Mezey became Sr. Vice President and Chief Operating Officer – Itron North America.
Mr. PruittMezey brings to the Board more than 13 years of experience in research and development, manufacturing, and business development for metering software and related services. While at Silicon Energy Corp., he managed the marketing and sales departments, and was directly involved with a number of mergers and acquisitions prior to Itron’s acquisition of that company. During his experiencetenure at Itron, he has had extensive exposure to international systems and utilities throughout the world, and, as the only employee director, Mr. Mezey provides the Board with valuable insight into management’s views and perspectives, as well as the day-to-day operations of Itron.
Daniel S. Pelino (age 57) was elected as a chief executive officer of a multi-national company and alldirector by 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.
Michael V. Pulli(age 49) has been a director since January ofBoard effective November 1, 2014. Mr. PulliPelino joined International Business Machines Corp (IBM) in 1980, and currently serves as chief executive officergeneral manager of Pace Plc,its public sector business, where he leads IBM’s business in the government, education, healthcare, and life sciences industries, including IBM’s Smarter Cities initiative. He serves as a London-based company that creates world-wide technologies, productspublic sector expert and advisor to government officials, news media, and global publications, and his team helps organizations, states, and countries transform and create citizen-based, digitized services to improve economic vitality. Mr. Pelino currently serves on the Executive Committee for the broadcastPatient Centered Primary Care Collaborative (PCPCC) and broadband industries, including media servers, gateways, and other digital services to its customers. Pace is also the world’s market leader in set-top boxes for the television industry. Mr. Pulli was appointed CEO of Pace in December 2011, after nearly eight years as president of Pace Americas, where he was responsible for the company’s businesses in the USA, Canada and Latin America. In his role as CEO, Mr. Pulli is responsible for leading Pace’s global strategy. Prior to joining Pace in 2004, Mr. Pulli was CEO of the broadcasting company Digital Latin America. Previous to that, he spent eight years at Motorola in various senior management positions, including vice president of international operations. Mr. Pulli also serves on the Board of Directors of Pace, which is traded on the London Stock Exchange under the symbol PIC.Healthcare Executive Network (HEN).
Mr. Pulli brings toPelino provides the Board his ongoing experience aswith a chief executive officer of an international company with global operations and international strategies. He has extensive experience with Latin American technology companies and processes, where Itron has a business presence. Mr. Pulli’s strong background in technology, brand marketing, and business innovation including the design and development of software solutions and products, together withdevelopment. With his worldwide experience in working with over 160 of the world’s leading managed service operators,governmental business and strategies, he brings a wealth ofcurrent global business experience, diversity and talentperspective to the Board. In addition, Mr. Pelino’s knowledge of digitized services created for economic development adds invaluable insight to the Company’s smart metering systems and strategies for its utility customers.
Directors Continuing in Office until 2016 (Class 3)
Lynda L. Ziegler (age 61)62) has been a director since February of 2013. Ms. Ziegler recently retired from Southern California Edison (SCE), one of the largest electric utilities in the U.S., whose parent is Edison International. During her tenure at SCE, she held various management positions related to customer program offerings, customer service, development, communication and implementation of energy efficiency programs, marketing
and communication of smart meters, and generally led all aspects of delivering power to almost 5 million customers. From 2006 to 2011, Ms. Ziegler was Senior Vice President of Customer Service, and from January 1, 2011 until her retirement in September of 2012, she served as Executive Vice President of Power Delivery Services, where she was responsible for transmission and distribution construction and maintenance, customer service, information technology (IT), and support services including procurement and real estate management. In the past she has served on the advisory committee for power delivery and utilization at the Electric Power Research Institute (EPRI), and currently serves as a founding member of the Board of the Association for Women in Water and Energy.
Ms. Ziegler brings to the Board her extensive background with public utilities, especially with her recent responsibilities in the industry related to smart meters and customer relations from the utility perspective. Her breadth of knowledge of software services, transmission and distribution construction and maintenance, IT, and business development adds to the diverse business backgrounds of our other members of the Board.
Thomas S. Glanville(age 55)56) has been a director since 2001. Since 2003, Mr. Glanville has been managing partner of Eschelon Energy Partners,Advisors, LP, Eschelon Advisors,Energy Partners, LP, and affiliates, providing energy and private equity investment and advisory services. From 1999 to 2002,1999-2002, 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 boardsboard of directors of the privately-held oil and gas exploration and production companies Chroma Exploration and Production, Inc. andcompany Strand Energy, L.L.C. He also serves as chairman 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 67)68) 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 in 2011 she was co-chair of the State Energy Strategy Advisory Committee for the State of Washington. Previously, Ms. Nelson was 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.
Directors Continuing in Office until 20152017 (Class 2)1)
Kirby A. DyessJon E. Eliassen (age 67)(age 68)has been a director since 1987 and has served as our Chairman of the Board since January 1, 2010. In September 2013 he retired as the president, chief executive officer (CEO) and member of the Board of Directors of Red Lion Hotels Corporation, an NYSE traded company headquartered in Spokane, Washington, where he had served as president and CEO since January 2010. From 2003 until 2007, Mr. Eliassen 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 ITL, Inc., a privately held technology company, and was a member of the board of Red Lion Hotels Corporation from September 2003 to September 2013.
In addition to his experience as President and CEO of an NYSE traded hospitality company, 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 69) has been a director since 2006. Ms. DyessMr. 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 principalmember of the board of directors and a member of the compensation committee of Proximetry Inc., a privately-held company, and is a former member of the advisory board of Technology Crossover Ventures I, an investment firm that invests primarily in Austin Capital Management LLC where she invests inprivate and assists early stagepublic information technology companies. Prior
During various periods from 1990 to forming Austin Capital Management LLC in 2003, Ms. Dyess spent 23 years at Intel Corporation where she most recentlyapproximately 2002, Mr. Gaylord was a member of the boards of directors and served as its corporate vice presidenton the compensation committees of the following public companies: Stac, Inc.; HNC Software, Inc.; Maxis, Inc.; and as director of operations for Intel Capital, until her retirement in December 2002. While at Intel, sheRetek, Inc.; and also served as vice president anda director of newa 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 65) has been a director since 2006. From 2002 until his retirement in October 2009, Mr. Pruitt was chairman and corporate vice presidentchief executive officer of Univar N.V., a chemical distribution company with distribution centers in the U.S., Canada, and directorEurope. He had been associated with Univar and related entities since 1978 and held a variety of human resources worldwide. Ms. Dyesssenior management positions within Univar and Van Waters & Rogers, Inc., which ultimately became Vopak USA Inc. Mr. Pruitt has also worked as a chartered accountant with a public accounting firm. He currently 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,Premera Blue Cross, 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 and her more recent due diligence and investment in numerous early stage technology companies, 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 research and development knowledge.
Philip C. Mezey,age 54, was President and Chief Operating Officer (COO), Energy, from March 2011 until December 31, 2012, and effective January 1, 2013, he was elected our President and Chief Executive Officer, and a member of our Board of Directors. Mr. Mezey joined Itron in March 2003 as Managing Director of Software Development for Itron’s Energy Management Solutions Group as part of Itron’s acquisition of Silicon Energy Corp., where he had most recently served as its President of Product Development and Sales. Mr. Mezey was promoted to Group Vice President and Manager of Software Solutions in 2004. In 2005, he became Sr. Vice President Software Solutions, and in 2007 Mr. Mezey became Sr. Vice President and Chief Operating Officer – Itron North America.
Mr. Mezey brings to the Board more than 13 years of experience in research and development, manufacturing, and business development for metering software and related services. While at Silicon Energy Corp., he managed the marketing and sales departments and was directly involved with a number of mergers and acquisitions prior to Itron’s acquisition of that company. During his tenure at Itron, he has had extensive exposure to international systems and utilities throughout the world, and as the only employee director, Mr. Mezey provides the Board with valuable insight into management’s views and perspectives, as well as the day-to-day operations of Itron.
Graham M. Wilson (age 69) 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 CanadianNYSE traded companies: British Columbia Ferries ServicesPublic Storage, Inc., Naikun Wind Energy Group Inc.,; Esterline Technologies Corporation; and Hardwoods Distribution,PS Business Parks, Inc.
A Canadian citizen,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.
Retiring Director – Reduction in Size of Board
Graham M. Wilson has been a director of Itron since 1990, and his current term will expire at the 2015 Annual Meeting. Mr. Wilson has extensive financialreached the age of 70 and senior leadership experience, particularlywill retire in accordance with energy businesses such as Westcoast Energythe Company’s Corporate Governance Guiding Principles. During his twenty-five years of service on our Board, Mr. Wilson helped steer the Company through a period of tremendous growth and prosperity which focuses primarily on natural gasresulted in the U.S.recognition of Itron as a world leader in our industry. His financial acumen and Canada. He servedbusiness leadership have been invaluable to the Company and the other Board members. We at Itron recognize and appreciate Mr. Wilson’s dedication and service to the Company.
Mr. Wilson’s position as vice presidenta Class 2 director will be filled by Mr. Pelino, upon his re-election by the shareholders at the 2015 meeting. With the retirement of finance for two other public Canadian companies and currently serves on the audit committees of the aforementioned three 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 perspectivethe number of directors serving on our Board will be reduced from eleven to our Board.ten.
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 its 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 in the individual director biographies, the following matrix summarizes the skills and attributes of our directors and director nominees for 20142015 that we believe are essential to our business:
Director Qualifications and Attributes
Kirby Dyess | Jon Eliassen | Charles Gaylord | Thomas Glanville | Philip Mezey | Sharon Nelson | Gary Pruitt | Lynda Ziegler | |||||||||||||||||||||||||||||||||||||||||
Senior leadership/ CEO/COO experience | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||||||||
Business development experience | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||||||||
Financial expertise/CFO | Ö | Ö | Ö | Ö | Ö | Ö | ||||||||||||||||||||||||||||||||||||||||||
Public board experience | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||||||||||||
Independence | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||||||||
Utility Industry expertise | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||||||||||||
Industry expertise – global | Ö | Ö | Ö | Ö | Ö | Ö | ||||||||||||||||||||||||||||||||||||||||||
Operational | Ö | Ö | Ö | Ö | ||||||||||||||||||||||||||||||||||||||||||||
IT/technology/R&D/ Telecom expertise | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||||||||
Marketing/sales expertise | Ö | Ö | Ö | Ö | Ö | |||||||||||||||||||||||||||||||||||||||||||
Hardware/software services expertise | Ö | Ö | Ö | Ö | Ö | Ö | ||||||||||||||||||||||||||||||||||||||||||
Government expertise | Ö | Ö | 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 | 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
Director Fees. Our non-employee directors (other than our Chairman) receive an annual retainer of $165,000, with $65,000 paid in cash and $100,000 paid in shares of our common stock. For our Chairman, the annual retainer paid is $230,000, with $110,000 paid in cash and $120,000 paid in shares of our common stock. Members of the Audit/Finance Committee receive an additional annual retainer of $10,000, paid in cash, and members of our Compensation and Corporate Governance Committees receive an additional annual retainer of $6,500 and $5,000, respectively, paid in cash. The committee chairs for the Corporate Governance and Compensation Committees receive an additional annual retainer of $15,000, and the chair of the Audit/Finance Committee receives an additional annual retainer of $20,000, all paid in cash on a quarterly basis. Our Chairman receives no additional retainers for serving on any of our committees.
For new non-employee directors, we issue restricted stock units (RSUs) equal in value to fifty percent of the annual cash retainer (currently at $65,000 for directors other than the Chairman) upon the individual’s election to the Board, with the RSUs vesting ratably over three years. Shares of our common stock and RSUs granted to non-employee directors that are issued as compensation are issued under our 2010 Amended and Restated Stock Incentive Plan.
In 2014 we adopted a policy that, upon attainment of age 65, a Director can choose to receive all of his or her retainer in cash, provided they continuously meet the stock ownership guidelines described in the following paragraph.
Stock Ownership Guidelines. Since 2006, we have maintained stock ownership guidelines for our non-employee directors, including our Chairman. We expect our directors and Chairman to purchase (or hold) shares equal to five times their annual cash retainer within five years from their initial appointment or election as a director, or to be making substantial progress towards meeting the guidelines. For our Chairman that equates to $550,000 worth of stock, and for the other directors, it equates to $325,000 worth of stock. All of our non-employee directors currently comply with these ownership guidelines, with the exception of our two recently elected non-employee directors, Lynda Ziegler, Daniel Pelino, and Michael Pulli,Timothy Leyden, who joined the Board in February of 2013, and JanuaryNovember of 2014, and March of 2015, respectively, bothand all of whom are making progress towards their goal.
Deferred Compensation Plan. Pursuant to the Company’s Amended and Restated Executive Deferred Compensation Plan dated January 1, 2012, our non-employee directors are eligible to participate in that plan, and may defer up to 100% of any director fees and 100% of any RSUs that he or she anticipates receiving into a nonqualified account.
2013
2014 Director Compensation Table (for all non-employee Directors)
Director Compensation | Director Compensation | Director Compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(9) | Option Awards ($)(10) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (10) | Option Awards ($) (11) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
Kirby Dyess (1) | 80,000 | 99,937 | — | — | — | — | 179,937 | 80,000 | 99,924 | — | — | — | — | 179,924 | ||||||||||||||||||||||||||||||||||||||||||
Jon Eliassen | 110,000 | 119,948 | — | — | — | — | 229,948 | 110,000 | 119,947 | — | — | — | — | 229,947 | ||||||||||||||||||||||||||||||||||||||||||
Charles Gaylord (3)(4) | 76,500 | 99,937 | — | — | — | — | 176,437 | 76,500 | 99,924 | — | — | — | — | 176,424 | ||||||||||||||||||||||||||||||||||||||||||
Thomas Glanville (5) | 80,000 | 99,937 | — | — | — | — | 179,937 | 85,000 | 99,924 | — | — | — | — | 184,924 | ||||||||||||||||||||||||||||||||||||||||||
Sharon Nelson (6)(7) | 88,250 | 99,937 | — | — | — | — | 188,187 | 90,000 | 99,924 | — | — | — | — | 189,924 | ||||||||||||||||||||||||||||||||||||||||||
Daniel Pelino (8) | 10,833 | 49,134 | — | — | — | — | 59,967 | |||||||||||||||||||||||||||||||||||||||||||||||||
Gary Pruitt (6) | 75,000 | 99,937 | — | — | — | — | 174,937 | 75,000 | 99,924 | — | — | — | — | 174,924 | ||||||||||||||||||||||||||||||||||||||||||
Michael Pulli (6)(9) | 70,000 | 132,387 | — | — | — | — | 202,387 | |||||||||||||||||||||||||||||||||||||||||||||||||
Graham Wilson (4)(6) | 85,000 | 99,937 | — | — | — | — | 184,937 | 80,000 | 99,924 | — | — | — | — | 179,924 | ||||||||||||||||||||||||||||||||||||||||||
Lynda Ziegler (3)(8) | 64,458 | 124,082 | — | — | — | — | 188,540 | |||||||||||||||||||||||||||||||||||||||||||||||||
Lynda Ziegler (3) | 71,500 | 99,924 | — | — | — | — | 171,424 |
(1) | Chairman of the Compensation Committee. |
(2) | Chairman of the Board. |
(3) | Member of the Compensation Committee. |
(4) | Member of the Corporate Governance Committee. |
(5) | Chairman of the Audit/Finance Committee. |
(6) | Member of the Audit/Finance Committee. |
(7) | Chairman of the Corporate Governance Committee. |
(8) | Mr. Pelino was appointed to the Board on |
(9) | Mr. Pulli was appointed to the Board effective January 1, 2014 and resigned from the Board effective December 31, 2014. |
(10) | The amounts in this column reflect the aggregate grant date fair value of the awards determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) |
No options were granted to non-employee directors in |
LEADERSHIP STRUCTURE OF THE BOARD OF DIRECTORS
The leadership of our Board is managed by our Chairman of the Board (Chairman). Our Corporate Governance Guiding Principles (Governance Principles) require the role of Chairman to be held by an independent director who meets the independence requirements of NASDAQ. The Board believes having separate roles of Chairman and Chief Executive Officer (CEO) allows for a more balanced workload between the Chairman and the CEO, especially in light of the current duties and responsibilities of the Chairman, which include the following:
¡ | Preside over all meetings of the Board (including executive sessions of the Board) and meetings of the shareholders; |
¡ | Review the agendas of each Board and committee meeting; |
¡ | Prepare agendas as needed for executive sessions of the independent directors; |
¡ |
Serve as a liaison between the independent directors and the CEO; |
¡ | 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 |
¡ | Perform such other duties as the Board may require. |
Pursuant to the Company’s Governance 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 serving his second term that will expire at the 2016 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 Governance Principles.
See “CORPORATE GOVERNANCE” in this proxy statement for additional information on our Board of Directors.
PROPOSAL 2—2 – APPROVAL OF THE ITRON, INC. EXECUTIVE MANAGEMENT INCENTIVE
PLAN (AS AMENDED AND RESTATEDRESTATED)
2010 STOCK INCENTIVE PLANProposal
We are seeking shareholder approval of amendments to and the 2010 Stockrestatement of the Itron, Inc. Executive Management Incentive Plan, (the “Amended and Restated Itron, Inc. 2010 Stock Incentive Plan” or “2010 Plan”)EMIP, to authorize4,375,000 additional shares of common stock for issuance under the 2010 Plan, to comply with changes in applicable law, to improve the Company’s corporate governance, to implement other best practices and to eliminate provisions that are no longer relevant.
The Board believes it is in the best interests ofallow the Company and its shareholders to continue offering equity-basedretain the ability to grant awards to our management-level employees. InCEO and such other senior executives (generally, the three other most highly compensated officers other than the chief financial officer) who are considered “covered employees” under Section 162(m) of the Code that are deductible for U.S. federal income tax purposes under Section 162(m) of the Internal Revenue Code (Code). If the amendments to and restatement of the EMIP are approved by our shareholders, the EMIP, as amended and restated, will become effective for awards granted following the Company’s 2015 Annual Shareholders Meeting.
To preserve the Company’s ability to deduct for U.S. federal income tax purposes compensation that certain of our executive officers may recognize in connection with performance-based awards that may be granted in the future under the EMIP, shareholders are being asked to approve certain material terms of the EMIP related to such awards. Section 162(m) of the Code eliminates a federal income tax deduction for compensation in excess of $1 million paid by the Company (or our subsidiaries) to any covered employee each year, unless that compensation is conditioned upon the attainment of one or more “performance-based” goals and otherwise meets the requirements of “qualified performance-based compensation” under Section 162(m) of the Code. Among the requirements for compensation to be considered qualified performance-based compensation is that the material terms of the performance goals pursuant to which performance-based compensation is paid have been disclosed to and approved by the shareholders every five years. The material terms of the EMIP were last approved by the shareholders at the Company’s 2010 Annual Meeting. The material terms of the performance goals under which compensation may be paid under the EMIP include: the eligibility requirements for participation in the EMIP; the performance criteria upon which performance awards may be based; and the maximum amount of compensation that can be paid to any employee under the EMIP. Each of these terms is discussed below, and approval of the EMIP will constitute approval of the material terms of the performance goals.
The EMIP was adopted by the Board on February 12, 2010 and approved by the shareholders on May 4, 2010. Accordingly, in order to have an appropriate supply of shares available for equitycontinue to be able to make awards under the 2010 PlanEMIP that will constitute “qualified performance-based compensation” under Section 162(m) of the Code, the material terms of the EMIP must be approved by the Company’s shareholders. At the recommendation of the Compensation Committee, the Board has adopted amendments to recruit, hire,the EMIP, subject to approval by the Company’s shareholders, to clarify tax and retain the talent necessarylegal requirements applicable to achieve strong performance in the future, our Board believes the Company will need to reserveawards made under the 2010 PlanEMIP, providing for the additional shares for which shareholder approvalability to vary terms to address non-US requirements, and to otherwise implement certain current best practices.
Purpose of the EMIP
The purpose of the EMIP is being requested. By approvingto provide the 2010 Plan, shareholders are approvingmaterial terms, including the performance criteria on which performance goals may be based, that will allow the awards granted under the EMIP to be treated as qualified performance-based compensation under Section 162(m) of the Code and, therefore, preserve for Performance Awards as set forth in the 2010 Plan.
The 2010 Plan isCompany the federal income tax deductibility of incentive compensation paid to senior executive officers who are covered employees. Additionally, the EMIP enhances the Company’s only active employee equity plan (other than its Employee Stock Purchase Plan),ability to attract and as of February 25, 2014, we had approximately 65,732 shares remaining for issuance underretain highly qualified executives and to provide those executives with additional financial incentives to promote the 2010 Plan. If the shareholders approve the amendment, then at February 25, 2014, we would have had approximately 4,440,732 shares available for the grant of new awards. As of February 25, 2014, there were 1,322,322 options outstanding in aggregate under the 2010 Plan and the Amended and Restated 2000 Stock Incentive Plan (the “Prior Plan”) with a weighted average exercise price of $52.91 and a weighted average remaining term of 5.2 years, and 723,812 full value awards under the 2010 Plan that were unvested and outstanding. Shares under the Company’s 2012 Employee Stock Purchase Plan have been excluded from the above share totals.
Material Changes to the 2010 Plan
The following summary highlights the proposed material changes to the 2010 Plan.
Key Termssuccess of the Plan at a Glance
The following is a summary of the key provisions of the 2010 Plan, as set forth and stated herein.
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Summary of the 2010 Plan
The following description of the 2010 PlanEMIP is a summary and does not purport to be fully descriptive and is subject to the terms of the 2010 Plan, which is descriptive. SeeAppendix Aattached to this proxy statement asAppendix A.
Purposefor a copy of the 2010 Planentire EMIP.
The purposeSummary of the 2010 PlanEMIP
Administration. The EMIP will generally be administered by the Compensation Committee of the Board, which is comprised solely of “outside directors” under Section 162(m) of the Code. Each year the Compensation Committee (or the Board, for the CEO) will set incentive targets, establish performance goals and approve incentive awards to enhance the long-term shareholder valueChief Executive Officer and other participants in the EMIP.
Performance Criteria and Goals. Annually, the Committee must objectively define the manner of calculating the results for the performance criteria used to establish the performance goals and targets for that performance period. The performance period over which the performance goals are measured is generally the fiscal year of the Company, by offering opportunities to selected persons to participate inbut the Company’s growth and success, and to encourage them to remain in the serviceperiod could be of the Company and to acquire and maintain stock ownership in the Company. a different duration.
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.
Awards. The 2010 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 dividend equivalents. Awards may be granted singly or in combination with other awards.
Stock Subjectcriteria are limited to the 2010 Plan. A maximum of 7,875,000 shares of common stock (after giving effectfollowing: 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, the increase of 4,375,000 shares if the amendments are approved) will be authorized for issuance under the 2010 Plan, all of which shares may be issued pursuant to the exercise of incentive stock options granted under the 2010 Plan. The maximum number of shares, including the number of shares that may be issued pursuant to the exercise of incentive stock options, are subject to adjustment upon certain capitalization events of the Company as describedoperating cash flow and free cash flow), economic profit (including economic profit margin), return on equity or average shareholders’ equity, total shareholder return, growth in more detail below.
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,sales or other “full-value” stock-based awards will be counted against the pool as 1.7 shares for each such award.
Shares covered by awards under the 2010 Plan and the Prior Plan that are forfeited, cancelledreturn on sales, gross, operating 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. In addition, in the event that tax withholding liabilities arising under a full-value award under the 2010 Plan or Prior Plan are satisfied by surrendering of shares subject to an award, the surrendered shares will be added back to the pool at the same one share or 1.7 shares ratio used for the awards.
The following are not available for issuance pursuant to new awards: (i) shares that are surrendered to pay the exercise price of an award or, with regard to options or SARs, to satisfy tax withholding obligations; (ii) shares that are not issued as a result of a net settlement of an option or SARs; (iii) shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options.
Administration. Our Compensation Committee will administer the 2010 Plan (the Plan Administrator), unless the Board appoints another committee to administer the 2010 Plan. Subject to the terms of the 2010 Plan, the Plan Administrator selects the individuals to receive awards, determines the terms and conditions of all awards, and interprets the provisions of the 2010 Plan.
The Plan Administrator has the authority, in its sole discretion, to determine the type or types of awards to be made under the 2010 Plan. Except for adjustments to reflect stock splits and similar events, without shareholder approval, (i) no option or SAR may be amended to reduce the exercise price of such option or SAR below theprofit margin, working capital, earnings per share, fair market value of the common stock as of the date the optiongrowth in earnings or SAR was granted, and (ii) at any time when the then-current fair market value of aearnings per share, is less than the fair market value of a share of common stock on the date that an outstanding option or SAR was granted, such outstanding option or SAR may not be cancelled or surrendered in exchange for (i) cash, (ii) an option or SAR having an exercise price that is less than the fair market value of a share of common stock on the date that the original option or SAR was granted, or (ii) any other Award.
Eligible Participants. Awards may be granted under the 2010 Plan to those officers, directors, and employees of the Company and its Related Corporations (as defined in the 2010 Plan, generally Company subsidiaries) as the Plan Administrator 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. As of February 25, 2014, nine non-employee directors, and approximately 500 employees would be eligible to participate in the 2010 Plan.
Stock Options. Options granted under the 2010 Plan may be incentive stock options (as defined in Section 422 of the Code) or nonqualified stock options. Under the 2010 Plan, the exercise price for each Option is determined by the Plan Administrator, but cannot be less than 100% of the common stock’s fair market value on the date of grant. For purposes of the 2010 Plan, fair market value generally means the closing sales price of our common stock as reported by The NASDAQ Global Select Market for a single trading day. As of February 25, 2014, the fair market value of aper share of our common stock, was $35.02.
The term of each option may not be greater than ten years from the date of grant. The Plan Administrator will establishmarket share, overhead or other expense reduction, growth in shareholder value relative to various indices, safety, and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option will veststrategic plan development and become exercisable, which provisions may be waived or modified by the Plan Administrator atimplementation, any time.
The Plan Administrator will establish and set forth in each instrument that evidences an Option whether the Option will 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. If not so established in the instrument evidencing the Option, the Option will be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:
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 will expire upon the earlier to occur of (a) the last day of the Option Term or (b) 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 (as defined in the 2010 Plan), the Option will automatically expire upon first notification to the participant of such termination, unless the Plan Administrator determines otherwise.
Stock Awards and Stock Units. 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 will determine, in its sole discretion, and as set forth in the instrument evidencing the Award (“Restricted Stock”). The terms, conditions and restrictions determined by the Plan Administrator will 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 will 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”).
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 will determine, in its sole discretion. The terms, conditions and restrictions 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 will occur by reason of termination of the participant’s employment or service relationship.
Performance Share and Performance Unit Awards. 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 consist of a unit valued by reference to a designated number of shares of common stock, the value of which may be paidused to measure the performance of the Company as a whole or with respect to any affiliate, or division, business unit or business segment of the Company or an affiliate, 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, in each case as specified in the actual award.
Depending on the performance criteria used to establish the performance goals, the performance goals may be expressed in terms of overall Company performance, the performance of an affiliate of the Company, or the performance of a division, business unit or segment of the Company or an affiliate of the Company, or the performance of an individual, in each case as specified in the document evidencing the award.
The Compensation Committee (or the Board, for the CEO) may, in its discretion, at the time of grant, specify that one or more objectively determinable adjustments will be made to one or more of the performance goals.
Terms of Awards. Within 90 days after the beginning of each performance period (or, if earlier, within a number of days which is equal to 25% of the performance period), the Compensation Committee will determine, in writing (i) the applicable performance period, (ii) specific performance goals for the performance period, (iii) the specific target payout and, if applicable, the maximum payout for each covered employee as a percentage of base salary or based on other formulae, (iii) specific objectively determinable adjustments applicable to the participant by delivery of such property as the Plan Administrator will determine, including, without limitation, cash, shares of common stock, other property, or any combination thereof, upon the attainment of performance goals, as established by(iv) the Plan Administrator,form of payment and denomination of the award (cash, Company stock, or a combination of both), and (iv) any other terms and conditions specified byfor the Plan Administrator.determination and payment of the award, including the extent to which the award is payable following the employee’s termination of employment.
The Plan Administrator may grant awardsForm of performance units (“Performance UnitsPayment”) and designate. If an award granted under 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 consist of a unit valued by reference to a designated amount of property other thanEMIP is payable in shares of our common stock, which value may be paid to the participant by delivery of such property as the Plan Administrator will 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.
Dividend Equivalents. The Plan Administrator is authorized to grant dividend equivalents, which are rights under the 2010 Plan entitling a participant to receive credits based on dividends that would have been paid on shares of Common stock subject to an award if such shares had been held by the participant at the time the dividend was declared. Dividend equivalents cannot be granted as part of options or SARs. Any dividend equivalents granted with respect to performance-based awards (or dividends distributed on performance-based restricted stock awards) will be subject to the same vesting conditions applicable to the underlying performance-based award.
U.S. Internal Revenue Service Code (Code) Section 162(m) Provisions. 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 (as definedissued under Code Section 162(m), then the Plan Administrator may provide that Code Section 162(m) is applicable to such award and require the following:
Assignability. Except as otherwise determined by the Plan Administrator in accordance with the terms of our Amended and Restated 2010 Stock Incentive Plan.
Maximum Award. The maximum award that may be paid to any participant in a year may not exceed $3,000,000.
Certification.At the 2010 Planend of the performance period, the Compensation Committee must certify the attainment level of the performance goals and determine the amount of the awards to be paid to the extent permitted by Section 422 ofparticipants. In determining the Code, awards may not be pledged, assigned, or
transferred other than by will or the laws of descent and distribution, except that a participant may designate a beneficiary who may exercise an award or receive paymentamount payable under an award, after the participant’s death. DuringCompensation Committee has the participant’s lifetime, awards may be exercised only bysole discretion to reduce or eliminate (but not increase) the participant. Any transfer of an award that is authorized under the 2010 Plan must comply with the requirements applicable to offerings registered under a registration statement on Form S-8.
Adjustment of Shares. In the event of stock dividends, stock splits, spin-offs, combinations, or exchange of shares, recapitalization, mergers, consolidations, distributions to shareholders other than a normal cash dividend, or other change in the Company corporate or capital structure or similar changes in our corporate or capital structure, the Plan Administrator, will make proportional adjustments in (a) the maximum number and kind of securities subject to the 2010 Plan and the maximum number and kind of securities that may be made subject to awards to any participant, (b) 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, (c) the number and kind of securities automatically granted pursuantamount otherwise payable to a formula program established underparticipant notwithstanding the 2010 Plan, and (d) the maximum number of securities subject to an award to which Code Section 162(m) applies, as set forth in the 2010 Plan. Such adjustments will not be deemed an option repricing under the 2010 Plan.
Change in Control Transactions. Except as otherwise provided in the instrument evidencing the award or in a written employment or services agreement or other agreement between a participant and the Company or a Related Corporation in connection with an award, if in the event of a Change in Control Transaction (as defined in the 2010 Plan), a Participant’s Award is not assumed, continued, replaced or an equivalent award is not substituted for the Award by the surviving corporation, the successor corporation or its parent corporation, as applicable, the Award will become fully vested and, if applicable, exercisable whether or not the vesting requirements set forth in the applicable agreement evidencing the Award have been satisfied.
The vesting and payout of Performance Awards resulting from a Change in Control Transaction will 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.
The Plan Administrator will have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, or change in controlattainment of the Company, as defined byperformance goals.
Payment of Awards. After certification, the Plan Administrator, to take such further action as it determines toawards must be necessary or advisable, and fair and equitablepaid to the participants with respect to awards.no later than 90 days following the close of the performance period or March 15 of the year following the year in which the performance period ends, if earlier.
Amendment and Termination of 2010 Planthe Plan.. The Board or the Committee may at any time amend, suspend, or terminate the 2010 Plan at any time. The 2010 Plan will 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 2010 Plan’s adoption by the Board and (b) the adoption by the Board of any amendmentEMIP, subject to the 2010 Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code.
The 2010 Plan may be amended only by the Board in such respects as it will deem advisable; provided, however, thatshareholder approval to the extent required for compliance withunder Section 422162(m) of the Code, orand no modification to the Performance Goals (or adjustments) applicable to any applicable law or regulation, shareholder approvaloutstanding awards may cause the award to fail to be treated as qualified performance-based compensation under Section 162(m) of the Code.
Clawback/Recovery.Awards will be required for any amendment that would (a) increase the total number of shares available for issuance under the 2010 Plan, (b) modify the class of persons eligible to receive Options, or (c) otherwise require shareholder approval under any applicable law or regulation.
Clawback/Recovery. Awards are subject to recoupment under any “clawback”clawback policy that the Company is required to adopt under applicable stock exchange listing rules or as otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. The CompanyIn addition, the Compensation Committee may also impose other clawback, recovery or other recoupment provisions asprovisions.
Non-US Participants. The Compensation Committee is vested with the Plan Administrator may determine are necessary authority to adopt sub-plans, rules and modify the terms of awards to facilitate compliance with the laws in a non-US jurisdiction and/or appropriate.to take advantage of specific tax treatment for awards granted to participants in such jurisdictions.
Section 409A409A.. To the extent applicable, the 2010 PlanEMIP and any written instrument evidencing any award will be interpreted in accordance with Section 409A of the Code and U.S. Department of Treasuryany regulations andor other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of the 2010 Plan.
Federal Income Tax ConsequencesIf the shareholders do not approve the amendments to and restatement of the 2010 Plan
The following is a summary of the U.S. federal income tax consequences that generallyEMIP, awards will arise with respect to awardsnot be granted under the 2010 Plan. This summary is based on the federal tax lawsEMIP after 2015, and we will be limited in effect as of the date of this proxy statement. In addition, this summary assumesour ability to grant incentive awards to our covered employees that all awards are exempt from, or comply with, the rulesdeductible under Section 409A162(m) of the Code regarding nonqualified deferred compensation.
Incentive Stock Options. A participant will not have income upon the grant of an incentive stock option. Also, except as described below, a participant will not have income upon exercise of an incentive stock option if the participant has been employed by the Company or a 50% or more-owned corporate subsidiary at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under “Nonstatutory Stock Options.” The exercise of an incentive stock option may subject the participant to the alternative minimum tax.
A participant will have income uponextent that, when combined with other nonexempt compensation, the sale of the stock acquired under an incentive stock option at a profit (if sales proceedsawards exceed the exercise price). The type of income will depend on when the participant sells the stock. If a participant sells the stock more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the stock prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be ordinary income and a portion may be capital gain. This capital gain will be long-term if the participant has held the stock for more than one year and otherwise will be short-term. If a participant sells the stock at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Nonstatutory (nonqualified) Stock Options. A participant will not have income upon the grant of a nonstatutory stock option. A participant will have compensation income upon the exercise of a nonstatutory stock option equal to the value of the stock on the day the participant exercised the option less the exercise price. Upon sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.
Stock Appreciation Rights. A participant will not have income upon the grant of a stock appreciation right. A participant generally will recognize compensation income upon the exercise of a SAR equal to the amount of the cash and the fair market value of any stock received. Upon the sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the SAR was exercised. This capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Restricted Stock Awards. A participant will not have income upon the grant of restricted stock unless an election$1 million limit under Section 83(b) of the Code is made within 30 days of the date of grant. If a timely 83(b) election is made, then a participant will have compensation income equal to the value of the stock less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the date of grant. If the participant does not make an 83(b) election, then when the stock vests the participant will have compensation income equal to the value of the stock on the vesting date less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Restricted Stock Units. A participant will not have income upon the grant of a restricted stock unit. A participant is not permitted to make a Section 83(b) election with respect to a restricted stock unit award. When the stock is distributed with respect to a restricted stock unit, the participant will have income in an amount equal to the fair market value of the stock less the purchase price, if any. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock previously taxed. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.
Other Stock-Based Awards. The tax consequences associated with any other stock-based award granted under the 2010 Plan will vary depending on the specific terms of such award. Among the relevant factors are whether or not the award has a readily ascertainable fair market value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the award and the participant’s holding period and tax basis for the award or underlying common stock.
Tax Consequences to the Company. There will be no tax consequences to the Company except that the Company will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Code.
Future Plan Benefits
All awards to employees, officer, directors and consultants under the 2010 Plan are made at the discretion of the Plan Administrator. Therefore, the benefits and amounts that will be received or allocated under the 2010 Plan in the future are not determinable at this time.
Past Grants under the 2010 Plan
As of February 25, 2014, awards covering 2,468,503 shares of the common stock had been granted under the 2010 Plan. The following table shows information regarding the grants of those awards among the persons and groups identified below.
Name and Position | Option Grants | RSU Grants | Total | |||||||||
Named Executive Officers: | ||||||||||||
Philip Mezey – President and CEO | 279,615 | 73,634 | 353,249 | |||||||||
John Holleran – Executive Vice President and COO | 91,052 | 61,355 | 152,407 | |||||||||
Steven Helmbrecht – Executive Vice President and CFO | 61,663 | 44,706 | 106,369 | |||||||||
Russell Vanos, Senior VP, Strategy and Business Development | 13,830 | 20,634 | 34,464 | |||||||||
Shannon Votava – VP, General Counsel and Corporate Secretary | 27,853 | 8,782 | 36,635 | |||||||||
Marcel Reginer – President – Gas | 0 | 50,144 | 50,144 | |||||||||
Current Executive Officer Group (including all of the Named Executive Officers and all other executive officers) | 474,013 | 259,255 | 733.268 | |||||||||
Non-employee Director Group: | ||||||||||||
Kirby Dyess | 3,099 | 7,424 | 10,523 | |||||||||
Jon Eliassen | 4,144 | 9,069 | 13,213 | |||||||||
Charles Gaylord | 2,486 | 7,268 | 9,754 | |||||||||
Thomas Glanville | 3,712 | 7,268 | 10,980 | |||||||||
Sharon Nelson | 2,486 | 7,268 | 9,754 | |||||||||
Gary Pruitt | 2,486 | 7,424 | 9,910 | |||||||||
Michael Pulli | 0 | 1,414 | 1,414 | |||||||||
Graham Wilson | 2,486 | 7,424 | 9,910 | |||||||||
Lynda Ziegler | 0 | 3,462 | 3,462 | |||||||||
Total for Non-Executive Director Group (nine individuals) | 20,899 | 58,021 | 78,920 | |||||||||
All employees who are not executive officers, as a group | 160,683 | 1,495,632 | 1,656,315 | |||||||||
Total 2010 Plan Shares | 655,595 | 1,812,908 | 2,468,503 |
THE BOARD BELIEVES APPROVAL OF THE AMENDMENTS TO AND RESTATEMENT OF THE 2010 PLAN
EMIP IS IN THE BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS A VOTE “FOR”
THE APPROVALRE-APPROVAL OF THE ITRON, INC. EXECUTIVE MANAGEMENT INCENTIVE PLAN (AS
AMENDED AND RESTATED 2010 STOCK INCENTIVE PLAN.RESTATED).
PROPOSAL 3 – APPROVAL OF EXECUTIVE COMPENSATION (Say-on-Pay)
We are asking our shareholders to approve a non-binding advisory resolution on the Company’s executive compensation programs for our Named Executive Officers (NEOs) (commonly known as “say-on-pay”) as we have described them in this proxy statement. Although this advisory vote is nonbinding, the Board and the Compensation Committee will take into account the outcome of the vote when considering future compensation decisions for our executives. In addition, the Board has determined that it will seek say-on-pay votes annually, with the next vote occurring at the Company’s 20152016 annual meeting.
As discussed in the Compensation Discussion and Analysis (CD&A) section of this proxy statement beginning on page 28,23, we believe our compensation programs are reasonable, competitive, and strongly focused on pay-for-performance principles that will result in the creation of long-term shareholder value. Some of the features of our compensation programs that illustrate our philosophy are:
¡ | A significant portion of an NEO’s compensation is at-risk or performance-based, and subject to the Company’s operating and financial performance. We consider annual cash-based incentives, equity long-term incentives, and stock options to be performance-based, because each of these three elements is valuable to the executive only if performance goals are achieved and/or our share price improves. In fiscal year |
¡ | Our long-term |
¡ | Stock ownership guidelines require executive officers to acquire and hold certain amounts of Itron stock to further strengthen alignment of management’s interest with those of our shareholders. |
¡ | We have established a “Clawback Policy” that covers awards under all of our incentive programs, and provides that if a bonus or equity award is paid that is conditioned on meeting certain financial metrics, and, subsequently, there is a required financial restatement, which had the correct information been known at the time would have resulted in a lower award, then the Board |
¡ | We maintain our long-standing commitment to strong corporate governance by continuing our policies of (i) separate Chairman and Chief Executive Officer (CEO) roles, (ii) majority voting for directors, (iii) all independent Board members (except our CEO) and all independent committee members, (iv) executive sessions of independent directors after each quarterly Board meeting, and (v) forbidding the hedging or pledging of Itron stock by our executives. |
¡ | The compensation of our NEOs varies depending upon the achievement of pre-established performance goals determined by the Compensation Committee (or Board, for the CEO), which are intended to serve as incentives for our executives. When performance does not meet the pre-established target goals, |
¡ | We believe our executive compensation policies have enabled us to retain exceptional senior executives whose talent and experience have helped Itron become a leader in our industry. Our Compensation Committee (and the Board, for our CEO), which provides overall direction for our compensation programs, believes the fiscal year |
Shareholders are encouraged to read the full details of our executive compensation programs as described in the CD&A section of this proxy statement.
For the reasons provided above, we recommend that the shareholders vote in favor of the following resolution:
RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Company’s NEOs, as disclosed in the Compensation Discussion and Analysis (“CD&A”) section of the Company’s proxy statement for the 20142015 Annual Meeting of Shareholders (which disclosure includes the CD&A, the Executive Compensation Tables, and the accompanying footnotes and narratives within the CD&A section of the proxy statement).
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR THE APPROVAL OF THE
EXECUTIVE COMPENSATION OF OUR NEOs.
PROPOSAL 4—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 2014,the 2015 fiscal year, 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 2014.THE 2015 FISCAL YEAR.
Corporate Governance Guiding Principles
The Company has adopted Corporate Governance Guiding Principles, which are available on the Company’s website,www.itron.com, by selecting “About Itron”, “Investors” and then “Corporate Governance”. Also, Itron has been a long time member of the National Association of Corporate Directors (NACD), which promotes director education, leadership, and effective governance practices.
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 Guiding Principles, directors are expected to attend the Company’s annual meeting of shareholders. All but one of our directors attended the 20132014 annual meeting of shareholders. During 2013,2014, the Board met thirteensixteen times. EachWith the exception of Mike Pulli, each of the directors attended at least 75% 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. Mr. Pulli resigned from the Board effective December 31, 2014.
Also in accordance with our Corporate Governance Guiding Principles, our independent directors meet in an executive session as often as necessary, but no less than four times annually.
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 “About Itron”, “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.
The following table shows the current membership of each committee at the end of fiscal 2013:2014:
Director | Compensation Committee | Corporate Governance Committee | Audit/Finance Committee | |||
Kirby Dyess | Chair | |||||
Jon Eliassen | X | X | ||||
Charles Gaylord | X | X | ||||
Thomas Glanville | Chair | |||||
Sharon Nelson | Chair | X | ||||
Gary Pruitt | X | |||||
Graham Wilson | X | X | ||||
Lynda Ziegler | X |
Director Mike PulliDan Pelino was elected to the Board in JanuaryNovember of 2014 and he will be appointed to one or more committees at the annual meeting of the Board in May following his re-election to the Board.Board by our shareholders. Similarly, Director Tim Leyden was elected to the Board in March of 2015, and he also will be appointed to one or more committees at the annual meeting of the Board in May following his re-election to the Board by our shareholders. Our sole employee director, Philip Mezey, does not sit on any committees.
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. It also reviews the compensation paid to our directors, and makes recommendations to the Board on director fees and other compensation payable to the Board members.
The Corporate Governance Committee has determined that all of the non-employee directors of the Board are independent (and Mike Pulli, prior to his resignation, was independent) under SEC rules and NASDAQ listing standards. The Corporate Governance Committee held eleventhirteen meetings during 2013.2014.
Audit/Finance Committee. The Audit/Finance Committee monitors our borrowings and capital structure, accounting practices,policies, internal controls over financial reporting, 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 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 three of the four current members of the Audit/Finance Committee (Messrs Glanville, Pruitt and Wilson) are financially literate in accordance with the Standards of NASDAQ Rule 5605(c) (2) (A) (iv), and that the same three members are also “audit committee financial experts” 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 nineeight meetings during 2013.2014.
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. The Committee 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 to it.
In 2014, the Compensation Committee amended its charter to reflect changes in NASDAQ rules that were effective in 2014. The revised and current charter can be found on our website atwww.itron.com by selecting “About Itron”, “Investors” and then “Corporate Governance”.
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 eightten meetings during 2013.2014. See “EXECUTIVE COMPENSATION – CD&A” 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 2013.2014. In order to determine this, the Board requires our executive officers, directors, or director nominees to disclose certain information related to related person transactions. A “related person transaction” generally is a transaction (including any indebtedness or a guarantee of indebtedness) that involves the Company’s directors, executive officers, director nominees, 5% or more beneficial owners of the Company’s common stock, immediate family members of these persons, or entities in which one of these persons has a direct
or indirect material interest. The current threshold required to be disclosed under SEC regulations is $120,000. Under its charter, the Corporate Governance Committee of the Board has been delegated with the responsibility of reviewing and approving any related person transactions.
Our Board’s Role in Risk Oversight
The Board has overall responsibility for risk oversight, including, as part of regular Board and committee meetings, general oversight of our executives’ management of risks relevant to the Company. The Board routinely satisfies itself,determines, 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 isare intended to ensure that Company risks are taken into account in corporate decision-making; and (iii) the risk management system ensures 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 to which the Board has delegated specific oversight responsibility, as described below. Throughout the year, the Board and each committee spend a portion of their time reviewing and discussing specific risk topics. Committee chairs regularly report to the full Board on actions taken at committee meetings. 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 our executives and ensuring that our executive compensation is aligned with Company performance. The Compensation Committee reviews a summary and assessment of such risks annually and in connection with discussions of various compensation elements and benefits throughout the year. 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. The Corporate Governance Committee is also involved with succession planning for the Board and management, and its charter requires it to review annually our Corporate Governance Guiding Principles.
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 (CFO), and is available on the Company’s website,www.itron.com, by selecting “About Itron”, “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 CFO, by posting such information on our website,www.itron.com.
The Company has adopted a Hedgingan Anti-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 – CD&A – Anti-Hedging Policy” in this proxy statement for more information on this policy.
The Company has adopted a repayment or “clawback” policy, which provides that if a bonus or equity award (award) is paid that is conditioned on meeting certain financial metrics, and, subsequently, there is a required financial restatement, which had the correct information been known at the time would have resulted in a lower award, then the Board has the right to demand repayment of the excess amount of the award, net of taxes, from an executive officer who has received an award.
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:
¡ | the name and address of the shareholder; |
¡ | a representation that the shareholder is entitled to vote at the meeting at which directors will be elected; |
¡ | a statement of the number of shares of the Company that are beneficially owned by the shareholder; |
¡ | a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; |
and the following information with respect to the person nominated by the shareholder:
¡ | name and address; |
¡ | other information regarding such nominee as would be required in a proxy statement filed pursuant to applicable SEC rules; |
¡ | a description of any arrangements or understandings between the shareholder and the nominee and any other persons (including their names), pursuant to which the nomination is made; and |
¡ | the consent of such nominee to serve as a director, if elected. |
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 “About Itron”, “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 “About Itron”, “Investors,” “Corporate Governance,” and then “Contact the Board.”
Shareholders wishing to submit proposals for inclusion in the proxy statement relating to the 20152016 annual shareholders meeting should follow the procedures specified under “SHAREHOLDER PROPOSALS FOR 2015”2016”in this proxy statement. Shareholders wishing to nominate directors should follow the procedures specified under “CORPORATE GOVERNANCE – Director Nominations by Shareholders”Shareholders” in this proxy statement.
Compensation Discussion and Analysis (CD&A)
In the following CD&A, we will present (1) an executive summary that provides an overview of our 20132014 financial and operational performance, as well as significant aspects of our 20132014 compensation program;programs; (2) our compensation philosophy and the processes we use to make compensation decisions for our NEOs; (3) the components of our compensation and benefits plans; and (4) detailed 20132014 compensation information for our NEOs.
Our 20132014 NEOs, as determined by SEC rules, are as follows:
¡ | Philip C. Mezey – President and CEO; |
¡ | John W. Holleran – Executive Vice President and Chief Operating Officer (COO); |
¡ | Steven M. Helmbrecht – Executive Vice President and |
��
¡ | W. Mark Schmitz – Executive Vice President and CFO (as of September 8, 2014); |
¡ | Michel C. Cadieux – Senior Vice President, Human Resources (as of February 17, 2014); and |
¡ | Shannon M. Votava – Vice President, General Counsel and Corporate |
Secretary.
Overview of our 20132014 Financial and Operational PerformancePerformance.
FiscalWe made progress in fiscal 2014 compared with fiscal 2013 was a challenging year. Althoughon many fronts, ending the global transition to smart metering continues throughoutyear with higher revenues, significant backlog growth and increased cash flow.
Business highlights for 2014 include the world, the slow global economic recovery negatively impacted business and therefore affected our 2013 financial performance. The substantial completion of several of our large smart grid projects in North America contributed to an 11% reduction in our overall revenue year-over-year. Excluding the impact of these large smart grid projects, our totalfollowing:
¡ | Revenue growth of 1% compared with last year, and 2.8% adjusting for the impact of foreign currency exchange rates. |
¡ | Record revenue levels in the Water segment. |
¡ | Bookings of $2.4 billion for the year – up 23% from 2013. |
¡ | Total year-end backlog of $1.49 billion – up 39% from 2013. |
¡ | Free cash flow of $88 million, nearly double the free cash flow generated in 2013. |
¡ | Settlement of several long standing international legal disputes. |
¡ | Continued restructure of our business to reduce costs and improve efficiencies. |
Total revenues increased approximatelyby 1% compared with last year.2013. Revenues in the Water and Gas segments grew year-over-year by 7% and 5%, respectively, which offset a decline in the Electricity segment. Electricity’s revenues were impacted by weaker sales in the European, Middle East and African (EMEA) regions and our decision to exit the standard residential meter business in Brazil. Our gross margin remained relatively flat, with a slight improvement from 2013 of 31.5% decreased over the prior year, primarily due to lower volumes associated with the wind down of the large smart grid projects. In addition, our GAAP earnings were negatively impacted by restructuring charges and a goodwill impairment charge related to our Electricity business segment. This impairment resulted from a decrease in the segment’s long-term forecast due to delays in global smart grid projects as well as competitive pressures that impacted our pricing and profits. The lower forecast also required us to write-down a deferred tax asset. Despite these challenges, we ended 2013 with $1.1 billion in total backlog, which is a 3% increase compared with the backlog at the end of 2012.31.6% for 2014.
During the year, we continued to focus on reducing our operating costs and streamlining our business operations. In 2013 we completedoperations and developed a plan to improve the profitability of the Electricity segment. Operating performance in the Electricity segment improved in 2014 due to higher revenues from smart grid projects in North America and reduced costs driven by our execution of restructuring project begun in 2011 to both reduce our manufacturing and operating expenses and to increase efficiencies, andefforts announced in September of 2013,2013. In November 2014, we initiatedannounced another and more
aggressive restructuring project to further restructurereduce costs and improve efficiencies in the Electricity segment and related general and administrative activities, in order to achieve annualized cost savings of approximately $40 million by the end of 2016.
Our sales success in 2014 delivered an impressive year-end backlog of $1.49 billion. This success and momentum has been spurred by our operationscontinued commitment to improve profitability and efficiencies. We continue to prioritize our research and development investment regarding new and improved products as part of our ongoing efforts to improve and solidify our uniquely broad portfolio of energy and water solutions. We anticipate these efforts will help us capture new worldwide opportunities as they become available, while at the same time maximizing and improving our portfolio ofprovide innovative products and services currently provided to our utility customers. In October we launched our Itron OpenWay Riva™ software service, which delivers edge intelligence and adaptive communications technology to provide optimal network performance and better support at the device level for analytics such as load management and distribution automation, at lower total cost of ownership. Earlier in the year we introduced Itron® TOTAL Services, where we provide complete managed services for utilities’ data collection systems and operations, with predictable subscription-based pricing.
SomeWe were also honored with the 2014 Frost & Sullivan “Company of the Year” award for Smart Cities. The award recognizes Itron’s smart city growth strategy, diversified offerings, and excellence in implementation. Itron is strongly positioned to participate in the coming Internet of Things (IoT) technology advancements that cities around the world are increasingly demanding so they may enhance their sustainability and become more energy efficient, automated and integrated.
Finally, we hired two new senior executives with extensive global experience whom we believe bring enhanced expertise and capabilities to Itron. Michel Cadieux was appointed Senior Vice President of Human Resources in February 2014, and Mark Schmitz was appointed Executive Vice President and CFO in September 2014.
2014 Compensation Program Overview.
We continue our 2013 business highlights includelong-standing commitment to strong corporate governance that includes aligning a significant portion of compensation with performance. As a result, our programs contain the following;following attributes:
What We Do | What We Don’t Do | |
þ Award a mix of annual and long-term incentive compensation, the þ Measure performance for long-term compensation over a three-year performance period to encourage executive retention þ Structure long-term compensation so that 50% is subject to achievement of objective, pre-established financial goals to tie compensation to shareholders’ interests þ Require aggressive minimum stock ownership guidelines þ Use an independent compensation consultant þ Seek shareholder approval of our executive compensation on an annual basis þ Maintain a Clawback Policy for executives þ Maintain a Severance Policy for executives þ Maintain totally independent Board (other than the CEO), and þ Structure incentive compensation to be deductible for income tax purposes for the |
Company when possible
x No employment agreements with executives (i.e., all serve “at will”) x Minimal perquisites x No “single trigger” change-of-control (CIC) cash payments; all CIC agreements provide for “double-trigger” treatment of equity awards. x No excise tax gross ups in CIC severance agreements. x No shareholder rights plan x No option backdating or repricing x No margining, derivative or speculative transactions, such as hedges, pledges and |
Significant 2013 Compensation Programs
Compensation paid to our NEOs in 20132014 was consistent with and reflective of our pay-for-performance philosophy. Each year our Compensation Committee (Committee) sets specific compensation targets and goals consistent with our pay for performancethis pay-for-performance philosophy. See “Components of Our Compensation Program” in this CD&A. Given our less than robust financial performance in 2013, payouts under our annual cash incentive plan were substantially reduced from the prior year (payouts for Mr. Holleran and Mr. Mezey were zero), and there were no payouts under our equity-based Long-Term PerformanceIncentive Plan (LTPP).
None of the minimum threshold requirements for a payout (consolidated revenue(LTIP), and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) for the annual cash incentive plan were achieved. As a result,minimal cash payouts forunder our NEOs were based solely on their performance against personal objectives, withannual Executive Management Incentive Plan (EMIP) in 2013 to three of our five NEOs. Performance-based RSUs (PRSUs) granted under the exception of Messrs. Mezey and Holleran, who did not earn any payout since their minimum threshold requirements did not include personal objectives. Similarly, since the Company failed to meet the threshold for earnings per share (EPS) with respect to the Company’s LTPP, there were no equity payouts to any of the NEOs under these awards. The LTPP accountsLTIP account for 50% of an NEO’s long-term incentive opportunity.
As part In 2014, our NEOs earned modest performance-based compensation under both our LTIP and our EMIP. There were payouts under the LTIP totaling 9,472 PRSUs distributed to the NEOs (out of a possible 49,332 PRSUs maximum opportunity) for the two-year performance period 2013-2014, and annual cash incentives earned under the 2014 EMIP by our long-standing commitment to strong corporate governance, manyNEOs averaged 73% of the changes we implementedtarget payout.See“2014 Compensation Paid to Our NEOs” in 2012 to our compensation plans and governance policies (as described in last year’sthis CD&A) became effective in 2013, which included the following:&A.
Say-on-Pay – Shareholder OutreachSay-on-Pay.
In 2013,2014, shareholders were presented with an advisory vote to approve our executive compensation paid in 2012.2013. Approximately 74%75% of our shareholders who voted were in favor of our executive compensation programs. Prior to the vote, our Chairman of the Board and Chair of the Committee, together with other senior executive officers of the Company, engaged with our major shareholders and proxy advisory firms to review theWe implemented extensive changes to our compensation programs in 2013, and, following the positive feedback we received from our major shareholders at that time, in addition to the favorable shareholder vote on say-on-pay in 2014, we approvedhave continued the same programs in 2012 and implemented in 2013. These changes2014. The programs, as summarized above, were meant to reinforce our strong corporate governance policies and continue our policy of aligning our executive compensation to the financial performance of the Company, and included the following: (a)Company. In order to emphasize our CIC agreements contain double-trigger provisions and no tax gross-up obligations; (b)commitment to these programs, we are reaching out to our LTPP program was revisedshareholders in early 2015 to increase the performance period from one-year to three-years, with new performance metrics tied to the Company’s EPS, subject also to a multiplier based on the Company’s TSR as compared to the Russell 3000 index; (c) adoption of a Clawback Policy and a Severance Policy for our executive officers; (d) expiration of our shareholder rights plan; and (e) continuation of strong stock ownership guidelines for our NEOs and directors, as well as the prohibition of hedging and pledging of Itron stock. Our shareholders indicated their support of our continued strong corporate governance and ofdiscuss our executive compensation being aligned so closely topaid in 2014, together with the Company’s financial performance, including non-GAAP EPS with a TSR multiplier tied toCommittee’s decisions that affected our LTPP plan. Since we seek shareholder votes on our executivepolicies and the 2014 compensation, on an annual basis, we intend to continue seeking input and feedback from our shareholders so we can address their concerns and issues related to our compensation programs each year. In early 2014, we will again meet with our major shareholders to discuss our compensation programs, and to solicit feedback from them on our compensation and governance policies.as described in the following pages of this CD&A.
Executive Compensation Philosophy and Objectives
The philosophy underlying the Company’s compensation plans is to provide compensation that attracts and retains top performers and rewards both individual, and Company, orand business line performance and that aligns such compensationin line with our shareholders’ interests. Our programs provide a competitive package of annual base pay, annual cash incentives, and long-term equity based incentives. We design ourincentives, with a majority of compensation tied to at-risk or performance-based financial measurements (See “Components of Our Compensation Program”.) Our executive incentive compensation plans to correlate(both annual and long-term) align with the Company’s performance which is generally defined in terms of revenue, profitability,EBITDA, and comparative total shareholder return as reflected by EPS. Annual and long-term incentives are based on a “pay-for-performance” philosophy and are directly(TSR). The short-term annual cash compensation is tied to the Company’s financial performance. The Committee also provides for compensation tiedpartially to individual performance objectives for certain NEOs.NEOs, as well as business line performance. These objectives are objectives set by the CEO (and for Mr. Regnier, by the COO) and agreed to annually by the executive.See“2013 Compensation Paidexecutive, and they are intended to motivate and reward achievement of strategic goals which we believe will help build organizational competitiveness. The Committee believes these individual goals are important to motivate our NEOs – 2013 Compensation – Annual Cash Incentives – EMIP” and “2013 EXECUTIVE MANAGEMENT INCENTIVE PLAN – Metrics, Weighting, Targets, Actual Results” tableto focus on strategic objectives in this CD&A.addition to the long-term success of the Company.
Because Itron is widely recognized as a world leader in our industry, we recruit, motivate, and retain exceptional, highly talented people who are key to our continued leadership and success. This is especially important while we work through a significant restructuring which we expect will enable us to grow the Company in terms of revenue and profitability. We focus on creating a pay-for-performance culture, but one that does not encourage excessive or unnecessary risk-taking. Our executive compensation programs are reviewed annually, and targets and metrics may be changed to support Itron’s business goals and promote both short-and long-term profitable growth of the Company. Currently we target our full compensation package for our executives to fall within the 50th to 75th percentile of peer compensation data for comparable positions. We design our compensation programs to achieve the following objectives through a combination of fixed and variable cash and equity-based elements:
¡ | Performance (Company)– motivating performance by creating a direct link between compensation and the Company’s performance, as measured against pre-set financial goals; |
¡ | Performance (Individual)– motivating performance by rewarding those NEOs who contribute their skills, talent and perseverance to the Company’s business in ways that may be tied directly or indirectly to financial |
¡ | Alignment –aligning our NEOs’ interests with those of our shareholders by fostering stock ownership and paying a significant portion of compensation with equity; and |
¡ | Retention and Recruitment– providing a competitive total compensation package of annual base pay, annual cash incentives, and long-term equity incentives so we can both attract and retain talented, qualified executives. |
Role of Compensation Committee, Compensation Consultant, and Executive Officers
The Committee provides oversight and direction for our executive compensation plans, policies, and programs, and determines the components of compensation for each of our NEOs. Each member of the Committee qualifies as an independent director under NASDAQ listing standards and SEC rules, including the recently enacted listing standards for compensation committees and compensation advisors.rules. In addition, each member is a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (Code).
The Committee makes all final compensation and equity award decisions regarding our NEOs, except for the CEO, whose compensation is determined by the full Board, based upon recommendations of the Committee. The Committee engages an independent compensation consultant to provide expertise on competitive pay practices, program design, and an objective assessment of any inherent risks of any programs. Pursuant to authority granted to it under its charter, the Committee has hired Frederic W. Cook & Co. (FWC) as its independent consultant. FWC reports directly to the Committee and does not provide any additional services to management. The Committee has conducted an independence assessment of FWC in accordance with recently adopted SEC rules.
Members of our management team typically attend meetings where executive compensation, Company and individual performances,performance, 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. The Committee meets in executive session to discuss other compensation matters, including its recommendations to the full Board on the CEO’s compensation.
Peer Data as it Relates to Compensation Decisions
To determine market-based compensation for our executives, the Committee, after consultation with FWC, identified a relevant group of peer companies for which there is publicly available compensation information, and which are part of the same broad Standard & Poor’s (S&P) industry classification, and are similar in size and scope of operations (Peer Companies). Many of our direct competitors (Elster, Sensus, and Landis & Gyr) are private, and there is no publicly available compensation information about them. For 2013,2014, our Peer Companies are named below, with those we consider to be direct competitors of Itron identified with an asterisk. The Committee reviews our Peer Companies annually, and for 2013, some new companies were added to replace those the Committee felt were no longer direct competitors (marked below). Theother 12 companies in our Peer Group, like Itron, are in the S&P industry classification of technology hardware and equipment, and also have significant international operations. The size criteria generally ranged from one-third to three times Itron’s revenues and market capitalization. During the 2014 year, Molex, Inc, was omitted because it merged into another entity.
Ametek, Inc. | ESCO Technologies, Inc. | Pentair, Ltd. | ||
AVX Corporation | FLIR Systems, Inc. | Plexus Corp. | ||
Belden Inc. | *Mueller Water Products, Inc. | *Roper Industries, Inc. | ||
Benchmark Electric LLC | NCR Corporation | Trimble Navigation Limited | ||
Diebold Inc. | Vishay Intertechnology, Inc. |
* | direct competitors |
For each of the Peer Companies, FWC obtained data regarding base salaries, annual incentives, and long-term incentives from their annual proxy statements. This data was supplemented with survey data prepared by Radford Survey & Consulting (Radford Survey), a unit of Aon Consulting, which provides compensation market information
on more than 700 technology companies, presented anonymously. 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 Radford Survey data was narrowed to those technology companies with revenues similar to Itron’s of between $1 billion and $3 billion.
The Committee uses the Peer Companies and the Radford Survey data as benchmarks to establish a range of competitive compensation for our NEOs. For each NEO, the Committee determined the mid-point of a salary range, annual incentive target, and long-term incentive based upon the 50thmedian to 75th percentile of the market data for the position being evaluated. Then, taking into account the experience, performance, responsibilities, and contributions to the Company by each executive, the Committee makes 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 makes a recommendation to the full Board, and the Board reviews and approves the CEO’s compensation. The Committee (and the Board for the CEO) decided to make no adjustments to the base salaries of our NEOs in 2014, with the exception of Messrs. Schmitz and Cadieux, who were new to the Company in 2014 and whose salaries and compensation were determined as set forth in the following pages under “2014 Compensation Paid to Our NEOs”.
See “Modifications Made to Peer Companies for 2015 Compensation Decisions” in this CD&A for information about proposed changes to the Peer Companies for compensation planning in 2015.
Components of Our Compensation Program
Total Compensation.The Committee designs the compensation plans 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, near-term financial performance objectives together with an individual NEO’s personal objectives, where applicable. 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 philosophy, we overweight the executive’s long-term incentive opportunity towards performance-based restricted stock units (RSUs)(PRSUs) under our LTPPLong Term Incentive Plan (LTIP) when compared to that of our Peer Companies. Finally, for NEOs, the Committee oversees severance, retirement, and other benefits intended to promote the objectives of our compensation plans.
Base Salary.We believe The table that an executive’sfollows summarizes our total compensation should have an element of compensation that provides a stable, base salary which is competitive and enablespaid to the Company to attract and retain executives. The Committee reviews base salaries annually and at the time of promotions or other changesNEOs in responsibilities, and determines base salary based on peer company information and the market,2014, as well as the experience and performance of the executive and internal equity, if applicable.
Annual Cash Incentives. The Committee provides the NEOs with an opportunity to earn annual variable cash compensation under the Itron Executive Management Incentive Plan (EMIP). Awards are generally based on the Company’s annual financial performance on a non-GAAP basis. A portion of the EMIP is also tied to some NEOs’ personal objectives (20% for Steve Helmbrecht, Russ Vanos and Shannon Votava, and 10% for Mr. Regnier whose performance award is also based in part on the financial performance of his business division). For Mr. Mezey and Mr. Holleran, their EMIP awards were based entirely on the Company’s 2013 financial performance.
In the first quarterpurpose of each year, the Committee identifies financial performance criteria that the Company must meet for any awards to become payable under the EMIP,element and establishes threshold, target, and maximum payout levels for each performance element. In accordance with the terms of the EMIP, the Committee may adjust the financial performance levels during the year for items such as restructurings, acquisitions, dispositions, and the effects of foreign currency translation. If the threshold level of performance for any financial element of the EMIP during the performance periodwhat it is not achieved, management is not entitled to an 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.
In addition, the CEO (and the COO for Mr. Regnier) develops functional and operational goals for each NEO, which are reviewed with and agreed to by the NEO.See “2013 Compensation Paid to Our NEOs – Annual Cash Incentives – EMIP”and “2013 EXECUTIVE MANAGEMENT INCENTIVE PLAN – Metrics, Weighting, Targets, Actual Results” table in this CD&A.reward.
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 time-vested RSU equity awards and stock options help retain eligible executives and reward achievement of long-term business objectives that also benefit our shareholders. Our variable long-term compensation is paid with the following three types of long-term equity awards:2014 NEO TOTAL DIRECT COMPENSATION (TDC)
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 RSUs.Performance-based RSUs are issued under our LTPP and provide equity award opportunities to our executives based on the Company attaining certain pre-determined financial and stock price performance criteria over a three-year performance cycle. The criteria are established each year by the Committee. Once actual performance is determined and approved by the Committee at the end of the three-year period, RSU awards are issued and vest immediately. Prior to 2013, our LTPP provided for a one-year performance period, with any RSUs earned at the end of that period vesting ratably over three years. Because 2013 was the first year of the newly designed performance period, the Committee adopted an LTPP for that year only with a two-year and a three-year performance component in order to transition into the three-year cycle. See “Compensation Paid in 2013 – Long-Term Incentives – LTPP”in this CD&A for further details and discussion.
Time-Vested RSUs. Time-vested RSUs are granted annually 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.
Overview of 2014 TDC | ||||
Pay Element | What It Does | How It Links to Performance | ||
Base Salary | Provides a competitive rate relative to similar positions in the market, and enables the Company to attract and retain executives | ¡ Based on job scope, level of responsibilities, experience, tenure, and market levels ¡ Also reflects performance in the role and growth of the Company ¡ Reviewed annually and at promotions or change in responsibilities | ||
Annual Cash Incentive Compensation (EMIP) | Encourages focus on achievement of Itron’s annual financial plan as well as specific goals in the strategic plan | ¡ Payouts may range from 0% to 200% of a target opportunity based on actual performance versus pre-established goals ¡ Payouts are based: – CEO and COO: 100% financial metrics – All others: 80% financial metrics and 20% individual goals ¡ Financial metrics include Revenues and Adjusted EBITDA Margin, equally weighted ¡ Individual goals are based on specific strategic objectives for the organization | ||
Long-term Incentive Plan (LTIP) Compensation: Performance-based Awards (PRSUs) | Rewards achievement of performance related to the Company’s long-term objectives and provides shareholder alignment | 50% of LTIP awarded as performance-based RSUs ¡ Payouts may range from 0% to 200% of a target opportunity based on actual performance versus pre-established goals ¡ Three-year performance period ¡ Payouts are determined based on EPS performance, with a relative TSR modifier: – 0-160% of target is earned based on average annual EPS performance over the three-year period – Additional multiplier of +/- 25% is then applied based on Itron’s relative TSR performance versus the Russell 3000 Index over the three year- performance period | ||
LTIP Compensation: Stock Options | Rewards achievement of stock price appreciation and provides shareholder alignment | 25% of LTIP awarded as stock options ¡ Exercise price equal to 100% of fair market value on the grant date ¡ Vesting in one-third annual increments over three years ¡ Ten-year exercise term | ||
LTIP Compensation: Time-vested RSUs | Supports retention and provides shareholder alignment | 25% of LTIP awarded as time-vested RSUs ¡ Typical vesting in one-third annual increments over three years ¡ RSUs are paid in Itron shares at vesting |
Executive Deferred Compensation Plan
NEOs located in the U.S. are eligible to participate in our Executive Deferred Compensation Plan (EDCP). We offer the EDCP to our highly compensated employees to give them the benefit of being able to defer some of their taxable income, which also encourages their retention with the Company. Participants may defer up to 50% of their base salary and annual cash 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. In 2013,2014, 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, which is the same matching formula as the Company’s 401(k) Plan. The employer match into the Executive Deferred Compensation Program only commences after the employee reaches IRS limits on the 401(k) plan and is no longer eligible for the 401(k) match. 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 “20132014 Nonqualified Deferred Compensation Table” in this section under “EXECUTIVE COMPENSATION TABLES”.
401(k) Plan and Employee Stock Purchase Plan
Executives located in the U.S. 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 U.S. may participate in the Company’s Employee Stock Purchase Plan, along with our other U.S. employees.
We do not maintain any defined benefit or supplemental retirement programs for our NEOs, with the exception of Mr. Regnier, who resides in France and whose plan (also described below) is customary for executives in that country. See also “EXECUTIVE COMPENSATION TABLES – Summary Compensation Table”in this section for more information on those benefits.NEOs.
Change-in-Control (CIC) Agreements
We have entered into CIC agreements with our executives to encourage their full attention and dedication to the Company duringin the event of 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. All equity awards granted after January 1, 2014 will have “double trigger” requirements before vesting upon a change-in-control. See – “EXECUTIVE COMPENSATION TABLES – Potential Payments upon Change-in-Control” in this CD&Aproxy statement for descriptions of the benefits provided under the CIC agreements.
Employment AgreementsAgreements; Severance Policy
We do not have formal employment agreements with our executives. However, we do have a Severance Policy for our executives other thanwhich provides severance pay equal to one year’s base salary, employer benefit premium payments or reimbursements for one year, and outplacement assistance, provided there is a release of claims and non-disparagement agreement with Mr. Regnier, whose employmentthe executive. In addition, the executive must enter into a one-year non-compete agreement, is described under “Other Benefitswhere enforceable. The Company adopted this policy in Effect2014 in 2013 – Marcel Regnier Benefits”recognition of the difficulty executive officers who are terminated involuntarily usually have in this CD&A.obtaining a comparable position to the one he or she had with the Company.
Other Components Related to Compensation of Our Executives
Stock Ownership Guidelines & Policies
Since 2006, we have had stock ownership guidelines to encourage our key executives to own stock at least equal in value to: (i) six times base salary for our CEO; (ii) three times each NEO’s base salary for our senior or executive VPs; and (iii) onetwo times each NEO’s base salary for our other executive officers.senior VPs and our General Counsel. Common stock, restricted stock awards, RSUs, 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 annually review the levels of stock ownership of our executives, and, based on a rolling 12-month average of our stock price as of the end of 2013,2014, John Holleran is the only NEO who has met the guidelines. The other NEOs, all of whom were elected to their present positions within the NEOs had met the guidelines, with the exception of Mr. Mezey, who is new to his position in 2013, and Ms. Votava, who has been an executive officer for justlast three years. Both, however,years, are making progress towards meeting those guidelines. We also have stock ownership guidelines for the members of our Board (see “COMPENSATION OF DIRECTORS” in this proxy statement).
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 prohibit our officers and directors from engaging in transactions designed to insulate them from changes in the Company’s stock price. Therefore, the Company has adopted a Hedgingan Anti-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 under this policy, and borrowing against any account in which our securities are held is prohibited.
We regularly consider the various tax and accounting implications of our compensation plans. 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 FASB ASC Topic 718.
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 stock options and LTPP awards are designed to meet the definition of
performance-based compensation under Section 162(m), as are our annual cash-based awards payable under the EMIP. The Committee, however, believes that it is important for it to retain maximum flexibility in designing compensation programs that are in the best interest of the Company and its shareholders. Therefore, the Committee, while considering tax deductibility as a factor in determining compensation, may not limit compensation to those levels or types of compensation that will be deductible if it believes that the compensation is commensurate with the performance of the covered employee.
20132014 Compensation Paid to Our NEOs
Compensation Tied to Performance.
We tie a majority of our NEOs’ compensation to the Company’s financial performance, so that our NEOs’ interests are aligned with those of our shareholders. The following charts highlight that portion of the CEO’s 20132014 total compensation and the percentage of our total, averaged NEOs’ 20132014 compensation which is variable or “at risk” (including equity grants of performance-based RSUs, time-vested RSUs, and stock options, and annual cash incentives under the EMIP).
Base Salaries.In November 2012,At its quarterly meeting in December 2013, the Board elected Mr. Mezey as our President and CEO, effective January 1, 2013, and determined his 2013 compensation at that time, based upon the Committee’s recommendations. At the same time, the Committee recommended and the Board approved the promotion of two of our NEOs to newly created positions for 2013. Mr. Holleran was elected Executive Vice President and COO, effective January 1, 2013, and Russell Vanos was elected Senior Vice President – Strategy and Business Development, also effective
January 1, 2013. The Committee reviewed the Peer Companies and Radford Survey data available and, consultedin consultation with its compensation consultant, before determiningdetermined the 2014 salaries and other compensation payable to Messrs. Holleran and Vanos, whose compensation (including their base salaries) isfor our NEOs that are set forth in the “Summary Compensation Table”in this section of the CD&Aproxy statement.Additionally,The Committee concluded at its December 2012 meeting,that time that no salary adjustments for any of the Committee increased the base salarycurrent NEOs would be made.
During 2014 there were changes for two of Shannon Votava by approximately 1.5%, effective January 1, 2013, in recognition of her additional duties as Corporate Secretary, a position she was elected to hold effective January 1, 2013.
our senior executive positions. In February, 2013, Steve HelmbrechtMichel Cadieux was promoted fromelected Senior Vice President, and CFO to ExecutiveHuman Resources, replacing our Vice President and CFO. Dueof Competitive Resources who left the Company at the beginning of 2014. In 2014, the Company determined a significant human capital program restructure must be achieved to support the additional duties and responsibilities of an executive vice president,necessary business transformation. As candidates were evaluated, the Committee, in consultation with its independent consultant, determined that in order to hire a candidate with sufficient depth of knowledge and experience, higher levels of compensation would be required. Although the Committee typically provides executive compensation based on the median to 75th percentile of the market data for a specific position, Mr. Cadieux’s total compensation is slightly in excess of the 75th percentile, in recognition of his experience and skills, particularly with global technology companies. Given the transformation work Mr. Cadieux is leading, his compensation is intentionally heavily weighted towards performance-based compensation.See the “Summary Compensation Table”in this CD&A.
In September 2014, our Executive Vice President and CFO Steven Helmbrecht left the Company, and Mark Schmitz was elected to succeed him. To effect an orderly transition of his responsibilities, however, Mr. Helmbrecht remained employed by the Company as Vice President of Finance and received his full salary until the end of 2014. In accordance with our Severance Policy for executive officers, Mr. Helmbrecht was paid severance in the amount of one year’s base salary and was also entitled to receive employer benefit premium payments on medical benefits for one year following his termination. Beginning January 1, 2015, Mr. Helmbrecht served in the capacity of a consultant through the end of February 2015, for which he was paid a monthly stipend of $2,000.
For Mr. Schmitz, the Committee relied on the Radford Survey as well as Peer Companies data provided by its compensation consultant electedfor executives with Mr. Schmitz’s experience and qualifications to increasedetermine the salary and other compensation payable to Mr. Helmbrecht’s base salary by approximately 9.5%, as shownSchmitz, all of which is reflected in the “Summary Compensation Table” inthat follows this section of the CD&A.
The base salary for Mr. Regnier served as President and COO-Water until April 1, 2013, at which time he assumedSchmitz represents the new positionapproximate median of President – Gas and ceased to be an executive officer of the Company.that paid by our Peer Companies for similar positions.
Annual Cash Incentives – EMIP. Like their base salaries, the targeted annual cash awards for the NEOs were not adjusted by the Committee at the beginning of 2014. For Mr. Mezey, the targeted annual cash award under the EMIP for 2013 was2014 remained at 125% of his base salary, and for Mr. Holleran it wasremained at 100% of his base salary. The Committee (and the Board for the CEO) determined these payout percentages were appropriate given the elements of their annual incentive plan that are entirely based on the financial performance of the Company, as described in the next paragraph.Company. The remaining NEOs’ incentive plans included additional elements also described below.in the following paragraphs. For Mr. Helmbrecht, the targeted payout wasremained at 85% of his base salary. For Messrs. Regnier and Vanos, the target payout was 75% of their base salaries,salary, and for Ms. Votava, it wasremained at 50% of her base salary. For Messrs. Cadieux and Schmitz, our new NEOs, the targeted payout for both is 75% of their base salary, which is within the competitive range of that paid by our Peer Companies for those positions.Seethe table “NEO Actual Rewards”that follows this section and shows targeted as well as actual payouts for our NEOs.
For Messrs. Mezey and Holleran, there were two elements in their annual incentive plan: (i) Company consolidated revenue (50%), and (ii) Company consolidated adjusted EBITDA as a percent of consolidated revenue (50%). For Ms. Votava and Messrs. Helmbrecht, Cadieux and Vanos,Schmitz, there were three elements in their annual incentive plan: (i) Company consolidated revenue (40%); (ii) Company consolidated adjusted EBITDA as a percent of consolidated revenue (40%); and (iii) personal objectives established with, and approved by, the CEO (20%). For Mr. Regnier, there were five elements in his annual incentive plan: (i) Company consolidated revenue (15%); (ii) Company consolidated adjusted EBITDA (15%); (iii) Gas business line revenue (30%); (iv) Gas business line gross margin (30%), and (v) personal objectives established with the COO (10%). Mr. Regnier’s new position reports to our COO. Therefore his personal objectives were determined in consultation with our COO, Mr. Holleran, rather than our CEO.See alsothe following table, “2013“2014 EXECUTIVE MANAGEMENT INCENTIVE PLAN – Metrics, Weighting, Targets, and Actual Results”.
The individual goals for each executive, as determined in consultation with the CEO (and for Mr. Regnier,and reviewed with the COO), encompassedCommittee, generally encompass strategic objectives as they relate to both the following priorities forindividual business segments and the Company: (i) explore strategic alternatives that enhance our visionentire Company, and roadmap for Itron’s success; (ii) extend our intellectual property strategyin 2014 were developed to support business interests beyond our core metering business; (iii) continue to foster a culture of risk management and compliance throughout the Company; (iv) continue to build and facilitate financial competencies within the Company; and (v) strengthen our organizational capabilities through efficient alignment and accountability.
For Ms. Votava, her goals focused on key due diligence efforts, improvement of departmental operational efficiencies, direct support of major contract negotiations and case settlements, and implementing key risk mitigation strategies. Mr. Cadieux’s individual goals centered on a strong collaboration with the CEO in building a world class leadership team, including building a succession plan to address organizational gaps, and leading major senior leader recruitment efforts to improve leadership talent within the organization. Additionally, his goals centered on development and implementation of a 3-year human capital roadmap that provides our business with a focus on strong partnerships with business and functional leaders. Mr. Cadieux also played a major role in leading the G&A cost reduction review and implementation that was part of our restructuring activities.See the following tables: 2014 EMIP Metrics, Weighting, Targets, Actual Results, and 2014 EMIP – NEO Actual Awards.
Mr. Helmbrecht’s goals were focused on the improvement of Itron’s financial technology platform, improvement in the effectiveness and efficiency of the Finance organization, improvement in the quality and timeliness of Itron’s accounting and reporting, and transition of the CFO leadership role to Mr. Schmitz. For Mark Schmitz, who joined the Company in September of 2014, his goals were to provide a strong performance supporting the day-to-day operations and reporting requirements, strengthening the controllership function, developing a comprehensive tax strategy, and leading major cost reduction initiatives within the Company’s finance organization and business units.
Each executive had one element of his or her goals related to management of expenses within the budget. These individual goals are designed to encourage the NEOs to focus on internal corporate efficiencies and global collaborativestrategic processes that we believe will help drive future growth of the Company. As explained above under the EMIP annual incentive plan, Messrs. Mezey and Holleran were not assigned individual goals in 2014.
We use adjusted EBITDA as a performance metric in the EMIP because we believe that it is important to focus on both revenue as well as profitability to better understand our core business.profitability. Non-GAAP adjustments exclude certain expenses that may not be indicative of our recurring core operating results. These non-GAAP financial measures facilitate management’s internal comparisons to our historical performance as well as comparisons to our competitors’ operating results. We believe this is a better measurement of our core business and enhances the overall understanding of our current and future performance. We define adjusted EBITDA as GAAP net income or loss minus interest income, plus interest expense, depreciation, and amortization of intangible asset expenses, restructuring expense, acquisition-related expense and goodwill impairment, and we exclude the tax expense or benefit. We believe this adjusted EBITDA metric, when included with consolidated revenue, provides a more
balanced illustration of our financial performance and the ongoing operations of our business. A schedule reconciling GAAP to non-GAAP results is available on our website atwww.itron.com.
EMIP 2014 Adjustments.Each year, the Committee reviews the financial performance levels and considers adjustments for items that are not reflective of normal operating performance for that year. These adjustments are items that the Committee believes are fair to both participants and shareholders, encourage appropriate actions that foster the long-term health of the business, and are consistent with the objectives underlying our predetermined performance goals. Such exclusions may consist of the costs and financial effects of restructuring, acquisitions and dispositions, selected legal costs and settlements, and the effects of foreign currency translation.
For the 2014 EMIP plan year, the Committee excluded certain discrete expenses from the adjusted EBITDA results related to long-standing global litigation disputes and restructuring efforts. These legal disputes dated back to the mid-1990s, were not part of the budget, and the Board encouraged management to resolve such matters in 2014 if possible. Restructuring costs were related to the repositioning of our Electricity business
segment and our G&A transformation, both of which were accelerated to 2014 from 2015 due to their immediate impact on costs. These exclusions added $11 million back to Adjusted EBITDA, resulting in a total Adjusted EBITDA margin of approximately 8.75%, and a payout for this portion of the annual bonus equal to approximately 34% of target.
Note that as used in the table below, and for the purposes of determining the 2014 EMIP bonus calculations, the term “consolidated adjusted EBITDA” excludes such discrete expenses and therefore is distinct from and does not conform with our stated definition of Adjusted EBITDA with respect to our earnings releases and other financial results filed in our reports with the SEC (and as stated on our website.)See the table below for specific award calculations for 2014.
EMIP 2014 Payouts.The first table below shows for each NEO the fiscal 20132014 financial and operational performance targets and actual results for awards under the EMIP. The second table indicates the actual awards and bonus paid for each NEO’s attained results.
2013
2014 EXECUTIVE MANAGEMENT INCENTIVE PLAN (EMIP)
Metrics, Weighting, Targets, Actual Results
Payout Factor | Payout Factor | Results Required to Achieve Bonus (in millions) | 2013 Actual Results (millions) | 2013 Actual Percentage Attainment (% attainment of Target Bonus) | Payout Factor | Results Required to Achieve Bonus (in millions) | 2014 Actual Results as Adjusted (millions) (1) | 2014 Actual Percentage Attainment (% attainment of Target Bonus) | ||||||||||||||||||||||||||||||||||||||||
Metrics | Weighting Factor | Threshold | Target | Maximum | Weighting Factor | Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||||
(50%) | (100%) | (200%) | (25%) | (100%) | (200%) | |||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | ||||||||||||||||||||||||||||||||||||||||||||||||
P. Mezey | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Revenue | 50.0 | % | $ | 2,090.5 | $ | 2,161.8 | $ | 2,352.5 | $ | 1,948.7 | 0.0 | % | 50.0 | % | $ | 1,794 | $ | 1,959 | $ | 2,145 | $ | 1,970.8 | 107.4 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA | 50.0 | % | $ | 247.9 | $ | 256.9 | $ | 290.7 | $ | 168.5 | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Consolidated Adjusted EBITDA % | 50.0 | % | 8.56 | % | 9.30 | % | 11.30 | % | 8.75 | % | 34.2 | % | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 0.0 | % | 70.8 | % | ||||||||||||||||||||||||||||||||||||||||||||
John Holleran | ||||||||||||||||||||||||||||||||||||||||||||||||
J. Holleran | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Revenue | 50.0 | % | $ | 2,090.5 | $ | 2,161.8 | $ | 2,352.5 | $ | 1,948.7 | 0.0 | % | 50.0 | % | $ | 1,794 | $ | 1,959 | $ | 2,145 | $ | 1,970.8 | 107.4 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA | 50.0 | % | $ | 247.9 | $ | 256.9 | $ | 290.7 | $ | 168.5 | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Consolidated Adjusted EBITDA % | 50.0 | % | 8.56 | % | 9.30 | % | 11.30 | % | 8.75 | % | 34.2 | % | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 0.0 | % | 70.8 | % | ||||||||||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | ||||||||||||||||||||||||||||||||||||||||||||||||
S. Helmbrecht | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Revenue | 40.0 | % | $ | 2,090.5 | $ | 2,161.8 | $ | 2,352.5 | $ | 1,948.7 | 0.0 | % | 40.0 | % | $ | 1,794 | $ | 1,959 | $ | 2,145 | $ | 1,970.8 | 107.4 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA | 40.0 | % | $ | 247.9 | $ | 256.9 | $ | 290.7 | $ | 168.5 | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Consolidated Adjusted EBITDA % | 40.0 | % | 8.56 | % | 9.30 | % | 11.30 | % | 8.75 | % | 34.2 | % | ||||||||||||||||||||||||||||||||||||
Individual Objectives | 20.0 | % | 99 | % | 19.8 | % | 20.0 | % | 78.0 | % | 78.0 | % | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 19.8 | % | 72.2 | % | ||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava | ||||||||||||||||||||||||||||||||||||||||||||||||
W. M. Schmitz | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Revenue | 40.0 | % | $ | 2,090.5 | $ | 2,161.8 | $ | 2,352.5 | $ | 1,948.7 | 0.0 | % | 40.0 | % | $ | 1,794 | $ | 1,959 | $ | 2,145 | $ | 1,970.8 | 107.4 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA | 40.0 | % | $ | 247.9 | $ | 256.9 | $ | 290.7 | $ | 168.5 | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Consolidated Adjusted EBITDA % | 40.0 | % | 8.56 | % | 9.30 | % | 11.30 | % | 8.75 | % | 34.2 | % | ||||||||||||||||||||||||||||||||||||
Individual Objectives | 20.0 | % | 96.5 | % | 19.3 | % | 20.0 | % | 95.0 | % | 95.0 | % | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 19.3 | % | 75.6 | % | ||||||||||||||||||||||||||||||||||||||||||||
Russell Vanos | ||||||||||||||||||||||||||||||||||||||||||||||||
M. Cadieux | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Revenue | 40.0 | % | $ | 2,090.5 | $ | 2,161.8 | $ | 2,352.5 | $ | 1,948.7 | 0.0 | % | 40.0 | % | $ | 1,794 | $ | 1,959 | $ | 2,145 | $ | 1,970.8 | 107.4 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA | 40.0 | % | $ | 247.9 | $ | 256.9 | $ | 290.7 | $ | 168.5 | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Consolidated Adjusted EBITDA % | 40.0 | % | 8.56 | % | 9.30 | % | 11.30 | % | 8.75 | % | 34.2 | % | ||||||||||||||||||||||||||||||||||||
Individual Objectives | 20.0 | % | 92 | % | 18.4 | % | 20.0 | % | 94.0 | % | 94.0 | % | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 18.4 | % | 75.4 | % | ||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | ||||||||||||||||||||||||||||||||||||||||||||||||
S. Votava | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Revenue | 15.0 | % | $ | 2,090.5 | $ | 2,161.8 | $ | 2,352.5 | $ | 1,948.7 | 0.0 | % | 40.0 | % | $ | 1,794 | $ | 1,959 | $ | 2,145 | $ | 1,970.8 | 107.4 | % | ||||||||||||||||||||||||
Consolidated Adjusted EBITDA | 15.0 | % | $ | 247.9 | $ | 256.9 | $ | 290.7 | $ | 168.5 | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Gas Business Line Revenue | 30.0 | % | $ | 656.2 | $ | 678.6 | $ | 738.5 | $ | 570.3 | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Gas Business Line Gross Margin Percent | 30.0 | % | 40.4 | % | 42.1 | % | 45.9 | % | 36.5 | % | 0.0 | % | ||||||||||||||||||||||||||||||||||||
Consolidated Adjusted EBITDA % | 40.0 | % | 8.56 | % | 9.30 | % | 11.30 | % | 8.75 | % | 34.2 | % | ||||||||||||||||||||||||||||||||||||
Individual Objectives | 10.0 | % | 100 | % | 10.0 | % | 20.0 | % | 30 | 98.5 | % | 98.5 | % | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total | 10.0 | % | 76.3 | % |
(1) | See“EMIP 2014 Adjustments” for definition of Consolidated Adjusted EBITDA for purposes of the 2014 EMIP |
20132014 EMIP – NEO Actual Awards
NEO | EMIP Attainment % | EMIP Target, % of Base Salary | Actual Payout, % of Base Salary | Cash Award | EMIP Attainment % | EMIP Target, % of Base Salary | Actual Payout, % of Base Salary * | Cash Award | ||||||||||||||||||||||||
Philip Mezey | 0.0 | % | 125 | % | 0.0 | % | 0 | 70.8 | % | 125 | % | 88.5 | % | $ | 707,870 | |||||||||||||||||
John Holleran | 0.0 | % | 100 | % | 0.0 | % | 0 | 70.8 | % | 100 | % | 70.8 | % | $ | 424,722 | |||||||||||||||||
Steve Helmbrecht | 19.8 | % | 85 | % | 16.8 | % | $ | 80,868 | 72.2 | % | 85 | % | 61.4 | % | $ | 295,004 | ||||||||||||||||
Mark Schmitz | 75.6 | % | 75 | % | 17.9 | % | $ | 80,421 | ||||||||||||||||||||||||
Michel Cadieux | 75.4 | % | 75 | % | 49.3 | % | $ | 197,150 | ||||||||||||||||||||||||
Shannon Votava | 19.3 | % | 50 | % | 9.7 | % | $ | 33,775 | 76.3 | % | 50 | % | 38.2 | % | $ | 133,577 | ||||||||||||||||
Russell Vanos | 18.4 | % | 75 | % | 13.8 | % | $ | 44,850 | ||||||||||||||||||||||||
Marcel Regnier | 10.0 | % | 75 | % | 7.5 | % | $ | 30,314 |
* | Payouts for Messrs. Cadieux & Schmitz are based on partial year worked during 2014. |
Long-term Incentives. In accordance with our compensation philosophy and objectives, for long-term incentives we use a mix of stock options (25%), time-vested RSUs (25%), and performance-based RSUs or PRSUs (50%) under our LTPP (50%LTIP, all of which are issued under the terms of our Amended and Restated 2010 Stock Incentive Plan (“2010 SIP”). Individual award amounts for stock options are calculated based on Black-Scholes values, and award amounts for time-vested RSUs and LTPP RSUsPRSUs are determined based on the closing price of our common stock on the date of grant. For time-vested RSUs, LTPP awards,our two new NEOs in 2014, Messrs. Schmitz and stock options,Cadieux, we evaluated their long-term incentive (LTI) to market data and in consultation with the Committee’s consultant at the time of their hire, in order to determine their appropriate LTI compensation.
For the other NEOs (other than the CEO), the date of grant and approval by the Committee for the NEOstime-vested RSUs and stock options was February 21, 2013, and19, 2014, when our closing stock price was $42.35 per share, and the date of grant and approval$35.29. The PRSU values were also approved by the BoardCommittee for the NEOs on February 19, 2014, and there were no changes to the LTI values from the prior year. The actual number of PRSUs granted was approved by the Committee for the NEOs on April 29, 2014, based on our closing stock price on February 19th of $35.29 and subject to shareholder approval of the 2010 SIP at the annual meeting in May.
For our CEO Mr. Mezey, washis time-vested RSUs, PRSU value, and stock options (as recommended by the Committee) were approved by the Board on February 22, 2013,21, 2014, and our closing stock price on that date was $43.38.$35.05. On May 1, 2014, the Board approved the actual number of PRSUs to be granted to Mr. Mezey (as recommended by the Committee) based on our closing stock price on the date of Board approval, which was $35.05, also subject to shareholder approval of the 2010 SIP at the annual meeting in May.
Upon his promotionThe PRSUs approved in February for all NEOs, including the CEO, were not effectively issued until after the shareholders had approved the 2010 SIP at the 2014 Annual Meeting and the additional shares underlying the 2010 SIP had been registered with the SEC, and upon the Committee’s authorization and approval of the PRSU award agreements pertaining to Presidentthe award grants, which were approved and CEO effective January 1, 2013, Mr. Mezey’s LTPP opportunity at target was increased from $425,000 to $1,600,000. Atadopted by the same time, upon his promotion to Executive Vice President and COO, Mr. Holleran’s LTPP opportunity at target was increased from $425,000 to $900,000. In February 2013 when Mr. Helmbrecht was promoted to Executive Vice President and CFO, his LTPP opportunity at target was increased from $425,000 to $475,000. As stated, the LTPP opportunity represents 50% of an NEO’s long-term incentive.Committee on May 28, 2015.
LTPP RSUs Value | Stock Options Value ** | Time-vested RSUs Value | Long-term Incentive (“LTI”) | PRSUs Value | Stock Options Value | Time-vested RSU’s Value | Total Long-term Incentive (“LTI”) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NEO | Value * | LTI % | Value | LTI % | Value | LTI % | Target Award ($’s) | % | Value * | LTI % | Value | LTI % | Value | LTI % | Target Award ($’s) | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | $ | 1,600,000 | 50 | % | $ | 800,000 | 25 | % | $ | 800,000 | 25 | % | 3,200,000 | 100% | $ | 1,600,000 | 50 | % | $ | 800,000 | 25 | % | $ | 800,000 | 25 | % | $ | 3,200,000 | 100% | |||||||||||||||||||||||||||||||||||
John Holleran | $ | 900,000 | 50 | % | $ | 450,000 | 25 | % | $ | 450,000 | 25 | % | 1,800,000 | 100% | $ | 900,000 | 50 | % | $ | 450,000 | 25 | % | $ | 450,000 | 25 | % | $ | 1,800,000 | 100% | |||||||||||||||||||||||||||||||||||
Steve Helmbrecht | $ | 475,000 | 50 | % | $ | 237,500 | 25 | % | $ | 237,500 | 25 | % | 950,000 | 100% | $ | — | 50 | % | $ | 118,750 | 25 | % | $ | 118,750 | 25 | % | $ | 475,000 | 100% | |||||||||||||||||||||||||||||||||||
Mark Schmitz | $ | 375,000 | 50 | % | $ | 187,500 | 25 | % | $ | 187,500 | 25 | % | $ | 750,000 | 100% | |||||||||||||||||||||||||||||||||||||||||||||||||
Michel Cadieux | $ | 225,000 | 50 | % | $ | 112,500 | 25 | % | $ | 112,500 | 25 | % | $ | 450,000 | 100% | |||||||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava | $ | 200,000 | 50 | % | $ | 100,000 | 25 | % | $ | 100,000 | 25 | % | 400,000 | 100% | $ | 200,000 | 50 | % | $ | 100,000 | 25 | % | $ | 100,000 | 25 | % | $ | 400,000 | 100% | |||||||||||||||||||||||||||||||||||
Russell Vanos | $ | 200,000 | 50 | % | $ | 100,000 | 25 | % | $ | 100,000 | 25 | % | 400,000 | 100% | ||||||||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | $ | 425,000 | 50 | % | $ | — | 0 | %** | $ | 289,420 | 50 | % | 850,000 | 100% |
* | Value based on performance at |
At the |
2013 LTPP.2014 LTIP Plan under the 2010 SIP.
ForIn 2013, the Committee implemented a new LTPP, moving away fromprogram for performance-based RSUs or PRSUs, replacing our previous program that was based on a one-year performance period with RSUPRSU awards granted upon attainment and vesting ratably over three years, toyears. The new program has a three-year performance period with RSU awards vesting immediately upon attainmentthat consists of three annual performance cycles that are then averaged at the end of year three.the three-year period to determine final attainment and shares earned. In order to transition to the new three-year performance period LTPP,PRSU program, the Committee adopted awards for 2013 under which 33.3% of the total LTPP opportunity iswas based on a two-year performance period (2013 through 2014), and 66.7% is based on thea three-year performance period.period (2013 through 2015.) Both tranches of the 2013 LTPPPRSU grant are identical in their design, with the lengthnumber of years included in the performance period along with the related vesting schedule being the only difference. The components for2014 PRSUs were granted with three one-year annual performance cycles consisting of 2014 through 2016, with final attainment and shares earned being determined at the 2013 LTPP awardsend of 2016. The PRSUs earned are determined as follows:
(1) | At the beginning of each year in the performance cycle, the Committee sets the annual non-GAAP EPS target levels for that year. A performance percentage (ranging from 50% to 160%) for each year in the performance cycle is determined based on our achievement of the annual non-GAAP EPS target set by the Committee (Board for CEO). If the minimum or threshold level is met, the performance percentage is 50%; if the target level for the measure is met, the performance percentage is 100%; and if the maximum level for the measure is met, the performance percentage is 160%. Performance for levels achieved between threshold, target and maximum are linearly interpolated. |
(2) | At the end of the two and three-year performance cycles, the |
(3) | The average EPS attainment for the performance period is then adjusted based on our achievement of TSR for the same two and three-year performance cycles relative to the Russell 3000 index. If our TSR for the two and three-year performance |
The following table shows the target for annual non-GAAP EPS (weighted 100%) set by the Committee at the beginning of each year and our actual results for these measures for 2013:2013 and 2014:
Metrics | Threshold (50%) | Target (100%) | Maximum (160%) | 2013 Actual Results | Absolute Performance Percentage Achieved | Weighted Performance Percentage Achieved | ||||||||||||||||||
Non-GAAP Earnings Per Share (EPS) – 2013 | $ | 3.17 | $ | 3.42 | $ | 4.35 | $ | 1.90 | 0.0 | % | 0.0 | % | ||||||||||||
Non-GAAP Earnings Per Share (EPS) – 2014 | Approved annually by the Compensation Committee | |||||||||||||||||||||||
Non-GAAP Earnings Per Share (EPS) – 2015 | Approved annually by the Compensation Committee |
For our NEOs, the following table shows the target number of shares awarded in 2013 under the LTPP (including shares under the 2013-2014 performance cycle and the 2013—2015 performance cycle), as well as the maximum number of shares that can be earned after giving effect to the performance results for the first year (2013) of the performance cycle (which was zero attainment), and assuming maximum performance for 2014 and 2015 under the performance measure and maximum performance under the TSR multiplier:
Metrics | Threshold (50%) | Target (100%) | Maximum (160%) | Actual Results | ||||||||||||
Non-GAAP Earnings Per Share (EPS) – 2013 | $ | 3.17 | $ | 3.42 | $ | 4.35 | $ | 1.90 | ||||||||
Non-GAAP Earnings Per Share (EPS) – 2014 | $ | 1.58 | $ | 1.76 | $ | 2.75 | $ | 1.80 | (1) | |||||||
Non-GAAP Earnings Per Share (EPS) – 2015 | Approved annually by the Compensation Committee | |||||||||||||||
Non-GAAP Earnings Per Share (EPS) – 2016 | Approved annually by the Compensation Committee |
NEO | Target Shares Award | Maximum Shares opportunity (at beginning of Performance Period) | Maximum Shares opportunity (as of January 1, 2014) | |||||||||
Philip Mezey | 36,883 | 73,766 | 45,100 | |||||||||
John Holleran | 21,251 | 42,502 | 25,986 | |||||||||
Steve Helmbrecht | 11,216 | 22,432 | 13,716 | |||||||||
Shannon Votava | 4,722 | 9,444 | 5,776 | |||||||||
Russell Vanos | 4,722 | 9,444 | 5,776 | |||||||||
Marcel Regnier | 10,035 | 20,070 | 12,272 |
(1) | See“2014 Adjustments to EPS” below for definition of Non-GAAP EPS for purposes of the 2014 LTIP. |
As indicated above, weWe use non-GAAP diluted EPS as the performance metric for our LTPP.LTIP performance-based RSUs or PRSUs. We define non-GAAP diluted EPS as non-GAAP net income (net income excluding the expenses associated with amortization of intangible assets, restructuring, acquisitions, goodwill impairment and amortization of debt placement fees) divided by the weighted average shares outstanding, on a diluted basis, during each period. We consider these financial measures to be useful metrics for management and investors for the same reasons that we
use adjusted EBITDA metrics for our EMIP. We believe this is a better measurement of our core business and enhances the overall understanding of our current and future performance. Therefore, we provide specific information regarding the GAAP amounts excluded from these non-GAAP measures and evaluate non-GAAP diluted EPS together with GAAP diluted EPS. A schedule reconciling GAAP to non-GAAP results is available on our website atwww.itron.com.
2014 Adjustments to EPS. As similarly discussed under “EMIP 2014 Adjustments”,each year the Committee reviews the financial performance levels and considers adjustments for items that are not reflective of normal operating performance for that year. These adjustments are items that the Committee believes are fair to both participants and stockholders, encourage appropriate actions that foster the long-term health of the business, and are consistent with the objectives underlying our predetermined performance goals. Such exclusions may consist of the costs and financial effects of restructuring, acquisitions and dispositions, selected legal costs and settlements, and the effects of foreign currency translation.
For the 2014 plan year, the Committee chose to adjust the non-GAAP EPS definition by excluding certain discrete expenses from the non-GAAP diluted EPS calculation. These excluded expenses were related to long-standing global litigation disputes and restructuring efforts. These legal disputes dated back to the mid-1990s, were not part of the budget, and the Board encouraged management to resolve such matters in 2014 if possible. Restructuring costs were related to the repositioning of our Electricity business segment and our G&A transformation, both of which were accelerated to 2014 from 2015 due to their immediate impact on costs. The cumulative net effect of these adjustments resulted in non-GAAP diluted EPS of $1.80.See the tables below for specific award calculations for 2014. The Committee determined that this adjustment was a more accurate measurement of the Company’s EPS for purposes of the PRSUs, and it was in the best interests of the Company to implement this adjustment, for both retentive and incentive purposes.
Note that as used in the table above, the term “non-GAAP EPS” excludes those discrete expenses described above, and therefore is distinct from and does not conform with our stated defnition of non-GAAP earnings per share in our earnings releases and other financial results filed in our reports with the SEC (and as stated on our website.)
For our NEOs, the following two tables show: 1)2014 Performance-Based RSU Accrued Awards – the target number of shares awarded in 2014 under the Three-Year Performance Period, as well as the maximum number of shares that can be earned after giving effect to the performance results for the first year (2014) of the performance cycle (which was 102.42% attainment), and assuming maximum performance for 2015 and 2016 under the performance measure and maximum performance under the TSR multiplier; and 2)2013 Performance-Based RSU Awards Earned under Two-Year Period – the actual number of shares earned under the 2013-2014 performance cycle after giving effect to the performance results for the first year (2013) of the performance cycle (which was zero attainment), and for the second year (2014) of the performance cycle (which was 102.42% attainment) reduced by 25% since our TSR was below the 25th percentile of the Russell 3000 index.
2014 PRSUs Accrued – Three-Year Performance Period (1/1/2014 – 12/31/2016)
NEO | Target Shares Award | Maximum Shares Opportunity (at Beginning of Performance Period) | Maximum Share Opportunity (as of December 31, 2014) | |||||||||
Philip Mezey | 45,649 | 91,298 | 80,346 | |||||||||
John Holleran | 25,502 | 51,004 | 44,886 | |||||||||
Steve Helmbrecht | 0 | 0 | 0 | |||||||||
Mark Schmitz | 9,238 | 18,476 | 16,260 | |||||||||
Michel Cadieux | 6,375 | 12,750 | 11,221 | |||||||||
Shannon Votava | 5,667 | 11,334 | 9,974 |
2013 PRSUs Earned – Two-Year Performance Period (1/1/2013 – 12/31/2014)
NEO | Target Award (PRSUs) | Attainment % | Actual Awards Earned PRSUs | |||||||||
Philip Mezey | 12,282 | 38.41 | % | 4,717 | ||||||||
John Holleran | 7,077 | 38.41 | % | 2,718 | ||||||||
Steve Helmbrecht | 3,735 | 38.41 | % | 1,434 | ||||||||
Mark Schmitz (1) | 0 | 38.41 | % | 0 | ||||||||
Michel Cadieux (1) | 0 | 38.41 | % | 0 | ||||||||
Shannon Votava | 1,572 | 38.41 | % | 603 |
(1) | Messrs. Schmitz and Cadieux joined Itron in 2014; therefore they were not eligible to receive awards resulting from the 2013 grant of PRSUs. |
Risk and Incentive Compensation.
It is our belief that a majority of an executive’s total compensation should be variable “at risk” compensation, meaning it 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 executive plans and policies in 20132014 for attributes that could cause excessive risk-taking by our executives. We concluded that our programs and policies do not encourage excessive risk-taking because: (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 and continually evolving Company financial objectives which diversify risks associated with a single indicator of performance, (ii) our equity-based incentives encourage a longer-term focus through multi-year performance periods, (iii) there are risk-mitigating policies in place such as insider trading and hedging prohibitions and clawbacks, and (iv) final awards are reviewed and approved by our Committee (and the full 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 – Our Board’s Role in Risk Oversight” in this proxy statement.
Other BenefitsImpact of Tax and Accounting
We regularly consider the various tax and accounting implications of our compensation plans. 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 FASB ASC Topic 718.
Section 162(m) of the Code generally prohibits any publicly held corporation from taking a federal income tax deduction for compensation paid in Effect For NEOsexcess of $1 million in 2013
Marcel Regnier Benefits
Employment Agreement.We have entered into an Employment Agreement with Mr. Regnier, who residesany taxable year to the CEO and works in France. Frenchthe next three highest compensated officers (other than the CFO). Under the current tax laws, require us to document the terms of Mr. Regnier’s employmentexceptions are made for qualified performance-based compensation. The Committee may structure certain compensation programs in a written
agreement. This agreement generally sets forthmanner intended to allow compensation to be deductible as qualified performance-based compensation under Section 162(m) of the Code. The Committee, however, believes that it is important for it to retain maximum flexibility in designing compensation programs that are in the best interest of the Company and other employment provisions generally applicableits shareholders. Therefore, the Committee, while considering tax deductibility as a factor in determining compensation, may not limit compensation to employees in France. In addition, Mr. Regnierthose levels or types of compensation that will be deductible if it believes that the compensation is providedcommensurate with the useperformance of a Company car which is typicalthe covered employee. As required by law, we are submitting to the shareholders for executives residing in France.
French Retirement Indemnity Plan. Under French law, Mr. Regnier is eligibletheir approval, our EMIP with its performance-based compensation goals, to participate in a retirement indemnity planallow for the tax deductibility under Section 162(m) of the Code. We are required for all employees with an employment contract. Theto obtain shareholder approval of the material terms of the indemnity provideperformance goals set forth in the EMIP every five years.See “Proposal No. 2” in the proxy statement for a lump sum payout upon voluntary retirement only, equaldescription of the EMIP, and refer to Appendix A attached to the average monthly salary ofproxy statement which is the employee (including all bonuses) for the last 12 months prior to retirement, multiplied by a multiplier based on the number of years employed. The full amount is paid by the employer, and it is not paid if retirement is not initiated by the employee. In addition, no payments are owed in the event of other terminations, including death or disability. See also “EXECUTIVE COMPENSATION TABLES – Potential Payments upon Change-in-Controlcomplete EMIP.” and “Termination Payment Tables for NEOs” in this CD&A.
Profit Sharing Plan.In addition, Mr. Regnier participates in a discretionary profit plan, the scheme of which mirrors a plan prescribed by French law and local labor contracts. All employees in France participate in this plan. See also “EXECUTIVE COMPENSATION TABLES – Summary Compensation Table” in this CD&A.
Supplemental Tables of NEO Realizable Compensation
In this section, we are presenting supplemental information to the CD&A “EXECUTIVE COMPENSATION TABLES”that begin on page 43.41. The following table and bar graph show realizable long-term compensation paid to our NEOs for the past five years and indicate what we believe are more accurate statements of our NEOs’ actual compensation value as compared to the grant date fair value of these awards.
The table summarizes the long-term compensation that our NEOs received in 20132014 and the prior four years.years (as applicable). It shows grant date fair market value of the stock options, time-vested RSUs, and LTPP performanceperformance-based RSUs or PRSUs for each of our NEOs (three years of which are shown in the“Summary Compensation Table”of the “EXECUTIVE COMPENSATION TABLES”)as applicable) and supplements that information with what the fair market value of the same stock options, time-vested RSUs and LTPP RSUsPRSUs was at the end of fiscal 2013 (20132014, based on our closing stock price on December 31, 2014 of $42.29 per share (2014 Values). Because the 20132014 Values are based in part on the market value of our stock at year end, we believe the 20132014 Values more accurately reflect the current value of the long-term compensation we have paid to our NEOs.
The bar graph underscores the difference between grant date fair market value and the 20132014 Values of the annual long-term compensation earned by our NEOs for the years 2009-2013.2010-2014, as applicable. This also reflects the alignment of our at-risk compensation with the value of our stock and hence, the long-term interests of our NEOs with those of our shareholders.
2009-20132010-2014 Long-Term Incentive Grant Value vs. Actual Value at 12-31-1312-31-14
2009-2013 LTI Grants ($000s) | 2010-2014 LTI Grants ($000s) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total LTI | Stock Options | Time-Vested RSUs | LTPP | Total LTI | Stock Options | Time-Vested RSUs | Performance- Based RSUs | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant- Date Fair Value | 12-31-13 Actual Value* | Actual Value vs. Grant Value | Grant- Date Fair Value | 12-31-13 Actual Value* | Grant- Date Fair Value | 12-31-13 Actual Value* | Grant- Date Fair Value | 12-31-13 Actual Value* | Grant- Date Fair Value | 12-31-14 Actual Value 1 | Actual Value vs. Grant Value | Grant- Date Fair Value | 12-31-14 Actual Value 1 | Grant- Date Fair Value | 12-31-14 Actual Value 1 | Grant- Date Fair Value | 12-31-14 Actual Value 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
MEZEY | $ | 7,980 | $ | 2,815 | -65 | % | $ | 3,667 | $ | 10 | $ | 1,438 | $ | 1,245 | $ | 2,875 | $ | 1,560 | $ | 11,353 | $ | 6,204 | -45 | % | $ | 4,467 | $ | 558 | $ | 2,238 | $ | 2,236 | $ | 4,649 | $ | 3,410 | ||||||||||||||||||||||||||||||||||||
HOLLERAN | $ | 6,464 | $ | 4,253 | -34 | % | $ | 1,560 | $ | 230 | $ | 1,738 | $ | 1,717 | $ | 3,166 | $ | 2,305 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
HELMBRECHT | $ | 3,523 | $ | 1,786 | -49 | % | $ | 897 | $ | 0 | $ | 875 | $ | 714 | $ | 1,750 | $ | 1,073 | $ | 3,998 | $ | 2,238 | -44 | % | $ | 1,135 | $ | 122 | $ | 1,113 | $ | 1,013 | $ | 1,750 | $ | 1,103 | ||||||||||||||||||||||||||||||||||||
HOLLERAN | $ | 4,573 | $ | 2,417 | -47 | % | $ | 1,110 | $ | 0 | $ | 1,288 | $ | 1,154 | $ | 2,175 | $ | 1,263 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCHMITZ | $ | 750 | $ | 581 | -23 | % | $ | 187 | $ | 23 | $ | 187 | $ | 195 | $ | 375 | $ | 362 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CADIEUX | $ | 473 | $ | 442 | -6 | % | $ | 112 | $ | 58 | $ | 112 | $ | 135 | $ | 248 | $ | 250 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
VOTAVA | $ | 962 | $ | 394 | -59 | % | $ | 318 | $ | 58 | $ | 279 | $ | 236 | $ | 365 | $ | 100 | $ | 1,382 | $ | 806 | -42 | % | $ | 418 | $ | 118 | $ | 379 | $ | 361 | $ | 585 | $ | 327 | ||||||||||||||||||||||||||||||||||||
VANOS | $ | 1,217 | $ | 825 | -32 | % | $ | 100 | $ | 0 | $ | 801 | $ | 669 | $ | 316 | $ | 156 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
REGNIER | $ | 2,889 | $ | 2,011 | -30 | % | $ | 0 | $ | 0 | $ | 1,189 | $ | 961 | $ | 1,700 | $ | 1,050 |
* Assumes all grants held until end of the period; for 2013 LTPP grants, assumes no shares are earned for the 2013 performance period, target shares for the 2014 and 2015 performance periods, and a TSR Modifier of 0.75x based on relative TSR performance vs. Russell 3000 through 12/31/13.
1 | Assumes all grants held until end of the period. |
2 | For Performance-based RSUs, reflects actual shares earned for completed performance periods, and target for future periods; the TSR Modifier portion of each award is based on performance tracking through 12/31/14, which results in a modifier of 0.75x for 2013 grants and 0.91x for 2014 grants. |
Modifications Made to Peer Companies for 2015 Compensation Decisions. In September 2014, the Committee’s consultants reviewed our compensation Peer Companies, which had generally remained the same since 2012. As stated previously, many of our direct competitors are private and there is no publicly available compensation information about them. As a result, our Peer Companies generally consist of direct competitors for which public information is available, and that are both part of the same broad S&P industry classification and have some similarity in terms of size and scope of operations (global and North American) as Itron. For 2015, in conjunction with the recommendation of the Committee’s consultant, we have increased the number of Peer Companies from 14 to 17, keeping seven companies from 2014 to maintain consistency, and adding five companies with software services as part of their business mix (marked with an asterisk). The following companies will be included in our Peer Companies Group:
+Ametek Inc. | +FLIR Systems, Inc. | +Trimble Navigation Limited | ||
Atmel Corporation | *Juniper Networks, Inc. | *Unisys Corporation | ||
*Ciber, Inc | +Mueller Water Products, Inc. | Watts Water Technologies, Inc. | ||
+Diebold, Incorporated | OSI Systems, Inc | Xylem Inc. | ||
*EPAM Systems, Inc. | +Roper Industries Inc. | *Zebra Technologies Corp | ||
+ESCO Technologies Inc. | Teradyne Inc. |
+ | Retained from 2014 Peer Group |
* | Software services included in their business mix |
The Committee will continue to review the Peer Companies on an annual basis.
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 20142015 Proxy Statement.
Compensation Committee
Kirby Dyess, Chair
Jon Eliassen
Charles Gaylord
Lynda Ziegler
The following table provides information regarding compensation of the Company’s NEOs. The amounts shown include amounts deferred at the executives’ election. All numbers are rounded to the nearest dollar.
Summary Compensation Table | Summary Compensation Table | Summary Compensation Table | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Stock Awards ($) (2) (3) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) (4) | All Other Compensation ($) | Total ($) | Year | Salary ($) | Stock Awards ($) (1)(2) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) (3) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | 2013 | 800,000 | 1,507,739 | 799,997 | 0 | 29,330 | (5) | 3,137,066 | 2014 | 800,000 | 1,510,723 | 799,991 | 707,869 | 24,000 | (4) | 3,842,583 | ||||||||||||||||||||||||||||||||||||||||
President and CEO | 2012 | 500,000 | 637,468 | 2,419,315 | 138,700 | 18,453 | 3,713,936 | 2013 | 800,000 | 1,507,739 | 799,997 | 0 | 29,330 | 3,137,066 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 483,173 | 637,313 | 212,364 | 345,863 | 49,617 | 1,728,330 | 2012 | 500,000 | 637,468 | 2,419,315 | 138,700 | 18,453 | 3,713,936 | |||||||||||||||||||||||||||||||||||||||||||
John Holleran | 2013 | 600,000 | 845,638 | 449,995 | 0 | 24,153 | (5) | 1,919,786 | 2014 | 600,000 | 847,023 | 449,993 | 424,722 | 37,073 | (4) | 2,358,811 | ||||||||||||||||||||||||||||||||||||||||
Executive Vice President and COO | 2012 | 444,500 | 637,468 | 212,491 | 115,848 | 21,363 | 1,431,670 | 2013 | 600,000 | 845,638 | 449,995 | 0 | 24,153 | 1,919,786 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 444,125 | 837,310 | 212,364 | 307,472 | 7,350 | 1,808,621 | 2012 | 444,500 | 637,468 | 212,491 | 115,848 | 21,363 | 1,431,670 | |||||||||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | 2013 | 480,500 | 446,301 | 237,496 | 80,868 | 13,944 | (5) | 1,259,109 | 2014 | 480,500 | 237,466 | 237,487 | 295,004 | 535,887 | (4) | 1,786,344 | ||||||||||||||||||||||||||||||||||||||||
Senior Vice President and CFO | 2012 | 437,500 | 637,468 | 212,491 | 118,125 | 10,996 | 1,415,680 | |||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 437,260 | 637,313 | 212,364 | 302,630 | 47,158 | 1,636,725 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Vice President – Finance; Former Executive Vice President and CFO | 2013 | 480,500 | 446,301 | 237,496 | 80,868 | 13,944 | 1,259,109 | |||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 437,500 | 637,468 | 212,491 | 118,125 | 10,096 | 1,415,680 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava (7) | 2013 | 350,000 | 187,895 | 100,007 | 33,775 | 7,650 | (5) | 679,327 | ||||||||||||||||||||||||||||||||||||||||||||||||
W. Mark Schmitz (6)(7) Executive Vice President and CFO | 2014 | 129,808 | 335,187 | 187,490 | 80,421 | 22,272 | (4) | 755,178 | ||||||||||||||||||||||||||||||||||||||||||||||||
Michel Cadieux (6)(8) Senior Vice President, Human Resources | 2014 | 321,154 | 211,728 | 112,498 | 197,150 | 86,410 | (4) | 928,940 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava (6) | 2014 | 350,000 | 188,212 | 99,994 | 133,577 | 7,800 | (4) | 779,583 | ||||||||||||||||||||||||||||||||||||||||||||||||
Vice President, General Counsel and Corporate Secretary | 2013 | 350,000 | 187,895 | 100,007 | 33,775 | 7,650 | 679,327 | |||||||||||||||||||||||||||||||||||||||||||||||||
Russell Vanos (7) | 2013 | 325,000 | 187,895 | 100,007 | 44,850 | 7,650 | (5) | 665,402 | ||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President – Strategy and Business Development | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier (8) | 2013 | 404,192 | 476,245 | 0 | 30,314 | 45,722 | (5) | 956,473 | ||||||||||||||||||||||||||||||||||||||||||||||||
President – Gas | 2012 | 437,487 | 719,604 | 0 | 86,474 | 494,982 | 1,738,547 | |||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 406,415 | 727,386 | 0 | 281,117 | 128,827 | 1,543,745 |
(1) |
These columns reflect the aggregate grant date fair value of awards granted under our Long-Term |
Includes the grant date fair value of |
The grant date fair value of the performance related component is based upon the probable outcome for the award and is consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718. As required under FASB ASC Topic 718, the full grant date fair value for the TSR multiplier for the entire |
This column reflects the cash awards earned by the |
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 | 401(k) Company Contributions | Executive Deferred Comp. Plan Company Match (9) | Company Car | Transportation | Housing Allowance | Group Insurance Retirement Contributions (10) | Profit Sharing | 401(k) Company Contributions | Executive Deferred Comp. Plan Company Match (9) | Transportation | Housing Allowance | Relocation | Severance Payments (10) | Gross-up (11) | ||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | $ | 7,650 | $ | 21,680 | $ | 7,800 | $ | 16,200 | ||||||||||||||||||||||||||||||||||||||||||||||||
John Holleran | 7,650 | 6,124 | 5,006 | 5,373 | 7,800 | 10,200 | $ | 8,656 | $ | 10,417 | ||||||||||||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | 7,650 | 6,294 | 7,800 | 6,615 | $ | 521,472 | ||||||||||||||||||||||||||||||||||||||||||||||||||
W. Mark Schmitz | 779 | $ | 15,808 | $ | 5,685 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Michel Cadieux | 6,865 | 35,480 | 24,612 | 19,453 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava | 7,650 | 7,800 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Russell Vanos | 7,650 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | 4,065 | 34,479 | 7,178 |
In connection with his separation of employment with the Company as CFO in September 2014, Mr. |
Messrs Schmitz and Cadieux, and Ms. Votava |
(7) | Mr. Schmitz joined the Company as Executive Vice President and CFO effective September 8, 2014. His base salary upon hire was $450,000. |
(8) | Mr. |
(9) | Deferred compensation plan details are discussed following the Nonqualified Deferred Compensation Table. |
(10) | Represents |
(11) | Represents tax gross-up payment related to the relocation benefit paid. |
20132014 Grants of Plan-Based Awards Table
The following table provides information regarding grants of plan-based awards to the NEOs during 2013.2014.
Grants of Plan – Based Awards | Grants of Plan – Based Awards | Grants of Plan – Based Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Board or Committee Action Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | All Other Option Awards: Number of Securities Underlying Options (#) (4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards | Grant Date | Board or Committee Action 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 ($/Sh) | Grant Date Fair Value of Stock and Option Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($)(1) | Target ($)(1) | Maximum ($)(1) | Threshold (#)(2) | Target (#)(2) | Maximum (#)(2) | Threshold ($) (1) | Target ($) (1) | Maximum ($) (1) | Threshold (#) (2) | Target (#) (2) | Maximum (#) (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Philip Mezey | n/a | n/a | $ | 500,000 | $ | 1,000,000 | $ | 2,000,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 250,000 | $ | 1,000,000 | $ | 2,000,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2013 | 2/22/2013 | n/a | n/a | n/a | n/a | n/a | n/a | 18,441 | n/a | n/a | $ | 799,971 | 2/21/2014 | 2/21/2014 | n/a | n/a | n/a | n/a | n/a | n/a | 22,824 | n/a | n/a | $ | 799,981 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2013 | 2/22/2013 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 51,270 | $ | 43.38 | $ | 799,997 | 2/21/2014 | 2/21/2014 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 58,957 | $ | 35.05 | $ | 799,991 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2013 | 2/22/2013 | n/a | n/a | n/a | 13,831 | 36,883 | 73,766 | n/a | n/a | n/a | $ | 707,768 | (5) | 5/28/2014 | 5/28/2014 | n/a | n/a | n/a | 17,118 | 45,649 | 91,298 | n/a | n/a | n/a | $ | 710,742 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John Holleran | n/a | n/a | $ | 300,000 | $ | 600,000 | $ | 1,200,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 150,000 | $ | 600,000 | $ | 1,200,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | 10,625 | n/a | n/a | $ | 449,969 | 2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | 12,751 | n/a | n/a | $ | 449,983 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 29,342 | $ | 42.35 | $ | 449,995 | 2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 32,892 | $ | 35.29 | $ | 449,993 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | 7,969 | 21,251 | 42,502 | n/a | n/a | n/a | $ | 395,670 | (5) | 5/28/2014 | 5/28/2014 | n/a | n/a | n/a | 9,563 | 25,502 | 51,004 | n/a | n/a | n/a | $ | 397,040 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | n/a | n/a | $ | 204,213 | $ | 408,425 | $ | 816,850 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 102,106 | $ | 408,425 | $ | 816,850 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | 5,608 | n/a | n/a | $ | 237,499 | 2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | 6,729 | n/a | n/a | $ | 237,466 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 15,486 | $ | 42.35 | $ | 237,496 | 2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 17,359 | $ | 35.29 | $ | 237,487 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | 4,206 | 11,216 | 22,432 | n/a | n/a | n/a | $ | 208,802 | (5) | 5/28/2014 | 5/28/2014 | n/a | n/a | n/a | 0 | 0 | 0 | n/a | n/a | n/a | $ | 0 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
W. Mark Schmitz | n/a | n/a | $ | 26,353 | $ | 105,411 | $ | 210,822 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9/17/2014 | 9/17/2014 | n/a | n/a | n/a | n/a | n/a | n/a | 4,619 | n/a | n/a | $ | 187,485 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9/17/2014 | 9/17/2014 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 13,527 | $ | 40.59 | $ | 187,490 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9/17/2014 | 9/17/2014 | n/a | n/a | n/a | 3,464 | 9,238 | 18,476 | n/a | n/a | n/a | $ | 147,702 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michel Cadieux | n/a | n/a | $ | 65,137 | $ | 260,548 | $ | 521,096 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | 3,187 | n/a | n/a | $ | 112,469 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 8,223 | $ | 35.29 | $ | 112,498 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/28/2014 | 5/28/2014 | n/a | n/a | n/a | 2,390 | 6,375 | 12,750 | n/a | n/a | n/a | $ | 99,259 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava | n/a | n/a | $ | 87,500 | $ | 175,000 | $ | 350,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | $ | 43,750 | $ | 175,000 | $ | 350,000 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | 2,361 | n/a | n/a | $ | 99,988 | 2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | 2,833 | n/a | n/a | $ | 99,977 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 6,521 | $ | 42.35 | $ | 100,007 | 2/19/2014 | 2/19/2014 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 7,309 | $ | 35.29 | $ | 99,994 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | 1,770 | 4,722 | 9,444 | n/a | n/a | n/a | $ | 87,907 | (5) | 5/28/2014 | 5/28/2014 | n/a | n/a | n/a | 2,125 | 5,667 | 11,334 | n/a | n/a | n/a | $ | 88,235 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Russell Vanos | n/a | n/a | $ | 121,875 | $ | 243,750 | $ | 487,500 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | 2,361 | n/a | n/a | $ | 99,988 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 6,521 | $ | 42.35 | $ | 100,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | 1,770 | 4,722 | 9,444 | n/a | n/a | n/a | $ | 87,907 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | n/a | n/a | $ | 0 | $ | 0 | $ | 0 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | n/a | n/a | n/a | 6,834 | n/a | n/a | $ | 289,420 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2/21/2013 | n/a | n/a | n/a | 3,763 | 10,035 | 20,070 | n/a | n/a | n/a | $ | 186,825 | (5) |
(1) | Represents threshold, target and maximum opportunity under the Company’s annual incentive program for fiscal |
(2) | Represents range of possible payouts under the |
(3) | Amounts shown in this column reflect the number of |
(4) | Amounts shown in this column reflect the number of options granted |
(5) | Amounts shown are based on target performance achievement for the |
The non-equity incentive awards included in this table and also set forth in the Summary Compensation Table represent the annual incentive component 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 criteria. For more details, refer to the “EXECUTIVE COMPENSATION – CD&A – Components of our Compensation Program” section of this proxy statement.
Under the Company’s 2013 LTPPLTIP for the 2013 three-year performance period (2013-2015), the threshold level of performance for 2013 was not achieved, so no awards were earned for year one of the two-year and three-year performance period. (For the first year of the new three-year performance period implemented in 2013, there is a 2-year (33.3% of the potential) and a 3-year (66.7% of the potential) component.) For more
details, refer to the “EXECUTIVE COMPENSATION – CD&A – 20132014 Compensation Paid to Our NEOs” section of the proxy statement. The amounts included in the “All Other Stock Awards” column and in the “All Other Option Awards” column represent time-vested RSUs and stock options, respectively, both of which were issued under the Company’s Amended and Restated 2010 SIP.Stock Incentive Plan (2010 SIP). For further details on these awards, refer to the“EXECUTIVE COMPENSATION TABLES – CD&A – Components of Our Compensation ProgramProgram”.
See “2014 Compensation – Long-Term Incentives”.Base SalariesBecause of” regarding severance paid to Steve Helmbrecht, which included the adverse tax consequencesfollowing equity awards that are reflected in France on stock options, Mr. Regnier received additionalthe above table: 2,243 time-vested RSUs, in lieuwhich represent those RSUs from the February 19, 2014 grant (reflected above) that were vested as of February 19, 2015; and 1,434 Performance-based RSUs (PRSUs) earned for the optionsperformance period 2013-2014. Mr. Helmbrecht did not earn any PRSUs for the 2014 LTIP, and the remainder of his time-vested RSUs granted to the other NEOs. For further details on the compensation and benefits paid to our NEO residing in France, Mr. Regnier, refer to the “EXECUTIVE COMPENSATION – CD&A – 2013 Compensation Paid to Our NEOs – Marcel Regnier Benefits”.February 19, 2014 that were unvested at February 19, 2015, expired by their terms.
20132014 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, 2013.2014.
Outstanding Equity Awards At Fiscal Year End | Outstanding Equity Awards At Fiscal Year End | Outstanding Equity Awards At Fiscal Year End | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | 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 ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | 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 ($) (6) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 5/5/2008 | 20,000 | $ | 95.78 | 5/5/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | 2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/5/2008 | 20,000 | $ | 95.78 | 5/5/2018 | 2/24/2011 | 8,810 | $ | 56.65 | 2/24/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | 2/16/2012 | 7,598 | 3,800 | $ | 48.23 | 2/16/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 5,873 | 2,937 | $ | 56.65 | 2/24/2021 | 2/16/2012 | 1,469(2) | $ | 62,124 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 1,250 | (2) | $ | 51,788 | 11/15/2012 | 93,713 | 46,857 | $ | 41.36 | 11/15/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 2,311 | (3) | $ | 95,745 | 2/22/2013 | 17,090 | 34,180 | $ | 43.38 | 2/22/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 3,799 | 7,599 | $ | 48.23 | 2/16/2022 | 2/22/2013 | 12,294(2) | $ | 519,913 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 2,938 | (2) | $ | 121,721 | 2/22/2013 | 4,717(3) | $ | 199,482 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/15/2012 | 46,856 | 93,714 | $ | 41.36 | 11/15/2022 | 2/22/2013 | 24,601(4) | $ | 1,040,376 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2013 | 51,270 | $ | 43.38 | 2/22/2023 | 2/21/2014 | 58,957 | $ | 35.05 | 2/21/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2013 | 18,441 | (2) | $ | 764,011 | 2/21/2014 | 22,824(2) | $ | 965,227 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2013 | 13,831 | (4) | $ | 573,018 | 5/28/2014 | 45,649(5) | $ | 1,930,496 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John Holleran | 2/22/2007 | 20,000 | $ | 62.52 | 2/22/2017 | 2/22/2007 | 20,000 | $ | 62.52 | 2/22/2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | 5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/5/2008 | 20,000 | $ | 95.78 | 5/5/2018 | 5/5/2008 | 20,000 | $ | 95.78 | 5/5/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | 2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 5,873 | 2,937 | $ | 56.65 | 2/24/2021 | 2/24/2011 | 8,810 | $ | 56.65 | 2/24/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 1,250 | (2) | $ | 51,788 | 2/16/2012 | 7,598 | 3,800 | $ | 48.23 | 2/16/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 2,311 | (3) | $ | 95,745 | 2/16/2012 | 1,469(2) | $ | 62,124 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 3,799 | 7,599 | $ | 48.23 | 2/16/2022 | 2/21/2013 | 9,780 | 19,562 | $ | 42.35 | 2/21/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 2,938 | (2) | $ | 121,721 | 2/21/2013 | 7,084(2) | $ | 299,582 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 29,342 | $ | 42.35 | 2/21/2023 | 2/21/2013 | 2,718(3) | $ | 114,944 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 10,625 | (2) | $ | 440,194 | 2/21/2013 | 14,174(4) | $ | 599,418 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 7,969 | (4) | $ | 330,156 | 2/19/2014 | 32,892 | $ | 35.29 | 2/19/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/19/2014 | 12,751(2) | $ | 539,240 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/28/2014 | 25,502(5) | $ | 1,078,480 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steve Helmbrecht | 12/6/2004 | 8,333 | $ | 21.18 | 12/6/2014 | 5/3/2005 | 2,327 | $ | 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 | 5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/14/2007 | 20,000 | $ | 67.43 | 5/14/2017 | 5/5/2008 | 20,000 | $ | 95.78 | 5/5/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/5/2008 | 20,000 | $ | 95.78 | 5/5/2018 | 2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/11/2010 | 8,610 | $ | 61.56 | 2/11/2020 | 2/24/2011 | 8,810 | $ | 56.65 | 2/24/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 5,873 | 2,937 | $ | 56.65 | 2/24/2021 | 2/16/2012 | 7,598 | 3,800 | $ | 48.23 | 2/16/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 1,250 | (2) | $ | 51,788 | 2/16/2012 | 1,469(2) | $ | 62,124 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 2,311 | (3) | $ | 95,745 | 2/21/2013 | 5,162 | 10,324 | $ | 42.35 | 2/21/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 3,799 | 7,599 | $ | 48.23 | 2/16/2022 | 2/21/2013 | 3,739(2) | $ | 158,122 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 2,938 | (2) | $ | 121,721 | 2/21/2013 | 1,434(3) | $ | 60,644 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 15,486 | $ | 42.35 | 2/21/2023 | 2/21/2013 | 7,481(4) | $ | 316,371 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 5,608 | (2) | $ | 232,339 | 2/19/2014 | 17,359 | $ | 35.29 | 2/19/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 4,206 | (4) | $ | 174,255 | 2/19/2014 | 6,729(2) | $ | 284,569 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava | 2/24/2011 | 260 | (2) | $ | 10,772 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
W. Mark Schmitz | 9/17/2014 | 13,527 | $ | 40.59 | 9/17/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 81 | (3) | $ | 3,356 | 9/17/2014 | 4,619(2) | $ | 195,338 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/12/2011 | 6,666 | 3,334 | $ | 35.65 | 12/12/2021 | 9/17/2014 | 9,238(5) | $ | 390,675 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michel Cadieux | 2/19/2014 | 8,223 | $ | 35.29 | 2/19/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 1,341 | 2,682 | $ | 48.23 | 2/16/2022 | 2/19/2014 | 3,187(2) | $ | 134,778 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 1,037 | (2) | $ | 42,963 | 5/28/2014 | 6,375(5) | $ | 269,599 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 6,521 | $ | 42.35 | 2/21/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2,361 | (2) | $ | 97,816 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 1,770 | (4) | $ | 73,331 |
Outstanding Equity Awards At Fiscal Year End | Outstanding Equity Awards At Fiscal Year End | Outstanding Equity Awards At Fiscal Year End | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | 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 ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | 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 ($) (6) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Russell Vanos | 2/24/2011 | 617 | (2) | $ | 25,562 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shannon Votava | 12/12/2011 | 10,000 | $ | 35.65 | 12/12/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 183 | (3) | $ | 7,582 | 2/16/2012 | 2,682 | 1,341 | $ | 48.23 | 2/16/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 4,839 | (2) | $ | 200,480 | 2/16/2012 | 519(2) | $ | 21,949 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12/13/2012 | 1,508 | (2) | $ | 62,476 | 2/21/2013 | 2,173 | 4,348 | $ | 42.35 | 2/21/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 6,521 | $ | 42.35 | 2/21/2023 | 2/21/2013 | 1,574(2) | $ | 66,564 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 2,361 | (2) | $ | 97,816 | 2/21/2013 | 603(3) | $ | 25,501 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 1,770 | (4) | $ | 73,331 | 2/21/2013 | 3,150(4) | $ | 133,214 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marcel Regnier | 2/24/2011 | 1,780 | (2) | $ | 73,745 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/24/2011 | 2,311 | (3) | $ | 95,745 | 2/19/2014 | 7,309 | $ | 35.29 | 2/19/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/16/2012 | 4,073 | (2) | $ | 168,744 | 2/19/2014 | 2,833(2) | $ | 119,808 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 6,834 | (2) | $ | 283,133 | 5/28/2014 | 5,667(5) | $ | 239,657 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2013 | 3,763 | (4) | $ | 155,901 |
(1) | One third of the options granted on February 16, 2012 vest on each of February 16, 2013, 2014 and 2015. One third of the options granted on November 15, 2012 vest on each of November 15, 2013, 2014 and 2015. One third of the options granted on February 21, 2013 vest on each of February 21, 2014, 2015 and 2016. One third of the options granted on February 22, 2013 vest on each of February 22, 2014, 2015 and 2016. One third of the options granted on February 19, 2014 vest on each of February 19, 2015, 2016 and 2017. One third of the options granted on February 21, 2014 vest on each of February 21, 2015, 2016 and 2017. One third of the options granted on September 17, 2014 vest on each of September 17, 2015, 2016 and 2017. |
(2) | Represents time-vested RSUs granted under the 2010 SIP. |
(3) | Represents |
(4) | Represents |
(5) | Represents PRSUs granted under the LTIP for the three-year performance cycles beginning in 2014 assuming achievement at target levels of performance. |
(6) | Based on the closing price of our common stock on December 31, |
20132014 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 20132014 fiscal year.
Option Exercises and Stock Vested | Option Exercises and Stock Vested | Option Exercises and Stock Vested | ||||||||||||||||||||||||||
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($)(1) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(2)(3) | ||||||||||||||||||||
Philip Mezey | 10,791 | 459,544 | 15,894 | 609,714 | ||||||||||||||||||||||||
John Holleran | 13,596 | 568,770 | 11,289 | 433,836 | ||||||||||||||||||||||||
Steve Helmbrecht | 10,791 | 459,544 | 8,333 | 165,519 | 8,333 | 320,932 | ||||||||||||||||||||||
W. Mark Schmitz | n/a | n/a | ||||||||||||||||||||||||||
Michel Cadieux | n/a | n/a | ||||||||||||||||||||||||||
Shannon Votava | 1,196 | 50,912 | 2,249 | 84,370 | ||||||||||||||||||||||||
Russell Vanos | 5,148 | 219,908 | ||||||||||||||||||||||||||
Marcel Regnier | 12,372 | 530,182 |
(1) | Represents the difference between the exercise price and the fair market value of our common stock on the date of exercise. |
(2) | Includes PRSUs earned under the LTIP for the two-year performance cycle beginning in 2013 and vested on 12/31/2014. |
(3) | Based on the fair market value of our common stock on the vest date. |
20132014 Nonqualified Deferred Compensation Table
The following table provides information regarding the nonqualified deferred compensation of each of the NEOs for the 20132014 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 ($) | Aggregate Balance at Last Fiscal Year End ($) | ||||||||||||||||||||||||||||||
Philip Mezey | 75,333 | 21,680 | 124,313 | 0 | 1,099,744 | 48,000 | 16,200 | 51,618 | 0 | 1,215,562 | ||||||||||||||||||||||||||||||
John Holleran | 59,822 | 6,124 | 5,261 | 0 | 71,208 | 60,000 | 10,200 | 12,520 | 0 | 153,928 | ||||||||||||||||||||||||||||||
Steve Helmbrecht | 28,483 | 6,294 | 65,147 | 0 | 415,509 | 28,830 | 6,615 | 23,612 | 0 | 474,566 | ||||||||||||||||||||||||||||||
W. Mark Schmitz | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||
Michel Cadieux | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||
Shannon Votava | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||
Russell Vanos | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||
Marcel Regnier | n/a | 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 Table in 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. Annually, 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. The employer match into the Executive Deferred Compensation Program only commences after the employee reaches IRS limits on the 401(k) plan and is no longer eligible for the 401(k) match.
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. 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.
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
The following describes payments due upon termination in accordance with the provisions of our current 2010 stock incentive plan (2010 SIP). Our Board has adopted an Amended and Restated 2010 Stock Incentive PlanSIP, pursuant to which will be presented to the shareholders for their approval at the annual meeting. See “Proposal No. 2 – Approvalall of Amended and Restated 2010 Stock Incentive Plan”in this proxy statement for a summary of payments upon termination under the proposed, amended plan.our LTIP equity awards are granted.
Termination for Cause
The 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-vested RSUs and all unvested awards under the LTPPLTIP and the EMIP are forfeited in the event of termination for cause.
Termination due to Death, Disability, or Retirement
Base Salary: The executive or his or her estate is entitled to any accrued and unpaid base salary through the date of termination.
Time-vested RSUs: If termination is due to retirement, any unvested RSUs granted under the 2010 SIP would immediately terminate. Unvested RSUs granted prior to 2013 are forfeited upon death or disability. For those granted insubsequent to 2013, any unvested RSUs will vest immediately upon termination due to death or disability (as defined in the 2010 SIP).
Stock Options: All unvested options automatically expire when termination is due to retirement. If termination is due to death or disability, all unvested options become exercisable and remain exercisable until 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 under the 2010 SIP 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.
LTPPPerformance-Based RSUs (PRSUs): There were no LTPP awardsPRSUs earned for the 2009, 2012 and 2013 performance periods. For awards earned under the 2010 and 2011 LTPP,performance period, if termination occurs during the performance period by reason of death, disability, or retirement, the number of RSUsPRSUs that become eligible for vesting, based on attainment of performance goals assessed at the end of the performance period, will be determined pro-rata based on the number of calendar days employed during the performance period and will vest as of the date of death, disability, or retirement. If termination occurs during the performance period under the 2013-2015 LTPP,2013 grant (2013-2014 performance period) and the 2014 grant (2014-2016 performance period), the awards will be vested at the greater of target or actual performance for the year, and pro-rated based on the number of calendar days between the beginning of the performance period and the date of death, disability, or retirement. Vested units generally will be settled at the original vesting date set forth in 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.
Definition of Retirement: For purposes of stock options granted since 2008 as well as all awards granted under the 2010 SIP to NEOs located in the U.S., “retirement” means the earlier of age 65 or age 55 with at least 10 years of service with Itron. For awards outstanding under the Company’s prior 2000 SIP,Stock Incentive Plan (2000 SIP), other than stock options granted in 2008 or later, “retirement” means attainment of age 65.
Voluntary Termination or Termination without Cause
Base Salary: The executive is entitled to any accrued and unpaid base salary through the date of termination.
Stock Options: All unvested options automatically expire due to voluntary termination or termination by the Company without cause. Any vested options would remain exercisable until the earlier of 90 days following termination of employment or the date on which the options expire by their terms.
Time-vested RSUs: All unvested RSUs are forfeited upon voluntary termination or termination without cause.
LTPPPerformance-Based RSUs (PRSUs):There were no LTPP awardsPRSUs earned for the 2009, 2012 and 2013 performance periods. For awards earned under the 2010 and 2011 LTPP,performance period, if termination occurs during the performance period or the three-year ratable vesting period, any unvested awards are forfeited. For any LTPP awardsPRSUs earned during the performance period under the 2013-2015 LTPP,2013 grant (2013-2014 performance period) and the 2014 grant (2014-2016 performance period), the awards will be vested at the greater of target or actual performance for the year and pro-rated based on the number of calendar days between the beginning of the performance period and the date of termination. Vested units will be settled in accordance with the provisions of Section 409A of the Code.
Annual Incentive Plan: The bonus under the 20132014 EMIP would be forfeited in its entirety if the NEO is not employed by the Company or working as a service contractor for the Company at the time of the payout.
Potential Payments upon Change-in-Control
The following describes the material provisions of the CIC agreements that we entered into with our NEOs in January of 2013 or later. The CIC agreements provide for the following benefits if there is a change-in-controland the NEO’s employment is terminated by the Company without cause or by the NEO for “good reason”:
Severance Benefit. The CIC agreements provide Messrs Mezey, Holleran, Helmbrecht, and RegnierSchmitz with a severance benefit equal to 2.5 times the sum of base salary and target annual incentive opportunity. For Ms. Votava and Mr. Vanos,Cadieux, the benefit is equal to 2 times the sum of base salary and target annual incentive opportunity. For all, the benefit is paid in cash in one lump sum.
Pro-Rata Annual Incentive for Year of Termination. The CIC 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 CIC agreements provide Messrs Mezey, Holleran, Helmbrecht and RegnierSchmitz with 2.5 years of life and disability insurance coverage (with no tax gross-up). For Ms. Votava and Mr. Vanos,Cadieux, this benefit is equal to two years of life and disability insurance coverage (with no tax gross-up). The Agreements also provide our NEOs and their dependents with the same respective years of health care coverage.
Equity Award Vesting and Acceleration (Double Trigger). The 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. There is accelerated vesting of the LTPPPRSU awards 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, pro-rated for the portion of the performance period as of the date of the change-in-control. For purposes of these CIC agreements, which pertain to equity awards granted after January 1, 2014, such accelerated vesting herein described will occuronly upon a change-in-controlanda termination of employment without cause or for “good reason” as defined in the Agreements. All vesting acceleration is subject to consummation of the CIC transaction.
Excise Tax Gross-Up. There are no effective provisions for an excise tax gross-up.
Legal Fees. The CIC agreements provide that NEOs will be 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:
¡ | An acquisition of 25 percent or more of our voting securities; |
¡ | Our current Board of Directors (and their approved successors) ceasing to constitute a majority of the Board; |
¡ | Consummation of any merger or consolidation with or into another corporation, the effect of which would be that our Board would consist of a majority of directors who were not members of the Board prior to the merger or consolidation; or |
¡ | Consummation of any sale or disposition of all or substantially all of our assets, or the approval by our shareholders of a plan of complete liquidation or dissolution of the Company. |
Definition of Good Reason. For purposes of the CIC agreements, “good reason” for termination by the NEO of his or her employment generally means any one of the following acts by the Company following a change-in-control:
¡ | An adverse change in the NEO’s duties, status or position as an executive officer; |
¡ | A reduction in the NEO’s base salary; |
¡ | A reduction in the NEO’s annual bonus or long-term incentive opportunity; |
¡ | The failure to continue to provide welfare, medical, and other fringe benefits which in the aggregate are substantially similar to those provided immediately prior to the change-in-control; |
¡ | The requirement for the NEO to be based at an office more than 50 miles from the NEO’s office prior to the change-in-control; or |
¡ | The failure by the Company or successor company to assume or agree to perform the provisions of the CIC agreement. |
See also “Termination Payment Tables for NEOs”in this section of the proxy statement.
Regnier Severance Benefits and Change-in-Control Agreement
Our President – Gas, Mr. Regnier, resides in France. Under French laws, Mr. Regnier may be entitled to receive severance payments determined under the formula prescribed by statute in France, 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 CIC agreement provides that any severance payments and benefits he receives under French law, if any, will be offset against any payments or benefits he receives pursuant to his CIC agreement.
2010 SIP Change-in-Control Provisions
Our 2010 SIP contains certain provisions relating to a change-in-control of the Company. In the event of a change-in-control, , as defined in our CIC Agreements described above, unless otherwise provided in the award agreement, generally:
¡ | 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, 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. |
¡ | 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 completion of the change-in-control. If unvested options are to be assumed or substituted by a Successor Corporation without acceleration upon the |
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. |
¡ | The vesting and payout of |
As previously mentioned, our Board has adopted an Amended and Restated 2010 Stock Incentive Plan to be submitted to the shareholders for their approval at the annual meeting. For a summary of change-in-control provisions of that amended plan, see “Proposal No 2 – Approval of Amended and Restated 2010 Stock Incentive Plan”in this proxy statement.
LTPPPerformance-Based (PRSU) Change-in-Control Provisions
There were no LTPP awardsPRSUs earned for the 2009, 2012 and 2013 performance periods. For awards earned under the 2010 and 2011 LTPP,performance period, all unvested RSUsPRSUs will accelerate and become vested immediately prior toupon consummation of the change-in-control. If a change-in-control occurs during the performance period under the 2010 and 2011 LTPP,grant, the number of RSUsPRSUs subject to the award will be the greater of (a) the target number of RSUsPRSUs subject to the award or (b) the actual number of RSUsPRSUs 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. If a change-in-control occurs during the performance period (2013-2015) under the 2013-2015 LTPP,2013 grant, the PRSU awards will be vested at the greater of target or actual performance for the year, and pro-rated based on the number of calendar days between the beginning of the performance period and the change-in-control.
The definition of change-in-control for those RSUsPRSUs granted under the 2010 and 2011 LTPPgrant is defined in the 2010 SIP, as described above, and the transaction must constitute a change-in-control event within the meaning of Section 409A of the Code.
Time-vested RSUs:RSUs Change-in-Control Provisions
In the event of a change-in-control, any unvested RSUs will accelerate and become vested immediately prior to such transaction.transaction if the unvested RSUs are not otherwise assigned, substituted for, or converted by the successor corporation.
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. 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-control event had occurred. The amounts shown assume that such termination or change-in-control was effective as of December 31, 2013.2014. 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, as applicable.
Summary of Termination Payments Philip 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 Following a Change-in- Control | ||||||||||||||||||||||||
Annual Incentive (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,000,000 | $ | 1,000,000 | ||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 6,560 | $ | 6,560 | ||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 800,000 | $ | — | $ | 4,500,000 | ||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 48,656 | ||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | $ | 859,755 | $ | 859,755 | $ | 95,745 | $ | — | $ | 1,033,264 | $ | 1,033,264 | |||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | 1,528,063 | $ | 1,528,063 | $ | 594,244 | $ | — | $ | 594,244 | $ | 594,244 |
Summary of Termination Payments Phillip Mezey Executive Benefits (1) Annual Incentive (2) Accelerated Stock Options (3) Severance (4) Benefit Continuation Accelerated RSUs (5) Accelerated Performance RSUs (PRSUs) (6) 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 $ — $ — $ — $ — $ — $ — $ 292,131 $ 292,131 $ — $ — $ 426,849 $ 426,849 $ — $ — $ 43,577 $ 470,426 $ — $ — $ — $ — $ — $ 838,105 $ — $ 4,500,000 $ — $ — $ — $ — $ — $ — $ — $ 51,512 $ — $ — $ 1,485,140 $ 1,485,140 $ — $ — $ 582,037 $ 1,547,264 $ — $ — $ 3,170,354 $ 3,170,354 $ 1,535,978 $ — $ 1,559,782 $ 1,855,902
(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 |
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Effective |
(5) | For the time-vested RSUs granted |
(6) | Pursuant to our award agreements with this executive the |
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 Following a Change-in- Control | 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) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 600,000 | $ | 600,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 175,278 | $ | 175,278 | ||||||||||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 230,244 | $ | 230,244 | $ | — | $ | — | $ | — | $ | 230,244 | ||||||||||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 600,000 | $ | — | $ | 3,000,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 631,396 | $ | — | $ | 3,000,000 | ||||||||||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 32,903 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 34,740 | ||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | — | $ | 535,938 | $ | 535,938 | $ | 95,745 | $ | — | $ | 709,447 | $ | 709,447 | $ | — | $ | — | $ | 838,822 | $ | 838,822 | $ | — | $ | — | $ | 361,706 | $ | 900,946 | ||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | 880,429 | $ | 880,429 | $ | 342,391 | $ | — | $ | 342,391 | $ | 342,391 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accelerated Performance RSUs (PRSUs) (6) | $ | — | $ | — | $ | 1,792,842 | $ | 1,792,842 | $ | 873,722 | $ | — | $ | 898,663 | $ | 1,058,022 |
(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 |
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Effective |
(5) | For the time-vested RSUs granted |
(6) | Pursuant to our award agreements with this executive the |
performance and are pro-rated based on the number of completed calendar days during the performance |
Summary of Termination Payments Steve Helmbrecht | Summary of Termination Payments Steve Helmbrecht | 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 | 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) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 327,557 | $ | 327,557 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 113,421 | $ | 113,421 | ||||||||||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 121,513 | $ | 121,513 | $ | — | $ | — | $ | — | $ | 121,513 | ||||||||||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 480,500 | $ | — | $ | 2,222,313 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 521,472 | $ | — | $ | 2,222,313 | ||||||||||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 48,335 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 51,512 | ||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | — | $ | 328,084 | $ | 328,084 | $ | 95,745 | $ | — | $ | 501,593 | $ | 501,593 | $ | — | $ | — | $ | 442,692 | $ | 442,692 | $ | — | $ | — | $ | 220,246 | $ | 504,816 | ||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | 464,679 | $ | 464,679 | $ | 180,711 | $ | — | $ | 180,711 | $ | 180,711 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accelerated Performance RSUs (PRSUs) (6) | $ | — | $ | — | $ | 377,015 | $ | 377,015 | $ | 271,558 | $ | — | $ | 474,282 | $ | 368,825 |
(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 |
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Effective |
(5) | For the time-vested RSUs granted |
(6) | Pursuant to our award agreements with this executive the |
Summary of Termination Payments Shannon Votava | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Termination Payments W. Mark Schmitz | Summary of Termination Payments W. Mark Schmitz | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 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) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 141,225 | $ | 141,225 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 24,990 | $ | 24,990 | ||||||||||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 19,271 | $ | 19,271 | $ | — | $ | — | $ | 22,996 | $ | 22,996 | $ | — | $ | — | $ | — | $ | 22,996 | ||||||||||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 350,000 | $ | — | $ | 1,050,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 481,396 | $ | — | $ | 1,968,750 | ||||||||||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 13,660 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 34,740 | ||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | — | $ | 101,172 | $ | 101,172 | $ | 3,356 | $ | — | $ | 154,907 | $ | 154,907 | $ | — | $ | — | $ | 195,338 | $ | 195,338 | $ | — | $ | — | $ | — | $ | 195,338 | ||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | 195,632 | $ | 195,632 | $ | 76,079 | $ | — | $ | 76,079 | $ | 76,079 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accelerated Performance RSUs (PRSUs) (6) | $ | — | $ | — | $ | 390,675 | $ | 390,675 | $ | 130,106 | $ | — | $ | — | $ | 130,106 |
(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) | 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 |
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Effective |
(5) | For the time-vested RSUs granted |
(6) | Pursuant to our award agreements with this executive the |
Summary of Termination Payments Russell Vanos | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Termination Payments Michel Cadieux | Summary of Termination Payments Michel Cadieux | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 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) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 198,900 | $ | 198,900 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 63,398 | $ | 63,398 | ||||||||||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 57,561 | $ | 57,561 | $ | — | $ | — | $ | — | $ | 57,561 | ||||||||||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 325,000 | $ | — | $ | 1,137,500 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 438,105 | $ | — | $ | 1,400,000 | ||||||||||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 38,925 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 41,209 | ||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | — | $ | 105,398 | $ | 105,398 | $ | 7,582 | $ | — | $ | 393,916 | $ | 393,916 | $ | — | $ | — | $ | 134,778 | $ | 134,778 | $ | — | $ | — | $ | — | $ | 134,778 | ||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | 195,632 | $ | 195,632 | $ | 76,079 | $ | — | $ | 76,079 | $ | 76,079 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accelerated Performance RSUs | $ | — | $ | — | $ | 269,599 | $ | 269,599 | $ | 89,784 | $ | — | $ | — | $ | 89,784 |
(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 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 |
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Effective |
(5) | For the time-vested RSUs granted |
(6) | Pursuant to our award agreements with this executive the |
Summary of Termination Payments Marcel Regnier | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Termination Payments Shannon Votava | Summary of Termination Payments Shannon Votava | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 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) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 272,830 | $ | 272,830 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 41,423 | $ | 41,423 | ||||||||||||||||||||||||||||||||
Accelerated Stock Options (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 51,163 | $ | 51,163 | $ | — | $ | — | $ | — | $ | 51,163 | ||||||||||||||||||||||||||||||||
Severance (4) | $ | — | $ | — | $ | 404,192 | $ | 404,192 | $ | — | $ | 404,192 | $ | — | $ | 1,768,340 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 374,486 | $ | — | $ | 1,050,000 | ||||||||||||||||||||||||||||||||
Benefit Continuation | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 16,360 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 13,972 | ||||||||||||||||||||||||||||||||
Accelerated RSUs (5) | $ | — | $ | — | $ | 378,877 | $ | 378,877 | $ | — | $ | — | $ | 621,367 | $ | 621,367 | $ | — | $ | — | $ | 186,372 | $ | 186,372 | $ | — | $ | — | $ | 88,513 | $ | 208,321 | ||||||||||||||||||||||||||||||||
Accelerated Long-Term Performance Plan Award (6) | $ | — | $ | — | $ | 415,750 | $ | 415,750 | $ | — | $ | — | $ | 161,681 | $ | 161,681 | ||||||||||||||||||||||||||||||||||||||||||||||||
Accelerated Performance RSUs (PRSUs) (6) | $ | — | $ | — | $ | 398,372 | $ | 398,372 | $ | 194,123 | $ | — | $ | 199,693 | $ | 235,102 |
(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) | 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 |
(3) | Represents in-the-money value of accelerated stock options based on the closing price of our common stock on December 31, |
(4) | Effective April 29, 2014, the Executive Officer Severance Pay Policy provides an executive officer, who is terminated involuntarily, a severance payment equal to 1 times base salary plus one year of |
(5) | For the time-vested RSUs granted |
(6) | Pursuant to our award agreements with this executive the |
20132014 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 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) (the PCAOB) 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, 20132014 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 PCAOB Auditing Standard No. 16,Communications with Audit Committees. |
(3) | The Audit/Finance Committee has received the written disclosures and the letter from the auditors required by applicable requirements of the PCAOB 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
Thomas S. Glanville, Chairman
Sharon M.L. Nelson
Gary E. Pruitt
Graham M. Wilson
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S AUDIT FEES AND SERVICES
For the years ended December 31, 20122013 and December 31, 2013,2014, professional services were performed by Ernst & Young LLP and their respective affiliates (collectively, EY). The aggregate fees billed by EY for the years ended December 31, 20122013 and 20132014 were as follows:
Services Rendered | 2012 | 2013 | 2013 | 2014 | ||||||||||||
Audit Fees (1) | $ | 7,335,200 | $ | 7,592,435 | $ | 7,592,435 | $ | 7,773,112 | ||||||||
Audit-Related Fees (2) | 39,852 | 4,331 | 4,331 | — | ||||||||||||
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Total Audit and Audit-Related Fees | 7,375,052 | 7,596,766 | 7,596,766 | 7,773,112 | ||||||||||||
Tax Fees (3) | 238,551 | 153,903 | 153,903 | 20,513 | ||||||||||||
Other Fees (4) | — | — | — | 1,995 | ||||||||||||
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Total Fees | $ | 7,613,603 | $ | 7,750,669 | $ | 7,750,669 | $ | 7,795,620 | ||||||||
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(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 a statutory certification for the year ended December 31, |
(3) | Tax services include fees for consultation and assistance with tax preparation and compliance during the years ended December 31, |
(4) | Services performed by EY qualifying as “Other” for the year ended December 31, 2014 related to accounting research tools. There were no services performed by EY qualifying as “Other” for the |
The Audit/Finance Committee has considered and concluded that the non-audit services provided to the Company by EY are compatible with maintainingdo not impair the auditors’ independence.
The Audit/Finance Committee has adopted policies and procedures 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 20122013 and 2013,2014, 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, 2013.2014.
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) | 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) | 1,837,453 | $ | 54.79 | (2) | 1,253,457 | (3) | 1,790,664 | $ | 51.90 | (2) | 4,119,289 | (3) | ||||||||||||
Equity Compensation Plans Not Approved by Shareholders | — | — | — | — | — | — | ||||||||||||||||||
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Total | 1,837,453 | $ | 54.79 | (2) | 1,253,457 | (3) | 1,790,664 | $ | 51.90 | (2) | 4,119,289 | (3) | ||||||||||||
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(1) | Under the provisions of the Itron Amended and Restated 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 |
(3) | This number includes |
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 25, 2014March 4, 2015 by:
¡ | each of our directors; |
¡ | each of our executive officers for whom compensation is reported in this proxy statement; |
¡ | all of our directors and executive officers as a group; and |
¡ | each person that we know beneficially owns more than 5% of our common stock. |
The percentage ownership data is based on 39,324,20338,533,900 shares of our common stock outstanding as of February 25, 2014.March 4, 2015. 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 | ||||||||
Name | Number | Percent | ||||||
Directors and Executive Officers: | ||||||||
Philip C. Mezey (1) | 222,653 | * | ||||||
Steven M. Helmbrecht (2) | 155,459 | * | ||||||
John W. Holleran (3) | 156,113 | * | ||||||
Marcel Regnier (4) | 65,415 | * | ||||||
Russell E. Vanos (5) | 20,009 | * | ||||||
Shannon M. Votava (6) | 18,575 | * | ||||||
Kirby A. Dyess (7) | 19,878 | * | ||||||
Jon E. Eliassen (8) | 24,801 | * | ||||||
Charles H. Gaylord, Jr. (9) | 19,357 | * | ||||||
Thomas S. Glanville (10) | 30,040 | * | ||||||
Sharon L. Nelson (11) | 18,012 | * | ||||||
Gary E. Pruitt (12) | 21,329 | * | ||||||
Michael V. Pulli | 1,414 | * | ||||||
Graham M. Wilson (13) | 21,687 | * | ||||||
Lynda L. Ziegler | 3,495 | * | ||||||
All directors and executive officers as a group (16 persons) (14) | 801,424 | 2.02 | % | |||||
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Greater-Than-5% Shareholders: | ||||||||
Fairpointe Capital LLC (15) 1 N. Franklin Ste. 3300 Chicago, IL 60606 | 4,343,310 | 11.10 | % | |||||
BlackRock, Inc. (16) 40 East 52nd Street New York, NY 10022 | 3,942,763 | 10.1 | % | |||||
Capital Research Global Investors (17) 333 South Hope St. Los Angeles, CA 90071 | 3,630,314 | 9.3 | % | |||||
Norges Bank (Bank of Norway) (18) Bankplassen 2 PO Box 1179 Sentrum NO 0107 Oslo Norway | 2,565,439 | 6.55 | % | |||||
Vanguard Group (19) 100 Vanguard Blvd. Malvern, PA 19355 | 2,124,928 | 5.42 | % |
Shares Beneficially Owned | ||||||||
Name | Number | Percent | ||||||
Directors and Executive Officers: | ||||||||
Philip C. Mezey (1) | 325,355 | * | ||||||
W. Mark Schmitz (2) | 11,703 | * | ||||||
John W. Holleran (3) | 190,078 | * | ||||||
Michel C. Cadieux (4) | 11,242 | * | ||||||
Shannon M. Votava (5) | 30,687 | * | ||||||
Kirby A. Dyess (6) | 21,823 | * | ||||||
Jon E. Eliassen (7) | 24,636 | * | ||||||
Charles H. Gaylord, Jr. (8) | 21,899 | * | ||||||
Thomas S. Glanville (9) | 30,022 | * | ||||||
Timothy M. Leyden (10) | 1,088 | * | ||||||
Sharon L. Nelson (11) | 17,457 | * | ||||||
Daniel S. Pelino (12) | 1,809 | * | ||||||
Gary E. Pruitt (13) | 23,871 | * | ||||||
Graham M. Wilson (14) | 21,132 | * | ||||||
Lynda L. Ziegler (15) | 6,037 | * | ||||||
All directors and executive officers as a group (16 persons) (16) | 758,100 | 1.95 | % | |||||
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Greater-Than-5% Beneficial Owners: | ||||||||
Fairpointe Capital LLC (17) 1 N. Franklin Ste. 3300 Chicago, IL 60606 | 4,196,799 | 10.74 | % | |||||
BlackRock, Inc. (18) 40 East 52nd Street New York, NY 10022 | 3,752,447 | 9.6 | % | |||||
Harris Associates L.P. (19) 111 South Wacker Drive, Suite 4600 Chicago, IL 60606 | 3.015,500 | 7.7 | % | |||||
Norges Bank (Bank of Norway) (20) Bankplassen 2 PO Box 1179 Sentrum NO 0107 Oslo Norway | 2,469,378 | 6.32 | % | |||||
Vanguard Group (21) 100 Vanguard Blvd. Malvern, PA 19355 | 2,219,121 | 5.68 | % |
* | Less than 1%. |
(1) | Includes |
(2) | Represents shares owned as of the record date. |
(3) | Includes |
Includes |
(5) | Includes 20,806 shares issuable on exercise of outstanding options exercisable within 60 days at a weighted average exercise price of |
(6) |
Includes 9,099 shares issuable on exercise of outstanding options exercisable within 60 days at a weighted average exercise price of $69.13 per share. |
Includes |
Includes 8,486 shares issuable on exercise of outstanding options exercisable within 60 days at a weighted average exercise price of $70.92 per share. Also includes 2,000 shares held in |
Includes 7,212 shares issuable on exercise of outstanding options exercisable within 60 days at a weighted average exercise price of $54.75 per share. |
(10) | Represents shares owned as of the record date. |
(11) | Includes 3,486 shares issuable on exercise of outstanding options exercisable within 60 days at a weighted average exercise price of $70.81 per share. |
(12) | Represents shares owned as of the record date. |
(13) | Includes 8,486 shares issuable on exercise of outstanding options exercisable within 60 days at a weighted average exercise price of $61.97 per share. |
(14) | Includes 5,986 shares issuable on exercise of outstanding options exercisable within 60 days at a weighted average exercise price of $56.86 per share. |
Represents shares |
Includes |
Information is based on Amendment No. |
Information is based on Amendment No. |
Information is based on a Schedule 13G filed with the SEC on February |
(20) | Information is based on Amendment No. 4 to a Schedule 13G filed with the SEC on February 13, 2015 reporting beneficial ownership as of December 31, 2014. The Schedule 13G indicates that Norges Bank has sole voting power over all of these shares, and sole dispositive power over |
Information is based on Amendment No. 2 to a Schedule 13G filed with the SEC on February |
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% 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 20132014 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 20132014 Annual Report to Shareholders, which includes our financial statements for the year ended December 31, 2013,2014, accompanies this proxy statement. In addition, you may view the Annual Report and this proxy statement on our Company website, www.itron.com, by selecting “About Itron”, “Investors” and then “Investor Relations”.
SHAREHOLDER PROPOSALS FOR 20152016
Under the SEC’s proxy rules, shareholder proposals that meet specified conditions must be included in our proxy statement and proxy for the 20152016 annual meeting. Under Exchange Act Rules 14a-5(e) and 14a-8(e), shareholders that intend to present a proposal at our 20152016 annual meeting must give us written notice of the proposal not later than November 20, 201427, 2015 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 20152016 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 1, 20158, 2016 and no sooner than January 2, 2015,9, 2016, assuming the annual meeting is held on May 1, 2015.8, 2016. 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 20152016 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 “About Itron”, “Investors” and then “Investor Relations —– Financial Information”. Shareholders mustmay submit a request for printed copies bye-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
ITRON, INC.
AMENDED AND RESTATED 2010 STOCK INCENTIVE PLAN
Approved by the Board of Directors on February 21, 2014
Approved by the Shareholders on [—], 2014Itron, Inc.
SECTION 1. PURPOSE
The purpose of the Itron, Inc. Amended and Restated 2010 StockExecutive Management Incentive Plan (the “Plan”) is to enhance the long-term shareholder value of
Effective January 1, 2010
(as amended and restated May , 2015)
1. Establishment, Purpose, Duration.
Itron Inc., a Washington corporation, (the “Company”and any successor thereto (“Company”), by offering opportunitieshereby establishes an incentive compensation plan to selected personsbe known as the “Itron, Inc. Executive Management Incentive Plan,” as amended from time to participate intime (the “Plan”).
The purpose of the Plan is to enhance the Company’s growthability to attract and success,retain highly qualified executives and to encourage themprovide such executives with additional financial incentives to remain inpromote the servicesuccess of the Company and its Related CorporationsAffiliates (as defined in Section 2)below). Awards (as defined below) payable under the Plan are intended to constitute Qualified Performance-Based Compensation (as defined below), and to acquirethe Plan shall be construed consistently with such intention.
The Plan became effective for Performance Periods (as defined below) beginning on or after January 1, 2010. The amendment and maintain stock ownership in the Company.
SECTION 2. DEFINITIONS
For purposesrestatement of the Plan shall become effective with respect to Awards granted following the 2015 Annual Meeting of Shareholders if the Plan is approved by the stockholders of the Company at the annual meeting. The Plan shall remain in effect until such time as it shall be terminated by the Board or the Committee (as these terms are defined below), pursuant to Section 10 herein. The Plan shall be subject to reapproval by the stockholders of the Company not later than the first stockholder meeting that occurs in the fifth year following the year in which the stockholders last approved the Plan, as required under the Treasury Regulations pursuant to Section 162(m). In the event that the Plan is not so reapproved, no Award that is granted after the date contemplated by the foregoing sentence and that is intended to constitute Qualified Performance-Based Compensation shall become payable.
2. Definitions.
The following terms, when capitalized, shall be defined ashave the meanings set forth below:
(a) | “Affiliate” means any entity (a) in which the Company has a significant equity interest, or (b) that directly or through one or more intermediaries is controlled by the Company, in each case, as determined by the Committee. |
(b) | “Award” means a right to receive cash or Shares pursuant to Section 7 hereof. |
(c) | “Board” means the Board of Directors of the Company. |
(d) | “Code” means the Internal Revenue Code of 1986, as amended. |
(e) | “Committee” means the Committee specified in Section 3(a). |
(f) | “Company” has the meaning assigned to it in Section 1 hereof. |
(g) | “
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(h) | “GAAP” shall |
“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.
(i) | “Participant” means
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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 (“
(j) | “
return on capital, return on investment, return on operating revenue, return on equity or average |
(k) | “Performance Goal” means, for a Performance Period, the goals |
(l) | “Performance Period” means one or more periods of time, |
(m) | “Plan” has the meaning assigned to it in Section 1 hereof. |
(n) | “Qualified Performance-Based Compensation” means any compensation that is intended to constitute “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code. |
(o) | “Section 162(m)” means Section 162(m) of the Code |
(c) Notwithstanding any provision of the Plan other than
(p) | “Section
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(q) | “Share” means a share of common stock, no par value, of the Company. |
3. Administration of the Plan.
(a) | The Committee. The Plan shall be administered by the Compensation Committee of the Board or such other committee (the “Committee”) as the Board shall select consisting of two or more members of the Board each of whom shall be determined by the Board to be an “outside director” under Section 162(m)(4)(C) of the Code. |
(b) | Authority of the Committee. Subject to applicable laws and provisions of the Plan (including any other powers given to the Committee hereunder), and except as otherwise provided by the Board, the |
Committee shall have full power and authority in its discretion to establish rules and take all actions, including, without limitation,
|
(c) | Effect of Committee’s Decision. All decisions, determinations and
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4. Eligibility.
Eligibility for Awards granted under this Plan is limited to Participants.
5. Form of Payment of Awards.
Payment of Awards under the Plan shall be made or denominated 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 2010 Stock Incentive Plan (or any successor stock incentive plan approved by the stockholders of the Company).
7. Awards.
(a)Selection of Participants and Designation of Performance Period and Terms of Award. Within 90 days after the beginning of each Performance Period or, if less than 90 days, the number of days which is equal to twenty-five percent (25%) of the relevant Performance Period applicable to an Award, the Committee shall, in writing, (i) designate the applicable Performance Period, (ii) specify the applicable Performance Goals for the Performance Period and define in an objective fashion the manner of determining at the end of the Performance Period whether and to what extent the specified Performance Goal(s) has been attained for the Performance Period, (iii) to the extent the Committee elects not to determine attainment of the Performance Goal in accordance with GAAP or in the event determination of attainment in accordance with GAAP would not satisfy the requirements of Section 162(m), specify any one or more objectively determinable adjustments that will be made to one or more of the Performance Goals in accordance with Section 7(b) hereof, (iv) specify the target amount of the Award and maximum amount of the Award, if any, for each Participant, including, without limitation, as a percent of base salary or other base amount, or based on other payout formulae, (v) specify the intended form of payment and payment denomination of the Award, and (vi) specify any other terms and conditions for the determination and payment of the Award for each Participant for such Performance Period, including, without limitation, the extent to which the Participant shall have the right to receive an Award following termination of the Participant’s employment in a manner compliant with Code Section 409A.
(b)Adjustments to Performance Goals. For each Award, the Committee, in its discretion, may, at the time of grant, specify in the document evidencing the Award that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include or exclude, without limitation, one or more of the following: items that are extraordinary or unusual in nature or infrequent in occurrence, including one-time or non-recurring items; items related to a change in accounting principles under GAAP; items related to changes in law or regulatory requirements; items related to financing activities; expenses for restructuring or productivity initiatives; other non-operating items; items related to acquisitions, including transaction-related charges and amortization; items attributable to the business operations of any entity acquired by the Company during the Performance Period; items related to the disposal of a business or segment of a business; items related to discontinued operations that do not qualify as a segment of a business under GAAP;
expenses related to natural disasters; litigation related expenses; taxes; stock-based compensation; non-cash items; and any other items of significant income or expense which are determined to be appropriate adjustments.
(c)Maximum Award. The maximum Award that may be paid to any Participant with regard to any fiscal year shall not exceed $3,000,000. For purposes of this Section 7(c), if the Award is denominated in a dollar amount, payments made in Shares shall count against the maximum Award limit based on the Fair Market Value of such shares on the date the Award is paid, and if the Award is denominated in Shares, payments made in Shares shall count against the maximum Award limit based on the Fair Market Value of such shares on the date the Award is granted.
(d)Committee’s Negative Discretion. In determining the amount payable to a Participant under an Award, the Committee has the sole discretion to reduce or eliminate (but not to increase) the amount otherwise payable to any Participant pursuant to any Award notwithstanding the achievement of the Performance Goal(s) to take into account recommendations of the Chief Executive Officer of the Company and such additional factors, if any, that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period, subject in all cases to the terms, conditions and limits of the Plan. For the avoidance of any doubt, in no event shall any such reduction or elimination of the amount payable under an Award contemplated in the foregoing sentence increase the amount payable under an Award and the Committee may not increase the maximum amount permitted to be paid to any Participant under Section 7(c) of the Plan for any Performance Period.
8. Committee Certification and Payment of Awards.
(a)Certification. 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 Goals 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 Affiliates 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).
(b)Payment. An Award shall be paid to a Participant following the certification by the Committee required under this Section 8 and, unless otherwise determined by the Committee and set forth in the document evidencing the Award, by a date that is no later than 90 days following the last day of the Performance Period with respect to which the Award relates or March 15 of the year following the calendar 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 an Affiliate), 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, as determined in the sole discretion of the Committee, 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 and no action of the Board or the Committee may modify the Performance Goals (or adjustments) applicable to any outstanding Award, to the extent such modification would cause the Award to fail to constitute 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 or an Affiliate, nor shall it interfere in any way with his or her right or the right of the Company or an Affiliate (if any) to terminate a Participant’s 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, or in the event of the Participant’s death, payment shall be made to the Participant’s estate.
13. Clawback/Recovery
All Awards granted under the Plan will be subject to recoupment under the Company’s current Clawback Policy or under any other clawback policy that the Company may be required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Committee may impose such other clawback, recovery or recoupment provisions on an Award as the Committee determines necessary or appropriate, including, but not limited to, a reacquisition right in respect of cash payments or Shares previously made under the Plan or other property upon the occurrence of cause (as determined by the Committee).
14. General.
(a)Gender, Number and References. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural. Any reference in the Plan to a Section of the Plan either in the Plan or to an act or code or to any section thereof or rule or regulation thereunder shall be deemed to refer to such Section of the Plan, act, code, section, rule or regulation, as may be amended from time to time, or to any successor Section of the Plan, act, code, section, rule or regulation.
(b)Severability. If any one or more of the provisions contained in this Plan, or any application thereof, shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and all other applications thereof shall not in any way be affected or impaired thereby. This Plan shall be construed and enforced as if such invalid, illegal or unenforceable provision has never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the invalid, illegal or unenforceable provision or by its severance herefrom. In lieu of such invalid, illegal or unenforceable provisions there shall be added automatically as a part hereof a provision as similar in terms and economic effect to such invalid, illegal or unenforceable provision as may be possible and be valid, legal and enforceable. Notwithstanding anything to the contrary herein, if any provision of the Plan would cause Awards not to constitute Qualified Performance-Based Compensation, that provision shall be severed from, and shall be deemed not to be a part of, the Plan, but, subject to this Section 14(b), the other provisions of the Plan shall thereafter remain in full force and effect.
(c)Requirements of Law. The granting of Awards and issuance of cash or Shares under the Plan shall be subject to all applicable laws and to such approvals by governmental agencies or national securities exchanges as may be required.
(d)Participants in Non-US Jurisdictions. To facilitate compliance with the laws in non-U.S. jurisdictions and/or to take advantage of specific tax treatment for Awards granted to Participants in such jurisdictions, the Committee shall have the power and authority to: (i) establish sub-plans and/or modify the terms and conditions of any Award, to the extent such actions may be necessary or desirable, including adoption of rules, procedures or sub-plans applicable to particular Affiliates or Participants residing in particular locations, and (ii) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the U.S. Securities Act of 1933, as amended, the U.S. Securities Exchange Act of 1933, as amended, the Code, or any other securities law or governing statute or any other law applicable to the Awards or Shares or that would cause an Award to no longer be Qualified Performance-Based Compensation.
(e)Unfunded Plan. The Company shall have no obligation to reserve or otherwise fund in advance any Award that is or may in the future become payable under the Plan. Awards under the Plan will be paid from the general assets of the Company, and the rights of Participants under the Plan will be only those of general unsecured creditors of the Company.
(f)Governing Law. To the extent not preempted by federal law, the Plan shall be construed in accordance with and governed by the laws of the State of Washington, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
(g)Non-Exclusive Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable. Awards under the Plan shall not constitute compensation for the purpose of determining benefits under any other plan of the Company unless expressly included in compensation under the terms of such other plans. To the extent consistent with the requirements of Section 162(m), nothing contained in the Plan shall limit the Company’s ability to make payments or awards to Participants under any other plan, program or agreement.
(h)Code Section 409A Compliance. The parties intend that the Plan be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), or otherwise. To the extent Section 409A is applicable to the Plan, the parties intend that the terms of the Plan comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Plan to the contrary, the Plan shall be interpreted, operated and administered in a manner consistent with the foregoing intentions to the extent the Committee deems necessary or advisable to comply with the requirements of Section 409A. The Plan shall be deemed to be amended, and any deferrals and distributions hereunder shall be deemed to be modified, to the extent permitted by and necessary to comply with Section 409A and to avoid or mitigate the imposition of additional taxes under Section 409A. Notwithstanding the foregoing, no provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with Section 409A from a Participant or any other individual to the Company or any of its affiliates.
101414CP-01
Itron, Inc. | ||||||||||||||
IMPORTANT ANNUAL MEETING INFORMATION | ||||||||||||||
Electronic Voting Instructions | ||||||||||||||
Available 24 hours a day, 7 days a week! | ||||||||||||||
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. | ||||||||||||||
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | ||||||||||||||
Proxies submitted by the Internet or telephone must be received by 11:59 PM, Eastern Time, on | ||||||||||||||
Vote by Internet | ||||||||||||||
• Go towww.envisionreports.com/ITRI | ||||||||||||||
• Or scan the QR code with your smartphone | ||||||||||||||
• Follow the steps outlined on the secure website | ||||||||||||||
Vote by telephone | ||||||||||||||
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone | ||||||||||||||
x | • Follow the instructions provided by the recorded message | |||||||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.
|
qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q |
A | Proposals — The Board of Directors recommends a voteFOR all the nominees |
1. Election of Directors: | For | Against | Abstain | For | Against | Abstain | + | |||||||||||||||||||
1.1 - Kirby A. Dyess | ¨ | ¨ | ¨ | 1.2 - Philip C. Mezey | ¨ | ¨ | ¨ | |||||||||||||||||||
1.3 - Daniel S. Pelino | ¨ | ¨ | ¨ | 1.4 - Timothy M. Leyden | ¨ | ¨ | ¨ |
The Board of Directors recommends a voteFOR Proposals 2, 3, and 4, all of which are |
For
| Against
| Abstain
| ||||||||||||||||
2. Proposal to | ¨ | ¨ | ¨ | |||||||||||||||
3. Proposal to approve the advisory (non-binding) resolution relating to executive compensation. | ¨ | ¨ | ¨ | |||||||||||||||
4. Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for | ¨ | ¨ | ¨ |
B | Non-Voting Items |
Change of Address — Please print your new address below. | Comments— Please print your comments below. | Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. | ¨ | |||||
C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |
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.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
/ / |
01ZEVC |
Important Notice regarding Internet availability of proxy materials for the Shareholder Meeting to be held on May The Proxy Statement and the Annual Report to security holders are available at: http://www.envisionreports.com/ITRI |
qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q |
|
This Proxy is Solicited by Itron’s Board of Directors for the Annual Meeting of Shareholders to be held on May |
The undersigned hereby appoint(s) Philip C. Mezey and Shannon M. Votava 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 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. |
(Continued and to be marked, dated and signed, on the other side)
Itron, Inc. | ||||||||||||||
IMPORTANT ANNUAL MEETING INFORMATION | ||||||||||||||
x | ||||||||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. |
qPLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q |
A | Proposals — The Board of Directors recommends a voteFOR all the nominees |
1. Election of Directors: | For | Against | Abstain | For | Against | Abstain | + | |||||||||||||||||||
1.1 - Kirby A. Dyess | ¨ | ¨ | ¨ | 1.2 - Philip C. Mezey | ¨ | ¨ | ¨ | |||||||||||||||||||
1.3 - Daniel S. Pelino | ¨ | ¨ | ¨ | 1.4 - Timothy M. Leyden | ¨ | ¨ | ¨ |
The Board of Directors recommends a voteFOR Proposals 2, 3, and |
For
| Against
| Abstain
| ||||||||||||||||
2. Proposal to | ¨ | ¨ | ¨ | |||||||||||||||
3. Proposal to approve the advisory (non-binding) resolution relating to executive compensation. | ¨ | ¨ | ¨ | |||||||||||||||
4. Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for | ¨ | ¨ | ¨ |
B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |
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.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
/ / |
Important Notice regarding Internet availability of proxy materials for the Shareholder Meeting to be held on May The Proxy Statement and the Annual Report to security holders are available at: http://www.edocumentview.com/ITRI |
qPLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q |
This Proxy is Solicited by Itron’s Board of Directors for the Annual Meeting of Shareholders to be held on May |
The undersigned hereby appoint(s) Philip C. Mezey and Shannon M. Votava 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 of Itron to be held at The Davenport Hotel in the Porter Room, at 10 South Post Street, Spokane, Washington 99201, at 8:00 a.m., local time, on Friday, May 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. |
(Continued and to be marked, dated and signed, on the other side)
Itron, Inc. | ||||||||||||||
IMPORTANT ANNUAL MEETING INFORMATION | ||||||||||||||
Electronic Voting Instructions | ||||||||||||||
Available 24 hours a day, 7 days a week! | ||||||||||||||
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. | ||||||||||||||
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | ||||||||||||||
Proxies submitted by the Internet or telephone must be received by 11:59 PM, Eastern Time, on | ||||||||||||||
Vote by Internet | ||||||||||||||
• Go towww.envisionreports.com/ITRI | ||||||||||||||
• Or scan the QR code with your smartphone | ||||||||||||||
• Follow the steps outlined on the secure website | ||||||||||||||
Vote by telephone | ||||||||||||||
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone | ||||||||||||||
x | • Follow the instructions provided by the recorded message | |||||||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.
|
qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q |
A | Proposals — The Board of Directors recommends a voteFOR all the nominees |
1. Election of Directors: | For | Against | Abstain | For | Against | Abstain | + | |||||||||||||||||||
1.1 - Kirby A. Dyess | ¨ | ¨ | ¨ | 1.2 - Philip C. Mezey | ¨ | ¨ | ¨ | |||||||||||||||||||
1.3 - Daniel S. Pelino | ¨ | ¨ | ¨ | 1.4 - Timothy M. Leyden | ¨ | ¨ | ¨ |
The Board of Directors recommends a voteFOR Proposals 2, 3, and 4, all of which are |
For
| Against
| Abstain
| ||||||||||||||||
2. Proposal to | ¨ | ¨ | ¨ | |||||||||||||||
3. Proposal to approve the advisory (non-binding) resolution relating to executive compensation. | ¨ | ¨ | ¨ | |||||||||||||||
4. Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for | ¨ | ¨ | ¨ |
B | Non-Voting Items |
Change of Address — Please print your new address below. | Comments— Please print your comments below. | Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. | ¨ | |||||
C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |
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.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
/ / |
01ZEYC
Important Notice regarding Internet availability of proxy materials for the Shareholder Meeting to be held on May The Proxy Statement and the Annual Report to security holders are available at: http://www.envisionreports.com/ITRI |
qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q |
Annual Meeting May 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 Fidelity Management Trust Company |
(Continued and to be marked, dated and signed, on the other side)