Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Employment Agreement”) is entered into as of
the 16th day of March, 2015, with respect to an employment start date of March
30, 2015 (the “Effective Date”), by and between Stoneridge, Inc., an Ohio
corporation (the “Company”), and Jonathan DeGaynor (the “Executive”).

 

Recital

 

The Company desires to employ the Executive, and the Executive desires to be
employed by the Company, on the terms and subject to the conditions set forth
herein.

 

Agreements

 

NOW, THEREFORE, in consideration of the mutual promises and mutual covenants
herein contained and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, the parties agree as follows:

 

1.Employment.

 

A.          The Company hereby employs the Executive as its President and Chief
Executive Officer and the Executive hereby accepts such employment for the Term
(as defined below), in the positions and with the duties and responsibilities
set forth herein, all subject to the terms and conditions hereinafter set forth.
The Executive shall be located at the Company’s Warren, Ohio corporate
headquarters.

 

B.          The term of Executive’s employment and the term of this Employment
Agreement (the “Term”) shall commence as of the Effective Date and shall
continue until terminated in accordance with, and subject to, the terms and
condition of this Employment Agreement. During the Term (all references herein
to the Term of this Employment Agreement shall include references to the period
of renewal hereof, unless properly and timely not renewed under Section 2.A.),
the Executive shall be and have the title of President and Chief Executive
Officer and shall devote his full working time, attention, energy and all
reasonable efforts to his employment and to the affairs of the Company, its
subsidiaries and divisions, and perform faithfully and diligently his duties
hereunder and such duties as are customarily performed by Presidents and Chief
Executive Officers of companies similar in size to the Company or whose equity
securities are listed on the New York Stock Exchange, together with such other
duties as may be reasonably requested from time to time by the Board of
Directors of the Company (the “Board”), which duties shall be consistent with
his positions as set forth above and as provided in Section 2. To the extent
such policies, procedures and practices do not conflict with this Employment
Agreement the Executive agrees to comply with and be bound by the Company’s
operational policies, procedures and practices from time to time in effect
during the Term.

 

C.          The Executive shall obtain Board approval before serving as an
outside director of any other company. This Employment Agreement shall not be
construed as preventing the Executive from investing his assets in such form or
manner as will not require a material amount of his time, in each case subject
to the confidentiality, non-competition and non-solicitation obligations
contained in Section 5 below.

 

 

 

 

2.Term and Positions.

 

A.          Subject to the provisions for renewal and termination hereinafter
provided, (i) the Term shall begin on the Effective Date shall continue until
December 31, 2016 and (ii) provided if the Executive is less than 65 years old
as of the first day of each succeeding calendar year after December 31, 2016,
the Term automatically shall be extended for successive additional calendar year
periods, beginning with the calendar year commencing January 1, 2017 and
continuing on each January 1 thereafter; provided, however, upon the occurrence
of a Change in Control (as defined below), the Term shall automatically extend
until December 31 of the fourth year after the occurrence of the Change in
Control. This Employment Agreement and the Executive’s employment may be
terminated at any time as provided in Section 4. This Employment Agreement and
Executive’s employment may also be terminated by either the Executive or the
Company at the end of the then current Term upon written notice of non-renewal
of this Employment Agreement given to the other party at least 90 days before
the end of the then current Term, with the provisions of Section 4 applying to
such non-renewal. Upon any termination, the Executive shall be deemed to have
ceased serving in all offices and directorships held by the Executive or the
Company or its subsidiaries.

 

B.          The Executive shall be entitled to serve as the President and Chief
Executive Officer of the Company. Without limiting the generality of any of the
foregoing, except as hereafter expressly agreed in writing by the Executive: (i)
the Executive shall not be required to report to any single individual and shall
report only to the Board as an entire body, (ii) no other individual shall be
elected or appointed as President or Chief Executive Officer of the Company,
(iii) the other senior executive officers of the Company, with the exception of
the Director of Internal Audit, shall report to no individual other than the
Executive, and (iv) no individual or group of individuals (including a committee
established or other designee appointed by the Board) shall have any authority
over or equal to the authority of the Executive in his role as President and
Chief Executive Officer, and neither the Company, the Board, nor any member of
the Board shall take any action which will or could have the effect of, or
appear to have the effect of, giving such authority to any such individual or
group. For service as a director, officer and employee of the Company, the
Executive shall be entitled to the fullest indemnification permitted by law,
including the full protection of the applicable indemnification provisions of
the articles of incorporation and code of regulations of the Company, as the
same may be amended from time to time. The Company and Executive have,
contemporaneously herewith, executed an Indemnification Agreement (the
“Indemnification Agreement”) and the Company agrees that notwithstanding
anything to the contrary contained in the Indemnification Agreement, the Company
shall maintain in full force and effect D&O insurance similar in amount and
terms as its peers during the Term and for four (4) years thereafter.

 

C.          At all times during the term of his employment hereunder, the
Executive shall be entitled to nominate himself for election to the Board and
the Company shall take all actions required for the Executive to be elected to
the Board at the first Annual Meeting of Shareholders following Executive’s
employment and at all subsequent Annual Meetings of Shareholders during the
Term.

 

 

 

 

3.Compensation and Benefits.

 

During the Term of this Employment Agreement the Company shall pay or provide,
as the case may be, to the Executive the compensation and other benefits and
rights set forth in this Section 3.

 

A.          The Company shall pay to the Executive a base salary payable in
accordance with the Company’s usual pay practices (and in any event no less
frequently than monthly) of not less than Five Hundred Thousand Dollars
($500,000) per annum. The Executive will be eligible for a merit increase on a
standard cycle beginning in 2016.

 

B.          For the Company’s 2015 fiscal year and each subsequent fiscal year
during the Term, the Executive shall participate in the Company’s Annual
Incentive Plan (the “AIP”), in effect at the time and approved by the
Compensation Committee of the Board (the “Committee”), at a threshold equal to
at least fifty percent (50%) of base salary, a target equal to one hundred
percent (100%) of base salary and a maximum equal to at least two hundred
percent (200%) of base salary; provided, however, notwithstanding the 2015
fiscal year target, the Company shall pay to the Executive or his estate, as
applicable, incentive or bonus compensation under the AIP for the 2015 fiscal
year of not less than fifty percent (50%) of base salary actually paid (the
“prorated incentive”) and the payment of the prorated incentive may be made on
or before December 31, 2015 at the Company’s discretion. If the prorated
incentive is not paid in 2015 the Company shall pay to the Executive incentive
or bonus compensation for the Company’s 2015 fiscal year (including any amount
earned above the prorated incentive if the prorated incentive has been paid in
2015) not later than March 15 following the end of the fiscal year; provided,
however, if the Executive’s employment and this Employment Agreement is
terminated for “Cause” the Executive shall not be entitled to be paid any
incentive or bonus compensation.

 

C.          For the Company’s 2016 fiscal year and fiscal years thereafter, the
Company shall pay, if earned, to the Executive bonus or incentive compensation
each fiscal year of the Company, not later than March 15 following the end of
each fiscal year. In the event the Executive’s employment is terminated other
than for “Cause” or the Executive resigns for “Good Reason” or in the event of
Executive’s death or Permanent Disability, the Executive shall be eligible for
incentive or bonus compensation, if any, prorated on a per diem basis for
partial fiscal years. If the Executive’s employment is terminated for “Cause”
the Executive shall not be entitled to be paid any incentive or bonus
compensation. Executive’s annual incentive or bonus compensation entitlement for
each of the fiscal years during the Term generally shall be pursuant to the
terms of the AIP, in effect at the time, at the target level approved by the
Committee, or in accordance with a formula or other bonus plan established by
the Committee for such fiscal year; provided, however, that with respect only to
termination of employment by reason of death, permanent disability, or
termination of employment other than for “Cause” or resignation for “Good
Reason,” and provided that such termination occurs more than six months after
the beginning of the then current fiscal year, then the Executive (or his
beneficiary) shall also be entitled to a pro-rated annual bonus based upon the
proportion of the fiscal year during which the Executive was actively employed,
but payable only if and when the annual bonus would have been paid if no
termination had occurred. Other than for the 2015 fiscal year as provided for in
Section 3(B) nothing in this Employment Agreement guarantees that the Executive
shall be paid incentive or bonus compensation; provided, however, the Executive
shall be entitled to participate in the AIP or other incentive compensation
plans, if any, if approved by the Committee for the Company’s management
employees.

 

 

 

 

D.          The Company shall provide to the Executive such health insurance for
himself, his spouse and eligible dependents, as offered to the Company’s senior
executive officers, and shall provide such other employee welfare benefits such
as life and long-term disability as offered to the Company’s senior executive
officers. The Company shall provide the Executive with an annual executive
physical.

 

E.          The Executive shall be entitled to participate in all retirement and
other benefit plans, including 401(k) plans, of the Company generally available
from time to time to employees of the Company and for which the Executive
qualifies under the terms thereof (and nothing in this Employment Agreement
shall or shall be deemed to in any way effect the Executive’s right and benefits
thereunder except as expressly provided herein).

 

F.          The Company shall pay the Executive, each month, a monthly
automobile allowance of Twelve Hundred Dollars ($1,200.00) to pay for the costs
associated with the Executive’s transportation expenses.

 

G.          The Executive shall be entitled to such vacation with pay during
each year of his employment hereunder consistent with the policies of the
Company, but in no event less than four (4) weeks in any such calendar year
(pro-rated as necessary for partial calendar years during the Term); provided,
however, that the vacation days taken do not interfere with the operations of
the Company. Such vacation may be taken, in the Executive’s discretion, at such
time or times as are not inconsistent with the reasonable business needs of the
Company. Unused vacation time shall not be carried over to another year. The
Executive shall not be entitled to any compensation in lieu of vacation in the
event that the Executive, for whatever reason, including termination of
employment, fails to take such vacation during any year of his employment
hereunder. The Executive shall also be entitled to all paid holidays given by
the Company to its executive officers.

 

H.          The Executive shall be entitled to participate in any equity or
other employee benefit plan, including the Company’s Long-Term Incentive Plan
(the “Plan”) that is generally available to executive officers. The Executive’s
participation in and benefits under any such plan shall be on the terms and
subject to the conditions specified in the governing document of the particular
plan. Upon execution of this Agreement, the Executive shall be awarded, for
2015, a grant pursuant to the Plan. The terms of such awards are set forth in
the Award Agreement attached hereto as Appendix A, which award agreement will be
issued and signed by the Company on March 30, 2015 with the blanks completed
such that 45% of the award will be time based and 55% will be performance based
(with 35% based on the three year annual EPS and 20% based on cumulative three
year relative total shareholder return) and the value of the award will be
$750,000 on the grant date. Thereafter, grants or awards made under any such
plan, if any, shall be made at the discretion of the Committee, the Board or
such other appropriate committee of the Board, as determined appropriate
annually.

 

 

 

 

I.          Upon execution of this Agreement the Executive shall awarded a
one-time special grant pursuant to the terms of the Plan. The terms of such
awards are set forth in the Award Agreement attached hereto as Appendix B, which
award agreement will be issued and signed by the Company on March 30, 2015 with
the blanks completed such that 50% of the award will be time based and 50% will
be performance based (with 35% based on the three year annual EPS and 15% based
on cumulative three year relative total shareholder return), the value of the
award on the grant date will be $1,000,000 and the time based portion will vest
50% in two years and 50% in three years and the performance based portion will
vest in three years.

 

J.          The Company shall provide the Executive with the Company’s standard
relocation benefits for senior executive offers in connection with the
Executive’s relocation to the Warren, Ohio area. If not already provided for
pursuant to the Company’s standard relocation benefits for senior executive
officers, the Company shall pay up to One Hundred Thousand Dollars ($100,000)
for reasonable relocation costs within 18 months from employment date, including
payment or reimbursement for: (i) transportation for the Executive and spouse
during the search for permanent housing, (ii) temporary housing for up to 12
months during the transition period, (iii) purchase/sale assistance of
residences, including points, closing costs and real estate commissions; and
(iv) move of household goods.

 

K.          The Company shall reimburse the Executive or provide him with an
expense allowance during the term of this Employment Agreement for travel,
entertainment and other expenses reasonably and necessarily incurred by the
Executive in connection with the Company’s business. The Executive shall furnish
such documentation with respect to reimbursement to be paid hereunder as the
Company shall reasonably request.

 

4.Termination of Employment.

 

A.          Termination for Cause.          The Company may terminate this
Employment Agreement and Executive’s employment for Cause. For purposes of this
Employment Agreement, termination for “Cause” shall result from the Executive’s:

 

(1)          misappropriation of funds from the Company;

 

(2)          conviction of a felony;

 

(3)          commission of a crime or act or series of acts involving moral
turpitude;

 

(4)          commission of an act or series of acts of dishonesty that are
materially inimical to the best interests of the Company;

 

(5)          breach of any material term of this Employment Agreement;

 

(6)          willful and repeated failure to perform the duties associated with
the Executive’s position, which failure has not been cured within thirty (30)
days after the Company gives notice thereof to the Executive; or

 

(7)          failure to cooperate with any Company investigation or with any
investigation, inquiry, hearing or similar proceedings by any governmental
authority having jurisdiction over the Executive or the Company.

 

 

 

 

Provided, however, the Executive shall have been provided with written notice
that there is a basis for termination for cause under clauses (1) and (4)-(7),
above. The notice shall set forth the facts regarding the basis for termination.
The Executive shall be afforded a reasonable amount of time under the
circumstances after the delivery of the notice before the Board meets to
consider any possible termination for cause (which amount of time the parties
acknowledge may be very limited depending on the circumstances). At or prior to
the meeting of the Board to consider the matters described in the written notice
the Executive will be afforded an opportunity to express his views to the Board
on the subject matter of the notice. The Board’s determination concerning a
termination for Cause shall be made at the sole discretion of the Board.

 

In the event of termination for Cause, the Executive shall only be paid his
unpaid base salary through the date of termination.

 

B.Termination by the Company Without Cause; Resignation for Good Reason.

 

(1)          Provided that a “Change in Control” (as defined in a separate
Change in Control Agreement, dated March 16, 2015, by and between the Executive
and the Company (the “CIC Agreement”) (a copy of the CIC Agreement is attached
hereto as Appendix C)) has not occurred, or that a Change in Control has
occurred but the two years during which a Triggering Event as defined in the CIC
Agreement could occur has expired, (i) the Company may terminate this Employment
Agreement and Executive’s employment without Cause (the Company agrees that the
provision of a notice of non-renewal under Section 2(A) by the Company is a
termination of Executive’s employment without Cause) and (ii) the Executive may
terminate this Employment Agreement and the Executive’s employment for Good
Reason (as hereinafter defined). If the Executive’s employment is terminated by
the Company without Cause or if Executive resigns for Good Reason, then the
Company shall pay, upon the receipt of the release described in Section 4(B)(3),
the severance payment described in this Section 4(B)(1) to the Executive (which
will be in addition to any other compensation or remuneration to which the
Executive is, or becomes, entitled to receive from the Company). The amount of
the severance payment is equal to the sum of the Executive’s annual base salary
and target annual incentive. In addition, the Company shall, at its expense,
provide the Executive and his eligible dependents with life and health insurance
(“Health and Welfare Benefits”) in an amount not less than provided on the date
of the Executive’s termination from employment for a period of twelve (12)
months following the termination without Cause; provided, however, the Company
shall not be obligated to pay for Health and Welfare Benefits after the date on
which the Executive shall be eligible to receive benefits from another employer
which are substantially equivalent to or greater than the benefits the Executive
and his family received from Company; provided, further, that if the Executive’s
continuation in some or all of the Company’s Health and Welfare Benefits is not
available, then the Company shall make additional monthly payments to the
Executive equal to the cost of the coverage, as determined solely by the Company
for similarly situated employees of the Company, over a period of up to twelve
(12) months with respect to those benefits among the Health and Welfare Benefits
not available. All payments pursuant to this Employment Agreement shall be made
less standard required deductions and withholdings.

 

 

 

 

(2)          Notwithstanding anything in this Employment Agreement to the
contrary, if there shall occur a “Change in Control” and a “Triggering Event”
(as those terms are defined in the Change in Control Agreement (“CIC
Agreement”)), then the Company or the Executive shall have the right to
terminate the employment of the Executive with the Company and, in the event of
such termination, the payments to be made to the Executive in connection
therewith shall be governed by the CIC Agreement and not Section 4(B)(1) of this
Employment Agreement and the Executive shall be entitled to no further
compensation or other benefits under this Employment Agreement, except (i)
unpaid base salary, vacation, unreimbursed expenses and amounts pursuant to
Section 4(B)(4), below, subject to any release requirement in the CIC Agreement.

 

(3)          Notwithstanding anything to the contrary contained in any award
agreement, the Company agrees that upon a Change in Control (as defined in the
CIC Agreement), whether or not a Triggering Event (as defined in the CIC
Agreement), all equity and equity type awards granted to the Executive
including, without limitation, performance shares and restricted shares, shall
vest and any performance goals shall be deemed to have been met at target.
Notwithstanding anything to the contrary contained in any award agreement, the
Company agrees that upon a termination of employment of the Executive due to
death or Permanent Disability (i) all equity and equity type awards that are not
performance based (including, without limitation, restricted shares) shall vest;
and (ii) all equity and equity type awards that are performance based shall vest
and the award value will be determined at the end of the performance period
based on actual performance and payment shall be pro-rated based on employment
during the performance period. Payment shall be made not later than the 15th day
of the third month following the year in which awards under this Section 4(B)(3)
vest.

 

(4)          Payment of amounts described in this Section 4(B) shall commence
within seventy (70) days following the Executive’s termination of employment,
contingent upon the Executive executing a general release in the form set forth
in Appendix D (“General Release”) within sixty (60) days of cessation of
employment and not revoking the General Release, provided that if such seventy
(70) day period begins in one calendar year and ends in a second calendar year,
payment shall commence in the second calendar year. If the Company has not
received the General Release within forty-five (45) days after the Executive’s
cessation of employment, the Company shall provide Executive Written Notice that
the General Release must be signed within sixty (60) days after cessation of
employment to receive the benefits hereunder, which notice, however, shall in no
event modify any otherwise applicable time periods. If the Executive fails to
timely sign and deliver the General Release, the Company shall not be obligated
to pay the amounts set forth in this Section 4(B). Under no circumstances there
shall be duplication of payments under this Employment Agreement and the CIC
Agreement.

 

C.          Termination for Death.          In the event of termination for
reason of death (in the case of death the Executive’s employment hereunder shall
be terminated as of the date of his death) the Executive’s designated
beneficiary, or, in the absence of such designation, the estate or other legal
representative of the Executive shall be paid the amounts described in Section
4(B)(3) and the Executive’s unpaid base salary (but no annual bonus or annual
incentive compensation except as specifically provided in Section 3(B) or 3(C)
with respect to a pro-rated annual bonus) through the end of the month in which
the death occurs. No other benefits shall be payable under this Section 4 due to
the Executive’s termination in the event of death.

 

 

 

 

D.          Termination for Disability.     In the event that the Executive is
determined to be Permanently Disabled, the Company or Executive shall have the
right to terminate Executive’s employment under this Employment Agreement by
giving the other ten (10) days’ prior written notice. If the Executive’s
employment hereunder is so terminated, the Executive shall be paid the amounts
described in Section 4(B)(3) and shall continue to receive his base salary for a
period of three (3) months (but no annual bonus or annual incentive compensation
except as specifically provided in Section 3(B) or 3(C) with respect to a
pro-rated annual bonus). No other benefits shall be payable under this Section 4
due to the Executive’s termination due to his Permanent Disability. For purposes
of this Employment Agreement, the Executive’s “Permanent Disability” means a
permanent and total disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended.

 

E.          Termination by Executive Without Good Reason.     If the Executive
terminates his employment voluntarily, other than a termination for Good Reason,
the Executive shall be paid his unpaid base salary (but no annual bonus or
incentive compensation except as specifically provided in Section 3(B) and 3(C)
with respect to retirement and with respect to a pro-rated annual bonus).

 

F.          Definition of Good Reason.     The Executive may resign for “Good
Reason,” which for purposes of this Employment Agreement is defined as the
Executive’s separation from service that occurs following the initial existence
of one or more of the following conditions:

 

(1)          Company materially reduces Executive’s title, responsibilities,
power or authority;

 

(2)          Company assigns Executive duties that are materially inconsistent
with the duties set forth in this Agreement, and which duties Company persists
in assigning to Executive despite the prior written objection of Executive;

 

(3)          Company reduces Executive’s base compensation, or materially
reduces his group health, life, disability or other insurance programs
(including any such benefits provided to Executive’s family), his pension,
retirement or profit-sharing benefits or any benefits provided by Company’s
Annual Incentive Plans or Long-Term Incentive Plans or any substitute therefor,
or excludes him from any plan, program or arrangement, including but not limited
to any bonus or incentive plans in which Company’s other executive officers are
included; or

 

(4)          Company requires Executive to be based at or generally work from
any location more than 100 miles from the geographical center of the city where
Executive worked or Executive’s residence on the date hereof (the “Location of
Employment”) or Company over the course of any calendar month requires Executive
to be away from his Location of Employment for more than 50% of the business
days during that month.

 

G.          Section 409A Compliance.     To the extent the payments and benefits
to be made or provided to Executive upon a termination of employment are
“non-qualified deferred compensation” within the meaning of Code Section 409A,
then they may only be made upon a “separation from service” of the Executive,
within the meaning of Code Section 409A and for purposes of Section 409A, (i)
each payment made under this Employment Agreement shall be treated as a separate
payment; (ii) the Executive (his/her spouse or beneficiary) may not, directly or
indirectly, designate the calendar year of payment; and (iii) except as provided
by Section 409A, no acceleration of the time and form of payment of any
nonqualified deferred compensation to the Executive or any portion thereof,
shall be permitted. All compensation, including nonqualified deferred
compensation with the meaning of Section 409A, payable pursuant to the terms of
this Employment Agreement or otherwise, shall be subject to all applicable tax
withholdings.

 

 

 

 

In the event Executive is a “specified employee” under Code Section 409A, the
payments under this Employment Agreement and related benefits, to the extent
required, will be delayed in accordance with Code Section 409A(2).

 

5.          Covenants, Non-Competition, Non-Solicitation and Confidential
Information. This Section 5 shall not apply after a Change in Control.

 

A.          The Executive acknowledges the Company’s reliance and expectation of
the Executive’s continued commitment to performance of his duties and
responsibilities during the term of this Employment Agreement. In light of such
reliance and expectation on the part of the Company, during the Term of this
Employment Agreement, while the Executive is receiving payments hereunder and
for a period of two (2) years after the Executive has received his last payment
hereunder (and, as to clauses (4) and (5) of this subsection (A), at any time
during and after the Term of this Employment Agreement), the Executive shall
not, directly or indirectly, do or suffer any of the following:

 

(1)          Own, or control or participate in the ownership, or control of, or
in a competitive capacity be employed or engaged by or in a competitive capacity
otherwise affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship, firm,
association or other business entity engaged in the business of designing and/or
manufacturing of engineered electrical and electronic components, modules and
systems for applications that compete with products sold by the Company;
provided, however, that the ownership of not more than one percent (1%) of any
class of publicly traded securities of any entity shall not be deemed a
violation of this covenant;

 

(2)          Without the prior written consent of the Company, on his own behalf
or on behalf of any person or entity, directly or indirectly, hire or knowingly
solicit the employment of any employee who has been employed by the Company or
its subsidiaries at any time during the six (6) months immediately preceding
such date of hiring or solicitation;

 

(3)          Solicit, divert or entice away or attempt to solicit, divert or
entice away the business or patronage of any individual or entity who is a
client, or known prospective client of the Company (excluding members of the
Executive’s immediate family) or otherwise interfere or attempt to interfere
with any transaction, agreement, prospective agreement, business opportunity or
business relationship in which the Company is involved;

 

 

 

 

(4)          Use, disclose or make accessible to any other person, firm,
partnership, corporation or any other entity any Confidential Information (as
defined below) pertaining to the business of the Company or any entity
controlling, controlled by or under common control with the Company (each an
"Affiliate") except (i) while employed by the Company in the business of and for
the benefit of the Company or its Affiliates or (ii) when required to do so by a
court of competent jurisdiction, by any governmental agency having supervisory
authority over the business of the Company or its Affiliates, or by any
administrative body or legislative body (including a committee thereof) with
jurisdiction to order the Company or its Affiliates to divulge, disclose or make
accessible such information. For purposes of this Employment Agreement,
“Confidential Information” shall mean non-public information concerning the
Company’s financial data, statistical data, strategic business plans, product
development (or other proprietary product data), customer and supplier lists,
customer and supplier information, pricing data, information relating to
governmental relations, discoveries, practices, processes, methods, trade
secrets, developments, marketing plans and other non-public, proprietary and
confidential information of the Company or its Affiliates, that, in any case, is
not otherwise generally available to the public and has not been disclosed by
the Company, or its Affiliates, as the case may be, to others not subject to
confidentiality agreements. In the event the Executive’s employment is
terminated hereunder for any reason, the Executive immediately shall return to
the Company all Confidential Information in his possession; or

 

(5)          Disclose, divulge, discuss, copy or otherwise use or suffer to be
used in any manner, in competition with, or contrary to the interests of, the
Company, any Confidential Information relating to the Company’s operations,
properties or otherwise to its particular business or other trade secrets of the
Company, it being acknowledged by the Executive that all such information
regarding the business of the Company compiled or obtained by, or furnished to,
the Executive while the Executive shall have been employed by or associated with
the Company is confidential information and the Company’s exclusive property;
provided, however, that the foregoing restrictions shall not apply to the extent
that such information (1) is clearly obtainable in the public domain, (2)
becomes obtainable in the public domain, except by reason of the breach by the
Executive of the terms hereof, (3) was not acquired by the Executive in
connection with his employment or affiliation with the Company, (4) was not
acquired by the Executive from the Company or its representatives, or (5) is
required to be disclosed by rule of law or by order of a court or governmental
body or agency.

 

B.          The Executive agrees that during and after Executive’s term of
employment, Executive will not disparage the Company or its affiliates. The
Company agrees that during and after the Executive’s employment, the Company
will not disparage Executive.

 

C.          The Executive agrees and understands that the remedy at law for any
breach by him of this Section 5 will be inadequate and that the damages flowing
from such breach are not readily susceptible to being measured in monetary
terms. Accordingly, it is acknowledged that, upon adequate proof of the
Executive’s violation of any legally enforceable provision of this Section 5,
the Company shall be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach. Nothing in this
Section 5 shall be deemed to limit the Company’s remedies at law or in equity
for any breach by the Executive of any of the provisions of this Section 5 which
may be pursued or availed of by the Company.

 

D.          The Executive and the Company agree that the covenants of
non-competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction such covenants are not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants as to the court shall appear not
reasonable and to enforce the remainder of these covenants as so amended.

 

 

 

 

E.          The Executive has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon the Company
under this Section 5, and hereby acknowledges and agrees that the same are
reasonable in time and otherwise, are designed to eliminate competition which
otherwise would be unfair to the Company, do not stifle the inherent skill and
experience of the Executive, would not operate as a bar to the Executive’s sole
means of support, are fully required to protect the legitimate interests of the
Company and do not confer a benefit upon the Company disproportionate to the
detriment to the Executive.

 

F.          The provisions of this Section 5 shall survive any termination of
this Employment Agreement.

 

G.          Notwithstanding anything else in this Employment Agreement, the cash
component and benefits component of any severance payments made pursuant to
Section 4 under this Employment Agreement shall cease in the event that the
Executive breaches any covenant of this Section 5.

 

6.Representations and Warranties of the Company.

 

A.          The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio, and has all requisite
corporate power and authority to enter into, execute and deliver this Employment
Agreement, fulfill its obligations hereunder and consummate the transactions
contemplated hereby.

 

B.          The execution and delivery of, performance of obligations under, and
consummation of the transactions contemplated by, this Employment Agreement have
been duly authorized and approved by all requisite corporate action by or in
respect of the Company, and this Employment Agreement constitutes the legally
valid and binding obligation of the Company, enforceable by the Executive in
accordance with its terms.

 

C.          No provision of the Company’s governing documents or any agreement
to which it is a party or by which it is bound or of any material law or
regulation of the kind usually applicable and binding upon the Company prohibits
or limits its ability to enter into, execute and deliver this Employment
Agreement, fulfill its respective obligations hereunder and consummate the
transactions contemplated hereby.

 

7.Miscellaneous.

 

A.          The Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Employment Agreement.

 

B.          The provisions of this Employment Agreement are severable and if any
one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any partially
unenforceable provision to the extent enforceable in any jurisdiction
nevertheless shall be binding and enforceable.

 

 

 

 

C.          The rights and obligations of the Company under this Employment
Agreement shall inure to the benefit of, and shall be binding on, the Company
and its successors and assigns, and the rights and obligations (other than
obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns. “Successors and
assigns” shall mean, in the case of the Company, any successor pursuant to a
merger, consolidation, or sale, or other transfer of all or substantially all of
the assets or common shares of the Company.

 

D.          Any controversy or claim arising out of or relating to this
Employment Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association then
pertaining in the County of Cuyahoga, Ohio, and judgment upon the award rendered
by the arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator or arbitrators shall be deemed to possess the powers to
issue mandatory orders and restraining orders in connection with such
arbitration; provided, however, that nothing in this Section 7(D) shall be
construed so as to deny the Company the right and power to seek and obtain
injunctive relief in a court of equity for any breach or threatened breach by
the Executive of any of his covenants contained in Section 5 hereof. In the
event of a legal dispute, the Company shall reimburse the Executive for
reasonable legal fees and expenses if the Executive prevails on at least one
material issue.

 

E.          All notices and other communications hereunder shall be in writing
and shall be deemed to have been given if delivered personally or sent by
facsimile transmission, overnight courier, or certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission (provided that a confirmation copy
is sent by overnight courier), one day after deposit with an overnight courier,
or if mailed, five (5) days after the date of deposit in the United States
mails, as follows:

 

To the Company:   Stoneridge, Inc. 9400 East Market Street Warren, Ohio 44484
Telephone: (330) 856-2443 Attention: Chief Financial Officer   With copy to:  
Robert M. Loesch Tucker Ellis LLP 950 Main Avenue, Suite 1100 Cleveland, Ohio
44113 Telephone (216) 696-5916 Fax (216) 592-5009

 

 

 

 

To Executive:   Jonathan DeGaynor c/o Stoneridge, Inc. 9400 East Market Street
Warren, Ohio 44484   With copy to:   Jeffrey A. Hopper, Esq. Partner Barnes &
Thornburg LLP 11 South Meridian Street Indianapolis, Indiana 46204-3534
Telephone (317) 231-72552 Fax (317) 231-7433

 

F.          The failure of either party to enforce any provision or provisions
of this Employment Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Employment Agreement. The rights granted the parties herein are cumulative
and the waiver of any single remedy shall not constitute a waiver of such
party’s right to assert all other legal remedies available to it under the
circumstances.

 

G.          This Employment Agreement supersedes all prior agreements and
understandings between the parties and may not be modified or terminated orally.
No modification, termination or attempted waiver shall be valid unless in
writing and signed by the party against whom the same is sought to be enforced.
From time to time the Executive may receive award agreements pursuant to one or
more long term incentive plans or otherwise which may contain terms in addition
to or different from this Employment Agreement, and the Company agrees that the
Executive shall have the benefit of the terms that are the most advantageous to
the Executive so that if the award agreement (1) defines “cause” then the
definition of Cause in this Employment Agreement shall apply or (2) treats
certain resignation events as a termination without cause, the definition of
Good Reason in this Employment Agreement shall apply.

 

H.          This Employment Agreement shall not be assignable or otherwise
transferable by Executive. The Company shall have the right to assign this
Agreement to any successor which agrees to be bound by the terms hereof.

 

I.          This Employment Agreement shall be governed by and construed
according to the laws of the State of Ohio.

 

J.          Captions and Section headings used herein are for convenience and
are not a part of this Employment Agreement and shall not be used in construing
it.

 

 

 

 

K.          Where necessary or appropriate to the meaning hereof, the singular
and plural shall be deemed to include each other, and the masculine, feminine
and neuter shall be deemed to include each other.

 

L.          This Employment Agreement may be executed in one or more
counterparts, which together shall constitute one agreement. It shall not be
necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.

 

M.          The Company shall reimburse Executive all legal fees up to $10,000
incurred by Executive in the negotiation of this Employment Agreement, the
Indemnity Agreement, the CIC Agreement and any amendment or modification hereto
or thereto.

 

[The remainder of this page is intentionally left blank.]

 

 

 

 

[Signature Page for Employment Agreement]

 

IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the
day and year first set forth above.

 

 

STONERIDGE, INC.

 

  By: /s/ George E. Strickler     George E. Strickler     Executive Vice
President and Chief Financial Officer           /s/ Jonathan DeGaynor    
Jonathan DeGaynor

 

 

 

 

Appendix A

 

2015 Regular Grant

 

 

 

 

STONERIDGE, INC.

AMENDED AND RESTATED

LONG-TERM INCENTIVE PLAN

2015 PERFORMANCE SHARE UNITS AGREEMENT

 

Stoneridge, Inc., an Ohio corporation (the “Company”), pursuant to the terms and
conditions hereof, hereby grants to Jonathan DeGaynor (“Grantee”) the right to
receive, depending on continued service and Company performance, _______ Common
Shares (the “Target Award”), without par value, of the Company (the “Performance
Share Units”), subject to the terms and conditions of this Agreement (the
“Agreement”). As set forth below, the grant of the Performance Share Units is
comprised of three separate mutually exclusive parts, Target Award I, Target
Award II and Target Award III.

 

1.          The Performance Share Units are in all respects subject to the
terms, conditions and provisions of this Agreement and the Company’s Amended and
Restated Long-Term Incentive Plan (the “Plan”).

 

2.          The right to receive the Performance Share Units will be forfeited
to the Company if the Grantee’s employment with the Company is terminated prior
to March __, 2018 except in the case of (i) Retirement, (ii) death, (iii)
Disability, (iv) Change in Control or (v) termination without cause, each as
provided below.

 

If the employment of the Grantee is not terminated prior to March __, 2018 the
Performance Share Units shall, subject to satisfaction of the performance
criteria applicable to Target Awards II and III, be earned on March __, 2018.

 

Special Provisions Applicable to Retirement.

 

Subject to the conditions below, in the case of Retirement the Performance Share
Units granted with respect to:

 

(1)Target Award I shall be earned on the date of Retirement and a certificate or
certificates representing Target Award I Performance Share Units shall promptly
be delivered to the Grantee, but in no event shall be delivered later than the
15th day of the third month following the year in which Performance Share Units
were earned;

 

(2)Target Award II shall be earned on the date of Retirement, subject to
satisfaction of the performance criteria applicable to Target Award II, and a
certificate or certificates representing Target Award II Performance Share Units
shall be delivered to the Grantee as promptly as practical after completion of
the Peer Group Performance Period but in no event later than March __, 2018; and

 

(3)Target Award III shall be earned on the date of Retirement, subject to
satisfaction of the performance criteria applicable to the Target Award III, and
a certificate or certificates representing Target Award III Performance Share
Units shall be delivered to the Grantee as promptly as practical after
completion of the EPS Performance Period but in no event later than March __,
2018.

 

 

 

 

“Retirement” shall mean a Grantee’s separation from service, but only if a
Grantee (i) is 63 or older on the date of separation from service, (ii) has
provided written notice to the Compensation Committee of the Board of Directors
(the “Committee”) of the intent to retire at least one year prior to the
separation from service, and (iii) has executed prior to separation from service
a customary one year non-competition agreement.

 

If the employment of the Grantee is not terminated prior to March __, 2018 (the
“Performance Period”), the Performance Share Units shall be earned in the
amounts set forth below on March __, 2018:

 

Target Award ITime-Based Earning

 

Number of Shares That May be Earned      

 

Target Award IICompany Performance Versus Peer Group Performance and Time-Based
Earning

 

Depending on the achievement of the Company’s total shareholder return (“TSR”)
(as defined below) as compared to the Peer Group’s TSR for the Company’s fiscal
years 2015, 2016, and 2017 (the “Peer Group Performance Period”):

 

Quartile  Percentile   Shares Earned  1st   >75% -100%   ______  2nd   >50% -
<75%   ______  3rd   >25% -< 50%   ______  4th   <25%   0 

 

If the Company’s TSR for the Peer Group Performance Period is between the upper
and lower percentiles within a quartile, per the above table, the number of
shares earned shall be determined by interpolation between the corresponding
percentiles as follows: the difference between the actual percentile performance
and the lower percentile in the applicable quartile shall be divided by 0.25,
the resulting fraction shall be multiplied by 50 and the resulting product,
rounded to the nearest whole share, shall be added to the corresponding number
of shares in the above table for the immediately lower quartile, with the sum
being the total shares earned. If the Company’s TSR for the Peer Group
Performance Period is exactly 50%, 75% or 100% of the Peer Group Performance
then the number of shares earned shall be the maximum amount for the respective
quartile in the above table, as applicable.

 

The Peer Group companies are: Accuride, American Axle & Manufacturing,
Commercial Vehicle Group, CTS, EnPro Industries, Esterline Technologies, Gentex,
Graco, Meritor, Inc., Littelfuse, Modine Manufacturing, Standard Motor Products,
Superior Industries, and Titan International. The Peer Group shall be subject to
modification at the discretion of the Committee from time to time, when events
warrant. The performance of the Peer Group companies shall not be weighted based
on the size of the respective company.

 

 

 

 

Total shareholder return for both the Company and the Peer Group companies shall
be calculated by dividing: (i) the sum of (A) the cumulative amount of dividends
for the Peer Group Performance Period, and (B) the difference between the
respective company’s share price at the end of and the beginning of the Peer
Group Performance Period; by (ii) the shares price at the beginning of the Peer
Group Performance Period.

 

Target Award III                EPS Performance and Time-Based Earning

 

Depending on the Company’s earnings per share (“EPS”) (as defined below) for the
Company’s annual fiscal years of 2015, 2016, and 2017 (the “EPS Performance
Period”) and subject to the 2016 and 2017 Addenda to this Agreement:

 

2015 EPS  Shares Earned   2016 EPS
per
Addendum  Shares Earned   2017 EPS
per
Addendum  Shares Earned  > $1.07   ______   TBD   ______   TBD   ______  >
$0.82*   ______     TBD*   ______     TBD*   ______  > $0.57   ______   TBD 
 ______   TBD   ______  < $.057   0   TBD   0   TBD   0 

 

TBD – To be provided in the 2016 and 2017 Addenda

*Target threshold

 

If the Company’s EPS for any fiscal year is between two EPS data points, per the
above table for that fiscal year, the number of shares earned shall be
determined by interpolation between those data points as follows: the difference
between the actual EPS and the lower data point shall be divided by the
difference between the two data points, the resulting fraction shall be
multiplied by the difference between the two corresponding numbers of shares in
the above table and the resulting product, rounded to the nearest whole share,
shall be added to the corresponding number of shares for the lower data point in
the above table, with the sum being the total shares earned.

 

The Company’s EPS for any fiscal year in the EPS Performance Period shall mean
the Company’s aggregate fully diluted earnings per Common Share for that fiscal
year calculated in accordance with generally accepted accounting principles,
before extraordinary items, cumulative effects of changes in accounting
principles, adjustments for goodwill impairments and the tax effect thereof, if
any, as set forth on the audited consolidated financial statements of the
Company for that fiscal year; provided, however, at the Committee’s discretion,
the impact of any acquisitions or divestitures that may occur during any year in
the Performance Period may be excluded from actual EPS and the EPS targets for
any year in the Performance Period may be adjusted as a result of any
significant, unusual or one-time expense or gain items that the Company could
not have reasonably been expected to foresee.

 

 

 

 

The 2016 and 2017 Addenda to this Agreement shall be appended to this Agreement
and incorporated herein by reference, effective upon their respective adoption
by the Committee.

 

3.          If earned, the Performance Share Units for the respective Target
Award will be issued in the name of the Grantee. The Company’s transfer agent
and/or share transfer records will show the Grantee as the owner of record of
the Performance Share Units as of the date the Performance Share Units are
earned.  The certificate or certificates representing the Performance Share
Units earned may, at the Company's discretion, be in uncertificated (electronic
or book entry) form.

 

4.          Notwithstanding the foregoing, in addition to earning the
Performance Share Units as set forth above, the Performance Share Units shall be
earned upon the occurrence of an event and in the amounts as described below.

 

Target Award I shall be earned and not be forfeited in the event of:

 

(a)          the Grantee’s death or Disability in proportion to the number of
months, including any partial month, elapsed in the Performance Period divided
by 36;

 

(b)          a Change in Control or Potential Change in Control of the Company;
or

 

(c)          the termination “without cause” of the Grantee’s employment by the
Company; provided, however only in proportion to the number of months, including
any partial month, elapsed in the Performance Period divided by 36.

 

  A certificate or certificates representing the earned Performance Share Units
granted under Award I shall be delivered to the Grantee or the Grantee’s estate
after the occurrence of an event described above as soon as practical, but in no
event shall be delivered later than 15th day of the third month following the
year in which Performance Share Units were earned. If any Performance Share
Units are deferred compensation subject to Section 409A of the Code, Change in
Control shall have the meaning as defined in the Plan except that “30%” shall be
substituted for “25%” in Section 11(b)(iii) of the Plan.

 

Target Award II shall be earned and not be forfeited in the event of:

 

(a)          the Grantee’s death or Disability in proportion to the number of
months, including any partial month, elapsed in the Peer Group Performance
Period divided by 36;

 

(b)          a Change in Control or Potential Change in Control of the Company;
or

 

(c)          the termination “without cause” of the Grantee’s employment by the
Company; provided, however only in proportion to the number of months, including
any partial month, elapsed in the Peer Group Performance Period divided by 36.

 

 

 

 

In the event of the Grantee’s death, Disability or termination without cause the
shares granted in Target Award II shall be earned in amounts (and subject to the
36 month pro rata earning provisions for death, Disability and termination
without cause) in accordance with the Company’s TSR during the Peer Group
Performance Period as determined under the metrics of Target Award II above. A
certificate or certificates representing the earned Performance Share Units
under Target Award II shall be delivered to the Grantee or the Grantee’s estate
as promptly as practical after completion of the Peer Group but no in event
later than March __, 2018. In the event of a Change in Control or Potential
Change in Control of the Company, Target Award II shall be earned in amounts
which assume the Company’s TSR during the Peer Group Performance Period is equal
to the 50th percentile of the Peer Group companies’ performance in that period.
A certificate or certificates representing the earned Performance Share Units
under Target Award II shall be delivered to the Grantee as promptly as practical
after the Change in Control, but in no event shall be delivered later than 15th
day of the third month following the year in which Performance Share Units were
earned. In the event of a Potential Change in Control, the earned Performance
Share Units under Target Award II shall be delivered as promptly as practical
after completion of the Peer Group Performance Period but in no event later than
March __, 2018. If the Performance Share Units are deferred compensation subject
to Section 409A of the Code, Change in Control shall have the meaning as defined
in the Plan except that “30%” shall be substituted for “25%” in Section
11(b)(iii) of the Plan.

 

Target Award III shall be earned and not be forfeited in the event of:

 

(a)          the Grantee’s death or Disability in proportion to the number of
months, including any partial month, elapsed in the EPS Performance Period
divided by 36;

 

(b)          a Change in Control or Potential Change in Control of the Company;
or

 

(c)          the termination “without cause” of the Grantee’s employment by the
Company; provided, however only in proportion to the number of months, including
any partial month, elapsed in the EPS Performance Period divided by 36.

 

In the event of the Grantee’s death, Disability or termination without cause the
Performance Share Units granted under Target Award III shall be earned in
amounts (and subject to the 36 month pro rata earning provisions for death,
Disability and termination without cause) in accordance with the Company’s
actual EPS for each of 2015, 2016, and 2017 target thresholds during the EPS
Performance Period for Target Award III. A certificate or certificates
representing the earned Performance Share Units under Target Award III shall be
delivered to the Grantee or the Grantee’s estate as promptly as practical after
completion of the EPS Performance Period, but no in event later than March __,
2018. In the event of a Change in Control of the Company, Target Award III
shares shall be earned in amounts which assume the Company’s EPS satisfied the
respective 2015, 2016 and 2017 at the specified target thresholds. A certificate
or certificates representing the earned Performance Share Units under Target
Award III shall be delivered to the Grantee as promptly as practical after the
Change in Control but in no event shall be delivered later than 15th day of the
third month following the year in which Performance Share Units were earned. In
the event of a Potential Change in Control, the earned Performance Share Units
under Target Award II shall be delivered as promptly as practical after
completion of the EPS Performance Period but in no event later than March __,
2018. If the Performance Share Units are deferred compensation subject to
Section 409A of the Code, Change in Control shall have the meaning as defined in
the Plan except that “30%” shall be substituted for “25%” in Section 11(b)(iii)
of the Plan.

 

 

 

 

Termination shall be deemed to be “without cause” unless the Board of Directors
of the Company, or its designee, in good faith determines that termination is
because of any one or more of the following, in which case such termination
shall be deemed to be for “cause”:

 

The Grantee’s:

 

(a)fraud;

 

(b)misappropriation of funds from the Company;

 

(c)commission of a felony or of an act or series of acts which result in
material injury to the business reputation of the Company;

 

(d)commission of a crime or act or series of acts involving moral turpitude;

 

(e)commission of an act or series of repeated acts of dishonesty that are
materially inimical to the best interests of the Company;

 

(f)willful and repeated failure to perform his duties, which failure has not
been cured within fifteen (15) days after the Company gives notice thereof to
the Grantee;

 

(g)material breach of any material provision of an employment agreement, if any,
which breach has not been cured in all substantial respects within ten (10) days
after the Company gives notice thereof to the Grantee; or

 

(h)failure to carry out the reasonable directions or instructions of the
Grantee’s superiors, provided the directions or instructions are consistent with
the duties of the Grantee’s office, which failure has not been cured in all
substantial respects within ten (10) days after the Company gives notice thereof
to the Grantee.

 

Provided, however, the Company’s obligation to provide notice and an opportunity
to cure, pursuant to subsections (f)-(h) above, shall only apply to the
Grantee’s first breach, first failure to perform or first failure to follow
directions, as the case may be, of the nature giving rise to the right of the
Company to provide notice thereof. In addition, the Grantee may terminate his
employment with the Company, and such termination shall be deemed a termination
by the Company “without cause” if:

 

(a)the Company reduces the Grantee’s title, responsibilities, power or authority
in comparison with his title, responsibilities, power or authority on the date
hereof;

 

 

 

 

(b)the Company assigns the Grantee duties which are inconsistent with the duties
assigned to the Grantee on the date hereof and which duties the Company persists
in assigning to the Grantee despite the prior written objection of the Grantee;
or

 

(c)the Company reduces the Grantee’s annual base compensation (unless such
decrease is proportionate with a decrease in the base compensation of the
officers of the Company as a group), or materially reduces his group health,
life, disability or other insurance programs, his pension, retirement or
profit-sharing benefits or any benefits provided by the Company, or excludes him
from any plan, program or arrangement, including but not limited to bonus or
incentive plans.

 

5.          On any change in the number or kind of outstanding common shares of
the Company by reason of a recapitalization, merger, consolidation,
reorganization, separation, liquidation, share split, share dividend,
combination of shares or any other change in the corporate structure or Common
Shares of the Company, the Company, by action of the Committee, is empowered to
make such adjustment, if any, in the number and kind of Performance Share Units
subject to this Agreement as it considers appropriate for the protection of the
Company and of the Grantee.

 

6.          No later than the date as of which an amount first becomes
includable in the gross income of the Grantee for federal income tax purposes
with respect to the Performance Share Units granted hereunder, the Grantee shall
pay to the Company, or make arrangements satisfactory to the Committee regarding
the payment of, any federal, state or local taxes of any kind required by law to
be withheld with respect to that amount. Unless otherwise determined by the
Committee, minimum statutory withholding obligations may be settled with
previously owned Common Shares or Performance Share Units that have been earned.
The making of that payment or those arrangements is a condition to the
obligations of the Company under the Plan, and the Company and its subsidiaries
and affiliates may, to the extent permitted by law, deduct any taxes from any
payment of any kind otherwise payable to the Grantee.

 

7.          Nothing in this Agreement shall affect in any manner any conflicting
or other provision of any other agreement between the Grantee and the Company.
Nothing contained in this Agreement shall limit whatever right the Company might
otherwise have to terminate the employment of the Grantee.

 

8.          The laws of the State of Ohio govern this Agreement, the Plan and
the Performance Share Units granted hereby.

 

IN WITNESS WHEREOF, the Company has caused its corporate name to be subscribed
by its duly authorized officer as of the ___ day of March 2015.

 

 

 

 

  STONERIDGE, INC.       By       George E. Strickler

 

 

  The foregoing is hereby accepted.                 Jonathan DeGaynor

 

 

 

 

Appendix B

 

Special Grant

 

 

 

 

STONERIDGE, INC.

AMENDED AND RESTATED

LONG-TERM INCENTIVE PLAN

2015 PERFORMANCE SHARE UNITS AGREEMENT

 

Stoneridge, Inc., an Ohio corporation (the “Company”), pursuant to the terms and
conditions hereof, hereby grants to Jonathan DeGaynor (“Grantee”) the right to
receive, depending on continued service and Company performance, _______ Common
Shares (the “Target Award”), without par value, of the Company (the “Performance
Share Units”), subject to the terms and conditions of this Agreement (the
“Agreement”). As set forth below, the grant of the Performance Share Units is
comprised of four separate mutually exclusive parts, Target Award I, Target
Award II, Target Award III and Target Award IV.

 

1.          The Performance Share Units are in all respects subject to the
terms, conditions and provisions of this Agreement and the Company’s Amended and
Restated Long-Term Incentive Plan (the “Plan”).

 

2.          The right to receive the Performance Share Units will be forfeited
to the Company if the Grantee’s employment with the Company is terminated prior
to March __, 2017 with respect to Target Award I, and prior to March __, 2018
with respect to Target Awards II, III and IV, except in the case of (i)
Retirement, (ii) death, (iii) Disability, (iv) Change in Control or (v)
termination without cause, each as provided below.

 

If the employment of the Grantee is not terminated prior to March __, 2017 the
Performance Share Units applicable to Target Award I shall be earned on March
__, 2017.

 

If the employment of the Grantee is not terminated prior to March __, 2018 the
Performance Share Units applicable to Target Awards II, III and IV shall,
subject to satisfaction of the performance criteria applicable to Target Awards
III and IV, be earned on March __, 2018.

 

Special Provisions Applicable to Retirement.

 

Subject to the conditions below, in the case of Retirement the Performance Share
Units granted with respect to:

 

(1)Target Awards I and II shall be earned on the date of Retirement and a
certificate or certificates representing Target Awards I and II Performance
Share Units shall promptly be delivered to the Grantee, but in no event shall be
delivered later than the 15th day of the third month following the year in which
Performance Share Units were earned;

 

(2)Target Award III shall be earned on the date of Retirement, subject to
satisfaction of the performance criteria applicable to Target Award III, and a
certificate or certificates representing Target Award III Performance Share
Units shall be delivered to the Grantee as promptly as practical after
completion of the Peer Group Performance Period but in no event later than March
__, 2018;and

 

(3)Target Award IV shall be earned on the date of Retirement, subject to
satisfaction of the performance criteria applicable to the Target Award IV, and
a certificate or certificates representing Target Award IV Performance Share
Units shall be delivered to the Grantee as promptly as practical after
completion of the EPS Performance Period but in no event later than March __,
2018.

 

 

 

 

“Retirement” shall mean a Grantee’s separation from service, but only if a
Grantee (i) is 63 or older on the date of separation from service, (ii) has
provided written notice to the Compensation Committee of the Board of Directors
(the “Committee”) of the intent to retire at least one year prior to the
separation from service, and (iii) has executed prior to separation from service
a customary one year non-competition agreement.

 

If the employment of the Grantee is not terminated prior to March __, 2017 the
Performance Share Units applicable to Target Award I shall be earned in the
amounts set forth below on March __, 2017:

 

Target Award ITime-Based Earning

 

Number of Shares That May be Earned                ________

 

If the employment of the Grantee is not terminated prior to March __, 2018 (the
“Performance Period”), the Performance Share Units applicable to Target Awards
II, III and IV shall be earned in the amounts set forth below on March __, 2018:

 

Target Award IITime-Based Earning

 

Number of Shares That May be Earned               ________

 

Target Award IIICompany Performance Versus Peer Group Performance and Time-Based
Earning

 

Depending on the achievement of the Company’s total shareholder return (“TSR”)
(as defined below) as compared to the Peer Group’s TSR for the Company’s fiscal
years 2015, 2016, and 2017 (the “Peer Group Performance Period”):

 

Quartile  Percentile   Shares Earned  1st   >75% -100%   ______  2nd   >50% -
<75%   ______  3rd   >25% -< 50%   ______  4th   <25%   0 

 

If the Company’s TSR for the Peer Group Performance Period is between the upper
and lower percentiles within a quartile, per the above table, the number of
shares earned shall be determined by interpolation between the corresponding
percentiles as follows: the difference between the actual percentile performance
and the lower percentile in the applicable quartile shall be divided by 0.25,
the resulting fraction shall be multiplied by 50 and the resulting product,
rounded to the nearest whole share, shall be added to the corresponding number
of shares in the above table for the immediately lower quartile, with the sum
being the total shares earned. If the Company’s TSR for the Peer Group
Performance Period is exactly 50%, 75% or 100% of the Peer Group Performance
then the number of shares earned shall be the maximum amount for the respective
quartile in the above table, as applicable.

 

 

 

 

The Peer Group companies are: Accuride, American Axle & Manufacturing,
Commercial Vehicle Group, CTS, EnPro Industries, Esterline Technologies, Gentex,
Graco, Meritor, Inc., Littelfuse, Modine Manufacturing, Standard Motor Products,
Superior Industries, and Titan International. The Peer Group shall be subject to
modification at the discretion of the Committee from time to time, when events
warrant. The performance of the Peer Group companies shall not be weighted based
on the size of the respective company.

 

Total shareholder return for both the Company and the Peer Group companies shall
be calculated by dividing: (i) the sum of (A) the cumulative amount of dividends
for the Peer Group Performance Period, and (B) the difference between the
respective company’s share price at the end of and the beginning of the Peer
Group Performance Period; by (ii) the shares price at the beginning of the Peer
Group Performance Period.

 

Target Award IV                EPS Performance and Time-Based Earning

 

Depending on the Company’s earnings per share (“EPS”) (as defined below) for the
Company’s annual fiscal years of 2015, 2016, and 2017 (the “EPS Performance
Period”) and subject to the 2016 and 2017 Addenda to this Agreement:

 

2015 EPS  Shares Earned   2016 EPS
per
Addendum  Shares Earned   2017 EPS
per
Addendum  Shares Earned  > $1.07   ______   TBD   ______   TBD   ______  >
$0.82*   ______     TBD*   ______     TBD*   ______  > $0.57   ______   TBD 
 ______   TBD   ______  < $0.57   0   TBD   0   TBD   0 

 

TBD – To be provided in the 2016 and 2017 Addenda

*Target threshold

 

If the Company’s EPS for any fiscal year is between two EPS data points, per the
above table for that fiscal year, the number of shares earned shall be
determined by interpolation between those data points as follows: the difference
between the actual EPS and the lower data point shall be divided by the
difference between the two data points, the resulting fraction shall be
multiplied by the difference between the two corresponding numbers of shares in
the above table and the resulting product, rounded to the nearest whole share,
shall be added to the corresponding number of shares for the lower data point in
the above table, with the sum being the total shares earned.

 

 

 

 

The Company’s EPS for any fiscal year in the EPS Performance Period shall mean
the Company’s aggregate fully diluted earnings per Common Share for that fiscal
year calculated in accordance with generally accepted accounting principles,
before extraordinary items, cumulative effects of changes in accounting
principles, adjustments for goodwill impairments and the tax effect thereof, if
any, as set forth on the audited consolidated financial statements of the
Company for that fiscal year; provided, however, at the Committee’s discretion,
the impact of any acquisitions or divestitures that may occur during any year in
the Performance Period may be excluded from actual EPS and the EPS targets for
any year in the Performance Period may be adjusted as a result of any
significant, unusual or one-time expense or gain items that the Company could
not have reasonably been expected to foresee.

 

The 2016 and 2017 Addenda to this Agreement shall be appended to this Agreement
and incorporated herein by reference, effective upon their respective adoption
by the Committee.

 

3.          If earned, the Performance Share Units for the respective Target
Award will be issued in the name of the Grantee. The Company’s transfer agent
and/or share transfer records will show the Grantee as the owner of record of
the Performance Share Units as of the date the Performance Share Units are
earned.  The certificate or certificates representing the Performance Share
Units earned may, at the Company's discretion, be in uncertificated (electronic
or book entry) form.

 

4.          Notwithstanding the foregoing, in addition to earning the
Performance Share Units as set forth above, the Performance Share Units shall be
earned upon the occurrence of an event and in the amounts as described below.

 

Target Award I shall be earned and not be forfeited in the event of:

 

(a)          the Grantee’s death or Disability in proportion to the number of
months, including any partial month, elapsed in the Performance Period divided
by 24;

 

(b)          a Change in Control or Potential Change in Control of the Company;
or

 

(c)          the termination “without cause” of the Grantee’s employment by the
Company; provided, however only in proportion to the number of months, including
any partial month, elapsed in the Performance Period divided by 24.

 

Target Award II shall be earned and not be forfeited in the event of:

 

(a)          the Grantee’s death or Disability in proportion to the number of
months, including any partial month, elapsed in the Performance Period divided
by 36;

 

(b)          a Change in Control or Potential Change in Control of the Company;
or

 

(c)          the termination “without cause” of the Grantee’s employment by the
Company; provided, however only in proportion to the number of months, including
any partial month, elapsed in the Performance Period divided by 36.

 

 

 

 

A certificate or certificates representing the earned Performance Share Units
granted under Awards I and II shall be delivered to the Grantee or the Grantee’s
estate after the occurrence of an event described above as soon as practical,
but in no event shall be delivered later than the 15th day of the third month
following the year in which Performance Share Units were earned. If any
Performance Share Units are deferred compensation subject to Section 409A of the
Code, Change in Control shall have the meaning as defined in the Plan except
that “30%” shall be substituted for “25%” in Section 11(b)(iii) of the Plan.

 

Target Award III shall be earned and not be forfeited in the event of:

 

(a)          the Grantee’s death or Disability in proportion to the number of
months, including any partial month, elapsed in the Peer Group Performance
Period divided by 36;

 

(b)          a Change in Control or Potential Change in Control of the Company;
or

 

(c)          the termination “without cause” of the Grantee’s employment by the
Company; provided, however only in proportion to the number of months, including
any partial month, elapsed in the Peer Group Performance Period divided by 36.

 

In the event of the Grantee’s death, Disability or termination without cause the
shares granted in Target Award III shall be earned in amounts (and subject to
the 36 month pro rata earning provisions for death, Disability and termination
without cause) in accordance with the Company’s TSR during the Peer Group
Performance Period as determined under the metrics of Target Award III above. A
certificate or certificates representing the earned Performance Share Units
under Target Award III shall be delivered to the Grantee or the Grantee’s estate
as promptly as practical after completion of the Peer Group but no in event
later than March __, 2018. In the event of a Change in Control or Potential
Change in Control of the Company, Target Award III shall be earned in amounts
which assume the Company’s TSR during the Peer Group Performance Period is equal
to the 50th percentile of the Peer Group companies’ performance in that period.
A certificate or certificates representing the earned Performance Share Units
under Target Award III shall be delivered to the Grantee as promptly as
practical after the Change in Control in Control, but in no event shall be
delivered later than the 15th day of the third month following the year in which
Performance Share Units were earned. In the event of a Potential Change in
Control, the earned Performance Share Units under Target Award II shall be
delivered as promptly as practical after completion of the Peer Group
Performance Period but in no event later than March __, 2018. If any Performance
Share Units are deferred compensation subject to Section 409A of the Code,
Change in Control shall have the meaning as defined in the Plan except that
“30%” shall be substituted for “25%” in Section 11(b)(iii) of the Plan.

 

Target Award IV shall be earned and not be forfeited in the event of:

 

(a)          the Grantee’s death or Disability in proportion to the number of
months, including any partial month, elapsed in the EPS Performance Period
divided by 36;

 

(b)          a Change in Control or Potential Change in Control of the Company;
or

 

 

 

 

(c)          the termination “without cause” of the Grantee’s employment by the
Company; provided, however only in proportion to the number of months, including
any partial month, elapsed in the EPS Performance Period divided by 36.

 

In the event of the Grantee’s death, Disability or termination without cause the
Performance Share Units granted under Target Award IV shall be earned in amounts
(and subject to the 36 month pro rata earning provisions for death, Disability
and termination without cause) in accordance with the Company’s actual EPS for
each of 2015, 2016, and 2017 target thresholds during the EPS Performance Period
for Target Award IV. A certificate or certificates representing the earned
Performance Share Units under Target Award IV shall be delivered to the Grantee
or the Grantee’s estate as promptly as practical after completion of the EPS
Performance Period, but no in event later than March __, 2018. In the event of a
Change in Control of the Company, Target Award IV shares shall be earned in
amounts which assume the Company’s EPS satisfied the respective 2015, 2016 and
2017 at the specified target thresholds. A certificate or certificates
representing the earned Performance Share Units under Target Award IV shall be
delivered to the Grantee as promptly as practical after the Change in Control or
Potential Change in Control, but in no event shall be delivered later than the
15th day of the third month following the year in which Performance Share Units
were earned. In the event of a Potential Change in Control, the earned
Performance Share Units under Target Award II shall be delivered as promptly as
practical after completion of the EPS Performance Period but in no event later
than March __, 2018. If any Performance Share Units are deferred compensation
subject to Section 409A of the Code, Change in Control shall have the meaning as
defined in the Plan except that “30%” shall be substituted for “25%” in Section
11(b)(iii) of the Plan.

 

Termination shall be deemed to be “without cause” unless the Board of Directors
of the Company, or its designee, in good faith determines that termination is
because of any one or more of the following, in which case such termination
shall be deemed to be for “cause”:

 

The Grantee’s:

 

(a)fraud;

 

(b)misappropriation of funds from the Company;

 

(c)commission of a felony or of an act or series of acts which result in
material injury to the business reputation of the Company;

 

(d)commission of a crime or act or series of acts involving moral turpitude;

 

(e)commission of an act or series of repeated acts of dishonesty that are
materially inimical to the best interests of the Company;

 

(f)willful and repeated failure to perform his duties, which failure has not
been cured within fifteen (15) days after the Company gives notice thereof to
the Grantee;

 

 

 

 

(g)material breach of any material provision of an employment agreement, if any,
which breach has not been cured in all substantial respects within ten (10) days
after the Company gives notice thereof to the Grantee; or

 

(h)failure to carry out the reasonable directions or instructions of the
Grantee’s superiors, provided the directions or instructions are consistent with
the duties of the Grantee’s office, which failure has not been cured in all
substantial respects within ten (10) days after the Company gives notice thereof
to the Grantee.

 

Provided, however, the Company’s obligation to provide notice and an opportunity
to cure, pursuant to subsections (f)-(h) above, shall only apply to the
Grantee’s first breach, first failure to perform or first failure to follow
directions, as the case may be, of the nature giving rise to the right of the
Company to provide notice thereof. In addition, the Grantee may terminate his
employment with the Company, and such termination shall be deemed a termination
by the Company “without cause” if:

 

(a)the Company reduces the Grantee’s title, responsibilities, power or authority
in comparison with his title, responsibilities, power or authority on the date
hereof;

 

(b)the Company assigns the Grantee duties which are inconsistent with the duties
assigned to the Grantee on the date hereof and which duties the Company persists
in assigning to the Grantee despite the prior written objection of the Grantee;
or

 

(c)the Company reduces the Grantee’s annual base compensation (unless such
decrease is proportionate with a decrease in the base compensation of the
officers of the Company as a group), or materially reduces his group health,
life, disability or other insurance programs, his pension, retirement or
profit-sharing benefits or any benefits provided by the Company, or excludes him
from any plan, program or arrangement, including but not limited to bonus or
incentive plans.

 

5.          On any change in the number or kind of outstanding common shares of
the Company by reason of a recapitalization, merger, consolidation,
reorganization, separation, liquidation, share split, share dividend,
combination of shares or any other change in the corporate structure or Common
Shares of the Company, the Company, by action of the Committee, is empowered to
make such adjustment, if any, in the number and kind of Performance Share Units
subject to this Agreement as it considers appropriate for the protection of the
Company and of the Grantee.

 

6.          No later than the date as of which an amount first becomes
includable in the gross income of the Grantee for federal income tax purposes
with respect to the Performance Share Units granted hereunder, the Grantee shall
pay to the Company, or make arrangements satisfactory to the Committee regarding
the payment of, any federal, state or local taxes of any kind required by law to
be withheld with respect to that amount. Unless otherwise determined by the
Committee, minimum statutory withholding obligations may be settled with
previously owned Common Shares or Performance Share Units that have been earned.
The making of that payment or those arrangements is a condition to the
obligations of the Company under the Plan, and the Company and its subsidiaries
and affiliates may, to the extent permitted by law, deduct any taxes from any
payment of any kind otherwise payable to the Grantee.

 

 

 

 

7.          Nothing in this Agreement shall affect in any manner any conflicting
or other provision of any other agreement between the Grantee and the Company.
Nothing contained in this Agreement shall limit whatever right the Company might
otherwise have to terminate the employment of the Grantee.

 

8.          The laws of the State of Ohio govern this Agreement, the Plan and
the Performance Share Units granted hereby.

 

IN WITNESS WHEREOF, the Company has caused its corporate name to be subscribed
by its duly authorized officer as of the ___ day of March 2015.

 

  STONERIDGE, INC.       By       George E. Strickler

 

 

  The foregoing is hereby accepted.                 Jonathan DeGaynor

 

 

 

 

Appendix C

 

STONERIDGE, INC.

CHANGE IN CONTROL AGREEMENT

 

THIS CHANGE IN CONTROL AGREEMENT (the “Agreement”) is by and between Stoneridge,
Inc., an Ohio corporation (“Employer”), and Jonathan DeGaynor (“Executive”),
made this 16th day of March 2015.

 

RECITALS

 

A.          Executive desires to be employed by Employer as its President and
Chief Executive Officer;

 

B.          Employer wishes to induce Executive to accept employment and
continue thereafter as its President and Chief Executive Officer and,
accordingly, to provide certain employment security to Executive in the event of
a “Change in Control” (as hereinafter defined);

 

C.          Employer believes that it is in the best interest of its
shareholders for Executive to accept Employer’s employment offer and thereafter
continue in his position on an objective and impartial basis and without
distraction, whether based upon individual financial uncertainties or otherwise,
or conflict of interest as a result of a possible or actual Change in Control;
and

 

D.          In consideration of this Agreement, Executive is willing to accept
Employer’s offer of employment and thereafter continue as Employer’s President
and Chief Executive Officer;

 

NOW THEREFORE, in consideration of Executive’s acceptance of employment and
thereafter Executive continuing as the President and Chief Executive Officer of
Employer and of the mutual promises herein contained, Executive and Employer,
intending to be legally bound, hereby agree as follows:

 

SECTION 1

 

DEFINITIONS

 

1.          A “Change in Control” for the purpose of this Agreement will be
deemed to have occurred if during Executive’s employment with Employer, at any
time:

 

(a)          the Board of Directors or shareholders of Employer approve a
consolidation or merger that results in the shareholders of Employer,
immediately prior to the transaction giving rise to the consolidation or merger,
owning less than 50% of the total combined voting power of all classes of equity
securities entitled to vote of the surviving entity immediately after the
consummation of the transaction giving rise to the merger or consolidation;

 

(b)          the Board of Directors or shareholders of Employer approve the sale
of substantially all of the assets of Employer or the liquidation or dissolution
of Employer;

 

 

 

 

 

(c)          any person or other entity (other than Employer or a subsidiary of
Employer or any Employer employee benefit plan (including any trustee of any
such plan acting in its capacity as trustee)) purchases any common shares (or
securities convertible into common shares) pursuant to a tender or exchange
offer without the prior consent of the Board of Directors or becomes the
beneficial owner of securities of Employer representing 35% or more of the
voting power of Employer’s outstanding securities; or

 

(d)          during any two-year period, individuals who at the beginning of
such period constitute the entire Board of Directors cease to constitute a
majority of the Board of Directors, unless the election or the nomination for
election of each new director is approved by the Nominating and Corporate
Governance Committee (if comprised entirely of directors who were in office at
the beginning of that period) or at least two-thirds of the directors then still
in office who were directors at the beginning of that period.

 

2.          A “Triggering Event” for the purpose of this Agreement will be
deemed to have occurred if within two years after the date on which the Change
in Control occurred:

 

(a)          Employer separates Executive from service with Employer, other than
in the case of a Termination for Cause (as defined below); or

 

(b)          Executive separates from service with Employer for Good Reason (as
defined below).

 

For purposes of this Agreement, the term “separates from service with Employer”
shall mean Executive’s Separation from Service, as determined under Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), and the
regulations promulgated thereunder; provided, however, that such Separation from
Service with Employer is not as a result of Executive’s death, or disability (as
defined in Code Section 409A). If, however, Executive separates from service
with Employer as a result of death or disability (as defined in Code Section
409A) after Employer has provided written notice to Executive of Employer’s
intent to separate Executive from service with Employer at a future date or
after Executive has provided written notice to Employer of Executive’s intent to
separate from service with Employer at a future date for Good Reason, but in no
event later than two years after the date on which the Change in Control
occurred, then notwithstanding the prior sentence, Executive or his estate, as
applicable, will be entitled the benefits provided herein.

 

3.          Executive will be deemed to have separated from service with
Employer for “Good Reason” for the purpose of this Agreement if:

 

(a)          Employer materially reduces Executive’s title, responsibilities,
power or authority in comparison with his title, responsibilities, power or
authority at or about the time of the Change in Control;

 

(b)          Employer assigns Executive duties that are materially inconsistent
with the duties assigned to Executive on the date on which the Change in Control
occurred, and which duties Employer persists in assigning to Executive despite
the prior written objection of Executive;

 

 

 

 

(c)          Employer reduces Executive’s base compensation, or materially
reduces his group health, life, disability or other insurance programs
(including any such benefits provided to Executive’s family), his pension,
retirement or profit-sharing benefits or any benefits provided by Employer’s
Annual Incentive Plans or Long-Term Incentive Plans or any substitute therefor,
or excludes him from any plan, program or arrangement, including but not limited
to any bonus or incentive plans in which Employer’s other executive officers are
included; or

 

(d)          Employer requires Executive to be based at or generally work from
any location more than 100 miles from the geographical center of the city where
Executive worked or Executive’s residence on the date on which the Change of
Control occurred (the “Location of Employment”) or Employer over the course of
any calendar month requires Executive to be away from his Location of Employment
for more than 50% of the business days during that month.

 

4.          A “Termination for Cause” for the purposes of this Agreement will be
deemed to have occurred if, and only if, the Executive’s employment is
terminated because of any one or more of the following:

 

(a)          misappropriation of funds from Employer;

 

(b)          conviction of a felony;

 

(c)          commission of a crime or act or series of acts involving moral
turpitude;

 

(d)          commission of an act or series of acts of dishonesty that are
materially inimical to the best interests of Employer;

 

(e)          willful and repeated failure to perform the duties associated with
Executive’s position, which failure has not been cured within thirty (30) days
after Employer gives notice thereof to Executive; or

 

(f)          failure to cooperate with any Employer investigation or with any
investigation, inquiry, hearing or similar proceedings by any governmental
authority having jurisdiction over Employer or Executive.

 

Provided, however, the Executive shall have been provided with written notice
that there is a basis for termination for cause under clauses (a) and (d)-(f),
above. The notice shall set forth the facts regarding the basis for termination.
The Executive shall be afforded a reasonable amount of time under the
circumstances after the delivery of the notice before the Board meets to
consider any possible termination for cause (which amount of time the parties
acknowledge may be very limited depending on the circumstances). At or prior to
the meeting of the Board to consider the matters described in the written notice
the Executive will be afforded an opportunity to express his views to the Board
on the subject matter of the notice. The Board’s determination concerning a
termination for Cause shall be made at the sole discretion of the Board.

 

5.          “Executive’s Annual Bonus” means the greater of the target annual
incentive award at the time of termination or the actual incentive award
received for the fiscal year prior to termination.

 

 

 

 

6.          “Executive’s Annual Salary” means the greater of Executive’s annual
base salary at the time of a Triggering Event or at the time of the occurrence
of a Change in Control.

 

7.          “Executive Pro Rata Annual Bonus” means an amount equal to the pro
rata amount of incentive compensation Executive would have been entitled to at
the time of a Triggering Event calculated based upon the personal and Employer
targets or performance goals that were achieved in the year in which the
Triggering Event occurred.

 

SECTION 2

 

TRIGGERING EVENT PAYMENTS

 

1.          After the occurrence of a Triggering Event, Employer shall pay
amounts described in this Section 2 within seventy (70) days following the
Executive’s termination of employment, contingent upon the Executive executing a
general release in the form attached as Appendix D to the Employment Agreement
(“General Release”) and as described in Section 9, within sixty (60) days of
cessation of employment, and not revoking the General Release, provided that if
such seventy (70) day period begins in one calendar year and ends in a second
calendar year, payment shall commence in the second calendar year. If the
Company has not received the General Release within forty-five (45) days after
the Executive’s cessation of employment, the Company shall provide Executive
Written Notice that the General Release must be signed within sixty (60) days
after cessation of employment to receive the benefits hereunder, which notice,
however, shall in no event modify any otherwise applicable time periods. If the
Executive fails to timely sign and deliver the General Release, the Company
shall not be obligated to pay the amounts set forth in this Section 2 and this
Agreement shall terminate. Under no circumstances there shall be duplication of
payments under this Section 2 and the Employment Agreement. The amounts to be
paid are as follows:

 

(a)          A lump sum payment, which will be in addition to any other
compensation or remuneration to which Executive is, or becomes, entitled to
receive from Employer. The lump sum cash payment shall be in an amount equal to
the sum of (i) two times Executive’s Annual Salary, plus (ii) two times
Executive’s Annual Bonus.

 

(b)          In addition to making the payment described above, Employer shall
also pay Executive a lump sum cash payment equal to the Executive Pro Rata
Annual Bonus which shall be paid in the year after the year in which the
Triggering Event occurred.

 

 

 

 

(c)          In addition, Employer shall, at its expense, provide Executive, and
his family with life and health insurance (“Health and Welfare Benefits”) in an
amount not less than that provided on the date on which the Change in Control
occurred for a period of twenty-four (24) months beginning on the date of the
Triggering Event; provided, however, Employer shall not be obligated to pay for
Health and Welfare Benefits after the date on which Executive shall be eligible
to receive benefits from another employer which are substantially equivalent to
or greater than the benefits Executive and his family received from Employer;
provided, further, that if Executive’s continuation in some or all of Employer
Health and Welfare Benefits is not available, then Employer shall make monthly
payments to Executive commencing the first day of the month after Employer makes
the payments described in Section 2, paragraph 1(a) above equal to the cost of
the coverage for similarly situated employees of Employer, as determined solely
by Employer, over a period of twenty-four (24) months with respect to those
benefits among the Health and Welfare Benefits not available. The benefits shall
run concurrent with the health insurance continuation coverage otherwise
available under the COBRA rules.

 

The benefits under Section 2, paragraph 1(a) and, if applicable, Section 2,
paragraph 1(b) shall be paid in one lump sum cash payment. If the Executive is a
“specified employee” (within the meaning of Section 409A of the Code), all
payments under Section 2 that are deferred compensation subject to Section 409A
restrictions shall be made or commence, as applicable, on the date which is the
earlier of (i) the Executive’s death or (ii) six (6) months after the date of
Executive’s separation from service with Employer. In addition, all payments
pursuant to this Agreement shall be made less standard required deductions and
withholdings, including the amount of the excise tax on excess parachute
payments as provided in Code Section 4999.

 

2.          Notwithstanding anything in this Agreement to the contrary, in the
event that it shall be determined (as hereinafter provided) that any payment or
distribution by Employer to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement,
or otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any grants under Employer’s
Amended and Restated Long-Term Incentive Plan, any stock option, restricted
stock, stock appreciation right or similar right, or the lapse or termination of
any restriction on, or the vesting or exercisability of, any of the foregoing
(in the aggregate “Total Payments”), would be subject, but for the application
of this Section 2, paragraph 2, to the excise tax imposed by Code Section 4999
(or any successor provision thereto) (the “Excise Tax”) by reason of being
considered “contingent on a change in ownership or control” of Employer and as
being considered an “excess parachute payment,” both within the meaning of Code
Section 280G (or any successor provision thereto), then:

 

(a)          If the aggregate Parachute Value (as defined below) of the Total
Payments is 110% or less than the Safe Harbor Amount (as defined below), then
the payments payable to Executive pursuant to Section 2, paragraph 1 shall be
reduced to such an amount so that Total Payments will be capped to the extent
necessary so that Total Payments will equal the Safe Harbor Amount and no Excise
Tax will be triggered.

 

 

 

 

(b)          If, however, the aggregate Parachute Value of the Total Payments
exceeds 110% of the Safe Harbor Amount, then the payments payable to Executive
pursuant to Section 2, paragraph 1 shall not be reduced as provided for under
Section 2, paragraph 2(a), but instead, the full amount of Total Payments shall
be paid to Executive and the Excise Tax will be triggered.

 

For purposes of this Agreement, the “Safe Harbor Amount” is the maximum
aggregate Parachute Value of the Total Payments that may be paid or distributed
to Executive or for the benefit of Executive without triggering the Excise Tax
because such amount is less than three times Executive’s “base amount,” within
the meaning of Code Section 280G. The “Parachute Value” of the Total Payments is
the aggregate present value as of the date of the Change in Control of that
portion of the Total Payments that constitutes “parachute payments,” within the
meaning of Code Section 280G. The calculation of the Total Payments, the Safe
Harbor Amount, and the Parachute Value, as well as the method in which the
reduction in payments under Section 2, paragraph 2(a) will be applied, shall be
conducted and determined by a national accounting firm selected by Employer and
its determinations shall be binding on all parties; provided, however, that if
the calculation of such national accounting firm will result in a reduction of
any of the payments to be made to Executive under Section 2, paragraph 1, prior
to issuance of the final and binding determination, Executive shall be given a
reasonable opportunity to (i) review and comment upon all of the material,
information and documentation provided to the national accounting firm by
Employer, and (ii) offer such input as Executive may determine to be helpful to
the national accounting firm’s preliminary determination.

 

3.          If in any future year a determination is made that the reduction
described in Section 2, paragraph 2(a) was not required, then payment of such
reduced amount shall be made as soon as administratively feasible.

 

SECTION 3

 

SETOFF

 

No amounts otherwise due or payable under this Agreement will be subject to
setoff or counterclaim by either party hereto.

 

SECTION 4

 

ATTORNEY’S FEES/DISPUTE RESOLUTION/ARBITRATION AGREEMENT

 

All attorney’s reasonable fees and related expenses incurred in good faith by
Executive in connection with or relating to the enforcement by him of his rights
under this Agreement will be paid for by Employer. In addition, Executive and
Employer agree that, subject to the express exceptions set forth in this Section
4, any dispute, claim or controversy that could be brought in court
(collectively referred to herein as “Claim”) that Executive has against Employer
or that Employer has against Executive relating to or arising out of the terms
of this Agreement shall be resolved by final and binding arbitration as set
forth in this Section 4.  Under this Dispute Resolution/Arbitration Agreement
Section, the term Claim includes any allegations of unlawful discrimination,
harassment, wrongful discharge, constructive discharge, and claims related to
the payment of wages or benefits, under federal, state or local law and further
includes, but is not limited to, contract, tort, common law, and statutory
claims.  By agreeing to this Dispute Resolution/Arbitration Agreement Section,
Executive and Employer expressly waive any right that they may have to resolve
any covered Claim through any other means, including a jury or court trial.

 

 

 

 

Executive and Employer agree that any covered Claim shall be resolved by
exclusive, final and binding arbitration to be conducted in accordance with the
American Arbitration Association’s (“AAA”) Employment Arbitration Rules and
Mediation Procedures and held in the county in which the Executive provides a
majority of Executive’s services.  In any arbitration proceeding, the Arbitrator
shall apply the terms of this Dispute Resolution/Arbitration Agreement, and
applicable federal, Ohio state, and local law. In the event any portion of this
Dispute Resolution/Arbitration Agreement Section is held inapplicable as in
violation of applicable law, as determined by the arbitrator selected herein or
a court of competent jurisdiction, the offending portion of this provision may
be removed or modified and the remainder of this Dispute Resolution/Arbitration
Agreement Section shall not be affected.  This Dispute Resolution/Arbitration
Agreement Section shall be governed by the Federal Arbitration Act as will any
actions to compel, enforce, vacate or confirm proceedings, awards, or orders of
the arbitrator under this Dispute Resolution/Arbitration Agreement.

 

SECTION 5

 

SUCCESSORS AND PARTIES IN INTEREST

 

This Agreement will be binding upon and will inure to the benefit of Employer
and its successors and assigns, including, without limitation, any corporation
or other person which acquires, directly or indirectly, by purchase, merger,
consolidation or otherwise, all or substantially all of the business or assets
of Employer. Without limitation of the foregoing, Employer will require any such
successor, by agreement in form and substance satisfactory to Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that it is required to be performed by Employer. This
Agreement will be binding upon and will inure to the benefit of Executive, his
heirs at law and his personal representatives.

 

SECTION 6

 

ATTACHMENT

 

Neither this Agreement nor any benefits payable hereunder will be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge or to execution, attachment, levy or similar process at law, whether
voluntary or involuntary.

 

SECTION 7

 

NO EMPLOYMENT CONTRACT; TERMINATION

 

This Agreement will not in any way constitute an employment agreement between
Employer and Executive and it will not oblige Executive to continue in the
employ of Employer, nor will it oblige Employer to continue to employ Executive,
but it will merely require Employer to pay benefits hereunder to Executive under
the agreed upon circumstances. In addition, provided a Change in Control has not
occurred, this Agreement shall terminate and be of no further force or effect
one year from the date Executive ceases to be an employee

 

 

 

  

SECTION 8

 

RIGHTS UNDER OTHER PLANS AND AGREEMENTS

 

The Change in Control benefits herein provided will be in addition to, and are
not intended to reduce, restrict or eliminate any benefit to which Executive may
otherwise be entitled by virtue of his termination of employment or otherwise.

 

SECTION 9

 

RELEASE

 

As a condition to the payment of the benefits by Employer to Executive pursuant
to this Agreement, as described in Section 2, Executive shall deliver a signed
release of claims against Employer within the timeframe set forth in Section 2.
Such release shall be in the form attached as Appendix D of the Employment
Agreement.

 

SECTION 10

 

COVENANTS, NON-COMPETITION, AND CONFIDENTIAL INFORMATION

 

For the first year following Executive’s separation from service with Employer
without Cause or for Good Reason, Executive shall not, directly or indirectly,
do or suffer any of the following:

 

(a)          Own, or control or participate in the ownership, or control of, or
in a competitive capacity be employed or engaged by or in a competitive capacity
otherwise affiliated or associated as a consultant, independent contractor or
otherwise with, any other corporation, partnership, proprietorship, firm,
association or other business entity engaged in the business of designing and/or
manufacturing of engineered electrical and electronic components, modules and
systems for applications that compete with products sold by the Company;
provided, however, that the ownership of not more than one percent (1%) of any
class of publicly traded securities of any entity shall not be deemed a
violation of this covenant;

 

(b)          Without the prior written consent of Employer, on his own behalf or
on behalf of any person or entity, directly or indirectly, hire or knowingly
solicit the employment of any employee who has been employed by Employer or its
subsidiaries at any time during the six (6) months immediately preceding such
date of hiring or solicitation;

 

(c)          Solicit, divert or entice away or attempt to solicit, divert or
entice away the business or patronage of any individual or entity who is a
client or known prospective client of the Company (excluding members of the
Executive’s immediate family) or otherwise interfere or attempt to interfere
with any transaction, agreement, prospective agreement, business opportunity or
business relationship in which the Company is involved and of which Executive
has knowledge; or

 

 

 

 

(d)          Use, disclose or make accessible to any other person, firm,
partnership, corporation or any other entity any Confidential Information (as
defined below) pertaining to the business of Employer or any entity controlling,
controlled by, or under common control with Employer (each an “Affiliate”)
except when required to do so by a court of competent jurisdiction; provided,
however, that the foregoing restrictions shall not apply to the extent that such
information (i) is clearly obtainable in the public domain, (ii) becomes
obtainable in the public domain, except by reason of the breach by Executive of
the terms hereof, (iii) was not acquired by Executive in connection with his
employment or affiliation with Employer, (iv) was not acquired by Executive from
Employer or its representatives, or (v) is required to be disclosed by rule of
law or by order of a court or governmental body or agency. For purposes of this
Agreement, “Confidential Information” shall mean non-public information
concerning Employer’s financial data, statistical data, strategic business
plans, product development (or other proprietary product data), customer and
supplier lists, customer and supplier information, pricing data, information
relating to governmental relations, discoveries, practices, processes, methods,
trade secrets, developments, marketing plans and other non-public, proprietary
and confidential information of Employer or its Affiliates, that, in any case,
is not otherwise generally available to the public and has not been disclosed by
Employer, or its Affiliates, as the case may be, to others not subject to
confidentiality agreements. In the event Executive’s employment is terminated
for any reason, Executive immediately shall return to Employer all Confidential
Information in his possession.

 

SECTION 11

 

NOTICES

 

All notices and other communications required to be given hereunder shall be in
writing and will be deemed to have been delivered or made when mailed, by
certified mail, return receipt requested, if to Executive, to the last address
which Executive shall provide to Employer, in writing, for this purpose, but if
Executive has not then provided such an address, then to the last address of
Executive then on file with Employer; and if to Employer, then to the last
address which Employer shall provide to Executive, in writing, for this purpose,
but if Employer has not then provided Executive with such an address, then to:

 

Secretary

Stoneridge, Inc.

9400 East Market Street

Warren, Ohio 44484

 

SECTION 12

 

GOVERNING LAW AND JURISDICTION

 

This Agreement will be governed by, and construed in accordance with, the laws
of the State of Ohio, except for the laws governing conflict of laws. Subject to
Section 4, if either party institutes a suit or other legal proceedings, whether
in law or equity, Executive and Employer hereby irrevocably consent to the
jurisdiction of the Common Pleas Court of the State of Ohio (Trumbull County) or
the United States District Court for the Northern District of Ohio.

 

 

 

 

SECTION 13

 

ENTIRE AGREEMENT AND COMPLIANCE WITH LAW

 

This Agreement constitutes the entire understanding between Employer and
Executive concerning the subject matter hereof and supersedes all prior written
or oral agreements or understandings between the parties hereto, including all
prior Change in Control agreements or arrangements by and between Employer and
Executive. Nothing in this Agreement is intended to affect Executive’s rights,
including rights to indemnification, if applicable, under the Employer’s
Certificate of Incorporation or Code of Regulations or under any employment
agreement, award agreement or indemnification agreement. No term or provision of
this Agreement may be changed, waived, amended or terminated except by a written
instrument signed by both parties.

 

[The remainder of this page is intentionally left blank.]

 

 

 

  

[Signature Page for Change in Control Agreement]

 

IN WITNESS WHEREOF, and as conclusive evidence of the adoption of this
Agreement, the parties have hereunto set their hands as of the date and year
first above written.

 

    STONERIDGE, INC.             By: /s/ George E. Strickler       George E.
Strickler       Executive Vice President and Chief Financial Officer            
/s/ Jonathan DeGaynor     Jonathan DeGaynor

 

 

 

 

Appendix D

 

FORM OF GENERAL RELEASE

 

This general release (“Release”) agreement is made by and between Jonathan
DeGaynor (“DeGaynor”) and Stoneridge, Inc. (“Stoneridge’).

 

The Release is required be delivered to Stoneridge by DeGaynor as a condition to
certain payments to be made to DeGaynor under his [Employment Agreement][Change
in Control Agreement] and is intended to resolve any claims which DeGaynor may
have relating to his employment and other positions with Stoneridge and
DeGaynor’s separation from employment with Stoneridge, so that both DeGaynor and
Stoneridge may go their separate ways without further disputes or litigation.
DeGaynor understands that Stoneridge is not entering into this Agreement as an
admission of any liability on its part, but rather to reach a friendly
resolution with DeGaynor regarding his employment with, and separation from,
Stoneridge.

 

1.          DeGaynor and Stoneridge agree that DeGaynor’s employment with
Stoneridge [has been][will be] terminated on __________.

 

2.          DeGaynor’s execution and delivery of this Release is a condition to
Stoneridge’s obligation to pay DeGaynor certain severance, other amounts and/or
provide certain benefit continuation in accordance with the [Employment
Agreement][Change in Control Agreement].

 

 

 

 

4.          In exchange for the payments set in the [Employment
Agreement][Change in Control Agreement] DeGaynor for himself and for his heirs,
personal representatives, successors and assigns, hereby forever releases,
remises and discharges Stoneridge and each of its past, present, and future
officers, directors, shareholders, members, employees, trustees, agents,
representatives, affiliates, successors and assigns (collectively the
“Stoneridge Released Parties”) from any and all claims, claims for relief,
demands, actions and causes of action of any kind or description whatsoever,
known or unknown, whether arising out of contract, tort, statute, treaty or
otherwise, in law or in equity, which DeGaynor now has, has had, or may
hereafter have against any of the Stoneridge Released Parties from the beginning
of DeGaynor’s employment with Stoneridge to the date of this Release, arising
from, connected with, or in any way growing out of, or related to, directly or
indirectly, (i) DeGaynor’s employment by Stoneridge, (ii) DeGaynor’s service as
an officer, director or key employee, as the case may be, of Stoneridge, (iii)
any transaction prior to the date of this Release and all effects, consequences,
losses and damages relating thereto, (iv) the services provided by DeGaynor to
Stoneridge, or (v) DeGaynor’s termination of employment with Stoneridge under
the common law or any federal or state statute, including, but not limited to,
all claims arising under the Civil Rights Acts of 1866 and 1964, the Equal Pay
Act of 1963, the Age Discrimination in Employment Act of 1967, the
Rehabilitation Act of 1973, the Older Workers Benefit Protection Act of 1990,
the Americans with Disabilities Act of 1990, the Civil Rights Act of 1991, the
Family and Medical Leave Act of 1993, the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”), Title 4112 of the Ohio Revised Code, and all other
foreign, federal, state or local laws governing employers and employees;
provided, however, that the Executive does not release, remise or discharge and
nothing in this Release will bar, impair or affect the obligations, covenants
and agreements of Stoneridge (i) set forth in the Employment Agreement with
respect to the last two sentences of Section 2(B), Sections 3(B) with respect to
the 2015 AIP, 3(C), 4(B)(1), 5(B) and to the extent necessary Section 7, (ii)
set forth in the Indemnification Agreement between Stoneridge and DeGaynor or
with respect to rights to be indemnified and/or advanced expenses under any
corporate document of Stoneridge or any agreement or pursuant to applicable law
or to be covered under any applicable directors’ and officers’ liability
insurance policies, (iii) to pay any wages that have been earned prior to
separation from service, (iv) the earning of any equity awards in connection
with the termination of DeGaynor’s employment pursuant to any award agreement,
(v) those set forth in this Release, (vi) any benefit claims under any qualified
employee benefit plans in which DeGaynor is a participant by virtue of his
employment either (1) arising after the date hereof, (2) arising before the date
hereof (except for known disputes which are released), or (3) for which DeGaynor
has no knowledge of on the date hereof, and (vii) set forth in the Change in
Control Agreement with respect to severance obligations (the “Excluded
Matters”). With regard to the release of claims under the Age Discrimination in
Employment Act, DeGaynor understands that he has a period of at least 21 days in
which to consider this release, although he may sign it sooner if he chooses.
DeGaynor also understands that he will have a period of 7 days following the
signing of this Release to revoke it by notifying Stoneridge’s Chief Financial
Officer, in writing at 9400 East Market Street, Warren, Ohio 44484 prior to the
expiration of the seven day period. The release of claims under the Age
Discrimination in Employment Act shall not become effective and the payments to
be made under the [Employment Agreement][Change in Control Agreement] will not
be made until the 7 day revocation period has expired. DeGaynor is advised that
by signing this Release, he is waiving legal rights and he is hereby advised to
consult with an attorney prior to signing. Notwithstanding DeGaynor’s release of
claims, DeGaynor retains the right to file a charge of alleged employment
discrimination with the federal Equal Employment Opportunity Commission (“EEOC”)
or a state or local civil rights agency or to participate in the investigation
of such charge filed by another person or to initiate or respond to
communications with the EEOC or a state or local civil rights agency; however,
DeGaynor waives all rights to recover or share in any damages or monetary
payment awarded under any EEOC charge or action or any state or local agency
complaint or action.

 

5.          DeGaynor agrees he will not disparage Stoneridge or any of its
officers or directors about any events occurring during his employment with
Stoneridge. Stoneridge will not, and will cause its officers and directors not
to, disparage DeGaynor and agrees to respond to reference requests with only the
following information: dates of employment and positions held (unless DeGaynor
provided prior approval to release additional information).

 

6.          DeGaynor agrees that he has or will, upon request, return any
property, including manuals, other documents and electronic files, which were
furnished to him by Stoneridge during his employment. DeGaynor acknowledges that
during his employment he has had access to and knowledge of Stoneridge
confidential business information, including but not limited to special
information about Stoneridge financial affairs, budgeting, donors, financial and
contract data, expansion plans, and strategies for Stoneridge’s business.
DeGaynor agrees that he will not, without Stoneridge’s express written consent,
directly or indirectly disclose to any third party or use for his own benefit or
the benefit of any third party, any confidential information of Stoneridge or
any other confidential information concerning Stoneridge business that he
obtained in the course of his employment with Stoneridge which is not generally
known to the public; provided, however, nothing in this section is intended to
affect any other or additional DeGaynor’s obligation with respect to
confidentiality, non-competition, and similar covenants, etc., set forth in any
other agreement by and between Stoneridge and DeGaynor or DeGaynor’s obligations
as an officer or director under common law.

 

 

 

  

7.          DeGaynor acknowledges and affirms that he has had the opportunity to
and has carefully read and reviewed all the terms and conditions contained in
this Release with anyone of his choosing and he fully understands it and that he
signs it voluntarily, without duress or coercion.

 

8.          DeGaynor agrees that he will not now or hereafter sue Stoneridge
concerning any claims relating to his employment or termination of employment
with Stoneridge, except as the same may affect DeGaynor’s rights with respect to
the enforcement of this Release or DeGaynor’s rights with respect to the
Excluded Matters. This Release may be pleaded as a full and complete defense to,
and may be used as a basis for injunction against, any action or proceeding
DeGaynor may institute, prosecute, or maintain in breach of this Release.

 

9.          This Release is to be construed under the laws of the State of Ohio.
The invalidity or unenforceability of any provision of this Release shall not
affect the validity or enforceability of any other provision of it, which shall
nevertheless remain in full force and effect. The Release contains the entire
agreement between the parties and may not be modified, except in writing signed
by both of the parties.

 

This Release has been executed by the parties on the dates indicated below.

 

    Jonathan DeGaynor       Date:       Stoneridge, Inc.         By:        
Date: