SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
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Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
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STANDARD MOTOR PRODUCTS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
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STANDARD MOTOR PRODUCTS, INC.
37-18 NORTHERN BOULEVARD
LONG ISLAND CITY, NEW YORK 11101
APRIL 18, 2006
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Standard Motor Products, Inc. to be held in the offices of JPMorgan Chase, One
Chase Manhattan Plaza, New York, NY 10081, on Thursday, May 18, 2006 at 2:00
p.m. (Eastern Daylight Time).
At the Annual Meeting, you will be asked to (a) elect nine directors, (b)
approve the Standard Motor Products, Inc. 2006 Omnibus Incentive Plan, and (c)
ratify the appointment of Grant Thornton LLP as the Company's independent
registered public accounting firm for our 2006 fiscal year. The Board of
Directors recommends that you vote "FOR" each of the above proposals. Please
refer to the Proxy Statement for a detailed explanation of each of the
proposals.
The formal notice of the Annual Meeting, the Proxy Statement and the Proxy
Card are enclosed. We have also enclosed a copy of our Annual Report to
Stockholders, which includes our Form 10-K for our 2005 fiscal year.
YOUR VOTE IS IMPORTANT! The Board of Directors appreciates and encourages
stockholder participation in the Company's affairs and invites you to attend the
Annual Meeting in person. It is important, however, that your shares be
represented at the Annual Meeting in any event, and for that reason, we ask that
whether or not you expect to attend the Annual Meeting, you take a moment to
complete, date, sign and return the accompanying proxy in the enclosed
postage-paid envelope. You should be aware that only votes cast "FOR" or
"AGAINST" a proposal are used in determining the results of a vote.
On behalf of the Board of Directors, I would like to thank you for your
continued support of the Company, and I look forward to seeing you at the Annual
Meeting.
Sincerely,
/s/ Lawrence I. Sills
Lawrence I. Sills
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
STANDARD MOTOR PRODUCTS, INC.
37-18 NORTHERN BOULEVARD
LONG ISLAND CITY, NEW YORK 11101
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2006
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of STANDARD
MOTOR PRODUCTS, INC. (the "Company") will be held in the offices of JPMorgan
Chase, One Chase Manhattan Plaza, New York, NY 10081, on Thursday, May 18, 2006
at 2:00 p.m. (Eastern Daylight Time). The Annual Meeting will be held for the
following purposes:
1. To elect nine directors of the Company, all of whom shall hold
office until the next annual meeting of stockholders and until their
successors are duly elected and qualified;
2. To approve the Standard Motor Products, Inc. 2006 Omnibus Incentive
Plan;
3. To ratify the appointment of Grant Thornton LLP as the Company's
independent registered public accounting firm for the fiscal year
ending December 31, 2006; and
4. To transact such other business as may properly come before the
Annual Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice. The Board of Directors has fixed the close
of business on April 7, 2006 as the record date for the determination of
stockholders entitled to notice of and to vote at, the Annual Meeting or any
adjournment thereof.
Whether or not you plan to attend the Annual Meeting, please vote, date
and sign the enclosed proxy, which is solicited by the Board of Directors of the
Company, and return it in the pre-addressed envelope, to which no postage need
be affixed, if mailed in the United States.
By Order of the Board of Directors
/s/ Carmine J. Broccole
Carmine J. Broccole
VICE PRESIDENT GENERAL COUNSEL
AND SECRETARY
Long Island City, New York
April 18, 2006
STANDARD MOTOR PRODUCTS, INC.
37-18 NORTHERN BOULEVARD
LONG ISLAND CITY, NEW YORK 11101
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2006
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Standard Motor Products, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held on May 18, 2006 or at any adjournment thereof. Proxy material is being
mailed on or about April 18, 2006 to the Company's 424 stockholders of record.
The total number of shares of Common Stock outstanding and entitled to vote on
April 7, 2006 was 18,470,891.
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
INFORMATION AS TO VOTING SECURITIES
The close of business on April 7, 2006 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of, and vote at, the Annual Meeting. Holders of Common Stock have the
right to one vote for each share registered in their names on the books of the
Company as of the close of business on the record date.
In order to conduct business at the Annual Meeting, our Bylaws require the
presence in person or by proxy of stockholders holding a majority of the voting
power of the outstanding shares of Common Stock entitled to vote on the matters
presented at the Annual Meeting. If a quorum is not present, a vote cannot
occur, and our Annual Meeting may be adjourned to a subsequent date for the
purpose of obtaining a quorum. Proxy cards received by us but marked "Withheld,"
abstentions and broker non-votes will be included in the calculation of the
number of shares considered in determining whether or not a quorum exists. A
broker non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received voting
instructions from the beneficial owner.
VOTING AND REVOCATION OF PROXIES
You can vote your shares by completing and returning a proxy card or by
voting in person. If you hold your shares in "street name," you should provide
your broker or other nominee with voting instructions to ensure that your shares
are voted.
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The persons named in the accompanying form of proxy will vote the shares
represented thereby, as directed in the proxy, if the proxy appears to be valid
on its face and is received on time. In the absence of specific instructions,
proxies so received will be voted: (1) "FOR" the election of the named nominees
to the Company's Board of Directors; (2) "FOR" the approval of the Standard
Motor Products, Inc. 2006 Omnibus Incentive Plan; and (3) "FOR" the ratification
of Grant Thornton LLP as the Company's independent registered public accounting
firm.
Proxies are revocable at any time before they are exercised by (a) sending
in a later-dated proxy (with the same or other instructions), (b) appearing at
the Annual Meeting and voting in person, or (c) notifying the Secretary of the
Company that the proxy is revoked via fax at 718-784-3284 or via mail to Carmine
J. Broccole, Secretary, Standard Motor Products, Inc., 37-18 Northern Blvd.,
Long Island City, NY 11101. If you hold shares through a bank or brokerage firm,
you must contact that bank or firm to revoke any prior voting instructions.
VOTES REQUIRED
Nominees receiving a plurality of the votes cast will be elected as
directors. Proposal Nos. 2 and 3 require the approval of the affirmative vote of
a majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting. Only those votes cast "FOR" or "AGAINST"
a proposal are used in determining the results of a vote. An abstention or a
broker non-vote shall not constitute a vote cast.
METHOD AND EXPENSE OF PROXY SOLICITATION
The solicitation of proxies will be made primarily by mail. Proxies may
also be solicited personally and by telephone by regular employees of the
Company at nominal cost.
The Company does not expect to pay compensation for any solicitation of
proxies but may pay brokers and other persons holding shares in their names, or
in the name of nominees, their expenses for sending proxy material to beneficial
owners for the purpose of obtaining their proxies. The Company will bear all
expenses in connection with the solicitation of proxies.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, nine directors are to be elected to hold office
until the next annual meeting of stockholders and until their successors are
duly elected and qualified. Unless individual stockholders specify otherwise,
each executed proxy will be voted "FOR" the election to the Board of Directors
of the nine nominees named below, all of whom are currently directors of the
Company.
INFORMATION REGARDING NOMINEES
Each person listed below has consented to be named as a nominee and agreed
to serve if elected. If any of those named are not available for election at the
time of the Annual Meeting, discretionary authority will be exercised to vote
for substitutes unless the Board chooses to reduce the number of directors.
Management is not aware of any circumstances that would render any nominee
listed below unavailable.
DIRECTOR
NAME OF DIRECTOR POSITION WITH THE COMPANY AGE SINCE
-------------------------- ------------------------------------------------- --- --------
Lawrence I. Sills Chairman of the Board and Chief Executive Officer 66 1986
William H. Turner(1)(2) Presiding Independent Director 66 1990
Robert M. Gerrity(1)(3) Director 68 1996
Kenneth A. Lehman(1) Director 62 1999
Arthur S. Sills Director 62 1995
Peter J. Sills Director 59 2004
Frederick D. Sturdivant(1) Director 68 2001
Richard S. Ward(1)(4) Director 65 2004
Roger M. Widmann(1) Director 66 2005
----------
(1) Member of the Company's Audit Committee, Compensation and Management
Development Committee, and Nominating and Corporate Governance
Committee.
(2) Chairman of the Audit Committee.
(3) Chairman of the Compensation and Management Development Committee.
(4) Chairman of the Nominating and Corporate Governance Committee.
LAWRENCE I. SILLS has served as our Chief Executive Officer and Chairman
of the Board since December 2000 and has been a director of the Company since
1986. From 1986 to 2000, Mr. Sills served as our President and Chief Operating
Officer. From 1983 to 1986, he served as our Vice President of Operations. Mr.
Sills is the brother of Arthur S. Sills and Peter J. Sills, each a director of
the Company.
WILLIAM H. TURNER has served as our Presiding Independent Director since
January 2006 and as a director of the Company since May 1990. Since 2004, Mr.
Turner has been the Dean of the College of Business at Stony Brook University.
He is also a director of Ameriprise Financial, Inc., Franklin Electronic
Publishers, Inc., Volt Information Sciences, Inc. and New Jersey Resources
Corporation. Mr. Turner served as the Senior Partner of Summus Ltd., a
consulting firm, from 2002 to 2004. From 1997 until 2002, he served in various
capacities at PNC Bank NJ, including President, Chief Executive Officer and
Chairman Northeast Region. He was President and Co-Chief Executive Officer of
Franklin Electronic Publishers, Inc. from 1996 to 1997. Prior to that time, he
was the Vice-Chairman, Chase Manhattan Bank and its predecessor, Chemical
Banking Corporation.
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ROBERT M. GERRITY has served as a director of the Company since July 1996.
Mr. Gerrity currently serves as the Chairman of the Industrial Group of Glencoe
Capital, a private equity firm, and is a director and principal of Gerrity
Partners, a consulting business. He is also a director of the Rimrock
Corporation, Federal Signal Corporation and Polyair Inter Pack Inc. Mr. Gerrity
served as Chairman and Chief Executive Officer of the Antrim Group, Inc. from
1996 to 2000. Prior to 1996, he served as Vice Chairman of New Holland, n.v., an
agricultural and construction equipment company.
KENNETH A. LEHMAN has served as a director of the Company since April
1999. Mr. Lehman has been Managing Director of the KKP Group LLC since 1999 and
is also an advisor to Gold Eagle Co. He currently serves as a Board Chair of
Winning Workplaces, a General Assembly Member of CARE International, and a Board
Member of CARE USA, Public Radio International, Chicago Public Radio and the
University of Chicago Hospital. From 1990 to 1998, he was Co-Chairman and Chief
Executive Officer of Fel-Pro Incorporated.
ARTHUR S. SILLS has served as a director of the Company since October
1995. Mr. Sills was an educator and administrator in the Massachusetts school
districts for thirty years prior to his retirement in 2000. Mr. Sills is the
brother of Lawrence I. Sills and Peter J. Sills.
PETER J. SILLS has served as a director of the Company since July 2004 and
from December 2000 until May 2004. Mr. Sills has been a writer for the past ten
years and was also an attorney. Mr. Sills is the brother of Arthur S. Sills and
Lawrence I. Sills.
FREDERICK D. STURDIVANT has served as a director of the Company since
December 2001. Mr. Sturdivant has been an independent consultant and a Visiting
Professor at the Warrington College of Business at the University of Florida
since 2002. Mr. Sturdivant was Chairman of Reinventures LLC from 2000 to 2002.
From 1998 to 2000, he was Executive Managing Director of Navigant Consulting.
From 1996 to 1998, he was President of Index Research and Advisory Services, a
subsidiary of Computer Sciences Corporation.
RICHARD S. WARD has served as a director of the Company since July 2004.
He is a private investor and a legal consultant. From 1984 until 1998, he served
in various capacities at ITT Corporation, including Executive Vice President and
General Counsel, and served as a member of the ITT Management Committee.
ROGER M. WIDMANN has served as a director of the Company since May 2005.
Mr. Widmann is also a director of Paxar Corporation and Cedar Shopping Centers,
Inc. He currently serves as a director of the March of Dimes of Greater New
York, a director of Oxfam America, a senior moderator of the Executive Seminar
(Humanities) at The Aspen Institute, and a senior mentor of the Henry Crown
Fellowship Program. He previously served as Chairman of the Board of Lydall,
Inc., a manufacturing company, from 1974 to 2004 and was a principal of Tanner &
Co., Inc., an investment banking firm, from 1997 to 2004. Prior to that time, he
was Senior Managing Director of Chemical Securities Inc. (now JPMorgan Chase
Corporation).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH
OF THE NOMINEES LISTED ABOVE.
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PROPOSAL 2
APPROVAL OF 2006 OMNIBUS INCENTIVE PLAN
GENERAL
We are asking our stockholders to approve the Standard Motor Products,
Inc. 2006 Omnibus Incentive Plan (the "Plan"), which was approved by our Board
of Directors on March 8, 2006. If approved by stockholders, the Plan will
replace our existing stock option plans and will become the Company's only plan
for providing stock-based incentive compensation to our eligible employees,
independent directors and other eligible persons.
The following summary of certain material features of the Plan is subject
to the specific provisions contained in the full text of the Plan, as set forth
in Appendix A attached hereto.
PURPOSE OF PLAN
The Plan will allow the Company, under the direction of the Compensation
and Management Development Committee of the Board of Directors or those persons
to whom administration of the Plan has been delegated or permitted by law (the
"Committee") (the Nominating and Corporate Governance Committee of the Board of
Directors will make recommendations to the Committee concerning independent
directors), to make grants of stock options, restricted stock awards, restricted
stock units, stock appreciation rights, performance shares, cash-based awards
and other stock-based awards to employees, directors, consultants, independent
contractors, agents and advisors. The purpose of these stock awards is to
attract and retain talented employees, directors and other eligible persons and
further align their interests and those of our stockholders by continuing to
link a portion of their compensation with the Company's performance.
KEY TERMS
The following is a summary of the key provisions of the Plan.
PLAN TERM: May 18, 2006 to May 18, 2016
ELIGIBLE PARTICIPANTS: All of our employees, directors, consultants,
independent contractors, agents and advisors are
eligible to receive awards under the Plan, provided they
render bona fide services to the Company. The Committee
will determine which individuals will participate in the
Plan. As of March 15, 2006, there were approximately 180
employees and six independent directors who would be
eligible to participate in the Plan.
SHARES AUTHORIZED: 700,000, subject to adjustment to reflect stock splits
and other corporate events or transactions. Shares
subject to awards that are cancelled, forfeited or that
expire by their terms will be returned to the pool of
shares available for grant and issuance under the Plan.
Of this amount, the maximum number of shares that may be
issued to independent directors is one hundred fifty
thousand (150,000) shares.
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AWARD TYPES: (1) Non-qualified and incentive stock options;
(2) Stock appreciation rights (SARs);
(3) Restricted stock and restricted stock units;
(4) Performance units and performance shares;
(5) Cash-based awards; and
(6) Other stock-based awards.
ANNUAL SHARE LIMITS ON (a) Options: The annual maximum aggregate number of
AWARDS: shares subject to options granted to any one person
is twenty-five thousand (25,000).
(b) SARs: The annual maximum number of shares subject to
stock appreciation rights granted to any one person
is twenty-five thousand (25,000).
(c) Restricted Stock or Restricted Stock Units: The
annual maximum aggregate grant with respect to
awards of restricted stock or restricted stock units
to any one person is ten thousand (10,000).
(d) Performance Units or Performance Shares: The annual
maximum aggregate award of performance units or
performance shares that a person may receive is ten
thousand (10,000) shares, or equal to the value of
ten thousand (10,000) shares determined as of the
date of vesting or payout, as applicable.
(e) Cash-Based Awards: The annual maximum aggregate
amount awarded or credited with respect to
cash-based awards to any one person is the greater
of two hundred fifty thousand dollars ($250,000) or
the value of twenty-five thousand (25,000) shares
determined as of the date of vesting or payout, as
applicable.
(f) Other Stock-Based Awards: The annual maximum
aggregate grant with respect to other stock-based
awards to any one person is twenty-five thousand
(25,000) shares.
(g) Independent director limits: The annual maximum
aggregate grant with respect to awards to any
independent director shall be five thousand (5,000)
shares.
VESTING: Vesting schedules will be determined by the Committee
when each award is granted.
AWARD TERMS: Each option granted shall expire at such time as the
Committee shall determine at the time of grant but shall
not be exercisable later than the tenth (10th)
anniversary date of its grant. The term of any SAR
granted shall be determined by the Committee but shall
not be exercisable later than the tenth (10th)
anniversary date of its grant.
REPRICING PROHIBITED: Repricing, or reducing the exercise price of a stock
option or stock appreciation right, is prohibited unless
approved by stockholders.
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INDEPENDENT DIRECTOR AWARDS
If the Plan is approved by stockholders at the Annual Meeting, each
independent director will receive on the date of each annual meeting of
stockholders an automatic restricted stock award of 1,000 shares, and an
additional award of Common Stock valued at $20,000, based on the fair market
value of the Company's Common Stock as of the date of the annual meeting of
stockholders. Independent director restricted stock grants will vest after one
year, so long as the director remains continuously in office. Independent
directors will also be eligible to receive other types of awards under the Plan,
but such awards are discretionary. In the event of a merger or asset sale, all
of the shares of restricted stock will accelerate and become exercisable in
full.
NEW PLAN BENEFITS
Except as described below, the following table sets forth information
concerning the benefits or amounts under the Plan that we can determine will be
received by all current independent directors as a group on an annualized basis.
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF SHARES
----------------- ---------------- ----------------
Independent directors
as a group............. Fair market value on date of grant 6,000
Independent directors
as a group............. $120,000 Based on fair market
value on date of grant
The information in the above table is limited to the annual automatic
restricted stock awards and other stock awards to be granted to our independent
directors in connection with the Annual Meeting. Future awards under the Plan to
executive officers, employees or other eligible participants, and any additional
future discretionary awards to independent directors in addition to those
granted automatically, are discretionary and cannot be determined at this time,
nor can it be determined what these discretionary awards would have been if the
Plan had been in effect during fiscal 2005. We therefore have not included any
such awards in the table above.
TERMS APPLICABLE TO STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The exercise price of stock options or stock appreciation rights granted
under the Plan may not be less than the fair market value of our Common Stock on
the date of grant. On the record date, the closing price of the Company's Common
Stock on the New York Stock Exchange was $8.01 per share. The term of these
awards may not be longer than ten years. The Committee will determine at the
time of grant the other terms and conditions applicable to such award, including
vesting and exercisability.
TERMS APPLICABLE TO RESTRICTED STOCK AWARDS, RESTRICTED STOCK UNIT AWARDS,
PERFORMANCE SHARES AND OTHER STOCK-BASED AWARDS
The Committee will determine the terms and conditions applicable to the
granting of restricted stock awards, restricted stock unit awards, performance
shares and other stock-based awards (including the grant of unrestricted
shares). The Committee may make the grant, issuance, retention and/or vesting of
restricted stock awards, restricted stock unit awards, performance shares and
other stock-based awards contingent upon continued employment with the Company,
the passage of time, or such performance criteria and the level of achievement
versus such criteria as it deems appropriate.
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ELIGIBILITY UNDER SECTION 162(M)
Awards may, but need not, include performance criteria that satisfy
Section 162(m) of the Internal Revenue Code. To the extent that awards are
intended to qualify as "performance-based compensation" under Section 162(m),
the performance criteria may include among other criteria, one of the following
criteria, either individually, alternatively or in any combination, applied to
either the company as a whole or to a business unit or subsidiary, either
individually, alternatively, or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group, in each case as specified by the Committee in the award:
(a) Net earnings or net income (before or after taxes);
(b) Earnings per share (basic or diluted);
(c) Net sales or revenue growth;
(d) Net operating profit;
(e) Return measures (including, but not limited to, return on assets,
capital, invested capital, equity, sales, or revenue);
(f) Cash flow (including, but not limited to, operating cash flow, free
cash flow, cash flow return on equity, and cash flow return on
investment);
(g) Earnings before or after taxes, interest, depreciation, and/or
amortization;
(h) Gross or operating margins;
(i) Productivity ratios;
(j) Share price (including, but not limited to, growth measures and
total stockholder return);
(k) Expense targets;
(l) Margins;
(m) Operating efficiency;
(n) Market share;
(o) Customer satisfaction;
(p) Working capital targets; and
(q) Economic value added or EVA(R) (net operating profit after tax minus
the sum of capital multiplied by the cost of capital).
To the extent that an award under the Plan is designated as a "performance
award," but is not intended to qualify as performance-based compensation under
Section 162(m), the performance criteria can include the achievement of
strategic objectives as determined by the Committee.
Notwithstanding satisfaction of any completion of any performance criteria
described above, to the extent specified at the time of grant of an award, the
number of shares of Common Stock, stock options or other benefits granted,
issued, retainable and/or vested under an award on account of satisfaction of
performance criteria may be reduced by the Committee on the basis of such
further considerations as the Committee in its sole discretion determines.
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CASH-BASED AWARDS
The Committee, at any time and from time to time, may grant cash-based
awards to participants in such amounts and upon such terms as the Committee may
determine. The Committee may establish performance goals in its discretion in
connection with the grant of any cash-based awards.
TRANSFERABILITY
Except as otherwise provided in the Plan, awards granted under the Plan
may not be sold, pledged, assigned, hypothecated, transferred or disposed of
except by will or the laws of descent and distribution. No award may be made
subject to execution, attachment or other similar process.
ADMINISTRATION
The Committee will administer the Plan. The Committee will select the
persons who receive awards, determine the number of shares covered thereby, and,
subject to the terms and limitations expressly set forth in the Plan, establish
the terms, conditions and other provisions of the grants. The Committee may
construe and interpret the Plan and prescribe, amend and rescind any rules and
regulations relating to the Plan. The Committee may delegate to a committee of
two or more directors or other persons the ability to grant awards to plan
participants. In addition, the Committee may authorize one or more officers of
the Company to do one or both of the following: (a) designate employees to be
recipients of awards and (b) determine the size of any such awards; provided,
however, (i) the Committee shall not delegate such responsibilities to any such
officer for awards granted to an employee who is considered an insider (as
defined in the Plan); (ii) the resolution providing such authorization sets
forth the total number of awards such officer(s) may grant; and (iii) the
officer(s) shall report periodically to the Committee regarding the nature and
scope of the awards granted pursuant to the authority delegated.
AMENDMENTS
The Committee may alter, amend, modify, suspend, or terminate the Plan and
any related award agreement in whole or in part; provided, however, that,
without the prior approval of the Company's stockholders, options or SARs issued
under the Plan will not be re-priced, replaced, or re-granted through
cancellation, or by lowering the option price of a previously granted option or
the grant price of a previously granted SAR, and no material amendment of the
Plan shall be made without stockholder approval if stockholder approval is
required by law, regulation, or stock exchange rule.
ADJUSTMENTS
In the event of a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change of the
Company's capital structure without consideration, the Committee may approve, in
its discretion, an adjustment of the number and kind of shares available for
grant under the Plan, and subject to the various limitations set forth in the
Plan, the number of shares subject to outstanding awards under the Plan, and the
exercise price of outstanding stock options and of other awards.
10
In the event of a merger or asset sale any or all outstanding awards may
be assumed or an equivalent award substituted by a successor corporation. In the
event the successor corporation refuses to assume or substitute the awards
outstanding under the Plan, the outstanding awards shall vest and become
exercisable as to 100% of the shares subject thereto.
U.S. TAX CONSEQUENCES
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT
OF THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND
PARTICIPANTS IN THE PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPANT WILL DEPEND UPON HIS OR HER
INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT IS ENCOURAGED TO SEEK THE ADVICE OF A
QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PARTICIPATION IN THE
PLAN.
NON-QUALIFIED STOCK OPTIONS
A participant will realize no taxable income at the time a non-qualified
stock option is granted under the plan, but generally at the time such
non-qualified stock option is exercised, the participant will realize ordinary
income in an amount equal to the excess of the fair market value of the shares
on the date of exercise over the stock option exercise price. Upon a disposition
of such shares, the difference between the amount received and the fair market
value on the date of exercise will generally be treated as a long-term or
short-term capital gain or loss, depending on the holding period of the shares.
The Company will generally be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as the participant is
considered to have realized ordinary income in connection with the exercise of
the non-qualified stock option.
INCENTIVE STOCK OPTIONS
A participant will realize no taxable income, and the Company will not be
entitled to any related deduction, at the time any incentive stock option is
granted. If certain employment and holding period conditions are satisfied, then
no taxable income will result upon the exercise of such option and the Company
will not be entitled to any deduction in connection with the exercise of such
stock option. Upon disposition of the shares after expiration of the statutory
holding periods, any gain realized by a participant will be taxed as long-term
capital gain and any loss sustained will be long-term capital loss, and the
Company will not be entitled to a deduction in respect to such disposition.
While no ordinary taxable income is recognized at exercise (unless there is a
"disqualifying disposition," see below), the excess of the fair market value of
the shares over the stock option exercise price is a preference item that is
recognized for alternative minimum tax purposes.
Except in the event of death, if shares acquired by a participant upon the
exercise of an incentive stock option are disposed of by such participant before
the expiration of the statutory holding periods (i.e., a "disqualifying
disposition"), such participant will be considered to have realized as
compensation taxed as ordinary income in the year of such disposition an amount,
not exceeding the gain realized on such disposition, equal to the difference
between the stock option price and the fair market value of such shares on the
date of exercise of such stock option. Generally, any gain realized on the
disposition in excess of the amount treated as compensation or any loss realized
on the disposition will constitute capital gain or loss, respectively. If a
participant makes a "disqualifying disposition," generally in the fiscal year of
such "disqualifying disposition" the Company will be allowed a deduction for
federal income tax purposes in an amount equal to the compensation realized by
such participant.
11
STOCK APPRECIATION RIGHTS
A grant of a stock appreciation right (which can be settled in cash or the
Company Common Stock) has no federal income tax consequences at the time of
grant. Upon the exercise of stock appreciation rights, the value received is
generally taxable to the participant as ordinary income, and the Company
generally will be entitled to a corresponding tax deduction.
RESTRICTED STOCK
A participant receiving restricted stock may be taxed in one of two ways:
the participant (i) pays tax when the restrictions lapse (i.e., they become
vested) or (ii) makes a special election to pay tax in the year the grant is
made. At either time the value of the award for tax purposes is the excess of
the fair market value of the shares at that time over the amount (if any) paid
for the shares. The Company receives a tax deduction at the same time and for
the same amount taxable to the participant. If a participant elects to be taxed
at grant, then, when the restrictions lapse, there will be no further tax
consequences attributable to the awarded stock until the participant disposes of
the stock.
RESTRICTED STOCK UNITS
In general, no taxable income is realized upon the grant of a restricted
stock unit award. The participant will generally include in ordinary income the
fair market value of the restricted stock units at the time they vest. The
Company generally will be entitled to a tax deduction at the time and in the
amount that the participant recognizes ordinary income.
PERFORMANCE SHARES
The participant will not realize income when a performance share is
granted, but will realize ordinary income when shares are transferred to him or
her. The amount of such income will be equal to the fair market value of such
transferred shares on the date of transfer. The Company will be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount as the participant is considered to have realized ordinary income as a
result of the transfer of shares.
SECTION 162(M) LIMIT
The Plan is intended to enable the Company to provide certain forms of
performance-based compensation to executive officers that will meet the
requirements for tax deductibility under Section 162(m) of the Internal Revenue
Code. Section 162(m) provides that, subject to certain exceptions, the Company
may not deduct compensation paid to any one of certain executive officers in
excess of $1 million in any one year. Section 162(m) excludes certain
performance-based compensation from the $1 million limitation.
12
CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS
The participant will recognize, as a general rule, ordinary income at the
time of payment of cash or delivery of actual shares of Common Stock. Future
appreciation on shares of Common Stock held beyond the ordinary income
recognition event will be taxable at capital gains rates when the shares of
Common Stock are sold. The Company, as a general rule, will be entitled to a tax
deduction that corresponds in time and amount to the ordinary income recognized
by the participant, and the Company will not be entitled to any tax deduction in
respect of capital gain income recognized by the participant.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE STANDARD MOTOR PRODUCTS, INC. 2006 OMNIBUS INCENTIVE PLAN.
13
PROPOSAL 3
RATIFICATION OF GRANT THORNTON LLP
The Audit Committee of our Board of Directors plans to appoint Grant
Thornton LLP as the Company's independent registered public accounting firm to
audit its consolidated financial statements for the 2006 fiscal year. Although
the Company is not required to seek stockholder approval of this appointment,
the Board believes it to be sound corporate governance to do so and is asking
stockholders to ratify the appointment of Grant Thornton LLP. If the appointment
is not ratified, the Audit Committee will investigate the reasons for
stockholder rejection and will reconsider the appointment.
Representatives of Grant Thornton LLP are expected to attend the Annual
Meeting where they will be available to respond to questions and, if they
desire, to make a statement.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
AUDIT AND NON-AUDIT FEES
The following table presents fees for professional services rendered by
Grant Thornton LLP, our principal accountants, for the fiscal years ended
December 31, 2005 and 2004:
2005 2004
---- ----
Audit fees, including fees paid in
the subsequent year for services
performed in the prior year and
excluding audit-related fees .............. $2,621,100 $2,290,094
Audit-related fees (1) ....................... 111,625 --
Tax fees (2) ................................. 175,425 7,250
All other fees ............................... -- --
---------- ----------
Total .................................. $2,908,150 $2,297,344
========== ==========
----------
(1) Audit-related fees consisted principally of audits of financial statements
of certain employee benefit plans.
(2) Tax fees consist primarily of U.S. and international tax compliance and
planning.
It is the policy of the Audit Committee to pre-approve any audit and
non-audit services provided to the Company by its independent auditors. All of
the fees paid to the Company's independent auditors described above in 2005 and
2004 were for services pre-approved by the Audit Committee.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
KPMG LLP
On August 19, 2004, the Company was informed in writing by KPMG that KPMG
resigned as of such date as the Company's independent registered public
accounting firm. KPMG had not previously advised management or the Audit
Committee of its intention to resign.
14
The audit report of KPMG on the consolidated financial statements of the
Company as of and for the fiscal year ended December 31, 2003 did not contain
any adverse opinion or disclaimer of opinion and was not qualified or modified
as to uncertainty, audit scope or accounting principles.
In connection with the audit of the consolidated financial statements of
the Company for fiscal year ended December 31, 2003 and the subsequent interim
period through August 19, 2004, there were no disagreements between the Company
and KPMG on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures, which disagreements, if
not resolved to KPMG's satisfaction, would have caused KPMG to make reference
thereto in its opinions thereon.
No reportable event of the type described in Item 304(a)(1)(v) of
Regulation S-K occurred during the fiscal year ended December 31, 2003 and the
subsequent interim period through August 19, 2004.
GRANT THORNTON LLP
On September 27, 2004, the Company engaged Grant Thornton as its
independent registered public accounting firm to audit the Company's
consolidated financial statements for the fiscal year ended December 31, 2004.
The Audit Committee recommended and the Board approved Grant Thornton's
engagement.
During the fiscal year ended December 31, 2003 and through September 27,
2004, the Company has not consulted with Grant Thornton on any matter that (a)
involved the application of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered on
the Company's financial statements, in each case where written or oral advice
was provided that was an important factor considered by the Company in reaching
a decision as to the accounting, auditing or financial reporting issue; or (b)
was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a
reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 15, 2006 by:
o each person known by the Company to beneficially own more than 5% of
the Common Stock;
o each director and nominee for director of the Company;
o our chief executive officer and each of our other four most highly
compensated executive officers during 2005 as defined by the
regulations of the Securities Exchange Commission;
o all directors and officers as a group.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME AND ADDRESS OWNERSHIP(1) OF CLASS
---------------- ------------ --------
GAMCO Investors, Inc.................................. 2,427,146(2) 12.9%
One Corporate Center
Rye, NY
Peter J. Sills........................................ 1,650,932(3) 8.9
Arthur S. Sills....................................... 1,639,441(4) 8.9
Dimensional Fund Advisors Inc......................... 1,486,300(5) 8.0
1299 Ocean Avenue
Santa Monica, CA
Rutabaga Capital Management LLC....................... 1,347,463(6) 7.3
64 Broad Street, 3rd Floor
Boston, MA
Marilyn F. Cragin..................................... 1,323,524(7) 7.1
Arthur D. Davis....................................... 1,189,542(8) 6.4
Lawrence I. Sills..................................... 1,071,148(9) 5.8
Susan F. Davis........................................ 946,253(10) 5.1
John P. Gethin........................................ 72,225(11) *
James J. Burke........................................ 60,733(12) *
Sanford Kay........................................... 53,218(13) *
William H. Turner..................................... 23,852(14) *
Robert M. Gerrity..................................... 20,649(15) *
Frederick D. Sturdivant............................... 17,961(16) *
Kenneth A. Lehman..................................... 17,887(17) *
Dale Burks............................................ 17,502(18) *
Roger M. Widmann...................................... 5,725 *
Richard S. Ward....................................... 5,138 *
Directors and Officers as a group (sixteen persons)... 3,458,513(19) 18.2%
----------
* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Applicable percentage of ownership is calculated by dividing (a) the total
number of shares beneficially owned by the stockholder by (2) 18,470,891,
which is the number shares of Common Stock outstanding as of March 15,
2006, plus that number of additional shares, if any, which may be acquired
through the exercise of options or convertible debentures within 60 days
of March 15, 2006. Beneficial ownership is calculated based on the
requirements of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage
ownership of that person, shares of Common Stock subject to options and
our convertible debentures held by that person that are currently
exercisable or exercisable within 60 days of March 15, 2006 are deemed
outstanding. Regarding our convertible debentures, at March 15, 2006 our
convertible debentures were convertible into 31.068 shares of common stock
for each $1,000 of convertible debentures converted and the conversion
price for our convertible debentures was equivalent to approximately
$32.19 per share. Shares subject to options or our convertible debentures,
however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Except as indicated in the
footnotes to this table, the stockholder named in the table has sole
voting power and sole investment power with respect to the shares set
forth opposite such stockholder's name. Unless otherwise indicated, the
address of each individual listed in the table is c/o Standard Motor
Products, Inc., 37-18 Northern Boulevard, Long Island City, New York.
16
In footnotes 3, 4 and 9, where more than one director of our company is a
co-trustee of a trust or co-director of a foundation, and shares voting
power and investment power with another director or directors with respect
to a certain number of shares, such shares are counted as being
beneficially owned by each director who shares such voting power and
investment power. However, in computing the aggregate number of shares
owned by directors and officers in footnote 19, these same shares are only
counted once.
(2) The information for GAMCO Investors, Inc. and certain of its affiliates
("GAMCO") is based solely on an amendment to its Schedule 13D filed with
the SEC on August 24, 2005, wherein GAMCO stated that it beneficially
owned an aggregate of 2,427,146 shares of our Common Stock. GAMCO states
that it has sole voting power for 2,392,646 shares and has sole
dispositive power for 2,427,146 shares.
(3) Includes 1,056,619 shares of Common Stock, of which: (a) 289,687 shares
are held as co-trustee with Lawrence I. Sills and Arthur S. Sills, for
which Peter J. Sills has shared voting and shared investment power; and
(b) 766,932 shares are held by the Sills Family Foundation, Inc., of which
Peter J. Sills is a director and officer and shares voting and investment
power with, among others, Arthur S. Sills. In his capacity as a trustee
and director of the foundation, Peter J. Sills disclaims beneficial
ownership of the shares so deemed "beneficially owned" by him within the
meaning of Rule 13d-3 of the Exchange Act.
(4) Includes 1,056,619 shares of Common Stock, of which: (a) 289,687 shares
are held as co-trustee with Lawrence I. Sills and Peter J. Sills, for
which Arthur S. Sills has shared voting and shared investment power; and
(b) 766,932 shares are held by the Sills Family Foundation, Inc., of which
Arthur S. Sills is a director and officer and shares voting and investment
power with, among others, Peter J. Sills. In his capacity as a trustee and
director of the foundation, Arthur S. Sills disclaims beneficial ownership
of the shares so deemed "beneficially owned" by him within the meaning of
Rule 13d-3 of the Exchange Act.
(5) The information for Dimension Fund Advisors Inc. ("Dimension") is based
solely on an amendment to its Schedule 13G filed with the SEC on February
6, 2006, wherein Dimension stated that it beneficially owned an aggregate
of 1,486,300 shares of our Common Stock. Dimension states that it has sole
voting and sole dispositive power for all of such shares.
(6) The information for Rutabaga Capital Management LLC ("Rutabaga") is based
solely on its Schedule 13G filed with the SEC on February 14, 2006,
wherein Rutabaga stated that it beneficially owned an aggregate of
1,347,463 shares of our Common Stock. Rutabaga states that it has sole
voting power for 553,900 shares, has shared voting power for 793,563
shares, and has sole dispositive power for 1,347,463 shares.
(7) The information for Marilyn Cragin is based solely on her Schedule 13D
filed with the SEC on February 25, 2005, wherein Ms. Cragin stated that
she beneficially owned an aggregate of 1,323,524 shares of our Common
Stock. Ms. Cragin states that she has sole voting and sole dispositive
power for 667,794 shares and has shared voting and shared dispositive
power for 655,730 shares.
(8) The information for Arthur D. Davis is based on his Schedule 13D filed
with the SEC on February 25, 2005 and subsequent information provided by
Mr. Davis to us. Mr. Davis stated that he beneficially owned an aggregate
of 1,189,542 shares of our Common Stock. Mr. Davis states that he has sole
voting and sole dispositive power for 456,745 shares and has shared voting
and shared dispositive power for 732,797 shares.
(9) Includes 376,553 shares of Common Stock, of which: (a) 289,687 shares are
held as co-trustee with Arthur S. Sills and Peter J. Sills, for which
Lawrence I. Sills has shared voting and shared investment power; (b) 6,138
shares are allocated to Lawrence I. Sills under the Standard Motor
Products ESOP; (c) 2,812 shares are owned by Mr. Sills' wife; and (d)
77,916 shares are held by Lawrence I. Sills which were subject to options
exercisable within 60 days of March 15, 2006. In his capacity as a trustee
and executor and for shares of stock held by his wife, Lawrence I. Sills
disclaims beneficial ownership of the shares so deemed "beneficially
owned" by him within the meaning of Rule 13d-3 of the Exchange Act.
17
(10) The information for Susan F. Davis is based solely on her Schedule 13D
filed with the SEC on February 25, 2005, wherein Ms. Davis stated that she
beneficially owned an aggregate of 946,253 shares of our Common Stock. Ms.
Davis states that she has sole voting and sole dispositive power for
195,936 shares and has shared voting and shared dispositive power for
750,317 shares.
(11) Includes (a) 2,017 shares of Common Stock allocated to the account of John
P. Gethin under the Standard Motor Products ESOP and (b) 56,708 shares of
Common Stock held by Mr. Gethin which were subject to options exercisable
within 60 days of March 15, 2006.
(12) Includes (a) 4,233 shares of Common Stock allocated to the account of
James J. Burke under the Standard Motor Products ESOP and (b) 46,500
shares of Common Stock held by Mr. Burke which were subject to options
exercisable within 60 days of March 15, 2006.
(13) Includes (a) 3,118 shares of Common Stock allocated to the account of
Sanford Kay under the Standard Motor Products ESOP, and (b) 46,500 shares
of Common Stock held by Mr. Kay which were subject to options exercisable
within 60 days of March 15, 2006.
(14) Includes 14,400 shares of Common Stock held by William H. Turner which
were subject to options exercisable within 60 days of March 15, 2006.
(15) Includes 14,400 shares of Common Stock held by Robert M. Gerrity which
were subject to options exercisable within 60 days of March 15, 2006.
(16) Includes 5,400 shares of Common Stock held by Frederick D. Sturdivant
which were subject to options exercisable within 60 days of March 15,
2006.
(17) Includes 9,400 shares of Common Stock held by Kenneth A. Lehman which were
subject to options exercisable within 60 days of March 15, 2006.
(18) Includes (a) 2,952 shares of Common Stock allocated to the account of Dale
Burks under the Standard Motor Products ESOP and (b) 14,550 shares of
Common Stock held by Mr. Burks which were subject to options exercisable
within 60 days of March 15, 2006.
(19) All of our directors and officers as a group have (a) 21,610 shares of
Common Stock allocated to them under the Standard Motor Products ESOP and
(b) 294,074 shares of Common Stock which were subject to options
exercisable within 60 days of March 15, 2006.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's Common Stock, to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of the Common Stock of
the Company. Officers, directors and greater than ten percent stockholders are
required by regulation of the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely upon a review of the copies of such reports furnished to
the Company and representations that no other reports were required during the
fiscal year ended December 31, 2005, all Section 16(a) filing reports applicable
to the Company's officers and directors were timely filed.
18
CORPORATE GOVERNANCE
The Company's Board of Directors has adopted policies and procedures that
the Board believes are in the best interests of the Company and its stockholders
as well as compliant with the Sarbanes-Oxley Act of 2002, the rules and
regulations of the Securities and Exchange Commission, and the listing standards
of the New York Stock Exchange. In particular:
o The Board has adopted Corporate Governance Guidelines;
o The Board has appointed a Presiding Independent Director, who is
independent under the New York Stock Exchange standards and
applicable Securities and Exchange Commission rules.
o A majority of the Board is independent, and each member of the Audit
Committee, Compensation and Management Development Committee, and
Nominating and Corporate Governance Committee is independent under
the New York Stock Exchange standards and applicable Securities and
Exchange Commission rules.
o The Board has adopted charters for the Audit Committee, Compensation
and Management Development Committee, Nominating and Corporate
Governance Committee, and the Presiding Independent Director;
o The Company's Corporate Governance Guidelines provide that the
independent directors meet periodically in executive session without
management and that the Presiding Independent Director chairs the
executive sessions;
o Interested parties are able to make their concerns known to
non-management directors or the Audit Committee by e-mail or by mail
(see "Communications to the Board" below);
o The Company has a Corporate Code of Ethics that applies to all
company employees and directors and, as part of the Corporate Code
of Ethics, has established a whistleblower hotline available to all
employees; and
o Subject to the approval of the 2006 Omnibus Incentive Plan, the
Company intends to establish stock ownership guidelines that will
apply to its independent directors and executive officers.
Certain information relating to corporate governance matters can be viewed
at www.smpcorp.com. Copies of the Company's (1) Corporate Governance Guidelines,
(2) charters for the Audit Committee, Compensation and Management Development
Committee, Nominating and Corporate Governance Committee, and the Presiding
Independent Director, and (3) Corporate Code of Ethics are available on the
Company's website. Copies will also be provided to any stockholder free of
charge upon written request to the Secretary of the Company at 37-18 Northern
Boulevard, Long Island City, NY 11101.
19
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
In 2005 the total number of meetings of the Board of Directors, including
regularly scheduled and special meetings, was six. All of our directors attended
at least 75% of the meetings of the Board and the committees during the period
for which he was a director in 2005.
The Company encourages all Board members attend its Annual Meeting of
Stockholders. All Directors, other than Kenneth A. Lehman, were present at the
2005 Annual Meeting of Stockholders held on May 19, 2005.
The Board currently has three committees: an Audit Committee, a
Compensation and Management Development Committee, and a Nominating and
Corporate Governance Committee. The members of each committee consist of all of
our independent directors: William H. Turner (Chairman of the Audit Committee
and Presiding Independent Director), Robert M. Gerrity (Chairman of the
Compensation and Management Development Committee), Kenneth A. Lehman, Frederick
D. Sturdivant, Richard S. Ward (Chairman of the Nominating and Corporate
Governance Committee), and Roger M. Widmann.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors the engagement of
the independent auditors of the Company and reviews with the independent
auditors the scope and results of the Company's audits, the professional
services furnished by them to the Company and their management letter with
comments on the Company's internal accounting controls. The Audit Committee held
seven meetings in 2005.
The Board of Directors has determined that each committee member is
financially literate. In addition, the Board has determined that at least one
member of the Audit Committee meets the New York Stock Exchange standard of
having accounting or related financial management expertise. The Board has also
determined that William H. Turner, the Audit Committee's Chairman, meets the
Securities and Exchange Commission criteria of an "audit committee financial
expert."
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
The Compensation and Management Development Committee's function is to
approve the compensation packages (salary and bonus) of the Company's officers,
to administer the Company's equity incentive plans, to review the Company's
overall compensation policies, to review the performance, training and
development of Company management in achieving corporate goals and objectives,
and to oversee the Company's management succession planning. The Compensation
and Management Development Committee held one meeting in 2005.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee's function is to assist
the Board of Directors in discharging and performing the duties and
responsibilities of the Board with respect to corporate governance, including:
o The identification and recommendation to the Board of individuals
qualified to become or continue as directors;
20
o The continuous improvement in corporate governance policies and
practices;
o The annual self-assessment of the performance of the Board; and
o The recommendation of members for each committee of the Board.
The Nominating and Corporate Governance Committee held three meetings in 2005.
Qualifications for consideration as a director nominee vary according to
the particular areas of expertise being sought as a complement to the existing
board composition. However, in making nominations, the Nominating and Corporate
Governance Committee seeks candidates who possess (1) the highest level of
integrity and ethical character, (2) strong personal and professional
reputation, (3) sound judgment, (4) financial literacy, (5) independence, (6)
significant experience and proven superior performance in professional
endeavors, (7) an appreciation for board and team performance, (8) the
commitment to devote the time necessary for Board activities, (9) skills in
areas that will benefit the Board, and (10) the ability to make a long-term
commitment to serve on the Board.
Stockholders may propose director candidates for consideration by the
Nominating and Corporate Governance Committee. In order for stockholder
candidates to be considered, written notice of such stockholder recommendation
(a) must be provided to the Secretary of the Company not less than 45 days nor
more than 75 days prior to the first anniversary of the record date for the
preceding year's annual meeting, and (b) must contain the name of any
recommended candidate for director, together with a brief biographical sketch, a
document indicating the candidate's willingness to serve, if elected, and
evidence of the nominating person's ownership of Company stock. Both stockholder
proposed candidates and other candidates identified and evaluated by the
Nominating and Corporate Governance Committee must comply with the procedures,
and meet the qualification of directors, as outlined in the Charter of the
Committee.
PRESIDING INDEPENDENT DIRECTOR
In 2006, the Board established the position of Presiding Independent
Director. The initial Presiding Independent Director of the Company is William
H. Turner, who also serves as the Chairman of the Company's Audit Committee. The
term of the Presiding Independent Director is three years. The role of the
Presiding Independent Director shall be to aid and assist the Chairman and the
remainder of the Board in assuring effective corporate governance in managing
the affairs of the Board and the Company.
COMMUNICATIONS TO THE BOARD
Stockholders and other interested parties may communicate with the Board
of Directors or individual directors pursuant to the procedures established by
the Nominating and Corporate Governance Committee from time to time. The
Nominating and Corporate Governance Committee shall review such correspondence
that first is delivered to the attention of the Secretary of the Company at
37-18 Northern Boulevard, Long Island City, NY 11101, which correspondence the
Secretary will forward to the Committee. The Nominating and Corporate Governance
Committee shall have the discretion to distribute only such correspondence to
the Board or individual members of the Board that the Committee determines in
good faith has a valid business purpose or is otherwise appropriate for the
Board or individual member thereof to receive.
21
CORPORATE CODE OF ETHICS
The Board of Directors of the Company has adopted a Corporate Code of
Ethics to (1) promote honest and ethical conduct, including fair dealing and the
ethical handling of actual or apparent conflicts of interest, (2) promote full,
fair, accurate, timely and understandable disclosure, (3) promote compliance
with applicable laws and governmental rules and regulations, (4) ensure the
protection of the Company's legitimate business interests, including business
opportunities, assets and confidential information, and (5) deter wrongdoing.
The Corporate Code of Ethics is available on the Company's website at
www.smpcorp.com.
DIRECTOR INDEPENDENCE
The Board of Directors has affirmatively determined that each member of
the Board and committees thereof, other than Lawrence I. Sills, Arthur S. Sills
and Peter J. Sills, is independent under the criteria established by the New
York Stock Exchange and the Securities and Exchange Commission for independent
board members. In that regard, the Board considered whether any director has,
and generally has not had in the most recent three years, any material
relationships with the Company, including any affiliation with our independent
auditors.
DIRECTORS COMPENSATION
The 2005 directors' compensation year began on May 19, 2005 (the date of
our 2005 Annual Meeting of Stockholders) and will end on May 18, 2006 (the date
of our 2006 Annual Meeting of Stockholders). For 2005, independent directors
were paid a retainer of $55,000, of which at least $10,000 was in shares of the
Company's Common Stock valued as of the date of the 2005 Annual Meeting of
Stockholders. The Presiding Independent Director is entitled to receive an
additional annual retainer of $20,000; for 2005, the Presiding Independent
Director received a retainer of $10,000 representing the pro rata portion of the
retainer. The Chairman of the Audit Committee, the Compensation and Management
Development Committee, and the Nominating and Corporate Governance Committee
received an additional annual retainer of $7,500, $5,000 and $5,000,
respectively. In addition, pursuant to the Company's 2004 Independent Outside
Directors' Stock Option Plan, the Outside Directors (as defined therein) each
received a stock option grant of up to 2,000 shares of the Company's Common
Stock with an exercise price per share equal to the price of the Common Stock on
the New York Stock Exchange as of the date of the 2005 Annual Meeting of
Stockholders. Independent directors also received $1,000 for each Board and
Committee meeting they attended and are reimbursed for meeting expenses. In
addition, Arthur S. Sills and Peter J. Sills received $1,000 for each Board
meeting they attended, reimbursement for meeting expenses and are covered under
the Company's medical plan. All other directors, being officers of the Company,
received no payment for the fulfillment of their directorial responsibilities.
In addition, in connection with providing services as the Company's Director,
Frederick D. Sturdivant received additional compensation of $14,000 plus
expenses for assisting the Company in developing its long term strategy.
If Proposal No. 2 regarding the approval of the Standard Motor Products,
Inc. 2006 Omnibus Incentive Plan is approved at the Annual Meeting, the annual
retainer for each independent director will be $35,000, of which any portion can
be taken in Common Stock at the discretion of each director. In addition, each
independent director will receive on the date of each annual meeting of
stockholders an automatic restricted stock award of 1,000 shares, and an
additional award of Common Stock valued at $20,000, based on the fair market
value of the Company's Common Stock as of the date of the annual stockholder
meeting. Independent director restricted stock grants will vest after one year,
so long as the director remains continuously in office. Independent directors
will also be eligible to receive other types of awards under the 2006 Omnibus
Incentive Plan, but such awards are discretionary. In the event of a merger or
asset sale, all of the shares of restricted stock will accelerate and become
exercisable in full.
22
POLICY ON POISON PILLS
On February 28, 2006, the Company's Rights Agreement or "poison pill"
expired according to its stated terms. The Company does not have a poison pill
and is not presently considering the adoption of such a device. If the Company
were ever to adopt another stockholder rights agreement, the Company would seek
prior stockholder approval, unless due to time constraints or other reasons, the
Board, in the exercise of its fiduciary responsibilities, determines it would be
in the best interests of stockholders to adopt a stockholder rights agreement
before obtaining stockholder approval. If the Company's Board were ever to adopt
a stockholder rights agreement without prior stockholder approval, the Board
would submit such agreement to stockholders for ratification within one year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of the Board's Compensation and Management Development
Committee during 2005 were independent directors, and none of them were
employees or former employees of the Company. During 2005, no executive officer
of the Company served on the compensation committee (or equivalent) or the board
of directors, of another entity whose executive officer(s) served on the
Company's Compensation and Management Development Committee or Board of
Directors.
MANAGEMENT INFORMATION
Our officers and key employees, and their ages and positions as of March
15, 2006, are:
NAME AGE POSITION
---- --- --------
Lawrence I. Sills(1)...... 66 Chairman of the Board and
Chief Executive Officer
John P. Gethin(1)......... 57 President and Chief Operating Officer
James J. Burke(1)......... 50 Vice President Finance and Chief
Financial Officer
Carmine J. Broccole....... 40 Vice President General Counsel and Secretary
Luc Gregoire.............. 46 Corporate Controller and Chief Accounting
Officer
Robert H. Martin.......... 59 Treasurer and Assistant Secretary
Dale Burks................ 46 Vice President, General Manager Temperature
Control Division
----------
(1) Member of the Office of Chief Executive.
23
LAWRENCE I. SILLS has served as our Chief Executive Officer and Chairman
of the Board since 2000 and has been a director of the Company since 1986. From
1986 to December 2000, Mr. Sills served as our President and Chief Operating
Officer. From 1983 to 1986, he served as our Vice President of Operations. Mr.
Sills is the brother of Arthur S. Sills and Peter J. Sills, each of whom are
directors of the Company.
JOHN P. GETHIN has served as our President and Chief Operating Officer
since December 2000. From 1997 to 2000, Mr. Gethin served as our Senior Vice
President of Operations. From 1998 to 2003, he served as General Manager of our
Temperature Control Division. From 1995 to 1997, Mr. Gethin was Vice President
and General Manager of EIS Brake Parts Division (a former business unit of
ours).
JAMES J. BURKE has served as our Vice President Finance, Chief Financial
Officer since 1999. From 1998 to 1999, Mr. Burke served as our Director of
Finance, Chief Accounting Officer. From 1993 to 1997, he served as our Corporate
Controller.
CARMINE J. BROCCOLE has served as our Vice President General Counsel and
Secretary since January 2006 and was our General Counsel from August 2004 to
2006. From 1991 to 2004, Mr. Broccole was an attorney at several law firms, most
recently as Partner of Kelley Drye & Warren LLP.
LUC GREGOIRE has served as our Corporate Controller and Chief Accounting
Officer since July 2005. From 1992 to 2005, Mr. Gregoire served in various
capacities for Merck & Co., Inc., most recently as Controller of the Human
Health Europe, Middle East & Africa. Prior to that time, he was a Partner of
Arthur Andersen.
ROBERT H. MARTIN has served as our Treasurer and Assistant Secretary since
1999. From 1993 to 1999, Mr. Martin served as Controller of our Engine
Management Division. From 1989 to 1993, he was the Division Controller of
Stanric, Inc., our subsidiary.
DALE BURKS has served as our Vice President, General Manager - Temperature
Control Division since July 2003. From 1984 until 2003, Mr. Burks has served in
a various capacities for the Company including Director - Sales & Marketing,
Regional Manager and Territory Manager.
OFFICE OF CHIEF EXECUTIVE
In January 2006, the Company established the Office of the Chief Executive
to strengthen the executive management structure of the Company. The Office of
Chief Executive is primarily responsible for the development of policy, strategy
and quality assurance, and the provision of leadership. Its functions also
include (a) supporting and providing timely and quality advice to the Chief
Executive Officer; (b) promoting the policies of the Company; and (c) improving
communications between management, customers, the Board of Directors and
stockholders. The Office of Chief Executive is comprised of Lawrence I. Sills,
the Chairman and Chief Executive Officer, John P. Gethin, the President and
Chief Operating Officer, and James J. Burke, the Vice President Finance and
Chief Financial Officer.
24
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid by the Company
during fiscal 2005, 2004 and 2003 to our Chief Executive Officer and our four
other most highly compensated executive officers in 2005 as defined in the
regulations of the Securities and Exchange Commission (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(#) COMPENSATION(2)
------------------------------------ ---- -------- -------- --------------- ---------- ---------------
Lawrence I. Sills .................. 2005 $403,000 $146,250 $ -- 12,500 $ 24,086
Chief Executive Officer and 2004 403,000 204,060 -- 12,500 29,654
Chairman of the Board 2003 403,000 255,200 -- 20,000 32,688
John P. Gethin ..................... 2005 503,000 112,500 -- 11,250 26,900
President and Chief Operating 2004 478,000 175,780 -- 11,250 31,039
Officer 2003 453,000 208,800 -- 18,000 31,718
James J. Burke ..................... 2005 403,000 90,000 -- 7,500 20,969
Vice President Finance and 2004 328,000 130,900 -- 7,500 20,233
Chief Financial Officer 2003 303,000 170,000 -- 12,000 21,339
Dale Burks ......................... 2005 233,000 70,708 -- 7,500 11,099
Vice President and General 2004 215,800 42,500 -- 7,500 9,721
Manager of Temperature Control 2003 179,900 11,850 -- 4,800 10,056
Division
Sanford Kay ........................ 2005 220,000 45,144 -- 7,500 10,830
Vice President of Human 2004 210,000 49,320 -- 7,500 11,817
Resources 2003 205,000 58,480 -- 12,000 13,467
----------
(1) Does not include compensation associated with perquisites because such
amounts do not exceed the lesser of either $50,000 or 10% of total salary
and bonus disclosed.
(2) Represents Company contributions to the Profit Sharing, 401(k), ESOP and
SERP programs on behalf of the named individual.
25
The following table sets forth certain information with respect to stock
option grants made to the Named Executive Officers during 2005.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM (3)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR ($/SHARE)(1) DATE(1)(2) 5% 10%
---------------------- ---------- --------------- ------------ ---------- -------- --------
Lawrence I. Sills..... 12,500 5.2% $10.55-$11.61 5/19/15 $ 87,033 $220,686
John P. Gethin........ 11,250 4.7% $10.55-$11.61 5/19/15 78,330 198,617
James J. Burke........ 7,500 3.1% $10.55-$11.61 5/19/15 52,220 132,412
Dale Burks............ 7,500 3.1% $10.55-$11.61 5/19/15 52,220 132,412
Sanford Kay........... 7,500 3.1% $10.55-$11.61 5/19/15 52,220 132,412
----------
(1) Stock options granted in 2005 vest equally over a two year period
beginning at the anniversary of the grant. The exercise price in the first
year is $10.55 and increases 10% to $11.61 in the subsequent year.
(2) Stock option grants expire at the end of ten years from the date of grant.
(3) No gain to the optionees is possible without an increase in the stock
price, which would benefit all stockholders commensurately. The dollar
amounts under the columns are the result of calculations at five percent
and ten percent rates set by the Securities and Exchange Commission and
therefore are not intended to forecast possible future appreciation, if
any, of the Company's stock price.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to option exercises
in 2005 by the Named Executive Officers and the value of such Named Executives
Officers' unexercised options at December 31, 2005.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 2005 AT DECEMBER 31, 2005 (1)
ACQUIRED VALUE ----------------------------- ----------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
Lawrence I. Sills....... -- $ -- 77,916 18,750 $ -- $ --
John P. Gethin.......... -- -- 56,708 16,875 -- --
James J. Burke.......... -- -- 46,500 11,250 -- --
Dale Burks.............. -- -- 14,500 11,250 -- --
Sanford Kay............. -- -- 46,500 11,250 -- --
----------
(1) Market value of unexercised options is based on the closing price of the
Company's Common Stock on the New York Stock Exchange of $9.23 per share
on December 31, 2005 (the last trading day of 2005) minus the exercise
price. All of the unexercised stock options at December 31, 2005 are not
in-the-money because they have an exercise price greater than the market
value at year end 2005.
26
EQUITY COMPENSATION PLAN INFORMATION
The following table presents a summary of outstanding stock options
available for future grant under our stockholder approved equity compensation
plans as of December 31, 2005.
NUMBER OF SECURITIES
NUMBER OF SECURITIES WEIGHTED AVERAGE REMAINING AVAILABLE
TO BE ISSUED UPON EXERCISE PRICE OF FOR FUTURE ISSUANCE
EXERCISE OF OUTSTANDING OUTSTANDING UNDER EQUITY
PLAN CATEGORY STOCK OPTIONS STOCK OPTIONS COMPENSATION PLANS
-------------------------------------- ----------------------- ----------------- --------------------
Equity compensation plans approved by
security holders (1).................. 1,249,226 $ 14.42 37,625
Equity compensation plans not
approved by security holders.......... -- -- --
--------- -------- ------
All plans............................. 1,249,226 $ 14.42 37,625
========= ======== ======
----------
(1) Represents shares of the Company's Common Stock issuable upon exercise of
options outstanding under our 1994 Omnibus Stock Option Plan, 1996
Independent Outside Directors' Stock Option Plan, 2004 Omnibus Stock
Option Plan and 2004 Independent Outside Directors' Stock Option Plan.
SUPPLEMENTAL RETIREMENT PROGRAM
Effective October 1, 2001, the Company adopted an unfunded supplemental
retirement program for eligible employees. Participation is limited to those
employees who as of the effective date have been designated by the Compensation
and Management Development Committee. The benefits under this supplemental
retirement program (the "Supplemental Program") are computed under a formula
which takes into account a percentage of the participant's average annual base
salary plus bonus and other incentive compensation earned in three (3) of the
last five (5) years of service prior to age 60 ("Final Average Earnings") and
years of participating service. The maximum benefit payable to a participant
under the Supplemental Program is an amount equal to 50% of the participant's
Final Average Earnings. If a participant terminates his employment voluntarily
prior to age 60 or is terminated for cause (as defined under the Supplemental
Program), such participant will forfeit his benefits under the Supplemental
Program. The benefits under the Supplemental Program are in addition to benefits
payable to participants under the Company's 401(k) Plan and SERP. Benefits under
the Supplemental Program will be paid from general corporate funds in the form
of a single life annuity and are not subject to any deduction for Social
Security or other offset amounts.
It is not possible to calculate exactly each participant's benefits under
the Supplemental Program prior to retirement. However, the tables below indicate
the aggregate amount of annual benefits payable under the Supplemental Program
using the formula described above for the specified final average earnings and
years of participating service for Category A and Category B participants,
respectively, and are based upon retirement at age 60 and payment in the form of
a life annuity. A participant must have completed the number of years of
participating service specified in order to receive the benefit listed. Benefits
do not increase pro rata between the years of participating service categories
specified.
27
CATEGORY A
ANNUAL BENEFIT YEARS OF PARTICIPATING SERVICE
---------------------------------------------
FINAL AVERAGE EARNINGS 2 5 6 7 OR MORE
---------------------------- -------- -------- -------- ----------
$670,000 ................... $ 83,750 $167,500 $251,250 $335,000
$710,000 ................... 88,750 177,500 266,250 355,000
$750,000 ................... 93,750 187,500 281,250 375,000
$790,000 ................... 98,750 197,500 296,250 395,000
$830,000 ................... 103,750 207,500 311,250 415,000
$870,000 ................... 108,750 217,500 326,250 435,000
$910,000 ................... 113,750 227,500 341,250 455,000
CATEGORY B
ANNUAL BENEFIT YEARS OF PARTICIPATING SERVICE
---------------------------------------------
FINAL AVERAGE EARNINGS 4 10 12 14 OR MORE
---------------------------- -------- -------- -------- ----------
$450,000 ................... $ 56,250 $112,500 $168,750 $225,000
$490,000 ................... 61,250 122,500 183,750 245,000
$530,000 ................... 66,250 132,500 198,750 265,000
$570,000 ................... 71,250 142,500 213,750 285,000
$610,000 ................... 76,250 152,500 228,750 305,000
$650,000 ................... 81,250 162,500 243,750 325,000
$690,000 ................... 86,250 172,500 258,750 345,000
The only participants in the Supplemental Program at the current time are
John P. Gethin, our President and Chief Operating Officer, in Category A and
James J. Burke, our Vice President Finance, Chief Financial Officer, in Category
B. The approximate number of years of participating service at December 31, 2005
for each of Messrs. Gethin and Burke was four.
REPORT OF THE COMPENSATION
AND MANAGEMENT DEVELOPMENT COMMITTEE
The Compensation and Management Development Committee of the Board of
Directors is responsible for approving the compensation packages (base salary
and bonus) of the Company's executive officers, for administering the Company's
equity incentive plans, and for reviewing the Company's overall compensation
policies including the structure of its bonus program. The Committee is
comprised of six directors who are "independent" as defined under the listing
standards of the New York Stock Exchange. The Committee met one time in 2005 and
operates under a written charter adopted by the Board of Directors.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to (1) attract,
motivate and retain exceptional talent whose abilities are critical to the
Company's long-term success, (2) maintain a portion of the executive's total
compensation at risk, tied to achievement of annual and long term financial,
organizational and management performance goals, and (3) provide variable
compensation incentives directly linked to the performance of the Company and
improvement in stockholder return so that executives manage from the perspective
of owners with an equity stake in the Company. In this regard, the levels of
executive compensation established by the Committee are designed to be
consistent with those available to other executives in comparable companies.
28
ELEMENTS OF COMPENSATION
The key elements of the Company's executive compensation are generally
base salary, bonus and long-term equity incentives. While the elements of
compensation are considered separately, the Committee also considers the
complete compensation package provided by the Company to the individual
executive to ensure that it will be effective in motivating and incentivizing
such executive and to assess its competitiveness with comparable positions at
other comparable companies.
BASE SALARY. Base salaries for executive officers are determined by
evaluating the responsibilities of the position, the experience of the
individual, and the competitive marketplace. Base salary adjustments are
determined annually by evaluating the factors above, the Company's financial
performance, the Company's achievement of certain non-financial performance
measures, and the performance of the executive officer.
BONUS. The Company utilizes an Economic Value Added (EVA) based bonus
program to more closely align executive compensation to continuous improvements
in corporate performance and increases in stockholder value. Simply stated, EVA
is equal to net operating profit after tax, less a charge for the cost of
capital. Bonuses tied to EVA are such that increasing EVA year over year will be
favorable for the Company's stockholders as well as those whose compensation is
based on EVA. In the event of decreasing EVA, bonuses will be affected
negatively to the point of erasing the portion based upon EVA. EVA bonuses
earned in any one year may not necessarily be paid out in full. In order to
promote longer-term stockholder improvement and to provide for years which may
produce "negative EVA" results, the entire bonus structure is monitored through
a "banking" feature. The "bank" allows only a portion of the year's earnings to
be paid out in any given year, saving the remainder for lean year's growth or
negative growth. Due to this feature, it is possible to receive a nominal bonus
in a poor year only because the individual has a bank upon which to draw. It is
also possible to completely exhaust the bank or create a negative bank. In the
case of a negative bank, bonuses tied to EVA would not be paid until the bank is
once again positive. However, the Board may in its discretion reset negative
bank balances to zero in order to preserve an incentive for continuous effort in
future years. For 2005, bank balances were set at negative 100%.
Under the EVA bonus program, the bonuses of the officers are based on a
range of 40% -70% on year-over-year improvement in Company EVA and the remaining
30% - 60% on MBO goals approved by the Compensation and Management Development
Committee. Earned MBO bonuses are paid out in full each year.
LONG-TERM EQUITY INCENTIVES. As part of the Company's compensation
program, the Compensation and Management Development Committee from time to time
grants stock options to the Company's executive officers and other key
employees. This feature further strengthens the link between continuous Company
improvement and long-term compensation. These grants generally include
proportional vesting over multi-year periods at increasing exercise prices. The
grants also require a holding period before they may be exercised. If the 2006
Omnibus Incentive Plan is approved by the Company's stockholders, the
Compensation and Management Development Committee intends to grant restricted
stock and other types of equity-based awards to the Company's executives and
other key employees.
29
CHIEF EXECUTIVE OFFICER COMPENSATION
The executive compensation policy described above is applied in setting
the compensation of our Chief Executive Officer, Lawrence I. Sills. Mr. Sills
generally participates in the same executive compensation plans and arrangements
available to the other senior executives. Accordingly, his compensation also
consists of an annual base salary, an annual cash bonus and, potentially,
long-term equity-linked compensation in the form of stock options. The
Compensation and Management Development Committee's general approach in
establishing Mr. Sills' compensation is to be competitive with peer companies,
but to have a large percentage of his target compensation based upon certain
performance criteria and targets established in the Company's strategic plan. If
the 2006 Omnibus Incentive Plan is approved by the Company's stockholders, the
Compensation and Management Development Committee intends to grant restricted
stock and other types of equity-based awards to Mr. Sills.
Mr. Sills' compensation for the fiscal year ended December 31, 2005
included $403,000 in base salary and bonus compensation of $146,250. Mr. Sills'
base salary for 2005 was the same as his 2004 base salary and was based on,
among other factors, the Company's performance and the 2004 compensation of
chief executives of comparable companies, although his compensation was not
linked to any particular group of these companies. In 2005, Mr. Sills received a
grant of stock options to purchase 12,500 shares of Common Stock.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) disallows a tax deduction for any publicly held
corporation for individual compensation exceeding $1 million in any taxable year
for any of the Named Executive Officers, unless compensation is
performance-based. In general, it is the Committee's policy to qualify, to the
maximum extent possible, its executives' compensation for deductibility under
applicable tax laws.
In approving the amount and form of compensation for the Company's
executive officers, the Committee will continue to consider all elements of the
cost to the Company of providing such compensation, including the potential
impact of Section 162(m).
COMPENSATION AND MANAGEMENT DEVELOPMENT
COMMITTEE
Robert M. Gerrity, Chairman
Kenneth A. Lehman
Frederick D. Sturdivant
William H. Turner
Richard S. Ward
Roger M. Widmann
30
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Committee is comprised of six directors
who are "independent" as defined under the listing standards of the New York
Stock Exchange. The Committee met seven times in 2005 and operates under a
written charter adopted by the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process, including
the Company's systems of internal controls. In fulfilling its oversight
responsibilities, the Committee reviewed with management the audited financial
statements in the Annual Report on Form 10-K for the fiscal year ended December
31, 2005, including a discussion of the quality and the acceptability of the
Company's financial reporting and controls.
The Committee also reviewed with Grant Thornton LLP, the Company's
independent registered public accounting firm, that is responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgments as to the quality
and the acceptability of the Company's financial reporting, and such other
matters as are required to be discussed with the Committee under generally
accepted auditing standards, including SAS No. 61 (Codification of Statements on
Auditing Standards, AU Section 380). In addition, the Committee discussed with
Grant Thornton the auditors' independence from management and the Company,
including the matters in the auditors' written disclosures required by the
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committee).
The Committee also discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets periodically with the internal and the independent auditors, with and
without management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal year
ended December 31, 2005 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
William H. Turner, Chairman
Robert M. Gerrity
Kenneth A. Lehman
Frederick D. Sturdivant
Richard S. Ward
Roger M. Widmann
31
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
CHANGE IN CONTROL ARRANGEMENTS
The Company has long-term retention agreements with John P. Gethin and
James J. Burke. If a change in control of the Company occurs, and within twelve
months thereafter the executive's employment is terminated by the Company
without cause, or by the executive for certain specific reasons, the executive
will receive severance payments and certain other benefits. The specific reasons
which allow the executive to resign and receive the benefits are: (1) a
reduction in status or position with the Company; (2) a reduction by the Company
in the executive's annual rate of base salary; and (3) relocation.
If the executive resigns for one of the specific reasons, or is terminated
without cause, the executive will be entitled to receive: (1) a severance
payment equal to three times his base salary plus standard bonus, payable over a
two year period; (2) continued participation for a period of thirty six months
in group medical, dental and/or life insurance plans; and (3) enhanced benefits
under the Company's Supplemental Compensation Plan.
A change in control of the Company for these purposes means the occurrence
of any of these events: (1) a sale of all or substantially all of the assets of
the Company to any person or group other than certain designated individuals;
(2) any person or group, other than certain designated individuals, become the
beneficial owner or owners of more than 50 percent of the total voting stock of
the Company, including by way of merger, consolidation or otherwise; or (3)
Lawrence I. Sills ceases to be the Chairman of the Board or the Chief Executive
Officer of the Company.
32
STOCK PERFORMANCE GRAPH
The following graph compares the five year cumulative total return on the
Company's Common Stock to the total returns on the Standard & Poor's 500 Stock
Index, a Former Peer Group and the S&P 1500 Auto Parts & Equipment Index. The
graph shows the growth of a $100 investment in the Company's Common Stock and
each of the above indices on December 31, 2000 and the reinvestment of all
dividends. The comparisons in this table are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Company's Common Stock or the referenced
indices.
FIVE YEAR PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
[THE STOCK PERFORMANCE GRAPH WAS REPRESENTED AS A LINE GRAPH
IN THE PRINTED MATERIAL.]
S&P 1500 AUTO
PARTS &
FORMER PEER EQUIPMENT
SMP S&P 500 GROUP(1) INDEX(2)
------ ------- ----------- -------------
2000......................... $100 $100 $100 $100
2001......................... 194 88 118 125
2002......................... 186 69 102 114
2003......................... 180 88 157 167
2004......................... 240 98 153 169
2005......................... 145 103 81 135
* Source: Standard & Poor's.
(1) The Former Peer Group consists of Dana Corp., ArvinMeritor, Inc. and R&B,
Inc.
(2) We have changed our peer group to the S&P 1500 Auto Parts & Equipment
Index, which is a combination of automotive parts and equipment companies
within the S&P 400, the S&P 500 and the S&P 600. We believe that the S&P
1500 Auto Parts & Equipment Index provides a better basis to compare our
stock performance and is a more relevant comparison to our business and
industry than the former peer group.
33
STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING
To be considered for inclusion in next year's Proxy Statement pursuant to
the provisions of Rule 14a-8 of the Exchange Act, stockholder proposals must be
received at the Company's offices no later than the close of business on
December 20, 2006. Proposals should be addressed to Carmine J. Broccole,
Secretary, Standard Motor Products, Inc., 37-18 Northern Boulevard, Long Island
City, New York 11101.
For any stockholder proposal that is not submitted for inclusion in the
next year's Proxy Statement, but is instead sought to be presented directly at
the 2007 Annual Meeting, rules of the Securities and Exchange Commission permit
management to vote proxies in its discretion if the Company: (1) receives notice
of the proposal before close of business on March 3, 2007, and advises
stockholders in the 2007 Proxy Statement about the nature of the matter and how
management intends to vote on such matter; or (2) does not receive notice of the
proposal prior to the close of business on March 3, 2007. Notice of intention to
present proposals at the 2007 Annual Meeting should be addressed to Carmine J.
Broccole, Secretary, Standard Motor Products, Inc., 37-18 Northern Boulevard,
Long Island City, New York 11101.
The Company's 2005 Annual Report has been mailed to stockholders. A copy
of the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2005 is included in the 2005 Annual Report and will also be furnished to any
stockholder who requests the same free of charge (except for exhibits thereto
for which a nominal fee covering reproduction and mailing expenses will be
charged.)
OTHER MATTERS
On the date this Proxy Statement went to press, management knew of no
other business that will be presented for action at the Annual Meeting. In the
event that any other business should come before the Annual Meeting, it is the
intention of the proxy holders named in the proxy card to take such action as
shall be in accordance with their best judgment.
By Order of the Board of Directors
/s/ Carmine J. Broccole
Carmine J. Broccole
VICE PRESIDENT GENERAL COUNSEL
AND SECRETARY
Dated: April 18, 2006
34
APPENDIX A
STANDARD MOTOR PRODUCTS, INC.
2006 OMNIBUS INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT. Standard Motor Products, Inc., a New York corporation
(hereinafter referred to as the "Company"), establishes an incentive
compensation plan to be known as the Standard Motor Products, Inc. 2006 Omnibus
Incentive Plan (hereinafter referred to as the "Plan"), as set forth in this
document.
This Plan permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based
Awards.
This Plan shall become effective upon shareholder approval (the "Effective
Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2 PURPOSE OF THIS PLAN. The purpose of this Plan is to provide a means
whereby Employees, Directors, and Third Party Service Providers develop a sense
of proprietorship and personal involvement in the development and financial
success of the Company, and to encourage them to devote their best efforts to
the business of the Company, thereby advancing the interests of the Company and
its shareholders. A further purpose of this Plan is to provide a means through
which the Company may attract able individuals to become Employees or serve as
Directors or Third Party Service Providers and to provide a means whereby those
individuals upon whom the responsibilities of the successful administration and
management of the Company are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the welfare of the Company.
1.3 DURATION OF THIS PLAN. Unless sooner terminated as provided herein,
this Plan shall terminate ten (10) years from the Effective Date. After this
Plan is terminated, no Awards may be granted but Awards previously granted shall
remain outstanding in accordance with their applicable terms and conditions and
this Plan's terms and conditions. Notwithstanding the foregoing, no Incentive
Stock Options may be granted more than ten (10) years after the earlier of (a)
adoption of this Plan by the Board, or (b) the Effective Date.
ARTICLE 2. DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings
set forth below, and when the meaning is intended, the initial letter of the
word shall be capitalized.
2.1 "AFFILIATE" shall mean any corporation or other entity (including, but not
limited to, a partnership or a limited liability company), that is
affiliated with the Company through stock or equity ownership or
otherwise, and is designated as an Affiliate for purposes of this Plan by
the Committee.
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2.2 "ANNUAL AWARD LIMIT" or "ANNUAL AWARD LIMITS" have the meaning set forth
in Section 4.3.
2.3 "AWARD" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units,
Cash-Based Awards, or Other Stock-Based Awards, in each case subject to
the terms of this Plan.
2.4 "AWARD AGREEMENT" means either (i) a written agreement entered into by the
Company and a Participant setting forth the terms and provisions
applicable to an Award granted under this Plan, or (ii) a written or
electronic statement issued by the Company to a Participant describing the
terms and provisions of such Award, including any amendment or
modification thereof. The Committee may provide for the use of electronic,
internet or other non-paper Award Agreements, and the use of electronic,
internet or other non-paper means for the acceptance thereof and actions
thereunder by a Participant.
2.5 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
2.6 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.7 "CASH-BASED AWARD" means an Award, denominated in cash, granted to a
Participant as described in Article 10.
2.8 "CAUSE" means, unless otherwise specified in an Award Agreement or in an
applicable employment agreement between the Company and a Participant,
with respect to any Participant, as determined by the Committee in its
sole discretion:
(a) Willful failure to substantially perform his or her duties as an
Employee (for reasons other than physical or mental illness) or
Director after reasonable notice to the Participant of that failure;
(b) Misconduct that materially injures the Company or any Subsidiary or
Affiliate;
(c) Conviction of, or entering into a plea of nolo contendere to, a
felony; or
(d) Breach of any written covenant or agreement with the Company or any
Subsidiary or Affiliate.
2.9 "CHANGE OF CONTROL" means any of the following events:
(a) The acquisition by any Person of Beneficial Ownership of twenty
percent (20%) or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of Directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
Section 2.9, the following acquisitions shall not constitute a
Change of Control: (i) any acquisition by a Person who on the
Effective Date is the Beneficial Owner of twenty percent (20%) or
more of the Outstanding Company Voting Securities, (ii) any
acquisition directly from the Company, including without limitation,
a public offering of securities, (iii) any acquisition by the
Company, (iv) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
subsidiaries, or (v) any acquisition by any corporation pursuant to
a transaction which complies with subparagraphs (i), (ii), and (iii)
of Section 2.9(c); provided, however, the acquisition by any Person
of Beneficial Ownership of twenty percent (20%) or more of the
combined voting power shall not constitute a Change in Control if
Standard Motor Products, Inc. maintains a Beneficial Ownership of
more than fifty percent (50%) of the then-outstanding voting
securities of the Company entitled to vote generally in the election
of Directors;
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(b) Individuals who constitute the Board as of the Effective Date hereof
(the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board, provided that any individual becoming a
Director subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the Directors then comprising
the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election or removal of the Directors of the Company or other
actual or threatened solicitation of proxies of consents by or on
behalf of a Person other than the Board;
(c) Consummation of a reorganization, merger, or consolidation to which
the Company is a party or a sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case unless, following such Business
Combination: (i) all or substantially all of the individuals and
entities who were the Beneficial Owners of Outstanding Company
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty percent
(50%) of the combined voting power of the outstanding voting
securities entitled to vote generally in the election of directors
of the corporation resulting from the Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more
subsidiaries) (the "Successor Entity") in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Voting Securities; and (ii)
no Person (excluding any Successor Entity or any employee benefit
plan, or related trust, of the Company or such Successor Entity)
beneficially owns, directly or indirectly, twenty percent (20%) or
more of the combined voting power of the then outstanding voting
securities of the Successor Entity, except to the extent that such
ownership existed prior to the Business Combination; and (iii) at
least a majority of the members of the board of directors of the
Successor Entity were members of the Incumbent Board (including
individuals deemed to be members of the Incumbent Board by reason of
the proviso to paragraph (b) of this Section 2.9) at the time of the
execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
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(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
2.10 "CODE" means the U.S. Internal Revenue Code of 1986, as amended from time
to time. For purposes of this Plan, references to sections of the Code
shall be deemed to include references to any applicable regulations
thereunder and any successor or similar provision.
2.11 "COMMITTEE" means the Compensation and Management Development Committee of
the Board or a subcommittee thereof, or any other committee designated by
the Board to administer this Plan. The members of the Committee shall be
appointed from time to time by and shall serve at the discretion of the
Board. If the Committee does not exist or cannot function for any reason,
the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.
2.12 "COMPANY" means Standard Motor Products, Inc., a New York corporation, and
any successor thereto as provided in Article 20 herein.
2.13 "COVERED EMPLOYEE" means any salaried Employee who is or may become a
"Covered Employee," as defined in Code Section 162(m), and who is
designated, either as an individual Employee or class of Employees, by the
Committee within the shorter of (i) ninety (90) days after the beginning
of the Performance Period, or (ii) twenty-five percent (25%) of the
Performance Period has elapsed, as a "Covered Employee" under this Plan
for such applicable Performance Period.
2.14 "DIRECTOR" means any individual who is a member of the Board of Directors
of the Company.
2.15 "EFFECTIVE DATE" has the meaning set forth in Section 1.1.
2.16 "EMPLOYEE" means any individual performing services for the Company, an
Affiliate, or a Subsidiary and designated as an employee of the Company,
its Affiliates, and/or its Subsidiaries on the payroll records thereof. An
Employee shall not include any individual during any period he or she is
classified or treated by the Company, Affiliate, and/or Subsidiary as an
independent contractor, a consultant, or any employee of an employment,
consulting, or temporary agency or any other entity other than the
Company, Affiliate, and/or Subsidiary, without regard to whether such
individual is subsequently determined to have been, or is subsequently
retroactively reclassified as a common-law employee of the Company,
Affiliate, and/or Subsidiary during such period.
2.17 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto.
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2.18 "FAIR MARKET VALUE" or "FMV" means a price that is based on the opening,
closing, actual, high, low, or average selling prices of a Share reported
on the New York Stock Exchange ("NYSE") or other established stock
exchange (or exchanges) on the applicable date, the preceding trading day,
the next succeeding trading day, or an average of trading days, as
determined by the Committee in its discretion. Unless the Committee
determines otherwise, Fair Market Value shall be deemed to be equal to the
average between the reported high and low selling price of a Share on the
most recent date on which Shares were publicly traded. In the event Shares
are not publicly traded at the time a determination of their value is
required to be made hereunder, the determination of their Fair Market
Value shall be made by the Committee in such manner as it deems
appropriate. Such definition(s) of FMV shall be specified in each Award
Agreement and may differ depending on whether FMV is in reference to the
grant, exercise, vesting, settlement, or payout of an Award.
2.19 "FULL VALUE AWARD" means an Award other than in the form of an ISO, NQSO,
or SAR, and which is settled by the issuance of Shares.
2.20 "GRANT DATE" means the date an Award is granted to a Participant pursuant
to the Plan.
2.21 "GRANT PRICE" means the price established at the time of grant of an SAR
pursuant to Article 7, used to determine whether there is any payment due
upon exercise of the SAR.
2.22 "INCENTIVE STOCK OPTION" or "ISO" means an Option to purchase Shares
granted under Article 6 to an Employee and that is designated as an
Incentive Stock Option and that is intended to meet the requirements of
Code Section 422, or any successor provision.
2.23 "INSIDER" shall mean an individual who is, on the relevant date, an
officer, or Director of the Company, or a more than ten percent (10%)
Beneficial Owner of any class of the Company's equity securities that is
registered pursuant to Section 12 of the Exchange Act, as determined by
the Board in accordance with Section 16 of the Exchange Act.
2.24 "NET INCOME" means the consolidated net income before taxes for the Plan
Year, as reported in the Company's annual report to shareholders or as
otherwise reported to shareholders.
2.25 "NONEMPLOYEE DIRECTOR" means a Director who is not an Employee.
2.26 "NONEMPLOYEE DIRECTOR AWARD" means any NQSO, SAR, or Full Value Award
granted, whether singly, in combination, or in tandem, to a Participant
who is a Nonemployee Director pursuant to such applicable terms,
conditions, and limitations as the Board or Committee may establish in
accordance with this Plan.
2.27 "NONQUALIFIED STOCK OPTION" or "NQSO" means an Option that is not intended
to meet the requirements of Code Section 422, or that otherwise does not
meet such requirements.
2.28 "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option,
as described in Article 6.
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2.29 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.30 "OTHER STOCK-BASED AWARD" means an equity-based or equity-related Award
not otherwise described by the terms of this Plan, granted pursuant to
Article 10.
2.31 "PARTICIPANT" means any eligible individual as set forth in Article 5 to
whom an Award is granted.
2.32 "PERFORMANCE-BASED COMPENSATION" means compensation under an Award that is
intended to satisfy the requirements of Code Section 162(m) for certain
performance-based compensation paid to Covered Employees. Notwithstanding
the foregoing, nothing in this Plan shall be construed to mean that an
Award which does not satisfy the requirements for performance-based
compensation under Code Section 162(m) does not constitute
performance-based compensation for other purposes, including Code Section
409A.
2.33 "PERFORMANCE MEASURES" means measures as described in Article 12 on which
the performance goals are based and which are approved by the Company's
shareholders pursuant to this Plan in order to qualify Awards as
Performance-Based Compensation.
2.34 "PERFORMANCE PERIOD" means the period of time during which the performance
goals must be met in order to determine the degree of payout and/or
vesting with respect to an Award.
2.35 "PERFORMANCE SHARE" means an Award under Article 9 herein and subject to
the terms of this Plan, denominated in Shares, the value of which at the
time it is payable is determined as a function of the extent to which
corresponding performance criteria have been achieved.
2.36 "PERFORMANCE UNIT" means an Award under Article 9 herein and subject to
the terms of this Plan, denominated in units, the value of which at the
time it is payable is determined as a function of the extent to which
corresponding performance criteria have been achieved.
2.37 "PERIOD OF RESTRICTION" means the period when Restricted Stock or
Restricted Stock Units are subject to a substantial risk of forfeiture
(based on the passage of time, the achievement of performance goals, or
upon the occurrence of other events as determined by the Committee, in its
discretion), as provided in Article 8.
2.38 "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.39 "PLAN" means the Standard Motor Products, Inc. 2006 Omnibus Incentive
Plan.
2.40 "PLAN YEAR" means the calendar year.
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2.41 "PRIOR PLANS" means the Company's (a) 2004 Omnibus Stock Option Plan of
Standard Motors Products, Inc., (b) the 1994 Omnibus Stock Option Plan of
Standard Motor Products, Inc., (c) the 2004 Standard Motor Products, Inc.
Independent Directors Stock Option Plan and (d) the 1996 Standard Motor
Products, Inc. Independent Directors' Stock Option Plan.
2.42 "RESTRICTED STOCK" means an Award granted to a Participant pursuant to
Article 8.
2.43 "RESTRICTED STOCK UNIT" means an Award granted to a Participant pursuant
to Article 8, except no Shares are actually awarded to the Participant on
the Grant date.
2.44 "SHARE" means a share of common stock of the Company, $2.00 par value per
share.
2.45 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, designated as an SAR,
pursuant to the terms of Article 7 herein.
2.46 "SUBSIDIARY" means any corporation or other entity, whether domestic or
foreign, in which the Company has or obtains, directly or indirectly, a
proprietary interest of more than fifty percent (50%) by reason of stock
ownership or otherwise.
2.47 "THIRD PARTY SERVICE PROVIDER" means any consultant, agent, advisor, or
independent contractor who renders services to the Company, a Subsidiary,
or an Affiliate that (a) are not in connection with the offer and sale of
the Company's securities in a capital raising transaction, and (b) do not
directly or indirectly promote or maintain a market for the Company's
securities.
ARTICLE 3. ADMINISTRATION
3.1 GENERAL. The Committee shall be responsible for administering this
Plan, subject to this Article 3 and the other provisions of this Plan. The
Committee may employ attorneys, consultants, accountants, agents, and other
individuals, any of whom may be an Employee, and the Committee, the Company, and
its officers and Directors shall be entitled to rely upon the advice, opinions,
or valuations of any such individuals. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Participants, the Company, and all other interested individuals.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full and
exclusive discretionary power to interpret the terms and the intent of this Plan
and any Award Agreement or other agreement or document ancillary to or in
connection with this Plan, to determine eligibility for Awards and to adopt such
rules, regulations, forms, instruments, and guidelines for administering this
Plan as the Committee may deem necessary or proper. Such authority shall
include, but not be limited to, selecting Award recipients, establishing all
Award terms and conditions, including the terms and conditions set forth in
Award Agreements, granting Awards as an alternative to or as the form of payment
for grants or rights earned or due under compensation plans or arrangements of
the Company, construing any ambiguous provision of the Plan or any Award
Agreement, and, subject to Article 18, adopting modifications and amendments to
this Plan or any Award Agreement, including without limitation, any that are
necessary to comply with the laws of the countries and other jurisdictions in
which the Company, its Affiliates, and/or its Subsidiaries operate.
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3.3 DELEGATION. The Committee may delegate to one or more of its members
or to one or more officers of the Company, and/or its Subsidiaries and
Affiliates or to one or more agents or advisors such administrative duties or
powers as it may deem advisable, and the Committee or any individuals to whom it
has delegated duties or powers as aforesaid may employ one or more individuals
to render advice with respect to any responsibility the Committee or such
individuals may have under this Plan. The Committee may, by resolution,
authorize one or more officers of the Company to do one or both of the following
on the same basis as can the Committee: (a) designate Employees to be recipients
of Awards and (b) determine the size of any such Awards; provided, however, (i)
the Committee shall not delegate such responsibilities to any such officer for
Awards granted to an Employee who is considered an Insider; (ii) the resolution
providing such authorization sets forth the total number of Awards such
officer(s) may grant; and (iii) the officer(s) shall report periodically to the
Committee regarding the nature and scope of the Awards granted pursuant to the
authority delegated.
ARTICLE 4. SHARES SUBJECT TO THIS PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR AWARDS.
(a) Subject to adjustment as provided in Section 4.4, the maximum
number of Shares available for issuance to Participants under
this Plan on or after the Effective Date shall be seven
hundred thousand (700,000) Shares (the "Share Authorization"),
which shall consist of (i) a number of shares not previously
authorized for issuance under any plan, plus (ii) the number
of shares remaining available for issuance under the Prior
Plans but not subject to outstanding awards as of the
Effective Date, plus (iii) the number of shares subject to
awards outstanding under the Prior Plans as of the Effective
Date but only to the extent that such outstanding awards are
forfeited, expire, or otherwise terminate without the issuance
of such Shares.
(b) The maximum number of Shares of the Share Authorization that
may be issued pursuant to ISOs under this Plan shall be seven
hundred thousand (700,000) Shares.
(c) The maximum number of Shares of the Share Authorization that
may be issued to Nonemployee Directors shall be one hundred
fifty thousand (150,000) Shares, and no Nonemployee Director
may receive Awards subject to more than five thousand (5,000)
Shares in any Plan Year.
4.2 SHARE USAGE. Shares covered by an Award shall only be counted as used
to the extent they are actually issued. Any Shares related to Awards which
terminate by expiration, forfeiture, cancellation, or otherwise without the
issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged
with the Committee's permission, prior to the issuance of Shares, for Awards not
involving Shares, shall be available again for grant under this Plan. Moreover,
if the Option Price of any Option granted under this Plan or the tax withholding
requirements with respect to any Award granted under this Plan are satisfied by
tendering Shares to the Company (by either actual delivery or by attestation),
or if an SAR is exercised, only the number of Shares issued, net of the Shares
tendered, if any, will be deemed delivered for purposes of determining the
maximum number of Shares available for delivery under this Plan. The Shares
available for issuance under this Plan may be authorized and unissued Shares or
treasury Shares.
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4.3 ANNUAL AWARD LIMITS. Unless and until the Committee determines that an
Award to a Covered Employee shall not be designed to qualify as
Performance-Based Compensation, the following limits (each an "Annual Award
Limit" and, collectively, "Annual Award Limits"), as adjusted pursuant to
Sections 4.4 and/or 18.2, shall apply to grants of such Awards under this Plan:
(a) OPTIONS: The maximum aggregate number of Shares subject to Options
granted in any one Plan Year to any one Participant shall be
twenty-five thousand (25,000).
(b) SARS: The maximum number of Shares subject to Stock Appreciation
Rights granted in any one Plan Year to any one Participant shall be
twenty-five thousand (25,000).
(c) RESTRICTED STOCK OR RESTRICTED STOCK UNITS: The maximum aggregate
grant with respect to Awards of Restricted Stock or Restricted Stock
Units in any one Plan Year to any one Participant shall be ten
thousand (10,000).
(d) PERFORMANCE UNITS OR PERFORMANCE SHARES: The maximum aggregate Award
of Performance Units or Performance Shares that a Participant may
receive in any one Plan Year shall be ten thousand (10,000) Shares,
or equal to the value of ten thousand (10,000) Shares, determined as
of the date of vesting or payout, as applicable.
(e) CASH-BASED AWARDS: The maximum aggregate amount awarded or credited
with respect to Cash-Based Awards to any one Participant in any one
Plan Year may not exceed the greater of two hundred fifty thousand
dollars ($250,000) or the value of twenty-five thousand (25,000)
Shares, determined as of the date of vesting or payout, as
applicable.
(f) OTHER STOCK-BASED AWARDS. The maximum aggregate grant with respect
to Other Stock-Based Awards pursuant to Section 10.2 in any one Plan
Year to any one Participant shall be twenty-five thousand (25,000)
Shares.
4.4 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any corporate event
or transaction (including, but not limited to, a change in the Shares of the
Company or the capitalization of the Company) such as a merger, consolidation,
reorganization, recapitalization, separation, partial or complete liquidation,
stock dividend, stock split, reverse stock split, split up, spin-off, or other
distribution of stock or property of the Company, combination of Shares,
exchange of Shares, dividend in kind, or other like change in capital structure,
number of outstanding Shares or distribution (other than normal cash dividends)
to shareholders of the Company, or any similar corporate event or transaction,
the Committee, in its sole discretion, in order to prevent dilution or
enlargement of Participants' rights under this Plan, shall substitute or adjust,
as applicable, the number and kind of Shares that may be issued under this Plan
or under particular forms of Awards, the number and kind of Shares subject to
outstanding Awards, the Option Price or Grant Price applicable to outstanding
Awards, the Annual Award Limits, and other value determinations applicable to
outstanding Awards.
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The Committee, in its sole discretion, may also make appropriate
adjustments in the terms of any Awards under this Plan to reflect or related to
such changes or distributions and to modify any other terms of outstanding
Awards, including modifications of performance goals and changes in the length
of Performance Periods. The determination of the Committee as to the foregoing
adjustments, if any, shall be conclusive and binding on Participants under this
Plan.
Subject to the provisions of Article 18 and notwithstanding anything else
herein to the contrary, without affecting the number of Shares reserved or
available hereunder, the Committee may authorize the issuance or assumption of
benefits under this Plan in connection with any merger, consolidation,
acquisition of property or stock, or reorganization upon such terms and
conditions as it may deem appropriate (including, but not limited to, a
conversion of equity awards into Awards under this Plan in a manner consistent
with paragraph 53 of FASB Interpretation No. 44), subject to compliance with the
rules under Code Sections 422 and 424, as and where applicable.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Individuals eligible to participate in this Plan include
all Employees, Directors, and Third Party Service Providers.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of this Plan, the
Committee may, from time to time, select from all eligible individuals, those
individuals to whom Awards shall be granted and shall determine, in its sole
discretion, the nature of, any and all terms permissible by law, and the amount
of each Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of this Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee, in
its sole discretion; provided that ISOs may be granted only to eligible
Employees of the Company or of any parent or subsidiary corporation (as
permitted under Code Sections 422 and 424).
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the maximum duration of the
Option, the number of Shares to which the Option pertains, the conditions upon
which an Option shall become vested and exercisable, and such other provisions
as the Committee shall determine which are not inconsistent with the terms of
this Plan. The Award Agreement also shall specify whether the Option is intended
to be an ISO or a NQSO.
6.3 OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be determined by the Committee in its sole discretion and shall be
specified in the Award Agreement; provided, however, the Option Price must be at
least equal to one hundred percent (100%) of the FMV of the Shares as determined
on the Grant Date.
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6.4 TERM OF OPTIONS. Each Option granted to a Participant shall expire at
such time as the Committee shall determine at the time of grant; provided,
however, no Option shall be exercisable later than the day before the tenth
(10th) anniversary date of its grant. Notwithstanding the foregoing, for
Nonqualified Stock Options granted to Participants outside the United States,
the Committee has the authority to grant Nonqualified Stock Options that have a
term greater than ten (10) years.
6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which terms and restrictions need
not be the same for each grant or for each Participant.
6.6 PAYMENT. Options granted under this Article 6 shall be exercised by
the delivery of a notice of exercise to the Company or an agent designated by
the Company in a form specified or accepted by the Committee, or by complying
with any alternative procedures which may be authorized by the Committee,
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
A condition of the issuance of the Shares as to which an Option shall be
exercised shall be the payment of the Option Price. The Option Price of any
Option shall be payable to the Company in full either: (a) in cash or its
equivalent; (b) by tendering (either by actual delivery or attestation)
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the Option Price (provided that except as otherwise determined
by the Committee, the Shares that are tendered must have been held by the
Participant for at least six (6) months (or such other period, if any, as the
Committee may permit) prior to their tender to satisfy the Option Price if
acquired under this Plan or any other compensation plan maintained by the
Company or have been purchased on the open market); (c) by a cashless
(broker-assisted) exercise; (d) by a combination of (a), (b) and/or (c); or (e)
any other method approved or accepted by the Committee in its sole discretion.
Subject to any governing rules or regulations, as soon as practicable
after receipt of written notification of exercise and full payment (including
satisfaction of any applicable tax withholding), the Company shall deliver to
the Participant evidence of book entry Shares, or upon the Participant's
request, Share certificates in an appropriate amount based upon the number of
Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of
the methods indicated above shall be paid in United States dollars.
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, minimum holding period requirements, restrictions under applicable
federal securities laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, or under any blue sky or
state securities laws applicable to such Shares.
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6.8 TERMINATION OF EMPLOYMENT. Each Participant's Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the Option following termination of the Participant's employment or provision of
services to the Company, its Affiliates, and/or its Subsidiaries, as the case
may be. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination.
6.9 NOTIFICATION OF DISQUALIFYING DISPOSITION. If any Participant shall
make any disposition of Shares issued pursuant to the exercise of an ISO under
the circumstances described in Code Section 421(b) (relating to certain
disqualifying dispositions), such Participant shall notify the Company of such
disposition within ten (10) days thereof.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of this Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee.
Subject to the terms and conditions of this Plan, the Committee shall have
complete discretion in determining the number of SARs granted to each
Participant and, consistent with the provisions of this Plan, in determining the
terms and conditions pertaining to such SARs.
The Grant Price for each grant of an SAR shall be determined by the
Committee and shall be specified in the Award Agreement; provided, however, the
Grant Price on the Grant Date must be at least equal to one hundred percent
(100%) of the FMV of the Shares as determined on the Grant Date.
7.2 SAR AGREEMENT. Each SAR Award shall be evidenced by an Award Agreement
that shall specify the Grant Price, the term of the SAR, and such other
provisions as the Committee shall determine.
7.3 TERM OF SAR. The term of an SAR granted under this Plan shall be
determined by the Committee, in its sole discretion, and except as determined
otherwise by the Committee and specified in the SAR Award Agreement, no SAR
shall be exercisable later than the tenth (10th) anniversary date of its grant.
Notwithstanding the foregoing, for SARs granted to Participants outside the
United States, the Committee has the authority to grant SARs that have a term
greater than ten (10) years.
7.4 EXERCISE OF SARS. SARs may be exercised upon whatever terms and
conditions the Committee, in its sole discretion, imposes.
7.5 SETTLEMENT OF SARS. Upon the exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The excess of the Fair Market Value of a Share on the date of
exercise over the Grant Price; by
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(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be
in cash, Shares, or any combination thereof, or in any other manner approved by
the Committee in its sole discretion. The Committee's determination regarding
the form of SAR payout shall be set forth in the Award Agreement pertaining to
the grant of the SAR.
7.6 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with or provision of
services to the Company, its Affiliates, and/or its Subsidiaries, as the case
may be. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to this Plan,
and may reflect distinctions based on the reasons for termination.
7.7 OTHER RESTRICTIONS. The Committee shall impose such other conditions
and/or restrictions on any Shares received upon exercise of an SAR granted
pursuant to this Plan as it may deem advisable or desirable. These restrictions
may include, but shall not be limited to, a requirement that the Participant
hold the Shares received upon exercise of an SAR for a specified period of time.
ARTICLE 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1 GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS. Subject to the
terms and provisions of this Plan, the Committee, at any time and from time to
time, may grant Shares of Restricted Stock and/or Restricted Stock Units to
Participants in such amounts as the Committee shall determine. Restricted Stock
Units shall be similar to Restricted Stock except that no Shares are actually
awarded to the Participant on the Grant Date.
8.2 RESTRICTED STOCK OR RESTRICTED STOCK UNIT AGREEMENT. Each Restricted
Stock and/or Restricted Stock Unit grant shall be evidenced by an Award
Agreement that shall specify the Period(s) of Restriction, the number of Shares
of Restricted Stock or the number of Restricted Stock Units granted, and such
other provisions as the Committee shall determine.
8.3 OTHER RESTRICTIONS. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units
granted pursuant to this Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock or each Restricted Stock Unit, restrictions based
upon the achievement of specific performance goals, time-based restrictions on
vesting following the attainment of the performance goals, time-based
restrictions, and/or restrictions under applicable laws or under the
requirements of any stock exchange or market upon which such Shares are listed
or traded, or holding requirements or sale restrictions placed on the Shares by
the Company upon vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee, the Company may retain
the certificates representing Shares of Restricted Stock in the Company's
possession until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied or lapse.
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Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock Award shall become freely transferable by the
Participant after all conditions and restrictions applicable to such Shares have
been satisfied or lapse (including satisfaction of any applicable tax
withholding obligations), and Restricted Stock Units shall be paid in cash,
Shares, or a combination of cash and Shares as the Committee, in its sole
discretion shall determine.
8.4 CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to Section 8.3, each certificate representing Shares of Restricted
Stock granted pursuant to this Plan may bear a legend such as the following or
as otherwise determined by the Committee in its sole discretion:
"The sale or transfer of Shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the Standard
Motor Products, Inc. 2006 Omnibus Incentive Plan, and in the associated
Award Agreement. A copy of this Plan and such Award Agreement may be
obtained from Standard Motor Products, Inc."
8.5 VOTING RIGHTS. Unless otherwise determined by the Committee and set
forth in a Participant's Award Agreement, to the extent permitted or required by
law, as determined by the Committee, Participants holding Shares of Restricted
Stock granted hereunder may be granted the right to exercise full voting rights
with respect to those Shares during the Period of Restriction. A Participant
shall have no voting rights with respect to any Restricted Stock Units granted
hereunder.
8.6 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain Restricted Stock
and/or Restricted Stock Units following termination of the Participant's
employment with or provision of services to the Company, its Affiliates, and/or
its Subsidiaries, as the case may be. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Shares of
Restricted Stock or Restricted Stock Units issued pursuant to this Plan, and may
reflect distinctions based on the reasons for termination.
8.7 SECTION 83(B) ELECTION. The Committee may provide in an Award
Agreement that the Award of Restricted Stock is conditioned upon the Participant
making or refraining from making an election with respect to the Award under
Code Section 83(b). If a Participant makes an election pursuant to Code Section
83(b) concerning a Restricted Stock Award, the Participant shall be required to
file promptly a copy of such election with the Company.
ARTICLE 9. PERFORMANCE UNITS/PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE UNITS/PERFORMANCE SHARES. Subject to the terms
and provisions of this Plan, the Committee, at any time and from time to time,
may grant Performance Units and/or Performance Shares to Participants in such
amounts and upon such terms as the Committee shall determine.
9.2 VALUE OF PERFORMANCE UNITS/PERFORMANCE SHARES. Each Performance Unit
shall have an initial value that is established by the Committee at the time of
grant. Each Performance Share shall have an initial value equal to the Fair
Market Value of a Share on the Grant Date. The Committee shall set performance
goals in its discretion which, depending on the extent to which they are met,
will determine the value and/or number of Performance Units/Performance Shares
that will be paid out to the Participant.
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9.3 EARNING OF PERFORMANCE UNITS/PERFORMANCE SHARES. Subject to the terms
of this Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Performance Shares shall be entitled to receive payout on the
value and number of Performance Units/Performance Shares earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been achieved.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/PERFORMANCE SHARES.
Payment of earned Performance Units/Performance Shares shall be as determined by
the Committee and as evidenced in the Award Agreement. Subject to the terms of
this Plan, the Committee, in its sole discretion, may pay earned Performance
Units/Performance Shares in the form of cash or in Shares (or in a combination
thereof) equal to the value of the earned Performance Units/Performance Shares
at the close of the applicable Performance Period, or as soon as practicable
after the end of the Performance Period. Any Shares may be granted subject to
any restrictions deemed appropriate by the Committee. The determination of the
Committee with respect to the form of payout of such Awards shall be set forth
in the Award Agreement pertaining to the grant of the Award.
9.5 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain Performance Units
and/or Performance Shares following termination of the Participant's employment
with or provision of services to the Company, its Affiliates, and/or its
Subsidiaries, as the case may be. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Awards of
Performance Units or Performance Shares issued pursuant to this Plan, and may
reflect distinctions based on the reasons for termination.
ARTICLE 10. CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS
10.1 GRANT OF CASH-BASED AWARDS. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Cash-Based
Awards to Participants in such amounts and upon such terms as the Committee may
determine.
10.2 OTHER STOCK-BASED AWARDS. The Committee may grant other types of
equity-based or equity-related Awards not otherwise described by the terms of
this Plan (including the grant or offer for sale of unrestricted Shares) in such
amounts and subject to such terms and conditions, as the Committee shall
determine. Such Awards may involve the transfer of actual Shares to
Participants, or payment in cash or otherwise of amounts based on the value of
Shares and may include, without limitation, Awards designed to comply with or
take advantage of the applicable local laws of jurisdictions other than the
United States.
10.3 VALUE OF CASH-BASED AND OTHER STOCK-BASED AWARDS. Each Cash-Based
Award shall specify a payment amount or payment range as determined by the
Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or
units based on Shares, as determined by the Committee. The Committee may
establish performance goals in its discretion. If the Committee exercises its
discretion to establish performance goals, the number and/or value of Cash-Based
Awards or Other Stock-Based Awards that will be paid out to the Participant will
depend on the extent to which the performance goals are met.
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10.4 PAYMENT OF CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS. Payment,
if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall
be made in accordance with the terms of the Award, in cash or Shares as the
Committee determines.
10.5 TERMINATION OF EMPLOYMENT. The Committee shall determine the extent
to which the Participant shall have the right to receive Cash-Based Awards or
Other Stock-Based Awards following termination of the Participant's employment
with or provision of services to the Company, its Affiliates, and/or its
Subsidiaries, as the case may be. Such provisions shall be determined in the
sole discretion of the Committee, such provisions may be included in an
agreement entered into with each Participant, but need not be uniform among all
Awards of Cash-Based Awards or Other Stock-Based Awards issued pursuant to the
Plan, and may reflect distinctions based on the reasons for termination.
ARTICLE 11. TRANSFERABILITY OF AWARDS
11.1 TRANSFERABILITY. Except as provided in Section 11.2 below, during a
Participant's lifetime, his or her Awards shall be exercisable only by the
Participant. Awards shall not be transferable other than by will or the laws of
descent and distribution; no Awards shall be subject, in whole or in part, to
attachment, execution, or levy of any kind; and any purported transfer in
violation hereof shall be null and void. The Committee may establish such
procedures as it deems appropriate for a Participant to designate a beneficiary
to whom any amounts payable or Shares deliverable in the event of, or following,
the Participant's death, may be provided.
11.2 COMMITTEE ACTION. The Committee may, in its discretion, determine
that notwithstanding Section 11.1, any or all Awards (other than ISOs) shall be
transferable to and exercisable by such transferees, and subject to such terms
and conditions, as the Committee may deem appropriate; provided, however, no
Award may be transferred for value (as defined in the General Instructions to
Form S-8).
ARTICLE 12. PERFORMANCE MEASURES
12.1 PERFORMANCE MEASURES. The performance goals upon which the payment or
vesting of an Award to a Covered Employee that is intended to qualify as
Performance-Based Compensation shall be limited to the following Performance
Measures:
(a) Net earnings or net income (before or after taxes);
(b) Earnings per share (basic or diluted);
(c) Net sales or revenue growth;
(d) Net operating profit;
(e) Return measures (including, but not limited to, return on assets,
capital, invested capital, equity, sales, or revenue);
(f) Cash flow (including, but not limited to, operating cash flow, free
cash flow, cash flow return on equity, and cash flow return on
investment);
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(g) Earnings before or after taxes, interest, depreciation, and/or
amortization;
(h) Gross or operating margins;
(i) Productivity ratios;
(j) Share price (including, but not limited to, growth measures and
total shareholder return);
(k) Expense targets;
(l) Margins;
(m) Operating efficiency;
(n) Market share;
(o) Customer satisfaction;
(p) Working capital targets; and
(q) Economic value added or EVA(R) (net operating profit after tax minus
the sum of capital multiplied by the cost of capital).
Any Performance Measure(s) may be used to measure the performance of the
Company, Subsidiary, and/or Affiliate as a whole or any business unit of the
Company, Subsidiary, and/or Affiliate or any combination thereof, as the
Committee may deem appropriate, or any of the above Performance Measures as
compared to the performance of a group of comparator companies, or published or
special index that the Committee, in its sole discretion, deems appropriate, or
the Company may select Performance Measure (j) above as compared to various
stock market indices. The Committee also has the authority to provide for
accelerated vesting of any Award based on the achievement of performance goals
pursuant to the Performance Measures specified in this Article 12.
12.2 EVALUATION OF PERFORMANCE. The Committee may provide in any such
Award that any evaluation of performance may include or exclude any of the
following events that occurs during a Performance Period: (a) asset write-downs,
(b) litigation or claim judgments or settlements, (c) the effect of changes in
tax laws, accounting principles, or other laws or provisions affecting reported
results, (d) any reorganization and restructuring programs, (e) extraordinary
nonrecurring items as described in Accounting Principles Board Opinion No. 30
and/or in management's discussion and analysis of financial condition and
results of operations appearing in the Company's annual report to shareholders
for the applicable year, (f) acquisitions or divestitures, and (g) foreign
exchange gains and losses. To the extent such inclusions or exclusions affect
Awards to Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility.
12.3 ADJUSTMENT OF PERFORMANCE-BASED COMPENSATION. Awards that are
intended to qualify as Performance-Based Compensation may not be adjusted
upward. The Committee shall retain the discretion to adjust such Awards
downward, either on a formula or discretionary basis or any combination, as the
Committee determines.
12.4 COMMITTEE DISCRETION. In the event that applicable tax and/or
securities laws change to permit Committee discretion to alter the governing
Performance Measures without obtaining shareholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee determines
that it is advisable to grant Awards that shall not qualify as Performance-Based
Compensation, the Committee may make such grants without satisfying the
requirements of Code Section 162(m) and base vesting on Performance Measures
other than those set forth in Section 12.1.
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ARTICLE 13. NONEMPLOYEE DIRECTOR AWARDS
The Board or Committee shall determine all Awards to Nonemployee
Directors. The terms and conditions of any grant to any such Nonemployee
Director shall be set forth in an Award Agreement.
ARTICLE 14. DIVIDEND EQUIVALENTS
Any Participant selected by the Committee may be granted dividend
equivalents based on the dividends declared on Shares that are subject to any
Award, to be credited as of dividend payment dates, during the period between
the date the Award is granted and the date the Award is exercised, vests or
expires, as determined by the Committee. Such dividend equivalents shall be
converted to cash or additional Shares by such formula and at such time and
subject to such limitations as may be determined by the Committee.
ARTICLE 15. BENEFICIARY DESIGNATION
Each Participant under this Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under this Plan is to be paid in case of his death before he
receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence of any such
beneficiary designation, benefits remaining unpaid or rights remaining
unexercised at the Participant's death shall be paid to or exercised by the
Participant's executor, administrator, or legal representative.
ARTICLE 16. RIGHTS OF PARTICIPANTS
16.1 EMPLOYMENT. Nothing in this Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company, its Affiliates,
and/or its Subsidiaries, to terminate any Participant's employment or service on
the Board or to the Company at any time or for any reason not prohibited by law,
nor confer upon any Participant any right to continue his employment or service
as a Director or Third Party Service Provider for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute
an employment contract with the Company, its Affiliates, and/or its Subsidiaries
and, accordingly, subject to Articles 3 and 19, this Plan and the benefits
hereunder may be terminated at any time in the sole and exclusive discretion of
the Committee without giving rise to any liability on the part of the Company,
its Affiliates, and/or its Subsidiaries.
16.2 PARTICIPATION. No individual shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
16.3 RIGHTS AS A SHAREHOLDER. Except as otherwise provided herein, a
Participant shall have none of the rights of a shareholder with respect to
Shares covered by any Award until the Participant becomes the record holder of
such Shares.
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ARTICLE 17. CHANGE OF CONTROL
17.1 CHANGE OF CONTROL OF THE COMPANY. Notwithstanding any other provision
of this Plan to the contrary, the provisions of this Article 17 shall apply in
the event of a Change of Control, unless otherwise determined by the Committee
in connection with the grant of an Award as reflected in the applicable Award
Agreement.
Upon a Change of Control, except to the extent that another Award meeting
the requirements of Section 17.2 (a "Replacement Award") is provided to the
Participant to replace such Award (the "Replaced Award"), all then-outstanding
Stock Options and Stock Appreciation Rights shall immediately become fully
vested and exercisable, and all other then-outstanding Awards whose
exercisability depends merely on the satisfaction of a service obligation by a
Participant to the Company, Subsidiary, or Affiliate shall vest in full and be
free of restrictions related to the vesting of such Awards. The treatment of any
other Awards shall be as determined by the Committee in connection with the
grant thereof, as reflected in the applicable Award Agreement.
Except to the extent that a Replacement Award is provided to the
Participant, the Committee may, in its sole discretion, determine that any or
all outstanding Awards granted under the Plan, whether or not exercisable, will
be canceled and terminated and that in connection with such cancellation and
termination the holder of such Award may receive for each Share of Common Stock
subject to such Awards a cash payment (or the delivery of shares of stock, other
securities or a combination of cash, stock and securities equivalent to such
cash payment) equal to the difference, if any, between the consideration
received by shareholders of the Company in respect of a Share of Common Stock in
connection with such transaction and the purchase price per share, if any, under
the Award multiplied by the number of Shares of Common Stock subject to such
Award; provided that if such product is zero or less or to the extent that the
Award is not then exercisable, the Awards will be canceled and terminated
without payment therefore.
17.2 REPLACEMENT AWARDS. An Award shall meet the conditions of this
Section 17.2 (and hence qualify as a Replacement Award) if: (i) it has a value
at least equal to the value of the Replaced Award as determined by the Committee
in its sole discretion; (ii) it relates to publicly traded equity securities of
the Company or its successor in the Change of Control or another entity that is
affiliated with the Company or its successor following the Change of Control;
and (iii) its other terms and conditions are not less favorable to the
Participant than the terms and conditions of the Replaced Award (including the
provisions that would apply in the event of a subsequent Change of Control).
Without limiting the generality of the foregoing, the Replacement Award may take
the form of a continuation of the Replaced Award if the requirements of the
preceding sentence are satisfied. The determination of whether the conditions of
this Section 17.2 are satisfied shall be made by the Committee, as constituted
immediately before the Change of Control, in its sole discretion.
17.3 TERMINATION OF EMPLOYMENT. Upon a termination of employment or
termination of directorship of a Participant occurring in connection with or
during the period of two (2) years after such Change of Control, other than for
Cause, (i) all Replacement Awards held by the Participant shall become fully
vested and (if applicable) exercisable and free of restrictions, and (ii) all
Stock Options and Stock Appreciation Rights held by the Participant immediately
before the termination of employment or termination of directorship that the
Participant held as of the date of the Change of Control or that constitute
Replacement Awards shall remain exercisable for not less than one (1) year
following such termination or until the expiration of the stated term of such
Stock Option or SAR, whichever period is shorter; provided, that if the
applicable Award Agreement provides for a longer period of exercisability, that
provision shall control.
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ARTICLE 18. AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION
18.1 AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION. Subject to
Section 18.3, the Committee may, at any time and from time to time, alter,
amend, modify, suspend, or terminate this Plan and any Award Agreement in whole
or in part; provided, however, that, without the prior approval of the Company's
shareholders and except as provided in Section 4.4, Options or SARs issued under
this Plan will not be repriced, replaced, or regranted through cancellation, or
by lowering the Option Price of a previously granted Option or the Grant Price
of a previously granted SAR, and no material amendment of this Plan shall be
made without shareholder approval if shareholder approval is required by law,
regulation, or stock exchange rule.
18.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.4 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent unintended dilution or enlargement of the benefits or potential
benefits intended to be made available under this Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under this Plan.
18.3 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of
this Plan to the contrary (other than Section 18.4), no termination, amendment,
suspension, or modification of this Plan or an Award Agreement shall adversely
affect in any material way any Award previously granted under this Plan, without
the written consent of the Participant holding such Award.
18.4 AMENDMENT TO CONFORM TO LAW. Notwithstanding any other provision of
this Plan to the contrary, the Board of Directors may amend the Plan or an Award
Agreement, to take effect retroactively or otherwise, as deemed necessary or
advisable for the purpose of conforming the Plan or an Award Agreement to any
present or future law relating to plans of this or similar nature (including,
but not limited to, Code Section 409A), and to the administrative regulations
and rulings promulgated thereunder. By accepting an Award under this Plan, a
Participant agrees to any amendment made pursuant to this Section 18.4 to any
Award granted under the Plan without further consideration or action.
ARTICLE 19. WITHHOLDING
19.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, the
minimum statutory amount to satisfy federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.
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19.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock
and Restricted Stock Units, or upon the achievement of performance goals related
to Performance Shares, or any other taxable event arising as a result of an
Award granted hereunder, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax withholding
that could be imposed on the transaction. All such elections shall be
irrevocable, made in writing, and signed by the Participant, and shall be
subject to any restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.
ARTICLE 20. SUCCESSORS
All obligations of the Company under this Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 21. GENERAL PROVISIONS
21.1 FORFEITURE EVENTS.
(a) The Committee may specify in an Award Agreement that the
Participant's rights, payments, and benefits with respect to
an Award shall be subject to reduction, cancellation,
forfeiture, or recoupment upon the occurrence of certain
specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events may
include, but shall not be limited to, termination of
employment for cause, termination of the Participant's
provision of services to the Company, Affiliate, and/or
Subsidiary, violation of material Company, Affiliate, and/or
Subsidiary policies, breach of noncompetition,
confidentiality, or other restrictive covenants that may apply
to the Participant, or other conduct by the Participant that
is detrimental to the business or reputation of the Company,
its Affiliates, and/or its Subsidiaries.
(b) If the Company is required to prepare an accounting
restatement due to the material noncompliance of the Company,
as a result of misconduct, with any financial reporting
requirement under the securities laws, if the Participant
knowingly or grossly negligently engaged in the misconduct, or
knowingly or grossly negligently failed to prevent the
misconduct, or if the Participant is one of the individuals
subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002, the Participant shall reimburse
the Company the amount of any payment in settlement of an
Award earned or accrued during the twelve (12) month period
following the first public issuance or filing with the United
States Securities and Exchange Commission (whichever just
occurred) of the financial document embodying such financial
reporting requirement.
21.2 LEGEND. The certificates for Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer of such
Shares.
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21.3 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
21.4 SEVERABILITY. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
21.5 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under this Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
21.6 DELIVERY OF TITLE. The Company shall have no obligation to issue or
deliver evidence of title for Shares issued under this Plan prior to:
(a) Obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the Shares
under any applicable national or foreign law or ruling of any
governmental body that the Company determines to be necessary or
advisable.
21.7 INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
21.8 INVESTMENT REPRESENTATIONS. The Committee may require any individual
receiving Shares pursuant to an Award under this Plan to represent and warrant
in writing that the individual is acquiring the Shares for investment and
without any present intention to sell or distribute such Shares.
21.9 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES. Notwithstanding any
provision of this Plan to the contrary, in order to comply with the laws in
other countries in which the Company, its Affiliates, and/or its Subsidiaries
operate or have Employees, Directors, or Third Party Service Providers, the
Committee, in its sole discretion, shall have the power and authority to:
(a) Determine which Affiliates and Subsidiaries shall be covered by this
Plan;
(b) Determine which Employees and/or Directors or Third Party Service
Providers outside the United States are eligible to participate in
this Plan;
(c) Modify the terms and conditions of any Award granted to Employees
and/or Directors or Third Party Service Providers outside the United
States to comply with applicable foreign laws;
A-22
(d) Establish subplans and modify exercise procedures and other terms
and procedures, to the extent such actions may be necessary or
advisable. Any subplans and modifications to Plan terms and
procedures established under this Section 21.9 by the Committee
shall be attached to this Plan document as appendices; and
(e) Take any action, before or after an Award is made, that it deems
advisable to obtain approval or comply with any necessary local
government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions
hereunder, and no Awards shall be granted, that would violate applicable law.
21.10 UNCERTIFICATED SHARES. To the extent that this Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange.
21.11 UNFUNDED PLAN. Participants shall have no right, title, or interest
whatsoever in or to any investments that the Company, and/or its Subsidiaries,
and/or its Affiliates may make to aid it in meeting its obligations under this
Plan. Nothing contained in this Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Participant, beneficiary,
legal representative, or any other individual. To the extent that any individual
acquires a right to receive payments from the Company, its Subsidiaries, and/or
its Affiliates under this Plan, such right shall be no greater than the right of
an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as
the case may be. All payments to be made hereunder shall be paid from the
general funds of the Company, a Subsidiary, or an Affiliate, as the case may be
and no special or separate fund shall be established and no segregation of
assets shall be made to assure payment of such amounts except as expressly set
forth in this Plan.
21.12 NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to this Plan or any Award. The Committee shall determine
whether cash, Awards, or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
21.13 RETIREMENT AND WELFARE PLANS. Neither Awards made under this Plan
nor Shares or cash paid pursuant to such Awards, except pursuant to Covered
Employee Annual Incentive Awards, may be included as "compensation" for purposes
of computing the benefits payable to any Participant under the Company's or any
Subsidiary's or Affiliate's retirement plans (both qualified and non-qualified)
or welfare benefit plans unless such other plan expressly provides that such
compensation shall be taken into account in computing a Participant's benefit.
21.14 DEFERRED COMPENSATION. No deferral of compensation (as defined under
Code Section 409A or guidance thereto) is intended under this Plan.
Notwithstanding this intent, if any Award would be considered deferred
compensation as defined under Code Section 409A and if this Plan fails to meet
the requirements of Code Section 409A with respect to such Award, then such
Award shall be null and void. However, the Committee may permit deferrals of
compensation pursuant to the terms of a Participant's Award Agreement, a
separate plan or a subplan which meets the requirements of Code Section 409A and
any related guidance. Additionally, to the extent any Award is subject to Code
Section 409A, notwithstanding any provision herein to the contrary, the Plan
does not permit the acceleration or delay of the time or schedule of any
distribution related to such Award, except as permitted by Code Section 409A,
the regulations thereunder, and/or the Secretary of the United States Treasury.
A-23
21.15 NONEXCLUSIVITY OF THIS PLAN. The adoption of this Plan shall not be
construed as creating any limitations on the power of the Board or Committee to
adopt such other compensation arrangements as it may deem desirable for any
Participant.
21.16 NO CONSTRAINT ON CORPORATE ACTION. Nothing in this Plan shall be
construed to: (i) limit, impair, or otherwise affect the Company's or a
Subsidiary's or an Affiliate's right or power to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer
all or any part of its business or assets; or, (ii) limit the right or power of
the Company or a Subsidiary or an Affiliate to take any action which such entity
deems to be necessary or appropriate.
21.17 GOVERNING LAW. The Plan and each Award Agreement shall be governed
by the laws of the State of New York, excluding any conflicts or choice of law
rule or principle that might otherwise refer construction or interpretation of
this Plan to the substantive law of another jurisdiction. Unless otherwise
provided in the Award Agreement, recipients of an Award under this Plan are
deemed to submit to the exclusive jurisdiction and venue of the federal or state
courts of New York, to resolve any and all issues that may arise out of or
relate to this Plan or any related Award Agreement.
A-24
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
STANDARD MOTOR PRODUCTS, INC.
REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2006
The undersigned stockholder of STANDARD MOTOR PRODUCTS, INC. (the
"Company") hereby appoints LAWRENCE I. SILLS, JOHN P. GETHIN, and JAMES J. BURKE
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and vote as designated on this Proxy, all of the shares of the
Company's Common Stock held of record by the undersigned on April 7, 2006 at the
annual meeting of the stockholders of the Company to be held on May 18, 2006, or
at any adjournment thereof.
COMMON
FOR WITHHOLD
ELECTION VOTE
1. Election of Directors OF ALL FOR ALL FOR ALL
NOMINEES NOMINEES EXCEPT
[ ] [ ] [ ]
ROBERT M. GERRITY, KENNETH A. LEHMAN, ARTHUR S. SILLS, LAWRENCE I. SILLS,
PETER J. SILLS, FREDERICK D. STURDIVANT, WILLAM H. TURNER, RICHARD S. WARD
AND ROGER M. WIDMANN
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), MARK
"FOR ALL EXCEPT" AND WRITE THE NAME OF SUCH NOMINEE(S) IN THE SPACE PROVIDED
BELOW.
------------------------------------------------
DIRECTORS RECOMMEND:
FOR AGAINST ABSTAIN
[FOR] 2. Proposal to approve the Standard Motor
Products, Inc. 2006 Omnibus Incentive Plan. [ ] [ ] [ ]
[FOR] 3. Proposal to ratify the appointment of Grant
Thornton LLP as the Company's independent
registered public accounting firm for the
fiscal year ending December 31, 2006. [ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED "FOR" ALL OF THE NOMINEES NAMED ABOVE, "FOR" PROPOSAL 2 AND
"FOR" PROPOSAL 3. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
Please be sure to sign and date
this Proxy in the box below. Date
----------------------
------------------------------------ --------------------------------
Stockholder sign above Co-holder (if any) sign above
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
STANDARD MOTOR PRODUCTS, INC.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Please sign exactly as your name appears on this card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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