Sensata Technologies Holding plc 10-Q for FY2023 Q1
Sensata Technologies Holding plc (ST)
10-Q
2023-05-02
For: 2023-03-31
View Original
Added on
April 04, 2026
About this 10-Q
Sensata Technologies Holding plc filed this 10-Q on May 2, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $998.18M
- up 2.3% from $975.77M a year earlier
- Net income
- $86.42M
- up 285.1% from net income of $22.44M a year earlier
- Diluted EPS
- $0.56
- up 300.0% from $0.14 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________
FORM 10-Q
_________________________________________________________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number 001-34652
_________________________________________________________________________________
(Exact name of registrant as specified in its charter)
_________________________________________________________________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||
(Address of principal executive offices, including zip code)
+1 (508 ) 236 3800
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
_____________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 14, 2023, 152,894,406 ordinary shares were outstanding.
TABLE OF CONTENTS
| PART I | |||||||||||
| Item 1. | |||||||||||
| Item 2. | |||||||||||
| Item 3. | |||||||||||
| Item 4. | |||||||||||
| PART II | |||||||||||
| Item 1. | |||||||||||
| Item 1A. | |||||||||||
| Item 2. | |||||||||||
| Item 3. | |||||||||||
| Item 5. | |||||||||||
| Item 6. | |||||||||||
2
PART I—FINANCIAL INFORMATION
Item 1.Financial Statements.
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
(unaudited)
| March 31, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
Other intangible assets, net of accumulated amortization of $ | |||||||||||
| Deferred income tax assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and shareholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt, finance lease and other financing obligations | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Income taxes payable | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Pension and other post-retirement benefit obligations | |||||||||||
| Finance lease and other financing obligations, less current portion | |||||||||||
| Long-term debt, net | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Shareholders’ equity: | |||||||||||
Ordinary shares, € | |||||||||||
Treasury shares, at cost, | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders' equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Net revenue | $ | $ | |||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Restructuring and other charges, net | |||||||||||||||||||||||
| Total operating costs and expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense, net | ( | ( | |||||||||||||||||||||
| Other, net | ( | ||||||||||||||||||||||
| Income before taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Basic net income per share | $ | $ | |||||||||||||||||||||
| Diluted net income per share | $ | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||
| Defined benefit and retiree healthcare plans | |||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||
| Comprehensive income | $ | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
| For the three months ended | |||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Gain on sale of business | ( | ||||||||||
| Share-based compensation | |||||||||||
| Loss on debt financing | |||||||||||
| Amortization of intangible assets | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Acquisition-related compensation payments | ( | ( | |||||||||
| Mark-to-market loss on equity investments, net | |||||||||||
| Unrealized loss/(gain) on derivative instruments and other | ( | ||||||||||
| Changes in operating assets and liabilities, net of the effects of acquisitions: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Inventories | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Accounts payable and accrued expenses | ( | ||||||||||
| Income taxes payable | ( | ||||||||||
| Other | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions, net of cash received | ( | ||||||||||
| Additions to property, plant and equipment and capitalized software | ( | ( | |||||||||
| Investment in debt and equity securities | ( | ||||||||||
| Proceeds from the sale of business, net of cash sold | |||||||||||
| Other | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from exercise of stock options and issuance of ordinary shares | |||||||||||
| Payment of employee restricted stock tax withholdings | ( | ( | |||||||||
| Payments on debt | ( | ( | |||||||||
| Dividends paid | ( | ||||||||||
| Payments to repurchase ordinary shares | ( | ||||||||||
| Payments of debt financing costs | ( | ||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net change in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of year | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
SENSATA TECHNOLOGIES HOLDING PLC
Condensed Consolidated Statements of Changes in Shareholders' Equity
(In thousands)
(unaudited)
| Ordinary Shares | Treasury Shares | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Surrender of shares for tax withholding | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted securities | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends paid | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement of ordinary shares | ( | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ordinary Shares | Treasury Shares | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Surrender of shares for tax withholding | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted securities | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of ordinary shares | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement of ordinary shares | ( | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
SENSATA TECHNOLOGIES HOLDING PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements reflect the financial position, results of operations, comprehensive income, cash flows, and changes in shareholders' equity of Sensata Technologies Holding plc, a public limited company incorporated under the laws of England and Wales, and its consolidated subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," or "us."
2. New Accounting Standards
3. Revenue Recognition
The following table presents net revenue disaggregated by segment and end market for the three months ended March 31, 2023 and 2022:
| For the three months ended March 31, 2023 | For the three months ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||
| Performance Sensing | Sensing Solutions | Total | Performance Sensing | Sensing Solutions | Total | |||||||||||||||||||||||||||||||||
| Automotive | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
HVOR (1) | ||||||||||||||||||||||||||||||||||||||
| Industrial | ||||||||||||||||||||||||||||||||||||||
Appliance and HVAC (2) | ||||||||||||||||||||||||||||||||||||||
| Aerospace | ||||||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
___________________________________
(1) Heavy vehicle and off-road
(2) Heating, ventilation and air conditioning
4. Share-Based Payment Plans
The following table presents the components of non-cash compensation expense related to our equity awards for the three months ended March 31, 2023 and 2022:
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Stock options | $ | $ | |||||||||||||||||||||
| Restricted securities | |||||||||||||||||||||||
| Share-based compensation expense | $ | $ | |||||||||||||||||||||
8
5. Restructuring and Other Charges, Net
The following table presents the components of restructuring and other charges, net for the three months ended March 31, 2023 and 2022:
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Severance costs, net | $ | $ | |||||||||||||||||||||
| Facility and other exit costs | |||||||||||||||||||||||
| Gain on sale of business | ( | ||||||||||||||||||||||
Acquisition-related compensation arrangements (1) | |||||||||||||||||||||||
Other (1)(2) | ( | ||||||||||||||||||||||
| Restructuring and other charges, net | $ | $ | |||||||||||||||||||||
___________________________________
(1) We have reclassified acquisition-related compensation arrangements for the three months ended March 31, 2022 from the "other" caption within restructuring and other charges, net, to correspond to current period presentation.
The following table presents a rollforward of our severance liability for the three months ended March 31, 2023:
| Severance | |||||||||||||||||
| Balance as of December 31, 2022 | $ | ||||||||||||||||
| Charges, net of reversals | |||||||||||||||||
| Payments | ( | ||||||||||||||||
| Foreign currency remeasurement | |||||||||||||||||
| Balance as of March 31, 2023 | $ | ||||||||||||||||
The severance liability as of March 31, 2023 and December 31, 2022 was entirely recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets.
6. Other, Net
The following table presents the components of other, net for the three months ended March 31, 2023 and 2022:
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Currency remeasurement loss on net monetary assets | $ | ( | $ | ( | |||||||||||||||||||
| Gain/(loss) on foreign currency forward contracts | ( | ||||||||||||||||||||||
| Gain on commodity forward contracts | |||||||||||||||||||||||
| Loss on debt financing | ( | ||||||||||||||||||||||
| Mark-to-market loss on equity investments, net | ( | ||||||||||||||||||||||
| Net periodic benefit cost, excluding service cost | ( | ( | |||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Other, net | $ | $ | ( | ||||||||||||||||||||
7. Income Taxes
The following table presents the provision for income taxes for the three months ended March 31, 2023 and 2022:
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Provision for income taxes | $ | $ | |||||||||||||||||||||
The provision for income taxes consists of (1) current tax expense, which relates primarily to our profitable operations in tax jurisdictions with limited or no net operating loss carryforwards and withholding taxes related to management fees, royalties, and the repatriation of foreign earnings; and (2) deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to (a) book versus tax basis in intangible assets, (b) changes in net operating loss
9
carryforwards, and (c) changes in withholding taxes on unremitted earnings. Other items impacting deferred tax expense include changes in tax rates and changes in our assessment of the realizability of our deferred tax assets.
We recorded a partial valuation allowance against certain interest carryforwards in the U.S. at both December 31, 2022 and December 31, 2021. We are continually evaluating both the positive and negative evidence for this partial valuation allowance. We believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of this deferred tax asset and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability and future utilization of this attribute that we are able to actually achieve.
8. Net Income per Share
Basic and diluted net income per share are calculated by dividing net income by the number of basic and diluted weighted-average ordinary shares outstanding during the period. For the three months ended March 31, 2023 and 2022 the weighted-average ordinary shares outstanding used to calculate basic and diluted net income per share were as follows:
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Basic weighted-average ordinary shares outstanding | |||||||||||||||||||||||
| Dilutive effect of stock options | |||||||||||||||||||||||
| Dilutive effect of unvested restricted securities | |||||||||||||||||||||||
| Diluted weighted-average ordinary shares outstanding | |||||||||||||||||||||||
Certain potential ordinary shares were excluded from our calculation of diluted weighted-average ordinary shares outstanding because either they would have had an anti-dilutive effect on net income per share or they related to equity awards that were contingently issuable for which the contingency had not been satisfied. These potential ordinary shares were as follows:
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Anti-dilutive shares excluded | |||||||||||||||||||||||
| Contingently issuable shares excluded | |||||||||||||||||||||||
9. Inventories
The following table presents the components of inventories as of March 31, 2023 and December 31, 2022:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Finished goods | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Raw materials | |||||||||||
| Inventories | $ | $ | |||||||||
10
10. Debt
The following table presents the components of long-term debt, finance lease and other financing obligations as of March 31, 2023 and December 31, 2022:
| Maturity Date | March 31, 2023 | December 31, 2022 | ||||||||||||||||||
Term Loan (1) | September 20, 2026 | $ | $ | |||||||||||||||||
| November 1, 2024 | ||||||||||||||||||||
| October 1, 2025 | ||||||||||||||||||||
| February 15, 2030 | ||||||||||||||||||||
| February 15, 2031 | ||||||||||||||||||||
| April 15, 2029 | ||||||||||||||||||||
| September 1, 2030 | ||||||||||||||||||||
| Less: debt discount, net of premium | ( | ( | ||||||||||||||||||
| Less: deferred financing costs | ( | ( | ||||||||||||||||||
| Less: current portion | ( | ( | ||||||||||||||||||
| Long-term debt, net | $ | $ | ||||||||||||||||||
| Finance lease and other financing obligations | $ | $ | ||||||||||||||||||
| Less: current portion | ( | ( | ||||||||||||||||||
| Finance lease and other financing obligations, less current portion | $ | $ | ||||||||||||||||||
___________________________________
Our debt consists of secured credit facilities and various tranches of senior unsecured notes. Refer to Note 14: Debt of our 2022 Annual Report for additional information related to our existing indebtedness.
As of March 31, 2023, we had $746.1 million available under our $750.0 million revolving credit facility (the "Revolving Credit Facility"), net of $3.9 million of obligations in respect of outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of March 31, 2023, no amounts had been drawn against these outstanding letters of credit.
Accrued Interest
Accrued interest associated with our outstanding debt is included as a component of accrued expenses and other current liabilities in the condensed consolidated balance sheets. As of March 31, 2023 and December 31, 2022, accrued interest totaled $54.4 million and $50.1 million, respectively.
11. Commitments and Contingencies
12. Shareholders' Equity
Cash Dividends
On February 22, 2023, we paid a cash dividend of $0.11 per share, or $16.8 million in aggregate, to shareholders of record as of February 8, 2023. On April 13, 2023, we announced that our Board of Directors approved a quarterly dividend of $0.12 per share, payable on May 24, 2023 to shareholders of record as of May 10, 2023.
11
Treasury Shares
From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by the Board at any time. On January 20, 2022, we announced that our Board of Directors had authorized a new $500.0 million ordinary share repurchase program (the “January 2022 Program”), which replaced the previous $500.0 million program approved in July 2019. We did not repurchase any ordinary shares under this program in the three months ended March 31, 2023. In the three months ended March 31, 2022, we repurchased 1.1 million ordinary shares under the January 2022 Program. As of March 31, 2023, $224.5 million remained available for repurchase under the January 2022 Program.
Accumulated Other Comprehensive Loss
The following table presents the components of accumulated other comprehensive loss for the three months ended March 31, 2023:
| Cash Flow Hedges | Defined Benefit and Retiree Healthcare Plans | Accumulated Other Comprehensive Loss | ||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income before reclassifications, net of tax | ||||||||||||||||||||
| Reclassifications from accumulated other comprehensive loss, net of tax | ( | ( | ||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | ( | $ | ( | |||||||||||||||
The following table presents the amounts reclassified from accumulated other comprehensive loss for the three months ended March 31, 2023 and 2022:
| For the three months ended March 31, | Affected Line in Condensed Consolidated Statements of Operations | |||||||||||||||||||||||||||||||
| Component | 2023 | 2022 | ||||||||||||||||||||||||||||||
| Derivative instruments designated and qualifying as cash flow hedges: | ||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | ( | $ | ( | Net revenue (1) | |||||||||||||||||||||||||||
| Foreign currency forward contracts | ( | ( | Cost of revenue (1) | |||||||||||||||||||||||||||||
| Total, before taxes | ( | ( | Income before taxes | |||||||||||||||||||||||||||||
| Income tax effect | Provision for income taxes | |||||||||||||||||||||||||||||||
| Total, net of taxes | $ | ( | $ | ( | Net income | |||||||||||||||||||||||||||
| Defined benefit and retiree healthcare plans | $ | $ | Other, net | |||||||||||||||||||||||||||||
| Income tax effect | ( | ( | Provision for income taxes | |||||||||||||||||||||||||||||
| Total, net of taxes | $ | $ | Net income | |||||||||||||||||||||||||||||
___________________________________
(1) Refer to Note 14: Derivative Instruments and Hedging Activities for additional information on amounts to be reclassified from accumulated other comprehensive loss in future periods.
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13. Fair Value Measures
Measured on a Recurring Basis
The fair values of our derivative assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 are shown in the below table. All fair value measures presented in the table below are categorized in Level 2 of the fair value hierarchy.
| March 31, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Foreign currency forward contracts | $ | $ | |||||||||
| Commodity forward contracts | |||||||||||
| Total | $ | $ | |||||||||
| Liabilities | |||||||||||
| Foreign currency forward contracts | $ | $ | |||||||||
| Commodity forward contracts | |||||||||||
| Total | $ | $ | |||||||||
Refer to Note 14: Derivative Instruments and Hedging Activities for additional information related to our forward contracts.
As of March 31, 2023 and December 31, 2022, we also held cash equivalents of $653.3 million and $860.0 million, respectively, consisting of U.S. Government Treasury money market funds that are categorized in Level 1 of the fair value hierarchy.
Measured on a Nonrecurring Basis
We evaluated our goodwill and other indefinite-lived intangible assets for impairment as of October 1, 2022 and determined that they were not impaired. No events or changes in circumstances occurred in the three months ended March 31, 2023 that would have triggered the need for an additional impairment review of our goodwill and other indefinite-lived intangible assets.
Financial Instruments Not Recorded at Fair Value
The following table presents the carrying values and fair values of financial instruments not recorded at fair value in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022. All fair value measures presented are categorized in Level 2 of the fair value hierarchy.
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||
Carrying Value(1) | Fair Value | Carrying Value(1) | Fair Value | ||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Term Loan | $ | $ | $ | $ | |||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
___________________________________
(1) Excluding any related debt discounts, premiums, and deferred financing costs.
In addition to the above, we hold certain equity investments that do not have readily determinable fair values for which we use the measurement alternative prescribed in FASB ASC Topic 321, Investments—Equity Securities. As of March 31, 2023 and December 31, 2022, we held a $15.0
13
14. Derivative Instruments and Hedging Activities
Hedges of Foreign Currency Risk
For the three months ended March 31, 2023 and 2022, amounts excluded from the assessment of effectiveness of our foreign currency forward contracts that are designated as cash flow hedges were not material. As of March 31, 2023, we estimated that $21.8 million of net gains will be reclassified from accumulated other comprehensive loss to earnings during the twelve-month period ending March 31, 2024.
As of March 31, 2023, we had the following outstanding foreign currency forward contracts:
| Notional (in millions) | Effective Date(s) | Maturity Date(s) | Index (Exchange Rates) | Weighted-Average Strike Rate | Hedge Designation (1) | |||||||||||||||||||||||||||
| March 29, 2023 | April 28, 2023 | Euro ("EUR") to USD | Not designated | |||||||||||||||||||||||||||||
| Various from April 2021 to March 2023 | Various from April 2023 to March 2025 | EUR to USD | Cash flow hedge | |||||||||||||||||||||||||||||
| March 28, 2023 | April 28, 2023 | USD to Chinese Renminbi ("CNY") | Not designated | |||||||||||||||||||||||||||||
| Various in January 2023 | Various from April 2023 to September 2023 | USD to CNY | Cash flow hedge | |||||||||||||||||||||||||||||
| March 29, 2023 | April 28, 2023 | USD to Japanese Yen ("JPY") | Not designated | |||||||||||||||||||||||||||||
| Various from June 2021 to March 2023 | Various from April 2023 to February 2025 | USD to Korean Won ("KRW") | Cash flow hedge | |||||||||||||||||||||||||||||
| March 28, 2023 | April 28, 2023 | USD to Malaysian Ringgit ("MYR") | Not designated | |||||||||||||||||||||||||||||
| March 29, 2023 | April 28, 2023 | USD to Mexican Peso ("MXN") | Not designated | |||||||||||||||||||||||||||||
| Various from April 2021 to March 2023 | Various from April 2023 to March 2025 | USD to MXN | Cash flow hedge | |||||||||||||||||||||||||||||
| March 29, 2023 | April 28, 2023 | British Pound Sterling ("GBP") to USD | Not Designated | |||||||||||||||||||||||||||||
| Various from April 2021 to March 2023 | Various from April 2023 to March 2025 | GBP to USD | Cash flow hedge | |||||||||||||||||||||||||||||
___________________________________
(1) Derivative financial instruments not designated as hedges are used to manage our exposure to currency exchange rate risk. They are intended to preserve economic value, and they are not used for trading or speculative purposes.
Hedges of Commodity Risk
As of March 31, 2023, we had the following outstanding commodity forward contracts, none of which were designated for hedge accounting treatment in accordance with FASB ASC Topic 815, Derivatives and Hedging:
| Commodity | Notional | Remaining Contracted Periods | Weighted-Average Strike Price Per Unit | |||||||||||||||||
| Silver | April 2023 to January 2025 | $ | ||||||||||||||||||
| Gold | April 2023 to January 2025 | $ | ||||||||||||||||||
| Nickel | April 2023 to January 2025 | $ | ||||||||||||||||||
| Aluminum | April 2023 to January 2025 | $ | ||||||||||||||||||
| Copper | April 2023 to January 2025 | $ | ||||||||||||||||||
| Platinum | April 2023 to January 2025 | $ | ||||||||||||||||||
| Palladium | April 2023 to January 2025 | $ | ||||||||||||||||||
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Financial Instrument Presentation
The following table presents the fair values of our derivative financial instruments and their classification in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022:
| Asset Derivatives | Liability Derivatives | ||||||||||||||||||||||||||||||||||
| Balance Sheet Location | March 31, 2023 | December 31, 2022 | Balance Sheet Location | March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | Prepaid expenses and other current assets | $ | $ | Accrued expenses and other current liabilities | $ | $ | |||||||||||||||||||||||||||||
| Foreign currency forward contracts | Other assets | Other long-term liabilities | |||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Commodity forward contracts | Prepaid expenses and other current assets | $ | $ | Accrued expenses and other current liabilities | $ | $ | |||||||||||||||||||||||||||||
| Commodity forward contracts | Other assets | Other long-term liabilities | |||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | Prepaid expenses and other current assets | Accrued expenses and other current liabilities | |||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
These fair value measurements were all categorized within Level 2 of the fair value hierarchy.
The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive income for the three months ended March 31, 2023 and 2022:
| Derivatives designated as hedging instruments | Amount of Deferred (Loss)/Gain Recognized in Other Comprehensive Income | Location of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income | Amount of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income | |||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | ( | $ | Net revenue | $ | $ | ||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | $ | Cost of revenue | $ | $ | |||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | Amount of Gain/(Loss) Recognized in Net Income | Location of Gain/(Loss) Recognized in Net Income | ||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
| Commodity forward contracts | $ | $ | Other, net | |||||||||||||||||
| Foreign currency forward contracts | $ | $ | ( | Other, net | ||||||||||||||||
Credit Risk Related Contingent Features
We have agreements with our derivative counterparties that contain a provision whereby if we default on our indebtedness and repayment of the indebtedness has been accelerated by the lender, then we could also be declared in default on our derivative obligations.
15. Acquisitions and Divestitures
Acquisitions
Elastic M2M
On February 11, 2022, we acquired all of the equity interests of Elastic M2M Inc. ("Elastic M2M") for an aggregate cash purchase price of $51.6 million, subject to certain post-closing items. In addition to the aggregate cash purchase price, the previous shareholders of Elastic M2M are entitled to up to $30.0 million of additional acquisition-related incentive
15
compensation, which was pending the completion of certain technical milestones in fiscal year 2022 and achievement of financial targets in fiscal years 2022 and 2023. All technical milestones were completed in fiscal year 2022. As of December 31, 2022, we had recognized $24.7 million of this acquisition-related incentive compensation. In three months ended March 31, 2023, we recognized an additional $3.3 million of this acquisition-related incentive compensation. This incentive compensation is recorded in restructuring and other charges, net.
Elastic M2M was a privately-held innovator of connected intelligence for operational assets across heavy-duty transport, warehouse, supply chain and logistics, industrial, light-duty passenger car, and a variety of other industry segments. Elastic M2M primarily serves telematics service providers and resellers, enabling them to leverage Elastic M2M’s cloud platform and analytics capabilities to deliver sensor-based operational insights to their end users. This acquisition augments our cloud capabilities critical to delivering actionable sensor-based insights, an increasingly important capability in this fast-growing industry segment. We are integrating Elastic M2M into the Performance Sensing reportable segment.
The allocation of the purchase price related to this acquisition was finalized in the three months ended March 31, 2023. The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed:
| Net working capital, excluding cash | $ | |||||||
| Goodwill | ||||||||
| Other intangible assets | ||||||||
| Deferred income tax liabilities | ( | |||||||
| Fair value of net assets acquired, excluding cash and cash equivalents | ||||||||
| Cash and cash equivalents | ||||||||
| Fair value of net assets acquired | $ | |||||||
The goodwill recognized as a result of this acquisition represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. The goodwill recognized in this acquisition will not be deductible for tax purposes.
In connection with the allocation of purchase price to the assets acquired and liabilities assumed, we identified certain definite-lived intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and weighted-average lives:
| Acquisition Date Fair Value | Weighted-Average Lives (years) | |||||||||||||
| Acquired definite-lived intangible assets | ||||||||||||||
| Customer relationships | $ | |||||||||||||
| Completed technologies | ||||||||||||||
| Total definite-lived intangible assets acquired | $ | |||||||||||||
The definite-lived intangible assets were valued using the income approach. We primarily used the relief-from-royalty method to value completed technologies, and we used the multi-period excess earnings method to value customer relationships. These valuation methods incorporate assumptions including expected discounted future net cash flows resulting from either the future estimated after-tax royalty payments avoided as a result of owning the completed technologies or the future earnings related to existing customer relationships.
Dynapower
On July 12, 2022, we completed the acquisition of all of the outstanding equity interests of DP Acquisition Corp ("Dynapower"), a leader in power conversion systems including inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications, for an aggregate cash purchase price of $577.5 million, subject to certain post-closing items. Dynapower also provides aftermarket sales and service to maintain its equipment in the field.
Dynapower is a foundational addition to our Clean Energy Solutions strategy and complements our recent acquisitions of GIGAVAC, Lithium Balance, and Spear. We are integrating Dynapower into our Sensing Solutions reportable segment.
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The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed:
| Net working capital, excluding cash | $ | |||||||
| Property, plant and equipment | ||||||||
| Goodwill | ||||||||
| Other intangible assets | ||||||||
| Other assets | ||||||||
| Deferred income tax liabilities | ( | |||||||
| Other long-term liabilities | ( | |||||||
| Fair value of net assets acquired, excluding cash and cash equivalents | ||||||||
| Cash and cash equivalents | ||||||||
| Fair value of net assets acquired | $ | |||||||
The allocation of purchase price of Dynapower is preliminary and is based on management’s judgments after evaluating several factors, including preliminary valuation assessments of intangible assets. The final allocation of the purchase price to the assets acquired will be completed when the final valuations are completed. The preliminary goodwill recognized as a result of this acquisition represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. The goodwill recognized in this acquisition will not be deductible for tax purposes.
In connection with the preliminary allocation of purchase price to the assets acquired and liabilities assumed, we identified certain definite-lived intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and weighted-average lives:
| Acquisition Date Fair Value | Weighted-Average Lives (years) | |||||||||||||
| Acquired definite-lived intangible assets | ||||||||||||||
| Customer relationships | $ | |||||||||||||
| Backlog | ||||||||||||||
| Completed technologies | ||||||||||||||
| Tradenames | ||||||||||||||
| Total definite-lived intangible assets acquired | $ | |||||||||||||
The definite-lived intangible assets were valued using the income approach. We primarily used the relief-from-royalty method to value completed technologies and tradenames, and we used the multi-period excess earnings method to value customer relationships. These valuation methods incorporate assumptions including expected discounted future net cash flows resulting from either the future estimated after-tax royalty payments avoided as a result of owning the completed technologies or the future earnings related to existing customer relationships.
Divestiture - Qinex Business
On May 27, 2022, we executed an asset purchase agreement (the "APA") whereby we agreed to sell various assets and liabilities comprising our semiconductor test and thermal business (collectively, the "Qinex Business") to LTI Holdings, Inc. ("LTI") in exchange for consideration of approximately $219.0 million, subject to working capital and other adjustments. Concurrent with the execution of the APA, the parties entered into a Contract Manufacturing Agreement ("CMA") and a Transition Services Agreement ("TSA"), each for nominal consideration.
The CMA commenced at closing of the transaction ("Closing") and had a term of either or nine months , depending on the manufacturing site. LTI also had the option of extending each contract for an additional three months . The period from Closing to the end of the CMA term (including extensions, if any) is referred to as the "Transition Period." The terms of the CMA required that we provide manufacturing and distribution services for the Transition Period. The TSA commenced at Closing and had a term that varied depending on the nature of the support services, ranging from one month to the entirety of the Transition Period. The terms of the TSA required that we provide various forms of commercial, operational, and back-office support to LTI. As of March 31, 2023, the Transition Period has ended.
Closing occurred in July 2022, at which time assets of approximately $70 million (including allocated goodwill of $45 million) and liabilities of approximately $2 million transferred to LTI. Transferred assets and liabilities excluded inventories and accounts payable, which transferred to LTI at the end of the Transition Period. We received cash consideration of
17
16. Segment Reporting
We present financial information for two reportable segments, Performance Sensing and Sensing Solutions. The Performance Sensing reportable segment consists of two operating segments, Automotive and HVOR, which meet the criteria for aggregation in FASB ASC Topic 280, Segment Reporting. The Sensing Solutions reportable segment is also an operating segment.
Our operating segments are businesses that we manage as components of an enterprise, for which separate financial information is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and assess performance.
An operating segment’s performance is primarily evaluated based on segment operating income, which excludes amortization of intangible assets, restructuring and other charges, net, certain costs associated with our strategic megatrend initiatives, and certain corporate costs or credits not associated with the operations of the segment, including share-based compensation expense and a portion of depreciation expense associated with assets recognized in connection with acquisitions. Corporate and other costs excluded from an operating (and reportable) segment’s performance are separately stated below and also include costs that are related to functional areas such as finance, information technology, legal, and human resources. We believe that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of our segments. However, this measure should be considered in addition to, and not as a substitute for, or superior to, operating income or other measures of financial performance prepared in accordance with U.S. GAAP. The accounting policies of each of our operating and reportable segments are materially consistent with those described in Note 2: Significant Accounting Policies of the audited consolidated financial statements and notes thereto included in our 2022 Annual Report.
The following table presents net revenue and segment operating income for our reportable segments and other operating results not allocated to our reportable segments for the three months ended March 31, 2023 and 2022:
| For the three months ended | |||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||
| Performance Sensing | $ | $ | |||||||||||||||||||||
| Sensing Solutions | |||||||||||||||||||||||
| Total net revenue | $ | $ | |||||||||||||||||||||
| Segment operating income (as defined above): | |||||||||||||||||||||||
| Performance Sensing | $ | $ | |||||||||||||||||||||
| Sensing Solutions | |||||||||||||||||||||||
| Total segment operating income | |||||||||||||||||||||||
| Corporate and other | ( | ( | |||||||||||||||||||||
| Amortization of intangible assets | ( | ( | |||||||||||||||||||||
| Restructuring and other charges, net | ( | ( | |||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense, net | ( | ( | |||||||||||||||||||||
| Other, net | ( | ||||||||||||||||||||||
| Income before taxes | $ | $ | |||||||||||||||||||||
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Cautionary Statements Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terminology such as "may," "will," "could," "should," "expect," "anticipate," "believe," "estimate," "predict," "project," "forecast," "continue," "intend," "plan," "potential," "opportunity," "guidance," and similar terms or phrases. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business and market outlook, megatrends, priorities, growth, shareholder value, capital expenditures, cash flows, demand for products and services, share repurchases, and Sensata’s strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. These statements are subject to risks, uncertainties, and other important factors relating to our operations and business environment, and we can give no assurances that these forward-looking statements will prove to be correct.
A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements, including, but not limited to, risks related to public health crises, instability and changes in the global markets, supplier interruption or non-performance, the acquisition or disposition of businesses, adverse conditions or competition in the industries upon which we are dependent, intellectual property, product liability, warranty and recall claims, market acceptance of new product introductions and product innovations, labor disruptions or increased labor costs, and changes in existing environmental or safety laws, regulations, and programs.
Investors and others should carefully consider the foregoing factors and other uncertainties, risks, and potential events including, but not limited to, those described in Item 1A: Risk Factors included in our 2022 Annual Report and as may be updated from time to time in Item 1A: Risk Factors included in our quarterly reports on Form 10-Q or other subsequent filings with the United States Securities and Exchange Commission. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations supplements, and should be read in conjunction with, the discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2022 Annual Report. The following discussion should also be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Amounts and percentages in the following discussions have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
Overview
Net revenue increased 2.3% in the three months ended March 31, 2023 compared to the prior year period. Net revenue increased 4.7% on an organic basis, which excludes a decrease of 2.3% attributed to changes in foreign currency exchange rates and a decrease of 0.1% due to the net effect of acquisitions and divestitures. This reflects organic revenue growth of 7.0% in Performance Sensing and organic revenue decline of 1.5% in Sensing Solutions. Organic revenue growth (or decline), discussed throughout this Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A"), is a financial measure not presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Refer to Non-GAAP Financial Measures included elsewhere in this MD&A for additional information related to our use of organic revenue growth (or decline).
Operating income for the three months ended March 31, 2023, increased $22.9 million, or 18.2%, to $148.8 million (14.9% of net revenue) compared to $125.9 million (12.9% of net revenue) in the prior year period. This increase was primarily due to (1) lower selling, general and administrative ("SG&A") expense, primarily related to reduced compensation in the first quarter of 2023 as a result of restructuring actions taken in fiscal year 2022, (2) margin improvements driven by organic revenue growth partially offset by the unfavorable effect of changes in foreign currency exchange rates, and (3) lower restructuring and other charges, net. These increases were partially offset by an increase in amortization expense as a result of intangibles recently acquired. Refer to Results of Operations included elsewhere in this MD&A for additional discussion of our earnings results for the three months ended March 31, 2023 compared to the prior year period.
We have sufficient cash to operate the business effectively. We generated $96.9 million of operating cash flow in the three months ended March 31, 2023, ending the quarter with $1.0 billion in cash and cash equivalents. In the three months ended March 31, 2023, we used approximately $16.8 million for payment of cash dividends and we have announced an increase in cash dividends for the second quarter to $0.12 per share. In the first quarter of 2023, we prepaid $250.0 million of principal on the balance outstanding of the Term Loan and we intend to pay down the remaining principal balance on the Term Loan in the second quarter of 2023. In fiscal year 2023, we will continue to return capital to shareholders through our dividend and
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opportunistic share repurchases. We expect improving free cash flow will naturally allow leverage to decline and returns on invested capital to improve over time.
Results of Operations
The table below presents our historical results of operations, in millions of dollars and as a percentage of net revenue, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. We have derived the results of operations from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| For the three months ended | |||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Margin* | Amount | Margin* | ||||||||||||||||||||||||||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Performance Sensing | $ | 751.5 | 75.3 | % | $ | 717.7 | 73.6 | % | |||||||||||||||||||||||||||||||||||||||
| Sensing Solutions | 246.7 | 24.7 | 258.1 | 26.4 | |||||||||||||||||||||||||||||||||||||||||||
| Net revenue | 998.2 | 100.0 | 975.8 | 100.0 | |||||||||||||||||||||||||||||||||||||||||||
| Operating costs and expenses | 849.3 | 85.1 | 849.8 | 87.1 | |||||||||||||||||||||||||||||||||||||||||||
| Operating income | 148.8 | 14.9 | 125.9 | 12.9 | |||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | (40.1) | (4.0) | (45.4) | (4.7) | |||||||||||||||||||||||||||||||||||||||||||
| Other, net | 1.4 | 0.1 | (50.5) | (5.2) | |||||||||||||||||||||||||||||||||||||||||||
| Income before taxes | 110.1 | 11.0 | 30.0 | 3.1 | |||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 23.7 | 2.4 | 7.6 | 0.8 | |||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | 86.4 | 8.7 | % | $ | 22.4 | 2.3 | % | |||||||||||||||||||||||||||||||||||||||
___________________________________
* Represents the amount presented divided by total net revenue.
Net Revenue
Net revenue for the three months ended March 31, 2023 increased 2.3% compared to the three months ended March 31, 2022. Net revenue for the three months ended March 31, 2023 increased 4.7% on an organic basis, which excludes a decrease of 2.3% attributed to changes in foreign currency exchange rates and a decrease of 0.1% due to the net effect of acquisitions and divestitures. This represents market outgrowth of 20 basis points. We use the term "market outgrowth" to describe the impact of an increasing quantity and value of our products used in customer systems and applications above external market growth. It is only loosely correlated to normal unit demand fluctuations in the markets we serve.
Performance Sensing
Performance Sensing net revenue for the three months ended March 31, 2023 increased 4.7% compared to the three months ended March 31, 2022. Excluding a decrease of 2.7% attributed to changes in foreign currency exchange rates and an increase of 0.4% due to the effect of acquisitions, Performance Sensing net revenue for the three months ended March 31, 2023 increased 7.0% on an organic basis. Both automotive and HVOR contributed to these results as discussed below.
Automotive net revenue for the three months ended March 31, 2023 grew 2.9% compared to the three months ended March 31, 2022. Excluding a decline of 3.1% attributed to changes in foreign currency exchange rates, Automotive net revenue for the three months ended March 31, 2023 grew 6.0% on an organic basis, primarily due to improved market performance. HVOR net revenue for the three months ended March 31, 2023 grew 9.0% compared to the three months ended March 31, 2022. Excluding a decline of 1.7% attributed to changes in foreign currency exchange rates and an increase of 1.3% due to the effect of acquisitions, HVOR net revenue for the three months ended March 31, 2023 grew 9.4% on an organic basis, primarily due to market outgrowth.
Sensing Solutions
Sensing Solutions net revenue for the three months ended March 31, 2023 decreased 4.4% compared to the three months ended March 31, 2022. Excluding a decline of 1.5% attributed to changes in foreign currency exchange rates and a decline of 1.4% due to the net effect of acquisitions and divestitures, Sensing Solutions net revenue for the three months ended March 31, 2023 declined 1.5% on an organic basis, which primarily reflects market declines in our industrial business, partially offset by improvements in the aerospace markets.
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Operating costs and expenses
Operating costs and expenses for the three months ended March 31, 2023 and 2022 are presented, in millions of dollars and as a percentage of net revenue, in the following table. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| For the three months ended | |||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Margin* | Amount | Margin* | ||||||||||||||||||||||||||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | 670.5 | 67.2 | % | $ | 657.1 | 67.3 | % | |||||||||||||||||||||||||||||||||||||||
| Research and development | 45.9 | 4.6 | 46.0 | 4.7 | |||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 86.2 | 8.6 | 95.7 | 9.8 | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 40.8 | 4.1 | 37.4 | 3.8 | |||||||||||||||||||||||||||||||||||||||||||
| Restructuring and other charges, net | 6.0 | 0.6 | 13.7 | 1.4 | |||||||||||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | $ | 849.3 | 85.1 | % | $ | 849.8 | 87.1 | % | |||||||||||||||||||||||||||||||||||||||
___________________________________
* Represents the amount presented divided by total net revenue.
Cost of revenue
For the three months ended March 31, 2023, cost of revenue as a percentage of net revenue decreased slightly from the three months ended March 31, 2022, as the net impacts of (1) pricing recoveries from customers, (2) inflation on material and logistics costs, and (3) volume leverage was largely offset by (1) product mix and (2) the unfavorable effect of changes in foreign currency exchange rates.
Research and development expense
For the three months ended March 31, 2023, research and development ("R&D") expense decreased slightly from the three months ended March 31, 2022, due to lower costs as a result of repositioning activities in fiscal year 2022 and the favorable effect of changes in foreign currency exchange rates.
Selling, general and administrative expense
For the three months ended March 31, 2023, SG&A expense decreased from the three months ended March 31, 2022, primarily as a result of (1) reduced compensation in the first quarter of 2023, primarily the result of restructuring actions taken in fiscal year 2022, (2) the favorable effect of changes in foreign currency exchange rates, and (3) lower costs related to mergers and acquisitions activity. Refer to Note 15: Acquisitions and Divestitures of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information related to acquired businesses.
Amortization of intangible assets
For the three months ended March 31, 2023, amortization expense increased from the three months ended March 31, 2022, primarily due to increased intangibles from recent acquisitions. Refer to Note 15: Acquisitions and Divestitures of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information related to recent acquisitions.
Restructuring and other charges, net
For the three months ended March 31, 2023, restructuring and other charges, net decreased from the three months ended March 31, 2022 primarily due to (1) a reduction in expense for acquisition-related compensation arrangements and (2) the gain on sale of a business in the first quarter of 2023, partially offset by (1) the impact of the non-recurrence of a gain recognized in the first quarter of 2022 related to the reduction of the liability for contingent consideration for Spear and (2) an increase in severance charges that were not the result of initiation of a larger restructuring plan. Refer to Note 5: Restructuring and Other Charges, Net of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for additional information on the components of restructuring and other charges, net.
Operating income
For the three months ended March 31, 2023, operating income increased compared to the three months ended March 31, 2022, primarily due to (1) lower SG&A expense, primarily related to reduced compensation in the first quarter of 2023 as a result of restructuring actions taken in fiscal year 2022, (2) margin improvements driven by organic revenue growth partially offset by
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the unfavorable effect of changes in foreign currency exchange rates, and (3) lower restructuring and other charges, net. These increases were partially offset by an increase in amortization expense as a result of intangibles recently acquired.
Interest expense, net
For the three months ended March 31, 2023, interest expense, net decreased $5.4 million from the three months ended March 31, 2022 primarily due to increased interest income as a result of increasing interest rates partially offset by (1) increased interest expense on the Term Loan (partially mitigated by the $250.0 million prepayment on the Term Loan in the first quarter of 2023) and (2) the net impact of the early redemption of the 4.875% Senior Notes and the issuance of the 5.875% Senior Notes in the third quarter of 2022.
Other, net
Other, net primarily includes currency remeasurement gains and losses on net monetary assets, gains and losses on foreign currency and commodity forward contracts not designated as hedging instruments, mark-to-market gains and losses on investments, losses related to debt refinancing, and the portion of our net periodic benefit cost excluding service cost. Refer to Note 6: Other, Net of our condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, for more details related to the components of other, net.
For the three months ended March 31, 2023, other, net represented a net gain of $1.4 million, a favorable impact on earnings of $51.8 million compared to a net loss of $50.5 million in the three months ended March 31, 2022. This impact was primarily due to the non-recurrence of mark-to-market losses on equity investments, primarily related to our investment in Quanergy Systems Inc., in the first quarter of 2022, partially offset by lower gains on commodity forward contracts.
Provision for income taxes
For the three months ended March 31, 2023, the provision for income taxes increased $16.1 million from the three months ended March 31, 2022, predominantly due to the increase in profit before tax as impacted by the jurisdictional mix of profits.
The provision for income taxes consists of (1) current tax expense, which relates primarily to our profitable operations in tax jurisdictions with limited or no net operating loss carryforwards and withholding taxes related to management fees, royalties, and the repatriation of foreign earnings; and (2) deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to (a) book versus tax basis in intangible assets, (b) changes in net operating loss carryforwards, and (c) changes in withholding taxes on unremitted earnings. Other items impacting deferred tax expense include changes in tax rates and changes in our assessment of the realizability of our deferred tax assets.
Non-GAAP Financial Measures
This section provides additional information regarding certain non-GAAP financial measures, including organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share ("EPS"), free cash flow, net leverage ratio, and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which are used by our management, Board of Directors, and investors. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance, and as a factor in determining compensation for certain employees.
The use of our non-GAAP financial measures has limitations. They should be considered as supplemental in nature and are not intended to be considered in isolation from, or as an alternative to, reported net revenue growth (or decline), operating income, operating margin, net income, diluted EPS, net cash provided by operating activities, or total debt, finance lease and other financing obligations, respectively, calculated in accordance with U.S. GAAP. In addition, our measures of organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted EPS, free cash flow, net leverage ratio, and adjusted EBITDA may not be the same as, or comparable to, similar non-GAAP financial measures presented by other companies.
Organic revenue growth (or decline)
Organic revenue growth (or decline) is defined as the reported percentage change in net revenue, calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign currency exchange rate differences as well as the net impact of material acquisitions and divestitures for the 12-month period following the respective transaction date(s).
We believe that organic revenue growth (or decline) provides investors with helpful information with respect to our operating performance, and we use organic revenue growth (or decline) to evaluate our ongoing operations as well as for internal planning and forecasting purposes. We believe that organic revenue growth (or decline) provides useful information in
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evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior-year period.
Adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS
We define adjusted operating income as operating income, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described under the heading Non-GAAP adjustments below. Adjusted operating margin is calculated by dividing adjusted operating income by net revenue determined in accordance with U.S. GAAP. We define adjusted net income as follows: net income (or loss) determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described under the heading Non-GAAP Adjustments below. Adjusted EPS is calculated by dividing adjusted net income by the number of diluted weighted-average ordinary shares outstanding in the period.
Management uses adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS as measures of operating performance, for planning purposes (including the preparation of our annual operating budget), to allocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies, in communications with our Board of Directors and investors concerning our financial performance, and as factors in determining compensation for certain employees. We believe investors and securities analysts also use these non-GAAP financial measures in their evaluation of our performance and the performance of other similar companies. These non-GAAP financial measures are not measures of liquidity.
Free cash flow
Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software. We believe free cash flow is useful to management and investors as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to, among other things, fund acquisitions, repurchase ordinary shares, and (or) accelerate the repayment of debt obligations.
Adjusted EBITDA
Adjusted EBITDA is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and other transaction costs, and (3) deferred loss or gain on derivative instruments. Refer to Non-GAAP Adjustments below for additional discussion of these adjustments. We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
Net leverage ratio
Net leverage ratio represents net debt (total debt, finance lease and other financing obligations less cash and cash equivalents) divided by last twelve months ("LTM") adjusted EBITDA. We believe that the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.
Non-GAAP adjustments
Many of our non-GAAP adjustments relate to a series of strategic initiatives developed by our management aimed at better positioning us for future revenue growth and an improved cost structure. These initiatives have been modified from time to time to reflect changes in overall market conditions and the competitive environment facing our business. These initiatives include, among other items, acquisitions, divestitures, restructurings of certain business, supply chain or corporate activities, and various financing transactions. We describe these adjustments in more detail below, each of which is net of current tax impacts, as applicable.
•Restructuring related and other: includes net charges related to certain restructuring and other exit activities as well as other costs (or income) that we believe are either unique or unusual to the identified reporting period, and that we believe impact comparisons to prior period operating results. Such costs include charges related to optimization of our manufacturing processes to increase productivity. This type of activity occurs periodically, however each action is unique, discrete, and driven by various facts and circumstances. Such amounts are excluded from internal financial statements and analyses that management uses in connection with financial planning and in its review and assessment of our operating and financial performance, including the performance of our segments.
•Financing and other transaction costs: includes losses or gains related to debt financing transactions, losses or gains related to the divestiture of a business, costs incurred, including for legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or equity financing transaction, mark-to-market losses or gains on
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our equity investments, expenses related to compensation arrangements entered into concurrent with the closing of an acquisition, and gains related to changes in the fair value of acquisition-related contingent consideration amounts.
•Deferred loss or gain on derivative instruments: includes unrealized losses or gains on derivative instruments that do not qualify for hedge accounting as well as the impact of commodity prices on our raw material costs relative to the strike price on our commodity forward contracts.
•Step-up depreciation and amortization: includes depreciation and amortization expense associated with the step-up in fair value of assets acquired in connection with a business combination (e.g., property, plant and equipment, definite-lived intangible assets, and inventories).
•Deferred taxes and other tax related: includes adjustments for book-to-tax basis differences due primarily to the step-up in fair value of fixed and intangible assets and goodwill, the utilization of net operating losses, and adjustments to our valuation allowance in connection with certain acquisitions and tax law changes. Other tax related items include certain adjustments to unrecognized tax benefits and withholding tax on repatriation of foreign earnings.
•Amortization of debt issuance costs: represents interest expense related to the amortization of deferred financing costs as well as debt discounts, net of premiums.
•Where applicable, the current income tax effect of non-GAAP adjustments.
Our definition of adjusted net income excludes the deferred provision for (or benefit from) income taxes and other tax related items described above. As we treat deferred income taxes as an adjustment to compute adjusted net income, the deferred income tax effect associated with the reconciling items presented below would not change adjusted net income for any period presented.
Non-GAAP reconciliations
The following tables present reconciliations of certain financial measures calculated in accordance with U.S. GAAP to the related non-GAAP financial measures for the periods presented. Refer to Non-GAAP adjustments section above for additional information related to these adjustments. Amounts and percentages in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| For the three months ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Operating Income | Operating Margin | Income Taxes | Net Income | Diluted EPS | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Reported (GAAP) | $ | 148.8 | 14.9 | % | $ | 23.7 | $ | 86.4 | $ | 0.56 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring related and other | 2.9 | 0.3 | (0.7) | 2.3 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Financing and other transaction costs | 4.2 | 0.4 | 2.9 | 7.6 | 0.05 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Step-up depreciation and amortization | 39.1 | 3.9 | — | 39.1 | 0.26 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred gain on derivative instruments | (2.3) | (0.2) | 0.9 | (3.3) | (0.02) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of debt issuance costs | — | — | — | 1.7 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred taxes and other tax related | — | — | 6.8 | 6.8 | 0.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 44.1 | 4.4 | 9.8 | 54.2 | 0.35 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 192.9 | 19.3 | % | $ | 13.9 | $ | 140.7 | $ | 0.92 | ||||||||||||||||||||||||||||||||||||||||||||||
| For the three months ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Operating Income | Operating Margin | Income Taxes | Net Income | Diluted EPS | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Reported (GAAP) | $ | 125.9 | 12.9 | % | $ | 7.6 | $ | 22.4 | $ | 0.14 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring related and other | 4.1 | 0.4 | (0.1) | 4.0 | 0.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Financing and other transaction costs | 15.8 | 1.6 | (0.5) | 74.6 | 0.47 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Step-up depreciation and amortization | 35.9 | 3.7 | — | 35.9 | 0.23 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred loss/(gain) on derivative instruments | 0.7 | 0.1 | 1.8 | (7.0) | (0.04) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of debt issuance costs | — | — | — | 1.7 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred taxes and other tax related | — | — | (8.3) | (8.3) | (0.05) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 56.6 | 5.8 | (7.2) | 101.0 | 0.64 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 182.5 | 18.7 | % | $ | 14.8 | $ | 123.4 | $ | 0.78 | ||||||||||||||||||||||||||||||||||||||||||||||
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The following table provides a reconciliation of net cash provided by operating activities in accordance with U.S. GAAP to free cash flow.
| For the three months ended March 31, | ||||||||||||||||||||
| (in millions) | 2023 | 2022 | ||||||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 96.9 | $ | 47.4 | ||||||||||||||||
| Additions to property, plant and equipment and capitalized software | (36.9) | (35.7) | ||||||||||||||||||
| Free cash flow (non-GAAP) | $ | 60.0 | $ | 11.6 | ||||||||||||||||
The following table provides a reconciliation of corporate and other expenses in accordance with U.S. GAAP to adjusted corporate and other expenses.
| For the three months ended March 31, | ||||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | ||||||||||||||||||||||||
| Corporate and other expenses (GAAP) | $ | (62.4) | $ | (76.1) | ||||||||||||||||||||||
| Restructuring related and other | (1.4) | 2.5 | ||||||||||||||||||||||||
| Financing and other transaction costs | 2.6 | 3.7 | ||||||||||||||||||||||||
| Step-up depreciation and amortization | 0.1 | 0.3 | ||||||||||||||||||||||||
| Deferred (gain)/loss on derivative instruments | (2.3) | 0.7 | ||||||||||||||||||||||||
| Total adjustments | (1.0) | 7.2 | ||||||||||||||||||||||||
| Adjusted corporate and other expenses (non-GAAP) | $ | (63.4) | $ | (68.9) | ||||||||||||||||||||||
The following table provides a reconciliation of net income in accordance with U.S. GAAP to Adjusted EBITDA.
| For the three months ended March 31, | ||||||||||||||||||||||||||||||||
| (in millions) | LTM | 2023 | 2022 | |||||||||||||||||||||||||||||
| Net income | $ | 374.7 | $ | 86.4 | $ | 22.4 | ||||||||||||||||||||||||||
| Interest expense, net | 173.5 | 40.1 | 45.4 | |||||||||||||||||||||||||||||
| Provision for income taxes | 102.2 | 23.7 | 7.6 | |||||||||||||||||||||||||||||
| Depreciation expense | 126.6 | 30.9 | 31.5 | |||||||||||||||||||||||||||||
| Amortization of intangible assets | 157.2 | 40.8 | 37.4 | |||||||||||||||||||||||||||||
| EBITDA | 934.1 | 222.0 | 144.4 | |||||||||||||||||||||||||||||
| Non-GAAP adjustments | ||||||||||||||||||||||||||||||||
| Restructuring related and other | 36.8 | 2.9 | 4.1 | |||||||||||||||||||||||||||||
| Financing and other transaction costs | (62.9) | 4.7 | 75.1 | |||||||||||||||||||||||||||||
| Deferred loss/(gain) on derivative instruments | 6.5 | (4.1) | (8.8) | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 914.5 | $ | 225.5 | $ | 214.9 | ||||||||||||||||||||||||||
The following table provides a reconciliation of total debt, finance lease and other financing obligations in accordance with U.S. GAAP to net leverage ratio.
| (Dollars in millions) | March 31, 2023 | December 31, 2022 | ||||||||||||||||||
| Current portion of long-term debt, finance lease and other financing obligations | $ | 198.7 | $ | 256.5 | ||||||||||||||||
| Finance lease and other financing obligations, less current portion | 24.5 | 24.7 | ||||||||||||||||||
| Long-term debt, net | 3,768.6 | 3,958.9 | ||||||||||||||||||
| Total debt, finance lease and other financing obligations | 3,991.8 | 4,240.1 | ||||||||||||||||||
| Less: discount, net of premium | (2.8) | (3.4) | ||||||||||||||||||
| Less: deferred financing costs | (28.5) | (29.9) | ||||||||||||||||||
| Total gross indebtedness | 4,023.2 | 4,273.4 | ||||||||||||||||||
| Less: cash and cash equivalents | 1,034.1 | 1,225.5 | ||||||||||||||||||
| Net debt | $ | 2,989.0 | $ | 3,047.9 | ||||||||||||||||
| Adjusted EBITDA (LTM) | $ | 914.5 | $ | 903.9 | ||||||||||||||||
| Net leverage ratio | 3.3 | 3.4 | ||||||||||||||||||
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Liquidity and Capital Resources
As of March 31, 2023 and December 31, 2022, we held cash and cash equivalents in the following regions:
| (In millions) | March 31, 2023 | December 31, 2022 | |||||||||
| United Kingdom | $ | 17.0 | $ | 15.7 | |||||||
| United States | 16.0 | 16.1 | |||||||||
| The Netherlands | 669.7 | 861.3 | |||||||||
| China | 228.9 | 210.0 | |||||||||
| Other | 102.5 | 122.5 | |||||||||
| Total | $ | 1,034.1 | $ | 1,225.5 | |||||||
The amount of cash and cash equivalents held in these geographic regions fluctuates throughout the year due to a variety of factors, such as our use of intercompany loans and dividends and the timing of cash receipts and disbursements in the normal course of business. Our earnings are not considered to be permanently reinvested in certain jurisdictions in which they were earned. We recognize a deferred tax liability on these unremitted earnings to the extent the remittance of such earnings cannot be recovered in a tax-free manner.
In certain jurisdictions, our cash balances are subject to withholding taxes immediately upon withdrawal of funds to a different jurisdiction. In addition, in order to take advantage of incentive programs offered by various jurisdictions, including tax incentives, we are required to maintain minimum cash balances in these jurisdictions. The transfer of cash from these jurisdictions could result in loss of incentives or higher cash tax expense, but those impacts are not expected to be material.
Our cash and cash equivalent balances are held in the following significant currencies (amounts in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding):
As of March 31, 2023 | |||||||||||||||||||||||||||||
| (In millions) | USD | EUR | GBP | CNY | Other | ||||||||||||||||||||||||
| United Kingdom | $ | 0.1 | € | 0.0 | £ | 12.9 | ¥ | — | |||||||||||||||||||||
| United States | 15.8 | 0.2 | — | — | |||||||||||||||||||||||||
| The Netherlands | 660.2 | 7.7 | 0.4 | — | |||||||||||||||||||||||||
| China | 84.0 | — | — | 997.0 | |||||||||||||||||||||||||
| Other | 75.2 | 2.3 | — | — | |||||||||||||||||||||||||
| Total | $ | 835.3 | € | 10.2 | £ | 13.4 | ¥ | 997.0 | |||||||||||||||||||||
| USD Equivalent | $ | 11.1 | $ | 16.5 | $ | 144.9 | $ | 26.4 | |||||||||||||||||||||
As of December 31, 2022 | |||||||||||||||||||||||||||||
| (In millions) | USD | EUR | GBP | CNY | Other | ||||||||||||||||||||||||
| United Kingdom | $ | 2.7 | € | 0.0 | £ | 10.7 | ¥ | — | |||||||||||||||||||||
| United States | 16.1 | — | — | — | |||||||||||||||||||||||||
| The Netherlands | 848.6 | 10.9 | 0.2 | — | |||||||||||||||||||||||||
| China | 95.0 | — | — | 794.4 | |||||||||||||||||||||||||
| Other | 99.9 | 2.3 | — | — | |||||||||||||||||||||||||
| Total | $ | 1,062.3 | € | 13.2 | £ | 10.9 | ¥ | 794.4 | |||||||||||||||||||||
| USD Equivalent | $ | 14.0 | $ | 13.2 | $ | 115.2 | $ | 20.8 | |||||||||||||||||||||
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Cash Flows:
The table below summarizes our primary sources and uses of cash for the three months ended March 31, 2023 and 2022. We have derived these summarized statements of cash flows from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| For the three months ended | |||||||||||
| (In millions) | March 31, 2023 | March 31, 2022 | |||||||||
| Net cash provided by/(used in): | |||||||||||
| Operating activities: | |||||||||||
Net income adjusted for non-cash items | $ | 168.3 | $ | 150.5 | |||||||
| Changes in operating assets and liabilities, net | (71.4) | (103.2) | |||||||||
| Operating activities | 96.9 | 47.4 | |||||||||
| Investing activities | (22.9) | (90.9) | |||||||||
| Financing activities | (265.4) | (57.0) | |||||||||
| Net change | $ | (191.4) | $ | (100.5) | |||||||
Operating activities. Net cash provided by operating activities for the three months ended March 31, 2023 increased compared to the corresponding period of the prior year, primarily due to higher net income and timing of supplier payments and customer receipts. We also paid approximately $17.0 million in additional interest in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.
Investing activities. Net cash used in investing activities for the three months ended March 31, 2023 decreased compared to the corresponding period of the prior year, primarily due to no cash paid for acquisitions (compared to $48.4 million paid for Elastic M2M in the three months ended March 31, 2022) and no cash paid for investments in debt and equity securities (compared to $6.9 million in the three months ended March 31, 2022), partially offset by cash proceeds of $14.0 million from the divestiture of a business in the three months ended March 31, 2023. For fiscal year 2023, we anticipate capital expenditures of approximately $170.0 million to $180.0 million, which we expect to fund with cash on hand.
Financing activities. Net cash used in financing activities for the three months ended March 31, 2023 increased primarily due to the $250.0 million payment on the Term Loan made in the three months ended March 31, 2023 and $16.8 million paid to shareholders in the form of cash dividends paid, partially offset by lower cash paid to repurchase ordinary shares as part of our share repurchase program. On April 25, 2023, we announced that we intended to pay down $196.8 million (the remaining outstanding balance) on the Term Loan in the second quarter of 2023, which will be presented as a cash outflow within financing activities.
Indebtedness and Liquidity
As of March 31, 2023, we had $4.0 billion in gross indebtedness, which includes finance lease and other financing obligations and excludes debt discounts, premiums, and deferred financing costs.
Capital Resources
Senior Secured Credit Facilities
The Credit Agreement provides for Senior Secured Credit Facilities consisting of the Term Loan, the Revolving Credit Facility, and incremental availability (the "Accordion") under which additional secured credit facilities could be issued under certain circumstances. In the first quarter of 2023, we paid $250 million on the Term Loan. We intend to repay the remaining outstanding balance in the second quarter of 2023.
Sources of liquidity
Our sources of liquidity include cash on hand, cash flows from operations, and available capacity under the Revolving Credit Facility. As of March 31, 2023, we had $746.1 million available under the Revolving Credit Facility, net of $3.9 million of obligations in respect of outstanding letters of credit issued thereunder. Outstanding letters of credit are issued primarily for the benefit of certain operating activities. As of March 31, 2023, no amounts had been drawn against these outstanding letters of credit. Availability under the Accordion varies each period based on our attainment of certain financial metrics as set forth in the terms of the Credit Agreement and the indentures under which our senior notes were issued (the "Senior Notes Indentures"). As of March 31, 2023, availability under the Accordion was approximately $1.0 billion.
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We believe, based on our current level of operations and taking into consideration the restrictions and covenants included in the Credit Agreement and Senior Notes Indentures, that the sources of liquidity described above will be sufficient to fund our operations, capital expenditures, dividend payments, ordinary share repurchases, and debt service for at least the next twelve months. However, we cannot make assurances that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Further, our highly-leveraged nature may limit our ability to procure additional financing in the future.
Our ability to raise additional financing, and our borrowing costs, may be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios. As of April 21, 2023, Moody’s Investors Service’s corporate credit rating for STBV was Ba2 with a stable outlook, and Standard & Poor’s corporate credit rating for STBV was BB+ with a stable outlook. Any future downgrades to STBV's credit ratings may increase our future borrowing costs but will not reduce availability under the Credit Agreement.
Restrictions and Covenants
The Credit Agreement provides that if our senior secured net leverage ratio exceeds a specified level we are required to use a portion of our excess cash flow, as defined in the Credit Agreement, generated by operating, investing, or financing activities to prepay some or all of the outstanding borrowings under the Senior Secured Credit Facilities. The Credit Agreement also requires mandatory prepayments of the outstanding borrowings under the Senior Secured Credit Facilities upon certain asset dispositions and casualty events, in each case subject to certain reinvestment rights, and upon the incurrence of certain indebtedness (excluding any permitted indebtedness). These provisions were not triggered during the three months ended March 31, 2023.
The Credit Agreement and the Senior Notes Indentures contain restrictions and covenants that limit the ability of our wholly-owned subsidiary, STBV, and certain of its subsidiaries to, among other things, incur subsequent indebtedness, sell assets, pay dividends, and make other restricted payments. For a full discussion of these restrictions and covenants, refer to Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources included in our 2022 Annual Report. These restrictions and covenants, which are subject to important exceptions and qualifications set forth in the Credit Agreement and Senior Notes Indentures, were taken into consideration when we established our share repurchase programs and will be evaluated periodically with respect to future potential funding of those programs. As of March 31, 2023, we believe we were in compliance with all covenants and default provisions under our credit arrangements.
Share repurchase programs
From time to time, our Board of Directors has authorized various share repurchase programs, which may be modified or terminated by our Board at any time. We currently have an authorized $500.0 million share repurchase program (the "January 2022 Program") under which approximately $224.5 million remained available as of March 31, 2023. We did not repurchase any ordinary shares under this program in the three months ended March 31, 2023. In the three months ended March 31, 2022, we repurchased 1.1 million ordinary shares under the January 2022 Program.
Dividends
On February 22, 2023, we paid a cash dividend of $0.11 per share, or $16.8 million in aggregate, to shareholders of record as of February 8, 2023. On April 13, 2023, we announced that our Board of Directors approved a quarterly dividend of $0.12 per share, payable on May 24, 2023 to shareholders of record as of May 10, 2023.
Recently Issued Accounting Pronouncements
There are no recently issued accounting standards that have been adopted in the current period or will be adopted in future periods that have had or are expected to have a material impact on our consolidated financial position or results of operations.
Critical Accounting Policies and Estimates
For a discussion of the critical accounting policies that require the use of significant judgments and estimates by management, refer to Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates included in our 2022 Annual Report.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
No significant changes to our market risk have occurred since December 31, 2022. For a discussion of market risks affecting us, refer to Part II, Item 7A: Quantitative and Qualitative Disclosures About Market Risk included in our 2022 Annual Report.
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Item 4.Controls and Procedures.
The required certifications of our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer are included as exhibits to this Quarterly Report on Form 10-Q. The disclosures set forth in this Item 4 contain information concerning the evaluation of our disclosure controls and procedures and changes in internal control over financial reporting referred to in these certifications. These certifications should be read in conjunction with this Item 4 for a more complete understanding of the matters covered by the certifications.
Evaluation of Disclosure Controls and Procedures
With the participation of our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2023, our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
There are inherent limitations to the effectiveness of any system of internal control over financial reporting. Accordingly, even an effective system of internal control over financial reporting can only provide reasonable assurance with respect to financial statement preparation and presentation in accordance with U.S. GAAP. Our internal controls over financial reporting are subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may be inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time.
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PART II—OTHER INFORMATION
Item 1.Legal Proceedings.
We are regularly involved in a number of claims and litigation matters that arise in the ordinary course of business. Although it is not feasible to predict the outcome of these matters, based upon our experience and current information known to us, we do not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on our results of operations, financial condition, and/or cash flows.
Item 1A.Risk Factors.
Information regarding risk factors appears in Part I, Item 1A: Risk Factors, included in our 2022 Annual Report. There have been no material changes to the risk factors disclosed therein.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
| Period | Total Number of Shares Purchased (in shares) (1) | Weighted-Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs (in millions) | ||||||||||||||||||||||
| January 1 through January 31, 2023 | 701 | $ | 43.37 | — | $ | 224.5 | ||||||||||||||||||||
| February 1 through February 28, 2023 | 1,361 | $ | 52.64 | — | $ | 224.5 | ||||||||||||||||||||
| March 1 through March 31, 2023 | 399 | $ | 50.78 | — | $ | 224.5 | ||||||||||||||||||||
| Quarter total | 2,461 | $ | 49.70 | — | $ | 224.5 | ||||||||||||||||||||
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(1) The number of ordinary shares presented were withheld upon the vesting of restricted securities to cover payment of employee withholding tax. These withholdings took place outside of a publicly announced repurchase plan.
Item 3.Defaults Upon Senior Securities.
None.
Item 5.Other Information.
On April 28, 2023, Sensata Technologies, Inc. (“STI”), a wholly-owned subsidiary of Sensata Technologies Holding plc (the “Company”), entered into a mutually agreed Separation and Release of Claims Agreement (the “Separation Agreement”) with Hans Lidforss, Senior Vice President, Chief Strategy and Corporate Development Officer, which amends Mr. Lidforss’s Amended and Restated Employment Agreement with STI, dated as of March 5, 2020 (the “Employment Agreement”). Pursuant to the terms of the Separation Agreement, Mr. Lidforss will serve in his current position through June 30, 2023, during which period he will be eligible to continue to receive his regular salary and benefits. He will then transition to an Advisor role beginning July 1, 2023 through August 31, 2023, or such earlier date as may be agreed between Mr. Lidforss and the Company (the “Separation Date”). In connection with his continued service as Advisor, Mr. Lidforss will be eligible to receive a monthly base salary of $40,937 and may continue to participate in the Company’s benefits programs, with the exception of accruing vacation pay.
Under the terms of the Separation Agreement, Mr. Lidforss will receive the following payments (collectively, the “Separation Payments”): (1) a lump sum payment in the amount of $409,368 (an amount equal to 10 months of his annual base salary); (2) a lump sum payment in the amount of $359,176 (an amount equal to the average annual bonus paid to Mr. Lidforss in 2022 and 2023 for the two completed fiscal years immediately preceding the date hereof )); and (3) a lump sum payment in the amount of $28,467 (an amount to assist Mr. Lidforss with replacing health and dental benefits in fulfillment of his Employment Agreement). The Separation Payments are to be made within 30 days following the Separation Date. Mr. Lidforss’s separation will be treated as a “Covered Retirement” under the terms of his equity award agreements. Under the Separation Agreement and consistent with the Employment Agreement, Mr. Lidforss has granted a general release of claims in favor of STI and the Company and has agreed to certain cooperation, confidentiality, non-competition, and non-solicitation covenants.
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Item 6.Exhibits.
| Exhibit No. | Description | |||||||
| 3.1 | ||||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
| 10.3 | ||||||||
| 10.4 | ||||||||
| 10.5 | ||||||||
| 10.6 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 31.3 | ||||||||
| 32.1 | ||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. * | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. * | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. * | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. * | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. * | |||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | |||||||
___________________________________
* Filed herewith
† Indicates management contract or compensatory plan, contract, or arrangement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 2, 2023
SENSATA TECHNOLOGIES HOLDING PLC | ||
| /s/ Jeff Cote | ||
(Jeff Cote) Chief Executive Officer and President (Principal Executive Officer) | ||
| /s/ Paul Vasington | ||
(Paul Vasington) Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||
| /s/ Maria Freve | ||
(Maria Freve) Vice President and Chief Accounting Officer (Principal Accounting Officer) | ||
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is hereby executed by and between Sensata Technologies, Inc., a Delaware corporation (the “Company”), and Jennifer Slater (“Executive”), to be effective as of April 1, 2023 (the “Effective Date”).
WHEREAS, the Company and Executive desire to enter into an employment agreement in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are expressly hereby acknowledged, the parties hereto agree as follows:
1.Employment. The Company shall employ Executive, and Executive hereby agrees to continue employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 4 hereof (the “Employment Period”). Subject to applicable law, the parties agree that for purposes of calculating years of service under any benefit plans or programs, Executive’s employment with the Company commenced as of September 11, 2022 unless expressly provided otherwise under the terms of any employee benefit plans or programs.
2.Position and Duties.
(a)During the Employment Period, Executive shall serve as Senior Vice President, Performance Sensing, Automotive & Aftermarket of the Company and shall have the duties, responsibilities, functions and authority that are normally associated with the position of Senior Vice President. Executive’s duties shall be subject to the power and authority of the Company’s Board of Directors (the “Company Board”) and the Board of Directors (the “Board”) of Sensata Technologies Holding plc, a public limited company formed under the laws of England and Wales (“Parent”), to expand or limit such duties, responsibilities, functions and authority and to overrule actions of officers of the Company. During the Employment Period, Executive shall render to Parent and its Subsidiaries (as defined herein) administrative, financial and other executive and managerial services that are consistent with Executive’s position as the Board may from time to time direct.
(b)Executive shall report to the Chief Executive Officer and President, or to such other person or persons as may be designated from time to time by the Chief Executive Officer or the Board. Executive shall devote her full business time and attention (except for vacation periods consistent with past practice and reasonable periods of illness or other incapacity) to the business and affairs of Parent and its Subsidiaries. In performing her duties and exercising her authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board. As long as Executive is employed by the Company, Executive shall not, without the prior written consent of the Board, perform other services for compensation. Unless otherwise agreed by Executive, Executive’s place of work shall be in the greater Milwaukee, Wisconsin metropolitan area, except for travel reasonably required for Company business.
(c)For purposes of this Agreement, “Subsidiaries” shall mean any corporation or other entity of which the securities or other ownership interests having the voting power to elect a majority of the board of directors or other governing body are, at the time of determination, owned by Parent, directly or through one or more Subsidiaries.
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(d)For purposes of this Agreement, “Affiliate” shall mean with respect to Parent and its Subsidiaries, any other Person controlling, controlled by or under common control with Parent or any of its Subsidiaries and, in the case of a Person that is a partnership, any partner of the Person.
(e)For purposes of this Agreement, “Person” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
3.Compensation and Benefits.
(a)During the Employment Period, Executive’s base salary shall be equal to the amount determined by the Board or the Compensation Committee of the Board on an annual basis (as adjusted from time to time, the “Base Salary”), which Base Salary shall be payable by the Company in regular installments in accordance with the Company’s general payroll practices (in effect from time to time). In addition, during the Employment Period, Executive shall be entitled to participate in all of the Company’s employee benefit programs for which senior executive employees of Parent and its Subsidiaries are generally eligible (assuming Executive and/or her family meet the eligibility requirements of those benefit programs) (the “Senior Executive Benefits”).
(b)During the Employment Period, Executive shall be reimbursed by the Company for all reasonable business expenses incurred by her in the course of performing her duties and responsibilities under this Agreement, which business expenses are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses. Reimbursement of the costs and expenses set forth in this Section 3(b) are subject to the Company’s requirements with respect to reporting and documentation of such costs and expenses.
(c)In addition to the Base Salary, Executive shall be eligible to earn an annual bonus (“Annual Bonus”) in an amount as determined by the Board or the Compensation Committee of the Board equal to a certain percentage of the Base Salary then in effect, with such other terms and based upon Executive’s individual performance and/or the achievement by Parent and its Subsidiaries of financial and other objectives, in each case as established for each fiscal year by the Board or the Compensation Committee of the Board. Executive will become entitled to receive an Annual Bonus, if any, only if Executive continues to be employed by Parent or any of its Subsidiaries through April 1st of the fiscal year following the fiscal year to which such Annual Bonus relates and such Annual Bonus, if any, will be paid to Executive by the Company on or before April 15th of the fiscal year following the fiscal year to which such Annual Bonus relates. There is no guaranteed Annual Bonus under this Agreement, and for each applicable year, Executive’s Annual Bonus could be as low as zero or as high as the maximum Annual Bonus opportunity established for such year.
4.Term.
(a)The Employment Period shall end on the first anniversary of the Effective Date, but shall automatically be renewed on the same terms and conditions set forth herein (as may be modified from time to time in accordance with the terms of this Agreement) for additional one-year periods beginning on the first anniversary of the Effective Date and on each successive anniversary of the Effective Date, unless the Company or Executive gives the other party written notice of the election not to renew the Employment Period at least 90 days prior to any such renewal date; provided that, the Employment Period shall terminate immediately upon Executive’s resignation (with or without Good Reason, as defined below), death or Disability (as
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defined below) or upon the Company’s termination of Executive’s employment (whether with Cause (as defined below) or without Cause).
(b)If the Employment Period is terminated (1) by the Company without Cause (other than as a result of Executive’s Disability) or (2) upon Executive’s resignation with Good Reason, Executive shall be entitled to: (i) her Base Salary through the date of termination; (ii) any Annual Bonus amounts to which Executive is entitled for years that ended on or prior to the date of termination in accordance with the terms set forth in Section 3(c) (including the requirement that Executive remain employed by the Parent or its Subsidiaries through April 1 of the fiscal year following the fiscal year to which such Annual Bonus relates); (iii) an amount equal to one year of Executive’s then current Base Salary plus an amount equal to the average of the Annual Bonuses paid to Executive for the two completed fiscal years immediately preceding the date of the termination of Executive’s employment; and (iv) running concurrently with (and counting toward) her COBRA period, continued participation throughout the Severance Period (as defined below) in all health and dental benefit plans in which Executive was entitled to participate immediately prior to the termination of Executive’s employment (or the Company shall arrange to make available to Executive benefits substantially similar to those which Executive would otherwise have been entitled to receive over such period if Executive’s employment had not been terminated) on the same terms and conditions (including the amount of employee contributions toward premium payments but not guaranteeing any particular tax result to Executive of such continued benefits) under which Executive was entitled to participate immediately prior to her termination. Any stock options, RSUs or other equity awards granted to Executive shall be subject to the terms and conditions of the applicable Management Equity Plans and such awards. The amounts and benefits described in clauses (iii) and (iv) of this Section 4(b) will be paid if and only if Executive has executed and delivered to the Company a separation agreement with a general release to be provided by the Company in connection with Executive’s termination, and such release has become effective and no longer subject to revocation not later than sixty (60) days following the date of termination (the “General Release”) and only if Executive does not breach the provisions of Sections 5 through 7 hereof. The amounts payable pursuant to clause (iii) of this Section 4(b) shall be payable in a lump sum payment following the date of termination (the “Severance Period”) in accordance with the Company’s general payroll practices as in effect on the date of termination; provided that no amounts shall be paid until the first scheduled payment date following the date the General Release is executed and no longer subject to revocation, with the first such payment being in an amount equal to the total amount to which Executive would otherwise have been entitled during the period following the date of termination through such payment date if such deferral had not been required. The amounts and benefits described in clauses (i) and (ii) of this Section 4(b) shall be paid to Executive in a lump sum in cash within thirty (30) days of the applicable date of termination.
(c)If the Employment Period is terminated (1) by the Company with Cause, (2) due to Executive’s death or Disability or (3) by Executive’s resignation without Good Reason, Executive shall be entitled to receive (i) her Base Salary through the date of termination and (ii) any Annual Bonus amounts to which Executive is entitled determined by reference to years that ended on or prior to the date of termination in accordance with the terms set forth in Section 3(c) (including the requirement that Executive remain employed by the Parent or its Subsidiaries through April 1 of the fiscal year following the fiscal year to which such Annual Bonus relates). The amounts and benefits described in clauses (i) and (ii) of this Section 4(c) shall be paid to Executive or, in the event of death, Executive’s estate or beneficiaries, in a lump sum in cash within thirty (30) days of the applicable date of termination.
(d)Except as otherwise expressly provided herein, Executive shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company or its Subsidiaries after the termination of the Employment Period and all of Executive’s rights to
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salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the termination of the Employment Period (other than vested retirement benefits accrued on or prior to the termination of the Employment Period in accordance with the terms of the applicable retirement plan or other amounts owing hereunder as of the date of such termination that have not yet been paid) shall cease upon such termination, other than those expressly required under applicable law (such as COBRA) or as provided under an applicable Management Equity Plan.
(e)Executive is under no obligation to mitigate damages or the amount of any payment provided for hereunder by seeking other employment or otherwise, and the Company shall have no right of offset for any amounts received by Executive from other employment; provided that, notwithstanding anything to the contrary herein, Executive’s coverage under the Company’s health and dental benefit plans will terminate when Executive becomes eligible under any employee benefit plan made available by another employer covering health and dental benefits. Executive shall notify the Company within thirty (30) days after becoming eligible for any such benefits.
(f)Subject to applicable law, the Company may offset any amounts Executive owes Parent and its Subsidiaries against any amounts Parent and its Subsidiaries owe Executive hereunder.
(g)For purposes of this Agreement, “Cause” shall mean, with respect to Executive, one or more of the following: (1) the indictment for a felony or other crime involving moral turpitude or the commission of any other act or any omission to act involving fraud with respect to Parent or any of its Subsidiaries or any of their customers or suppliers; (2) any act or any omission to act involving dishonesty or disloyalty that causes, or in the good faith judgment of the Board would be reasonably likely to cause, material harm (including reputational harm) to Parent or any of its Subsidiaries or any of their customers or suppliers; (3) any (i) repeated abuse of alcohol or (ii) abuse of controlled substances, in either case, that adversely affects Executive’s work performance (and, in the case of clause (i), continues to occur at any time more than thirty (30) days after Executive has been given written notice thereof) or brings Parent or its Subsidiaries into public disgrace or disrepute; (4) the failure by Executive to substantially perform duties as reasonably directed by the Board, which non-performance remains uncured for ten (10) days after written notice thereof is given to Executive; (5) willful misconduct with respect to Parent or any of its Subsidiaries, which misconducts causes, or in the good faith judgment of the Board would be reasonably likely to cause, material harm (including reputational harm) to Parent or any of its Subsidiaries; (6) the failure of Executive to cooperate in any audit or investigation of the business or financial practices of the Parent or any of its Subsidiaries; or (7) any breach by Executive of Sections 5 through 7 of this Agreement or any other material breach of this Agreement or the Management Equity Plans (as defined below).
(h)Executive will be “Disabled” only if, as a result of her incapacity due to physical or mental illness, Executive is considered disabled under the Company’s long-term disability insurance plans.
(i)For purposes of this Agreement, “Good Reason” shall mean if Executive resigns from employment with the Company and, if applicable, its Subsidiaries prior to the end of the Employment Period as a result of one or more of the following reasons: (1) any reduction in Executive’s Base Salary or Annual Bonus opportunity, without Executive’s prior consent, in either case other than any reduction which (i) is generally applicable to senior leadership team executives of the Company and (ii) does not exceed 15% of Executive’s Base Salary and Annual Bonus opportunity in the aggregate; (2) any material breach by Parent or any of its Subsidiaries of any agreement between such Persons and Executive; or (3) a change in Executive’s principal office without Executive’s prior consent to a location that is more than fifty (50) miles from
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Executive’s principal office on the date hereof; provided that, in order for Executive’s resignation with Good Reason to be effective hereunder, Executive must provide written notice to the Company of the event constituting Good Reason within thirty (30) days of the initial occurrence of such event, the Company shall have thirty (30) days after delivery of such written notice to cure such event to Executive’s reasonable satisfaction, and Executive’s resignation with Good Reason must be effective within thirty (30) days following the end of the Company’s cure period.
(j)For purposes of this Agreement, “Management Equity Plans” shall mean the 2021 Equity Incentive Plan of Parent, including any amendments thereto, together with any other incentive equity plan of Parent or any of its Subsidiaries under which Executive may have in the past received, or may in the future receive any equity or equity-based award, along with any Award Agreements (as defined therein) and any attachments thereto, as amended from time to time.
5.Confidential Information.
(a)Executive acknowledges that the continued success of Parent and its Subsidiaries and Affiliates, depends upon the use and protection of a large body of confidential and proprietary information. All of such confidential and proprietary information now existing or to be developed in the future will be referred to in this Agreement as “Confidential Information”. Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is (1) related to Parent’s or its Subsidiaries’ or Affiliates’ current or potential business and (2) is not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Executive during the course of her performance with Parent and its Subsidiaries or Affiliates (including the Company) concerning the business and affairs of Parent and its Subsidiaries and Affiliates, information concerning acquisition opportunities in or reasonably related to the Parent’s or its Subsidiaries’ or Affiliates’ business or industry of which Executive has become or becomes aware during her employment, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Executive’s course of performance, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, employee lists and telephone numbers, locations of sales representatives, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Executive agrees that during her employment and thereafter she shall not disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act; or (ii) is required to be disclosed pursuant to any applicable law or court order. Executive agrees to deliver to the Company at the end of the Employment Period, or at any other time the Company may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of Parent or its Subsidiaries or Affiliates (including, without limitation, all Confidential Information) that she may then possess or have under her control.
(b)During the Employment Period, Executive shall not use or disclose any confidential information, including trade secrets, if any, of any former employers or any other person to whom Executive has an obligation of confidentiality, and shall not bring onto the premises of Parent or its Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other Person to whom Executive has an obligation of confidentiality unless consented to in writing by the former employer or Person. Executive shall
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use in the performance of her duties only information that is (1) generally known and used by persons with training and experience comparable to Executive’s and that is (i) common knowledge in the industry or (ii) is otherwise legally in the public domain; (2) otherwise provided or developed by Parent or its Subsidiaries or Affiliates; or (3) in the case of materials, property or information belonging to any former employer or other Person to whom Executive has an obligation of confidentiality, approved for such use in writing by such former employer or Person. If at any time during the Employment Period, Executive believes she is being asked to engage in work that will, or will be likely to, jeopardize any confidentiality or other obligations Executive may have to former employers, Executive shall immediately advise the Board so that Executive’s duties can be modified appropriately.
(c)Executive represents and warrants to the Parent and its Subsidiaries that Executive took nothing with her that belonged to any former employer when Executive left her position(s) with such employer(s) that Executive was not authorized to take and that Executive has nothing that contains any confidential information that belongs to any former employer. If at any time Executive discovers that this representation is incorrect, Executive shall promptly return any such materials to Executive’s former employer(s). Parent and its Subsidiaries do not want any such materials, and Executive shall not be permitted to use or refer to any such materials in the performance of Executive’s duties hereunder.
(d)Executive understands that Parent and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on Parent’s and its Subsidiaries’ and Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Employment Period and thereafter, and without in any way limiting the provisions of Section 5(a) above, Executive will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of Parent or its Subsidiaries and Affiliates who need to know such information in connection with their work for Parent or such Subsidiaries and Affiliates) or use, except in connection with her work for Parent or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.
(e)Under the federal Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (1) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made to Executive’s attorney in relation to a lawsuit for retaliation against the Company for reporting a suspected violation of law; or (3) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, nothing in this Agreement prevents Executive from providing, without prior notice to the Company or its Affiliates, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations.
6.Intellectual Property, Inventions and Patents. Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to Parent’s or any of its Subsidiaries’ actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether alone or jointly with others) while employed by the Company and its Subsidiaries, whether before or after the date of this Agreement (“Work Product”), belong to Parent, the Company or such Subsidiary. At the Company’s expense, Executive shall perform all actions reasonably requested by the Board (whether during or after
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the Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).
7.Non-Compete; Non-Solicitation.
(a)In further consideration of the compensation and benefits to be paid to Executive hereunder, Executive acknowledges that during the course of her employment with the Company and its Subsidiaries, she has and shall become familiar with Parent’s and its Subsidiaries’ and Affiliates’ corporate strategy, pricing and other market information, know-how, trade secrets and valuable customer, supplier and employee relationships, and with other Confidential Information concerning Parent and its Subsidiaries and Affiliates, and that her services have been and shall be of special, unique and extraordinary value to Parent and its Subsidiaries and Affiliates. Accordingly, Executive agrees that, during the Employment Period and for one (1) year thereafter (the “Non-compete Period”), if the termination of Executive’s employment is voluntary or for “Cause” (as defined above), she shall not, directly or indirectly, without the prior written consent of the Company, serve in a capacity similar to the position(s) held by Executive with the Company in the last two (2) years of Executive’s employment by the Company, and in a geographic area to which Executive was assigned, in which Executive provided services or had a material presence or influence, or for which Executive was directly or indirectly responsible, during the last two (2) years of her employment by the Company, own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any Competing Business that conducts operations or sales in such U.S. states, or such countries outside the United States, as Parent and its Subsidiaries conduct sales or operations as of the date of termination of the Employment Period. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a publicly-traded corporation, so long as Executive has no active participation in the business of such corporation. For purpose of this Agreement, “Competing Business” shall mean any business engaged (whether directly or indirectly) in the design, manufacture, marketing, or sale of products or services competitive with those designed, manufactured, marketed or sold by the Parent or its Subsidiaries or Affiliates. Executive acknowledges and agrees that Executive has received sufficient mutually agreed-upon consideration for agreeing to be bound by the obligations in this Section, specifically the salary, benefits and the potential to receive severance set forth in Section 4(b) above. The restrictions in this Section do not become effective until the 11th business day after this Agreement is executed by Executive.
(b)During the Non-compete Period, Executive shall not directly or indirectly through another person or entity (1) induce or attempt to induce any employee of Parent or any Subsidiary to leave the employ of Parent or such Subsidiary, or in any way interfere with the relationship between Parent or any Subsidiary and any employee thereof; (2) knowingly hire any person who was an employee of Parent or any Subsidiary at any time during the twelve (12) months prior to the termination of Executive’s employment; or (3) induce or encourage, or attempt to induce, encourage or solicit, any customer, supplier, licensee, licensor or other business relation of Parent or any Subsidiary to cease doing business with Parent or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor or business relation and Parent or any Subsidiary (including, without limitation, making any negative or disparaging statements or communications regarding Parent or its Subsidiaries); provided that, in each case, this Section 7(b) shall only apply if Executive shall have done business with, or had direct or indirect supervisory or other responsibility for, the employee, customer, supplier, licensee, licensor, or business relation to which the applicable clause of this Section 7(b) applies.
(c)If, at the time of enforcement of this Section 7, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such
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circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. Executive acknowledges that the restrictions contained in this Section 7 are reasonable and that she has reviewed the provisions of this Agreement with her legal counsel.
(d)Executive acknowledges that any breach or threatened breach of the provisions of this Section 7 would cause Parent and its Subsidiaries irreparable harm. Accordingly, in addition to other rights and remedies existing in its favor, the Company shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). Further, in the event of an alleged breach or violation by Executive of this Section 7, the Non-compete Period shall be tolled until such breach or violation has been duly cured.
8.Executive’s Representations. Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which she is bound; (b) Executive is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other person or entity; and (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that she has consulted with independent legal counsel regarding her rights and obligations under this Agreement and that she fully understands the terms and conditions contained herein.
9.Recoupment Policy. Notwithstanding anything in this Agreement to the contrary, Executive acknowledges and agrees that this Agreement and any compensation described herein are subject to the terms and conditions of the Company's recoupment policy (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Securities Exchange Act of 1934, as amended, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the shares of the Company’s common stock may be traded) (the “Claw-back Policy”), and that applicable sections of this Agreement and any related documents shall be deemed superseded by and subject to the terms and conditions of the Claw-back Policy from and after the effective date thereof.
10.Survival. Sections 4 through 24 (other than Section 22) shall survive and continue in full force in accordance with their terms notwithstanding the termination of the Employment Period.
11.Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:
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Notices to Executive:
Executive’s last residence shown on the records of the Company.
Notices to the Company:
Sensata Technologies, Inc.
529 Pleasant Street
Attleboro, MA 02703
Attention: General Counsel
or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.
12.Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
13.Complete Agreement. This Agreement, those documents expressly referred to herein, and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
14.No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.
15.Counterparts. This Agreement may be executed in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
16.Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including, without limitation, any Persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company other than to Parent or any of its Subsidiaries. This Agreement will inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees, but otherwise will not otherwise be assignable, transferable or delegable by Executive. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as otherwise expressly provided in this Section 16.
17.Choice of Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or
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conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
18.Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company (as approved by the Board or the Compensation Committee of the Board as appropriate) and Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement (including, without limitation, the Company’s right to terminate the Employment Period with Cause or, except as otherwise stated herein, Executive’s right to terminate the Employment Agreement with Good Reason) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement.
19.Insurance. The Company may, at its discretion, apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered advisable. Executive agrees to cooperate in any medical or other examination, supply any information and execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance.
20.Tax Matters; Code Section 409A.
(a)The Company and its respective Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, local or foreign withholding taxes, excise tax, or employment taxes (“Taxes”) imposed with respect to Executive’s compensation or other payments from the Company or any of its Subsidiaries or Executive’s ownership interest in Parent (including, without limitation, wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity). In the event the Company or any of its Subsidiaries does not make such deductions or withholdings, Executive shall indemnify the Company and its Subsidiaries for any amounts paid with respect to any such Taxes, together (if such failure to withhold was at the written direction of Executive) with any interest, penalties and related expenses thereto. The Company does not guarantee any particular tax result to Executive with respect to any payments or benefits provided hereunder.
(b)The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. In no event whatsoever shall the Company, or Parent or any of their Subsidiaries be liable for any additional tax, interest or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.
(c)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered “nonqualified deferred compensation” under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (1) the first business day following the expiration of the six-month period measured from the date of such “separation
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from service” of Executive, and (2) the date of Executive’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 19(c) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(d)To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (1) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive; (2) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; and (3) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(e)For purposes of Code Section 409A, Executive’s right to receive any payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(f)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
21.Waiver of Jury Trial. AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.
22.Corporate Opportunity. During the Employment Period, Executive shall submit to the Board all business, commercial and investment opportunities or offers presented to Executive, or of which Executive becomes aware, at any time during the Employment Period, which opportunities relate to the business of designing, manufacturing, marketing, or selling products or services competitive with those designed, manufactured, marketed or sold by the Parent or its Subsidiaries or Affiliates (“Corporate Opportunities”). During the Employment Period, unless approved by the Board, Executive shall not accept or pursue, directly or indirectly, any Corporate Opportunities on Executive’s own behalf.
23.Executive’s Cooperation. During the Employment Period and thereafter, Executive shall reasonably cooperate with Parent and its Subsidiaries in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by Parent or any Subsidiary (including, without limitation, Executive being available to Parent and its Subsidiaries upon reasonable notice for interviews and factual investigations, appearing at Parent’s or any Subsidiary’s request to give truthful and accurate testimony without requiring service of a subpoena or other legal process, volunteering to Parent and its Subsidiaries all pertinent information and turning over to Parent and its Subsidiaries all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments). In the event Parent or any Subsidiary requires Executive’s cooperation in accordance with this Section 23, Parent shall pay Executive a per diem reasonably determined by the Board or the Compensation
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Committee and reimburse Executive for reasonable expenses incurred in connection therewith (including lodging and meals, upon submission of receipts).
24.Nondisparagement. Executive agrees not to, except as may be required by law, directly or indirectly, publicly or privately, make, publish or solicit, or encourage others to make, publish or solicit, any disparaging statements, comments, announcements, or remarks concerning Parent or its Affiliates, or any of their respective past and present directors, officers or employees. Parent and its Affiliates agree not to, except as may be required by law, directly or indirectly, publicly or privately, make, publish or solicit, or encourage others to make, publish or solicit, any disparaging statements, comments, announcements or remarks concerning Executive or her employment with the Company or any of its Subsidiaries.
25.Acknowledgement. Executive acknowledges that she had the opportunity to consult with counsel regarding this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date set forth above.
SENSATA TECHNOLOGIES, INC.
/s/ Jeff Cote
Jeff Cote
Chief Executive Officer & President
EXECUTIVE
/s/ Jennifer Slater
Jennifer Slater
Senior Vice President, Performance Sensing & Aftermarket
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is hereby executed by and between Sensata Technologies, Inc., a Delaware corporation (the “Company”), and Brian Wilkie (“Executive”), to be effective as of April 1, 2023 (the “Effective Date”).
WHEREAS, the Company and Executive desire to enter into an employment agreement in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are expressly hereby acknowledged, the parties hereto agree as follows:
1.Employment. The Company shall employ Executive, and Executive hereby agrees to continue employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 4 hereof (the “Employment Period”). Subject to applicable law, the parties agree that for purposes of calculating years of service under any benefit plans or programs, Executive’s employment with the Company commenced as of January 6, 1998 unless expressly provided otherwise under the terms of any employee benefit plans or programs.
2.Position and Duties.
(a)During the Employment Period, Executive shall serve as Senior Vice President, Sensing Solutions of the Company and shall have the duties, responsibilities, functions and authority that are normally associated with the position of Senior Vice President. Executive’s duties shall be subject to the power and authority of the Company’s Board of Directors (the “Company Board”) and the Board of Directors (the “Board”) of Sensata Technologies Holding plc, a public limited company formed under the laws of England and Wales (“Parent”), to expand or limit such duties, responsibilities, functions and authority and to overrule actions of officers of the Company. During the Employment Period, Executive shall render to Parent and its Subsidiaries (as defined herein) administrative, financial and other executive and managerial services that are consistent with Executive’s position as the Board may from time to time direct.
(b)Executive shall report to the Chief Executive Officer and President, or to such other person or persons as may be designated from time to time by the Chief Executive Officer or the Board. Executive shall devote his full business time and attention (except for vacation periods consistent with past practice and reasonable periods of illness or other incapacity) to the business and affairs of Parent and its Subsidiaries. In performing his duties and exercising his authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board. As long as Executive is employed by the Company, Executive shall not, without the prior written consent of the Board, perform other services for compensation. Unless otherwise agreed by Executive, Executive’s place of work shall be in the greater Attleboro, Massachusetts metropolitan area, except for travel reasonably required for Company business.
(c)For purposes of this Agreement, “Subsidiaries” shall mean any corporation or other entity of which the securities or other ownership interests having the voting power to elect a majority of the board of directors or other governing body are, at the time of determination, owned by Parent, directly or through one or more Subsidiaries.
(d)For purposes of this Agreement, “Affiliate” shall mean with respect to Parent and its Subsidiaries, any other Person controlling, controlled by or under common control
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with Parent or any of its Subsidiaries and, in the case of a Person that is a partnership, any partner of the Person.
(e)For purposes of this Agreement, “Person” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
3.Compensation and Benefits.
(a)During the Employment Period, Executive’s base salary shall be equal to the amount determined by the Board or the Compensation Committee of the Board on an annual basis (as adjusted from time to time, the “Base Salary”), which Base Salary shall be payable by the Company in regular installments in accordance with the Company’s general payroll practices (in effect from time to time). In addition, during the Employment Period, Executive shall be entitled to participate in all of the Company’s employee benefit programs for which senior executive employees of Parent and its Subsidiaries are generally eligible (assuming Executive and/or his family meet the eligibility requirements of those benefit programs) (the “Senior Executive Benefits”).
(b)During the Employment Period, Executive shall be reimbursed by the Company for all reasonable business expenses incurred by his in the course of performing his duties and responsibilities under this Agreement, which business expenses are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses. Reimbursement of the costs and expenses set forth in this Section 3(b) are subject to the Company’s requirements with respect to reporting and documentation of such costs and expenses.
(c)In addition to the Base Salary, Executive shall be eligible to earn an annual bonus (“Annual Bonus”) in an amount as determined by the Board or the Compensation Committee of the Board equal to a certain percentage of the Base Salary then in effect, with such other terms and based upon Executive’s individual performance and/or the achievement by Parent and its Subsidiaries of financial and other objectives, in each case as established for each fiscal year by the Board or the Compensation Committee of the Board. Executive will become entitled to receive an Annual Bonus, if any, only if Executive continues to be employed by Parent or any of its Subsidiaries through April 1st of the fiscal year following the fiscal year to which such Annual Bonus relates and such Annual Bonus, if any, will be paid to Executive by the Company on or before April 15th of the fiscal year following the fiscal year to which such Annual Bonus relates. There is no guaranteed Annual Bonus under this Agreement, and for each applicable year, Executive’s Annual Bonus could be as low as zero or as high as the maximum Annual Bonus opportunity established for such year.
4.Term.
(a)The Employment Period shall end on the first anniversary of the Effective Date, but shall automatically be renewed on the same terms and conditions set forth herein (as may be modified from time to time in accordance with the terms of this Agreement) for additional one-year periods beginning on the first anniversary of the Effective Date and on each successive anniversary of the Effective Date, unless the Company or Executive gives the other party written notice of the election not to renew the Employment Period at least 90 days prior to any such renewal date; provided that, the Employment Period shall terminate immediately upon Executive’s resignation (with or without Good Reason, as defined below), death or Disability (as defined below) or upon the Company’s termination of Executive’s employment (whether with Cause (as defined below) or without Cause).
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(b)If the Employment Period is terminated (1) by the Company without Cause (other than as a result of Executive’s Disability) or (2) upon Executive’s resignation with Good Reason, Executive shall be entitled to: (i) his Base Salary through the date of termination; (ii) any Annual Bonus amounts to which Executive is entitled for years that ended on or prior to the date of termination in accordance with the terms set forth in Section 3(c) (including the requirement that Executive remain employed by the Parent or its Subsidiaries through April 1 of the fiscal year following the fiscal year to which such Annual Bonus relates); (iii) an amount equal to one year of Executive’s then current Base Salary plus an amount equal to the average of the Annual Bonuses paid to Executive for the two completed fiscal years immediately preceding the date of the termination of Executive’s employment; and (iv) running concurrently with (and counting toward) his COBRA period, continued participation throughout the Severance Period (as defined below) in all health and dental benefit plans in which Executive was entitled to participate immediately prior to the termination of Executive’s employment (or the Company shall arrange to make available to Executive benefits substantially similar to those which Executive would otherwise have been entitled to receive over such period if Executive’s employment had not been terminated) on the same terms and conditions (including the amount of employee contributions toward premium payments but not guaranteeing any particular tax result to Executive of such continued benefits) under which Executive was entitled to participate immediately prior to his termination. Any stock options, RSUs or other equity awards granted to Executive shall be subject to the terms and conditions of the applicable Management Equity Plans and such awards. The amounts and benefits described in clauses (iii) and (iv) of this Section 4(b) will be paid if and only if Executive has executed and delivered to the Company a separation agreement with a general release to be provided by the Company in connection with Executive’s termination, and such release has become effective and no longer subject to revocation not later than sixty (60) days following the date of termination (the “General Release”) and only if Executive does not breach the provisions of Sections 5 through 7 hereof. The amounts payable pursuant to clause (iii) of this Section 4(b) shall be payable in a lump sum payment following the date of termination (the “Severance Period”) in accordance with the Company’s general payroll practices as in effect on the date of termination; provided that no amounts shall be paid until the first scheduled payment date following the date the General Release is executed and no longer subject to revocation, with the first such payment being in an amount equal to the total amount to which Executive would otherwise have been entitled during the period following the date of termination through such payment date if such deferral had not been required. The amounts and benefits described in clauses (i) and (ii) of this Section 4(b) shall be paid to Executive in a lump sum in cash within thirty (30) days of the applicable date of termination.
(c)If the Employment Period is terminated (1) by the Company with Cause, (2) due to Executive’s death or Disability or (3) by Executive’s resignation without Good Reason, Executive shall be entitled to receive (i) his Base Salary through the date of termination and (ii) any Annual Bonus amounts to which Executive is entitled determined by reference to years that ended on or prior to the date of termination in accordance with the terms set forth in Section 3(c) (including the requirement that Executive remain employed by the Parent or its Subsidiaries through April 1 of the fiscal year following the fiscal year to which such Annual Bonus relates). The amounts and benefits described in clauses (i) and (ii) of this Section 4(c) shall be paid to Executive or, in the event of death, Executive’s estate or beneficiaries, in a lump sum in cash within thirty (30) days of the applicable date of termination.
(d)Except as otherwise expressly provided herein, Executive shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company or its Subsidiaries after the termination of the Employment Period and all of Executive’s rights to salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the termination of the Employment Period (other than vested retirement benefits accrued on or prior to the termination of the Employment Period in accordance with the
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terms of the applicable retirement plan or other amounts owing hereunder as of the date of such termination that have not yet been paid) shall cease upon such termination, other than those expressly required under applicable law (such as COBRA) or as provided under an applicable Management Equity Plan.
(e)Executive is under no obligation to mitigate damages or the amount of any payment provided for hereunder by seeking other employment or otherwise, and the Company shall have no right of offset for any amounts received by Executive from other employment; provided that, notwithstanding anything to the contrary herein, Executive’s coverage under the Company’s health and dental benefit plans will terminate when Executive becomes eligible under any employee benefit plan made available by another employer covering health and dental benefits. Executive shall notify the Company within thirty (30) days after becoming eligible for any such benefits.
(f)Subject to applicable law, the Company may offset any amounts Executive owes Parent and its Subsidiaries against any amounts Parent and its Subsidiaries owe Executive hereunder.
(g)For purposes of this Agreement, “Cause” shall mean, with respect to Executive, one or more of the following: (1) the indictment for a felony or other crime involving moral turpitude or the commission of any other act or any omission to act involving fraud with respect to Parent or any of its Subsidiaries or any of their customers or suppliers; (2) any act or any omission to act involving dishonesty or disloyalty that causes, or in the good faith judgment of the Board would be reasonably likely to cause, material harm (including reputational harm) to Parent or any of its Subsidiaries or any of their customers or suppliers; (3) any (i) repeated abuse of alcohol or (ii) abuse of controlled substances, in either case, that adversely affects Executive’s work performance (and, in the case of clause (i), continues to occur at any time more than thirty (30) days after Executive has been given written notice thereof) or brings Parent or its Subsidiaries into public disgrace or disrepute; (4) the failure by Executive to substantially perform duties as reasonably directed by the Board, which non-performance remains uncured for ten (10) days after written notice thereof is given to Executive; (5) willful misconduct with respect to Parent or any of its Subsidiaries, which misconducts causes, or in the good faith judgment of the Board would be reasonably likely to cause, material harm (including reputational harm) to Parent or any of its Subsidiaries; (6) the failure of Executive to cooperate in any audit or investigation of the business or financial practices of the Parent or any of its Subsidiaries; or (7) any breach by Executive of Sections 5 through 7 of this Agreement or any other material breach of this Agreement or the Management Equity Plans (as defined below).
(h)Executive will be “Disabled” only if, as a result of his incapacity due to physical or mental illness, Executive is considered disabled under the Company’s long-term disability insurance plans.
(i)For purposes of this Agreement, “Good Reason” shall mean if Executive resigns from employment with the Company and, if applicable, its Subsidiaries prior to the end of the Employment Period as a result of one or more of the following reasons: (1) any reduction in Executive’s Base Salary or Annual Bonus opportunity, without Executive’s prior consent, in either case other than any reduction which (i) is generally applicable to senior leadership team executives of the Company and (ii) does not exceed 15% of Executive’s Base Salary and Annual Bonus opportunity in the aggregate; (2) any material breach by Parent or any of its Subsidiaries of any agreement between such Persons and Executive; or (3) a change in Executive’s principal office without Executive’s prior consent to a location that is more than fifty (50) miles from Executive’s principal office on the date hereof; provided that, in order for Executive’s resignation with Good Reason to be effective hereunder, Executive must provide written notice to the Company of the event constituting Good Reason within thirty (30) days of the initial
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occurrence of such event, the Company shall have thirty (30) days after delivery of such written notice to cure such event to Executive’s reasonable satisfaction, and Executive’s resignation with Good Reason must be effective within thirty (30) days following the end of the Company’s cure period.
(j)For purposes of this Agreement, “Management Equity Plans” shall mean the 2021 Equity Incentive Plan of Parent, including any amendments thereto, together with any other incentive equity plan of Parent or any of its Subsidiaries under which Executive may have in the past received, or may in the future receive any equity or equity-based award, along with any Award Agreements (as defined therein) and any attachments thereto, as amended from time to time.
5.Confidential Information.
(a)Executive acknowledges that the continued success of Parent and its Subsidiaries and Affiliates, depends upon the use and protection of a large body of confidential and proprietary information. All of such confidential and proprietary information now existing or to be developed in the future will be referred to in this Agreement as “Confidential Information”. Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is (1) related to Parent’s or its Subsidiaries’ or Affiliates’ current or potential business and (2) is not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Executive during the course of his performance with Parent and its Subsidiaries or Affiliates (including the Company) concerning the business and affairs of Parent and its Subsidiaries and Affiliates, information concerning acquisition opportunities in or reasonably related to the Parent’s or its Subsidiaries’ or Affiliates’ business or industry of which Executive has become or becomes aware during his employment, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Executive’s course of performance, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, employee lists and telephone numbers, locations of sales representatives, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Executive agrees that during his employment and thereafter she shall not disclose to any unauthorized person or use for his own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act; or (ii) is required to be disclosed pursuant to any applicable law or court order. Executive agrees to deliver to the Company at the end of the Employment Period, or at any other time the Company may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of Parent or its Subsidiaries or Affiliates (including, without limitation, all Confidential Information) that she may then possess or have under his control.
(b)During the Employment Period, Executive shall not use or disclose any confidential information, including trade secrets, if any, of any former employers or any other person to whom Executive has an obligation of confidentiality, and shall not bring onto the premises of Parent or its Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other Person to whom Executive has an obligation of confidentiality unless consented to in writing by the former employer or Person. Executive shall use in the performance of his duties only information that is (1) generally known and used by persons with training and experience comparable to Executive’s and that is (i) common knowledge in the industry or (ii) is otherwise legally in the public domain; (2) otherwise
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provided or developed by Parent or its Subsidiaries or Affiliates; or (3) in the case of materials, property or information belonging to any former employer or other Person to whom Executive has an obligation of confidentiality, approved for such use in writing by such former employer or Person. If at any time during the Employment Period, Executive believes she is being asked to engage in work that will, or will be likely to, jeopardize any confidentiality or other obligations Executive may have to former employers, Executive shall immediately advise the Board so that Executive’s duties can be modified appropriately.
(c)Executive represents and warrants to the Parent and its Subsidiaries that Executive took nothing with his that belonged to any former employer when Executive left his position(s) with such employer(s) that Executive was not authorized to take and that Executive has nothing that contains any confidential information that belongs to any former employer. If at any time Executive discovers that this representation is incorrect, Executive shall promptly return any such materials to Executive’s former employer(s). Parent and its Subsidiaries do not want any such materials, and Executive shall not be permitted to use or refer to any such materials in the performance of Executive’s duties hereunder.
(d)Executive understands that Parent and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on Parent’s and its Subsidiaries’ and Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Employment Period and thereafter, and without in any way limiting the provisions of Section 5(a) above, Executive will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of Parent or its Subsidiaries and Affiliates who need to know such information in connection with their work for Parent or such Subsidiaries and Affiliates) or use, except in connection with his work for Parent or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.
(e)Under the federal Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (1) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made to Executive’s attorney in relation to a lawsuit for retaliation against the Company for reporting a suspected violation of law; or (3) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, nothing in this Agreement prevents Executive from providing, without prior notice to the Company or its Affiliates, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations.
6.Intellectual Property, Inventions and Patents. Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to Parent’s or any of its Subsidiaries’ actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether alone or jointly with others) while employed by the Company and its Subsidiaries, whether before or after the date of this Agreement (“Work Product”), belong to Parent, the Company or such Subsidiary. At the Company’s expense, Executive shall perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).
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7.Non-Compete; Non-Solicitation.
(a)In further consideration of the compensation and benefits to be paid to Executive hereunder, Executive acknowledges that during the course of his employment with the Company and its Subsidiaries, she has and shall become familiar with Parent’s and its Subsidiaries’ and Affiliates’ corporate strategy, pricing and other market information, know-how, trade secrets and valuable customer, supplier and employee relationships, and with other Confidential Information concerning Parent and its Subsidiaries and Affiliates, and that his services have been and shall be of special, unique and extraordinary value to Parent and its Subsidiaries and Affiliates. Accordingly, Executive agrees that, during the Employment Period and for one (1) year thereafter (the “Non-compete Period”), if the termination of Executive’s employment is voluntary or for “Cause” (as defined above), she shall not, directly or indirectly, without the prior written consent of the Company, serve in a capacity similar to the position(s) held by Executive with the Company in the last two (2) years of Executive’s employment by the Company, and in a geographic area to which Executive was assigned, in which Executive provided services or had a material presence or influence, or for which Executive was directly or indirectly responsible, during the last two (2) years of his employment by the Company, own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any Competing Business that conducts operations or sales in such U.S. states, or such countries outside the United States, as Parent and its Subsidiaries conduct sales or operations as of the date of termination of the Employment Period. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a publicly-traded corporation, so long as Executive has no active participation in the business of such corporation. For purpose of this Agreement, “Competing Business” shall mean any business engaged (whether directly or indirectly) in the design, manufacture, marketing, or sale of products or services competitive with those designed, manufactured, marketed or sold by the Parent or its Subsidiaries or Affiliates. Executive acknowledges and agrees that Executive has received sufficient mutually agreed-upon consideration for agreeing to be bound by the obligations in this Section, specifically the salary, benefits and the potential to receive severance set forth in Section 4(b) above. The restrictions in this Section do not become effective until the 11th business day after this Agreement is executed by Executive.
(b)During the Non-compete Period, Executive shall not directly or indirectly through another person or entity (1) induce or attempt to induce any employee of Parent or any Subsidiary to leave the employ of Parent or such Subsidiary, or in any way interfere with the relationship between Parent or any Subsidiary and any employee thereof; (2) knowingly hire any person who was an employee of Parent or any Subsidiary at any time during the twelve (12) months prior to the termination of Executive’s employment; or (3) induce or encourage, or attempt to induce, encourage or solicit, any customer, supplier, licensee, licensor or other business relation of Parent or any Subsidiary to cease doing business with Parent or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor or business relation and Parent or any Subsidiary (including, without limitation, making any negative or disparaging statements or communications regarding Parent or its Subsidiaries); provided that, in each case, this Section 7(b) shall only apply if Executive shall have done business with, or had direct or indirect supervisory or other responsibility for, the employee, customer, supplier, licensee, licensor, or business relation to which the applicable clause of this Section 7(b) applies.
(c)If, at the time of enforcement of this Section 7, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area
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permitted by law. Executive acknowledges that the restrictions contained in this Section 7 are reasonable and that she has reviewed the provisions of this Agreement with his legal counsel.
(d)Executive acknowledges that any breach or threatened breach of the provisions of this Section 7 would cause Parent and its Subsidiaries irreparable harm. Accordingly, in addition to other rights and remedies existing in its favor, the Company shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). Further, in the event of an alleged breach or violation by Executive of this Section 7, the Non-compete Period shall be tolled until such breach or violation has been duly cured.
8.Executive’s Representations. Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which she is bound; (b) Executive is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other person or entity; and (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that she has consulted with independent legal counsel regarding his rights and obligations under this Agreement and that she fully understands the terms and conditions contained herein.
9.Recoupment Policy. Notwithstanding anything in this Agreement to the contrary, Executive acknowledges and agrees that this Agreement and any compensation described herein are subject to the terms and conditions of the Company's recoupment policy (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Securities Exchange Act of 1934, as amended, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the shares of the Company’s common stock may be traded) (the “Claw-back Policy”), and that applicable sections of this Agreement and any related documents shall be deemed superseded by and subject to the terms and conditions of the Claw-back Policy from and after the effective date thereof.
10.Survival. Sections 4 through 24 (other than Section 22) shall survive and continue in full force in accordance with their terms notwithstanding the termination of the Employment Period.
11.Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:
Notices to Executive:
Executive’s last residence shown on the records of the Company.
Notices to the Company:
Sensata Technologies, Inc.
529 Pleasant Street
Attleboro, MA 02703
Attention: General Counsel
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or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.
12.Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
13.Complete Agreement. This Agreement, those documents expressly referred to herein, and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
14.No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.
15.Counterparts. This Agreement may be executed in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
16.Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including, without limitation, any Persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company other than to Parent or any of its Subsidiaries. This Agreement will inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees, but otherwise will not otherwise be assignable, transferable or delegable by Executive. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as otherwise expressly provided in this Section 16.
17.Choice of Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
18.Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company (as approved by the Board or the Compensation Committee of the Board as appropriate) and Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement (including, without limitation, the Company’s right to terminate the Employment Period with Cause or, except as otherwise stated herein, Executive’s right to terminate the Employment Agreement with Good Reason) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement.
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19.Insurance. The Company may, at its discretion, apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered advisable. Executive agrees to cooperate in any medical or other examination, supply any information and execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance.
20.Tax Matters; Code Section 409A.
(a)The Company and its respective Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, local or foreign withholding taxes, excise tax, or employment taxes (“Taxes”) imposed with respect to Executive’s compensation or other payments from the Company or any of its Subsidiaries or Executive’s ownership interest in Parent (including, without limitation, wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity). In the event the Company or any of its Subsidiaries does not make such deductions or withholdings, Executive shall indemnify the Company and its Subsidiaries for any amounts paid with respect to any such Taxes, together (if such failure to withhold was at the written direction of Executive) with any interest, penalties and related expenses thereto. The Company does not guarantee any particular tax result to Executive with respect to any payments or benefits provided hereunder.
(b)The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. In no event whatsoever shall the Company, or Parent or any of their Subsidiaries be liable for any additional tax, interest or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.
(c)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered “nonqualified deferred compensation” under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (1) the first business day following the expiration of the six-month period measured from the date of such “separation from service” of Executive, and (2) the date of Executive’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 19(c) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(d)To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (1) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive; (2) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; and (3) no such reimbursement, expenses eligible for
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reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(e)For purposes of Code Section 409A, Executive’s right to receive any payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(f)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
21.Waiver of Jury Trial. AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.
22.Corporate Opportunity. During the Employment Period, Executive shall submit to the Board all business, commercial and investment opportunities or offers presented to Executive, or of which Executive becomes aware, at any time during the Employment Period, which opportunities relate to the business of designing, manufacturing, marketing, or selling products or services competitive with those designed, manufactured, marketed or sold by the Parent or its Subsidiaries or Affiliates (“Corporate Opportunities”). During the Employment Period, unless approved by the Board, Executive shall not accept or pursue, directly or indirectly, any Corporate Opportunities on Executive’s own behalf.
23.Executive’s Cooperation. During the Employment Period and thereafter, Executive shall reasonably cooperate with Parent and its Subsidiaries in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by Parent or any Subsidiary (including, without limitation, Executive being available to Parent and its Subsidiaries upon reasonable notice for interviews and factual investigations, appearing at Parent’s or any Subsidiary’s request to give truthful and accurate testimony without requiring service of a subpoena or other legal process, volunteering to Parent and its Subsidiaries all pertinent information and turning over to Parent and its Subsidiaries all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments). In the event Parent or any Subsidiary requires Executive’s cooperation in accordance with this Section 23, Parent shall pay Executive a per diem reasonably determined by the Board or the Compensation Committee and reimburse Executive for reasonable expenses incurred in connection therewith (including lodging and meals, upon submission of receipts).
24.Nondisparagement. Executive agrees not to, except as may be required by law, directly or indirectly, publicly or privately, make, publish or solicit, or encourage others to make, publish or solicit, any disparaging statements, comments, announcements, or remarks concerning Parent or its Affiliates, or any of their respective past and present directors, officers or employees. Parent and its Affiliates agree not to, except as may be required by law, directly or indirectly, publicly or privately, make, publish or solicit, or encourage others to make, publish or solicit, any disparaging statements, comments, announcements or remarks concerning Executive or his employment with the Company or any of its Subsidiaries.
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25.Acknowledgement. Executive acknowledges that she had the opportunity to consult with counsel regarding this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date set forth above.
SENSATA TECHNOLOGIES, INC.
/s/ Jeff Cote
Jeff Cote
Chief Executive Officer & President
EXECUTIVE
/s/ Brian Wilkie
Brian Wilkie
Senior Vice President, Sensing Solutions
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is hereby executed by and between Sensata Technologies, Inc., a Delaware corporation (the “Company”), and Lynne Caljouw (“Executive”), to be effective as of January 1, 2023 (the “Effective Date”).
WHEREAS, the Company and Executive have executed that certain Employment Agreement dated June 15, 2020 (the “Prior Employment Agreement”); and
WHEREAS, the Company and Executive desire to amend and restate the Prior Employment Agreement in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, continued employment of Executive by the Company and other good and valuable consideration, the receipt and sufficiency of which are expressly hereby acknowledged, the parties hereto agree as follows:
1.Employment. The Company shall employ Executive, and Executive hereby agrees to continue employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 4 hereof (the “Employment Period”). Subject to applicable law, the parties agree that for purposes of calculating years of service under any benefit plans or programs, Executive’s employment with the Company commenced as of October 13, 2014, unless expressly provided otherwise under the terms of any employee benefit plans or programs.
2.Position and Duties.
(a)During the Employment Period, Executive shall serve as Executive Vice President, Chief Administrative Officer of the Company and shall have the duties, responsibilities, functions and authority that are normally associated with the position of Executive Vice President. Executive’s duties shall be subject to the power and authority of the Company’s Board of Directors (the “Company Board”) and the Board of Directors (the “Board”) of Sensata Technologies Holding plc, a public limited company formed under the laws of England and Wales (“Parent”), to expand or limit such duties, responsibilities, functions and authority and to overrule actions of officers of the Company. During the Employment Period, Executive shall render to Parent and its Subsidiaries (as defined herein) administrative, financial and other executive and managerial services that are consistent with Executive’s position as the Board may from time to time direct.
(b)Executive shall report to the Chief Executive Officer & President, or to such other person or persons as may be designated from time to time by the Chief Executive Officer or the Board. Executive shall devote her full business time and attention (except for vacation periods consistent with past practice and reasonable periods of illness or other incapacity) to the business and affairs of Parent and its Subsidiaries. In performing her duties and exercising her authority under this Agreement, Executive shall support and implement the business and strategic plans approved from time to time by the Board. As long as Executive is employed by the Company, Executive shall not, without the prior written consent of the Board, perform other services for compensation. Unless otherwise agreed by Executive, Executive’s place of work shall be in the greater Attleboro, Massachusetts metropolitan area, except for travel reasonably required for Company business.
(c)For purposes of this Agreement, “Subsidiaries” shall mean any corporation or other entity of which the securities or other ownership interests having the voting
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power to elect a majority of the board of directors or other governing body are, at the time of determination, owned by Parent, directly or through one or more Subsidiaries.
(d)For purposes of this Agreement, “Affiliate” shall mean with respect to Parent and its Subsidiaries, any other Person controlling, controlled by or under common control with Parent or any of its Subsidiaries and, in the case of a Person that is a partnership, any partner of the Person.
(e)For purposes of this Agreement, “Person” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
3.Compensation and Benefits.
(a)During the Employment Period, Executive’s base salary shall be equal to the amount determined by the Board or the Compensation Committee of the Board on an annual basis (as adjusted from time to time, the “Base Salary”), which Base Salary shall be payable by the Company in regular installments in accordance with the Company’s general payroll practices (in effect from time to time). In addition, during the Employment Period, Executive shall be entitled to participate in all of the Company’s employee benefit programs for which senior executive employees of Parent and its Subsidiaries are generally eligible (assuming Executive and/or her family meet the eligibility requirements of those benefit programs) (the “Senior Executive Benefits”).
(b)During the Employment Period, Executive shall be reimbursed by the Company for all reasonable business expenses incurred by her in the course of performing her duties and responsibilities under this Agreement, which business expenses are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses. Reimbursement of the costs and expenses set forth in this Section 3(b) are subject to the Company’s requirements with respect to reporting and documentation of such costs and expenses.
(c)In addition to the Base Salary, Executive shall be eligible to earn an annual bonus (“Annual Bonus”) in an amount as determined by the Board or the Compensation Committee of the Board equal to a certain percentage of the Base Salary then in effect, with such other terms and based upon Executive’s individual performance and/or the achievement by Parent and its Subsidiaries of financial and other objectives, in each case as established for each fiscal year by the Board or the Compensation Committee of the Board. Executive will become entitled to receive an Annual Bonus, if any, only if Executive continues to be employed by Parent or any of its Subsidiaries through April 1st of the fiscal year following the fiscal year to which such Annual Bonus relates and such Annual Bonus, if any, will be paid to Executive by the Company on or before April 15th of the fiscal year following the fiscal year to which such Annual Bonus relates. There is no guaranteed Annual Bonus under this Agreement, and for each applicable year, Executive’s Annual Bonus could be as low as zero or as high as the maximum Annual Bonus opportunity established for such year.
4.Term.
(a)The Employment Period shall end on the first anniversary of the Effective Date, but shall automatically be renewed on the same terms and conditions set forth herein (as may be modified from time to time in accordance with the terms of this Agreement) for additional one year periods beginning on the first anniversary of the Effective Date and on each successive anniversary of the Effective Date, unless the Company or Executive gives the other
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party written notice of the election not to renew the Employment Period at least 90 days prior to any such renewal date; provided that, the Employment Period shall terminate immediately upon Executive’s resignation (with or without Good Reason, as defined below), death or Disability (as defined below) or upon the Company’s termination of Executive’s employment (whether with Cause (as defined below) or without Cause).
(b)If the Employment Period is terminated (1) by the Company without Cause (other than as a result of Executive’s Disability) or (2) upon Executive’s resignation with Good Reason, Executive shall be entitled to: (i) her Base Salary through the date of termination; (ii) any Annual Bonus amounts to which Executive is entitled for years that ended on or prior to the date of termination in accordance with the terms set forth in Section 3(c) (including the requirement that Executive remain employed by the Parent or its Subsidiaries through April 1 of the fiscal year following the fiscal year to which such Annual Bonus relates); (iii) an amount equal to one year of Executive’s then current Base Salary plus an amount equal to the average of the Annual Bonuses paid to Executive for the two completed fiscal years immediately preceding the date of the termination of Executive’s employment; and (iv) running concurrently with (and counting toward) her COBRA period, continued participation throughout the Severance Period (as defined below) in all health and dental benefit plans in which Executive was entitled to participate immediately prior to the termination of Executive’s employment (or the Company shall arrange to make available to Executive benefits substantially similar to those which Executive would otherwise have been entitled to receive over such period if Executive’s employment had not been terminated) on the same terms and conditions (including the amount of employee contributions toward premium payments but not guaranteeing any particular tax result to Executive of such continued benefits) under which Executive was entitled to participate immediately prior to her termination. Any stock options, RSUs or other equity awards granted to Executive shall be subject to the terms and conditions of the applicable Management Equity Plans and such awards. The amounts and benefits described in clauses (iii) and (iv) of this Section 4(b) will be paid if and only if Executive has executed and delivered to the Company a separation agreement with a general release to be provided by the Company in connection with Executive’s termination, and such release has become effective and no longer subject to revocation not later than sixty (60) days following the date of termination (the “General Release”) and only if Executive does not breach the provisions of Sections 5 through 7 hereof. The amounts payable pursuant to clause (iii) of this Section 4(b) shall be payable in regular installments over the twelve (12)-month period following the date of termination (the “Severance Period”) in accordance with the Company’s general payroll practices as in effect on the date of termination, but in no event less frequently than monthly; provided that no amounts shall be paid until the first scheduled payment date following the date the General Release is executed and no longer subject to revocation, with the first such payment being in an amount equal to the total amount to which Executive would otherwise have been entitled during the period following the date of termination through such payment date if such deferral had not been required. The amounts and benefits described in clauses (i) and (ii) of this Section 4(b) shall be paid to Executive in a lump sum in cash within thirty (30) days of the applicable date of termination.
(c)If the Employment Period is terminated (1) by the Company with Cause, (2) due to Executive’s death or Disability or (3) by Executive’s resignation without Good Reason, Executive shall be entitled to receive (i) her Base Salary through the date of termination and (ii) any Annual Bonus amounts to which Executive is entitled determined by reference to years that ended on or prior to the date of termination in accordance with the terms set forth in Section 3(c) (including the requirement that Executive remain employed by the Parent or its Subsidiaries through April 1 of the fiscal year following the fiscal year to which such Annual Bonus relates). The amounts and benefits described in clauses (i) and (ii) of this Section 4(c) shall be paid to Executive or, in the event of death, Executive’s estate or beneficiaries, in a lump sum in cash within thirty (30) days of the applicable date of termination.
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(d)Except as otherwise expressly provided herein, Executive shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company or its Subsidiaries after the termination of the Employment Period and all of Executive’s rights to salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the termination of the Employment Period (other than vested retirement benefits accrued on or prior to the termination of the Employment Period in accordance with the terms of the applicable retirement plan or other amounts owing hereunder as of the date of such termination that have not yet been paid) shall cease upon such termination, other than those expressly required under applicable law (such as COBRA) or as provided under an applicable Management Equity Plan.
(e)Executive is under no obligation to mitigate damages or the amount of any payment provided for hereunder by seeking other employment or otherwise, and the Company shall have no right of offset for any amounts received by Executive from other employment; provided that, notwithstanding anything to the contrary herein, Executive’s coverage under the Company’s health and dental benefit plans will terminate when Executive becomes eligible under any employee benefit plan made available by another employer covering health and dental benefits. Executive shall notify the Company within thirty (30) days after becoming eligible for any such benefits.
(f)Subject to applicable law, the Company may offset any amounts Executive owes Parent and its Subsidiaries against any amounts Parent and its Subsidiaries owe Executive hereunder.
(g)For purposes of this Agreement, “Cause” shall mean, with respect to Executive, one or more of the following: (1) the indictment for a felony or other crime involving moral turpitude or the commission of any other act or any omission to act involving fraud with respect to Parent or any of its Subsidiaries or any of their customers or suppliers; (2) any act or any omission to act involving dishonesty or disloyalty that causes, or in the good faith judgment of the Board would be reasonably likely to cause, material harm (including reputational harm) to Parent or any of its Subsidiaries or any of their customers or suppliers; (3) any (i) repeated abuse of alcohol or (ii) abuse of controlled substances, in either case, that adversely affects Executive’s work performance (and, in the case of clause (i), continues to occur at any time more than thirty (30) days after Executive has been given written notice thereof) or brings Parent or its Subsidiaries into public disgrace or disrepute; (4) the failure by Executive to substantially perform duties as reasonably directed by the Board, which non-performance remains uncured for ten (10) days after written notice thereof is given to Executive; (5) willful misconduct with respect to Parent or any of its Subsidiaries, which misconducts causes, or in the good faith judgment of the Board would be reasonably likely to cause, material harm (including reputational harm) to Parent or any of its Subsidiaries; (6) the failure of Executive to cooperate in any audit or investigation of the business or financial practices of the Parent or any of its Subsidiaries; or (7) any breach by Executive of Sections 5 through 7 of this Agreement or any other material breach of this Agreement or the Management Equity Plans (as defined below).
(h)Executive will be “Disabled” only if, as a result of her incapacity due to physical or mental illness, Executive is considered disabled under the Company’s long-term disability insurance plans.
(i)For purposes of this Agreement, “Good Reason” shall mean if Executive resigns from employment with the Company and, if applicable, its Subsidiaries prior to the end of the Employment Period as a result of one or more of the following reasons: (1) any reduction in Executive’s Base Salary or Annual Bonus opportunity, without Executive’s prior consent, in either case other than any reduction which (i) is generally applicable to senior leadership team executives of the Company and (ii) does not exceed 15% of Executive’s Base Salary and Annual
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Bonus opportunity in the aggregate; (2) any material breach by Parent or any of its Subsidiaries of any agreement between such Persons and Executive; or (3) a change in Executive’s principal office without Executive’s prior consent to a location that is more than fifty (50) miles from Executive’s principal office on the date hereof; provided that, in order for Executive’s resignation with Good Reason to be effective hereunder, Executive must provide written notice to the Company of the event constituting Good Reason within thirty (30) days of the initial occurrence of such event, the Company shall have thirty (30) days after delivery of such written notice to cure such event to Executive’s reasonable satisfaction, and Executive’s resignation with Good Reason must be effective within thirty (30) days following the end of the Company’s cure period.
(j)For purposes of this Agreement, “Management Equity Plans” shall mean the 2021 Equity Incentive Plan of Parent, including any amendments thereto, together with any other incentive equity plan of Parent or any of its Subsidiaries under which Executive may have in the past received, or may in the future receive any equity or equitybased award, along with any Award Agreements (as defined therein) and any attachments thereto, as amended from time to time.
5.Confidential Information.
(a)Executive acknowledges that the continued success of Parent and its Subsidiaries and Affiliates, depends upon the use and protection of a large body of confidential and proprietary information. All of such confidential and proprietary information now existing or to be developed in the future will be referred to in this Agreement as “Confidential Information”. Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is related to Parent’s or its Subsidiaries’ or Affiliates’ current or potential business and (2) is not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Executive during the course of her performance with Parent and its Subsidiaries or Affiliates (including the Company) concerning the business and affairs of Parent and its Subsidiaries and Affiliates, information concerning acquisition opportunities in or reasonably related to the Parent’s or its Subsidiaries’ or Affiliates’ business or industry of which Executive has become or becomes aware during her employment, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Executive’s course of performance, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, employee lists and telephone numbers, locations of sales representatives, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Executive agrees that during her employment and thereafter he shall not disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act; or (ii) is required to be disclosed pursuant to any applicable law or court order. Executive agrees to deliver to the Company at the end of the Employment Period, or at any other time the Company may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of Parent or its Subsidiaries or Affiliates (including, without limitation, all Confidential Information) that he may then possess or have under her control.
(b)During the Employment Period, Executive shall not use or disclose any confidential information, including trade secrets, if any, of any former employers or any other person to whom Executive has an obligation of confidentiality, and shall not bring onto the
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premises of Parent or its Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other Person to whom Executive has an obligation of confidentiality unless consented to in writing by the former employer or Person. Executive shall use in the performance of her duties only information that is (1) generally known and used by persons with training and experience comparable to Executive’s and that is (i) common knowledge in the industry or (ii) is otherwise legally in the public domain; (2) otherwise provided or developed by Parent or its Subsidiaries or Affiliates; or (3) in the case of materials, property or information belonging to any former employer or other Person to whom Executive has an obligation of confidentiality, approved for such use in writing by such former employer or Person. If at any time during the Employment Period, Executive believes he is being asked to engage in work that will, or will be likely to, jeopardize any confidentiality or other obligations Executive may have to former employers, Executive shall immediately advise the Board so that Executive’s duties can be modified appropriately.
(c)Executive represents and warrants to the Parent and its Subsidiaries that Executive took nothing with her that belonged to any former employer when Executive left her position(s) with such employer(s) that Executive was not authorized to take and that Executive has nothing that contains any confidential information that belongs to any former employer. If at any time Executive discovers that this representation is incorrect, Executive shall promptly return any such materials to Executive’s former employer(s). Parent and its Subsidiaries do not want any such materials, and Executive shall not be permitted to use or refer to any such materials in the performance of Executive’s duties hereunder.
(d)Executive understands that Parent and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on Parent’s and its Subsidiaries’ and Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Employment Period and thereafter, and without in any way limiting the provisions of Section 5(a) above, Executive will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of Parent or its Subsidiaries and Affiliates who need to know such information in connection with their work for Parent or such Subsidiaries and Affiliates) or use, except in connection with her work for Parent or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.
(e)Under the federal Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (1) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made to Executive’s attorney in relation to a lawsuit for retaliation against the Company for reporting a suspected violation of law; or (3) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, nothing in this Agreement prevents Executive from providing, without prior notice to the Company or its Affiliates, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations.
6.Intellectual Property, Inventions and Patents. Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to Parent’s or any of its Subsidiaries’ actual or anticipated business, research and development or existing or future products or services and that are conceived, developed or made by Executive (whether alone or jointly with others) while employed by the
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Company and its Subsidiaries, whether before or after the date of this Agreement (“Work Product”), belong to Parent, the Company or such Subsidiary. At the Company’s expense, Executive shall perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).
7.Non-Compete; Non-Solicitation.
(a)In further consideration of the increased compensation and benefits to be paid to Executive hereunder, Executive acknowledges that during the course of her employment with the Company and its Subsidiaries, he has and shall become familiar with Parent’s and its Subsidiaries’ and Affiliates’ corporate strategy, pricing and other market information, know-how, trade secrets and valuable customer, supplier and employee relationships, and with other Confidential Information concerning Parent and its Subsidiaries and Affiliates, and that her services have been and shall be of special, unique and extraordinary value to Parent and its Subsidiaries and Affiliates. Accordingly, and in consideration for receiving the salary increase in connection with this Agreement and the potential severance benefits set forth in Section 4(b) above, Executive agrees that, during the Employment Period and for one (1) year thereafter (the “Non-compete Period”), if the termination of Executive’s employment is voluntary or for “Cause” (as defined above), he shall not, directly or indirectly, without the prior written consent of the Company, in a capacity similar to the position(s) held by Executive with the Company in the last two (2) years of Executive’s employment by the Company, and in a geographic area to which Executive was assigned, in which Executive provided services or had a material presence or influence, or for which Executive was directly or indirectly responsible, during the last two (2) years of her employment by the Company, own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any Competing Business that conducts operations or sales in such U.S. states, or such countries outside the United States, as Parent and its Subsidiaries conduct sales or operations as of the date of termination of the Employment Period. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a publicly-traded corporation, so long as Executive has no active participation in the business of such corporation. For purpose of this Agreement, “Competing Business” shall mean any business engaged (whether directly or indirectly) in the design, manufacture, marketing, or sale of products or services competitive with those designed, manufactured, marketed or sold by the Parent or its Subsidiaries or Affiliates. Executive acknowledges and agrees that Executive has received sufficient mutually agreed-upon consideration for agreeing to be bound by the obligations in this Section, specifically the salary increase and the potential to receive severance set forth in Section 4(b) above. The restrictions in this Section do not become effective until the 11th business day after this Agreement is executed by Executive.
(b)During the Non-compete Period, Executive shall not directly or indirectly through another person or entity (1) induce or attempt to induce any employee of Parent or any Subsidiary to leave the employ of Parent or such Subsidiary, or in any way interfere with the relationship between Parent or any Subsidiary and any employee thereof; (2) knowingly hire any person who was an employee of Parent or any Subsidiary at any time during the twelve (12) months prior to the termination of Executive’s employment; or (3) induce or encourage, or attempt to induce, encourage or solicit, any customer, supplier, licensee, licensor or other business relation of Parent or any Subsidiary to cease doing business with Parent or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor or business relation and Parent or any Subsidiary (including, without limitation, making any negative or disparaging statements or communications regarding Parent or its Subsidiaries); provided that, in each case, this Section 7(b) shall only apply if Executive shall have done business with, or had direct or indirect supervisory or other responsibility for, the
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employee, customer, supplier, licensee, licensor, or business relation to which the applicable clause of this Section 7(b) applies.
(c)If, at the time of enforcement of this Section 7, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. Executive acknowledges that the restrictions contained in this Section 7 are reasonable and that he has reviewed the provisions of this Agreement with her legal counsel.
(d)Executive acknowledges that any breach or threatened breach of the prov1s1ons of this Section 7 would cause Parent and its Subsidiaries irreparable harm. Accordingly, in addition to other rights and remedies existing in its favor, the Company shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). Further, in the event of an alleged breach or violation by Executive of this Section 7, the Non-compete Period shall be tolled until such breach or violation has been duly cured.
8.Executive’s Representations. Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound; (b) Executive is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other person or entity; and (c) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that he has consulted with independent legal counsel regarding her rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.
9.Recoupment Policy. Notwithstanding anything in this Agreement to the contrary, Executive acknowledges and agrees that this Agreement and any compensation described herein are subject to the terms and conditions of the Company’s recoupment policy (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Securities Exchange Act of 1934, as amended, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the shares of the Company’s common stock may be traded) (the “Claw-back Policy”), and that applicable sections of this Agreement and any related documents shall be deemed superseded by and subject to the terms and conditions of the Claw-back Policy from and after the effective date thereof.
10.Survival. Sections 4 through 24 (other than Section 22) shall survive and continue in full force in accordance with their terms notwithstanding the termination of the Employment Period.
11.Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:
Notices to Executive:
Executive’s last residence shown on the records of the Company.
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Notices to the Company:
Sensata Technologies, Inc.
529 Pleasant Street
Attleboro, MA 02703 Attention: General Counsel
or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.
12.Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
13.Complete Agreement. This Agreement, those documents expressly referred to herein, and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
14.No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.
15.Counterparts. This Agreement may be executed in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
16.Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including, without limitation, any Persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company other than to Parent or any of its Subsidiaries. This Agreement will inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees, but otherwise will not otherwise be assignable, transferable or delegable by Executive. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as otherwise expressly provided in this Section 16.
17.Choice of Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
18.Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company (as approved by the Board or the
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Compensation Committee of the Board as appropriate) and Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement (including, without limitation, the Company’s right to terminate the Employment Period with Cause or, except as otherwise stated herein, Executive’s right to terminate the Employment Agreement with Good Reason) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement.
19.Insurance. The Company may, at its discretion, apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered advisable. Executive agrees to cooperate in any medical or other examination, supply any information and execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance.
20.Tax Matters; Code Section 409A.
(a)The Company and its respective Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, local or foreign withholding taxes, excise tax, or employment taxes (“Taxes”) imposed with respect to Executive’s compensation or other payments from the Company or any of its Subsidiaries or Executive’s ownership interest in Parent (including, without limitation, wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity). In the event the Company or any of its Subsidiaries does not make such deductions or withholdings, Executive shall indemnify the Company and its Subsidiaries for any amounts paid with respect to any such Taxes, together (if such failure to withhold was at the written direction of Executive) with any interest, penalties and related expenses thereto. The Company does not guarantee any particular tax result to Executive with respect to any payments or benefits provided hereunder.
(b)The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. In no event whatsoever shall the Company, or Parent or any of their Subsidiaries be liable for any additional tax, interest or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.
(c)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered “nonqualified deferred compensation” under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (1) the first business day following the expiration of the six-month period measured from the date of such “separation from service” of Executive, and the date of Executive’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 19(c) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to
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Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(d)To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (1) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive; (2) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; and (3) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
(e)For purposes of Code Section 409A, Executive’s right to receive any payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(f)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
21.Waiver of Jury Trial. AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANYWAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.
22.Corporate Opportunity. During the Employment Period, Executive shall submit to the Board all business, commercial and investment opportunities or offers presented to Executive, or of which Executive becomes aware, at any time during the Employment Period, which opportunities relate to the business of designing, manufacturing, marketing, or selling products or services competitive with those designed, manufactured, marketed or sold by the Parent or its Subsidiaries or Affiliates (“Corporate Opportunities”). During the Employment Period, unless approved by the Board, Executive shall not accept or pursue, directly or indirectly, any Corporate Opportunities on Executive’s own behalf.
23.Executive’s Cooperation. During the Employment Period and thereafter, Executive shall reasonably cooperate with Parent and its Subsidiaries in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by Parent or any Subsidiary (including, without limitation, Executive being available to Parent and its Subsidiaries upon reasonable notice for interviews and factual investigations, appearing at Parent’s or any Subsidiary’s request to give truthful and accurate testimony without requiring service of a subpoena or other legal process, volunteering to Parent and its Subsidiaries all pertinent information and turning over to Parent and its Subsidiaries all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments). In the event Parent or any Subsidiary requires Executive’s cooperation in accordance with this Section 23, Parent shall pay Executive a per diem reasonably determined by the Board or the Compensation Committee and reimburse Executive for reasonable expenses incurred in connection therewith (including lodging and meals, upon submission of receipts).
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24.Nondisparagement. Executive agrees not to, except as may be required by law, directly or indirectly, publicly or privately, make, publish or solicit, or encourage others to make, publish or solicit, any disparaging statements, comments, announcements, or remarks concerning Parent or its Affiliates, or any of their respective past and present directors, officers or employees. Parent and its Affiliates agree not to, except as may be required by law, directly or indirectly, publicly or privately, make, publish or solicit, or encourage others to make, publish or solicit, any disparaging statements, comments, announcements or remarks concerning Executive or her employment with the Company or any of its Subsidiaries.
25.Acknowledgement. Executive acknowledges that he had the opportunity to consult with counsel regarding this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date set forth above.
SENSATA TECHNOLOGIES, INC.
/s/ Jeff Cote
Jeff Cote
Chief Executive Officer & President
EXECUTIVE
/s/ Lynne Caljouw
Lynne Caljouw
Executive Vice President,
Chief Administrative Officer
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AWARD AGREEMENT
SENSATA TECHNOLOGIES HOLDING PLC
(the “Company”)
(the “Company”)
PERFORMANCE RESTRICTED STOCK UNITS
Date: %%OPTION_DATE,’Month DD, YYYY’%-% (“Grant Date”)
Issue to:
%%FIRST_NAME%-% %%LAST_NAME%-% (“Participant”)
%%TOTAL_SHARES_GRANTED,’999,999,999’%-% Performance Restricted Stock Units of the Company (the “PRSUs”). Each PRSU represents the right to potentially receive one Ordinary Share, par value €0.01 per Ordinary Share.
The foregoing PRSUs are “Performance Awards” as such term is in the Company's 2021 Equity Incentive Plan, as may be amended from time to time (the “Plan”), and such Performance Awards are subject to all of the terms and conditions of the Plan in effect from time to time, except as otherwise provided herein. Any capitalized term used herein and not otherwise defined shall have the meaning ascribed to such term in the Plan. For valuable consideration, receipt of which is acknowledged, Participant agrees to the following additional terms and conditions.
PRSU Terms and Conditions
1.Plan Incorporated by Reference. This Award Agreement (this “Agreement”) is issued pursuant to the terms of the Plan and may be amended as provided in the Plan. This Agreement does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Legal Department of the Company.
2.Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
a.“Peer Company” shall mean each of the companies listed on Annex A.
b.“Peer Group” means the companies listed on Annex A attached hereto, which will be amended to remove any Peer Company that is acquired (whether through merger, stock purchase or purchase of substantially all the assets of the company) or ceases to operate (whether through bankruptcy, insolvency or sale) during the Performance Period.
c.“Performance Period” means January 1, 2023 through December 31, 2025.
d.“Performance Year” means each fiscal year for the Company beginning on January 1 and ending December 31 of each year during the Performance Period, and a similar 12-month fiscal period for each Peer Company that occurs in each of Year 1, Year 2 and Year 3.
e.“Relative Total Shareholder Return Performance” or “rTSR Performance” means the Company’s TSR when ranked among the TSR of the Peer Group during the applicable Performance Year (e.g. the Company’s TSR ranks 8th out of 20 Peer Companies during a Performance Year, the rTSR Performance will be the 60th percentile).
f.“ROIC” means Return on Invested Capital and is a percentage calculated by dividing NOPAT by Total Invested Capital where (1) NOPAT means adjusted EBIT minus adjusted taxes and (2) Total Invested Capital means (i) Average Trailing 5 Quarters of Shareholder Equity, Total Long-Term Debt, and Deferred Taxes plus (ii) Long-Term Capital Leases & Other Obligations.
g.“Target” means 100% of 1/3 of the PRSUs granted under this Agreement per Performance Year.
h.“Three-Year CAGR Relative Performance” means the Company’s three-year compound annual growth rate of rTSR Performance during the Performance Period as compared to the three-year compound annual growth rate of rTSR Performance of the Peer Group during the Performance Period.
i.“TSR” means Total Shareholder Return and is calculated in accordance with Item 201(e) of Regulation S-K. Specifically, TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the registrant’s share price at the end and the beginning of the measurement period, by the share price at the beginning of the measurement period.
j.“Vesting Date” means the third anniversary of the Grant Date.
k.“Year 1” means the Company or the Peer Company’s fiscal year end during 2023.
l.“Year 2” means the Company or the Peer Company’s fiscal year end during 2024.
m.“Year 3” means the Company or the Peer Company’s fiscal year end during 2025.
3.Vesting of PRSUs; Issuance of Ordinary Shares. Except as may be set forth in Section 4 below, the PRSUs (or a portion thereof) shall vest upon meeting the performance criteria described in this Agreement on the Vesting Date, provided the Participant remains employed by the Company or one of its Subsidiaries continuously through the Vesting Date. The number of PRSUs that will vest and the number of Ordinary Shares to be issued to the Participant on the Vesting Date will be determined based upon the Company’s achievement of the performance goals, inclusive of sTSR and ROIC, to be determined as follows:
a.The PRSUs will bank, or accrue, in each Performance Year during the Performance Period as follows:
i.Year 1: On the first anniversary of the Grant Date, between 0% and 100% of 1/3 of the PRSUs will be banked, or accrued, based upon the Company’s rTSR and ROIC Performance during Year 1 set forth in Table 1 below.
ii.Year 2: On the second anniversary of the Grant Date, between 0% and 125% of 1/3 of the PRSUs will be banked, or accrued, based upon the Company’s rTSR and ROIC Performance during Year 2 set forth in Table 1 below.
iii.Year 3: On the third anniversary of the Grant Date, between 0% and 150% of 1/3 of the PRSUs will be banked, or accrued, based upon the Company’s rTSR and ROIC Performance during Year 3 set forth in Table 1 below.
b.On the Vesting Date, the number of PRSUs that shall vest will be equal to the greater of:
i.The cumulative number of PRSUs banked, or accrued, in accordance with Section 3(a) above; or
ii.If the Company’s Three-Year CAGR Relative Performance exceeds the 50th percentile of the Peer Group, then 50% of the PRSUs granted in this Agreement multiplied by the Three-Year CAGR Modifier plus the cumulative number of banked shares for ROIC performance during the Performance Period.
c. If by seven (7) business days prior to the first, second, or third anniversary of the Grant Date, a Peer Company has not reported its financial performance for a Performance Year, the Compensation Committee may decide to either (i) exclude the Peer Company for that Performance Year or (ii) calculate the Peer Company’s performance based on projections using the most recently disclosed financial results.
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TABLE 1: RELATIVE TSR AND ROIC PERFORMANCE
| 2023 | 2024 | 2025 | 3-Year CAGR | ||||||||||||||||||||||||||
| rTSR accounts for 50% of PRSU award | 2023 rTSR | Year 1 Banked Shares Scale | 2024 rTSR | Year 2 Banked Shares Scale | 2025 rTSR | Year 3 Banked Shares Scale | 3 Yr. CAGR Relative Performance | 3-Year CAGR Modifier | |||||||||||||||||||||
| <25th %ile | 0% | <25th %ile | 0% | <25th %ile | 0% | N/A | N/A | ||||||||||||||||||||||
| 25th %ile | 50% | 25th %ile | 50% | 25th %ile | 50% | N/A | N/A | ||||||||||||||||||||||
| 50th %ile | 100% | 50th %ile | 100% | 50th %ile | 100% | 50th %ile | 100% | ||||||||||||||||||||||
| 75th %ile | 100% | 75th %ile | 125% | 75th %ile | 150% | 75th %ile | 150% | ||||||||||||||||||||||
| ROIC accounts for 50% of PRSU award | 2023 ROIC | Year 1 Banked Shares Scale | 2024 ROIC | Year 2 Banked Shares Scale | 2025 ROIC | Year 3 Banked Shares Scale | |||||||||||||||||||||||
| <8% | 0% | <8% | 0% | <8% | 0% | ||||||||||||||||||||||||
| 8% | 50% | 8% | 50% | 8% | 50% | ||||||||||||||||||||||||
| 10% | 100% | 11.5% | 100% | 12.8% | 100% | ||||||||||||||||||||||||
| 12% | 150% | 15% | 150% | 17.6% | 150% | ||||||||||||||||||||||||
| * The amount of shares banked/vest are interpolated based on performance between thresholds. | |||||||||||||||||||||||||||||
4.Vesting on Termination of Employment, Death, Disability, Retirement and Change in Control.
a.General. Unless otherwise provided in this Section 4, any unvested PRSUs shall be forfeited immediately upon the date that Participant terminates his or her service with the Company or any Subsidiary or Affiliate or otherwise ceases to be a Participant Eligible to Vest (“Termination Date”). Unless otherwise expressly provided in this Agreement or determined by the Committee or its designee, Participant’s right to vest in the PRSUs under the Plan, if any, will terminate as of such Termination Date and will not be extended by any notice period.
b.Participant’s Death. Notwithstanding any provision in the Plan to the contrary, if a Participant dies while providing service to the Company or any Subsidiary or Affiliate, the PRSUs shall immediately vest based on the banked amounts for those Performance Year(s) completed and vest at Target for any uncompleted Performance Year. The vested portion of the PRSUs shall be delivered to the executor or administrator of Participant’s estate or, if none, to the person(s) entitled to receive the vested PRSUs under Participant’s will or the laws of descent or distribution, and the unvested portion of the PRSUs shall be forfeited.
c.Participant’s Disability. Notwithstanding any provision in the Plan to the contrary, if a Participant terminates service from the Company or any Subsidiary or Affiliate due to Disability, the PRSUs shall vest in full based on the banked amounts for those Performance Year(s) completed and vest at Target for any uncompleted Performance Year. “Disability” shall mean that the Participant, due to physical or mental illness, is considered disabled under the Company’s long-term disability insurance plan.
d.Participant’s Retirement. If the Participant’s status as an employee of the Company any Subsidiary or Affiliate terminates by reason of a Covered Retirement, as defined below, the PRSUs shall immediately vest based on the banked amounts for those Performance Year(s) completed prior to the Participant’s date of retirement plus the pro-rata of the Target for any uncompleted Performance Year (number of days employed during the Performance Year divided 365 multiplied by the Target for the uncompleted Performance Year). For purposes hereof, a “Covered Retirement” is the voluntary termination of a Retirement Eligible Individual who has provided the Company not less than six months prior notice of such employee’s intent to retire from the Company or any Subsidiary or Affiliate; provided, however, the Compensation Committee may waive the six-month notice period or allow an earlier retirement date with the consent of the Participant. A “Retirement Eligible Individual” means an employee of the Company or any Subsidiary or Affiliate who has attained at least 55 years of age and who has a combined age and years of credited employment service with the
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Company and/or all Affiliates of 65 years. Notwithstanding the foregoing, the definition of a Covered Retirement shall not include any retirement of service that occurs prior to the first Vesting Date.
e.Qualifying Termination. Upon a Qualifying Termination, unvested PRSUs that otherwise would have vested within six months of the Participant’s Termination Date shall vest on the Participant’s Termination Date in full at the sum of the banked amounts for those Performance Year(s) completed (if any) plus Target for any uncompleted Performance Year(s). “Qualifying Termination” shall mean, with respect to the Participant, an involuntary termination of employment without Cause by the Company or any Subsidiary or Affiliate other than a termination by reason of death, Disability, Covered Retirement, or related to a Change-in-Control (and covered by Section 4(f) below). Cause as a reason for a Participant’s termination of employment as an employee shall have the meaning assigned such term in the employment agreement, if any, between such Participant and the Company or any Subsidiary or Affiliate; provided, however, that if there is no such employment agreement in which such term is defined, “Cause” shall mean (i) the Participant’s willful and continued failure to perform his or her duties with the Company or any Subsidiary or Affiliate (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by the Participant, after reasonable efforts, to meet performance expectations), or (ii) the willful engaging by the Participant in illegal conduct, gross misconduct, or conduct in violation of Company policies. For purposes of this provision, no act or failure to act, on the part of the Participant, shall be considered “willful” unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that his or her action or omission was in the best interests of the Company.
f.Change in Control. In the event of a Change in Control, the PRSUs will convert to time-based RSUs based on the greater of (i) the sum of the Target for each Performance Year or (ii) the sum of the banked amounts plus Target for uncompleted Performance Year(s). Vesting of the time-based RSUs will assume the vesting schedule of the original PRSU award. The time-based RSUs as so converted:
i.Will automatically accelerate and vest in full if within the 24-month period following the Change in Control, if the Participant is terminated by the Company or the continuing entity or any of its Affiliates without Cause;
ii.Will automatically accelerate and vest in full at the Change in Control if this Agreement is not assumed or replaced by the acquirer/continuing entity or replaced by other terms or awards deemed by the Compensation Committee to be appropriate; or
iii.Will vest on the third anniversary of the Grant Date, if vesting has not otherwise been accelerated as provided above.
5.Restrictive Covenants and Remedies. Participant agrees to the restrictive covenants contained in this Section 5 (the “Restrictive Covenants”) and agrees that the Restrictive Covenants and the remedies described herein are reasonable and necessary to protect the legitimate interests of the Company. The Participant acknowledges the uncertainty of the law with respect to Restrictive Covenants and expressly stipulates that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.
a.Confidentiality. The Participant agrees, during their employment with the Company and thereafter, to maintain the confidentiality of the Company’s Confidential Information and to use such Confidential Information for the exclusive benefit of the Company. “Confidential Information” will be interpreted as broadly as possible to include all information of any sort (whether merely remembered or embodied in a tangible or intangible form) that is (1) related to Company’s or any Subsidiary’s or Affiliate’s current or potential business and (2) is not generally or publicly known.
b.Competing Activity. During the Participant’s employment with the Company or for one (1) year following the later of (i) termination of the Participant’s employment with the Company for any reason whatsoever or (ii) the last scheduled vesting date of this award, the Participant shall not compete, directly or indirectly, in any manner or capacity, with the Company. Competing activity shall include any business engaged (whether directly or indirectly) in the
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design, manufacture, marketing, or sale of products or services competitive with those designed, manufactured, marketed, or sold by the Company or any Subsidiary or Affiliate.
c.Non-Solicitation of Employees. During the Participant’s employment with the Company or for two (2) years following the later of (i) termination of the Participant’s employment with the Company for any reason whatsoever or (ii) the last scheduled Vesting Date of this award, the Participant shall not, directly or indirectly, solicit or encourage any person who was an employee of the Company or any Subsidiary or Affiliate during Participant’s employment, to leave employment with the Company or in any way interfere adversely with the relationship between any such employee and the Company.
d.Non-Solicitation of Customers or Vendors. During the Participant’s employment with the Company or for two (2) years following the later of (i) termination of the Participant’s employment with the Company for any reason whatsoever or (ii) the last scheduled Vesting Date of this award, the Participant shall not, directly or indirectly, solicit or divert the business of the Company’s customers or vendors who were customers or vendors to the Company during Participant’s employment or in any way interfere adversely with the business relationship between any such customer or vendor and the Company.
e.Partial Invalidity. If any portion of this Section 5 is determined to be unenforceable in any respect, it shall be interpreted to be valid to the maximum extent for which it reasonably may be enforced. The Participant acknowledges the uncertainty of the law in this respect and expressly stipulate that this Award Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.
f.Remedy for Breach. The Participant agrees that a breach of any of the Restrictive Covenants would cause material and irreparable harm to the Company that would be difficult or impossible to measure, and that monetary damages for any such harm would, therefore, be an inadequate remedy. Accordingly, Participant agrees that if they breach any Restrictive Covenant, the Company shall be entitled, in addition to and without limitation upon all other remedies the Company may have under this Award Agreement, at law or otherwise, to obtain injunctive or other appropriate equitable relief.
g.Clawback. The Participant acknowledges that the award is subject to the Company’s clawback policy, as in effect from time to time. The Committee may, in accordance with the Plan and any applicable clawback policy and in its sole discretion, provide for cancellation of any or all of the Participant’s outstanding awards or forfeiture by the Participant of any gain realized in respect of awards, and repayment of any such gain promptly to the Company.
6.Non-Transferability. This Agreement or the rights hereunder may not be transferred.
7.No Dividends. Participant shall not be entitled to receive dividends or dividend equivalents with respect to the number of unvested Ordinary Shares covered by the PRSUs.
8.No Security Holder Rights. Participant shall have no rights as a security holder with respect to the unvested Ordinary Shares covered by the PRSUs.
9.Taxes. Participant acknowledges that the Company has the right to require Participant to remit to the Company an amount sufficient to satisfy his or her minimum federal, state, local and foreign withholding tax requirements, or to deduct from all payments under the Plan amounts sufficient to satisfy such minimum withholding tax requirements. Participant further acknowledges that the ultimate liability for all federal, state, local and foreign income taxes, social insurance, payroll tax, or other tax-related items related to the Participant’s participation in the Plan is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company. Participant authorizes the Company and/or its Subsidiaries, or their respective agents, at their discretion, to satisfy the Participant’s tax obligations that must be withheld by the Company and/or its Subsidiaries by withholding in Ordinary Shares to be issued upon vesting of the PRSUs, or in the sole discretion of the Company, by any other appropriate method.
With respect to a Retirement Eligible Individual, the Company may, in its discretion, accelerate the vesting and settlement of a portion of the Units to the extent necessary to pay the Federal
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Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2) of the Code and to pay the income tax at source on wages imposed under Section 3401 of the Code or the corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of the FICA tax, and to pay the additional income tax at source on wages attributable to the pyramiding section 3401 wages and taxes; provided that the total payment under this acceleration provision cannot exceed the aggregate of the FICA tax amount, and the income tax withholding related to such FICA amount (as permitted under Treasury Regulation Section 1.409A-3(j)(4)(vi); and provided further that any Units vested and settled in accordance with this Section will reduce, share-for-share, that portion of the Award that would vest on the immediately following Vesting Date. Participant authorizes the Company and/or any Subsidiary or Affiliate, or their respective agents, at their discretion, to satisfy the Participant’s tax obligations that must be withheld by the Company and/or any Subsidiary or Affiliate by withholding in Shares to be issued upon vesting of the Units, or in the sole discretion of the Company, by any other appropriate method. The Company shall delay the issuance of any Shares upon any Vesting Date to the extent necessary to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to “specified employees” as a result of their separation from service) to the date that is six months and one day following the date of the Participant’s separation from service (or shorter period ending on the date of the Participant’s death following such separation).
10.Data Protection. Participant consents to the collection and processing of Personal data relating to the Participant so that the Company and its Affiliates can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan. “Personal data” shall include but may not be limited to, data about participation in the Plan and securities offered or received, purchased or sold under the Plan from time to time and other appropriate financial and other data (such as the date on which the PRSUs were granted, Participant’s name and address) about the Participant and his or her participation in the Plan. Participant accepts that the Personal data will be administered and processed by the Company or any other agent or person designated by the Company. Participant is entitled to request access to the data referring to the Participant and held by the Company and to request the amendment or deletion of such data. Participant also gives express consent to the Company to transfer and process his/her Personal data to the United States in accordance with the applicable laws and regulations of the United States even if the level of Personal data protection in the United States may be lower than in the Participant’s country. Participant acknowledges that he/she is free to withdraw his/her consent at any time.
For the purposes of compliance with the General Data Protection Regulation (EU) 2016/679, Participant acknowledges that the Company will separately provide information on the collection, processing, and transfer of Personal Data.
11.Language. Participant acknowledges that the Plan and this Agreement are provided in English only and waives his/her right to translated Plan documentation.
12.Discretionary Nature of Benefit; No Right to Continued Employment; No Entitlement to Future Awards. Participant understands that under this Agreement, grants of PRSUs are made at the complete discretion of the Company pursuant to the Plan. The offer to participate in the Plan does not constitute an acquired right. Nothing in this Agreement shall confer on any Participant any right to continue in the employment of the Company or its Subsidiaries or interfere in any way with the right of the Company or its Subsidiaries to terminate such Participant’s employment at any time for any reason or to continue such Participant’s present (or any other) rate of compensation. The grant of the PRSUs under any award to any Participant is a one-time benefit and shall not create any rights in such Participant to any subsequent awards by the Company, no award hereunder shall be considered a condition of such Participant’s employment, and no profit with respect to an award shall be considered part of such Participant’s salary or compensation under any severance statute or other applicable law.
This Agreement may be executed in one or more counterparts (including by means of electronically signed or submitted signature pages), all of which taken together shall constitute one and the same Agreement.
* * * *
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IN WITNESS WHEREOF, the Company, acting by and through its duly authorized officers, has executed this Agreement effective as of the date first above written.
SENSATA TECHNOLOGIES HOLDING PLC
By:
/s/ Jeff Cote
Name: Jeff Cote
Title: CEO & President
Name: Jeff Cote
Title: CEO & President
Accepted and Agreed:
____________________________
%%FIRST_NAME%-% %%LAST_NAME%-%
%%FIRST_NAME%-% %%LAST_NAME%-%
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Annex A
Peer Group
| AMETEK, Inc. (AME) | American Axle & Manufacturing, Inc. (AXL) | Amphenol Corporation (APH) | ||||||
| Aptiv plc (APTV) | Autoliv Inc. (ALV) | BorgWarner, Inc. (BWA) | ||||||
| Dana Incorporated (DAN) | Gentex Corporation (GNTX) | Gentherm Incorporated (THRM) | ||||||
| Lear Corporation (LEA) | Littelfuse, Inc. (LFUS) | Melexis SA (MELE-BE) | ||||||
| Regal Rexnord Corp (RRX) | Stoneridge, Inc. (SRI) | TE Connectivity Ltd (TEL) | ||||||
| Visteon Corporation (VC) | ||||||||
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April 28, 2023
Hans Lidforss
c/o Sensata Technologies, Inc.
529 Pleasant Street
Attleboro, MA 02703
RE: SEPARATION AND RELEASE OF CLAIMS AGREEMENT BETWEEN HANS LIDFORSS AND SENSATA TECHNOLOGIES, INC.
Dear Hans:
This letter agreement is a Separation and Release of Claims Agreement (“Separation and Release Agreement” or “Agreement”) between you (“Employee”) and Sensata Technologies, Inc., a Delaware corporation (“Sensata” or the “Company”), which amends your Amended and Restated Employment Agreement, dated as of March 5, 2020 (the “Employment Agreement”). Employee and the Company shall each be referred to herein as a “Party” and collectively herein as the “Parties”.
In consideration of the mutual covenants contained in this Separation and Release Agreement, the Separation Payment to Employee, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Employee and the Company hereby agree as follows:
1.Defined Terms. Capitalized terms not otherwise defined in this Agreement shall have the meaning assigned to them in the Employment Agreement.
2.Position and Duties. Paragraphs 2(a) and 2(b) of Employee’s Employment Agreement is hereby deleted in its entirety and replaced with the following: “Executive shall serve as Senior Vice President, Chief Strategy and Corporate Development Officer until June 30, 2023. Commencing on July 1, 2023, Executive shall serve as an Advisor to the Company and shall have such duties and responsibilities as requested or directed by the Company’s Chief Executive Officer.”
3.Compensation and Benefits. Through June 30, 2023, Employee shall continue to be eligible to receive his Base Salary described in Section 3 of the Employment Agreement to the extent it is consistent with the terms and conditions of this Agreement and the Company’s policies (which shall control). Effective July 1, 2023 his Advisor Base Salary will be $40,937 monthly. Until the Employment End Date (as defined below), Employee may participate in the Company’s employee benefit programs and no vacation shall accrue after June 30, 2023.
4.Employment Period and Separation from the Company
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a.Paragraphs 4(a) and 4(b) of the Employment Agreement are hereby deleted in their entirety and replaced with the following: “The Employment Period shall end on the “Employment End Date” which shall be the earlier of: (i) August 31, 2023 (“Planned Employment End Date”) or ii) the Early Employment End Date. The “Early Employment End Date” shall mean any termination of the Employment Period prior to the Planned Employment End Date due to any one of the following events: (a) Employee’s resignation (with or without Good Reason); (b) Employee’s death or Disability; (c) the Company’s termination of Employee’s employment for Cause: or (d) the Company’s termination of Employee’s employment as a result of the CEO’s determination, in the CEO’s sole but reasonable discretion, that Employee is no longer positively collaborating or contributing to the success of the Company’s business. Employee agrees that if he obtains new employment during the Employment Period, he will notify the Company by promptly submitting his written resignation to the Company’s Chief Executive Officer (the “CEO”). Employee understands that until the Employment End Date he shall remain subject to all Company policies, procedures and practices.
b.Employee’s last day of work will be on the Employment End Date. Employee will receive Employee’s final paycheck, which will reflect final wages less customary withholdings. Employee acknowledges that, as of the Employment End Date, Employee’s salary will cease, and any entitlement Employee may have under a Company provided benefit plan, program, contract or practice will terminate, except as otherwise: (i) required by applicable law; (ii) expressly stated in this Agreement; or (iii) expressly provided under the Sensata Technologies Holding plc 2021 Equity Incentive Plan.
5.Separation Payment
a.In exchange for Employee’s timely execution and non-revocation of this Agreement, including the Releases contained in Section (6) of this Agreement, and Employee’s continued compliance with the terms of the Employment Agreement and this Agreement, and conditioned upon Employee not being terminated by the Company for Cause, the Company agrees to pay Employee the following amounts, which shall be collectively referred to herein as the “Separation Payment”:
(i)payment of Employee’s Base Salary, through the Employment End Date, such Base Salary to be paid in semi-monthly payments on the Company’s regular payroll dates;
(ii)a lump sum payment of US$409,368.00, which sum is equal to 10 months Employee’s Base salary;
(iii)a lump sum payment in the amount of US$359,176.00, which sum is equal to the average of the Annual Bonus amounts paid to Employee in 2022 and 2023 for the two completed fiscal years immediately preceding the date hereof;
(iv)a lump sum payment in the amount of US$28,467 to assist Employee with replacing various employee health and dental benefits and in agreed complete fulfillment of Section 4(b)(iv) of the Employment Agreement.
b. The Separation Payment shall be made within thirty (30) days following the Employment End Date and shall deduct all customary withholdings and deductions required by law.
6.Release of Claims
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a.Employee (for himself, his heirs, assigns or executors) releases and forever discharges the Company, any of its Affiliates, and its and their directors, officers, agents and employees (collectively, the “Released Parties”) from any and all claims, suits, demands, causes of action, contracts, covenants, obligations, debts, costs, expenses, attorneys’ fees, liabilities of whatever kind or nature in law or equity, by statute or otherwise whether now known or unknown, vested or contingent, suspected or unsuspected, which have existed or may have existed, or which do exist, of any kind (“Claims”), which relate in any way to (i) Employee’s employment with the Company or the termination of that employment, (ii) Employee’s employment with any Affiliate of the Company or the termination of that employment, (iii) Employee’s rights under the employee benefit plans of the Company, and (iv) Employee’s rights to accrued, unused vacation time in the payroll system.
b.Such released Claims include any and all claims, obligations, or causes of actions, of whatever kind, arising out of or in any way connected with any acts, omissions, practices, or policies that were or could have been asserted in connection with a civil action or administrative action under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e et seq. as amended; the Civil Rights Act of 1991, 42 U.S.C. §§1981-1988; the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq.; the Older Workers Benefits Protection Act of 1990; the Vocational Rehabilitation Act of 1973, 29 U.S.C. § 793 et seq.; the Family Medical Leave Act, 29 U.S.C. §2601 et seq.; the Americans With Disabilities Act, 42 U.S.C. § 12101 et seq.; 42 U.S.C. §§ 1981-1988; the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq.; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq.; the Immigration Reform and Control Act of 1986, 8 U.S.C. § 1324a, et seq.; the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq.; the Sarbanes-Oxley Act of 2002 (including the “whistleblower” provisions, 18 U.S.C. § 1514A, et seq.); the National Labor Relations Act, 29 U.S.C. §151 et seq.; the Equal Pay Act of 1963; the Consolidated Omnibus Budget Reconciliation Act of 1985, I.R.C. § 4980B; the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.; the Genetic Information Nondiscrimination Act of 2008; the Fair Labor Standards Act, 29 U.S.C. §201 et seq.; the Employee Polygraph Protection Act of 1988; the Lily Ledbetter Fair Pay Act of 2009; the Pregnancy Discrimination Act of 1978; the Uniformed Services Employment and Reemployment Rights Act of 1994; Massachusetts Law Against Discrimination, G.L. c.151B; Massachusetts Workers’ Compensation Act, G.L. c. 152 §75B; Massachusetts Civil Rights Act, G.L. c.12, §11; Massachusetts Equal Rights Act, G.L. c. 93; Massachusetts Small Necessities Act, G.L. c. 149 §52D; Massachusetts Privacy Statute, G.L. c. 214, §1B; Massachusetts Equal Pay Act, G.L. c. 149 §105A-C; Massachusetts Age Discrimination Law, G.L. c. 149 §24 A et seq.; Massachusetts Maternity Leave Act, G.L. c. 149, § 105D; Massachusetts Sexual Harassment Statute, G.L. c. 214, §1C; Massachusetts Wage and Hour Laws, G.L. c. 151§1A et seq.; Massachusetts Wage Payment Statutes, G.L. c. 149, §§ 148, 148A, 148B, 149, 150, 150A-150C, 151, 152, 152A, et seq.; any other relevant statute, law, rule, or regulation relating to labor and employment, including but not limited to, any claim for unpaid wages and/or penalties or any amendments to any of the foregoing; any other federal, state, and/or local civil rights law and/or whistleblower law; any other federal, state, and/or local statute, law, constitution, ordinance, rule, regulation, or order, or common law, in any way resulting from your employment with or separation from employment from the Company.
c.Nothing herein prohibits Employee from challenging the validity of this Agreement under the federal age or other discrimination laws (the “Federal Discrimination Laws”) or from filing a charge or complaint of age or other employment- related discrimination with the Equal Employment Opportunity Commission (the “EEOC”), or from participating in any investigation or proceeding conducted by the EEOC. However, the release in this Section 6 does prohibit Employee from seeking or receiving monetary damages or other individual-specific relief in connection with any such charge or complaint of age or other employment-related discrimination with the EEOC or applicable state agency. Further, nothing in this
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Agreement limits the Company’s right to seek immediate dismissal of such charge or complaint on the basis that Employee’s signing of this Agreement constitutes a full release of any individual rights under the Federal Discrimination Laws, or the Company’s right to seek restitution of the economic benefits provided to Employee under this Agreement (or other legal remedies) if Employee successfully challenges the validity of this Release and prevails in any claim under the Federal Discrimination Laws.
d.Nothing in this Agreement prohibits Employee from reporting possible violations of federal law or regulation to any governmental agency or regulatory authority (including but not limited to the Securities and Exchange Commission, U.S. Department of Labor, U.S. Department of Justice and/or the National Labor Relations Board), or from making other disclosures that are protected under the whistleblower provisions of federal law or regulation. However, Employee understands and agrees that he is waiving the right to any monetary recovery in connection with any complaint or charge that he may file with an administrative agency, except with respect to any monetary recovery under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002.
e.In signing this Agreement, Employee acknowledges that he intends that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. Employee expressly consents that this Settlement and Release Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. Employee acknowledges and agrees that the releases contained herein are an essential and material term of this Agreement and without such releases the Company would not have agreed to the Separation Payment provided for in this Agreement. Employee further agrees that in the event he brings his own Claim in which he seeks damages against the Company, or in the event Employee seeks to recover damages against the Company in any Claim brought by a governmental agency on his behalf, this Release shall serve as a complete defense to such Claims.
f.Employee acknowledges that he is receiving this Agreement on April 18, 2023, and he shall have twenty-one (21) days from receipt of the Agreement to consider and sign it (“Acceptance Period”). Employee also acknowledges that any changes or modifications to this Agreement do not restart or otherwise extend the Acceptance Period, unless such changes are material. Employee shall have seven (7) calendar days following execution of the Agreement to revoke the Agreement by giving written notice of such revocation to the Company’s Chief Administrative Officer, via e-mail, and such notice must be received by the Company no later than the seventh (7th) calendar day following Employee’s execution of this Agreement (if such day is a Saturday or Sunday, or a legal holiday then such notice must be received on the first day thereafter that is not a Saturday, Sunday, or legal holiday). Employee further acknowledges that if he does not sign this Agreement within twenty-one (21) days from his receipt of the Agreement, or, alternatively, if he signs this Agreement within twenty-one (21) days from receipt of the Agreement but subsequently revokes the Agreement no later than seven (7) calendar days following execution of the Agreement by giving timely notice (as described above) of such revocation, then Employee forfeits any and all rights to the Separation Payment under this Agreement.
7.Compliance With Older Workers’ Benefit Protection Act. Employee and the Company desire and intend that this Agreement comply with the terms of the Older Workers’ Benefit Protection Act. Accordingly, Employee acknowledges that he has been advised of the following rights:
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a.Employee understands that federal and state laws, including the Age Discrimination in Employment Act, prohibit employment discrimination based upon age, sex, race, color, national origin, ethnicity, or disability. Employee further understands and agrees that, by signing this Agreement, he agrees to waive any and all such claims, and releases the Released Parties from any and all such claims.
b.EMPLOYEE AGREES THAT THIS RELEASE IS GIVEN KNOWINGLY AND VOLUNTARILY AND ACKNOWLEDGE THAT:
(i)THIS AGREEMENT IS WRITTEN IN A MANNER UNDERSTOOD BY EMPLOYEE;
(ii)THIS RELEASE REFERS TO RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AS AMENDED;
(iii)EMPLOYEE HAS NOT WAIVED ANY RIGHTS ARISING AFTER THE DATE OF THIS AGREEMENT;
(iv)EMPLOYEE HAS RECEIVED VALUABLE CONSIDERATION IN EXCHANGE FOR THE RELEASES OTHER THAN AMOUNTS EMPLOYEE IS OTHERWISE ALREADY ENTITLED TO RECEIVE;
(v)EMPLOYEE HAS TWENTY-ONE (21) DAYS AFTER RECEIVING THIS AGREEMENT TO CONSIDER WHETHER TO SIGN IT;
(vi)IN THE EVENT THAT EMPLOYEE SIGNS THE AGREEMENT, HE HAS ANOTHER SEVEN (7) DAYS TO REVOKE IT BY DELIVERING NOTICE AS SET FORTH IN SECTION 6(f).
(vii)NEITHER THE COMPANY NOR ITS AGENTS OR ATTORNEYS HAS MADE ANY REPRESENTATIONS OR PROMISES TO THE TERMS OR EFFECTS OF THIS AGREEMENT OTHER THAN THOSE CONTAINED HERE; AND
(viii)EMPLOYEE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT.
8.Incorporation of Employment Agreement. All terms and provisions of Employee’s Employment Agreement are hereby incorporated by reference with the same force and effect as though fully set forth herein; provided, however, that if any term or provision set forth in this Agreement is inconsistent with any term or provision in the Employment Agreement, the terms and provisions in this Agreement shall prevail.
9.Employee Acknowledgements, Representations, and Obligations.
a.Employee agrees that the Company and its employees or agents have made no representations regarding consequences of any amounts received pursuant to this Agreement and that Employee is not relying upon the Company’s employee’s or agents in any way regarding the tax consequences of entering into this Agreement. Employee shall be solely responsible for payment of all personal tax liability due on all payments made, and benefits provided, under this Agreement, including federal, state and local taxes, interest and penalties, if applicable, which are or may become due.
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b.Employee represents that Employee has received all compensation, wages, bonuses, commissions, and benefits to which Employee may be entitled at the time this Agreement is executed.
c.Employee represents that Employee has no known workplace injuries or occupational diseases.
d.Employee further agrees that Employee has not been retaliated against for reporting any allegations of wrongdoing by the Company or its officers, including any allegations of corporate fraud. Both parties acknowledge that this Agreement does not limit either Party’s right, where applicable, to file or participate in an investigative proceeding of any federal, state or local governmental agency. To the extent permitted by law, Employee agrees that if such an administrative claim is made, Employee shall not be entitled to recover any individual monetary relief or other individual remedies.
e.Employee hereby resigns, as of June 30, 2023 from any positions that Employee may hold as an officer or director of the Company and its subsidiaries and affiliates. Employee agrees to sign such additional letters of resignation as the Company may request.
10.No Legal Actions. Employee represents that he has not filed any claim, charge, or lawsuit against any of the Released Parties relating to his employment with the Company or termination thereof.
11.No Admission of Liability. The Parties execute this Agreement to put to rest all issues and disagreements that may exist between them regarding Employee’s employment with the Company or the termination thereof. This Agreement, however, should in no way be construed as an admission of liability or wrongdoing by the Company or any of the Released Parties, or as an admission of liability or wrongdoing by Employee, or that either Party has any rights whatsoever against the other, except as specifically provided herein. Each Party specifically disclaims any liability to or wrongful acts against the other.
12.Return of Company Property and Protection of Proprietary Information and Intellectual Property. Employee confirms that, prior to the Employment End Date, he will return to the Company, and not make or keep copies of, any Company-owned or Company-issued property, including, without limitation, all documents, data, information, files, reports, emails, spreadsheets, projections, studies, business plans, or any other material, whether in paper, electronic, or other form, belonging to or issued by the Company, or which were received or used by Employee during his employment with the Company. Employee further agrees that following the termination of his employment with the Company, he will refrain from disclosing to any third party or using any of the Company’s confidential business information or intellectual property in accordance with Employee’s agreements with the Company, statutes protecting trade secrets and/or common law.
13. Recapture of Payment. Notwithstanding any other provision of this Agreement, if Employee breaches any of his obligations hereunder or under the Employment Agreement, then Company may cease further payments pursuant to this Agreement without affecting the
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validity of the Employee’s release of claims and may seek damages from Employee including but not limited to amounts provided to Employee under this Agreement.
14. Binding on Parties and Representatives. This Agreement shall be binding upon Employee, his heirs, administrators, representatives, executors, successors, and assigns, and shall inure to the benefit of the Company and to the other Released Parties, and to their respective administrators, representatives, executors, successors, and assigns.
15. No Other Agreement. This Agreement, including the Employment Agreement, which is incorporated herein (to the extent it is not inconsistent with this Agreement), contains the entire agreement between Employee and the Company with respect to the subject matter herein. No part of this Agreement may be changed except in a writing, executed by both Employee and the Company.
16. Governing Law. This Agreement shall be interpreted in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Whenever possible, each provision of this Agreement shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision shall be held to be prohibited or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting the remainder of such provision or any of the remaining provisions of this Agreement.
17. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same Agreement.
Remainder of Page Intentionally Left Blank
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Please indicate your agreement and acceptance of the terms and conditions set forth in this Agreement by signing below.
Very truly yours,
Sensata Technologies, Inc.
By: __/s/ Jeff Cote_____________________
Jeff Cote
Jeff Cote
Chief Executive Officer & President
AGREED TO AND ACCEPTED BY:
/s/ Hans Lidforss
Hans Lidforss
April 28, 2023
Date
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Exhibit 31.1
Certification
I, Jeff Cote, certify that:
1.I have reviewed the quarterly report on Form 10-Q of Sensata Technologies Holding plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | May 2, 2023 | |||||||
| /s/ JEFF COTE | ||||||||
| Jeff Cote | ||||||||
| Chief Executive Officer and President | ||||||||
Exhibit 31.2
Certification
I, Paul Vasington, certify that:
1.I have reviewed the quarterly report on Form 10-Q of Sensata Technologies Holding plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | May 2, 2023 | |||||||
| /s/ PAUL VASINGTON | ||||||||
| Paul Vasington | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
Exhibit 31.3
Certification
I, Maria Freve, certify that:
1.I have reviewed the quarterly report on Form 10-Q of Sensata Technologies Holding plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | May 2, 2023 | |||||||
| /s/ MARIA FREVE | ||||||||
| Maria Freve | ||||||||
| Vice President and Chief Accounting Officer | ||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Sensata Technologies Holding plc (the “Company”) for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned chief executive officer, chief financial officer, and chief accounting officer of the Company, certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ JEFF COTE | |||||
| Jeff Cote | |||||
| Chief Executive Officer and President | |||||
| Date: | May 2, 2023 | ||||
| /s/ PAUL VASINGTON | |||||
| Paul Vasington | |||||
| Executive Vice President and Chief Financial Officer | |||||
| Date: | May 2, 2023 | ||||
| /s/ MARIA FREVE | |||||
| Maria Freve | |||||
| Vice President and Chief Accounting Officer | |||||
| Date: | May 2, 2023 | ||||