CEO Performance Evaluation: Merit & 2014 Organizational Objectives

1. CEO Performance Evaluation:Merit & 2014 Organizational Objectives Attachment 3 A Framing Discussion David L. Schutt, PhD Chief Executive Officer

2. Discussion Topics • 2013 • Preliminary projection for Organizational Objectives • A review of performance evaluation tools • 2014 • Enterprise Balance • SAE International Objectives • Financial Performance • Customer Satisfaction • Strategic Importance • Performance Review Institute Objectives • Strategic Importance • Financial performance • Customer Satisfaction Compensation Committee | 13 November 2013

3. 2013 Organizational Objectives ✓ Compensation Committee | 13 November 2013

4. Current Performance Evaluation Tools • Merit • Only considers SAE • Uses seven evaluation criteria (does not formally factor in organizational performance) • Developed for first year CEO, and then modified slightly since then—past Committee recognition that tool is not ideal • CEO finds it difficult to showcase organizational performance and personal contributions • Incentive • Last revised in 2013—three core objectives • Incorporated a single PRI objective Compensation Committee | 13 November 2013

5. CEO Request of the Committee • For 2014: • Develop a new merit tool that: • Focuses on organizational performance as well as CEO leadership expectations • Reduces redundancy and is designed to measure a seasoned executive • Factors in enterprise responsibilities • Continue to refine the incentive tool so that it: • Focuses on the organizational priorities • Factors in the enterprise • The trigger(s) is clear • Serves as an incentive for the CEO and the management team Compensation Committee | 13 November 2013

6. 2014 Incentive: Enterprise Balance • A Proposal: • Increase PRI weighting from 20% to 35% • Use the same three primary objective categories: Financial Performance, Customer Satisfaction and Strategic Focus • SAE: 35-25-40 weighting • PRI: 50-0-50 weighting We will return to this at the end of the presentation. Compensation Committee | 13 November 2013

7. SAE Objectives: Financial Performance • Proposal: • Threshold calibrated to year-end performance + inflation +/- any special adjustments (i.e. acquisition) • Target performance based on 2014 business plan, which is now based on 2013 Q3 forecast (Board will approve in December) • Stretch and Outstanding performance formulaically determined (using target as base) • Topline: +1.5%(2), +3.0%(5) • Bottomline: 1.5x, 2.0x • Committee Considerations: • Matrix interior weightings • (Top/bottom-line weighting) • Trigger (and scope) • Performance targets • No change being proposed • Unclear – historical ambiguity: What is the policy for 2014? • Based on business plan and historical formulas Compensation Committee | 13 November 2013

8. Trigger(s) • <2008: ? • 2008-2010 • Financial threshold performance was a trigger for the entire plan • 2011-2012 • Threshold performance was a trigger for financial objective • Plan trigger • Achieving 65% of objectives • Breakeven or better financial performance after payout • 2013 • 2014: A Proposal • Separate “plan” triggers established for each organization • Plan trigger • If deficit budget approved, achieve budgeted deficit after payout • Otherwise, breakeven or better financial performance after payout • If plan activated: • Each objective stands on its own Compensation Committee | 13 November 2013

9. SAE Objective: Customer Satisfaction • Background • Customer satisfaction measurement tool is new and is still being implemented. • Insufficient data to understand where we truly are • Maybe too early to expect substantial outcomes/results • 2013 performance targets too aggressive for nature of organization • Proposal: • Include a subjective component • Specifics to be determined once current data is collected and analyzed • Establish realistic performance targets What is the Committee’s guidance? Compensation Committee | 13 November 2013

10. SAE Objective: Strategic Focus • Background • 2013 focused on getting the “growth” efforts tuned-up and underway, specifically acquisitions and new business development • Proposal: • Possible focus areas include: • Acquisitions • New Business • Global • IP Roadmap • Inclusion of a “mission”-based objective, possible STEM related What is the Committee’s preferred pathway? Compensation Committee | 13 November 2013

11. PRI Objective: Strategic Focus • Background • 2013 was the first year PRI was included in incentive program—incorporated ”strategic focus” as the first (and only) element • Proposal • Growth initiatives remain a focal point for management (the 2014 Business Plan includes continued support) • Major initiative is Pricing Model. PRI BoD is actively engaged Is the Committee supportive of this approach? Compensation Committee | 13 November 2013

12. PRI: Financial Performance • Background • PRI business climate is flattening ( “fully” penetrated market) • PRI will miss its aggressive 2013 Business Plan by about $1.XM • 2014 approved budget • Below 2013 approved • Moderate deficit • Management Proposal • Develop a FPM similar to that used for SAE. Matrix “tuning” (top/bottom line) will likely be different • An alternative prospective What is the Committee’s general guidance? Compensation Committee | 13 November 2013

13. PRI: Customer Satisfaction • Background • PRI monitors a variety of performance indicators • Member leader committees are developing different aspects of a fourteen-vector performance matrix. • Being very careful to develop appropriate metrics • Proposal • N/A Is the Committee comfortable looking at 2015 for including this, or an alternative? Compensation Committee | 13 November 2013

14. Wrap-up • How does the Committee allow the PRI objectives to be developed for it, yet have sufficient knowledge such that it has the confidence that the “right” objectives and performance levels are being established? • PRI • Financial Performance: • Performance levels • Interior weightings: top/bottom-line calibration • Customer Satisfaction • Strategic Focus • Pricing • Growth • 2014 Merit Tool • Develop new form • 2014 Incentive Tool • Enterprise and interior weightings • Trigger • SAE • Financial Performance: • Performance levels • Interior weightings: top/bottom-line calibration • Customer Satisfaction • Subjective component • Objective component • Strategic Focus Compensation Committee | 13 November 2013

15. 2014 Incentive: Enterprise Balance & Objective Summary Compensation Committee | 13 November 2013