COOPER TIRE & RUBBER COMPANY
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of
Cooper Tire & Rubber Company will be held at Urbanski's, 1500 Manor Hill
Road, Findlay, Ohio on Tuesday, May 5, 1998, at 10:00 a.m. Eastern
Daylight Time for the following purposes:
(1) To elect three (3) Directors of the Company.
(2) To approve and adopt the Cooper Tire & Rubber Company 1998
Incentive Compensation Plan, and to reserve for issuance under such
plan up to 4,000,000 shares of the Company's Common Stock. The
stockholders will also be approving each of the performance goals
under the plan, pursuant to which the incentive compensation will
be paid. As of the date of stockholder approval, the Cooper Tire &
Rubber Company 1998 Incentive Compensation Plan will replace the
Cooper Tire & Rubber Company 1996 Stock Option Plan.
(3) To approve and adopt the Cooper Tire & Rubber Company 1998 Employee
Stock Option Plan, and to reserve for issuance under such plan up
to 1,200,000 shares of the Company's Common Stock.
(4) To approve and adopt the Cooper Tire & Rubber Company 1998 Non-
Employee Directors Compensation Deferral Plan, and to reserve for
issuance under such plan up to 200,000 shares of the Company's
Common Stock.
(5) To consider a stockholder proposal.
(6) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of Common Stock of record at the close of business on
March 9, 1998, are entitled to notice and to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Stan C. Kaiman
Secretary
Findlay, Ohio
March 24, 1998
Please mark, date and sign the enclosed proxy and return it
promptly in the enclosed addressed envelope, which requires no postage.
If you are present and vote in person at the meeting, the proxy will not
be used.
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COOPER TIRE & RUBBER COMPANY
Lima & Western Avenues, Findlay, Ohio 45840
March 24, 1998
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Cooper Tire &
Rubber Company (the "Company") to be used at the Annual Meeting of the
stockholders of the Company to be held on May 5, 1998, at 10:00 a.m.
Eastern Daylight Time at Urbanski's, 1500 Manor Hill Road, Findlay,
Ohio. If the enclosed form of proxy is properly executed and returned,
it will be voted in accordance therewith. Abstentions and broker
nonvotes are voted neither "for" nor "against", but are counted in the
determination of a quorum. Any proxy may be revoked at any time, to the
extent that it has not been exercised, by written notice to the Company
prior to the meeting, or by execution of a new proxy or by voting by
ballot at the meeting.
Only stockholders of record on March 9, 1998, will be entitled to
vote at the Annual Meeting, and each will be entitled to one vote for
each share so held. As of March 9, 1998, there were 78,762,408 shares
of the Company's Common Stock outstanding. Holders of a majority of the
stock of the Company issued and outstanding and entitled to vote must be
present or represented by proxy at the Annual Meeting to form a quorum
for the transaction of business thereat.
The matters anticipated to be voted upon by stockholders at the
meeting are election of three (3) Directors (Agenda Item 1), approval
and adoption of the 1998 Incentive Compensation Plan (Agenda Item 2),
approval and adoption of the 1998 Employee Stock Option Plan (Agenda
Item 3), approval and adoption of the 1998 Non-Employee Directors
Compensation Deferral Plan (Agenda Item 4), and consideration of a
stockholder proposal (Agenda Item 5). For Agenda items 2 through 5, the
affirmative vote of the majority of shares represented in person or by
proxy at the meeting and entitled to vote on the subject matter will
constitute stockholder approval. Directors will be elected by a
plurality of the votes of the shares represented in person or by proxy
at the meeting and entitled to vote on the subject matter.
Agenda Item 1
ELECTION OF DIRECTORS
The Bylaws of the Company provide for the Board of Directors to be
divided into three classes as nearly equal in number as the total number
of Directors constituting the entire Board permits, with the term of
office of one class expiring each year. By vote of a majority, the
Board of Directors has the authority to fix the number of Directors
constituting the entire Board at not less than six (6) nor more than
twelve (12) individuals, and the number is currently set at ten (10).
Three Directors are to be elected to the class having terms expiring
this year and shall serve for a three-year term expiring in 2001 and
until their respective successors are elected and qualified. In
February of 1998, Allan H. Meltzer retired from the Board, having served
since 1983.
(continued)
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Unless otherwise specified, the persons named as proxies in the
enclosed form of proxy intend to vote for the nominees hereinafter
indicated. Although the Board of Directors does not contemplate that
any such nominee shall be unavailable for election, if a vacancy in the
slate of nominees should be occasioned by death or other unexpected
occurrence, it is presently intended that the proxies shall be voted for
such other person as the Board of Directors may recommend.
Each of the nominees to be elected at the Annual Meeting, other
than Byron O. Pond, has been serving as a Director and has previously
been elected by vote of the stockholders. Mr. Pond has not been serving
as a Director of the Company; he has been nominated to fill the vacancy
created by Dr. Meltzer's retirement. A brief statement of the
background of each nominee and each Director who is not a nominee is set
forth on the following pages, including for each the period of service
as a Director of the Company and the expiration date of the term as a
Director.
NOMINEES FOR DIRECTOR
---------------------
ARTHUR H. ARONSON Executive Vice President,
(PHOTOGRAPH) Allegheny Teledyne Incorporated
Mr. Aronson, age 62, joined Allegheny Ludlum Corporation in 1988
as Executive Vice President and was elected as a director in 1990. Mr.
Aronson was elected President and Chief Executive Officer in 1994, and
in 1996 was named to his present position with the successor
corporation, Allegheny Teledyne Incorporated, where he also serves as
President of the Metals Segment. Prior experience includes service as
President and Chief Operating Officer of Lukens Steel and as Chief
Executive Officer of Cold Metal Products. He is a director of Allegheny
Teledyne Incorporated and a trustee of Carnegie Mellon University. Mr.
Aronson has a Ph.D. degree in Metallurgy from Rensselaer Polytechnic
Institute and a B.S. degree in Metallurgy from M.I.T.
Director Since 1995
Nominee for Term to Expire 2001
BYRON O. POND Chairman and Chief Executive Officer,
(PHOTOGRAPH) Arvin Industries, Inc.
Mr. Pond, age 61, was elected to his current position at Arvin
Industries, Inc. in 1996. He joined Arvin in 1986 with the acquisition
of Maremont Corporation where he served as Chairman, President and Chief
Executive Officer. He was appointed Executive Vice President and a
Director of Arvin in 1990 and was elected President and Chief Operating
Officer in 1991. Mr. Pond became Arvin's President and Chief Executive
Officer in 1993. Arvin is a worldwide manufacturer of automotive
exhaust systems and ride control products for both original equipment
and replacement markets. Mr. Pond holds a B.S. degree in Business
Administration from Wayne State University.
Nominee for Term to Expire 2001
(continued)
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NOMINEES FOR DIRECTOR (CONT.)
J. ALEC REINHARDT Executive Vice President
(PHOTOGRAPH) and Chief Financial Officer
Mr. Reinhardt, age 56, was elected Executive Vice President of the
Company in 1991, having served as Chief Financial Officer since 1983 and
as Vice President since 1982. He served as Secretary from 1977 to 1986
and as General Counsel from 1976 to 1983. Prior to joining the Company
in 1976, he had been Secretary and Assistant General Counsel of White
Motor Corporation. Mr. Reinhardt is a graduate of the University of
Cincinnati with a B.S.E.E. degree and has earned M.B.A. and J.D. degrees
from the Ohio State University. He is a director of the Fifth Third
Bank of Northwestern Ohio, N.A.
Director Since 1983
Nominee for Term to Expire 2001
DIRECTORS WHO ARE NOT NOMINEES
------------------------------
EDSEL D. DUNFORD Retired (Former President and
(PHOTOGRAPH) Chief Operating Officer, TRW Inc.)
Mr. Dunford, age 62, was elected President and Chief Operating
Officer of TRW, Inc. and named to its Board of Directors in 1991. After
joining TRW in 1964, Mr. Dunford held a variety of technical and
management positions, including executive vice president and general
manager of TRW's space and defense businesses. He holds a B.S.E.E.
degree from the University of Washington and a master of engineering
degree from UCLA, and completed the Executive Program at Stanford
University. A member of a number of professional organizations, Mr.
Dunford is also a director of Thiokol Corporation and Howmet
International.
Director Since 1994
Expiration of Term 1999
JOHN FAHL Vice President
(PHOTOGRAPH)
Mr. Fahl, age 61, began his career with the Company in 1955,
holding various positions in technical, manufacturing, and
transportation before joining the purchasing department in 1962. He was
named Corporate Director of Purchasing in 1966, was elected a Vice
President in 1978, and in 1994 was named President, Tire Operations. He
attended Denison University and is a graduate of advanced management
programs at Bowling Green State University and Harvard University. Mr.
Fahl is a director of The Peoples Banking Company in Findlay, Ohio and
of Rurban Financial Corp. in Defiance, Ohio.
Director Since 1992
Expiration of Term 1999
DEBORAH M. FRETZ Senior Vice President, Lubricants and
(PHOTOGRAPH) Logistics, Sun Company, Inc.
Ms. Fretz, age 49, was named Senior Vice President, Lubricants and
Logistics, of Sun Company, Inc., an energy company, in 1997. She is
(continued)
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DIRECTORS WHO ARE NOT NOMINEES (CONT.)
responsible for the Lubricants business which includes two refineries,
blending and packaging plants as well as all marketing and sales. In
addition, she manages all Sun Company transportation businesses,
including pipelines, terminals, trucking and rail. Since joining Sun
Company in 1977, she has served in a variety of management positions
including President of Sun Pipe Line Company and Sun Marine Terminals
from 1991 to 1994. She is a director of GATX Corporation. Ms. Fretz
earned a B.S. degree in Biology/Chemistry from Butler University and an
M.B.A. in Finance from Temple University, and completed the Senior
Executive Program at the M.I.T. Sloan School.
Director Since 1996
Expiration of Term 1999
DENNIS J. GORMLEY Former Chairman and Chief Executive Officer,
(PHOTOGRAPH) Federal-Mogul Corporation
Mr. Gormley, age 58, joined Federal-Mogul Corporation, a global
manufacturer and distributor of precision parts, in 1963. He held sales
management, corporate planning, and marketing positions before being
named Executive Vice President in 1975. He was elected President, Chief
Operating Officer, and a director in 1988, Chief Executive Officer in
1989, and Chairman in 1990. Federal-Mogul Corporation's principal
products are vehicular and industrial components. Mr. Gormley is a
director of NBD Bank. He is a graduate of Rensselaer Polytechnic
Institute with a B.S.M.E. degree.
Director Since 1991
Expiration of Term 1999
JOHN F. MEIER Chairman and Chief Executive Officer,
(PHOTOGRAPH) Libbey Inc.
Mr. Meier, age 50, has been Chairman and Chief Executive Officer
of Libbey Inc., a producer of glass tableware and china, since it became
public in 1993. From December, 1990 to June, 1993, he was a Vice
President of Owens-Illinois, Inc. and Executive Vice President and
General Manager of its subsidiary, Libbey Glass Inc. His service at
Owens-Illinois, Inc. began in 1970 and included various marketing and
sales positions. Mr. Meier received a B.S. degree in Business
Administration from Wittenberg University and an M.B.A. degree from
Bowling Green State University. He is a director of Keybank, Northwest
Region, in Toledo, Ohio.
Director Since 1997
Expiration of Term 2000
PATRICK W. ROONEY Chairman of the Board, President and
Chief Executive Officer
Mr. Rooney, age 62, was elected Chairman of the Board and Chief
Executive Officer in 1994. He joined the Company in 1956, became
general sales manager of the Cooper brand division in 1965, Vice
President of the Tire Division in 1969, Vice President of the Company in
1987, President of the Tire Division in 1990, and President and Chief
Operating Officer in 1991. A graduate of The University of Findlay with
(continued)
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DIRECTORS WHO ARE NOT NOMINEES (CONT.)
a B.S. degree in Business Administration, Mr. Rooney also completed the
Harvard Advanced Management Program. He is a director of the Ohio Bank,
Alltrista Corporation, and Huffy Corporation, and is Chairman of the
Board of Trustees of The University of Findlay.
Director Since 1990
Expiration of Term 2000
JOHN H. SHUEY Chairman, President and Chief Executive Officer,
Amcast Industrial Corporation
Mr. Shuey, age 52, joined Amcast Industrial Corporation in 1991 as
Executive Vice President. He was elected President and Chief Operating
Officer in 1993, a Director in 1994, Chief Executive Officer in 1995,
and Chairman in 1997. Amcast produces fabricated metal products, valves
and controls, and cast and tubular metal products. Prior to joining
Amcast, he held executive positions at The Trane Company, American
Standard, and AM International. Mr. Shuey has a B.S. degree in
industrial engineering and an MBA degree, both from the University of
Michigan.
Director Since 1996
Expiration of Term 2000
Note: The beneficial ownership of the Directors and nominees in the
Common Stock of the Company is shown in the table at page 27 of this
proxy statement.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Audit and Compensation Committee Report on Executive Compensation
This report is submitted by all members of the Audit and
Compensation Committee (the "Committee"), for inclusion in this proxy
statement, to explain the Committee's policies applicable to the 1997
compensation reported for the Company's executive officers, as well as
the background and philosophy of certain changes believed necessary in
1998.
Philosophy and Overview
The following objectives guide the Company's policies regarding
executive compensation:
- - To support the attainment of desired Company performance.
- - To provide compensation that will attract and retain superior talent
and reward performance.
- - To align the executive officers' interests with the success of the
Company by placing a significant portion of compensation at risk.
(continued)
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For many years, the compensation of the Company's executive
officers has consisted of three components - (a) cash remuneration in
the form of salaries and incentive bonuses directly related to financial
performance measures, (b) long-term incentive opportunities in the form
of stock options, and (c) other benefits typically offered to employees
by major corporations.
The Committee has responsibilities for the first two components.
It recommends to the Board of Directors the cash remuneration for the
Company's executive officers and grants options, without further action
by the Board of Directors, under the Company's stock-based compensation
plans. The third component is discussed briefly below under the heading
"Other Compensation Plans".
The Company has historically targeted aggregate fixed compensation
levels for the Chief Executive Officer and other executive officers
lower than average compensation levels in the market. Individual pay
levels have been based primarily on senior management's assessment of
the contributions and responsibilities of each individual officer, with
the sum of target pay levels equaling the median of the market for a
comparable group of managers.
During 1997, the Company and the Committee, with the assistance of
a nationally recognized independent executive compensation consulting
firm, conducted a comprehensive review of the Company's executive
compensation program. The purpose of this review was to ensure the
executive compensation program continues to support the Company's
current and future business objectives and is competitive in the
following respects:
- - The level of compensation provided.
- - The mix of fixed and variable compensation.
- - The structural design of the incentive plans.
The review confirmed the objectives cited above continue to be
appropriate and the existing program generally supports these
objectives. However, the study also indicated the Company's target
incentive levels, particularly long-term incentives, were significantly
below the Company's desired position relative to the market. As a
result, the Company's pay mix between fixed and variable compensation
has become skewed toward base salary relative to competitive market
practice.
In order to emphasize variable, performance-related pay and to
maintain the Company's ability to attract and retain key executives now
and into the future, the Committee believes it is important to provide a
competitive level of total compensation, particularly incentive
compensation. Accordingly, the Committee determined it was necessary to
move the Company's target cash compensation levels closer to market
rates of pay. The majority, and in some cases all, of the increases
will be delivered through increased cash incentive opportunities.
To minimize the short-term expense and dilutive impact of the
changes and to ensure increased incentive opportunities are allocated
appropriately, target compensation levels will be moved to the desired
level over a four-year period. For annual incentives, this transition
(continued)
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period will begin with the 1998 performance period. For long-term
incentives, the transition period started with the stock options granted
in 1997.
It is important to note the transition increases will apply
primarily to target incentive levels only. The majority of the
increased amounts will be realized only if the Company achieves its
annual operating goals and if its stock price appreciates.
As a result of the 1997 study, the Committee also approved,
subject to stockholder approval, a new comprehensive incentive plan to
be implemented in 1998. The new plan would replace the 1996 Stock
Option Plan currently in effect. While the new plan provides the
flexibility to use a variety of incentive vehicles, the only new feature
contemplated for use in 1998 is a long-term cash incentive program.
In combination with increased stock option grants, the new long-
term cash program will help reduce the competitive shortfall in long-
term incentives noted earlier. The long-term cash opportunity, which
for the executive officer group provides target payouts ranging from
approximately 10% to 50% of salary based on performance goals
established by the Committee, is intended to focus participants on
planning for and achieving long-term financial results. Approximately
30% of each officer's total long-term incentive opportunity will be
provided through the long-term cash plan, with the remaining 70%
continuing to be delivered through stock options. This mix of stock and
cash results in a comprehensive incentive opportunity motivating both
operational and market performance.
These changes, the bulk of which will be implemented during 1998,
strengthen the alignment between the interests of stockholders and
executive officers and allow the Company to continue to properly
attract, retain, and motivate high caliber officers and managers of the
Company.
Salaries and Bonuses
Salaries and incentive bonuses paid to the Company's executive
officers for 1997 were based upon a program which has been followed each
year since 1973. Prior to the start of the fiscal year, average
compensation levels are determined for the executive officer positions
based upon published compensation data and independent surveys relating
to similar size firms in a broad cross-section of industries and each
officers' contributions to Company performance. The sum of average
compensation levels for the executive officer group is intended to equal
the aggregate competitive median total cash compensation (i.e., salary
plus bonus) for the group. As mentioned earlier, actual total cash
compensation levels are currently below median competitive levels; the
Company began transitioning pay levels toward the market median during
1998.
Base salaries for the Chief Executive Officer and the other
executive officers are then set at levels lower than the average
compensation levels, but near competitive median base salary levels.
Company goals defining minimum, average and excellent performance under
the Company's annual bonus plan are established considering operational
plans, competitive industry information, and prevailing economic
conditions.
(continued)
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For results at or below minimum performance established under the
bonus plan, the executive officers' cash compensation would be as much
as 30% below average compensation levels. For excellent performance
goal attainment under the annual bonus plan, the executive officers'
cash remuneration may be as much as 30% above average compensation
levels, and additional incentive bonuses are earned for exceptional
performance above the excellent performance goal. For results between
the minimum and the excellent performance goals, bonus awards are paid
on a graduated scale.
Executive officers have a significant portion of their cash
remuneration at risk in the event of results below the average
performance goal. Beginning with results above the minimum performance
goal, incentive bonuses increase cash remuneration such that, at the
average performance goal, executive officers' cash remuneration reaches
the average compensation levels (though still below competitive median
levels, as noted earlier). Greater than average cash remuneration is
earned only as results increase further, toward or beyond the excellent
performance goal.
Performance measurement, for purposes of the program, is return on
stockholders' equity ("ROE") for officers with primarily corporate
responsibilities and return on assets managed ("ROAM") for officers with
primarily operational responsibilities. ROE is calculated by dividing
the total net income for the year by the total shareholders' equity at
the beginning of the year. ROAM is calculated by dividing (a) income
before interest, foreign currency gains or losses, and federal income
taxes by (b) an average of controlled assets. ROAM, like ROE, is a
measurement of employees' success in utilizing resources but, unlike
ROE, focuses on specific assets.
Thus, for any fiscal year the incentive bonus for each executive
officer results from measured performance under a formula-driven program
determined in advance of that fiscal year, rather than from a subjective
evaluation of performance made during or after that fiscal year. The
program applies to all executive officers, including the Chief Executive
Officer.
The specifics of the program for total cash compensation,
including salaries and incentive bonuses, for executive officers for
1997 was established in late 1996, along with ROE and ROAM performance
goals applicable to the program for 1997. Incentive bonuses were based
upon the Company's performance for 1997, as measured by the ROE and ROAM
performance attained for the year.
ROE for fiscal year 1997 was 15.6%, which exceeded the average
performance goal. In accordance with the program explained above, Mr.
Rooney's cash remuneration as Chairman of the Board, President, and
Chief Executive Officer was 31% above the average compensation level
determined for that position. However, it was below competitive median
pay levels for his position, consistent with the earlier-cited reference
to the Company's below-market cash compensation levels for its officers.
Average compensation levels for the executive officers for 1997
were based upon published data compiled by an independent consulting
firm, including data for companies of a size comparable to the Company.
Later in this proxy statement there appears a performance graph
including an Auto Parts Index. The companies included in the published
(continued)
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survey data and in the Auto Parts Index were not identical, although
each may include some of the same companies' data.
The Committee believes that the program structure explained above
has consistently provided a fair and appropriate relationship between
Company performance and the cash remuneration of its executive officers.
For that reason, the Committee authorized the continuation of the
program structure, other than changes made to pay levels, mix of pay,
and award determination schedules for fiscal 1998. Stockholder approval
for the incentive bonus program is being sought as part of this proxy
statement to ensure the Company continues to maximize the tax
deductibility of awards under the program.
Stock Options
Key employees of the Company, including executive officers, are
eligible for annual stock option grants in accordance with plans
approved by the stockholders. Plans currently in effect include the
1981 Incentive Stock Option Plan (the "1981 Plan") and the 1986
Incentive Stock Option Plan (the "1986 Plan"). These plans were amended
in 1988 to allow the granting of nonqualified stock options as well as
incentive stock options; nonqualified stock options are not intended to
qualify for the tax treatment applicable to incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
At the Annual Meeting held May 7, 1996, the stockholders of the
Company approved and adopted the 1996 Stock Option Plan (the "1996
Plan"). The 1996 Plan has terms similar to the 1986 Plan but no longer
provides for issuance of stock appreciation rights in tandem with option
shares. Stockholders are being asked to approve the new incentive plan
described later in this proxy statement, which would allow grants of
stock options and performance cash awards, as well as other long-term
incentives.
In awarding stock options to the Company's key executives,
including the executive officers, consideration is given to the number
of option shares already outstanding. No stock option grants are made
which would cause the total number of outstanding option shares
exercisable for the first time during any year, or exercisable at any
time, to exceed specified percentages of the outstanding Common Stock of
the Company.
By the terms of each of these plans, no grant of new options may
be made following the plan's termination, but some grants made prior to
such termination are still outstanding and may be exercised. Stock
option grants are made in amounts related to the participants' cash
remuneration, with the relationship increasing with the responsibility
levels of the positions involved. The more responsible the position,
the greater the number of option grant shares and thus the greater the
significance to the participant's total compensation.
Prior to 1997, the number of shares involved in a particular
executive officers' stock option grant was derived by dividing a fixed
percentage of that executive officer's average compensation by the fair
market value of the Company's stock at or near the grant date. However,
as an outcome of the 1997 executive compensation review, the method for
determining 1997 stock option grant levels was revised. As noted
(continued)
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earlier in this report, the Company's recent stock option grants have
been significantly below competitive practice, and the Committee
determined that grant levels should gradually be increased to provide a
more competitive value.
Thus, stock option grants for 1997 were targeted to deliver
approximately 60% of the median expected market value of long-term
incentives for each executive officer based upon published compensation
data and independent surveys, with some adjustments for the relative
contributions of individual officers. In combination with the new
incentive plan to be implemented in 1998, stock option grants in 1998
will be targeted to deliver 100% of the median expected market value for
long-term incentives, again adjusted for individual contributions.
It is the opinion of the Committee that this program constitutes
an alignment between the Company's performance and executive
compensation and also promotes the common long-term interests of the
Company's executive officers and its stockholders.
Broad-Based Stock Option Grant
As part of the executive compensation study conducted in 1997, the
Committee also reviewed the possibility of making a special grant of
stock options to all employees of the Company. Such a grant would help
build alignment between the compensation elements for executive officers
and the rest of the Company, allow all Company employees to share in the
success of the Company, and further enhance the Company's egalitarian,
stockholder-focused culture.
After careful consideration, the Committee has recommended that,
among the matters being submitted to stockholders in this proxy
statement, a one-time grant of stock options be made to all employees
who do not receive stock options under the 1998 Incentive Compensation
Plan. These options, scheduled to be granted during 1998 subject to
approval of the 1998 Employee Stock Option Plan, will be for
approximately 100 shares per employee. These options will carry the
same general terms and conditions of the options granted to executive
officers except they will fully vest three years after the grant date.
Other Compensation Plans
The Company has adopted for many of its employees various benefit
plans in which the executive officers are permitted to participate,
subject to any legal limitations on the amounts that may be contributed
or the benefits that may be payable under the plans. The Committee
notes that one of the most important of these benefits is the Thrift and
Profit Sharing Plan, which includes a Company matching contribution in
Company stock dependent upon the profit level of the Company.
Deductibility of Compensation Over $1 Million
Regulations issued under Section 162(m) of the Code provide that
compensation in excess of $1 million paid to the Chief Executive Officer
and other executive officers named in the proxy statement will not be
deductible unless it meets specified criteria for being "performance-
based". The Company believes its incentive bonus plan clearly meets the
spirit of the "performance-based" requirement; however, the Company has
not previously taken action to comply with the regulations, as it was
(continued)
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not expected that the compensation of any executive officer would exceed
the $1 million level.
The Company is now seeking stockholder approval of the 1998
Incentive Compensation Plan as part of this proxy statement, which
should result in the Company retaining the tax deductibility of any
amounts earned under this plan in future years.
Submitted by the Audit and Compensation Committee of the Company's
Board of Directors:
Allan H. Meltzer, Chairman
Arthur H. Aronson
Deborah M. Fretz
Dennis J. Gormley
Agenda Item 2
PROPOSAL TO APPROVE AND ADOPT
THE 1998 INCENTIVE COMPENSATION PLAN
The stockholders are being asked to approve the "Cooper Tire &
Rubber Company 1998 Incentive Compensation Plan" (the "Incentive Plan")
and to reserve for issuance up to 4,000,000 shares of Common Stock under
such plan. The Board adopted the Incentive Plan, effective as of
January 1, 1998, subject to stockholder approval of the Incentive Plan
at the Annual Meeting. If the Incentive Plan is adopted by the
stockholders at the Annual Meeting, it will replace the "Cooper Tire &
Rubber Company 1996 Stock Option Plan" (the "1996 Option Plan"), and as
of the date of such approval, no further grants will be permitted under
the 1996 Option Plan.
In connection with the approval of the Incentive Plan, the
stockholders are also being asked to approve each of the performance
goals listed under the Incentive Plan pursuant to which the Committee
may make payments which meet the requirements for "qualified
performance-based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
Approval of the Incentive Plan and the performance goals at the
Annual Meeting requires an affirmative vote of the majority of shares
represented in person or by proxy at the meeting and entitled to vote on
the subject matter.
The complete text of the Incentive Plan is attached to this Proxy
Statement as Appendix A. The following is a summary of the key terms of
the Incentive Plan, which is qualified in its entirety by reference to
the text of the Incentive Plan.
DESCRIPTION OF INCENTIVE PLAN
General Terms. The Incentive Plan is an omnibus equity-based
incentive plan that provides for awards in the form of stock awards,
restricted stock units, stock options, stock appreciation rights,
performance units, dividend equivalents and other awards to eligible
individuals. The Incentive Plan also allows the Committee to grant
annual and long-term performance awards that meet the criteria for
"qualified performance-based compensation" under Section 162(m) of the
Code. Only officers and key employees, consultants and advisers to the
(continued)
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Company or any of its subsidiaries (including key individuals who have
accepted an offer of employment with any of them) are eligible to
receive awards under the Incentive Plan. The Company estimates that as
of March 9, 1998 approximately 200 individuals were eligible to
participate in the Incentive Plan.
The Company's ability to issue shares of Common Stock under the
Incentive Plan is subject to a number of limits set forth in the
Incentive Plan. No more than 4,000,000 shares of Common Stock may be
issued under the Incentive Plan (increased by the number of shares
tendered or withheld in connection with the payment or settlement of an
award or for tax purposes under the Incentive Plan or the 1996 Option
Plan) (the "Plan Limit"). The 4,000,000 shares submitted for
stockholder approval includes the 3,200,000 shares already approved by
stockholders for the 1996 Option Plan, of which 2,841,500 remained
available as of December 31, 1997 for grants. The 1996 Option Plan
would be replaced by the Incentive Plan. Shares issued under the
Incentive Plan may be newly issued shares or treasury shares. In
addition, no more than 1,000,000 shares of Common Stock may be issued
under the Incentive Plan as stock awards or in settlement of stock
units, stock appreciation rights, performance units or other stock-based
awards. In order to satisfy the requirements of Section 162(m) of the
Code, no eligible individual may receive under the Incentive Plan in any
calendar year options or stock appreciation rights covering more than
150,000 shares. The limits described above are subject to adjustment by
the Committee in the event of a merger, consolidation, stock dividend,
stock split or other event affecting the Common Stock. On March 9,
1998, the closing price of the Company's Common Stock on the New York
Stock Exchange was $23.5625.
The Committee administers the Incentive Plan and has the authority
to select the participants and determine the type, number and other
terms and conditions of the awards. The Committee may prescribe award
documents, establish rules and regulations for the administration of the
Incentive Plan, construe and interpret the Incentive Plan and the award
documents and make all other decisions or interpretations as the
Committee may deem necessary.
Awards under the Incentive Plan may be granted singly or in
combination or tandem with any other award. The terms and conditions of
each award will be set forth in an award document approved by the
Committee at or after the time of grant of the award. At or after the
time of grant of an award, the Committee may determine the vesting,
exercisability, payment and other restrictions that apply to the award.
The Committee will also have authority, at or after the time of grant,
to determine the effect, if any, that an employee's termination of
employment or a change in control of the Company will have on the
vesting and exercisability of an award.
The Incentive Plan contemplates the following types of awards:
Stock Options. Stock options may be either nonqualified stock
options or incentive stock options within the meaning of Section 422 of
the Code. The term of a stock option may not be longer than ten years,
and the exercise price of an option may not be less than the fair market
value of a share of Common Stock at the time of grant. The exercise
price of a stock option may be paid in cash or previously owned stock or
(continued)
13
<PAGE>
both. The Incentive Plan also allows the Committee to grant a so-called
"reload option" in connection with the exercise of an option through the
tender of previously owned shares of Common Stock. In order to comply
with the provisions of the Code, the Incentive Plan does not allow for
the grant of incentive stock options of more than the Plan Limit.
Stock Appreciation Rights. Each stock appreciation right entitles
a participant to receive the excess, if any, of the fair market value of
a share of Common Stock on the date of exercise over the fair market
value of a share of Common Stock on the date of grant. At the
discretion of the Committee, payments to an employee upon exercise of a
stock appreciation right may be made in cash, shares of Common Stock or
both. The Committee may grant stock appreciation rights alone or
together with stock options. If a stock appreciation right is granted
in tandem with a stock option, the stock appreciation right may not be
exercised prior to, or later than, the time the related option could be
exercised.
Stock Awards. Stock awards generally consist of one or more
shares of Common Stock granted to a participant for no consideration or
sold to a participant for a stated amount. Stock awards may be subject
to restrictions on transfer and to vesting conditions, as the Committee
may determine.
Restricted Stock Units. Each restricted stock unit represents the
right of a participant to receive the value of one share of Common Stock
at a payment date specified in connection with the grant of the unit,
subject to the terms and conditions established by the Committee. When
these terms and conditions are satisfied, restricted stock units will be
payable, at the discretion of the Committee, in cash, shares of Common
Stock or both.
Performance Units. Performance units may be granted as fixed or
variable share- or dollar-denominated units, subject to conditions of
vesting and time of payment as the Committee may determine. Performance
units will be payable, at the discretion of the Committee, in cash,
shares of Common Stock or both.
Dividend Equivalents. Each dividend equivalent granted under the
Incentive Plan generally entitles a participant to receive the value of
any dividends paid in respect of a share of Common Stock. Dividend
equivalents may be settled through the payment of cash, Common Stock,
other property or any combination thereof and may be awarded on a free-
standing basis or in connection with another award.
Other Awards. The Incentive Plan authorizes the Committee to
fashion other types of equity and non-equity based awards and gives the
Committee broad discretion to specify the terms and provisions of such
other awards. Other awards may be based upon performance goals, the
value of a share of Common Stock, the value of other securities of the
Company, or other criteria that the Committee specifies. Other awards
may consist solely of cash bonuses or supplemental cash payments to a
participant to permit the participant to pay some or all of the tax
liability incurred in connection with the vesting, exercise, payment or
settlement of an award.
Performance Awards. The Incentive Plan permits the Committee to
establish one or more performance periods and to provide for performance
(continued)
14
<PAGE>
payments to participants upon the achievement of the targets for one or
more performance goals applicable to the performance period. A
performance period may be for such duration as the Committee may
specify, and the Incentive Plan allows the Committee to establish
concurrent or overlapping performance periods. Performance payments are
intended to qualify as "qualified performance-based compensation" for
purposes of Section 162(m) of the Code and to be fully deductible for
federal income tax purposes by the Company.
Payments in respect of a performance period may be made only upon
the achievement of the targets for one or more of the following
performance goals: earnings per share, net income, net operating income,
pretax profits, pretax operating income, revenue growth, return on
sales, return on equity, return on assets managed, return on investment,
increase in the Fair Market Value of a share of Common Stock, total
return to stockholders, cash flow, or economic value added. A
performance goal may be measured on a periodic, annual or cumulative
basis and may be established on a corporate-wide basis or established
with respect to one or more operating units, divisions, subsidiaries,
acquired businesses, minority investments, partnerships or joint
ventures. Performance goals may be calculated without regard to changes
in accounting rules that occur during a performance period.
Following the completion of a performance period, the Incentive
Plan requires the Committee to certify that the applicable performance
targets have been achieved and to determine the amount of the
performance payment to be made to a participant for the performance
period. The Plan allows the Committee to exercise discretion to reduce
(but not increase) the amount of the performance payment for a
performance period.
Performance payments may be paid in cash, Common Stock, awards
under the Incentive Plan or in other property. The Committee may also
permit a participant to defer receipt of a performance payment or may
require the mandatory deferral of some or all of a performance payment.
Where a performance payment is made in the form of Common Stock that is
subject to transfer or other restrictions, the Incentive Plan permits,
but does not require, the Committee to apply a discount not in excess of
25% to the fair market value of a share of Common Stock to determine the
number of shares of Common Stock that will be delivered to the
participant as part of the performance payment.
The maximum value of a performance payment that may be made to a
participant for any performance period of twelve months is $2,000,000.
If the payment for a twelve month period is expressed as a percentage of
the participant's base salary, it may not be greater than 150% of the
participant's annual base salary in effect at the start of the
performance period. If a performance period is greater than or less
than twelve months, the dollar or salary limit will be determined by
multiplying the applicable twelve-month limit by a fraction, the
numerator of which is the number of whole and partial months in the
performance period and the denominator of which is twelve.
The Board or the Committee may, at any time, terminate or, from
time to time, amend, modify or suspend the Plan. However, no amendment
may increase the limits set forth in the Incentive Plan, allow for
grants of options at an exercise price less than Fair Market Value at
the time of grant or amend the Incentive Plan in anyway which would
(continued)
15
<PAGE>
permit a reduction in the exercise price of options, without stockholder
approval.
NEW PLAN BENEFITS
As of the date of the Proxy statement, the only awards which have
been made or determined by the Company under the Incentive Plan are set
forth in the table below. For a discussion of the stock options granted
in 1997 to the Named Executive Officers (as defined in the Summary
Compensation Table below), see the section of this Proxy statement
entitled "Option Grants In Last Fiscal Year."
<TABLE>
COOPER TIRE & RUBBER COMPANY
1998 INCENTIVE COMPENSATION PLAN
<CAPTION>
Target Opportunity Target Opportunity
For One Year For Three Year
Performance Period Performance Period
Beginning Beginning
Name and Position January 1, 1998 January 1, 1998
- ----------------- ------------------- -------------------
<S> <C> <C>
Patrick W. Rooney $ 289,749 $220,000
Chairman of the Board,
President and Chief
Executive Officer
J. Alec Reinhardt 215,388 110,000
Executive Vice President
John Fahl 147,538 65,000
Vice President
William S. Klein 67,129 50,000
Vice President
Robert C. Gasser 2 - -
Vice President
Executive Officer Group 3 1,047,839 620,000
Non-Executive Officer 4 328,468 137,000
Employee Group
<FN>
(1) Amounts indicated above reflect payments that will be made if the
Company achieves the performance targets for the applicable period set
by the Committee and the Committee does not exercise discretion to
reduce such amounts. Actual amounts earned may be less than, equal to,
or greater than the amounts shown depending upon the Company's
performance for the applicable performance period.
(2) Mr. Gasser retired on February 11, 1998 and will not participate in
the Incentive Compensation Plan.
(3) Includes eleven individuals, including the four listed above.
(4) Includes nine individuals.
</TABLE>
16
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of the grant and exercise of
an option are summarized below. The summary is not intended to be
complete and is not intended as tax advice to any person.
Nonqualified Stock Options. The grant of a nonqualified stock
option has no immediate federal income tax effect; the employee will not
recognize taxable income and the Company will not receive a tax
deduction. When the employee exercises the option, the employee will
recognize ordinary income in an amount equal to the excess of the fair
market value of the Common Stock on the date of exercise over the
exercise price, and the Company will generally receive a tax deduction
equal to the amount of income recognized. Nonqualified stock options
granted under the Incentive Plan are intended to qualify as qualified-
performance-based compensation for purposes of Section 162(m) of the
Code.
Incentive Stock Options. When an employee is granted an incentive
stock option, or when the employee exercises the option, the employee
will generally not recognize taxable income (except for purposes of the
alternative minimum tax) and the Company will not receive a tax
deduction. If the employee holds the shares of Common Stock for at
least two years from the date of grant and one year from the date of
exercise, any gain or loss upon a subsequent disposition of the shares
will be treated as long-term capital gain or loss.
The Board of Directors recommends that stockholders vote FOR the 1998
- ---------------------------------------------------------------------
Incentive Compensation Plan.
- ----------------------------
Agenda Item 3
PROPOSAL TO APPROVE AND ADOPT
THE 1998 EMPLOYEE STOCK OPTION PLAN
The stockholders are being asked to approve the "Cooper Tire &
Rubber Company 1998 Employee Stock Option Plan" (the "Stock Option
Plan") and reserve for issuance under the Stock Option Plan of up to
1,200,000 shares of Common Stock. The Board adopted the Stock Option
Plan on February 10, 1998, subject to stockholder approval at the Annual
Meeting. Approval of the Stock Option Plan requires an affirmative vote
of the majority of shares represented in person or by proxy at the
meeting and entitled to vote on the subject matter.
The full text of the Stock Option Plan is included as Appendix B.
Below is a summary of certain key provisions of the Stock Option Plan,
which is qualified in its entirety by reference to the text of the Stock
Option Plan.
DESCRIPTION OF STOCK OPTION PLAN
General Terms. The Stock Option Plan provides for grants of
stock options to purchase shares of Company Common Stock to employees of
the Company and its subsidiaries and will allow the Company to make a
universal option grant to substantially all of its employees. All
employees of the Company and any of its subsidiaries are eligible to
(continued)
17
<PAGE>
participate in the Stock Option Plan other than those officers and key
employees who are eligible for awards under the Incentive Plan. For a
discussion of the Incentive Plan, see the section of this Proxy entitled
"Proposal to Approve and Adopt the 1998 Incentive Compensation Plan."
No participant will be granted under the Stock Option Plan in any
calender year an option covering more than 100 shares of Common Stock.
The Company estimates that as of March 9, 1998 approximately 10,000
individuals were eligible to participate in the Stock Option Plan.
A total of 1,200,000 shares of Company Common Stock are authorized
for issuance under the Stock Option Plan. The shares issued will be
treasury shares and will be increased by any shares tendered or withheld
to pay the exercise price of an option or to satisfy a participant's tax
withholding obligations. The number and type of shares available for
issuance may be adjusted by the Committee if there are changes in the
capitalization of the Company or as a result of a merger or a similar
transaction. On March 9, 1998, the closing price of the Company's
Common Stock on the New York Stock Exchange was $23.5625.
The Committee will administer the Stock Option Plan, select the
participants, and determine the size and terms of the options. The
Committee will also prescribe award documents, and may establish rules
and regulations for the administration of the Stock Option Plan,
construe and interpret the Stock Option Plan and the award documents and
make other decisions or interpretations they deem necessary.
Only nonqualified stock options may be granted under the Stock
Option Plan. The exercise price of options granted under the Stock
Option Plan may not be less than the fair market value of the Company's
Common Stock on the date of grant. The exercise price of a stock option
may be paid in cash or by tendering previously owned shares of Common
Stock or any combination thereof. The Committee may set the term of a
stock option upon grant, however; no option may have a term longer than
ten years.
Under the terms of the Stock Option Plan, the Committee may
specify at or after the time of the grant the vesting and forfeiture
conditions applicable to an option. Under the terms of the Stock Option
Plan, the Committee has the discretion to accelerate the vesting or
exercisability of stock options, including in connection with a change
in control of the Company.
The Board or the Committee may amend or terminate the Stock Option
Plan at any time. Unless terminated earlier by the Committee or the
Board, the Stock Option Plan will expire on the third anniversary of the
date of stockholder approval.
NEW PLAN BENEFITS
If the Stock Option Plan is approved by the Company's stockholders
at the Annual Meeting, it is anticipated that the Committee would grant
an option covering 100 shares of Common Stock to each eligible employee
at an exercise price equal to the fair market value of a share of Common
Stock on the date of grant. The options would vest on the third
anniversary of the date of the grant and would have a ten-year term.
(continued)
18
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
For a general discussion of the federal income tax consequences of
the grant and exercise of a nonqualified stock option, see the section
entitled "Federal Income Tax Consequences" in this Proxy Statement
entitled "Proposal to Approve and Adopt the 1998 Incentive Compensation
Plan."
The Board of Directors recommends that stockholders vote FOR the 1998
- ---------------------------------------------------------------------
Employee Stock Option Plan.
- ---------------------------
Agenda Item 4
PROPOSAL TO APPROVE AND ADOPT
THE 1998 NON-EMPLOYEE DIRECTORS
COMPENSATION DEFERRAL PLAN
The stockholders are being asked to approve the "Cooper Tire &
Rubber Company 1998 Non-Employee Director Compensation Deferral Plan"
(the "Deferral Plan") and reserve for issuance under the Deferral Plan
of up to 200,000 shares of Common Stock. The Board adopted the Deferral
Plan on February 10, 1998, subject to stockholder approval at the Annual
Meeting. Approval of the Deferral Plan requires an affirmative vote of
the majority of shares represented in person or by proxy at the meeting
and entitled to vote on the subject matter.
The full text of the Deferral Plan, is included as Appendix C.
Below is a summary of certain key provisions of the Deferral Plan which
is qualified in its entirety by reference to the text of the Deferral
Plan.
DESCRIPTION OF DEFERRAL PLAN
General Terms. The purpose of the Deferral Plan is to permit non-
employee Directors of the Company to defer some or all of the Director's
fees and meeting fees payable to them for service on the Board. Only
Directors who are not, and have not been, employees of the Company or
any of its subsidiaries may participate in the Deferral Plan. There are
currently six such Directors who are eligible to participate in the
Deferral Plan.
The portion of the Director's fees that a non-employee Director
elects to defer will be converted into phantom stock units and credited
to a bookkeeping account established by the Company for this purpose.
The number of phantom stock units to be credited will be determined by
dividing the amount of the deferred Director's fees by the fair market
value of a share of Company Common Stock as of the date of crediting.
The phantom stock units credited to a Director's account will be
settled through the delivery of a corresponding number of shares of
Common Stock to the Director on the payment date or dates selected by
the Director in connection with the Director's initial deferral
election. Payment must commence on the date specified in the deferral
election form (or earlier if the Director ceases to be a member of the
Board) and be made in either a lump sum or through no more than five
annual installments.
A total of 200,000 shares of Company Common Stock are authorized
for issuance under the Deferral Plan. The shares issued will be either
(continued) 19
<PAGE>
authorized and unissued shares of Common Stock or treasury shares. The
number and type of shares available for issuance may be adjusted by the
Committee if there are changes in the capitalization of the Company, or
as a result of a merger, or a similar transaction.
Directors do not have any right to vote the shares of Common Stock
underlying the phantom stock units. A Director's account under the
Deferral Plan will be credited with dividend equivalents equal to the
value of the actual dividends paid on a corresponding number of shares
of Common Stock and will be converted into additional phantom stock
units based upon the then fair market value of the Common Stock.
The amount and number of phantom stock units payable under the
Deferral Plan will be based upon the deferral election made by eligible
Directors. As of the date of this Proxy Statement, the Company has not
distributed deferral forms to Directors and has not determined the level
of Director participation.
The Board of Directors recommends that stockholders vote FOR the Non-
- ----------------------------------------------------------------------
Employee Directors Compensation Deferral Plan.
- ----------------------------------------------
Agenda Item 5
STOCKHOLDER PROPOSAL
Alan G. Hevesi, Comptroller of the City of New York, on behalf of
The New York City Police Department Pension Fund, c/o Office of
Comptroller, Municipal Building, 1 Center Street, Room 736, New York, NY
10007, the beneficial holder of 4,200 shares of the Company's Common
Stock, has given notice of the Fund's intention to introduce the
following resolution at the Annual Meeting:
BE IT RESOLVED, that the stockholders of Cooper Tire and Rubber Company
request that the Board of Directors take the necessary steps to
declassify the Board and establish annual elections of directors,
whereby directors would be elected annually and not by classes. This
policy would take effect immediately, and be applicable to the re-
election of any incumbent director whose term, under the current
classified system, subsequently expires.
STOCKHOLDER'S STATEMENT IN SUPPORT OF THIS PROPOSAL
We believe that the ability to elect directors is the single most
important use of the shareholder franchise. Accordingly, directors
should be accountable to shareholders on an annual basis. The election
of directors by classes, for three-year terms, in our opinion, minimizes
accountability and precludes the full exercise of the rights of
shareholders to approve or disapprove annually the performance of a
director or directors.
In addition, since only one-third of the Board of Directors is
elected annually, we believe that classified boards could frustrate, to
the detriment of long-term shareholder interest, the efforts of a bidder
to acquire control or a challenger to engage successfully in a proxy
contest.
(continued)
20
<PAGE>
We urge your support for the proposal which requests the Board of
Directors to take the necessary steps to repeal the classified board and
establish that all directors be elected annually.
BOARD'S RESPONSE TO THIS STOCKHOLDER PROPOSAL
The Board of Directors believes that a classified board is in the
best interests of the Company and its stockholders. Unlike corporations
that have had a classified board since their incorporation, the Company
submitted the adoption of its classified board to the vote of its
stockholders at an annual meeting held on May 7, 1985. Holders of
approximately 79% of the Company's shares present and voting at the
meeting decided that a classified board was in the best interest of the
Company and voted to approve its adoption. This proposal seeks to
reverse that decision.
A classified board is a widely used safeguard to protect a
corporation and its stockholders from inadequate tender offers or
unsolicited attempts to seize control of the corporation. The
classified board would prevent a hostile actor from replacing the board
in less than 12 months, which in effect encourages that person who might
seek to acquire control of a corporation to negotiate with its board.
This would give the board time to evaluate any proposal, study
alternatives and seek the best result for all stockholders.
The Company believes that its classified board helps provide
continuity and stability to the Company's management and policies. It
also contributes to more effective long-term strategic planning because
it ensures that at least a majority of the directors at any one time
will have an in-depth knowledge of the Company and its business. In
addition, the system permits directors to effectively represent the
interests of all stockholders in a variety of circumstances, including
those interests created by a minority stockholder.
The affirmative vote of the stockholders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual
meeting is required for approval of this proposal.
The Board of Directors recommends that stockholders vote AGAINST this
- ----------------------------------------------------------------------
stockholder proposal.
- ---------------------
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ending December
31, 1995, 1996, and 1997, the cash compensation paid by the Company as
well as certain other compensation paid or accrued for those years, to
Mr. Rooney, the Chairman of the Board, President and Chief Executive
Officer, and the four most highly compensated officers other than Mr.
Rooney who were serving as executive officers as of December 31, 1997
(the "Named Executive Officers").
(continued)
21
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Long-Term All Other
Compensation Compensation Compensation1
------------ ------------ -------------
Number
of shares
underlying
stock
Name and Principal option
Position Year Salary Bonus awards
- ------------------ ---- ------ ----- ---------
<S> <C> <C> <C> <C> <C>
Patrick W. Rooney 1997 $452,733 $397,111 33,000 $50,872
Chairman of the Board, 1996 431,174 351,407 16,600 45,185
President and Chief 1995 402,639 374,455 11,900 47,012
Executive Officer
J. Alec Reinhardt 1997 336,543 295,197 18,000 37,816
Executive Vice 1996 320,517 261,222 11,100 33,601
President 1995 302,044 280,902 8,000 35,468
John Fahl 1997 230,528 202,206 10,500 30,104
Vice President 1996 219,550 178,933 5,900 26,615
1995 206,793 192,316 4,300 22,483
William S. Klein 1997 267,886 149,386 5,600 24,953
Vice President 1996 257,582 122,124 3,800 22,185
1995 243,002 145,373 2,600 22,299
Robert C. Gasser 1997 221,334 179,802 7,000 14,053
Vice President 1996 210,794 153,818 3,800 21,533
1995 191,245 134,996 2,700 20,294
<FN>
(1) Includes total amounts paid or accrued for the indicated fiscal
years, consisting of Company matching contributions to the Thrift and
Profit Sharing Plan and allocations to the Nonqualified Supplementary
Benefit Plan which provides benefits otherwise denied participants
because of Internal Revenue Code limitations on qualified benefits.
</TABLE>
Stock Option Grants
The following table contains information concerning the grant of
stock options under the Company's 1996 Stock Option Plan to the Named
Executive Officers during the 1997 fiscal year. In addition, in
accordance with rules of the Securities and Exchange Commission (the
"SEC"), a valuation is assigned to each reported option as of the grant
date. In assessing these values it should be kept in mind that no
matter what theoretical value is placed on a stock option on the date of
grant, its ultimate value will be determined only by the market value of
the Company's stock at a future date.
(continued)
22
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Grant Date
Individual Grants Value
------------------------------------------- ----------
Percent of
total
Number of options
shares granted to Grant
underlying employees Exercise date
options in fiscal price Expiration present
Name granted1 year per share date2 value3
- ----------------- -------- --------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Patrick W. Rooney 33,000 14.4% $24.50 July 21, 2007 $279,212
J. Alec Reinhardt 18,000 7.8 24.50 July 21, 2007 159,072
John Fahl 10,500 4.6 24.50 July 21, 2007 77,822
William S. Klein 7,000 3.1 24.50 July 21, 2007 37,551
Robert C. Gasser 7,000 3.1 24.50 - 4 - 4
<FN>
(1) The options become exercisable for 50% of the shares on the first
anniversary of the date of grant and for the balance on the second
anniversary of the date of grant.
(2) Subject to earlier expiration if the executive officer ceases to be
an employee of the Company, with specified periods for exercise after
termination provided in the event of termination without cause,
retirement, or death.
(3) Calculated using the Black-Scholes option pricing model.
Assumptions used in calculating the reported values include (a) an
expected volatility based on the monthly change for the forty-nine month
period July 1, 1993 through July 31, 1997, (b) a weighted average risk-
free rate of return of 6.1%, (c) a dividend yield of 1%, and (d) a time
of exercise based on the earlier of the historical exercise pattern of
each individual or the latest permissible date. No adjustments were
made for non-transferability or forfeiture.
(4) Due to the retirement of Robert C. Gasser, these options will not
vest and therefore have no value at the Grant Date.
</TABLE>
Option Exercises and Holdings
The following table sets forth information, with respect to the
Named Executive Officers, concerning the exercise of options during the
1997 fiscal year and unexercised options held as of the end of the
fiscal 1997 year.
(continued)
23
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Value of
shares underlying unexercised in-the-
unexercised options money options2 at
Shares at fiscal year-end fiscal year-end
acquired ------------------- ------------------
on Value Exercis- Unexercis- Exercis- Unexercise-
Name exercise realized1 able able able able
- --------------- -------- -------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Patrick W. Rooney 2,200 $34,753 53,500 41,300 $186,756 $47,466
J. Alec Reinhardt - - 27,650 23,550 32,489 31,739
John Fahl - - 17,850 13,450 53,399 16,870
William S. Klein - - 13,100 8,900 29,172 10,866
Robert C. Gasser - - 15,200 8,900 47,244 10,866
<FN>
(1) In accordance with SEC rules, this value is based upon the average
of the high and low market prices on the New York Stock Exchange on the
date of exercise less the exercise price. Whether any actual profits
will be realized will depend upon whether the shares acquired are sold
and the amount received upon any such sale.
(2) In accordance with SEC rules, this value is based upon the average
of the high and low market prices on the New York Stock Exchange on the
last trading day of the fiscal year, which was $24.21875, less the
exercise price. Whether any actual profits will be realized will depend
upon whether the shares acquired are sold and the amount received upon
any such sale.
</TABLE>
Pension Plans
The following table shows the estimated annual pension benefits
payable to a covered participant at normal retirement age under the
Company's Salaried Employees' Retirement Plan, a qualified defined
benefit pension plan, as well as under the Company's Nonqualified
Supplementary Benefit Plan, which provides benefits that would otherwise
be denied participants by reason of certain Code limitations on
qualified plan benefits.
(continued)
24
<PAGE>
<TABLE>
PENSION PLAN TABLE
Years Of Service
------------------------------------------------------------
<CAPTION>
Remuneration 20 25 30 35 40 45 50
- ------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
$300,000 $ 90,000 $112,500 $135,000 $157,500 $180,000 $202,500 $225,000
350,000 105,000 131,250 157,500 183,750 210,000 236,250 262,500
400,000 120,000 150,000 180,000 210,000 240,000 270,000 300,000
450,000 135,000 168,750 202,500 236,250 270,000 303,750 337,500
500,000 150,000 187,500 225,000 262,500 300,000 337,500 375,000
550,000 165,000 206,250 247,500 288,750 330,000 371,250 412,500
600,000 180,000 225,000 270,000 315,000 360,000 405,000 450,000
650,000 195,000 243,750 292,500 341,250 390,000 438,750 487,500
700,000 210,000 262,500 315,000 367,500 420,000 472,500 525,000
750,000 225,000 281,250 337,500 393,750 450,000 506,250 562,500
800,000 240,000 300,000 360,000 420,000 480,000 540,000 600,000
850,000 255,000 318,750 382,500 446,250 510,000 573,750 637,500
900,000 270,000 337,500 405,000 472,500 540,000 607,500 675,000
950,000 285,000 356,250 427,500 498,750 570,000 641,250 712,500
</TABLE>
Remuneration in the table above is the average of a participant's
annual compensation, as reported in the Summary Compensation Table,
during the highest five out of the last ten years of employment.
Benefits shown reflect estimated straight-life annuity payments assuming
normal retirement at age 65; the benefits are not subject to deduction
for Social Security or other offset amounts.
The credited years of service at normal retirement for each of the
executive officers named in the Summary Compensation Table, with the
exception of Mr. Gasser who has retired, will be as follows: Patrick W.
Rooney - 42.3; J. Alec Reinhardt - 30.3; John Fahl - 46.2; and William
S. Klein - 32.3.
Employment Agreements
The Company entered into employment agreements with J. Alec
Reinhardt, effective January 1, 1987; with Patrick W. Rooney, effective
January 1, 1991; and with John Fahl, effective January 1, 1995. The
agreements provide for the payment of an annual base salary and for
participation in certain employee benefit plans. The current base
salaries payable to Messrs. Reinhardt, Rooney and Fahl under the
agreements are $323,081, $434,623, and $221,306, respectively, which
amounts are reviewed annually and may be increased but not decreased. In
addition, these executive officers receive cash bonuses as described
earlier in this proxy statement. The initial term of each agreement is
four (4) years, with the term being automatically extended for one year
each January 1 unless either the Company or the executive officer gives
prior written notice of its or his desire not to extend the term. In no
event will the term extend beyond the end of the year in which the
executive officer's 65th birthday occurs.
The agreements restrict these executive officers from competition
with the Company, unless the prior written consent of the Board of
Directors is received, and prohibit disclosure of confidential
information. In addition, the agreements provide that in the event of
termination of employment by the Company without Cause or by the
(continued)
25
<PAGE>
executive officer for Good Reason, the executive officer is entitled to
receive severance benefits for the remainder of the term equal to his
average annual compensation during the five years prior to the year in
which such termination occurs. In the event that any payment of such
severance benefits would, under the Internal Revenue Code of 1986, as
amended, trigger the imposition of an excise tax on, and the loss of a
deduction to the Company or its successors for, all or any part of the
payments, such payments shall be reduced until no such excise tax is
imposed or deduction lost.
The agreements also provide (i) continuation of Company-sponsored
life, accident and health insurance benefits for the remainder of the
term, (ii) a lump sum payment equal to the actuarial equivalent of the
difference between (a) the benefits which would have accrued under the
Salaried Employees' Retirement Plan or the Nonqualified Supplementary
Benefit Plan, based on full vesting and additional service credit, and
(b) the amount of the benefits actually accrued at the date of
termination, (iii) a lump sum cash payment equal to the difference
between the exercise price of stock options held by the executive
officer and the fair market value of the stock subject to such options
at the time of termination, and (iv) any legal expenses and fees
incurred as a result of his termination of employment. "Cause" under
the agreements generally includes the willful failure of the executive
officer to substantially perform his duties or the commission of a
felony or his engaging in some type of willful misconduct which is
materially injurious to the Company. "Good Reason" generally includes
any reduction in salary, benefits, an alteration of the executive
officer's responsibilities or status, relocation of the Company, and
failure of any successor of the Company or its business to assume the
employment agreements.
Compensation of Directors
The Company pays each Director who is not a Company officer an
annual retainer of $13,000 together with a $2,500 per diem fee for
attendance at Board meetings and at Committee meetings not held on the
same day as a Board meeting. Directors who are Company Officers receive
no additional compensation for serving as Directors. During 1997, Board
meetings were held on five days, and the Audit and Compensation
Committee met three times on days other than on a Board meeting day.
At the Annual Meeting in 1991, stockholders approved the 1991
Stock Option Plan for Non-Employee Directors. Only Directors who are
not present or former employees of the Company or any of its
subsidiaries ("Non-Employee Directors") may participate in this Plan.
The maximum number of shares of the Company's Common Stock which
may be issued pursuant to options granted under the Plan is currently
100,000 shares, subject to adjustment for subsequent stock splits, stock
dividends, or other specified events. The number of option shares
granted to a Non-Employee Director each year is determined pursuant to a
formula which provides that the dollar value of the option grant will be
equal to a fixed percentage of each Non-Employee Director's total
compensation paid by the Company for the previous fiscal year, which
percentage is based upon the Company's return on equity for such
previous fiscal year.
(continued)
26
<PAGE>
The exercise price for each option is equal to the fair market
value of a share of Common Stock on the grant date, calculated by
averaging the high and low sale prices of the Common Stock on the New
York Stock Exchange on that date. The maximum number of option shares
which may be awarded to a Non-Employee Director in any year is currently
1,000. All options granted pursuant to the Plan are unexercised, except
that an option for 236 shares was exercised during 1993 and options for
1,000 shares each were exercised during 1996 and 1997. The current
number of unexercised shares for each Director is indicated in the table
on page 30 of this proxy statement.
Five-Year Stockholder Return Comparison
The SEC requires that the Company include in its proxy statement a
line graph presentation comparing cumulative, five-year stockholder
returns on an indexed basis with the Standard & Poors ("S&P") 500 Stock
Index and either a published industry or line-of-business index or an
index of peer companies selected by the Company. The Company in 1993
chose the S&P Auto Parts After Market Index as the most appropriate of
the nationally recognized industry standards and used that index for its
stockholder return comparisons in the Proxy Statements for its Annual
Meetings of Stockholders held in 1993 through 1997. The particular
stocks in each index are selected by S&P, and each index includes the
Company's stock. In June of 1996, S&P changed the name and composition
of its Auto Parts After Market index. The new index name is Auto Parts
& Equipment, and the new index deletes two stocks from the former index
and adds four new stocks.
The following chart assumes three hypothetical $100 investments on
January 1, 1992, and shows the cumulative values at the end of each
succeeding year resulting from appreciation or depreciation in the stock
market price, assuming dividend reinvestment.
<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P 500 INDEX
AND S&P AUTO PARTS & EQUIPMENT INDEX
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$100.00 $ 74.05 $ 70.62 $ 74.39 $ 60.48 $ 75.83
100.00 110.08 111.53 153.45 188.68 251.63
100.00 116.23 101.36 125.32 140.61 175.86
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1997 the Company's Board of Directors held four Board
meetings, seven meetings of the Board's Audit and Compensation Committee
and two meetings of the Board's Nominating Committee. Each Director
other than Mr. Dunford attended more than 75% of the aggregate number of
meetings of the Board of Directors and meetings of Committees on which
such Director served during the past fiscal year. Due to travel
commitments, Mr. Dunford was unable to attend one Board meeting and one
Nominating Committe meeting held the same day.
The Company's Audit and Compensation Committee consists of
Directors Aronson, Fretz, and Gormley. The functions of this Committee
(continued)
27
<PAGE>
include recommending the engaging and discharging of the Company's
independent auditors, directing and supervising special investigations,
reviewing with the independent auditors the plan for and results of the
audit engagement, reviewing the scope and results of the Company's
procedures for internal auditing, approving professional services
provided by the independent auditors, reviewing the independence of the
independent auditors, considering the range of audit and non-audit fees,
and reviewing the adequacy of the Company's system of internal
accounting controls. In addition, the Committee recommends the
remuneration arrangements for the Company's officers, the adoption of a
compensation plan in which officers are eligible to participate, and the
granting of options or other benefits under any such plan.
The Nominating Committee, composed of Directors Dunford, Rooney,
Meier, and Shuey, conducts the search for, evaluation of, and proposal
to the Board for nomination of qualified, competent and worthy
candidates. The Nominating Committee will consider candidates proposed
by stockholders of this Company or other parties. Such a recommendation
must be in writing, accompanied by a description of the proposed
nominee's qualifications and other relevant biographical information,
and an indication of the consent of the proposed nominee to serve. The
recommendation should be addressed to the Nominating Committee of the
Board of Directors, Attention: Secretary, Cooper Tire & Rubber Company,
Findlay, Ohio 45840.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP has been the Company's independent auditors for
a number of years and will continue in that capacity during 1998. Ernst
& Young LLP has advised the Company that neither the firm nor any of its
members or associates has any direct or indirect financial interest in
the Company or any of its affiliates. During 1997, Ernst & Young LLP
rendered audit and related services to the Company, including an audit
of the Company's annual financial statements. There is no understanding
or agreement between the Company and its independent auditors that
places a limit on audit fees since the Company pays only for services
actually rendered and at what it believes are customary rates.
A representative of Ernst & Young LLP will be present at the
Annual Meeting of Stockholders and will be available to respond to
appropriate questions and to make a statement if he desires to do so.
Professional services rendered by the Company's independent auditors are
reviewed by the Audit and Compensation Committee both as to the
advisability and scope of the service, and also to consider whether such
service would affect the continuing independence of the Company's
independent auditors.
BENEFICIAL OWNERSHIP OF SHARES
The information which follows is furnished as of March 9, 1998, to
indicate those persons known by the Company to be holders of record of,
or who may be the beneficial owners of, more than 5% of any class of the
Company's voting securities.
(continued)
28
<PAGE>
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Common Stock National City1 6,995,639 shs2 8.9%
P.O. Box 5756
Cleveland, OH 44101-0756
Common Stock Amvescap PLC 7,361,316 shs3 9.3%
11 Devonshire Square
London EC2M4YR
England
<FN>
(1) Trustee for the Company's Thrift and Profit Sharing Plan and the
Pre-Tax Savings Plans at the Auburn, Bowling Green, Findlay, El Dorado,
and Texarkana Plants.
(2) National City, in its fiduciary capacity as Trustee of each Plan,
has no investment powers and will vote the shares held in such Plan in
accordance with the written instructions from the respective Plan
participants. However, if no such instructions are received by the
close of business two (2) days prior to the meeting date, the provisions
of each Plan direct the Trustee to vote such participant's shares in the
same manner in which the Trustee was directed to vote the majority of
the shares of the other participants who gave directions as to voting.
(3) According to a filing on Schedule 13G with the Securities and
Exchange Commission dated February 9, 1998, subsidiaries of Amvescap
PLC, a holding company, hold the indicated shares on behalf of other
persons who have the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of such shares; the
shares are held solely for investment purposes in the ordinary course of
business and not for the purpose of changing or influencing the control
of the Company. The nature of the beneficial ownership consists of sole
power to vote with respect to no shares, shared power to vote with
respect to all the indicated shares, sole power to dispose with respect
to no shares, and shared power to dispose with respect to all the
indicated shares.
</TABLE>
(continued)
29
<PAGE>
The information which follows is furnished as of March 9, 1998, to
indicate ownership by all executive officers and Directors of the
Company, as a group, and each Named Executive Officer, Director or
nominee, individually, of each class of the Company's voting securities.
Unless otherwise indicated, the nature of the beneficial ownership
consisted of sole voting and investment power.
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Common Stock All executive officers and 1,164,083 shs1 1.5 %
Directors as a group
Common Stock Arthur H. Aronson 1,096 shs2 *
Common Stock Edsel D. Dunford 12,181 shs2 *
Common Stock John Fahl 98,908 shs2 *
Common Stock Deborah M. Fretz 650 shs2 *
Common Stock Dennis J. Gormley 2,582 shs2 *
Common Stock William S. Klein 188,269 shs2 *
Common Stock John F. Meier 1,000 shs *
Common Stock Byron O. Pond 1,000 shs *
Common Stock J. Alec Reinhardt 308,807 shs2 *
Common Stock Patrick W. Rooney 287,373 shs2 *
Common Stock John H. Shuey 638 shs2 *
<FN>
*Less than 1%
(1) Includes 150,647 shares obtainable on exercise of stock options
within 60 days following March 9, 1998, which options have not been
exercised. The nature of the beneficial ownership consists of 415,593
shares subject to sole voting and investment power, and 8,284 shares
subject to shared voting and investment power. Of the shares shown as
beneficially owned, 589,559 or .75% of the shares outstanding, are
shares held in the Company's Thrift and Profit Sharing Plan for the
account of the various officers and Directors.
(2) Includes shares obtainable on exercise of stock options within 60
days following March 9, 1998, which options have not been exercised, as
follows: Arthur H. Aronson - 596; Edsel D. Dunford - 1,181; John Fahl -
17,850; Deborah M. Fretz - 350; Dennis J. Gormley - 2,582; William S.
Klein - 13,100; J. Alec Reinhardt - 27,650; Patrick W. Rooney - 53,500;
and John H. Shuey - 138.
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and executive officers, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission and the
New York Stock Exchange initial reports of ownership and reports of
changes in beneficial ownership of Common Stock of the Company.
To the Company's knowledge, based upon the reports filed and
written representations that no other reports were required, during the
fiscal year ended December 31, 1997, its Directors and executive
officers complied with all applicable Section 16(a) filing requirements.
30
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any stockholder who intends to present a proposal at the 1999
Annual Meeting and who wishes to have the proposal included in the
Company's proxy statement and form of proxy for that meeting must
deliver the proposal to the Secretary of the Company not later than
November 24, 1998.
SOLICITATION AND OTHER MATTERS
The Board of Directors is not aware of any other matters which may
come before the meeting. However, if any other matters properly come
before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy in accordance with their
judgment on such matters.
The cost of soliciting proxies will be borne by the Company. In
addition to the solicitation by use of the mails, the Company has
retained Georgeson & Co., New York, New York, to aid in the solicitation
of proxies, at an anticipated cost of approximately $7,500, plus
expenses. The Company will also reimburse brokers and other persons for
their reasonable expenses in forwarding proxy material to the beneficial
owners of the Company's stock. Solicitations may be made by telephone,
telegram or by personal calls, and it is anticipated that such
solicitation will consist primarily of requests to brokerage houses,
custodians, nominees and fiduciaries to forward soliciting material to
the beneficial owners of shares held of record by such persons. If
necessary, officers and other employees of the Company may, by
telephone, telegram or personal interview, request the return of
proxies.
Please mark, execute and return the accompanying proxy so that
your shares may be voted at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Stan C. Kaiman, Secretary
March 24, 1998
IMPORTANT: All stockholders are earnestly requested to mark,
date, sign and mail promptly the enclosed proxy for which an envelope is
provided.
Appendix A
COOPER TIRE & RUBBER COMPANY
1998 INCENTIVE COMPENSATION PLAN
1. Purposes. The purposes of the Plan are to advance the interests of
the Company and its stockholders by attracting and retaining officers
and key employees and to reward officers and key employees for
contributing to the success of the Company and the creation of
stockholder value. The Plan permits the Committee to make Awards which
constitute "qualified performance-based compensation" for purposes of
Section 162(m) of the Code.
2. Definitions and Rules of Construction.
(a) Definitions. For purposes of the Plan, the following capitalized
words shall have the meanings set forth below:
(continued)
31
<PAGE>
"Award" means a Stock Award, RSU, Option, SAR, Dividend Equivalent,
Other Award, Performance Award or any combination of the foregoing.
"Award Document" means an agreement, certificate or other type or
form of document or documentation approved by the Committee which sets
forth the terms and conditions of an Award. An Award Document may be in
written, electronic or other media, may be limited to a notation on the
books and records of the Company and, unless the Committee requires
otherwise, need not be signed by a representative of the Company or a
Participant.
"Beneficiary" means the person designated in writing by the
Participant to exercise or to receive an Award or payments or other
amounts in respect thereof in the event of the Participant's death or,
if no such person has been designated in writing by the Participant
prior to the date of death, the Participant's estate. No Beneficiary
designation under the Plan shall be effective unless it is in writing
and is received by the Company prior to the date of death of the
applicable Participant.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the rulings and regulations promulgated thereunder.
"Committee" means the Audit and Compensation Committee of the
Board, or such other committee of the Board as may be designated by the
Board to administer the Plan.
"Common Stock" means the common stock, par value $1.00 per share,
of the Company.
"Companies" means the Company and each Subsidiary.
"Company" means Cooper Tire & Rubber Company, a Delaware
corporation.
"Deferred Compensation Account" means the account established on
the books and records of the Company to record the amount of deferred
compensation payable under the Plan to a Participant.
"Dividend Equivalent" means a right granted in accordance with
Section 12 to receive a payment in cash, shares of Common Stock or other
property equal in value to the dividends declared and paid on a
specified number of shares of Common Stock. A Dividend Equivalent may
constitute a free-standing Award or may be granted in connection with
another type of Award.
"Effective Date" means January 1, 1998.
"Eligible Individual" means an individual described in Section 4(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rulings and regulations promulgated
thereunder.
"Fair Market Value" means, with respect to a share of Common
Stock, the fair market value thereof as of the relevant date of
(continued)
32
<PAGE>
determination, as determined in accordance with a valuation methodology
approved by the Committee. In the absence of any alternative valuation
methodology approved by the Committee, the Fair Market Value of a share
of Common Stock shall equal the average of the highest and the lowest
quoted selling price of a share of Common Stock as reported on the
composite tape for securities listed on the New York Stock Exchange, or
such other national securities exchange as may be designated by the
Committee, or, in the event that the Common Stock is not listed for
trading on a national securities exchange but is quoted on an automated
system, on such automated system, in any such case on the valuation date
(or, if there were no sales on the valuation date, the average of the
highest and the lowest quoted selling prices as reported on said
composite tape or automated system for the most recent day during which
a sale occurred).
"GAAP" means United States Generally Accepted Accounting
Principles.
"Incentive Stock Option" means an Option which meets the
requirements of Section 422 of the Code.
"Nonqualified Stock Option" means any Option which is not an
Incentive Stock Option.
"Option" means an Option granted under Section 9 of the Plan,
including an Incentive Stock Option and a Nonqualified Stock Option.
"Other Award" means an Award granted under the Plan in accordance
with Section 13.
"Participant" means an Eligible Individual who holds an
outstanding Award under the Plan.
"Performance Award" means the right of a Participant to receive a
specified amount following the completion of a Performance Period based
upon performance in respect of one or more of the Performance Goals
applicable to such period.
"Performance Goal" means any of the following: earnings per
share, net income, net operating income, pretax profits, pretax
operating income, revenue growth, return on sales, return on equity,
return on assets managed, return on investment, increase in the Fair
Market Value of a share of Common Stock, total return to stockholders,
cash flow, or economic value added. A Performance Goal may be measured
over a Performance Period on a periodic, annual, cumulative or average
basis and may be established on a corporate-wide basis or established
with respect to one or more operating units, divisions, Subsidiaries,
acquired businesses, minority investments, partnerships or joint
ventures. To the extent that there is a change in GAAP during a
Performance Period, the Committee may calculate any Performance Goal
with or without regard to such change.
"Performance Period" means a period of time designated by the
Committee over which one or more Performance Goals are measured.
"Performance Unit" means an Award granted pursuant to Section 11.
(continued)
33
<PAGE>
"Plan" means this Cooper Tire & Rubber Company 1998 Incentive
Compensation Plan, as the same may be amended from time to time.
"Restoration Option" means an Option that is awarded upon the
exercise of an Option earlier awarded under the Plan or any other plan
of the Company (an "Underlying Option") for which the exercise price is
paid in whole or in part by tendering shares of Common Stock previously
owned by the Participant, where such Restoration Option (i) covers a
number of shares of Common Stock no greater than the number of
previously owned shares tendered in payment of the exercise price of the
Underlying Option plus the number of shares withheld to pay taxes
arising upon such exercise, (ii) the expiration date of the Restoration
Option is no later than the expiration date of the Underlying Option and
(iii) the exercise price per share of the Restoration Option is no less
than the Fair Market Value per share of Common Stock on the date of
exercise of the Underlying Option.
"Restricted Shares" means shares of Common Stock subject to a
Stock Award that have not vested or remain subject to forfeiture,
transfer or other restrictions in accordance with Section 7 and the
applicable Award Document.
"RSU" means a restricted stock unit award granted in accordance
with Section 8.
"SAR" means a stock appreciation right or limited stock
appreciation right granted in accordance with Section 10.
"Stock Award" means a grant of shares of Common Stock in
accordance with Section 7.
"Stock Option Plan" means the Cooper Tire & Rubber Company 1996
Stock Option Plan, as amended and in effect immediately prior to the
Effective Date.
"Subsidiary" means (i) a corporation or other entity with respect
to which the Company, directly or indirectly, has the power, whether
through the ownership of voting securities, by contract or otherwise, to
elect at least a majority of the members of such corporation's board of
directors or analogous governing body, or (ii) any other corporation or
other entity in which the Company, directly or indirectly, has an equity
or similar interest and which the Committee designates as a Subsidiary
for purposes of the Plan. For purposes of determining eligibility for
the grant of Incentive Stock Options under the Plan, the term
"Subsidiary" shall be defined in the manner required by Section 424(f)
of the Code.
"Substitute Award" means an Award granted upon assumption of, or
in substitution for, outstanding awards previously granted by a company
or other entity in connection with a corporate transaction, such as a
merger, combination, consolidation or acquisition of property or stock.
"Target" means the target performance objective set by the
Committee for a Performance Goal.
"Target Payment" means the amount payable to a Participant for a
Performance Period upon the achievement of one of more Targets set by
the Committee for that period.
(continued)
34
<PAGE>
(b) Rules of Construction. The masculine pronoun shall be deemed to
include the feminine pronoun and the singular form of a word shall be
deemed to include the plural form, unless the context requires
otherwise. Unless the text indicates otherwise, references to sections
are to sections of the Plan.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, no member of which shall be eligible to participate in the
Plan. The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, (i) to select
the Participants, (ii) to grant Awards, (iii) to determine the type,
number and other terms and conditions of, and all other matters related
to, Awards, (iv) to prescribe Award Documents (which need not be
identical for each Participant), (v) to establish rules and regulations
for the administration of the Plan, (vi) to construe and interpret the
Plan and the forms of Award Documents and to correct defects, supply
omissions or reconcile inconsistencies therein, (vii) to make factual
determinations in connection with the administration or interpretation
of the Plan, and (viii) to make all other decisions or interpretations
as the Committee may deem necessary or advisable for the administration
of the Plan. Any decision of the Committee in the administration of the
Plan shall be final and conclusive on all interested persons.
(b) Delegation. The Committee may delegate its responsibility with
respect to the administration of the Plan to one or more officers of the
Company, to one or more members of the Committee or to one or more
members of the Board; provided, however, that the Committee may not
delegate its responsibility (i) to make Awards to individuals who are
subject to Section 16 of the Exchange Act, (ii) to make Awards under
Section 14 which are intended to constitute "qualified performance-based
compensation" under Section 162(m) of the Code or (iii) to amend or
terminate the Plan in accordance with Section 20. The Committee may
also appoint agents to assist in the day-to-day administration of the
Plan and may delegate the authority to execute documents under the Plan
to one or more members of the Committee or to one or more officers of
any of the Companies.
(c) Reliance and Indemnification. The Committee shall be entitled to
rely in good faith upon any report or other information furnished to it
by any officer or employee of the Companies or from the financial,
accounting, legal or other advisers of any of the Companies. Each
member of the Committee, each individual to whom the Committee delegates
authority hereunder, each individual designated by the Committee to
administer the Plan and each other person acting at the direction of or
on behalf of the Committee shall not be liable for any determination or
anything done or omitted to be done by him or by any other member of the
Committee or any other such individual in connection with the Plan,
except for his own willful misconduct or as expressly provided by
statute, and, to the extent permitted by law and the bylaws of the
Company, shall be fully indemnified and protected by the Company with
respect to such determination, act or omission.
(continued)
35
<PAGE>
4. Participation.
(a) Eligible Individuals. Only officers and key employees of one of
the Companies (or a division or operating unit thereof) or key
consultants or advisers to any of the Companies or any individual who
has accepted an offer of employment with any of the Companies as an
officer or key employee shall be eligible to participate in the Plan and
to receive Awards under the Plan.
(b) Awards to Participants. The Committee shall have no obligation to
grant any Eligible Individual an Award or to designate an Eligible
Individual as a Participant for a Performance Period solely by reason of
such Eligible Individual having received a prior Award or having been
designated as a Participant for any prior Performance Period. The
Committee may grant more than one Award to a Participant at the same
time or may designate an Eligible Individual as a Participant in
Performance Periods that begin on the same date or that cover
overlapping periods of time.
5. Common Stock Subject to the Plan.
(a) Plan Limit. The Company is authorized to issue up to 4,000,000
shares of Common Stock under the Plan (the "Plan Limit"). Such shares
of Common Stock may be newly issued shares of Common Stock or reacquired
shares of Common Stock held in the treasury of the Company.
(b) Rules Applicable to Determining Shares Available for Issuance. For
purposes of determining the number of shares of Common Stock that remain
available for issuance, the following shares shall be added back to the
Plan Limit and again be available for Awards:
(i) The number of shares tendered to pay the exercise price of an
Option or other Award or to satisfy a Participant's tax withholding
obligations; and
(ii) The number of shares withheld from any Award to satisfy a
Participant's tax withholding obligations or, if applicable, to pay the
exercise price of an Option or other form of Award.
Solely for purposes of clauses (i) and (ii) in this Section 5(b),
the term "Options" shall include any options granted under the Stock
Option Plan. In addition, any shares issued in connection with
Substitute Awards shall not be counted against the Plan Limit and shall
not be subject to Section 5(d).
(c) Reserve. In administering the Plan, the Committee may establish
reserves against the Plan Limit for amounts payable in settlement of
Awards or in settlement of Deferred Compensation Accounts. The
Committee may also promulgate additional rules and procedures for
calculating the portion of the Plan Limit available for Awards. This
Section 5 shall be applied and construed by the Committee so that no
share of Common Stock is counted more than once for purposes of any
debit or credit to the Plan Limit.
(d) Special Limits. Anything to the contrary in Section 5(a)
notwithstanding, but subject to Section 18(b), the following special
limits shall apply to shares of Common Stock available for Awards under
the Plan:
(continued)
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(i) The number of shares to all participants in the aggregate that may
be issued in the form of Stock Awards, or issued upon settlement of
RSUs, SARs, Performance Units or Other Awards, shall not exceed
1,000,000 shares; provided, however, that any such Stock Awards, RSUs,
SARs, Performance Units or Other Awards that are issued in lieu of cash
compensation that otherwise would be paid to a Participant, or in
satisfaction of any other obligation owed by the Company to a
Participant, shall not be counted against such limitation; and
(ii) The maximum number of shares of Common Stock that may be subject
to Options or free-standing SARs granted to any Eligible Individual in
any calendar year shall equal 150,000 shares, plus any shares which were
available under this Section 5(d)(ii) for Awards of Options or free-
standing SARs to such Eligible Individual in any prior calendar year but
which were not covered by such Awards.
(iii) In no event will the number of shares of Common Stock issued in
connection with the grant of Incentive Stock Options exceed the Plan
Limit, as in effect on the Effective Date.
6. Awards in General. Awards under the Plan may consist of Stock
Awards, RSUs, Options, SARs, Performance Units, Dividend Equivalents,
Other Awards, Performance Awards or any combination of the foregoing.
Any Award may be granted singly or in combination or tandem with any
other Award, as the Committee may determine. Awards may be made in
combination with or as alternatives to grants or rights under any other
compensation or benefit plan of the Companies, including the plan of any
acquired entity. The terms and conditions of each Award shall be set
forth in an Award Document in a form approved by the Committee for such
Award, which shall contain terms and conditions not inconsistent with
the Plan. Except in connection with a transaction or event described in
Section 18(b) or in connection with the grant of Substitute Awards,
nothing in the Plan shall be construed as permitting the Company to
reduce the exercise price of Options previously granted under this Plan
or options previously granted under any other plan of the Companies
without stockholder approval.
7. Stock Awards.
(a) Form of Award. The Committee is authorized to grant shares of
Common Stock to an Eligible Individual as a Stock Award for no
consideration other than the provision of services or at a purchase
price determined by the Committee. Stock Awards may be granted in lieu
of other compensation or benefits payable to a Participant or in
settlement of previously granted Awards. Shares of Common Stock granted
pursuant to this Section 7 shall be subject to such restrictions on
transfer or other incidents of ownership for such periods of time, and
shall be subject to such conditions of vesting, as the Committee may
determine. If shares of Common Stock are offered for sale under the
Plan, the purchase price shall be payable in cash, or, in the sole
discretion of the Committee or as set forth in the applicable Award
Document, in shares of Common Stock already owned by the Participant,
for other consideration acceptable to the Committee or in any
combination of cash, shares of Common Stock or such other consideration.
(continued)
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(b) Share Certificates; Rights and Privileges. At the time Restricted
Shares are granted or sold to a Participant, share certificates
representing the appropriate number of Restricted Shares shall be
registered in the name of the Participant but shall be held by the
Company in custody for the account of such person. The certificates
shall bear a legend restricting their transferability as provided
herein. Except for such restrictions on transfer or other incidents of
ownership as may be determined by the Committee and set forth in the
Agreement relating to an award or sale of Restricted Shares, a
Participant shall have the rights of a stockholder as to such Restricted
Shares, including the right to receive dividends and the right to vote
in accordance with applicable law.
(c) Distributions. Unless the Committee determines otherwise at or
after the time of grant, any shares of Common Stock or other securities
of the Company received by a Participant to whom Restricted Shares have
been granted or sold as a result of a non-cash distribution to holders
of Common Stock or as a stock dividend on Common Stock shall be subject
to the same terms, conditions and restrictions as such Restricted
Shares.
8. RSUs. The Committee is authorized to grant RSUs to Eligible
Individuals. Each RSU shall entitle the holder thereof to receive, as
determined by the Committee at or after the time of grant, one share of
Common Stock or cash and other property with a value equal to the Fair
Market Value of a share of Common Stock on the date of settlement of the
RSU. RSUs shall be subject to such vesting, payment and settlement
terms and restrictions as the Committee shall impose. RSUs may be
granted in lieu of other compensation or benefits payable to a
Participant or in settlement of previously granted Awards.
9. Stock Options.
(a) Form of Award. The Committee is authorized to grant Options to
Eligible Individuals. An Option shall entitle a Participant to purchase
a specified number of shares of Common Stock during a specified time at
an exercise price that is fixed at the time of grant or for which the
method of determining the exercise price is specified at the time of
grant, all as the Committee may determine; provided, however, that,
except in the case of Options which are Substitute Awards, the exercise
price per share shall be no less than 100% of the Fair Market Value per
share on the date of grant (or if the exercise price is not fixed on the
date of grant, then on such date as the exercise price is fixed). An
Option may be an Incentive Stock Option or a Nonqualified Stock Option
as determined by the Committee and set forth in the applicable Award
Document. Payment of the exercise price of an Option shall be made in
cash, or, to the extent provided by the Committee at or after the time
of grant, in shares of Common Stock (including shares already owned by
the Participant or to be issued to the Participant upon exercise of the
Option) or in any combination of cash and shares of Common Stock. An
Option may also be exercised through a "cashless exercise" procedure
facilitated by a broker approved by the Company, and in accordance with
procedures established by the Committee, for this purpose. An Option
shall be effective for such term as shall be determined by the Committee
and set forth in the Award Document relating to such Option, and the
Committee may extend the term of an Option after the time of grant;
provided, however, that the term of an Option may in no event extend
beyond the tenth anniversary of the date of grant of such Option. The
(continued)
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Committee may also provide at or after the time of grant that a
Participant shall have the right to receive a Restoration Option upon
the exercise through the tendering of shares of Common Stock of an
Option or an option granted under another plan of the Company.
(b) Incentive Stock Options. Each Option granted pursuant to the Plan
shall be designated at the time of grant as either an Incentive Stock
Option or as a Nonqualified Stock Option. No Incentive Stock Option may
be issued pursuant to the Plan to any individual who, at the time the
Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any of
its Subsidiaries, unless (A) the exercise price determined as of the
date of grant is at least 110% of the Fair Market Value on the date of
grant of the shares of Common Stock subject to such Option, and (B) the
Incentive Stock Option is not exercisable more than five years from the
date of grant thereof. No Incentive Stock Option may be granted under
the Plan after the tenth anniversary of the Effective Date.
10. Stock Appreciation Rights.
(a) Form of Award. The Committee is authorized to grant SARs to
Eligible Individuals. An SAR shall entitle a Participant to receive,
upon exercise, (i) an amount in cash equal to the excess, if any, of the
Fair Market Value on the exercise date of the number of shares of Common
Stock for which the stock appreciation right is exercised, over the Fair
Market Value of such number of shares on the date of grant (or, in the
case of an SAR granted in tandem with an Option, the aggregate exercise
price which the Participant would otherwise have been required to pay
under the terms of the Option in order to purchase such shares), (ii) a
number of shares of Common Stock having an aggregate Fair Market Value,
as of the date of exercise, equal to the amount determined as in the
preceding clause (i), or (iii) a combination of cash and shares having
an aggregate value equal to the amount determined as in the preceding
clause (i). An SAR may be granted on a free-standing basis or in tandem
with another Award. Notwithstanding the foregoing, the exercise price
of an SAR that is a Substitute Award may be less than the Fair Market
Value of a share of Common Stock on the date of grant.
(b) Exercisability. The Committee shall determine at or after the time
of grant whether payments in respect of an SAR shall be in cash, shares
of Common Stock or a combination thereof. An SAR shall be exercisable
at the time or times established by the Committee at or after the time
of grant.
(c) Tandem SARs. If an SAR is granted in tandem with an Option, the SAR
shall not be exercisable prior to or later than the time the related
Option could be exercised. An SAR granted in tandem with an Option may
be granted either at the same time as such Option or subsequent thereto.
If granted in tandem with an Option, an SAR shall cover the same number
of shares of Common Stock as covered by the Option (or such lesser
number of shares as the Committee may determine) and shall be
exercisable only at such time or times and to the extent the related
Option shall be exercisable, and shall have the same term and exercise
price as the related Option (which, in the case of an SAR granted after
the grant of the related Option, may be less than the Fair Market Value
per share on the date of grant of the tandem SAR). Upon exercise of an
SAR granted in tandem with an Option, the related Option shall be
cancelled automatically to the extent of the number of shares covered by
(continued)
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<PAGE>
such exercise; conversely, if the related Option is exercised as to some
or all of the shares covered by the tandem grant, the tandem SAR shall
be cancelled automatically to the extent of the number of shares covered
by the Option exercise.
11. Performance Units. The Committee is authorized to grant
Performance Units to Eligible Individuals. Performance Units may be
granted as fixed or variable share- or dollar-denominated units subject
to such conditions of vesting and time of payment as the Committee may
determine and as shall be set forth in the applicable Award Document
relating to such Performance Units. Performance Units may be paid in
cash, Common Stock, Awards, other property or any combination thereof,
as the Committee may determine at or after the time of grant.
12. Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to
receive cash, Common Stock, Awards or other property equal in value to
the dividends paid in respect of a specified number of shares of Common
Stock. Dividend Equivalents may be awarded on a free-standing basis or
in connection with another Award. The Committee may provide that
Dividend Equivalents will be paid or distributed when accrued or will be
deemed reinvested in additional shares of Common Stock, Awards, or other
investment vehicles as the Committee may specify. Dividend Equivalents
may be subject to the same terms and conditions as any Award granted in
connection therewith or to such other terms and conditions as the
Committee specifies in connection with the granting of the Dividend
Equivalents.
13. Other Awards. The Committee is authorized to grant Other Awards in
addition to the Awards as described in Sections 6 through 12 pursuant to
which cash, Common Stock or other securities of the Company, other
property or any combination thereof is, or in the future may be,
acquired by a Participant. Other Awards may be valued in whole or in
part with reference to, or otherwise based upon or related to one or
more Performance Goals, the value of a share of Common Stock or the
value of other securities of the Company, including preferred stock,
debentures, notes, convertible or exchangeable debt securities, rights
or warrants, the value of any asset or property of the Company or such
other criteria as the Committee shall specify. Other Awards may consist
solely of cash bonuses or supplemental cash payments to a Participant,
including without limitation, payments to permit the Participant to pay
some or all of the tax liability incurred in connection with the
vesting, exercise, payment or settlement of an Award. Other Awards may
be granted in lieu of other compensation or benefits payable to a
Participant or in settlement of previously granted Awards.
14. Performance Awards.
(a) Form of Award. Subject to the further provisions of this Section
14, the Committee is authorized to grant Performance Awards under this
Section 14 which shall provide for Target Payments to Participants for a
Performance Period upon the achievement of the Target or Targets
established by the Committee for such Performance Period. Target
Payments may be made in cash, Common Stock, Awards, other property or
any combination thereof. The provisions of this Section 14 shall be
construed and administered by the Committee in a manner which complies
with the requirements under Section 162(m) of the Code applicable to
"qualified performance-based compensation."
(continued)
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<PAGE>
(b) Performance Goals and Targets. The Performance Goals and Targets
applicable to a Performance Period shall be established by the Committee
prior to, or reasonably promptly following the inception of, a
Performance Period but, to the extent required by Section 162(m) of the
Code and the regulations thereunder, by no later than the earlier of the
date that is ninety days after the commencement of the Performance
Period or the day prior to the date on which 25% of the Performance
Period has elapsed. At the time that the Committee specifies the
Performance Goals and Targets applicable to a Performance Period, the
Committee shall also specify (i) the Target Payment payable for the
Performance Period if the applicable Target or Targets are achieved,
(ii) the amount, if any, payable in excess of the Target Payment if
actual performance exceeds the Target or Targets and (iii) the amount by
which the Target Payment will be reduced if actual performance is less
than the Target or Targets established for the Performance Period. The
Committee may also establish the minimum level of performance on one or
more Performance Goals for a Performance Period below which no amounts
will be payable for the Performance Period.
(c) Additional Provisions Applicable to Performance Periods. More than
one Performance Goal may apply to a given Performance Period and the
payment in connection with a Performance Award for a given Performance
Period may be made based upon (i) the attainment of the performance
Targets for only one Performance Goal or for any one of the Performance
Goals applicable to that Performance Period or (ii) performance related
to two or more Performance Goals, whether assessed individually or in
combination with each other. The Committee may, in connection with the
establishment of Performance Goals and Targets for a Performance Period,
establish a matrix setting forth the relationship between performance on
two or more Performance Goals and the amount of the Award payable for
that Performance Period.
(d) Duration of the Performance Period. The Committee shall establish
the duration of each Performance Period at the time that it sets the
Performance Goals and Targets applicable to that period. The Committee
shall be authorized to permit overlapping or consecutive Performance
Periods.
(e) Certification. Following the completion of each Performance Period,
the Committee shall certify, in accordance with the requirements in the
regulations under Section 162(m) of the Code, whether the criteria for
paying amounts in respect of each Performance Award related to that
Performance Period have been achieved. Unless the Committee determines
otherwise, no amounts payable in respect of Performance Awards shall be
paid for a Performance Period until the Performance Period has ended and
the Committee has certified the amount of the Awards payable for the
Performance Period in accordance with Section 162(m) of the Code.
(f) Discretion. The Committee is authorized at any time during or after
a Performance Period to reduce or eliminate the amount payable in
respect of a Performance Award to any Participant, for any reason,
including, without limitation, (i) in recognition of unusual or
nonrecurring events affecting the Company, any Subsidiary, or any
business division or unit or the financial statements of the Company or
any Subsidiary, or in response to changes in applicable laws,
regulations, or accounting principles, (ii) to take into account a
change in the position or duties of a Participant during the
(continued)
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<PAGE>
Performance Period or a change in the Participant's employment status
during the Performance Period or (iii) to take into account subjective
or objective performance factors not otherwise set forth in the Plan or
applicable Award Documents.
(g) Timing of Payment. Subject to Section 14(e), the amounts, if any,
payable in respect of Performance Awards for a Performance Period will
generally be paid within ninety days following the end of the applicable
Performance Period.
(h) Maximum Amount Payable Per Participant Under This Section 14. The
maximum aggregate value of the cash and other property in settlement of
a Performance Award (prior to adjustment in accordance with Section
14(i)) payable per Participant for any Performance Period of twelve
months may not exceed $2,000,000 (the "Performance Dollar Limit"). If
the Target Payment in connection with a Performance Award payable to a
Participant for a Performance Period of twelve months is expressed as a
percentage of the Participant's base salary, then, in addition to the
limit set forth in the previous sentence, the maximum aggregate value of
the cash and other property (prior to adjustment in accordance with
Section 14(i)) payable to such Participant in respect of the Performance
Award for such Performance Period shall not exceed 150% (the "Salary
Limit") of the Participant's annual rate of base salary as of the start
of the Performance Period. If a Performance Period is greater than or
less than twelve months, the applicable Performance Dollar Limit or
Salary Limit, as the case may be, shall be determined by multiplying the
applicable twelve-month limit by a fraction, the numerator of which is
the number of whole and partial months in the Performance Period and the
denominator of which is twelve.
(i) Payment of Performance Awards in Shares of Common Stock. In the
event that the Company settles a Performance Award through the payment
of Common Stock that is subject to either forfeiture or transfer
restrictions, the Company may apply a reasonable discount to the then
Fair Market Value of the stock in determining the number of shares
issued in settlement of such portion of the award; provided, however,
that the amount of the discount applied to the Fair Market Value of a
share of Common Stock may not exceed 25%.
15. Vesting; Forfeiture; Termination of Employment and Change in
Control. The Committee shall specify at or after the time of grant of
an Award the vesting, forfeiture and other conditions applicable to the
Award and the provisions governing the disposition of an Award in the
event of a Participant's termination of employment with the Companies.
In connection with a Participant's termination of employment, the
Committee may vary the vesting, exercisability and settlement provisions
of an Award relative to the circumstances resulting in such termination
of employment. The Committee shall have the discretion to accelerate
the vesting or exercisability of, eliminate the restrictions and
conditions applicable to, or extend the post-termination exercise period
of an outstanding Award. Similarly, the Committee shall have full
authority to determine the effect, if any, of a change in control of the
Company on the vesting, exercisability, payment or lapse of restrictions
applicable to an Award, which effect may be specified in the applicable
Award Document or determined at a subsequent time.
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<PAGE>
16. Acceleration and Deferral.
(a) Acceleration. The Committee may accelerate the payment or
settlement of an Award and may apply a reasonable discount to the amount
delivered to the Participant to reflect such accelerated payment or
settlement. If the Committee accelerates the payment or settlement of a
Performance Award, the amount of the discount applied to such
accelerated payment or settlement shall meet the requirements of the
regulations under Section 162(m) of the Code.
(b) Deferral. In accordance with rules and procedures established by
the Committee, the Committee (i) may permit a Participant at or after
the time of grant to defer receipt of payment or settlement of some or
all of an Award to one or more dates elected by the Participant,
subsequent to the date on which such Award is payable or otherwise to be
settled, or (ii) may require at or after the time of grant that the
portion of an Award in excess of an amount specified by the Committee be
mandatorily deferred until one or more dates specified by the Committee.
Amounts deferred in accordance with the preceding sentence shall be
noted in a bookkeeping account maintained by the Company for this
purpose and may periodically be credited with notional interest or
earnings in accordance with procedures established by the Committee from
time to time. Deferred amounts shall be paid in cash, Common Stock or
other property, as determined by the Committee at or after the time of
deferral, on the date or dates elected by the Participant or, in the
case of amounts which are mandatorily deferred, on the date or dates
specified by the Committee.
17. General Provisions.
(a) Non-transferability of Award. Unless the Committee determines
otherwise, no Award or amount payable under, or interest in, the Plan
shall be transferable by a Participant except by will or the laws of
descent and distribution or otherwise be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge; provided, however, that the Committee may, in its
discretion and subject to such terms and conditions as it shall specify,
permit the transfer of an Award for no consideration to a Participant's
family members or to one or more trusts or partnerships established in
whole or in part for the benefit of one or more of such family members
(collectively, "Permitted Transferees"); and provided further that this
sentence shall not preclude a Participant from designating a Beneficiary
to receive the Participant's outstanding Award following the death of
the Participant. Any Award transferred to a Permitted Transferee shall
be further transferable only by will or the laws of descent and
distribution or, for no consideration, to another Permitted Transferee
of the Participant. The Committee, may in its discretion, permit
transfers of Awards other than those contemplated by this Section 17(a).
During the lifetime of the Participant, an Option, SAR or similar-type
Other Award shall be exercisable only by the Participant or by a
Permitted Transferee to whom such Option, SAR or Other Award has been
transferred in accordance with this Section 17(a).
(b) Rights with Respect to Shares. A Participant shall have no rights
as a stockholder with respect to shares of Common Stock covered by an
Award until the date the Participant or his nominee becomes the holder
of record of such shares, and, except as provided in Section 12, no
(continued)
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<PAGE>
adjustments shall be made for cash dividends or other distributions or
other rights as to which there is a record date preceding the date such
person becomes the holder of record of such shares.
(c) No Right to Continued Employment. Neither the creation of the Plan
nor the granting of Awards thereunder shall be deemed to create a
condition of employment or right to continued employment with the
Company, and each Participant shall be and shall remain subject to
discharge by the Company as though the Plan had never come into
existence.
(d) Consent to Plan. By accepting any Award or other benefit under the
Plan, each Participant and each person claiming under or through him
shall be conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan by the
Company, the Board or the Committee.
(e) Wage and Tax Withholding. The Company or any Subsidiary is
authorized to withhold from any Award or any compensation or other
payment to a Participant amounts of withholding and other taxes due in
connection with any Award, and to take such other action as the
Committee may deem necessary or advisable to enable the Company and the
Participants to satisfy obligations for the payment of withholding taxes
and other tax obligations relating to any Award. This authority shall
include authority for the Company to withhold or receive Common Stock or
other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations, either on a mandatory
or elective basis in the discretion of the Committee.
(f) Compliance with Securities Laws. An Award may not be exercised,
and no shares of Common Stock may be issued in connection with an Award,
unless the issuance of such shares has been registered under the
Securities Act of 1933, as amended, and qualified under applicable state
"blue sky" laws, or the Company has determined that an exemption from
registration and from qualification under such state "blue sky" laws is
available.
(g) Awards to Individuals Subject to Non-U.S. Jurisdictions. To the
extent that Awards under the Plan are awarded to individuals who are
domiciled or resident outside of the United States or to persons who are
domiciled or resident in the United States but who are subject to the
tax laws of a jurisdiction outside of the United States, the Committee
may adjust the terms of the Awards granted hereunder to such person (i)
to comply with the laws of such jurisdiction and (ii) to permit the
grant of the Award not to be a taxable event to the Participant. The
authority granted under the previous sentence shall include the
discretion for the Committee to adopt, on behalf of the Company, one or
more sub-plans applicable to separate classes of Eligible Individuals
who are subject to the laws of jurisdictions outside of the United
States.
(h) Unfunded Plan. The Plan is intended to constitute an "unfunded"
plan for incentive compensation. Nothing contained in the Plan (or in
any Award Documents or other documentation related thereto) shall give
any Participant any rights that are greater than those of a general
creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts and deposit therein cash, shares of
Common Stock, or other property or make other arrangements, to meet the
(continued)
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<PAGE>
Company's obligations under the Plan. Such trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee determines otherwise. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in
alternative investments, subject to such terms and conditions as the
Committee may specify.
(i) Other Employee Benefit Plans. Payments received by a Participant
under any Award made pursuant to the Plan shall not be included in, nor
have any effect on, the determination of benefits under any other
employee benefit plan or similar arrangement provided by the Company,
unless otherwise specifically provided for under the terms of such plan
or arrangement or by the Committee.
(j) Compliance with Rule 16b-3. Notwithstanding anything contained in
the Plan or in any Award Document to the contrary, if the consummation
of any transaction under the Plan would result in the possible
imposition of liability on a Participant pursuant to Section 16(b) of
the Exchange Act, the Committee shall have the right, in its sole
discretion, but shall not be obligated, to defer such transaction or the
effectiveness of such action to the extent necessary to avoid such
liability, but in no event for a period longer than six months.
(k) Expenses. The costs and expenses of administering and implementing
the Plan shall be borne by the Company.
(l) Application of Funds. The proceeds received by the Company from
the sale of Common Stock or other securities pursuant to Award will be
used for general corporate purposes.
18. Recapitalization or Reorganization.
(a) Authority of the Company and Stockholders. The existence of the
Plan, the Award Documents and the Awards granted hereunder shall not
affect or restrict in any way the right or power of the Company or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company, any issue of stock or of options, warrants or rights to
purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Common Stock or the
rights thereof or which are convertible into or exchangeable for Common
Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(b) Change in Capitalization. Notwithstanding any provision of the
Plan or any Award Document, the number and kind of shares authorized for
issuance under Section 5(a), including the maximum number of shares
available under the special limits provided for in Section 5(d), may be
equitably adjusted in the sole discretion of the Committee in the event
of a stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, extraordinary dividend, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase
Common Stock at a price substantially below Fair Market Value or other
similar corporate event affecting the Common Stock in order to preserve,
but not increase, the benefits or potential benefits intended to be made
(continued)
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available under the Plan. In addition, upon the occurrence of any of
the foregoing events, the number of outstanding Awards and the number
and kind of shares subject to any outstanding Award and the purchase
price per share, if any, under any outstanding Award may be equitably
adjusted (including by payment of cash to a Participant) in the sole
discretion of the Committee in order to preserve the benefits or
potential benefits intended to be made available to Participants granted
Awards. Such adjustments shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent
thereof, shall be final. Unless otherwise determined by the Committee,
such adjusted Awards shall be subject to the same vesting schedule and
restrictions to which the underlying Award is subject.
19. Effective Date. The Plan shall become effective on the Effective
Date, subject to subsequent approval thereof by the Company's
stockholders at the first annual meeting of stockholders to occur after
the Effective Date, and shall remain in effect until it has been
terminated pursuant to Section 20. If the Plan is not approved by the
stockholders at such annual meeting, the Plan and all interests in the
Plan awarded to Participants before the date of such annual meeting
shall be void ab initio and of no further force and effect. Subject to
the approval of the Plan by the stockholders of the Company in
accordance with the first sentence of this Section 19, as of the date of
stockholder approval, the Plan shall replace the Stock Option Plan;
provided, however, that stock options granted under the Stock Option
Plan prior to the date of stockholder approval shall remain outstanding
in accordance with their applicable terms and provisions; and provided
further that, if the Plan is not approved by the stockholders at the
first annual meeting of stockholders to occur after the Effective Date,
the Stock Option Plan shall continue in full force and effect. No
options may be granted under the Stock Option Plan after the date of
stockholder approval of the Plan. Any options granted under the Stock
Option Plan between the Effective Date and the date of stockholder
approval will be treated as options granted under this Plan for purposes
of the Plan Limit in Section 5. Section 14 of the Plan and the
definition of "Performance Goal" shall be submitted to the Company's
stockholders at the first stockholder meeting that occurs in the fifth
year following the year in which the Plan was last approved by
stockholders (or any earlier meeting designated by the Board), in
accordance with the requirements of Section 162(m) of the Code and the
regulations thereunder. If stockholder approval of the Plan is not
obtained at any such meeting, then no further Performance Awards shall
be made under Section 14 after the date of such annual meeting, but the
remainder of the Plan shall continue in effect until terminated in
accordance with Section 20.
20. Amendment and Termination. Notwithstanding anything herein to the
contrary, the Board or the Committee may, at any time, terminate or,
from time to time, amend, modify or suspend the Plan; provided, however,
that no amendment which (i) increases the Plan Limit or increases limits
set forth in Section 5(d) (except as otherwise contemplated by the terms
of the Plan as approved by stockholders), (ii) allows for grants of
Options (other than Substitute Awards) at an exercise price less than
Fair Market Value at the time of grant or (iii) amends the last sentence
of Section 6 in a manner that would permit a reduction in the exercise
price of Options (or options granted under another plan of the
Companies), under circumstances other than those stated in such
sentence, shall be effective without stockholder approval.
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21. Governing Law. The validity, construction and effect of the Plan,
any rules and regulations relating to the Plan, and any Award shall be
determined in accordance with the laws of the State of Delaware
applicable to contracts to be performed entirely within such state and
without giving effect to principles of conflicts of laws.
Appendix B
COOPER TIRE & RUBBER COMPANY
1998 EMPLOYEE STOCK OPTION PLAN
1. Purpose. The purpose of the Cooper Tire & Rubber Company 1998
Employee Stock Option Plan (the "Plan") is to advance the interests of
Cooper Tire & Rubber Company, a Delaware corporation ("Company"), and
its stockholders by providing options to purchase shares of Common Stock
(as defined below) of the Company ("Options") to employees of the
Company and its Subsidiaries (as defined below) (collectively, the
"Companies").
2. Administration.
(a) The Plan shall be administered by the Audit and Compensation
Committee (the "Committee") of the Board of Directors (the "Board ") of
the Company or such other committee of the Board as may be designated by
the Board to administer the Plan.
(b) The Committee shall have all the powers vested in it by the terms
of the Plan, such powers to include the authority (within the
limitations described herein) to select the employees to be granted
Options under the Plan, to determine the size and terms of the Options
to be granted to each employee selected, to determine the time when
Options will be granted and prescribe the form of the award document
setting forth the terms of the Options granted under the Plan. The
Committee shall be authorized to interpret the Plan and the Options
granted under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, to make factual determinations in
connection with the administration or interpretation of the Plan, and to
make any other determinations that it believes are necessary or
advisable for the administration of the Plan. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in the
Plan, in any award document or in any Option in the manner and to the
extent the Committee deems desirable to carry the Plan into effect. Any
decision of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. The Committee may act
only by a majority of its members in office, except that the members
thereof may authorize any one or more of the Committee members or
officers of the any of the Companies to execute and deliver documents on
behalf of the Committee.
(c) The Committee may delegate its responsibility with respect to the
administration of the Plan to one or more officers of the Company, to
one or more members of the Committee or to one or more members of the
Board; provided, however, that the Committee may not delegate its
responsibility to amend or terminate the Plan in accordance with Section
18. The Committee may also appoint agents to assist in the day-to-day
administration of the Plan and may delegate the authority to execute
documents under the Plan to one or more members of the Committee or to
one or more officers of any of the Companies.
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(d) The Committee shall be entitled to rely in good faith upon any
report or other information furnished to it by any officer or employee
of the Companies or from the financial, accounting, legal or other
advisers of any of the Companies. Each member of the Committee, each
individual to whom the Committee delegates authority hereunder, each
individual designated by the Committee to administer the Plan and each
other person acting at the direction of or on behalf of the Committee
shall not be liable for any determination or anything done or omitted to
be done by him or by any other member of the Committee or any other such
individual in connection with the Plan, except for his own willful
misconduct or as expressly provided by statute, and to the extent
permitted by law and the by laws of the Company, shall be fully
indemnified and protected by the Company with respect to such
determination, act or omission.
3. Participation.
(a) All employees of the Companies shall be eligible to participate in
the Plan other than those officers and key employees who are designated
by the Committee as ineligible to participate in the Plan by reason of
their designation by the Committee as eligible for awards under the
Cooper Tire & Rubber Company 1998 Incentive Compensation Plan, as
amended, or any successor plan.
(b) For purposes of the Plan, "Subsidiary" shall mean (i) a corporation
or other entity with respect to which the Company, directly or
indirectly, has the power, whether through the ownership of voting
securities, by contract or otherwise, to elect at least a majority of
the members of such corporation's board of directors or analogous
governing body, or (ii) any other corporation or other entity in which
the Company, directly or indirectly, has an equity or similar interest
and which the Committee designates as a Subsidiary for purposes of the
Plan.
4. The Stock. For the purpose of the Plan, the Board is authorized to
issue and sell up to 1,200,000 shares of the Company's common stock, par
value $1.00 per share (the "Common Stock"). Such shares of Common Stock
shall be treasury shares. The number of shares available for issuance
under the Plan at any time shall be increased by (i) the number of
shares tendered to pay the exercise price of an Option or to satisfy a
Participant's tax withholding obligations and (ii) the number of shares
withheld from any Option to pay the exercise price or to satisfy a
Participant's tax withholding obligations.
5. Options Under the Plan.
(a) Options under the Plan shall be nonqualified stock options and not
incentive stock options within the meaning of Section 422 of the Code.
(b) To the extent that Options under the Plan are awarded to persons
who are domiciled or resident outside of the United States or to persons
who are domiciled or resident in the United States but who are subject
to the tax laws of a jurisdiction outside of the United States, the
Committee may adjust the terms of the Options granted hereunder to such
person (i) to comply with the laws of such jurisdiction and (ii) to
permit the grant of the Options not to be a taxable event to the
Optionee. The authority granted under the previous sentence shall
include the discretion for the Committee to adopt, on behalf of the
(continued)
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Company, one or more sub-plans applicable to separate classes of
eligible employees who are subject to the laws of jurisdictions outside
of the United States. In exercising its authority under this Section
5(b), the Committee may also exclude one or more classes of employees
from participation in the Plan if the Committee determines that such
exclusion is in the best interests of the Company.
6. Award Document. Each Option granted under the Plan shall be
evidenced by an award document in the form approved by the Committee
specifying the number of shares of Common Stock subject to the Option,
the Option exercise price and the other terms and conditions of such
Option as shall be specified by the Committee. An award document may be
in written, electronic or other media, may be limited to a notation on
the books and records of the Company and, unless the Committee requires
otherwise, need not be signed by a representative of the Company or a
Participant. Each Option shall be deemed granted as of the date
specified in the grant resolution of the Committee and noted in the
award document.
7. Amount of Option. Subject to the provisions of Section 12, no
eligible employee selected to participate in the Plan (an "Optionee")
shall receive an Option in any calendar year covering more than 100
shares of Common Stock.
8. Option Exercise Price. The price per share to be paid by the
Optionee at the time an Option is exercised shall be equal to one
hundred percent of the Fair Market Value of a share of Common Stock on
the date the Option is granted. For purposes of the Plan, "Fair Market
Value" means, with respect to a share of Common Stock, the value thereof
as of the relevant date of determination, as determined in accordance
with a valuation methodology approved by the Committee. In the absence
of any alternative valuation methodology approved by the Committee, the
Fair Market Value of a share of Common Stock shall equal the average of
the highest and the lowest quoted selling price of a share of Common
Stock as reported on the composite tape for securities listed on the New
York Stock Exchange, or such other national securities exchange as may
be designated by the Committee, or, in the event that the Common Stock
is not listed for trading on a national securities exchange but is
quoted on an automated system, on such automated system, in any such
case on the valuation date (or, if there were no sales on the valuation
date, the average of the highest and the lowest quoted selling prices as
reported on said composite tape or automated system for the most recent
day during which a sale occurred). Except in connection with a
transaction or event described in Section 12(b), nothing in the Plan
shall be construed as permitting the Company to reduce the exercise
price of Options previously granted under this Plan or options
previously granted under any other plan of the Companies without
stockholder approval.
9. Term, Vesting and Exercisability of Options. An Option shall be
effective for such term as shall be determined by the Committee and set
forth in the award document relating to such Option, and the Committee
may extend the term of an Option after the time of grant; provided,
however, that the term of an Option may in no event extend beyond the
tenth anniversary of the date of grant of such Option. The Committee
shall specify, at or after the time of the grant of an Option, the
vesting, forfeiture and other conditions applicable to the Option. The
Committee shall have the discretion to accelerate the vesting or
(continued)
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exercisability of, eliminate the restrictions and conditions applicable
to, or extend the post-termination exercise period of an Option.
Similarly, the Committee shall have full authority to determine the
effect, if any, of a change in control of the Company on the vesting and
exercisability of an Option, which effect may be specified in the
applicable award document or determined at a subsequent time.
10. Manner of Option Exercise. The Committee shall, at or after the
date of grant of an Option, determine the methods by which an Option may
be exercised in whole or in part and the methods by which the exercise
price may be paid or deemed to be paid, and the form of such payment,
including, without limitation, cash or Common Stock. As a condition to
the grant or exercise of an Option, the Company may require the Optionee
to pay such sum to the Company as shall be necessary to discharge the
Company's obligations with respect to any income or other wage
withholding resulting from the grant or exercise of the Option. The
Company or any Subsidiary is authorized to withhold from any Option or
any compensation or other payment to a Participant amounts of
withholding and other taxes due in connection with the grant or exercise
of such Option, and to take such other action as the Committee may deem
necessary or advisable to enable the Company and the Participants to
satisfy obligations for the payment of withholding taxes and other tax
obligations relating to the Option. This authority shall include
authority for the Company to withhold or receive Common Stock or other
property and to make cash payments in respect thereof in satisfaction of
a Participant's tax obligations, either on a mandatory or elective basis
in the discretion of the Committee.
The exercise of an Option shall be conditioned upon the receipt
from the Optionee (or, in the event of his death, his Beneficiary (as
defined below)) of a representation that, at the time of such exercise,
it is the intent of such person to acquire the shares for investment and
not with a view to distribution; provided, however, that the receipt of
this representation shall not be required upon exercise of the Option in
the event that, at the time of such exercise, the shares subject to the
Option shall be covered by an effective and current registration
statement under the Securities Act of 1933, as amended. The
certificates for unregistered shares issued for investment shall be
restricted by the Company as to transfer unless the Company receives an
opinion of counsel satisfactory to the Company to the effect that such
restriction is not necessary under then pertaining securities laws.
Further, the Company shall not be required to sell or issue any shares
under any outstanding Option if, in the opinion of the Committee, (i)
the issuance of such shares would constitute a violation by the Optionee
or the Company of any applicable law or regulation of any governmental
authority, or (ii) the consent or approval of any governmental body is
necessary or desirable as a condition of, or in connection with, the
issuance of such shares.
11. Termination of Employment and Change in Control. Unless the
Committee determines otherwise at or after the time of grant, the
following provisions shall apply upon an Optionee's termination of
employment with the Companies ("Covered Employment"):
(a) If the Optionee's Covered Employment ends by reason of the
Optionee's death, the Optionee's Beneficiary may exercise the Option
until the earlier to occur of (i) the first anniversary of the date of
the Optionee's death and (ii) the normal expiration date of the Option
(continued)
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as set forth in the applicable award document. "Beneficiary" shall mean
the person designated in writing by the Optionee to receive and exercise
the Option in the event of the Optionee's death or, if no such person
has been designated in writing by the Optionee prior to the date of
death, the Optionee's estate. No Beneficiary designation under the Plan
shall be effective unless it is in writing and is received by the
Company prior to the date of death of the applicable Optionee.
(b) If the Optionee's Covered Employment ends by reason of the
Optionee's Disability (as defined below), the Optionee may exercise the
Option until the earliest to occur of (i) the first anniversary of the
date of the Optionee's termination of Covered Employment due to
Disability, (ii) the normal expiration date of the Option as set forth
in the applicable award document and (iii) the end of the period of
Disability without the Optionee resuming Covered Employment.
"Disability" shall have the meaning assigned to such term or a similar
term under the long-term disability plan of the Companies applicable to
the Optionee at the time of the termination of Covered Employment.
(c) If the Optionee's Covered Employment ends by reason of the
Optionee's Retirement (as defined below), the Optionee may exercise the
Option until the earlier to occur of (i) such period as the Committee
may specify at or after the time of grant and (ii) the normal expiration
date of the Option as set forth in the applicable award document.
"Retirement" shall mean a voluntary resignation of Covered Employment
under circumstances under which the Optionee is entitled to an immediate
pension under the retirement plan of the Companies applicable to the
Optionee.
(d) If the Optionee's Covered Employment is terminated by the Companies
without Cause (as defined below), the Optionee may exercise the Option
until the earlier to occur of (i) the end of the ninety-day period
immediately following the date of the termination of Covered Employment
and (ii) the normal expiration date of the Option as set forth in the
applicable award document. For purposes of this Section 11(d), unless
the Committee determines otherwise, Covered Employment shall not include
any period during which the Optionee is receiving severance pay or other
termination payments.
(e) If an Optionee's Covered Employment ends for a reason not specified
in Section 11(a), 11(b), 11(c) and 11(d), the Options held by the
Optionee on the date of such termination of Covered Employment shall be
immediately forfeited. Whether an Optionee's employment is terminated
for "Cause" shall be determined by the Committee, and such determination
shall be final and binding on all interested persons.
(f) An Optionee may exercise an Option during a post-termination period
exercise period described above only to the extent permitted by the
vesting and forfeiture provisions in the applicable award document or as
otherwise determined by the Committee.
(g) The Committee shall have full authority to determine the effect, if
any, of a change in control of the Company on the vesting,
exercisability, payment or lapse of restrictions applicable to an
Option, which effect may be specified in the applicable award document
or determined at a subsequent time.
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(h) In no event shall an Option be exercisable after the normal
expiration date of the Option set forth in the applicable award
document.
12. Adjustments for Changes in Common Stock.
(a) The existence of the Plan, the award documents and the Options
granted hereunder shall not affect or restrict in any way the right or
power of the Company or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants
or rights to purchase stock or of bonds, debentures, preferred or prior
preference stocks whose rights are superior to or affect the Common
Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) Notwithstanding any provision of the Plan or any award document, the
number and kind of shares authorized for issuance under Section 4 may be
equitably adjusted in the sole discretion of the Committee in the event
of a stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, extraordinary dividend, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase
Common Stock at a price substantially below fair market value or other
similar corporate event affecting the Common Stock in order to preserve,
but not increase, the benefits or potential benefits intended to be made
available under the Plan. In addition, upon the occurrence of any of the
foregoing events, the number of outstanding Options and the number and
kind of shares subject to any outstanding Option and the exercise price
per share, if any, under any outstanding Option may be equitably adjusted
(including by payment of cash to a Participant) in the sole discretion of
the Committee in order to preserve the benefits or potential benefits
intended to be made available to Participants granted Options. Such
adjustments shall be made by the Committee, whose determination as to
what adjustments shall be made, and the extent thereof, shall be final.
Unless otherwise determined by the Committee, such adjusted Options shall
be subject to the same vesting schedule and restrictions to which the
underlying Option is subject.
13. Non-transferability of Option. No Option granted under the Plan
shall be transferable by the Optionee, either voluntarily or
involuntarily, except by will or the laws of descent and distribution.
During the lifetime of the Optionee, an Option shall be exercisable only
by the Optionee or by the Optionee's legal representative. Following
the date of death of an Optionee, the Option may be exercised only by
the Optionee's Beneficiary.
14. General Provisions.
(a) No person shall have any rights as a stockholder with respect to
any shares of Common Stock covered by an Option granted pursuant to the
Plan until the person shall have become the holder of record of such
shares, and no adjustments shall be made for cash dividends or other
distributions or other rights as to which there is a record date
preceding the date such person becomes the holder of record of such
shares.
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(b) Payments received by a Participant under any Option made pursuant
to the Plan shall not be included in, nor have any effect on, the
determination of benefits under any other employee benefit plan or
similar arrangement provided by the Company, unless otherwise
specifically provided for under the terms of such plan or arrangement or
by the Committee.
(c) Notwithstanding anything contained in the Plan or in any award
document to the contrary, if the consummation of any transaction under
the Plan would result in the possible imposition of liability on a
Participant pursuant to Section 16(b) of the Securities Exchange Act of
1934, as amended, the Committee shall have the right, in its sole
discretion, but shall not be obligated, to defer such transaction or the
effectiveness of such action to the extent necessary to avoid such
liability, but in no event for a period longer than six months.
(d) The costs and expenses of administering and implementing the Plan
shall be borne by the Company.
(e) The proceeds received by the Company from the sale of Common Stock
or other securities upon exercise of an Option will be used for general
corporate purposes.
15. No Right to Continued Employment. Neither the creation of the Plan
nor the granting of Options thereunder shall be deemed to create a
condition of employment or right to continued employment with the
Companies, and each Optionee shall be and shall remain subject to
discharge by the Companies as though the Plan had never come into
existence.
16. Unfunded Status of Plan. The Plan shall be unfunded. The
Companies shall not be required to establish a special or separate fund
or to make any other segregation of assets to assure the issuance of
shares of Common Stock under the Plan and the issuance of shares of
Common Stock shall be subordinate to the claims of the Company's general
creditors.
17. Consent to Plan. By accepting any Option or other benefit under
the Plan, each participant, and each person claiming under or through
him or her, shall be conclusively deemed to have indicated his or her
acceptance and ratification of, and consent to, any action taken under
the Plan by the Company, the Board or the Committee.
18. Amendment or Discontinuance. The Board or the Committee may at any
time amend, modify or terminate the Plan in whole or in part without any
advance notice or prior consent of any person; provided, however, that
no amendment which (i) allows for grants of Options at an exercise price
less than Fair Market Value at the time of grant, (ii) increases the
limit in Section 4 (except as otherwise contemplated by the terms of the
Plan as approved by stockholders) or (iii) amends the last sentence of
Section 8 in a manner that would permit a reduction in the exercise
price of Options (or options granted under another plan of the
Companies) in circumstances other than those stated in such sentence,
shall be effective without stockholder approval.
19. Effective Date and Termination. The Plan shall be submitted for
approval to the stockholders of the Company at the first annual meeting
of stockholders to occur after the Plan is approved by the Board and
(continued)
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shall be effective as of the date of such stockholder approval (the
"Effective Date"). No Options may be granted under the Plan unless and
until such stockholder approval is obtained. Except as to Options
previously granted and outstanding under the Plan, the Plan shall
terminate on, and no further Options may be granted after, the third
anniversary of the Effective Date. Options then outstanding may
continue to be exercised in accordance with their terms.
20. Governing Law. The Plan and all rights and obligations hereunder
shall be construed and enforced in accordance with the laws of the State
of Delaware applicable to contracts to be performed entirely in such
state and without giving effect to principles of conflicts of laws.
Appendix C
COOPER TIRE & RUBBER COMPANY
1998 NON-EMPLOYEE DIRECTORS COMPENSATION DEFERRAL PLAN
1. Purpose. The purpose of the Plan is to provide qualified individuals
who are not employees of the Company who serve as members of the Board an
opportunity to defer payment of a portion of their Director's Fees in
accordance with the terms and conditions set forth herein.
2. Definitions. For the purposes of the Plan, the following
capitalized words shall have the meanings set forth below:
"Annual Fees" means the cash portion of (i) any annual fee payable
to a Non- Employee Director for service on the Board, (ii) any other fee
determined on an annual basis and payable for service on, or for acting
as chairperson of, any committee of the Board, and (iii) any similar
annual fee or fees payable in respect of service on the board of
directors of any Subsidiary or any committee of any such board of
directors.
"Annual Meeting" means an annual meeting of the Company's
stockholders.
"Beneficiary" or "Beneficiaries" means an individual or entity
designated by a Non-Employee Director on a Beneficiary Designation Form
to receive Deferred Benefits in the event of the Non-Employee Director's
death; provided, however, that, if no such individual or entity is
designated or if no such designated individual is alive at the time of
the Non-Employee Director's death, Beneficiary shall mean the Non-
Employee Director's estate.
"Beneficiary Designation Form" means a document, in a form
approved by the Executive Committee to be used by Non-Employee Directors
to name their respective Beneficiaries. No Beneficiary Designation Form
shall be effective unless it is signed by the Non-Employee Director and
received by the Executive Committee prior to the date of death of the
Non-Employee Director.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and
the applicable rules and regulations promulgated thereunder.
"Common Stock" means the common stock, par value $1.00 per share,
of the Company.
(continued)
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"Companies " means the Company and each Subsidiary.
"Company" means Cooper Tire & Rubber Company, a Delaware
corporation, or any successor to substantially all of its business.
"Deferral Election Form" means a document, in a form approved by
the Executive Committee, pursuant to which a Non-Employee Director makes
a deferral election under the Plan.
"Deferral Period" means each period commencing on the date of an
Annual Meeting and ending on the date immediately preceding the next
Annual Meeting. The first Deferral Period under the Plan shall commence
on the first day of the first fiscal quarter of the Company to begin
after May 5, 1998. If an individual becomes eligible to participate in
the Plan after the commencement of a Deferral Period, the Deferral
Period for the individual shall be the remainder of such Deferral
Period.
"Deferred Benefit" means an amount that will be paid on a deferred
basis under the Plan to a Non-Employee Director who has made a deferral
election pursuant to Section 5.
"Deferred Compensation Account" means the bookkeeping record
established for each Non-Employee Director. A Deferred Compensation
Account is established only for purposes of measuring a Deferred Benefit
and not to segregate assets or to identify assets that may be used to
pay a Deferred Benefit.
"Director's Fees" means the aggregate of a Non-Employee Director's
Annual Fees and Per Diem Fees.
"Effective Date" means May 5, 1998.
"Election Date" means the day immediately preceding the
commencement of a Deferral Period. If an individual first becomes
eligible to participate in the Plan on an Annual Meeting date or after
the start of a Deferral Period, the Election Date shall be the thirtieth
day following such Annual Meeting date or initial participation date, as
the case may be. The Election Date for the first Deferral Period shall
be June 30, 1998.
"Executive Committee" means the executive committee of the Board
which has been appointed to administer the Plan.
"Fair Market Value" means the average of the highest and the
lowest quoted selling price of a share of Common Stock as reported on
the composite tape for securities listed on the New York Stock Exchange,
or such other national securities exchange as may be designated by the
Committee, or, in the event that the Common Stock is not listed for
trading on a national securities exchange but is quoted on an automated
system, on such automated system, in any such case on the valuation date
(or, if there were no sales on the valuation date, the average of the
highest and the lowest quoted selling prices as reported on said
composite tape or automated system for the most recent day during which
a sale occurred).
"Non-Employee Director" means a member of the Board who is not,
and has not been, an employee of the Company or any of its Subsidiaries.
(continued)
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"Per Diem Fees" means a fee paid for attendance at or
participation in (i) each meeting of the Board, (ii) each meeting of a
committee of the Board when such meeting is held on a day other than a
day for which a fee is paid for a meeting of the Board, (iii) each day
of services to the Company requested by the chairman of the Board, and
(iv) services similar to those specified in (i), (ii), or (iii) above,
provided to any Subsidiary.
"Phantom Stock Unit" means a bookkeeping unit representing one
share of Common Stock credited to a Deferred Compensation Account in
accordance with Section 5(c).
"Plan" means the Cooper Tire & Rubber Company 1998 Non-Employee
Director Compensation Deferral Plan.
"Subsidiary" means a corporation or other entity with respect to
which the Company, directly or indirectly, has the power, whether
through the ownership of voting securities, by contract or otherwise, to
elect at least a majority of the members of such corporation's board of
directors or analogous governing body.
3. Administration.
(a) The Plan shall be administered by the Executive Committee.
(b) The Executive Committee shall be authorized to interpret the Plan,
to establish, amend and rescind any rules and regulations relating to
the Plan, to make factual determinations in connection with the
administration or interpretation of the Plan, and to make any other
determinations that it believes are necessary or advisable for the
administration of the Plan. The Executive Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan
or in any Deferral Election Form to the extent the Executive Committee
deems desirable to carry the Plan into effect. Any decision of the
Executive Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Executive Committee may act
only by a majority of its members, except that the members thereof may
authorize any one or more of the Executive Committee members to execute
and deliver documents on behalf of the Executive Committee.
(c) The Executive Committee shall be entitled to rely in good faith
upon any report or other information furnished to it by any officer or
employee of the Companies or from the financial, accounting, legal or
other advisers of the Companies. Each member of the Executive
Committee, each individual designated by the Executive Committee to
administer the Plan and each other person acting at the direction of or
on behalf of the Executive Committee shall not be liable for any
determination or anything done or omitted to be done by him or by any
other member of the Executive Committee or any other such individual in
connection with the Plan, except for his own willful misconduct or as
expressly provided by statute, and to the extent permitted by law and
the bylaws of the Company, shall be fully indemnified and protected by
the Company with respect to such determination, act or omission.
4. Shares Available. The Company is authorized to issue up to 200,000
shares of Common Stock under the Plan (the "Plan Limit"). Such shares
of Common Stock may be newly issued shares of Common Stock or reacquired
shares of Common Stock held in the treasury of the Company.
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5. Deferral of Director's Fees.
(a) Deferral Elections.
(i) General Provisions. Non-Employee Directors may elect to defer all
or a specified percentage of their Director's Fees with respect to a
Deferral Period in the manner provided in this Section 5. A Non-
Employee Director's Deferred Benefit is at all times nonforfeitable.
(ii) Deferral Election Forms. Before the Election Date applicable to
a Deferral Period, each Non-Employee Director will be provided with a
Deferral Election Form and a Beneficiary Designation Form. In order for
a Non-Employee Director to participate in the deferral portion of the
Plan for a given Deferral Period, a Deferral Election Form, completed
and signed by him, must be delivered to the Company on or prior to the
applicable Election Date. A Deferral Election Form submitted by a Non-
Employee Director for a Deferral Period shall be deemed to be a
continuing election for all subsequent Deferral Periods, unless the
Employee Director completes and files a subsequent Deferral Election
Form with the Company prior to the Election Date applicable to that
Deferral Period. A Non-Employee Director electing to participate in the
Plan for a given Deferral Period shall indicate on his Deferral Election
Form:
(A) the percentage of the Director's Fees for the Deferral Period to be
deferred which shall be in multiples of 10%; and
(B) if the Deferral Election Form is the first such form filed by the
Non-Employee Director, the Non-Employee Director's election, in
accordance with Sections 5(e) and 5(f), as to the timing and manner of
payment of the Deferred Benefits. A Non-Employee Director's election as
to the timing and manner of payment of Deferred Benefits in the initial
Deferral Election Form shall govern the timing and manner of payment of
all subsequent deferrals under the Plan and may not be changed or
revoked without the prior written consent of the Executive Committee.
(iii) Effect of No Deferral Election. A Non-Employee Director who
does not have a completed and signed Deferral Election Form on file with
the Company on or prior to the applicable Election Date for a Deferral
Period may not defer his Director's Fees for such Deferral Period.
(b) Establishment of Deferred Compensation Accounts. A Non-Employee
Director's deferrals will be credited to a Deferred Compensation Account
set up for that Non-Employee Director by the Company in accordance with
the provisions of this Section 5.
(c) Crediting of Phantom Stock Units to Deferred Compensation Accounts.
(i) Number of Phantom Stock Units. The portion of the Director's Fees
that a Non-Employee Director elects to defer shall be credited to the
Deferred Compensation Account as of the last business day of the fiscal
quarter in which such portion of the Director's Fees would otherwise
have been payable to the Non-Employee Director. The number of Phantom
Stock Units to be credited to the Deferred Compensation Account shall be
determined by dividing (1) the amount of the Director's Fees deferred
over such quarter by (2) the Fair Market Value of a share of Common
Stock as of the date of crediting. Any partial Phantom Stock Unit that
results from the application of the previous sentence shall be rounded
to the nearest whole Phantom Stock Unit.
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(ii) Dividend Equivalents. In the event that the Company pays any
cash or other dividend or makes any other distribution in respect of the
Common Stock, the Deferred Compensation Account of a Non-Employee
Director will be credited with additional Phantom Stock Units determined
by dividing (A) the amount of cash, or the value (as determined by the
Executive Committee) of any securities or other property, paid or
distributed in respect of a corresponding number of shares of Common
Stock by (B) the Fair Market Value of a share of Common Stock as of the
date of such payment or distribution. Any partial Phantom Stock Unit
that results from the application of the previous sentence shall be
rounded up to a whole Phantom Stock Unit. Such credit shall be made
effective as of the date of the dividend or other distribution in
respect of the Common Stock.
(iii) No Rights as Stockholder. The crediting of Phantom Stock Units
to a Non-Employee Director's Deferred Compensation Account shall not
confer on the Non-Employee Director any rights as a stockholder of the
Company.
(d) Written Statements of Account. The Company will furnish each Non-
Employee Director with a statement setting forth the value of such Non-
Employee Director's Deferred Compensation Account as of the end of each
Deferral Period and all credits to and payments from the Deferred
Compensation Account during the Deferral Period. Such statement will be
furnished no later than sixty days after the end of the Deferral Period.
(e) Manner of Payment of Deferred Benefit. Payment of the Deferred
Benefits shall be in shares of Common Stock. Payment shall be made
either in a single lump sum or in a series of five or fewer annual
installments. The amount of each installment payment to a Non-Employee
Director shall be determined in accordance with the formula B/(N - P),
where "B" is the total value of the Deferred Compensation Account as of
the installment calculation date, "N" is the number of installments
elected by the Non-Employee Director and "P" is the number of
installments previously paid to the Non-Employee Director. Any partial
unit resulting in the calculation above will be settled in cash.
(f) Commencement of Payment of Deferred Benefit. Payment of a Non-
Employee Director's Deferred Benefit shall commence as soon as
practicable (but in no event more than sixty days) after the earlier to
occur of:
(i) termination of service as a member of the Board; and
(ii) the date specified in the Deferral Election Form executed by the
Non- Employee Director.
(g) Death. In the event of a Non-Employee Director's death, the Non-
Employee Director's entire Deferred Benefit (including any unpaid
portion thereof corresponding to installments not yet paid at the time
of death), to the extent not distributed earlier pursuant to Section
5(f), will be distributed in a lump sum to the Non-Employee Director's
Beneficiary as soon as practicable after the date of death, but in no
event more than six months after the Non-Employee Director's date of
death.
(h) Restrictions on Transfer. The Company shall pay all Deferred
Benefits payable under the Plan only to the Non-Employee Director or
(continued)
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Beneficiary designated under the Plan to receive such amounts. Neither
a Non-Employee Director nor his Beneficiary shall have any right to
anticipate, alienate, sell, transfer, assign, pledge, encumber or change
any benefits to which he may become entitled under the Plan, and any
attempt to do so shall be void. A Deferred Benefit shall not be subject
to attachment, execution by levy, garnishment, or other legal or
equitable process for a Non-Employee Director's or Beneficiary's debts
or other obligations.
6. Designation of Beneficiary.
(a) Beneficiary Designations. Each Non-Employee Director may designate
a Beneficiary to receive any Deferred Benefit due under the Plan on the
Non-Employee Director's death by executing a Beneficiary Designation
Form.
(b) Change of Beneficiary Designation. A Non-Employee Director may
change an earlier Beneficiary designation by executing a later
Beneficiary Designation Form and delivering it to the Executive
Committee. The execution of a Beneficiary Designation Form and its
receipt by the Executive Committee revokes and rescinds any prior
Beneficiary Designation Form.
7. Recapitalization or Reorganization.
(a) Authority of the Company and Stockholders. The existence of the
Plan shall not affect or restrict in any way the right or power of the
Company or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation
of the Company, any issue of stock or of options, warrants or rights to
purchase stock or of bonds, debentures, preferred or prior preference
stocks having rights superior to or affecting the Common Stock or the
rights thereof or which are convertible into or exchangeable for Common
Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(b) Change in Capitalization. Notwithstanding any other provision of
the Plan, in the event of any change in the outstanding Common Stock by
reason of a stock dividend, recapitalization, reorganization, merger,
consolidation, stock split, combination or exchange of shares (a "Change
in Capitalization"): (i) such proportionate adjustments as may be
necessary (in the form determined by the Executive Committee in its sole
discretion) to reflect such change shall be made to prevent dilution or
enlargement of the rights of Non-Employee Directors under the Plan with
respect to the aggregate number of shares of Common Stock authorized to
be awarded under the Plan, the number of Phantom Stock Units credited to
a Non-Employee Director's Deferred Compensation Account, and (ii) the
Executive Committee may make such other adjustments, consistent with the
foregoing, as it deems appropriate in its sole discretion.
(c) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all Deferred Benefits
credited to the Non-Employee Director's Deferred Compensation Account as
of the date of the consummation of a proposed dissolution or liquidation
shall be paid in cash to the Non-Employee Director or, in the event of
(continued)
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death of the Non-Employee Director prior to payment, to the Beneficiary
thereof on the date of the consummation of such proposed action. The
cash amount paid for each Phantom Stock Unit shall be the Fair Market
Value of a share of Common Stock as of the date of the consummation of
such proposed action.
8. Termination and Amendment of the Plan.
(a) Termination. Unless terminated earlier in accordance with Section
8(b), the Plan shall terminate on the tenth anniversary of the Effective
Date. Following the tenth anniversary of the Effective Date, no further
Director's Fees may be deferred by a Non-Employee Director but any
amounts deferred prior to the date of such termination shall be paid in
accordance with the Deferral Election Form.
(b) General Power of Board. Notwithstanding anything herein to the
contrary, the Board may at any time and from time to time terminate,
modify, suspend or amend the Plan in whole or in part and settle all
Phantom Stock Units in shares of Common Stock; provided, however, that
no such termination, modification, suspension or amendment shall be
effective without stockholder approval if such approval is required to
comply with any applicable law or stock exchange rule; and, provided
further, that the Board may not, without stockholder approval, increase
the maximum number of shares issuable under the Plan, except as provided
in Section 7(b) above.
9. Miscellaneous.
(a) No Right to Reelection. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any of its
members for reelection by the Company's stockholders, nor confer upon
any Non-Employee Director the right to remain a member of the Board for
any period of time, or at any particular rate of compensation.
(b) Unfunded Plan.
(i) Generally. This Plan is unfunded. Amounts payable under the Plan
will be satisfied solely out of the general assets of the Company
subject to the claims of the Company's creditors.
(ii) Deferred Benefits. A Deferred Benefit represents at all times an
unfunded and unsecured contractual obligation of the Company and each
Non-Employee Director or Beneficiary will be an unsecured creditor of
the Company. No Non-Employee Director, Beneficiary or any other person
shall have any interest in any fund or in any specific asset of the
Company by reason of any amount credited to him hereunder, nor shall any
Non-Employee Director, Beneficiary or any other person have any right to
receive any distribution under the Plan except as, and to the extent,
expressly provided in the Plan. The Company will not segregate any
funds or assets for Deferred Benefits or issue any notes or security for
the payment of any Deferred Benefits. Any reserve or other asset that
the Company may establish or acquire to assure itself of the funds to
provide benefits under the Plan shall not serve in any way as security
to any Non-Employee Director, Beneficiary or other person for the
performance of the Company under the Plan.
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<PAGE>
(c) Other Compensation Arrangements. Benefits received by a Non-
Employee Director pursuant to the provisions of the Plan shall not be
included in, nor have any effect on, the determination of benefits under
any other arrangement provided by the Company.
(d) Securities Law Restrictions. All certificates for shares of Common
Stock delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Executive Committee may deem
advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission or any exchange upon which the Common
Stock is then listed, and any applicable federal or state securities
law, and the Executive Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions. No shares of Common Stock shall be issued hereunder
unless the Company shall have determined that such issuance is in
compliance with, or pursuant to an exemption from, all applicable
federal and state securities laws.
(e) Expenses. The costs and expenses of administering the Plan shall
be borne by the Company.
(f) Applicable Law. Except as to matters of federal law, the Plan and
all actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect
to conflicts of law principles.
(g) Effective Date. The Plan shall be effective as of the Effective
Date, subject to the approval thereof by the stockholders of the Company
at the Annual Meeting held on such date.
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<LOGO>
COOPER TIRE & RUBBER COMPANY
NOTICE
of Annual Meeting of Stockholders
and Proxy Statement
May 5, 1998
IMPORTANT:
All stockholders are earnestly requested to mark, date,
sign and mail promptly the enclosed proxy for which
an envelope is provided.
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<PAGE>
COOPER TIRE & RUBBER COMPANY
----------------------------
March 24, 1998
Dear Stockholder:
Enclosed is a Notice of our Annual Meeting on May 5, 1998 and a Proxy
Statement describing the business we will conduct at the meeting.
Your vote is important, whatever number of shares you hold. Whether you
plan to attend the meeting or not, please remove the proxy form below,
complete it and return it in the envelope provided.
Sincerely,
/s/Patrick W. Rooney
- --------------------
Patrick W. Rooney
Chairman of the Board, President, Chief Executive Officer
- -----------------------------------------------------------------------
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, SHARES REPRESENTED
HEREBY WILL BE VOTED. IF A CHOICE IS SPECIFIED, THE SHARES WILL BE
VOTED ACCORDINGLY. IF NO INSTRUCTIONS ARE GIVEN AS TO ANY AGENDA ITEM,
THEY WILL BE VOTED "FOR" THE ELECTION OF THE LISTED NOMINEES AS
DIRECTORS, "FOR" AGENDA ITEMS 2, 3, AND 4, AND "AGAINST" AGENDA ITEM 5.
AFTER COMPLETING THE REVERSE SIDE OF THIS PROXY FORM, PLEASE
SIGN AND DATE BELOW AND RETURN PROMPTLY IN THE ENVELOPE PROVIDED.
Please date and sign exactly as name appears hereon. If any shares are
held by joint tenants, both should sign. When signing as attorney, as
executor, administrator or custodian, please give full title as such.
If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership
name by authorized person.
Signature(s)-------------------------------- Date---------------
Signature(s)-------------------------------- Date---------------
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<PAGE>
COOPER TIRE & RUBBER COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints J. Fahl, S. C. Kaiman, J. A.
Reinhardt, and P. W. Rooney and each of them, Proxies with full power of
substitution to attend the Annual Meeting of Stockholders of Cooper Tire
& Rubber Company to be held at Urbanski's, 1500 Manor Hill Road,
Findlay, Ohio, on May 5, 1998, and any adjournment thereof, and thereat
to vote all shares of Common Stock registered in the name of the
undersigned at the close of business on March 9, 1998, upon the matters
set forth in the notice of said meeting and listed below. In their
discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR" the nominees listed
- ------------------------------------------------------------------
below, and "FOR" Agenda Items 2, 3, and 4:
- -----------------------------------------
1. Election of Directors ( ) FOR the nominees listed below:
( ) WITHHOLD authority to vote for the nominees listed below:
Arthur H. Aronson Byron O. Pond J. Alec Reinhardt
(INSTRUCTION: To withhold authority to vote for an
individual nominee, write that nominee's name in the
space provided here.)
-----------------------------------------------------
2. Approval and adoption of the 1998 Incentive Compensation Plan.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. Approval and adoption of the 1998 Employee Stock Option Plan.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. Approval and adoption of the Non-Employee Directors Compensation
Deferral Plan
( ) FOR ( ) AGAINST ( ) ABSTAIN
The Board of Directors recommends a vote "AGAINST" Agenda Item 5.
-----------------------------------------------------------------
5. Action on a stockholder proposal.
( ) FOR ( ) AGAINST ( ) ABSTAIN
IMPORTANT: PLEASE SIGN AND DATE THE PROXY ON THE REVERSE SIDE.
64
