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 4, 1999, at 10:00 a.m. Eastern
Daylight Time for the following purposes:
(1) To elect four (4) Directors of the Company.
(2) To consider a stockholder proposal requesting declassification of
the Board of Directors and establishment of annual elections of
directors.
(3) To consider a stockholder proposal urging confidential voting at
all meetings of stockholders.
(4) To consider a stockholder proposal urging that rights issued
pursuant to the Company's Rights Plan be redeemed.
(5) 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 8, 1999 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 23, 1999
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 23, 1999
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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 4, 1999, 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 8, 1999 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 8, 1999, there were 75,835,268 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 four (4) Directors (Agenda Item 1) and
consideration of three stockholder proposals (Agenda Items 2, 3, and 4).
For Agenda items 2, 3, and 4, 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).
Four Directors are to be elected to the class having terms expiring this
year and shall serve for a three-year term expiring in 2002 and until
their respective successors are elected and qualified.
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.
(continued)
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Each of the nominees to be elected at the Annual Meeting has
previously been elected by vote of the stockholders. J. Alec Reinhardt,
an employee since 1976 and a Director since 1983, retired effective
February 15, 1999. Thomas A. Dattilo, who assumed the duties of
President and Chief Operating Officer effective January 4, 1999, was
elected to fill the vacancy on the Board of Directors created by Mr.
Reinhardt'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
---------------------
EDSEL D. DUNFORD Former President and
(PHOTOGRAPH) Chief Operating Officer, TRW Inc.
Mr. Dunford, age 63, 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 Cordant Technologies, Howmet
International, and National Steel Corporation.
Director Since 1994
Nominee for Term to Expire 2002
JOHN FAHL Vice President
(PHOTOGRAPH)
Mr. Fahl, age 62, 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
Nominee for Term to Expire 2002
DEBORAH M. FRETZ Senior Vice President, Lubricants and
(PHOTOGRAPH) Logistics, Sunoco, Inc.
Ms. Fretz, age 50, was named Senior Vice President, Lubricants and
Logistics, of Sunoco, Inc., an energy company, in 1997. She is
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 Sunoco's transportation businesses, including
pipelines, terminals, trucking and rail. Since joining Sunoco 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
Nominee for Term to Expire 2002
(continued)
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DENNIS J. GORMLEY Former Chairman and Chief Executive Officer,
(PHOTOGRAPH) Federal-Mogul Corporation
Mr. Gormley, age 59, 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
graduate of Rensselaer Polytechnic Institute with a B.S.M.E. degree.
Director Since 1991
Nominee for Term to Expire 2002
DIRECTORS WHO ARE NOT NOMINEES
------------------------------
ARTHUR H. ARONSON Former Executive Vice President,
(PHOTOGRAPH) Allegheny Teledyne Incorporated
Mr. Aronson, age 63, 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 Executive Vice President of the successor corporation,
Allegheny Teledyne Incorporated, where he also served 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 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
Expiration of Term 2001
THOMAS A. DATTILO President and Chief
(PHOTOGRAPH) Operating Officer
Mr. Dattilo, age 47, was elected President and Chief Operating
Officer of the Company effective January 4, 1999. He was employed at
Dana Corporation since 1977, having been appointed President, Sealing
Products in 1998 after serving in senior management positions since
1985. He earned a B.A. degree from Ohio State University and a J.D.
degree from the University of Toledo, and also completed the Harvard
Advanced Management Program. He is a director of American Home Patient,
Inc.
Director Since 1999
Expiration of Term 2001
JOHN F. MEIER Chairman and Chief Executive Officer,
(PHOTOGRAPH) Libbey Inc.
Mr. Meier, age 51, 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
(continued) 4
<PAGE>
BYRON O. POND Chairman of the Board,
(PHOTOGRAPH) Arvin Industries, Inc.
Mr. Pond, age 62, joined Arvin Industries, Inc. 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, was elected President and
Chief Operating Officer in 1991, and became Arvin's President and Chief
Executive Officer in 1993. He was elected Chairman and Chief Executive
Officer in 1996 and Chairman of the Board in 1998. 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. He is a
director of Intermet Corporation.
Director Since 1998
Expiration of Term 2001
PATRICK W. ROONEY Chairman of the Board and
(PHOTOGRAPH) Chief Executive Officer
Mr. Rooney, age 63, 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
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,
(PHOTOGRAPH) Amcast Industrial Corporation
Mr. Shuey, age 53, 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 23 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 1998
compensation reported for the Company's executive officers.
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General Philosophy
The following objectives continue to 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.
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.
The Company and the Committee, with the assistance of a nationally
recognized independent executive compensation consulting firm, has
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 regarding the level of
compensation provided, the mix of fixed and variable compensation, and
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
had 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 deemed it important to provide a
competitive level of total compensation, particularly incentive
compensation. Accordingly, the Committee determined it was necessary to
begin moving the Company's target cash compensation levels closer to
market rates of pay, primarily through increased cash incentive
opportunities. It was determined that target compensation level should
be moved to the desired level over a four-year period. For long-term
incentives, the transition period started with the stock options granted
in 1997; for annual incentives, the transition began with the 1998
performance period.
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New Incentive Plan
As a result of its review, the Committee also approved a
comprehensive incentive plan which was implemented in 1998. The 1998
Incentive Compensation Plan, which was approved by the stockholders at
the Annual Meeting in 1998, provides the flexibility to use a variety
of incentive vehicles, including a long-term cash incentive program
introduced for 1998.
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, will 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.
The Committee believes these changes will 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 1998 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
officer's 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.
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.
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 stockholders' equity at
the beginning of the year. ROAM is calculated by dividing (a) income
(continued)
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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.
Cash Compensation for 1998
The specifics of the program for total cash compensation, including
salaries and incentive bonuses, for executive officers for 1998 was
established in late 1997, along with ROE and ROAM performance goals
applicable to the program for 1998. Incentive bonuses were based upon
the Company's performance for 1998, as measured by the ROE and ROAM
performance attained for the year.
ROE for fiscal year 1998 was 15.2%, which exceeded the Company's
average performance goal. Mr. Rooney's remuneration for 1998 as
Chairman of the Board, President, and Chief Executive Officer was
determined in accordance with the program explained above. It was below
competitive median pay levels for his position, consistent with the
earlier-cited reference to the Company's below-market compensation
levels for its officers. As reported later in this Proxy Statement, Mr.
Rooney also received an option for 38,500 shares of Common Stock in 1998
and was awarded a grant of restricted stock in 1999 in lieu of a portion
of 1998 cash compensation. Mr. Rooney is also participating in the
Company's Long-Term Performance Cash Plan.
Average compensation levels for the executive officers for 1998
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
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 the changes made to pay levels, mix of
pay, and award determination schedules for fiscal 1999.
Stock Options
Key employees of the Company, including executive officers, are
eligible for annual stock option grants in accordance with a number of
plans approved by the stockholders. Stock options have been issued and
are currently outstanding under the 1981 Incentive Stock Option Plan
(the "1981 Plan"), the 1986 Incentive Stock Option Plan (the "1986
Plan"), the 1996 Stock Option Plan and the 1998 Incentive Compensation
Plan. The 1981 Plan and the 1986 Plan 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"). The 1996 Plan and the 1998 Incentive Compensation Plan also
provide for the granting of non-qualified options.
(continued)
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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. In general, the stock option grants are based on
competitive practices and internal equity, as well as on assessments of
responsibilities, performance, and contributions. By the terms of each
of these plans, no grant of new options may be made following the plan's
termination, but grants made prior to termination may be exercised
following the Plan's termination.
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
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.
In combination with the new incentive plan implemented in 1998,
stock option grants in 1998 were targeted, as a percentage of salary, to
deliver 100% of the median expected market value for long-term
incentives, again adjusted for individual contributions. However,
because of the Company's below market salaries, the actual value of
long-term incentives is slightly below market value.
It is the opinion of the Committee that this program constitutes an
appropriate 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 considered a special grant of stock options to all
employees of the Company to help build alignment between the
compensation elements for executive officers and the rest of the
Company, allow additional Company employees to share in the success of
the Company, and further enhance the Company's egalitarian, stockholder-
focused culture.
Following adoption by the stockholders of the 1998 Employee Stock
Option Plan at the Annual Meeting in 1998, a grant of stock options was
made in July to all full-time employees who did not receive stock
options under the 1998 Incentive Compensation Plan. These options are
for 100 shares per employee, with the same general terms and conditions
as the options granted to executive officers except the vesting period
is 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
again recognizes 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.
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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 Committee believes the 1998 Incentive Compensation Plan
includes provisions which comply with the "performance-based" criteria
and accordingly 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:
Deborah M. Fretz, Chairman
Arthur H. Aronson
Dennis J. Gormley
John H. Shuey
Agenda Item 2
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 43,900 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.
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
(continued)
10
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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 interests of the
Company and voted to approve its adoption. At the Annual Meeting of
Stockholders last year, The New York City Police Department Pension Fund
unsuccessfully sought to reverse the stockholders' 1985 decision and is
now again seeking stockholders' approval of the same resolution it
presented last year.
As indicated in the Company's 1985 Proxy Statement, the classified
board was one of the provisions proposed by the Board of Directors
because it would assist in making it more time-consuming for a
substantial stockholder to gain control of the Board of Directors
without its consent, assure a measure of continuity in the management of
the business and affairs of the Company, and provide the Board of
Directors with sufficient time to review any proposal from the
substantial stockholder and to consider appropriate alternatives.
The current Board of Directors continues to believe that a
classified board promotes a continuity of policy and a stability of
leadership by assuring that experienced personnel familiar with the
Company and its business will be on the board at all times. A classified
board also prevents precipitous changes in the composition of the board
by preventing the election of an entire new board in a single year.
Preventing such a precipitous change in control serves to provide
informed oversight of corporate policies, business strategies, and
operations because a majority of the directors at all times will have
had prior experience in the operation of the Company's business.
Similarly, the Board of Directors believes that a classified board
serves as an obstacle to any sudden and disruptive attempts to obtain
control of a company. The mere attempt to obtain control or to further
some other personal goal, even if unsuccessful, can seriously disrupt
the conduct of the business of a company and cause it to incur
substantial expense to the detriment of its stockholders.
A classified board is a common practice which has been adopted by
the stockholders of many major corporations. It is specifically
permitted by the laws of many states, including the State of Delaware,
as well as by the rules of the New York Stock Exchange.
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 again vote AGAINST
- ----------------------------------------------------------------------
this stockholder proposal.
- -------------------------
Agenda Item 3
STOCKHOLDER PROPOSAL
Edwin D. Hill, Trustee of the International Brotherhood of
Electrical Workers' Pension Fund, 1125 Fifteenth St. N.W., Washington
D.C. 20005, the beneficial holder of 3,972 shares of the Company's
Common Stock, has given notice of the Fund's intention to introduce the
following resolution at the Annual Meeting:
RESOLVED: That the shareholders of Cooper Tire and Rubber Corporation
("Company") urge our board of directors to take the necessary steps to
adopt and implement a policy of confidential voting at all meetings of
its shareholders which includes the following provision:
(continued)
11
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1. that the voting of all proxies, consents and authorizations be
secret, and that no such document shall be available for
examination nor shall the vote or identify or any shareholder be
disclosed except to the extent necessary to meet the legal
requirements, if any, of the Company's state of incorporation; and
2. that the receipt, certification and tabulation of such votes shall
be performed by independent election inspectors.
STOCKHOLDER'S SUPPORTING STATEMENT
It is our belief that adoption of a system of confidential proxy
voting would be in the best interest of Cooper Tire & Rubber and its
shareholders. Confidential balloting is a basic tenet of our country's
political electoral process, working to help ensure the integrity of the
process. The integrity of the corporate voting process should also be
protected against potential abuses given the importance of corporate
elections and corporate policies and practices that are determined
through the corporate voting processes.
The implementation of a confidential voting system would enhance
shareholder right in several ways. First, in the absence of a system of
confidential voting at the company, incumbent managers and directors
have the power to review incoming proxy votes prior to a tabulation of
those votes. This access to the vote affords management an opportunity
to re-solicit proxies from shareholders voting against management.
Independent board candidates and shareholders submitting advisory
proposals or by-law changes are not afforded the same opportunity,
providing incumbents an unfair advantage over non-management
shareholders seeking to raise important issues for a shareholder vote.
Second, we believe that a confidential corporate ballot would help
eliminate concerns of retribution that shareholders may have concerning
a decision to oppose management nominees and issue positions. It is
especially important that institutional investors who may feel that
their voting positions may jeopardize actual or potential business with
a company have the confidence to vote without concern for anything by
the merits of the issue presented for shareholder consideration.
Finally, it is our belief that the enhancement of the proxy voting
process would change the system where too often shareholders vote "with
the feet," not with their ballots. This change would help to develop a
long-term investment perspective where corporate assets could be
deployed, and used in a more effective and efficient manner.
Confidential voting is gaining popularity. Approximately 156 major
U.S. publicly traded companies had adopted confidential proxy voting
procedures for corporate election. The list of Fortune 500 companies
with confidential voting includes AT&T, US West, American Express,
American Brands, Coca Cola, Citicorp, Gillette, Exxon, Sara Lee, JP
Morgan, Bear Steams, General Electric, General Mills, General Motors,
Colgate-Palmolive, American Home Products, Honeywell, Avon Products, 3M,
Du Pont, Boeing, Lockheed, Rockwell International, Amoco, Mobil, Eastman
Kodak, IBM, Xerox, and many others. It's time for our Company to do the
same.
For the reasons outlined above, we urge you to vote "FOR" the
proposal to establish confidential shareholder voting at Cooper Tire &
Rubber.
BOARD'S RESPONSE TO THIS STOCKHOLDER PROPOSAL
It is the opinion of the Board of Directors that the action sought
by this stockholder proposal is unnecessary and the reasons advanced to
support the proposal are not well founded.
(continued)
12
<PAGE>
For many years, proxies for the Company's meeting of stockholders
have been received, tabulated, and certified by the Company's transfer
agent appointed by the Board of Directors to serve as Inspectors of
Election. The Inspectors report only the total vote and not the nature
of any particular stockholder's vote. Similarly, the proxies of
employees having Company stock in the Company's Thrift and Profit
Sharing Plan and Pre-Tax Savings Plans are returned directly from the
employees to an independent Trustee of the plans for tabulation and
voting by the Trustee without identifying any particular employee's
vote. Thus, incumbent managers and Directors do not have the power to
review incoming proxy votes prior to tabulation, as the proponent
suggests, and therefore have no unfair advantage.
The proponent also suggests that stockholders may have concerns of
retribution concerning certain votes. No reports of such concerns have
been received either directly from stockholders or indirectly from a
representative of stockholders, likely because the Company has
consistently conducted stockholder solicitations in a fair and equitable
manner. The Board of Directors also recognizes that any stockholder may
assure voting privacy by registering stock in the name of a bank,
broker, or other nominee.
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.
- --------------------
Agenda Item 4
STOCKHOLDER PROPOSAL
Michael R. Fanning, Chief Executive Officer of the Central Pension
Fund of the International Union of Operating Engineers and Participating
Employers, the beneficial holder of 12,266 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 shareholders of Cooper Tire and Rubber Co.
("Company") urge the Board of Directors to redeem the shareholder rights
issued pursuant to the Preferred Stock Purchase Rights Plan (amended by
the Board of Directors in 1998) unless said Plan is approved by a
majority of the voting shares at a meeting of shareholders held as soon
as is practical.
SUPPORTING STATEMENT
We strongly believe that the Company's financial performance is
closely linked to its corporate governance policies and procedures, and
the level of management accountability they impose. The Company's Stock
Purchase Right Plan (commonly known as a "poison pill") is a powerful
anti-takeover device which effectively prevents a change in control of
the Company without the approval of the board of directors, despite a
level of performance which may adversely affect shareholder value.
Cooper Tire's poison pill inhibits a potential bidder of Company
stock when they own 15% or more of the outstanding common stock of the
Company. Triggering the poison pill has the effect of substantially
injuring the bidder by allowing our Board to unilaterally cut by 50% the
value of Company shareholdings held by such a person. Such a situation,
we believe, precludes shareholders of Cooper Tire from exercising their
ownership rights in assessing offers from potential bidders.
(continued)
13
<PAGE>
The poison pill forces potential investors to negotiate
acquisitions with management, instead of making their offer directly to
shareholders. We strongly believe that it is the shareholders (who are
the owners of the Company), not the directors and managers (who merely
act as agents for the owners), who should have the right to decide what
is or is not a fair price for their shareholdings.
The argument that our directors need a poison pill in order to
negotiate a better offer from potential bidders or prevent so-called
"abusive takeover practices" is unpersuasive. In the past several
years, proposals to redeem or allow shareholder votes on poison pills
have received majority support at numerous U.S. publicly-traded
companies including Advanced Micro Devices, Intel, Ryder and Wellman.
Moreover, since 1990 Philip Morris, Time Warner, United Technologies and
Lockheed have voluntarily redeemed their poison pills. None of these
companies have experienced any adverse impact attributable to redemption
of their poison pills.
Poison pills can pose such an obstacle to takeover that management
becomes entrenched. We believe that the entrenchment of management, and
the lack of accountability that results, can adversely affect
shareholder value. While it is impossible to assess the degree to which
the poison pill may inhibit performance, it is indisputable that a
poison pill effectively deters attempts by shareholders to remove the
current board and its management team for nonperformance. Redemption of
Cooper Tire's pill would allow shareholders to consider all tender
offers, not just those endorsed by incumbent management.
We urge you to VOTE FOR this proposal.
BOARD'S RESPONSE TO THIS STOCKHOLDER PROPOSAL
In 1988, the Board of Directors adopted a Rights Plan and declared
a dividend distribution of one Right on each outstanding share of the
Company's Common Stock. In 1998, the Board of Directors amended the
Rights Plan to reflect prevailing rights plan terms and to extend the
Rights Plan to May 11, 2008.
The Rights Plan is designed to provide the Board of Directors with
the ability to take what it believes are the most effective steps to
protect and maximize the value of the stockholders' investment in the
Company. It is designed to encourage potential acquirors to negotiate
directly with the Board of Directors, which the Company believes is in
the best position to negotiate on behalf of all stockholders, evaluate
the adequacy of any potential offer, and protect stockholders against
potential abuses during the takeover process, such as one which would
not treat all stockholders fairly and equally. The Rights would not
affect any takeover proposal which the Board of Directors believes is in
the best interests of the Company's stockholders.
The objective of the Board of Directors in adopting the Rights Plan
was, and continues to be, the preservation and maximization of the
Company's value for all stockholders. Companies continue to adopt new
rights plans, or renew existing ones, in large numbers; over 500 U.S.
companies did so in 1998, consistent with an increasing number of
studies demonstrating the economic benefits that rights plans provide
for stockholders. Studies in March and October of 1988 by Georgeson &
Company, a nationally recognized proxy solicitation and investor
relations firm, found that companies adopting rights plans do not lessen
the value of their stock, and, more importantly, that companies with
rights plans received higher takeover premiums than those companies
without rights plans. The March, 1988 study concluded that companies
with rights plans received takeover premiums averaging 69% higher than
those received by companies not protected by such plans. A more recent
study by the same firm, in late 1997, reported that rights plans
(continued)
14
<PAGE>
contributed an additional $13 billion in stockholder value during the
past five years, and that stockholders of acquired companies without
such protection gave up $14.5 billion in potential premiums. The report
also noted that the presence of a rights plan at a target company did
not increase the likelihood of the withdrawal of a friendly takeover bid
nor the defeat of a hostile one.
The Board of Directors believes that the proper time to consider
redemption of the Rights is if and when a specific offer is made to
acquire the Corporation's stock. Redemption of the Rights prior to that
time would be premature and would remove any incentive for a potential
acquiror to negotiate with the Board of Directors to assure that the
stockholders are treated fairly.
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,
1996, 1997, and 1998, the cash compensation paid by the Company as well
as certain other compensation paid or accrued for those years, to Mr.
Rooney, as 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, 1998
(the "Named Executive Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
All Other
Annual Long-Term Compen-
Compensation Compensation sation1
------------ -------------------- --------
Number of
shares
underlying
Restricted stock
Name and Principal Stock option
Position Year Salary Bonus Awards awards
- ------------------ ---- ------ ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Patrick W. Rooney 1998 $434,623 $415,221 $167,279 2 38,500 $54,638
Chairman of the 1997 452,733 397,111 - 33,000 50,872
Board, President 1996 431,174 351,407 - 16,600 45,185
and Chief Executive
Officer
J. Alec Reinhardt 1998 323,081 434,524 - 22,900 44,712
Executive Vice 1997 336,543 295,197 - 18,000 37,816
President 1996 320,517 261,222 - 11,100 33,601
John Fahl 1998 221,306 297,643 - 11,900 18,627
Vice President 1997 230,528 202,206 - 10,500 30,104
1996 219,550 178,933 - 5,900 26,615
Roderick F. Millhof 1998 223,938 245,556 - 9,600 27,659
Vice President 1997 159,420 129,506 - 2,600 17,311
1996 151,829 110,790 - 1,100 15,521
(continued)
15
<PAGE>
William S. Klein 1998 268,516 174,022 - 9,600 26,252
Vice President 1997 267,886 149,386 - 7,000 24,953
1996 257,582 122,124 - 3,800 22,185
<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.
(2) The award is for 8,210 common shares restricted for a one year
period granted in lieu of a portion of 1998 cash compensation.
Dividends will be paid on all restricted common shares distributed to
Mr. Rooney during the restricted period. The value of his restricted
holdings was $167,792 as of December 31, 1998.
</TABLE>
Stock Option Grants
The following table contains information concerning the grant of
stock options under the Company's 1998 Incentive Compensation Plan to
the Named Executive Officers during the 1998 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.
<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 38,500 2.8% $20.5625 July 20, 2008 $258,132
J. Alec Reinhardt 22,900 1.7 20.5625 - 4 - 4
John Fahl 11,900 0.9 20.5625 July 20, 2008 74,323
Roderick F. Millhof 9,600 0.7 20.5625 July 20, 2008 65,114
William S. Klein 9,600 0.7 20.5625 July 20, 2008 55,895
<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 daily change in the share price of the
Company's Common Stock for the period July 1, 1993 through July 21,
1998, (b) a weighted average risk-free rate of return of 5.5%, (c) a
(continued)
16
<PAGE>
dividend yield of 1.3%, 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 J. Alec Reinhardt, 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
1998 fiscal year and unexercised options held as of the end of the
fiscal 1998 year.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Value of unexer-
shares underlying cised in-the-
unexercised options money options1 at
Shares at fiscal year-end fiscal year-end
acquired ------------------ ----------------
on Value Exercis- Unexer- Exercis- Unexer-
Name exercise realized able cisable able cisable
- ----------------- -------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Patrick W. Rooney - - 78,300 55,000 $131,044 $2,406
J. Alec Reinhardt - - 42,200 31,900 23,588 1,431
John Fahl - - 26,050 17,150 34,288 744
Roderick F. Millhof - - 11,300 10,900 59,194 600
William S. Klein - - 18,500 13,100 18,950 600
<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
last trading day of the fiscal year, which was $20.625, 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>
Long-Term Performance Cash Plan
The following table sets forth information, with respect to the
Named Executive Officers, concerning the grant of long-term performance
cash awards under the Company's 1998 Incentive Compensation Plan during
the 1998 fiscal year.
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<CAPTION>
Performance or
Other Periods Until Target
Name Maturation or Payout1 Payouts2
- ------------------- --------------------------- --------
<S> <C> <C>
Patrick W. Rooney 1/1/1998 through 12/31/2000 $220,000
J. Alec Reinhardt 1/1/1998 through 12/31/2000 110,000
John Fahl 1/1/1998 through 12/31/2000 65,000
Roderick F. Millhof 1/1/1998 through 12/31/2000 50,000
William S. Klein 1/1/1998 through 12/31/2000 50,000
<FN>
(continued)
17
<PAGE>
(1) A participant must be an employee at the end of the Performance
Period to receive the proceeds of the grant; except that if such
participant dies, retires or becomes disabled prior to the end of the
Performance Period, he will receive a prorated award earned based on the
portion of the Performance Period he was an employee.
(2) Payouts of awards are tied to the achievement of specified levels
of ROE or ROAM for the three-year Performance Period and will be made
during the first quarter of 2001. The target award amounts will be
earned if 100% of the targeted ROE or ROAM is achieved. No payouts of
awards will be made if the ROE or ROAM results achieved fall below a
"minimum" level. Results earned in excess of targeted ROE or ROAM are
not capped, with awards accruing at rates of 16-2/3% for each additional
1% ROE or ROAM achieved until a "maximum" ROE or ROAM is achieved, then
accruing at 15% for each additional 1% ROE or ROAM achieved beyond the
"maximum."
</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.
<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. Reinhardt who has retired, will be as follows: Patrick
W. Rooney - 42.3; John Fahl - 46.2; William S. Klein - 32.3; and
Roderick F. Millhof - 15.5.
18
<PAGE>
Employment Agreements
The Company entered into employment agreements 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. Rooney and Fahl under the
agreements are $456,355, and $232,372, 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 executive officer's 65th birthday.
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
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 $14,000 together with a $2,750 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 1998, Board
meetings were held on six days, and the Audit and Compensation Committee
met three times on days other than on a Board meeting day.
(continued)
19
<PAGE>
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. 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. Information regarding
unexercised options for each Director is indicated in the table on page
23 of this proxy statement.
Last year, stockholders approved the 1998 Non-Employee Directors
Compensation Deferral Plan. This plan permits Non-Employee Directors of
the Company to defer some or all the 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. Amounts deferred and dividend equivalents are converted into
phantom stock units and credited to a bookkeeping account established
for this purpose. The number of phantom stock units credited is
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. 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.
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 1998. 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 revised name is Auto Parts &
Equipment, and that index deleted two stocks from the former index and
added four new stocks.
(continued)
20
<PAGE>
The following chart assumes three hypothetical $100 investments on
December 31, 1993, 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>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$100.00 $ 95.36 $100.46 $ 81.67 $102.40 $ 87.48
100.00 101.32 139.40 171.40 228.59 293.91
100.00 87.21 107.82 120.97 151.30 171.30
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1998 the Company's Board of Directors held five Board
meetings, seven meetings of the Board's Audit and Compensation Committee
and two meetings of the Board's Nominating Committee. Each Director
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.
The Company's Audit and Compensation Committee consists of
Directors Aronson, Fretz, Gormley and Shuey. The functions of this
Committee 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, Meier,
Pond, and Rooney 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 the 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 1999. 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 1998, 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.
(continued)
21
<PAGE>
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 8, 1999, 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.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership Of Class
- -------------- ------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock National City1 8,314,086 shs2 11.0%
P.O. Box 5756
Cleveland, OH 44101-0756
Common Stock Amvescap PLC 7,384,346 shs3 9.7%
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, Clarksdale, 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 10, 1999, 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>
The information which follows is furnished as of March 8, 1999, 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.
(continued)
22
<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 All executive officers and 1,303,124 shs1 1.7%
Directors as a group
Common Stock Arthur H. Aronson 1,489 shs2, 3 *
Common Stock Thomas A. Dattilo 30,000 shs4 *
Common Stock Edsel D. Dunford 12,477 shs2 *
Common Stock John Fahl 108,641 shs2 *
Common Stock Deborah M. Fretz 1,458 shs2, 3 *
Common Stock Dennis J. Gormley 3,007 shs2 *
Common Stock William S. Klein 197,471 shs2 *
Common Stock John F. Meier 1,254 shs2, 3 *
Common Stock Roderick F. Millhof 17,765 shs2 *
Common Stock Byron O. Pond 1,000 shs *
Common Stock J. Alec Reinhardt 326,576 shs2 *
Common Stock Patrick W. Rooney 323,938 shs2, 5 *
Common Stock John H. Shuey 999 shs2, 3 *
<FN>
*Less than 1%
(1) Includes 225,284 shares obtainable on exercise of stock options
within 60 days following March 8, 1999, which options have not been
exercised. The nature of the beneficial ownership consists of 414,986
shares subject to sole voting and investment power, and 8,904 shares
subject to shared voting and investment power. Of the shares shown as
beneficially owned, 615,740 or .81% 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 8, 1999, which options have not been exercised, as
follows: Arthur H. Aronson - 989; Edsel D. Dunford - 1,477; John Fahl -
26,050; Deborah M. Fretz - 808; Dennis J. Gormley - 3,007; William S.
Klein - 18,500; John F. Meier - 254; Roderick F. Millhof - 11,300; J.
Alec Reinhardt - 42,200; Patrick W. Rooney - 78,300; and John H. Shuey -
499.
(3) In addition, pursuant to the 1998 Non-Employee Directors
Compensation Deferral Plan explained at page 20 of this proxy statement,
the following Directors deferred fees for service on the Board during a
portion of 1998 and were credited with the following number of phantom
stock units: Arthur H. Aronson - 1,261; Deborah M. Fretz - 504; John F.
Meier - 490; and John H. Shuey - 1,247.
(4) The shares, awarded under the 1998 Incentive Compensation Plan,
are restricted as follows: 10,000 shares for a one year period, 10,000
shares for a two year period, and 10,000 shares for a three period.
(5) Includes 8,210 shares, awarded under the 1998 Incentive
Compensation Plan, restricted for a one year period.
</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.
(continued)
23
<PAGE>
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, 1998, its Directors and executive
officers complied with all applicable Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 2000
Any stockholder who intends to present a proposal at the 1999
Annual Meeting in 2000 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 23, 1999.
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 23, 1999
IMPORTANT: All stockholders are earnestly requested to mark,
date, sign and mail promptly the enclosed proxy for which an envelope is
provided.
24
<PAGE>
\
<LOGO>
COOPER TIRE & RUBBER COMPANY
NOTICE
of Annual Meeting of Stockholders
and Proxy Statement
May 4, 1999
IMPORTANT:
All stockholders are earnestly requested to mark, date,
sign and mail promptly the enclosed proxy for which
an envelope is provided.
25
<PAGE>
COOPER TIRE & RUBBER COMPANY
----------------------------
March 23, 1999
Dear Stockholder:
Enclosed is a Notice of our Annual Meeting on May 4, 1999 and a Proxy
Statement describing the business to be conducted at the meeting.
Your vote is important on each of the four agenda items, 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 and 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, AND "AGAINST" AGENDA ITEMS 2,3, AND 4.
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---------------
26
<PAGE>
COOPER TIRE & RUBBER COMPANY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints T. A. Dattilo, J. Fahl, S. C. Kaiman,
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 4, 1999, 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 8, 1999, 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:
- ------
1. Election of Directors ( ) FOR the nominees listed below:
( ) WITHHOLD authority to vote for the nominees listed below:
Edsel D. Dunford John Fahl Deborah M. Fretz Dennis J. Gormley
(INSTRUCTION: To withhold authority to vote for an
individual nominee, write that nominee's name in the
space provided here.)
-----------------------------------------------------
The Board of Directors recommends a vote "AGAINST" Agenda Items 2, 3,
- ---------------------------------------------------------------------
and 4
- -----
2. Action on a stockholder proposal.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. Action on a stockholder proposal.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. Action on a stockholder proposal.
( ) FOR ( ) AGAINST ( ) ABSTAIN
IMPORTANT: PLEASE SIGN AND DATE THE PROXY ON THE REVERSE SIDE.
27
