<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
THE GOODYEAR TIRE & RUBBER COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:___________
(2) Aggregate number of securities to which transaction applies:______________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):______________________________
(4) Proposed maximum aggregate value of transaction:__________________________
(5) Total fee paid:___________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:___________________________________________________
(2) Form, Schedule or Registration Statement No.:_____________________________
(3) Filing Party:_____________________________________________________________
(4) Date Filed:_______________________________________________________________
================================================================================
<PAGE> 2
[LOGO]
GOODYEAR
NOTICE OF
1997 ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
THE GOODYEAR TIRE & RUBBER COMPANY
1144 East Market Street
Akron, Ohio 44316-0001
DATE: Monday, April 14, 1997
TIME: 10:00 A.M., Akron Time
PLACE: Office Of The Company
Goodyear Theater
1201 East Market Street
Akron, Ohio
YOUR VOTE IS IMPORTANT
----------------------
PLEASE COMPLETE, DATE AND SIGN YOUR PROXY AND PROMPTLY RETURN IT
IN THE ENCLOSED ENVELOPE.
<PAGE> 3
THE GOODYEAR TIRE & RUBBER COMPANY
AKRON, OHIO 44316 - 0001
SAMIR G. GIBARA
CHAIRMAN OF THE BOARD
CHIEF EXECUTIVE OFFICER AND PRESIDENT
February 26, 1997
DEAR SHAREHOLDERS:
You are cordially invited to attend your Company's 1997 Annual Meeting of
Shareholders, which will be held at the Goodyear Theater, 1201 East Market
Street, Akron, Ohio, at 10:00 A.M., Akron Time, on Monday, April 14, 1997. We
hope you will be able to attend and participate. The Notice of 1997 Annual
Meeting of Shareholders and Proxy Statement follow. The 1996 Annual Report is
enclosed.
At the Annual Meeting, shareholders will elect four persons to serve as
directors; three to serve as Class III directors for three year terms and one to
serve as a Class II director for a one year term (Item 1 on your Proxy). Each
nominee is an incumbent. The Proxy Statement contains information regarding each
nominee for director and the seven continuing directors.
Your Board of Directors is presenting for action by the shareholders its
proposal that shareholders ratify the Board's appointment of Price Waterhouse
LLP as independent accountants for the Company for 1997 (Item 2 on your Proxy).
Your Board of Directors recommends that you vote for the ratification of the
appointment of Price Waterhouse LLP. Shareholders are also requested to approve
the adoption of the 1997 Performance Incentive Plan of the Company (Item 3 on
your Proxy). Your Board of Directors recommends that you vote to approve the
adoption of the 1997 Performance Incentive Plan.
If you plan to attend the Annual Meeting, please mark the indicated box on
the reverse side of your Proxy. You are cordially invited to join us for
refreshments from 9:00 to 9:45 A.M. in the Goodyear Gymnasium, which is adjacent
to the Theater. You do not need a ticket to attend the Annual Meeting or the
reception.
Whether or not you plan to attend, it is important that you complete, date,
sign and promptly return your Proxy. This will ensure that your shares will be
represented at the meeting. If you attend and decide to vote in person, you may
revoke your Proxy. Remember, your vote is important!
Sincerely,
/s/ SAMIR G. GIBARA
SAMIR G. GIBARA
Chairman of the Board,
Chief Executive Officer and President
<PAGE> 4
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
NOTICE OF THE 1997 ANNUAL MEETING OF SHAREHOLDERS ..............................................................I
PROXY STATEMENT
General Information .........................................................................................1
Shares Voting ............................................................................................1
Vote Required - Cumulative Voting ........................................................................1
Voting of Proxy - Confidentiality ........................................................................1
Revocability of Proxy ....................................................................................2
The Board of Directors and Its Committees ...................................................................2
Audit Committee ..........................................................................................2
Compensation Committee ...................................................................................2
Nominating Committee .....................................................................................3
Committee on Corporate Responsibility ....................................................................3
Election of Directors (Proxy Item 1) ........................................................................3
Ratification of Appointment of Independent Accountants (Proxy Item 2) .......................................7
Proposal to Approve The Adoption of The 1997 Performance Incentive Plan (Proxy Item 3) ......................7
Other Business .............................................................................................12
Beneficial Ownership of Common Stock .......................................................................12
Executive Officer Compensation .............................................................................14
Summary of Compensation .................................................................................14
Option/SAR Grants in 1996 ...............................................................................16
Option/SAR 1996 Exercises and Year-End Values ...........................................................17
Long Term Incentive Awards ..............................................................................18
Other Plan Information ..................................................................................20
Retirement Benefits .....................................................................................21
Employment and Stock Purchase Agreements ................................................................22
Directors' Compensation .................................................................................22
Other Matters ...........................................................................................23
Section 16(a) Beneficial Ownership Reporting Compliance ....................................................23
Compensation Committee Report on Executive Compensation ....................................................24
Performance Graph ..........................................................................................28
Miscellaneous ..............................................................................................29
Submission of Shareholder Proposals .....................................................................29
10-K Report .............................................................................................29
Dividend Reinvestment Plan Shares .......................................................................29
Savings Plan Shares .....................................................................................29
Costs of Solicitation ...................................................................................29
Appendix A (Complete text of 1997 Performance Incentive Plan) .............................................A-1
</TABLE>
<PAGE> 5
THE GOODYEAR TIRE & RUBBER COMPANY
NOTICE OF THE
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 14, 1997
TO THE SHAREHOLDERS:
The 1997 Annual Meeting of Shareholders of The Goodyear Tire & Rubber
Company (the "Company"), an Ohio corporation, will be held at the Goodyear
Theater (in the Company's Principal Office Complex), 1201 East Market Street,
Akron, Ohio, on Monday, April 14, 1997, at 10:00 A.M., Akron Time, for the
following purposes:
1. To elect four directors; three to serve as Class III directors, each
for a term of three years, and one to serve as a Class II director for
a one year term (Proxy Item 1);
2. To consider and vote upon a proposal to ratify the appointment of Price
Waterhouse LLP as independent accountants for the Company for 1997
(Proxy Item 2);
3. To consider and vote upon a proposal to approve the adoption of the
1997 Performance Incentive Plan of the Company (Proxy Item 3); and
4. To act upon such other matters and to transact such other business as
may properly come before the meeting or any adjournments thereof.
The Board of Directors fixed the close of business on February 18, 1997 as
the record date for determining shareholders entitled to notice of, and to vote
at, the 1997 Annual Meeting. Only holders of record of the Common Stock of the
Company at the close of business February 18, 1997 will be entitled to vote at
the 1997 Annual Meeting and adjournments, if any, thereof.
By order of the Board of Directors:
/s/ James Boyazis
February 26, 1997 James Boyazis, Secretary
- - --------------------------------------------------------------------------------
Please complete and sign your proxy and return it promptly
in the enclosed envelope.
<PAGE> 6
<PAGE> 7
PROXY STATEMENT
THE GOODYEAR TIRE & RUBBER COMPANY
---------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Goodyear Tire & Rubber Company, an Ohio
corporation (the "Company"), to be voted at the Annual Meeting of Shareholders
to be held April 14, 1997 (the "Annual Meeting"), and at any adjournments
thereof, for the purposes set forth in the accompanying notice.
The principal executive offices of the Company are located at 1144 East
Market Street, Akron, Ohio 44316-0001. The Company's telephone number is
330-796-2121.
The Company's Annual Report to Shareholders for the year ended December 31,
1996 is enclosed with this Proxy Statement. The Annual Report is not considered
part of the proxy solicitation materials. The approximate date on which this
Proxy Statement and the related form of Proxy are first being sent to
shareholders is March 4, 1997.
SHARES VOTING
Holders of shares of the Common Stock, without par value, of the Company (the
"Common Stock") at the close of business on February 18, 1997 are entitled to
notice of the Annual Meeting and to vote shares held on that date at the Annual
Meeting. As of the close of business February 18, 1997 (the "record date"),
there were 156,873,882 shares of Common Stock outstanding and entitled to vote
at the Annual Meeting. Each share of Common Stock is entitled to one vote.
VOTE REQUIRED -- CUMULATIVE VOTING
Except with respect to the election of directors,
the affirmative vote of at least a majority of the shares of Common Stock
outstanding on the record date is required for a resolution to be adopted.
In the election of directors, the three candidates for election as Class III
Directors receiving the most votes will be elected and the candidate for
election as a Class II Director receiving the most votes will be elected. In the
election of the three Class III Directors, each shareholder has the right to
vote cumulatively for candidates whose names have been placed in nomination for
election as Class III Directors prior to the voting. In voting cumulatively, a
shareholder may (a) give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares of Common Stock the
shareholder is entitled to vote, or (b) distribute his or her votes on the same
principle among two or more candidates as desired.
Abstentions, "withheld" votes and "broker non-votes" do not count for or
against a nominee for election as a director and have the same effect as votes
against the Board's proposals.
VOTING OF PROXY -- CONFIDENTIALITY
The accompanying Proxy is designed to permit each shareholder of record at
the close of business on February 18, 1997 to vote on the election of directors
and on the resolutions described in this Proxy Statement. Three directors of the
Company, Messrs. Gibara, Minter and Pytte, have been designated as proxies to
vote shares in accordance with the instructions on the Proxy.
Unless a shareholder requests that voting of the Proxy be withheld for any
one or more of the nominees for director, the Proxy will be voted for the four
nominees whose names are set forth at page 3. However, the proxies designated by
your Board of Directors may cumulatively vote each Proxy received if such
action is deemed by them to be appropriate, except to the extent authority to so
cumulate votes is expressly withheld as to any nominee for election as a Class
III Director.
Your Board of Directors does not presently anticipate that any of the
nominees named will be unavailable for election. In the event an unexpected
vacancy occurs, the Proxies received may be voted for the election of a new
nominee designated by the Board of Directors.
Where a shareholder specifies a choice with respect to any other matter set
forth in this Proxy Statement, his or her shares will be voted (or withheld from
voting) in accordance with the instructions given. If no specific instructions
are given, shares will be voted in favor of the proposals by the Board of
Directors to ratify the appointment of Price Waterhouse LLP as independent
accountants for the Company for 1997 and to approve the adoption of the 1997
Performance Incentive Plan of the Company.
-1-
<PAGE> 8
The vote of each shareholder, whether by proxy or ballot, will be treated as
confidential, except (a) as may be required by law, (b) as may be necessary to
assert or defend claims for or against the Company, (c) in the case of a
contested election of director(s), or (d) at the express request of the
shareholder. The inspectors of election and persons processing proxy cards and
ballots and tabulating the vote will not be employees of the Company.
Representatives of First Chicago Trust Company of New York have been appointed
to serve as the inspectors of election for the 1997 Annual Meeting.
REVOCABILITY OF PROXY
A shareholder may revoke or revise any proxy given to the Board of Directors
by the execution of a later proxy or by giving notice to the Company in writing
or in open meeting. No revocation or revision of any proxy shall affect any vote
previously taken.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
In accordance with the Ohio General Corporation Law and the Articles of
Incorporation and Code of Regulations of the Company, the Company is managed
under the direction of the Board of Directors by the chief executive officer and
other officers to whom authority has been delegated.
The Board is charged with specific responsibility with regard to the
selection and evaluation of management, the reporting of financial results to
the shareholders, and the consideration of other fundamental corporate matters,
including the declaration of dividends, the issuance of stock and the
authorization of significant business transactions. The Board also regularly
reviews the Company's operating results and financial statements, approves
capital expenditures and works with senior management in planning the Company's
business strategy and establishing its long term and short term business
objectives.
Historically, a majority of the members of the Board have been neither
officers nor employees of the Company. Ten of the eleven directors currently
serving are neither present nor past officers or employees of the Company or any
of its subsidiaries. The four nominees (each currently serving as a director)
are neither present nor past officers or employees of the Company or any of its
subsidiaries.
The Board meets on a regularly scheduled basis at least six times during the
year. The average attendance of all directors at the nine Board meetings held
during 1996 was 95%. The average attendance of all directors at all meetings of
the Board and its standing committees held during 1996 was 94%. During 1996,
each incumbent director attended at least 75% of all meetings of the Board and
the standing committees of the Board upon which he or she served.
The Board of Directors has four standing committees to assist it in the
discharge of its responsibilities. Their principal activities are set forth
below.
AUDIT COMMITTEE
Established in 1967, the Audit Committee is comprised of six directors who
are not present or past employees of the Company or any of its subsidiaries.
Each member of the Committee must be, in the opinion of the entire Board,
"independent." The Audit Committee held three formal meetings during 1996.
The Audit Committee reviews for the Board the activities of the Company's
internal auditors and its independent accountants to determine whether the
Company's organization, internal controls and policies are reasonably designed
to assure the adequacy of the Company's financial statements and records and to
provide for the safekeeping of the assets of the Company.
The Audit Committee annually considers the qualifications of the independent
accountants of the Company, makes recommendations to the Board as to their
selection, reviews the audit plan, approves services rendered or to be rendered
by the independent accountants and reviews the results of their audit for the
previous year. The Audit Committee reviews financial reports and monitors
compliance with the Company's ethics policies and accounting controls,
procedures and practices, receiving direct reports in this connection from the
Company's internal auditors and its independent accountants.
COMPENSATION COMMITTEE
Established in 1979, the Compensation Committee is comprised of all directors
who are not present or past employees of the Company or any of its subsidiaries.
The Compensation Committee held four formal meetings during 1996.
The Compensation Committee has primary responsibility for establishing and
administering the compensation programs of the Company for its executive
officers and other key personnel. The Compensation Committee consults with the
chief executive officer of the Company regarding executive compensation
policies, practices and plans, and
-2-
<PAGE> 9
undertakes such special studies regarding compensation as he or the Board may
request. The Compensation Committee also administers the 1989 Goodyear
Performance and Equity Incentive Plan, the Company's Performance Recognition
Plan, the Company's 1987 and 1982 Employees' Stock Option Plans, the Company's
Deferred Compensation Plan For Executives and the Company's Outside Directors'
Equity Participation Plan.
NOMINATING COMMITTEE
The Nominating Committee, established in 1978, is comprised of the Chairman
of the Board and six directors who are not present or past employees of the
Company or any of its subsidiaries. The Nominating Committee held two formal
meetings during 1996.
The principal function of the Nominating Committee is to identify candidates
for election to the Board of Directors. The Nominating Committee has the primary
responsibility for evaluating, and for recommending to the Board, candidates for
Board membership. The Nominating Committee also follows the development of
members of senior management for possible future nomination to the Board.
The Nominating Committee will consider candidates submitted by shareholders
for nomination to the Board and will make recommendations as to each such
candidate to the Board. Any shareholder desiring to submit a candidate for
consideration by the Nominating Committee should send the name of such proposed
candidate, together with such biographical data and background information
concerning the candidate as the shareholder may desire, to: The Office of the
Secretary, The Goodyear Tire & Rubber Company, Akron, Ohio 44316-0001.
COMMITTEE ON CORPORATE RESPONSIBILITY
The Committee on Corporate Responsibility was established in 1976 and is
currently comprised of six directors who are not present or past officers or
employees of the Company or any of its subsidiaries. During 1996, the Committee
held two formal meetings.
The principal functions of the Committee on Corporate Responsibility are to
periodically review the Company's policies relating to the manner in which the
Company conducts its business and its relationships with its shareholders,
employees and customers, as well as governmental agencies and the general
public, and to review the need for, and to develop, new policies relating to
such matters. The Committee is also responsible for establishing, with the
concurrence of the entire Board, methods for monitoring the implementation of,
and compliance with, policies adopted by the Company.
ELECTION OF DIRECTORS
(Item 1 on the Proxy)
The Board of Directors is comprised of eleven directors and is classified
into three classes of directors. At each Annual Meeting directors of one of the
classes, on a rotating basis, are elected to three year terms, to serve as the
successors to the directors of the same class whose terms expire at that Annual
Meeting. Classes I and III each currently have four directors serving and Class
II currently has three directors serving. The current terms of the four Class
III Directors will expire at the 1997 Annual Meeting. The current terms of the
four Class I Directors and the three current Class II Directors will expire at
the 1999 and 1998 Annual Meetings, respectively. Effective at the 1997 Annual
Meeting, Classes I and II will each be comprised of four directors and Class III
will be comprised of three directors.
At the 1997 Annual Meeting three persons are to be elected to serve as Class
III Directors, each to a three year term, and one person is to be elected to
serve as a Class II Director for a one year term. The Board of Directors has
selected the following nominees recommended by the Nominating Committee for
election to the Board of Directors:
As Class III Directors --
Thomas H. Cruikshank
Steven A. Minter
Agnar Pytte
each to hold office for a three year term expiring at the 2000 Annual Meeting
and until his successor shall have been duly elected and qualified; and
As a Class II Director --
Gertrude G. Michelson
to hold office for a one year term expiring at the 1998 Annual Meeting and until
her successor shall have been duly elected and qualified.
Each nominee is an incumbent director whose term of office expires at the
Annual Meeting. The following page contains certain information concerning the
four nominees, which information was furnished by them.
-3-
<PAGE> 10
NOMINEES FOR DIRECTOR -- CLASS III, THREE YEAR TERMS EXPIRING IN 2000
- - --------------------------------------------------------------------------------
THOMAS H. CRUIKSHANK
Retired. Formerly Chairman of the Board and Chief Executive Officer of
Halliburton Company, a supplier of oil field equipment and services and
engineering and construction services.
Mr. Cruikshank joined Halliburton Company in 1969. He was elected its President
in November of 1981, its Chief Executive Officer in May of 1983 and its Chairman
of the Board and Chief Executive Officer in June of 1989. Mr. Cruikshank retired
as Chief Executive Officer of Halliburton Company on October 1, 1995 and as its
Chairman of the Board on January 2, 1996. Mr. Cruikshank is also a director of
The Williams Companies, Inc., Central and Southwest Corporation, Seagull Energy
Corporation and Lehman Brothers Holdings Inc.
Member of Audit, Compensation and Nominating Committees.
Age: 65
Director since: October 7, 1986
- - --------------------------------------------------------------------------------
STEVEN A. MINTER
Executive Director and President of The Cleveland Foundation, a community trust
devoted to health, education, social services and civic and cultural affairs.
Mr. Minter has been the Executive Director and President of The Cleveland
Foundation, Cleveland, Ohio, since January 1, 1984. Mr. Minter served as
Associate Director and Program Officer of The Cleveland Foundation from 1975 to
1980 and from 1981 to 1983. Mr. Minter served as Undersecretary of the United
States Department of Education from May, 1980, until January, 1981. Mr. Minter
is also a director of Consolidated Natural Gas Company, KeyCorp and Rubbermaid
Incorporated, a trustee of The College of Wooster and Director of The Foundation
Center.
Member of Compensation, Corporate Responsibility and Nominating Committees.
Age: 58
Director since: February 12, 1985
- - --------------------------------------------------------------------------------
AGNAR PYTTE
President of Case Western Reserve University.
Dr. Pytte was a research physicist at Princeton University and Professor of
Physics, Dean of Science and Dean of Graduate Studies at Dartmouth College prior
to becoming the Provost of Dartmouth College in 1982, a position he held until
July 1, 1987, when he was elected President of Case Western Reserve University.
Dr. Pytte is also a director of A. O. Smith Corporation and the Sherman
Fairchild Foundation Inc.
Member of Compensation, Corporate Responsibility and Nominating Committees.
Age: 64
Director since: January 5, 1988
- - --------------------------------------------------------------------------------
NOMINEE FOR DIRECTOR -- CLASS II, ONE YEAR TERM EXPIRING IN 1998
- - --------------------------------------------------------------------------------
GERTRUDE G. MICHELSON
Retired. Formerly Senior Vice President -- External Affairs, R. H. Macy & Co.,
Inc., a national retail merchandising chain.
Mrs. Michelson joined R. H. Macy & Co., Inc. in 1947. After serving in various
posts, she was elected Senior Vice President-External Affairs of R. H. Macy &
Co., Inc., in November of 1980, which post she held until she retired effective
September 1, 1992. Mrs. Michelson served as a Senior Advisor to R. H. Macy & Co.
Inc. following retirement until December 31, 1994. She is also a director of The
Chubb Corporation, General Electric Company and The Stanley Works, a governor of
the American Stock Exchange and a trustee of RAND Corporation.
Chairwoman of Committee on Corporate Responsibility and member of Compensation
and Nominating Committees.
Age: 71
Director since: May 5, 1981
- - --------------------------------------------------------------------------------
The following two pages contain certain information concerning the seven
directors whose terms of office continue after the 1997 Annual Meeting, which
information was provided by the continuing directors.
-4-
<PAGE> 11
CONTINUING DIRECTORS -- CLASS II, TERMS EXPIRING IN 1998
- - --------------------------------------------------------------------------------
JOHN G. BREEN
Chairman of the Board and Chief Executive Officer, The Sherwin-Williams Company,
a manufacturer of paints, coatings and related products.
Mr. Breen has served as the Chairman of the Board and Chief Executive Officer of
The Sherwin-Williams Company since April 1980. He is also a director of Mead
Corporation, National City Corporation and Parker-Hannifin Corporation.
Chairman of Compensation Committee and member of Audit and Nominating
Committees.
Age: 62
Director since: January 7, 1992
- - --------------------------------------------------------------------------------
WILLIAM E. BUTLER
Retired. Formerly Chairman of the Board and Chief Executive Officer of Eaton
Corporation, a global manufacturer of highly engineered products for the
automotive, industrial, commercial and aerospace markets.
Mr. Butler served as the President and Chief Operating Officer of Eaton
Corporation from February of 1989 to September 4, 1991, when he was elected
President and Chief Executive Officer. Mr. Butler was elected Chairman of the
Board and Chief Executive Officer of Eaton Corporation in January of 1992,
serving in that capacity until he retired on December 31, 1995. Mr. Butler is
also a director of Applied Industrial Technologies, Inc., Ferro Corporation,
Pitney Bowes Inc. and Zurn Industries, Inc.
Member of Audit, Compensation and Corporate Responsibility Committees.
Age: 65
Director since: February 8, 1995
- - --------------------------------------------------------------------------------
GEORGE H. SCHOFIELD
Retired. Formerly Chairman of the Board and Chief Executive Officer of Zurn
Industries, Inc., which designs, manufactures and markets water control and HVAC
products.
Mr. Schofield served as the Chairman of the Board and Chief Executive Officer of
Zurn Industries, Inc. from 1986 until October 17, 1994, when he retired as Chief
Executive Officer. He retired as Chairman of the Board of Zurn Industries, Inc.
on March 31, 1995. Mr. Schofield is also a director of National Fuel Gas
Company.
Chairman of Audit Committee and member of Compensation and Corporate
Responsibility Committees.
Age: 67
Director since: December 3, 1991
- - --------------------------------------------------------------------------------
-5-
<PAGE> 12
CONTINUING DIRECTORS -- CLASS I, TERMS EXPIRING IN 1999
- - --------------------------------------------------------------------------------
SAMIR G. GIBARA
Chairman of the Board, Chief Executive Officer and President
Mr. Gibara joined the Company in 1966, serving in various managerial posts. Mr.
Gibara served as Chairman of the Board of a European subsidiary of the Company
from December 1, 1990 until September 30, 1992. Mr. Gibara was appointed a Vice
President of the Company on September 1, 1992. Mr. Gibara was elected Vice
President for Strategic Planning and Business Development and as the acting Vice
President of Finance and Chief Financial Officer of the Company on October 6,
1992. Mr. Gibara was elected Executive Vice President for North American Tire
Operations on May 3, 1994. Mr. Gibara was elected President and Chief Operating
Officer, and as a director, effective April 15, 1995. Mr. Gibara was elected
President and Chief Executive Officer effective January 1, 1996 and Chairman of
the Board, Chief Executive Officer and President effective July 1, 1996.
Member of Nominating Committee.
Age: 57
Director since: April 15, 1995
- - --------------------------------------------------------------------------------
WILLIAM J. HUDSON, JR.
President and Chief Executive Officer and a Director of AMP Incorporated, a
manufacturer of electrical and electronic connectors and terminals and related
products and systems.
Mr. Hudson served in various managerial posts with AMP Incorporated prior to
being elected its Executive Vice President International effective January 1,
1991. Mr. Hudson was elected President and Chief Executive Officer of AMP
Incorporated effective January 1, 1993. Mr. Hudson is also a director of
Carpenter Technology, a director of the National Association of Manufacturers, a
member of the Executive Committee of the Board of Governors of the National
Electrical Manufacturing Association, a member of the Board of Trustees and the
Executive Committee of the United States Council for International Business and
Chairman of the Pacific Basin Economic Council - United States.
Member of Audit, Compensation and Corporate Responsibility Committees.
Age: 62
Director since: November 7, 1995
- - --------------------------------------------------------------------------------
WILLIAM C. TURNER
Chairman of the Board and Chief Executive Officer of Argyle Atlantic
Corporation, a consulting firm to multinational corporations and investment
groups on international economic and political affairs, strategy, investments
and strategic alliances.
Mr. Turner has served as Chairman of the Board and Chief Executive Officer of
Argyle Atlantic Corporation since 1977. He is also a director of Rural/Metro
Corporation and Microtest, Inc. Mr. Turner is also Chairman of the Board of GO
Wireless International, Ltd., Chairman of the International Advisory Council of
Avon Products, Inc., a member of the Board of Governors of the Lauder Institute
of Management and International Studies of the University of Pennsylvania, a
trustee and former Chairman of the Board of the American Graduate School of
International Management, and a trustee and Executive Committee member of the
United States Council for International Business.
Chairman of Nominating Committee and member of Audit and Compensation
Committees.
Age: 66
Director since: October 3, 1978
- - --------------------------------------------------------------------------------
MARTIN D. WALKER
Chairman of the Board and former Chief Executive Officer of M. A. Hanna Company,
an international processor and distributor of polymers to the plastics and
rubber industries.
Mr. Walker served as Chairman of the Board and Chief Executive Officer of M. A.
Hanna Company from September 1, 1986 through December 31, 1996, when he retired
as Chief Executive Officer. He is Chairman of the Board and a director of M. A.
Hanna Company and a director of Comerica, Inc., Reynolds & Reynolds, The Timken
Company and Textron, Inc. Mr. Walker is also the Chairman of the Greater
Cleveland Growth Association.
Member of Compensation Committee.
Age: 64
Director since: February 4, 1997
-6-
<PAGE> 13
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 2 ON THE PROXY)
Price Waterhouse LLP ("Price Waterhouse") served as the Company's independent
accountants for the year ended December 31, 1996. In addition to rendering audit
services during 1996, Price Waterhouse performed various non-audit services for
the Company and its subsidiaries. The Audit Committee was advised of these
non-audit services and has determined that the independence of Price Waterhouse
was not impaired.
The Board of Directors, on the recommendation of the Audit Committee, has
appointed Price Waterhouse as independent accountants for the Company for the
year ending December 31, 1997. In making its recommendation, the Audit Committee
reviewed past audit results and the non-audit services performed during 1996 and
proposed to be performed during 1997.
In selecting Price Waterhouse, the Audit Committee and the Board of Directors
carefully considered their independence. Price Waterhouse have confirmed that
they are in compliance with all rules, standards and policies of the American
Institute of Certified Public Accountants and the Securities and Exchange
Commission governing auditor independence.
Representatives of Price Waterhouse will attend the Annual Meeting. They will
have the opportunity to make a statement, if they so desire, and have advised
the Company that they will be available to respond to appropriate questions of
shareholders.
The following resolution will be presented by your Board of Directors at the
Annual Meeting:
"Resolved, that the action of the Board
of Directors in selecting and appointing
Price Waterhouse LLP as independent accountants
for the Company for the year ending December 31,
1997 be, and hereby is, ratified."
In the event the appointment of Price Waterhouse is not ratified by the
shareholders, the adverse vote will be deemed to be an indication to the Board
of Directors that it should consider selecting other independent accountants for
1998.
Your Board of Directors recommends that shareholders vote FOR ratification
(Proxy Item 2).
PROPOSAL TO APPROVE THE ADOPTION OF THE 1997 PERFORMANCE INCENTIVE PLAN
(ITEM 3 ON THE PROXY)
On February 4, 1997, the Board of Directors adopted, subject to approval by
the shareholders of the Company, the 1997 Performance Incentive Plan of The
Goodyear Tire & Rubber Company (the "Plan"). In general, the Plan empowers the
Company to grant stock options and stock appreciation rights, and to make
restricted stock grants, performance grants and other stock-based grants and
awards, to officers of the Company and other employees of the Company and its
subsidiaries.
The Plan is designed to advance the interests of the Company and its
shareholders by strengthening the ability of the Company to attract, retain and
reward highly qualified officers and other employees, to motivate officers and
other selected employees to achieve business objectives established to promote
the long-term growth, profitability and success of the Company, and to encourage
ownership of the Common Stock of the Company.
The Plan is also designed to meet the requirements for tax deductibility
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to certain performance based compensation paid under the
Plan. Under the Code, the Company may not deduct compensation paid to any one of
certain executive officers in excess of $1 million in any one year. Section
162(m) provides exceptions to the limitations on deductibility for
performance-based compensation meeting certain requirements. If the Plan is
approved by the shareholders, based on the Company's interpretation of Section
162(m) and the regulations promulgated thereunder, all stock options, stock
appreciation rights and performance awards paid in accordance with the Plan, and
certain grants of restricted stock and other stock based grants made under the
Plan, will be deductible as performance-based compensation not subject to or
included in the $1 million limitation on tax deductibility set forth in Section
162(m) of the Code.
When approved by the shareholders, the Plan will replace the 1989 Goodyear
Performance and Equity Incentive Plan (the "1989 Plan"), which would otherwise
expire on December 31, 1998, except that approval of the Plan will not affect
grants and awards then outstanding under the 1989 Plan. In the opinion of the
Compensation Committee and the Board of Directors, it is in the best interests
of the Company and its shareholders to adopt the Plan.
-7-
<PAGE> 14
SUMMARY OF THE PLAN
The principal features of the Plan are summarized below. The summary is
qualified in its entirety by reference to the Plan, the complete text of which
is set forth at Appendix A to this Proxy Statement.
PLAN ADMINISTRATION. The Plan will be administered by a committee (the
"Committee") which shall be composed of not less than three members of the Board
of Directors who qualify as "outside directors" within the meaning of Section
162(m) of the Code and as "non-employee directors" within the meaning of Rule
16(b)-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Committee will have the sole authority to, among other things, construe and
interpret the Plan, make rules and regulations relating to the administration of
the Plan, select participants and establish the terms and conditions of the
grants and awards not inconsistent with the terms of the Plan. It is anticipated
that the Compensation Committee of the Board of Directors will act as the
Committee under the Plan.
ELIGIBILITY. Any employee of the Company and its subsidiaries, including any
officer of the Company, selected by the Committee is eligible to receive grants
of stock options and stock appreciation rights under the Plan. Any officer of
the Company and any other key employee of the Company or a subsidiary selected
by the Committee is eligible to receive restricted stock grants, performance
grants and awards and other stock-based grants and awards under the Plan. The
selection of recipients of, and the nature and size of, grants and awards will
be wholly within the discretion of the Committee. It is anticipated that all
officers of the Company will receive various grants under the Plan and that
approximately 1,200 other employees of the Company and its subsidiaries will
participate in at least one feature of the Plan. Except as otherwise may be
provided by the Committee, a participant must be an employee of the Company or a
subsidiary continuously from the date a grant is made through the date of
payment or settlement thereof, ordinarily for a period of not less than six
months.
SHARES SUBJECT TO THE PLAN. The maximum number of shares of Common Stock which
will be available for issuance and delivery under the Plan will be 15 million,
plus any shares that are forfeited back to the Company and any shares that are
tendered to the Company by a participant as full or partial payment of the
exercise price of any stock option granted under the Plan or in payment of any
withholding tax incurred in connection with the exercise of any stock option or
the settlement of any other award under the Plan. Shares of Common Stock that
were subject to grants or awards settled in cash or grants that expire
unexercised or unfulfilled shall be available for a new grant or issuance
pursuant to a new award. The Plan also limits the number of shares of Common
Stock which may be issued in settlement of the various types of grants and in
respect of which the various types of grants which may be made to any
participant during any calendar year.
ADJUSTMENTS. The maximum number of shares available for issuance under the Plan
are subject to appropriate adjustments to reflect certain events such as a stock
dividend, stock split, reorganization, recapitalization or business combination.
Similar adjustments shall also be made with respect to (i) the maximum number of
shares which may be subject to any type of grant or award or any outstanding
grant or award, or which may be granted or awarded to any participant during any
specified period, and (ii) the per share exercise price of any outstanding stock
option or stock appreciation right and the number or value of any units which
are the subject of any outstanding grant or award.
TERM, AMENDMENT AND TERMINATION. The Plan will remain in effect until December
31, 2001, unless sooner terminated by the Board of Directors. Termination will
not affect grants and awards then outstanding. The Board of Directors may
terminate or amend the Plan at any time without shareholder approval, unless
such approval is necessary to comply with applicable laws, including the
Exchange Act or the Code. In any event, shareholder approval shall be required
to, among other things, amend the Plan to increase the maximum number of shares
which may be issued pursuant to the Plan, reduce the minimum exercise price for
stock options and stock appreciation rights, or change the Performance Measures
(as defined below).
STOCK OPTIONS. The Plan will permit the Committee to grant stock options to all
officers of the Company and other selected employees of the Company and its
subsidiaries. No participant may receive stock options to purchase more than
500,000 shares of Common Stock in any calendar year. No more than 14 million
shares of Common Stock may be issued pursuant to non-qualified stock options and
no more than five million shares may be issued pursuant to incentive stock
options. The per share exercise price for any stock option shall not be less
than 100 % of the fair market value of a share of Common Stock (defined in the
Plan as the average of the high and low sale prices of the Common Stock on the
New York Stock Exchange Composite Transactions tape) at the time of grant. The
Plan also permits the Committee to establish the time periods for the exercise
of each stock option and to require a period of employment before the stock
option may be exercised.
The Plan authorizes the Committee to grant incentive stock options, as that
term is defined in Code
-8-
<PAGE> 15
Section 422A, each having a term of up to ten years from the date of grant. The
amount of incentive stock options vesting in a particular year can not exceed
$100,000 per option recipient, determined using the fair market value of the
shares of Common Stock subject to such option or options on the date of grant.
The Plan also permits the automatic grant of a replacement stock option for
that number of shares of Common Stock tendered to, or withheld by, the Company
in connection with the exercise of a stock option, which option shall have an
exercise price equal to the fair market value of the Common Stock on the date
the original option is exercised. The Plan prohibits the repricing of stock
options and SARs at a lower exercise price, whether by cancellation or amendment
of the original grant.
STOCK APPRECIATION RIGHTS. The Plan will permit the Committee to grant Stock
Appreciation Rights ("SARs") in tandem with, in relation to or independent of
any other grant under the Plan. The maximum number of shares of Common Stock in
respect of which SARs may be granted is six million; provided, that no more than
three million shares may be issued in settlement of SARs. The maximum number of
shares of Common Stock in respect of which SARs may be granted to any
participant during any calendar year is 250,000.
An SAR entitles the holder to receive an amount equal to all, or some portion
(as determined by the Committee in respect of each SAR granted), of the excess
of the fair market value of a share of the Common Stock on the date of exercise
over the fair market value of such share at the date of grant, multiplied by the
number of shares as to which the holder is exercising the SAR, payable in cash
or in shares of Common Stock (at fair market value on the date of exercise), or
a combination thereof, as the Committee may, in its sole discretion, determine.
The Committee may also determine that an SAR shall be automatically exercised on
one or more specified dates.
RESTRICTED STOCK. The Plan authorizes the Committee to grant restricted stock to
any officer of the Company and any other key employee of the Company and its
subsidiaries and to determine the time, amount and terms and conditions of the
grant. The maximum number of shares which may be issued as restricted stock is
two million. The maximum number of shares which may be issued to any participant
as restricted stock during any one calendar year shall be 200,000. The maximum
amount any participant may receive as a restricted stock grant or award in any
calendar year is $10 million. Shares awarded as restricted stock would be issued
subject to a restriction period of no less than three years. During the
restriction period, the recipient is not entitled to delivery of the shares,
restrictions are placed on the transferability of the shares, and the shares
would be forfeited if the recipient terminates employment for reasons other than
as approved by the Committee. The Committee may also require that specified
Performance Goals (as defined below) be attained during the restriction period.
Upon expiration of the restriction period, the appropriate number of shares of
Common Stock will be delivered to the grantee free of all restrictions. During
the restriction period the grantee shall be entitled to vote the shares and to
receive dividends paid thereon.
PERFORMANCE GRANTS AND AWARDS. The Plan will permit the Committee to grant to
officers of the Company and key employees of the Company and its subsidiaries
the contingent right, expressed in units (which may be equivalent to a share of
Common Stock or other monetary value), to receive payments of shares of Common
Stock, cash or any combination thereof ("Performance Grants") based upon Company
performance over a specified period ("Performance Period"). At the time of
grant, the Committee shall also establish one or more Company performance
criteria (the "Performance Measure") applicable to the Performance Grant and
targets that must be attained relative to the Performance Measure ("Performance
Goals").
The Performance Measure may be based on any of the following criteria, alone
or in combination, as the Committee deems appropriate: (i) Cumulative Net Income
Per Share; (ii) Cumulative Net Income; (iii) return on sales; (iv) total
shareholder return; (v) return on assets; (vi) economic value added; (vii) cash
flow; (viii) return on equity and (ix) cumulative operating income (which shall
equal consolidated sales minus cost of goods sold and selling, administrative
and general expense during the performance period). Cumulative Net Income and
Cumulative Net Income Per Share are determined based on net income for the
applicable year or years as reported in the Consolidated Income Statement(s) of
the Company and subsidiaries, adjusted to exclude (i) extraordinary items; (ii)
gains or losses on the disposition of discontinued operations; (iii) the
cumulative effect of changes in accounting principles; (iv) the writedown of any
asset; and (v) charges for restructuring and rationalization programs.
Performance Goals may include a minimum, maximum and target level of
performance, with the size of Performance Award based on the level attained.
Performance Goals and the Performance Measure in respect of any grant shall not
be changed when so provided in the grant agreement. The Committee may eliminate
or decrease (but not increase) the amount of any Performance Award otherwise
payable to a participant. Performance Grants may be paid in cash, shares of
Common Stock or any combination thereof.
-9-
<PAGE> 16
The maximum number of shares of Common Stock which may be issued pursuant to
Performance Grants is three million. The maximum number of shares of Common
Stock which may be the subject of Performance Grants made to any Participant in
respect of any Performance Period or during any calendar year shall be 100,000.
The maximum amount any Participant may receive pursuant to Performance Grants
during any calendar year shall not exceed $15 million, determined using the fair
market value of the Common Stock (multiplied by the aggregate number of units of
the Performance Grant awarded) on the last day of the Performance Period or on
the date of the payment thereof, whichever is higher. It is presently
anticipated that the Committee will make Performance Grants for three year
Performance Periods using Cumulative Net Income Per Share as the Performance
Measure.
OTHER STOCK-BASED GRANTS. The Plan would permit the Committee to make grants in
other forms in shares of Common Stock, in Common Stock equivalents or
denominated in other stock-based units. Such other stock-based grants may be
made to officers of the Company and other key employees of the Company and its
subsidiaries. The maximum number of shares of Common Stock which may be issued
pursuant to other stock-based grants is three million. No participant shall
receive more than 100,000 shares of Common Stock in settlement of stock- based
grants during any calendar year. The maximum amount any participant may receive
in stock- based awards during any calendar year shall not exceed $5 million.
TRANSFERABILITY. Awards under the Plan will not be transferable other than by
will or the laws of descent and distribution; except that the Committee may
permit the transfer of (i) specific non-qualified stock option and SAR grants by
gift to the employee's spouse, children and grandchildren, or to a trust for the
benefit of any one or more of them, or (ii) any grant or award pursuant to a
qualified domestic relations order.
DEFERRALS. The Committee may at any time require that the payment or settlement
of any grant or award under the Plan be deferred for such period or periods and
on such terms and conditions as the Committee shall determine. The Committee may
also permit participants to defer the receipt of the payment of any award on
such terms and conditions as the Committee shall deem appropriate. Such
deferrals may be in the form of Common Stock equivalents and earn dividend
equivalents. Amounts deferred in cash may earn interest at a rate or rates
determined by the Committee.
CHANGE IN CONTROL. In the event of a change in control of the Company, except as
the Board of Directors comprised of a majority of continuing directors may
expressly provide otherwise, and notwithstanding any other provision of the
Plan: (i) all stock options and stock appreciation rights then outstanding under
the Plan become fully exercisable (ii) all terms and conditions of all
restricted stock grants then outstanding are deemed satisfied, and (iii) all
Performance Grants and other stock-based grants shall be deemed to have been
fully earned. A change in control occurs if: (i) any person becomes a beneficial
owner of 15 percent or more of the Common Stock outstanding; (ii) the Company's
shareholders approve a combination with another company under certain
circumstances; (iii) the Company approves a plan of complete liquidation of the
Company or an agreement to dispose of substantially all of its assets; or (iv)
the continuing directors no longer constitute a majority of the Board of
Directors. The payment of awards in the event of a change in control may have
the incidental effect of increasing the net cost of that change, and,
theoretically, could render a change in control more difficult or discourage it.
FEDERAL INCOME TAX CONSEQUENCES. Based on current provisions of the Code, and
the existing regulations thereunder, the anticipated Federal income tax
consequences in respect of the several types of grants and awards under the Plan
are as described below.
Grant of Stock Options and SARs. An optionee will not recognize any taxable
income at the time a Stock Option or an SAR is granted and the Company will not
be entitled to a Federal income tax deduction at that time.
Incentive Stock Options. No ordinary income will be recognized by the holder
of an incentive stock option at the time of exercise. The excess of the fair
market value of the shares of Common Stock at the time of exercise over the
aggregate option exercise price will be an adjustment to alternative minimum
taxable income for purposes of the Federal "alternative minimum tax" at the date
of exercise. If the optionee holds the shares of Common Stock purchased for the
greater of two years after the date the option was granted or one year after the
acquisition of such shares, the difference between the aggregate option price
and the amount realized upon disposition of the shares will constitute a long
term capital gain or loss, as the case may be, and the Company will not be
entitled to a Federal Income tax deduction. If the shares of Common Stock are
disposed of in a sale, exchange or other "disqualifying disposition" within two
years after the date of grant or within one year after date of exercise, the
optionee will realize taxable ordinary income in an amount equal to the lesser
of (i) the excess of the fair market value of the shares of Common Stock
purchased at the time of exercise over the aggregate option exercise price or
(ii) the excess of the amount realized upon disposition of such shares over the
option exercise price, and the
-10-
<PAGE> 17
Company will usually be entitled to a Federal income tax deduction equal to such
amount.
Non-Qualified Stock Options. Taxable ordinary income will be recognized by
the holder of a non-qualified stock option at the time of exercise in an amount
equal to the excess of the fair market value of the shares of Common Stock
purchased at the time of such exercise over the aggregate option exercise price.
The Company will usually be entitled to a corresponding Federal income tax
deduction. The optionee will generally recognize a taxable capital gain or loss
based upon the difference between the per share fair market value at the time of
exercise and the per share selling price at the time of a subsequent sale of the
shares.
Stock Appreciation Rights. Upon the exercise of an SAR, the holder will
realize taxable ordinary income on the amount of cash received and/or the then
current fair market value of the shares of Common Stock acquired and the Company
will be entitled to a corresponding Federal income tax deduction. The holder's
basis in any shares of Common Stock acquired will be equal to the amount of
ordinary income upon which he or she was taxed. Upon any subsequent disposition,
any gain or loss realized will be a capital gain or loss.
Restricted Stock. Unless a participant makes the election described below, a
participant receiving a grant will not recognize income and the Company will not
be allowed a deduction at the time such shares of restricted stock are granted.
While the restrictions on the shares are in effect, a participant will recognize
compensation income equal to the amount of the dividends received and the
Company or its subsidiary will be allowed a deduction in a like amount. When the
restrictions on the shares of Common Stock are removed or lapse, the excess of
fair market value of such shares on the date the restrictions are removed or
lapse over the amount paid, if any, by the participant for such shares will be
ordinary income to the participant and will be allowed as a deduction for
Federal income tax purposes to the Company or its subsidiary. Upon disposition
of the shares of Common Stock, the gain or loss recognized by the participant
will be treated as capital gain or loss, and the capital gain or loss will be
short term or long term depending upon the period of time the shares are held by
the participant following the removal or lapse of the restrictions. However, by
filing a Section 83(b) election with the Internal Revenue Service within 30 days
after the date of grant, a participant's ordinary income and commencement of
holding period and the Company's deduction will be determined as of the date of
grant. In such a case, the amount of ordinary income recognized by such a
participant and deductible by the Company or its subsidiary will be equal to the
excess of the fair market value of the shares as of the date of grant over the
amount paid by the participant for the shares of Common Stock. If such election
is made and a participant thereafter forfeits such Shares of Common Stock, no
refund or deduction will be allowed for the amount previously included in such
participant's income.
Performance Grants. A participant receiving any Performance Grant will not
recognize income, and the Company will not be allowed a deduction, at the time
such grant is made. When a participant receives payment in cash or shares of
Common Stock, the amount of cash and the fair market value of the shares of
Common Stock received will be ordinary income to the participant and will be
allowed as a deduction for Federal income tax purposes to the Company.
Special Rules. To the extent an optionee pays all or part of the option price
of a non-qualified stock option by tendering shares of Common Stock owned by the
optionee, the tax consequences described above apply except that the number of
shares of Common Stock received upon such exercise which is equal to the number
of shares surrendered in payment of the option exercise price shall have the
same basis and tax holding period as the shares of Common Stock surrendered. If
the shares of Common Stock surrendered had previously been acquired upon the
exercise of an incentive stock option, the surrender of such shares may be a
disqualifying disposition of such shares. The additional shares of Common Stock
received upon such exercise have a tax basis equal to the amount of ordinary
income recognized on such exercise and a holding period which commences on the
date of exercise. If an optionee exercises an incentive stock option by
tendering shares previously acquired on the exercise of an incentive stock
option, a disqualifying disposition may occur and the optionee may recognize
income and be subject to other basis allocation and holding period requirements.
Withholding Taxes. There are no withholding taxes payable in connection with
the grant of any stock option or SAR or the exercise of an incentive stock
option. However, withholding taxes must be paid at the time of exercise of any
non-qualified stock option or SAR. Withholding taxes must also be paid in
respect of any restricted stock when the restrictions thereon lapse. In respect
of all other awards, withholding taxes must be paid whenever income to the Plan
participant is recognized for tax purposes.
Section 162(m) Limit. The Company believes that compensation paid under the
Plan from time to time to certain executive officers attributable to stock
options, stock appreciation rights and Performance Grants, and
-11-
<PAGE> 18
certain forms of restricted stock grants and stock-based grants, will be treated
as qualified performance based compensation and, therefore, will be deductible
by the Company and not subject to the $1 million deduction limitation of Section
162(m) of the Code.
OTHER INFORMATION. No benefits or amounts have been granted, awarded or received
under the Plan, nor are any such benefits or amounts now determinable. For
comparison purposes, reference is made to: (i) the LTIP payouts column of the
Summary Compensation Table on page 14 for amounts received pursuant to
Performance Grants for the 1994-1996 performance period; (ii) the Option/SAR
Grants Table at page 16 for stock options granted during 1996, which options
were granted under the 1989 Plan and were in respect of 1996 and 1997 annual
grants (the total shares optioned in 1996 to all officers and all other grantees
totaled 513,800 and 2,874,241, respectively); and (iii) the Long Term Incentive
Plan Awards Table at page 18 for performance equity grants made under the 1989
Plan in respect of three year performance periods ending December 31, 1998 and
1999, respectively (grants were made to all officers for a maximum of 135,450
units and 139,050 units for performance periods ending December 31, 1998 and
1999, respectively, and to all other grantees for a maximum of 12,300 units and
10,500 units for said performance periods, each unit equivalent to a share of
Common Stock and payable 50% in cash and 50% in shares of Common Stock).
The closing price of the Common Stock reported on the New York Stock Exchange
Composite Transaction tape on February 18, 1997 was $54.25 per share.
For additional information regarding the Plan, please refer to the complete
text of the Plan set forth at Appendix A to this Proxy Statement. If the Plan is
not approved by shareholders, the Company will consider other alternatives
available with respect to performance based compensation.
The following resolution will be presented by your Board of Directors at the
Annual Meeting:
"RESOLVED, that the adoption of the 1997 Performance Incentive Plan of the
Goodyear Tire & Rubber Company, the complete text of which is set forth at
Appendix A to the Proxy Statement of the Company for the Annual Meeting of
Shareholders on April 14, 1997, be, and the same hereby is, approved."
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
PLAN (PROXY ITEM 3).
The resolution to approve the Plan will be adopted only if it receives the
affirmative vote of at least a majority of the shares of Common Stock entitled
to vote at the Annual Meeting. Abstentions, "withheld" votes and "broker
non-votes" will not be counted as either "for" or "against" this proposal, but
will have the same effect as votes against the proposal.
OTHER BUSINESS
In addition to the matters described above, there will be an address by the
Chairman of the Board, Chief Executive Officer and President of the Company. A
discussion period will follow during which shareholders will have an opportunity
to ask appropriate questions regarding the Company and its operations.
The Board of Directors does not intend to bring any other business before the
Annual Meeting and is not aware of any other business intended to be presented
by any other person.
If any other matters properly come before the Annual Meeting, the persons
whose names appear in the enclosed Proxy intend to vote all Proxies received by
the Board of Directors in such manner as they, in their discretion, deem
appropriate.
BENEFICIAL OWNERSHIP OF COMMON STOCK
To the knowledge of the Company, no person, firm or group beneficially owned
(as defined in Rule 13d-3 of the Securities Exchange Act of 1934) more than 5%
of the shares of the Common Stock of the Company outstanding on the record date,
February 18, 1997; except that (i) Brinson Partners, Inc. and related entities,
209 South LaSalle, Chicago, Illinois 60604, filed a Schedule 13G dated February
12, 1997 indicating their beneficial ownership, with shared voting and
dispositive power, of 8,314,609 shares, or approximately 5.3% of outstanding
shares, of the Common Stock, and (ii) The Northern Trust Company, 50 South
LaSalle Street, Chicago, Illinois, has reported that at the record date it held
14,963,659 shares, or approximately 9.5% of outstanding shares, of the Common
Stock for various beneficial owners, including 8,304,069 shares, or
approximately 5.3%, of the Common Stock of the Company held as the Trustee of
four Employee Savings Plans sponsored by the Company.
As of February 18, 1997, each director and nominee, each person named in the
Summary Compensation Table on page 14, and all directors and officers as a
group, beneficially owned the number of shares of Common Stock set forth in the
Beneficial Ownership Table on the next page.
-12-
<PAGE> 19
BENEFICIAL OWNERSHIP TABLE
<TABLE>
<CAPTION>
Beneficial Ownership at February 18, 1997
--------------------------------------------------
Shares of Percent of
Common Stock Common
Name Owned(1)(2) Stock(2)
<S> <C> <C>
John G. Breen 5,200(3)(4) *
William E. Butler 400 *
Thomas H. Cruikshank 1,800(4) *
Eugene R. Culler, Jr. 47,865(5)(6)(7)(8) .03%
Stanley C. Gault 41,960(5)(6)(7) .03%
Samir G. Gibara 63,857(5)(6)(7) .04%
C. Thomas Harvie 15,674(5)(6)(7)(9) *
William J. Hudson, Jr. 1,000 *
Gertrude G. Michelson 1,200(4) *
Steven A. Minter 1,580(4) *
Agnar Pytte 1,200(4) *
George H. Schofield 2,200(4) *
William J. Sharp 100,625(5)(6)(7) .06%
Robert W. Tieken 36,668(5)(6)(7) .02%
William C. Turner 1,600(4) *
Martin D. Walker 0 *
All directors, the Named Officers and all other
officers as a group (36 persons) 814,615(4)(5)(6)(7)(10) .52%
<FN>
Notes to Beneficial Ownership Table:
(1) Unless otherwise indicated in a subsequent note, each person named and
each member of the group has sole voting and investment power with
respect to the shares of Common Stock shown.
(2) The number of shares indicated as beneficially owned by each of the
directors and named executive officers, and by all directors and
officers as a group, and the percentage of Common Stock outstanding
beneficially owned by each person and the group, has been computed in
accordance with Rule 13d-3(d)(1) promulgated under the Securities
Exchange Act of 1934. Asterisk indicates percentage of ownership is
less than one one-hundredth of one percent of all outstanding shares of
Common Stock.
(3) Includes 5,000 shares jointly owned by Mr. Breen and his spouse.
(4) Includes 200 shares acquired pursuant to the Company's 1994 Restricted
Stock Award Plan for Non-employee Directors which are subject to
certain restrictions on transfer.
(5) Does not include shares contingently receivable, or which may be
receivable on a deferred basis, pursuant to Performance Equity Grants
made under the 1989 Goodyear Performance and Equity Incentive Plan (the
"1989 Plan").
(6) Includes shares which may be acquired upon the exercise of options
which are exercisable prior to April 19, 1997 under the 1989 Plan and
predecessor employee stock option plans of the Company as follows: Mr.
Gibara, 50,000 shares; Mr. Sharp, 89,775 shares; Mr. Tieken, 34,375
shares; Mr. Culler, 29,975 shares; Mr. Harvie, 5,500 shares; and all
other officers, 414,480 shares.
(7) Includes full shares held in trust under the Company's Employee Savings
Plan for Salaried Employees ("Savings Plan") at February 18, 1997.
(8) Includes 50 shares owned by Mr. Culler's spouse, as to which he
disclaims beneficial ownership.
(9) Includes 10,000 shares acquired by Mr. Harvie pursuant to the terms of
a Restricted Stock Purchase Agreement and under the 1989 Plan, which
shares are subject to certain restrictions on transfer and the
Company's option to repurchase.
(10) Includes 154,132 shares owned of record and beneficially or owned
beneficially through a nominee, 30,078 shares held in the Savings Plan
Trust, 624,105 shares subject to options (exercisable prior to April
19, 1997) granted under the 1989 Plan and predecessor employee stock
option plans, and 6,300 shares held by or jointly with family members
of certain directors and officers.
</TABLE>
-13-
<PAGE> 20
EXECUTIVE OFFICER COMPENSATION
SUMMARY OF COMPENSATION
The Summary Compensation Table below sets forth information in respect of the
compensation of the Chief Executive Officer of the Company during 1996 and the
persons who were, at December 31, 1996, the other four most highly compensated
executive officers of the Company (and one other person who would have been one
of the four most highly compensated if he had been an executive officer at the
end of the year), for services in all capacities to the Company and its
subsidiaries during 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
- - --------------------------------------------------------------------------------------------------------------
Awards Payouts
Annual Compensation -------------------- ----------
------------------------------------------ Securities
Other Underlying Long Term All
Annual Restricted Options/ Incentive Other
Compen- Stock SARs Plan Compen-
Bonus sation Award(s) (Number Payouts sation
Salary (Dollars) (Dollars) (Dollars) of (Dollars) (Dollars)
Name and Principal Position Year (Dollars) (1) (2) (3) Shares) (4) (5)
---- ----------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samir G. Gibara 1996 $ 800,000 $ 771,373 $ 8,500 -0- 110,000 $ 371,565 $4,500
Chairman of the Board, 1995 463,542 387,301 8,500 -0- 30,000 242,663 4,500
Chief Executive Officer 1994 350,000 262,500 8,000 -0- 15,000 182,588 4,500
and President(6)
William J. Sharp 1996 443,333 349,927 8,500 -0- 43,000 312,115 4,500
President, 1995 370,000 253,750 8,500 -0- 12,400 283,106 4,500
Global Support Operations(7)1994 350,000 240,000 8,000 -0- 12,400 213,019 4,500
Robert W. Tieken 1996 381,667 301,182 8,000 -0- 25,000 304,683 4,500
Executive Vice President(8) 1995 358,333 273,000 4,473 -0- 12,500 -0- 4,500
1994 228,563 180,000 310,981 -0- 25,000 -0- -0-
Eugene R. Culler, Jr. 1996 317,500 169,276 896,447 -0- 22,500 130,048 4,500
Executive Vice President(9) 1995 303,802 123,107 317,788 -0- 9,000 134,813 -0-
1994 288,750 182,700 279,303 -0- 4,500 101,438 -0-
C. Thomas Harvie 1996 287,500 229,472 43,288 -0- 22,000 -0- 4,500
Vice President and 1995 137,500 105,000 50,000 $434,000 11,000 -0- -0-
General Counsel (10) 1994 -0- -0- -0- -0- -0- -0- -0-
Stanley C. Gault 1996 595,000 588,375 125,308 -0- 50,000 1,288,067 4,500
Retired. Formerly 1995 1,020,000(12) 1,155,000 32,239 -0- 155,000 1,348,125 4,500
Chairman of the Board (11) 1994 995,000(12) 1,162,500 32,004 -0- 150,000 1,014,375 4,500
<FN>
NOTES TO SUMMARY COMPENSATION TABLE:
(1) Amounts awarded in respect of 1996, 1995 and 1994 and paid in February
of 1997, 1996 and 1995, respectively, pursuant to the Company's
Performance Recognition Plan for 1996, 1995 and 1994, respectively;
except that (a) payment of the award to Mr. Gault in respect of 1996
has been deferred until April of 1997, and (b) payment of the awards to
Mr. Gault in respect of 1995 and 1994, and of a portion of the award to
Mr. Gibara in respect of 1996, was deferred pursuant to the Company's
Deferred Compensation Plan for Executives. The payout in respect of
plan year 1996 was determined based on EBIT (defined under the Plan as
sales minus cost of goods sold and sales, administrative and general
expense, after certain adjustments), and cash flow targets for 1996.
The amounts deferred are included in the amounts shown in the Table.
(2) Amounts shown represent the cost to the Company of tax and financial
planning assistance provided by third parties, plus: (a) in respect of
Mr. Tieken, payment in 1994 of $298,621 in relocation and related
expenses, including the reimbursement of taxes; (b) in respect of Mr.
Culler, payment in 1996 of $840,566 in reimbursement of Canadian taxes
in excess of normalized United States taxes, $35,514 for moving
expenses and $12,368 as reimbursement of United States taxes, and
payment of $266,515 and $284,770 in 1994 and 1995, respectively, as
reimbursement of Canadian taxes in excess of normalized United States
taxes, and $15,586 for relocation allowances in 1995; (c) in respect of
Mr. Harvie, payments in 1996 of $34,658 for costs in connection with
his relocation and in 1995 of $50,000 as special compensation; and (d)
in respect of Mr. Gault, payment in 1996 of $120,308 for vacation
earned but not taken in 1995 and 1996 and the cost of his use of a
Company car and driver during 1995 and 1994.
</TABLE>
-14-
<PAGE> 21
(3) No restricted stock was awarded or issued by the Company to any Named
Officer during 1996. On July 17, 1995, Mr. Harvie purchased, pursuant
to a Restricted Stock Purchase Agreement and under the 1989 Plan,
10,000 shares of Common Stock for a purchase price of $.10 per share,
which shares are subject to various restrictions through at least June
30, 1998 and to an option to repurchase in favor of the Company under
specified circumstances at a price of $.10 per share. The dollar value
reported represents the per share closing price of the Common Stock on
the date of grant ($43.50 on July 17, 1995), less the purchase price.
The total value of the 10,000 shares of Common Stock (net of the
purchase price) was $512,750.00 at December 31, 1996. Mr. Harvie
receives all dividends paid on said shares of Common Stock. On August
9, 1991, Mr. Gault purchased, pursuant to the terms of an employment
agreement and a related purchase agreement and under the 1989 Plan,
100,250 shares (after giving effect to the 2-for-1 stock split on May
4, 1993) of the Common Stock of the Company for $.05 per share, which
shares were restricted, not transferable and subject to the Company's
option to repurchase through December 31, 1996. Dividends were paid on
all said 100,250 restricted shares of the Common Stock. At December 31,
1996, the aggregate value of all of the 110,250 restricted shares of
the Common Stock (net of the purchase price) was $5,658,081.25, based
on the December 31, 1996 closing price on the New York Stock Exchange
Composite Transactions tape of $51.375 per share. No other shares of
restricted stock have been awarded or issued to the Named Officers of
the Company.
(4) The payouts indicated in respect of 1996 relate to amounts earned
pursuant to Performance Equity Grants made in 1994 pursuant to the 1989
Plan in respect of the three year performance period ended December 31,
1996. Under the 1994 Performance Equity Grants (as amended December 3,
1996), participants were granted a specified number of performance
units ("1996 Performance Units"), payable 50% in shares of Common Stock
and 50% in cash. Since the aggregate earnings per share of Common Stock
during the performance period were $12.11 (after adjustments by the
Committee to eliminate the effects on 1996 earnings per share of the
$872.0 million of asset writedown and rationalization charges), each
participant earned 143.6% of the 1996 Performance Units granted. The
value of each 1996 Performance Unit was $51.75, which was the average
of the high and the low sale prices of the Common Stock on December 31,
1996 as reported on the New York Stock Exchange Composite Transactions
tape. The payment of the Common Stock portion of the 1996 Performance
Units earned was automatically deferred in the form of Common Stock
equivalent units (which will earn dividend equivalents) for at least
five years and will be payable at the election of the participant in
shares of Common Stock, cash, or any combination thereof; except that
Mr. Gault, who has retired, received payment of the Common Stock
portion in February, 1997. The cash portion of the 1996 Performance
Units earned was paid in February 1997. The payouts indicated in
respect of 1995 relate to amounts distributed in February of 1996
pursuant to Performance Equity Grants made in 1993 pursuant to the 1989
Plan in respect of the three year performance period ended December 31,
1995. Under the 1993 Performance Equity Grants, participants received a
specified number of performance units ("1995 Performance Units")
payable 50% in shares of Common Stock and 50% in cash if aggregate
earnings per share of Common Stock during the performance period were
at least $9.15. Since the aggregate earnings per share of Common Stock
during the performance period were in excess of $10.15, each
participant also received a supplemental cash amount equal to 50% of
the value of the 1995 Performance Units. The 1995 Performance Units
were valued at $44.9375 per share, which was the fair market value of
the Common Stock at December 29, 1995, based on the average of the high
and low sale prices of the Common Stock on that date as reported on the
New York Stock Exchange Composite Transactions tape. Similarly, payouts
indicated in respect of 1994 related to amounts distributed in February
of 1995 pursuant to Performance Equity Grants made in 1992 in respect
of the three year performance period ended December 31, 1994. Under the
1992 Performance Equity Grants, participants received a specified
number of performance units ("1994 Performance Units") payable 70% in
shares of Common Stock and 30% in cash. As a result of the attainment
of cumulative earnings per share of Common Stock (calculated after
eliminating the cumulative effects of accounting changes in 1992)
during the performance period in excess of $7.55, each 1992 Performance
Unit received a supplemental cash amount equal to 50% of the value of
the 1994 Performance Units. The 1994 Performance Units were valued at
$33.8125 per share, the fair market value of the Common Stock at
December 30, 1994.
(5) All Other Compensation consists of amounts contributed during or
accrued in respect of 1996, 1995 and 1994 as matching contributions by
the Company for the Named Officers under the Company's Savings Plan.
See "Savings Plan" at page 20.
-15-
<PAGE> 22
(6) Mr. Gibara was elected Chairman of the Board, Chief Executive Officer
and President effective July 1, 1996. He was elected President and
Chief Executive Officer effective January 1, 1996. Mr. Gibara served as
the President and Chief Operating Officer of the Company from April 15,
1995 through December 31, 1995. He served as a Vice President of the
Company from October 6, 1992 through May 2, 1994 and as an Executive
Vice President of the Company from May 3, 1994 to April 15, 1995.
(7) Mr. Sharp was elected President, Global Support Operations effective
January 1, 1996. Mr. Sharp was an Executive Vice President of the
Company during 1995 and 1994.
(8) Mr. Tieken joined the Company on May 3, 1994, on which date he was
elected an Executive Vice President and the Chief Financial Officer of
the Company.
(9) Mr. Culler was elected an Executive Vice President of the Company
effective April 15, 1995. Mr. Culler was President of Goodyear Canada
Inc. from October 1, 1991 to April 15, 1995.
(10) Mr. Harvie joined the Company on July 1, 1995 as a Vice President and
the General Counsel of the Company.
(11) Mr. Gault retired as Chairman of the Board and a Director on June 30,
1996, and as an employee on July 31, 1996. Mr Gault was Chairman of the
Board and Chief Executive Officer of the Company from June 4, 1991
through December 31, 1995.
(12) The Company deferred payment of $90,600 of Mr Gault's 1995 salary and
$40,000 of his 1994 salary until the calendar year following his
retirement pursuant to the Company's Deferred Compensation Plan for
Executives. The amounts shown in the Table as Salary for 1995 and 1994
include the deferred amounts.
OPTION/SAR GRANTS IN 1996
The Option/SAR Grants Table below shows all grants of stock options and stock
appreciation rights ("SARs") during 1996 to the Named Officers. Stock Options
are ordinarily granted on an annual basis in January of each year. The annual
grant for 1997 was made in December 1996.
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
Individual Grants Potential
------------------------------------------- Realizable Value
Number of % of at Assumed
Securities Total Annual Rates of
Underlying Options/ Exercise Stock Price
Options/SARs SARs or Appreciation for
Granted Granted to Base Price Option Term
(Number of Employees (Dollars per Expiration (Dollars)(4)
Name Shares) in 1996 Share)(3) Date 5%(5) 10%(5)
------------ --------- ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Samir G. Gibara 55,000(1) 1.62% $44.00 1-9-06 $1,521,850 $3,856,600
55,000(2) 1.62 50.00 12-3-06 1,729,200 4,382,950
William J. Sharp 21,500(1) 0.63 44.00 1-9-06 594,905 1,507,580
21,500(2) 0.63 50.00 12-3-06 675,960 1,713,335
Robert W. Tieken 12,500(1) 0.37 44.00 1-9-06 345,875 876,500
12,500(2) 0.37 50.00 12-3-06 393,000 996,125
Eugene R. Culler, Jr. 10,000(1) 0.30 44.00 1-9-06 276,700 701,200
12,500(2) 0.37 50.00 12-3-06 393,000 996,125
C. Thomas Harvie 11,000(1) 0.32 44.00 1-9-06 304,370 771,320
11,000(2) 0.32 50.00 12-3-06 345,840 876,590
Stanley C. Gault 50,000(1) 1.48 44.00 7-31-03 1,383,500 3,506,000
<FN>
NOTES TO OPTION/SAR GRANTS TABLE:
(1) On January 9, 1996, incentive stock options and non-qualified stock
options in respect of 1,650,090 shares of Common Stock were granted to
810 persons, including the Named Officers. In the case of each Named
Officer, incentive stock options were granted in respect of 2,100
shares. No SARs were granted to the Named Officers during 1996. The
exercise price of each stock option is equal to 100% of the per share
fair market value (the average of the high and low sale prices as
reported on the New York Stock Exchange Composite Transactions tape) of
the Common Stock on the date granted. Each
</TABLE>
-16-
<PAGE> 23
incentive stock option and each non-qualified stock option granted is
exercisable in respect of 25% of the shares covered thereby beginning
January 9, 1997, in respect of 50% of the shares covered thereby
beginning January 9, 1998, in respect of 75% of the shares covered
thereby beginning January 9, 1999, and are fully exercisable beginning
January 9, 2000. Each unexercised stock option terminates automatically
if the optionee ceases to be an employee of the Company or one of its
subsidiaries for any reason, except that (a) upon the retirement or
disability (as such terms are defined in the 1989 Plan) of the optionee
more than six months after the date of the grant thereof, such stock
option shall become immediately exercisable and remain exercisable for
seven years following the retirement of the optionee and until the
expiration date indicated in the Option/SAR Grants Table in the event
of a disability, and (b) in the event of the death of the optionee more
than six months after the grant thereof, the stock option shall be
exercisable up to one year after the date of death of the optionee by
the person or persons to whom the rights passed by his or her will or
according to the laws of descent and distribution.
(2) On December 3, 1996, incentive stock options and non-qualified stock
options in respect of an aggregate of 1,737,951 shares of the Common
Stock were granted to 827 persons, including the Named Officers (except
Mr. Gault). In each case, incentive stock options were granted in
respect of 2,000 shares and the balance of the shares indicated are the
subject of non-qualified stock options. The exercise price of each
stock option is equal to 100% of the per share fair market value of the
Common Stock on the date granted. Each stock option is exercisable in
respect of 25% of the shares covered thereby beginning December 3,
1997, in respect of 50% of the shares covered thereby beginning
December 3, 1998, in respect of 75% of the shares covered thereby
beginning December 3, 1999, and are fully exercisable beginning
December 3, 2000. Each unexercised stock option terminates
automatically if the optionee ceases to be an employee of the Company
or one of its subsidiaries for any reason, except that (a) upon
retirement or disability (as such terms are defined in the 1989 Plan)
of the optionee more than six months after the date of the grant
thereof, such stock option shall become immediately exercisable and
remain exercisable until December 3, 2006, and (b) in the event of the
death of the optionee more than six months after the grant thereof,
each stock option shall be exercisable up to one year after the date of
death of the optionee by the person or persons to whom the rights
passed by his or her will or according to the laws of descent and
distribution. Each option also includes the right to the automatic
grant of a new option (a "reinvestment option") for that number of
shares tendered in the exercise of the original stock option. The
reinvestment option will have an exercise price equal to the fair
market value of the Common Stock on the date of the exercise of the
original stock option (which will also be the grant date of the
reinvestment option) and will be subject to the same terms and
conditions as the original stock option (except for the reinvestment
option feature).
(3) In respect of each stock option granted during 1996, the holder may,
subject to certain conditions, pay the exercise price by delivery of
owned shares of Common Stock (valued at the market value on the date of
exercise) and/or may satisfy withholding tax obligations by delivering
owned shares of Common Stock or by using shares of Common Stock
acquired upon the exercise of the stock option.
(4) The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates set by the Securities and Exchange Commission
and, therefore, are not intended to forecast possible future
appreciation, if any, of the price of the Common Stock. No economic
benefit to the optionees is possible without an increase in price of
the Common Stock, which will benefit all shareholders commensurately.
(5) In order to realize the potential values set forth in the 5% and 10%
columns of the Option/SAR Grants Table in respect of the January 9,
1996 grants at the $44.00 exercise price, the per share price of the
Common Stock would be $71.67 and $114.12, respectively. In order to
realize the potential values set forth in the 5% and 10% columns in
respect of the December 3, 1996 grants at the $50.00 exercise price,
the per share price of the Common Stock would be $81.44 and $129.69,
respectively.
OPTION/SAR 1996 EXERCISES AND YEAR-END VALUES
The Option/SAR Exercises and Year-End Values Table below sets forth certain
information regarding options and SARs exercised by the Named Officers in 1996
and the value of options/SARs held by the Named Officers at December 31, 1996,
valued at $51.375 per share, the closing price of the Common Stock on the New
York Stock Exchange Composite Transactions tape on December 31, 1996.
-17-
<PAGE> 24
OPTION/SAR EXERCISES AND YEAR-END VALUES TABLE
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND
DECEMBER 31, 1996 OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Value of Unexercised
Shares Options/SARs at In-the-Money Options/SARs
Acquired December 31, 1996 at December 31, 1996
on Exercise Value (Number of Shares)(1) (Dollars)(2)
(Number of Realized ----------------------------- ------------------------------
Name Shares)(1) (Dollars) Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Samir G. Gibara 17,500 $ 442,500 35,000 132,500 $ 306,250 $768,125
William J. Sharp 21,800 391,913 81,300 52,300 2,133,363 342,738
Robert W. Tieken -0- -0- 28,125 34,375 355,078 265,234
Eugene R. Culler, Jr. 20,800 503,750 26,350 29,250 474,450 177,000
C. Thomas Harvie -0- -0- 2,750 30,250 24,406 169,469
Stanley C. Gault 457,100 7,525,150 197,900 -0- 1,422,013 -0-
<FN>
NOTES TO OPTION/SAR EXERCISES AND YEAR-END VALUES TABLE:
(1) All shares acquired and all exercisable and unexercised shares are options
to acquire Common Stock, except that during 1996 Messrs. Gibara and Culler
exercised SARs in respect of 10,000 shares and 800 shares, respectively.
(2) Based on the $51.375 closing price of the Common Stock of the Company on
December 31, 1996, as reported on the New York Stock Exchange Composite
Transactions tape.
</TABLE>
LONG TERM INCENTIVE AWARDS
The 1989 Goodyear Performance and Equity Incentive Plan (the "1989 Plan"),
empowers the Committee to grant Awards from time to time until December 31,
1998, which Awards may be Incentive, Non-qualified or Deferred Compensation
Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Unit
Grants, Performance Equity or Performance Unit Grants, any other Stock-Based
Awards authorized by the Committee, or any combination of any or all of such
Awards, whether in tandem with each other or otherwise, to officers and other
key employees of the Company and its subsidiaries. If the 1997 Performance
Incentive Plan is adopted by shareholders at the Annual Meeting (see,
"Proposal to Approve The 1997 Performance Incentive Plan" at page 7), the 1989
Plan will expire on April 14, 1997, except with respect to the grants and
awards then outstanding.
Performance Equity Grants have ordinarily been granted on an annual basis in
January of each year. In 1996, grants were made in January for the three year
performance period ending December 31, 1998 and in December (rather than in
January 1997) for the three year performance period ending December 31, 1999.
The Long Term Incentive Plan Awards Table below sets forth the long term
incentive grants in 1996 to the Named Officers, all of which were Performance
Equity Grants under the 1989 Plan.
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN AWARDS TABLE
LONG TERM INCENTIVE PLANS -- AWARDS IN 1996
Estimated Future Payouts Under Non-Stock
Number of Shares, Price-Based Plans(3)
Units or -------------------------------------------------
Other Rights Threshold Target Maximum
(expressed in Performance (expressed in (expressed in (expressed in
Number of or Other Number of Number of Number of
Shares of Period Until Shares of Shares of Shares of
Common Stock) Maturation or Common Common Common
Name (1) (2) Payout(3) Stock)(4) Stock)(5) Stock(6)
- - ----- --------------- -------------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Samir G. Gibara 18,200(1) 1/1/96 to 12/31/98(1) 14,560(5) 18,200(7) 27,300(9)
23,800(2) 1/1/97 to 12/31/99(2) 19,040(6) 23,800(8) 35,700(10)
William J. Sharp 7,000(1) 1/1/96 to 12/31/98(1) 5,600(5) 7,000(7) 10,500(9)
7,800(2) 1/1/97 to 12/31/99(2) 6,240(6) 7,800(8) 11,700(10)
Robert W. Tieken 4,100(1) 1/1/96 to 12/31/98(1) 3,280(5) 4,100(7) 6,150(9)
5,000(2) 1/1/97 to 12/31/99(2) 4,000(6) 5,000(8) 7,500(10)
Eugene R. Culler, Jr. 3,300(1) 1/1/96 to 12/31/98(1) 2,640(5) 3,300(7) 4,950(9)
5,000(2) 1/1/97 to 12/31/99(2) 4,000(6) 5,000(8) 7,500(10)
C. Thomas Harvie 3,600(1) 1/1/96 to 12/31/98(1) 2,880(5) 3,600(7) 5,400(9)
4,200(2) 1/1/97 to 12/31/99(2) 3,360(6) 4,200(8) 6,300(10)
Stanley C. Gault 18,000(1) 1/1/96 to 12/31/98(1) 14,400(5) 18,000(7) 27,000(9)
</TABLE>
-18-
<PAGE> 25
NOTES TO LONG TERM INCENTIVE PLAN AWARDS TABLE:
(1) On January 9, 1996, the Committee granted performance equity grant units
("1998 Performance Units") under the 1989 Plan to the Named Officers and 22
other key executives of the Company. The number of 1998 Performance Units
paid will be determined by and contingent upon the extent to which the
performance goals are achieved. Payment of 50% of the 1998 Performance
Units earned will be made in cash in February of 1999 (unless payment is
deferred in whole or in part by the Committee on a mandatory basis or
pursuant to the timely election of the grantee). Payment of the other 50%
of the 1998 Performance Units earned will be deferred for at least five
years in the form of Common Stock equivalent units. The Common Stock
equivalent units will earn dividend equivalents and will be payable in
shares of Common Stock or cash, or a combination thereof, at the election
of the grantee. The performance goals are specified levels of aggregate
earnings per share of the Common Stock during the three year period ending
December 31, 1998 (the "1998 Performance Period").
(2) On December 3, 1996, the Committee granted performance equity grant units
("1999 Performance Units") under the 1989 Plan to the Named Officers
(except Mr. Gault) and to 27 other key executives of the Company. The
number of 1999 Performance Units paid will be determined by and contingent
upon the extent of which specified performance goals are achieved. Payment
of 50% of the 1999 Performance Units earned will be made in cash in
February of 2000 (unless payment is deferred in whole or in part by the
Committee on a mandatory basis or pursuant to the timely election of the
grantee). Payment of the other 50% of the 1999 Performance Units earned
will be deferred for at least five years in the form of Common Stock
equivalent units. The Common Stock equivalent units will earn dividend
equivalents and will be payable in shares of Common Stock or cash, or any
combination thereof, at the election of the grantee. The performance goals
are specified levels of aggregate earnings per share of the Common Stock
during the three year period ending December 31, 1999 (the "1999
Performance Period").
(3) A participant must be an employee at the end of Performance Period to
receive the proceeds of the Performance Units; except that, if such
participant dies, retires or becomes disabled prior to the end of the
Performance Period, the participant will receive a prorated portion of any
Performance Units earned based on the portion of the Performance Period he
or she was an active employee.
(4) Various payouts, ranging from 80% to 150% of the Performance Units granted,
may be earned based on the aggregate earnings per share of Common Stock
during the Performance Period. Under the 1989 Plan, the Committee may
eliminate the effect of accounting changes and extraordinary events in
determining the aggregate earnings per share of Common Stock during a
Performance Period. The amount ultimately realized by a Named Officer or
other grantee will depend on the aggregate earnings per share of Common
Stock during the relevant Performance Period and the value of the Common
Stock when the amount earned is ultimately paid.
(5) The aggregate earnings per share of Common Stock during the 1998
Performance Period must be at least $12.25 before any distribution may be
made. If aggregate earnings are at least $12.25 during the 1998 Performance
Period, at least 80% of the 1998 Performance Units granted will be awarded.
(6) The aggregate earnings per share of Common Stock during the 1999
Performance Period must be at least $13.25 before any distribution may be
made. If aggregate earnings are at least $13.25 during the 1999 Performance
Period, at least 80% of the 1999 Performance Units granted will be awarded.
(7) If the aggregate earnings per share of Common Stock are $13.00 during the
1998 Performance Period, 100% of the 1998 Performance Units granted will be
awarded.
(8) If the aggregate earnings per share of Common Stock are $14.00 during the
1999 Performance Period, 100% of the 1999 Performance Units granted will be
awarded.
(9) If the aggregate earnings per share of Common Stock are $14.25 or more
during the 1998 Performance Period, 150% of the 1998 Performance Units
granted will be awarded.
(10) If the aggregate earnings per share of Common Stock are $15.25 or more
during the 1999 Performance Period, 150% of the 1999 Performance Units
granted will be awarded.
-19-
<PAGE> 26
OTHER PLAN INFORMATION
STOCK OPTIONS AND APPRECIATION RIGHTS
The 1989 Plan provides, among other things, for the granting of Incentive
Stock Options, Non-qualified Stock Options, SARs and other grants and awards in
respect of up to approximately 21,500,000 shares of the Common Stock. The 1989
Plan will expire on the earlier of the approval of the 1997 Performance
Incentive Plan (or other successor plan to the 1989 Plan) or December 31, 1998,
except with respect to Stock Options, SARs and other grants and awards then
outstanding. At February 18, 1997, there were outstanding Stock Options granted
under the 1989 Plan in respect of 7,071,157 shares (including Stock Options with
tandem Change in Control SARs in respect of 18,400 shares and tandem SARs in
respect of 906,282 shares) and independent SARs in respect of 53,770 shares.
PERFORMANCE RECOGNITION PLAN
On December 3, 1996, the Board of Directors of the Company approved the
participation of approximately 921 key employees, including all executives of
the Company, in Plan Year 1997 of the Performance Recognition Plan of the
Company (the "Performance Plan"). The Committee determined the participants and
established their respective target bonuses. Thereafter the Committee reviewed
and approved the performance criteria and goals established for each
participant. The target bonus of each participant is subject to adjustment
between zero and 150%, depending upon the level of achievement measured relative
to the performance criteria and goals established by the Committee in respect of
such participant. The Performance Plan establishes specific goals for operating
earnings (calculated as the amount equal to sales minus cost of goods sold and
sales, administrative and general expense, herein "EBIT") and cash flow for the
Company or an operating unit, as the case may be, in respect of the participant.
Payment of awards in respect of Plan Year 1997 under the Performance Plan will
be made in February of 1998, except to the extent deferred by the Committee or
an eligible participant pursuant to the Company's Deferred Compensation Plan for
Executives, contingent upon the level of achievement of the EBIT and cash flow
goals and upon the Committee's determination that payment would be appropriate.
Awards, if any, will be paid in cash. Target bonuses under the Performance Plan
have been established for calendar year 1997 as follows: Mr. Gibara, $675,000;
Mr. Sharp, $275,000; Mr. Tieken, $220,000; Mr. Culler, $175,000; Mr. Harvie,
$170,000; and all participants (921 persons) as a group, $16,681,828.
SAVINGS PLAN
The Company sponsors the Employee Savings Plan for Salaried Employees (the
"Savings Plan"). An eligible employee (any full-time salaried employee with at
least six months of service) may contribute 1% to 16% of his or her compensation
to the Savings Plan, subject to an annual contribution ceiling ($9,500 in 1997).
Such contributions to the Savings Plan are not included in the current taxable
income of the employee pursuant to Section 401(k) of the Internal Revenue Code
of 1986, as amended (the "Code"). Employee contributions are, at the direction
of the participant, invested by the Savings Plan Trustee in the following eight
funds: The Stable Value Fund, the S&P 500 Index Stock Equity Fund, the Large
Capitalization Stock Equity Fund, the Small Capitalization Stock Equity Fund,
the International Stock Equity Fund, the Conservative Asset Allocation Fund, the
Moderate Asset Allocation Fund and the Aggressive Asset Allocation Fund.
During 1997, the Company is matching each dollar contributed by a
participating employee (up to a maximum of the lesser of 6% of such
participant's compensation during 1997 or $9,500) with 50 cents. The level of
the Company's matching contributions in future years will be determined by the
Company's Board of Directors. Company contributions are made in cash and are
invested by the Savings Plan Trustee in shares of Common Stock and held in the
Goodyear Stock Fund of the Plan. Participants who are age 52 or older may
transfer all or any whole percentage of their employer match funds from the
Goodyear Stock Fund to any one or more of the eight Funds listed above.
SEVERANCE PLAN
The Goodyear Employee Severance Plan (the "Severance Plan") was adopted by
the Company on February 14, 1989 pursuant to the authorization of the Board of
Directors and upon the recommendation of the Compensation Committee. The
Severance Plan provides that, if the employment of an eligible employee is
involuntarily terminated (as defined in the Severance Plan) within two years
following a Change in Control, such employee is entitled to receive severance
pay, either in a lump sum or, at the employee's election, on a regular salary
payroll interval basis, in an amount equal to the sum of (a) two weeks' pay for
each full year of service with the Company and its subsidiaries completed by
such employee and (b) one month's pay for each $12,000 of such employee's total
annual compensation (which includes such employee's base salary rate in effect
at the date of termination, plus all bonus, profit sharing and incentive
compensation paid to such employee during the twelve months prior to his or her
separation); provided, that such sever-
-20-
<PAGE> 27
ance pay shall not exceed two times the total annual compensation of such
employee. In addition, each such person shall receive medical benefits and basic
life insurance coverage on the same basis as in effect prior to his or her
separation for a period of weeks equal to the number of weeks of severance pay.
Any full-time salaried employee of the Company or any of its domestic
subsidiaries having at least one year of service and participating in the
Retirement Plan is eligible for benefits under the Severance Plan. Under the
Severance Plan, a Change in Control is deemed to occur upon the acquisition of
35% or more of the Common Stock by any "Acquiring Person" or any change in the
composition of the Board of Directors of the Company with the effect that a
majority of the directors are not "continuing directors."
If it is assumed that the Named Officers had been involuntarily terminated
as of December 31, 1996 following within two years of a Change in Control, the
amount of severance pay due under the Severance Plan to the Named Officers in
such event would have been: Mr. Gibara, $2,574,602; Mr. Sharp, $1,407,500; Mr.
Tieken, $1,326,000; Mr. Culler, $886,222; and Mr. Harvie, $810,000.
DEFERRED COMPENSATION PLAN
The Company's Deferred Compensation Plan for Executives was adopted by the
Board of Directors of the Company upon the recommendation and approval of the
Compensation Committee on and effective as of October 4, 1994. Pursuant to the
Deferred Compensation Plan, an eligible employee may elect to defer all or a
portion of his or her Performance Plan award and/or all or a portion of his or
her annual salary in excess of $150,000 by making a timely deferral election.
The deferral period options are five years, the year following retirement or in
five to fifteen annual installments commencing the year following retirement. In
addition, any cash compensation earned by any officer of the Company which, if
paid as and when due, would not be deductible by the Company for Federal Income
Tax purposes by reason of the limitations of Section 162(m) of the Code shall
automatically be deferred under the Deferred Compensation Plan. Amounts deferred
earn amounts equivalent to the returns on one or more of five reference funds,
as selected by the participant.
RETIREMENT BENEFITS
The Company maintains a Retirement Plan for Salaried Employees (the
"Retirement Plan"), a defined benefit plan qualified under the Code, in which
most salaried employees (other than employees assigned to retail store
locations) of the Company, including all officers, are eligible to participate.
The Retirement Plan permits any eligible employee to make monthly optional
contributions at an annual rate equal to 2% of his or her annual earnings in
excess of Social Security covered compensation ($29,304 in 1997), up to a
maximum 1997 contribution of $2,613.92. The Code limits the maximum amount of
earnings that may be used in calculating benefits under the Retirement Plan,
which limit is $160,000 for 1997. In 1994, the Company established a
non-qualified, unfunded Excess Benefits Plan which provides additional benefits
to a select group of highly compensated employees. The Excess Benefits Plan will
pay benefits equal to the difference between the monthly amount paid under the
Retirement Plan and the monthly amount which would have been paid under the
Retirement Plan if calculated without the Code limitation on compensation
($160,000 in 1997) in respect of which benefits may be calculated. The Company
also maintains a Supplementary Pension Plan (the "Supplementary Plan"), a
non-qualified, unfunded plan which provides additional retirement benefits to
all officers of the Company and certain other key employees. Participants in the
Supplementary Plan do not participate in the Excess Benefits Plan. The
Retirement Plan and the Supplementary Plan (the "Pension Plans") provide pension
benefits to participants who have at least 30 years of service or have at least
ten years of service and have attained the age of 55. Benefits payable to a
participant who retires between ages 55 and 62 are subject to a reduction of
4.8% for each full year of retirement before age 62. Prior to retirement, a
participant may elect to receive, subject to approval of the Committee, a lump
sum settlement of the benefits payable under the Supplementary Plan.
The Pension Plan Table on the next page shows estimated annual benefits
payable at selected earnings levels under the Retirement Plan, as supplemented
by the Supplementary Plan, assuming retirement on July 1, 1997 at age 65 after
selected periods of service.
The pension benefit amounts shown in the Pension Plan Table include the
maximum benefits obtainable under the formula for the optional contributory
portion of the Retirement Plan and under the Supplementary Plan and assume
payments are made on a five year certain and life annuity basis (and not under
any of the various survivor options or the lump sum option) and are not subject
to any deduction for social security or any other offsets. Pension benefits are
based on the participant's highest average monthly earnings, consisting of
salary and cash payments under the Performance Recognition Plan (and prior
annual incentive plans) for any period of 60 consecutive months within the 120
months immediately preceding his or her retirement (assuming full participation
-21-
<PAGE> 28
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Estimated annual benefits upon retirement at July 1, 1996, with years of service indicated.
- - ---------------------------------------------------------------------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
- - ------------ ----------- ----------- ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 250,000 $ 70,883 $ 90,128 $ 102,753 $ 115,378 $ 123,589 $ 131,800 $ 140,011
500,000 151,703 193,391 221,713 250,036 264,992 279,948 294,905
750,000 234,203 298,391 341,713 385,036 407,492 429,948 452,405
1,000,000 316,703 403,391 461,713 520,036 549,992 579,948 609,905
1,250,000 399,203 508,391 581,713 655,036 692,492 729,948 767,405
1,500,000 481,703 613,391 701,713 790,036 834,992 879,948 924,905
1,750,000 564,203 718,391 821,713 925,036 977,492 1,029,948 1,082,405
2,000,000 646,703 823,391 941,713 1,060,036 1,119,992 1,179,948 1,239,905
2,250,000 729,203 928,391 1,061,713 1,195,036 1,262,492 1,329,948 1,397,405
2,500,000 811,703 1,033,391 1,181,713 1,330,036 1,404,992 1,479,948 1,554,905
</TABLE>
in the contributory feature of the Retirement Plan), with monthly benefits
ranging from as low as 21% of such earnings in the case of a participant who
retires after 10 years of service to as high as 63% of such earnings in the case
of a participant who retires after 45 years of service. Earnings covered by the
Pension Plans are substantially equivalent to the sum of the amounts set forth
under the "Salary" and "Bonus" columns of the Summary Compensation Table in
respect of each of the Named Officers, except Mr. Gault who has retired and did
not participate in the contributory feature of the Retirement Plan or in the
Supplementary Plan. Mr. Gault receives $103 per month under the Retirement Plan.
The years of credited service under the Plans for each of the Named Officers
are: Mr. Gibara, 30 years; Mr. Sharp, 32 years; Mr.
Tieken, 4 years; Mr. Culler, 35 years; and Mr. Harvie, 2 years.
EMPLOYMENT AND STOCK PURCHASE
AGREEMENTS
Mr. Gault and the Company were parties to an Employment Agreement dated
August 6, 1991(as amended, the "Employment Agreement"), which provided for the
employment of Mr. Gault as Chairman of the Board and Chief Executive Officer
through December 31, 1995, on which date the Employment Agreement expired. Mr.
Gault continued to serve as the Chairman of the Board and a Director of the
Company until June 30, 1996 and as an employee of the Company until July 31,
1996. Mr. Gault's salary was continued in 1996 by the Compensation Committee at
the annual rate of $1,020,000 established in 1994. Mr. Gault was awarded a
payout of $588,375 under the Performance Plan for plan year 1996, which amount
will be paid in April 1997.
Under the terms of the Employment Agreement, a Stock Purchase Agreement and
the 1989 Plan, Mr. Gault, in lieu of retirement benefits, purchased 100,250
shares (after giving effect to the two-for-one stock split on May 4, 1993) of
Common Stock for $.05 per share, which shares were, through December 31, 1996,
restricted, subject to forfeiture and, under certain circumstances, subject to
the Company's $.05 per share repurchase option.
DIRECTORS' COMPENSATION
Directors of the Company who are not serving as officers or employees of, or
consultants to, the Company or any of its subsidiaries receive, as compensation
for their services to the Company as a director, $7,500 per calendar quarter,
plus $1,500 for each Board meeting attended and for each committee meeting
attended. Travel and lodging expenses incurred by such directors in attending
Board and committee meetings are paid by the Company. A director who is also an
officer or an employee of, or a consultant to, the Company or any of its
subsidiaries does not receive additional compensation for his or her services as
a director.
On February 2, 1996, the Compensation Committee recommended and the Board of
Directors adopted the Outside Directors' Equity Participation Plan (the
"Directors' Equity Plan") for directors who are not current or former employees
of the Company or a subsidiary. The Directors' Equity Plan replaces the
Retirement Plan for Outside Directors, which was terminated on February 2, 1996
except with respect to former directors currently receiving benefits ($20,000
per year until death, with a $100,000 minimum payout) thereunder. Under the
Directors' Equity Plan, on April 1, 1996 and on the first business day of each
calendar quarter thereafter each eligible director who has been a director for
the entire preceding calendar quarter will have $2,000 accrued to his or her
Plan account, which amount will be converted into units equivalent in value to
shares of Common Stock ("share equivalents") at the fair market value of the
Common Stock on the accrual date. In addition, each eligible director on
February 2,
-22-
<PAGE> 29
1996 was awarded a special accrual to his or her Plan Account in accordance with
a formula designed to reflect prior service and result in an estimated Plan
account value at age 70 commensurate with the value of the terminated plan. The
share equivalents in each participant's Plan account will be deemed to receive
dividends at the same rate as the Common Stock, which dividends will also be
converted into share equivalents in the same manner.
A director is entitled to benefits under the Directors' Equity Plan after
leaving the Board of Directors unless the Board of Directors elects to deny or
reduce benefits, except that benefits may not be denied or reduced if prior to
leaving the Board of Directors the participant either (i) attained the age of 70
with at least five years of Board service or (ii) attained the age of 65 with at
least ten years of Board service. The share equivalents will be converted to a
dollar value at the price of the Company's Common Stock on the later of the
first day of the seventh month following the month during which the participant
ceases to be a director or the first business day of the year next following the
year during which the participant ceased to be a director. Such amount will be
paid in ten annual installments or, at the discretion of the Compensation
Committee, in a lump sum or in fewer than 10 installments beginning on the tenth
day following the aforesaid conversion from share equivalents to a dollar value.
The amount in the director's Plan account will earn interest from the date
converted to a dollar value until paid at a rate one percent higher than the
prevailing yield on United States Treasury securities having a ten year maturity
on the conversion date.
The Directors' Equity Plan also permits each participant to annually elect to
have 25%, 50%, 75% or 100% or his or her retainer and meeting fees deferred and
converted into share equivalents on substantially the same basis. The Board of
Directors believes the Directors' Equity Plan will further align the interests
of directors with the interests of shareholders by making part of each
director's compensation dependent on the value and appreciation over time of
the Common Stock.
The Company established a directors' Charitable Award Program funded by
Company purchased and owned life insurance policies on the lives of pairs of
directors. The Company will donate $1 million per director to one or more
qualifying charitable organizations recommended by the paired directors after
both of the paired directors are deceased. Assuming current tax laws remain in
effect, the Company will recover the cost of the program over time with the
proceeds of the insurance policies purchased. Individual directors will derive
no financial benefit from the program, as the related charitable contributions
will accrue to the Company.
OTHER MATTERS
Mrs. Gertrude G. Michelson, a director of the Company, was a director of,
and served as a Senior Advisor to, R. H. Macy & Co., Inc. from September 1, 1992
to December 31, 1994. Mrs. Michelson retired as the Senior Vice President --
External Affairs of R. H. Macy & Co., Inc. effective September 1, 1992. On
January 27, 1992, R. H. Macy & Co., Inc. commenced a case seeking reorganization
under the Federal Bankruptcy Code and emerged from bankruptcy on December 19,
1994. Mrs. Michelson was a director of Federated Department Stores, Inc., which
acquired R. H. Macy & Co., Inc, from January of 1995 to May of 1996.
During 1996, the Company and its subsidiaries in the ordinary course of their
business and at competitive prices and terms made sales to or purchases from, or
engaged in other transactions with, corporations of which certain of the
Company's non-employee directors are executive officers. The Company does not
consider the amounts involved in such transactions or the transactions
themselves to be material to its business and believes such amounts and
transactions were not material in relation to the business of such other
corporations or the interests of the directors concerned.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers to file reports of ownership and changes in ownership in the Company's
equity securities with the Securities and Exchange Commission, the New York
Stock Exchange and the Company. Based solely on a review of the copies of Forms
3, 4 and 5 received by the Company, or on written representations from certain
directors and officers that no updating Section 16(a) forms were required to be
filed by them, the Company believes that no director or officer of the
Company filed a late report or failed to file a required report under Section
16(a) of the Exchange Act during or in respect of the year ended December 31,
1996, except that Mr. D. E. Dick, a Vice President of the Company, filed an
amendment, dated January 8, 1997, to his Form 3 dated November 6, 1996 to
correct an administrative error in the initial reporting of his holdings of
Common Stock. To the knowledge of the Company, no person owned 10% or more of
any class of the Company's equity securities registered under the Exchange Act
during 1996.
-23-
<PAGE> 30
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE POLICIES AND PRACTICES
The Board of Directors of the Company (the "Board") has delegated to the
Compensation Committee of the Board (the "Committee") primary responsibility for
establishing and administering the compensation programs of the Company for its
executive officers and other key personnel. In performing its duties, the
Committee meets with the Chief Executive Officer to review compensation policy
and specific levels of compensation paid to the executive officers and other key
personnel, administers the Company's annual, intermediate term and long term
compensation plans for its executive officers and certain other key personnel
and reports and makes recommendations to the Board regarding executive
compensation policies and programs. Each director who is not a former or current
officer or employee of the Company or any of its subsidiaries is a member of the
Committee. Members of the Committee are not eligible to participate in any of
the Company's compensation programs for its executive officers and other key
personnel.
The Committee annually reviews the compensation of the Company's executive
officers and other key personnel to determine whether (a) the Company is
competitive and can attract and retain qualified and experienced executive
officers and other key personnel, and (b) the executive officers and other key
personnel employed by the Company are appropriately motivated to seek to attain
short term and intermediate term corporate and business unit performance goals
approved by the Committee and to manage the Company for sustained long term
growth.
The Company's compensation programs are designed to retain and motivate its
executive officers and other key personnel and align their interests with the
interests of the shareholders by providing compensation in the form of: (1)
competitive salaries; (2) annual cash bonuses pursuant to the Company's
Performance Recognition Plan (the "Performance Plan") based on operating
performance measured against specific goals for operating earnings before
interest and taxes (calculated as the amount equal to sales minus cost of goods
sold and sales, administrative and general expense, herein "EBIT") and cash
flow; (3) intermediate term compensation in the form of the Common Stock of the
Company and cash pursuant to performance equity grants having three year
performance periods, where payout is dependent on the Company achieving
designated levels of cumulative earnings per share during the performance
period; and (4) long term compensation in the form of stock options granted at
the fair market value of the Common Stock on the date of grant. Other elements
of compensation, such as retirement, health and life insurance benefits, are
also considered by the Committee in its evaluation of the compensation package
provided to the Company's executive officers.
The Company's executive compensation programs are designed so that a
substantial percentage of each executive officer's compensation is dependent
upon corporate performance and appreciation in the value of the Common Stock of
the Company.
In addition, the Committee desires to encourage ownership of the Common Stock
by the executive officers of the Company by providing forms of intermediate and
long-term performance based incentive compensation which afford convenient
methods for executive officers to acquire shares of Common Stock. In furtherance
of this objective, the Chief Executive Officer reviews ownership levels among
the executive officers and reports them to the Committee. Although the Committee
has elected not to require specific levels of ownership, the Committee has
increased the connection between the performance of the Common Stock over time
with the compensation of executive officers and other key employees of the
Company by requiring the deferral of 50% of the payouts which may be earned
pursuant to all outstanding performance equity grants, including grants payable
in February of 1997, for at least five years in the form of common stock
equivalent units, which may be paid in shares of Common Stock, cash or any
combinations thereof at the election of the participant. Further, the
participant may elect in respect of performance equity grants payable in 1998,
1999 and 2000 to defer all or a portion of the remaining 50% of the amounts
earned thereunder in the form of such common stock equivalent units.
Section 162(m) of the Internal Revenue Code (the "Code") provides that
compensation paid to a public company's chief executive officer and its four
other highest paid executive officers in tax years 1994 and thereafter in excess
of $1 million is not deductible unless such compensation is paid only upon the
achievement of objective performance goals where certain procedural requirements
have been satisfied. Alternatively, such compensation may be deferred until the
executive officer is no longer a covered person under Section 162(m) of the
Code. The Committee has adopted a policy of conforming to the requirements of
Section 162(m) of the Code and the regulations promulgated thereunder. Any
compensation which would be subject to the Section 162(m) limitation has been
automatically deferred until the payment of such compensation would be
deductible by the Company. However, the Committee recognizes that there may be
instances in
-24-
<PAGE> 31
the future where it would be in the best interest of the Company and its
shareholders to pay compensation which would not be deductible by reason of
Section 162(m) of the Code.
In order to continue to provide intermediate and long term performance based
incentive compensation on a basis that will permit the Company to comply with
Section 162(m) of the Code with respect to the grant of stock options, stock
appreciation rights, performance grants and certain restricted stock and other
stock-based grants and awards, the Committee has approved and recommended to the
Board of Directors a new 1997 Performance Incentive Plan, which the Board of
Directors adopted and is submitting to the 1997 Annual Meeting for shareholder
approval. The Committee believes the 1997 Performance Incentive Plan provides
the appropriate means for granting various forms of performance based incentive
compensation which will permit the Company to comply with Section 162(m) of the
Code, as well as provide other forms of compensation which, although not
excludable from the limitations of Section 162(m), permits the Committee to
offer compensation arrangements which are appropriate to the needs of the
Company and consistent with the compensation policies and practices of the
Committee.
COMPENSATION OF EXECUTIVE OFFICERS
The Committee met with the Chief Executive Officer to receive his
recommendations regarding 1996 adjustments to the salary and Performance Plan
participation guidelines for each executive officer position and certain other
key positions. The guidelines for each position were based primarily on market
data from four generally available surveys of the salary and annual bonus
practices of other companies. Each of the surveys included compensation data
compiled from at least 300 companies, with one survey using data compiled from
more than 1,200 companies. The Company also retained a nationally recognized
consulting firm to review the guidelines for each executive officer position, by
function, in comparison to a customized group of 25 industrial companies similar
to the Company with comparable annual sales. The Committee generally seeks to
establish salary and annual performance plan guidelines at levels that
approximate the median (the 50th percentile) of such kinds of compensation paid
by companies included in said surveys. The median survey compensation for each
position was determined utilizing regression analysis based on revenues. The
results of the surveys were weighted to emphasize manufacturing companies,
especially producers of nondurable goods. In addition to the individual position
data surveys, nine other general surveys indicating past, present and projected
salary structures and increases for executive positions were reviewed.
The compensation levels indicated by the surveys were the principal basis
used by the Committee for establishing the combined salary and annual
Performance Plan compensation. The Committee also considered the Chief Executive
Officer's recommendations, which were based in substantial part on the aforesaid
guidelines as well as on certain subjective factors, including his evaluation of
the performance of each executive officer, the performance of the Company and
general economic and competitive conditions.
In 1996, salaries of the executive officers named in the Summary Compensation
Table (the "Named Officers") were an average of 5.4% lower than the median
indicated by the guidelines and 16.2% higher than in 1995. The aggregate
salaries paid to all executive officers during 1996, which included promotional
and merit increases, were 10.0% higher than in 1995. Salaries averaged
approximately 58% of total annual cash compensation paid to executive officers,
and 52% of total annual cash compensation paid to the Named Officers, in respect
of 1996.
Pursuant to the Performance Plan, the Committee established, based on the
recommendations of the Chief Executive Officer, the target amount of the bonus
for each executive officer and reviewed and adopted performance goals for plan
year 1996. Compensation paid under the Performance Plan in respect of plan year
1996 was based on the EBIT and cash flow performance of the entire Company and
of the operating unit to which the executive officer is assigned, or, as in the
case of certain officers of the Company, including Messrs. Gibara, Sharp,
Tieken, Harvie and Gault, based solely on the EBIT and cash flow performance of
the entire Company. Depending on the extent to which applicable EBIT and cash
flow goals were achieved, payouts could have ranged from zero to 150% of the
target amounts. The target annual incentive compensation levels (assuming payout
at 100% of target) for 1996 represented approximately 30% of total 1996 annual
cash (salary and Performance Plan) compensation, which was substantially the
same proportion as the median level established by the aforesaid surveys. EBIT
and cash flow goals for 1996 were exceeded by the Company and most operating
units. Payouts for 1996 averaged approximately 136% of the target levels for the
various operating units and were 143% of the target level for the Company. The
Performance Plan payments represented an average of approximately 42% of the
total 1996 annual cash compensation of the Company's executive officers and 48%
of annual cash compensation of the Named Officers.
-25-
<PAGE> 32
A significant portion of the total compensation package of each executive
officer is contingent upon the performance of the Company over the intermediate
term, where performance is measured by the Company's cumulative net income per
share or another appropriate standard. Accordingly, performance equity grants
have been made annually since 1992 to executive officers (and certain other key
employees) of the Company pursuant to the 1989 Goodyear Performance and Equity
Incentive Plan (the "1989 Plan"). The Committee, after consultation with and
based on the recommendations of the Chief Executive Officer, establishes the
terms and conditions of all grants (including the performance criteria, the
target levels for payout and the aggregate amount of grants), selects the
persons to whom grants are made and fixes the size of each such person's grant.
Performance equity grants are designed to comprise approximately 50% of target
medium and long term compensation.
The Committee awarded payouts in respect of the performance equity grants
made in January 1994 pursuant to the 1989 Plan for the three year Performance
Period ended December 31, 1996, at 143.6% of the units granted, the payment of
50% of which was automatically deferred for at least five years in the form of
Common Stock equivalent units. The other 50% will be paid in cash in February
1997. The awards were made based on aggregate earnings per share of $12.11,
determined by the Committee after adjusting 1996 earnings per share to eliminate
the effects of the $872.0 million of asset writedown and rationalization
charges. The Committee deemed the adjustments to 1996 earnings to be appropriate
in view of the special nature of said charges.
Performance equity grants for 1996 were granted by the Committee under the
1989 Plan to all executive officers and certain other key employees of the
Company on January 9, 1996, based on guidelines established using the median of
medium and long term compensation awards by 33 manufacturing companies (having
median annual sales of approximately $14.0 billion) included in a 1994 survey
acquired by the Company. The performance equity grants were granted in respect
of substantially the same number of units as were granted in respect of 1995.
Payouts in respect of the performance equity grants may range from zero to 150%
of the target amounts, depending on the cumulative net income per share of
Common Stock during the three year performance period ending December 31, 1998,
which must equal or exceed $12.25 per share of Common Stock in order for any
payout to be made. If total net income per share during the performance
period is $14.25 or more, 150% of the targeted amount may be paid.
Performance equity grants for 1997 were also granted by the Committee under
the 1989 Plan to all executive officers and certain other key employees of the
Company on December 3, 1996, based on guidelines established using the median of
medium and long term compensation awards by 40 manufacturing companies (having
median annual sales of approximately $14.6 billion) included in a 1996 survey
acquired by the Company. The Performance Equity Grants were granted in respect
of substantially the same number of units as were granted in respect of 1996.
Payouts in respect of the Performance Equity Grants may range from zero to 150%
of the target amounts, depending on the cumulative net income per share of
Common Stock during the three year performance period ending December 31, 1999,
which must equal or exceed $13.25 per share of Common Stock in order for any
payout to be made. If total net income per share during the performance period
is $15.25 or more, 150% of the targeted amount may be paid.
The Committee also grants stock options to officers and other key employees
of the Company. The Committee believes that annual grants of stock options
provide an additional long term incentive for key personnel to remain with the
Company and improve future Company performance and confirm the mutuality of
interests shared by the Company's management and its other shareholders with
compensation dependent upon the appreciation of the Common Stock of the Company.
All options are granted at a per share exercise price equal to the market value
of the Common Stock on the date of grant. The Committee obtains and reviews
surveys of the option granting practices of other manufacturing companies of a
similar size in order to determine if the Company's grants are competitive in
size and terms and conditions. The Committee believes that options should be
granted once each year and that, under ordinary circumstances, each year each
executive officer should be granted options in respect of shares having
approximately the same dollar value, determined using the standard growth
methodology applied in the surveys used by the Company for determining
performance equity grant levels, subject to variation to reflect changes in the
responsibility or performance of the executive officers or changes in the
performance or circumstances of the Company.
Accordingly, options have been granted to all executive officers and other
key employees annually, ordinarily at the beginning of each year. Within the
guideline ranges established using the aforesaid surveys, the size of individual
stock option grants were determined primarily on the basis of the
responsibilities of each executive officer in the Company. Recent Company
performance, prior grants
-26-
<PAGE> 33
and the prior performance of the executive officer were also considered in
determining the size of the grants.
On January 9, 1996, stock options in respect of 1,655,170 shares were granted
pursuant to the 1989 Plan at $44.00 per share (the fair market value of the
Common Stock on that day) to 813 key employees (including all executive
officers), which options expire on January 9, 2006. In addition, stock options
in respect of 1,737,951 shares of Common Stock were granted under the 1989 Plan
on December 3, 1996, to 827 key employees (including all executive officers) at
an exercise price of $50.00 per share (the fair market value of the Common Stock
on that day). The options, which will expire on December 3, 2006, provide for
the automatic grant of new "reinvestment options" for that number of shares of
Common Stock tendered as payment of the exercise price. The reinvestment options
will be granted at an exercise price equal to the fair market value of the
Common Stock on the date the original option is exercised.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Gibara was elected President and Chief Executive Officer of the Company
effective January 1, 1996 and Chairman of the Board effective July 1, 1996. The
Committee reviewed Mr. Gibara's compensation in the same manner as described
above for the executive officers. In light of Mr. Gibara's increased
responsibilities and in recognition of his outstanding performance in his prior
position of President and Chief Operating Officer, the Committee significantly
increased his annual salary effective April 1, 1996 to an annual rate of
$900,000.
Pursuant to the Performance Plan for 1996, the Committee established a target
bonus of $537,842 for Mr. Gibara, the payout of which was subject to adjustment
from zero to 150% of the target amount depending on the extent to which total
company EBIT and cash flow goals were achieved. Under Mr. Gibara's leadership,
the Company exceeded the EBIT and cash flow goals for 1996 resulting in Mr.
Gibara earning 143.4% of his target bonus. Mr. Gibara also participated in the
payout of the performance award in respect of the three year performance period
ended December 31, 1996, and will receive $185,783 in cash in February 1997 and
$185,783 will be deferred in the form of Common Stock equivalent units for at
least five years.
The cash compensation in respect of 1996 for Mr. Gibara would be subject to
the limitation on deductibility for Federal Income Tax purposes under Section
162(m) of the Code. In accordance with the Committee's policy to preserve the
compensation deduction for the Company, payment of a portion of the Performance
Plan payout for plan year 1996 was deferred pursuant to the Company's Deferred
Compensation Plan for Executives.
Applying the same guidelines used in respect of other executive officers, Mr.
Gibara was granted as incentive compensation contingent upon the earnings
performance of the Company two performance equity grants in 1996. The first
grant was made on January 9 for the three year performance period ending on
December 31, 1998 and the second grant was made on December 3, 1996 for the
three year performance period ending on December 31, 1999.
Mr. Gibara was granted stock options as long term incentive compensation
based on the same guidelines applied by the Committee in respect of the stock
option grants to the other executive officers. The grant in respect of 1996 was
made on January 9, 1996, consisting of non-qualified stock options in respect of
52,900 shares of Common Stock and incentive stock options in respect of 2,100
shares of the Common Stock. He was also granted stock options in respect of
55,000 shares in respect of 1997 on December 3, 1996, consisting of
non-qualified stock options in respect of 53,000 shares of Common Stock and
incentive stock options in respect of 2,000 shares of Common Stock, which stock
options also provide for the reinvestment options.
Mr. Gault, who served as Chairman of the Board until June 30, 1996, was
compensated by the Company until his retirement as an employee on July 31, 1996.
His salary was continued in 1996 at the $1,020,000 annual rate established by
the Committee in 1994. Mr. Gault will also receive in 1997 a payout under the
Performance Plan for 1996 and an award under performance equity grants for the
three year performance period ended December 31, 1996, in each case prorated
based on the portion of the respective performance periods he was an active
employee of the Company.
Applying the same guidelines used in respect of other executive officers, on
January 9, 1996, Mr. Gault was granted (i) a performance equity grant for the
three year performance period ending on December 31, 1998, and (ii) stock
options in respect of 50,000 shares.
February 4, 1997
The Compensation Committee
John G. Breen, Chairman
William E. Butler Steven A. Minter
Thomas H. Cruikshank Agnar Pytte
William J. Hudson, Jr. George H. Schofield
Gertrude G. Michelson William C. Turner
-27-
<PAGE> 34
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total shareholder returns
of the Common Stock of the Company ("Goodyear Common"), the Standard & Poor's
500 Composite Stock Index (the "S&P 500") and the Dow Jones Auto Parts &
Equipment-All Index (the "Dow Auto Parts") at each December 31 during the period
beginning December 31, 1991 and ending December 31, 1996. The graph assumes the
investment of $100 on December 31, 1991 in Goodyear Common Stock, in the S&P
500 and in the Dow Auto Parts. Total shareholder return was calculated on the
basis that in each case all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
GOODYEAR COMMON, S & P 500 AND DOW AUTO PARTS
<TABLE>
<CAPTION>
[GRAPH]
- - ---------------------------------------------------------------------------
December 31, 1991 1992 1993 1994 1995 1996
- - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GOODYEAR COMMON 100 129 175 131 181 210
- - ---------------------------------------------------------------------------
S & P 500 100 108 118 120 165 203
- - ---------------------------------------------------------------------------
DOW AUTO PARTS 100 129 160 136 170 192
- - ---------------------------------------------------------------------------
</TABLE>
-28-
<PAGE> 35
MISCELLANEOUS
SUBMISSION OF SHAREHOLDER PROPOSALS
If a shareholder desires to have a proposal included in the Proxy Statement
and Proxy of the Board of Directors for the 1998 Annual Meeting of Shareholders,
such proposal shall conform to the applicable proxy rules of the Securities and
Exchange Commission concerning the submission and content of proposals and must
be received by the close of business on October 29, 1997 at the executive
offices of the Company, 1144 East Market Street, Akron, Ohio 44316-0001,
Attention: Office of the Secretary.
10-K REPORT
Interested shareholders may obtain a copy of the Company's Annual Report for
1996 (on Form 10-K) to the Securities and Exchange Commission, including all
financial statements, schedules and exhibits, without charge by writing to:
Investor Relations
The Goodyear Tire & Rubber Company
1144 East Market Street
Akron, Ohio 44316-0001
or by a telephone call to: 330-796-3457; or to
515-263-6408.
DIVIDEND REINVESTMENT PLAN SHARES
First Chicago Trust Company of New York will vote any shares that it holds
as custodian for the account of a shareholder participating in the Goodyear
Dividend Reinvestment and Stock Purchase Plan in accordance with the Proxy
returned by the participant to the Company in respect of the shares of Common
Stock such participant holds of record. Shares of Common Stock in respect of
which a Proxy or other written instruction is not received will not be voted.
SAVINGS PLAN SHARES
A separate "Confidential Voting Instructions" card is being sent to each
employee or former employee of the Company participating in one or more of the
Employee Savings Plans in which shares of Common Stock are held in a Savings
Plan trust for the account of such participant. Shares of Common Stock held in a
Savings Plan trust will be voted by the Plan trustee as instructed by Plan
participants. Shares held in a Savings Plan trust for which voting instructions
are not received will be voted by the Plan trustee in the same proportion as it
votes shares for which voting instructions were received from participants in
that Savings Plan.
COSTS OF SOLICITATION
The costs of solicitation of proxies will be borne by the Company. The
Company has retained Beacon Hill Partners, Inc., 90 Broad Street, New York, New
York 10004, to assist the Company in the distribution of the proxy materials and
the solicitation of proxies for an estimated fee of $12,500 plus reimbursement
of reasonable out-of-pocket expenses. Beacon Hill Partners, Inc. may solicit
proxies from shareholders by mail, telephone, telex, telegram or personal call
or visit. In addition, officers or other employees of the Company may, without
additional compensation therefor, solicit proxies in person or by telephone.
February 26, 1997
By Order of the Board of Directors
/s/ JAMES BOYAZIS
JAMES BOYAZIS, Secretary
-29-
<PAGE> 36
APPENDIX A
1997 PERFORMANCE INCENTIVE PLAN
OF
THE GOODYEAR TIRE & RUBBER COMPANY
1. PURPOSE.
The purposes of the 1997 Performance Incentive Plan of The Goodyear Tire &
Rubber Company (the "Plan") are to advance the interests of the Company and its
shareholders by strengthening the ability of the Company to attract, retain and
reward highly qualified officers and other employees, to motivate officers and
other selected employees to achieve business objectives established to promote
the long-term growth, profitability and success of the Company, and to encourage
ownership of the Common Stock of the Company by participating officers and other
selected employees. The Plan authorizes performance-based stock and cash
incentive compensation in the form of stock options, stock appreciation rights,
restricted stock, performance grants and awards, and other stock-based grants
and awards.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall have the following
meanings:
(a) "ADJUSTED NET INCOME" means, with respect to any calendar or other
fiscal year of the Company, the amount reported as "Net Income" in the audited
Consolidated Income Statement of the Company and Subsidiaries for such year (as
set forth in the Company's Annual Report to Shareholders for such year),
adjusted to exclude any of the following items: (i) extraordinary items (as
described in Accounting Principles Board Opinion No. 30); (ii) gains or losses
on the disposition of discontinued operations; (iii) the cumulative effects of
changes in accounting principles; (iv) the writedown of any asset; and (v)
charges for restructuring and rationalization programs.
(b) "ANNUAL NET INCOME PER SHARE" means, with respect to any calendar or
other fiscal year of the Company in respect of which a determination thereof is
being or to be made, the Adjusted Net Income for such year divided by the
average number of shares of Common Stock outstanding during such year.
(c) "AWARD" means any payment or settlement in respect of a grant made
pursuant to the Plan, whether in the form of shares of Common Stock or in cash,
or in any combination thereof.
(d) "BOARD OF DIRECTORS" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute thereto, together with the
published rulings, regulations and interpretations duly promulgated thereunder.
(f) "COMMITTEE" means the committee of the Board of Directors established
and constituted as provided in Section 5 of the Plan.
(g) "COMMON STOCK" means the common stock, without par value, of the
Company, or any security issued by the Company in substitution or exchange
therefor or in lieu thereof.
(h) "COMMON STOCK EQUIVALENT" means a Unit (or fraction thereof, if
authorized by the Committee) substantially equivalent to a hypothetical share of
Common Stock, credited to a Participant and having a value at any time equal to
the Fair Market Value of a share of Common Stock (or such fraction thereof) at
such time.
(i) "COMPANY" means The Goodyear Tire & Rubber Company, an Ohio
corporation, or any successor corporation.
(j) "COVERED EMPLOYEE" means any person who is a "covered employee"
within the meaning of Section 162(m) of the Code.
A-1
<PAGE> 37
(k) "CUMULATIVE NET INCOME" means, in respect of any Performance Period,
the aggregate cumulative amount of the Adjusted Net Income for the calendar or
other fiscal years of the Company during such Performance Period.
(l) "CUMULATIVE NET INCOME PER SHARE" means, in respect of any Performance
Period, the aggregate cumulative amount of the Annual Net Income Per Share for
the calendar or other fiscal years of the Company during such Performance
Period.
(m) "DIVIDEND EQUIVALENT" means, in respect of a Common Stock Equivalent
and with respect to each dividend payment date for the Common Stock, an amount
equal to the cash dividend on one share of Common Stock payable on such dividend
payment date.
(n) "EMPLOYEE" means any individual, including any officer of the Company,
who is on the active payroll of the Company or a Subsidiary at the relevant
time.
(o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, including all rules and regulations promulgated
thereunder.
(p) "FAIR MARKET VALUE" means, in respect of any date on or as of which a
determination thereof is being or to be made, the average of the high and low
per share sale prices of the Common Stock reported on the New York Stock
Exchange Composite Transactions tape on such date, or, if the Common Stock was
not traded on such date, on the next preceding day on which sales of shares of
the Common Stock were reported on the New York Stock Exchange Composite
Transactions tape.
(q) "INCENTIVE STOCK OPTION" means any option to purchase shares of Common
Stock granted pursuant to the provisions of Section 6 of the Plan that is
intended to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422A of the Code.
(r) "NON-QUALIFIED STOCK OPTION" means any option to purchase shares of
Common Stock granted pursuant to the provisions of Section 6 of the Plan that is
not an Incentive Stock Option.
(s) "PARTICIPANT" means any Employee of the Company or a Subsidiary who
receives a grant or Award under the Plan.
(t) "PERFORMANCE GRANT" means a grant made pursuant to Section 9 of the
Plan, the Award of which is contingent on the achievement of specific
Performance Goals during a Performance Period, determined using a specific
Performance Measure, all as specified in the grant agreement relating thereto.
(u) "PERFORMANCE GOALS" mean, with respect to any applicable grant made
pursuant to the Plan, the one or more targets, goals or levels of attainment
required to be achieved in terms of the specified Performance Measure during the
specified Performance Period, all as set forth in the related grant agreement.
(v) "PERFORMANCE MEASURE" means, with respect to any applicable grant made
pursuant to the Plan, one or more of the criteria identified at Section 9(c) of
the Plan selected by the Committee for the purpose of establishing, and
measuring attainment of, Performance Goals for a Performance Period in respect
of such grant, as provided in the related grant agreement.
(w) "PERFORMANCE PERIOD" means, with respect to any applicable grant made
pursuant to the Plan, the one or more periods of time, which may be of varying
and overlapping durations, as the Committee may select during which the
attainment of one or more Performance Goals will be measured to determine
whether, and the extent to which, a Participant is entitled to receive payment
of an Award pursuant to such grant.
(x) "PLAN" means this 1997 Performance Incentive Plan of the Company, as
set forth herein and as hereafter amended from time to time in accordance with
the terms hereof.
(y) "RESTRICTED STOCK" means shares of Common Stock issued pursuant to a
Restricted Stock Grant under Section 8 of the Plan so long as such shares remain
subject to the restrictions and conditions specified in the grant agreement
pursuant to which such Restricted Stock Grant is made.
A-2
<PAGE> 38
(z) "RESTRICTED STOCK GRANT" means a grant made pursuant to the provisions
of Section 8 of the Plan.
(aa) "STOCK APPRECIATION RIGHT" means a grant in the form of a right to
benefit from the appreciation of the Common Stock made pursuant to Section 7 of
the Plan.
(bb) "STOCK OPTION" means and includes any Non-Qualified Stock Option and
any Incentive Stock Option granted pursuant to Section 6 of the Plan.
(cc) "SUBSIDIARY" means any corporation or entity in which the Company
directly or indirectly owns or controls 50% or more of the equity securities
issued by such corporation or entity having the power to vote for the election
of directors.
(dd) "UNIT" means a bookkeeping entry used by the Company to record and
account for the grant, settlement or, if applicable, deferral of an Award until
such time as such Award is paid, canceled, forfeited or terminated, as the case
may be, which, except as otherwise specified by the Committee, shall be equal to
one Common Stock Equivalent.
3. EFFECTIVE DATE; TERM.
(a) EFFECTIVE DATE. The Plan shall be effective on April 14, 1997, upon
approval by the shareholders of the Company at the 1997 annual meeting of
shareholders or any adjournments thereof.
(b) TERM. The Plan shall remain in effect until December 31, 2001, unless
sooner terminated by the Board of Directors. Termination of the Plan shall not
affect grants and Awards then outstanding.
4. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) MAXIMUM NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE PLAN. The
maximum aggregate number of shares of Common Stock which may be issued pursuant
to the Plan, subject to adjustment as provided in Section 4(b) of the Plan,
shall be fifteen million, plus (i) any shares of Common Stock issued under the
Plan that are forfeited back to the Company or are canceled, and (ii) any shares
of Common Stock that are tendered, whether by physical delivery or by
attestation, to the Company by a Participant as full or partial payment of the
exercise price of any Stock Option granted pursuant to the Plan, in connection
with the payment or settlement of any other grant or Award made pursuant to the
Plan, or in payment of any applicable withholding for federal, state, city,
local or foreign income, payroll or other taxes incurred in connection with the
exercise of any Stock Option or Stock Appreciation Right granted under the Plan
or the receipt or settlement of any other grant or Award under the Plan. The
shares of Common Stock which may be issued under the Plan may be authorized and
unissued shares or issued shares which have been reacquired by the Company. No
fractional share of the Common Stock shall be issued under the Plan. Awards of
fractional shares of the Common Stock, if any, shall be settled in cash.
(b) ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event of any
change in the capital structure, capitalization or Common Stock of the Company
such as a stock dividend, stock split, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Stock, such proportionate adjustments, if
any, as the Board of Directors in its discretion may deem appropriate to reflect
such change shall be made with respect to: (i) the maximum number of shares of
Common Stock which may be (1) issued pursuant to the Plan, (2) the subject of
any type of grant or Award under the Plan, and (3) granted, Awarded or issued to
any Participant pursuant to any provision of the Plan; (ii) the number of shares
of Common Stock subject to any outstanding Stock Option, Stock Appreciation
Right or other grant or Award made to any Participant under the Plan; (iii) the
per share exercise price in respect of any outstanding Stock Options and Stock
Appreciation Rights; (iv) the number of shares of Common Stock and the number of
Units or the value of such Units, as the case may be, which are the subject of
grants and Awards then outstanding under the Plan; and (v) any other term or
condition of any grant affected by any such change.
A-3
<PAGE> 39
5. ADMINISTRATION.
(a) THE COMMITTEE. The Plan shall be administered by the Committee to be
appointed from time to time by the Board of Directors and comprised of not less
than three of the then members of the Board of Directors who qualify as
"non-employee directors" within the meaning of Rule 16(b)-3 promulgated under
the Exchange Act and as "outside directors" within the meaning of Section 162(m)
of the Code. Members of the Committee shall serve at the pleasure of the Board
of Directors. The Board of Directors may from time to time remove members from,
or add members to, the Committee. A majority of the members of the Committee
shall constitute a quorum for the transaction of business and the acts of a
majority of the members present at any meeting at which a quorum is present
shall be the acts of the Committee. Any one or more members of the Committee may
participate in a meeting by conference telephone or similar means where all
persons participating in the meeting can hear and speak to each other, which
participation shall constitute presence in person at such meeting. Action
approved in writing by a majority of the members of the Committee then serving
shall be fully as effective as if the action had been taken by unanimous vote at
a meeting duly called and held. The Company shall make grants and effect Awards
under the Plan in accordance with the terms and conditions specified by the
Committee, which terms and conditions shall be set forth in grant agreements
and/or other instruments in such forms as the Committee shall approve.
(b) COMMITTEE POWERS. The Committee shall have full power and authority to
operate and administer the Plan in accordance with its terms. The powers of the
Committee include, but are not limited to, the power to: (i) select Participants
from among the Employees of the Company and Subsidiaries; (ii) establish the
types of, and the terms and conditions of, all grants and Awards made under the
Plan, subject to any applicable limitations set forth in, and consistent with
the express terms of, the Plan; (iii) make grants and pay or otherwise effect
Awards subject to, and consistent with, the express provisions of the Plan; (iv)
establish Performance Goals, Performance Measures and Performance Periods,
subject to, and consistent with, the express provisions of the Plan; (v) reduce
the amount of any grant or Award; (vi) prescribe the form or forms of grant
agreements and other instruments evidencing grants and Awards under the Plan;
(vii) pay and to defer payment of Awards on such terms and conditions, not
inconsistent with the express terms of the Plan, as the Committee shall
determine; (viii) direct the Company to make conversions, accruals and payments
pursuant to the Plan; (ix) construe and interpret the Plan and make any
determination of fact incident to the operation of the Plan; (x) promulgate,
amend and rescind rules and regulations relating to the implementation,
operation and administration of the Plan; (xi) adopt such modifications,
procedures and subplans as may be necessary or appropriate to comply with the
laws of other countries with respect to Participants or prospective Participants
employed in such other countries; (xii) delegate to other persons the
responsibility for performing administrative or ministerial acts in furtherance
of the Plan; (xiii) engage the services of persons and firms, including banks,
consultants and insurance companies, in furtherance of the Plan's activities;
and (xiv) make all other determinations and take all other actions as the
Committee may deem necessary or advisable for the administration and operation
of the Plan.
(c) COMMITTEE'S DECISIONS FINAL. Any determination, decision or action of
the Committee in connection with the construction, interpretation,
administration or application of the Plan, and of any grant agreement, shall be
final, conclusive and binding upon all Participants, and all persons claiming
through Participants, affected thereby.
(d) ADMINISTRATIVE ACCOUNTS. For the purpose of accounting for Awards
deferred as to payment, the Company shall establish bookkeeping accounts
expressed in Units bearing the name of each Participant receiving such Awards.
Each account shall be unfunded, unless otherwise determined by the Committee in
accordance with Section 15(d) of the Plan.
(e) CERTIFICATIONS. In respect of each grant under the Plan to a Covered
Person which the Committee intends to be "performance based compensation" under
Section 162(m) of the Code, the provisions of the Plan and the related grant
agreement shall be construed to confirm such intent, and to conform to the
requirements of Section 162(m) of the Code, and the Committee shall certify in
writ-
A-4
<PAGE> 40
ing (which writing may include approved minutes of a meeting of the Committee)
that the applicable Performance Goal(s), determined using the Performance
Measure specified in the related grant agreement, was attained during the
relevant Performance Period at a level that equaled or exceeded the level
required for the payment of such Award in the amount proposed to be paid and
that such Award does not exceed any applicable Plan limitation.
6. STOCK OPTIONS.
(a) IN GENERAL. Options to purchase shares of Common Stock may be granted
under the Plan and may be Incentive Stock Options or Non-Qualified Stock
Options. All Stock Options shall be subject to the terms and conditions of this
Section 6 and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
determine. Stock Options may be granted in addition to, or in tandem with or
independent of Stock Appreciation Rights or other grants and Awards under the
Plan. The Committee may grant Stock Options that provide for the automatic grant
of a replacement Stock Option if payment of the exercise price and/or any
related withholding taxes is made by tendering (whether by physical delivery or
by attestation) shares of Common Stock or by having shares of Common Stock
withheld by the Company. The replacement Stock Option would cover the number of
shares of Common Stock tendered or withheld, would have a per share exercise
price equal to at least 100% of the Fair Market Value of a share of Common Stock
on the date of the exercise of the original Stock Option, and would have such
other terms and conditions as may be specified by the Committee and set forth in
the related grant agreement.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary may be granted Stock Options. The
Committee shall determine, in its discretion, the Employees to whom Stock
Options will be granted, the timing of such grants, and the number of shares of
Common Stock subject to each Stock Option granted; provided, that (i) the
maximum aggregate number of shares of Common Stock which may be issued and
delivered upon the exercise of Non-Qualified Stock Options granted under the
Plan shall be fourteen million, (ii) the maximum aggregate number of shares of
Common Stock which may be issued and delivered upon the exercise of Incentive
Stock Options shall be five million, (iii) the maximum number of shares of
Common Stock in respect of which Stock Options may be granted to any Employee
during any calendar year shall be 500,000, and (iv) in respect of Incentive
Stock Options, the aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which an Incentive Stock Option becomes exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000, or such other
limit as may be required by the Code, except that, if authorized by the
Committee and provided for in the related grant agreement, any portion of any
Incentive Stock Option that cannot be exercised as such because of this
limitation may be converted into and exercised as a Non-Qualified Stock Option.
In no event shall any Stock Option or Stock Appreciation Right be granted to a
Participant in exchange for the Participant's agreement to the cancellation of
one or more Stock Options or Stock Appreciation Rights then held by such
Participant if the exercise price of the new grant is lower than the exercise
price of the grant to be cancelled and in no event shall any Stock Option or
Stock Appreciation Right be amended to reduce the option price, except as
contemplated by Section 4(b) of the Plan.
(c) OPTION EXERCISE PRICE. The per share exercise price of each Stock
Option granted under the Plan shall be determined by the Committee prior to or
at the time of grant, but in no event shall the per share exercise price of any
Stock Option be less than 100% of the Fair Market Value of the Common Stock on
the date of the grant of such Stock Option.
(d) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee; except that in no event shall the term of any Incentive Stock Option
exceed ten years after the date such Incentive Stock Option is granted.
(e) EXERCISABILITY. A Stock Option shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at the date of grant; provided, however,
A-5
<PAGE> 41
that no Stock Option shall be exercisable during the first six months after the
date such Stock Option is granted. No Stock Option may be exercised unless the
holder thereof is at the time of such exercise an Employee and has been
continuously an Employee since the date such Stock Option was granted, except
that the Committee may permit the exercise of any Stock Option for any period
following the Participant's termination of employment not in excess of the
original term of the Stock Option on such terms and conditions as it shall deem
appropriate and specify in the related grant agreement.
(f) METHOD OF EXERCISE. A Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Company specifying the number
of shares of Common Stock to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, plus any required withholding taxes, in
cash or, if permitted by the terms of the related grant agreement or otherwise
approved in advance by the Committee, in shares of Common Stock already owned by
the Participant valued at the Fair Market Value of the Common Stock on the date
of exercise. The Committee may also permit Participants, either on a selective
or aggregate basis, to simultaneously exercise Stock Options and sell the shares
of Common Stock thereby acquired pursuant to a brokerage or similar arrangement
approved in advance by the Committee and to use the proceeds from such sale to
pay the exercise price and withholding taxes.
7. STOCK APPRECIATION RIGHTS.
(a) IN GENERAL. Stock Appreciation Rights in respect of shares of Common
Stock may be granted under the Plan alone, in tandem with, in addition to or
independent of a Stock Option or other grant or Award under the Plan. A Stock
Appreciation Right entitles a Participant to receive an amount equal to the
excess 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 of the Stock Appreciation Right, or such other higher price as may be set
by the Committee, multiplied by the number of shares of Common Stock with
respect to which the Stock Appreciation Right shall have been exercised.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary selected by the Committee may be granted
Stock Appreciation Rights. The Committee shall determine, in its discretion, the
Employees to whom Stock Appreciation Rights will be granted, the timing of such
grants and the number of shares of Common Stock in respect of which each Stock
Appreciation Right is granted; provided that (i) the maximum aggregate number of
shares of Common Stock in respect of which Stock Appreciation Rights may be
granted shall be six million, (ii) the maximum aggregate number of shares of
Common Stock which may be issued and delivered in payment or settlement of Stock
Appreciation Rights shall be three million, and (iii) the maximum number of
shares of Common Stock in respect of which Stock Appreciation Rights may be
granted to any Employee during any calendar year shall be 250,000.
(c) EXERCISABILITY; EXERCISE; FORM OF PAYMENT. A Stock Appreciation Right
may be exercised by a Participant at such time or times and in such manner as
shall be authorized by the Committee and set forth in the related grant
agreement, except that in no event shall a Stock Appreciation Right be
exercisable within the first six months after the date of grant. The Committee
may provide that a Stock Appreciation Right shall be automatically exercised on
one or more specified dates. No Stock Appreciation Right may be exercised unless
the holder thereof is at the time of exercise an Employee and has been
continuously an Employee since the date the Stock Appreciation Right was
granted, except that the Committee may permit the exercise of any Stock
Appreciation Right for any period following the Participant's termination of
employment not in excess of the original term of the Stock Appreciation Right on
such terms and conditions as it shall deem appropriate and specify in the
related grant agreement. A Stock Appreciation Right may be exercised, in whole
or in part, by giving the Company a written notice specifying the number of
shares of Common Stock in respect of which the Stock Appreciation Right is to be
exercised. Stock Appreciation Rights may be paid upon exercise in cash, in
shares of Common Stock, or in any combination of cash and shares of Common Stock
as determined by the Committee.
A-6
<PAGE> 42
8. RESTRICTED STOCK GRANTS AND AWARDS.
(a) IN GENERAL. A Restricted Stock Grant is the issue of shares of Common
Stock in the name of an Employee, which issuance is subject to such terms and
conditions as the Committee shall deem appropriate, including, without
limitation, restrictions on the sale, assignment, transfer or other disposition
of such shares and the requirement that the Employee forfeit such shares back to
the Company (i) upon termination of employment for specified reasons within a
specified period of time, or (ii) if any specified Performance Goals are not
achieved during a specified Performance Period, or (iii) if such other
conditions as the Committee may specify are not satisfied.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
key Employee of the Company or a Subsidiary selected by the Committee may
receive a Restricted Stock Grant. The Committee, in its sole discretion, shall
determine whether a Restricted Stock Grant shall be made, the Employee to
receive the Restricted Stock Grant, and the conditions and restrictions imposed
on the Restricted Stock Grant. The maximum number of shares of Common Stock
which may be issued as Restricted Stock under the Plan shall be two million. The
maximum number of shares of Common Stock which may be issued to any Employee as
Restricted Stock during any calendar year shall not exceed 200,000. The maximum
amount any Employee may receive as a Restricted Stock Grant in any calendar year
shall not exceed $10 million, determined using the Fair Market Value of such
Restricted Stock Grant as at the date of the grant thereof.
(c) RESTRICTION PERIOD. Restricted Stock Grants shall provide that in order
for a Participant to receive shares of Common Stock free of restrictions, the
Participant must remain in the employment of the Company or its Subsidiaries,
subject to such exceptions as the Committee shall deem appropriate and specify
in the related grant agreement, for a period of not less than three years
commencing on the date of the grant and ending on such later date or dates as
the Committee may designate at the time of the grant (the "Restriction Period").
The Committee, in its sole discretion, may provide for the lapse of restrictions
in installments during the Restriction Period. The Committee may also establish
one or more Performance Goals that are required to be achieved during one or
more Performance Periods within the Restriction Period as a condition to the
lapse of the restrictions.
(d) RESTRICTIONS. The following restrictions and conditions shall apply to
each Restricted Stock Grant during the Restriction Period: (i) the Participant
shall not be entitled to delivery of the shares of the Common Stock; (ii) the
Participant may not sell, assign, transfer, pledge, hypothecate, encumber or
otherwise dispose of or realize on the shares of Common Stock subject to the
Restricted Stock Grant; and (iii) the shares of the Common Stock issued as
Restricted Stock shall be forfeited to the Company if the Participant for any
reason ceases to be an Employee prior to the end of the Restriction Period,
except due to circumstances specified in the related grant agreement or
otherwise approved by the Committee. The Committee may in, its sole discretion,
include such other restrictions and conditions as it may deem appropriate.
(e) PAYMENT. Upon expiration of the Restriction Period and if all
conditions have been satisfied and any applicable Performance Goals attained,
the shares of the Restricted Stock will be made available to the Participant,
subject to satisfaction of applicable withholding tax requirements, free of all
restrictions; provided, that the Committee may, in its discretion, require (i)
the further deferral of any Restricted Stock Grant beyond the initially
specified Restriction Period, (ii) that the Restricted Stock be retained by the
Company, and (iii) that the Participant receive a cash payment in lieu of
unrestricted shares of Common Stock.
(f) RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect to
shares of Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares and receive any cash dividends paid
thereon. Stock dividends distributed with respect to shares of Restricted Stock
shall be treated as additional shares under the Restricted Stock Grant and shall
be subject to the restrictions and other terms and conditions set forth therein.
A-7
<PAGE> 43
9. PERFORMANCE GRANTS AND AWARDS.
(a) ELIGIBILITY AND TERMS. The Committee may grant to officers of the
Company and other key Employees of the Company and its Subsidiaries the
prospective contingent right, expressed in Units, to receive payments of shares
of Common Stock, cash or any combination thereof, with each Unit equivalent in
value to one share of Common Stock, or equivalent to such other value or
monetary amount as may be designated or established by the Committee
("Performance Grants"), based upon Company performance over a specified
Performance Period. The Committee shall, in its sole discretion, determine the
officers of the Company and other key Employees eligible to receive Performance
Grants. At the time each Performance Grant is made, the Committee shall
establish the Performance Period, the Performance Measure and the targets to be
attained relative to such Performance Measure (the "Performance Goals") in
respect of such Performance Grant. The number of shares of Common Stock and/or
the amount of cash earned and payable in settlement of a Performance Grant shall
be determined at the end of the Performance Period (a "Performance Award").
(b) LIMITATIONS ON GRANTS AND AWARDS. The maximum number of shares of
Common Stock which may be issued pursuant to Performance Grants shall be three
million. The maximum number of shares which may be the subject of Performance
Grants made to any Participant in respect of any Performance Period or during
any calendar year shall be 100,000. The maximum amount any Participant may
receive during any calendar year as Performance Awards pursuant to Performance
Grants shall not exceed $15 million, determined using the Fair Market Value of
such Performance Awards as at the last day of the applicable Performance Period
or Periods or as at date or dates of the payment thereof, whichever is higher.
(c) PERFORMANCE GOALS, PERFORMANCE MEASURES AND PERFORMANCE PERIODS. Each
Performance Grant shall provide that, in order for a Participant to receive an
Award of all or a portion of the Units subject to such Performance Grant, the
Company must achieve certain Performance Goals over a designated Performance
Period having a minimum duration of one year, with attainment of the Performance
Goals determined using a specific Performance Measure. The Performance Goals and
Performance Period shall be established by the Committee in its sole discretion.
The Committee shall establish a Performance Measure for each Performance Period
for determining the portion of the Performance Grant which will be earned or
forfeited based on the extent to which the Performance Goals are achieved or
exceeded. In setting Performance Goals, the Committee may use a Performance
Measure based on any one, or on any combination, of the following Company
performance factors as the Committee deems appropriate: (i) Cumulative Net
Income Per Share; (ii) Cumulative Net Income; (iii) return on sales; (iv) total
shareholder return; (v) return on assets; (vi) economic value added; (vii) cash
flow; (viii) return on equity; and (ix) cumulative operating income (which shall
equal consolidated sales minus cost of goods sold and selling, administrative
and general expense). Performance Goals may include minimum, maximum and target
levels of performance, with the size of Performance Award based on the level
attained. Once established by the Committee and specified in the grant
agreement, and if and to the extent provided in or required by the grant
agreement, the Performance Goals and the Performance Measure in respect of any
Performance Grant (or any Restricted Stock Grant or Stock-Based Grant that
requires the attainment of Performance Goals as a condition to the Award) shall
not be changed. The Committee may, in its discretion, eliminate or reduce (but
not increase) the amount of any Performance Award (or Restricted Stock or
Stock-Based Award) that otherwise would be payable to a Participant upon
attainment of the Performance Goal(s).
(d) FORM OF GRANTS. Performance Grants may be made on such terms and
conditions not inconsistent with the Plan, and in such form or forms, as the
Committee may from time to time approve. Performance Grants may be made alone,
in addition to in tandem with, or independent of other grants and Awards under
the Plan. Subject to the terms of the Plan, the Committee shall, in its
discretion, determine the number of Units subject to each Performance Grant made
to a Participant and the Committee may impose different terms and conditions on
any particular Performance Grant made to any Participant. The Performance Goals,
the Performance Period or Periods, and the Performance Measure applicable to a
Performance Grant shall be set forth in the relevant grant agreement.
A-8
<PAGE> 44
(e) PAYMENT OF AWARDS. Each Participant shall be entitled to receive
payment in an amount equal to the aggregate Fair Market Value (if the Unit is
equivalent to a share of Common Stock), or such other value as the Committee
shall specify, of the Units earned in respect of such Performance Award. Payment
in settlement of a Performance Award may be made in shares of Common Stock, in
cash, or in any combination of Common Stock and cash, and at such time or times,
as the Committee, in its discretion, shall determine.
10. OTHER STOCK-BASED GRANTS AND AWARDS.
(a) IN GENERAL. The Committee may make other grants and Awards pursuant to
which Common Stock is, or in the future may be, acquired by Participants, and
other grants and Awards to Participants denominated in Common Stock Equivalents
or other Units ("Stock-Based Grants"). Such Stock-Based Grants may be granted
alone or in addition to, in tandem with, or independent of any other grant made
or Award effected under the Plan.
(b) ELIGIBILITY AND TERMS. The Committee may make Stock-Based Grants to
officers of the Company and other key Employees of the Company and its
Subsidiaries. Subject to the provisions of the Plan, the Committee shall have
authority to determine the Employees to whom, and the time or times at which,
Stock-Based Grants will be made, the number of shares of Common Stock, if any,
to be subject to or covered by each Stock-Based Grant, and any and all other
terms and conditions of each Stock-Based Grant.
(c) LIMITATIONS. The aggregate number of shares of Common Stock issued to
Participants pursuant to Stock-Based Grants made and Awards effected pursuant to
this Section 10 shall not exceed three million. No Participant shall receive
more than 100,000 shares of Common Stock in settlement of Stock-Based Awards
during any calendar year. The maximum amount any Participant may receive in
Stock-Based Awards during any calendar year shall not exceed $5 million,
determined using the Fair Market Value of any shares of Common Stock delivered
in payment of the Stock-Based Awards on the date or dates of the payment
thereof.
(d) FORM OF GRANTS; PAYMENT OF AWARDS. Stock-Based Grants may be made in
such form or forms and on such terms and conditions, including the attainment of
specific Performance Goals, as the Committee, in its discretion, shall approve.
Payment of Stock-Based Awards may be made in cash, in shares of Common Stock, or
in any combination of cash and shares of Common Stock, and at such time or
times, as the Committee shall determine.
11. DEFERRALS.
The Committee may, whether at the time of grant or at anytime thereafter
prior to payment or settlement, require a Participant to defer, or permit
(subject to such conditions as the Committee may from time to time establish) a
Participant to elect to defer, receipt of all or any portion of any payment of
cash or shares of Common Stock that would otherwise be due to such Participant
in payment or settlement of any Award under the Plan. If any such deferral is
required by the Committee (or is elected by the Participant with the permission
of the Committee), the Committee shall establish rules and procedures for such
payment deferrals. The Committee may provide for the payment or crediting of
interest, at such rate or rates as it shall in its discretion deem appropriate,
on such deferred amounts credited in cash and the payment or crediting of
dividend equivalents in respect of deferred amounts credited in Common Stock
Equivalents. Deferred amounts may be paid in a lump sum or in installments in
the manner and to the extent permitted, and in accordance with rules and
procedures established, by the Committee.
12. NON-TRANSFERABILITY OF GRANTS AND AWARDS.
No grant or Award under the Plan, and no right or interest therein, shall be
(i) assignable, alienable or transferable by a Participant, except by will or
the laws of descent and distribution, or (ii) subject to any obligation, or the
lien or claims of any creditor, of any Participant, or (iii) subject to any
lien, encum-
A-9
<PAGE> 45
brance or claim of any party made in respect of or through any Participant,
however arising. During the lifetime of a Participant, Stock Options and Stock
Appreciation Rights are exercisable only by, and shares of Common Stock issued
upon the exercise of Stock Options and Stock Appreciation Rights or in
settlement of other Awards will be issued only to, and other payments in
settlement of any Award will be payable only to, the Participant or his or her
legal representative. The Committee may, in its sole discretion, authorize
written designations of beneficiaries and authorize Participants to designate
beneficiaries with the authority to exercise Stock Options and Stock
Appreciation Rights granted to a Participant in the event of his or her death.
Notwithstanding the foregoing, the Committee may, in its sole discretion and on
and subject to such terms and conditions as it shall deem appropriate, which
terms and conditions shall be set forth in the related grant agreement: (i)
authorize a Participant to transfer all or a portion of any Non-Qualified Stock
Option or Stock Appreciation Right, as the case may be, granted to such
Participant; provided, that in no event shall any transfer be made to any person
or persons other than such Participant's spouse, children or grandchildren, or a
trust for the exclusive benefit of one or more such persons, which transfer must
be made as a gift and without any consideration; and (ii) provide for the
transferability of a particular grant or Award pursuant to a qualified domestic
relations order. All other transfers and any retransfer by any permitted
transferee are prohibited and any such purported transfer shall be null and
void. Each Stock Option or Stock Appreciation Right which becomes the subject of
permitted transfer (and the Participant to whom it was granted by the Company)
shall continue to be subject to the same terms and conditions as were in effect
immediately prior to such permitted transfer. The Participant shall remain
responsible to the Company for the payment of all withholding taxes incurred as
a result of any exercise of such Stock Option or Stock Appreciation Right. In no
event shall any permitted transfer of a Stock Option or Stock Appreciation Right
create any right in any party in respect of any Stock Option, Stock Appreciation
Right or other grant or Award, other than the rights of the qualified transferee
in respect of such Stock Option or Stock Appreciation Right specified in the
related grant agreement.
13. CHANGE IN CONTROL.
(a) EFFECT ON GRANTS. In the event of a Change in Control (as defined
below) of the Company, except as the Board of Directors comprised of a majority
of Continuing Directors may expressly provide otherwise, and notwithstanding any
other provision of the Plan to the contrary: (i) all Stock Options and Stock
Appreciation Rights then outstanding shall become fully exercisable as of the
date of the Change in Control, whether or not then exercisable; (ii) all
restrictions and conditions in respect of all Restricted Stock Grants then
outstanding shall be deemed satisfied as of the date of the Change in Control;
and (iii) all Performance Grants and other Stock-Based Grants shall be deemed to
have been fully earned, at the maximum amount of the award opportunity specified
in the grant agreement, as of the date of the Change in Control.
(b) CHANGE IN CONTROL DEFINED. A "Change in Control" of the Company shall
occur when: (i) any Acquiring Person (other than the Company, any Subsidiary,
any employee benefit plan of the Company or of any Subsidiary, or any person or
entity organized, appointed or established by the Company or a Subsidiary for or
pursuant to the terms of any such plans), alone, or together with its Affiliates
and Associates, shall become the beneficial owner of fifteen percent (15%) or
more of the shares of Common Stock then outstanding (except pursuant to an offer
for all outstanding shares of Common Stock at a price and upon such terms and
conditions as a majority of the Continuing Directors determines to be in the
best interest of the Company and its shareholders); or (ii) the shareholders of
the Company approve a definitive agreement for a merger or consolidation
involving the Company which would result in the Common Stock outstanding
immediately prior to such merger or consolidation continuing to represent
(whether by remaining outstanding or by being converted into voting securities
of the surviving entity) less than fifty percent of the combined voting power of
the Company and such other entity outstanding immediately after such merger or
consolidation; or (iii) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or other
disposition of all or substantially all of the assets of the Company; or (iv)
the Continuing Directors no longer constitute a majority of the Board of
Directors. "Acquiring Person" means any person (any indi-
A-10
<PAGE> 46
vidual, firm, corporation or other entity) who or which, together with all its
Affiliates and Associates, shall be the beneficial owner of a substantial block
of Common Stock. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Exchange Act. "Continuing
Director" means any individual who is a member of the Board of Directors, while
such individual is a member of the Board of Directors, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
or nominee of an Acquiring Person or of any such Affiliate or Associate, and was
a member of the Board of Directors prior to the occurrence of a Change in
Control, and any successor of a Continuing Director, while such successor is a
member of the Board of Directors, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or representative or nominee of
an Acquiring Person or of any such Affiliate or Associate, and is recommended or
elected to succeed the Continuing Director by a majority of the Continuing
Directors.
14. AMENDMENT AND TERMINATION.
The Board of Directors may at any time terminate the Plan, except with
respect to grants then outstanding. The Board of Directors may amend the Plan at
any time and from time to time in such respects as the Board of Directors may
deem necessary or appropriate without approval of the shareholders, unless such
approval is necessary in order to comply with applicable laws, including the
Exchange Act and the Code. In no event may the Board of Directors amend the Plan
without the approval of the shareholders to (i) increase the maximum number of
shares of Common Stock which may be issued pursuant to the Plan, (ii) increase
any limitation set forth in the Plan on the number of shares of Common Stock
which may be issued, or the aggregate value of Awards which may be made, in
respect of any type of grant to all Participants during the term of the Plan or
to any Participant during any specified period, (iii) reduce the minimum
exercise price for Stock Options and Stock Appreciation Rights, or (iv) change
the Performance Measure criteria identified at Section 9(c) of the Plan.
15. MISCELLANEOUS.
(a) WITHHOLDING TAXES. All Awards under the Plan will be made subject to
any applicable withholding for taxes of any kind. The Company shall have the
right to deduct from any amount payable under the Plan, including delivery of
shares of Common Stock to be made under the Plan, all federal, state, city,
local or foreign taxes of any kind required by law to be withheld with respect
to such payment and to take such other actions as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such taxes.
If shares of Common Stock are used to satisfy withholding taxes, such shares
shall be valued based on the Fair Market Value thereof on the date when the
withholding for taxes is required to be made. The Company shall have the right
to require a Participant to pay cash to satisfy withholding taxes as a condition
to the payment of any amount (whether in cash or shares of Common Stock) under
the Plan.
(b) NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the making
of any grant or Award shall confer upon any Employee any right to continued
employment with the Company or any Subsidiary, nor shall it interfere in any way
with the right of the Company or any Subsidiary to terminate the employment of
any Employee at any time, with or without cause.
(c) UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of the Company to any person with respect to any
Award under the Plan shall be based solely upon any contractual obligations that
may be effected pursuant to the Plan. No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.
(d) PAYMENTS TO TRUST. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
(e) ENGAGING IN COMPETITION WITH COMPANY. In the event a Participant
terminates his or her employment with the Company or a Subsidiary for any reason
whatsoever, and within eighteen (18) months after the date thereof accepts
employment with any competitor of, or otherwise engages in com-
A-11
<PAGE> 47
petition with, the Company, the Committee, in its sole discretion, may require
such Participant to return, or (if not received) to forfeit, to the Company the
economic value of any Award which is realized or obtained (measured at the date
of exercise, vesting or payment) by such Participant (i) at any time after the
date which is six months prior to the date of such Participant's termination of
employment with the Company or (ii) during such other period as the Committee
may determine.
(f) OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of any termination indemnity or severance pay law of any country
and shall not be included in, nor have any effect on, the determination of
benefits under any pension or other employee benefit plan or similar arrangement
provided by the Company or any Subsidiary, unless (i) expressly so provided by
such other plan or arrangement or (ii) the Committee expressly determines that
an Award or a portion thereof should be included as recurring compensation.
Nothing contained in the Plan shall prohibit the Company or any Subsidiary from
establishing other special awards, incentive compensation plans, compensation
programs and other similar arrangements providing for the payment of
performance, incentive or other compensation to Employees. Payments and benefits
provided to any Employee under any other plan, including, without limitation,
any stock option, stock award, restricted stock, deferred compensation, savings,
retirement or other benefit plan or arrangement, shall be governed solely by the
terms of such other plan.
(g) SECURITIES LAW RESTRICTIONS. In no event shall the Company be obligated
to issue or deliver any shares of Common Stock if such issuance or delivery
shall constitute a violation of any provisions of any law or regulation of any
governmental authority or securities exchange. No shares of Common Stock shall
be issued under the Plan unless counsel for the Company shall be satisfied that
such issuance will be in compliance with all applicable Federal and state
securities laws and regulations and all requirements of any securities exchange
on which the Common Stock is listed.
(h) GRANT AGREEMENTS. Each Participant receiving a grant under the Plan
shall enter into a grant agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the grant and such related
matters as the Committee shall, in its sole discretion, determine.
(i) SEVERABILITY. In the event any provision of the Plan shall be held to
be invalid or unenforceable for any reason, such invalidity or unenforceability
shall not affect the remaining provisions of the Plan.
(j) TRANSITION - 1989 PLAN. The Plan replaces and supersedes the 1989
Goodyear Performance and Equity Incentive Plan (the "1989 Plan") and the 1989
Plan shall automatically terminate when the Plan becomes effective, except that
such termination shall not affect any grants or awards then outstanding under
the 1989 Plan.
(k) GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Ohio.
A-12
<PAGE> 48
[logo]
GOODYEAR
700-862-928-65100
<PAGE> 49
[GOODYEAR LOGO]
THE GOODYEAR TIRE & RUBBER COMPANY
PROXY FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned, a holder (or designated proxy) of shares of the Common
Stock of The Goodyear Tire & Rubber Company, hereby appoints SAMIR G. GIBARA,
STEVEN A. MINTER, and AGNAR PYTTE, and each or any of them, the proxies or proxy
of the undersigned, with full power of substitution, to represent the
undersigned, and to vote all of the shares of Common Stock that the undersigned
is entitled to vote, at the Annual Meeting of Shareholders of the Company to be
held at its offices in Akron, Ohio, on Monday, April 14, 1997, at 10:00 A.M.,
Akron time, and at any and all adjournments thereof; to vote for the election of
four Directors of the Company, and with the power to vote said shares FOR the
ratification of appointment of Independent Accountants, FOR approval of the
adoption of the Company's 1997 Performance Incentive Plan and upon all other
matters as may properly come before the meeting or any adjournment thereof. This
Proxy is given and is to be construed according to the laws of the State of
Ohio.
UNLESS OTHERWISE SPECIFIED ON THE REVERSE SIDE, THE PROXY WILL BE VOTED:
FOR ELECTION OF THE FOUR NOMINEES FOR DIRECTOR NAMED ON THE REVERSE SIDE, WITH
DISCRETIONARY AUTHORITY TO CUMULATE VOTES WITH RESPECT TO THE THREE NOMINEES FOR
CLASS III DIRECTOR (ITEM 1 ON THE REVERSE SIDE), FOR RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS (ITEM 2 ON THE REVERSE SIDE) AND FOR THE PROPOSAL TO
APPROVE THE ADOPTION OF THE COMPANY'S 1997 PERFORMANCE INCENTIVE PLAN (ITEM 3 ON
THE REVERSE SIDE).
IF YOU PLAN TO ATTEND THE 1997 ANNUAL MEETING, PLEASE MARK THE BOX
INDICATED ON THE REVERSE SIDE.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
ANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
APRIL 14, 1997
10:00 A.M.
OFFICE OF THE COMPANY
GOODYEAR THEATER
1201 EAST MARKET STREET
AKRON, OHIO
REFRESHMENTS WILL BE SERVED FROM 9:00 TO 9:45 A.M. IN THE GOODYEAR
GYMNASIUM, WHICH IS ADJACENT TO THE THEATER IN GOODYEAR HALL.
WE INVITE YOU TO JOIN US.
YOUR VOTE IS IMPORTANT
======================
PLEASE COMPLETE, DATE AND SIGN YOUR PROXY AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
PLEASE MARK YOUR 5721
[X] VOTES IN BLUE OR
BLACK INK AS IN THIS
EXAMPLE.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT.
- - ---------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES, FOR ITEM 2 AND FOR ITEM 3.
- - ----------------------------------------------------------------------------------------------------------------------
ITEM 1. ELECTION OF DIRECTORS. NOMINEES:
Class III Directors--Each Class II Director--To serve a
FOR ALL [ ] WITHHOLD [ ] to serve a 3-year term: 1-year term:
NOMINEES AUTHORITY Thomas H. Cruikshank
AS TO ALL Steven A. Minter Gertrude G. Michelson
NOMINEES Agnar Pytte
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME IN THE SPACE BELOW.)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2. Ratification of appointment [ ] [ ] [ ]
of Price Waterhouse LLP as
Independent Accountants.
- - -----------------------------------------------------------------------------------------
ITEM 3. Approval of the adoption of [ ] [ ] [ ]
the Company's 1997 Performance
Incentive Plan.
- - ------------------------------------------------------
I plan to attend the Annual [ ]
Meeting of Shareholders.
- - ------------------------------------------------------
PLEASE SIGN NAME EXACTLY AS IT APPEARS ABOVE. EACH JOINT OWNER SHOULD SIGN.
PLEASE INDICATE TITLE IF YOU ARE SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE,
CUSTODIAN, GUARDIAN OR CORPORATE OFFICER.
- - ------------------------------------------------------------------------------------
SIGNATURE DATE
- - ------------------------------------------------------------------------------------
SIGNATURE DATE
</TABLE>
FOLD AND DETACH HERE
[GOODYEAR LOGO]
SPECIAL SAVINGS
<TABLE>
<S> <C>
- - --------------------------------------- ----------------------------------------------
OIL LUBE ANY TIRE
& FILTER $5.00 OFF
$5.00 OFF PER TIRE
Includes: WITH THIS COUPON
* Lube (where applicable) 1 TIRE .............................$5.00 OFF
* New oil filter installed 2 TIRE .............................$10.00 OFF
* Up to 5 quarts premium brand oil 3 TIRE .............................$15.00 OFF
4 TIRE .............................$20.00 OFF
OFFER GOOD ONLY AT LOCATIONS DISPLAYING OFFER GOOD ONLY AT LOCATIONS DISPLAYING
COMPANY OWNED & OPERATED SIGN COMPANY OWNED & OPERATED SIGN
[GOODYEAR LOGO] [GOODYEAR LOGO]
DIRECT MAIL I.D. GAR DIRECT MAIL I.D. GAR
Environmental disposal fee may apply in
some areas. Most cars. No other discounts
apply. Offer ends 7/31/97. No other discounts apply. Offer ends 7/31/97.
- - --------------------------------------- ---------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
TIRE MAINTENANCE TIPS
- - --------------------------------------------------------------------------------
Q. WHAT TYPE OF CAR MAINTENANCE HELPS INCREASE TIRE LIFE?
A. Correct vehicle alignment is a must and should be checked periodically.
Improper alignment not only can cause excessive tire wear, it also can
increase fuel consumption. Tires and wheels should be balanced
dynamically--rear wheels as well as fronts. Goodyear recommends "off the
car" computer balancing.
Q. CAN MY DRIVING HABITS AFFECT THE LIFE OF MY TIRES?
A. They certainly can. Here are some tips to increase the life of your tires:
don't speed; avoid fast turns on curves and around corners; avoid fast
starts and panic stops; don't ride on the edge of the pavement; and avoid
driving over curbs, chuckholes, or other obstructions.
Q. WHEN BUYING JUST TWO NEW TIRES, SHOULD THEY BE PUT ON THE FRONT OR REAR?
A. When radial tires are used with bias or bias belted tires on the same car,
the radials must always be placed on the rear axle. When you select a pair
of replacement tires in the same tires in the same size and construction as
those on the car, Goodyear recommends you put them on the rear axle. A
single new tire should be paired on the rear axle with the tire having the
most tread depth of the other three.
We hope these suggestions and tire tips will help you to get optimum performance
and much longer tire life from all your tires. If you have any questions, stop
at any Goodyear retail outlet. You'll always find a friendly tire professional
who will be glad to answer all of your questions.
<PAGE> 51
[GOODYEAR LOGO]
THE GOODYEAR TIRE & RUBBER COMPANY
PROXY FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned, a holder (or designated proxy) of shares of the Common
Stock of The Goodyear Tire & Rubber Company, hereby appoints SAMIR G. GIBARA,
STEVEN A. MINTER, and AGNAR PYTTE, and each or any of them, the proxies or proxy
of the undersigned, with full power of substitution, to represent the
undersigned, and to vote all of the shares of Common Stock that the undersigned
is entitled to vote, at the Annual Meeting of Shareholders of the Company to be
held at its offices in Akron, Ohio, on Monday, April 14, 1997, at 10:00 A.M.,
Akron time, and at any and all adjournments thereof; to vote for the election of
four Directors of the Company, and with the power to vote said shares FOR the
ratification of appointment of Independent Accountants, FOR approval of the
adoption of the Company's 1997 Performance Incentive Plan and upon all other
matters as may properly come before the meeting or any adjournment thereof. This
Proxy is given and is to be construed according to the laws of the State of
Ohio.
UNLESS OTHERWISE SPECIFIED ON THE REVERSE SIDE, THE PROXY WILL BE VOTED:
FOR ELECTION OF THE FOUR NOMINEES FOR DIRECTOR NAMED ON THE REVERSE SIDE, WITH
DISCRETIONARY AUTHORITY TO CUMULATE VOTES WITH RESPECT TO THE THREE NOMINEES FOR
CLASS III DIRECTOR (ITEM 1 ON THE REVERSE SIDE), FOR RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS (ITEM 2 ON THE REVERSE SIDE) AND FOR THE PROPOSAL TO
APPROVE THE ADOPTION OF THE COMPANY'S 1997 PERFORMANCE INCENTIVE PLAN (ITEM 3 ON
THE REVERSE SIDE).
IF YOU PLAN TO ATTEND THE 1997 ANNUAL MEETING, PLEASE MARK THE BOX
INDICATED ON THE REVERSE SIDE.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
ANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
APRIL 14, 1997
10:00 A.M.
OFFICE OF THE COMPANY
GOODYEAR THEATER
1201 EAST MARKET STREET
AKRON, OHIO
REFRESHMENTS WILL BE SERVED FROM 9:00 TO 9:45 A.M. IN THE GOODYEAR
GYMNASIUM, WHICH IS ADJACENT TO THE THEATER IN GOODYEAR HALL.
WE INVITE YOU TO JOIN US.
YOUR VOTE IS IMPORTANT
======================
PLEASE COMPLETE, DATE AND SIGN YOUR PROXY AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
PLEASE MARK YOUR 5722
[X] VOTES IN BLUE OR
BLACK INK AS IN THIS
EXAMPLE.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT.
- - ---------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES, FOR ITEM 2 AND FOR ITEM 3.
- - ----------------------------------------------------------------------------------------------------------------------
ITEM 1. ELECTION OF DIRECTORS. NOMINEES:
Class III Directors--Each Class II Director--To serve a
FOR ALL [ ] WITHHOLD [ ] to serve a 3-year term: 1-year term:
NOMINEES AUTHORITY Thomas H. Cruikshank
AS TO ALL Steven A. Minter Gertrude G. Michelson
NOMINEES Agnar Pytte
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME IN THE SPACE BELOW.)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2. Ratification of appointment [ ] [ ] [ ]
of Price Waterhouse LLP as
Independent Accountants.
- - -----------------------------------------------------------------------------------------
ITEM 3. Approval of the adoption of [ ] [ ] [ ]
the Company's 1997 Performance
Incentive Plan.
- - ------------------------------------------------------
I plan to attend the Annual [ ]
Meeting of Shareholders.
- - ------------------------------------------------------
PLEASE SIGN NAME EXACTLY AS IT APPEARS ABOVE. EACH JOINT OWNER SHOULD SIGN.
PLEASE INDICATE TITLE IF YOU ARE SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE,
CUSTODIAN, GUARDIAN OR CORPORATE OFFICER.
- - ------------------------------------------------------------------------------------
SIGNATURE DATE
- - ------------------------------------------------------------------------------------
SIGNATURE DATE
</TABLE>
FOLD AND DETACH HERE
[GOODYEAR LOGO]
SPECIAL SAVINGS
<TABLE>
<S> <C>
- - --------------------------------------- ----------------------------------------------
OIL LUBE ANY TIRE
& FILTER $5.00 OFF
$5.00 OFF PER TIRE
Includes: WITH THIS COUPON
* Lube (where applicable) 1 TIRE .............................$5.00 OFF
* New oil filter installed 2 TIRE .............................$10.00 OFF
* Up to 5 quarts premium brand oil 3 TIRE .............................$15.00 OFF
4 TIRE .............................$20.00 OFF
OFFER GOOD ONLY AT LOCATIONS DISPLAYING OFFER GOOD ONLY AT LOCATIONS DISPLAYING
COMPANY OWNED & OPERATED SIGN COMPANY OWNED & OPERATED SIGN
[GOODYEAR LOGO] [GOODYEAR LOGO]
DIRECT MAIL I.D. GAR DIRECT MAIL I.D. GAR
Environmental disposal fee may apply in
some areas. Most cars. No other discounts
apply. Offer ends 7/31/97. No other discounts apply. Offer ends 7/31/97.
- - --------------------------------------- ---------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
TIRE MAINTENANCE TIPS
- - --------------------------------------------------------------------------------
Q. WHAT TYPE OF CAR MAINTENANCE HELPS INCREASE TIRE LIFE?
A. Correct vehicle alignment is a must and should be checked periodically.
Improper alignment not only can cause excessive tire wear, it also can
increase fuel consumption. Tires and wheels should be balanced
dynamically--rear wheels as well as fronts. Goodyear recommends "off the
car" computer balancing.
Q. CAN MY DRIVING HABITS AFFECT THE LIFE OF MY TIRES?
A. They certainly can. Here are some tips to increase the life of your tires:
don't speed; avoid fast turns on curves and around corners; avoid fast
starts and panic stops; don't ride on the edge of the pavement; and avoid
driving over curbs, chuckholes, or other obstructions.
Q. WHEN BUYING JUST TWO NEW TIRES, SHOULD THEY BE PUT ON THE FRONT OR REAR?
A. When radial tires are used with bias or bias belted tires on the same car,
the radials must always be placed on the rear axle. When you select a pair
of replacement tires in the same tires in the same size and construction as
those on the car, Goodyear recommends you put them on the rear axle. A
single new tire should be paired on the rear axle with the tire having the
most tread depth of the other three.
We hope these suggestions and tire tips will help you to get optimum performance
and much longer tire life from all your tires. If you have any questions, stop
at any Goodyear retail outlet. You'll always find a friendly tire professional
who will be glad to answer all of your questions.
<PAGE> 53
CONFIDENTIAL VOTING INSTRUCTIONS -- 1997 ANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY EMPLOYEE SAVINGS PLANS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GOODYEAR
The proxy soliciting materials furnished by the Board of Directors of The
Goodyear Tire & Rubber Company in connection with the Annual Meeting of
Shareholders to be held on Monday, April 14, 1997 are delivered herewith.
Under each Employee Savings Plan in which you participate ("Plan"), you
have the right to give written instructions to the Trustee for such Plan to vote
as you specify the number of full shares of Common Stock of The Goodyear Tire &
Rubber Company representing your proportionate interest in each such Plan on
February 18, 1997.
If you wish to have such shares voted by the Trustee, please sign the
authorization on the reverse side of this card and return it in the accompanying
envelope. If you do not give instructions by marking, signing and returning this
Confidential Voting Instructions Card in the envelope provided, shares of the
Common Stock held for your account in each Plan will be voted by the Trustee in
the same proportion as it votes shares for which Confidential Voting
Instructions are received by the Trustee from other participants in that Plan.
I hereby instruct the Trustee to vote (or cause to be voted) all shares of
Common Stock of The Goodyear Tire & Rubber Company credited to my account under
each Plan at February 18, 1997 at the Annual Meeting of Shareholders to be held
on April 14, 1997, and at any adjournment thereof, as indicated on the reverse
side hereof or, if not so indicated, as recommended by the Board of Directors.
UNLESS INSTRUCTIONS ARE GIVEN ON THE REVERSE SIDE, THE TRUSTEE WILL VOTE
FOR THE ELECTION OF THE FOUR NOMINEES FOR DIRECTOR, WITH DISCRETIONARY AUTHORITY
TO CUMULATE VOTES WITH RESPECT TO THE THREE NOMINEES FOR CLASS III DIRECTOR
(ITEM 1 ON REVERSE SIDE), FOR RATIFICATION OF APPOINTMENT OF INDEPENDENT
ACCOUNTANTS (ITEM 2 ON REVERSE SIDE), AND FOR THE PROPOSAL TO APPROVE THE
ADOPTION OF THE COMPANY'S 1997 PERFORMANCE INCENTIVE PLAN.
IF YOU PLAN TO ATTEND THE 1997 ANNUAL MEETING, PLEASE MARK THE BOX INDICATED ON
THE REVERSE SIDE.
THIS CONFIDENTIAL VOTING INSTRUCTIONS CARD IS CONTINUED ON THE REVERSE
SIDE. PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
ANNUAL MEETING OF SHAREHOLDERS
THE GOODYEAR TIRE & RUBBER COMPANY
APRIL 14, 1997
10:00 A.M.
OFFICE OF THE COMPANY
GOODYEAR THEATER
1201 EAST MARKET STREET
AKRON, OHIO
REFRESHMENTS WILL BE SERVED FROM 9:00 TO 9:45 A.M. IN THE GOODYEAR
GYMNASIUM, WHICH IS ADJACENT TO THE THEATER IN GOODYEAR HALL.
WE INVITE YOU TO JOIN US.
YOUR VOTE IS IMPORTANT
======================
PLEASE COMPLETE, DATE AND SIGN YOUR PROXY AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 54
<TABLE>
<S> <C> <C> <C>
PLEASE MARK YOUR 8396
[X] VOTES IN BLUE OR
BLACK INK AS IN THIS
EXAMPLE.
- - -------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES, FOR ITEM 2 AND FOR ITEM 3.
- - ----------------------------------------------------------------------------------------------------------------------
ITEM 1. ELECTION OF DIRECTORS. NOMINEES:
Class III Directors--Each Class II Director--To serve a
FOR ALL [ ] WITHHOLD [ ] to serve a 3-year term: 1-year term:
NOMINEES AUTHORITY Thomas H. Cruikshank
AS TO ALL Steven A. Minter Gertrude G. Michelson
NOMINEES Agnar Pytte
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME IN THE SPACE BELOW.)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2. Ratification of appointment [ ] [ ] [ ]
of Price Waterhouse LLP as
Independent Accountants.
- - -----------------------------------------------------------------------------------------
ITEM 3. Approval of the adoption of [ ] [ ] [ ]
the Company's 1997 Performance
Incentive Plan.
- - ------------------------------------------------------
I plan to attend the Annual [ ]
Meeting of Shareholders.
- - ------------------------------------------------------
AUTHORIZATION: I ACKNOWLEDGE RECEIPT OF THE NOTICE OF 1997 ANNUAL MEETING AND
PROXY STATEMENT. I HEREBY INSTRUCT THE TRUSTEE TO VOTE BY PROXY, IN THE FORM
SOLICITED BY THE BOARD OF DIRECTORS, THE NUMBER OF FULL SHARES IN MY PLAN
ACCOUNT(S) AS SPECIFIED ABOVE, OR, IF NOT SPECIFIED ABOVE, AS RECOMMENDED BY THE
BOARD OF DIRECTORS.
- - ------------------------------------------------------------------------------------
SIGNATURE DATE
- - ------------------------------------------------------------------------------------
SIGNATURE DATE
</TABLE>
FOLD AND DETACH HERE
[GOODYEAR LOGO]
SPECIAL SAVINGS
<TABLE>
<S> <C>
- - --------------------------------------- ----------------------------------------------
OIL LUBE ANY TIRE
& FILTER $5.00 OFF
$5.00 OFF PER TIRE
Includes: WITH THIS COUPON
* Lube (where applicable) 1 TIRE .............................$5.00 OFF
* New oil filter installed 2 TIRE .............................$10.00 OFF
* Up to 5 quarts premium brand oil 3 TIRE .............................$15.00 OFF
4 TIRE .............................$20.00 OFF
OFFER GOOD ONLY AT LOCATIONS DISPLAYING OFFER GOOD ONLY AT LOCATIONS DISPLAYING
COMPANY OWNED & OPERATED SIGN COMPANY OWNED & OPERATED SIGN
[GOODYEAR LOGO] [GOODYEAR LOGO]
DIRECT MAIL I.D. GAR DIRECT MAIL I.D. GAR
Environmental disposal fee may apply in
some areas. Most cars. No other discounts
apply. Offer ends 7/31/97. No other discounts apply. Offer ends 7/31/97.
- - --------------------------------------- ---------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
TIRE MAINTENANCE TIPS
- - --------------------------------------------------------------------------------
Q. WHAT TYPE OF CAR MAINTENANCE HELPS INCREASE TIRE LIFE?
A. Correct vehicle alignment is a must and should be checked periodically.
Improper alignment not only can cause excessive tire wear, it also can
increase fuel consumption. Tires and wheels should be balanced
dynamically--rear wheels as well as fronts. Goodyear recommends "off the
car" computer balancing.
Q. CAN MY DRIVING HABITS AFFECT THE LIFE OF MY TIRES?
A. They certainly can. Here are some tips to increase the life of your tires:
don't speed; avoid fast turns on curves and around corners; avoid fast
starts and panic stops; don't ride on the edge of the pavement; and avoid
driving over curbs, chuckholes, or other obstructions.
Q. WHEN BUYING JUST TWO NEW TIRES, SHOULD THEY BE PUT ON THE FRONT OR REAR?
A. When radial tires are used with bias or bias belted tires on the same car,
the radials must always be placed on the rear axle. When you select a pair
of replacement tires in the same tires in the same size and construction as
those on the car, Goodyear recommends you put them on the rear axle. A
single new tire should be paired on the rear axle with the tire having the
most tread depth of the other three.
We hope these suggestions and tire tips will help you to get optimum performance
and much longer tire life from all your tires. If you have any questions, stop
at any Goodyear retail outlet. You'll always find a friendly tire professional
who will be glad to answer all of your questions.
