<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE STANDARD PRODUCTS COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE STANDARD PRODUCTS COMPANY
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
(4) Proposed maximum aggregate value of transaction:
/ / 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:
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<PAGE> 2
THE STANDARD PRODUCTS COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------
Notice is hereby given that the annual meeting of shareholders of The
Standard Products Company, an Ohio corporation (the "Company"), will be held at
the offices of the Company, 2130 West 110th Street, Cleveland, Ohio 44102, on
Tuesday, October 22, 1996 at 9:00 a.m., Cleveland time, for the following
purposes:
1. To receive reports at the meeting. No action constituting approval
or disapproval of the matters referred to in said reports is contemplated.
2. To elect four directors, each to serve for a term of three years.
3. To consider a proposal to approve the Company's 1996 Employee Stock
Option Plan and to reserve 350,000 authorized but unissued Common Shares,
$1 par value, for purposes of such plan.
4. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on September 12, 1996,
will be entitled to notice of and to vote at said meeting or any adjournment
thereof. Shareholders are urged to complete, date and sign the enclosed proxy
and return it in the enclosed envelope.
By order of the Board of Directors,
J. RICHARD HAMILTON,
Secretary
Dated: September 18, 1996
<PAGE> 3
THE STANDARD PRODUCTS COMPANY
PROXY STATEMENT
------------------
This proxy statement is furnished in connection with the solicitation of
proxies to be used at the annual meeting of shareholders of The Standard
Products Company, an Ohio corporation (the "Company"), to be held at the offices
of the Company, 2130 West 110th Street, Cleveland, Ohio 44102, on Tuesday,
October 22, 1996, at 9:00 a.m., Cleveland time. This proxy statement and the
accompanying notice and proxy will first be sent to shareholders by mail on or
about September 18, 1996.
Annual Report. A copy of the Company's Annual Report to Shareholders for
the fiscal year ended June 30, 1996 is enclosed with this proxy statement.
Solicitation and Revocation of Proxies. This solicitation of proxies is
made by and on behalf of the Board of Directors. The cost of the solicitation of
proxies will be borne by the Company. The Company has retained Georgeson &
Company, at an estimated cost of $8,500 plus reimbursement of expenses, to
assist in the solicitation of proxies from brokers, nominees, institutions and
individuals. In addition to solicitation of proxies by mail, Georgeson & Company
and regular employees of the Company may solicit proxies by telephone or
facsimile.
If the enclosed proxy is returned, the shares represented thereby will be
voted in accordance with any specifications made therein by the shareholder. In
the absence of any such specification, they will be voted to elect the directors
set forth under "Election of Directors" below and FOR Proposal One set forth
herein. A shareholder's presence alone at the meeting will not operate to revoke
his or her proxy. The proxy is revocable by a shareholder at any time insofar as
it has not been exercised by giving notice to the Company in writing at its
address indicated above or in open meeting.
Outstanding Shares. The close of business on September 12, 1996, has been
fixed as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting. On such date, the Company's voting
securities outstanding consisted of 16,804,123 Common Shares, $1 par value, each
of which is entitled to one vote at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Common Shares of the Company as of June 30, 1996, by: (a) the
Company's directors (including nominees for director); (b) each other person who
is known by the Company to own beneficially more than 5% of the outstanding
Common Shares; (c) the Company's Chief Executive Officer and the other four most
highly compensated executive officers named in the Summary Compensation Table;
and (d) the Company's executive officers and directors as a group. Except as
otherwise described in the notes below, the following beneficial owners have
sole voting power and sole investment power with respect to all Common Shares
set forth opposite their names.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ----------------------------------------------------------- ------------------ --------
<S> <C> <C>
James S. Reid, Jr.......................................... 1,383,998(1) 8.2%
2401 South Gulley Road
Dearborn, Michigan 48124
John D. Drinko............................................. 797,413(2) 4.8%
John D. Sigel.............................................. 299,165(3) 1.8%
Leigh H. Perkins........................................... 245,756(4) 1.5%
Theodore K. Zampetis....................................... 132,667(5) (6)
Malcolm R. Myers........................................... 87,125(7) (6)
</TABLE>
1
<PAGE> 4
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ----------------------------------------------------------- ------------------ --------
<S> <C> <C>
Curtis E. Moll............................................. 58,435(8) (6)
W. Hayden Thompson......................................... 20,000 (6)
John Doddridge............................................. 10,000 (6)
Alan E. Riedel............................................. 25,012 (6)
Edward B. Brandon.......................................... 5,500(9) (6)
Alfred M. Rankin, Jr....................................... 2,500 (6)
James C. Baillie........................................... 2,000 (6)
Stephan J. Mack............................................ 20,720(10) (6)
James F. Keys.............................................. 33,129(11) (6)
Donald R. Sheley, Jr....................................... 6,163(12) (6)
All Executive Officers and Directors as a Group............ 3,149,867 18.8%
<FN>
- ---------------
(1) Includes 891,745 shares owned by Mr. Reid (which amount includes 12,591
restricted shares earned in fiscal 1995 and 1996 but subject to
forfeiture); 139,196 shares owned by his wife, Donna S. Reid; 10,220 shares
which Mr. Reid has the right to acquire pursuant to stock options currently
exercisable or exercisable within 60 days; 71,987 shares held by a life
trust in which Mr. Reid has a remainder interest; 1,428 shares held for his
account under the Company's Employee Stock Purchase Plan and 14,491 shares
held for his account under the Company's Individual Retirement and
Investment Trust Plan; and 254,931 shares held by The Standard Products
Foundation, of which Mr. Reid is President and a trustee. The number of
shares shown above does not include shares owned by Mr. Reid's children or
grandchildren and 210,345 shares held by two trusts as to which Mr. Reid is
an income beneficiary and Mr. Drinko is trust advisor, which shares are
included in the number of shares reported by Mr. Drinko.
(2) Includes 47,010 shares owned by Mr. Drinko; 21,521 shares held in an
individual retirement account of which Mr. Drinko is the beneficiary;
36,175 shares owned by his wife, Elizabeth G. Drinko; 1,000 shares held in
an individual retirement account of which Mrs. Drinko is the beneficiary;
165,076 shares owned by a corporation of which Mr. Drinko is a shareholder,
officer and director; 56,218 shares owned by a charitable foundation
established by Mr. Drinko and his wife; 210,345 shares held by two trusts
as to which Mr. Drinko is a trust advisor and of which Mr. Reid is an
income beneficiary; 135,062 shares owned by a foundation of which Mr.
Drinko is President and a trustee; and 125,006 shares held by a charitable
lead trust of which Mr. Drinko is a co-trustee. In addition, 80,700 shares
are held by a charitable lead trust in which Mr. Drinko and Mr. Sigel are
co-trustees; 78,125 shares are owned by Cloyes Gear & Products, Inc. of
which Mr. Drinko and Mr. Myers are directors; 1,000 shares are owned by a
foundation of which Mr. Drinko and Mr. Myers are trustees; and 29,752
shares are owned by a foundation of which Mr. Drinko and Mr. Perkins are
trustees, none of which shares are included in the number of shares shown
in the table above as being owned by Mr. Drinko.
(3) Includes 16,403 shares owned by Mr. Sigel; 178,281 shares owned by his
wife, Sally C. Reid; 23,781 shares held by trusts of which his wife is a
trustee; 80,700 shares owned by a charitable lead trust of which Mr. Sigel
and Mr. Drinko are co-trustees. In addition, 254,931 shares are owned by
The Standard Products Foundation of which Mr. Sigel is a trustee, none of
which shares are included in the number of shares shown in the table as
being owned by Mr. Sigel. Mr. Sigel is the son-in-law of Mr. Reid, Chairman
and Chief Executive Officer of the Company.
(4) Includes 127,857 shares owned by Mr. Perkins; 88,147 shares held by his
wife, Romi Perkins; and 29,752 shares owned by a foundation of which he and
Mr. Drinko are trustees.
(5) Includes 87,453 shares owned by Mr. Zampetis (which amount includes 22,991
restricted shares earned in fiscal 1994, 1995 and 1996 but subject to
forfeiture); 24,833 shares owned by his wife, Ann J. Zampetis; 468 shares
held for his account under the Company's Employee Stock Purchase Plan;
10,473 shares held for his account under the Company's Individual
Retirement and Investment Trust Plan; and 9,440 shares which Mr. Zampetis
has the right to acquire pursuant to stock options currently exercisable or
exercisable within 60 days.
</TABLE>
2
<PAGE> 5
(6) Represents less than one percent.
(7) Includes 8,000 shares owned by Mr. Myers; 78,125 shares owned by Cloyes
Gear & Products, Inc.; and 1,000 shares owned by a foundation of which Mr.
Myers and Mr. Drinko are Trustees.
(8) Includes 210 shares owned by his wife, Sara Moll; 45,725 shares owned by
the pension fund of MTD Products, Inc.; and 12,500 shares owned by a
charitable foundation of which he is a trustee.
(9) In addition, Mr. Brandon is a trustee of The Standard Products Foundation,
which owned 254,931 shares as of June 30, 1996, which shares are included
in the number of shares reported by Mr. Reid.
(10) Includes 16,055 shares owned by Mr. Mack; 825 shares held for his account
under the Individual Retirement and Investment Trust Plan; and 3,840 shares
which Mr. Mack has the right to acquire pursuant to stock options currently
exercisable or exercisable within 60 days.
(11) Includes 24,175 shares owned by Mr. Keys; 2,117 shares held for Mr. Keys in
his account under the Company's Individual Retirement and Investment Trust
Plan; 1,800 shares which Mr. Keys has the right to acquire pursuant to
stock options currently exercisable or exercisable within 60 days; and
5,037 restricted shares owned by Mr. Keys which were earned in fiscal 1995
and 1996;
(12) Includes 2,163 shares owned by Mr. Sheley; and 4,000 shares which Mr.
Sheley has the right to acquire pursuant to stock options currently
exercisable or exercisable within 60 days.
The persons named in the table above disclaim any beneficial ownership with
respect to shares owned by their spouses and children or by any trust, estate,
foundation, custody account or other entity of which they are a trustee, trust
advisor or custodian.
ELECTION OF DIRECTORS
In accordance with the Company's Amended Code of Regulations, the Board of
Directors has fixed the number of directors at thirteen, divided into two
classes of four and one class of five. At the Annual Meeting, the shares
represented by proxies, unless otherwise specified, will be voted for the
election of the four nominees hereinafter named, each to serve for a term of
three years and until his successor is duly elected and qualified.
The nominees for director are John D. Drinko, Curtis E. Moll, Malcolm R.
Myers and Theodore K. Zampetis, all of whom are presently directors of the
Company. Messrs. Drinko, Moll, Myers and Zampetis were each elected at the 1993
Annual Meeting of the Company's Shareholders. Proxies cannot be voted at the
Annual Meeting for a greater number of persons than the four persons named
hereinafter, although persons in addition to those nominees named herein may be
nominated by the shareholders at the meeting.
If for any reason any of the nominees is not a candidate (which is not
expected) when the election occurs, it is intended that proxies will be voted
for the election of a substitute nominee designated by management. The following
information is furnished with respect to each person nominated for election as a
director.
3
<PAGE> 6
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
<TABLE>
<CAPTION>
EXPIRATION
PERIOD OF TERM
OF SERVICE FOR WHICH
NAME AND AGE PRINCIPAL OCCUPATION AS DIRECTOR PROPOSED
- ------------------- ------------------------------------------- ------------- ---------
<S> <C> <C> <C>
John D. Drinko Attorney-at-Law, Baker & Hostetler, 1957-1958 1999
75 Cleveland, Ohio 1967-1968
1969 to date
Curtis E. Moll Chairman and Chief Executive Officer, MTD 1991 to date 1999
57 Products, Inc. (manufacturer of outdoor
power equipment and of tools, dies and
stampings for the automotive industry)
Malcolm R. Myers Chairman, Cloyes Gear & Products, Inc. 1984 to date 1999
62 (manufacturer of automotive timing
components)
Theodore K. Zampetis President and Chief Operating Officer of 1991 to date 1999
the Company
51
</TABLE>
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
The following information is furnished with respect to each person
continuing as a director.
<TABLE>
<CAPTION>
EXPIRATION
PERIOD OF TERM
OF SERVICE FOR WHICH
NAME AND AGE PRINCIPAL OCCUPATION AS DIRECTOR PROPOSED
- ------------------- ------------------------------------------- ------------- ---------
<S> <C> <C> <C>
John Doddridge Chairman and Chief Executive Officer, 1995 to date 1998
56 Intermet Corporation (manufacturer of
precision ductile and gray iron castings
for the automotive and truck industries)
Leigh H. Perkins Chairman, The Orvis Company, Inc. 1969 to date 1998
68 (manufacturer and distributor of fishing
tackle and sporting goods)
Alfred M. Rankin, Jr. Chairman, President and Chief Executive 1989 to date 1998
Officer, NACCO Industries, Inc. (holding
54 company with operations in mining,
manufacturing of small electrical
appliances and of forklift trucks and
service parts)
John D. Sigel Attorney-at-Law, Hale and Dorr, Boston, 1991 to date 1998
43 Massachusetts
W. Hayden Thompson Chairman and Chief Executive Officer, 1982 to date 1998
69 Solarflo Corporation (manufacturer of gas
and electric heating equipment)
James C. Baillie Partner, Tory Tory DesLauriers & 1994 to date 1997
58 Binnington, Barristers & Solicitors,
Toronto, Canada
Edward B. Brandon Retired Chairman, President and Chief 1976 to date 1997
64 Executive Officer, National City
Corporation (bank holding company)
James S. Reid, Jr. Chairman and Chief Executive Officer of the 1959 to date 1997
70 Company
Alan E. Riedel Retired Vice Chairman, Cooper Industries, 1976 to date 1997
66 Inc. (worldwide diversified manufacturer of
electrical products, electric power
equipment, tools and hardware, and of
automotive products)
</TABLE>
4
<PAGE> 7
Each of the above directors and nominees for election as a director has had
the principal occupation indicated for at least five years, except Mr.
Doddridge, who served as Vice Chairman and Chief Executive Officer of Magna
International, Inc. from November 1992 to November 1994 and President of North
American Operations of Dana Corporation from mid-1989 to 1992; Mr. Riedel, who
served as Senior Vice President-Administration of Cooper Industries, Inc. from
1973 to August 1992; Mr. Brandon, who served as Chairman, President, and Chief
Executive Officer of National City Corporation until September 1995; and Mr.
Zampetis, who served as Executive Vice President and President, Standard
Products Automotive Operations, from June 1991 to October 1991.
Mr. Brandon is a director of National City Corporation and RPM, Inc. Mr.
Doddridge is a director of Intermet Corporation and Detroit Diesel Corporation.
Mr. Moll is a director of United Screw and Bolt Corporation and Shiloh
Industries, Inc. Mr. Rankin is a director of NACCO Industries, Inc., The B.F.
Goodrich Company and The Vanguard Group. Mr. Riedel is a director of Belden
Inc., First Knox Bank Corp., Arkwright Mutual Insurance Company and Chairman of
Gardner Denver Machinery, Inc. Mr. Zampetis is a director of Shiloh Industries,
Inc. and National City Bank.
During the fiscal year ended June 30, 1996, the Board of Directors held
seven meetings. During the last fiscal year the Board of Directors appointed an
Audit Committee, a Finance Committee and a Compensation Committee. The Board of
Directors does not have a Nominating Committee. With the exception of Mr.
Doddridge, each member of the Board of Directors attended at least 75% of the
meetings of the Board of Directors and of the committees on which he served.
The Audit Committee of the Board of Directors of the Company (the "Audit
Committee"), of which Mr. Brandon was Chairman and Messrs. Baillie, Moll, Myers,
Rankin, Sigel and Thompson were members, held three meetings and consulted
informally on other occasions during the last fiscal year. The Audit Committee
recommends annually to the Board of Directors the independent public accountants
for the Company, reviews with the independent public accountants the
arrangements for and scope of the audits to be conducted by them and the results
of those audits, and reviews various financial and accounting matters affecting
the Company.
The Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee"), of which Mr. Riedel was chairman and Messrs. Brandon,
Myers and Perkins were members, held six meetings and consulted informally on
other occasions during the last fiscal year. The Compensation Committee
periodically reviews and determines the compensation, including fringe benefits
and incentive compensation, of officers and management personnel of the Company
and administers the Company's restricted stock plan and the Company's stock
option plans. The Compensation Committee also determines the officers and key
employees of the Company who participate in the plans and the stock options and
restricted stock awards to be granted.
The Finance Committee, of which Mr. Drinko was chairman and Messrs.
Doddridge, Moll, Perkins, Riedel and Thompson were members, held one meeting and
consulted informally during the last fiscal year. The Finance Committee
administers the investments of the Company's retirement funds and renders advice
and counsel to management on financial matters affecting the Company.
Director's Compensation. Each director who is not an officer of the Company
or a subsidiary of the Company is compensated at the rate of $16,000 per year.
Each director also receives $1,000 for attendance at each meeting of the Board
of Directors and for each meeting of any committee not held in conjunction with
a meeting of the Board of Directors. Committee Chairmen receive an additional
$1,000 per year.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following information is set forth with respect to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION
---------------------------------- AWARDS
OTHER -------------------- ALL
ANNUAL RESTRICTED OTHER
COMPEN- STOCK STOCK COMPEN-
NAME AND FISCAL SALARY BONUS SATION AWARD(S) OPTIONS SATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) (#) ($)(3)
- -------------------------- ------ -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
James S. Reid, Jr. 1996 $600,000 $158,190 - (4) - $3,594
Chairman and Chief 1995 600,000 144,000 - - - 1,957
Executive Officer 1994 550,000 228,800 - - 3,000 3,484
Theodore K. Zampetis 1996 $410,000 $108,096 - (5) 50,000 $3,594
President and Chief 1995 400,000 96,000 - - - 1,957
Operating Officer 1994 338,542 140,833 - - 3,000 3,758
Stephan J. Mack 1996 $228,971 $ 78,300 - - 4,000 -
President, Holm 1995 225,000 78,300 - - - -
Industries, Inc. 1994 225,000 90,000 - - 4,650 -
James F. Keys 1996 $241,074 $ 63,559 - (6) 15,000 $3,734
Executive Vice 1995 168,220 33,430 - - - 3,038
President-International 1994 132,961 52,678 - - - 3,038
Donald R. Sheley, Jr.(7) 1996 $215,625 $ 56,849 - - 10,000 $ 240
Vice President-Finance 1995 - - - - - -
and Chief Financial 1994 - - - - - -
Officer
<FN>
- ---------------
(1) Amounts shown represent bonuses earned pursuant to the Company's
Officers Incentive Compensation Plan, except that amounts shown with
respect to Mr. Mack reflect amounts paid pursuant to the Holm
Industries, Inc. bonus plan.
(2) Total perquisites and other personal benefits for each of the named
executive officers do not exceed the threshold amounts specified in the
regulations promulgated by the Securities and Exchange Commission.
(3) Amounts shown represent the Company's contributions on behalf of
Messrs. Reid, Zampetis and Keys under the Individual Retirement and
Investment Trust Plan and, in the case of Messrs. Reid, Zampetis and
Sheley, under the Stock Purchase Plan. During the last fiscal year, the
Company's contributions on behalf of Mr. Reid under each of the
Individual Retirement and Investment Trust Plan and the Stock Purchase
Plan were $3,234 and $360, respectively. During the last fiscal year,
the Company's contributions on behalf of Mr. Zampetis under each of the
Individual Retirement and Investment Trust Plan and the Stock Purchase
Plan were $3,234 and $360, respectively.
(4) Mr. Reid was awarded 62,500 restricted Common Shares (adjusted to
reflect a 5-for-4 stock split of the Company's Common Shares effected
in the form of a stock dividend paid on June 3, 1993, to shareholders
of record on May 20, 1993) in fiscal 1992. Under the terms of the
award, up to 12,500 of the awarded Common Shares may be earned in each
of five consecutive fiscal years beginning in fiscal 1992, based on the
percentage of bonus earned during such fiscal year. Awarded Common
</TABLE>
6
<PAGE> 9
Shares earned by Mr. Reid are subject to forfeiture until the end of
the second fiscal year following the fiscal year in which such awarded
Common Shares are earned. Mr. Reid earned 10,400 of the awarded Common
Shares in fiscal 1994, 6,000 in fiscal year 1995 and 6,591 in fiscal
year 1996, 10,400 of which shares vested in 1996, and 6,000 and 6,591
of which shares will vest in 1997 and 1998, respectively. In the event
of Mr. Reid's death, all earned but unvested awarded Common Shares
shall vest in his designated beneficiary. Based on the last reported
sale price of the Company's Common Shares on the New York Stock
Exchange, the total awarded and earned Common Shares had a fair market
value on June 28, 1996, of $534,541. Dividends are paid only with
respect to the awarded Common Shares which are earned. For a discussion
of the bonuses payable to the Company's officers, see "Executive
Compensation--Compensation Committee Report."
(5) Mr. Zampetis was awarded 125,000 restricted Common Shares (adjusted to
reflect a 5-for-4 stock split of the Company's Common Shares effected
in the form of a stock dividend paid on June 3, 1993 to shareholders of
record on May 20, 1993) in fiscal 1992. Under the terms of the award,
up to 12,500 of the awarded Common Shares may be earned in each of ten
consecutive fiscal years beginning in fiscal 1992, based on the
percentage of bonus earned during such fiscal year. Awarded Common
Shares earned by Mr. Zampetis are subject to forfeiture until the end
of the third fiscal year following the fiscal year in which such
awarded Common Shares are earned. Mr. Zampetis earned 10,400 Common
Shares in fiscal 1994, 6,000 Common Shares in fiscal 1995, and 6,591
Common Shares in fiscal 1996, 10,400, 6,000 and 6,591 of which shares
will vest in 1997, 1998 and 1999, respectively. Awarded Common Shares,
if any, which are earned in fiscal year 1997 will vest in fiscal year
2000. In the event of Mr. Zampetis's death, all earned but unvested
awarded Common Shares and one-half of awarded but unearned Common
Shares will vest in his designated beneficiary. Based on the last
reported sale price of the Company's Common Shares on the New York
Stock Exchange, the total awarded and earned Common Shares had a fair
market value on June 28, 1996, of $534,541. Dividends are paid only
with respect to the awarded Common Shares which have been earned. For a
discussion of the bonuses payable to the Company's officers, see
"Executive Compensation--Compensation Committee Report."
(6) Mr. Keys was awarded 50,000 restricted Common Shares in fiscal 1995.
Under the terms of the award, up to 5,000 of the awarded Common Shares
may be earned in each of ten consecutive fiscal years beginning in
fiscal 1995, based on the percentage of bonus earned during such fiscal
year. Awarded Common Shares earned by Mr. Keys are subject to
forfeiture until the end of the third fiscal year following the fiscal
year in which such awarded Common Shares are earned. Mr. Keys earned
2,400 Common Shares in fiscal 1995 and 2,635 Common Shares in fiscal
1996 which shares will vest in fiscal 1998 and in fiscal 1999,
respectively. Awarded Common Shares, if any, which are earned in fiscal
year 1997 will vest in fiscal year 2000. In the event of Mr. Keys'
death, all earned but unvested awarded Common Shares and one-half of
awarded but unearned Common Shares will vest in his designated
beneficiary. Based on the last reported sale price of the Company's
Common Shares on the New York Stock Exchange, the awarded and earned
Common Shares had a fair market value on June 28, 1996, of $117,064.
Dividends are paid only with respect to the awarded Common Shares which
have been earned. For a discussion of the bonuses payable to the
Company's officers, see "Executive Compensation--Compensation Committee
Report."
(7) Mr. Sheley commenced employment with the Company on July 17, 1995.
7
<PAGE> 10
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF
TOTAL OPTIONS STOCK
GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION -------------------
NAME #(1) YEAR(2) ($/SHARE) DATE 5%($) 10%($)
- ------------------------------ ------- -------------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
James S. Reid................. -- -- -- -- -- --
Theodore K. Zampetis.......... 50,000(4) 37.04% $23.50 June 2001 $324,653 $717,338
Stephan J. Mack............... 4,000 2.97% 19.25 August 2000 17,574 38,195
James F. Keys................. 15,000(4) 11.12% 23.50 June 2001 97,396 215,201
Donald R. Sheley, Jr.......... 10,000 7.41% 22.12 July 2000 50,487 109,724
</TABLE>
- ---------------
(1) Options are not exercisable for the one-year period from the date of
grant, then no more than 40% of such options may be exercised in any
succeeding one-year period.
(2) Based on 135,000 options granted to all employees during the fiscal
year.
(3) These amounts are based on hypothetical appreciation rates of 5% and
10% and are not intended to forecast the actual future appreciation of
the Company's stock price. No gain to optionees is possible without an
actual increase in the price of the Company's shares, which increase
will benefit all of the Company's shareholders. All calculations are
based on a five-year option period.
(4) Option Agreements with Mr. Zampetis provide: (i) 16,270 incentive stock
options which will vest with respect to 3,520 shares in 1997 and in
equal amounts of 4,250 per year over a three-year period beginning on
June 24, 1998 and (ii) 33,730 nonqualified stock options which will
vest after one year. The Option Agreement with Mr. Keys provides
incentive stock options which will vest with respect to 4,130 shares in
1997, 4,250 shares in both 1998 and 1999, and 2,370 shares in 2000.
III. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR- END FISCAL
(#) YEAR-END($)
SHARES VALUE --------------- -------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------- --------------- -------------
<S> <C> <C> <C> <C>
James S. Reid, Jr. 5,000 $ 56,425 10,220/10,820 --
Theodore K. Zampetis -- -- 9,440/60,040 --
Stephan J. Mack 6,850 73,638 2,240/ 7,170 -- /$16,000
James F. Keys 4,500 59,063 1,800/16,900 --
Donald R. Sheley, Jr. -- -- --/10,000 -- /$11,250
</TABLE>
PENSION PLAN AND SUPPLEMENTAL PLAN
Salaried employees of the Company with one year of full-time service are
eligible to participate in The Standard Products Company Salaried Employees'
Pension Plan (the "Pension Plan") and The Standard Products Company Supplemental
Salaried Employees' Pension Plan (the "Supplemental Plan"). Except as otherwise
noted in "Table I. Summary Compensation Table," the amounts shown therein
exclude amounts, if any, expended for financial reporting purposes by the
Company as contributions, reserves or benefits paid under the Pension Plan and
the Supplemental Plan.
8
<PAGE> 11
The Pension Plan provides for normal retirement benefits based on the
highest average monthly compensation for 60 consecutive months within the last
120 months prior to retirement (final average compensation). The basic formula
is 1 1/15% times final average compensation (up to but not exceeding Social
Security-covered compensation), plus 1 2/3% of the amount (if any) of final
average compensation in excess of Social Security-covered compensation, all
multiplied by the participant's years of pension service under the Plan (up to a
maximum of 30 years). Employees who were hired prior to July 1, 1976, may have
their normal retirement benefit calculated under an alternative formula as
follows: final average compensation multiplied by a percentage equal to the sum
of (i) 21.25%, plus (ii) 0.75% for each year of pension service up to a maximum
of 25 years (that is, a maximum of 40%). In addition, the Plan provides that the
minimum normal retirement benefit shall in all events be no less than $13
multiplied by a participant's years of pension service. Certain of these benefit
formulas were adopted effective July 1, 1989, to comply with the Tax Reform Act
of 1986. Notwithstanding any new benefit formulas, each participant is entitled
to a benefit no less than his or her accrued benefit as of June 30, 1989.
Participants may elect that retirement benefits be paid in the form of a life
annuity, a ten-year or five-year sum certain annuity, or various joint and
surviving spouse options; the Plan's normal retirement benefit amount is payable
monthly, based on a single-life annuity with five years certain.
Compensation covered under the Pension Plan includes (i) base salary, (ii)
bonuses, (iii) payments for overtime, (iv) salary deferred under the Company's
Individual Retirement Plan, and (vi) the taxable amount value of Restricted
Stock that vests in any Plan Year under the Restricted Stock Plan. Extraordinary
payments and Company contributions to the Company's Individual Retirement Plan
are not included in compensation. Additionally, the collective value of the
taxable amount of vested Restricted Stock and bonuses received in any Plan Year
in excess of 50% of base salary in that Plan Year is not included in
compensation.
The Supplemental Plan is a nonqualified plan which provides a supplemental
benefit for eligible salaried employees under terms and conditions similar to
those under the Pension Plan. The supplemental benefit is equal to the excess of
(i) the benefit that would have been payable to the employee under the Pension
Plan without regard to certain annual retirement income and benefit limitations
imposed by federal law over (ii) the benefit payable to the employee under the
Pension Plan.
The Table below shows estimated annual benefits payable (assuming payments
made in the normal retirement form, and not under any of the various survivor
forms of benefit payments) under the Pension Plan and the Supplemental Plan to
any salaried employee upon retirement in the 1996 Plan Year at age 65 after
selected periods of service.
<TABLE>
<CAPTION>
AVERAGE ANNUAL ESTIMATED ANNUAL BENEFITS UPON RETIREMENT IN 1996 PLAN YEAR
SALARY USED WITH YEARS OF SERVICE INDICATED
TO DETERMINE ------------------------------------------------------------------------------------------
BENEFITS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$125,000 $ 28,768 $ 45,313 $ 50,000 $ 57,536 $ 57,536
150,000 35,018 54,375 60,000 70,036 70,036
175,000 41,268 63,438 70,000 82,536 82,536
200,000 47,518 72,500 80,000 95,036 95,036
225,000 53,768 81,563 90,000 107,536 107,536
250,000 60,018 90,625 100,030 120,036 120,036
300,000 72,518 108,750 120,864 145,036 145,036
350,000 85,018 126,875 141,697 170,036 170,036
400,000 97,518 145,000 162,530 195,036 195,036
450,000 110,018 163,125 183,364 220,036 220,036
500,000 122,518 181,250 204,197 245,036 245,036
550,000 135,018 199,375 225,030 270,036 270,036
600,000 147,518 217,500 245,864 295,036 295,036
650,000 160,018 235,625 266,697 320,036 320,036
700,000 172,518 253,750 287,530 345,036 345,036
750,000 185,018 271,875 308,364 370,036 370,036
800,000 197,518 290,000 329,197 395,036 395,036
850,000 210,018 308,125 350,030 420,036 420,036
900,000 222,518 326,250 370,864 445,036 445,036
</TABLE>
9
<PAGE> 12
As of June 30, 1996, the credited years of service for retirement purposes
were as follows: Mr. Reid--40; Mr. Zampetis--23; Mr. Mack--7; Mr. Keys--24; and
Mr. Sheley--0.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Brandon, Myers, Perkins and Riedel are the members of the Company's
Compensation Committee. There are no compensation committee interlocks.
Transactions with Management. Edward B. Brandon, a director of the Company,
is a director and the retired Chairman, President and Chief Executive Officer of
National City Corporation. The Company has a $125,000,000 revolving credit
agreement with National City Bank, Cleveland, Ohio ("National City"), a wholly
owned subsidiary of National City Corporation, and three other banks, until
January 19, 1998. National City has a 31.4% participation in such credit
agreement. The Company borrowed from National City during the 1996 fiscal year
on a short-term uncommitted line of credit at prevailing market rates. NatCity
Investments, Inc., a subsidiary of National City, also received a one-time fee
in fiscal 1996 of $125,000 from the Company for advisory services rendered to
the Company in connection with the securitization of certain of the Company's
accounts receivables.
John D. Drinko, a director of the Company, is senior advisor to the policy
committee of Baker & Hostetler, which firm acts as general legal counsel for the
Company.
10
<PAGE> 13
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return of a
hypothetical investment in the Common Shares with the cumulative total return of
a hypothetical investment in each of the Standard & Poor's Composite--500 Index
and the Dow Jones Auto Parts Index based on the respective market price of each
such investment at the end of each of the Company's fiscal years shown below,
assuming in each case an initial investment of $100 on July 1, 1991, and
reinvestment of dividends.
<TABLE>
<CAPTION>
The Standard Dow Jones
Measurement Period Products Auto Parts
(Fiscal Year Covered) Company Index S&P 500
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 190.99 141.25 113.42
1993 257.09 176.29 128.90
1994 221.32 178.06 130.72
1995 169.33 196.04 164.80
1996 187.35 218.66 207.65
</TABLE>
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee which has responsibility for reviewing all aspects of the
compensation program for the executive officers of the Company. The Compensation
Committee is comprised of the four directors listed at the end of this report,
none of whom is an employee of the Company.
The Compensation Committee's primary objective with respect to executive
compensation is to establish programs which attract and retain key managers and
align their compensation with the Company's overall business strategies, values,
and performance. To this end, the Compensation Committee has established, and
the Board of Directors has endorsed, an executive compensation philosophy to
compensate executive officers based on their responsibilities, achievement of
annual established goals and the Company's overall annual and longer-term
performance.
11
<PAGE> 14
The primary components of the Company's executive compensation program are:
(a) base salaries, (b) annual cash incentive opportunities, and (c) long-term
incentive opportunities in the form of stock-based awards. Each of these primary
components of compensation is discussed below.
Base Salaries. Base salaries for each of the Company's executive officers
are generally established annually by the Compensation Committee using as a
guide one or more widely accepted salary evaluation systems -- taking into
account individual and Company performance and competitive, inflationary, and
internal equity considerations.
With respect to the $600,000 base salary established for Mr. Reid in June
1995 for fiscal 1996, which is the same base salary as paid to Mr. Reid in
fiscal 1995, the Compensation Committee took into account Mr. Reid's
responsibilities as a result of the new product launches under his management,
as well as a review of the compensation paid to chief executive officers of
comparable companies.
Annual Cash Incentives. All executives of the Company are eligible to
receive annual cash bonus awards based on a set percentage of base salary with a
maximum bonus attainable equal to 50% of base salary. Each year the Company's
Board of Directors, usually at the director's meeting held in August, sets a
target goal for maximum bonus awards based on the Company's earnings per common
share. Actual bonus awards paid are proportional to the percentage of the target
goal actually attained. The bonus target in fiscal year 1996 was $1.65 per
common share. Since earnings per common share, as adjusted for the bonus awards,
for fiscal 1996 were $.87, the bonus award for fiscal 1996 to each executive
officer of the Company, including Mr. Reid but excluding Mr. Mack, was equal to
26.34% of base salary. Mr. Mack's bonus awards are calculated under Holm
Industries, Inc.'s bonus plan. For fiscal year 1996, Mr. Mack's bonus was equal
to 34% of his base salary.
Long-Term Stock Incentives. The Company's restricted stock plan permits the
Compensation Committee to award restricted shares, which awards are designed to
attract and retain well-qualified personnel for positions of substantial
responsibility with the Company and its subsidiaries. Awards of restricted
Common Shares may be made by the Compensation Committee in its sole discretion.
Awards of 62,500 and 125,000 restricted Common Shares (adjusted to reflect a
5-for-4 stock split of the Company's Common Shares effected in the form of a
stock dividend paid on June 3, 1993 to shareholders of record on May 20, 1993)
were made in fiscal 1992 to Messrs. Reid and Zampetis, respectively. In fiscal
1995, Mr. Keys was awarded 50,000 restricted Common Shares. See "Table
I -- Summary Compensation Table" set forth on page 6 of this proxy statement for
a discussion of the terms pursuant to which the restricted Common Shares awarded
to Messrs. Reid, Zampetis and Keys are earned and subject to forfeiture. Only
one other award of restricted Common Shares has been made to an executive
officer of the Company.
The Company's stock option plans permit the Compensation Committee, in its
sole discretion, to grant stock option awards which are designed to encourage
and enable key management employees of the Company to acquire a larger stock
ownership and personal financial interest in the Company. The Compensation
Committee believes that stock option awards subject to periodic vesting enable
the Company to attract and retain qualified individuals for service with the
Company. Individual option grants, with exercise prices at least equal to the
fair market value of the Company's Common Shares on the date of grant, are
determined by the Compensation Committee based on the executive's current
performance, potential for future responsibility, and the impact of the
particular executive officer's performance on the operational results of the
Company. Stock option awards during the last fiscal year to each of the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company are set forth in "Table II -- Option/SAR Grants in Last Fiscal
Year" on page 8 of this proxy statement.
Alan E. Riedel, Chairman
Edward B. Brandon
Malcolm R. Myers
Leigh H. Perkins
12
<PAGE> 15
PROPOSAL ONE: 1996 EMPLOYEE STOCK OPTION PLAN
The Board of Directors of the Company, at a meeting of the Board of
Directors on May 13, 1996, approved The Standard Products Company 1996 Employee
Stock Option Plan (the "1996 Stock Option Plan") and directed that the 1996
Stock Option Plan be submitted to the shareholders for approval at the annual
meeting. The primary purpose of the 1996 Stock Option Plan is to encourage and
enable key management employees of the Company and its subsidiaries to acquire a
larger stock ownership and personal financial interest in the Company and
thereby provide additional incentive for the promotion of the welfare of the
Company and for the continued service of the participants with the Company. A
copy of the 1996 Stock Option Plan is attached to this proxy statement as
Exhibit A.
THE FOLLOWING DESCRIPTION OF THE 1996 STOCK OPTION PLAN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO EXHIBIT A.
Description of the Plan
Shareholder approval of the 1996 Stock Option Plan is being sought to
qualify the 1996 Stock Option Plan as an incentive stock option plan under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), in
order for awards of options to be eligible for exemption from the dollar
limitation on deductions imposed by Section 162(m) of the Code and to satisfy a
condition of the Plan requiring shareholder approval of the Plan.
Under the 1996 Stock Option Plan, awards of options to purchase Common
Shares may be made to key employees of the Company or its subsidiaries. The
options provided for under the 1996 Stock Option Plan may be either incentive
stock options intended to qualify for favorable tax treatment under Section 422
of the Code or nonqualified stock options which do not qualify for such
treatment.
The aggregate number of Common Shares with respect to which awards may be
made under the 1996 Stock Option Plan is 350,000. Such maximum number of Common
Shares is subject to appropriate adjustment upon the occurrence of certain
events, including stock dividends, recapitalizations, mergers, reorganizations,
consolidations, stock splits, stock consolidations or certain other changes in
the Common Shares. Common Shares which are not purchased under an option which
has terminated or lapsed may be used for the further grant of options under the
1996 Stock Option Plan.
The 1996 Stock Option Plan is administered by the Compensation Committee,
each member of which is a "disinterested person" (as defined in Rule 16b-3
promulgated under Section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act")) and an "outside director" within the meaning of Section 162(m)
of the Code. Subject to the terms of the 1996 Stock Option Plan, the
Compensation Committee has sole authority to determine and designate persons to
whom awards are to be made under the 1996 Stock Option Plan and the nature and
terms, including vesting schedules, of such awards.
Options granted under the 1996 Stock Option Plan may not be exercised more
than ten years after the date of grant. The aggregate fair market value
(determined on the date of grant) of the Common Shares subject to incentive
stock options under all option plans of an employer corporation (and its parent
and subsidiary corporations) which are exercisable for the first time by an
employee in any calendar year may not exceed $100,000. In no event shall there
be granted under the 1996 Stock Option Plan to any employee options to purchase
more than 250,000 Common Shares. The Compensation Committee, in its sole
discretion, will determine the vesting schedule of each option granted under the
1996 Stock Option Plan; provided, however, that options may not be exercised
during the first year after they are granted. The 1996 Stock Option Plan
provides that the option price shall not be less than 100% of the fair market
value of the Common Shares on the date such option is granted or 110% of such
fair market value in the case of an incentive stock option granted to an
employee holding more than 10% of the Company's outstanding Common Shares on the
date of grant. The purchase price of the Common Shares subject to options must
be paid in full by an optionee at the time of exercise of such option in either
cash or Common Shares.
13
<PAGE> 16
No cash consideration will be received by the Company for granting options
under the 1996 Stock Option Plan. Options will be granted in consideration of
the services rendered or to be rendered to the Company by the employees
receiving the options.
Options will be granted to key management employees of the Company or its
subsidiaries who are in a position to contribute substantially to the growth and
success of the Company and its subsidiaries. No director who is not an employee
of the Company or one of its subsidiaries will be eligible to receive options.
TAX CONSEQUENCES
With respect to nonqualified stock options, in general, for federal income
tax purposes under present law:
(i) The grant of a nonqualified stock option, by itself, will not
result in income to the optionee.
(ii) Except as provided in (v) below, the exercise of a nonqualified
stock option (in whole or in part, according to its terms) will result in
ordinary income to the optionee at that time in an amount equal to the
excess (if any) of the fair market value of the shares on the date of
exercise over the option price.
(iii) Except as provided in (v) below, the tax basis of the shares
acquired upon exercise of a nonqualified stock option, which will be used
to determine the amount of any capital gain or loss on a future taxable
disposition of such shares, will be the fair market value of the shares on
the date of exercise.
(iv) No deduction will be allowable to the employer corporation upon
the grant of a nonqualified stock option, but upon the exercise of a
nonqualified stock option, a deduction will in general be allowable to the
employer corporation at that time in an amount equal to the amount of
ordinary income realized by the optionee exercising such option if the
employer corporation deducts and withholds appropriate federal withholding
tax.
(v) With respect to the exercise of a nonqualified stock option and
the payment of the option price by the delivery of Common Shares, to the
extent that the number of shares received does not exceed the number of
shares surrendered, no taxable income will be realized by the optionee at
that time, the tax basis of the shares received will be the same as the tax
basis of the shares surrendered, and the holding period of the optionee in
the shares received will include his holding period in the shares
surrendered. To the extent that the number of shares received exceeds the
number of shares surrendered, ordinary income will be realized by the
optionee at the time in the amount of the fair market value of such excess
shares, the tax basis of such excess shares will be equal to the fair
market value of such shares at the time of exercise, and the holding period
of the optionee in such shares will begin on the date such shares are
transferred to the optionee.
With respect to incentive stock options, in general, for federal income tax
purposes under present law:
(i) Neither the grant nor the exercise of an incentive stock option,
by itself, will result in income to the optionee; however, the excess of
the fair market value of the shares at the time of exercise over the option
price is (unless there is a disposition of the shares acquired upon
exercise of an incentive stock option in the taxable year of exercise)
includable in alternative minimum taxable income which may, under certain
circumstances, result in alternative minimum tax liability to the optionee.
(ii) If the shares acquired upon exercise of an incentive stock option
are disposed of in a taxable transaction after the later of two years from
the date on which the option is granted or one year from the date on which
such shares are transferred to the optionee, long-term capital gain or loss
will be realized by the optionee in an amount equal to the difference
between the amount realized by the optionee and the optionee's basis which,
except as provided in (v) below, is the option price.
(iii) Except as provided in (v) below, if the shares acquired upon the
exercise of an incentive stock option are disposed of within the two-year
period from the date of grant or the one-year period after the transfer of
the shares to the optionee (a "disqualifying disposition"):
14
<PAGE> 17
(a) Ordinary income will be realized by the optionee at the
time of such disqualifying disposition in the amount of the excess, if
any, of the fair market value of the shares at the time of such exercise
over the option price, but not in an amount exceeding the excess, if
any, of the amount realized by the optionee over the option price.
(b) Short-term or long-term capital gain will be realized by
the optionee at the time of any such disqualifying disposition in an
amount equal to the excess, if any, of the amount realized over the fair
market value of the shares at the time of such exercise.
(c) Short-term or long-term capital loss will be realized by
the optionee at the time of any such disqualifying disposition in an
amount equal to the excess, if any, of the option price over the amount
realized.
(iv) No deduction will be allowed to the employer corporation with
respect to incentive stock options granted or shares transferred upon
exercise thereof, except that if a disqualifying disposition is made by the
optionee, the employer corporation will in general be entitled to a
deduction in the taxable year in which the disqualifying disposition
occurred in an amount equal to the amount of ordinary income realized by
the optionee making such disposition.
(v) With respect to the exercise of an incentive stock option and the
payment of the option price by the delivery of Common Shares, to the extent
that the number of shares received does not exceed the number of shares
surrendered, no taxable income will be realized by the optionee at that
time, the tax basis of the shares received will be the same as the tax
basis of the shares surrendered, and the holding period (except for
purposes of the one-year period referred to in (iii) above) of the optionee
in shares received will include this holding period in the shares
surrendered. To the extent that the number of shares received exceeds the
number of shares surrendered, no taxable income will be realized by the
optionee at that time, such excess shares will be considered incentive
stock option stock with a zero basis, and the holding period of the
optionee in such shares will begin on the date such shares are transferred
to the optionee. If the shares surrendered were acquired as the result of
the exercise of an incentive stock option and the surrender takes place
within two years from the date the option relating to the surrendered
shares was granted or within one year from the date of such exercise, the
surrender will result in a disqualifying disposition and the optionee will
realize ordinary income at that time in the amount of the excess, if any,
of the fair market value at the time of exercise of the shares surrendered
over the basis of such shares. If any of the shares received are disposed
of in a disqualifying disposition, the optionee will be treated as first
disposing of the shares with a zero basis.
The Board of Directors may at any time amend the 1996 Stock Option Plan or
any part thereof as it shall deem advisable; provided, however, that the Board
of Directors shall obtain any approval by shareholders which is necessary
pursuant to Sections 422 and 162(m) of the Code. No amendment may be made in any
option then outstanding under the 1996 Stock Option Plan, however, which would
impair the rights of the optionee without the consent of such optionee.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the Common Shares
present at the annual meeting is required to adopt this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE 1996 STOCK OPTION PLAN.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 1997
Annual Meeting of Shareholders must be received by the Company at 2130 West
110th Street, Cleveland, Ohio 44102, on or before May 22, 1997, for inclusion in
the Company's proxy statement and form of proxy relating to the 1997 Annual
Meeting of Shareholders.
15
<PAGE> 18
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and owners of more than 10% of the Company's
Common Shares, to file with the Securities and Exchange Commission (the "SEC")
and the New York Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Shares and other equity securities of the
Company. Executive officers, directors and owners of more then 10% of the Common
Shares are required by SEC regulations to furnish the Company with copies of all
forms they file pursuant to Section 16(a).
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1996, all Section
16(a) filing requirements applicable to its executive officers, directors and
greater-than-10% beneficial owners were complied with, except that Mr. Sigel
inadvertently failed to file reports of change in ownership relating to the
Common Shares as a result of a share dividend on June 3, 1993 (41,254 shares)
and family gifts on the following dates: October 11, 1993 -- 24,000 shares;
January 11, 1994 -- 2,160 shares; March 17, 1995 -- 4,900 shares; and January
17, 1996 -- 4,600 shares; and Mr. Keys inadvertently failed to include the
ownership of 1,588 shares on his initial Form 3 filing in 1993 and his
subsequent Section 16 filings. Corrective Form 5 filings were made for both Mr.
Keys and Mr. Sigel on August 13, 1996 and September 10, 1996 respectively.
OTHER MATTERS
The Company has not selected its independent public accountants for the
current fiscal year. This selection will be made later in the year by the Board
of Directors. Representatives of Arthur Andersen LLP, which served as the
Company's independent public accountants during the fiscal year ended June 30,
1996, are expected to be present at the annual meeting with the opportunity to
make a statement if they so desire and to be available to respond to appropriate
questions.
If the enclosed proxy is executed and returned to the Company, the persons
named in it will vote the shares represented by such proxy at the meeting. The
form of proxy permits specification of a vote for the election of directors as
set forth under "Election of Directors" above, the withholding of authority to
vote in the election of directors, or the withholding of authority to vote for
one or more specified nominees.
Where a choice has been specified in the proxy, the shares represented will
be voted in accordance with such specification. If no specification is made,
such shares will be voted at the meeting to elect directors as set forth under
"Election of Directors" above and FOR Proposal One above. Under Ohio law and the
Company's Second Amended and Restated Articles of Incorporation, as amended,
broker non-votes and abstaining votes will not be counted in favor of or against
any nominee. Under Ohio law and the Company's Second Amended and Restated
Articles of Incorporation, as amended, broker non-votes and abstaining votes
with respect to Proposal One will in effect be votes against such proposal. If
any other matters shall properly come before the meeting, the persons named in
the proxy will vote thereon in accordance with their judgment. Management does
not know of any other matters which will be presented for action at the meeting.
By order of the Board of Directors,
J. RICHARD HAMILTON,
Secretary
Dated: September 18, 1996
16
<PAGE> 19
EXHIBIT A
THE STANDARD PRODUCTS COMPANY
1996 EMPLOYEE STOCK OPTION PLAN
1. INCENTIVE PURPOSE. The purpose of The Standard Products Company 1996
Employee Stock Option Plan (the "Plan") is to encourage and enable key
management employees of The Standard Products Company, an Ohio corporation (the
"Company"), and its subsidiaries to acquire a larger stock ownership and
personal financial interest in the Company and thereby provide additional
incentive for the promotion of the welfare of the Company and for the continued
service of the participants with the Company.
2. AMOUNT OF STOCK. Upon the approval of the Plan by the shareholders,
there shall be reserved, allotted and set aside for issuance under the Plan
350,000 of the presently authorized but unissued Common Shares, $1.00 par value,
of the Company (the "Common Shares"), subject to Paragraph 13. As set forth in
Paragraph 19 of the Plan, all of such options may be granted as incentive stock
options, all of such options may be granted as nonqualified stock options, or
such options may be granted as both incentive stock options and nonqualified
stock options.
3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") of the Board of Directors which shall consist of not
less than three members, none of whom are employees of the Company or its
subsidiaries or are eligible to receive an incentive or nonqualified stock
option while serving as a member of the Committee, and each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934 or
any successor definition adopted by the Securities and Exchange Commission and
an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Board may also select one or
more qualified Directors to serve as alternate members of the Committee, who may
take the place of any absent member or members at any meeting of the Committee.
The Committee shall be authorized to administer the Plan in accordance with its
terms and may adopt, amend or repeal such rules and regulations as the Committee
may desire concerning the conduct of its affairs. The interpretation and
construction by the Committee of any provision of the Plan or of any stock
option granted under it and the administration of the Plan by the Committee
shall be final. No member of the Board of Directors or the Committee shall be
liable for any action taken or omitted or any determination made in good faith
in connection with the Plan.
4. PARTICIPATION. Subject to the limitations herein set forth, the
Committee may grant incentive or nonqualified stock options from time to time
during the period ending May 12, 2006 to such key management employees of the
Company or any subsidiary thereof as in the opinion of the Committee will best
further the interests of the Company and achieve the purposes of the Plan. No
option shall be granted to any individual who, at the time the option is
granted:
(i) Shall not be an employee of the Company or a subsidiary (as
defined in Section 424(f) of the Code) thereof, or
(ii) Shall be a member of the Committee.
5. THE OPTION PRICE. Except as provided in Paragraph 7, the option price
per Common Share to be paid upon the exercise of any stock option, as determined
by the Committee, shall be not less than the fair market value per Common Share
at the time the option is granted. Such fair market value shall be the first
sale price per Common Share (or in the event there are no sales, then the
average of the opening bid and asked prices per Common Share) on the New York
Stock Exchange on the date on which the option is granted.
6. LENGTH OF OPTION. Except as otherwise provided, each option shall be
exercisable no later than ten (10) years from the date it is granted. Each
option granted to an employee, who at the time the incentive stock option is
granted to him, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the employee corporation or of its parent or
subsidiary corporation under the attribution rules set forth in Section 424(d)
of the Code, shall be exercisable no later than five (5) years from the date it
is granted. The Committee, in its sole discretion, will determine the vesting
schedule of each option granted
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under this Plan; provided, however, that no option may be exercised prior to one
year from the date it is granted. Except as provided in Paragraphs 8, 9 and 10
hereof, no option may be exercised unless the optionee is at the time of such
exercise in the employ of the Company or of a subsidiary thereof and shall have
been continuously so employed since the granting of his option. Absence or leave
approved by the Committee in accordance with applicable provisions of the Code
and the regulations promulgated thereunder shall not be considered an
interruption of employment for purposes of the Plan.
7. LIMITATION ON GRANTING OF OPTIONS. The Committee shall not grant
incentive stock options if the aggregate fair market value (determined at the
time the option is granted) of Common Shares with respect to which incentive
stock options are exercisable for the first time by an employee during any
calendar year (under all option plans of his employer corporation and its parent
and subsidiary corporations) shall exceed $100,000. In no event shall there be
granted under the 1996 Stock Option Plan or any other stock option plan of the
Company to any employee in any calendar year options to purchase more than
250,000 Common Shares. If any employee, at the time an incentive stock option is
granted to him, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the employer corporation or its
parent or subsidiary corporations (taking into account the attribution of stock
ownership rules set forth in Section 424(d) of the Code), the option price per
Common Share to be paid upon the exercise of such incentive stock option shall
not be less than one hundred and ten percent (110%) of the fair market value per
Common Share at the time the incentive stock option is granted, as determined in
accordance with Paragraph 5.
8. TERMINATION OF EMPLOYMENT. If an optionee shall cease to be employed by
the Company or a subsidiary thereof on account of normal retirement, early
retirement, or disability, either physical or mental, he may exercise his option
to the extent that he was entitled to exercise it at the date of such cessation
or for such greater number of shares subject to the option as to which the
Committee may authorize an acceleration of time of exercise under the option. If
such cessation of employment is for any reason other than death or permanent and
total disability (within the meaning of Section 22 (e)(3) of the Code), said
optionee may exercise his option to the same extent, but only within the three
months next succeeding such cessation of employment; provided, however, that in
the event of an uninterrupted transfer of employment to or between the Company
and/or any parent or subsidiary corporation of the Company, such option shall
continue in effect until the employee ceases to be employed by all such
affiliated corporations. Neither the Plan, nor the granting of any option
thereunder, will confer upon any optionee any right with respect to continuance
of employment by the Company, or any subsidiary thereof, nor will it interfere
in any way with his right, or the employer's right, to terminate his employment
at any time.
9. DEATH OF OPTIONEE. In the event of the death of an optionee while in
the employ of the Company or a subsidiary thereof, the options theretofore
granted to him shall be exercisable only within one year next succeeding such
death, or within the balance of the period of the option if less than one year,
and then only by the administrator or executor of his estate and to the extent
that the deceased optionee was entitled to exercise it at the date of his death.
10. DISABILITY OF OPTIONEE. In the event of the permanent and total
disability (within the meaning of Section 22(e)(3) of the Code) of the optionee
while in the employ of the Company or a subsidiary thereof, the options
theretofore granted to him shall be exercisable only within the one-year period
next succeeding his cessation of employment or within the balance of the period
of the option if less than one year.
11. NONASSIGNABILITY. Each option shall by its terms provide that it is
not transferable by the optionee other than by will or the laws of descent and
distribution and that it is exercisable during his lifetime, only by the
optionee or by the optionee's duly authorized legal representative if the
optionee is unable to exercise his option as a result of the optionee's
disability, but only if, and to the extent, permitted by Section 422 of the
Code, and after his death, only by his administrator or executor, as above
permitted; provided, however, that if so provided in the instrument evidencing
the Option, the Compensation Committee may permit any optionee to transfer the
Option during his lifetime to one or more members of his family or to one or
more trusts for the benefit of one or more members of his family, provided that
no consideration is paid for the transfer and that such transfer would not
result in the loss of any exemption under Rule 16b-3 for any Option that the
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Compensation Committee does not permit to be so transferred. The transferee of
an Option shall be subject to all restrictions, terms, and conditions applicable
to the Option prior to its transfer, except that the Option shall not be further
transferable inter vivos by the transferee. The Compensation Committee may
impose on any transferable Option and on the Common Shares to be issued upon the
exercise of the Option such limitations and conditions as the Committee deems
appropriate.
12. METHOD OF EXERCISE. Options shall be exercised in blocks of fifty (50)
or more shares. Exercise of options shall be by the execution by the person
entitled at the time to exercise the options of a written notice of such
exercise and delivery thereof to the Company at its principal office in
Dearborn, Michigan, which notice shall specify the number of shares being
purchased. In the case of Common Shares purchased under options (unless such
Common Shares have in either case been registered under the Securities Act of
1933 (the "1933 Act")), the written notice shall contain a representation in
form approved by the Company that such Common Shares are being acquired not with
a view to resale or distribution and will not be sold or otherwise transferred
except upon compliance with the 1933 Act and the Rules and Regulations issued
thereunder. In the case of the exercise of an option, such notice shall be
accompanied by payment in full of the option price of the Common Shares. Payment
of the option price with respect to any stock option may be made in cash or in
Common Shares valued at the closing sale price per Common Share (or in the event
there are no sales, then the average of the closing bid and asked prices per
Common Share) on the New York Stock Exchange on the last trading day preceding
the date on which the option is exercised. Upon receipt of such notice and
payment, the Company will promptly issue and deliver its certificate for the
number of Common Shares being purchased under options. No person, estate or
other entity shall have any of the rights of a shareholder with reference to
Common Shares subject to an option until a certificate or certificates for the
shares have been delivered. An option granted under this Plan may be exercised
for any lesser number of Common Shares than the full amount for which it could
be exercised subject to the first two sentences of this Paragraph. Such a
partial exercise of an option shall not affect the right to exercise the option
from time to time in accordance with this Plan for the remaining Common Shares
subject to the option.
13. ADJUSTMENTS. In the event of any change in the number or kind of
outstanding shares of the Company by reason of recapitalization, merger,
consolidation, reorganization, separation, liquidation, stock split, stock
dividend, combination of shares or any other change in the corporate structure
or shares of stock of the Company, the Committee in its discretion shall make an
appropriate adjustment in the number and kind of shares for which options may
thereafter be granted both in the aggregate and as to each optionee, as well as
in the number and kind of shares subject to options theretofore granted and the
option price payable upon exercise of such options.
14. REALLOCATION OF UNUSED SHARES. Shares which are not purchased under
options which terminate or lapse may be used for the further grant of options
under the Plan.
15. EXPIRATION AND TERMINATION OF THE PLAN. Options may be granted under
the Plan at any time up to and including May 12, 2006, on which date the Plan
will expire, except as to options then outstanding under the Plan, which options
shall remain in effect until they have been exercised or have expired.
16. AMENDMENT AND REVOCATION. The Board of Directors shall have the right
to alter, amend or revoke the Plan or any part thereof at any time and from time
to time; provided, however, that the Board of Directors shall obtain any
approval by shareholders which is necessary for continued applicability of Rule
16b-3 of the Securities and Exchange Commission; and provided, further, that,
without the consent of the optionees, no change may be made in any option
theretofore granted which will impair the rights of such optionees.
17. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES.
a. No option shall be exercisable and no Common Shares will be delivered
under this Plan except in compliance with all applicable federal and state laws
and regulations including, without limitation, compliance with the rules of all
domestic stock exchanges on which the Company's Common Shares may be listed. Any
share certificate issued to evidence Common Shares may bear legends and
statements the Committee shall deem advisable to assure compliance with federal
and state laws and regulations. No option shall be exercisable, and no Common
Shares will be delivered under this Plan, until the Company has obtained
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consent or approval from regulatory bodies, federal or state, having
jurisdiction over such matters as the Committee may deem advisable.
b. In the case of the exercise of an option by a person or estate acquiring
the right to exercise the option by bequest or inheritance, the Committee may
require reasonable evidence as to the ownership of the option and may require
such consents and releases of taxing authorities as it may deem advisable.
18. WITHHOLDING OF TAXES. No later than the date as of which an amount
first becomes includable in the gross income of an optionee for federal income
tax purposes with respect to any option granted under the Plan, the optionee
shall pay to the Company, or make arrangements satisfactory to the Committee
regarding the payment of, any federal, state or local taxes of any kind required
by law to be withheld with respect to such amount. Unless otherwise determined
by the Committee, withholding obligations may be settled with Common Shares,
including Common Shares that are a part of the option that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and its subsidiaries
and affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due the optionee.
19. TYPES OF OPTIONS. Options granted under the Plan may be: (i) options
which are intended to qualify and are identified as incentive stock options
under Section 422 of the Code; (ii) options which are not intended clearly to
qualify under Section 422 of the Code and are clearly identified as options
which are not to be treated as incentive stock options under Section 422 of the
Code; or (iii) both of the foregoing.
20. GOVERNING LAW. The Plan, all options and action taken thereunder and
any agreements relating thereto, shall be governed by and construed in
accordance with the laws of the State of Ohio.
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<PAGE> 23
THE STANDARD PRODUCTS COMPANY
P R O X Y
The undersigned hereby appoints JAMES S. REID, JR., DONALD R.
SHELEY, JR. and J. RICHARD HAMILTON, and each of them, attorneys
and proxies of the undersigned, with full power of substitution, to
attend the annual meeting of shareholders of The Standard Products
Company to be held at its office, 2130 West 110th Street,
Cleveland, Ohio, on Tuesday, October 22, 1996 at 9:00 a.m.,
Cleveland time, or any adjournment thereof, and to vote the number
of shares of said Company which the undersigned would be entitled
to vote, and with all the power the undersigned would possess, if
personally present, as follows:
1. / / FOR, or / / WITHHOLD AUTHORITY to vote for, the
following nominees for election as directors of the class
the term of which will expire in 1999: John D. Drinko,
Curtis E. Moll, Malcolm R. Myers and Theodore K. Zampetis.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME
ON THE LINE PROVIDED BELOW.)
---------------------------------------------------------------
2. / / FOR, / / ABSTAIN, or / / AGAINST the proposal to approve
The Standard Products Company 1996 Employee Stock Option
Plan and to reserve 350,000 authorized but unissued Common
Shares, $1 par value, for purposes of such Plan.
3. On such other business as may properly come before the
meeting.
THE PROXIES WILL VOTE AS SPECIFIED ABOVE, OR IF A CHOICE IS NOT
SPECIFIED, THEY WILL VOTE FOR THE NOMINEES LISTED IN ITEM 1 AND FOR
ITEM 2.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
Receipt of the Notice of Annual
Meeting of Shareholders and
Proxy Statement dated September
18, 1996 is hereby acknowledged.
Dated: , 1996
-----------------------------
-----------------------------
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Signature(s)
(Please sign exactly as your
name or names appear hereon,
indicating, where proper,
official position or
representative capacity.)
