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EXHIBIT 10.5
THE GOODYEAR TIRE & RUBBER COMPANY
OUTSIDE DIRECTORS' EQUITY PARTICIPATION PLAN
(AS ADOPTED FEBRUARY 2, 1996)
1. PURPOSE. The purpose of the Plan is to enable The Goodyear Tire & Rubber
Company (the "Company") to (a) attract and retain outstanding individuals to
serve as non-employee directors of the Company, (b) further align the
interests of non-employee directors with the interests of the other
shareholders of the Company by making the amount of the compensation of
non-employee directors dependent in part on the value and appreciation over
time of the Common Stock of the Company, and (c) permit each non-employee
director to defer receipt of all or a portion of his or her annual retainer
until after retirement from the Board of Directors of the Company.
2. DEFINITIONS. As used in the Plan, the following words and phrases shall
have the meanings specified below:
"ACCOUNT" means any of, and "ACCOUNTS" means all of, the Equity
Participation Accounts and the Retainer Deferral Accounts maintained on the
records of the Company for Participants.
"ACCRUAL" means any dollar amount credited to an Account, including Special
Accruals, Quarterly Accruals, Retainer Deferral Accruals, Dividend
Equivalents and Interest Equivalents.
"BENEFICIARY" means the person or persons designated by a Participant
pursuant to Section 12.
"BOARD" means the Board of Directors of the Company.
"COMMITTEE" means the Compensation Committee of the Board.
"COMMON STOCK" means the Common Stock, without par value, of the Company.
"CONVERSION DATE" means, with respect to each Account of each Retired
Outside Director, the later of (i) the first business day of the seventh
month following the month during which such Retired Outside Director for
any reason terminated his or her service as a member of the Board, or (ii)
the fifth business day of the calendar year following the calendar year
during which such Retired Outside Director for any reason terminated his or
her service as a member of the Board.
"DIVIDEND EQUIVALENT" means, with respect to each dividend payment date
for the Common Stock, an amount equal to the cash dividend per share of
Common Stock which is payable on such dividend payment date.
"EQUITY PARTICIPATION ACCOUNT" means a bookkeeping account maintained by the
Company for a Participant to which Quarterly Accruals and Dividend
Equivalents are credited in respect of Outside Directors through the
Conversion Date (and, with respect to each Outside Director serving as a
Director on February 2, 1996, a Special Accrual will be credited) and
Interest Equivalents are credited subsequent to the Conversion Date, which
Account shall be denominated in Units until the Conversion Date and,
thereafter, shall be denominated in dollars.
"FAIR MARKET VALUE OF THE COMMON STOCK" 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 on the New
York Stock Exchange Composite Transaction Tape on such date.
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"INTEREST EQUIVALENT" has the meaning assigned in Section 11(c).
"OUTSIDE DIRECTOR" means and includes each person who, at the time any
determination thereof is being made, is a member of the Board and who is not
and never has been an employee of the Company or any subsidiary or affiliate
of the Company.
"PARTICIPANT" means and includes, at the time any determination thereof is
being made, each Outside Director and each Retired Outside Director who has
a balance in his or her Accounts.
"RETAINER" means with respect to each Outside Director the retainer fee
payable to such Outside Director by the Company, plus all meeting attendance
fees payable by the Company to such Outside Director, in respect of a
calendar quarter.
"RETAINER DEFERRAL ACCOUNT" means a bookkeeping account maintained by the
Company for a Participant to which Retainer Accruals and Dividend
Equivalents are credited through the Conversion Date and Interest
Equivalents are credited subsequent to the Conversion Date, which Account
shall be denominated in Units until the Conversion Date and, thereafter,
shall be denominated in dollars.
"RETIRED OUTSIDE DIRECTOR" means an Outside Director who for any reason
has terminated his or her service as a member of the Board and is entitled
to receive distribution of the cash balance of his or her Account or
Accounts as provided in Section 10.
"PLAN" means The Goodyear Tire & Rubber Company Outside Directors' Equity
Participation Plan, the provisions of which are set forth herein.
"QUARTERLY ACCRUAL" has the meaning assigned in Section 7.
"RETAINER DEFERRAL ACCRUAL" has the meaning assigned in Section 8.
"SPECIAL ACCRUAL" has the meaning assigned in Section 7.
"UNIT" means an equivalent to a hypothetical share of Common Stock, which
is the denomination into which all dollar Accruals (other than Interest
Equivalents) to any Account are to be translated. Upon the Accrual of any
dollar amount to any Account on or prior to the Conversion Date in respect
of such Account, such dollar amount shall be translated into Units (and
fractions, if any, thereof) by dividing the dollar amount of such Accrual by
the Fair Market Value of the Common Stock on the day on or as of which such
Accrual to the Account is made or, if not made on a trading day, on the
trading day next following the date the Accrual is made. Units, and the
translation thereof from dollars, shall be calculated and recorded on the
Accounts rounded to the fourth decimal place.
"YEAR OF SERVICE" means, with respect to each Outside Director, the twelve
month period commencing with the date of the individuals' election as an
Outside Director or any anniversary thereof.
3. EFFECTIVE DATE. The Plan is adopted on, and is effective on and after,
February 2, 1996.
4. ELIGIBILITY. Each person who serves as an Outside Director at any time
subsequent to February 1, 1996 is eligible to participate in the Plan.
5. ADMINISTRATION. Except with respect to matters expressly reserved for
action by the Board pursuant to the provisions of the Plan, the Plan shall
be administered by the Committee, which shall have the exclusive authority
except as aforesaid to take any action necessary or appropriate for the
proper administration of the Plan, including the full power and authority to
interpret the Plan and to adopt such rules, regulations and procedures
consistent with the terms of the Plan as the Committee deems necessary or
appropriate. The Committee's interpretation of the Plan, and all actions
taken within the scope of its authority, shall be final and binding on the
Company and the Participants.
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6. EQUITY PARTICIPATION ACCOUNTS. There shall be established and maintained by
the Company an Equity Participation Account with respect to each Outside
Director to which Accruals shall be made from time to time in accordance
with the provisions of the Plan.
7. ACCRUALS TO EQUITY PARTICIPATION ACCOUNTS. (A) QUARTERLY ACCRUALS. On the
first day of each calendar quarter, commencing April 1, 1996, the Company
shall credit $2,000 to the Equity Participation Account of each Outside
Director who is then a member of the Board and served as a member of the
Board for the entire calendar quarter ended immediately prior to such day
(each a "Quarterly Accrual").
(B) SPECIAL ACCRUALS. On February 2, 1996, the Company shall credit to the
Equity Participation Account of each Outside Director then serving as a
member of the Board a special, one-time credit (a "Special Accrual"), the
amount of which shall be determined in respect of each such Outside Director
in accordance with the following formula:
N
SP = [FRPA - FQC] / 1.01943
where,
SP is the dollar amount of the Special Accrual in respect of a participating
Outside Director at February 2, 1996;
FRPA is the future value of an annuity at age 70 under the Retirement Plan
for Outside Directors (as provided by Watson Wyatt and based on the UP-1984
mortality table) that would be needed to provide a lifetime annuity at age 70
assuming the benefit increases 3% per year starting in 1997.
FQC is the future value of quarterly accruals, calculated on the value at age
70 of $2,000 quarterly accruals to the Equity Participation Account of the
participating Outside Director starting April 1, 1996, assuming a compound
annual growth rate of 8%.
N is the number of full quarters until the annual meeting of shareholders of
the Company next following the date the Outside Director attains age 70.
(C) TRANSLATION OF ACCRUALS INTO UNITS. Each Accrual (other than Accruals
of Interest Equivalents) to an Equity Participation Account shall be
translated into Units by dividing the dollar amount of such Accrual by the
Fair Market Value of the Common Stock on the day on or as of which such
Accrual is made, or, if the date on or as of which such Accrual is made is
not a trading day, on the next following trading day. Upon such translation
of an Accrual into Units, the resulting number of Units shall be credited to
the relevant Equity Participation Account (in lieu of the dollar amount of
such Accrual) and such Accrual shall continue to be denominated in such
number of Units until the Conversion Date for such Account, when the Units
will be converted into a dollar amount equal to the product of (i) the number
of Units credited to such Account on such Conversion Date, multiplied by (ii)
the Fair Market Value of the Common Stock on such Conversion Date.
8. RETAINER DEFERRAL ACCOUNTS. Each Outside Director may, at his or her sole
election, defer receipt of 25%, 50%, 75% or 100% of his or her Retainer
payable in respect of and during any calendar year by electing to have such
amount credited to his or her Retainer Deferral Account (herein referred to
as a "Retainer Account Accrual"). Each deferral election, if any, by an
Outside Director shall be (i) made annually, (ii) effective in respect of an
entire calendar year, and (iii) made not later than June 30th of the year
prior to the calendar year in respect of which such election is being made.
The dollar amount of each Retainer Account Accrual shall be translated (in
the manner specified in Section 7(C)) into Units on the date such Retainer
Account Accrual is credited to the relevant Retainer Deferral Account, which
shall be the day on which the payment of such portion of the Retainer would
have been made absent the election of the Outside Director to defer the
payment of all or a portion thereof. Upon such translation into Units, the
resulting number of Units shall be credited to the relevant Retainer
Deferral Account (in lieu of the dollar amount of such Accrual) and such
Accrual shall continue to be denominated in such number of Units until the
Conversion Date for such Account, when the Units will be converted into a
dollar amount equal to the
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product of (i) the number of Units credited to such Retainer Deferral
Account on such Conversion Date, multiplied by (ii) the Fair Market
Value of the Common Stock on such Conversion Date.
9. DIVIDEND EQUIVALENTS. With respect to each Account and through the
Conversion Date for such Account, on each date on which cash dividends are
paid on shares of the Common Stock such Account shall be credited with one
Dividend Equivalent for each Unit credited to such Account (and each
fraction of a Unit shall be credited with a like fraction of a Dividend
Equivalent) on such date. Dividend Equivalents (and fractions, if any,
thereof) credited to each Account shall be automatically translated into
Units by dividing the dollar amount of such Dividend Equivalents by the Fair
Market Value of the Common Stock on the date the relevant Dividend
Equivalent is accrued to such Account. The number of Units (and fraction,
if any, thereof) resulting shall be credited to such Account (in lieu of the
dollar amount of such Accrual) and such Accrual shall be denominated in
Units until the Conversion Date.
10. ELIGIBILITY FOR BENEFITS. (A) EQUITY PARTICIPATION ACCOUNTS. Each
Retired Outside Director shall be entitled to receive the balance of his
or her Equity Participation Account in accordance with the provisions of
Section 11 of the Plan, unless the Board of Directors acts to reduce the
amount of, or to deny the payment of, the Equity Participation Account of
such Retired Outside Director; provided, however, that the Board of
Directors shall not have the authority to reduce the amount of, or to deny
the payment of, the Equity Participation Account of any Outside Director
who terminates his or her service on the Board of Directors if (i) prior
to such termination of service, the Retired Outside Director either (x)
had five or more Years of Service and had attained age 70, or (y) had ten
or more Years of Service and had attained age 65, or (ii) such termination
was due to the death of the Outside Director. Notwithstanding the
foregoing, the Board may at any time deny the payment of, or reduce the
amount of, the Equity Participation Account of any Participant if, in the
opinion of the Board, such Participant has engaged in an act of misconduct
or otherwise engaged in conduct contrary to the best interests of the
Company.
(B) RETAINER DEFERRAL ACCOUNTS. Each Retired Outside Director shall be
entitled to receive the balance, if any, of his or her Retainer Deferral
Account in accordance with Section 11 and the other applicable provisions
of the Plan.
11. PAYMENT OF ACCOUNTS. (a) All distributions of Equity Participation
Accounts and Retainer Deferral Accounts to Participants shall be made in
cash.
(b) In the case of each Retired Outside Director, the Units credited to
his or her Equity Participation Account and Retainer Deferral
Account, respectively, shall, on the Conversion Date for such Retired
Outside Director, be converted to a dollar denominated amount by
multiplying the number of Units in each of the Accounts by the Fair Market
Value of the Common Stock on such Conversion Date.
(c) From and after the Conversion Date until paid, the balance (expressed
in dollars) of the Equity Participation Account, and, if any, of the
Retainer Deferral Account, of each Retired Outside Director shall be
credited at the end of each calendar month until paid with "Interest
Equivalents", which shall be equal to one twelfth (1/12th) of the product
of (x) the dollar balance of each such Account, multiplied by (y) the sum
(expressed as a decimal to six places) of the rate equivalent to the
prevailing annual yield of United States Treasury obligations having a
maturity of ten years (or, if not exactly ten years, as close to ten years
as possible without exceeding ten years) at the Conversion Date for such
Accounts, plus one percent (1%).
(d) The Accounts of each Retired Outside Director will be paid in ten
(10) annual installments commencing on the fifth business day following
the Conversion Date for such Accounts, and thereafter on each anniversary
of such Conversion Date; each installment to be in an amount equal to
the total dollar balance of such Accounts on the fifth business day prior
to the date such annual installment is due and payable divided by the
number of installments remaining (including the annual installment then
being calculated for payment) to be paid.
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(e) The Committee may, in its sole discretion, elect to pay the Equity
Participation Account or the Retainer Deferral Account, or both, of any
Retired Outside Director in a lump sum or in fewer than ten installments.
In the event that the Committee shall elect to make a lump sum payment of
an Account of any Retired Outside Director (or to make payment thereof in
fewer than ten annual installments), the payment of such lump sum shall be
made (or such installments shall commence) on the fifth business day
following the Conversion Date in respect of such Retired Outside Director
or on such subsequent date or dates as the Committee shall determine.
(f) In the event of the death of an Outside Director, the entire balance
of his or her Accounts shall be eligible for payment, which shall be made
in a lump sum on the fifth business day following the Conversion Date for
such Accounts.
(g) In the event of the death of a Retired Outside Director, the entire
balance of his or her Account(s) shall be paid on the fifth business day
following the Conversion Date for such Accounts (if it has not occurred at
the date of death), or on the next occurring anniversary thereof.
12. DESIGNATION OF BENEFICIARY. A Participant may designate a person or
persons (the "Beneficiary") to receive, after the Participant's death, any
remaining benefits payable under the Plan. Such designation shall be made
by the Participant on a form prescribed by the Committee. The Participant
may at any time change or revise such designation by filing a new form
with the Company. The person or persons named as beneficiary in the
designation of beneficiary form duly completed and filed with the Company
bearing the most recent date will be the Beneficiary. All payments due
under the Plan after the death of a Participant shall be made to his or
her Beneficiary, except that (i) if the Participant does not designate a
Beneficiary or the Beneficiary predeceases the Participant, any remaining
benefits payable under the Plan after the Participant's death shall be
paid to the Participant's estate, and (ii) if the Beneficiary survives the
Participant but dies prior to receiving the benefits payable under the
Plan, the benefits under the Plan shall be paid to the Beneficiary's
estate.
13. AMENDMENT AND TERMINATION. The Board may at any time, or from time to
time, amend or terminate the Plan; provided, however, that no such
amendment or termination shall reduce Plan benefits which accrued prior to
such amendment or termination without the prior written consent of each
person entitled to receive benefits under the Plan who is adversely
affected by such action; and, provided further, that the Plan shall not be
amended more frequently than once every six months, other than to comply
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules promulgated thereunder.
14. PLAN UNFUNDED, RIGHTS UNSECURED. The Plan is unfunded. Each Account
under the Plan represents only a general contractual conditional
obligation of the Company to pay in cash the balance thereof in accordance
with the provisions of the Plan.
15. ASSIGNABILITY. All payments under the Plan shall be made only to the
Participant or his or her duly designated Beneficiary (in the event of his
or her death). Except pursuant to Section 12 or the laws of descent and
distribution and except as may be required by law, the right to receive
payments under the Plan may not be assigned or transferred by, and are not
subject to the claims of creditors of, any Participant or his or her
Beneficiary during his or her lifetime.
16. CHANGE IN THE COMMON STOCK. In the event of any stock dividend, stock
split, recapitalization, merger, split-up, spin-off or other change
affecting the Common Stock of the Company, the Units in each Account shall
be adjusted in the same manner and proportion as the change to the Common
Stock.
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17. QUARTERLY STATEMENTS OF ACCOUNTS - VALUATION. Each calendar quarter the
Company will prepare and send to each Participant a statement reporting
the status of his or her Account or Accounts as of the close of business
on the last business day of the prior calendar quarter. To the extent an
Account is denominated in Units, the value of the Units will be reported
at the Fair Market Value of the Common Stock on the relevant valuation
date.
18. NO OTHER RIGHTS. Neither the establishment of the Plan, nor any action
taken thereunder, shall in any way obligate the Company to nominate an
Outside Director for re-election or continue to retain an Outside Director
on the Board or confer upon any Outside Director any other rights in
respect of the Company.
19. SUCCESSORS OF THE COMPANY. The Plan shall be binding upon any successor
to the Company, whether by merger, acquisition, consolidation or
otherwise.
20. LAW GOVERNING. The Plan shall be governed by the laws of the State of
Ohio.
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