def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant x |
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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x Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
LEAR CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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x No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o 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. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
LEAR CORPORATION
21557 Telegraph Road
Southfield, Michigan 48034
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 11, 2006
10:00 A.M., Eastern Time
Dear Fellow Stockholder:
On behalf of the Board of Directors, you are cordially invited
to attend the 2006 Annual Meeting of Stockholders to be held on
Thursday, May 11, 2006, at 10:00 a.m. (Eastern time)
at the Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, Florida
33607. The purpose of the meeting is to:
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2. ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2006; |
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3. approve an amendment to our Long-Term Stock Incentive
Plan; |
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4. consider two stockholder proposals, if presented at the
meeting; and |
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5. conduct any other business properly before the meeting. |
Attendance and voting are limited to stockholders of record at
the close of business on March 21, 2006. A list of
stockholders entitled to vote at the meeting, and any
postponements or adjournments of the meeting, will be available
for examination between the hours of 9:00 a.m. and
5:00 p.m. at our headquarters and at our offices in Tampa,
Florida during the ten days prior to the meeting and also at the
meeting. Our offices in Tampa are located at 5100 W. Waters
Avenue, Tampa, Florida 33634.
Your vote is important. Whether you plan to attend the meeting
or not, please complete, sign and date the enclosed proxy card
and return it in the envelope provided. If you attend the
meeting and prefer to vote in person, you may do so.
Thank you for your continued support of our company.
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Robert E. Rossiter
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Chairman and Chief Executive Officer |
March 27, 2006
TABLE OF CONTENTS
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LEAR CORPORATION
21557 Telegraph Road
Southfield, Michigan 48034
PROXY STATEMENT
INTRODUCTION
Annual Meeting
The 2006 Annual Meeting of Stockholders will be held at the
Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, Florida 33607,
on Thursday, May 11, 2006, at 10:00 a.m. (Eastern
time).
Record Date
The date fixed to determine stockholders entitled to notice of
and to vote at the meeting is the close of business on
March 21, 2006.
Mailing Date
We anticipate first mailing this proxy statement, the attached
Notice of Annual Meeting and the enclosed proxy card on or about
March 27, 2006.
Agenda
The agenda for the meeting is to:
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elect four directors; |
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2. |
ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2006; |
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3. |
approve an amendment to our Long-Term Stock Incentive Plan; |
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4. |
consider two stockholder proposals, if presented at the
meeting; and |
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5. |
conduct any other business properly before the meeting. |
Proxy Solicitation
Our Board of Directors is soliciting this proxy. Certain of our
officers and employees may also solicit proxies personally and
by telephone. The cost of solicitation, including the cost of
mailing, will be paid for by the Company. MacKenzie Partners,
Inc. will assist us in soliciting brokers and nominees at a cost
of approximately $6,500 plus its expenses. We have requested
that banks, brokers and other custodian nominees and fiduciaries
supply, at our expense, proxy material to the beneficial owners
of our common stock.
Voting of Proxies
Your proxy will be voted in accordance with your instructions,
provided that you date, execute and return a proxy card. If you
execute and return your proxy card but provide no specific
instructions in the proxy card, your shares will be voted FOR
our Boards nominees named on the proxy card, FOR the
ratification of the appointment of our independent registered
public accounting firm, FOR the approval of an amendment to our
Long-Term Stock Incentive Plan, and AGAINST the approval of the
stockholder proposals, if presented.
We do not intend to bring any matters before the meeting except
those indicated in the Notice of Annual Meeting and we do not
know of any matter which anyone else intends to present for
action at the meeting. If any other matters properly come before
the meeting, however, the persons named in the enclosed proxy
will be authorized to vote or otherwise act in accordance with
their judgment.
Revoking Proxies
You may revoke your proxy at any time before it is voted at the
meeting by:
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delivering to Daniel A. Ninivaggi, our Senior Vice President,
Secretary and General Counsel, a signed, written revocation
letter dated later than the date of your proxy; |
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submitting a proxy to the Company with a later date; or |
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attending the meeting and voting either in person or by ballot. |
Outstanding Shares
On the record date, there were approximately
67,330,515 shares of our common stock outstanding. Our
common stock is the only class of our voting securities
outstanding.
Quorum
A quorum is established when a majority of shares entitled to
vote is present at the meeting, either in person or by proxy.
Abstentions and broker non-votes (as described below under
Required Vote) are counted for purposes
of determining whether a quorum is present.
Voting
Each share of common stock that you hold as of the record date
entitles you to one vote, without cumulation, on each matter to
be voted upon at the meeting.
Required Vote
Our directors are elected by a plurality of the votes cast by
the holders of our common stock. Plurality means
that the four individuals who receive the highest number of the
votes will be elected as directors. Any shares not voted
(whether by abstention, broker non-vote or otherwise) have no
impact on the election of directors except to the extent that
the failure to vote for an individual results in another
individual receiving a higher number of votes.
For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and
entitled to vote on the item will be required for approval. A
properly executed proxy marked ABSTAIN with respect to any such
matter will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a negative vote on such
items.
If you hold your shares in street name through a
broker or other nominee, your broker or nominee may not be
permitted to exercise voting discretion with respect to some of
the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions with respect to a
non-discretionary matter, your shares will not be voted on such
matter and will not be counted as shares entitled to vote on
such matter. However, shares represented by such broker
non-votes will be counted in determining whether there is
a quorum.
Annual Report
Lear Corporations 2005 Annual Report is being mailed to
you with this proxy statement.
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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board consists of three classes. One class of directors is
elected at each annual meeting of stockholders to serve a three
year term. Directors elected at the 2006 Annual Meeting of
Stockholders will hold office until their successors are elected
at the 2009 Annual Meeting of Stockholders. Directors not up for
election this year will continue in office for the remainder of
their terms.
The Nominating and Corporate Governance Committee has nominated
David E. Fry, David P. Spalding, James A. Stern and Henry D.G.
Wallace to stand for election to the Board. The Board has
determined that each nominee is an independent director under
the New York Stock Exchange listing requirements. Unless
contrary instructions are given, the shares represented by your
proxy will be voted FOR the election of all nominees.
All nominees have consented to being named in this proxy
statement and to serve if elected. However, if any nominee
becomes unable to serve, proxy holders will have discretion and
authority to vote for another nominee proposed by our Board.
Alternatively, our Board may reduce the number of directors to
be elected at the meeting.
Nominees For Terms Expiring at the 2009 Annual Meeting
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Dr. Fry, who has been a director of Lear since August 2002,
has been the President and Chief Executive Officer of Northwood
University, a university of business administration with
campuses in Midland, Michigan, Dallas, Texas and Palm Beach,
Florida, since 1982. Dr. Fry also serves as a director of
Reynolds and Reynolds Company and Decker Energy International.
Dr. Fry is also a director and member of the executive
committee of the Automotive Hall of Fame and past Chairman of
the Michigan Higher Education Facilities Authority. |
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David P. Spalding |
Age: 51 |
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Mr. Spalding has been a director of Lear since 1991.
Mr. Spalding is the Vice President of Alumni Relations for
Dartmouth College, a position he has held since October 2005.
Prior to joining Dartmouth College, Mr. Spalding was a Vice
Chairman of The Cypress Group L.L.C., a private equity fund
manager, since 1994. Mr. Spalding is also the Chairman of
the Board and a member of the executive committee of the
Make-A-Wish Foundation of Metro New York. |
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Mr. Stern has been a director of Lear since 1991.
Mr. Stern is Chairman of The Cypress Group L.L.C., a
private equity fund manager, a position he has held since 1994.
He is also a director of Affinia Group Inc., AMTROL, Inc., WESCO
International, Inc. and ClubCorp, Inc. |
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Henry D.G. Wallace |
Age: 60 |
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Mr. Wallace has been a director of Lear since February
2005. Mr. Wallace worked for 30 years at Ford Motor
Company until his retirement in 2001 and held several
executive-level operations and financial oversight positions,
most recently as Group Vice President, Mazda & Asia
Pacific Operations in 2001, Chief Financial Officer in 2000 and
Group Vice President, Asia Pacific Operations in 1999.
Mr. Wallace |
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also serves as a director of AMBAC Financial Group, Inc.,
Diebold, Inc. and Hayes-Lemmerz International, Inc. |
YOUR BOARD RECOMMENDS A VOTE FOR
THE ELECTION OF EACH NOMINEE.
DIRECTORS AND BENEFICIAL OWNERSHIP
Directors
Set forth below is a description of the business experience of
each of our directors other than Messrs. Fry, Spalding,
Stern and Wallace, whose biographies are set forth above. The
terms of Messrs. McCurdy, Parrott and Wallman expire at the
annual meeting in 2007, and the terms of Ms. Bingaman and
Messrs. Mallett, Rossiter and Vandenberghe expire at the
annual meeting in 2008.
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Ms. Bingaman has been a director of Lear since February
2004. She has been Chairman and Chief Executive Officer of
Soundpath Conferencing Services, LLC since 2002, and she is the
founder of VALOR Telecom, a telecommunications company serving
the southwestern United States and a subsidiary of Valor
Communications Group, Inc. She served as VALOR Telecoms
Chief Executive Officer from September 1999 to January 2002, and
Chairman from September 1999 to February 2005. Prior to founding
VALOR Telecom, Ms. Bingaman served as President of the
Local Services Division of LCI International, Inc., a long
distance telephone company, from January 1997 to June 1998.
Prior to joining LCI International, Ms. Bingaman served as
Assistant Attorney General and Head of the Antitrust Division of
the United States Department of Justice from June 1993 to
October 1996. |
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Conrad L. Mallett, Jr. |
Age: 53 |
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Justice Mallett, who has been a director of Lear since August
2002, has been the President and CEO of Sinai Grace Hospital
since August 2003. Prior to his current position, Justice
Mallett served as the Chief Administrative Officer of the
Detroit Medical Center since March 2003. Previously, he served
as President and General Counsel of Hawkins Food Group LLC from
April 2002 to March 2003, and Transition Director for Detroit
Mayor Kwame M. Kilpatrick and Chief Operating Officer for the
City of Detroit from January 2002 to April 2002. From August
1999 to April 2002, Justice Mallett was General Counsel and
Chief Administrative Officer of the Detroit Medical Center.
Justice Mallett was also a Partner in the law firm of Miller,
Canfield, Paddock & Stone from January 1999 to August
1999. Justice Mallett was a Justice of the Michigan Supreme
Court from December 1990 to January 1999 and served a two-year
term as Chief Justice beginning in 1997. Justice Mallett also
serves as a director of TechTeam Global, Inc. and serves as a
General Board Member of the Metropolitan Detroit YMCA. |
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Mr. McCurdy has been a director of Lear since 1988. In July
2000, Mr. McCurdy retired from Dana Corporation, a motor
vehicle parts manufacturer and after-market supplier, where he
served as President, Dana Automotive Aftermarket Group, since
July 1998. Mr. McCurdy was Chairman of the Board, President
and Chief Executive Officer of Echlin, a motor vehicle parts
manufacturer, from March 1997 until July 1998 when it was merged
into Dana Corporation. Prior to this, Mr. McCurdy was
Executive Vice President, Operations of Cooper Industries, a
diversified manufacturing company, from April 1994 to March
1997. Mr. McCurdy also serves as a director of Mohawk
Industries, Inc., as well as the non-executive Chairman of
Affinia Group Inc., a privately-held supplier of after-market
motor vehicle parts. |
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Mr. Parrott has been a director of Lear since February
1997. In January 2003, Mr. Parrott retired from Metaldyne
Corporation where he served as President of Business Operations
since December 2000. Metaldyne Corporation, an integrated metal
solutions supplier, purchased Simpson Industries, Inc. in |
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December 2000. Previously, Mr. Parrott was the Chief
Executive Officer of Simpson Industries, Inc. from 1994 to
December 2000 and Chairman of Simpson Industries, Inc. from
November 1997 to December 2000. |
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Robert E. Rossiter |
Age: 60 |
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Mr. Rossiter is the Chairman of the Board, a position he
has held since January 1, 2003. Mr. Rossiter also
serves as our Chief Executive Officer, a position he has held
since October 2000. Mr. Rossiter served as our President
from 1984 until December 2002 and served as Chief Operating
Officer from 1988 to April 1997 and from November 1998 to
October 2000. Mr. Rossiter has been a director of Lear
since 1988. Mr. Rossiter also served as our Chief Operating
Officer International Operations from
April 1997 to November 1998. |
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James H. Vandenberghe |
Age: 56 |
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Mr. Vandenberghe is our Vice Chairman, a position he has
held since November 1998. Mr. Vandenberghe has also acted
as our Interim Chief Financial Officer since March 10, 2006
and is expected to continue in such capacity until we appoint a
new Chief Financial Officer. Mr. Vandenberghe has been a
director of Lear since 1995. He served as our President and
Chief Operating Officer North American Operations
from April 1997 to November 1998. He also served as our Chief
Financial Officer from 1988 to April 1997 and as our Executive
Vice President from 1993 to April 1997. |
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Richard F. Wallman |
Age: 55 |
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Mr. Wallman has been a director of Lear since November
2003. Mr. Wallman has more than 25 years of
executive-level operations and financial oversight experience,
most recently as Senior Vice President and Chief Financial
Officer of Honeywell International, Inc. from 2000 to 2003 and
of AlliedSignal, Inc. from 1995 to 1999. He has also held
positions with International Business Machines Corporation,
Chrysler Corporation and Ford Motor Company. Mr. Wallman
also serves as a director of Hayes-Lemmerz International, Inc.,
Ariba, Inc., Avaya Inc. and ExpressJet Holdings, Inc. |
Board Information
The Board has approved Corporate Governance Guidelines and a
Code of Business Conduct and Ethics. All of our corporate
governance documents, including the Corporate Governance
Guidelines, the Code of Business Conduct and Ethics and
committee charters, are available on our website at www.lear.com
or in printed form upon request by contacting Lear Corporation
at 21557 Telegraph Road, Southfield, Michigan 48034,
Attention: Investor Relations. The Board regularly reviews
corporate governance developments and modifies these documents
as warranted. Any modifications will be reflected on our website.
In 2005, our full Board held six (6) meetings. In addition
to our full Board meetings, our directors attend meetings of
permanent committees established by our Board. Each director
participated in at least 75% of the total number of meetings of
our Board and the committees on which he or she serves. Our
directors are encouraged to attend all annual and special
meetings of our stockholders. In 2005, all of our directors,
other than Dr. Fry, attended the annual meeting of
stockholders held on May 5, 2005.
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Meetings of Non-Employee Directors |
In accordance with our Corporate Governance Guidelines and the
listing standards of the New York Stock Exchange, our
non-management directors meet regularly in executive sessions of
the Board without management present. Our non-management
directors have elected Larry W. McCurdy as the Presiding
Director of such non-management sessions of our Board.
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Independence of Directors |
The Board has adopted Corporate Governance Guidelines to address
significant issues of corporate governance, including Board and
Board Committee composition and responsibilities, compensation
of directors, executive selection and succession planning and
director tenure. The Nominating and Corporate Governance
Committee is responsible for overseeing and reviewing the
Corporate Governance Guidelines and reporting and recommending
to the Board any changes to the Guidelines.
The Corporate Governance Guidelines provide that a majority of
the members of the Board, and each member of the Audit
Committee, Compensation Committee and Nominating and Corporate
Governance Committee, must meet the criteria for independence
set forth under applicable law and the New York Stock Exchange
listing standards. No director qualifies as independent unless
the Board determines that the director has no direct or indirect
material relationship with the Company. The Board has
established guidelines to assist in determining director
independence. These guidelines are set forth as Exhibit A
to our Corporate Governance Guidelines, can be found on our
website at www.lear.com and are set forth on Appendix A
attached hereto. In addition to applying these director
independence guidelines, the Board will consider all relevant
facts and circumstances that it is aware of in making an
independence determination.
Based on the New York Stock Exchange listing standards and our
director independence guidelines, the Board has affirmatively
determined that (i) Ms. Bingaman and Mr. Wallace have
no relationship with us (other than as a director or
stockholder) and are independent, (ii) Messrs. Fry,
Mallett, McCurdy, Spalding and Stern have only immaterial
relationships with us and are independent and
(iii) Messrs. Rossiter, Vandenberghe and Parrott are
not independent. Mr. Rossiter is our Chairman and Chief
Executive Officer and Mr. Vandenberghe is our Vice
Chairman. In making its determination with respect to
Mr. Parrott, the Board considered that children of
Mr. Parrott are employed by Lear. The Board does not
believe that these employment relationships have any influence
on Mr. Parrotts independent judgment. However, in
light of these relationships, the Board has determined not to
deem Mr. Parrott independent for purposes of the New York
Stock Exchange listing standards. In making its independence
determinations, the Board also considered that we employ a
brother of Mr. Spalding in a non-executive position (a
senior account manager at one of our divisions). The employment
relationship is on an arms-length basis and
Mr. Spalding has no involvement or interest, directly or
indirectly, in employment decisions affecting his brother. The
Board concluded that Mr. Spalding is independent. The Board
also noted that until February 2005 Mr. Rossiter served as
a Trustee of Northwood University, of which Dr. Fry is
President and Chief Executive Officer. Mr. Rossiter did not
serve on the compensation committee of the Board of Trustees of
Northwood. Northwood is a university which prepares and trains
students for careers in the automotive industry. Lear actively
recruits employees from Northwood and has sponsored automotive
programs at Northwood in the past. The Board believes that
Mr. Rossiters uncompensated service as a Trustee of
Northwood and Lears sponsorship of automotive programs at
the university furthered the interests of Lear. The Board has
concluded that these relationships were not material and that
Dr. Fry is independent.
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Communications to the Board |
Stockholders and interested parties can contact the Board
through written communication sent to Lear Corporation,
21557 Telegraph Road, Southfield, Michigan 48034,
Attention: General Counsel. Lears General Counsel reviews
all written communications and forwards to the Board a summary
and/or copies of any such correspondence that is directed to the
Board or that, in the opinion of the General Counsel, deals with
the functions of the Board or Board Committees or that he
otherwise determines requires the Board or any Board
Committees attention. Directors may at any time review a
log of all correspondence received by Lear that is addressed to
the members of the Board and request copies of any such
correspondence. Concerns relating to accounting, internal
accounting controls or auditing matters are immediately brought
to the attention of our internal audit department and handled in
accordance with procedures established by the Audit Committee
with respect to such matters. From time to time, the Board may
change the process by which stockholders may communicate with
the Board. Any such changes will be reflected in our Corporate
Governance Guidelines, which are posted on our website at
www.lear.com.
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Communications of a confidential nature can be made directly to
Lears non-management directors or the Chairman of the
Audit Committee regarding any matter, including any accounting,
internal accounting control or auditing matter, by submitting
such concerns to the Audit Committee or the Presiding Director.
Any submissions to the Audit Committee or the Presiding Director
should be marked confidential and addressed to the Chairman of
the Audit Committee or the Presiding Director, as the case may
be, c/o Lear Corporation, P.O. Box 604, Southfield,
Michigan 48037. In addition, confidential communications may be
submitted in accordance with other procedures set forth from
time to time in our Corporate Governance Guidelines, which are
posted on our website at www.lear.com. The submission should
contain, to the extent possible, a full and complete description
of the matter, the parties involved, the date of the occurrence
or, if the matter is ongoing, the date the matter was initiated
and any other information that the reporting party believes
would assist the Audit Committee or the Presiding Director in
the investigation of such matter.
In 2005, the Audit Committee, which held eight (8) meetings
during the year, consisted of Mr. McCurdy, Mr. Stern,
Mr. Wallace and Mr. Wallman, all of whom were
non-employee directors and currently remain members of the
Committee. Mr. McCurdy served as the Chairman of the Audit
Committee. Dr. Fry also served on the Audit Committee until
Mr. Wallace was appointed to the Committee in May 2005. The
Board has determined that all of the current members of the
Audit Committee are independent as defined in the listing
standards of the New York Stock Exchange and that all such
members are financially literate. In addition, the Board has
determined that Mr. McCurdy, Mr. Wallace and
Mr. Wallman are audit committee financial experts as
defined in Item 401(h) of
Regulation S-K
under the Securities Exchange Act of 1934, as amended, and have
accounting or related financial management expertise. Our
Corporate Governance Guidelines limit the number of audit
committees on which an Audit Committee member can be a member to
three or less without approval of the Board. Mr. Wallman
serves on the audit committees of three public company boards in
addition to our Audit Committee. The Board has determined that
such simultaneous service does not impair
Mr. Wallmans ability to effectively serve on the
Audit Committee and has thus approved the simultaneous service
by Mr. Wallman on the Audit Committee and on the audit
committees of up to three additional public company boards of
directors. For a description of the Audit Committees
responsibilities and findings, see Audit Committee
Report beginning on page 30. The Audit Committee
operates under a written charter setting forth its functions and
responsibilities. A copy of the current charter is available on
our website at www.lear.com or in printed form upon request.
In 2005, the Compensation Committee, which held four
(4) meetings during the year, consisted of
Mr. Spalding, Ms. Bingaman, Mr. McCurdy and
Mr. Wallman, all of whom were non-employee directors and
currently remain members of the Committee. Mr. Spalding
served as the Chairman of the Compensation Committee.
Mr. Wallman was appointed to the Committee in May 2005. The
Compensation Committee has overall responsibility for approving
and evaluating director and officer compensation plans, policies
and programs of the Company and reviewing the disclosure of such
plans, policies and programs to the Companys stockholders
in the annual proxy statement. The Board has determined that all
of the current members of the Compensation Committee are
independent as defined in the listing standards of the New York
Stock Exchange. The Compensation Committee operates under a
written charter setting forth its functions and
responsibilities. A copy of the current charter is available on
our website at www.lear.com or in printed form upon request.
The Executive Committee currently consists of
Messrs. Stern, McCurdy, Parrott, Rossiter and Spalding,
with Mr. Stern serving as Chairman. The Executive Committee
meets, as needed, during intervals between meetings of our Board
and may exercise certain powers of our Board relating to the
general supervision and control of the business and affairs of
our Company. In 2005, the Executive Committee held one
(1) meeting.
7
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|
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Nominating and Corporate Governance Committee |
In 2005, the Nominating and Corporate Governance Committee,
which held three (3) meetings during the year, consisted of
Mr. Stern, Dr. Fry and Justice Mallett, all of whom
currently remain members of the Committee. Mr. Stern served
as the Chairman of the Nominating and Corporate Governance
Committee. The Board of Directors has determined that the
current members of the Nominating and Corporate Governance
Committee are independent as defined in the listing standards of
the New York Stock Exchange.
The Nominating and Corporate Governance Committee is responsible
for, among other things: (i) identifying individuals
qualified to become members of the Board, consistent with
criteria approved by the Board; (ii) recommending to the
Board director nominees for the next annual meeting of the
stockholders of the Company; (iii) in the event of a
vacancy on or an increase in the size of the Board, recommending
to the Board director nominees to fill such vacancy or newly
established Board seat; (iv) recommending to the Board
director nominees for each committee of the Board;
(v) establishing and reviewing annually the Companys
Corporate Governance Guidelines and Code of Business Conduct and
Ethics; and (vi) reviewing potential conflicts of interest
involving executive officers of the Company. The Nominating and
Corporate Governance Committee operates under a written charter
setting forth its functions and responsibilities. A copy of the
current charter is available on our website at www.lear.com or
in printed form upon request.
|
|
|
Recommendation of Directors by Stockholders |
In accordance with its charter, the Nominating and Corporate
Governance Committee will consider candidates for election as a
director of the Company recommended by any Company stockholder,
provided that the recommending stockholder follows the same
procedures set forth in Section 2.3 of the Companys
By-Laws for nominations by stockholders of persons to serve as
directors.
Pursuant to Section 2.3 of the By-Laws, nominations of
persons for election to the Board at a meeting of stockholders
may be made by any stockholder of the Company entitled to vote
for the election of directors at the meeting who sends a timely
notice in writing to the Secretary of the Company. To be timely,
a stockholders notice must be delivered to, or mailed and
received by, the Secretary of the Company at the principal
executive offices of the Company not less than 60 nor more than
90 days prior to the meeting; provided, however, that if
the Company has not publicly disclosed the date of
the meeting at least 70 days prior to the meeting date,
notice may be timely made by a stockholder if received by the
Secretary of the Company not later than the close of business on
the tenth day following the day on which the Company publicly
disclosed the meeting date. For purposes of the By-Laws,
publicly disclosed or public disclosure
means disclosure in a press release reported by the Dow Jones
News Service, Associated Press, or a comparable national news
service or in a document publicly filed by the Company with the
Securities and Exchange Commission.
The stockholders notice or recommendation is required to
contain certain prescribed information about each person whom
the stockholder proposes to recommend for election as a
director, the stockholder giving notice, and the beneficial
owner, if any, on whose behalf notice is given. The
stockholders notice must also include the consent of the
person proposed to be nominated and to serve as a director if
elected. Recommendations should be sent to Lear Corporation,
21557 Telegraph Road, Southfield, Michigan 48034;
Attention: Daniel A. Ninivaggi, Senior Vice President,
Secretary & General Counsel.
A copy of our By-Laws has been filed with the Securities and
Exchange Commission as an exhibit to our Current Report on
Form 8-K filed on
August 9, 2002.
|
|
|
Criteria for Selection of Directors |
The following are the general criteria for the selection of the
Companys directors that the Nominating and Corporate
Governance Committee utilizes in evaluating candidates for Board
membership. None of the following criteria should be construed
as minimum qualifications for director selection nor is it
expected that director nominees will possess all of the criteria
identified. Rather, they represent the range of complementary
talents, backgrounds and experiences that the Nominating and
Corporate Governance Committee believes
8
would contribute to the effective functioning of our Board. The
general criteria set forth below are not listed in any
particular order of importance.
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|
Strong automotive background, with an understanding of
Lears customers and markets. |
|
|
|
Extensive general business background with a record of
achievement. |
|
|
|
Financial and accounting expertise. |
|
|
|
Gender, racial and geographic diversity. |
|
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|
Strong international experience, particularly in those regions
in which Lear seeks to conduct business. |
|
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|
Understands the potential role of technology in the development
of Lears business. |
|
|
|
Marketing or sales background in the automotive industry. |
|
|
|
Schedule is sufficiently flexible to permit attendance at Board
meetings at regularly scheduled times. |
|
|
|
A contributor but accepting of opinions of others and supportive
of decisions that are in the stockholders best interests. |
|
|
|
Able to assimilate complex business problems and analyze them in
the context of the Companys strategic goals. |
|
|
|
A team player yet possessing independence to appropriately
question and challenge corporate strategy, as required. |
The Nominating and Corporate Governance Committee is responsible
for, subject to approval by the Board, establishing and
periodically reviewing the criteria for Board membership and
selection of new directors, including independence standards.
The Nominating and Corporate Governance Committee may also
recommend to the Board changes to the portfolio of director
skills, experience, perspective and background required for the
effective functioning of the Board considering the
Companys strategy and its regulatory, geographic and
market environments. Any such changes to the director selection
criteria must be approved by the Board.
The Nominating and Corporate Governance Committee considers
candidates for Board membership suggested by its members and
other Board members, as well as management and stockholders.
Once a potential candidate has been identified, the Nominating
and Corporate Governance Committee evaluates the potential
candidate based on the Boards criteria for selection of
directors (described above) and the composition and needs of the
Board at the time.
If a director candidate were to be recommended by a stockholder
in accordance with the procedures set forth under
Recommendation of Directors by Stockholders above,
the Nominating and Corporate Governance Committee would evaluate
such candidate in the same manner in which it evaluates other
director candidates considered by the committee.
The Nominating and Corporate Governance Committee has approved
the retention of Russell Reynolds Associates, Inc., a
third-party search firm, to assist the committee with its search
for qualified director candidates. The firm has the task of
identifying potential director candidates based on the criteria
for the selection of the Companys directors approved by
the Board of Directors.
Compensation of Directors
In 2005, non-employee directors were compensated pursuant to our
Outside Directors Compensation Plan, which provides for an
annual retainer of $45,000 for each of our non-employee
directors with an additional retainer of $20,000 for the
Chairman of the Audit Committee and an additional $10,000
retainer for each of the Chairmen of the Compensation Committee
and the Nominating and Corporate Governance Committee as well as
for our Presiding Director. In addition, each non-employee
director received a fee of $1,500 for each Board and committee
meeting attended. The non-employee director annual retainer and
meeting fees were paid quarterly pursuant to the Outside
Directors Compensation Plan. Directors were also
9
reimbursed for their expenses incurred in attending meetings. A
copy of the Outside Directors Compensation Plan has been filed
with the Securities and Exchange Commission as an exhibit to our
Current Report on
Form 8-K filed on
December 9, 2004.
Pursuant to the Outside Directors Compensation Plan, each
non-employee director receives annually on the last business day
of each January, restricted units representing shares of Lear
common stock having a value of $90,000 on the date of the grant.
Restricted unit grants were made on January 31, 2005 to all
non-employee directors except for Henry D.G. Wallace, who
received a grant of restricted units when he joined the Board on
February 10, 2005. The restricted units granted to
non-employee directors vest over the three-year period following
the grant date, with one-third of each recipients
restricted units vesting on each of the first three
anniversaries of the grant date. During the vesting period,
non-employee directors receive credits in a dividend equivalent
account equal to amounts that would be paid as dividends on the
shares represented by the restricted units. Once a restricted
unit vests, the non-employee director holding such restricted
unit will be entitled to receive a cash distribution equal to
the value of a share of Lear Common Stock on the date of
vesting, plus any amount in his or her dividend equivalent
account. The restricted units are also immediately vested upon a
directors termination of service due to death,
disability, retirement, or upon a
change in control of Lear (as each such term is
defined in the Outside Directors Compensation Plan) prior to or
concurrent with the directors termination of service.
A non-employee director may elect to defer receipt of all or a
portion of his or her annual retainer and meeting fees as well
as any cash payments made upon vesting of restricted units. At
the non-employee directors election, amounts deferred will
be:
|
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|
|
credited to a notional account and bear interest at an annual
rate equal to the prime rate (as defined in the Outside
Directors Compensation Plan); or |
|
|
|
credited to a stock unit account. |
Each stock unit is equal in value to one share of Lear common
stock, but does not have voting rights. Stock units are credited
with dividend equivalents which are paid into an interest
account (credited with interest at an annual rate equal to the
prime rate (as defined in the Outside Directors Compensation
Plan)) if and when the Company declares and pays a dividend on
its common stock.
In general, amounts deferred are paid to a non-employee director
as of the earliest of:
|
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|
|
|
the date elected by such director; |
|
|
|
the date the director ceases to be a director; or |
|
|
|
the date a change of control (as defined in the Outside
Directors Compensation Plan) occurs. |
Amounts deferred are paid in cash in a single sum payment or, at
the directors election, in installments. Deferred stock
units are paid based on the fair market value of our common
stock on the payout date.
A non-employee director may elect to defer receipt of all or a
portion of the payment due to him or her when a restricted unit
vests, including the amount in his or her dividend equivalent
account. This deferral is generally subject to the same
requirements that apply to deferrals of the annual retainer and
meeting fees.
In February 1997, we implemented stock ownership guidelines for
non-employee directors. These ownership guidelines require each
non-employee director to own stock or deferred stock units equal
in value to three times the Base Retainer within five years of
becoming a director.
Directors who are also our employees receive no compensation for
their services as directors except reimbursement of expenses
incurred in attending meetings of our Board or Board committees.
10
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth, as of March 21, 2006
(except as indicated below), beneficial ownership, as defined by
Securities and Exchange Commission rules, of our common stock
and ownership of restricted stock units and deferred stock units
by the persons or groups specified. Each of the persons listed
below has sole voting and investment power with respect to the
beneficially owned shares listed unless otherwise indicated.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
Percentage of | |
|
|
|
|
of Common Stock | |
|
Common Stock | |
|
Number of | |
|
|
Owned Beneficially | |
|
Owned Beneficially | |
|
Stock Units Owned(19) | |
|
|
| |
|
| |
|
| |
Pzena Investment Management, LLC(1)
|
|
|
10,885,504 |
|
|
|
16.21 |
% |
|
|
N/A |
|
AXA Financial, Inc.(2)
|
|
|
8,270,629 |
|
|
|
12.3 |
% |
|
|
N/A |
|
Wellington Management Company, LLP(3)
|
|
|
7,059,030 |
|
|
|
10.51 |
% |
|
|
N/A |
|
Vanguard Windsor Funds(4)
|
|
|
6,772,100 |
|
|
|
10.08 |
% |
|
|
N/A |
|
CAM/Salomon/Smith Barney/ TIMCO/Citigroup(5)
|
|
|
6,084,609 |
|
|
|
9.06 |
% |
|
|
N/A |
|
Robert E. Rossiter(6)(7)
|
|
|
340,947 |
(9) |
|
|
* |
|
|
|
189,146 |
|
James H. Vandenberghe(6)(7)
|
|
|
231,199 |
(10) |
|
|
* |
|
|
|
112,686 |
|
Douglas G. DelGrosso(7)
|
|
|
153,781 |
(11) |
|
|
* |
|
|
|
73,214 |
|
David C. Wajsgras(7)(8)
|
|
|
4,098 |
|
|
|
* |
|
|
|
30,762 |
|
Daniel A. Ninivaggi(7)
|
|
|
71 |
|
|
|
* |
|
|
|
27,484 |
|
Anne K. Bingaman(6)
|
|
|
1,500 |
|
|
|
* |
|
|
|
4,645 |
|
David E. Fry(6)
|
|
|
3,103 |
(12) |
|
|
* |
|
|
|
6,006 |
|
Conrad L. Mallett(6)
|
|
|
2,475 |
(13) |
|
|
* |
|
|
|
6,843 |
|
Larry W. McCurdy(6)
|
|
|
11,500 |
(14) |
|
|
* |
|
|
|
15,789 |
|
Roy E. Parrott(6)
|
|
|
7,730 |
(15) |
|
|
* |
|
|
|
4,645 |
|
David P. Spalding(6)
|
|
|
14,250 |
(16) |
|
|
* |
|
|
|
12,828 |
|
James A. Stern(6)
|
|
|
14,650 |
(17) |
|
|
* |
|
|
|
14,834 |
|
Henry D.G. Wallace(6)
|
|
|
1,000 |
|
|
|
* |
|
|
|
5,223 |
|
Richard F. Wallman(6)
|
|
|
1,500 |
|
|
|
* |
|
|
|
4,645 |
|
Total Executive Officers and Directors as a Group (19
individuals)
|
|
|
995,887 |
(18) |
|
|
1.5 |
% |
|
|
621,154 |
(20) |
|
|
|
|
* |
Less than 1% |
|
|
(1) |
We have been informed by Pzena Investment Management, LLC
(PIM), in an amended report on Schedule 13G
dated February 14, 2006, that (a) PIM is a registered
investment advisor, and (b) PIM exercises sole voting power
over 8,920,159 shares, shared voting power over no shares,
sole dispositive power over 10,885,504 shares and shared
dispositive power over no shares. The address of Pzena
Investment Management, LLC is 120 West 45th Street,
20th Floor, New York, New York 10036. |
|
|
(2) |
We have been informed by AXA Financial, Inc. and certain of its
affiliates, in an amended report on Schedule 13G dated
February 14, 2006, that (a) they are parent holding
companies of (i) Alliance Capital Management L.P., a
registered investment advisor, which acquired the shares solely
for investment purposes on behalf of client discretionary
investment advisory accounts and (ii) AXA Equitable Life
Insurance Company which acquired the shares solely for
investment purposes, (b) they exercise sole voting power
over 4,719,283 shares and shared voting power over
855,247 shares, (c) they exercise sole dispositive
power over 8,270,629 shares and shared dispositive power
over no shares, and (d) they beneficially own the shares
reported pursuant to (x) the investment advisory role of
their |
11
|
|
|
|
|
subsidiary, Alliance Capital Management L.P. and (y) the
direct holdings of their subsidiaries. The address of AXA
Financial, Inc. is 1290 Avenue of the Americas, New York, New
York 10104. |
|
|
(3) |
We have been informed by Wellington Management Company, LLP
(WMC), in an amended report on Schedule 13G
dated January 10, 2006, that (a) WMC is a registered
investment advisor and that WMC may be deemed to beneficially
own the shares held by its clients, and (b) WMC exercises
sole voting power over no shares, shared voting power over
298,500 shares, sole dispositive power over no shares and
shared dispositive power over 7,059,030 shares. The address
of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts 02109. |
|
|
(4) |
We have been informed by Vanguard Windsor Funds
Vanguard Windsor Fund 51-00082715 (Vanguard),
in a report on Schedule 13G dated February 13, 2006,
that (a) Vanguard is a registered investment company under
Section 8 of the Investment Company Act of 1940, and
(b) Vanguard exercises sole voting power over
6,772,100 shares, shared voting power over no shares, sole
dispositive power over no shares and shared dispositive power
over no shares. The address of Vanguard Windsor
Funds Vanguard Windsor Fund 51-00082715 is 100
Vanguard Boulevard, Malvern, Pennsylvania 19355. |
|
|
(5) |
We have been informed by CAM North America, LLC, Salomon
Brothers Asset Management Inc, Smith Barney Fund Management LLC,
TIMCO Asset Management Inc. and Citigroup Asset Management Ltd.,
in a report on Schedule 13G dated February 15, 2006,
that (a) they report as a group pursuant to
Rule 13d-1(b)(1)(ii)(J)
under the Securities Exchange Act of 1934, and (b) they
exercise sole voting power over no shares, shared voting power
over 5,031,232 shares, sole dispositive power over no
shares and shared dispositive power over 6,084,609 shares.
The principal place of business of the group consisting of CAM
North America, LLC, Salomon Brothers Asset Management Inc, Smith
Barney Fund Management LLC, TIMCO Asset Management Inc. and
Citigroup Asset Management Ltd., is 399 Park Avenue, New York,
New York 10022. |
|
|
(6) |
The individual is a director. |
|
|
(7) |
The individual is a named executive officer. |
|
|
(8) |
Mr. Wajsgras resigned as our Executive Vice President and
Chief Financial Officer effective March 10, 2006. |
|
|
(9) |
Includes 251,250 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. Also includes 45,000 shares of common
stock held by a grantor retained annuity trust. |
|
|
(10) |
Includes 165,000 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. |
|
(11) |
Includes 132,500 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. Also includes 8,781 shares of common
stock held in his wifes revocable trust. |
|
(12) |
Includes 2,000 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. |
|
(13) |
Includes 2,000 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. |
|
(14) |
Includes 9,500 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. |
|
(15) |
Includes 4,500 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. |
|
(16) |
Includes 8,250 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. |
|
(17) |
Includes 8,250 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. Also, includes 2,400 shares of common
stock held in a revocable trust for the benefit of
Mr. Sterns children. Mr. Stern disclaims
beneficial ownership of these shares. |
12
|
|
(18) |
Includes 754,950 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the record date. |
|
(19) |
Includes the restricted stock units owned by our executive
officers and the restricted units and deferred stock units owned
by our non-employee directors. These restricted stock units,
restricted units and deferred stock units are subject to all the
economic risks of stock ownership but may not be voted or sold
and, therefore, ownership of such units is not deemed to
constitute beneficial ownership of common stock. In addition,
the restricted stock units and restricted units are subject to
vesting provisions as set forth in the respective grant
agreements. |
|
(20) |
Consists of 545,696 restricted stock units owned by our
executive officers in the aggregate, 41,819 restricted units
owned by our non-employee directors in the aggregate and 33,639
deferred stock units owned by our non-employee directors in the
aggregate. |
Section 16(a) Beneficial Ownership Reporting
Compliance
Based upon our review of reports filed with the Securities and
Exchange Commission and written representations that no other
reports were required, we believe that all of our directors and
executive officers complied during 2005 with the reporting
requirements of Section 16(a) of the Securities Exchange
Act of 1934.
13
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth annual and long-term compensation
for our chief executive officer and four other most highly
compensated executive officers (our named executive
officers) in the fiscal years ended December 31,
2005, 2004 and 2003.
Summary Compensation Table
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Awards | |
|
Payouts | |
|
|
|
|
|
|
| |
|
| |
|
|
|
|
Annual Compensation | |
|
|
|
Securities | |
|
|
|
|
|
|
| |
|
Restricted | |
|
Underlying | |
|
|
|
|
|
|
|
|
Other Annual | |
|
Stock Unit | |
|
Options/ | |
|
LTIP | |
|
All Other | |
Name and Principal Positions |
|
Period | |
|
Salary(1) | |
|
Bonus(1) | |
|
Compensation(2) | |
|
Awards(3) | |
|
SARs(4) | |
|
Payouts(5) | |
|
Compensation | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter,
|
|
|
2005 |
|
|
$ |
1,100,000 |
|
|
$ |
0 |
|
|
$ |
287,437 |
|
|
$ |
499,929 |
|
|
|
151,875 |
|
|
$ |
0 |
|
|
$ |
47,094 |
(6) |
|
Chairman and
|
|
|
2004 |
|
|
|
1,008,334 |
|
|
|
1,506,000 |
|
|
|
117,527 |
|
|
|
2,852,586 |
|
|
|
0 |
|
|
|
442,358 |
|
|
|
84,071 |
|
|
Chief Executive Officer
|
|
|
2003 |
|
|
|
1,000,000 |
|
|
|
1,638,750 |
|
|
|
82,244 |
|
|
|
2,977,895 |
|
|
|
0 |
|
|
|
660,858 |
|
|
|
73,648 |
|
James H. Vandenberghe,
|
|
|
2005 |
|
|
$ |
925,000 |
|
|
$ |
0 |
|
|
$ |
86,298 |
|
|
$ |
279,208 |
|
|
|
84,375 |
|
|
$ |
0 |
|
|
$ |
40,881 |
(7) |
|
Vice Chairman and Interim
|
|
|
2004 |
|
|
|
902,083 |
|
|
|
813,240 |
|
|
|
|
|
|
|
1,569,632 |
|
|
|
0 |
|
|
|
364,952 |
|
|
|
55,187 |
|
|
Chief Financial Officer
|
|
|
2003 |
|
|
|
831,251 |
|
|
|
973,418 |
|
|
|
|
|
|
|
1,713,942 |
|
|
|
0 |
|
|
|
505,533 |
|
|
|
49,209 |
|
Douglas G. DelGrosso,
|
|
|
2005 |
|
|
$ |
705,834 |
|
|
$ |
0 |
|
|
$ |
770,686 |
|
|
$ |
262,282 |
|
|
|
84,375 |
|
|
$ |
0 |
|
|
$ |
24,737 |
(8) |
|
President and
|
|
|
2004 |
|
|
|
677,083 |
|
|
|
542,160 |
|
|
|
748,058 |
|
|
|
1,095,898 |
|
|
|
0 |
|
|
|
254,296 |
|
|
|
35,044 |
|
|
Chief Operating Officer
|
|
|
2003 |
|
|
|
629,168 |
|
|
|
655,500 |
|
|
|
388,079 |
|
|
|
1,151,526 |
|
|
|
0 |
|
|
|
317,192 |
|
|
|
29,272 |
|
David C. Wajsgras(9),
|
|
|
2005 |
|
|
$ |
605,000 |
|
|
$ |
0 |
|
|
$ |
92,293 |
|
|
$ |
187,515 |
|
|
|
60,750 |
|
|
$ |
0 |
|
|
$ |
22,636 |
(10) |
|
Former Executive
|
|
|
2004 |
|
|
|
577,083 |
|
|
|
461,840 |
|
|
|
|
|
|
|
876,401 |
|
|
|
0 |
|
|
|
185,828 |
|
|
|
24,481 |
|
|
Vice President and
|
|
|
2003 |
|
|
|
506,251 |
|
|
|
458,850 |
|
|
|
|
|
|
|
1,012,092 |
|
|
|
0 |
|
|
|
198,276 |
|
|
|
13,456 |
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Ninivaggi,
|
|
|
2005 |
|
|
$ |
449,584 |
|
|
$ |
0 |
|
|
$ |
98,881 |
|
|
$ |
125,010 |
|
|
|
40,500 |
|
|
$ |
0 |
|
|
$ |
12,711 |
(11) |
|
Senior Vice President,
|
|
|
2004 |
|
|
|
438,334 |
|
|
|
223,390 |
|
|
|
294,190 |
|
|
|
590,580 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,709 |
|
|
Secretary and General
|
|
|
2003 |
|
|
|
183,621 |
(12) |
|
|
127,685 |
(12) |
|
|
301,418 |
|
|
|
600,041 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,883 |
|
|
Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Under the Management Stock Purchase Plan, named executive
officers elected to defer portions of their 2005 salaries and
bonuses. Salaries and bonuses are reported without giving effect
to any amounts deferred under the Management Stock Purchase
Plan. The named executive officers deferred the following
amounts of their total salary and bonus earned in 2005:
Mr. Rossiter, $440,000; Mr. Vandenberghe, $277,500;
and Mr. DelGrosso, $175,000. For further information
regarding the Management Stock Purchase Plan, see
Compensation Committee Report Long-Term
Incentives Management Stock Purchase Plan
beginning on page 27. |
|
|
(2) |
This column includes the perquisites and personal benefits,
including any associated tax
gross-up payments,
received by the named executive officers which exceeded the
lesser of $50,000 or 10% of the named executives salary
and bonus for the year. Of the amounts reported in this column,
the following exceeded 25% of the value of the total perquisites
and benefits provided in a given year: for Mr. Rossiter,
personal use of the corporate aircraft in the amounts of
$197,930 in 2005, $60,428 in 2004 and $46,025 in 2003, payments
related to country club memberships of $31,831 in 2004 and
payments for expenses related to financial planning of $23,558
in 2003; for Mr. Vandenberghe, payments related to country
club memberships of $39,857 and personal use of the corporate
aircraft in the amount of $28,058 in 2005; for
Mr. DelGrosso, payments of $735,277 in 2005, $730,921 in
2004 and $363,787 in 2003 related to his overseas assignment
which commenced on October 1, 2001 and ended July 31,
2004; for Mr. Wajsgras, payments related to country club
memberships of $46,649 and personal use of the corporate
aircraft in the amount of $28,497 in 2005; and for
Mr. Ninivaggi, payments related to country club memberships
of $88,516 in 2005, relocation expenses of $247,663 in 2004 and
a relocation allowance and signing bonus totaling $300,121 in
2003. Overseas assignment compensation primarily reflects tax
equalization payments, reimbursement for foreign housing costs,
a cost-of-living
differential, |
14
|
|
|
|
|
certain moving and relocation expenses, an international
assignment allowance and certain associated tax gross-ups. |
|
|
(3) |
Restricted stock unit awards consist of (i) awards under
the Management Stock Purchase Plan based on deferral elections
with respect to salary and bonus earned in the respective years
and (ii) restricted stock unit awards valued based on the
price of our common stock on the grant date. With respect to the
Management Stock Purchase Plan, the restricted stock unit awards
reported reflect the premium portion (as a result of the
discounted unit price) awarded to each named executive officer
based on such officers deferral election, and the value of
each such award is reported as of its respective grant date.
Pursuant to deferral elections made under the Management Stock
Purchase Plan relating to compensation earned in the year ending
December 31, 2005, Mr. Rossiter, Mr. Vandenberghe
and Mr. DelGrosso received 10,136, 6,374 and 3,805
restricted stock units, respectively. The premium portions
awarded to these individuals resulting from their deferrals were
$31,141, $18,770 and $1,844 for Mr. Rossiter,
Mr. Vandenberghe and Mr. DelGrosso respectively. On
November 10, 2005, Mr. Rossiter,
Mr. Vandenberghe, Mr. DelGrosso, Mr. Wajsgras and
Mr. Ninivaggi received 16,875, 9,375, 9,375, 6,750, and
4,500 restricted stock units, respectively, under the Long-Term
Stock Incentive Plan. Values in the table for such units are
based on the per share closing price of $27.78 for our common
stock on November 10, 2005. However, these restricted stock
units are subject to vesting over a four-year time period, with
one half vesting on the second anniversary of the grant date and
one half vesting on the fourth anniversary. For additional
information regarding the Management Stock Purchase Plan and the
deferral elections thereunder as well as the grant of restricted
stock units in 2005, see Compensation Committee
Report beginning on page 23. |
|
|
|
Holders of restricted stock units are entitled to dividend
equivalents if and when cash dividends are declared and paid on
our common stock, which dividend equivalents are calculated by
multiplying the dividend amount by the number of restricted
stock units held. These dividend equivalents are credited to an
account established by the Company for bookkeeping purposes only
and credited monthly with interest at the prime rate, with
respect to the 2005, 2004 and 2003 restricted stock units.
Dividend equivalents vest in accordance with the vesting
schedule of the restricted stock units to which they relate. As
of December 31, 2005, Mr. Rossiter held 221,660
restricted stock units with an aggregate value of $6,308,444,
Mr. Vandenberghe held 111,112 restricted stock units with
an aggregate value of $3,162,248, Mr. DelGrosso held 63,193
restricted stock units with an aggregate value of $1,798,473,
Mr. Wajsgras held 65,886 restricted stock units with an
aggregate value of $1,875,116, and Mr. Ninivaggi held
26,381 restricted stock units with an aggregate value of
$750,803. The aggregate value of restricted stock units is based
on the per share closing price of $28.46 for our common stock on
December 30, 2005. |
|
|
|
|
(4) |
On November 10, 2005, Mr. Rossiter,
Mr. Vandenberghe, Mr. DelGrosso, Mr. Wajsgras and
Mr. Ninivaggi received 151,875, 84,375, 84,375, 60,750 and
40,500 stock-settled stock appreciation rights, respectively,
under the Long-Term Stock Incentive Plan. These stock-settled
stock appreciation rights are subject to vesting over a
three-year time period. For additional information regarding the
grant of stock appreciation rights in 2005, see
Compensation Committee Report beginning on
page 23. No options or stock appreciation rights were
granted to our named executive officers in 2003 or 2004. |
|
|
(5) |
There were no LTIP payouts for 2005. |
|
|
(6) |
Represents: Executive Supplemental Savings Plan matching
contributions of $24,406; Retirement Savings Plan matching
contributions of $3,094; life insurance premiums paid by Lear of
$11,808; imputed income of $2,786 with respect to life insurance
coverage; and consideration of $5,000 in respect of entering
into a new employment agreement. |
|
|
(7) |
Represents: Executive Supplemental Savings Plan matching
contributions of $20,090; Retirement Savings Plan matching
contributions of $3,035; life insurance premiums paid by Lear of
$12,756; and consideration of $5,000 in respect of entering into
a new employment agreement. |
|
|
(8) |
Represents: Executive Supplemental Savings Plan matching
contributions of $15,732; Retirement Savings Plan matching
contributions of $1,914; life insurance premiums paid by Lear of
$1,251; imputed |
15
|
|
|
|
|
income of $840 with respect to life insurance coverage; and
consideration of $5,000 in respect of entering into a new
employment agreement. |
|
|
|
|
(9) |
Mr. Wajsgras resigned as our Executive Vice President and
Chief Financial Officer effective March 10, 2006. |
|
|
(10) |
Represents: Executive Supplemental Savings Plan matching
contributions of $13,283; Retirement Savings Plan matching
contributions of $1,842; life insurance premiums paid by Lear of
$1,251; imputed income of $1,260 with respect to life insurance
coverage; and consideration of $5,000 in respect of entering
into a new employment agreement. |
|
(11) |
Represents: Executive Supplemental Savings Plan matching
contributions of $4,920; Retirement Savings Plan matching
contributions of $700; life insurance premiums paid by Lear of
$1,251; imputed income of $840 with respect to life insurance
coverage; and consideration of $5,000 in respect of entering
into a new employment agreement. |
|
(12) |
Mr. Ninivaggi joined Lear in July 2003. |
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
Available for Future | |
|
|
Number of | |
|
Weighted Average | |
|
Issuance Under | |
|
|
Securities to be | |
|
Exercise Price of | |
|
Equity | |
|
|
Issued Upon | |
|
Outstanding | |
|
Compensation Plans | |
|
|
Exercise of | |
|
Options, | |
|
(Excluding | |
|
|
Outstanding Options, | |
|
Warrants and | |
|
Securities Reflected | |
|
|
Warrants and Rights | |
|
Rights | |
|
in Column (a)) | |
As of December 31, 2005 |
|
(a) | |
|
(b) | |
|
(c) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders(1)
|
|
|
6,556,245 |
(2) |
|
$ |
28.73 |
(3) |
|
|
351,494 |
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,556,245 |
|
|
$ |
28.73 |
|
|
|
351,494 |
|
|
|
(1) |
Includes the 1994 Stock Option Plan, the 1996 Stock Option Plan
and the Long-Term Stock Incentive Plan. |
|
(2) |
Includes 2,983,405 of outstanding options, 1,215,046 of
outstanding stock-settled stock appreciation rights, 2,234,122
of outstanding restricted stock units and 123,672 of outstanding
performance shares. Does not include 334,542 of outstanding
cash-settled stock appreciation rights. |
|
(3) |
Reflects outstanding options at a weighted average exercise
price of $40.69, outstanding stock-settled stock appreciation
rights at a weighted average exercise price of $27.65,
outstanding restricted stock units at a weighted average price
of $14.94 and outstanding performance shares at a weighted
average price of zero. |
16
Option/ SAR Grants and Exercises and Long-Term Incentive
Awards in Last Fiscal Year
|
|
|
Stock Appreciation Right (SAR) Grants |
The following table indicates the SARs granted to each of our
named executive officers during the fiscal year ended
December 31, 2005 and the potential value of those SARs on
an aggregated basis. All the SARs reported below were granted
pursuant to the Long-Term Stock Incentive Plan.
SAR Grants in Fiscal Year 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
% of Total | |
|
|
|
|
|
|
|
|
Securities | |
|
SARs | |
|
|
|
|
|
|
|
|
Underlying | |
|
Granted to | |
|
Exercise or | |
|
|
|
|
|
|
SARs | |
|
Employees in | |
|
base price | |
|
Expiration | |
|
(1)Grant Date | |
Name |
|
Granted | |
|
Fiscal Year | |
|
($/Share) | |
|
Date | |
|
Present Value | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
151,875 |
|
|
|
9.8% (total |
) |
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
$ |
1,418,513 |
|
James H. Vandenberghe
|
|
|
84,375 |
|
|
|
5.4% (total |
) |
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
$ |
788,063 |
|
Douglas G. DelGrosso
|
|
|
84,375 |
|
|
|
5.4% (total |
) |
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
$ |
788,063 |
|
David C. Wajsgras
|
|
|
60,750 |
|
|
|
3.9% (total |
) |
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
$ |
567,405 |
|
Daniel A. Ninivaggi
|
|
|
40,500 |
|
|
|
2.6% (total |
) |
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
$ |
378,270 |
|
|
|
(1) |
The grant-date valuation shown is based upon a Black-Scholes
based option pricing model using the following assumptions:
(i) an expected volatility of 40.0%; (ii) risk-free
interest rate of 4.40%; (iii) expected dividend yields of
1.91%; and (iv) an expected life of
41/2
years. For a discussion of the terms of the SARs
granted, see Compensation Committee Report
Long-Term Incentives beginning on page 25. |
|
|
|
Restricted Stock Unit Grants |
The Companys equity-based awards for 2005 also consisted
of restricted stock units. See Compensation Committee
Report Long-Term Incentives Restricted
Stock Units beginning on page 26. On
November 10, 2005, Mr. Rossiter,
Mr. Vandenberghe, Mr. DelGrosso, Mr. Wajsgras and
Mr. Ninivaggi were granted 16,875, 9,375, 9,375, 6,750 and
4,500 restricted stock units, respectively, under the Long-Term
Stock Incentive Plan. One half of these units vest on the second
anniversary of the grant date, and the remaining half vest on
the fourth anniversary of the grant date, provided the executive
remains employed. If the executive retires after age 55
with 10 or more years of vesting service (as defined in the
Companys pension plan), the executive will be deemed
vested in the units that would have become vested during the
24 months following his retirement date. If the
executives employment terminates due to death or
disability, all units will become vested. If a change in control
of the Company occurs (as defined in the Long-Term Stock
Incentive Plan), all units will become vested. The restricted
stock units are credited with dividend equivalents which are
credited to an account established by the Company for
bookkeeping purposes only (credited monthly with interest at an
annual rate equal to the prime rate) if and when the Board of
Directors declares and pays a dividend on our common stock. Such
dividend equivalents are subject to the same vesting schedule as
the associated restricted stock units.
The restricted stock units are converted into shares of our
common stock, on a one-for-one basis, net of taxes on their
respective vesting dates. Delivery of shares is made at the time
of vesting unless the employee has elected to defer delivery. An
employee may elect to defer delivery of shares for up to ten
years.
17
The following table indicates the value of stock options and
SARs exercised during the fiscal year ended December 31,
2005 and the value of unexercised stock options and SARs held as
of December 31, 2005 by each of our named executive
officers.
Aggregated Option/ SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/ SAR Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Unexercised | |
|
Value of Unexercised | |
|
|
|
|
|
|
Options/SARs at | |
|
In-the-Money Options/SARs | |
|
|
Shares Acquired | |
|
Value | |
|
December 31, 2005 | |
|
at December 31, 2005(1) | |
|
|
on Exercise | |
|
Realized | |
|
| |
|
| |
Name |
|
(#) | |
|
($) | |
|
Exercisable/Unexercisable | |
|
Exercisable/Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
0 |
|
|
|
0 |
|
|
|
251,250/151,875 |
|
|
$ |
0/0 |
|
James H. Vandenberghe
|
|
|
0 |
|
|
|
0 |
|
|
|
165,000/84,375 |
|
|
$ |
0/0 |
|
Douglas G. DelGrosso
|
|
|
0 |
|
|
|
0 |
|
|
|
132,500/84,375 |
|
|
$ |
0/0 |
|
David C. Wajsgras
|
|
|
0 |
|
|
|
0 |
|
|
|
35,000/60,750 |
|
|
$ |
0/0 |
|
Daniel A. Ninivaggi
|
|
|
0 |
|
|
|
0 |
|
|
|
0/40,500 |
|
|
$ |
0/0 |
|
|
|
(1) |
Based on the closing price of $28.46 per share for our
common stock on December 30, 2005, as reported by the New
York Stock Exchange. |
The following table provides information concerning the grants
of performance share awards under the Long-Term Stock Incentive
Plan in 2005 to our named executive officers.
Long-Term Incentive Plan Performance Share Awards
in Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts under Non-Stock | |
|
|
|
|
|
|
Price-Based Plans(1) | |
|
|
Number of shares, | |
|
Performance or Other | |
|
| |
|
|
units or other | |
|
Period until Maturation | |
|
Threshold | |
|
Target | |
|
Maximum | |
Name |
|
rights (#) | |
|
or Payout | |
|
(#) | |
|
(#) | |
|
(#) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
9,049 |
|
|
|
1/1/200512/31/07 |
|
|
|
2,263/2,263 |
|
|
|
4,525/4,525 |
|
|
|
6,788/6,788 |
|
James H. Vandenberghe
|
|
|
3,805 |
|
|
|
1/1/200512/31/07 |
|
|
|
952/952 |
|
|
|
1,903/1,903 |
|
|
|
2,855/2,855 |
|
Douglas G. DelGrosso
|
|
|
2,879 |
|
|
|
1/1/200512/31/07 |
|
|
|
720/720 |
|
|
|
1,440/1,440 |
|
|
|
2,160/2,160 |
|
David C. Wajsgras
|
|
|
2,468 |
|
|
|
1/1/200512/31/07 |
|
|
|
617/617 |
|
|
|
1,234/1,234 |
|
|
|
1,851/1,851 |
|
Daniel A. Ninivaggi
|
|
|
1,830 |
|
|
|
1/1/200512/31/07 |
|
|
|
458/458 |
|
|
|
915/915 |
|
|
|
1,373/1,373 |
|
|
|
(1) |
Represents performance share awards under our Long-Term Stock
Incentive Plan. The threshold column refers to the amount
payable for a specific minimum level of performance under the
plan, the target column refers to the amount payable if the
specified targets are reached, and the maximum column refers to
the maximum payout under the plan. The first number in each
column represents the number of shares under the performance
share awards that a named executive officer may receive based
upon satisfaction of the return on invested capital performance
criteria. The second number in each column represents the number
of shares under the performance share award that a named
executive officer may receive based upon satisfaction of the
relative return to shareholders performance criteria. See
Compensation Committee Report Long-Term
Incentives Performance Share Awards beginning
on page 27. |
Pension Plan and Benefits
The named executive officers (as well as other eligible
employees) participate in the Lear Corporation Pension Plan. The
pension plan is intended to be a qualified pension plan under
the Internal Revenue Code, and its benefits are integrated with
Social Security benefits. In general, an eligible employee
becomes a participant on the July 1st or
January 1st after completing one year of service (as
defined in the plan). Benefits are funded by employer
contributions that are determined under accepted actuarial
principles and the Internal Revenue Code. The Company may make
contributions in excess of any minimum funding requirements when
the Company believes it is financially advantageous to do so and
based on its other capital requirements and other considerations.
18
The pension plan contains multiple benefit formulas. Under the
principal formula which applies to all named executive officers,
pension benefits are based on a participants final
average earnings, which is the average of the
participants compensation for the five calendar years in
the last 10 years of employment in which the participant
had his highest earnings. Compensation is defined under the plan
to mean (i) all cash compensation reported for federal
income tax purposes other than long-term incentive bonuses, and
(ii) any elective contributions that are not includable in
gross income under Internal Revenue Code Section 125 or
401(k). A participants annual retirement benefit, payable
as a life annuity at age 65, equals the greater of:
|
|
|
|
|
(a) 1.10% times final average annual earnings times years
of credited service before 1997 (to a maximum of 35 years),
plus (b) 1.00% times final average annual earnings times
years of credited service after 1996 (with a maximum of
35 years reduced by years of credited service before 1997),
plus (c) 0.65% times final average annual earnings in
excess of covered compensation (as defined in I.R.S. Notice
89-70) times years of credited service (with a maximum of
35 years); and |
|
|
|
$360.00 times years of credited service. |
Any employee who on December 31, 1996 was an active
participant and age 50 or older earned benefits under the
1.10% formula for years of credited service through 2001.
Credited service under the pension plan includes all years of
pension service under the Lear Siegler Seating Corp. Pension
Plan, and a participants retirement benefit under the
pension plan is reduced by his benefit under the Lear Siegler
Seating Corp. Pension Plan. The benefits under the pension plan
become vested once the participant accrues five years of vesting
service under the plan.
At age 65, it is estimated that under the pension plan
Mr. Rossiter, Mr. Vandenberghe and Mr. DelGrosso
will each have 35 years of credited service and
Mr. Ninivaggi will have 26 years of credited service.
Mr. Wajsgras resigned his position with Lear effective
March 10, 2006. Mr. Wajsgras estimated annual
retirement benefit under the pension plan, payable at
age 65, is $18,350.
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Pension Equalization Plan |
In addition to the pension plan, we have established the Pension
Equalization Plan. Lear Corporations pension plan is
subject to rules in the Internal Revenue Code that restrict the
level of retirement income that can be provided to, and the
amount of compensation that can be considered for, highly paid
executives under the pension plan. The Pension Equalization Plan
is intended to supplement the benefits under the pension plan
for certain highly paid executives whose pension plan benefits
are limited by those Internal Revenue Code limits. A
participants Pension Equalization Plan benefit equals the
difference between the executives actual vested accrued
pension plan benefit and the pension plan benefit the executive
would have accrued under the Lear Corporation formula if the
Internal Revenue Code limits on considered compensation and
total benefits did not apply. Highly compensated executives and
other employees whose compensation exceeds the Internal Revenue
Code limits for at least three years are eligible to participate
in the Pension Equalization Plan. Each of Mr. Rossiter,
Mr. Vandenberghe, Mr. DelGrosso and Mr. Ninivaggi
participates in the Pension Equalization Plan. The benefits
under the Pension Equalization Plan become vested once the
participant has either (i) attained age 55 and has
10 years of vesting service, attained age 65, or
becomes eligible for disability retirement under the pension
plan, or (ii) attained 20 years of vesting service.
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|
Executive Supplemental Savings Plan |
In addition to the pension plan and the Pension Equalization
Plan, we have established the Lear Corporation Executive
Supplemental Savings Plan. The purpose of the plan is to provide
participants with the opportunity to make elective deferrals of
compensation that could not be made under the Retirement Savings
Plan due to limits imposed by the Internal Revenue Code on the
amount of pre-tax contributions a participant can make to the
Retirement Savings Plan and/or the amount of compensation that
can be recognized under the Retirement Savings Plan. In
addition, the Executive Supplemental Savings Plan also provides
retirement benefits that would have been accrued under the
Retirement Savings Plan, the pension plan and/or the Pension
Equalization Plan if the participant had not elected to defer
compensation under the plan or the
19
Management Stock Purchase Plan (as described below beginning on
page 27). Participants are always vested in amounts they
elect to defer under the Executive Supplemental Savings Plan and
they generally become vested in the other benefits under the
Executive Supplemental Savings Plan after three years of vesting
service (as defined in the pension plan). Participants do not
vest in amounts that would have otherwise accrued under the
Pension Equalization Plan until they meet the vesting
requirements of that plan. Certain senior officers are eligible
to participate in the Executive Supplemental Savings Plan. Each
of Mr. Rossiter, Mr. Vandenberghe, Mr. DelGrosso,
Mr. Wajsgras and Mr. Ninivaggi participates in the
Executive Supplemental Savings Plan. Mr. Rossiter,
Mr. Vandenberghe, Mr. DelGrosso, Mr. Wajsgras and
Mr. Ninivaggi received matching contributions in the
Executive Supplemental Savings Plan based on 2005 earnings in
the amounts of $24,406, $20,090, $15,732, $13,283 and $4,920,
respectively.
The following table indicates estimated total annual benefits
payable as a single life annuity beginning at age 65 for
various compensation levels and years of credited service under
the pension plan, the Pension Equalization Plan and the
Executive Supplemental Savings Plan. Generally, annual
compensation used for pension formula purposes includes salary
and annual bonus paid in a particular year.
Pension Plan Table
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|
|
|
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|
Years of Credited Service | |
|
|
Covered | |
|
| |
Annual Compensation |
|
Compensation* | |
|
10 | |
|
15 | |
|
20 | |
|
25 | |
|
30 | |
|
35 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
$ 500,000
|
|
$ |
62,712 |
|
|
$ |
78,924 |
|
|
$ |
120,636 |
|
|
$ |
162,347 |
|
|
$ |
204,059 |
|
|
$ |
245,771 |
|
|
$ |
287,483 |
|
600,000
|
|
|
62,712 |
|
|
|
95,524 |
|
|
|
145,986 |
|
|
|
196,447 |
|
|
|
246,909 |
|
|
|
297,371 |
|
|
|
347,833 |
|
700,000
|
|
|
62,712 |
|
|
|
112,124 |
|
|
|
171,336 |
|
|
|
230,547 |
|
|
|
289,759 |
|
|
|
348,971 |
|
|
|
408,183 |
|
800,000
|
|
|
62,712 |
|
|
|
128,724 |
|
|
|
196,686 |
|
|
|
264,647 |
|
|
|
332,609 |
|
|
|
400,571 |
|
|
|
468,533 |
|
900,000
|
|
|
62,712 |
|
|
|
145,324 |
|
|
|
222,036 |
|
|
|
298,747 |
|
|
|
375,459 |
|
|
|
452,171 |
|
|
|
528,883 |
|
1,000,000
|
|
|
62,712 |
|
|
|
161,924 |
|
|
|
247,386 |
|
|
|
332,847 |
|
|
|
418,309 |
|
|
|
503,771 |
|
|
|
589,233 |
|
1,200,000
|
|
|
62,712 |
|
|
|
195,124 |
|
|
|
298,086 |
|
|
|
401,047 |
|
|
|
504,009 |
|
|
|
606,971 |
|
|
|
709,933 |
|
1,400,000
|
|
|
62,712 |
|
|
|
228,324 |
|
|
|
348,786 |
|
|
|
469,247 |
|
|
|
589,709 |
|
|
|
710,171 |
|
|
|
830,633 |
|
1,600,000
|
|
|
62,712 |
|
|
|
261,524 |
|
|
|
399,486 |
|
|
|
537,447 |
|
|
|
675,409 |
|
|
|
813,371 |
|
|
|
951,333 |
|
1,800,000
|
|
|
62,712 |
|
|
|
294,724 |
|
|
|
450,186 |
|
|
|
605,647 |
|
|
|
761,109 |
|
|
|
916,571 |
|
|
|
1,072,033 |
|
2,000,000
|
|
|
62,712 |
|
|
|
327,924 |
|
|
|
500,886 |
|
|
|
673,847 |
|
|
|
846,809 |
|
|
|
1,019,771 |
|
|
|
1,192,733 |
|
2,200,000
|
|
|
62,712 |
|
|
|
361,124 |
|
|
|
551,586 |
|
|
|
742,047 |
|
|
|
932,509 |
|
|
|
1,122,971 |
|
|
|
1,313,433 |
|
2,400,000
|
|
|
62,712 |
|
|
|
394,324 |
|
|
|
602,286 |
|
|
|
810,247 |
|
|
|
1,018,209 |
|
|
|
1,226,171 |
|
|
|
1,434,133 |
|
2,600,000
|
|
|
62,712 |
|
|
|
427,524 |
|
|
|
652,986 |
|
|
|
878,447 |
|
|
|
1,103,909 |
|
|
|
1,329,371 |
|
|
|
1,554,833 |
|
2,800,000
|
|
|
62,712 |
|
|
|
460,724 |
|
|
|
703,686 |
|
|
|
946,647 |
|
|
|
1,189,609 |
|
|
|
1,432,571 |
|
|
|
1,675,533 |
|
3,000,000
|
|
|
62,712 |
|
|
|
493,924 |
|
|
|
754,386 |
|
|
|
1,014,847 |
|
|
|
1,275,309 |
|
|
|
1,535,771 |
|
|
|
1,796,233 |
|
3,200,000
|
|
|
62,712 |
|
|
|
527,124 |
|
|
|
805,086 |
|
|
|
1,083,047 |
|
|
|
1,361,009 |
|
|
|
1,638,971 |
|
|
|
1,916,933 |
|
3,400,000
|
|
|
62,712 |
|
|
|
560,324 |
|
|
|
855,786 |
|
|
|
1,151,247 |
|
|
|
1,446,709 |
|
|
|
1,742,171 |
|
|
|
2,037,633 |
|
3,600,000
|
|
|
62,712 |
|
|
|
593,524 |
|
|
|
906,486 |
|
|
|
1,219,447 |
|
|
|
1,532,409 |
|
|
|
1,845,371 |
|
|
|
2,158,333 |
|
3,800,000
|
|
|
62,712 |
|
|
|
626,724 |
|
|
|
957,186 |
|
|
|
1,287,647 |
|
|
|
1,618,109 |
|
|
|
1,948,571 |
|
|
|
2,279,033 |
|
4,000,000
|
|
|
62,712 |
|
|
|
659,924 |
|
|
|
1,007,886 |
|
|
|
1,355,847 |
|
|
|
1,703,809 |
|
|
|
2,051,771 |
|
|
|
2,399,733 |
|
|
|
* |
Indicates the covered compensation for Mr. Rossiter who has
the lowest covered compensation of all the named executive
officers. The covered compensation for each of the other named
executive officers will be higher and their number of years of
credited service at the 1.10% formula will be fewer than
Mr. Rossiters, resulting in a slightly lower payout
amount for comparable compensation levels and years of credited
service. Such differences are not expected to be material. |
At age 65, it is estimated that under the plans
Mr. Rossiter, Mr. Vandenberghe and Mr. DelGrosso
will each have 35 years of credited service, and
Mr. Ninivaggi will have 26 years of credited service.
20
Retirement Savings Plan
We have established a Retirement Savings Plan pursuant to
Section 401(k) of the Internal Revenue Code for non-union
salaried employees who have completed one month of service.
Under the Retirement Savings Plan, each eligible employee may
elect to defer, on a pre-tax basis, a portion of his or her base
salary and annual bonus each year. The plan was originally
established with a company matching provision of 50%, 75% and
100% on an employees compensation up to a maximum of 5% of
an employees base salary and annual incentive bonus,
depending on years of service. Effective January 1, 2002
matching contributions were eliminated, but were subsequently
reinstated effective April 1, 2003 at a reduced rate of 25%
and 50% on an employees compensation up to a maximum of 5%
of an employees base salary and annual incentive bonus,
depending on years of service. In addition, the plan was amended
effective January 1, 2003 to allow for discretionary
company matching contributions. Company matching contributions
are initially invested in a money market-type fund and may be
transferred by the participant to other funds under the
Retirement Savings Plan at any time. Matching contributions
become vested under the Retirement Savings Plan at a rate of 20%
for each full year of service.
In 2005, each named executive received matching contributions in
the Retirement Savings Plan based on 2005 contributions in the
amounts of $3,094, $3,035, $1,914, $1,842 and $700 for
Mr. Rossiter, Mr. Vandenberghe, Mr. DelGrosso,
Mr. Wajsgras and Mr. Ninivaggi, respectively.
Employment Agreements
Effective March 15, 2005, we entered into revised
employment agreements with each of our named executive officers
and certain other officers and key employees. Unless terminated
earlier pursuant to a written notice of termination provided by
us or the executive, each employment agreement with our named
executive officers remains in effect until the earlier of
(i) the date two years after a written notice of
non-renewal is provided by us or the executive or (ii) the
date the executive reaches his or her normal retirement date
under our retirement plan for salaried employees then in effect.
Under the revised employment agreements for our named executive
officers, Mr. Rossiters annual base salary is
$1,100,000, Mr. Vandenberghes salary is $925,000,
Mr. DelGrossos salary is $770,000 ($925,000 effective
January 1, 2007) and Mr. Ninivaggis salary is
$500,000. The salaries of each of our named executive officers
may be increased at the discretion of the Compensation
Committee. In addition, each of Mr. Rossiter,
Mr. Vandenberghe, Mr. DelGrosso and Mr. Ninivaggi
are eligible for an annual incentive compensation bonus at the
discretion of the Compensation Committee. Under the terms of the
employment agreements, each named executive officer is also
eligible to participate in the welfare, retirement, perquisite
and fringe benefit, and other benefit plans, practices, policies
and programs, as may be in effect from time to time, for senior
executives of Lear generally.
The employment agreement for each named executive officer
provides that:
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|
|
|
|
following the death of the employee, we will pay to his estate
or designated beneficiary his full base salary and a pro rata
portion of any bonus earned prior to the date of death; |
|
|
|
upon termination for incapacity (as defined in the employment
agreement), the employee will receive all compensation payable
under our disability and medical plans and programs plus an
additional payment from us so that the aggregate amount received
by the employee from all sources equals, for the remainder of
such calendar year, his base salary at the rate in effect on the
date of termination plus any bonus and other amounts the
employee would have been entitled to if his employment continued
until the end of the calendar year, and so that the aggregate
amount received by the employee from all sources equals, for the
period from the end of such calendar year until the date two
years after the date of termination, his base salary at the rate
in effect on the date of termination; |
|
|
|
upon termination by the employee for good reason (as defined in
the employment agreement) or by us other than for cause or
incapacity (each as defined in the employment agreement), if the
employee executes a release, in form and substance satisfactory
to us, he will receive severance payments for two years after
the termination date equal to the sum of the base salary (at the
highest rate received during |
21
|
|
|
|
|
the term of the agreement) and aggregate bonus he would have
received for the same period (based on the highest annual bonus
received during the period of two calendar years preceding the
termination); |
|
|
|
in addition to the foregoing, upon termination by the employee
for good reason (as defined in the employment agreement) or by
us other than for cause or incapacity (each as defined in the
employment agreement), (i) all outstanding equity-based
awards and other benefits that are subject to time-based vesting
criteria will continue to vest during the severance period and,
following the conclusion of the severance period, unvested
awards will vest on a pro rata basis, and (ii) all benefits
that would vest under compensation and benefit plans based on
the satisfaction of specific performance measures would be paid
to the employee after the end of the performance period on a pro
rata basis, if and to the extent all relevant performance
targets are actually achieved; |
|
|
|
upon termination by the employee without good reason or by us
for cause, the employee is entitled to receive only unpaid
salary and benefits, if any, accrued through the effective date
of the employees termination; |
|
|
|
the Company may generally reduce the employees base salary
or bonus, defer payment of his compensation, or eliminate or
modify his benefits, without giving rise to a claim of
constructive termination, so long as such changes are made for
all executive officers of the Company; however, any such actions
by the Company within one year after a change in control (as
defined in the employment agreement) would give the employee a
basis for termination for good reason; |
|
|
|
the employee agrees to comply with certain confidentiality
covenants both during employment and after termination; |
|
|
|
the employee agrees to comply with certain non-compete and
non-solicitation covenants during his employment and for two
years after the date of termination, unless the employee is
terminated by us for cause, pursuant to a notice of non-renewal
from us, or if the employee terminates employment for other than
good reason, in which cases the employee agrees to comply with
such covenants for one year after the date of
termination; and |
|
|
|
upon transfer of all or substantially all of our assets to a
successor entity, we will require the successor entity expressly
to assume performance of the employment agreement. |
A copy of the revised employment agreement with each of our
named executive officers has been filed with the Securities and
Exchange Commission as an exhibit to our Current Report on
Form 8-K filed on
March 18, 2005.
Code Section 409A
On October 22, 2004, the American Jobs Creation Act was
enacted. Among other things, the American Jobs Creation Act
added a new Section 409A to the Internal Revenue Code that
makes significant changes to most nonqualified deferred
compensation plans. These changes include new restrictions on
when a deferral election may be made, or payments of amounts
deferred under a prior election may be postponed, and
restrictions on events that may trigger a distribution of
benefits. Except in very limited circumstances,
Section 409A prohibits the acceleration of any payment of
deferred compensation. Section 409A imposes additional
taxes and interest on deferrals that do not comply with the new
law. Section 409A applies in addition to other laws
applicable to nonqualified deferred compensation, including
those pertaining to the constructive receipt of income and
limitations on transfers of property in connection with the
performance of services. Section 409A is effective for
deferrals made after December 31, 2004, but may also apply
to amounts that are not vested by December 31, 2004, or
that were deferred under plans that are materially modified
after October 3, 2004. Under guidance issued by the
Internal Revenue Service in October, 2005, plans that are
subject to Section 409A must be amended by
December 31, 2006 to comply with the new law. We are
reviewing the impact of Section 409A on our deferred
compensation and equity compensation arrangements. We anticipate
making amendments to those arrangements by December 31,
2006 to comply with the new law.
22
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Compensation Committee was, during the fiscal
year ended December 31, 2005, an officer, former officer or
employee of our company or any of our subsidiaries. None of our
executive officers served as a member of:
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|
|
the compensation committee of another entity in which one of the
executive officers of such entity served on our Compensation
Committee; |
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|
the board of directors of another entity, one of whose executive
officers served on our Compensation Committee; or |
|
|
|
the compensation committee of another entity in which one of the
executive officers of such entity served as a member of our
Board. |
Michael Spalding, the brother of David Spalding, the Chairman of
our Compensation Committee, is employed as a non-executive
Senior Account Manager at Lears DaimlerChrysler
Division. In 2005, Michael Spalding was paid $99,442, which
included a bonus of $9,048. The employment relationship is on an
arms-length basis and Mr. Spalding has no involvement
or interest, directly or indirectly, in employment decisions
affecting his brother. The Board has concluded that
Mr. Spalding is independent.
COMPENSATION COMMITTEE REPORT
Regardless of anything indicating the contrary set forth in any
of our previous or future filings under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, that might incorporate this proxy statement, in whole
or in part, the following report and the performance graph which
follows shall not be deemed to be incorporated by reference.
Introduction
Our Compensation Committee is responsible for approving and
evaluating the director and officer compensation plans, policies
and programs of our Company, and for administering its stock
plans (including reviewing and approving equity grants to
officers). In addition, the Compensation Committee is
responsible for evaluating the performance of our Chief
Executive Officer and our other executive officers. The
Compensation Committee is currently comprised of four
non-employee directors: Ms. Bingaman, Mr. McCurdy,
Mr. Spalding and Mr. Wallman. Mr. Wallman was
appointed to the Committee in May 2005. Our Board has not
rejected or modified any action taken by the Compensation
Committee.
Executive Compensation Policy
The objectives of our compensation policies are to:
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optimize profitability and growth; |
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link the interests of management with those of stockholders; |
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align managements compensation mix with our business
strategy and compensation philosophy; |
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provide management with incentives for excellence in individual
performance; |
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maintain a strong link between executive pay and performance; |
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promote teamwork among managers; and |
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attract and retain highly qualified and effective officers, key
employees and directors. |
23
To achieve these objectives, the Compensation Committee believes
that the total compensation program for executive officers
should consist of the following:
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|
base salary; |
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|
annual incentives; |
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long-term incentives; and |
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certain other benefits. |
The Compensation Committee chooses a combination of the above
elements designed to retain executives and provide proper
incentives for performance. The Compensation Committee selects
the specific form of compensation within each of the
above-referenced groups based on industry standards, the cost to
the company versus the benefit provided to the recipient, the
impact of accounting and tax rules and other factors.
The Compensation Committee targets total remuneration of our
senior executives at the 75th percentile of our peer group
in return for comparable performance. However, this percentile
is only a target and actual compensation is dependent on various
factors, including the Companys actual financial
performance and satisfaction of specified management objectives,
and may be more or less than the target.
Executive Compensation Process
Our human resources executives and staff support the
Compensation Committee in its work. These members of management
work with compensation consultants, accountants and legal
counsel, as necessary, to implement the Compensation
Committees decisions and to make compensation
recommendations to the Compensation Committee. In addition, the
Compensation Committee has the authority to hire its own
advisors and counsel. In accordance with this authority, the
Compensation Committee has retained an independent compensation
consultant, reporting directly to the Compensation Committee, to
undertake a review of our executive compensation policies and
programs. A discussion of each of the elements of executive
compensation follows.
Base Salary
Base salaries for our executive officers are established at
levels considered appropriate in light of the duties and scope
of responsibilities of each officers position. In this
regard, the Compensation Committee considers the compensation
practices and corporate financial performance of similarly
situated companies based on research provided by outside
consultants. The Compensation Committee focuses primarily on
total compensation, including incentive awards, rather than base
salary alone, as the appropriate measure of executive officer
remuneration. As of December 31, 2005,
Mr. Rossiters base salary was $1,100,000,
Mr. Vandenberghes salary was $925,000,
Mr. DelGrossos salary was $770,000 ($925,000
effective January 1, 2007), Mr. Wajsgras salary
was $660,000 and Mr. Ninivaggis salary was $500,000.
Pursuant to elections made under the Management Stock Purchase
Plan, Mr. Rossiter, Mr. Vandenberghe and
Mr. DelGrosso elected to defer $440,000, $277,500 and
$175,000 of their 2005 salaries, respectively. Amounts deferred
were applied toward the purchase of restricted stock units under
the Management Stock Purchase Plan described below. In addition,
in lieu of additional increases in base salary levels in 2006,
certain of our senior executives, including Mr. DelGrosso
and Mr. Wajsgras, were granted supplemental restricted
stock units effective January 3, 2006. The restricted stock
units were granted to further align the interests of these
executives to those of our stockholders.
Annual Incentives
Our executive officers participate in the Annual Incentive
Compensation Plan, which was approved by stockholders in 2005.
Pursuant to this plan, the Compensation Committee makes annual
incentive awards designed to reward past financial performance
and the achievement of goals considered important to our future.
Awards are typically made in the first quarter of each year
based on our performance achieved in the previous calendar year.
24
Each named executive officer is assigned an annual target
opportunity under the Annual Incentive Compensation Plan
expressed as a percentage of such officers base salary.
Historically, the target opportunity for a given years
performance has been based 50% upon whether our earnings per
share reaches a threshold established by the Compensation
Committee and 50% upon whether the return on our net assets
reaches a threshold set by the Compensation Committee. The
actual award can vary from 0% to 140% of the annual target
opportunity based on whether these thresholds are met and, if
met, by how much the thresholds are exceeded. The Annual
Incentive Compensation Plan allows the Compensation Committee to
use various other financial and operational measures to set
performance goals, including, among others, earnings, EBITDA,
asset turnover, revenues, return on equity, return on invested
capital, net income, cash flow, market share, sales growth,
increase in customer base, capacity utilization, environmental
health and safety, diversity and quality. The Compensation
Committee may choose to use any one or a combination of these
measures (or any of the other measures listed in the plan) in
the future. No bonuses were earned under the Annual Incentive
Compensation Plan for the year ended December 31, 2005.
Long-Term Incentives
The long-term incentive component of our executive compensation
program is designed to provide our senior management with
substantial at-risk components and to align the interests of our
senior management with those of our stockholders. To achieve
these goals, the Compensation Committee has taken the following
steps with respect to senior management:
|
|
|
|
|
approved stock ownership guidelines for members of senior
management; |
|
|
|
granted stock-settled stock appreciation rights to certain
members of senior management; |
|
|
|
granted restricted stock units to certain members of senior
management; |
|
|
|
granted performance share awards to certain members of senior
management; and |
|
|
|
permitted certain members of senior management to defer a
portion of their base salary and annual incentive bonus under
the Management Stock Purchase Plan. |
The Compensation Committee strives to achieve a proper balance
between grants of long-term equity awards with time-based
vesting such as restricted stock units and grants of equity
awards whose value is more performance-based, such as stock
appreciation rights and performance shares. In 2003 and 2004,
the Compensation Committee awarded time-vested restricted stock
units to executives in lieu of awarding stock options. The
Compensation Committee took into account that restricted stock
units result in less dilution of the ownership interests of
existing stockholders than the options they replaced and
restricted stock units are effective incentives for our superior
performing employees to remain with us and to continue their
performance during periods of stock price fluctuations, when
stock options may have no realizable value. Based on a review of
evolving market practices and industry trends, in November 2005
the Compensation Committee approved a combination of equity
awards for certain members of senior management with 75% of the
value coming from stock-settled stock appreciation rights and
25% of the value coming from time-vested restricted stock units.
The Compensation Committee believes that stock-settled stock
appreciation rights result in less dilution to existing
stockholders than a comparable amount of options yet provide a
performance-based component that restricted stock units lack.
This is consistent with the Compensation Committees desire
to keep a significant portion of equity awards as
performance-based. In addition, in contrast to stock options,
participants do not need to fund an exercise price to exercise a
stock appreciation right.
|
|
|
Management Stock Ownership Requirements |
The Compensation Committee has implemented stock ownership
guidelines that require our officers to achieve, within five
years of reaching senior officer status, specified stock
ownership levels, based on a multiple of such officers
base salary. These guidelines are intended to create a strong
link between our long-term success and the ultimate compensation
of our officers. Compliance with the stock ownership guidelines
is determined in January of each year. The value of stock and
stock equivalents is based, in part, on a twelve-month average
stock price in order to mitigate the effect of stock price
fluctuations. The stock ownership levels
25
which must be achieved by our senior officers within the
five-year period, based on a multiple of such officers
base salary, are as follows:
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|
|
Multiple of | |
Position |
|
Base Salary | |
|
|
| |
Chief Executive Officer
|
|
|
5x |
|
Vice Chairman
|
|
|
4x |
|
Chief Operating Officer/Chief Financial Officer
|
|
|
3x |
|
Senior Vice Presidents and Division Presidents
|
|
|
2.5x |
|
Corporate Vice Presidents
|
|
|
2x |
|
The following are included for purposes of determining whether
the stock ownership requirements are satisfied: (i) shares
of common stock owned directly or held under the Retirement
Savings Plan; (ii) restricted stock units under the
Management Stock Purchase Plan, including those to be credited
in March following the date of determination; (iii) the
value of vested restricted stock units (non-MSPP) granted under
the Long-Term Stock Incentive Plan to the extent deferred and
not converted to shares of common stock; (iv) seventy
percent of performance shares scheduled to be distributed in the
current year under the Long-Term Stock Incentive Plan;
(v) seventy percent of restricted stock units under the
Management Stock Purchase Plan which are scheduled for
distribution in March following the date of determination;
(vi) seventy percent of the value of in the
money stock options or stock appreciation rights that are
currently exercisable or exercisable within twelve months of the
date of determination; and (vii) seventy percent of the
value of restricted stock units under the Long-Term Stock
Incentive Plan that are vested or will vest within twelve months
of the date of determination. Management personnel who have not
achieved a stock ownership level of at least 60% of their target
after three years will have up to 50% of their annual incentive
bonus delivered in the form of restricted stock units pursuant
to the Management Stock Purchase Plan described below until
their stock ownership meets the required levels.
|
|
|
Stock Appreciation Rights (SARs) |
In order to increase the portion of our officers total
equity compensation that is performance-based, the Compensation
Committee approved the grant of stock-settled stock appreciation
rights (SARs) to our officers in 2005. In contrast to restricted
stock units whose value is delivered partly based on the passage
of time, the SARs are more performance-driven, entitling the
recipient, upon exercise, to receive shares of our common stock
equal to the difference between the grant price per SAR and the
fair market value of one share of common stock on the date the
SAR is exercised. Accordingly, on November 10, 2005,
Mr. Rossiter, Mr. Vandenberghe, Mr. DelGrosso,
Mr. Wajsgras and Mr. Ninivaggi were granted 151,875,
84,375, 84,375, 60,750 and 40,500 stock-settled SARs,
respectively, with an exercise price of $27.74 per SAR, the
market price of our common stock on the grant date. One-third of
the SARs vest and become exercisable on each of the first three
anniversaries of the grant date.
In 2001, the Company proposed and our stockholders approved the
amendment and restatement of the Long-Term Stock Incentive Plan,
which prohibits the repricing of stock options without
stockholder approval. The proposed amendment to the Long-Term
Stock Incentive Plan, if approved by stockholders, would clarify
that the prohibition on repricing stock options also applies to
SARs. The Company has never repriced a stock option or SAR.
The Companys equity-based awards in 2005 also consisted of
restricted stock units. In comparison to the grant of stock
options or SARs, the Compensation Committee believes that
restricted stock units are effective incentives for our superior
performing employees to remain with us and to continue their
performance during periods of stock price fluctuations, when
stock options or SARs may have no realizable value. Accordingly,
on November 10, 2005, Mr. Rossiter,
Mr. Vandenberghe, Mr. DelGrosso, Mr. Wajsgras and
Mr. Ninivaggi were granted 16,875, 9,375, 9,375, 6,750 and
4,500 restricted stock units, respectively, under the Long-Term
Stock Incentive Plan. One-half of these units vest on the second
anniversary of the grant date, and the remaining half vest on
the fourth anniversary of the grant date, provided in each case
that the officer remains employed.
26
Performance share awards ensure that a significant component of
certain employees compensation depends upon the
achievement of specified financial performance goals over a
three-year period. The Compensation Committee chooses from
various measures of corporate performance to determine the level
of payout of performance share awards.
As in prior years, the Compensation Committee granted
performance share awards effective January 1, 2005 to
selected senior management personnel under the Long-Term Stock
Incentive Plan with target performance shares equal on the date
of the award to a specified percentage of each such
employees base salary on January 1, 2005. The
specified percentage for Mr. Rossiter was 50% and for each
of the other named executive officers was 25%. The 2005
performance criteria over a three-year period for these
performance share awards are our relative return to stockholders
compared to a peer group of representative independent
automotive suppliers, which at the time of the grant consisted
of ArvinMeritor, Inc., Dana Corporation, Delphi Automotive
Systems Corporation, Eaton Corporation, Johnson Controls, Inc.,
Magna International, Inc., and Visteon Corporation, and our
return on invested capital, calculated either on a relative or
absolute basis. For an officer to receive shares of common stock
for his or her performance shares, relative return to
stockholders and/or return on invested capital over the
three-year period must equal or exceed specified thresholds. Our
officers may earn additional shares of common stock for their
performance share awards if we exceed these thresholds. Because
the required levels of performance with respect to the
performance criteria were not met for the performance shares
granted in 2003 for the three-year period ending
December 31, 2005, there were no payouts made for such
performance share cycle.
|
|
|
Management Stock Purchase Plan |
In furtherance of its goal of aligning the interests of officers
and key employees with those of our stockholders, the
Compensation Committee permits certain management personnel to
participate in the Management Stock Purchase Plan. The program
is part of the Long-Term Stock Incentive Plan and, in 2005,
there were approximately 290 eligible participants. Under this
program, members of management can elect to defer a portion of
their base salary and/or annual incentive bonuses under the
Annual Incentive Compensation Plan and receive restricted stock
units credited at a discount to the fair market value of our
common stock. The discount rates on restricted stock units
purchased with deferred salary or bonus are based on the
following scale:
|
|
|
|
|
|
|
|
|
Total Dollar Amount of Salary and Bonus |
|
|
|
Value of Restricted Stock Units | |
Deferrals, Expressed as a Percentage of |
|
Applicable | |
|
Received as a Percentage of the | |
the Participants Base Salary |
|
Discount Rate | |
|
Amount Deferred | |
|
|
| |
|
| |
15% or less
|
|
|
20 |
% |
|
|
125 |
% |
Over 15% and up to 100%
|
|
|
30 |
% |
|
|
143 |
% |
Over 100%
|
|
|
20 |
% |
|
|
125 |
% |
In consideration for deferring their 2005 base salary in a
deferral election made in December 2004, participants were
credited with a number of restricted stock units under the
Long-Term Stock Incentive Plan equal to 125% or 143% of the
amount deferred divided by the fair market value of a share of
common stock determined in a manner approved by the Compensation
Committee. This formula effectively provided participants with a
20% or 30% discount on restricted stock units credited under the
Plan, depending on the amount of the deferral as set forth in
the above table. For restricted stock units credited in March
2005 for 2005 base salary deferral elections, the fair market
value of a share of common stock was based on the average of the
high and low prices of our common stock during the last five
trading days of 2004, which was $60.78 per share.
Generally, a participant must hold restricted stock units and
remain employed for at least three years following the grant
date, at which time the participant receives, net of taxes, a
number of shares of common stock equal to the restricted stock
units held and a cash payment equal to the amount of dividends,
if any, the participant would have earned if he or she had held
shares of common stock rather than restricted stock units,
together with accrued interest on such dividends. Pursuant to
deferral elections made under the Management
27
Stock Purchase Plan for base salary earned in the year ending
December 31, 2005, Mr. Rossiter, Mr. Vandenberghe
and Mr. DelGrosso received 10,136, 6,374 and 3,805
restricted stock units, respectively. No annual incentive
bonuses were earned in the year ending December 31, 2005
and, consequently, no bonus amounts were deferred for such year.
For a description of the retirement benefits we provide, see
Executive Compensation Pension Plan and
Benefits beginning on page 18.
The Estate Preservation Plan has been established for certain of
our senior executives. The Estate Preservation Plan provides the
beneficiaries of a participant with death benefits which may be
used to pay estate taxes on inherited common stock. Under the
Estate Preservation Plan, we purchase a life insurance policy on
the life of the participant, or a joint life insurance policy on
the lives of the participant and his or her spouse. We own the
life insurance policy but endorse a portion of the policys
proceeds to the participants designated beneficiaries.
Each participant pays a portion of the policys annual
premium (until he or she reaches age 65) and we pay the
remainder of the annual premium. After the participant reaches
age 65, we pay the entire annual premium and the
participant pays income taxes on the imputed income from the
policy. Upon the death of the participant or, in the case of a
joint life insurance policy, the death of the participant and
his or her spouse, the participants beneficiaries receive
a fixed portion of the policy death benefit which they may use
to pay the estate taxes on inherited common stock. Any amounts
payable under the policy in excess of such fixed portion of the
policy death benefit are payable to Lear.
Certain Other Benefits
To remain competitive in the market for a high caliber
management team, Lear provides its executive officers, including
our Chief Executive Officer, with health and welfare benefits
and certain perquisites, including financial counseling
services, reimbursement of country club dues, the use of a
company automobile and limited personal use of the corporate
aircraft. In certain instances, the Company also provides tax
gross-up payments for
the imputed income associated with such perquisites. The
Compensation Committee periodically reviews perquisites made
available to the Companys executive officers, including
our Chief Executive Officer, to ensure that they are generally
consistent with market practice. For additional information
regarding perquisites made available to the Companys
executive officers, including our Chief Executive Officer,
during 2005, please see Summary Compensation
Table beginning on page 14.
Chief Executive Officer Compensation
Pursuant to his employment agreement, Mr. Rossiter received
a base salary of $1,100,000 during the fiscal year ending
December 31, 2005. Mr. Rossiters base salary was
not increased in 2005. Mr. Rossiter was also eligible to
participate in the Annual Incentive Compensation Plan, the
Long-Term Stock Incentive Plan, including the Management Stock
Purchase Plan, the Executive Supplemental Savings Plan, the
Estate Preservation Plan, the Retirement Savings Plan and the
Pension Equalization Plan.
In evaluating the appropriateness of Mr. Rossiters
overall compensation, the Compensation Committee took into
account the Companys financial performance in a
challenging industry and economic environment as well as the
achievement of specified corporate and management objectives,
including continued improvements in product quality, customer
satisfaction and management development. In addition, the
Compensation Committee considered the fact that a substantial
portion of Mr. Rossiters compensation continues to
consist of at-risk components and therefore is directly based on
the Companys performance. In 2005, much of
Mr. Rossiters overall compensation consisted of
at-risk components based on Company performance, including
16,875 restricted stock units subject to two and four-year
vesting requirements, 151,875 stock appreciation rights and the
premium portion of restricted stock units granted under the
Management Stock Purchase Plan which vest three years following
the grant date. No performance share payouts were made to
28
Mr. Rossiter or the other named executive officers for the
2003-2005 performance period because specified target levels of
relative return to shareholders and return on invested capital
were not achieved. In addition, no annual bonuses were awarded
to Mr. Rossiter or the other named executive officers for
services performed in 2005. As a result,
Mr. Rossiters total compensation in 2005 was lower
than it was in prior years. For more information regarding
Mr. Rossiters equity-based compensation, see
Executive Compensation Option/SAR Grants and
Exercises and Long-Term Incentive Awards in Last Fiscal
Year beginning on page 17.
Tax Treatment of Executive Compensation
One of the factors the Compensation Committee considers when
determining compensation is the anticipated tax treatment to
Lear and to the executives of the various payments and benefits.
Section 162(m) of the Internal Revenue Code limits the
deductibility of non-performance based compensation in excess of
$1,000,000 paid to any named executive officer appearing in the
Summary Compensation Table. The Compensation Committee generally
considers this limit when determining compensation; however,
there are instances where the Committee has concluded, and may
conclude in the future, that it is appropriate to exceed the
limitation on deductibility under Section 162(m) to ensure
that executive officers are compensated in a manner that it
believes to be consistent with the Companys best interests
and those of its stockholders.
This report is submitted by Ms. Bingaman and
Messrs. McCurdy, Spalding and Wallman, being all of the
members of the Compensation Committee.
|
|
|
David P. Spalding, Chairman |
|
Anne K. Bingaman |
|
Larry W. McCurdy |
|
Richard F. Wallman |
29
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder
return from December 31, 2000 through December 31,
2005 for Lear common stock, the S&P 500 Index and a peer
group1
of companies we have selected for purposes of this comparison.
We have assumed that dividends have been reinvested and the
returns of each company in the S&P 500 Index and the peer
group have been weighted to reflect relative stock market
capitalization. The graph assumes that $100 was invested on
December 31, 2000 in each of Lears common stock, the
stocks comprising the S&P 500 Index and the stocks
comprising the peer group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
12/31/00 | |
|
12/31/01 | |
|
12/31/02 | |
|
12/31/03 | |
|
12/31/04 | |
|
12/31/05 | |
| |
LEAR CORPORATION
|
|
$ |
100.00 |
|
|
$ |
153.73 |
|
|
$ |
134.14 |
|
|
$ |
248.00 |
|
|
$ |
249.95 |
|
|
$ |
120.69 |
|
|
S&P 500
|
|
$ |
100.00 |
|
|
$ |
88.15 |
|
|
$ |
68.79 |
|
|
$ |
88.29 |
|
|
$ |
97.77 |
|
|
$ |
102.50 |
|
|
PEER GROUP
|
|
$ |
100.00 |
|
|
$ |
138.19 |
|
|
$ |
127.18 |
|
|
$ |
186.58 |
|
|
$ |
206.15 |
|
|
$ |
206.48 |
|
|
|
|
(1) |
We do not believe that there is a single published industry or
line of business index that is appropriate for comparing
stockholder returns. The peer group that we have selected is
comprised of representative independent automobile suppliers of
comparable products whose common stock is publicly-traded. Our
peer group consists of ArvinMeritor, Inc., Borg-Warner
Automotive, Inc., Collins & Aikman Corporation, Dana
Corporation, Delphi Corporation (f/k/a Delphi Automotive Systems
Corporation), Eaton Corp., Gentex Corp., Johnson Controls, Inc.,
Magna International, Inc., Superior Industries International,
Tower Automotive and Visteon Corporation. |
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed
to be soliciting material or to be filed
with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any past or future
filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the
extent that we specifically incorporate it by reference in such
filing.
The Audit Committee of the Board of Directors is responsible for
evaluating audit performance, appointing, compensating,
retaining and overseeing the work of our independent registered
public accounting firm and evaluating policies and procedures
relating to internal accounting functions and controls. The
Audit Committee is currently comprised of Messrs. McCurdy,
Stern, Wallace and Wallman, each a non-employee director, and
operates under a written charter which was last amended by our
Board in November 2004. Dr. Fry was also a member of the
Audit Committee until he was replaced by Mr. Wallace in May
2005. Our
30
Board has determined that all members of the Audit Committee are
independent as defined in the New York Stock Exchange listing
standards.
The Audit Committee members are neither professional accountants
nor auditors, and their functions are not intended to duplicate
or to certify the activities of management and the independent
auditor, nor can the Audit Committee certify that the
independent auditor is independent under applicable
rules. The Audit Committee serves a board-level oversight role
in which it provides advice, counsel and direction to management
and the auditors on the basis of the information it receives,
discussions with management and the auditors and the experience
of the Audit Committees members in business, financial and
accounting matters. Our management has the primary
responsibility for the financial statements and reporting
process, including our systems of internal controls. In
fulfilling its oversight responsibilities, the Audit Committee
reviewed and discussed with management the audited financial
statements included in the Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005, as well as the report
of management and the opinion thereon of Ernst & Young
LLP, the Companys independent registered public accounting
firm for the year ended December 31, 2005, regarding the
Companys internal control over financial reporting
required by Section 404 of the Sarbanes-Oxley Act.
The Audit Committee has discussed with Ernst & Young
LLP, the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication With Audit
Committees) which includes, among other items, matters related
to the conduct of the audit of the Companys financial
statements. The Audit Committee has also received written
disclosures and the letter from Ernst & Young LLP
required by Independence Standards Board Standard No. 1
(which relates to the auditors independence from the
Company and its related entities) and has discussed with
Ernst & Young LLP its independence from the Company.
Based on the review and discussions referred to above, the Audit
Committee has recommended to the Board of Directors that the
Companys audited financial statements be included in the
Companys Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005, and be filed with the
United States Securities and Exchange Commission.
This report is submitted by Messrs. McCurdy, Stern, Wallace
and Wallman, being all of the members of the Audit Committee.
|
|
|
Larry W. McCurdy, Chairman |
|
James A. Stern |
|
Henry D.G. Wallace |
|
Richard F. Wallman |
FEES OF INDEPENDENT ACCOUNTANTS
In connection with the audit of the 2005 financial statements,
the Company entered into an engagement agreement with
Ernst & Young LLP which set forth the terms by which
Ernst & Young LLP will perform audit services for the
Company. That agreement is subject to alternative dispute
resolution procedures and an exclusion of punitive damages.
In addition to retaining Ernst & Young LLP to audit our
consolidated financial statements for 2005, Lear retained
Ernst & Young LLP, as well as other accounting firms,
to provide tax and other advisory services in 2005. We
understand the need for Ernst & Young LLP to maintain
objectivity and independence in its audit of our financial
statements. It is also the Audit Committees goal that the
fees that the Company pays to Ernst & Young LLP for
permitted non-audit services in any year should not exceed the
audit and audit-related fees paid to Ernst & Young LLP
in such year, a goal which the Company achieved in 2005 and 2004.
In order to assure that the provision of audit and non-audit
services provided by Ernst & Young LLP, the
Companys independent registered public accounting firm,
does not impair their independence, the Audit Committee is
required to pre-approve the audit and permitted non-audit
services to be performed by Ernst & Young LLP, other
than de minimis services that satisfy the requirements
pertaining to de minimis exceptions
31
for non-audit services described in Section 10A of the
Securities Exchange Act of 1934. The Audit Committee also has
adopted policies and procedures for pre-approving all audit and
permitted non-audit work performed by Ernst & Young
LLP. Any pre-approval is valid for 14 months from the date
of such pre-approval, unless the Audit Committee specifically
provides for a different period. Any pre-approval must also set
forth in detail the particular service or category of services
approved and is generally subject to a specific cost limit.
The Audit Committee has adopted policies regarding the
Companys ability to hire employees, former employees and
certain relatives of employees of the Companys independent
accountants.
During 2005 and 2004, we retained Ernst & Young LLP to
provide services in the following categories and amounts:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Audit fees(1)
|
|
$ |
8,639,000 |
|
|
$ |
9,342,000 |
|
Audit-related fees(2)
|
|
|
202,000 |
|
|
|
339,000 |
|
Tax fees(3)
|
|
|
1,828,000 |
|
|
|
2,238,733 |
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
(1) |
Audit fees include services related to the annual audit of our
consolidated financial statements, the audit of our internal
controls over financial reporting, the reviews of our quarterly
reports on
Form 10-Q,
international statutory audits and other services that are
normally provided by the independent accountants in connection
with our regulatory filings. |
|
(2) |
Audit-related fees include services related to the audits of
U.S. and Canadian employee benefit plans, accounting
consultations and other assurance and related services that are
reasonably related to the performance of the audits of our
financial statements. |
|
(3) |
Tax fees include services related to tax compliance, tax advice
and tax planning. |
All of the audit, audit-related, tax and other services
performed by Ernst & Young LLP were pre-approved by the
Audit Committee in accordance with the pre-approval policies and
procedures described above.
CERTAIN TRANSACTIONS
Kelli Duty, a Human Resources Specialist at Lears
corporate offices in Europe, is the
daughter-in-law of
Robert Rossiter, Lears Chairman and Chief Executive
Officer. In 2005, Ms. Duty was paid $182,542, which
included a bonus of $2,004 and payments relating to an
international assignment of $133,324.
Noelle Gill, a Human Resources Manager in Lears Electrical
Systems Division, is the daughter of Roy Parrott, a Director of
Lear. In 2005, Ms. Gill was paid $126,866, which included a
bonus of $9,379 and payments relating to an international
assignment of $11,309. Ms. Gill also received 120
restricted stock units and 360 stock appreciation rights in 2005.
Spencer Gill, a former Director of Business Practices at
Lears GM Division, is the
son-in-law of Roy
Parrott, a Director of Lear. In 2005, Mr. Gill was paid
$322,152, which included a bonus of $25,822 and payments
relating to an international assignment of $167,550.
Mr. Gill resigned his position with Lear in November 2005.
Terrence Kittleson, a
brother-in-law of
Lears Chairman and Chief Executive Officer, Robert
Rossiter, is employed by Trammell Crow Company as an Executive
Vice President. Trammell Crow provides Lear with real estate
brokerage as well as property and project management services.
In 2005, Lear paid $4,269,745 to Trammell Crow for these
services. Lear has engaged Trammell Crow in the ordinary course
of its business and in accordance with its normal procedures for
engaging service providers of these types of services.
32
Scott Ratsos, a Vice President of Engineering at Lears GM
Division, is a
son-in-law of Robert
Rossiter, Lears Chairman and Chief Executive Officer. In
2005, Mr. Ratsos was paid $195,330, which included a bonus
of $35,818. Mr. Ratsos also received 520 restricted stock
units and 2,340 stock appreciation rights in 2005.
Brian Rossiter, a brother of Lears Chairman and Chief
Executive Officer, Robert Rossiter, owns an entity that has
represented Center Manufacturing in the sale of automotive
products to Lear. In 2005, Lear paid $20,277,005 for tooling,
steel stampings and assemblies that it purchased from Center
Manufacturing. The entity owned by Brian Rossiter received a
commission with respect to a portion of these sales at customary
rates. Brian Rossiter is also an owner of Creative Seating
Innovations, Inc. In 2005, Lear paid $1,873,630 to Creative
Seating Innovations for prototype tooling and parts. Lear made
its purchases from Center Manufacturing and Creative Seating
Innovations in the ordinary course of its business and in
accordance with its normal sourcing procedures for these types
of products.
Brian T. Rossiter, a Program Manager at one of Lears
European offices, is the son of Robert Rossiter, Lears
Chairman and Chief Executive Officer. In 2005, Brian T.
Rossiter was paid $241,901, which included a bonus of $8,311 and
payments relating to an international assignment of $144,169.
Brian T. Rossiter also received 90 restricted stock
units and 270 stock appreciation rights in 2005.
Jayme Rossiter, a
sister-in-law of Robert
Rossiter, Lears Chairman and Chief Executive Officer, has
an ownership interest in Elite Support Management Group, LLC. In
2005, Lear paid $358,728 to Elite Support for the provision of
information technology temporary support personnel. Lear engaged
Elite Support to provide these services in the ordinary course
of its business and in accordance with its normal procedures for
engaging service providers of these types of services.
Terrence Rossiter, a brother of Lears Chairman and Chief
Executive Officer, Robert Rossiter, has been employed as a
computer equipment salesperson by Sequoia Services Group
(Sequoia), a subsidiary of Analysts International,
since 1994. Sequoia has provided equipment and contract services
to Lear since 1991. In 2005, Lear paid $727,507 to Sequoia for
the purchase of computer equipment and the license or purchase
of software and $6,306,684 for computer-related services.
Terrence Rossiter was not involved in the provision of
computer-related services to Lear. Lear purchased this equipment
and software and these services in the ordinary course of its
business and in accordance with its normal sourcing procedures
for equipment, software and services of these types.
Richard Snyder, a Financial Manager at one of Lears
division offices, is a
brother-in-law of
Robert Rossiter, Lears Chairman and Chief Executive
Officer. In 2005, Mr. Snyder was paid $119,702, which
included a bonus of $14,459.
Michael Spalding, a Senior Account Manager at Lears
DaimlerChrysler Division, is the brother of David Spalding, a
Director of Lear. In 2005, Michael Spalding was paid $99,442,
which included a bonus of $9,048.
Scott Vandenberghe, a Program Manager at Lears GM
Division, is the son of James Vandenberghe, a Director and the
Vice Chairman of Lear. In 2005, Scott Vandenberghe was paid
$67,155, which included a bonus of $2,689.
Patrick VandenBoom, an Information Technology Director for Lear,
is the brother-in-law
of James Vandenberghe. In 2005, Mr. VandenBoom was paid
$187,350, which included a bonus of $35,796. Mr. VandenBoom
also received 300 restricted stock units and 900 stock
appreciation rights in 2005.
John Youvon, a Sales Manager in Lears Ford Division
office, is the
brother-in-law of Paul
Joseph Zimmer, Lears Senior Vice President and President,
Global Seating Systems Product Group. In 2005, Mr. Youvon
was paid $117,137, which included a bonus of $15,286.
William Zimmer, the brother of Paul Joseph Zimmer, is a Sales
Manager in Lears Interior Systems Division. In 2005,
William Zimmer was paid $93,849.
33
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
(PROPOSAL NO. 2)
Our Audit Committee has appointed Ernst & Young LLP as
our independent registered public accounting firm for the year
ending December 31, 2006. A proposal will be presented at
the meeting to ratify this appointment. Ratification of the
appointment of our independent registered public accounting firm
requires the affirmative vote of the majority of shares present
in person or represented by proxy at the meeting and entitled to
vote. If the stockholders fail to ratify such selection, another
independent registered public accounting firm will be considered
by our Audit Committee, but the Audit Committee may nonetheless
choose to engage Ernst & Young LLP. Even if the
appointment of Ernst & Young LLP is ratified, the Audit
Committee in its discretion may select a different independent
registered public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of the Company and its stockholders. We have been advised that a
representative of Ernst & Young LLP will be present at
the meeting and will be available to respond to appropriate
questions and, if such person chooses to do so, make a statement.
YOUR BOARD RECOMMENDS A VOTE FOR RATIFICATION
OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2006.
APPROVAL OF AN AMENDMENT TO OUR LONG-TERM STOCK INCENTIVE
PLAN
(PROPOSAL NO. 3)
On March 13, 2006, our Compensation Committee adopted,
subject to stockholder approval, an amendment to the Long-Term
Stock Incentive Plan which (i) increases the maximum number
of shares of common stock that may be issued under the plan by
3,000,000, from 11,690,000 plus any shares that are or become
available on or after May 3, 2001 under our 1994 and 1996
stock option plans to 14,690,000 plus any shares that are or
become available on or after May 3, 2001 under our 1994 and
1996 stock option plans, (ii) removes the sub-limits for
restricted stock units and performance units and provides that
remaining shares available under the plan will be reduced by
2.15 for each share awarded pursuant to restricted stock,
restricted units, restricted stock units, performance shares,
performance units and other awards with value denominated in
full shares, (iii) prohibits the Compensation Committee
from granting dividend equivalent rights on stock option and
stock appreciation right awards, (iv) prohibits shares
subject to an award that are withheld to satisfy tax withholding
obligations or pay an exercise price from being available for
further issuance under the plan, (v) specifies that each
stock-settled SAR will count as one full share against the
shares available for future issuance under the plan regardless
of the number of net shares issued upon exercise,
(vi) amends the definitions of Change in
Control and Disability solely to comply with
Code Section 409A, (vii) reiterates the performance
goals to be used in granting performance based awards under the
plan, (viii) expands the prohibition on option repricing
without stockholder approval to include SARs and clarifies that
the prohibition applies to canceling an option or SAR and
issuing a substitute option or SAR with a lower exercise price
or canceling an underwater option or SAR and issuing a
substitute award, and (ix) clarifies that awards may not be
transferred for value or consideration to third parties without
stockholder approval.
As of December 31, 2005, without taking into account any
increase in the number of shares available under the plan, there
were approximately 351,494 shares not subject to
outstanding awards under the plan. Our Compensation Committee
believes that increasing the total number of shares available
for awards under the plan is necessary to ensure that a
sufficient number of shares will be available to fund our
executive compensation programs over the next two years. In
addition, in order to retain flexibility under the plan
regarding the types of awards given, we wish to remove sublimits
on restricted stock units and performance units and implement a
fungible share ratio which counts each share awarded as part of
a full-value award as 2.15 shares against the overall plan
limit. Removing the plans liberal share counting
provisions (provisions that we have never utilized) increases
the number of shares that can be issued under the plan for
comparable
34
value. In addition, we have never granted dividend equivalent
rights with respect to options or SARs and by removing this
feature from the plan, more value can be granted in the form of
actual options and SARs. Certain definitions were modified to
prevent adverse tax consequences under Code Section 409A
and the performance goals for performance based awards are
restated and reaffirmed to comply with the requirements of Code
Section 162(m). In addition, the prohibition on repricing
of options without stockholder approval was expanded to include
SARs and also clarify that a repricing by canceling an option or
SAR and substituting another award for it is also prohibited. We
have never repriced an option or SAR. Finally, the proposed
amendment clarifies that awards may not be transferred to third
parties for value or consideration without stockholder approval.
Such transfers have not been allowed under the plan, as it has
been administered to date.
Approval of an amendment to our Long-Term Stock Incentive Plan
requires the affirmative vote of the majority of shares present
in person or represented by proxy at the meeting and entitled to
vote. If the amendment is approved by our stockholders, we plan
to register the offer and sale of the 3,000,000 additional
shares of common stock on a registration statement on
Form S-8.
Summary of our Long-Term Stock Incentive Plan
The following is only a summary of our Long-Term Stock Incentive
Plan, as amended by the proposed amendment, and, upon
stockholder approval, effective May 11, 2006, and is
qualified in its entirety by reference to its full text, a copy
of which is attached as Appendix B to this proxy statement.
General. The purposes of the Long-Term Stock Incentive
Plan are to optimize the profitability and growth of our company
through long-term incentives that are consistent with our
objectives and that link the interests of plan participants to
those of our stockholders; to provide plan participants with an
incentive for excellence in individual performance; to promote
teamwork among plan participants; and to give us an advantage in
attracting and retaining officers, key employees and directors.
The plan permits awards of nonqualified stock options, incentive
stock options, stock appreciation rights, restricted stock,
restricted units, restricted stock units, performance shares and
performance units. In addition, the plan provides an opportunity
for the deferral of payment of salary, bonuses and other forms
of incentive compensation.
Term of Plan. Awards may be made under the plan until the
earliest of:
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the date when all of the shares reserved for issuance under the
plan have been exhausted, |
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May 3, 2011, and |
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the date as of which the plan is terminated by our Compensation
Committee. |
Shares Subject to the Plan. If approved by our
stockholders, the maximum number of shares that may be issued or
transferred to participants under the plan will be increased by
3,000,000 from 11,690,000, plus any shares that are or become
available on or after May 3, 2001 under our 1994 and 1996
stock option plans, to 14,690,000 plus any shares that are or
become available on or after May 3, 2001 under our 1994 and
1996 stock option plans. The plans share reserve is not a
simple numeric limit, because when we amended and restated the
plan in 2001, we designed it so that future awards would all be
made under the Long-Term Stock Incentive Plan. Therefore, shares
of common stock that are or become available on or after
May 3, 2001 under our 1994 and 1996 stock option plans are
subject to awards under the Long-Term Stock Incentive Plan only.
No awards have been made since May 3, 2001, or will in the
future be made, under those other, prior stock option plans.
Each share awarded as a full value award will count as
2.15 shares against the maximum shares available under the
plan.
If any award terminates or lapses for any reason, the shares
subject to that award will again be available for grant under
the plan. However, shares subject to an award that are withheld
to satisfy an exercise price or tax withholding obligation shall
not be available for future grant under the plan. If there is a
change in our capitalization, our Compensation Committee may
make appropriate adjustments to the number and class of shares
that may be delivered under the plan, to the number, class or
price of shares subject to outstanding awards, and to the annual
individual award limit to prevent dilution or enlargement of
rights. Each stock-
35
settled SAR awarded will count as a full share against the
available shares under the plan regardless of the number of
shares delivered upon exercise.
Administration. The Long-Term Stock Incentive Plan is
administered by the Compensation Committee of our Board of
Directors.
Eligibility. All of our employees and all employees of
our affiliates are eligible to participate in the plan. Our
non-employee directors and non-employee directors of our
affiliates may receive only nonqualified stock options under the
plan. An affiliate is defined as a corporation,
partnership, joint venture or other enterprise of which we own
or control, directly or indirectly, at least one half of the
voting rights. An employee actually becomes a plan participant
when he or she is chosen by our Compensation Committee to
receive an award.
Limitations. Section 162(m) of the Internal Revenue
Code places limits on the deductibility for federal income tax
purposes of compensation paid to certain executive officers. To
ensure that we can deduct the compensation income associated
with stock compensation awards granted to our officers, the
Long-Term Stock Incentive Plan provides that the maximum number
of shares and share equivalent units that may be granted during
any calendar year to any one participant under all types of plan
awards is 300,000. In addition, the maximum number of shares
that may be issued through options intended to be incentive
stock options during the entire life of the plan is 2,000,000.
Terms and Conditions of Options. Each option will be
evidenced by an award agreement. The award agreement is issued
in the form of a certificate summarizing the broad terms of the
option grant, coupled with a longer document that describes the
terms and conditions of the grant in greater detail. Our
Compensation Committee determines the exercise price of an
option at the time it is granted, but that exercise price must
equal at least 100% of the fair market value of our common stock
at the time the option is granted. Fair market value
is generally the average of the high and low trading prices of a
share of our common stock on the New York Stock Exchange. Except
in the case of certain recapitalization events, an option award
may not be modified to specify a lower exercise price without
the approval of our stockholders. The Compensation Committee may
not grant dividend equivalent rights with respect to options.
Exercise of Options. An option vests and becomes
exercisable according to the terms specified in the stock option
award agreement that covers the option. Whether and under what
circumstances an option may be exercised after the plan
participants death, retirement, disability or other
termination of employment are specified in the stock option
award agreement. Notwithstanding the foregoing, no option may be
exercised more than ten years after the date of grant. The stock
option award agreement also specifies the means of payment that
will be permitted. Among the forms of payment that may be
permitted under the plan are cash, cashiers check,
surrender of shares the optionee has held for at least six
months, any combination of the foregoing or any other type of
exercise permitted by applicable law. Broker-assisted
cashless exercise may be allowed so long as it meets
the requirements of the Federal Reserve Boards
Regulation T.
Stock Appreciation Rights (SARs). Our
Compensation Committee may grant freestanding SARs, tandem SARs,
and/or any combination of these forms of SARs under the plan.
The grant price of a freestanding SAR will equal the fair market
value of our common stock on the date of grant. The grant price
of a tandem SAR will equal the exercise price of the related
option. A tandem SAR may be exercised for all or some of the
shares subject to the related option upon the surrender of the
right to exercise the equivalent portion of the related option.
A tandem SAR may be exercised only as to the shares for which
its related option is then exercisable. The term of a SAR may
not exceed ten years. Except in certain recapitalization events,
a SAR award may not be modified to specify a lower exercise
price without the approval of our stockholders. The Compensation
Committee may not grant dividend equivalent rights with respect
to SARs.
Restricted Stock, Restricted Stock Units and Restricted
Units. Our Compensation Committee may grant restricted
stock, restricted units or restricted stock units under the
plan. Except as provided in the plan, these types of awards may
not be sold, transferred, pledged, assigned, or otherwise
alienated until the end of a restriction period or upon earlier
satisfaction of other conditions governing the award. Restricted
units may be settled in cash or shares as determined by our
Compensation Committee and the specific plan provisions.
36
Restricted stock units are restricted units that must be settled
in shares, except to the extent of fractional shares.
Selected participants may elect to defer a portion of their
annual bonus under the Annual Incentive Compensation Plan and/or
their base salary in exchange for restricted stock units. Each
participant who elects to make a deferral will be credited under
the plan with a number of restricted stock units equal to the
amount deferred increased by up to fifty percent, as determined
by our Compensation Committee, divided by the fair market value
of the common stock on the date designated by our Compensation
Committee. This compensation deferral program is known as the
Management Stock Purchase Plan.
During the restriction period, participants holding restricted
stock, if issued (but not restricted stock units or restricted
units), may exercise full voting rights with respect to the
underlying common stock. In addition, if the award agreement
governing the restricted stock or restricted units permits it, a
participant may receive regular cash dividends or dividend
equivalents that are paid with respect to the underlying shares
or share equivalent units during the restriction period.
Performance Units and Performance Shares. Our
Compensation Committee may grant performance units or
performance shares under the plan. Each performance unit has an
initial value that is established by our Compensation Committee
at the time of grant. Each performance share must have an
initial value equal to the fair market value of our common stock
on the date of grant.
Our Compensation Committee will set performance periods and
performance objectives that, depending on the extent to which
they are met, will determine the number or value (or both) of
performance units or performance shares that will be paid out to
the participant. Our Compensation Committee may pay earned
performance units or performance shares in cash, shares or a
combination of cash and shares. Shares may be issued subject to
any restrictions deemed appropriate by our Compensation
Committee.
For a description of the performance measures used under the
Long-Term Stock Incentive Plan in 2005, see Compensation
Committee Report Long-Term Incentives
Performance Share Awards beginning on page 27.
Transferability of Plan Awards. Plan awards are not
transferable other than by the laws of descent and distribution,
or pursuant to a domestic relations order (as defined in
Section 414(p) of the Internal Revenue Code). During his or
her lifetime, only the participant may exercise an option or a
stock appreciation right that has been granted to him or her.
Notwithstanding the foregoing, at the discretion of our
Compensation Committee, options and other awards granted
pursuant to the Long-Term Stock Incentive Plan may be
transferred or assigned to:
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a participants spouse, children or grandchildren; |
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a trust or trusts for the exclusive benefit of a
participants spouse, children or grandchildren; or |
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a partnership in which participants spouse, children or
grandchildren are the only partners. |
There must, however, be no consideration paid for such a
transfer.
Amendment, Modification and Termination. Our Compensation
Committee may amend the plan at any time without stockholder
approval, except as to certain enumerated matters. Our
Compensation Committee may also terminate the plan without
stockholder approval. No termination, amendment, or modification
of the plan may adversely affect in any material way any award
previously granted under the plan, without the written consent
of the participant holding the affected award.
Our Compensation Committee may make adjustments in the terms and
conditions of, and the criteria included in, awards in
recognition of unusual or nonrecurring events affecting our
company or of changes in applicable laws, regulations or
accounting principles, if our Compensation Committee determines
that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits
intended to be made available under the plan. Stockholder
approval is required for our Compensation
37
Committee to increase the number of shares available for plan
awards, to lower the exercise price of any outstanding option or
SAR or to grant new awards in exchange for the surrender of
outstanding awards.
Change in Control. If a change in control, as defined in
the plan, occurs, then unless otherwise specifically prohibited
under the applicable laws or by the rules and regulations of any
governing governmental agencies or national securities exchanges:
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outstanding options and SARs granted under the plan will become
immediately exercisable and remain exercisable throughout their
term; |
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in most cases, any restriction period and any other restrictions
imposed on restricted stock or restricted units will
lapse; and |
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generally, the vesting of all performance units and performance
shares will be accelerated as of the effective date of the
change in control, and there will be paid out in cash to
participants a pro rata amount based upon an assumed achievement
of all relevant performance objectives at target levels and upon
the length of time within the performance period which has
elapsed prior to the effective date of the change in control. |
U.S. Federal Income Tax Consequences of Awards Granted
under the Long-Term Stock Incentive Plan
The following is a general description of the United States
federal income tax consequences to participants and our company
relating to SARs, options, restricted stock units and other
awards that may be granted under the Long-Term Stock Incentive
Plan. The plan is not qualified under the Internal Revenue Code
Section 401(a). This discussion only applies to
U.S. citizens and/or residents and does not purport to
cover all tax consequences relating to SARs, options, restricted
stock units and other awards.
Stock Appreciation Rights (SARs). A participant will
generally not recognize income, and we will not be entitled to a
deduction from income, at the time of grant of a SAR. When the
SAR is exercised, the participant will recognize ordinary income
equal to the difference between the aggregate grant price and
the fair market value, as of the date the SAR is exercised, of
our common stock. The participants tax basis in shares
acquired upon exercise of a stock-settled SAR will equal the
amount recognized by the participant as ordinary income. We will
generally be entitled to a federal income tax deduction, in the
tax year in which the SAR is exercised, equal to the ordinary
income recognized by the participant as described above. If the
participant holds shares acquired through exercise of a
stock-settled SAR for more than one year after the exercise of
the SAR, the capital gain or loss realized upon the sale of
those shares will be a long-term capital gain or loss. The
participants holding period for shares acquired upon the
exercise of a stock-settled SAR will begin on the date of
exercise.
Nonqualified Stock Options. A participant will generally
not recognize income, and we will not be entitled to a deduction
from income, at the time of grant of a nonqualified stock
option. When the option is exercised, the participant will
recognize ordinary income equal to the difference, if any,
between the aggregate exercise price paid and the fair market
value, as of the date the option is exercised, of the shares
received. The participants tax basis in shares acquired
upon exercise will equal the exercise price paid plus the amount
recognized by the participant as ordinary income. We will
generally be entitled to a federal income tax deduction, in the
tax year in which the option is exercised, equal to the ordinary
income recognized by the participant as described above. If the
participant holds shares acquired through exercise of a
nonqualified stock option for more than one year after the
exercise of the option, the capital gain or loss realized upon
the sale of those shares will be a long-term capital gain or
loss. The participants holding period for shares acquired
upon the exercise of an option will begin on the date of
exercise.
Incentive Stock Options. A participant will generally not
recognize income, and we will not be entitled to a deduction
from income, at the time of grant of an incentive stock option.
If the option is exercised during employment, or within three
months thereafter (or one year in the case of a permanently and
totally disabled employee), the participant will generally not
recognize any income and we will not be entitled to a deduction.
However, the excess of the fair market value of the shares on
the date of exercise over the option price generally is included
in computing the participants alternative minimum taxable
income.
38
Generally, if the participant disposes of shares acquired by
exercise of an incentive stock option within either two years
after the date of grant or one year after the date of exercise,
the participant will recognize ordinary income, and we will be
entitled to a deduction, equal to the excess of the fair market
value of the shares on the date of exercise over the option
price (limited generally to the gain on the sale). The balance
of any gain or loss will be treated as a capital gain or loss to
the participant. If shares are disposed of after the two year
and one year periods described above expire, we will not be
entitled to any deduction, and the entire gain or loss for the
participant will be treated as a long-term capital gain or loss.
Restricted Stock Units. Restricted stock units generally
are subject to tax at the time of payment and we generally will
have a corresponding deduction when the participant recognizes
income.
Other Awards. The current federal income tax consequences
of other awards authorized under the plan are generally in
accordance with the following:
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restricted stock subject to a substantial risk of forfeiture
results in income recognition equal to the excess of the fair
market value of shares over the purchase price (if any) only at
the time the restrictions lapse (unless the Participant elects
to accelerate recognition as of the date of grant); and |
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restricted units, performance shares, performance units and
dividend equivalents generally are subject to tax at the time of
payment. |
In each of the foregoing cases, we will generally have (at the
time the participant recognizes income) a corresponding
deduction.
Compliance with Section 409A of the Internal Revenue
Code
The American Jobs Creation Act of 2004, enacted on
October 22, 2004, revised the federal income tax law
applicable to certain types of awards that may be granted under
the Long-Term Stock Incentive Plan. To the extent applicable, it
is intended that the Long-Term Stock Incentive Plan and any
grants made under the Long-Term Stock Incentive Plan comply with
the provisions of Section 409A of the Internal Revenue
Code. We intend to administer the Long-Term Stock Incentive Plan
and any grants made thereunder in a manner consistent with the
requirements of Section 409A, and to make such amendments
(including retroactive amendments) to the Long-Term Stock
Incentive Plan and any other grants made thereunder as required
by Section 409A on a timely basis. Any reference to
Section 409A will also include any proposed temporary or
final regulations, or any other guidance, promulgated with
respect to such Section by the U.S. Department of Treasury
of the Internal Revenue Service.
New Plan Benefits and Other Matters
Our Compensation Committee has discretion to determine the type,
terms and conditions and recipients of awards granted under the
Long-Term Stock Incentive Plan. Accordingly, it is not possible
to determine the amount of the awards that will be received by
any director, officer or other employee of Lear under the
Long-Term Stock Incentive Plan if the amendment is approved.
On March 21, 2006, the New York Stock Exchange reported a
closing price of $17.31 for our common stock. For SAR and
restricted stock unit grants and other benefits awarded to our
named executive officers in 2005 under our Long-Term Stock
Incentive Plan see Executive Compensation beginning
on page 14.
YOUR BOARD RECOMMENDS A VOTE FOR APPROVAL OF
AN AMENDMENT TO OUR LONG-TERM STOCK INCENTIVE PLAN.
39
STOCKHOLDER PROPOSAL
(PROPOSAL NO. 4)
John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach,
CA 90278, has indicated to us that he has continuously held no
less than 100 shares of our common stock since July 1,
2004 and that he will continue to hold a minimum required stock
value until after the date of the 2006 Annual Meeting.
Mr. Chevedden has advised the Company that he intends to
present the following resolution at the Annual Meeting. In
accordance with the applicable proxy regulations, the proposed
resolution and supporting statement, for which the Company
accepts no responsibility, are set forth below.
4 Elect Each Director Annually
RESOLVED: Shareholders request that our Directors take the
necessary steps, in the most expeditious manner possible, to
adopt and implement annual election of each director. This would
include that our director elections completely transition from
the current staggered system to 100% annual election of each
director in one election cycle if practicable. Also to
transition solely through direct action of our board if this is
practicable.
The Safeway 2004 definitive proxy is one example of converting
from a 100% staggered system to a 100% annual election of each
director system in one election cycle. Southwest Airlines began
transition to annual election of each director solely through
direct action by the Southwest Airlines board in 2005.
John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach,
Calif. 90278 submitted this proposal.
66% Yes-Vote
Thirty-three (33) shareholder proposals on this topic
achieved an impressive 66% average yes vote in 2005 through late
September. The Council of Institutional Investors
www.cii.org, whose members have $3 trillion invested,
recommends adoption of this proposal topic.
To our boards credit our board terminated our
companys poison pill on December 15, 2004 after a
shareholder proposal was submitted to take such action. And no
subsequent pill has been adopted.
Arguably There is More to
Accomplish
For instance in 2005 it was reported that at our company (and
potential corresponding concerns are noted):
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Shareholders were only allowed to vote on individual
directors once in
3-years
Accountability concern. |
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An awesome 67% shareholder vote was required to make
certain key changes Entrenchment concern. |
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The person who is both our Lead Director and
Chairman of our key Audit Committee had
17-years director
tenure and was allowed to hold 5 outside board seats
Independence concern and over-extension concern. |
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Our 4-member Audit Committee had |
Two CEOs (over-extension concern)
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Two directors, including the committee chairman, with 14 to
17 years tenure (independence concern) |
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Our full board met 7-times and our Audit Committee
met 8-times in a year A relatively lean number of
meetings. |
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Our Lead Director owned only 2,000 shares after
17 years to accumulate stock Company confidence
concern. |
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Five directors owned from zero to
1500 shares Company confidence concern. |
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Our CEOs stock ownership declined. |
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Six directors were allowed to hold from 4 to
7 director seats each Over-extension concern. |
This list of improvements-needed reinforces the reason to adopt
the initial RESOLVED statement of this proposal.
40
Our directors should be comfortable with this proposal because
for many of our annual elections our unopposed directors needed
but one vote for election out of the tens of millions of shares
outstanding.
Best for the Investor
Arthur Levitt, Chairman of the Securities and Exchange
Commission, 1993-2001 said: In my view its best for the
investor if the entire board is elected once a year. Without
annual election of each director shareholders have far less
control over who represents them.
Take on the Street by Arthur Levitt
Elect Each Director Annually
Yes on 4
Board of Directors Statement in Opposition to
Proposal No. 4
The Board recommends a vote AGAINST the foregoing
shareholder proposal because it is not in the best interests of
Lear or its stockholders.
The Board has carefully considered this proposal and has
concluded that a classified board is in the best interests of
Lear and its stockholders at this time. The Board is currently
divided into three classes, with directors in each class
standing for election once every three years. These staggered
three-year terms help ensure that two-thirds of our directors
will have had prior experience and familiarity with our business
and the complex global markets in which we operate. This
long-term institutional knowledge benefits Lear and enables the
Board to provide long-term strategic planning. Directors who
have experience with Lear and knowledge about its business and
affairs are better positioned to make the fundamental decisions
that are best for Lear and its stockholders.
The classified board structure can also enhance the independence
of the non-employee directors who sit on the Board. There is a
risk that the annual election of all directors could lead
directors to conform to the wishes of the majority of the Board
to ensure a re-election nomination each year. In our view, the
staggered election of directors mitigates this risk and promotes
independent decision-making. With three-year terms, directors do
not have to continually consider an upcoming nomination for
re-election the following year. The Board also believes that a
nominees agreement to serve a three-year term demonstrates
the nominees commitment to Lear over the long-term.
In addition, the classified board is designed to safeguard Lear
against the unsolicited efforts of a third party to take control
of Lear and not pay fair value for Lears business and
assets. A classified board prevents the unilateral removal of
directors by a potential acquirer at a single annual meeting.
Therefore, the classified board structure enhances the ability
of the incumbent Board to negotiate the best results for all
stockholders in such circumstances. It does not preclude a
take-over, but it can afford the Board time to evaluate the
adequacy and fairness of any take-over proposal, negotiate with
the proposed acquirer on behalf of all stockholders and weigh
alternatives, including the continued operation of Lears
business on a stand-alone basis.
Further, directors have fiduciary duties to stockholders
regardless of their term of office. Thus, the term of office
does not affect his or her accountability to stockholders.
Rather, accountability depends on the selection of responsible
and experienced individuals.
41
The Board believes that the classified board protects the
interests of all Lear stockholders and that the continuity and
depth of knowledge that results from a classified Board provides
the proper environment in which to foster the creation of
long-term value for all stockholders.
YOUR BOARD RECOMMENDS A VOTE AGAINST THIS
SHAREHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
AGAINST THE PROPOSAL UNLESS STOCKHOLDERS SPECIFY A CONTRARY
VOTE.
STOCKHOLDER PROPOSAL
(PROPOSAL NO. 5)
The Office of the Comptroller of New York City at 1 Centre
Street, Room 736, New York, NY 10007-2341, as custodian and
trustee of the New York City Employees Retirement System,
the owner of 55,808 shares of our common stock, the New
York City Teachers Retirement System, owner of
69,719 shares, the New York City Police Pension Fund, owner
of 31,400 shares, and the New York City Fire Department
Pension Fund, owner of 6,600 shares, and as custodian of
the New York City Board of Education Retirement System, owner of
3,200 shares, has advised the Company of its intention to
present the following resolution at the Annual Meeting. The
foregoing shareholdings are based on information provided to us
by the Office of the Comptroller of New York City. We have not
independently verified such information. In accordance with
applicable proxy regulations, the proposed resolution and
supporting statement, for which the Company accepts no
responsibility, are set forth below.
LEAR CORPORATION
GLOBAL HUMAN RIGHTS STANDARDS
Submitted by William C. Thompson, Jr., Comptroller, City of New York,
on behalf of the Boards of Trustees of the New York City
Pension Funds
Whereas, Lear Corporation currently has overseas
operations,
Whereas, reports of human rights abuses in the overseas
subsidiaries and suppliers of
U.S.-based corporations
has led to an increased public
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awareness of the problems of
child labor, sweatshop conditions, and the denial of
labor rights in U.S. corporate overseas operations, and |
Whereas, corporate violations of human rights in these
overseas operations can lead to negative publicity, public
protests, and a loss of
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consumer confidence which can have a
negative impact on shareholder value, and |
Whereas, a number of corporations have implemented
independent monitoring programs with respected human rights and
religious
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organizations to strengthen compliance with
international human rights norms in subsidiary and supplier
factories, and |
Whereas, many of these programs incorporate the
conventions of the International Labor Organization (ILO) on
workplace human rights, and
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the United Nations Norms on
the Responsibilities of Transnational Corporations with Regard
to Human Rights (UN Norms), which include the
following principles: |
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1. |
All workers have the right to form and join trade unions and to
Bargain collectively. (ILO Conventions 87 and 98;
UN Norms, section D9). |
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2. |
Workers representatives shall not be the subject of
discrimination and shall have access to all workplaces necessary
to enable them to carry out their representation functions. (ILO
Convention 135; UN Norms, section D9). |
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3. |
There shall be no discrimination or intimidation in employment.
Equality of opportunity and treatment shall be provided
regardless of race, color, sex, religion, political opinion, age, |
42
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nationality, social origin or other distinguishing
characteristics. (ILO Conventions 100 and 111;
UN Norms, section B2). |
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4. |
Employment shall be freely chosen. There shall be no use of
force, including bonded or prison labor. (ILO
Conventions 29 and 105; UN Norms, section D5). |
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5. |
There shall be no use of child labor. (ILO Convention 138;
UN Norms, section D6), and, |
Whereas, independent monitoring of corporate adherence to
these internationally recognized principles is essential if
consumer and investor
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confidence in our companys
commitment to human rights is to be maintained, |
Therefore, be it resolved that the shareholders request
that the company commit itself to the implementation of a code
of conduct based on the
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aforementioned ILO human rights
standards and United Nations Norms on the Responsibilities
of Transnational Corporations with Regard to Human Rights, by
its international suppliers and in its own international
production facilities, and commit to a program of outside,
independent monitoring of compliance with these standards. |
Board of Directors Statement in Opposition to
Proposal No. 5
The Board recommends a vote AGAINST the foregoing
shareholder proposal because it is not in the best interests of
Lear or its stockholders.
Lear fully supports ethical business principles and human rights
standards and the Board believes that Lears compliance
program and existing monitoring practices are effective in
ensuring compliance with these standards. Lear has a
long-standing record of support for, and promotion of, workplace
human rights. Lear also requires its employees to observe high
standards of ethical conduct and business practices and strives
to do business with those who demonstrate high ethical standards
and behavior.
Lear maintains a Code of Business Conduct and Ethics (the
Code). The Code (1) requires that all of
Lears business be conducted in compliance with the letter
and spirit of applicable laws, (2) allows Lear to purchase
products only from reputable and qualified individuals or firms,
(3) states that Lear is committed to providing equal
opportunity in all aspects of employment and will not tolerate
any illegal discrimination or harassment of any kind and
(4) states that Lear is committed to maintaining high
standards of business conduct in the United States and abroad.
The Code is translated into nine languages and is available to
all employees. Lear provides training regarding the Code to its
employees, including web-based training where possible.
In addition, Lear maintains a global anti-discrimination policy
which prohibits illegal discrimination and states that Lear will
treat all individuals with dignity and respect and will conduct
its business ethically. This policy is reflected in the Code,
Lears Equal Employment Opportunity Policy and Lears
Harassment Free Workplace Policy. Lears Environmental
Health and Safety Policy confirms that Lear is dedicated to
employee health and safety. Lears Vision/Mission Statement
contains a mission statement that Lear will conduct its business
with integrity and will maintain an environment that is safe and
clean and that treats all individuals with respect and dignity.
Each of these documents provides a uniform set of workplace
standards and principles that apply to the worldwide operations
of Lear and its affiliates. Further, Lears posture with
respect to labor relations is that employees have the right to
choose (or not) to affiliate with legally sanctioned
organizations without unlawful interference, and where trade
unions are present Lear deals with them fairly and conducts
negotiations in a purposeful and non-adversarial manner. Lear is
proud of its longstanding history of positive relationships with
the unions that represent its employees worldwide. Lear has also
adopted a Global Working Conditions Policy which prohibits Lear
from using any type of forced labor, child labor or abusive or
corrupt business practices.
In addition to the foregoing, Lears Global Purchasing
Terms and Conditions (the Terms and Conditions)
prohibit suppliers and their subcontractors from using any type
of forced or child labor, or
43
engaging in abusive or corrupt business practices. Lear may
terminate a business relationship if a supplier violates the
Terms and Conditions. Lear also has the right to audit and
monitor suppliers compliance with the Terms and
Conditions. Further, the Terms and Conditions prohibit
Lears suppliers from using any third party to perform any
act that is prohibited by the Code.
Lear monitors and enforces the Code, the Terms and Conditions
and other policies affecting workplace human rights through a
compliance program that includes oversight by a Compliance
Committee, made up of various members of senior management, that
reviews Lears compliance efforts, assesses its programs,
facilitates the monitoring, auditing and evaluation of its
programs and periodically reports its progress to the Audit
Committee. Lears compliance function oversees the
worldwide distribution of these policies and compliance with
such standards. An annual Conflicts of Interest/Code of Conduct
Questionnaire is electronically distributed to approximately
1,900 employees, which requires confirmation that employees
have received and read the Code and have reported violations.
Results of this questionnaire are reported to Lears Audit
Committee. The compliance program allows Lear employees to
anonymously report potential violations either to an intranet
site, an internal email account or a post office box. An
employee can also report violations to his or her local
supervisor, the human resources department, the legal department
or the board of directors. Such reports are investigated and
action is taken as needed to address any violations and to
prevent reoccurrence. Retaliation against whistleblowers is not
tolerated. Furthermore, Lear regularly assesses the
effectiveness of its compliance programs.
The Board believes that the one-size-fits-all
approach in the shareholder proposal is inappropriate for
Lears complex, global business. It also believes that the
Code, the Terms and Conditions and Lears other policies
and business practices address the substantive areas covered by
the shareholder proposal and that its existing monitoring
processes effectively ensure compliance with the business
principles and human rights standards advocated by the
proponent. Furthermore, our management reviews and amends our
policies and practices as necessary and is committed to their
enforcement worldwide. Therefore, the Board believes that
modifying such practices and standards would not provide any
added benefits beyond those already achieved by our existing
compliance program. The Board also believes that independent
monitoring would not provide sufficient additional benefits to
warrant the substantial incremental costs. As a result, the
Board does not believe that implementation of the shareholder
proposal would be in the best interests of Lear or its
stockholders.
YOUR BOARD RECOMMENDS A VOTE AGAINST THIS
SHAREHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
AGAINST THE PROPOSAL
UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING OF
STOCKHOLDERS
Stockholders who intend to present proposals at the Annual
Meeting of Stockholders in 2007 pursuant to
Rule 14a-8 under
the Securities Exchange Act of 1934 must send notice of their
proposal to us so that we receive it no later than
November 27, 2006. Stockholders who intend to present
proposals at the Annual Meeting of Stockholders in 2007 other
than pursuant to
Rule 14a-8 must
comply with the notice provisions in our by-laws. The notice
provisions in our by-laws require that, for a proposal to be
properly brought before the Annual Meeting of Stockholders in
2007, proper notice of the proposal be received by us not less
than 120 days or more than 150 days prior to the first
anniversary of the mailing date of this proxy statement.
Stockholder proposals should be addressed to Lear Corporation,
21557 Telegraph Road, Southfield, Michigan 48034, Attention:
General Counsel.
OTHER MATTERS
We know of no other matters to be submitted to the stockholders
at the meeting. If any other matters properly come before the
meeting, persons named in the enclosed proxy intend to vote the
shares they represent in accordance with their own judgments.
44
If two or more stockholders sharing the same address are
receiving multiple copies of our annual report and proxy
statement and wish to receive only one copy, such stockholders
may notify their broker if their shares are held in a brokerage
account or may notify us if they hold registered shares. Such
registered stockholders may notify us by sending a written
request to Lear Corporation, Investor Relations, 21557 Telegraph
Road, Southfield, Michigan 48034.
Upon written request by any stockholder entitled to vote at
the meeting, we will promptly furnish, without charge, a copy of
the Form 10-K
Annual Report for 2005 which we filed with the Securities and
Exchange Commission, including financial statements and
schedules. If the person requesting the report was not a
stockholder of record on March 21, 2006, the request must
contain a good faith representation that he or she was a
beneficial owner of our common stock at the close of business on
that date. Requests should be addressed to Daniel A. Ninivaggi,
Lear Corporation, 21557 Telegraph Road, Southfield, Michigan
48034.
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By Order of the Board of Directors |
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Daniel A. Ninivaggi |
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Senior Vice President, Secretary & General Counsel |
45
APPENDIX A
DIRECTOR INDEPENDENCE GUIDELINES
The NYSE Listing Requirements require that the Board consist of
a majority of independent directors and that all members of the
Audit Committee, the Compensation Committee and the Nominating
and Corporate Governance Committee be independent. To be
considered independent under then NYSE Listing Requirements, the
Board must determine that a director does not have any material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a
relationship with the Company). The Board has established these
guidelines to assist it in determining whether a director has a
material relationship with the Company. Under these guidelines,
each of the following relationships (unless required to be
disclosed pursuant to Item 404 of
Regulation S-K
promulgated under the Securities Act of 1933, as amended) shall
be deemed immaterial so that a director who satisfies the
specific independence criteria in the NYSE Listing Requirements
will not be considered to have a material relationship with the
Company solely as a result of any such relationship:
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(1) the director, or his or her immediate family member(1),
is affiliated with an entity with which the Company does
business, unless the amount of purchases or sales of goods and
services from or to the Company, in any of the three fiscal
years preceding the determination and for which financial
statements are available, has exceeded 1% of the consolidated
gross revenues of such entity; |
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(2) the director, or his or her immediate family member,
serves as a trustee, director, officer or employee of a
foundation, university, non-profit organization or tax-exempt
entity to which the Company has made a donation, unless the
Companys aggregate annual donations to the organization,
in any of the three fiscal years preceding the determination and
for which financial statements are available, have exceeded the
greater of $250,000 or 1% of that organizations
consolidated gross revenues; |
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(3) the director, or his or her immediate family member, is
a director, officer or employee of an entity with which the
Company or any officer of the Company has a banking or
investment relationship, unless (x) the amount involved, in
any of the three fiscal years preceding the determination,
exceeds the lesser of $1 million or 1% of such
entitys total deposits or investments or (y) such
banking or investment relationship is on terms and conditions
that are not substantially similar to those available to an
unaffiliated third party; or |
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(4) the director or his or her immediate family member is
an officer of a company that is indebted to the Company, or to
which the Company is indebted, and the total amount of either
companys indebtedness to the other does not exceed 2% of
the other companys total consolidated assets as of the end
of the fiscal year immediately preceding the date of
determination and for which financial statements are available. |
In addition, as required by our Audit Committee Charter, Audit
Committee members must also satisfy the independence
requirements of Section 10A of the Securities Exchange Act
of 1934.
The types of relationships described above are not intended to
be comprehensive, and no inference should be drawn that a
director having a relationship of the type described in
items (1) through (4) above that fails to satisfy any of
the criteria in items (1) through (4) above is not
independent. If a director has a relationship that fails to
satisfy any of the criteria set forth in items (1) through
(4) above, the Board may still determine that such director is
independent so long as the NYSE Listing Requirements do not
preclude a finding of independence as a result of such
relationship. The Company shall disclose such determinations in
accordance with applicable law and stock exchange listing
requirements. The Company intends for the foregoing guidelines
to comply with both the NYSE Listing Requirements in effect as
of the date of adoption of these guidelines and as such NYSE
Listing Requirements are proposed to be amended (as such
proposed amendments were filed by the NYSE with the SEC on
November 23, 2005.)
(1) As used herein, an immediate family member
includes a persons spouse, parents, children, siblings,
mothers and
fathers-in-law, sons
and daughters-in-law,
brothers and
sisters-in-law, and
anyone (other than any domestic employee) who shares such
persons home; provided, however, that
immediate family member shall exclude stepchildren
that do not share a stepparents home, or the in-laws of
such stepchildren. Upon death, incapacity, legal separation or
divorce, a person shall cease to be an immediate family member.
A-1
APPENDIX B
LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
(As Amended and Restated Effective May 3, 2001)
(Conformed Copy through Third Amendment)
B-1
LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
(As Amended and Restated Effective May 3, 2001)
TABLE OF CONTENTS
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Page | |
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Article 1.
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Establishment, Objectives and Duration |
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B-3 |
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Article 2.
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Definitions |
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B-3 |
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Article 3.
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Administration |
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B-7 |
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Article 4.
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Shares Subject to the Plan and Maximum Awards |
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B-7 |
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Article 5.
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Eligibility and Participation |
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B-8 |
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Article 6.
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Stock Options |
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B-8 |
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Article 7.
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Stock Appreciation Rights |
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B-10 |
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Article 8.
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Restricted Stock, Restricted Stock Units and Restricted
Units |
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B-11 |
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Article 9.
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Performance Units and Performance Shares |
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B-12 |
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Article 10.
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Performance Measures |
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B-13 |
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Article 11.
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Beneficiary Designation |
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B-14 |
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Article 12.
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Deferrals |
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B-14 |
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Article 13.
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Rights of Employees |
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B-14 |
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Article 14.
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Change in Control |
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B-14 |
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Article 15.
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Amendment, Modification and Termination |
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B-15 |
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Article 16.
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Withholding |
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B-16 |
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Article 17.
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Indemnification |
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B-16 |
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Article 18.
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Successors |
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B-16 |
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Article 19.
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Legal Construction |
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B-16 |
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B-2
LEAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE MAY 3, 2001)
Article 1. Establishment, Objectives and
Duration
1.1 Establishment of the
Plan. Lear Corporation, a Delaware corporation, hereby
amends and restates its long-term incentive compensation plan,
to be known as the Lear Corporation Long-Term Stock
Incentive Plan (As Amended and Restated Effective May 3,
2001) as set forth in this document. Capitalized terms
used but not otherwise defined herein will have the meanings
given to them in Article 2. The Plan permits the grant of
Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Units,
Restricted Stock Units, Performance Shares and Performance
Units. In addition, the Plan provides the opportunity for the
deferral of the payment of salary, bonuses and other forms of
incentive compensation.
The Plan, as amended and restated, is effective as of
May 3, 2001, and will remain in effect as provided in
Section 1.3 hereof.
1.2 Objectives of the Plan.
The objectives of the Plan are to optimize the profitability and
growth of the Company through long-term incentives that are
consistent with the Companys objectives and that link the
interests of Participants to those of the Companys
shareholders; to provide Participants with an incentive for
excellence in individual performance; to promote teamwork among
Participants; and to give the Company a significant advantage in
attracting and retaining officers, key employees and directors.
The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract and retain the
services of Participants who make significant contributions to
the Companys success, and to allow Participants to share
in the success of the Company.
1.3 Duration of the Plan.
This amendment and restatement of the Plan will commence on the
Effective Date, as described in Section 1.1, and will
remain in effect, subject to the right of the Committee to amend
or terminate the Plan at any time pursuant to Article 15,
until all Shares subject to it pursuant to Article 4 have
been issued or transferred according to the Plans
provisions. In no event may an Award be granted under the Plan
on or after May 3, 2011.
Article 2. Definitions
Whenever used in the Plan, the following terms have the meanings
set forth below, and when the meaning is intended, the initial
letter of the word is capitalized:
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Affiliates means any corporation (or
partnership, joint venture, or other enterprise) of which the
Company owns or controls, directly or indirectly, at least fifty
percent of the outstanding shares of stock normally entitled to
vote for the election of directors (or comparable equity
participation and voting power). Notwithstanding the foregoing,
for purposes of determining whether an employee has terminated
employment with the Company and all Affiliates,
Affiliates means any corporation (or partnership,
joint venture, or other enterprise) of which the Company owns or
controls, directly or indirectly, at least ten percent of the
outstanding shares of stock normally entitled to vote for the
election of directors (or comparable equity participation and
voting power). |
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Award means, individually or collectively, a
grant under this Plan to a Participant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Restricted Units, Restricted Stock Units,
Performance Shares and Performance Units. |
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Award Agreement means an agreement entered
into by the Company and a Participant setting forth the terms
and provisions applicable to an Award or Awards granted to the
Participant or the terms and provisions applicable to an
election to defer compensation under Section 8.2. |
B-3
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Beneficial Owner or Beneficial
Ownership has the meaning ascribed to that term in
Rule 13d-3 of the
General Rules and Regulations under the Exchange Act. |
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Board or Board of Directors
means the Board of Directors of the Company. |
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Cause has the meaning set forth in any
unexpired employment or severance agreement between the
Participant and the Company or an Affiliate. If there is no such
agreement, Cause means: |
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(a) the willful and continued failure of the Participant
substantially to perform his or her duties with or for the
Company or an Affiliate; |
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(b) the Participants engaging in conduct that is
significantly injurious to the Company or an Affiliate,
monetarily or otherwise; |
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(c) the Participants commission of a crime that is
significantly injurious to the Company or an Affiliate,
monetarily, reputationally or otherwise; |
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(d) the Participants abuse of illegal drugs or other
controlled substances; or |
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(e) the Participants habitual intoxication. |
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Unless otherwise defined in the Participants employment or
severance agreement, an act or omission is willful
for this purpose if it was knowingly done, or knowingly omitted
to be done, by the Participant not in good faith and without
reasonable belief that the act or omission was in the best
interest of the Company or an Affiliate. For purposes of this
Plan, if a Participant is convicted of a crime or pleads nolo
contendere to a criminal charge, he or she will conclusively
be deemed to have committed the crime. The Committee has the
discretion, in other circumstances, to determine in good faith,
from all the facts and circumstances reasonably available to it,
whether a Participant who is under investigation for, or has
been charged with, a crime will be deemed to have committed it
for purposes of this Plan. |
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Change in Control of the Company will be
deemed to have occurred (as of a particular day, as specified by
the Board) as of the first day any one or more of the following
paragraphs is satisfied. |
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(a) Any Person (other than the Company or a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company, or a corporation owned directly or
indirectly by the shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company)
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company, representing more than twenty percent
of the combined voting power of the Companys then
outstanding securities. |
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(b) During any period of twenty-six consecutive months
beginning on or after the Effective Date, individuals who at the
beginning of the period constituted the Board cease for any
reason (other than death, Disability or voluntary Retirement) to
constitute a majority of the Board. For this purpose, any new
Director whose election by the Board, or nomination for election
by the Companys shareholders, was approved by a vote of at
least two-thirds of the Directors then still in office, and who
either were Directors at the beginning of the period or whose
election or nomination for election was so approved, will be
deemed to have been a Director at the beginning of any
twenty-six month period under consideration. |
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(c) The shareholders of the Company approve: (i) a
plan of complete liquidation or dissolution of the Company; or
(ii) an agreement for the sale or disposition of all or
substantially all the Companys assets; or (iii) a
merger, consolidation or reorganization of the Company with or
involving any other corporation, other than a merger,
consolidation or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least eighty percent of the combined voting power of the
voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or
reorganization. |
B-4
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Notwithstanding the foregoing, to the extent necessary to avoid
subjecting Participants to interest and additional tax under
Section 409A of the Code, no Change in Control
will be deemed to occur unless and until paragraph (a),
(b) or (c), above, is satisfied and
Section 409A(a)(2)(A)(v) of the Code is satisfied. |
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Code means the Internal Revenue Code of 1986,
as amended from time to time. |
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Committee means, as specified in
Article 3, the Compensation Committee of the Board or such
other committee as may be appointed by the Board to administer
the Plan. |
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Company means Lear Corporation, a Delaware
corporation, and any successor thereto as provided in
Article 17. |
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Director means any individual who is a member
of the Board of Directors. |
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Disability means (a) long-term
disability as defined under the long-term disability plan of the
Company or an Affiliate that covers that individual, or
(b) if the individual is not covered by such a long-term
disability plan, disability as defined for purposes of
eligibility for a disability award under the Social Security
Act. Notwithstanding the foregoing, for purposes of determining
the period of time after termination of employment during which
a Participant may exercise an ISO, Disability will
have the meaning set forth in Section 22(e)(3) of the Code,
which is, generally, that the Participant is unable to engage in
any substantial gainful activity by reason of a medically
determinable physical or mental impairment that can be expected
to result in death or that has lasted or can be expected to last
for a continuous period of at least twelve months. |
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Notwithstanding the foregoing, to the extent necessary to avoid
subjecting an individual to interest and additional tax under
Section 409A of the Code, such individual shall not be
deemed to have a Disability unless and until
Section 409A(a)(2)(C) is satisfied. |
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Effective Date means May 3, 2001 for
purposes of this amendment and restatement of the Plan. The Plan
was originally effective January 1, 1996. |
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Eligible Employee means any employee of the
Company or any of its Affiliates. Directors who are not employed
by the Company or its Affiliates will be considered Eligible
Employees under this Plan, but only for purposes of Awards of
Nonqualified Stock Options. |
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Exchange Act means the Securities Exchange
Act of 1934, as amended from time to time, or any successor act
thereto. |
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Exercise Price means the price at which a
Share may be purchased by a Participant pursuant to an Option. |
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Fair Market Value means: |
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(a) the average of the high and low trading prices of the
Shares on the New York Stock Exchange or, if the Shares are not
traded on the New York Stock Exchange, on any other exchange on
which they are traded, or, if the Shares are not traded on any
other exchange and are regularly quoted on the NASDAQ National
Market System, on the NASDAQ National Market System; or |
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(b) if the Shares are not traded on any exchange or
regularly quoted on the NASDAQ National Market System, the mean
between the closing bid and asked prices of the shares in the
over-the-counter
market; or |
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(c) if those bid and asked prices are not available, then
the fair market value as reported by any nationally recognized
quotation service selected by the Committee or as determined by
the Committee. |
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Freestanding SAR means an SAR that is granted
independently of any Options, as described in Article 7. |
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Incentive Stock Option or ISO
means an option to purchase Shares granted under
Article 6 that is designated as an Incentive Stock Option
and that is intended to meet the requirements of Code
Section 422. |
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Nonqualified Stock Option or
NQSO means an option to purchase Shares
granted under Article 6 that is not intended to meet the
requirements of Code Section 422. |
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Option means an Incentive Stock Option or a
Nonqualified Stock Option, as described in Article 6. |
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Participant means an Eligible Employee who
has been selected by the Committee to participate in the Plan
pursuant to Section 5.2 and who has outstanding an Award
granted under the Plan. The term Participant will
include Directors who are not employees of the Company or an
Affiliate only if they are chosen to receive Awards of
Nonqualified Stock Options, and only for purposes of
Nonqualified Stock Options. |
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Performance-Based Exception means the
performance-based exception from the tax deductibility
limitations of Code Section 162(m) and any regulations
promulgated thereunder. |
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Performance Period means the time period
during which performance objectives must be met in order for a
Participant to earn Performance Units or Performance Shares
granted under Article 9. |
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Performance Share means an Award with an
initial value equal to the Fair Market Value on the date of
grant which is based on the Participants attainment of
performance objectives, as described in Article 9. |
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Performance Unit means an Award with an
initial value established by the Committee at the time of grant
which is based on the Participants attainment of
performance objectives, as described in Article 9. |
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Person has the meaning ascribed to that term
in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a
group as defined in Section 13(d) thereof. |
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Plan means the Lear Corporation Long-Term
Stock Incentive Plan, as set forth in this document. |
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Prior Plan means the Lear Corporation 1994
Stock Option Plan or the Lear Corporation 1996 Stock Option Plan. |
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Restriction Period means the period during
which the transfer of Shares of Restricted Stock is limited in
some way (based on the passage of time, the achievement of
performance objectives, or the occurrence of other events as
determined by the Committee, at its discretion) or the
Restricted Stock is not vested. |
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Restricted Stock means a contingent grant of
stock awarded to a Participant pursuant to Article 8. |
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Restricted Stock Unit means a Restricted Unit
granted to a Participant, as described in Article 8, that
is payable in Shares. |
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Restricted Unit means a notional account
established pursuant to an Award granted to a Participant, as
described in Article 8, that is (a) credited with
amounts equal to Shares or some other unit of measurement
specified in the Award Agreement, (b) subject to
restrictions and (c) payable in cash or Shares. |
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Retirement means termination of employment on
or after (a) reaching the age established by the Company as
the normal retirement age in any unexpired employment agreement
between the Participant and the Company or an Affiliate, or, in
the absence of such an agreement, the normal retirement age
under the tax-qualified defined benefit retirement plan or, if
none, the tax-qualified defined contribution retirement plan,
sponsored by the Company or an Affiliate in which the
Participant participates, or (b) reaching age sixty-two
with ten years of service with the Company or an Affiliate,
provided the retirement is approved by the Chief Executive
Officer of the Company, unless the Participant is an officer |
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subject to Section 16 of the Exchange Act, in which case
the retirement must be approved by the Committee. |
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Shares means the shares of common stock,
$0.01 par value, of the Company, including their associated
preferred share purchase rights, if applicable. |
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Stock Appreciation Right or
SAR means an Award, granted alone or in
connection with a related Option, designated as an SAR pursuant
to the terms of Article 7. |
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Tandem SAR means an SAR that is granted in
connection with a related Option pursuant to Article 7, the
exercise of which requires forfeiture of the right to purchase a
Share under the related Option (and when a Share is purchased
under the Option, the Tandem SAR will similarly be canceled). |
Article 3. Administration
3.1 The Committee. The Plan
will be administered by the Compensation Committee of the Board,
or by any other Committee appointed by the Board, which
Committee (unless otherwise determined by the Board) will
satisfy the nonemployee director requirements of
Rule 16b-3 under
the Exchange Act and the regulations of
Rule 16b-3 under
the Exchange Act and the outside director provisions
of Code Section 162(m), or any successor regulations or
provisions. The members of the Committee will be appointed from
time to time by, and serve at the discretion of, the Board of
Directors. The Committee will act by a majority of its members
at the time in office and eligible to vote on any particular
matter, and Committee action may be taken either by a vote at a
meeting or in writing without a meeting.
3.2 Authority of the
Committee. Except as limited by law and subject to the
provisions of this Plan, the Committee will have full power to:
select Eligible Employees to participate in the Plan; determine
the sizes and types of Awards; determine the terms and
conditions of Awards in a manner consistent with the Plan;
construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend or waive rules and
regulations for the Plans administration; and (subject to
the provisions of Article 15) amend the terms and
conditions of any outstanding Award to the extent they are
within the discretion of the Committee as provided in the Plan.
Further, the Committee will make all other determinations that
may be necessary or advisable to administer the Plan. As
permitted by law and consistent with Section 3.1, the
Committee may delegate some or all of its authority under the
Plan.
3.3 Decisions Binding. All
determinations and decisions made by the Committee pursuant to
the provisions of the Plan will be final, conclusive and binding
on all persons, including, without limitation, the Company, its
Board of Directors, its shareholders, all Affiliates, employees,
Participants and their estates and beneficiaries.
Article 4. Shares Subject to the Plan and Maximum
Awards
4.1 Number of Shares Available
for Grants. Subject to adjustment as provided in
Sections 4.2 and 4.3, the number of Shares that may be
issued or transferred to Participants under the Plan is
14,690,000, plus any Shares that are or become available for
grants of awards under any of the Prior Plans on or after the
Effective Date. On and after the Effective Date, any Shares that
are or become available for grants of awards under the Prior
Plans will be subject to Awards under this Plan only, and no
additional awards will be made under any of the Prior Plans. In
addition to the maximum Awards described above, remaining Shares
available will be reduced by 2.15 for each Share awarded
pursuant to Restricted Stock, Restricted Units, Restricted Stock
Units, Performance Shares, Performance Units or other Awards
with value denominated in full Shares. Each Share-settled SAR
will count as one Share, notwithstanding the fact that the net
Shares delivered upon exercise may be less than the number of
Share-settled SARs granted.
Subject to adjustment as provided in Section 4.3, the
maximum number of Shares and Share equivalent units that may be
granted during any calendar year to any one Participant under
Options, Freestanding SARs, Restricted Stock, Restricted Units
or Performance Shares is 300,000, which limit will apply
regardless of whether the compensation is paid in Shares or in
cash. The maximum number of Shares that may be issued by Options
intended to be ISOs is 2,000,000.
B-7
The Shares with respect to which Awards may be made will include
authorized but unissued Shares, and Shares that are currently
held or subsequently acquired by the Company as treasury Shares,
including Shares purchased in the open market or in private
transactions.
4.2 Lapsed Awards. If any
Award granted under this Plan is canceled, terminates, expires
or lapses for any reason, any Shares subject to the Award will
again be available for the grant of an Award under the Plan. In
addition, if a Share subject to an Award is not delivered
because the award is settled in cash, then that Share will
thereafter be deemed to be available for grant. If a Share
subject to an Award is not delivered because it is used to
satisfy a tax withholding obligation or used to pay the Exercise
Price of an Option, then that Share will not thereafter be
deemed to be available for grant.
4.3 Adjustments in Authorized
Shares.
(a) If the Shares, as currently constituted, are changed
into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another
corporation (whether because of merger, consolidation,
recapitalization, reclassification, split, reverse split,
combination of shares, or otherwise) or if the number of Shares
is increased through the payment of a stock dividend, then the
Committee will substitute for or add to each Share previously
appropriated, later subject to, or which may become subject to,
an Award, the number and kind of shares of stock or other
securities into which each outstanding Share was changed for
which each such Share was exchanged, or to which each such Share
is entitled, as the case may be. The Committee will also
appropriately amend outstanding Awards as to price and other
terms, to the extent necessary to reflect the events described
above. If there is any other change in the number or kind of the
outstanding Shares, of any stock or other securities into which
the outstanding Shares have been changed, or for which they have
been exchanged, the Committee may, in its sole discretion,
appropriately adjust any Award already granted or which may be
afterward granted.
(b) Fractional Shares resulting from any adjustment in
Awards pursuant to this section may be settled in cash or
otherwise as the Committee determines. The Company will give
notice of any adjustment to each Participant who holds an Award
that has been adjusted and the adjustment (whether or not that
notice is given) will be effective and binding for all Plan
purposes.
Article 5. Eligibility and Participation
5.1 Eligibility. All
Eligible Employees, including Eligible Employees who are members
of the Board, are eligible to participate in this Plan.
5.2 Actual Participation.
Subject to the provisions of the Plan, the Committee will, from
time to time, select those Eligible Employees to whom Awards
will be granted, and will determine the nature and amount of
each Award.
6.1 Grant of Options.
Subject to the terms and provisions of the Plan, Options may be
granted to Eligible Employees in the number, and upon the terms,
and at any time and from time to time, as determined by the
Committee.
6.2 Award Agreement. Each
Option grant will be evidenced by an Award Agreement that
specifies the Exercise Price, the duration of the Option, the
number of Shares to which the Option pertains, the manner, time
and rate of exercise or vesting of the Option, and such other
provisions as the Committee determines. The Award Agreement will
also specify whether the Option is intended to be an ISO or an
NQSO, and whether reload options will be granted.
6.3 Exercise Price. The
Exercise Price for each share subject to an Option will be at
least one hundred percent of the Fair Market Value on the date
the Option is granted.
6.4 Duration of Options.
Each Option will expire at the time determined by the Committee
at the time of grant, but no later than the tenth anniversary of
the date of its grant.
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6.5 No Dividend Equivalents.
The Committee may not grant payments in connection with Options
that are equivalent to dividends declared and paid on the Shares
underlying the Options.
6.6 Exercise of Options.
Options will be exercisable at such times and be subject to such
restrictions and conditions as the Committee in each instance
approves, which need not be the same for each Award or for each
Participant.
6.7 Payment. The holder of
an Option may exercise the Option only by delivering a written
notice of exercise to the Company setting forth the number of
Shares as to which the Option is to be exercised, together with
full payment at the Exercise Price for the Shares and any
withholding tax relating to the exercise of the Option.
The Exercise Price and any related withholding taxes will be
payable to the Company in full either: (a) in cash, or its
equivalent, in United States dollars; (b) if permitted in
the governing Award Agreement, by tendering Shares owned by the
Participant and duly endorsed for transfer to the Company,
Shares issuable to the Participant upon exercise of the Option,
or any combination of cash, certified or cashiers check
and Shares described in this clause (b); or (c) by any
other means the Committee determines to be consistent with the
Plans purposes and applicable law. Cashless exercise must
meet the requirements of the Federal Reserve Boards
Regulation T and any applicable securities law
restrictions. In a cashless exercise, the
Participant notifies the Company it will exercise, and the
Company is instructed to deliver the Share issuable on exercise
to a broker, who sells the Shares and holds back the exercise
price (and, often, the federal and state withholdings). No more
than the minimum required withholding may be satisfied by the
tender of Shares.
6.8 Reload Options. The
Committee may provide for reload options in the Award Agreement
evidencing an Option. Any reload feature will be subject to the
following requirements:
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(a) it must not be added to an already outstanding Option,
but must be part of the Option as originally granted; |
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(b) the reload must be automatic, not subject to the
discretion of the Committee or anyone else; |
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(c) it must have an Exercise Price at least equal to the
Fair Market Value of a Share at the time of reload; |
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(d) it may be granted with respect only to previously-owned
Shares used to pay the Exercise Price of the original Option,
and only if the Participant has owned the Shares used to pay the
Exercise Price for at least six months; |
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(e) the Award Agreement that contains the reload feature
must not permit multiple reloads (i.e., no reload Options
may be granted on Shares acquired through reload Options) and
must subject any Option granted on reload to a vesting period of
at least six months; and |
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(f) it must limit the duration of reload Options, by
providing that an Option granted on reload expires at the same
time as the initial Option would have. |
6.9 Restrictions on Share
Transferability. The Committee may impose such restrictions
on any Shares acquired through exercise of an Option as it deems
necessary or advisable, including, without limitation,
restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which the
Shares are then listed or traded, and under any blue sky or
state securities laws applicable to the Shares.
6.10 Termination of
Employment. Each Option Award Agreement will set forth the
extent to which the Participant has the right to exercise the
Option after his or her termination of employment with the
Company and all Affiliates. These terms will be determined by
the Committee in its sole discretion, need not be uniform among
all Options, and may reflect, among other things, distinctions
based on the reasons for termination of employment.
B-9
6.11 Nontransferability of
Options. Except as otherwise provided in a
Participants Award Agreement, no Option granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution, or pursuant to a domestic relations
order (as defined in Code Section 414(p)). In no event may
an Option be transferred to a third party for value or
consideration without prior approval of the Companys
shareholders. Further, except as otherwise provided in a
Participants Award Agreement, all Options will be
exercisable during the Participants lifetime only by the
Participant or his or her guardian or legal representative. The
Committee may, in its discretion, require a Participants
guardian or legal representative to supply it with the evidence
the Committee deems necessary to establish the authority of the
guardian or legal representative to act on behalf of the
Participant.
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Article 7. |
Stock Appreciation Rights |
7.1 Grant of SARs. Subject
to the terms and conditions of the Plan, SARs may be granted to
Participants at any time and from time to time, as determined by
the Committee. The Committee may grant Freestanding SARs, Tandem
SARs or any combination of the two.
Within the limits of Article 4, the Committee will have
sole discretion to determine the number of SARs granted to each
Participant and, consistent with the provisions of the Plan, to
determine the terms and conditions pertaining to SARs.
The grant price of a Freestanding SAR will equal the Fair Market
Value on the date of grant of the SAR. The grant price of a
Tandem SAR will equal the per Share Exercise Price of the Option
to which it relates.
7.2 Exercise of Tandem SARs.
Tandem SARs may be exercised for all or part of the Shares
subject to the related Option, upon the surrender of the right
to exercise the equivalent portion of the related Option. A
Tandem SAR may be exercised only with respect to the Shares for
which its related Option is then exercisable.
7.3 Exercise of Freestanding
SARs. Freestanding SARs may be exercised upon whatever terms
and conditions the Committee, in its sole discretion, imposes.
7.4 Award Agreement. Each
SAR grant will be evidenced by an Award Agreement that specifies
the grant price, the term of the SAR and such other provisions
as the Committee determines.
7.5 Term of SARs. The term
of an SAR will be determined by the Committee, in its sole
discretion, but may not exceed ten years.
7.6 Payment of SAR Amount.
Upon exercise of an SAR, a Participant will be entitled to
receive payment from the Company in an amount determined by
multiplying:
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(a) the excess (or some portion of the excess as determined
at the time of the grant by the Committee) if any, of the Fair
Market Value on the date of exercise of the SAR over the grant
price specified in the Award Agreement; by |
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(b) the number of Shares as to which the SAR is exercised. |
The payment upon SAR exercise may be made in cash, in Shares of
equivalent Fair Market Value or in some combination of the two,
as specified in the Award Agreement.
7.7 Termination of
Employment. Each SAR Award Agreement will set forth the
extent to which the Participant has the right to exercise the
SAR after his or her termination of employment with the Company
and all Affiliates. These terms will be determined by the
Committee in its sole discretion, need not be uniform among all
SARs issued under the Plan, and may reflect, among other things,
distinctions based on the reasons for termination of employment.
7.8 Nontransferability of
SARs. Except as otherwise provided in a Participants
Award Agreement, no SAR may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution, or pursuant to
a domestic relations order (as defined in Code
Section 414(p)). In no event may an SAR be transferred to a
third party for value or consideration without
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prior approval of the Companys shareholders. Further,
except as otherwise provided in a Participants Award
Agreement, all SARs will be exercisable during the
Participants lifetime only by the Participant or the
Participants guardian or legal representative. The
Committee may, in its discretion, require a Participants
guardian or legal representative to supply it with evidence the
Committee deems necessary to establish the authority of the
guardian or legal representative to act on behalf of the
Participant.
7.9 No Dividend Equivalents.
The Committee may not grant payments in connection with SARs
that are equivalent to dividends declared and paid on the Shares
underlying the SARs.
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Article 8. |
Restricted Stock, Restricted Stock Units and Restricted
Units |
8.1 Grant of Restricted Stock,
Restricted Stock Units or Restricted Units. Subject to the
terms and provisions of the Plan, the Committee may, at any time
and from time to time, grant Restricted Stock, Restricted Stock
Units or Restricted Units to Participants in such amounts as it
determines.
8.2 Deferral of Compensation
into Restricted Stock Units. Subject to the terms and
provisions of the Plan, the Committee may, at any time and from
time to time, allow (or require, as to bonuses) selected
Eligible Employees to defer the payment of any portion of their
salary or annual bonuses or both pursuant to this section. A
Participants deferral under this section will be credited
to the Participant in the form of Shares of Restricted Stock
Units. The Committee will establish rules and procedures for the
deferrals, as it deems appropriate.
In consideration for forgoing compensation, the dollar amount
deferred by a Participant may be increased by fifty percent (or
such lesser percentage as the Committee may determine) for
purposes of determining the number of Restricted Stock Units to
grant the Participant. If a Participants compensation is
deferred under this Section 8.2, he or she will be
credited, as of the date specified in the Award Agreement, with
a number of Restricted Stock Units equal to the amount of the
deferral (increased as described above) divided by the Fair
Market Value on that date.
8.3 Award Agreement. Each
grant of Restricted Stock, Restricted Units or Restricted Stock
Units will be evidenced by an Award Agreement that specifies the
Restriction Periods, the number of Shares or Share equivalent
units granted, and such other provisions as the Committee
determines.
8.4 Nontransferability.
Restricted Stock, Restricted Units and Restricted Stock Units
granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by
the laws of descent and distribution, or pursuant to a domestic
relations order (as defined in Code Section 414(p)), until
the end of the applicable Restriction Period as specified in the
Award Agreement, or upon earlier satisfaction of any other
conditions specified by the Committee in its sole discretion and
set forth in the Award Agreement. Without prior approval of the
Companys shareholders, in no event may Restricted Stock,
Restricted Units or Restricted Stock Units be transferred to a
third party for value or consideration unless and until such
Award has vested or the Shares underlying such Awards have been
issued and the applicable Restriction Period has ended. All
rights with respect to Restricted Stock, Restricted Units and
Restricted Stock Units will be available during the
Participants lifetime only to the Participant or the
Participants guardian or legal representative. The
Committee may, in its discretion, require a Participants
guardian or legal representative to supply it with evidence the
Committee deems necessary to establish the authority of the
guardian or legal representative to act on behalf of the
Participant.
8.5 Other Restrictions.
Subject to Article 11, the Committee may impose such other
conditions or restrictions on any Restricted Stock, Restricted
Units or Restricted Stock Units as it deems advisable including,
without limitation, restrictions based upon the achievement of
specific performance objectives (Company-wide, business unit,
individual, or any combination of them), time-based restrictions
on vesting following the attainment of the performance
objectives, and restrictions under applicable federal or state
securities laws. The Committee may provide that restrictions
established under this Section 8.5 as to any given Award
will lapse all at once or in installments.
The Company will retain the certificates representing Shares of
Restricted Stock in its possession until all conditions and
restrictions applicable to the Shares have been satisfied.
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8.6 Payment of Awards.
Except as otherwise provided in this Article 8, Shares
covered by each Restricted Stock grant will become freely
transferable by the Participant after the last day of the
applicable Restriction Period, and Share equivalent units
covered by a Restricted Unit will be paid out in cash or Shares
to the Participant following the last day of the applicable
Restriction Period, or on a later date provided in the Award
Agreement.
8.7 Voting Rights. During
the Restriction Period, Participants holding Shares of
Restricted Stock may exercise full voting rights with respect to
those Shares.
8.8 Dividends and Other
Distributions. During the Restriction Period, Participants
awarded Shares of Restricted Stock, Restricted Units or
Restricted Stock Units hereunder will be credited with regular
cash dividends or dividend equivalents paid on those Shares or
with respect to those Share equivalent units. Dividends may be
paid currently, accrued as contingent cash obligations, or
converted into additional Shares of Restricted Stock, upon such
terms as the Committee establishes.
The Committee may apply any restrictions it deems advisable to
the crediting and payment of dividends and other distributions.
Without limiting the generality of the preceding sentence, if
the grant or vesting of Restricted Stock is designed to qualify
for the Performance-Based Exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends
declared with respect to the Restricted Stock, so that the
dividends and the Restricted Stock continue to be eligible for
the Performance-Based Exception.
8.9 Termination of
Employment. Each Award Agreement will set forth the extent
to which the Participant has the right to retain unvested
Restricted Stock or Restricted Units after his or her
termination of employment with the Company or an Affiliate.
These terms will be determined by the Committee in its sole
discretion, need not be uniform among all Awards of Restricted
Stock, and may reflect, among other things, distinctions based
on the reasons for termination of employment.
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Article 9. |
Performance Units and Performance Shares |
9.1 Grant of Performance Units
or Performance Shares. Subject to the terms of the Plan,
Performance Units or Performance Shares may be granted to
Participants in such amounts and upon such terms, and at any
time and from time to time, as the Committee determines.
9.2 Value of Performance Units
and Performance Shares. Each Performance Unit will have an
initial value established by the Committee at the time of grant.
Each Performance Share will have an initial value equal to the
Fair Market Value on the date of grant. The Committee will set
performance objectives in its discretion which, depending on the
extent to which they are met, will determine the number or value
(or both) of Performance Units or Performance Shares that will
be paid out to the Participant. For purposes of this
Article 9, the time period during which the performance
objectives must be met will be called a Performance
Period and will be set by the Committee in its discretion.
9.3 Earning of Performance Units
and Performance Shares. Subject to the terms of this Plan,
after the applicable Performance Period has ended, the holder of
Performance Units or Performance Shares will be entitled to
receive payout on the number and value of Performance Units or
Performance Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent
to which the corresponding performance objectives have been
achieved.
9.4 Award Agreement. Each
grant of Performance Units or Performance Shares will be
evidenced by an Award Agreement specifying the material terms
and conditions of the Award (including the form of payment of
earned Performance Units or Performance Shares), and such other
provisions as the Committee determines.
9.5 Form and Timing of Payment
of Performance Units and Performance Shares. Except as
provided in Article 12, payment of earned Performance Units
and Performance Shares will be made as soon as practicable after
the close of the applicable Performance Period, in a manner
determined by the Committee in its sole discretion. The
Committee will pay earned Performance Units and Performance
Shares in the form of
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cash, in Shares, or in a combination of cash and Shares, as
specified in the Award Agreement. Performance Shares may be paid
subject to any restrictions deemed appropriate by the Committee.
9.6 Termination of Employment
Due to Death or Disability. Unless determined otherwise by
the Committee and set forth in the Participants Award
Agreement, if a Participants employment is terminated by
reason of death or Disability during a Performance Period, the
Participant will receive a prorated payout of the Performance
Units or Performance Shares, as specified by the Committee in
its discretion in the Award Agreement. Payment of earned
Performance Units and Performance Shares will be made at a time
specified by the Committee in its sole discretion and set forth
in the Participants Award Agreement.
9.7 Termination of Employment
for Other Reasons. If a Participants employment
terminates during a Performance Period for any reason other than
death or Disability, the Participant will forfeit all
Performance Units and Performance Shares to the Company, unless
the Participants Award Agreement provides otherwise.
9.8 Nontransferability.
Except as otherwise provided in a Participants Award
Agreement, Performance Units and Performance Shares may not be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution, or pursuant to a domestic relations order (as
defined in Code Section 414(p)). Without prior approval of
the Companys shareholders, in no event may Performance
Units or Performance Shares be transferred to a third party for
value or consideration prior to the vesting of such Award or the
issuance of Shares in respect of such Award. Further, except as
otherwise provided in a Participants Award Agreement, a
Participants rights under the Plan will be exercisable
during the Participants lifetime only by the Participant
or Participants guardian or legal representative. The
Committee may, in its discretion, require a Participants
guardian or legal representative to supply it with evidence the
Committee deems necessary to establish the authority of the
guardian or legal representative to act on behalf of the
Participant.
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Article 10. |
Performance Measures |
Unless and until the Committee proposes and the Companys
shareholders approve a change in the general performance
measures set forth in this Article 10, the performance
measure(s) to be used for purposes of Awards (both those granted
on or prior to the date of the 2006 annual meeting of the
Companys shareholders and those granted after the date of
such meeting) designed to qualify for the Performance-Based
Exception will be chosen from among the following alternatives:
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(a) net earnings; |
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(b) operating earnings or income; |
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(c) earnings growth; |
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(d) net income (absolute or competitive growth rates
comparative); |
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(e) net income applicable to Common Stock; |
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(f) cash flow, including operating cash flow, free cash
flow, discounted cash flow return on investment, and cash flow
in excess of cost of capital; |
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(g) earnings per Common share; |
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(h) return on shareholders equity (absolute or peer-group
comparative); |
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(i) stock price (absolute or peer-group comparative); |
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(j) absolute and/or relative return on common shareholders
equity; |
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(k) absolute and/or relative return on capital; |
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(l) absolute and/or relative return on assets; |
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(m) economic value added (income in excess of cost of
capital); |
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(n) customer satisfaction; |
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(o) expense reduction; and |
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(p) ratio of operating expenses to operating revenues. |
The Committee will have the discretion to adjust targets set for
preestablished performance objectives; however, Awards designed
to qualify for the Performance-Based Exception may not be
adjusted upward, except to the extent permitted under Code
Section 162(m), to reflect accounting changes or other
events.
If Code Section 162(m) or other applicable tax or
securities laws change to allow the Committee discretion to
change the types of performance measures without obtaining
shareholder approval, the Committee will have sole discretion to
make such changes without obtaining shareholder approval. In
addition, if the Committee determines it is advisable to grant
Awards that will not qualify for the Performance-Based
Exception, the Committee may grant Awards that do not so qualify.
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Article 11. |
Beneficiary Designation |
Each Participant may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case the
Participant should die before receiving any or all of his or her
Plan benefits. Each beneficiary designation will revoke all
prior designations by the same Participant, must be in a form
prescribed by the Committee, and must be made during the
Participants lifetime. If the Participants
designated beneficiary predeceases the Participant or no
beneficiary has been designated, benefits remaining unpaid at
the Participants death will be paid to the
Participants estate or other entity described in the
Participants Award Agreement.
The Committee may permit or require a Participant to defer
receipt of cash or Shares that would otherwise be due to him or
her by virtue of an Option or SAR exercise, the lapse or waiver
of restrictions on Restricted Stock, or the satisfaction of any
requirements or objectives with respect to Performance Units or
Performance Shares. If any such deferral election is permitted
or required, the Committee will, in its sole discretion,
establish rules and procedures for such deferrals.
Notwithstanding the foregoing, the Committee in its sole
discretion may defer payment of cash or the delivery of Shares
that would otherwise be due to a Participant under the Plan if
payment or delivery would result in the Companys or an
Affiliates being unable to deduct compensation under Code
Section 162(m). Deferral of payment or delivery by the
Committee may continue until the Company or Affiliate is able to
deduct the payment or delivery under the Code.
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Article 13. |
Rights of Employees |
13.1 Employment. Nothing in
the Plan will interfere with or limit in any way the right of
the Company or any affiliate of the Company (as defined in
federal securities laws) to terminate any Participants
employment at any time, or confer upon any Participant any right
to continue in the employ of the Company or any Affiliate.
13.2 Participation. No
Eligible Employee will have the right to receive an Award under
this Plan, or, having received any Award, to receive a future
Award.
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Article 14. |
Change in Control |
14.1 Treatment of Outstanding
Awards. Upon the occurrence of a Change in Control, unless
otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies
or national securities exchanges:
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(a) any and all outstanding Options and SARs will become
immediately exercisable, and will remain exercisable throughout
their entire term; |
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(b) any Restriction Periods or other restrictions imposed
on Restricted Stock, Restricted Stock Units and Restricted Units
will lapse, except that the degree of vesting associated with
those awards that |
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is conditioned on the achievement of performance conditions will
be determined as set forth in Section 14.1(c); |
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(c) except as otherwise provided in the Award Agreement,
the vesting of all Performance Units and Performance Shares will
be accelerated as of the effective date of the Change in
Control, and Participants will be paid in cash, within thirty
days after the effective date of the Change in Control, a pro
rata amount based on an assumed achievement of all relevant
performance objectives at target levels, and upon the length of
time within the Performance Period that elapsed prior to the
effective date of the Change in Control; and |
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(d) notwithstanding the foregoing, if the Committee
determines that actual performance to the effective date of the
Change in Control exceeds target levels, the prorated payouts
made pursuant to Sections 14.1(b) and (c) will be made
at levels commensurate with the actual performance (determined
by extrapolating the actual performance to the end of the
Performance Period) based on the length of time within the
Performance Period that elapsed prior to the Change in Control. |
14.2 Termination, Amendment and
Modifications of Change in Control Provisions.
Notwithstanding any other provision of this Plan or any
provision in an Award Agreement, this Article 14 may not be
terminated, amended or modified on or after the effective date
of a Change in Control in a way that would adversely affect any
Award theretofore granted to a Participant, unless the
Participant gives his or her prior written consent to the
amendment.
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Article 15. |
Amendment, Modification and Termination |
15.1 Amendment, Modification and
Termination. Subject to Section 14.2, the Committee may
at any time and from time to time, alter, amend, modify or
terminate the Plan in whole or in part. The Committee will not,
however, increase the number of Shares that may be issued or
transferred to Participants under the Plan, as described in the
first sentence of Section 4.1 (and subject to adjustment as
provided in Sections 4.2 and 4.3).
Subject to the terms and conditions of the Plan, the Committee
may modify, extend or renew outstanding Awards under the Plan,
or accept the surrender of outstanding Awards (to the extent not
already exercised) and grant new Awards in substitution of them
(to the extent not already exercised). Except as provided in
Sections 4.3 and 15.2, the Committee will not, however,
modify any outstanding Option or SAR so as to specify a lower
Exercise Price or grant price (and will not cancel an Option or
SAR and substitute for it an Option or SAR with a lower Exercise
Price or grant price), without the approval of the
Companys shareholders. In addition, except as provided in
Sections 4.3 and 15.2, the Committee may not cancel an
outstanding Option or SAR whose Exercise Price or grant price is
equal to or greater than the current Fair Market Value of a
Share and substitute for it another Award without the prior
approval of the Companys stockholders. Notwithstanding the
foregoing, no modification of an Award will, without the prior
written consent of the Participant, alter or impair any rights
or obligations under any Award already granted under the Plan.
15.2 Adjustment of Awards Upon
the Occurrence of Certain Unusual or Nonrecurring Events. In
recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4.3)
affecting the Company or its financial statements, or in
recognition of changes in applicable laws, regulations, or
accounting principles, and, whenever the Committee determines
that adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be
made available under the Plan, the Committee may, using
reasonable care, make adjustments in the terms and conditions
of, and the criteria included in, Awards. In case of an Award
designed to qualify for the Performance-Based Exception, the
Committee will take care not to make an adjustment that would
disqualify the Award.
15.3 Awards Previously
Granted. No termination, amendment or modification of the
Plan will adversely affect in any material way any Award already
granted, without the written consent of the Participant who
holds the Award.
B-15
15.4 Compliance with Code
Section 162(m). Awards will comply with the
requirements of Code Section 162(m), unless the Committee
determines that such compliance is not desired with respect to
an Award available for grant under the Plan. In addition, if
changes are made to Code Section 162(m) to permit greater
flexibility as to any Award available under the Plan, the
Committee may, subject to this Article 15, make any
adjustments it deems appropriate.
16.1 Tax Withholding. The
Company will have the power and the right to deduct or withhold,
or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic
or foreign, required by law or regulation to be withheld with
respect to any taxable event arising under this Plan. No Award
Agreement will permit reload options to be granted in connection
with any Shares used to pay a tax withholding obligation.
16.2 Share Withholding. With
respect to withholding required upon the exercise of Options or
SARs, upon the lapse of restrictions on Restricted Stock, or
upon any other taxable event arising as a result of Awards
granted hereunder, the Company may satisfy the minimum
withholding requirement for supplemental wages, in whole or in
part, by withholding Shares having a Fair Market Value
(determined on the date the Participant recognizes taxable
income on the Award) equal to the minimum withholding tax
required to be collected on the transaction. The Participant may
elect, subject to the approval of the Committee, to deliver the
necessary funds to satisfy the withholding obligation to the
Company, in which case there will be no reduction in the Shares
otherwise distributable to the Participant.
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Article 17. |
Indemnification |
Each person who is or has been a member of the Committee or the
Board will be indemnified and held harmless by the Company from
and against any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection
with or as a result of any claim, action, suit or proceeding to
which he or she may be a party or in which he or she may be
involved by reason of any action taken, or failure to act, under
the Plan. Each such person will also be indemnified and held
harmless by the Company from and against any and all amounts
paid by him or her in a settlement approved by the Company, or
paid by him or her in satisfaction of any judgment, of or in a
claim, action, suit or proceeding against him or her and
described in the previous sentence, so long as he or she gives
the Company an opportunity, at its own expense, to handle and
defend the claim, action, suit or proceeding before he or she
undertakes to handle and defend it. The foregoing right of
indemnification will not be exclusive of any other rights of
indemnification to which a person who is or has been a member of
the Committee or the Board may be entitled under the
Companys Articles of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that the Company may have to
indemnify him or her or hold him or her harmless.
All obligations of the Company under the Plan or any Award
Agreement will be binding on any successor to the Company,
whether the existence of the successor results from a direct or
indirect purchase of all or substantially all of the business or
assets of the Company or both, or a merger, consolidation, or
otherwise.
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Article 19. |
Legal Construction |
19.1 Number. Except where
otherwise indicated by the context, any plural term used in this
Plan includes the singular and a singular term includes the
plural.
19.2 Severability. If any
provision of the Plan is held illegal or invalid for any reason,
the illegality or invalidity will not affect the remaining parts
of the Plan, and the Plan will be construed and enforced as if
the illegal or invalid provision had not been included.
B-16
19.3 Requirements of Law.
The granting of Awards and the issuance of Share or cash payouts
under the Plan will be subject to all applicable laws, rules,
and regulations, and to any approvals by governmental agencies
or national securities exchanges as may be required.
19.4 Securities Law
Compliance. As to any individual who is, on the relevant
date, an officer, director or ten percent beneficial owner of
any class of the Companys equity securities that is
registered pursuant to Section 12 of the Exchange Act, all
as defined under Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all
applicable conditions of
Rule 16b-3 under
the Exchange Act, or any successor rule. To the extent any
provision of the Plan or action by the Committee fails to so
comply, it will be deemed null and void, to the extent permitted
by law and deemed advisable by the Committee.
19.5 Awards to Foreign Nationals
and Employees Outside the United States. To the extent the
Committee deems it necessary, appropriate or desirable to comply
with foreign law of practice and to further the purposes of this
Plan, the Committee may, without amending the Plan,
(i) establish rules applicable to Awards granted to
Participants who are foreign nationals, are employed outside the
United States, or both, including rules that differ from those
set forth in this Plan, and (ii) grant Awards to such
Participants in accordance with those rules.
19.6 Unfunded Status of the
Plan. The Plan is intended to constitute an
unfunded plan for incentive and deferred
compensation. With respect to any payments or deliveries of
Shares not yet made to a Participant by the Company, the
Participants rights are no greater than those of a general
creditor of the Company. The Committee may authorize the
establishment of trusts or other arrangements to meet the
obligations created under the Plan, so long as the arrangement
does not cause the Plan to lose its legal status as an unfunded
plan.
19.7 Governing Law. To the
extent not preempted by federal law, the Plan and all agreements
hereunder will be construed in accordance with and governed by
the laws of the State of Michigan.
* * * * *
B-17
ADMISSION TICKET
LEAR CORPORATION
ANNUAL MEETING OF
STOCKHOLDERS
MAY 11, 2006 AT 10:00 A.M.
(EASTERN TIME)
GRAND HYATT TAMPA BAY
2900 BAYPORT DRIVE
TAMPA, FLORIDA 33607
ADMITS ONE
STOCKHOLDER AND UP TO TWO GUESTS
▼
DETACH PROXY CARD
HERE
▼
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Mark, Sign, Date and Return the Proxy
Card Promptly Using the Enclosed Envelope. |
x Votes must be indicated
(x) in Black or Blue Ink. |
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THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR THE NOMINEES IN PROPOSAL NO. 1 AND FOR
PROPOSAL NO. 2 AND PROPOSAL NO. 3. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL NO. 4 AND PROPOSAL NO. 5.
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1. |
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Election of
Directors |
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FOR |
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AGAINST |
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ABSTAIN |
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FOR all nominees
listed below |
o |
WITHHOLD AUTHORITY to vote for all nominees listed below |
o |
*EXCEPTIONS |
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Approve an amendment to the Lear Corporation Long-Term Stock Incentive Plan. |
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Nominees: David E.
Fry, David P. Spalding, James A. Stern and Henry D.G. Wallace |
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(INSTRUCTIONS: To withhold authority
to vote for any individual nominee, mark the Exceptions
box and write that nominees name in the space provided below). |
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Stockholder proposal to elect each director annually. |
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* Exceptions |
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5. |
Stockholder proposal regarding global human rights standards. |
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FOR |
AGAINST |
ABSTAIN |
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YES |
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NO |
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Ratify the
appointment of Ernst & Young LLP as our independent registered
public accounting firm for 2006. |
o |
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6. |
Do you plan to
attend the Meeting? |
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o |
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Please sign this proxy and return it promptly whether or not you expect to attend the meeting.
You may nevertheless vote in person if you attend. Please sign
exactly as your name appears herein. Give full title if an Attorney,
Executor, Administrator, Trustee, Guardian, etc. For an account in
the name of two or more persons, each should sign, or if one signs,
he should attach evidence of his authority. |
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Date Share Owner sign here |
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Co-Owner sign here |
Dear Stockholder:
The Annual Meeting of Stockholders (the Meeting) of Lear Corporation (the Company) will be
held at 10:00 a.m. (Eastern time) on Thursday, May 11, 2006 at the Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, Florida, 33607.
To be sure that your vote is counted, we urge you to complete and sign the proxy/voting
instruction card below, detach it from this letter and return it in the postage paid envelope
enclosed in this package. The giving of such proxy does not affect your right to vote in person if
you attend the Meeting. The prompt return of your signed proxy will aid the Company in reducing the
expense of additional proxy solicitation.
In order to assist the Company in preparing for the Meeting, please indicate in item 6 on the
proxy whether you currently plan to attend the Meeting.
If you attend the Meeting in person, detach and bring this letter to the Meeting as an
admission ticket for you and up to two of your guests.
March 27, 2006
LEAR CORPORATION
PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors of Lear Corporation for the Annual
Meeting of Stockholders on May 11, 2006 or any adjournment or postponement thereof (the Meeting).
The undersigned appoints James H. Vandenberghe and Daniel A. Ninivaggi, and each of them, with full
power of substitution in each of them, the proxies of the undersigned, to vote for and on behalf of
the undersigned all shares of Lear Corporation Common Stock which the undersigned may be entitled
to vote on all matters properly coming before the Meeting, as set forth in the related Notice of
Annual Meeting and Proxy Statement, both of which have been received by the undersigned.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned
stockholder. If no direction is given, this proxy will be voted FOR the nominees in proposals 1, FOR proposals 2 and 3, and AGAINST proposals 4 and 5.
To change your address, please mark this box. o
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Change of address
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LEAR CORPORATION
P.O. BOX 11211
NEW YORK, NY 10203-0211 |