-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MFAX4VKwdqaN/kPOqSabLCSxHmGO55UMGVJkx5/uNiWgvn1XzglLf0ZVB0SAtVg9 7cr862NOd5GG1/o97tpR3A== 0000950152-02-001645.txt : 20020415 0000950152-02-001645.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950152-02-001645 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOODYEAR TIRE & RUBBER CO /OH/ CENTRAL INDEX KEY: 0000042582 STANDARD INDUSTRIAL CLASSIFICATION: TIRES AND INNER TUBES [3011] IRS NUMBER: 340253240 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01927 FILM NUMBER: 02571656 BUSINESS ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 BUSINESS PHONE: 2167962121 MAIL ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 10-K 1 l92979ae10-k.htm THE GOODYEAR TIRE & RUBBER COMPANY 10-K/12-31-01 The Goodyear Tire & Rubber Company 10-K/12-31-01
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

Commission File Number: 1-1927

THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of Registrant as specified in its charter)

     
Ohio   34-0253240
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
1144 East Market Street, Akron, Ohio   44316-0001
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (330) 796-2121

Securities registered pursuant to Section 12(b) of the Act:

     
    Name Of Each Exchange On
Title Of Each Class   Which Registered

 
Common Stock, Without Par Value   New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
     
Preferred Stock Purchase Rights   New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange

Securities registered pursuant to Section 12(g) of the Act:

None


          Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

     
Yes (CHECK BOX)   No (BOX)

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein or in the definitive proxy statement incorporated by reference in Part III of this Form 10-K. (BOX).


          The aggregate market value of Registrant’s outstanding Common Stock held by nonaffiliates of the Registrant on February 15, 2002 determined using the per share closing price thereof on the New York Stock Exchange Composite Transactions tape of $24.68 on that date, was approximately $4,024,778,194.44.


Shares of Common Stock, Without Par Value, outstanding at February 15, 2002:

163,211,324


DOCUMENTS INCORPORATED BY REFERENCE:

Portions of Registrant’s definitive Proxy Statement, dated February 26, 2002,
for its 2002 Annual Meeting of Shareholders are incorporated by reference into Part III.

 


PART I.
ITEM 1. BUSINESS.
ITEM 2. PROPERTIES.
ITEM 3. LEGAL PROCEEDINGS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 4(A). EXECUTIVE OFFICERS OF REGISTRANT.
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND                      FINANCIAL DISCLOSURE. None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
SIGNATURES
INDEX TO FINANCIAL STATEMENT SCHEDULES
Index of Exhibits
EX-4.1 Common Stock Shares
EX-4.2 Appointment of Successor Rights Agent
EX-10.1 Goodyear Supplement Pension Plan
EX-10.2 Stock Option Plan
EX-10.3 Deferred Compensation Plan for Executives
EX-10.4 Stock Option Grant Agreement
EX-10.5 Grant Agreement
EX-12 Computation-Ratio of Earnings:Fixed Charges
EX-21 Subsidiaries of the Registrant
EX-23 Consent of Independent Accountants
EX-24 Power of Attorney


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THE GOODYEAR TIRE & RUBBER COMPANY

Annual Report on Form 10-K

For the Fiscal Year Ended December 31, 2001

Table of Contents

         
Item       Page
Number       Number

     
    PART I    
         
1   Business     1
2   Properties   21
3   Legal Proceedings   23
4   Submission of Matters to a Vote of Security Holders   27
4(A)   Executive Officers of Registrant   27
         
    PART II    
         
5   Market for Registrant’s Common Equity and Related Stockholder Matters   32
6   Selected Financial Data   33
7   Management’s Discussion and Analysis of Financial Condition and Results of Operations   34
7A   Quantitative and Qualitative Disclosures About Market Risk   50
8   Financial Statements and Supplementary Data   52
9   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   81
         
    PART III    
         
10   Directors and Executive Officers of the Registrant   81
11   Executive Compensation   81
12   Security Ownership of Certain Beneficial Owners and Management   81
13   Certain Relationships and Related Transactions   81
         
    PART IV    
         
14   Exhibits, Financial Statement Schedules, and Reports on Form 8-K   82
         
    Signatures   84
    Index to Financial Statement Schedules   FS-1
    Index of Exhibits   X-1

 


Table of Contents

PART I.

ITEM 1. BUSINESS.

BUSINESS OF GOODYEAR

          The Goodyear Tire & Rubber Company (the “Company”) is an Ohio corporation organized in 1898. Its principal offices are located at 1144 East Market Street, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The terms “Goodyear” and “we”, “us” or “our” wherever used herein refer to the Company together with all of its consolidated domestic and foreign subsidiary companies, unless the context indicates to the contrary.

          Goodyear is one of the world’s leading manufacturers of tires and rubber products, engaging in operations in most regions of the world. Goodyear’s 2001 net sales were $14.1 billion. Goodyear’s net loss for 2001 was $203.6 million. Goodyear’s worldwide employment averaged 100,779 during 2001.

          Goodyear’s principal business is the development, manufacture, distribution and sale of tires for most applications. Goodyear also:

    manufactures and markets –
 
    several lines of rubber and other products for the transportation industry and various other industrial and consumer markets; and
 
    synthetic rubber and numerous rubber-related chemicals for various applications.
 
    provides automotive repair and other services at retail and commercial outlets.
 
    sells various other products.

FORWARD-LOOKING INFORMATION – SAFE HARBOR STATEMENT

          Certain information set forth herein (other than historical data and information) may constitute forward-looking statements regarding events and trends which may affect Goodyear’s future operating results and financial position. The words “estimate,” “expect,” “intend” and “project,” as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including:

    changes in general economic and industry conditions in the various markets served by Goodyear’s operations;
 
    price and product competition;
 
    increased competitive activity;
 
    changes in demand levels for our products;
 
    fluctuations in the prices paid for raw materials and energy;
 
    our ability to control costs and expenses;
 
    changes in the monetary policies of various countries where Goodyear has significant operations;
 
    changes in interest and currency exchange rates; and
 
    other unanticipated events and conditions.

It is not possible to foresee or identify all such factors. We will not revise or update any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof which may affect the accuracy of any forward-looking statement.

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DESCRIPTION OF GOODYEAR’S BUSINESS

General Segment Information

          Goodyear’s operating segments are North American Tire, European Union Tire, Eastern Europe, Africa and Middle East Tire, Latin American Tire and Asia Tire (collectively the “Tire Segments”), Engineered Products and Chemical Products.

          Each Tire Segment exports tires to one or more of the other Tire Segments. The sales and operating income of each Tire Segment exclude sales in respect of tires sold to other Tire Segments and include sales and operating income derived from the sale of tires imported from other Tire Segments to unaffiliated customers and tires exported to unaffiliated customers. Sales and operating income of the Chemical Products segment include sales and operating income in respect of products transferred to the Tire Segments or the Engineered Products segment.

          No customer or group of affiliated customers accounted for as much as 6.8% of Goodyear’s consolidated net sales during 2001, 2000 or 1999. Worldwide, Goodyear’s annual net sales to its ten largest customers, including their respective affiliates, represented less than 25.3% of consolidated net sales during each of 2001, 2000 and 1999.

Financial Information About Goodyear’s Segments

          Financial information relating to Goodyear’s “Segments” for the three year period ended December 31, 2001 appears in Note 20 captioned “Business Segments” of the Notes to Financial Statements set forth in Item 8 of this Annual Report, at pages 74 through 77, inclusive, and is incorporated herein.

General Information Regarding Tire Segments

          Goodyear’s principal business is the development, manufacture, distribution and sale of tires and related products and services worldwide. Goodyear manufactures and markets numerous lines of rubber tires for:

     
• automobiles   • farm implements
• trucks   • earthmoving equipment
• buses   • industrial equipment
• aircraft   • various other applications
• motorcycles    

in each case for sale to vehicle manufacturers for mounting as original equipment and in replacement markets worldwide. Goodyear manufactures and sells tires under the Goodyear-brand, the Dunlop-brand, the Kelly-brand, the Fulda-brand, the Debica-brand, the Sava-brand and various other Goodyear owned “house” brands. Goodyear also manufactures tires with the brands of certain customers. Goodyear also:

    manufactures and sells flaps for truck tires and other types of tires.
 
    retreads truck, aircraft and heavy equipment tires.
 
    manufactures and sells tread rubber and other tire retreading materials.
 
    provides automotive repair services and miscellaneous other products and services.

          The total sales and operating income of the Tire Segments during the periods indicated were:

                         
(In millions of dollars)   Year Ended December 31,
   
    2001   2000   1999
   
 
 
Total sales of Tire Segments
  $ 12,489.9     $ 12,674.9     $ 11,645.5  
Total operating income of Tire Segments
  $ 294.9     $ 491.7     $ 357.8  

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          The principal class of products of the Tire Segments is new tires for most applications. The percentages of Goodyear’s consolidated net sales and operating income attributable to the Tire Segments, and the percentage of Goodyear’s net sales attributable to new tires, for each year in the three year period ended December 31, 2001 were:

                           
      Year Ended December 31,
     
      2001   2000   1999
     
 
 
Total sales of Tire Segments
    88.3 %     87.9 %     87.2 %
Total operating income of Tire Segments
    80.4 %     82.1 %     65.7 %
 
Tire sales
    83.1 %     81.2 %     79.5 %

          Worldwide, Goodyear’s sales of new tires to the replacement markets substantially exceed its sales of new tires to vehicle manufacturers for original equipment (“OE”). Goodyear’s worldwide tire unit sales in the replacement and OE markets during the periods indicated were:

GOODYEAR WORLDWIDE ANNUAL TIRE UNIT SALES – REPLACEMENT AND OE

                           
(In millions of tires)   Year Ended December 31,
   
      2001   2000   1999
     
 
 
Replacement tire unit sales
    155.2       157.8       141.3  
OE tire unit sales
    64.1       65.5       59.2  
 
   
     
     
 
 
Total Goodyear Worldwide
    219.3       223.3       200.5  

          Goodyear offers two basic constructions of tires, radial and bias ply. Various belting and reinforcing materials are used as components of tires, including nylon, polyester and steel. Generally, radial tires are more durable and offer more handling performance than bias ply tires. Radial tires are also more complex and costly to manufacture than bias ply tires. Approximately 97% of all passenger tires, 86% of all light truck tires and 80% of all medium truck tires sold by Goodyear during 2001 were radial construction.

          New tires are sold under highly competitive conditions throughout the world. On a worldwide basis, Goodyear has two major competitors: Bridgestone/Firestone (based in Japan) and Michelin/UniroyalGoodrich (based in France). Other significant competitors include Continental/General, Cooper Tire, Pirelli, Sumitomo, Toyo, Yokohama, Kumho, Hankook and various regional tire manufacturers.

          Goodyear competes with other tire manufacturers on the basis of product design, performance, price and reputation, warranty terms, customer service and consumer convenience. Goodyear-brand tires enjoy a high recognition factor worldwide and have a reputation for performance, high quality and value. Goodyear believes Dunlop-brand tires have a reputation for performance, quality and value. Kelly-brand, Fulda-brand, Debica-brand, Sava-brand and various other house brand tire lines offered by Goodyear, and tires manufactured and sold by Goodyear to private brand customers, compete primarily on the basis of value and price.

          No customer or group of affiliated customers accounted for as much as 7.3% of the sales of the Tire Segments during 2001, 2000 or 1999. Annual sales by the Tire Segments to their ten largest customers, including their respective affiliates, represented less than 27.4% of the total sales of the Tire Segments during each of 2001, 2000 and 1999.

          Goodyear does not consider its tire businesses to be seasonal to any significant degree. A significant inventory of new tires is maintained in order to optimize production schedules and assure prompt delivery to customers, especially original equipment manufacturers that require “just in time” deliveries of tires or tire and wheel assemblies. Tire production and inventory levels are generally managed to avoid unnecessary increases in unit production costs and limit working capital requirements by optimizing production schedules consistent with anticipated demand.

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          Tire unit sales for each Tire Segment and for Goodyear worldwide during the periods indicated were:

GOODYEAR’S ANNUAL TIRE UNIT SALES

                           
(In millions of tires)   Year Ended December 31,
   
      2001   2000   1999
     
 
 
North American Tire
    112.0       115.9       109.1  
European Union Tire
    61.1       60.3       45.7  
Eastern Europe, Africa and Middle East Tire
    14.0       15.6       15.8  
Latin American Tire
    20.0       19.7       17.8  
Asia Tire
    12.2       11.8       12.1  
 
   
     
     
 
 
Goodyear worldwide
    219.3       223.3       200.5  

          Based on information available from various industry and other sources, Goodyear estimates that industry passenger and truck tire shipments worldwide during the periods indicated were:

ESTIMATED ANNUAL INDUSTRY TIRE SHIPMENTS WORLDWIDE

                         
    Year Ended December 31,
   
(In millions of tires)   2001   2000   1999
   
 
 
Industry tire shipments worldwide
    865.3       892.4       870.0  

          Based on new tire sales, Goodyear was the world’s largest tire manufacturer during 2001. Information published by the Rubber Manufacturers Association (the “RMA”) and various other sources indicates that Goodyear’s share of the worldwide auto, truck and farm tire markets during the last three years was approximately:

GOODYEAR SHARE OF GLOBAL TIRE MARKET
(Auto, Truck and Farm Tires)

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Goodyear share of tire market worldwide
    24.0 %     23.0 %     20.1 %

North American Tire

          Goodyear’s largest segment, the North American tire business (“North American Tire”), develops, manufactures, distributes and sells tires and related products and services in the United States and Canada. The principal class of products of North American Tire is new tires for most applications. North American Tire manufactures tires in 13 plants in the United States and Canada.

          The sales and operating income of North American Tire during the periods indicated were:

NORTH AMERICAN TIRE SALES AND OPERATING INCOME

                         
    Year Ended December 31,
   
(In millions of dollars)   2001   2000   1999
   
 
 
North American Tire sales
  $ 7,152.3     $ 7,111.3     $ 6,648.6  
North American Tire operating income
  $ 107.8     $ 260.7     $ 26.3  

          The percentages of Goodyear’s consolidated net sales and operating income attributable to North American Tire, and the percentages of the North American Tire’s sales attributable to new tires, for the periods indicated were:

                           
      Year Ended December 31,
     
      2001   2000   1999
     
 
 
North American Tire sales
    50.6 %     49.3 %     49.8 %
North American Tire operating income
    29.4 %     43.5 %     4.8 %
 
Tire sales
    92.7 %     89.9 %     88.1 %

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          Certain Dunlop-brand related businesses of North American Tire are conducted by Goodyear Dunlop Tires North America, Ltd, which is 75% owned by Goodyear and 25% owned by Sumitomo Rubber Industries, Ltd. (“Sumitomo”).

          Tires. North American Tire manufactures and sells a broad line of tires in North America for automobiles, trucks, motorcycles, buses, farm implements, earthmoving equipment, aircraft and industrial equipment and for various other applications.

          Goodyear-brand radial passenger tire lines sold in North America include the Aquatred line of tires, Eagle high performance and touring tires, Eagle Aquatred high performance tires, and run-flat extended mobility technology (EMT) tires. The major lines of Goodyear-brand radial tires offered in the United States and Canada for sport utility vehicles and light trucks are Wrangler and Fortera North American Tire also manufactures and sells Dunlop-brand, Kelly-brand, other house brand and several private brand radial passenger tires in the United States and Canada.

          North American Tire manufactures and markets a full line of Goodyear-brand all-steel cord and belt construction radial medium truck tires, the Unisteel series, for various applications, including line haul highway use and off-road service. The current truck tire line includes the Unisteel G-177, which features a high-tensile steel reinforced cording, a skid resistant tread design and a new damage resistant tread compound, and the Unisteel G-397 line haul steer tire, which features reinforced belting of super-tensile steel with a polyimide top belt for resistance to damage and rust propagation and increased retreadability. North American Tire also manufactures and distributes various lines of Dunlop-brand and Kelly-brand radial and bias-ply truck tires for sale in the United States and Canadian replacement markets.

          Several lines of tires for other applications are manufactured by Goodyear in North America, including radial and bias-ply tires for farm machinery and heavy equipment and aircraft tires for commercial and military aircraft.

          Related Products and Services. North American Tire also:

    retreads truck, aircraft and heavy equipment tires, primarily as a service to its commercial customers.
 
    manufactures tread rubber and other tire retreading materials for various applications.
 
    provides automotive maintenance and repair services at approximately 941 retail outlets.
 
    sells automotive repair and maintenance items, automotive equipment and accessories and other items to dealers and consumers.
 
    provides miscellaneous other products and services.

Market and Other Information

          North American Tire sells Goodyear-brand and Dunlop-brand tires to vehicle manufacturers for use as original equipment on vehicles they produce (“OE customers”) and sells Goodyear-brand, Dunlop-brand, Kelly-brand, other house brand and several lines of private brand tires through various channels of distribution for sale to vehicle owners for replacement purposes. Goodyear’s sales of tires in the North American replacement markets substantially exceed its sales of tires to OE customers.

          Tire unit sales in the replacement markets and to OE customers in the United States and Canada during the periods indicated were:

NORTH AMERICAN TIRE UNIT SALES – REPLACEMENT AND OE

                           
      Year Ended December 31,
     
(In millions of tires)   2001   2000   1999
   
 
 
Replacement tire unit sales
    79.7       79.5       71.8  
OE tire unit sales
    32.3       36.4       37.3  
 
   
     
     
 
 
Total
    112.0       115.9       109.1  

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          The percentages of North American Tire’s production of new tires exported during the periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Exported to unaffiliated customers
    1.7 %     2.7 %     2.6 %
Exported to affiliates
    3.4 %     1.9 %     1.9 %

          Exports to affiliates were primarily to European Union Tire and Latin American Tire. North American Tire imported approximately 5.2% of the tires it sold during 2001 (8% in 2000 and 1999), primarily from Latin American Tire and Asia Tire.

          All passenger tires (except bias-ply temporary spare tires) and approximately 96% of all light and medium truck tires sold by Goodyear in the United States and Canada during the last three years were radial construction. During 2001, approximately 40.2% (39.9% in 2000 and 39.0% in 1999) of all passenger tires sold by Goodyear in the United States and Canada were high performance type tires. Industry sales of high performance tires in the United States and Canada during 2001 represented approximately 31% (36% in 2000 and 34% in 1999) of total passenger tire unit sales.

          No customer or group of affiliated customers of North American Tire accounted for as much as 11.0% of its sales during 2001, 6.1% of its sales during 2000 or 7.3% during 1999. The ten largest customers of North American Tire accounted for less than 41.6% of its sales during 2001, less than 36.0% of its sales during 2000 and less than 35.5% of its sales during 1999.

          Goodyear is a major supplier of tires to most manufacturers of automobiles, trucks, farm and construction equipment and aircraft that have production facilities located in North America, including:

     
• DaimlerChrysler   • Freightliner
• Ford   • International Truck and Engine
• General Motors   • Kenwork
• BMW   • Mack Truck
• Honda   • Peterbuilt
• Mitsubishi   • Caterpillar
• Nissan   • John Deere
• Toyota   • J.I. Case
• Volvo   • Boeing
• AAI   • Lockheed-Martin

          Goodyear’s major competitors in the North American tire market are Bridgestone/Firestone, Michelin/UniroyalGoodrich, Continental/General and Cooper Tire, each having manufacturing facilities and other operations in North America. Other significant competitors in North America are Pirelli, Toyo, Yokohama, Kumho and Hankook, who import most of the tires they sell, and various regional tire manufacturers that export tires to North America.

          Goodyear-brand, Dunlop-brand and Kelly-brand tires are sold in the United States and Canadian replacement markets through several channels of distribution. The principal method of distribution for Goodyear-brand tires is a large network of independent dealers. Goodyear-brand, Dunlop-brand and Kelly-brand tires are also sold to numerous national and regional retail marketing firms in the United States, including Sears Roebuck & Co., Wal-Mart, Penske Auto Centers and numerous other firms.

          In addition, Goodyear operates approximately 973 retail outlets (including auto service centers, commercial tire and service centers and leased space in department stores) under the Goodyear name or under the Wingfoot Commercial Tire Systems, Allied or Just Tires trade styles. Several lines of Dunlop-brand and Kelly-brand and various other house brand passenger and truck tires are marketed through independent dealers. Private brand and associate brand

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tires are sold to independent dealers, to national and regional wholesale marketing organizations, including TBC Corporation, retail chain marketers, including Wal-Mart, Discount Tire, Sears Roebuck & Co. and Big-O, and to various other retail marketers.

          Automotive parts, automotive maintenance and repair services and associated merchandise are sold under highly competitive conditions in the United States and Canada through retail outlets operated by Goodyear. Automotive repair and maintenance items and associated merchandise are purchased by Goodyear for distribution to many of Goodyear’s tire dealers.

          North American Tire from time to time offers various financing and extended payment programs to certain of its tire customers in the replacement market. Goodyear does not believe these programs, when considered in the aggregate, require an unusual amount of working capital relative to the volume of sales involved and prevailing tire industry practices. Tire inventories are maintained at levels designed to optimize production schedules, assure prompt delivery to customers and minimize working capital requirements. During the second half of 2001, production schedules were significantly reduced to reflect changes in demand.

          Based on data published by the RMA and information obtained from other industry sources, industry shipments of passenger and light and medium highway truck tires in the United States during the periods indicated were:

INDUSTRY ANNUAL UNIT SALES IN THE UNITED STATES

                         
    Year Ended December 31,
   
(In millions of tires)   2001   2000   1999
   
 
 
U.S. Passenger Tire shipments
    247       259       253  
U.S. Light and Medium Truck Tire shipments
    56       63       64  
 
   
     
     
 
Total Industry Passenger and Truck Tire shipments
    303       322       317  

          Based on current economic forecasts, Goodyear expects the total market for passenger tires in the United States in 2002 to be 246 million tires, approximately the same as in 2001. Passenger tire demand in 2002 is expected to be 1.5% higher than in 2001 in the original equipment market and 1% lower than in 2001 in the replacement market. Goodyear estimates that demand for light and medium highway truck tires in the United States during 2002 will be 59 million units, a 4.5% increase compared to 2001.

          Goodyear sold more tires in the United States and Canada than any other tire manufacturer during the three years ended December 31, 2001. Based on information published by industry and other sources, Goodyear estimates that its share of the North American (United States and Canada) tire market during the periods indicated was approximately:

GOODYEAR’S SHARE OF TIRE MARKET – U.S. AND NORTH AMERICA

         
Year Ended December 31,   United States   North America

 
 
2001   32.7%   32.7%
2000   30.8%   31.1%
1999   31.2%   31.6%

          The National Highway Traffic Safety Administration (“NHTSA”), under authority granted to it by the National Traffic and Motor Vehicle Safety Act of 1966, as amended, has established various standards and regulations relating to motor vehicle safety, some of which apply to tires sold in the United States for highway use. NHTSA has the authority to order the recall of automotive products, including tires, having defects related to motor vehicle safety. NHTSA requires the registration of tires for identification in the event of a product recall, the grading of passenger tires for treadwear, traction and temperature resistance pursuant to prescribed testing procedures and the molding of such grades into the sidewall of each tire. Passenger and highway truck tires are required to be identified by manufacturing identification codes molded on

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the sidewall of each tire. The effect of compliance with these regulations on Goodyear’s sales and profits cannot be determined. However, these regulations increase the cost of producing and marketing passenger tires in the United States.

          In November of 2000, the Transportation Recall Enhancement, Accountability, and Documentation Act (the “Tread Act”) was enacted. The Tread Act requires, among other things, tire manufacturers to: (1) report to NHTSA within five (5) working days tire recalls or safety campaigns in foreign countries in respect of tires which are identical or substantially similar to tires sold in the United States: (2) remedy tire safety defects without charge for five (5) years; (3) undertake recalls on an accelerated basis under certain circumstances, which may require the replacement of recalled tires with competitors’ tires; (4) adopt plans to prevent, to the extent reasonably controllable by the manufacturer, replaced tires from being resold; (5) conform with revised and updated tire standards under rulemaking to be completed by June 1, 2002; and (6) report to NHTSA, on a quarterly basis, a variety of claim and adjustment information beginning in 2003 that will provide consumers with assistance in identifying tires subject to a recall and provide additional information on all tires. In addition, by November 2003, all new passenger cars, vans, SUVs and light trucks shall be equipped with warning systems to indicate significant tire underinflation. Goodyear cannot at this time determine the effect of compliance with these regulations on its sales and earnings. However, the Tread Act and the regulations adopted thereunder are likely to increase the cost of producing and distributing passenger and light truck tires in the United States.

European Union Tire

          Goodyear’s second largest Tire Segment (“European Union Tire ”) develops, manufactures, distributes and sells tires for automobiles, motorcycles, trucks, farm implements and construction equipment in the member states of the European Union and in Norway and Switzerland, exports tires to other regions of the world, and provides related products and services. European Union Tire manufactures tires in 12 plants located in England, France, Germany and Luxembourg. Substantially all of the operations and assets of European Union Tire are owned and operated by Goodyear Dunlop Tires Europe B.V., a 75% owned subsidiary of Goodyear.

          The sales and operating income of European Union Tire during the periods indicated were:

EUROPEAN UNION TIRE SALES AND OPERATING INCOME

                         
    Year Ended December 31,
   
(In millions of dollars)   2001   2000   1999
   
 
 
European Union Tire sales
  $ 3,128.0     $ 3,198.1     $ 2,642.7  
European Union Tire operating income
  $ 57.2     $ 88.7     $ 188.0  

          The percentages of Goodyear’s consolidated net sales and operating income attributable to European Union Tire, and the percentages of European Union Tire’s sales attributable to new tires, for the periods indicated were:

                           
      Year Ended December 31,
     
      2001   2000   1999
     
 
 
European Union Tire sales
    22.1 %     22.2 %     19.8 %
European Union Tire operating income
    15.6 %     14.8 %     34.5 %
 
Tire sales
    98.9 %     96.8 %     98.2 %

          European Union Tire:

    manufactures and sells Goodyear-brand, Dunlop-brand, Fulda-brand and Kelly-brand passenger, truck, motorcycle, farm and heavy equipment tires.

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    sells Debica-brand and Sava-brand passenger, truck and farm tires manufactured by the Eastern Europe, Africa and Middle East Tire segment.
 
    sells new, and manufactures and sells retreaded, aircraft tires.
 
    provides various retreading and related services for truck and heavy equipment tires, primarily for its commercial truck tire customers.
 
    offers automotive repair services at retail outlets in which it owns a controlling interest.
 
    provides miscellaneous related products and services.

Markets and Other Information

          European Union Tire distributes and sells tires throughout western Europe. Tire units sales to OE customers and in the replacement markets served by European Union Tire were:

EUROPEAN UNION TIRE UNIT SALES – REPLACEMENT AND OE

                           
      Year Ended December 31,
     
(In millions of tires)   2001   2000   1999
   
 
 
Replacement tire units
    41.6       42.4       33.0  
OE tire units
    19.5       17.9       12.7  
 
   
     
     
 
 
Total tire unit sales
    61.1       60.3       45.7  

          The percentages of European Union Tire’s production of new tires exported during the periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Exported to unaffiliated customers
    1.8 %     4.5 %     .9 %
Exported to affiliates
    5.3 %     5.3 %     7.0 %

          Most exports to affiliates were to Eastern Europe, Africa and Middle East Tire. Approximately 17.1% (20% in 2000 and 6.3% in 1999) of the tires sold by European Union Tire were imported, primarily from Eastern Europe, Africa and Middle East Tire.

          Substantially all passenger and light and medium truck tires sold during 2001 were radials. During 2001, approximately 64% (60% in 2000 and 50% in 1999) of all passenger tires sold by European Union Tire were high performance type tires.

          European Union Tire is a significant supplier of tires to most manufacturers of automobiles, trucks and farm and construction equipment located in western Europe, including:

     
• DaimlerChrysler   • Renault
• Ford   • Ferrari
• General Motors   • Peugeot
• Alfa Romeo   • Volkswagen-Audi
• BMW   • Volvo
• Fiat   • New Holland

          Goodyear is a leading tire manufacturer in western Europe. Based on data published by industry and other sources, Goodyear estimates that its share of the western European tire market was approximately 24.1% in 2001 (23.6% in 2000 and 18% in 1999), second in the region to Michelin’s 29% (30% in 2000 and 30% in 1999) market share. Other significant competitors include Continental, Bridgestone/Firestone, Pirelli, several regional tire producers and importers from other regions, primarily eastern Europe and Asia.

          Goodyear-brand and Dunlop-brand tires are sold in the replacement markets served by European Union Tire through various channels of distribution, principally independent tire dealers who sell several brands of tires. In some markets, Goodyear-brand tires, as well as Dunlop-

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brand, Kelly-brand, Fulda-brand, Debica-brand and Sava-brand tires, are distributed through independent dealers, regional distributors and approximately 514 retail outlets operated by multi-brand retail tire chains controlled by Goodyear.

          No customer or group of affiliated customers of European Union Tire accounted for as much as 4.2% of its sales during 2001, 5.0% of its sales during 2000 or 3.1% of its sales during 1999. The ten largest customers of European Union Tire represented less than 20.3% of its sales for 2001, less than 20.1% of its sales during 2000 and less than 19.3% of its sales during 1999.

          European Union Tire offers payment terms to customers in each market served consistent with industry practices in the region. The inventory levels and working capital requirements of European Union Tire are not unusual relative to the volume of sales involved and prevailing tire industry practices.

EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE

          Goodyear’s Eastern Europe, Africa and Middle East tire business segment (“EEAME Tire”) develops, manufactures, distributes and sells passenger, truck, farm and construction equipment tires in Eastern Europe, Africa and the Middle East. EEAME Tire manufactures tires at plants located in Morocco, Poland, Slovenia, South Africa and Turkey. EEAME Tire:

    maintains sales operations in most countries in eastern Europe, including Russia, Africa and the Middle East,
 
    exports tires for sale in North America, western Europe and other regions of the world, and
 
    provides related products and services in certain markets it serves.

          The sales and operating income of EEAME Tire during the periods indicated were:

EEAME SALES AND OPERATING INCOME

                         
    Year Ended December 31,
   
(In millions of dollars)   2001   2000   1999
   
 
 
EEAME Tire sales
  $ 703.1     $ 793.0     $ 812.9  
EEAME Tire operating income
  $ 20.2     $ 54.6     $ 49.8  

          The percentages of Goodyear’s consolidated net sales and operating income attributable to EEAME Tire, and the percentages of EEAME Tire’s sales attributable to new tires, for the periods indicated were:

                           
      Year Ended December 31,
     
      2001   2000   1999
     
 
 
EEAME Tire sales
    5.0 %     5.5 %     6.1 %
EEAME Tire operating income
    5.5 %     9.1 %     9.1 %
 
Tire sales
    91.6 %     93.4 %     92.7 %

          EEAME Tire:

    manufactures and sells Goodyear-brand, Kelly-brand, Debica-brand and Sava-brand tires and sells Dunlop-brand and Fulda-brand tires manufactured by European Union Tire.
 
    sells new and retreaded aircraft tires.
 
    provides various retreading and related services for truck and heavy equipment tires.
 
    sells automotive parts and accessories.
 
    provides automotive repair services.

Markets and Other Information

          EEAME Tire distributes and sells tires to all classes of customers in most countries in Eastern Europe, Africa and the Middle East. Approximately 98% (98% in 2000 and 1999) of pas-

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senger and light truck tires, and approximately 87% (82% in 2000 and 77% in 1999) of all medium truck tires, sold by EEAME Tire were radials. High performance type tires were 18% of all passenger tires sold by EEAME Tire during 2001 (16% during 2000 and 12% during 1999).

          Tire units sales by EEAME Tire to OE customers and in the several replacement markets served were:

EEAME TIRE UNIT SALES – REPLACEMENT AND OE

                           
      Year Ended December 31,
     
(In millions of tires)   2001   2000   1999
   
 
 
Replacement tire units
    11.1       12.1       12.6  
OE tire units
    2.9       3.5       3.2  
 
   
     
     
 
 
Total tire unit sales
    14.0       15.6       15.8  

          The percentages of EEAME Tire production of new tires exported during the periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Exported to unaffiliated customers
    2.0 %     3.0 %     5.0 %
Exported to affiliates
    60.0 %     54.0 %     51.0 %

          Most tires exported by EEAME to affiliates were sold to European Union Tire. Approximately 18% of the tires sold by EEAME Tire during 2001 (23% in 2000 and 11% in 1999) were imported from other Tire Segments.

          EEAME Tire has a significant share of each of the markets it serves. Its major competitors are Michelin, Bridgestone/Firestone, Continental and Pirelli. Other competitors includes regional and local tire producers and imports from other regions, primarily Asia.

          EEAME Tire is a significant supplier of tires to manufacturers of automobiles, trucks, and farm and construction equipment in Poland, South Africa and Turkey. Manufacturers supplied by EEAME Tire include Fiat Auto Poland, Daewoo Poland, DaimlerChrysler South Africa, VW South Africa, Fiat Turkey and Renault Turkey.

          EEAME Tire sells Goodyear-brand tires in the various replacement markets primarily through independent tire dealers and wholesalers who sell several brands of tires. In some countries, Goodyear-brand, Dunlop-brand, Kelly-brand, Fulda-brand, Debica-brand and Sava-brand tires are sold through regional distributors and multi-brand dealers. In South Africa, tires are also sold through a retail chain of approximately 166 retail stores operated by Goodyear. In the Middle East and most of Africa, tires are sold primarily through regional distributors for resale to independent dealers.

          No customer or group of affiliated customers accounted for as much as 3.4% of the sales of EEAME Tire during 2001 (or as much as 2.8% in 2000 or 3.0% in 1999). Sales to the ten largest customers of EEAME Tire represented less than 13.7% of its 2001 sales (11.8% in 2000 and 13.0% in 1999).

          The payment terms offered customers of EEAME in each market it serves are consistent with industry practices. The inventory levels and working capital requirements of EEAME Tire are not unusual relative to the volume of sales involved and prevailing tire industry practices in the region.

LATIN AMERICAN TIRE

          Goodyear’s Latin American tire business segment (“Latin American Tire”) manufactures, distributes and sells automobile, truck and farm tires in Mexico and throughout Central and South America (“Latin America”), sells tires to various export markets, retreads and sells commercial truck, aircraft and heavy equipment tires, and provides other products and services.

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          Latin American Tire manufactures tires in plants located in Brazil, Chile, Colombia, Guatemala, Peru and Venezuela.

          The sales and operating income of Latin American Tire during the periods indicated were:

LATIN AMERICAN TIRE SALES AND OPERATING INCOME

                         
    Year Ended December 31,
   
(In millions of dollars)   2001   2000   1999
   
 
 
Latin American Tire sales
  $ 1,012.6     $ 1,047.9     $ 948.1  
Latin American Tire operating income
  $ 89.8     $ 69.8     $ 67.7  

The percentages of Goodyear’s consolidated net sales and operating income attributable to Latin American Tire, and the percentages of Latin American Tire’s sales attributable to new tires, for the periods indicated were:

                           
      Year Ended December 31,
     
      2001   2000   1999
     
 
 
Latin American Tire sales
    7.2 %     7.3 %     7.1 %
Latin American Tire operating income
    24.5 %     11.7 %     12.4 %
 
Tire sales
    90.5 %     91.6 %     89.0 %

          Latin American Tire manufactures and sells several lines of radial and bias-ply passenger, light and medium truck and farm tires. Latin American Tire also:

    manufactures and sells pre-cured treads for truck and heavy equipment tires.
 
    retreads, and provides various materials and related services for retreading, truck, aircraft and heavy equipment tires.
 
    manufactures other products, including batteries for motor vehicles.
 
    sells new aircraft tires.
 
    provides miscellaneous other products and services.

Markets and Other Information

          Latin American Tire distributes and sells several lines of tires for automobiles, trucks and farm equipment throughout Latin America to original equipment manufacturers, in the several replacement markets in the region and to various export markets. In Latin America, approximately 87.7% of all passenger and light truck tires, and approximately 39.6% of all medium truck tires, sold by Goodyear during 2001 were radials.

          Latin American Tire is a major supplier of tires to most manufacturers of automobiles and trucks with facilities in Latin America, including DaimlerChrysler, Ford, General Motors, Volkswagen, Fiat and Renault. Latin American Tire sells tires to independent dealers and distributors in the various replacement markets in Latin America.

          Goodyear is a leading participant in each of the markets served by Latin American Tire. Major competitors include Bridgestone/Firestone, Michelin and Pirelli. Other competition includes various regional producers and imports, primarily from Asia.

          Tire units sales by Latin American Tire to OE customers and in the replacement markets it serves were:

LATIN AMERICAN TIRE UNIT SALES – REPLACEMENT AND OE

                           
      Year Ended December 31,
     
(In millions of tires)   2001   2000   1999
   
 
 
Replacement tire units
    14.0       14.9       14.2  
OE tire units
    6.0       4.8       3.6  
 
   
     
     
 
 
Total Tire Unit Sales
    20.0       19.7       17.8  

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          The percentages of Latin American Tire production of new tires exported during the periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Exported to unaffiliated customers
    7.0 %     7.0 %     9.1 %
Exported to affiliates
    31.7 %     32.0 %     26.3 %

          Most tires exported to affiliates were sold to North American Tire. Latin American Tire imported approximately 21.5% (9% in 2000 and 8.3% in 1999) of the tires it sold from other Tire Segments.

          No customer or group of affiliated customers accounted for as much as 7.3% of Latin American Tire sales during 2001 (5.2% during 2000 or 6.5% during 1999). The ten largest customers of Latin American Tire represented less than 31.9% of its sales for 2001 (24.6% during 2000 and 24.9% during 1999).

          The working capital employed by Latin American Tire is limited to the extent possible, consistent with its sales volume and industry practices. The inventories maintained by Latin American Tire are ordinarily at levels designed to optimize production schedules consistent with anticipated demand. Payment terms are offered to customers in each Latin American country as required by market conditions.

          The operations of Latin American Tire are affected from time to time in certain countries by price controls, import controls, labor regulations, tariffs, and other restrictive governmental regulations.

ASIA TIRE

          Goodyear’s tire business in Asia (“Asia Tire”) engages in the development, manufacture, distribution and sale of tires throughout east, southeast and south Asia and the western Pacific. Asia Tire manufactures and sells radial and bias-ply tires for automobiles, light and medium trucks, farm implements, construction equipment and aircraft for both the original equipment and replacement markets. Asia Tire manufactures tires at facilities located in China, India, Indonesia, Japan, Malaysia, the Philippines, Taiwan and Thailand. Asia Tire also retreads truck, heavy equipment and aircraft tires and provides miscellaneous other products and services.

          The sales and operating income of Asia Tire during the periods indicated were:

ASIA TIRE SALES AND OPERATING INCOME

                         
    Year Ended December 31,
   
(In millions of dollars)   2001   2000   1999
   
 
 
Asia Tire sales
  $ 493.9     $ 524.6     $ 593.2  
Asia Tire operating income
  $ 19.9     $ 17.9     $ 26.0  

The percentages of Goodyear’s consolidated net sales and operating income attributable to Asia Tire, and the percentages of Asia Tire’s sales attributable to new tires, for the periods indicated were:

                           
      Year Ended December 31,
     
      2001   2000   1999
     
 
 
Asia Tire sales
    3.5 %     3.6 %     4.4 %
Asia Tire operating income
    5.4 %     3.0 %     4.8 %
 
Tire sales
    97.1 %     97.3 %     96.7 %

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Markets and Other Information

          Asia Tire distributes and sells tires in most countries in Asia and the western Pacific to OE customers and for the replacement markets. The number of tires sold in the replacement markets and to OE customers during the periods indicated were:

ASIA TIRE UNIT SALES – REPLACEMENT AND OE

                           
      Year Ended December 31,
     
(In millions of tires)   2001   2000   1999
   
 
 
Replacement tire units
    8.8       8.8       9.7  
OE tire units
    3.4       3.0       2.4  
 
   
     
     
 
 
Total tire unit sales
    12.2       11.8       12.1  

          The percentages of Asia Tire production of new tires exported during the periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Exported to unaffiliated customers
    6.2 %     1.0 %     4.0 %
Exported to affiliates
    15.2 %     7.0 %     10.0 %

Most export sales to affiliates were to North American Tire and Latin American Tire. In 2001, Asia Tire imported approximately 3% (1% in 2000 and 2% in 1999) of the tires it sold from the other Tire Segments.

          During 2001, approximately 87% of all passenger and light truck tires (86% in 2000 and 85% in 1999), and approximately 3.5% of all medium truck tires (3% in 2000 and 2.5% in 1999), sold by Asia Tire were radials.

          Goodyear is a leading tire manufacturer in Indonesia, Malaysia and the Philippines and a significant supplier in Thailand, India, Korea and China. In Asia, Goodyear’s principal competitors include Bridgestone, Michelin, Yokohama, Kumho, Hankook, MRF, Ceat and several regional and local tire companies.

          Asia Tire supplies tires to global automobile manufacturers with facilities in China, India, Indonesia, Malaysia and the Philippines, including:

     
• BMW   • Hyundai
• Citroën   • Isuzu
• DaimlerChrysler   • Mitsubishi
• Daihatsu   • Nissan
• Ford   • Toyota
• General Motors   • Volkswagen
• Honda   • Volvo

and to regional manufacturers, including Perodua and Proton (Malaysia), Maruti, Skoda and Telco (India) and AAT (Thailand). In the replacement market, Asia Tire sells tires through approximately 7,063 distributors and dealers.

          No customer or group of affiliated customers accounted for as much as 5.9% of the sales of Asia Tire during 2001 (3.7% during 2000 or 7.2% during 1999). The ten largest customers of Asia Tire accounted for less than 16.7% of its 2001 sales (15.2% in 2000 and 22.8% in 1999).

          Ordinarily, the working capital requirements of Asia Tire are low relative to the volume of sales involved and are consistent with prevailing tire industry practices in the region. During the past three years, working capital requirements have increased somewhat due to the economic downturn in most of the region.

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          Asia Tire information does not include the operations of South Pacific Tyre, an Australian Partnership, and South Pacific Tyres N.Z. Limited, a New Zealand Company (together, “SPT”), joint ventures 50% owned by Goodyear and 50% owned by Pacific Dunlop Limited. SPT is the largest tire manufacturer in Australia and New Zealand, with 3 tire manufacturing plants and 16 retread plants. SPT sells Goodyear-brand and Dunlop-brand tires through a chain of 498 retail stores and commercial tire centers owned by SPT. For additional information regarding SPT, see Note 20, “Business Segments”, of the notes to Financial Statements set forth in Item 8 of this Annual Report, at page 74.

          The net sales and operating income of SPT during the periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
SPT net sales
  $ 481.3     $ 563.6     $ 674.5  
SPT operating income (loss)
  $ (25.4 )   $ (11.1 )   $ 31.2  

          Asia Tire includes the activities of two joint venture companies in Japan, each 25% owned by Goodyear and 75% owned by Sumitomo. One company distributes Goodyear-brand passenger and truck tires manufactured by Sumitomo in Japan, or by Goodyear in other countries, in the replacement market in Japan. The other company sells Goodyear-brand and Dunlop-brand tires to original equipment manufacturers in Japan. Goodyear’s 25% share of the net income or loss of these companies is reported as an increase or decrease to the operating income of Asia Tire using the equity method of accounting.

Engineered Products

          Another Goodyear business is the development, manufacture, distribution and sale of numerous rubber and thermoplastic products worldwide (“Engineered Products”). The products and services offered by Engineered Products include:

    belts and hose for motor vehicles.
 
    air springs, engine mounts and chassis parts for motor vehicles.
 
    conveyor and power transmission belts.
 
    air, water, steam, hydraulic, petroleum, fuel, chemical and materials handling hose for industrial applications.
 
    tank tracks.
 
    miscellaneous products and services.

Engineered Products manufactures products at nine plants located in the United States and 15 plants located in Australia, Brazil, Canada, Chile, China, Mexico, Slovenia, South Africa and Venezuela.

          The sales and operating income of Engineered Products for the periods indicated were:

ENGINEERED PRODUCTS SALES AND OPERATING INCOME

                         
    Year Ended December 31,
   
(In millions of dollars)   2001   2000   1999
   
 
 
Engineered Products sales
  $ 1,122.3     $ 1,174.2     $ 1,234.8  
Engineered Products operating income
  $ 11.6     $ 43.1     $ 70.4  

The percentages of Goodyear’s consolidated net sales and operating income attributable to Engineered Products for periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Engineered Products sales
    7.9 %     8.1 %     9.2 %
Engineered Products operating income
    3.2 %     7.2 %     12.9 %

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Markets and Other Information

          Engineered Products sells its products to manufacturers of vehicles and various industrial products and to independent wholesale distributors. Approximately 14.8% (13.0% in 2000 and 12.4% in 1999) of Engineered Products sales are made to various industrial and transportation markets for replacement purposes.

          More than 50 major firms participate in the various markets served by Engineered Products. There are several suppliers of automotive belts and hose products, air springs, engine mounts and other rubber components for motor vehicles. Goodyear is a significant supplier of these products. Goodyear also is a leading supplier of conveyor and power transmission belts and industrial hose products. The principal competitors of Engineered Products include Dana, Mark IV, Gates, Dayco, Bridgestone/Firestone, Conti-Tech, Trelleborg, Tokai/DTR, Unipoly and Habasit.

          These markets are highly competitive, with quality, service and price being the most significant factors to most customers. Goodyear believes the products offered by Engineered Products are generally considered to be high quality and competitive in price and performance.

          During 2001, Engineered Product’s ten largest customers accounted for approximately 31.3% of its sales (32.2% in 2000 and 41.3% in 1999) and no customer, or group of affiliated customers, accounted for more than 6.7% (6.7% in 2000 and 11.7% in 1999) of its sales. The principal customers of Engineered Products include DaimlerChrysler, Ford, General Motors, International Truck and Engine, AutoZone, the United States Government and Applied Industrial.

          The business of Engineered Products is not seasonal to any significant degree. Engineered Products does not maintain a significant inventory or require an unusual amount of working capital when considered in relation to the volume of business transacted.

Chemical Products

          Another Goodyear business is the development, manufacture, distribution and sale of synthetic rubber and rubber latices, various resins and organic chemicals used in rubber and plastic processing, and other chemical products for industrial customers worldwide (“Chemical Products”). Chemical Products owns and operates four manufacturing facilities, a natural rubber plantation and processing facility in Indonesia and conducts natural rubber purchasing operations.

          The sales and operating income of Chemical Products during the periods indicated were:

CHEMICAL PRODUCTS SALES AND OPERATING INCOME

                         
    Year Ended December 31,
   
(In millions of dollars)   2001   2000   1999
   
 
 
Chemical Products sales
  $ 1,037.3     $ 1,129.7     $ 949.8  
Chemical Products operating income
  $ 60.2     $ 64.2     $ 116.4  

          The percentages of Goodyear’s consolidated net sales and operating income attributable to Chemical Products (which includes sales and operating income in respect of products transferred to Goodyear’s other segments), and to the sales of Chemical Products to Goodyear’s other segments, for the periods indicated were:

                         
    Year Ended December 31,
   
    2001   2000   1999
   
 
 
Chemical Products sales
    7.3 %     7.8 %     7.1 %
Chemical Products operating income
    16.4 %     10.7 %     21.4 %
Chemical Products sales to other segments
    3.7 %     3.9 %     3.6 %

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          The major portion approximately 50.0%, 50.0% and 52.0% in 2001, 2000 and 1999, respectively, of the revenues of Chemical Products were sales to Goodyear’s other segments, primarily synthetic rubber and rubber processing chemicals to North American Tire, on a formula price basis. All production is in the United States.

Markets and Other Information

          The Tire Segments purchase approximately 70% of the synthetic rubber, and a significant portion of the rubber processing chemicals, produced by Chemical Products. All of the natural rubber produced by Goodyear’s plantation and processing facility is used by Goodyear. All external sales of rubber processing and other chemical products are made directly to manufacturers of various products.

          Several major firms are significant suppliers of one or more chemical products similar to those manufactured by Goodyear. The principal competitors of Chemical Products include Bayer, Dow and Ameripol Synpol. The markets are highly competitive, with product quality and price being the most significant factors to most customers. Goodyear believes the products offered by Chemical Products are generally considered to be high quality and competitive in price.

          During 2001, the ten largest unaffiliated customers of Chemical Products accounted for approximately 14.8% (14.9% in 2000 and 12.1% in 1999) of its sales. No unaffiliated customer accounted for more than 3.7% of its 2001 sales (4.1% in 2000 and 2.2% in 1999). The Chemical Products business is not seasonal to any significant degree and does not require an unusual amount of inventory or working capital relative to the volume of business transacted.

GENERAL BUSINESS INFORMATION

Sources and Availability of Raw Materials

          The principal raw materials used by Goodyear are synthetic and natural rubber. Goodyear purchases substantially all of its requirements for natural rubber in the world market. Synthetic rubber accounted for approximately 52%, 53%, and 54% of all rubber consumed by Goodyear worldwide during 2001, 2000 and 1999, respectively. Goodyear’s plants located in Beaumont and Houston, Texas, supply the major portion of its synthetic rubber requirements in the United States. Substantially all of the synthetic rubber used by Goodyear outside the United States is supplied by third parties. The principal raw materials used in the production of synthetic rubber are butadiene and styrene purchased from independent suppliers and isoprene purchased from independent suppliers or produced by Goodyear from purchased materials.

          Nylon and polyester yarns are used by Goodyear, substantial quantities of which are processed in Goodyear’s textile mills. Significant quantities of steel wire are used for radial tires, a portion of which is produced by Goodyear. Other important raw materials used by Goodyear are carbon black, pigments, chemicals and bead wire. Substantially all of these raw materials are purchased from independent suppliers, except for certain chemicals which Goodyear manufactures. Goodyear purchases most of the raw materials it uses in significant quantities from several suppliers, except in those instances where only one or a few qualified sources are available. As in 2001, Goodyear anticipates the continued availability of all raw materials it will require during 2002, subject to possible spot shortages.

          Substantial quantities of hydrocarbon based chemicals and fuels are used in the production of tires and other rubber products, synthetic rubber, latex and other products. Supplies of chemicals and fuels have been and are expected to continue to be available to Goodyear in quantities sufficient to satisfy the anticipated requirements of its manufacturing plants, subject to possible spot shortages.

          In the aggregate, the costs of natural rubber and other raw materials during 2001 decreased approximately .78% from 2000 levels. Although natural rubber and crude oil prices decreased

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slightly in the world market in late 2001 reflecting reduced global demand, Goodyear anticipates that the cost of energy will remain at year-end 2001 levels or increase slightly during 2002. Raw materials prices are expected to remain at year-end 2001 levels or decrease somewhat during 2002. Prices for most raw materials and fuels may fluctuate significantly during 2002.

Patents and Trademarks

          Goodyear owns approximately 2,196 patents issued by the United States Patent Office and approximately 5,928 patents issued or granted in other countries around the world. Goodyear also has licenses under numerous patents of others, covering various improvements in the design and manufacture of its products and in processes and equipment for the manufacture of its products. Goodyear also has approximately 724 applications for United States Patents pending and approximately 5,077 patent applications on file in other countries around the world. While such patents, patent applications and licenses as a group are of material importance to Goodyear, it does not consider any one patent, patent application or license, or any related group of them, to be of such importance that the loss or expiration thereof would materially affect Goodyear or any segment.

          Goodyear owns or controls and uses approximately 1,460 different trademarks, including several using the word “Goodyear” or the word “Dunlop.” These trademarks are protected by approximately 8,760 registrations and 1,050 pending applications worldwide. While Goodyear believes such trademarks as a group are of importance, the only trademarks Goodyear considers material to its business or to the business of any of its segments are those using the word “Goodyear”. Goodyear believes all of its significant trademarks are valid and will have unlimited duration as long as they are adequately protected and appropriately used.

Backlog

          Goodyear does not consider its backlog of orders to be material to, or a significant factor in, evaluating and understanding any of its segments or its businesses considered as a whole.

Government Business

          The percentages of Goodyear’s net sales under contracts or subcontracts subject to termination at the election of the United States government in the years indicated were:

         
Year Ended December 31,

2001   2000   1999

 
 
1.2%   0.9%   0.5%

Research and Development

          Goodyear expends significant amounts each year on research for the development of new, and the improvement of existing, products and manufacturing processes and equipment. Goodyear maintains substantial research and development centers for tires and related products in Akron, Ohio, and Colmar-Berg, Luxembourg; and tire proving grounds in Akron, Ohio, Huntsville, Alabama, San Angelo, Texas, Mireval, France, and Colmar-Berg, Luxembourg. Goodyear operates significant research and development facilities for other products in Akron, Ohio, Green, Ohio, Lincoln, Nebraska and Marysville, Ohio.

          Direct and indirect expenditures by Goodyear on research, development and certain engineering activities relating to the design, development, improvement and modification of new and existing products and services and the formulation and design of new, and improvements to existing, manufacturing processes and equipment during the periods indicated were:

                                         
(In millions of dollars)   Year Ended December 31,
   
    2001   2000   1999   1998   1997
   
 
 
 
 
Research and development expenditures
  $ 375.5     $ 423.1     $ 438.0     $ 420.7     $ 384.1  

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Goodyear expects to expend approximately $375 million for research and development activities during 2002.

Employees

          At December 31, 2001, Goodyear employed approximately 96,430 people throughout the world. Approximately 38,737 persons were employed by Goodyear in the United States at December 31, 2001. Approximately 11,818 of our employees were covered by a master collective bargaining agreement, dated May 9, 1997 (as supplemented in 2000), with the United Steel Workers of America, A.F.L.-C.I.O.-C.L.C. (“USWA”), which agreement will expire on April 19, 2003. Approximately 9,763 Goodyear employees were covered by other contracts with the USWA and various other unions. The major portion of Goodyear’s employees in Europe and Latin America are represented by unions.

Compliance with Environmental Regulations

          Goodyear is subject to extensive regulation under environmental and occupational health and safety laws and regulations. These laws and regulations relate to, among other things, air emissions, discharges to surface and underground waters and the generation, handling, storage, transportation and disposal of waste materials and hazardous substances. Goodyear has several continuing programs designed to ensure its compliance with Federal, state and local environmental and occupational safety and health laws and regulations.

          Goodyear’s expenditures relating to environmental improvement and occupational safety and health compliance projects in respect of its facilities worldwide during the periods indicated were:

                                         
(In millions of dollars)   Year Ended December 31,
   
    2001   2000   1999   1998   1997
   
 
 
 
 
Environmental and Occupational Safety and Health Expenditures
  $ 7.8     $ 6.5     $ 10.4     $ 17.5     $ 16.6  

Goodyear expects to make capital expenditures for pollution control facilities and occupational safety and health projects of approximately $15 million during 2002 and approximately $16 million during 2003.

          In addition, Goodyear expended approximately $59 million during 2001, and expects to expend approximately $71 million during 2002 and approximately $54 million during 2003, to maintain and operate its pollution control facilities and conduct its other environmental and occupational safety and health activities, including the control and disposal of hazardous substances. Goodyear believes these expenditures will be sufficient to comply with applicable existing environmental and occupational safety and health laws and regulations and will not have a material adverse effect on Goodyear’s competitive position in the industries in which it participates.

          At December 31, 2001, Goodyear had recorded liabilities totaling $66.5 million for anticipated costs associated with the remediation of numerous waste disposal sites and certain other properties and related environmental activities. These costs include site studies, the designs and implementation of remediation plans, post-remediation monitoring and consulting and legal fees.

          In the future Goodyear may incur increased costs and additional charges associated with environmental compliance and cleanup projects necessitated by the identification of new waste sites, the impact of new environmental laws and regulatory standards, or the availability of new technologies. Compliance with Federal, state and local environmental laws and regulations in the future may require a material increase in Goodyear’s capital expenditures and could adversely affect Goodyear’s earnings and competitive position.

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INFORMATION ABOUT INTERNATIONAL OPERATIONS

          Goodyear engages in manufacturing and/or sales operations in most countries in the world, often through subsidiary companies. Goodyear has manufacturing operations in the United States and 27 other countries. Most of Goodyear’s international manufacturing operations relate to the production of tires. Several engineered rubber and certain other products are also manufactured in plants located outside the United States.

          Goodyear’s consolidated net sales and long-lived assets were split between the United States and all other countries during the periods indicated as follows:

                                                                         
    Net Sales           Long-Lived Assets
   
         
    United States   International           United States   International
   
 
         
 
Year                                                                        
Ended   In Millions   Percent of   In Millions   Percent of   At   In Millions   Percent of   In Millions   Percent of
12/31   of Dollars   Consolidated   of Dollars   Consolidated   12/31   of Dollars   Consolidated   of Dollars   Consolidated

 
 
 
 
 
 
 
 
 
2001     $7,655.8       54%     $ 6,491.4       46%       2001     $ 4,317.7       60%     $ 2,923.8       40 %
2000     $7,611.1       53%     $ 6,806.0       47%       2000     $ 4,188.5       57%     $ 3,166.3       43 %
1999     $7,136.6       53%     $ 6,218.8       47%       1999     $ 4,080.1       55%     $ 3,290.2       45 %

Net sales to unaffiliated customers are attributed to the country where the sale is made, without regard to where the product was manufactured or where the product or service sold was delivered. During 2001, there was no foreign country in which Goodyear’s operations contributed more than 7.8% of Goodyear’s consolidated net sales. At December 31, 2001, there was no foreign country in which Goodyear’s operations employed more than 5.1% of Goodyear’s long-lived assets. Goodyear’s operations in Brazil, Canada, England, Germany and France, its five largest foreign operations, contributed approximately 23.6% of its consolidated net sales during 2001 and employed approximately 19.5% of Goodyear long-lived assets at December 31, 2001.

          In addition to the ordinary risks of the marketplace, Goodyear’s operations in some countries are affected by price controls, import controls, labor regulations, tariffs, extreme inflation and/or fluctuations in currency values. Furthermore, in certain countries where we operate transfers of funds into or out of such countries are generally or periodically subject to various restrictive governmental regulations.

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ITEM 2. PROPERTIES.

          Goodyear manufactures its products in 86 manufacturing facilities located around the world. There are 31 plants in the United States and 55 plants in 27 other countries.

          North American Tire Manufacturing Facilities. Goodyear owns (or leases with the right to purchase at a nominal price) and operates 22 manufacturing facilities operated by North American Tire. These facilities have floor space aggregating approximately 24.5 million square feet. North American Tire operates:

    13 tire plants (10 in the United States and three in Canada),
 
    one steel tire wire cord plant,
 
    two tire mold plants,
 
    three textile mills, and
 
    three tread rubber plants.

          European Union Tire Manufacturing Facilities. European Union Tire owns and operates:

    12 tire plants,
 
    one tire fabric processing facility,
 
    one steel wire tire cord plant, and
 
    one tire molds and tire manufacturing machines facility.

These facilities have floor space aggregating approximately 14.0 million square feet.

          Eastern Europe, Africa and Middle East Tire Manufacturing Facilities. Goodyear owns six tire plants operated by EEAME Tire. These facilities have floor space aggregating approximately 7.5 million square feet.

          Latin American Tire Manufacturing Facilities. Goodyear owns seven tire manufacturing plants operated by Latin American Tire. These facilities have floor space aggregating approximately 7.1 million square feet. In addition, Goodyear manufactures tread rubber and tire molds in Brazil and batteries in Chile.

          Asia Tire Manufacturing Facilities. Goodyear owns nine tire plants operated by Asia Tire. These facilities have floor space aggregating approximately 5.2 million square feet.

          Engineered Products Manufacturing Facilities. Goodyear owns (or leases with the right to purchase at a nominal price) 23 facilities at 8 United States and 15 international locations operated by Engineered Products. These facilities have floor space aggregating approximately 5.3 million square feet. Certain facilities manufacture more than one group of products. The facilities include:

     
In the United States and Canada –   In Latin America –
     
• six hose products plants   • two air springs plants
• three conveyor belting plants   • five hose products plants
• two molded rubber products plants   • three power transmission products plants
• two power transmission products plants   • two conveyor belting plants
     
In Europe –   In Asia –
     
• two air springs plants   • one conveyor belting plant
• one power transmission products plant   • one hose products plant

          In Africa – • one conveyor belting and power transmission products plant

          Chemical Products Manufacturing Facilities. Goodyear owns four manufacturing facilities operated by Chemical Products. These facilities have floor space aggregating approximately 2.0 million square feet. The facilities are located in the United States and consist of:

    two synthetic rubber and rubber chemicals plants
 
    two rubber chemicals plants

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          Capital Expenditures. The manufacturing facilities of Goodyear are, when considered in the aggregate, modern and adequately maintained. Goodyear’s capital expenditures for new plant and equipment, for expansion and modernization of existing plants and equipment and related assets, for tire molds, for maintenance of existing facilities, and for various other projects (excluding the cost of any acquisitions of new businesses) for the periods indicated were:

Capital Expenditures

                           
      Year Ended December 31,
     
(In millions of dollars)   2001   2000   1999
   
 
 
U.S
  $ 261.7     $ 347.8     $ 483.4  
International
  $ 173.7     $ 266.7     $ 321.6  
 
   
     
     
 
 
Total
  $ 435.4     $ 614.5     $ 805.0  

Capital expenditures used on projects to increase capacity and improve productivity totaled: $197.6 million in 2001; $330.4 million in 2000; and $410.7 million in 1999. Goodyear’s capital expenditures during 2002 are expected to total approximately $500 million, of which amount approximately $300 million to $350 million is planned to be expended on projects to increase the capacity and improve the productivity of existing facilities. The balance will be used for maintenance of existing facilities and the manufacture of tire molds.

          Plant Utilization. Goodyear’s worldwide tire capacity utilization rate was approximately 89% during 2001, compared to approximately 95% during 2000 and 92% during 1999. Lower levels of capacity utilization by the tire industry during 2002 are anticipated based on current demand levels, the global economic outlook and announced and anticipated reductions in production levels by most vehicle manufacturers around the world.

          Engineered Products operated its manufacturing facilities at approximately 68% of capacity during 2001, compared to approximately 70% in 2000 and 69% in 1999. Chemical Products operated its manufacturing facilities at approximately 75% of rated capacity during 2001, compared to 88% in 2000 and 86% in 1999.

          In order to maintain its competitive position, respond to changing market conditions and optimize production efficiencies, Goodyear has a continuing program for rationalizing production, eliminating inefficient capacity and modernizing and increasing the capacity of its radial passenger and truck tire facilities. During the last five years Goodyear has acquired additional tire manufacturing capacity in various markets, including India, the Philippines, Poland, Slovenia and South Africa, and, in the global alliance with Sumitomo, in the United States, England, France and Germany. Goodyear has closed six tire plants since December 31, 1996. Goodyear expects that its manufacturing facilities will have production capacity sufficient to satisfy presently anticipated demand for its tires and other products for the foreseeable future.

          Other Facilities. Goodyear also owns and operates a rubber plantation processing facility in Indonesia, four research and development facilities and technical centers, and tire proving grounds in Akron, Ohio (82 acres), Colmar-Berg, Luxembourg (95 acres), Huntsville, Alabama (26 acres), Mireval, France (450 acres), and San Angelo, Texas (7,243 acres).

          Goodyear operates approximately 941 retail outlets for the sale of its tires to consumers in the United States and Canada and approximately 711 retail outlets in other countries. Worldwide, Goodyear operates approximately 118 tire retreading facilities and approximately 227 warehouse and distribution facilities. Substantially all of these facilities are leased. Goodyear does not consider any one of these leased properties to be material to its operations. For additional information regarding leased properties, see Note 9, “Properties and Plants,” and Note 10, “Leased Assets,” of the Notes to Financial Statements set forth in Item 8 of this Annual Report at page 64.

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ITEM 3. LEGAL PROCEEDINGS.

          At February 28, 2002, Goodyear was a party to the following material legal proceedings, as defined in the Instructions to Item 103 of Regulation S-K:

          (A)  A series of 66 civil actions filed against the Company in the United States District Court for the District of Maryland are pending. These actions relate to the alleged exposure of former employees of a former subsidiary (and now a part) of the Company, to allegedly toxic substances while working at a tire plant that was closed in 1987. The plaintiffs allege, among other things, that the Company, as the manufacturer or seller of certain materials, negligently failed to warn them of the health risks associated with their employment at the plant and failed to implement procedures to preserve their health and safety. The plaintiffs allege that these former employees developed lung cancer and other diseases as a result of exposure to these substances and are seeking an aggregate of $650 million in compensatory damages and $6.46 billion in punitive damages. On March 5, 1997, the District Court granted the Company’s motion for summary judgment and issued an Order and Judgment dismissing all of these civil actions with prejudice. The plaintiffs appealed and, on May 11, 1998, the United States Court of Appeals for the Fourth Circuit vacated the judgment of the District Court and remanded the cases for further proceedings. On January 28, 1999, the District Court granted the Company’s motion for summary judgment on causation and issued an order and judgment dismissing each case with prejudice and assessing costs to the plaintiffs. The plaintiffs again appealed and, on July 27, 2000, the Court of Appeals vacated the judgment of the District Court and remanded the cases for further proceedings, instructing the District Court to consider whether the plaintiffs should be entitled to limited additional discovery. On December 21, 2000, the District Court reaffirmed its opinion and the Company’s motion for summary judgment and issued an order and final judgment in favor of the Company, dismissing each case with prejudice and assessing costs against the plaintiffs. The plaintiffs appealed the decision of the District Court to the Court of Appeals.

          (B)  On June 7, 1990, a civil action, Teresa Boggs, et al. v. Divested Atomic Corporation, et al., was filed in United States District Court for the Southern District of Ohio by Teresa Boggs and certain other named plaintiffs on behalf of themselves and a putative class comprised of certain other persons who resided near the Portsmouth Uranium Enrichment Complex, a facility owned by the United States Department of Energy located in Pike County, Ohio (the “DOE Plant”), against Divested Atomic Corporation (“DAC”), the successor by merger of Goodyear Atomic Corporation (“GAC”), the Company, and Lockheed Martin Energy Systems (“LMES”). GAC operated the DOE Plant for several years pursuant to a series of contracts with the DOE until LMES assumed operation of the DOE Plant on November 16, 1986. The plaintiffs allege that the operators of the DOE Plant contaminated certain areas near the DOE Plant with radioactive and/or other hazardous materials causing property damage and emotional distress. Plaintiffs claim $300 million in compensatory damages, $300 million in punitive damages and unspecified amounts for medical monitoring and cleanup costs. This civil action is no longer a class action as a result of rulings of the District Court decertifying the class. On June 8, 1998, a civil action, Adkins, et al. v. Divested Atomic Corporation, et al. (Case No. C2 98-595), was filed in the United States District Court for the Southern District of Ohio, Eastern Division, against DAC, the Company and LMES on behalf of approximately 276 persons who currently reside, or in the past resided, near the DOE Plant. The plaintiffs allege, on behalf of themselves and a putative class of all persons who were residents, property owners or lessees of property subject to alleged windborne particulates and water run off from the DOE Plant, that DAC (and, therefore, the Company) and LMES in their operation of the Portsmouth DOE Plant (i) negligently contaminated, and are strictly liable for contaminating, the plaintiffs and their property with allegedly toxic substances, (ii) have in the past maintained, and are continuing to maintain, a private nuisance, (iii) have committed, and continue to commit, trespass, and (iv) violated the Comprehensive Environmental Response, Compensation and Liability Act of 1980. The plaintiffs are seeking $30 million of actual damages, $300 million of punitive damages, other unspecified legal and equitable remedies, costs, expenses and attorney’s fees.

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          (C)  On January 13, 1995, a civil action, Gregory Tire, et al. v. Goodyear, et al. (Cause No. 95-00409), was filed in the 192nd Judicial District Court, Dallas County, Texas, against the Company and two of its employees by 22 independent tire dealers or franchisees located in Texas who are or were customers of the Company. The complaint alleges, among other things, that in the course of the Company’s commercial relationships and dealings with the plaintiffs, it violated the Texas Business Opportunities Act and the Texas Deceptive Trade Practices Act, breached its fiduciary duty to the plaintiffs, breached its covenants of good faith and fair dealing with the plaintiffs, violated the Texas Free Enterprise Act, violated the Texas Antitrust Act, breached certain contracts with the plaintiffs and committed common law fraud. The plaintiffs seek unspecified compensatory damages, exemplary damages equal to the greater of $230 million and 10% of the Company’s net worth, and injunctive and other relief. In 1998, plaintiffs voluntarily dismissed the claim that the Company violated the Texas Antitrust Act. In February 1999, on the Company’s motion, the court issued an order dismissing with prejudice all of the claims of two of the plaintiffs and the claim of the remaining plaintiffs that the Company breached its fiduciary duty to them. The claims of a third plaintiff were dismissed for failure to respond to discovery. The court ordered the claims of each remaining plaintiff to be determined in a separate trial. On October 29, 2001, following a trial in respect of the claims of one plaintiff, the jury found in favor of the Company and a final judgment on that verdict was entered by the court on January 16, 2002. A trial in respect of the claims of one of the 18 remaining plaintiffs is scheduled to begin on April 15, 2002.

          (D)  On March 15, 1995, a civil action, Orion Tire Corporation, et al. vs. Goodyear, et al. (Cause No. SA CV 95-221), was filed in the United States District Court for the Central District of California, against the Company, Goodyear International Corporation, a subsidiary of the Company (“GIC”), and five individuals, including Samir G. Gibara, Chairman of the Board and Chief Executive Officer of the Company, by Orion Tire Corporation (“Orion”), China Tire Holdings Limited (“China Tire”), and China Strategic Holdings Limited (“China Strategic”). The plaintiffs allege, among other things, that in connection with Goodyear’s 1994 acquisition of a 75% interest in a tire manufacturing facility in Dalian, People’s Republic of China (the “Dalian Facility”), the Company and GIC engaged in tortious interference with certain alleged contractual relationships of plaintiffs involving the Dalian Facility, committed tortious interference with certain prospective economic advantages of the plaintiffs, and committed trade libel and defamation by making oral defamatory and written libelous statements concerning the plaintiffs to various parties. In addition, the defendants are alleged to have engaged in a civil conspiracy to induce the entities which owned the Dalian Facility to breach their contracts with the plaintiffs and to have engaged in civil racketeering. The plaintiffs claim more than $1.0 billion in actual damages and $3.0 billion in exemplary damages from the Company and GIC and such further relief as the court may deem appropriate. On motions made by the Company, the District Court dismissed all individual defendants from the proceedings for lack of jurisdiction, dismissed all claims made by China Strategic and most of the claims made by Orion and China Tire, and, on August 12, 1999, entered an order dismissing the entire cause of action. On September 9, 1999, the plaintiffs appealed the order of the District Court to the United States Court of Appeals for the Ninth Circuit. On October 18, 2001, the Court of Appeals reversed and vacated in part the judgment of the District Court with respect to the dismissal of Orion’s trade libel and defamation and intentional interference with prospective economic advantage claims and China Tire’s civil racketeering claims and remanded the case to the District Court for further proceedings.

          (E)  In January of 1997, the Company filed a civil action, Goodyear v. Chiles Power Supply Inc., case number 5:97CV0335, in the United States District Court for the Northern District of Ohio, Eastern Division, against Chiles Power Supply Inc. (“Heatway”) seeking (a) to collect approximately $2.0 million for Entran III hose sold to Heatway and (b) to obtain a declaratory judgment in respect of Entran II hose sold to Heatway. Heatway counterclaimed for damages allegedly in excess of $2.0 billion, claiming, among other things, that the Entran II hose did not comply with the implied warranty of merchantability. Following a trial, the jury rendered its verdict in favor of the Company, finding that the Company did not breach the implied warranty

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of merchantability in respect of the 25 million feet of Entran II hose sold to Heatway. On February 4, 2000, the Court entered its order terminating and dismissing all of the counterclaims of Heatway and entering a judgment against Heatway for $2.07 million, plus interest and costs. On February 25, 2000, Heatway filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court, Western District of Missouri.

          The Company is a defendant in the following civil actions relating to Entran II hose used in Heatway systems:

  (1)   In November 1998, a class action complaint was filed in the District Court of Eagle County, Colorado (Anderson, et al. v. Goodyear, et al., case number 98CV439), on behalf of a putative class consisting of all persons who have or have had an ownership interest in real property located in Colorado in which Heatway heating systems using Entran II hose had been installed. These plaintiffs claim, among other things, breach of express warranties, breach of implied warranties of merchantability and fitness for a particular purpose, negligence and strict liability for defective product against both Heatway and the Company. In July 2000, the court denied class certification. On November 7, 2001, the court, having considered plaintiff’s amended complaint and request for class certification, issued an order certifying a class to consist of all persons (alleged to be more then 1,000) who presently own or have owned real property located in Colorado on which Entran II hose was used in Heatway systems and have suffered or will suffer damages due to the alleged defective nature of Entran II hose. This case is scheduled for a jury trial in July of 2003.
 
  (2)   In March 2001, a class action complaint was filed against the Company (Stephen Payne, et al. v. Goodyear, Case No. 01-10118-NG) in the United States District Court, District of Massachusett, by the named plaintiffs individually and on behalf of a putative class consisting of all property owners in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont who have Entran II hose installed as part of a Heatway radiant floor heating system in their homes, buildings or other structures alleging, among other things, that (i) Entran II hose as designed was defective, (ii) the Company failed to warn purchasers that Entran II hose was “unreasonably dangerous when used in radiant heating systems,” (iii) Entran II hose was not of merchantable quality when sold by the Company and breached the implied warranties of merchantability and fitness for a particular purpose, and (iv) the Company violated certain consumer protection statues in the six states. Plaintiffs seek damages in unspecified amounts, certain statutory damages, interest, costs and expenses and such further relief as the court shall deem proper.
 
  (3)   The Company is the defendant in a class action, Jane Bates, et al. vs Goodyear, No. D-0101-CV-2001-359, in the First Judicial District Court, Santa Fe County, New Mexico, filed in February 2001 on behalf of two homeowners individually and as representatives of a class of similarly situated homeowners in New Mexico as of March 1, 2002 alleging, among other things, that Entran II hose used in the Heatway heating systems installed in their homes is defective and unfit for that purpose and seeking unspecified damages to include, among other things, punitive damages.
 
  (4)   There are 15 other civil actions involving 54 homesites pending in various Federal and state courts relating to alleged defects in Entran II hose used in Heatway Systems. In one of these actions, involving five homesites, a trial was held in a Colorado State Court and a jury rendered a verdict in favor of plaintiffs in the aggregate amount of approximately $5.9 million, which damages are trebled under the Colorado Consumer Protections Act. The total damages awarded are approximately $20 million, including interest, attorneys’ fees and costs. The Company will appeal the jury verdict.

          (F)  Four class action lawsuits seeking damages and equitable relief are currently pending against Goodyear: Julie Harper et al. vs. Goodyear et al., Circuit Court No. 18, 3rd Judicial

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Circuit, Madison County, Illinois, Civil Action No. 00L1154; Ronald Reusch et al. vs. Goodyear et al., United States District Court for the Eastern District of Wisconsin, Case No. 00-C-1562; Ryan J. Adkins et al. vs. Goodyear et al., United States District Court for the Northern District of West Virginia, Civil Action No. 5:01CV5; and Fred C. Hlad et al. vs. Goodyear et al., Civil Action No. 5-01CV21, United States District Court for the Northern District of West Virginia at Wheeling. In each case, the plaintiffs, on behalf of themselves and a putative class alleged to consist of all persons nationwide (other than claimants for personal injury or wrongful death) who own, or lease vehicles on which are mounted, specified types of Goodyear-brand, Kelly-brand and certain house-brand load range E and load range D light truck and recreational vehicle tires allege, among other things, that (i) Goodyear engaged in a “silent recall” of the specified types of load range D and E tires, thereby committing an unfair and deceptive trade practice, (ii) the specified types of tires did not conform to the express and implied warranties of merchantability, and (iii) Goodyear was negligent in the design and manufacture of the specified types tires. Plaintiffs are seeking actual damages, costs of suit, reasonable attorneys’ fees, prejudgment interest, punitive or exemplary damages, a court supervised recall and repair or replacement program, and a public awareness campaign to alert the public to any defects in the specified types of tires. Fifteen civil lawsuits related to the deaths or serious injuries of 31 persons in accidents involving allegedly defective Goodyear manufactured load range E light truck tires are also currently pending.

          (G)  On December 1, 2000, the National Highway Traffic Safety Administration gave Goodyear notice that it is conducting a preliminary evaluation of alleged failures of Goodyear’s load range E light truck tires. The investigation relates to belt separations of all types and blowouts of load range E tires. Goodyear cooperated fully with NHTSA. NHTSA has closed the preliminary evaluation. Goodyear will conduct a free tire replacement program for certain of its LT245/75R16 load range E tires that are in service on 15-passenger vans and ambulances. Goodyear estimates that approximately 200,000 tires covered by the program are in service on these vehicles and will be replaced.

          (H)  Goodyear is currently one of several (typically 50 to 80) defendants in civil actions involving approximately 65,000 claimants relating to their alleged exposure to materials containing asbestos in products manufactured by Goodyear or asbestos materials at Goodyear facilities. These cases are pending in various state courts, including primarily courts in Florida, Maryland, Michigan, Mississippi, New York, Ohio, Pennsylvania, Texas and West Virginia, and in certain Federal courts relating to the plaintiffs’ alleged exposure to materials containing asbestos. Goodyear manufactured, among other things, rubber coated asbestos sheet gasket materials from 1914 through 1973 and aircraft brake assemblies containing asbestos materials prior to 1987. Some of the claimants are independent contractors or their employees who allege exposure to asbestos while working at certain Goodyear facilities. It is expected that in a substantial portion of these cases there will be no evidence of exposure to a Goodyear manufactured product containing asbestos or asbestos in Goodyear facilities. Goodyear has disposed of approximately 22,000 similar civil actions in the past through dismissals and settlements. The plaintiffs in the pending cases allege they were exposed to asbestos and that as a result of such exposure suffer from various respiratory diseases, including in some cases mesothelioma and lung cancer. The plaintiffs are seeking unspecified actual and punitive damages and other relief.

          (I)  In addition to the legal proceedings described above, various other legal actions, claims and governmental investigations and proceedings covering a wide range of matters were pending against Goodyear at February 28, 2002, including claims and proceedings relating to several waste disposal sites that have been identified by the United States Environmental Protection Agency and similar agencies of various States for remedial investigation and cleanup, which sites were allegedly used by Goodyear in the past for the disposal of industrial waste materials. Based on available information, we do not consider any such action, claim, investigation or proceeding to be material, within the meaning of that term as used in Item 103 of Regulation S-K and the instructions thereto.

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          Based on available information, we have determined, in the case of each legal proceeding pending against us at February 28, 2002, that it is not reasonably possible that Goodyear has incurred liability in respect thereof or that any liability ultimately incurred will not exceed the amount, if any, recorded in respect of such proceeding at December 31, 2001, by an amount which would be material relative to the consolidated financial position, results of operations or liquidity of Goodyear. However, in the event of an unanticipated adverse final determination in respect of certain proceedings, Goodyear’s consolidated net income for the period in which such determination occurs could be materially affected.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          No matter was submitted to a vote of the security holders of the Company during the quarter ended December 31, 2001.

ITEM 4(A). EXECUTIVE OFFICERS OF REGISTRANT.

          Set forth below are: (1) the names and ages of all executive officers of the Company at February 28, 2002, (2) all positions with the Company presently held by each such person and (3) the positions held by, and principal areas of responsibility of, each such person during the last five years.

         
Name   Position(s) Held   Age
         
Samir G. Gibara   Chairman of the Board and Chief Executive Officer and a Director   62

          Mr. Gibara was elected President and Chief Operating Officer of the Company effective April 15, 1995, President and Chief Executive Officer of the Company effective January 1, 1996, and Chairman of the Board, Chief Executive Officer and President effective July 1, 1996. Mr. Gibara has served as Chairman of the Board and Chief Executive Officer since October 3, 2000. He is the principal executive officer of the Company. Mr. Gibara has been a director of the Company since April 15, 1995. Mr. Gibara has been a Goodyear employee for approximately 35 years.

         
Robert J. Keegan   President and Chief Operating Officer and a Director   54

          Mr. Keegan joined Goodyear on October 1, 2000. He was elected President and Chief Operating Officer and a Director of the Company on October 3, 2000. Except for a two year period beginning in 1995, when Mr. Keegan was an executive vice president of Avery Dennison Corporation, prior to joining Goodyear, Mr. Keegan held various marketing, finance and managerial positions at Eastman Kodak Company from 1972 through September 2000. He was president of Kodak Professional and a Vice President of Eastman Kodak Company from July of 1997 to October 1998, when he was appointed President of Consumer Imaging and elected a Senior Vice President of Eastman Kodak Company. He served as an Executive Vice President of Eastman Kodak Company from July 2000 to September 2000. Mr. Keegan is the Chief Operating Officer of the Company. Mr. Keegan has been a director of the Company since October 3, 2000.

         
John C. Polhemus   President, North American Tire   57

          Mr. Polhemus served in various managerial positions in Goodyear’s international operations until November 5, 1996, when he was elected a Vice President of the Company, serving as the executive officer of the Company responsible for Goodyear’s tire operations in Latin America. Effective July 1, 1999, Mr. Polhemus was appointed, and on August 3, 1999 he was elected, President, Latin American Region. On August 1, 2000, Mr. Polhemus was elected President, North American Tire. Mr. Polhemus is the executive officer of the Company responsible for Goodyear’s tire operations in the United States and Canada. Mr. Polhemus has been an employee of Goodyear since 1969.

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Name   Position(s) Held   Age
         
Michael J. Roney   President, European Union Region   47

          Mr. Roney served in various international financial, sales and managerial posts until May, 1995, when he was appointed managing director of Goodyear do Brasil Produtos de Borracha Ltda, a subsidiary of the Company operating in Brazil. On September 1, 1998, he was appointed Vice President for the Asia Region, in which capacity he was responsible for Goodyear’s tire operations in the Asia, Australia and western Pacific region. On December 1, 1998, Mr. Roney was appointed President and Managing Director of Compania Hulera Goodyear-Oxo, S.A. de C.V., a wholly-owned subsidiary of the Company, and was responsible for Goodyear’s tire operations in Mexico. Effective July 1, 1999, Mr. Roney was appointed, and on August 3, 1999 he was elected, President, Eastern Europe, Africa and Middle East, serving as the executive officer responsible for Goodyear’s operations in Eastern Europe, Africa and the Middle East. Mr. Roney was elected President, European Union Region on May 7, 2001. Mr. Roney is the executive officer of the Company responsible for Goodyear’s tire operations in western Europe. Mr. Roney has been an employee of Goodyear since 1981.

         
Jarro F. Kaplan   President, Eastern Europe, Africa and Middle East Region   54

          Mr. Kaplan served in various sales and marketing managerial posts until he was appointed Managing Director of Goodyear Great Britain Limited in 1996. He was appointed Managing Director of Deutsche Goodyear in 1999. On May 7, 2001, Mr. Kaplan was elected President, Eastern Europe, Africa and Middle East. Mr. Kaplan is the executive officer of the Company responsible for Goodyear’s tire operating in eastern Europe, Africa and the Middle East. Mr. Kaplan has been a Goodyear employee since 1986.

         
Christopher W. Clark   President, Latin American Region   50

          Mr. Clark served in various financial posts until October 1, 1996, when he was appointed managing director of P. T. Goodyear Indonesia Tbk, a subsidiary of the Company. On September 1, 1998, he was appointed managing director of Goodyear do Brasil Produtos de Borracha Ltda, a subsidiary of the Company. On August 1, 2000 he was elected President, Latin American Region. Mr. Clark is the executive officer of the Company responsible for Goodyear’s tire operations in Mexico, Central America and South America. Mr. Clark has been an employee of Goodyear since 1973.

         
Hugh D. Pace   President, Asia Region   49

          Mr. Pace served in various international sales and marketing posts until 1992, when he became President and managing director of Compania Hulera Goodyear–Oxo, S.A. de C.V., a subsidiary of the Company. Effective December 1, 1998, Mr. Pace was elected a Vice President of the Company, serving as the executive officer responsible for Goodyear’s tire operations in the Asia, Australia and western Pacific regions. Effective July 1, 1999, Mr. Pace was appointed, and on August 3, 1999 he was elected, President, Asia Region. Mr. Pace is the executive officer responsible for Goodyear’s tire operations in Asia, Australia and the western Pacific. Mr. Pace has been an employee of Goodyear since 1975.

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Name   Position(s) Held   Age
         
Timothy R. Toppen   President, Engineered Products   46

          Mr. Toppen served in various research, technology and marketing posts until May 1, 1995, when he was appointed Marketing Manager for the Chemical Division. He was appointed Director of Research and Development for Engineered Products on April 1, 1997. Mr. Toppen was elected President, Chemical Division, on August 1, 2000, serving in that office until he was elected President, Engineered Products on August 7, 2001. Mr. Toppen is the executive officer of the Company responsible for Goodyear’s Engineered Products operations worldwide. Mr. Toppen has been an employee of Goodyear since 1978.

         
Jonathan D. Rich   President, Chemical Division   47

          Mr. Rich joined Goodyear in September 2000 and was elected President, Chemical Division on August 7, 2001. Prior to joining Goodyear, Mr. Rich was technical director of GE Bayer Silicones in Leverkusen, Germany. He served in various managerial posts with GE Corporate R&D and GE Silicones, units of the General Electric Company from 1986 to 1998.

         
Robert W. Tieken   Executive Vice President and Chief Financial Officer   62

          Mr. Tieken joined Goodyear on May 3, 1994, when he was elected an Executive Vice President and the Chief Financial Officer of the Company. Mr. Tieken was the Vice President of Finance of Martin Marietta Corporation from April 1993 through April 1994. Mr. Tieken was Vice President, Finance and Information Technology, of General Electric Aerospace from 1988 through April 1993, when it was acquired by Martin Marietta Corporation. Mr. Tieken is the principal financial officer of the Company.

         
Vernon L. Dunckel   Senior Vice President, Global Product Supply   63

          Mr. Dunckel served in various quality assurance, production and managerial posts in the United States and Canada until October 1992, when he was appointed Director of Tire Manufacturing — Europe, serving in that capacity until June 30, 1999. Effective July 1, 1999, Mr. Dunckel was appointed, and on August 3, 1999 he was elected, Senior Vice President, Global Product Supply. Mr. Dunckel is the executive officer of the Company responsible for Goodyear’s facilities planning, purchasing, manufacturing and engineering applications activities worldwide. Mr. Dunckel has been an employee of Goodyear since 1962.

         
Joseph M. Gingo   Senior Vice President, Technology and Global Products Planning   57

          Mr. Gingo served in various research and development and managerial posts until November 5, 1996, when he was elected a Vice President, responsible for Goodyear’s operations in Asia, Australia and the western Pacific. On September 1, 1998, Mr. Gingo was placed on special assignment with the office of the Chairman of the Board. From December 1, 1998 to June 30, 1999, Mr. Gingo served as the Vice President of the Company responsible for Goodyear’s worldwide Engineered Products operations. Effective July 1, 1999, Mr. Gingo was appointed, and on August 3, 1999 he was elected, Senior Vice President, Technology and Global Products Planning. Mr. Gingo is the executive officer of the Company responsible for Goodyear’s research and tire technology development and product planning operations worldwide and for Goodyear’s global aviation, off-the-road and racing tire businesses. Mr. Gingo has been an employee of Goodyear since 1966.

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Name   Position(s) Held   Age
         
C. Thomas Harvie   Senior Vice President, General Counsel and Secretary   58

          Mr. Harvie joined Goodyear on July 1, 1995, when he was elected a Vice President and the General Counsel. Effective July 1, 1999 Mr. Harvie was appointed, and on August 3, 1999 he was elected, Senior Vice President and General Counsel. He was elected Senior Vice President, General Counsel and Secretary effective June 16, 2000. Mr. Harvie is the chief legal officer of the Company and is the executive officer responsible for the government relations and real estate activities of Goodyear. Prior to joining Goodyear, Mr. Harvie was a Vice President and the Associate General Counsel of TRW Inc.

         
Clark E. Sprang   Senior Vice President, Business Development and Integration   59

          Mr. Sprang served in various financial posts until November 5, 1996, when he was elected a Vice President. He served as the executive officer responsible for Goodyear’s worldwide business development activities until June 30, 1999. Effective July 1, 1999, Mr. Sprang was appointed, and on August 3, 1999 he was elected, Senior Vice President, Business Development and Business Integration. Mr. Sprang is the executive officer responsible for Goodyear’s business development, business integration and related activities worldwide. Mr. Sprang has been an employee of Goodyear since 1966.

         
Stephanie W. Bergeron   Senior Vice President Corporate Financial Operations and Treasurer   48

          Ms. Bergeron joined Goodyear on December 29, 1998 and was elected Vice President and Treasurer of the Company effective January 1, 1999. On February 5, 2002, Ms. Bergeron was elected Senior Vice President Corporate Financial Operations and Treasurer. Ms. Bergeron is the executive officer responsible for Goodyear’s worldwide corporate financial and treasury operations, investor relations activities, risk management programs and pension assets management. Prior to joining Goodyear, Ms. Bergeron was Vice President and Assistant Treasurer — Corporate Finance of DaimlerChrysler Corporation, serving in that position beginning in November of 1994.

         
Donald D. Harper   Vice President   55

          Mr. Harper served in various organizational effectiveness and human resources posts until June 1996, when he was appointed Vice President of Human Resources Planning, Development and Change. Mr. Harper was elected a Vice President effective December 1, 1998 and is the executive officer responsible for Goodyear’s human resources planning and development. Mr. Harper has been an employee of Goodyear since 1968.

         
William M. Hopkins   Vice President   57

          Mr. Hopkins served in various tire technology and managerial posts until appointed Director of Tire Technology for North American Tires effective June 1, 1996. He was elected a Vice President effective May 19, 1998. He served as the executive officer responsible for Goodyear’s worldwide tire technology activities until August 1, 1999. Since August 1, 1999, Mr. Hopkins has served as the executive officer primarily responsible for Goodyear’s worldwide product marketing and technology planning activities. Mr. Hopkins has been an employee of Goodyear since 1967.

         
Gary A. Miller   Vice President   55

          Mr. Miller served in various management and research and development posts until he was elected a Vice President effective November 1, 1992. He is the executive officer primarily responsible for Goodyear’s purchasing operations worldwide. Mr. Miller has been an employee of Goodyear since 1967.

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Name   Position(s) Held   Age
         
John W. Richardson   Vice President   56

          Mr. Richardson served in various financial and general management posts until he was appointed Vice President and Comptroller on June 1, 1996. He was elected Vice President — Corporate Finance on November 5, 1996, serving as the principal accounting officer the Company until August 31, 1999. Since September 1, 1999, Mr. Richardson has served as Vice President, Finance — North American Tire, and, is the executive officer responsible for the financial functions of Goodyear’s tire operations in the United States and Canada. Mr. Richardson has been an employee of Goodyear since 1967.

         
Eric A. Berg   Vice President   39

          Mr. Berg joined Goodyear on March 6, 2000, when he was elected a Vice President of the Company. Mr. Berg is the Company’s Chief Information Officer and is the executive officer responsible for Goodyear’s e-commerce and information technology and systems. Prior to joining Goodyear, Mr. Berg was a regional vice president for the Frito-Lay division of Pepsico Inc. from 1999 to 2000, having joined Pepsico Inc. in 1996. From 1995 to 1996, Mr. Berg was a senior engagement manager for McKinsey and Company, having joined McKinsey and Company in 1990.

         
Richard J. Kramer   Vice President   38

          Mr. Kramer joined Goodyear on March 6, 2000, when he was appointed a Vice President for corporate finance. On April 10, 2000, Mr. Kramer was elected Vice President-Corporate Finance. Mr. Kramer is the Company’s principal accounting officer. Prior to joining Goodyear, Mr. Kramer was an associate of PricewaterhouseCoopers LLP for 13 years, including two years as a partner.

         
Isabel H. Jasinowski   Vice President   53

          Mrs. Jasinowski served in various government relations posts until she was appointed Vice President of Governmental Relations in 1995. On April 2, 2001, Ms. Jasinowski was elected Vice President, Government Relations, serving as the executive officer of the Company primarily responsible for Goodyear’s governmental relations and public policy activities. Mrs. Jasinowski has been a Goodyear employee since 1981.

         
Cathryn M. Fischer   Vice President   40

          Ms. Fischer joined Goodyear on April 2, 2001, when she was elected Vice President and Chief Marketing Officer of the Company. Ms. Fischer is the executive officer primarily responsible for Goodyear’s global marketing and brand management strategies. Prior to joining Goodyear, Ms. Fischer was vice president for marketing of the Rubbermaid Home Products group. She held several marketing and general managerial posts at Procter & Gamble Company from 1983 to 1997.

          No family relationship exists between any of the above named executive officers or between said executive officers and any director or nominee for director of the Company.

          Each executive officer is elected by the Board of Directors of the Company at its annual meeting to a term of one year or until his or her successor is duly elected, except in those instances where the person is elected at other than an annual meeting of the Board of Directors in which event such person’s tenure will expire at the next annual meeting of the Board of Directors unless such person is reelected. The next annual meeting of the Board of Directors is scheduled to be held on April 15, 2002.

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PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

          The principal market for the Company’s Common Stock is the New York Stock Exchange (Stock Exchange Symbol GT). The Company’s Common Stock is also listed on the Chicago Stock Exchange and The Pacific Exchange. Overseas listings include stock exchanges in Amsterdam and Switzerland.

          Information relating to the high and low sale prices of the Company’s Common Stock and the dividends paid on such shares during 2001 and 2000 appears under the caption “Quarterly Data and Market Price Information” in Item 8 of this Annual Report, at page 80, and is incorporated herein by reference. The first quarter 2002 cash dividend of $.12 per share will be paid on March 15, 2002 to shareholders of record at February 15, 2002.

          At February 15, 2002, there were 29,836 record holders of the 163,211,324 shares of the Company’s Common Stock then outstanding. Approximately 14,429,885 shares of the Company’s Common Stock were beneficially owned by 30,940 participants in two employee savings plans sponsored by the Company and certain subsidiaries. The Northern Trust Company is the trustee for the plans.

*  *  *  *  *  *

          On September 10, 2001, the Company issued 4,300,000 shares of Common Stock to The Goodyear Tire & Rubber Company Common Trust for the Collective Investment of Plan Funds as a contribution to certain of Goodyear’s domestic pension plans. The fair market value of the 4,300,000 shares of the Company’s Common Stock contributed was approximately $100,000,000 on September 10, 2001. The issuance of the shares of the Company’s Common Stock to the trust was exempt from registration under the Securities Act of 1933, as amended (the “Act”), pursuant to Section 4(2) of the Act as a transaction by an issuer not involving a public offering.

          On February 6, 2001, the Company issued 1,140,866 shares of the Company’s Common Stock to Sumitomo Rubber Industries, Ltd (“Sumitomo”) upon the conversion of the Company’s 1.2% Convertible Note due August 15, 2001 in the principal amount of ¥6,536,535,767. The issuance of the shares of the Company’s Common Stock was exempt from registration under the Act pursuant to Section 4(2) of the Act as a transaction by an issuer not involving a public offering.

          In each transaction, the shares of Common Stock issued by the Company are subject to certain restrictions on transfer. No commission or fee was paid in connection with the issuance of the Company’s Common Stock in either of the transactions.

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ITEM 6. SELECTED FINANCIAL DATA.

                                         
    Year Ended December 31,
   
(In millions, except per share)   2001   2000   1999   1998   1997
   
 
 
 
 
Net Sales
  $ 14,147.2     $ 14,417.1     $ 13,355.4     $ 13,081.6     $ 13,502.0  
Income (Loss) from Continuing Operations
    (203.6 )     40.3       243.2       672.2       497.4  
Discontinued Operations
                      (34.7 )     36.3  
 
   
     
     
     
     
 
Net Income (Loss)
  $ (203.6 )   $ 40.3     $ 243.2     $ 637.5     $ 533.7  
 
   
     
     
     
     
 
Per Share of Common Stock:
                                       
Income (Loss) Per Share – Basic:
                                       
Income (Loss) from Continuing Operations
  $ (1.27 )   $ .26     $ 1.55     $ 4.29     $ 3.18  
Discontinued Operations
                      (.22 )     .24  
 
   
     
     
     
     
 
Net Income (Loss) – Basic
  $ (1.27 )   $ .26     $ 1.55     $ 4.07     $ 3.42  
 
   
     
     
     
     
 
Income (Loss) Per Share – Diluted:
                                       
Income (Loss) from Continuing Operations
  $ (1.27 )   $ .25     $ 1.53     $ 4.25     $ 3.14  
Discontinued Operations
                      (.22 )     .23  
 
   
     
     
     
     
 
Net Income (Loss) – Diluted
  $ (1.27 )   $ .25     $ 1.53     $ 4.03     $ 3.37  
 
   
     
     
     
     
 
Dividends Per Share
  $ 1.02     $ 1.20     $ 1.20     $ 1.20     $ 1.14  
Total Assets
  $ 13,512.9     $ 13,568.0     $ 13,278.1     $ 10,762.7     $ 10,135.6  
Long Term Debt
  $ 3,203.6     $ 2,349.6     $ 2,347.9     $ 1,186.5     $ 844.5  
Shareholders’ Equity
  $ 2,864.0     $ 3,503.0     $ 3,792.6     $ 3,919.2     $ 3,613.7  

Notes:

  (1)   See “Principles of Consolidation” at Note 1 (“Accounting Policies”) to the Financial Statements at page 57.
 
  (2)   Net income in 2001 included net after tax charges of $170.1 million, or $1.06 per share-diluted, for rationalizations, the sale of the specialty chemical business and other asset sales, costs related to a tire replacement program and rationalization costs at Goodyear’s SPT equity investment.
 
  (3)   Net Income in 2000 included a net after-tax charge of $63.0 million, or $.40 per share-diluted, for rationalizations and asset sales, change in Goodyear’s domestic inventory costing method from LIFO to FIFO and rationalization costs at Goodyear’s SPT equity investment.
 
  (4)   Net Income in 1999 included net after-tax benefit of $22.3 million, or $.13 per share, resulting from the net after tax gains of $154.8 million, or $.97 per share – diluted, from the change in control of the businesses contributed by the Company to the Goodyear Dunlop joint venture in Europe and the sale of certain rubber chemical assets and net rationalization charges of $132.5 million after tax, or $.84 per share – diluted.

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  (5)   Net Income in 1998 included a net after-tax gain of $61.3 million, or $.38 per share-diluted, from the sale of the All American Pipeline System and related assets, rationalizations and the sale of other assets.
 
  (6)   Net Income in 1997 included net after-tax charges of $176.3 million, or $1.12 per share-diluted, for rationalizations.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

          (All per share amounts are diluted)

CONSOLIDATED

          Net sales in 2001 were $14.15 billion, compared to $14.42 billion in 2000 and $13.36 billion in 1999.

          A net loss of $203.6 million, $1.27 per share, was recorded in 2001, compared to net income of $40.3 million, $.25 per share, in 2000 and $243.2 million, $1.53 per share, in 1999.

Net Sales

          Worldwide tire unit sales in 2001 were 219.3 million units, a decrease of 4.0 million units or 1.8% compared to 2000. North American (U.S. and Canada) volume decreased 3.9 million units or 3.4% in 2001, while international unit sales decreased .1 million units or .1%. Worldwide replacement unit sales decreased 1.6% in 2001, primarily in Europe and Latin America. Original equipment unit sales were 2.2% lower in 2001, primarily in North America and Eastern Europe.

          Worldwide tire unit sales in 2000 were 223.3 million units, 11.4% higher than in 1999. The Dunlop businesses contributed 37.3 million units during 2000, compared to 14.4 million units in 1999. Total North American volume increased 6.3% from 1999 while international unit sales increased 17.5%. Worldwide original equipment unit sales rose 10.7% from 1999, with increases in all regions outside of North America. Replacement unit sales increased 11.7%, primarily in the European Union and North America.

          Revenues decreased 1.9% in 2001 primarily due to lower tire unit sales and the effect of currency translation on international results. Goodyear estimates that versus 2000, currency translation adversely affected revenues by approximately $395 million.

          Revenues increased 7.9% in 2000 due primarily to higher tire unit sales. The Dunlop businesses, acquired on September 1, 1999, contributed $2.26 billion to 2000 sales, compared to $873.4 million in 1999. Revenues in 2000 were adversely impacted by the effect of currency translation on international results, primarily in Europe, where the average value of the Euro versus the U.S. dollar dropped 13.0% from the 1999 average rate. Goodyear estimates that versus 1999, currency movements adversely affected revenues in 2000 by approximately $450 million.

Cost of Goods Sold

          Cost of goods sold (CGS) was 82.1% of sales in 2001, compared to 80.7% in 2000 and 81.1% in 1999. CGS reflected higher conversion costs resulting from lower levels of plant utilization as Goodyear reduced finished goods inventory levels, as well as higher raw materials costs. Goodyear estimates that production cutbacks relative to 2000 levels resulted in approximately $320 million of underabsorbed costs due to less efficient absorption of fixed costs during 2001.

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Costs were favorably impacted by the effects of the previous rationalization actions and ongoing cost containment measures.

          Goodyear expects that the cost of energy and raw materials will remain at 2001 levels or decrease slightly. In addition, in 2000 Goodyear negotiated a new labor agreement in the United States that is anticipated to continue to result in higher costs in future periods. These costs may not be recoverable due to pricing pressures present in today’s highly competitive market.

          CGS in 2000 increased in dollars, but decreased as a percent to sales compared to 1999 due primarily to the effects of rationalization actions, ongoing cost containment measures and synergies realized in part from the strategic alliance with Sumitomo. Margins were adversely affected by the worldwide competitive pricing environment and a change in product and market mix to lower margin tires.

          Research and development expenses are included in CGS and were $375.5 million in 2001, compared to $423.1 million in 2000 and $438.0 million in 1999. Research and development expenditures in 2002 are expected to be approximately $375 million.

Selling, Administrative and General Expense

          Selling, administrative and general expense (SAG) in 2001 was 15.9% of sales, compared to 15.5% in 2000 and 15.1% in 1999. SAG increased in dollars and as a percent to sales in 2001 primarily due to increased warehousing and distribution costs in North America. SAG decreased in all international SBUs due to cost containment initiatives and the favorable effect on SAG of foreign currency exchange rates. SAG increased in 2000 compared to 1999 due to the acquisition of, and higher SAG levels at, the Dunlop businesses. SAG benefited in 2000 from the favorable impact of ongoing worldwide cost containment measures.

EBIT

          Consolidated EBIT is computed as follows: net sales less CGS and SAG. Consolidated EBIT was $278.9 million in 2001, $542.5 million in 2000 and $506.4 million in 1999. Consolidated margin (consolidated EBIT divided by consolidated sales) was 2.0% in 2001, 3.8% in 2000 and 3.8% in 1999.

Interest Expense

          Interest expense in 2001 was $292.4 million, compared to $282.6 million in 2000 and $179.4 million in 1999. Interest expense increased due to higher average debt levels.

Other (Income) and Expense

          Other (income) and expense was $11.8 million in 2001, compared to $27.8 million in 2000 and $(147.1) million in 1999. Other (income) expense in 2001 included gains of $17.0 million ($13.9 million after tax or $.09 per share) resulting from the sale of land and buildings in the United Kingdom and $27.4 million ($16.9 million after tax or $.10 per share) resulting from the sale of Goodyear’s specialty chemical business.

          Other (income) and expense in 2000 included a gain of $5.0 million ($3.2 million after tax or $.02 per share) on the sale of land at a manufacturing facility in Mexico.

          During 1999, other (income) and expense included a gain totaling $149.7 million ($143.7 million after tax or $.90 per share) on the change in control of 25% of the European businesses contributed to Goodyear Dunlop Tires Europe B.V. by the Company. In addition, proceeds of $17.0 million ($11.1 million after tax or $.07 per share) were realized in 1999 from Goodyear’s sale of customer lists and formulations in connection with its exit from the production of certain rubber chemicals.

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          Other (income) and expense included accounts receivable sales fees and commitment fees totaling $53.3 million, $43.9 million and $34.6 million in 2001, 2000 and 1999, respectively.

          For further information, refer to the note to the financial statements No. 4, Other (Income) and Expense.

Foreign Currency Exchange

          Foreign currency exchange expense was $.1 million in 2001, while income was recorded totaling $6.7 million in 2000 and $27.6 million in 1999. Foreign currency exchange in 1999 benefited from the impact of currency movements on U.S. dollar denominated monetary items, primarily in Brazil.

Equity in Earnings of Affiliates

          Equity in earnings of affiliates was a loss of $40.6 million in 2001, compared to a loss of $22.4 million in 2000 and income of $10.3 million in 1999. The losses in 2001 and 2000 were due primarily to operating losses and rationalization charges incurred by South Pacific Tyres, Ltd. (SPT), an Australian tire manufacturer in which Goodyear owns a 50% equity interest. Goodyear’s share of rationalization charges recorded by SPT in 2001 and 2000 totaled approximately $24.0 million ($24.0 million after tax or $.15 per share) and $16.1 million ($10.5 million after tax or $.07 per share), respectively.

Income Taxes

          Goodyear had a tax benefit at an effective tax rate of 25.4% for 2001. Goodyear’s effective tax rate was 20.0% and 16.7% in 2000 and 1999, respectively. The effective rate in 2000 increased from 1999 due to the nontaxable character of the $149.7 million gain in 1999 resulting from the change in control of 25% of Goodyear’s businesses contributed to the European joint venture with Sumitomo.

          For further information, refer to the note to the financial statements No. 16, Income Taxes.

Rationalization Activity

          To maintain global competitiveness, Goodyear has implemented rationalization actions over the past several years for the purpose of reducing over-capacity, eliminating redundancies and reducing costs. Goodyear recorded net rationalization costs of $206.8 million in 2001, $124.1 million in 2000 and $171.6 million in 1999. Goodyear has reduced employment levels by approximately 9,900 from December 31, 2000 and almost 19,000 since 1998, primarily as a result of rationalization activities.

Fourth Quarter 2001 Program

          Goodyear recorded a net rationalization charge on the Consolidated Statement of Income totaling $127.8 million ($101.2 million after tax or $.62 per share) in the fourth quarter of 2001, which included a $4.1 million reversal of reserves no longer needed for their originally intended purposes. These actions were in response to continued competitive conditions in the markets served by Goodyear and worldwide economic uncertainty. Under these actions, Goodyear has provided for worldwide associate reductions through retail and administrative consolidation and manufacturing plant downsizing and consolidation. Goodyear anticipates that, upon completion of these actions, it will further reduce annual operating costs by approximately $85 million.

          The 2001 fourth quarter actions included associate-related costs of $58.8 million for the release of approximately 2,200 associates around the world, primarily production and administrative associates in Europe. During 2001, approximately 300 associates were released under this program at a cost of $1.6 million, however, a significant amount of the payments related to these

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associates will be incurred during 2002. Rationalization costs, other than associate-related costs, totaled $73.1 million and were primarily for the writeoff of equipment taken out of service and noncancellable lease contracts. During 2001, Goodyear incurred $42.5 million of these costs for the writeoff of equipment taken out of service. The remaining reserve for costs related to the completion of these actions was $87.8 million at December 31, 2001.

First Quarter 2001/Fourth Quarter 2000 Program

          Goodyear recorded a rationalization charge totaling $79.0 million ($57.1 million after tax or $.36 per share) in the 2001 first quarter. Of the $79.0 million charge, $12.5 million related to the closure of Goodyear’s manufacturing facility in Italy announced in 1999 and $66.5 million continued the rationalization program announced in the fourth quarter of 2000.

          Goodyear recorded a rationalization charge totaling $124.1 million ($100.1 million after tax or $.63 per share) during 2000, of which $4.7 million related to the 1999 program, primarily the closure of Goodyear’s manufacturing facility in Italy, and $119.4 million related to rationalization actions announced during 2000. These 2000 actions were for global workforce reductions and manufacturing facility consolidations including the closure of a tire plant in Latin America.

          Pursuant to the program recorded in the fourth quarter of 2000 and the first quarter of 2001, Goodyear has released approximately 6,800 associates to date, for which costs totaling $122.8 million were incurred during 2001. The balance of the provision for associate-related costs totaled $5.9 million and $73.2 million as of December 31, 2001 and 2000, respectively. Rationalization costs, other than associate- related costs, totaling $12.3 million were incurred during 2001. These costs were primarily for ongoing lease obligations. The balance of the provision for rationalization costs, other than associate-related costs, totaled $3.4 million and $8.8 million at December 31, 2001 and 2000, respectively.

          Goodyear will complete these rationalization actions during the first quarter of 2002. Annual pretax savings of approximately $260 million were expected when the first quarter 2001/fourth quarter 2000 program was approved. Goodyear estimates that operating costs were reduced by approximately $155 million in 2001 as a result of these actions.

1999 Program

          During 1999, Goodyear committed to a number of rationalization actions to reduce costs and increase productivity and efficiency. The actions consisted of worldwide associate reductions, exit from the CART/IRL racing series, termination of tire production at the Gadsden, Alabama, facility and manufacturing facilities in Latin America and Italy, and downsizing and consolidation of tire manufacturing facilities in North America, Europe and Latin America. A charge of $240.1 million ($177.7 million after tax or $1.13 per share) was recorded, of which $47.6 million related to non-cash writeoffs and $192.5 million related to future cash outflows, primarily for associate severance costs. The associate-related charges of $171.6 million provided for the release of approximately 5,000 associates worldwide. Non-associate-related costs of $68.5 million were primarily for the writeoff of equipment taken out of service and noncancellable contracts at the closed manufacturing facilities.

          Goodyear recorded reversals of, and adjustments to, rationalization plans of $68.5 million ($45.2 million after tax or $.29 per share) during 1999, including $51.5 million related to charges which were originally recorded during 1999, primarily related to the decision to resume production of certain passenger tire lines in a portion of the Gadsden facility. The remaining $17.0 million related to reserves from prior year plans which were no longer needed for their originally intended purposes. The net charge to the Consolidated Statement of Income totaled $171.6 million ($132.5 million after tax or $.84 per share) during 1999.

          Related to the 1999 actions, Goodyear incurred costs of $16.0 million during 2001, primarily for the release of 350 associates and final plant closing costs for the closed manufacturing

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facility in Italy. The remaining reserve for the 1999 programs was $.8 million and $4.3 million at December 31, 2001 and 2000, respectively. Goodyear has completed these actions with the exception of ongoing severance payments.

Dunlop Integration Program

          The following rationalization actions have been recorded as adjustments to the purchase price allocation in respect of the acquired Dunlop businesses, and did not affect the Consolidated Statement of Income.

          Goodyear committed to certain rationalization actions related to the Dunlop businesses for the purpose of optimizing market growth opportunities and maximizing cost efficiencies. Goodyear recorded costs in 1999, 2000 and the first quarter of 2001 totaling $72.8 million, substantially all of which was for future cash outflows. Under these rationalization programs, associate-related costs for the release or relocation of approximately 2,000 production, support, technical, retail and administrative associates totaling $58.5 million were recorded, and rationalization costs, other than associate-related costs, totaling $14.3 million were recorded primarily for lease cancellations and future rental payments under noncancellable leases. Through December 31, 2001, costs totaling $61.0 million had been incurred and reversals of $5.0 million had been recorded for reserves no longer needed for their originally intended purposes. Goodyear has completed the Dunlop integration program except for ongoing associate severance payments and future rental payments under noncancellable leases. A balance of $6.8 million remains at December 31, 2001, for these purposes.

          For further information, refer to the note to the financial statements No. 3, Rationalizations.

Strategic Alliance

          On September 1, 1999, Goodyear commenced operations under a global alliance with Sumitomo Rubber Industries Ltd. (“Sumitomo”). Under the global alliance agreements, Goodyear acquired 75%, and Sumitomo owned 25%, of Goodyear Dunlop Tires Europe B.V., a Netherlands holding company. Concurrently, the holding company acquired substantially all of Sumitomo’s tire businesses in Europe, including eight tire manufacturing plants located in England, France and Germany and sales and distribution operations in 18 European countries, and most of Goodyear’s tire businesses in Europe. Excluded from the European joint venture are Goodyear’s tire businesses in Poland (other than a sales company), Slovenia and Turkey (as well as Morocco and South Africa), Goodyear’s aircraft tire businesses, and Goodyear’s textile, steel tire cord and tire mold manufacturing plants, a technical center and related facilities located in Luxembourg.

          Goodyear also acquired 75%, and Sumitomo acquired 25%, of Goodyear Dunlop Tires North America Ltd., a holding company that purchased Sumitomo’s tire manufacturing operations in North America and certain of its related tire sales and distribution operations. In addition, Goodyear acquired 100% of the balance of Sumitomo’s Dunlop Tire distribution and sales operations in the United States and Canada. Goodyear also acquired a 25% (and Sumitomo acquired a 75%) equity interest in each of two tire companies in Japan, one for the distribution and sale of Goodyear-brand passenger and truck tires in the replacement market in Japan and the other for the distribution and sale of Goodyear-brand and Dunlop-brand tires to original equipment manufacturers in Japan. Goodyear transferred certain assets of its subsidiary located in Japan in exchange for such equity interests and approximately $27 million in cash.

          Goodyear also acquired a 51% (and Sumitomo acquired a 49%) equity interest in a company that coordinates and disseminates commercialized tire technology among Goodyear, Sumitomo, the joint ventures and their respective affiliates, and an 80% (and Sumitomo acquired a 20%) equity interest in a global purchasing company. The global alliance Agreements also provided for the investment by Goodyear and Sumitomo in the common stock of the other.

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          Goodyear accounted for the strategic alliance using the purchase method. The cost of the acquired businesses totaled approximately $1.24 billion, including the cash payment of $931.6 million and the fair value of 25% of the Goodyear businesses contributed to the European joint venture, or $307 million. In addition, the Dunlop businesses contributed to the joint venture companies by Sumitomo included $130 million of debt. Approximately $367 million of goodwill was recorded on the transaction which was being amortized on a straight-line basis over 40 years. Amortization was discontinued on January 1, 2002, as a result of Goodyear’s adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” Goodyear recognized a gain of $149.7 million ($143.7 million after tax or $.90 per share) on the change of control of 25% of the businesses it contributed to the European joint venture.

          For further information, refer to the notes to the financial statements No. 3, Rationalizations and No. 8, Investments.

The Euro

          On January 1, 2002, the Euro became the lawful currency of each member state of the European Monetary Union. Goodyear actively prepared for the conversion of all information systems software to the Euro, which became the functional currency of most of its European businesses. This conversion did not have a material impact on results of operations, financial position or liquidity of Goodyear’s operations.

UNCERTAINTIES, ACCOUNTING ESTIMATES AND OTHER MATTERS

          If reduced levels of original equipment demand continue as anticipated, resulting lower levels of plant utilization would increase unit costs, which costs may not be recovered in the market. Increased labor costs are anticipated and Goodyear could experience unexpected higher raw material and energy prices. These costs, if incurred, may not be recoverable due to pricing pressures present in today’s highly competitive market. Goodyear is unable to predict future currency fluctuations. Sales and earnings in future periods are likely to be unfavorably impacted if the U.S. dollar strengthens versus various foreign currencies. A continuation of the current economic downturn in the U.S. and Europe is likely to unfavorably impact Goodyear’s sales and earnings in future periods. Similarly, continued volatile economic conditions in emerging markets could adversely affect sales and earnings in future periods.

          The ultimate liability of Goodyear in respect of the various claims, lawsuits and other legal proceedings to which it is a party cannot be estimated with certainty. Goodyear’s accounting policy is to determine whether a liability should be recorded and to estimate the amount of such liability, based on the information available and using assumptions and methods it has concluded are appropriate. As additional information becomes available, Goodyear will reassess its evaluation of the pending claims, lawsuits and other proceedings.

          Goodyear has established a liability in respect of the approximately 63,000 asbestos claims pending at December 31, 2001, and an asset for expected recoveries under insurance policies and coverage-in-place agreements with certain primary insurance carriers. The claims relate to exposure to asbestos in certain rubber coated products manufactured by Goodyear in the past or in certain Goodyear facilities. During 2001, Goodyear received approximately 18,000 new claims and resolved approximately 9,500 asbestos claims. The amount spent on asbestos litigation defense and claim resolution during 2001 was approximately $15.5 million (before recovery of insurance proceeds). Goodyear believes it will recover a substantial portion of its liability from the proceeds of existing insurance policies. Goodyear cannot predict the number of future claims, the cost of disposing of existing and future claims, or the future ability to recover from insurance carriers.

          Goodyear also has claims asserted in other legal proceedings to which it is currently a party. These proceedings include, among other things, several class actions relating to alleged breaches

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of warranty or product defects relating to Goodyear Entran II hose used in certain home heating systems and certain of Goodyear’s Load Range D and E light truck tires.

          A jury in a civil action between the Company and Heatway in Federal District Court in Cleveland, Ohio, found that the Company did not breach the implied warranty of merchantability in respect of Entran II hose sold to Heatway for installation in radiant heating systems and that the hose was fit for use in the systems and the court, on February 4, 2000, dismissed all claims of Heatway regarding the Entran II hose. On February 25, 2002, a jury in a civil action in a Colorado State Court awarded the plaintiffs damages for alleged defects in Goodyear Entran II hose installed as part of Heatway radiant heating systems at five homesites in the amount of $5.9 million, which is trebled under the Colorado Consumer Protection Act, plus interest, attorney’s fees and costs, for a total award of approximately $20 million. The Company believes the verdict was based on material errors of fact and law and will appeal.

          Litigation is inherently uncertain and difficult to predict. Due to these inherent uncertainties, it is possible that the actual liability, if any, will differ from estimates. Based on its understanding and evaluation of these claims, as well as existing environmental claims, Goodyear believes these matters are not likely to have a material effect on its consolidated financial position in future periods, although unanticipated adverse results in these proceedings could have a material impact on earnings and cash flow in any quarter or for any year.

          The terms and conditions of Goodyear’s global alliance with Sumitomo as set forth in the Umbrella Agreement between Goodyear and Sumitomo provide for certain minority exit rights available to Sumitomo commencing in September 2004. Sumitomo’s exit rights, in the unlikely event of exercise, could require Goodyear to make a substantial payment to acquire Sumitomo’s interest in the alliance.

          Goodyear entered into an agreement with Pacific Dunlop Ltd. (PDL) during 2001 relating to SPT. Under the agreement, PDL has the right, during the period beginning August of 2005 and ending one year later, to require Goodyear to purchase PDL’s 50% interest in SPT at a formula price based on the earnings of SPT. If PDL does not exercise its right, Goodyear may require PDL to sell its interest to Goodyear during the 180 days following the expiration of PDL’s right at a price established using the same formula.

          In view of current conditions in the financial markets, which are subject to change, and based on current estimates, it is possible that, beginning in 2003, Goodyear may be required to make substantial contributions to its domestic pension plans in order to satisfy minimum funding requirements in future periods.

RECENTLY ISSUED ACCOUNTING STANDARDS

          On January 1, 2001, Goodyear adopted Statement of Financial Accounting Standards No. 133 (SFAS 133), “Accounting for Derivative Instruments and Hedging Activities” as amended and interpreted. SFAS 133 requires all derivatives to be recognized as assets or liabilities and measured at fair value. Changes in such fair value will impact earnings to the extent of any ineffectiveness in hedging relationships. The transition adjustment resulting from the adoption of SFAS 133 increased Shareholders’ Equity by $5.4 million.

          On January 1, 2001, Goodyear adopted Statement of Financial Accounting Standards No. 140 (SFAS 140), “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS 140 requires that after a transfer of financial assets, an entity recognize the financial and servicing assets it controls and the liabilities it has incurred, derecognize financial assets when control has been surrendered, and derecognize liabilities when extinguished. A transfer of financial assets in which the transferor surrenders control over those assets is accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The adoption of SFAS 140 did not have a material impact on Goodyear’s results of operations, financial position or liquidity.

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          On January 1, 2002, Goodyear adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets”. SFAS 142 addresses the accounting for goodwill and other intangible assets and specifies that, among other things, intangible assets with an indefinite useful life and goodwill will no longer be amortized. The standard requires goodwill and intangible assets with an indefinite useful life to be annually tested for impairment and written down to fair value if considered impaired. Goodyear estimates that amortization expense in 2002 will be reduced by approximately $25 million to $30 million after tax ($.15 per share to $.17 per share) compared to 2001, and does not anticipate any impairment write-down as a result of the implementation of SFAS 142.

SEGMENT INFORMATION

          Segment information reflects the strategic business units of Goodyear, which are organized to meet customer requirements and global competition. The tire business is managed on a regional basis. Engineered Products and Chemical Products are managed on a global basis.

          Results of operations in the tire and engineered products business segments were measured based on net sales to unaffiliated customers and EBIT. Results of operations of the chemical business included transfers to other segments. Segment EBIT is computed as follows: net sales less cost of goods sold, less selling, administrative and general expense (excluding corporate administrative expenses).

          Segment EBIT was $366.7 million in 2001, $599.0 million in 2000 and $544.6 million in 1999. Segment operating margin (segment EBIT divided by segment sales) in 2001 was 2.5%, compared to 4.0% in 2000 and 3.9% in 1999.

          Segment EBIT does not include the previously discussed rationalization charges and gains on asset sales. For further information, refer to the note to the financial statements No. 20, Business Segments.

North American Tire

          North American Tire segment sales in 2001 were $7.15 billion, increasing .6% from $7.11 billion in 2000 and 7.6% from $6.65 billion in 1999.

          Unit sales in 2001 were 112.0 million, decreasing 3.4% from 2000 and increasing 2.7% from 1999. Replacement unit sales in 2001 increased .2% from 2000 and 10.9% from 1999. Original equipment volume in 2001 decreased 11.3% from 2000 and 13.2% from 1999.

          Sales in 2001 increased compared to 2000 due to the favorable impact of a change in product mix to higher priced tires, price increases in the replacement market and units delivered in connection with the Ford Motor Company (“Ford”) replacement program for certain light truck tires of a competitor. Sales were adversely affected in 2001 by lower original equipment volume resulting from production cutbacks by the manufacturers of automobiles and commercial trucks which Goodyear supplies, and lower volume in the replacement market during the fourth quarter, as economic conditions deteriorated. During 2001, Goodyear supplied approximately 5 million tire units with an EBIT impact of approximately $95 million in connection with the Ford replacement program.

          Sales in 2000 increased from 1999 due to the acquisition of the Dunlop businesses in the United States and Canada. The Dunlop businesses contributed $755.0 million to sales in 2000, compared to $252.3 million in 1999. Sales in the last four months of 2000 benefited from the sale of approximately 3.0 million tires related to a replacement program involving approximately 6.5 million of a competitor’s tires. Sales reflected improved customer fill rates from 1999, but revenues were adversely impacted by reduced tire shipments resulting from production cutbacks by original equipment customers in the auto and commercial truck industries. In addition, price

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increases implemented earlier in 2000 met with resistance in the marketplace and as a result negatively impacted sales of commercial tires in North America.

          North American Tire segment EBIT was $107.8 million in 2001, compared to $260.7 million in 2000 and $26.3 million in 1999. Operating margin in 2001 was 1.5%, compared to 3.7% in 2000 and .4% in 1999.

          During the fourth quarter of 2001, North American Tire recorded a charge of $30 million for a voluntary tire replacement program covering certain tires in service on 15-passenger vans and ambulances. These tires will be replaced with tires of the latest design. It is estimated that approximately 200,000 of these tires are in service and will be replaced.

          EBIT in 2001 decreased from 2000 due to higher conversion costs resulting from lower levels of plant utilization, higher raw material costs, higher SAG costs, lower sales volume and the charge for Goodyear’s tire replacement program. EBIT was favorably impacted by price increases in the replacement market, a shift in mix to higher margin tires, the Ford replacement program and lower research and development costs.

          EBIT in 2000 increased from 1999 due to the acquisition of the Dunlop businesses, lower SAG resulting from cost reduction programs and the inclusion of nonrecurring costs in EBIT in 1999. EBIT in 2000 also benefited from increased consumer replacement shipments due to a competitor’s tire recall program. EBIT was adversely affected in 2000 by significantly higher energy costs, increased raw material and labor costs and production cutbacks to better align inventory with original equipment demand.

          EBIT did not include net rationalization charges (credits) totaling $31.6 million in 2001, $(.7) million in 2000 and $71.5 million in 1999.

          Revenues and EBIT in the North American Tire segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, reduced demand by original equipment customers, changes in product mix, unanticipated increases in raw material and energy prices, anticipated higher wage and benefit costs and general economic conditions.

European Union Tire

          European Union Tire segment sales in 2001 were $3.13 billion, decreasing 2.2% from $3.20 billion in 2000 and increasing 18.4% from $2.64 billion in 1999.

          Unit sales in 2001 were 61.1 million, increasing 1.4% from 2000 and 33.6% from 1999. Replacement unit sales in 2001 decreased 2.0% from 2000 and increased 26.1% from 1999. Original equipment volume in 2001 increased 9.5% from 2000 and 53.1% from 1999.

          Revenues decreased in 2001 from 2000 due primarily to currency translation. Goodyear estimates that the effects of currency translation adversely affected European Union Tire segment sales by approximately $85 million in 2001 compared to 2000. Revenues also decreased in 2001 due to a shift in mix toward lower-priced original equipment tires and competitive pricing pressures, particularly in the first half of 2001. Revenues were favorably impacted by higher volume.

          Sales in 2000 increased from 1999 due to the acquisition of the Dunlop businesses. The Dunlop businesses contributed $1.50 billion to sales in 2000, compared to $621.1 million in 1999. Revenues were adversely impacted by the decrease in the value of the Euro versus the U.S. dollar, competitive pricing, especially in England and Germany, lower volume in some market segments and a change in mix to lower priced tires. Goodyear estimates that the effects of currency translation adversely affected European Union Tire segment sales by approximately $300 million in 2000 compared to 1999.

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          European Union Tire segment EBIT was $57.2 million in 2001, decreasing 35.5% from $88.7 million in 2000 and 69.6% from $188.0 million in 1999. Segment operating margin in 2001 was 1.8%, compared to 2.8% in 2000 and 7.1% in 1999.

          EBIT decreased in 2001 from 2000 due to higher raw material costs, a change in mix to lower margin original equipment tires and currency translation. Goodyear estimates that the effects of currency translation reduced operating income by approximately $5 million in 2001 compared to 2000. EBIT was favorably impacted by higher sales volume and lower SAG costs resulting from cost containment and rationalization programs.

          EBIT in 2000 decreased from 1999 due to competitive market conditions, manufacturing inefficiencies resulting from the relocation of tire production from England to the European continent and the closure of a tire plant in Italy, and higher raw material and energy prices. In addition, Goodyear estimates that the effects of currency translation reduced operating income by approximately $20 million in 2000 compared to 1999. EBIT was favorably affected in 2000 by higher tire unit sales resulting from the acquisition of the Dunlop businesses.

          EBIT did not include net rationalization charges totaling $81.5 million and gains on asset sales of $17.0 million in 2001, net rationalization charges totaling $23.3 million in 2000 and net rationalization charges totaling $2.8 million in 1999. A gain totaling $149.7 million resulting from the change in control of 25% of Goodyear’s businesses contributed to the European joint venture was also not included in 1999 EBIT.

          Revenues and EBIT in the European Union Tire segment may be adversely affected in future periods by the effects of currency translation if the U.S. dollar strengthens against European currencies. Sales and EBIT in future periods may be negatively impacted by continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy prices and the general economic slowdown in the region.

Eastern Europe, Africa and Middle East Tire

          Eastern Europe, Africa and Middle East Tire (“Eastern Europe Tire”) segment sales in 2001 were $703.1 million, decreasing 11.3% from $793.0 million in 2000 and 13.5% from $812.9 million in 1999.

          Unit sales in 2001 were 14.0 million, decreasing 10.1% from 2000 and 11.5% from 1999. Replacement unit sales in 2001 decreased 8.1% from 2000 and 11.5% from 1999. Original equipment volume in 2001 decreased 17.2% from 2000 and 11.1% from 1999.

          Revenues in 2001 decreased from 2000 due to currency devaluations in Turkey and South Africa and lower volume in both the original equipment and replacement markets. Goodyear estimates that the effects of currency translation adversely affected Eastern Europe Tire segment sales by approximately $120 million in 2001 compared to 2000.

          Revenues in 2000 decreased from 1999 due to a downturn in the replacement market and the effects of currency translation, but benefited from generally improved pricing in the region and a general improvement in the economic conditions in Eastern Europe and South Africa. Goodyear estimates that the effects of currency translation adversely affected Eastern Europe Tire segment sales by approximately $75 million in 2000 compared to 1999.

          Eastern Europe Tire EBIT was $20.2 million in 2001, decreasing 63.0% from $54.6 million in 2000 and 59.4% from $49.8 million in 1999. Operating margin in 2001 was 2.9%, compared to 6.9% in 2000 and 6.1% in 1999.

          EBIT in 2001 decreased from 2000 due to the economic crisis in Turkey, the effects of currency translation, lower sales volume and the effect of production cutbacks to align inventory levels with demand. EBIT was favorably impacted by reduced SAG resulting from cost containment

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and rationalization programs. Goodyear estimates that the effects of currency translation reduced operating income by approximately $25 million in 2001 compared to 2000.

          EBIT in 2000 increased from 1999 due primarily to increased factory utilization levels and improved market conditions. EBIT in 2000 was adversely impacted by an industry-wide strike in Turkey.

          EBIT did not include net rationalization charges totaling $11.2 million in 2001, $9.6 million in 2000 and $.3 million in 1999.

          Revenues and EBIT in the Eastern Europe Tire segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy prices, continued volatile economic conditions and currency translation.

Latin American Tire

          Latin American Tire segment sales in 2001 were $1.01 billion, decreasing 3.4% from $1.05 billion in 2000, but increasing 6.8% from $948.1 million in 1999.

          Unit sales in 2001 were 20.0 million, increasing 1.3% from 2000 and 12.4% from 1999. Replacement unit sales in 2001 decreased 6.3% from 2000 and 1.4% from 1999. Original equipment volume in 2001 increased 24.9% from 2000 and 67.6% from 1999.

          Revenues in 2001 decreased compared to 2000 due to currency translation, particularly in Brazil, a shift in mix toward lower-priced original equipment tires, lower volume in the replacement market due to an economic slowdown and weak economic conditions in the region. Revenues benefited from price adjustments partially offsetting currency movements and higher volume. Goodyear estimates that currency translation reduced sales by approximately $85 million in 2001 compared to 2000.

          Revenues in 2000 increased from 1999 due primarily to higher tire unit sales, but were adversely affected by competitive pricing pressures.

          Latin American Tire segment EBIT was $89.8 million in 2001, increasing 28.7% from $69.8 million in 2000 and 32.6% from $67.7 million in 1999. Operating margin in 2001 was 8.9%, compared to 6.7% in 2000 and 7.1% in 1999.

          EBIT in 2001 reflected price adjustments partially offsetting currency movements, the benefits of cost reduction programs, rationalizations, lower raw material costs and higher volume. EBIT was adversely affected by currency translation and a change in mix to lower margin original equipment tires. Goodyear estimates that the effects of currency translation reduced operating income by approximately $35 million in 2001 compared to 2000.

          EBIT in 2000 increased from 1999 due to higher tire unit sales, but was adversely affected by continued pricing pressures and higher raw material and labor costs.

          EBIT did not include rationalization charges totaling $.2 million in 2001, rationalization charges totaling $65.7 million and a $5.0 million gain on the sale of land at a manufacturing facility in Mexico in 2000 and rationalization charges totaling $77.3 million in 1999.

          Revenues and EBIT in future periods may be adversely affected by the effects of continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy prices, continued volatile economic conditions, future adverse economic conditions in Mexico, Central America and South America and currency translation.

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Asia Tire

          Asia Tire segment sales in 2001 were $493.9 million, decreasing 5.9% from $524.6 million in 2000 and 16.7% from $593.2 million in 1999.

          Unit sales in 2001 were 12.2 million, increasing 3.1% from 2000 and .9% from 1999. Replacement unit sales in 2001 were flat from 2000 and decreased 8.7% from 1999. Original equipment volume in 2001 increased 12.3% from 2000 and 39.8% from 1999.

          Revenues in 2001 decreased from 2000, reflecting the adverse impacts of currency translation, softening demand in some markets and competitive pricing pressures. Goodyear estimates that currency translation reduced sales by approximately $35 million in 2001 compared to 2000.

          Revenues in 2000 decreased from 1999 due primarily to the absence of the replacement tire business transferred to Goodyear’s non-consolidated joint venture with Sumitomo in Japan, which contributed revenues of approximately $49.7 million in 1999. In addition, revenues were adversely affected by competitive pricing, a less favorable product mix and currency translation.

          Asia Tire segment EBIT was $19.9 million in 2001, increasing 11.2% from $17.9 million in 2000 but decreasing 23.5% from $26.0 million in 1999. Operating margin in 2001 was 4.0%, compared to 3.4% in 2000 and 4.4% in 1999.

          EBIT in 2001 increased from 2000 as the adverse effects of currency translation and price competition were offset by lower conversion costs as a result of cost containment programs, higher volume and lower raw material costs.

          EBIT in 2000 decreased from 1999 due primarily to lower tire unit sales, competitive pricing conditions driven in part by increased low cost imports into the region and a shift in mix to lower margin tires, higher raw material and energy costs and price competition.

          EBIT did not include rationalization charges totaling $45.4 million in 2001, $3.3 million in 2000 and $1.5 million in 1999.

          Revenues and EBIT in future periods may be adversely impacted by the effects of continued competitive pricing conditions, changes in mix, unanticipated increases in raw material and energy costs and currency translation.

          Sales and EBIT of the Asia Tire segment do not include South Pacific Tyres Ltd. (SPT), a tire manufacturer in Australia and New Zealand, which is 50% owned by Goodyear. Results of operations of SPT are not reported in segment results and are reflected in Goodyear’s Consolidated Statement of Income using the equity method.

          The following table presents the sales and operating income of the Company’s Asia Tire segment together with 100% of the sales and EBIT of SPT:

                     
(In millions)   2001   2000   1999
   
 
 
Net Sales:
                   
Asia Tire Segment
    $ 493.9   $ 524.6   $ 593.2
SPT
      481.3     563.6     674.5
 
     
   
   
 
    $ 975.2   $ 1,088.2   $ 1,267.7
 
                   
EBIT:
                   
Asia Tire Segment
    $ 19.9   $ 17.9   $ 26.0
SPT
      (25.4 )   (11.1 )   31.2
 
     
   
   
 
    $ (5.5 ) $ 6.8   $ 57.2

          SPT sales in 2001 were $481.3 million, decreasing 14.6% from $563.6 million in 2000 and 28.6% from $674.5 million in 1999. Revenues in 2001 decreased from 2000 due to currency trans-

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lation and competitive low cost imports aided by continued import tariff reductions in Australia. Revenues in 2000 decreased from 1999 due to competitive pressures from low cost imported tires and effects of currency translation.

          SPT EBIT was a loss of $25.4 million in 2001, compared to a loss of $11.1 million in 2000 and income of $31.2 million in 1999. EBIT in 2001 decreased from 2000 due to excess production capacity and the weakened Australian dollar versus the U.S. dollar. EBIT in 2000 decreased from 1999 due to production inefficiencies and higher raw material costs.

          SPT EBIT did not include rationalization charges of approximately $48.0 million in 2001 and $32.2 million in 2000.

          SPT debt totaled $67.4 million and $158.1 million at December 31, 2001 and 2000, respectively.

Engineered Products

          Engineered Products segment sales in 2001 were $1.12 billion, decreasing 4.4% from $1.17 billion in 2000 and 9.1% from $1.23 billion in 1999.

          Revenues in 2001 decreased from 2000 due to unit sales decreases resulting from lower product demand from the automotive and transportation industries. Revenues were favorably impacted by increases in the conveyor belt and replacement products markets.

          Revenues in 2000 decreased from 1999 due primarily to Goodyear’s exit from the interior trim business in 1999, which contributed revenues of approximately $71.0 million in that year. In addition, revenues were adversely affected by reduced demand for conveyor belting for the mining and agriculture industries and reduced demand for hose and power transmission products in the North American replacement market.

          Engineered Products segment EBIT in 2001 was $11.6 million, decreasing 73.1% from $43.1 million in 2000 and 83.5% from $70.4 million in 1999. Operating margin in 2001 was 1.0%, compared to 3.7% in 2000 and 5.7% in 1999.

          EBIT in 2001 decreased from 2000 due primarily to lower revenues, increased SAG costs and increased costs associated with reduced capacity utilization resulting from reduced demand from the automotive industry. EBIT was favorably impacted by lower research and development and raw material costs.

          EBIT in 2000 decreased from 1999 due primarily to reduced demand, reduced capacity utilization, higher raw material costs and competitive pricing.

          EBIT did not include net rationalization charges of $1.5 million in 2001, $3.8 million in 2000 and $8.8 million in 1999.

          Revenues and EBIT in the Engineered Products segment may be adversely affected in future periods by lower original equipment demand, competitive pricing pressures, expected continuing unfavorable economic conditions in certain markets, adverse economic conditions globally in the mining, construction and agriculture industries, unanticipated increases in raw material and energy prices, anticipated higher wage and benefit costs and currency translation.

Chemical Products

          Chemical Products segment sales in 2001 were $1.04 billion, decreasing 8.2% from $1.13 billion in 2000 but increasing 9.2% from $949.8 million in 1999. Approximately 50% of Chemical Products sales are to Goodyear’s other segments.

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          Revenues in 2001 decreased from 2000 due to lower volume resulting from the slowdown in the tire industry. Revenues in 2000 increased from 1999 due primarily to price increases and higher sales volume.

          Chemical Products segment EBIT in 2001 was $60.2 million, decreasing 6.2% from $64.2 million in 2000 and 48.3% from $116.4 million in 1999. Operating margin in 2001 was 5.8%, compared to 5.7% in 2000 and 12.3% in 1999.

          EBIT in 2001 decreased from 2000 primarily due to lower volume as a result of decreased demand from tire manufacturers (including Goodyear) and higher energy costs. EBIT benefited from lower raw material and fixed costs.

          EBIT in 2000 decreased from 1999 due primarily to increased raw material and energy prices and the inability to recover cost increases due to the competitive pricing environment.

          EBIT did not include gains on asset sales of $27.4 million in 2001 and $17.0 million in 1999. EBIT did not include rationalization charges of $2.5 million in 1999.

          Goodyear sold its specialty chemical business in France and certain specialty chemical U.S. assets in the fourth quarter of 2001. The specialty chemical business generated sales of approximately $130 million in 2001.

          Revenues and EBIT in the Chemical Products segment may be adversely affected in future periods by competitive pricing pressures, lower aggregate demand levels for its products and unanticipated increases in raw material and energy prices.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

          Net cash provided by operating activities was $1.27 billion during 2001, as reported on the Consolidated Statement of Cash Flows. Working capital requirements decreased during the period as Goodyear implemented inventory reduction programs, reduced levels of gross receivables and increased its sales of trade accounts receivable.

          During the second quarter of 2001, Goodyear terminated its $550 million domestic accounts receivable continuous sale program and entered into a new program. The new program involves the continuous sale of substantially all of Goodyear’s domestic trade accounts receivable to Wingfoot A/R LLC, a wholly-owned limited liability subsidiary company that is a bankruptcy-remote special purpose entity. The results of operations and financial position of Wingfoot A/R LLC are not included in the consolidated financial statements of Goodyear as provided by SFAS 140. Wingfoot A/R LLC purchases Goodyear’s receivables with (a) the cash proceeds of borrowings from a group of five bank-affiliated issuers of commercial paper, which borrowings are secured by the trade accounts receivable purchased from Goodyear ($580.0 million at December 31, 2001), (b) the cash proceeds of the Company’s $98.2 million equity investment in Wingfoot A/R LLC and (c) a subordinated note payable to the Company in the amount of $385.2 million at December 31, 2001, which is equal to the total amount of trade receivables purchased by Wingfoot A/R LLC minus the sum of the equity of the Wingfoot A/R LLC and the cash proceeds from the sale of the notes issued by Wingfoot A/R LLC to the five lenders, and minus a discount. Goodyear retained responsibility for servicing the receivables. As the receivables are collected, the cash proceeds are used to purchase additional receivables. Goodyear pays fees under the program based on certain variable market interest rates and other agreed amounts. These fees are reported as Other (Income) and Expense. Wingfoot A/R LLC may borrow up to $825 million from the bank-affiliated note purchasers. The amount that may be borrowed from time to time by Wingfoot A/R LLC depends on, among other things, the total uncollected balance of receivables owned by it. The borrowings are available to Wingfoot A/R LLC until February 2003, unless extended by the lenders for additional one-year periods.

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          Various international subsidiaries of Goodyear have also established accounts receivable continuous sales programs whereunder these subsidiaries may receive proceeds from the sale of certain of their receivables to affiliates of certain banks. These subsidiaries retained servicing responsibilities. At December 31, 2001, the value in U.S. dollars of which these international subsidiaries may borrow is approximately $150 million. In addition, various other international subsidiaries of Goodyear sold certain of their trade receivables during 2001 and 2000.

          At December 31, 2001, the net proceeds for all sales of receivables by Goodyear were $851.8 million. Net cash inflows of $249.1 million were received in 2001 from transfers of accounts receivable under these and other programs. For further information, refer to the note to the financial statements No. 5, Accounts and Notes Receivable.

Investing Activities

          Net cash used in investing activities was $447.4 million during 2001. Capital expenditures in 2001 were $435.4 million, of which $197.6 million was used on projects to increase capacity and improve productivity and $237.8 million was used for tire molds and various other projects. Capital expenditures are expected to approximate $500 million in 2002.

                         
(In millions)   2001   2000   1999
   
 
 
Capital expenditures
  $ 435.4     $ 614.5     $ 805.0  
Depreciation
    596.4       593.6       557.6  
Amortization
    40.3       36.7       24.1  

          Depreciation and amortization are expected to be in the range of $550 million to $650 million in 2002.

          Investing activities in 2001 included the sale of land and buildings in the United Kingdom and Goodyear’s specialty chemical business.

          Investing activities in 2000 included the sale of leasehold interests in, and the sale and leaseback of, various distribution facilities in the United States. Goodyear also acquired a majority ownership interest in a retreading production and distribution operation in the United States.

          Investing activities in 1999 included a cash payment of $931.6 million for the acquisition of majority interests in the Dunlop Tire businesses in Europe and North America. The asset acquisition amount of $892.0 million reflected on Goodyear’s Consolidated Statement of Cash Flows is net of cash received. Other investing activities in 1999 included the net proceeds of $27 million from the sale of assets to the Japanese joint ventures formed under the strategic alliance, which are 25% owned by Goodyear, and the $17 million of proceeds from the sale of customer lists and formulations in connection with Goodyear’s exit from the production of certain rubber chemicals.

          At December 31, 2001, Goodyear had binding commitments for investments in land, buildings and equipment of $121.5 million and off-balance sheet financial guarantees written and other commitments totaling $151.4 million.

          For further information on investing activities, refer to the notes to the financial statements No. 2, Strategic Alliance and No. 8, Investments.

Financing Activities

          Net cash used in financing activities was $103.0 million during 2001.

                         
(In millions)   2001   2000   1999
   
 
 
Consolidated Debt
  $ 3,568.3     $ 3,585.8     $ 3,424.5  
Debt to Debt and Equity
    55.5%       50.6%       47.4%  

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          Consolidated Debt as stated above at December 31, 2000 and 1999 does not include the 1.2% Convertible Notes issued to Sumitomo ($56.9 million outstanding at December 31, 2000 and $127.8 million outstanding at December 31, 1999) which have been converted into 2,278,896 shares of the Common Stock of the Company.

          On March 30, 2001, the Company borrowed $800 million for a period of three years under a bank term loan agreement with 28 domestic and international banks. The term loan is due on March 30, 2004. The Company may prepay the loan without penalty at the end of any interest period. The loan bears interest at a floating rate at a spread over LIBOR for interest periods of 1,2,3,6 or 12 months, as selected by the Company. Proceeds from the borrowing were used to repay short term debt.

          The Company issued $650 million of its 7.857% Notes due 2011 in the third quarter of 2001. A portion of the proceeds from the issuance of the Notes was used to repay outstanding commercial paper and short term bank borrowings. The remaining portion was retained for general corporate purposes.

          During the third quarter of 2001, the Company issued 4.3 million shares of its common stock with a market value of approximately $100.0 million as a contribution to certain domestic pension plans.

          During the fourth quarter of 2001, the Board of Directors of the Company declared a regular quarterly dividend of $.12 per share, a reduction of $.18 per share from the $.30 per share declared and paid in each quarter of 2000 and the first three quarters of 2001. The Board’s decision to reduce the dividend was in response to current economic and business conditions and Goodyear’s operating results.

          On February 6, 2001, Sumitomo converted the Company’s 1.2% Convertible Note Due August 16, 2001 in the principal amount of ¥6,536,535,767 into 1,140,866 shares of the Common Stock of the Company.

Credit Sources

          Substantial short term and long term credit sources are available to Goodyear globally under normal commercial practices. In total, Goodyear had credit arrangements of $6.1 billion available at December 31, 2001, of which $2.6 billion were unused. At December 31, 2001, Goodyear had short term committed and uncommitted bank credit arrangements totaling $1.3 billion, of which $1.1 billion were unused. Goodyear also had available long term credit arrangements at December 31, 2001 totaling $4.8 billion, of which $1.5 billion were unused.

          The Company is a party to two revolving credit facility agreements, consisting of a $750 million five-year revolving credit facility and a $775 million 364-day revolving credit facility.

          The $750 million five-year credit facility agreement is with 26 domestic and international banks and provides that the Company may borrow at any time until August 15, 2005, when the commitment terminates and any outstanding loans mature. The Company pays a commitment fee ranging from 12.5 to 25 basis points on the entire amount of the commitment (whether or not borrowed) and a usage fee on amounts borrowed (other than on a competitive bid or prime rate basis) ranging from 37.5 to 125 basis points over LIBOR (or 50 to 137.5 basis points over a defined CD rate). These fees may fluctuate quarterly within these ranges based upon Goodyear’s leverage. During 2001, commitment fees averaged 19.5 basis points.

          The $775 million 364-day credit facility agreement is with 26 domestic and international banks and provides that the Company may borrow until August 13, 2002, on which date the facility commitment terminates, except as it may be extended on a bank by bank basis. If a bank does not extend its commitment if requested to do so, the Company may obtain from such bank a two year term loan up to the amount of such bank’s commitment. The Company pays a

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commitment fee ranging from 10 to 20 basis points on the entire amount of the commitment (whether or not borrowed) and a usage fee on amounts borrowed (other than on a competitive bid or prime rate basis) ranging from 40 to 130 basis points over LIBOR (or 52.5 to 142.5 basis points over a defined CD rate). These fees may fluctuate quarterly within these ranges based upon Goodyear’s leverage. During 2001, commitment fees averaged 14.6 basis points.

          Each of the bank credit facilities provides that the Company may obtain loans bearing interest at reserve adjusted LIBOR or a defined certificate of deposit rate, plus in each case the applicable usage fee, at rates based on the prime rate, or at rates determined on a competitive bid basis. Under each of the facility agreements, a utilization fee of 25 basis points per annum is charged each day on which the sum of the outstanding loans exceeds 50% of the total commitment. No utilization fees were paid during 2001. Each facility agreement contains certain covenants which, among other things, require Goodyear to maintain at the end of each fiscal quarter a minimum consolidated net worth and a defined minimum interest coverage ratio. In addition, the facility agreements establish a limit on the aggregate amount of consolidated debt the Company and its subsidiaries may incur. There were no borrowings outstanding under these agreements at December 31, 2001. These revolving credit facilities support, among other things, the uncommitted short term bank facilities. The Company amended each of these bank credit facility agreements and certain other agreements with banks during 2001 to modify the interest coverage ratio and consolidated net worth covenants and certain other provisions to reflect current operating conditions.

          Standard & Poor’s and Fitch have reduced their ratings of the Company’s short term and long term debt to B/BB+, which are below investment grade. Although the Company’s debt is rated P-3/Baa3 by Moody’s Investor Services, the Company has been advised by Moody’s that the Company’s ratings are under review for a possible future reduction to a rating below investment grade. As a result of these ratings actions, Goodyear will not be able to participate in certain capital markets and is likely to experience increases in the cost of obtaining capital in other markets. In addition, financing and related expenses under some existing arrangements have increased.

          For further information on financing activities, refer to the note to the financial statements No. 11, Financing Arrangements and Derivative Financial Instruments.

          Funds generated by operations, together with funds available under existing credit arrangements, are expected to be sufficient to meet Goodyear’s currently anticipated requirements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

          Goodyear actively manages its fixed and floating rate debt mix, within defined limitations, using refinancings and unleveraged interest rate swaps. Goodyear will enter into fixed and floating interest rate swaps to hedge against the effects of adverse changes in interest rates on consolidated results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce Goodyear’s risk of increased interest costs during periods of rising interest rates, and are normally designated as cash flow hedges. Floating rate swaps are used to convert the fixed rates of long term borrowings into short term variable rates, and are normally designated as fair value hedges. Interest rate swap contracts are thus used by Goodyear to separate interest rate risk management from the debt funding decision. At December 31, 2001, the interest rate on 75% of Goodyear’s debt was fixed by either the nature of the obligation or through the interest rate contracts, compared to 54% at December 31, 2000. Interest rate lock contracts are used to hedge the risk-free rate component of anticipated long term debt issuances. No interest rate lock contracts were outstanding at December 31, 2001 or 2000.

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         The following tables present information at December 31:

                 
(In millions)   2001   2000
   
 
Interest Rate Exchange Contracts
               
Fair value — (unfavorable)
  $ (9.2 )   $  
Carrying amount:
               
     Long term asset
    .2        
     Current (liability)
    (8.3 )     (.2 )
     Long term (liability)
    (1.1 )      
Pro forma fair value — (unfavorable)
    (10.6 )     (.2 )

         The pro forma information assumes a 10% decrease in variable market interest rates at December 31 of each year, and reflects the estimated fair value of contracts outstanding at that date under that assumption.

                 
(In millions)   2001   2000
   
 
Fixed Rate Debt
               
Fair value
  $ 2,359.0     $ 1,731.0  
Carrying amount
    2,353.3       1,776.5  
Pro forma fair value
    2,458.3       1,801.3  

         The pro forma information assumes a 100 basis point decrease in market interest rates at December 31 of each year, and reflects the estimated fair value of fixed rate debt outstanding at that date under that assumption.

         The sensitivity to changes in interest rates of Goodyear’s interest rate contracts and fixed rate debt was determined with a valuation model based upon net modified duration analysis. The model assumes a parallel shift in the yield curve, and the precision of the model decreases as the assumed change in interest rates increases.

Foreign Currency Exchange Risk

         In order to reduce the impact of changes in foreign exchange rates on consolidated results of operations and future foreign currency denominated cash flows, Goodyear was a party to various foreign currency forward exchange contracts at December 31, 2001 and 2000. These contracts reduce exposure to currency movements affecting existing foreign currency denominated assets, liabilities and firm commitments resulting primarily from trade receivables and payables, equipment acquisitions, intercompany loans and Goodyear’s foreign currency-denominated borrowings in the U.S. The contract maturities match the maturities of the currency positions. Changes in the fair value of forward exchange contracts are substantially offset by changes in the fair value of the hedged positions.

         The following table presents information at December 31:

                 
(In millions)   2001   2000
   
 
Fair value — favorable (unfavorable)
  $ (13.0 )   $ 24.0  
Carrying amount — asset (liability)
    (13.6 )     23.0  
Pro forma change in fair value — favorable
    44.6       33.3  

         The pro forma information assumes a 10% change in foreign exchange rates at December 31 of each year, and reflects the estimated change in the fair value of contracts outstanding at that date under that assumption.

         The sensitivity to changes in exchange rates of Goodyear’s foreign currency positions was determined using current market pricing models.

         For further information on interest rate contracts and foreign currency exchange contracts, refer to the note to the financial statements No. 11, Financing Arrangements and Derivative Financial Instruments.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX

CONSOLIDATED FINANCIAL STATEMENTS — FINANCIAL STATEMENT SCHEDULES

         
    Page
   
Report of Independent Accountants
    52  
Consolidated Statement of Income — years ended December 31, 2001, 2000 and 1999
    53  
Consolidated Balance Sheet — December 31, 2001 and 2000
    54  
Consolidated Statement of Shareholders’ Equity — years ended December 31, 2001, 2000 and 1999
    55  
Consolidated Statement of Cash Flows — years ended December 31, 2001, 2000 and 1999
    56  
Notes to Financial Statements
    57  
Supplementary Data (unaudited)
    80  
Financial Statement Schedules
  FS -1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of The Goodyear Tire & Rubber Company

         In our opinion, the consolidated financial statements listed in the accompanying index on this page present fairly, in all material respects, the financial position of The Goodyear Tire & Rubber Company and Subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP

Cleveland, Ohio
February 4, 2002

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CONSOLIDATED STATEMENT OF INCOME

                         
(Dollars in millions, except per share)                        
Year Ended December 31,   2001   2000   1999

 
 
 
Net Sales
  $ 14,147.2     $ 14,417.1     $ 13,355.4  
 
 
Cost of Goods Sold
    11,619.5       11,637.3       10,832.3  
Selling, Administrative and General Expense
    2,248.8       2,237.3       2,016.7  
Rationalizations (Note 3)
    206.8       124.1       171.6  
Interest Expense (Note 17)
    292.4       282.6       179.4  
Other (Income) and Expense (Note 4)
    11.8       27.8       (147.1 )
Foreign Currency Exchange
    .1       (6.7 )     (27.6 )
Equity in Earnings of Affiliates
    40.6       22.4       (10.3 )
Minority Interest in Net Income of Subsidiaries
    .2       33.5       40.3  
 
 
Income (Loss) before Income Taxes
    (273.0 )     58.8       300.1  
United States and Foreign Taxes on Income (Loss) (Note 16)
    (69.4 )     18.5       56.9  
 
 
Net Income (Loss)
  $ (203.6 )   $ 40.3     $ 243.2  
 
 
Net Income (Loss) Per Share — Basic
  $ (1.27 )   $ .26     $ 1.55  
 
 
Average Shares Outstanding (Note 12)
    159,955,869       156,840,646       156,182,004  
Net Income (Loss) Per Share — Diluted
  $ (1.27 )   $ .25     $ 1.53  
 
 
Average Shares Outstanding (Note 12)
    159,955,869       158,764,926       158,939,599  
 
 

The accompanying notes are an integral part of this financial statement.

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CONSOLIDATED BALANCE SHEET

                     
(Dollars in millions)                
December 31,   2001   2000
   
 
Assets
               
Current Assets:
               
 
Cash and cash equivalents
  $ 959.4     $ 252.9  
 
Accounts and notes receivable (Note 5)
    1,486.8       2,074.7  
 
Inventories (Note 6)
    2,380.9       2,879.7  
 
Prepaid expenses and other current assets
    427.9       259.9  
 
 
   
Total Current Assets
    5,255.0       5,467.2  
 
 
Long Term Accounts and Notes Receivable
    143.8       92.8  
Investments in Affiliates, at equity
    82.7       102.0  
Other Assets (Note 8)
    263.0       183.8  
Goodwill (Note 7)
    569.1       588.4  
Deferred Income Tax
    674.9       394.1  
Deferred Charges
    1,408.3       1,218.7  
Properties and Plants (Note 9)
    5,116.1       5,521.0  
 
 
   
Total Assets
  $ 13,512.9     $ 13,568.0  
 
 
Liabilities
               
Current Liabilities:
               
 
Accounts payable — trade
  $ 1,359.2     $ 1,505.2  
 
Compensation and benefits (Notes 14, 15)
    897.2       823.6  
 
Other current liabilities
    396.1       395.6  
 
United States and foreign taxes
    309.3       208.4  
 
Notes payable to banks (Note 11)
    255.0       1,077.0  
 
Sumitomo 1.2% Convertible Note Payable Due 8/01 (Note 8)
          56.9  
 
Long term debt due within one year (Note 11)
    109.7       159.2  
 
 
   
Total Current Liabilities
    3,326.5       4,225.9  
 
 
Long Term Debt (Note 11)
    3,203.6       2,349.6  
Compensation and Benefits (Notes 14, 15)
    2,848.9       2,310.5  
Other Long Term Liabilities
    482.3       334.1  
Minority Equity in Subsidiaries
    787.6       844.9  
 
 
   
Total Liabilities
    10,648.9       10,065.0  
 
 
Shareholders’ Equity
               
Preferred Stock, no par value:
               
 
Authorized, 50,000,000 shares, unissued
           
Common Stock, no par value:
               
 
Authorized, 300,000,000 shares Outstanding shares, 163,165,698 (157,603,962 in 2000)
    163.2       157.6  
Capital Surplus
    1,245.4       1,092.4  
Retained Earnings
    3,192.7       3,558.8  
Accumulated Other Comprehensive Income (Note 21)
    (1,737.3 )     (1,305.8 )
 
 
   
Total Shareholders’ Equity
    2,864.0       3,503.0  
 
 
   
Total Liabilities and Shareholders’ Equity
  $ 13,512.9     $ 13,568.0  
 
 

The accompanying notes are an integral part of this financial statement.

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CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

                                                       
                                          Accumulated        
                                          Other   Total
          Common Stock   Capital   Retained   Comprehensive   Shareholders'
(Dollars in millions, except per share)   Shares   Amount   Surplus   Earnings   Income   Equity

 
 
 
 
 
 
Balance at December 31, 1998
    155,943,535     $ 155.9     $ 1,015.9     $ 3,651.2     $ (903.8 )   $ 3,919.2  
 
(after deducting 39,735,133 treasury shares)
                                               
 
 
Comprehensive income:
                                               
 
Net income
                            243.2                  
 
Foreign currency translation
                                    (212.2 )        
   
Less reclassification adjustment for amounts recognized in income
                                    17.6          
 
Minimum pension liability (net of tax of $6.3)
                                    11.0          
 
Unrealized investment loss (net of tax of $7.8)
                                    (12.8 )        
   
Total comprehensive income
                                            46.8  
 
Cash dividends — $1.20 per share
                            (187.5 )             (187.5 )
 
Common stock issued from treasury:
                                               
   
Stock compensation plans
    391,585       .4       13.7                       14.1  
 
 
Balance at December 31, 1999
    156,335,120       156.3       1,029.6       3,706.9       (1,100.2 )     3,792.6  
 
(after deducting 39,343,548 treasury shares)
                                               
 
 
Comprehensive income:
                                               
 
Net income
                            40.3                  
 
Foreign currency translation
                                    (201.7 )        
 
Minimum pension liability (net of tax of $4.1)
                                    (6.7 )        
 
Unrealized investment gain (net of tax of $1.7)
                                    2.8          
   
Total comprehensive income (loss)
                                            (165.3 )
 
Cash dividends — $1.20 per share
                            (188.4 )             (188.4 )
 
Common stock issued from treasury:
                                               
   
Conversion of 1.2% Convertible Note Payable
    1,138,030       1.1       58.8                       59.9  
   
Stock compensation plans
    130,812       .2       4.0                       4.2  
 
 
Balance at December 31, 2000
    157,603,962       157.6       1,092.4       3,558.8       (1,305.8 )     3,503.0  
 
(after deducting 38,074,706 treasury shares)
                                               
 
 
Comprehensive income:
                                               
 
Net income (loss)
                            (203.6 )                
 
Foreign currency translation
                                    (183.5 )        
   
Less reclassification adjustment for amounts recognized in income
                                    7.2          
 
Minimum pension liability (net of tax of $124.4)
                                    (235.4 )        
 
Unrealized investment loss (net of tax of $4.1)
                                    (6.6 )        
 
Transition adjustment from adoption of SFAS 133
                                    5.4          
 
Deferred derivative loss (net of tax of $17.1)
                                    (27.8 )        
   
Less reclassification adjustment for amounts recognized in income (net of tax of $5.7)
                                    9.2          
     
Total comprehensive income (loss)
                                            (635.1 )
 
Cash dividends — $1.02 per share
                            (162.5 )             (162.5 )
 
Common stock issued from treasury:
                                               
   
Domestic pension funding
    4,300,000       4.3       95.7                       100.0  
   
Conversion of 1.2% Convertible Note Payable
    1,140,866       1.1       55.1                       56.2  
   
Stock compensation plans
    120,870       .2       2.2                       2.4  
 
 
Balance at December 31, 2001
    163,165,698     $ 163.2     $ 1,245.4     $ 3,192.7     $ (1,737.3 )   $ 2,864.0  
 
(after deducting 32,512,970 treasury shares)
                                               
 
 

The accompanying notes are an integral part of this financial statement.

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CONSOLIDATED STATEMENT OF CASH FLOWS

                               
(Dollars in millions)                        
Year Ended December 31,   2001   2000   1999
   
 
 
Cash Flows from Operating Activities:
                       
 
Net Income (Loss)
  $ (203.6 )   $ 40.3     $ 243.2  
 
Adjustments to reconcile net income (loss) to cash flows from operating activities:
                       
   
Depreciation and amortization
    636.7       630.3       581.7  
   
Deferred tax provision (Note 16)
    (252.0 )     (138.9 )     (141.0 )
   
Rationalizations (Note 3)
    158.3       100.1       132.5  
   
Asset sales (Note 4)
    (30.8 )     (3.2 )     (154.8 )
 
Proceeds from sale of accounts receivable (Note 5)
    249.1       38.6       (16.0 )
 
Changes in operating assets and liabilities, net of acquisitions and dispositions:
                       
   
Accounts and notes receivable
    214.6       97.4       29.4  
   
Inventories
    407.8       (382.6 )     273.4  
   
Accounts payable — trade
    (101.8 )     139.9       (83.4 )
   
Domestic pension funding (Note 8)
          (5.3 )     (47.3 )
   
Other assets and liabilities
    188.2       (6.8 )     (183.0 )
 
 
     
Total adjustments
    1,470.1       469.5       391.5  
 
 
   
Total cash flows from operating activities
    1,266.5       509.8       634.7  
 
 
Cash Flows from Investing Activities:
                       
 
Capital expenditures
    (435.4 )     (614.5 )     (805.0 )
 
Short term securities acquired
    (2.3 )     (24.4 )     (54.2 )
 
Short term securities redeemed
    1.9       26.1       59.5  
 
Asset dispositions
    118.2       172.6       49.5  
 
Asset acquisitions (Notes 2, 8)
                (892.0 )
 
Other transactions
    (129.8 )     (28.2 )     (159.8 )
 
 
   
Total cash flows from investing activities
    (447.4 )     (468.4 )     (1,802.0 )
 
 
Cash Flows from Financing Activities:
                       
 
Short term debt incurred
    83.8       1,199.2       2,111.8  
 
Short term debt paid
    (1,365.1 )     (1,908.2 )     (727.1 )
 
Long term debt incurred
    1,510.2       1,145.9       20.5  
 
Long term debt paid
    (158.0 )     (229.2 )     (48.7 )
 
Common stock issued (Notes 8, 12)
    1.7       4.2       14.1  
 
Joint venture dividends paid to Sumitomo
    (13.1 )     (27.1 )      
 
Dividends paid to Goodyear shareholders
    (162.5 )     (188.4 )     (187.5 )
 
 
   
Total cash flows from financing activities
    (103.0 )     (3.6 )     1,183.1  
 
 
Effect of Exchange Rate Changes on Cash and Cash Equivalents
    (9.6 )     (26.2 )     (13.5 )
 
 
Net Change in Cash and Cash Equivalents
    706.5       11.6       2.3  
Cash and Cash Equivalents at Beginning of the Period
    252.9       241.3       239.0  
 
 
Cash and Cash Equivalents at End of the Period
  $ 959.4     $ 252.9     $ 241.3  
 
 

The accompanying notes are an integral part of this financial statement.

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NOTES TO FINANCIAL STATEMENTS

Note 1

Accounting Policies

A summary of the significant accounting policies used in the preparation of the accompanying financial statements follows:

Principles of Consolidation

The consolidated financial statements include the accounts of all majority-owned subsidiaries in which no substantive participating rights are held by minority shareholders. All intercompany transactions have been eliminated.

         Goodyear’s investments in majority-owned subsidiaries in which substantive participating rights are held by minority shareholders and in 20% to 50% owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. Accordingly, Goodyear’s share of the earnings of these companies is included in consolidated net income. Investments in other companies are carried at cost.

Revenue Recognition

Revenues are recognized when finished products are shipped to unaffiliated customers and both title and the risks and rewards of ownership are transferred, or services have been rendered and accepted. Appropriate provision is made for uncollectible accounts.

Shipping and Handling Fees and Costs

Expenses for transportation of products to customers is recorded as a component of cost of goods sold.

Consolidated Statement of Cash Flows

Cash and cash equivalents include cash on hand and in the bank as well as all short term securities held for the primary purpose of general liquidity. Such securities normally mature within three months from the date of acquisition. Cash flows associated with items intended as hedges of identifiable transactions or events are classified in the same category as the cash flows from the items being hedged.

Inventory Pricing

Worldwide inventories are stated at the lower of cost or market. Cost is determined using FIFO or the average cost method. Refer to Note 6.

Investments

Investments in marketable equity securities are stated at fair value. Fair value is determined using quoted market prices at the end of the reporting period and, when appropriate, exchange rates at that date. Unrealized gains and losses on marketable equity securities classified as available-for-sale are recorded in Accumulated Other Comprehensive Income, net of tax. Refer to Notes 8 and 21.

Goodwill

Goodyear adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets” effective January 1, 2002. The following represents Goodyear’s policy in effect for the three year period ending December 31, 2001. Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill is amortized over its estimated useful life, based on an evaluation of all relevant factors. Substantially all goodwill resulting from the strategic alliance with Sumitomo and other acquisitions in North America and the European Union is amortized on a straight-line basis over 40 years. Goodwill resulting from acquisitions in emerging markets is amortized on a straight-line basis over periods ranging from 20-40 years. The carrying amount and estimated useful life of goodwill are reviewed whenever events or changes in circumstances indicate that revisions may be warranted. Refer to Note 7.

Properties and Plants

Properties and plants are stated at cost. Depreciation is computed using the straight-line method. Accelerated depreciation is used for income tax purposes, where permitted. Refer to Note 9.

Stock-Based Compensation

Compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s common stock at the date of the grant over the amount an employee must pay to acquire the stock. Compensation cost for stock appreciation rights and performance units is recorded based on the quoted market price of the Company’s stock at the end of the reporting period. Refer to Note 12.

Advertising Costs

Costs incurred for producing and communicating advertising are generally expensed when incurred. Costs incurred under Goodyear’s domestic cooperative advertising program with dealers and franchisees are recorded as reductions of sales subsequent to the first time the advertising takes place, as related revenues are recognized. Refer to Note 19.

Foreign Currency Translation

Financial statements of international subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted-average exchange rate for each period for revenues, expenses, gains and losses. Where the local currency is the functional currency, translation adjustments are recorded as Accumulated Other Comprehensive Income. Where the U.S. dollar is the functional currency, translation adjustments are recorded in income.

Derivative Financial Instruments and
Hedging Activities

Derivative financial instrument contracts and nonderivative instruments are utilized by Goodyear to manage interest rate and foreign exchange risks. Goodyear has established a

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control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. Company policy prohibits holding or issuing derivative financial instruments for trading purposes.

         To qualify for hedge accounting, hedging instruments must be designated as hedges and meet defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or financial statement effects of the hedging instrument substantially offset those of the position being hedged.

         Derivative contracts are reported at fair value on the Consolidated Balance Sheet as both current and long term Accounts Receivable or Other Liabilities. Deferred gains and losses on contracts designated as cash flow hedges are recorded in Accumulated Other Comprehensive Income (OCI). Ineffectiveness in hedging relationships is recorded as Other (Income) and Expense in the current period.

         Interest Rate Contracts — Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in OCI. Amounts are transferred from OCI and recognized in income as Interest Expense in the same period that the hedged item is recognized in income. Gains and losses on contracts designated as fair value hedges are recognized in income in the current period as Interest Expense. Gains and losses on contracts with no hedging designation are recorded in income in the current period as Other (Income) and Expense.

         Foreign Currency Contracts — Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in OCI. Amounts are transferred from OCI and recognized in income as Foreign Currency Exchange in the same period that the hedged item is recognized in income. Gains and losses on contracts with no hedging designation are recorded in income currently as Foreign Currency Exchange.

         Goodyear does not include premiums paid on forward currency contracts in its assessment of hedge effectiveness. Premiums on contracts designated as hedges are recognized in income as Foreign Currency Exchange over the life of the contract.

         Net Investment Hedging — Nonderivative instruments denominated in foreign currencies are used to hedge net investments in foreign subsidiaries. Gains and losses on these instruments are deferred and recorded in OCI as Foreign Currency Translation Adjustment. These gains and losses are only recognized in income upon the complete or partial sale of the related investment or the complete liquidation of the investment.

         Termination of Contracts — Deferred gains and losses in OCI are recognized in income as Other (Income) and Expense when contracts are terminated concurrently with the termination of the hedged position. To the extent that such position remains outstanding, deferred gains and losses in OCI are amortized to Interest Expense or Foreign Currency Exchange over the remaining life of that position. Gains and losses on contracts that Goodyear temporarily continues to hold after the early termination of a hedged position, or that otherwise no longer qualify for hedge accounting, are recognized in income as Other (Income) and Expense.

         Refer to Note 11.

Environmental Cleanup Matters

Goodyear expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. Goodyear determines its liability on a site by site basis and records a liability at the time when it is probable and can be reasonably estimated. Goodyear’s estimated liability is reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. The estimated liability of Goodyear is not discounted or reduced for possible recoveries from insurance carriers. Refer to Note 22.

Income Taxes

Income taxes are recognized during the year in which transactions enter into the determination of financial statement income, with deferred taxes being provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Refer to Note 16.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to financial statements. Changes in such estimates may affect amounts reported in future periods.

Reclassification

Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2001 presentation.

Per Share of Common Stock

Basic earnings per share have been computed based on the average number of common shares outstanding. Diluted earnings per share reflects the dilutive impact of outstanding stock options, computed using the treasury stock method, performance units, and in 1999 and 2000, Goodyear’s 1.2% Convertible Note Payable Due 8/01. All earnings per share amounts in these notes to financial statements are diluted, unless otherwise noted. Refer to Note 12.

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Note 2

Strategic Alliance

On September 1, 1999, Goodyear commenced operations under a global alliance with Sumitomo Rubber Industries Ltd. (“Sumitomo”) which included, among other things, the formation of tire manufacturing and sales joint ventures. In addition to its businesses contributed to the joint ventures, Goodyear paid $931.6 million to Sumitomo and its affiliates, which was financed by the issuance of additional debt.

         Under the global alliance agreements, Goodyear acquired 75%, and Sumitomo owned 25%, of Goodyear Dunlop Tires Europe B.V., a Netherlands holding company. Concurrently, the holding company acquired substantially all of Sumitomo’s tire businesses in Europe, including eight tire manufacturing plants located in England, France and Germany and sales and distribution operations in 18 European countries, and most of Goodyear’s tire businesses in Europe. Excluded from the European joint venture are Goodyear’s tire businesses in Poland (other than a sales company), Slovenia and Turkey (as well as Morocco and South Africa), Goodyear’s aircraft tire businesses, and Goodyear’s textile, steel tire cord and tire mold manufacturing plants, a technical center and related facilities located in Luxembourg.

         Goodyear also acquired 75%, and Sumitomo acquired 25%, of Goodyear Dunlop Tires North America Ltd., a holding company that purchased Sumitomo’s tire manufacturing operations in North America and certain of its related tire sales and distribution operations. In addition, Goodyear acquired 100% of the balance of Sumitomo’s Dunlop Tire distribution and sales operations in the United States and Canada. Goodyear also acquired a 25% (and Sumitomo acquired a 75%) equity interest in each of two tire companies in Japan, one for the distribution and sale of Goodyear-brand passenger and truck tires in the replacement market in Japan and the other for the distribution and sale of Goodyear-brand and Dunlop-brand tires to original equipment manufacturers in Japan. Goodyear transferred certain assets of its subsidiary located in Japan in exchange for such equity interests and approximately $27 million in cash.

         Goodyear also acquired a 51% (and Sumitomo acquired a 49%) equity interest in a company that will coordinate and disseminate commercialized tire technology among Goodyear, Sumitomo, the joint ventures and their respective affiliates, and an 80% (and Sumitomo acquired a 20%) equity interest in a global purchasing company. The global alliance Agreements also provided for the investment by Goodyear and Sumitomo in the common stock of the other. Refer to Note 8.

         Goodyear accounted for the strategic alliance using the purchase method. The cost of the acquired businesses totaled approximately $1.24 billion, including the cash payment of $931.6 million and the fair value of 25% of the Goodyear businesses contributed to the European joint venture, or $307 million. In addition, the Dunlop businesses contributed by Sumitomo included $130 million of debt. Approximately $367 million of goodwill was recorded on the transaction which was being amortized on a straight-line basis over 40 years. Amortization was discontinued on January 1, 2002, as a result of Goodyear’s adoption of SFAS No. 142. Goodyear recognized a gain of $149.7 million ($143.7 million after tax or $.90 per share) on the change of control of 25% of the businesses it contributed to the European joint venture.

         The following table presents supplemental pro forma estimated results of operations for 1999 as if the joint ventures had commenced operations on January 1, 1999. Historical results of the acquired businesses have been adjusted to exclude non-recurring items and to reflect changes in the carrying amounts and depreciable lives of certain fixed assets. The pro forma information also reflects amortization of goodwill recorded by Goodyear and interest expense at 6% associated with the debt incurred to finance Goodyear’s cash payment of $931.6 million to Sumitomo and its affiliates.

         
(In millions, except per share)        
Year Ended December 31,   1999
   
    (Unaudited)
Net Sales
  $ 14,970.1  
 
   
 
Net Income
  $ 243.7  
 
   
 
Net Income Per Share — Basic
  $ 1.56  
 
   
 
Net Income Per Share — Diluted
  $ 1.53  
 
   
 

Note 3

Rationalizations

To maintain global competitiveness, Goodyear has implemented rationalization actions over the past several years for the purpose of reducing over-capacity, eliminating redundancies and reducing costs. The net amounts of rationalization charges (credits) to the Consolidated Statement of Income by quarter for the periods indicated were as follows:

                         
(In millions)                        
Year Ended December 31,   2001   2000   1999
   
 
 
First Quarter
  $ 79.0     $     $ 167.4  
Second Quarter
          4.7       (9.6 )
Third Quarter
          1.2       6.1  
Fourth Quarter
    127.8       118.2       7.7  
 
 
 
  $ 206.8     $ 124.1     $ 171.6  
 
 

Fourth Quarter 2001 Program

Goodyear recorded a net rationalization charge totaling $127.8 million ($101.2 million after tax or $.62 per share) in the fourth quarter of 2001, which included a $4.1 million reversal of reserves no longer needed for their originally intended purposes. These actions were in response to

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continued competitive market conditions and worldwide economic uncertainty. Under these actions, Goodyear has provided for worldwide associate reductions through retail and administrative consolidation and manufacturing plant downsizing and consolidation. Of this charge, $89.4 million related to future cash outflows, primarily associate severance and noncancellable lease costs, and $42.5 million related to non-cash charges, primarily for the writeoff of equipment taken out of service.

         Associate-related rationalization costs totaling $58.8 million were recorded and incurred in the fourth quarter of 2001 as follows:

                         
                    Balance at
(In millions)   Recorded   Incurred   12/31/01
   
 
 
Plant downsizing and consolidation
  $ 21.2     $     $ 21.2  
Retail and administrative consolidation
    37.6       (1.6 )     36.0  
 
 
 
  $ 58.8     $ (1.6 )   $ 57.2  
 
 

Under the above programs, Goodyear provided for the release of approximately 2,200 associates around the world, primarily production and administrative associates. During 2001, approximately 300 associates were released at a cost of $1.6 million, however, a significant amount of the payments related to these associates will be incurred during 2002.

         Rationalization costs, other than associate-related costs, totaling $73.1 million were recorded and incurred in the fourth quarter of 2001 as follows:

                         
                    Balance at
(In millions)   Recorded   Incurred   12/31/01
   
 
 
Plant downsizing and consolidation
  $ 45.2     $ (40.0 )   $ 5.2  
Retail and administrative consolidation
    27.9       (2.5 )     25.4  
 
 
 
  $ 73.1     $ (42.5 )   $ 30.6  
 
 

These costs were primarily for the writeoff of equipment taken out of service and noncancellable lease costs. Goodyear incurred $42.5 million of other than associate-related costs during 2001 for the writeoff of equipment taken out of service.

First Quarter 2001/Fourth Quarter 2000 Program

Goodyear recorded a rationalization charge on the Consolidated Statement of Income totaling $79.0 million ($57.1 million after tax or $.36 per share) in the 2001 first quarter. Of this amount, $40.7 million related to future cash outflows, primarily associate severance costs and $38.3 million related to non-cash charges, primarily $33.3 million for special termination benefits and pension curtailments related to a voluntary exit program in the United States. Of the $79.0 million charge, $12.5 million related to the closure of Goodyear’s manufacturing facility in Italy announced in 1999 and $66.5 million continued the rationalization programs announced in the fourth quarter of 2000.

         Goodyear recorded a net rationalization charge totaling $124.1 million ($100.1 million after tax or $.63 per share) during 2000, of which $4.7 million related to the 1999 program, primarily the closure of Goodyear’s manufacturing facility in Italy, and $119.4 million related to rationalization actions announced during 2000. Of the $119.4 million, $86.4 million related to future cash outflows, primarily for associate severance costs and $33.0 million related to non-cash writeoffs. These 2000 actions were for global workforce reductions and manufacturing facility consolidations including the closure of a tire plant in Latin America.

         Associate-related rationalization costs for the first quarter 2001/fourth quarter 2000 totaled $152.0 million. Activity during 2001 is presented below:

                                         
      Balance at     2001                   Balance at
(In millions)   12/31/00   Charges   Incurred   Reversed   12/31/01
   
 
 
 
 
Plant downsizing and consolidation
  $ 48.0     $ 10.8     $ (56.8 )   $ ( .9 )   $ 1.1  
Worldwide associate reductions
    25.2       48.6       (66.0 )     (3.0 )     4.8  
 
 
 
  $ 73.2     $ 59.4     $ (122.8 )   $ (3.9 )   $ 5.9  
 
 

Under the above programs, Goodyear provided for the release of approximately 7,100 associates around the world, primarily production and support associates. To date, 6,800 associates have been released for which Goodyear incurred costs totaling $122.8 million during 2001. Goodyear plans to release the remaining 300 associates and complete the plan in the first quarter of 2002.

         Rationalization costs, other than associate-related costs, for these programs totaled $33.9 million, and were primarily for the writeoff of equipment taken out of service, scrap removal costs and noncancellable lease costs. Goodyear plans to complete these actions during the first quarter of 2002. Activity during 2001 is presented below:

                                         
    Balance at   2001                   Balance at
(In millions)   12/31/00   Charges   Incurred   Reversed   12/31/01
   
 
 
 
 
Plant downsizing and consolidation
  $ 8.8     $ 7.1     $ (12.3 )   $ (.2 )   $ 3.4  
 
 

1999 Program

During 1999, Goodyear committed to a number of rationalization actions to reduce costs and increase productivity and efficiency. The actions consisted of worldwide associate reductions, exit from the CART/IRL racing series, termination of tire production at the Gadsden, Alabama facility and manufacturing facilities in Latin America and Italy, and downsizing and consolidation of tire manufacturing facilities in North America, Europe and Latin America. A charge of $240.1 million ($177.7 million after tax or $1.13 per share)

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was recorded, of which $47.6 million related to non-cash writeoffs and $192.5 million related to future cash outflows, primarily for associate severance costs. The associate-related charges of $171.6 million provided for the release of approximately 5,000 associates worldwide. Non-associate-related costs of $68.5 million were primarily for the writeoff of equipment taken out of service and noncancellable contracts at the closed manufacturing facilities. Goodyear recorded additional charges of $4.7 million in 2000 and $12.5 million in 2001 related to the closing of the manufacturing facility in Italy for associates that accepted negotiated benefits in those respective periods.

         Activity during 2001 for associate-related and other than associate-related costs related to the 1999 actions are presented below:

                                 
    Balance at   2001           Balance at
(In millions)   12/31/00   Charges   Incurred   12/31/01
   
 
 
 
 
  $ 4.3     $ 12.5     $ (16.0 )   $ .8  
 
 

Under the above programs, approximately 350 associates were released in 2001 at a cost of $16.0 million, including the remaining costs related to the 1999 closing of the tire plant in Italy. Goodyear has completed these actions with the exception of ongoing severance payments.

         Goodyear recorded reversals of, and adjustments to, rationalization plans of $68.5 million ($45.2 million after tax or $.29 per share) during 1999, including $51.5 million related to charges which were originally recorded during 1999, primarily related to the decision to resume production of certain passenger tire lines in a portion of the Gadsden facility. The remaining $17.0 million related to reserves from prior year plans which were no longer needed for their originally intended purposes. The net charge to the Consolidated Statement of Income totaled $171.6 million ($132.5 million after tax or $.84 per share) during 1999.

Dunlop Integration Program

The following rationalization actions have been recorded as adjustments to the purchase price allocation in respect of the acquired Dunlop businesses, and did not affect the Consolidated Statement of Income.

         Goodyear committed to certain rationalization actions related to the Dunlop businesses acquired from Sumitomo on September 1, 1999, for the purpose of optimizing market growth opportunities and maximizing cost efficiencies. Goodyear has recorded costs totaling $72.8 million, including $5.7 million in the first quarter of 2001, substantially all of which was for future cash outflows. Under these rationalization programs, associate-related costs for the release or relocation of approximately 2,000 production, support, technical, retail and administrative associates totaling $58.5 million were recorded, and rationalization costs, other than associate-related costs, totaling $14.3 million were recorded primarily for lease cancellations and noncancellable leases.

         During 2001, Goodyear incurred associate-related costs of $16.5 million for the release of approximately 800 associates. During 2001, Goodyear evaluated the remaining reserves and recorded total reversals of $5.0 million for reserves no longer needed for their originally intended purposes. The remaining balance of $1.9 million relates to ongoing associate severance payments. During 2001, Goodyear incurred $5.6 million for rationalization costs, other than associate-related costs, primarily for ongoing lease payments. The remaining balance for rationalization costs, other than associate-related costs, at December 31, 2001 was $4.9 million. Goodyear has completed these actions during 2001, except for future rental payments under noncancellable leases.

Note 4

                         
Other (Income) and Expense                        
(In millions)   2001   2000   1999
   
 
 
Asset sales
  $ (44.4 )   $ (5.0 )   $ (166.7 )
Interest income
    (13.5 )     (13.9 )     (16.3 )
Financing fees and financial instruments
    50.1       44.8       41.1  
Miscellaneous
    19.6       1.9       (5.2 )
 
 
 
  $ 11.8     $ 27.8     $ (147.1 )
 
 

During 2001, Goodyear recorded a gain of $17.0 million ($13.9 million after tax or $.09 per share) resulting from the sale of land and buildings in the United Kingdom in the first quarter. Additionally, Goodyear recorded a gain of $27.4 million ($16.9 million after tax or $.10 per share) resulting from the sale of the Specialty Chemical Business in the 2001 fourth quarter. Other (Income) and Expense in the third quarter of 2000 included a gain of $5.0 million ($3.2 million after tax or $.02 per share) on the sale of land at a manufacturing facility in Mexico. During 1999, Goodyear recorded a gain of $149.7 million ($143.7 million after tax or $.90 per share) on the change in control of 25% of the European businesses contributed to Goodyear Dunlop Tires Europe B.V. by Goodyear. In addition, proceeds of $17.0 million ($11.1 million after tax or $.07 per share) were realized in 1999 from Goodyear’s sale of customer lists and formulations in connection with its exit from the production of certain rubber chemicals.

         Interest income consists of amounts earned on deposits. At December 31, 2001, $127.1 million or 13.2% of Goodyear’s cash, cash equivalents and short term securities were concentrated in Latin America, primarily Brazil ($93.2 million or 36.9% at December 31, 2000) and $82.1 million or 8.6% were concentrated in Asia ($65.8 million or 26.0% at December 31, 2000). Dividends received by the Company

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and domestic subsidiaries from its consolidated international operations for 2001, 2000 and 1999 were $114.8 million, $102.2 million and $352.4 million, respectively.

         Financing fees and financial instruments consist primarily of fees paid under Goodyear’s domestic accounts receivable continuous sale programs. Refer to Note 5.

Note 5

                 
Accounts and Notes Receivable                
(In millions)   2001   2000
   
 
Accounts and notes receivable
  $ 1,571.7     $ 2,168.0  
Allowance for doubtful accounts
    (84.9 )     (93.3 )
 
 
 
  $ 1,486.8     $ 2,074.7  
 
 

During the second quarter of 2001, Goodyear terminated its $550 million domestic accounts receivable continuous sale program and entered into a new program. The new program involves the continuous sale of substantially all of Goodyear’s domestic trade accounts receivable to Wingfoot A/R LLC, a wholly-owned limited liability subsidiary company that is a bankruptcy-remote special purpose entity. The results of operations and financial position of Wingfoot A/R LLC are not included in the consolidated financial statements of Goodyear as provided by Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Wingfoot A/R LLC purchases Goodyear’s receivables with (a) the cash proceeds of borrowings from a group of five bank-affiliated issuers of commercial paper, which borrowings are secured by the trade accounts receivable purchased from Goodyear ($580.0 million at December 31, 2001), (b) the cash proceeds of Goodyear’s $98.2 million equity investment in Wingfoot A/R LLC and, (c) a subordinated note payable to the Company in the amount of $385.2 million at December 31, 2001, which is equal to the total amount of trade receivables purchased by Wingfoot A/R LLC minus the sum of the equity of Wingfoot A/R LLC and the cash proceeds from the sale of the notes issued by Wingfoot A/R LLC to the five bank affiliated note purchasers and minus a discount. Goodyear retained the responsibility for servicing the receivables. As the receivables are collected, the cash proceeds are used to purchase additional receivables. Goodyear pays fees under the program based on certain variable market interest rates and other agreed amounts. These fees are reported as Other (Income) and Expense. Wingfoot A/R LLC may borrow up to $825 million from the note purchasers. The amount that may be borrowed from time to time by Wingfoot A/R LLC depends on, among other things, the total uncollected balance of receivables owned by it. The borrowings are available to Wingfoot A/R LLC until February 2003, unless extended by the lenders for additional one-year periods.

         The following table presents certain cash flows between Goodyear and Wingfoot A/R LLC:

         
(In millions)   2001
   
Proceeds from new securitizations
  $ 741.5  
Proceeds from collections reinvested in previous securitizations
    4,448.6  
Servicing fees received
    4.3  
Reimbursement for rebates and discounts issued
    112.0  
 
   
 

Various international subsidiaries of Goodyear have also established accounts receivable continuous sales programs whereunder these subsidiaries may receive proceeds from the sale of certain of their receivables to affiliates of certain banks. These subsidiaries retained servicing responsibilities. At December 31, 2001, the value in U.S. dollars of which these international subsidiaries may borrow is approximately $150 million.

         The following table presents certain cash flows related to these programs:

         
(In millions)   2001
   
Proceeds from new securitizations
  $ 124.5  
Proceeds from collections reinvested in previous securitizations
    254.8  
Reimbursement for rebates and discounts issued
    15.2  
 
   
 

In addition, various other international subsidiaries of Goodyear sold certain of their trade receivables during 2001 and 2000. The balance of net proceeds from all domestic and international agreements worldwide was $851.8 million at December 31, 2001, compared to $604.2 million at December 31, 2000.

Note 6

                 
Inventories                
(In millions)   2001   2000
   
 
Raw materials
  $ 398.8     $ 480.4  
Work in process
    112.5       123.5  
Finished product
    1,869.6       2,275.8  
 
 
 
  $ 2,380.9     $ 2,879.7  
 
 

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Note 7

                 
Goodwill                
(In millions)   2001   2000
   
 
Goodwill
  $ 676.7     $ 669.6  
Accumulated amortization
    (107.6 )     (81.2 )
 
 
 
  $ 569.1     $ 588.4  
 
 

Amortization of goodwill totaled $26.4 million, $25.7 million and $24.1 million in 2001, 2000 and 1999, respectively. Goodyear adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets” effective January 1, 2002. This standard specifies, among other things, that goodwill no longer be amortized. The standard requires goodwill to be periodically tested for impairment and written down to fair value if considered impaired.

Note 8

Investments

Investments

On February 25, 1999, Goodyear purchased at par from Sumitomo a 1.2% Convertible Note Due August 16, 2000, in the principal amount of ¥13,073,070,934 (the “Sumitomo Note”). On August 15, 2000, Goodyear converted the entire principal amount of the Sumitomo Note into shares of the Common Stock of Sumitomo (the “Sumitomo Investment”). Goodyear has classified the Sumitomo Investment as available-for-sale, as provided in Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”.

         The fair value of the Sumitomo Investment was $90.1 million and $100.9 million at December 31, 2001 and 2000, respectively, and is included in Other Assets on the Consolidated Balance Sheet. Changes in the fair value of the Sumitomo Investment are reported in the Consolidated Balance Sheet as Accumulated Other Comprehensive Income. Goodyear’s 1.2% Convertible Note Payable Due August 16, 2001 in the principal amount of ¥6,536,535,767 had been designated as a hedge of the exchange exposure of the Sumitomo Investment during 2000. To the extent the hedge was effective, the effect of exchange rate changes on Goodyear’s Note were reported on the Consolidated Balance Sheet as Accumulated Other Comprehensive Income. At December 31, 2001 the gross unrealized holding loss on the Sumitomo Investment, net of the hedge, totaled $26.8 million ($16.6 million after tax), compared to $16.1 million ($10.0 million after tax) at December 31, 2000.

Noncash Investing and Financing Activities

The Consolidated Statement of Cash Flows is presented net of the following transactions:

         In connection with Goodyear’s strategic alliance with Sumitomo, on February 25, 1999 the Company issued to Sumitomo at par its 1.2% Convertible Note Due August 16, 2000, in the principal amount of ¥13,073,070,934 pursuant to a Note Purchase Agreement dated February 25, 1999 (the “Note Agreement”). The Company’s Note was convertible during the period beginning July 16, 2000 through August 15, 2000 into 2,281,115 shares of the Common Stock, without par value, of the Company at a conversion price of ¥5,731 per share, subject to certain adjustments. In addition, on February 25, 1999, the Company purchased at par from Sumitomo a 1.2% Convertible Note Due August 16, 2000, in the principal amount of ¥13,073,070,934 (the “Sumitomo Note”). The Sumitomo Note was convertible, if not earlier redeemed, during the period beginning July 16, 2000 through August 15, 2000 into 24,254,306 shares of the Common Stock, ¥50 par value per share, of Sumitomo at a conversion price of ¥539 per share, subject to certain adjustments. The principal amount of each Note was equivalent to $108.0 million at February 25, 1999. The Company converted the Sumitomo Note in its entirety on July 27, 2000 into 24,254,306 shares of the Common Stock of Sumitomo, which represents 10% of Sumitomo’s outstanding shares.

         On July 7, 2000, Goodyear and Sumitomo amended the Note Agreement and on August 15, 2000: (1) Sumitomo converted ¥6,536,535,167 principal amount of the Company’s Note into approximately 1,138,030 shares of the Common Stock of the Company; (2) the Company paid ¥223,933,167 of interest on the Note; and (3) Sumitomo surrendered the Note and the Company issued a replacement note in the principal amount of ¥6,536,535,767 due on August 16, 2001 and payable at the Company’s option in cash or in shares of Common Stock at a conversion price of ¥5,731, subject to adjustment. The replacement note bore interest at the rate of 1.2% per annum from August 15, 2000 until the fifteenth day prior to its conversion into 1,140,866 shares of the Company’s Common Stock on February 6, 2001.

         The acquisition cost of the strategic alliance with Sumitomo in 1999 included the approximately $307 million fair value of 25% of Goodyear’s businesses contributed to the European joint venture. Goodyear also acquired debt totaling $130 million in Dunlop’s European and North American businesses.

         In 2001, the Company issued 4.3 million shares of its common stock with a market value of approximately $100.0 million as a contribution to certain domestic pension plans. In 2000, Goodyear acquired a majority ownership interest in a retreading production and distribution operation in the United States, and recorded a liability for the expected future payment of $72.5 million. In 1999, Goodyear’s Slovenian tire manufacturing subsidiary recorded fixed assets totaling $43.4 million acquired under a capital lease.

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Note 9

Properties and Plants

                                                   
              2001                   2000        
(In millions)   Owned   Capital Leases   Total   Owned   Capital Leases   Total
   
 
 
 
 
 
Properties and plants, at cost:
                                               
 
Land and improvements
  $ 368.0     $ 15.3     $ 383.3     $ 390.3     $ 20.7     $ 411.0  
 
Buildings and improvements
    1,606.3       98.7       1,705.0       1,683.4       108.5       1,791.9  
 
Machinery and equipment
    8,530.4       87.1       8,617.5       8,537.5       92.3       8,629.8  
 
Construction in progress
    440.9             440.9       550.9             550.9  
 
 
 
    10,945.6       201.1       11,146.7       11,162.1       221.5       11,383.6  
 
 
Accumulated depreciation
    (5,957.1 )     (73.5 )     (6,030.6 )     (5,785.5 )     (77.1 )     (5,862.6 )
 
 
 
  $ 4,988.5     $ 127.6     $ 5,116.1     $ 5,376.6     $ 144.4     $ 5,521.0  
 
 

The weighted average useful lives of property used in arriving at the annual amount of depreciation provided are as follows: buildings and improvements, approximately 18 years; machinery and equipment, approximately 10 years.

Note 10

Leased Assets

Net rental expense charged to income follows:

                         
(In millions)   2001   2000   1999
   
 
 
Gross rental expense
  $ 288.8     $ 289.9     $ 260.4  
Sublease rental income
    (67.8 )     (69.1 )     (72.5 )
 
 
 
  $ 221.0     $ 220.8     $ 187.9  
 
 

Goodyear enters into capital and operating leases primarily for its vehicles, data processing equipment and its wholesale and retail distribution facilities under varying terms and conditions. Goodyear subleases some of its domestic retail distribution network to independent dealers. Many of the leases provide that Goodyear will pay taxes assessed against leased property and the cost of insurance and maintenance.

         While substantially all subleases and some operating leases are cancellable for periods beyond 2002, management expects that in the normal course of its business nearly all of its independent dealer distribution network will be actively operated. As leases and subleases for existing locations expire, Goodyear would normally expect to renew the leases or substitute another more favorable retail location.

         The following table presents minimum future lease payments:

                                                           
                                              2007 and        
(In millions)   2002   2003   2004   2005   2006   beyond   Total
   
 
 
 
 
 
 
Capital Leases
                                                       
 
Minimum lease payments
  $ 9.5     $ 7.9     $ 6.6     $ 5.2     $ 4.5     $ 45.7     $ 79.4  
 
Minimum sublease rentals
    (.1 )                                   (.1 )
 
 
 
  $ 9.4     $ 7.9     $ 6.6     $ 5.2     $ 4.5     $ 45.7     $ 79.3  
 
 
 
Imputed interest
                                                    (29.7 )
 
Executory costs
                                                    (.9 )
 
 
 
Present value
                                                  $ 48.7  
 
 
Operating Leases
                                                       
 
Minimum lease payments
  $ 272.1     $ 201.2     $ 158.5     $ 123.3     $ 116.0     $ 432.1     $ 1,303.2  
 
Minimum sublease rentals
    (44.1 )     (36.4 )     (27.2 )     (18.9 )     (10.8 )     (17.2 )     (154.6 )
 
 
 
  $ 228.0     $ 164.8     $ 131.3     $ 104.4     $ 105.2     $ 414.9     $ 1,148.6  
 
 
 
Imputed interest
                                                    (385.0 )
 
 
 
Present value
                                                  $ 763.6  
 
 

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Note 11

FINANCING ARRANGEMENTS AND

DERIVATIVE FINANCIAL INSTRUMENTS

SHORT TERM DEBT AND FINANCING ARRANGEMENTS

Substantial short term and long term credit sources are available to Goodyear globally under normal commercial practices. In total, Goodyear had credit arrangements of $6.1 billion available at December 31, 2001, of which $2.6 billion were unused.

         At December 31, 2001, Goodyear had short term committed and uncommitted credit arrangements totaling $1.3 billion, of which $1.1 billion were unused. These arrangements are available to the Company or certain of its international subsidiaries through various domestic and international banks at quoted market interest rates. There are no commitment fees or compensating balances associated with these arrangements.

         Goodyear had outstanding debt obligations, which by their terms are due within one year, amounting to $364.7 million at December 31, 2001. Current maturities of long term debt represented $109.7 million of this total, with a weighted average interest rate of 5.46% at December 31, 2001. The remaining $255.0 million was short term debt of international subsidiaries, with a weighted average interest rate of 6.6% at December 31, 2001.

LONG TERM DEBT AND FINANCING ARRANGEMENTS

At December 31, 2001, Goodyear had long term credit arrangements totaling $4.8 billion, of which $1.5 billion were unused.

         The following table presents long term debt at December 31:

                   
(In millions)   2001   2000
   
 
5.375% Swiss franc bond due 2006
  $ 94.5     $ 96.7  
6.375% Euro Notes due 2005
    354.5       371.1  
Notes:
               
 
8 1/8% due 2003
    299.8       299.7  
 
6 5/8% due 2006
    249.5       249.4  
 
8 1/2% due 2007
    300.0       300.0  
 
6 3/8% due 2008
    99.7       99.7  
 
7 6/7% due 2011
    650.0        
 
7% due 2028
    149.0       148.9  
Bank term loans due 2002 – 2005
    895.7       151.4  
Domestic short term borrowings
          500.0  
Other domestic and international debt
    171.8       229.4  
 
 
 
    3,264.5       2,446.3  
Capital lease obligations
    48.8       62.5  
 
 
 
    3,313.3       2,508.8  
Less portion due within one year
    109.7       159.2  
 
 
 
  $ 3,203.6     $ 2,349.6  
 
 

In addition to the amounts in the table above, on February 25, 1999 Goodyear issued to Sumitomo Rubber Industries at par its 1.2% Convertible Note Due August 16, 2000, in the principal amount of ¥13,073,070,934 (equivalent to $127.8 million at December 31, 1999). Goodyear’s Note was convertible, if not earlier redeemed, during the period beginning July 16, 2000 through August 15, 2000 into 2,281,115 shares of the Common Stock, without par value, of the Company at a conversion price of ¥5,731 per share, subject to certain adjustments.

         On August 15, 2000, Sumitomo converted ¥6,536,535,167 principal amount of the Note into approximately 1,138,030 shares of the Common Stock of the Company, and Goodyear issued a replacement note in the principal amount of ¥6,536,535,767 due on August 16, 2001 (equivalent to $56.9 million at December 31, 2000) bearing interest at 1.2% per annum and payable at Goodyear’s option in cash or in shares of Common Stock at a conversion price of ¥5,731, subject to adjustment. The replacement note was convertible into Common Stock of the Company at a conversion price of ¥5,731 per share, subject to adjustment, at any time prior to maturity. On February 6, 2001, Sumitomo converted the replacement note into 1,140,866 shares of Common Stock of the Company.

         At December 31, 2001, the fair value of Goodyear’s long term fixed rate debt amounted to $2.36 billion, compared to its carrying amount of $2.35 billion. At December 31, 2000, the fair value of Goodyear’s long term fixed rate debt amounted to $1.73 billion, compared to its carrying amount $1.78 billion. The difference was attributable primarily to the long term Notes issued in 2001 and 2000. The fair value was estimated using quoted market prices or discounted future cash flows. The fair value of Goodyear’s variable rate debt approximated its carrying amount at December 31, 2001 and 2000.

         The Swiss franc bond was hedged by foreign exchange contracts at December 31, 2001 and 2000, as discussed below.

         Goodyear has designated 100 million principal amount of the Euro Notes as hedging the exposure to the impact of Euro/U.S. dollar exchange rate movements on the equity of certain of its subsidiaries in Europe. The remaining 300 million principal amount is hedged by foreign exchange contracts, as discussed below.

         The Notes and Euro Notes have an aggregate face amount of $2.1 billion and are reported net of unamortized discount aggregating $2.7 million ($1.5 billion and $3.2 million, respectively, at December 31, 2000).

         The bank term loans due 2002 through 2005 are comprised of $890.0 million of variable rate agreements based upon LIBOR plus a fixed spread, bearing interest at a weighted average rate of 4.0% per annum, and $5.7 million

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of fixed rate agreements bearing interest at a weighted average rate of 6.1% per annum at December 31, 2001.

         There were no domestic short term bank borrowings outstanding at December 31, 2001. At December 31, 2000, all commercial paper outstanding, which was issued for terms of less than 154 days, and certain domestic short term bank borrowings outstanding, which by their terms are or were due within one year, were classified as long term debt on the Consolidated Balance Sheet. These obligations were supported by lending commitments under the two revolving credit facilities described below. It was the Company’s intent to maintain these debt obligations as long term.

         Other domestic and international debt consisted of fixed and floating rate bank loans denominated in U.S. dollars and other currencies and maturing in 2002-2004. The weighted average interest rate in effect under these loans was 6.22% at December 31, 2001.

         The Company is a party to two revolving credit facility agreements, consisting of a $750 million five-year revolving credit facility and a $775 million 364-day revolving credit facility. These agreements were amended in August and November, 2001.

         The $750 million five-year credit facility agreement is with 26 domestic and international banks and provides that the Company may borrow at any time until August 15, 2005, when the commitment terminates and any outstanding loans mature. Goodyear pays a commitment fee ranging from 12.5 to 25 basis points (based on its ratio of debt to debt plus equity) on the entire amount of the commitment (whether or not borrowed) and a usage fee on amounts borrowed (other than on a competitive bid or prime rate basis) ranging from 37.5 to 125 basis points over LIBOR (or 50 to 137.5 basis points over a defined CD rate). These fees may fluctuate quarterly within these ranges based upon Goodyear’s leverage. During 2001, commitment fees averaged 19.5 basis points.

         The $775 million 364-day credit facility agreement is with 26 domestic and international banks and provides that the Company may borrow until August 13, 2002, on which date the facility commitment terminates, except as it may be extended on a bank by bank basis. If a bank does not extend its commitment if requested to do so, the Company may obtain from such bank a two year term loan up to the amount of such bank’s commitment. Goodyear pays a commitment fee ranging from 10 to 20 basis points on the entire amount of the commitment (whether or not borrowed) and a usage fee on amounts borrowed (other than on a competitive bid or prime rate basis) ranging from 40 to 130 basis points over LIBOR (or 52.5 to 142.5 basis points over a defined CD rate). These fees may fluctuate quarterly within these ranges based upon Goodyear’s leverage. During 2001, commitment fees averaged 14.6 basis points.

         Each of the facilities provide that the Company may obtain loans bearing interest at reserve adjusted LIBOR or a defined certificate of deposit rate, plus in each case the applicable usage fee, at rates based on the prime rate, or at rates determined on a competitive bid basis. Under each of the facility agreements, a utilization fee of 25 basis points per annum is charged each day on which the sum of the outstanding loans exceeds 50% of the total commitment. No utilization fees were paid during 2001. Each facility agreement contains certain covenants which, among other things, require the Company to maintain at the end of each fiscal quarter a minimum consolidated net worth and a defined minimum interest coverage ratio. In addition, the facility agreements establish a limit on the aggregate amount of consolidated debt the Company and its subsidiaries may incur. There are no borrowings outstanding under these agreements at December 31, 2001. These revolving credit facilities support, among other things, the uncommitted short term bank facilities.

         The annual aggregate maturities of long term debt and capital leases for the five years subsequent to 2001 are presented below. Maturities of debt supported by the availability of the revolving credit agreements have been reported on the basis that the commitments to lend under these agreements will be terminated effective at the end of their current terms.

                                         
(In millions)   2002   2003   2004   2005   2006
   
 
 
 
 
Debt incurred under or supported by revolving credit agreements
  $     $     $     $     $  
Other
    109.7       414.6       807.6       407.1       346.0  
 
 
 
  $ 109.7     $ 414.6     $ 807.6     $ 407.1     $ 346.0  
 
 

Refer to Note 5 for additional information on financing arrangements. Refer to Note 10 for additional information on capital lease obligations.

Derivative Financial Instruments

Goodyear adopted Statement of Financial Accounting Standards No. 133, as amended and interpreted, on January 1, 2001.

Interest Rate Exchange Contracts

Goodyear actively manages its fixed and floating rate debt mix, within defined limitations, using refinancings and unleveraged interest rate swaps. Goodyear will enter into fixed and floating interest rate swaps to hedge against the effects of adverse changes in interest rates on consolidated results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce Goodyear’s risk of increased interest costs during periods of rising interest

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rates, and are normally designated as cash flow hedges. Floating rate swaps are used to convert the fixed rates of long term borrowings into short term variable rates, and are normally designated as fair value hedges. Interest rate swap contracts are used by Goodyear to separate interest rate risk management from the debt funding decision. At December 31, 2001, the interest rate on 75% of Goodyear’s debt was fixed by either the nature of the obligation or through the interest rate contracts, compared to 54% at December 31, 2000.

         The following table presents contract information and weighted average interest rates. Current market pricing models were used to estimate the fair values of interest rate exchange contracts.

                                       
(Dollars in millions)   12/31/00   New   Matured   12/31/01
         
 
 
 
Fixed rate contracts:
                               
 
Notional principal
                               
   
amount
  $ 50.0     $ 325.0     $ 50.0     $ 325.0  
 
Pay fixed rate
    6.25 %     5.00 %     6.25 %     5.00 %
 
Receive variable
                               
   
LIBOR
    6.67       1.91       5.23       1.91  
 
Average years to
                               
   
maturity
    .9                       2.2  
 
Fair value:
                               
   
favorable (unfavorable)
  $                     $ (9.2 )
 
Carrying amount:
                               
   
Long term
                               
     
assets
                          .2  
   
Current
                               
     
(liability)
    (.2 )                     (8.3 )
   
Long term
                               
     
(liability)
                          (1.1 )
 
 

Weighted average information during the years 2001, 2000 and 1999 follows:

                           
(Dollars in millions)   2001   2000   1999
     
 
 
Fixed rate contracts:
                       
 
Notional principal
  $ 129     $ 71     $ 96  
 
Receive variable LIBOR
    3.58 %     6.63 %     5.26 %
 
Pay fixed rate
    5.43       6.24       6.18  
 
 

Interest Rate Lock Contracts

Goodyear will use, when appropriate, interest rate lock contracts to hedge the risk-free rate component of anticipated long term debt issuances. These contracts are designated as cash flow hedges of forecasted transactions. Gains and losses on these contracts are amortized to income over the life of the debt. No contracts were outstanding at December 31, 2001 or 2000.

Foreign Currency Contracts

In order to reduce the impact of changes in foreign exchange rates on consolidated results of operations and future foreign currency-denominated cash flows, Goodyear will enter into foreign currency contracts. These contracts reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade receivables and payables, equipment acquisitions, intercompany loans and royalty agreements and forecasted purchases and sales. In addition, the principal and interest on Goodyear’s Swiss franc bond due 2006 and 300 million of Euro Notes due 2005 are hedged by currency swap agreements.

         Contracts hedging the Swiss franc bond, the Euro Notes and forecasted transactions under intercompany royalty agreements are designated as cash flow hedges. The hedged intercompany royalty transactions will occur during 2002 and 2003. Contracts hedging short-term trade receivables and payables normally have no hedging designation.

         Amounts are reclassified from OCI into earnings each period to offset the effects of exchange rate movements on the principal and interest of the Swiss franc bond and the Euro Notes. Amounts are also reclassified concurrently with the recognition of intercompany royalty expense.

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NOTES TO FINANCIAL STATEMENTS

         The following table presents foreign currency contracts at December 31:

                                   
(In millions)   2001   2000
     
 
      Fair   Contract   Fair   Contract
      Value   Amount   Value   Amount
     
 
 
 
Buy currency:
                               
 
Euro
  $ 441.2     $ 460.2     $ 310.1     $ 296.7  
 
Swiss franc
    99.4       94.0       106.1       95.6  
 
U.S. dollar
    49.6       49.0       81.0       80.2  
 
Canadian dollar
    45.2       45.8              
 
Japanese yen
    16.1       16.0       7.0       7.5  
 
British pound
    10.3       10.3              
 
 
 
  $ 661.8     $ 675.3     $ 504.2     $ 480.0  
 
 
                                   
Contract maturity:
                               
 
Swiss franc swap
    3/06       3/06                  
 
Euro swap
    6/05       6/05                  
 
All other
    1/02 – 03/03       1/01 – 3/04                  
 
 
                                   
Sell currency:
                               
 
Euro
  $ 95.0     $ 96.0     $ 15.8     $ 15.6  
 
Swedish krona
    22.9       22.4       23.0       22.9  
 
U.S. dollar
    6.2       6.2       35.4       35.5  
 
All other
    5.0       5.0       6.3       6.3  
 
 
 
  $ 129.1     $ 129.6     $ 80.5     $ 80.3  
 
 
                                       
 
Contract maturity:
    1/02 – 3/02       1/01 – 3/01                  
Carrying amount —
                               
 
asset (liability):
                               
   
Swiss franc swap —
                               
     
current
  $ (4.6 )   $                  
   
Swiss franc swap —
                               
     
long term
    10.2       19.0                  
   
Euro swaps —
                               
     
current
    (5.5 )                      
   
Euro swaps —
                               
     
long term
    (15.0 )     3.2                  
   
Other —
                               
     
current asset
    2.4       .8                  
   
Other —
                               
     
current (liability)
    (1.1 )                      
 
 

The counterparties to Goodyear’s interest rate swap and foreign exchange contracts were substantial and creditworthy multinational commercial banks or other financial institutions which are recognized market makers. Neither the risks of counterparty nonperformance nor the economic consequences of counterparty nonperformance associated with these contracts were considered by Goodyear to be material.

Hedges of Net Investment in Foreign Operations

In order to reduce the impact of changes in foreign exchange rates on consolidated shareholders’ equity, Goodyear has designated certain foreign currency-denominated nonderivative instruments as hedges of its net investment in various foreign operations.

         On January 1, 2001, 100 million of Goodyear’s 6 5/8% Notes due 2005 was designated as hedging Goodyear’s net investment in European subsidiaries which have the Euro as the functional currency. In addition, from January 1 to February 6 of 2001, Goodyear’s ¥6,536,535,767 Sumitomo 1.2% Convertible Note Payable Due August 2001 was designated as hedging Goodyear’s net investment in Japanese subsidiaries which have the Yen as the functional currency. The Note Payable was converted into shares of the Common Stock of the Company on February 6, 2001.

Results of Hedging Activities

Ineffectiveness and premium amortization pretax charges totaled $1.5 million during the twelve months ended December 31, 2001. Deferred net pretax losses totaling $7.1 million on hedges of forecasted transactions are anticipated to be recognized in income during the twelve months ending December 31, 2002. It is not practicable to estimate the amount of deferred gains and losses that will be recognized in income resulting from the remeasurement of certain long term currency exchange contracts.

Deferred pretax gains totaling $4.9 million were recorded as Foreign Currency Translation Adjustment during the twelve months ended December 31, 2001, respectively, as a result of the designation of nonderivative instruments as net investment hedges. These gains and losses are only recognized in earnings upon the complete or partial sale of the related investment or the complete liquidation of the investment.

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NOTES TO FINANCIAL STATEMENTS

Note 12

Stock Compensation Plans and Dilutive Securities

The Company’s 1989 Goodyear Performance and Equity Incentive Plan (which expired in 1997 except as to grants and awards then outstanding) and the 1997 Performance Incentive Plan of The Goodyear Tire & Rubber Company provided for the granting of stock options and stock appreciation rights (SARs), restricted stock, performance grants and other stock-based awards. For options granted in tandem with SARs, the exercise of a SAR cancels the stock option; conversely, the exercise of the stock option cancels the SAR. Stock options and related SARs granted during 2001 generally have a maximum term of ten years and vest pro rata over four years.

         Performance units granted during 2001 are earned based on Return on Invested Capital and Total Shareholder Return relative to the S&P Auto Parts & Equipment Companies (each weighted at 50%) over a three year performance period each beginning January 1, 2002. To the extent earned, a portion of the performance units will generally be paid in cash (subject to deferral under certain circumstances) and a portion may be automatically deferred for at least five years in the form of units. Each unit is equivalent to a share of the Company’s Common Stock and payable in cash, shares of the Company’s Common Stock or a combination thereof at the election of the participant. A maximum of 15,000,000 shares of the Company’s Common Stock are available for issuance pursuant to grants and awards made under the 1997 Plan through December 31, 2001. The 1997 Plan expired on December 31, 2001, except as to options and other grants then outstanding.

         On December 4, 2000, the Company adopted The Goodyear Tire & Rubber Company Stock Option Plan for Hourly Bargaining Unit Employees, under which options in respect of up to 3,500,000 shares of the Common Stock of the Company may be granted, and the Hourly and Salaried Employee Stock Option Plan, under which options in respect of up to 600,000 shares of the Company’s Common Stock may be granted. Stock options granted under these plans have a maximum term of ten years and vest over one to three years.

         Stock-based compensation activity for the years 2001, 2000 and 1999 follows:

                                                   
      2001   2000   1999
     
 
 
      Shares   SARs   Shares   SARs   Shares   SARs
     
 
 
 
 
 
Outstanding at January 1
    19,054,838       2,783,983       12,418,808       2,141,954       9,563,252       1,496,670  
 
Options granted
    3,208,270       732,248       6,606,441       689,170       3,371,948       716,643  
 
Options without SARs exercised
    (105,360 )           (36,900 )           (347,312 )      
 
Options with SARs exercised
    (6,665 )     (6,665 )                 (44,126 )     (44,126 )
 
SARs exercised
    (13,500 )     (13,500 )     (3,900 )     (3,900 )     (9,870 )     (9,870 )
 
Options without SARs expired
    (345,151 )           (227,913 )           (68,342 )      
 
Options with SARs expired
    (97,285 )     (97,285 )     (43,241 )     (43,241 )     (17,363 )     (17,363 )
 
Performance units granted
    283,300             478,200             13,353        
 
Performance unit shares issued
                (127,871 )           (8,876 )      
 
Performance units cancelled
    (136,649 )           (8,786 )           (33,856 )      
 
 
Outstanding at December 31
    21,841,798       3,398,781       19,054,838       2,783,983       12,418,808       2,141,954  
 
 
Exercisable at December 31
    12,217,868       1,809,894       8,105,308       1,312,398       5,741,778       847,358  
 
 
Available for grant at December 31
    486,130               4,179,728               7,433,575          
 
 

Significant option groups outstanding at December 31, 2001 and related weighted average price and remaining life information follows:

                                 
Grant Date   Options Outstanding   Options Exercisable   Exercisable Price   Remaining Life (Years)

 
 
 
 
12/03/01
    3,083,590           $ 22.05       10  
12/04/00
    5,925,564       2,409,296       17.68       9  
12/06/99
    3,140,719       1,795,681       32.00       8  
11/30/98
    2,052,699       1,661,410       57.25       7  
12/02/97
    1,793,929       1,793,929       63.50       6  
12/03/96
    1,516,966       1,516,966       50.00       5  
1/09/96
    1,187,814       1,187,814       44.00       4  
1/04/95
    632,735       632,735       34.75       3  
All other
    1,667,422       1,220,037       37.64       2  

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NOTES TO FINANCIAL STATEMENTS

The 1,667,422 options in the ‘All other’ category were outstanding at exercise prices ranging from $17.68 to $74.25, with a weighted average exercise price of $33.89. All options and SARs were granted at an exercise price equal to the fair market value of the Company’s common stock at the date of grant.

         Weighted average option exercise price information follows:

                         
    2001   2000   1999
   
 
 
Outstanding at January 1
  $ 35.54     $ 45.63     $ 50.27  
Granted during the year
    22.05       17.68       32.00  
Exercised during the year
    20.53       16.59       23.71  
Outstanding at December 31
    33.87       35.54       45.63  
Exercisable at December 31
    41.34       47.48       47.55  
 
 

Forfeitures and cancellations were insignificant.

         Weighted average fair values at date of grant for grants in 2001, 2000 and 1999 follow:

                         
    2001   2000   1999
   
 
 
Options
  $ 6.95     $ 6.58     $ 12.85  
Performance units
    22.05       19.00       51.62  
 
 

The above fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions:

                         
    2001   2000   1999
   
 
 
Expected life (years)
    5       5       5  
Interest rate
    4.48 %     5.44 %     5.97 %
Volatility
    25.2       30.5       33.4  
Dividend yield
    3.18       2.81       2.12  
 
 

The fair value of performance units at date of grant was equal to the market value of the Company’s common stock at that date.

         Stock-based compensation costs reduced (increased) income as follows:

                         
(In millions, except per share)   2001   2000   1999
   
 
 
Pretax income
  $ 3.9     $ .2     $ (12.4 )
Net income
    2.4       .1       (7.7 )
Net income per share
    .02             (.05 )
 
 

The following table presents the pro forma reduction in income that would have been recorded had the fair values of options granted in each year been recognized as compensation expense on a straight-line basis over the vesting period of each grant.

                         
(In millions, except per share)   2001   2000   1999
   
 
 
Pretax income
  $ 43.1     $ 33.9     $ 30.3  
Net income
    30.5       25.3       23.2  
Net income per share
    .19       .16       .15  
 
 

Basic earnings per share have been computed based on the average number of common shares outstanding. The following table presents the number of incremental weighted average shares used in computing diluted per share amounts:

                           
      2001   2000   1999
     
 
 
Average shares outstanding— basic     159,955,869       156,840,646       156,182,004  
Stock options
          213,443       758,437  
Performance units
                98,230  
1.2% Convertible Note Payable
          1,710,837       1,900,928  
 
 
 
                       
Average shares outstanding— diluted     159,955,869       158,764,926       158,939,599  
 
 

The average shares outstanding-diluted total for 2001 does not include the antidilutive impact of 1.8 million shares of potential common stock associated with stock options and .1 million shares associated with the Sumitomo 1.2% Convertible Note Payable.

Note 13

Savings Plans

Substantially all domestic associates are eligible to participate in one of Goodyear’s two savings plans. Under these plans associates elect to contribute a percentage of their pay. Most plans provided for Goodyear’s matching of these contributions (up to a maximum of 6% of the associate’s annual pay or, if less, $10,500) at the rate of 50%. Goodyear contributions were $37.8 million, $41.4 million and $43.0 million for 2001, 2000 and 1999, respectively. A defined contribution pension plan for certain foreign associates was established July 1, 1999. Goodyear contributions were $.1 million in 2001 and 2000 and $2.4 million in 1999.

         In April 2001, a defined contribution plan was established for associates at Wingfoot Commercial Tire Systems LLC. The Company contributions to this plan were $1.1 million in 2001.

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NOTES TO FINANCIAL STATEMENTS

Note 14

Postretirement Health Care and

Life Insurance Benefits

The Company and its subsidiaries provide substantially all domestic associates and associates at certain international subsidiaries with health care and life insurance benefits upon retirement. Insurance companies provide life insurance and certain health care benefits through premiums based on expected benefits to be paid during the year. Substantial portions of the health care benefits for domestic retirees are not insured and are paid by Goodyear. Benefit payments are funded from operations.

         Net periodic benefit cost follows:

                           
(In millions)   2001   2000   1999
     
 
 
Service cost — benefits
                       
 
earned during the period
  $ 17.8     $ 19.5     $ 21.5  
Interest cost
    183.2       164.2       145.6  
Amortization of unrecognized:
                       
 
— net losses
    13.6       14.7       9.0  
 
— prior service cost
    10.4       (2.2 )     (2.3 )
 
 
 
  $ 225.0     $ 196.2     $ 173.8  
 
 

As a result of rationalization actions, Goodyear recognized a curtailment gain of $.2 million and a special termination loss of $6.5 million in 2001 and a curtailment loss of $3.7 million and a special termination loss of $1.4 million in 2000. Refer to Note 3.

         The following table sets forth changes in the accumulated benefit obligation and amounts recognized on Goodyear’s Consolidated Balance Sheet at December 31, 2001 and 2000:

                 
(In millions)   2001   2000
   
 
Accumulated benefit obligation:
               
Beginning balance
  $ (2,153.7 )   $ (2,124.3 )
Service cost — benefits earned
    (17.8 )     (19.5 )
Interest cost
    (183.2 )     (164.2 )
Plan amendments
    (150.1 )     (3.0 )
Actuarial gain (loss)
    (138.0 )     (75.4 )
Acquisitions
           
Foreign currency translation
    11.6       7.5  
Curtailments/settlements
    (6.4 )     (3.1 )
Associate contributions
    (4.2 )     (2.2 )
Benefit payments
    258.1       230.5  
 
 
Ending balance
    (2,383.7 )     (2,153.7 )
 
 
Unrecognized net loss
    440.8       313.5  
Unrecognized prior service cost
    119.0       (23.1 )
 
 
Accrued benefit liability recognized on the Consolidated Balance Sheet
  $ (1,823.9 )   $ (1,863.3 )
 
 

Of the accrued benefit liability recognized, $266.7 million and $222.0 million was included in current liabilities at December 31, 2001 and 2000, respectively.

         The following table presents significant assumptions used:

                 
    U.S.   International
   
 
2001
               
Discount rate
    7.75 %     7.5 %
Rate of increase in compensation levels
    4.0       4.5  
 
 
2000
               
Discount rate
    8.0 %     7.7 %
Rate of increase in compensation levels
    4.0       4.6  
 
 
1999
               
Discount rate
    7.5 %     8.3 %
Rate of increase in compensation levels
    4.0       5.4  
 
 

A 7.5% annual rate of increase in the cost of health care benefits for retirees under age 65 and a 7.5% annual rate of increase for retirees 65 years and older is assumed in respect of 2002. These rates gradually decrease to 5.0% in 2012 and remain at that level thereafter. A 1% change in the assumed health care cost trend would have increased (decreased) the accumulated benefit obligation at December 31, 2001 and the aggregate service and interest cost for the year then ended as follows:

                 
(In millions)   1% Increase   1% Decrease
   
 
Accumulated benefit obligation
  $ 21.3     $ (19.5 )
Aggregate service and interest cost
    2.4       (2.4 )
 
 

Note 15

Pensions

Goodyear and its subsidiaries provide substantially all associates with pension benefits. The principal domestic hourly plan provides benefits based on length of service. The principal domestic plans covering salaried associates provide benefits based on final five-year average earnings formulas. Associates making voluntary contributions to these plans receive higher benefits. Other plans provide benefits similar to the principal domestic plans as well as termination indemnity plans at certain international subsidiaries.

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NOTES TO FINANCIAL STATEMENTS

         Net periodic pension cost follows:

                           
(In millions)   2001   2000   1999
     
 
 
Service cost-benefits earned during the period
  $ 110.3     $ 119.6     $ 118.0  
Interest cost on projected benefit obligation
    377.4       353.0       314.6  
Expected return on plan assets
    (441.0 )     (470.7 )     (389.2 )
Amortization of unrecognized:
                       
 
— prior service cost
    84.1       69.1       65.9  
 
— net (gains) losses
    6.8       (7.1 )     14.2  
 
— transition amount
    .6       .4       .3  
 
 
 
  $ 138.2     $ 64.3     $ 123.8  
 
 

Goodyear recognized a settlement gain of $1.1 million, a curtailment gain of $.8 million and a special termination loss of $25.1 million during 2001. During 2000, Goodyear recognized a settlement loss of $1.4 million and a curtailment loss of $1.5 million and a special termination loss of $6.4 million. During 1999, Goodyear recognized a settlement gain of $12.5 million and a curtailment loss of $6.2 million. Refer to Note 3.

         The following table sets forth the funded status and amounts recognized on Goodyear’s Consolidated Balance Sheet at December 31, 2001 and 2000. At the end of 2001 and 2000, assets exceeded accumulated benefits in certain plans and accumulated benefits exceeded assets in others. Plan assets are invested primarily in common stocks and fixed income securities.

                   
(In millions)   2001   2000
     
 
Projected benefit obligation:
               
 
Beginning balance
  $ (5,051.4 )   $ (4,878.1 )
 
Service cost — benefits earned
    (110.3 )     (119.6 )
 
Interest cost
    (377.4 )     (353.0 )
 
Plan amendments
    (11.1 )     (248.6 )
 
Actuarial gain (loss)
    (157.6 )     153.8  
 
Associate contributions
    (20.2 )     (23.6 )
 
Divestitures
    2.1        
 
Curtailments/settlements
    (1.1 )     6.7  
 
Foreign currency translation
    63.6       78.7  
 
Benefit payments
    448.4       332.3  
 
 
Ending balance
    (5,215.0 )     (5,051.4 )
 
 
Plan assets
    4,176.2       4,749.6  
 
 
Projected benefit obligation in excess of plan assets
    (1,038.8 )     (301.8 )
Unrecognized prior service cost
    573.4       645.7  
Unrecognized net loss (gain)
    798.3       (10.2 )
Unrecognized net obligation at transition
    4.7       6.7  
 
 
Net benefit cost recognized on the Consolidated Balance Sheet
  $ 337.6     $ 340.4  
 
 

The following table presents significant assumptions used:

                 
    U.S.   International
   
 
2001
               
Discount rate
    7.75 %     6.5 %
Rate of increase in compensation levels
    4.0       3.5  
Expected long term rate of return on plan assets
    10.0       8.5  
 
 
2000
               
Discount rate
    8.0 %     6.7 %
Rate of increase in compensation levels
    4.0       3.6  
Expected long term rate of return on plan assets
    9.5       8.6  
 
 
1999
               
Discount rate
    7.5 %     6.8 %
Rate of increase in compensation levels
    4.3       3.9  
Expected long term rate of return on plan assets
    9.5       8.8  
 
 

The following table presents amounts recognized on the Consolidated Balance Sheet:

                   
(In millions)   2001   2000
     
 
Prepaid benefit cost
 
— current
  $ 159.4     $ 92.0  
 
— long term
    474.2       549.5  
Accrued benefit cost
 
— current
    (69.1 )     (72.7 )
 
— long term
    (1,146.0 )     (521.5 )
Intangible asset
    504.9       259.4  
Deferred income taxes
    136.2       11.8  
Minority shareholders’ equity
    20.7        
Accumulated other comprehensive income
    257.3       21.9  
 
 
Net benefit cost recognized on the Consolidated Balance Sheet
  $ 337.6     $ 340.4  
 
 

The following table presents changes in plan assets:

                   
(In millions)   2001   2000
     
 
Beginning balance
  $ 4,749.6     $ 5,178.9  
 
Actual return on plan assets
    (230.6 )     (117.2 )
 
Company contributions
    186.5       81.0  
 
Associate contributions
    20.2       23.6  
 
Settlements
    (48.3 )     (7.8 )
 
Foreign currency translation
    (52.8 )     (76.6 )
 
Benefit payments
    (448.4 )     (332.3 )
 
 
Ending balance
  $ 4,176.2     $ 4,749.6  
 
 

For plans that are not fully funded:

                 
(In millions)   2001   2000
   
 
Accumulated benefit obligation
  $ 3,959.0     $ 2,487.1  
Plan assets
    3,183.9       2,239.9  
 
 

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NOTES TO FINANCIAL STATEMENTS

Certain international subsidiaries maintain unfunded plans consistent with local practices and requirements. At December 31, 2001, these plans accounted for $153.1 million of Goodyear’s accumulated benefit obligation, $162.4 million of its projected benefit obligation and $13.4 million of its minimum pension liability adjustment ($167.7 million, $177.4 million and $16.7 million, respectively, at December 31, 2000).

Note 16

Income Taxes

The components of Income before Income Taxes, adjusted for Minority Interest in Net Income of Subsidiaries, follow:

                         
(In millions)   2001   2000   1999
   
 
 
U.S.
  $ (341.2 )   $ (142.3 )   $ (69.5 )
Foreign
    68.2       201.1       369.6  
 
 
 
    (273.0 )     58.8       300.1  
 
 
Minority Interest in Net Income of Subsidiaries
    .2       33.5       40.3  
 
 
 
  $ (272.8 )   $ 92.3     $ 340.4  
 
 

A reconciliation of Federal income taxes at the U.S. statutory rate to income taxes provided follows:

                         
(Dollars in millions)   2001   2000   1999
   
 
 
U.S. Federal income tax at the statutory rate of 35%
  $ (95.5 )   $ 32.3     $ 119.2  
Adjustment for foreign income taxed at different rates
    (17.3 )     (26.0 )     (17.7 )
Gain on formation of Goodyear Dunlop Tires Europe B.V
                (56.9 )
State income taxes, net of Federal benefit
    (21.1 )     (7.4 )     (12.7 )
Foreign operating loss with no tax benefit provided
    69.4       24.8       24.0  
Other
    (4.9 )     (5.2 )     1.0  
 
 
United States and Foreign Taxes on Income
  $ (69.4 )   $ 18.5     $ 56.9  
 
 
Effective tax rate
    25.4 %     20.0 %     16.7 %
 
 

The components of the provision for income taxes by taxing jurisdiction follow:

                           
(In millions)   2001   2000   1999
     
 
 
 
Current:
                       
 
Federal
  $ 45.9     $ 2.3     $ 40.7  
 
Foreign income and withholding taxes
    134.5       151.4       157.4  
 
State
    2.2       3.7       (.2 )
 
   
 
    182.6       157.4       197.9  
Deferred:
                       
 
Federal
    (184.4 )     (101.4 )     (128.5 )
 
Foreign
    (32.9 )     (22.6 )     6.6  
 
State
    (34.7 )     (14.9 )     (19.1 )
 
   
 
    (252.0 )     (138.9 )     (141.0 )
 
   
United States and Foreign Taxes on Income
  $ (69.4 )   $ 18.5     $ 56.9  
 
   

Temporary differences and carryforwards giving rise to deferred tax assets and liabilities at December 31, 2001 and 2000 follow:

                   
(In millions)   2001   2000
   
 
Postretirement benefits other than pensions
  $ 641.2     $ 674.6  
Vacation and sick pay
    68.6       71.0  
Items reflected as paid or received
    172.0       102.7  
Tax credit and operating loss carryforwards
    206.9       208.4  
Capitalized expenditures for tax reporting
    341.3       199.9  
Rationalizations and other provisions
    43.3       37.2  
Alternative minimum tax credit carryforwards
    20.0       46.7  
Other
    126.9       59.7  
 
 
 
    1,620.2       1,400.2  
Valuation allowance
    (257.9 )     (224.3 )
 
 
Total deferred tax assets
    1,362.3       1,175.9  
Total deferred tax liabilities
               
 
— property basis differences
    (444.7 )     (499.3 )
 
— inventory
    (61.0 )     (92.3 )
 
— pensions
    (20.3 )     (157.8 )
 
 
Total deferred taxes
  $ 836.3     $ 426.5  
 
 

At December 31, 2001, Goodyear had tax credit carryforwards of $3.8 million and $203.1 million of tax assets on foreign net operating loss carryforwards, some of which are subject to expiration beginning in 2002. At December 31, 2001, Goodyear had recorded valuation allowances totaling $257.9 million against these and other deferred tax assets where recovery of the asset or carryforward is uncertain.

         Goodyear made net cash payments for income taxes in 2001, 2000 and 1999 of $50.8 million, $152.7 million and $204.0 million, respectively.

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NOTES TO FINANCIAL STATEMENTS

         No provision for Federal income tax or foreign withholding tax on retained earnings of international subsidiaries of $1,727 million is required because this amount has been or will be reinvested in properties and plants and working capital. It is not practicable to calculate the deferred taxes associated with the remittance of these investments.

Note 17

Interest Expense

Interest expense includes interest and amortization of debt discount and expense, less amounts capitalized as follows:

                         
(In millions)   2001   2000   1999
   
 
 
Interest expense before capitalization
  $ 298.8     $ 294.6     $ 191.2  
Capitalized interest
    (6.4 )     (12.0 )     (11.8 )
 
 
 
  $ 292.4     $ 282.6     $ 179.4  
 
 

Goodyear made cash payments for interest in 2001, 2000 and 1999 of $292.6 million, $261.0 million and $192.8 million, respectively.

Note 18

Research and Development

Research and development costs for 2001, 2000 and 1999 were $375.5 million, $423.1 million and $438.0 million, respectively.

Note 19

Advertising Costs

Advertising costs for 2001, 2000 and 1999 were $268.7 million, $249.6 million and $238.2 million, respectively.

Note 20

Business Segments

Segment information reflects the strategic business units of Goodyear (SBUs), which are organized to meet customer requirements and global competition.

         The Tire business is comprised of five regional SBUs. The Engineered and Chemical businesses are each managed on a global basis. Segment information is reported on the basis used for reporting to Goodyear’s Chairman of the Board and Chief Executive Officer.

         Each of the five regional tire business segments is involved in the development, manufacture, distribution and sale of tires. Certain of the tire business segments also provide related products and services, which include retreads, automotive repair services and merchandise purchased for resale.

         North American Tire provides original equipment and replacement tires for autos, trucks, farm, aircraft and construction applications in the United States, Canada and export markets. North American Tire also provides related products and services including tread rubber, tubes, retreaded tires, automotive repair services and merchandise purchased for resale.

         European Union Tire provides original equipment and replacement tires for autos, trucks, farm and construction applications in the European Union, Norway, Switzerland and export markets. European Union Tire also retreads truck and aircraft tires.

         Eastern Europe, Africa and Middle East Tire provides replacement tires for autos, trucks and farm applications in Eastern Europe, Africa, the Middle East and export markets. The segment also provides original equipment tires to manufacturers in Poland, South Africa, Turkey, Morocco and the Czech Republic.

         Latin American Tire provides original equipment and replacement tires for autos, trucks, tractors, aircraft and construction applications in Central and South America, Mexico and export markets. Latin American Tire also manufactures materials for tire retreading.

         Asia Tire provides original equipment and replacement tires for autos, trucks, farm, aircraft and construction applications in Asia and the Western Pacific. Asia Tire also retreads truck, construction equipment and aircraft tires and provides automotive repair services.

         Engineered Products develops, manufactures and sells belts, hoses, molded products, airsprings, tank tracks and other products for original equipment and replacement transportation applications and industrial markets worldwide.

         Chemical Products develops, manufactures and sells synthetic rubber and rubber latices, and other organic chemical products for internal and external customers worldwide. Chemical Products also engages in plantation and natural rubber purchasing operations.

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NOTES TO FINANCIAL STATEMENTS

                           
(In millions)   2001   2000   1999
   
 
 
Sales
                       
North American Tire
  $ 7,152.3     $ 7,111.3     $ 6,648.6  
European Union Tire
    3,128.0       3,198.1       2,642.7  
Eastern Europe, Africa and Middle East Tire
    703.1       793.0       812.9  
Latin American Tire
    1,012.6       1,047.9       948.1  
Asia Tire
    493.9       524.6       593.2  
 
 
 
Total Tires
    12,489.9       12,674.9       11,645.5  
 
 
Engineered Products
    1,122.3       1,174.2       1,234.8  
Chemical Products
    1,037.3       1,129.7       949.8  
 
 
 
Total Segment Sales
    14,649.5       14,978.8       13,830.1  
 
 
Inter-SBU sales
    (521.0 )     (567.1 )     (482.8 )
Other
    18.7       5.4       8.1  
 
 
 
Net Sales
  $ 14,147.2     $ 14,417.1     $ 13,355.4  
 
 
Income
                       
North American Tire
  $ 107.8     $ 260.7     $ 26.3  
European Union Tire
    57.2       88.7       188.0  
Eastern Europe, Africa and Middle East Tire
    20.2       54.6       49.8  
Latin American Tire
    89.8       69.8       67.7  
Asia Tire
    19.9       17.9       26.0  
 
 
 
Total Tires
    294.9       491.7       357.8  
 
 
Engineered Products
    11.6       43.1       70.4  
Chemical Products
    60.2       64.2       116.4  
 
 
 
Total Segment Income (EBIT)
    366.7       599.0       544.6  
 
 
Rationalizations and asset sales
    (162.4 )     (119.1 )     (4.9 )
Interest expense
    (292.4 )     (282.6 )     (179.4 )
Foreign currency exchange
    (.1 )     6.7       27.6  
Minority interest in net income of subsidiaries
    (.2 )     (33.5 )     (40.3 )
Inter-SBU income
    (32.3 )     (28.8 )     (49.6 )
Other
    (152.3 )     (82.9 )     2.1  
 
 
 
Income (Loss) before Income Taxes
  $ (273.0 )   $ 58.8     $ 300.1  
 
 
Assets
                       
North American Tire
  $ 4,856.7     $ 5,268.5     $ 5,046.6  
European Union Tire
    2,786.5       3,088.1       3,336.1  
Eastern Europe, Africa and Middle East Tire
    747.7       903.6       897.1  
Latin American Tire
    753.9       796.5       820.7  
Asia Tire
    600.9       668.5       725.5  
 
 
 
Total Tires
    9,745.7       10,725.2       10,826.0  
 
 
Engineered Products
    681.2       736.8       712.4  
Chemical Products
    601.6       742.9       689.6  
 
 
 
Total Segment Assets
    11,028.5       12,204.9       12,228.0  
 
 
Corporate
    2,484.4       1,363.1       1,050.1  
 
 
 
Assets
  $ 13,512.9     $ 13,568.0     $ 13,278.1  
 
 

Results of operations in the Tire and Engineered Products segments were measured based on net sales to unaffiliated customers and EBIT. Results of operations of the Chemical Products segment included transfers to other SBUs. Segment EBIT is computed as follows: net sales less cost of goods sold, less selling, administrative and general expense (excluding corporate administrative expenses). Inter-SBU sales by Chemical Products were at the lower of a formulated price or market. Purchases from Chemical

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NOTES TO FINANCIAL STATEMENTS

Products were included in the purchasing SBU’s EBIT at Chemical Products cost. Segment assets include those assets under the management of the SBU.

         Sales and operating income of the Asia Tire segment reflect the results of Goodyear’s majority-owned tire business in the region. In addition, Goodyear owns a 50% interest in South Pacific Tyres Ltd. (SPT), a tire manufacturer in Australia and New Zealand. Results of operations of SPT are not reported in segment results, and are reflected in Goodyear’s Consolidated Statement of Income using the equity method.

         The following table presents the sales and operating income of Goodyear’s Asia Tire segment together with 100% of the sales and operating income of SPT:

                           
(In millions)   2001   2000   1999
   
 
 
Net Sales
                       
 
Asia Tire Segment
  $ 493.9     $ 524.6     $ 593.2  
 
SPT
    481.3       563.6       674.5  
 
 
 
  $ 975.2     $ 1,088.2     $ 1,267.7  
 
 
Operating Income (Loss)
                       
 
Asia Tire Segment
  $ 19.9     $ 17.9     $ 26.0  
 
SPT
    (25.4 )     (11.1 )     31.2  
 
 
 
  $ (5.5 )   $ 6.8     $ 57.2  
 
 

SPT operating losses did not include rationalization charges of approximately $48.0 million in 2001 and $32.2 million in 2000. SPT debt totaled $67.4 million and $158.1 million at December 31, 2001 and December 31, 2000, respectively.

         Portions of the items described in Note 3, Rationalizations and Note 4, Other (Income) and Expense were not charged (credited) to the SBUs for performance evaluation purposes but were attributable to the SBUs as follows:

                           
(In millions)   2001   2000   1999
   
 
 
Rationalizations
                       
North American Tire
  $ 31.6     $ (.7 )   $ 71.5  
European Union Tire
    81.5       23.3       2.8  
Eastern Europe, Africa and Middle East Tire
    11.2       9.6       .3  
Latin American Tire
    .2       65.7       77.3  
Asia Tire
    45.4       3.3       1.5  
 
 
 
Total Tires
    169.9       101.2       153.4  
 
 
Engineered Products
    1.5       3.8       8.8  
Chemical Products
                2.5  
 
 
 
Total Segments
    171.4       105.0       164.7  
 
 
Corporate
    35.4       19.1       6.9  
 
 
 
Rationalizations
  $ 206.8     $ 124.1     $ 171.6  
 
 
Other (Income) and Expense North American Tire
  $     $     $  
European Union Tire
    (17.0 )           (149.7 )
Eastern Europe, Africa and Middle East Tire
                 
Latin American Tire
          (5.0 )      
Asia Tire
                 
 
 
 
Total Tires
    (17.0 )     (5.0 )     (149.7 )
 
 
Engineered Products
                 
Chemical Products
    (27.4 )           (17.0 )
 
 
 
Total Segments
    (44.4 )     (5.0 )     (166.7 )
 
 
Corporate
    56.2       32.8       19.6  
 
 
 
Other (Income) and Expense
  $ 11.8     $ 27.8     $ (147.1 )
 
 

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NOTES TO FINANCIAL STATEMENTS

                           
(In millions)   2001   2000   1999
   
 
 
Capital Expenditures
                       
North American Tire
  $ 198.5     $ 235.4     $ 372.8  
European Union Tire
    71.4       94.0       106.2  
Eastern Europe, Africa and Middle East Tire
    37.7       43.4       46.9  
Latin American Tire
    24.8       36.6       50.6  
Asia Tire
    16.1       35.3       38.0  
 
 
 
Total Tires
    348.5       444.7       614.5  
 
 
Engineered Products
    29.0       36.7       54.6  
Chemical Products
    26.9       76.7       90.4  
 
 
 
Total Segment Capital Expenditures
    404.4       558.1       759.5  
 
 
Corporate
    31.0       56.4       45.5  
 
 
 
Capital Expenditures
  $ 435.4     $ 614.5     $ 805.0  
 
 
Depreciation and Amortization
                       
North American Tire
  $ 286.0     $ 270.0     $ 219.7  
European Union Tire
    116.5       111.7       91.8  
Eastern Europe, Africa and Middle East Tire
    53.3       49.3       48.6  
Latin American Tire
    28.2       35.9       34.2  
Asia Tire
    34.0       38.2       40.5  
 
 
 
Total Tires
    518.0       505.1       434.8  
 
 
Engineered Products
    34.3       34.4       44.2  
Chemical Products
    38.7       39.4       35.8  
 
 
 
Total Segment Depreciation and Amortization
    591.0       578.9       514.8  
 
 
Corporate
    45.7       51.4       66.9  
 
 
 
Depreciation and Amortization
  $ 636.7     $ 630.3     $ 581.7  
 
 

The following table presents geographic information. Net sales by country were determined based on the location of the selling subsidiary. Long-lived assets consisted primarily of properties and plants, deferred charges and other miscellaneous assets. Management did not consider the net sales or long-lived assets of individual countries outside the United States to be significant to the consolidated financial statements.

                         
(In millions)   2001   2000   1999
   
 
 
Net Sales
                       
United States
  $ 7,655.8     $ 7,611.1     $ 7,136.6  
International
    6,491.4       6,806.0       6,218.8  
 
 
 
  $ 14,147.2     $ 14,417.1     $ 13,355.4  
 
 
Long-Lived Assets
                       
United States
  $ 4,317.7     $ 4,188.5     $ 4,080.1  
International
    2,923.8       3,166.3       3,290.2  
 
 
 
  $ 7,241.5     $ 7,354.8     $ 7,370.3  
 
 

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NOTES TO FINANCIAL STATEMENTS

Note 21

Accumulated Other Comprehensive Income

The components of Accumulated Other Comprehensive Income follow:

                   
(In millions)   2001   2000
   
 
Foreign currency translation
               
 
adjustment
  $ (1,450.2 )   $ (1,273.9 )
Minimum pension liability adjustment
    (257.3 )     (21.9 )
Unrealized investment loss
    (16.6 )     (10.0 )
Deferred derivative loss
    (13.2 )      
 
 
 
  $ (1,737.3 )   $ (1,305.8 )
 
 

Note 22

Commitments and Contingent Liabilities

At December 31, 2001, Goodyear had binding commitments for investments in land, buildings and equipment of $121.5 million, and off-balance-sheet financial guarantees written and other commitments totaling $151.4 million.

         At December 31, 2001, Goodyear had recorded liabilities aggregating $66.5 million for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by Goodyear. These costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities and will be paid over several years. The amount of Goodyear’s ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute. Refer to Environmental Cleanup Matters at Note 1.

         At December 31, 2001, Goodyear had recorded liabilities aggregating $218.7 million for potential product liability and other tort claims, including related legal fees expected to be incurred, presently asserted against Goodyear. The amount recorded was determined on the basis of an assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and, where available, current trends.

         Goodyear is a defendant in numerous lawsuits involving at December 31, 2001, approximately 63,000 claimants alleging various asbestos related personal injuries purported to result from exposure to asbestos in certain rubber coated products manufactured by Goodyear in the past or in certain Goodyear facilities. Typically, these lawsuits have been brought against multiple defendants in state and Federal courts. In the past, Goodyear has disposed of approximately 22,000 cases by defending and obtaining the dismissal thereof or by entering into a settlement. Goodyear has policies and coverage-in-place agreements with certain of its insurance carriers that cover a substantial portion of estimated indemnity payments and legal fees in respect of the pending claims. At December 31, 2001, Goodyear has recorded an asset in the amount it expects to collect under the policies and coverage-in-place agreements with certain carriers related to its estimated asbestos liability. Goodyear has also commenced discussions with certain of its excess coverage insurance carriers to establish arrangements in respect of their policies.

         The portion of the recorded liabilities for potential product liability and other tort claims relating to asbestos claims is based on pending claims. The amount recorded reflects an estimate of the cost of defending and resolving pending claims, based on available information and our experience in disposing of asbestos claims in the past. The estimated liability of Goodyear is not discounted or reduced for possible recoveries from insurance carriers. No liability has been recorded for unknown asbestos claims, and Goodyear cannot predict the number of future claims, the cost of disposing of existing and future claims, or the future ability to recover from insurance carriers.

         The Company is a defendant in three class actions and twenty other civil actions in various Federal and state courts alleging, among other things, breaches of warranties and defects in the Company’s Entran II hose installed as a part of Heatway radiant heating systems in the homes or other structures of the claimants. On February 25, 2002, a jury in a civil action in a Colorado State Court found, among other things, that the Company’s Entran II hose installed in five homesites was defective and awarded plaintiffs $5.9 million in damages, which are trebled under the Colorado Consumer Protection Act, plus interest, attorney’s fees and costs, for a total award of approximately $20 million. The Company continues to believe the hose was not defective. The Company believes the verdict was based on material errors of fact and law and will appeal. A jury in a civil action between the Company and Heatway in Federal District Court in Cleveland, Ohio, found that the Company did not breach the implied warranty of merchantability in respect of Entran II hose sold to Heatway for installation in radiant heating systems and that the hose was fit for use in the systems and the court, on February 4, 2000, dismissed all claims of Heatway regarding the Entran II hose.

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NOTES TO FINANCIAL STATEMENTS

         Subject to the uncertainties referred to above, Goodyear has concluded that in respect of any of the above described liabilities, it is not reasonably possible that it would incur a loss exceeding the amount recognized at December 31, 2001 with respect thereto which would be material relative to the consolidated financial position, results of operations or liquidity of Goodyear.

         Various other legal actions, claims and governmental investigations and proceedings covering a wide range of matters are pending against Goodyear and its subsidiaries. Management, after reviewing available information relating to such matters and consulting with Goodyear’s General Counsel, has determined with respect to each such matter either that it is not reasonably possible that Goodyear has incurred liability in respect thereof or that any liability ultimately incurred will not exceed the amount, if any, recorded at December 31, 2001 in respect thereof which would be material relative to the consolidated financial position, results of operations or liquidity of Goodyear. However, in the event of an unanticipated adverse final determination in respect of certain matters, Goodyear’s consolidated net income for the period in which such determination occurs could be materially affected.

Note 23

Preferred Stock Purchase Rights Plan

In June 1996, the Company authorized 7,000,000 shares of Series B Preferred Stock (“Series B Preferred”) issuable only upon the exercise of rights (“Rights”) issued under the Preferred Stock Purchase Rights Plan adopted on, and set forth in the Rights Agreement dated, June 4, 1996. Each share of Series B Preferred issued would be non-redeemable, non-voting and entitled to (i) cumulative quarterly dividends equal to the greater of $25.00 or, subject to adjustment, 100 times the per year amount of dividends declared on Goodyear Common Stock (“the Common Stock”) during the preceding quarter and (ii) a liquidation preference.

         Under the Rights Plan, each shareholder of record on July 29, 1996 received a dividend of one Right per share of the Common Stock. Each Right, when exercisable, will entitle the registered holder thereof to purchase from the Company one one-hundredth of a share of Series B Preferred Stock at a price of $250 (the “Purchase Price”), subject to adjustment. The Rights will expire on July 29, 2006, unless earlier redeemed at $.001 per Right. The Rights will be exercisable only in the event that an acquiring person or group purchases, or makes — or announces its intention to make — a tender offer for, 15% or more of the Common Stock. In the event that any acquiring person or group acquires 15% or more of the Common Stock, each Right will entitle the holder to purchase that number of shares of Common Stock (or in certain circumstances, other securities, cash or property) which at the time of such transaction would have a market value of two times the Purchase Price.

         If the Company is acquired or a sale or transfer of 50% or more of the Company’s assets or earnings power is made after the Rights become exercisable, each Right (except those held by an acquiring person or group) will entitle the holder to purchase common stock of the acquiring entity having a market value then equal to two times the Purchase Price. In addition, when exercisable the Rights under certain circumstances may be exchanged by the Company at the ratio of one share of Common Stock (or the equivalent thereof in other securities, property or cash) per Right, subject to adjustment.

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Supplementary Data (unaudited)

Quarterly Data and Market Price Information

                                             
(In millions, except per share)           Quarter                        
       
2001   First   Second   Third   Fourth   Year
   
 
 
 
 
Net Sales
  $ 3,414.2     $ 3,582.5     $ 3,677.9     $ 3,472.6     $ 14,147.2  
Gross Profit
    628.6       670.4       683.6       545.1       2,527.7  
Net Income (Loss)
  $ (46.7 )   $ 7.8     $ 9.3     $ (174.0 )   $ (203.6 )
 
 
Net Income (Loss) Per Share
   
— Basic
  $ (.30 )   $ .05     $ .06     $ (1.07 )   $ (1.27 )
   
— Diluted
    (.30 )     .05       .06       (1.07 )     (1.27 )
 
 
Average Shares Outstanding
   
— Basic
    158.2       158.8       159.9       163.1       160.0  
   
— Diluted
    158.2       161.2       161.6       163.1       160.0  
Price Range of Common Stock:*
   
High
  $ 27.32     $ 30.40     $ 31.64     $ 25.28     $ 31.64  
   
Low
    22.72       22.80       17.72       17.85       17.72  
Dividends Per Share
  $ .30     $ .30     $ .30     $ .12     $ 1.02  
 
 

The first quarter included a net after-tax charge of $57.1 million or $.36 per share for rationalizations and an after-tax gain of $13.9 million or $.09 per share from asset sales. The fourth quarter included a net after-tax charge of $101.2 million or $.62 per share for rationalizations and an after-tax gain of $16.9 million or $.10 per share from asset sales.

         Quarterly per share amounts do not add to the year 2001 per share amount due to issuance of 4.3 million shares of common stock in the third quarter.

                                             
(In millions, except per share)           Quarter                        
       
2000   First   Second   Third   Fourth   Year
   
 
 
 
 
Net Sales
  $ 3,664.1     $ 3,607.3     $ 3,619.3     $ 3,526.4     $ 14,417.1  
Gross Profit
    730.1       756.7       650.5       642.5       2,779.8  
Net Income (Loss)
  $ 48.2     $ 77.1     $ 17.0     $ (102.0 )   $ 40.3  
 
 
Net Income (Loss) Per Share
   
— Basic
  $ .31     $ .49     $ .11     $ (.65 )   $ .26  
   
— Diluted
    .30       .49       .11       (.65 )     .25  
 
 
Average Shares Outstanding
   
— Basic
    156.3       156.4       157.0       157.6       156.8  
   
— Diluted
    158.7       158.7       158.2       157.6       158.8  
Price Range of Common Stock:*
 
High
  $ 29 1/8     $ 31 5/8     $ 26 3/4     $ 24.09     $ 31 5/8  
 
Low
    20 3/8       19 3/4       17 1/4       15.60       15.60  
Dividends Per Share
  $ .30     $ .30     $ .30     $ .30     $ 1.20  
 
 

The second quarter included a net after-tax charge of $5.2 million or $.03 per share for rationalizations. The third quarter included an after-tax gain of $3.2 million or $.02 per share from asset sales and an after-tax charge of $1.2 million or $.01 per share for rationalizations. The fourth quarter included an after-tax charge of $93.7 million or $.59 per share for rationalizations.

Per share amounts of unusual items are diluted.


*   New York Stock Exchange — Composite Transactions

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         Information required by Item 401 of Regulation S-K in respect of directors of the Company is incorporated herein by reference to the text set forth under the caption “Election of Directors” at pages 3 through 6, inclusive, of the Company’s Proxy Statement, dated February 26, 2002, for its Annual Meeting of Shareholders to be held on April 15, 2002 (the “Proxy Statement”). For information regarding the executive officers of the Company, reference is made to Part I, Item 4(A), at pages 27 through 31, inclusive, of this Annual Report.

Section 16(a) Beneficial Ownership Reporting Compliance.

         Based solely on a review of copies of reports on Forms 3, 4 and 5 received by the Company and on written representations from directors and executive officers, the Company believes that no director or executive officer of the Company filed a late report or failed to file a required report under Section 16(a) of the Exchange Act during or in respect of the year ended December 31, 2001; except that, as a result of administrative errors (1) Mr. J. M. Zimmerman, a director of the Company, filed in February 2002 a Form 4 for the month of July 2001 to report his July 2001 purchases of shares of the Company’s Common Stock and amendments to his Forms 4 for the months of October and December of 2001 to reflect those purchases, (2) Mr. M. J. Roney, President, European Union Region, filed in February 2002 a Form 4 for the month of August 2001 to report his August 2001 purchase of shares of Common Stock and an amendment to his Form 4 for December 2001 to reflect that purchase, and (3) Mr. W. J. Fish, a Senior Vice President prior to his resignation effective August 31, 2001, filed in February 2002 a Form 4 to report his sale of shares of Common Stock in December 2001. To the knowledge of the Company, during 2001 no person was required to file reports under Section 16(a) of the Exchange Act as the beneficial owner of 10% or more of the Common Stock or any other class of the Company’s equity securities. Except as stated above, the Company is not aware of any failure by a director, executive officer or 10% beneficial owner to file a report required under Section 16(a) of the Exchange Act on a timely basis during or in respect of 2001.

ITEM 11. EXECUTIVE COMPENSATION.

         Information required by Item 402 of Regulation S-K in respect of the compensation of management of the Company is incorporated herein by reference to the text set forth in the Proxy Statement under the caption “Executive Officer Compensation”, at pages 18 through 26, inclusive.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Information required by Item 403 of Regulation S-K relating to the ownership of the Company’s Common Stock by certain beneficial owners and management is incorporated herein by reference to the text set forth in the Proxy Statement under the caption “Beneficial Ownership of Common Stock” at pages 16, 17 and 18.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Information required by Item 404 of Regulation S-K relating to certain transactions by and relationships of management is incorporated herein by specific reference to the text set forth in the Proxy Statement under the caption “Executive Officer Compensation” at pages 18 through 26, inclusive.

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PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

A. LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:

  1.   Financial Statements: See Index on page 52 of this Annual Report.
 
  2.   Financial Statement Schedules: See Index To Financial Statement Schedules attached to this Annual Report at page FS-1. The Financial Statement Schedule at page FS-1 is incorporated into and made a part of this Annual Report.
 
  3.   Exhibits required to be filed by Item 601 of Regulation S-K: See the Index of Exhibits at pages X-1 through X-9, inclusive, which is attached to and incorporated into and made a part of this Annual Report.
 
      The following exhibits, each listed in the Index of Exhibits, are or relate to compensation plans and arrangements of the Company:

                 
Exhibit   Description   Filed as Exhibit

 
 
10(a)
  1997 Performance Incentive Plan of The   10.1 to Form 10-Q quarter
 
  Goodyear Tire & Rubber Company   ended June 30, 1997
 
  (the “1997 Plan”)        
10(b)
  1989 Goodyear Performance and Equity   A to Form 10-Q quarter
 
  Incentive Plan (“1989 Plan”)   ended March 31, 1989
10(c)
  Forms of Stock Option Grant Agreements   10.1 to Form 10-K for year
 
  under 1997 Plan, December 2, 1997 grant   ended December 31, 1997
10(d)
  Performance Recognition Plan   10.1 to Form 10-K for year
 
  adopted as of January 1, 2001   ended December 31, 2000
10(e)
  Form of Performance Unit Grant Agreement   10.2 to Form 10-K for year
 
  under 1997 Plan dated December 2, 1997   ended December 31, 1997
10(f)
  Forms of Stock Option Unit Grant Agreements   10.3 to Form 10-K for year
 
  under 1989 Plan, December 3, 1996 grant   ended December 31, 1996
10(g)
  Form of Stock Option Grant Agreement   G to Form 10-K for year under
 
  1989 Plan, January 4, 1994 grant   ended December 31, 1993
10(h)
  Forms of Stock Option Grant   10.1 to Form 10-K for
 
  Agreements and Performance Grant   year ended December 31, 1998
 
  Agreements under 1997 Plan grants made        
 
  on November 30, 1998 and other dates        
10(i)
  Form of Performance Equity Grant   10.2 to Form 10-K for year
 
  Agreement for 1994 under 1989 Plan   ended December 31, 1996
 
  (as amended December 3, 1996)        
10(j)
  Goodyear Supplementary Pension Plan   10.1 to this Annual Report
 
  (as amended)   on Form 10-K
10(k)
  Form of Performance Equity Grant   10.4 to Form 10-K for year
 
  Agreement for 1995 under 1989 Plan   ended December 31, 1996
 
  (as amended December 3, 1996)        
10(l)
  Goodyear Employee Severance Plan   A-II to Form 10-K for year ended
 
          December 31, 1988
10(m)
  Forms of Stock Option Grant Agreements   10.3 to Form 10-K for year
 
  under 1989 Plan, January 9, 1996 grant   ended December 31, 1995

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Exhibit   Description   Filed as Exhibit

 
 
10(n)
  Form of Performance Equity Grant   10.5 to Form 10-K for year
 
  Agreement for 1996 under 1989 Plan   ended December 31, 1996
 
  (as amended December 3, 1996)        
10(o)
  Form of Performance Equity Grant   10.6 to Form 10-K for year
 
  Agreement for 1997 under 1989 Plan   ended December 31, 1996
10(p)
  Forms of Stock Option Grant Agreements   G to Form 10-K for year
 
  under 1989, Plan January 4, 1995 grant   ended December 31, 1994
10(q)
  Stock Option Plan for Hourly Bargaining   10.2 to this Annual
 
  Unit Employees at Designated Locations   Report on Form 10-K
 
  as amended December 4, 2001        
10(r)
  Deferred Compensation Plan for Executives   10.3 to this Annual
 
  (as amended)   Report on Form 10-K
10(s)
  1994 Restricted Stock Award Plan for   B to Form 10-Q for
 
  Non-employee Directors   quarter ended June 30, 1994
10(t)
  Outside Directors” Equity   10.3 to Form 10-K for year
 
  Participation Plan (as amended)   ended December 31, 1997
10(u)
  Amended Annex A to Performance Grants   10.2 to Form 10-K for year
 
  for 1997 and 1998   ended December 31, 1998
10(y)
  Forms of Stock Option Grant Agreements   10.2 to for year ended
 
  under 1997 Plan, December 6, 1999 grant   December 31, 1999
10(z)
  Forms of Stock Option Grant Agreements   10.2 to Form 10-K for year
 
  under 1997 Plan, December 4, 2000 grant   ended December 31, 2000
10(aa)
  Forms of Performance Equity Grant   10.3 to Form 10-K for year
 
  Agreements under 1997 Plan for 2001   ended December 31, 2000
10(bb)
  Conformed copy of letter agreement dated   10.1 to Form 10-Q
 
  September 11, 2000, between Registrant   for quarter ended
 
  and Robert J. Keegan   September 30, 2000
10(cc)
  Conformed copy of Restricted Stock   10.1 to Form 10-Q
 
  Purchase Agreement, dated October   for quarter ended
 
  3, 2000, between Registrant and   September 30, 2000
 
  Robert J. Keegan        
10(dd)
  Conformed copy of Stock Option Grant   10.1 to Form 10-Q
 
  Agreement, dated October 3, 2000   for quarter ended
 
  between Registrant and Robert J   September 30, 2000
 
  Keegan        
10(ee)
  Form of Stock Option Grant Agreement   10.4 to this Annual Report
 
  under 1997 Plan, December 3, 2001   on Form 10-K
10(ff)
  Form of Performance Equity Grant   10.5 to this Annual
 
  Agreement under 1997 Plan for 2002   Report on Form 10-K

B. REPORTS ON FORM 8-K:

         No Current Report on Form 8-K was filed by the Company with the Securities and Exchange Commission during the quarter ended December 31, 2001.

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SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
    THE GOODYEAR TIRE & RUBBER COMPANY
(Registrant)
 
Date: March 11, 2002   By /s/ Samir G. Gibara

    Samir G. Gibara, Chairman of the Board
and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

     
     
Date: March 11, 2002   /s/ Samir G. Gibara

    Samir G. Gibara, Chairman of the Board and Chief
    (Principal Executive Officer)
     
     
Date: March 11, 2002   /s/ Robert W. Tieken

    Robert W. Tieken, Executive Vice President
    (Principal Financial Officer)
     
Date: March 11, 2002   /s/ Richard J. Kramer

    Richard J. Kramer, Vice President - Corporate Finance
    (Principal Accounting Officer)
         
    John G. Breen, Director    
    William E. Butler, Direction    
    Thomas H. Cruikshank, Director    
    Edward T. Fogarty, Director    
    William J. Hudson, Jr., Director   By /s/ Robert W. Tieken
Date: March 11, 2002   Robert J. Keegan, Director   Robert W. Tieken, Signing as
    Philip A. Laskawy, Director   Attorney-in-Fact for the directors
    Steven A. Minter, Director   whose names appear opposite.
    Agnar Pytte, Director    
    Martin D. Walker, Director    
    James M. Zimmerman, Director    

         A Power of Attorney, dated December 3, 2001, authorizing Robert W. Tieken to sign this Annual Report on Form 10-K for the fiscal year ended December 31, 2001 on behalf of certain of the directors of the Company is filed as Exhibit 24 to this Annual Report.

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FINANCIAL STATEMENT SCHEDULES
ITEMS 8 AND 14(a)(2) OF FORM 10-K
FOR CORPORATIONS
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2001

INDEX TO FINANCIAL STATEMENT SCHEDULES

Financial Statement Schedules:

                 
    Schedule No.   Page Number
   
 
Valuation and Qualifying Accounts
  II   FS-1

         All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

         Financial statements and schedules relating to 50 percent or less owned companies, the investments in which are accounted for by the equity method, have been omitted as permitted because, considered in the aggregate as a single subsidiary, these companies would not constitute a significant subsidiary.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31,

(In Millions)

                                                 
            Additions  
           
      Translation
    Balance at   Charged   Acquired   Deductions   Adjustment   Balance
    beginning   (credited)   by   from   during   at end of
Description   of period   to income   purchase   reserves   period   period

 
 
 
 
 
 
            2001                                
           
                               
Deducted from accounts and notes receivable:
                                               
For doubtful accounts
  $ 93.3     $ 28.1           $ (34.3 ) (a)   $ (2.2 )   $ 84.9  
Valuation allowance — deferred tax assets
    224.3       33.6                         257.9  

 
            2000                                
           
                               
Deducted from accounts and notes receivable:
                                               
For doubtful accounts
  $ 81.9     $ 42.7     $ 1.4     $ (29.1 ) (a)   $ (3.6 )   $ 93.3  
Valuation allowance — deferred tax assets
    163.9       60.4                         224.3  

 
            1999                                
           
                               
Deducted from accounts and notes receivable:
                                               
For doubtful accounts
  $ 54.9     $ 29.2     $ 19.3     $ (19.5 ) (a)   $ (2.0 )   $ 81.9  
Valuation allowance — deferred tax assets
    41.7       108.4       13.8                   163.9  


    Note: (a) Accounts and notes receivable charged off.

FS-1


Table of Contents

THE GOODYEAR TIRE & RUBBER COMPANY

Annual Report on Form 10-K

For Year Ended December 31, 2001

INDEX OF EXHIBITS(1)

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
3       Articles of Incorporation and By-Laws    
    (a)   Certificate of Amended Articles of Incorporation of The Goodyear Tire & Rubber Company, dated December 20, 1954, and Certificate of Amendment to Amended Articles of Incorporation of The Goodyear Tire & Rubber Company, dated April 6, 1993, and Certificate of Amendment to Amended Articles of Incorporation of the Company dated June 4, 1996, three documents comprising the Company’s Articles of Incorporation, as amended through February 28, 2002 (incorporated by reference, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, File No. 1-1927).    
    (b)   Code of Regulations of The Goodyear Tire & Rubber Company, adopted November 22, 1955, and amended April 5, 1965, April 7, 1980, April 6, 1981 and April 13, 1987 (incorporated by reference, filed as Exhibit 4.1(B) to the Company’s Registration Statement on Form S-3, File No. 333-1955).    
4       Instruments Defining the Rights of Security Holders, Including Indentures    
    (a)   Specimen nondenominational Certificate for shares of the Common Stock, Without Par Value, of the Company; EquiServe Trust Company, transfer agent and registrar.   4.1
    (b)   Conformed copy of Rights Agreement, dated as of June 4, 1996, between the Company and First Chicago Trust Company of New York, Rights Agent (incorporated by reference, filed as Exhibit 1 to the Company’s Registration Statement on Form 8-A dated June 11, 1996 and as Exhibit 4(a) to Registrant’s Current Report on Form 8-K dated June 4, 1996, File No. 1-1927).    
    (c)   Conformed copy of Amendment to Rights Agreement, dated as of February 8, 2000 between the Company and First Chicago Trust Company of New York, Rights Agent (incorporated by reference, filed as on Exhibit 4.1 to the Company’s annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-1927).    


(1)   See Part IV, Item 14, Part A.3.
(2)   Pursuant to Item 601 of Regulation S-K.

X-1


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
4   (d)   Conformed copy of Appointment of Successor Rights Agent, dated as of November 1, 2001, between the Company and EquiServe Trust Company, N.A.   4.2
    (e)   Conformed copy of Indenture, dated as of March 15, 1996, between the Company and Chemical Bank (now The Chase Manhattan Bank), as Trustee, as supplemented on December 3, 1996, March 11, 1998, and March 17, 1998 (incorporated by reference, filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-1927).    
    (f)   Conformed copy of Indenture, dated as of March 1, 1999, between the Company and The Chase Manhattan Bank, as Trustee, as supplemented on March 14, 2000 in respect of $300,000,000 principal amount of the Company’s 8.125% Notes due 2003 and $300,000,000 principal amount of the Company’s 8.50% Notes due 2007 (incorporated by reference, filed as Exhibit 4.1, to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, File No. 1-1927), and as further supplemented on August 15, 2001, in respect of the Company’s $650,000,000 principal amount of the Company’s 7.857% Notes due 2011 (incorporated by reference, filed as Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2001, File No. 1-1927).    
    (g)   Conformed copy of Term Loan Agreement, dated as of March 30, 2001, among the Company the Lenders named therein, The Chase Manhattan Bank, as Agent, and Chase Manhattan International Limited, as London Agent (incorporated by reference, filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, File No. 1-1927).    
    (h)   Conformed Copy of Amended and Restated Five Year Credit Agreement, dated as of August 14, 2001, among the Company, the Lenders named therein and The Chase Manhattan Bank, as Agent (incorporated by Reference, filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).    
    (i)   Conformed Copy of Amended and Restated 364-Day Credit Agreement, dated as of August 14, 2001, among the Company, the Lenders named therein and The Chase Manhattan Bank, an Agent (incorporated by reference, filed as Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).    


(2)   Pursuant to Item 601 of Regulation S-K.

X-2


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
4   (j)   Form of First Amendment, dated as of November 9, 2001, to the Term Loan Agreement dated as of March 30, 2001, among the Company, the Lenders named therein and The Chase Manhattan Bank, as Agent, and Chase Manhattan International Limited, as the London Agent (incorporated by reference, filed as Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).
    (k)   Form of First Amendment, dated as of November 9, 2001, to the Amended and Restated Five Year Revolving Credit Agreement dated as of August 14, 2001, among the Company, the Lenders named therein and The Chase Manhattan Bank, as Agent (incorporated by reference, filed as Exhibit 4.5 to the Company’s quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).
    (l)   Form of First Amendment, dated November 9, 2001, to the Amended and Restated 364-Day Revolving Credit Agreement dated as of August 14, 2001, among the Company, the Lenders named therein and The Chase Manhattan Bank, or Agent (incorporated by reference, filed as Exhibit 4.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).
        Information concerning Goodyear’s long-term debt is set forth at Note 11, captioned “Financing Arrangements and Derivative Financial Instruments”, at the sub-caption “Long Term Debt and Financing Arrangements”, in the Financial Statements set forth at Item 8 of this Annual Report and is incorporated herein by reference. In accordance with paragraph (iii) to Part 4 of Item 601 of Regulation S-K, agreements and instruments defining the rights of holders of long term debt of the Company pursuant to which the amount of securities authorized thereunder does not exceed 10% of the consolidated assets of the Company and its subsidiaries are not filed herewith. The Company hereby agrees to furnish a copy of any such agreement or instrument to the Securities and Exchange Commission upon request.
10       Material Contracts
    (a)   1997 Performance Incentive Plan of The Goodyear Tire & Rubber Company, as adopted by the Board of Directors on February 4, 1997, and approved by shareholders on April 14, 1997 (incorporated by reference, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File No. 1-1927).


(2)   Pursuant to Item 601 of Regulation S-K.
     

X-3


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
10   (b)   1989 Goodyear Performance and Equity Incentive Plan of the Company, as adopted by the Board of Directors of Registrant on December 6, 1988, and approved by the shareholders on April 10, 1989 (incorporated by reference, filed as Exhibit A to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1989, File No. 1-1927).
    (c)   Forms of Stock Option Grant Agreements in respect of options granted December 2, 1997 under the 1997 Performance Incentive Plan of the Company: Part I, form of Grant Agreement for Incentive Stock Options; Part II, form of Grant Agreement for Non-Qualified Stock Options; and Part III, form of Grant Agreement for Non-Qualified Stock Options and tandem Stock Appreciation Rights (incorporated by reference, filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-1927).
    (d)   Performance Recognition Plan of the Company adopted effective January 1, 2001 (incorporated by reference, filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-1927).
    (e)   Form of Performance Unit Grant Agreement in respect of grants made on December 2, 1997 in respect of 1998 under the 1997 Performance Incentive Plan of the Company (incorporated by reference, filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-1927).
    (f)   Forms of Stock Option Grant Agreements in respect of options and SARs granted December 3, 1996 under the 1989 Goodyear Performance and Equity Incentive Plan: Part I, form of Agreement for Incentive Stock Options; Part II, form of Agreement for Non-Qualified Stock Options; and Part III, form of Agreement for Non-Qualified Stock Options and tandem Stock Appreciation Rights (incorporated by reference, filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-1927).
    (g)   Form of Stock Option Grant Agreement under the 1989 Goodyear Performance and Equity Incentive Plan in respect of options granted January 4, 1994 (incorporated by reference, filed as Exhibit G to the Company’s Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-1927).


(2)   Pursuant to Item 601 of Regulation S-K.
     

X-4


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
10   (h)   Forms of Grant Agreements in respect of stock options, SARs and performance units granted during 1998 under 1997 Performance Incentive Plan: Part I, form of Grant Agreement for Non-Qualified Stock Options; Part II, form of Grant Agreement for Non-Qualified Stock Options and tandem Stock Appreciation Rights; Part III, form of Grant Agreement for Performance Units; and Part IV, form of Grant Agreement for Chairman’s Award Performance Units (incorporated by reference, filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-1927).    
    (i)   Form of Performance Equity Grant Agreement in respect of grants made on 10.1 January 4, 1994 under the 1989 Goodyear Performance and Equity Incentive Plan, as amended December 3, 1996 (incorporated by reference, filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-1927).    
    (j)   Goodyear Supplementary Pension Plan, as restated and amended May 1, 1995 and amended December 3, 2001.   10.1
    (k)   Form of Performance Equity Grant Agreement in respect of grants made on December 6, 1994 in respect of 1995 under the 1989 Goodyear Performance and Equity Incentive Plan, as amended December 3, 1996 (incorporated by reference, filed as Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-1927).    
    (l)   Goodyear Employee Severance Plan, as adopted by the Board of Directors of the Company on February 14, 1989 (incorporated by reference, filed as Exhibit A-II to the Company’s Annual Report on Form 10-K for the year ended December 31, 1988, File No. 1-1927).    
    (m)   Forms of Stock Option Grant Agreements granted January 9, 1996 under the 1989 Goodyear Performance and Equity Incentive Plan: Part I, Form of Agreement for Incentive Stock Options; Part II, Form of Agreement for Non-Qualified Stock Options; and Part III, Form of Agreement for Non-Qualified Stock Options and tandem Stock Appreciation Rights (incorporated by reference, filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995, File No. 1-1927).    
    (n)   Form of Performance Equity Grant Agreement in respect of grants made January 9, 1996 under the 1989 Goodyear Performance and Equity Incentive Plan, as amended December 3, 1996 (incorporated by reference, filed as Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-1927).    


(2)   Pursuant to Item 601 of Regulation S-K.

X-5


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
10   (o)   Form of Performance Equity Grant Agreement in respect of grants made on December 3, 1996 under the 1989 Goodyear Performance and Equity Incentive Plan (incorporated by reference, filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-1927).    
    (p)   Forms of Stock Option Grant Agreements in respect of options and SARs granted January 4, 1995 under the 1989 Goodyear Performance and Equity Incentive Plan: Part I, form of Agreement for Incentive Stock Options; Part II, form of Agreement for Non-Qualified Stock Options; and Part III, form of Agreement for Non-Qualified Stock Options and tandem Stock Appreciation Rights (incorporated by reference, filed as Exhibit G to the Company’s Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-1927).    
    (q)   The Goodyear Tire & Rubber Company Stock Option Plan for Hourly Bargaining Unit Employees at Designated Locations, as amended December 4, 2001.   10.2
    (r)   The Goodyear Tire & Rubber Company Deferred Compensation Plan for Executives, as adopted effective October 4, 1994 and amended December 3, 2001.   10.3
    (s)   1994 Restricted Stock Award Plan for Non-employee Directors of the Company, as adopted effective June 1, 1994 (incorporated by reference, filed as Exhibit B to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, File No. 1-1927).    
    (t)   Outside Directors’ Equity Participation Plan, as adopted February 2, 1996 and amended February 3, 1998 (incorporated by reference filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-1927).    
    (u)   Amendments to Annexes to Performance Grant Agreements: Part I, Amendment to Annex A to Performance Equity Grant Agreement for 1997; and Part II, Amendment to Annex A to Performance Grant Agreement for 1998 (incorporated by reference, filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-1927).    
    (v)   Conformed copy of Umbrella Agreement, dated as of June 14, 1999, between the Company and Sumitomo Rubber Industries, Ltd. (incorporated by reference, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, File No. 1-1927).    


(2)   Pursuant to Item 601 of Regulation S-K.

X-6


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
10   (w)   Conformed copy of Joint Venture Agreement for Europe, dated as of June 14, 1999 (and amendment No. 1 dated as of September 1, 1999), among the Company, Goodyear S.A., a French corporation, Goodyear S.A., a Luxembourg corporation, Goodyear Canada Inc., Sumitomo Rubber Industries, Ltd., and Sumitomo Rubber Europe B.V. (incorporated by reference, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-1927).
    (x)   Conformed copy of Shareholders Agreement for the Europe JVC, dated as of June 14, 1999, among the Company, Goodyear S.A., a French corporation, Goodyear S.A., a Luxembourg corporation, Goodyear Canada Inc., and Sumitomo Rubber Industries, Ltd. (incorporated by reference, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, File No. 1-1927).
    (y)   Forms of Stock Option Grant Agreements in respect of options granted December 6, 1999 under the 1997 Performance Incentive Plan of the Company: Part I, form of Grant Agreement for Incentive Stock Options; Part II, form of Grant Agreement for Non-Qualified Stock Options and tandem stock appreciation rights; and Part III, form of Grant Agreement for Non-Qualified Stock Options (incorporated by reference, filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-1927).
    (z)   Forms of Stock Option Grant Agreements in respect of options granted December 4, 2000, under the 1997 Performance Incentive Plan of the Company: Part I, form of Grant Agreement for Incentive Stock Options; Part II form of Grant Agreement for Non-Qualified Stock Option; and Part III, form of Grant Agreement for Non-Qualified Stock Options and tandem stock appreciation rights (incorporated by reference, filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-1927).
    (aa)   Forms of Performance Equity Plan Unit Grant Agreements in respect of grants made on December 5, 2000 under the 1997 Performance Incentive Plan of the Company: Part I, One year grant; Part II, Two year grant; part III, Three year grant (incorporated by reference, filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-1927).
    (bb)   Conformed copy of letter agreement dated September 11, 2000, between the Company and Robert J. Keegan (incorporated by reference, filed as Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, File No. 1-1927).


(2)   Pursuant to Item 601 of Regulation S-K.

X-7


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
10   (cc)   Conformed copy of Restricted Stock Purchase Agreement, dated October 3, 2000, between the Company and Robert J. Keegan (incorporated by reference, filed as Exhibit 10.2 to the Company’s Quarterly Report on form 10-Q for the quarter ended September 30, 2000, File No. 1-1927).    
    (dd)   Conformed copy of the Stock Option Grant Agreement, dated October 3, 2000, between the Company and Robert J. Keegan (incorporated by reference, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, File No. 1-1927).    
    (ee)   Forms of Stock Option Grant Agreements in respect of options granted December 3, 2001, under the 1997 Performance Incentive Plan of the Company: Part I, Form of Grant Agreement for Incentive Stock Options; Part II, Form of Grant Agreement for non-qualified stock options; and Part III, form of Grant Agreement for non-qualified stock option with tandem stock appreciation rights.   10.4
    (ff)   Form of Performance Equity Grant Agreement in respect of grants made on December 3, 2001 under the 1997 Performance Incentive Plan of the Company.   10.5
    (gg)   Conformed Copy of Receivables Purchase Agreement, dated as of April 27, 2001 between the Company and Wingfoot A/R LLC (incorporated by reference, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, File No. 1-1927).    
    (hh)   Conformed Copy of Base Indenture, dated as of April 27, 2001, between Wingfoot A/R LLC and The Chase Manhattan Bank, as Indenture Trustee (incorporated by reference, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, File No. 1-1927).    
    (ii)   Conformed Copy of Series 2001-1 Indenture Supplement, dated as of April 27, 2001, among the Company, as collection agent, Wingfoot A/R LLC, the CP conduit purchasers funding agents and APA banks named therein and the Chase Manhattan Bank, as Administrative Agent and Indenture Trustee (incorporated by reference, filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, File No. 1-1927).    
12       Statement re Computation of Ratios    
    (a)   Statement setting forth the Computation of Ratio of Earnings to Fixed Charges.   12
21       Subsidiaries    
    (a)   List of subsidiaries of the Company at December 31, 2001.   21

X-8


Table of Contents

             
Exhibit            
Table            
Item           Exhibit
No. (2)       Description of Exhibit   Number
             
23       Consents of Experts and Counsel    
    (a)   Consent of PricewaterhouseCoopers LLP, independent accountants, to incorporation by reference of their report set forth on page X-23-1 of this Annual Report in certain Registration Statements of the Company on Forms S-3 and S-8.   23
24       Power of Attorney    
    (a)   Power of Attorney, dated December 3, 2001, authorizing Robert W. Tieken, C. Thomas Harvie, Stephanie W. Bergeron, John W. Richardson and Richard J. Kramer, and each of them, to sign this Annual Report on behalf of certain directors of the Company.   24
99       Additional Exhibits    
    (a)   The Company’s definitive Proxy Statement dated February 26, 2002 (portions incorporated by reference, filed with the Securities and Exchange Commission, File No. 1-1927)    

X-9 EX-4.1 3 l92979aex4-1.htm EX-4.1 COMMON STOCK SHARES EX-4.1 Common Stock Shares

 

EXHIBIT 4.1

     
COMMON STOCK   COMMON STOCK
 
M NUMBER   SHARES
[ GOODYEAR LOGO ]
 
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO
 
THE GOODYEAR TIRE & RUBBER COMPANY
 
THIS CERTIFICATE IS TRANSFERABLE IN THE CITY OF NEW YORK.

SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 382550 10 1

This is to Certify that

is the owner of

     FULL-PAID AND NON-ASSESSABLE SHARES WITHOUT PAR VALUE OF THE COMMON STOCK OF

The Goodyear Tire & Rubber Company transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.

     Witness the seal of the Corporation and the signatures of its duly authorized officers.

         
Dated       The Goodyear Tire & Rubber Company.
 
    /s/ C. T. Harvie
      SECRETARY
  /s/ Samir Gibara
      CHAIRMAN OF THE BOARD

     
COUNTERSIGNED AND REGISTERED:    
         EQUISERVE TRUST COMPANY, N.A.
BY
  TRANSFER AGENT
AND REGISTRAR.
 
    AUTHORIZED SIGNATURE.


 

THE GOODYEAR TIRE & RUBBER COMPANY

     THE GOODYEAR TIRE & RUBBER COMPANY WILL MAIL, WITHOUT CHARGE, TO THE REGISTERED HOLDER OF THIS CERTIFICATE A COPY OF THE EXPRESS TERMS (AS SET FORTH IN THE ARTICLES OF INCORPORATION AND THE CODE OF REGULATIONS OF THE CORPORATION) OF THE SHARES OF THE COMMON STOCK OF THE CORPORATION AND OF OTHER CLASSES OR SERIES OF SHARES, IF ANY, WHICH THE CORPORATION IS AUTHORIZED TO ISSUE WITHIN FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR, ADDRESSED TO THE SECRETARY OF THE CORPORATION, AKRON, OHIO 44316.

     This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between THE GOODYEAR TIRE & RUBBER COMPANY and FIRST CHICAGO TRUST COMPANY OF NEW YORK, as Rights Agent,dated as of June 4, 1996 (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of THE GOODYEAR TIRE & RUBBER COMPANY. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. THE GOODYEAR TIRE & RUBBER COMPANY will mail to the holder of this certificate a copy of the Rights Agreement (as in effect on the date of mailing) without charge promptly after a receipt of a written request therefor. Under certain circumstances, Rights which are or were beneficially owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement), and any subsequent holder of such Rights, may become null and void.

Explanation of Abbreviations:

     The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

             
TEN COM
TEN ENT
  as tenants in common
as tentants by the entireties
  JT TEN



UNIF GIFT
MIN ACT
  as joint tenants with right of survivorship and not as tenants in common


Uniform Gifts to Minors Act

     Additional abbreviations may also be used though not in the above list.


ASSIGNMENT

     For value received, ________________________ hereby sell, assign and transfer unto

(Please Print or Type Name and Address of Assignee)

     
Name   Insert here Social Security or Other
   Identifying Number of Assignee
 

Street
   
                                   SHARES

City, State and Zip Code
   
 

(Please Print or Type Name and Address of Assignee)
     
Name   Insert here Social Security or Other
   Identifying Number of Assignee
 

Street
   
                                   SHARES

City, State and Zip Code
   

of the capital stock represented by the within Certificate and do hereby irrevocably constitute and appoint ________________________
_______________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.

     
Issue certificate to the same owner as shown on the face of this certificate for any shares not assigned above   SHARES

Dated __________________________

 
X ____________________________________________________________
(The signature here must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatever.)
SIGNATURE GUARANTEED:
 
EquiServe Trust Company, N.A. is the successor Rights Agent to the above-referenced Agreement.

EX-4.2 4 l92979aex4-2.htm EX-4.2 APPOINTMENT OF SUCCESSOR RIGHTS AGENT EX-4.2 Appointment of Successor Rights Agent

 

EXHIBIT 4.2

APPOINTMENT OF SUCCESSOR RIGHTS AGENT

     KNOW ALL MEN BY THESE PRESENTS, that The Goodyear Tire & Rubber Company, an Ohio corporation (the “Company”), is a party to that certain RIGHTS AGREEMENT, June 4, 1996 (the “Rights Agreement”), between the Company and First Chicago Trust Company of New York (“First Chicago”) that in accordance with Section 2 of the Rights Agreement, First Chicago was appointed the Rights Agent under the Rights Agreement, to act in such capacity as agent for the Company in accordance with the terms and conditions of the Rights Agreement; that First Chicago has, by written notice to the Company resigned as the Rights Agent under the Rights Agreement effective as of October 31, 2001; and that, in accordance with the provisions of Section 21 of the Rights Agreement, the Company desires to appoint EQUISERVE TRUST COMPANY, N.A. (“EquiServe”) as the successor Rights Agent under the Rights Agreement, such appointment to be effective as of the opening of business on November 1, 2001;

     NOW, THEREFORE, in accordance with the provisions of Section 21 of the Rights Agreement, the Company does hereby appoint EquiServe as the Rights Agent under the Rights Agreement, effective at the opening of business on November 1, 2001, to act in such capacity as the successor to First Chicago on and after November 1, 2001 and until EquiServe shall resign, be removed or shall otherwise become incapable of acting. The Company does hereby advise and confirm unto EquiServe that, on or before the issuance of Rights Certificate pursuant to the Rights Agreement, the Company shall cause a written notice to be sent to each shareholder of record of the Company, and to every person entitled to receive a Rights Certificate, stating that EquiServe has been appointed by the Company as the successor Rights Agent effective as of the opening of business on November 1, 2001 and that each reference to First Chicago in the form of Right Certificate and in the legend on certificates for shares of the Common Stock shall hereafter be replaced by the following: “EquiServe Trust Company, N.A., successor Rights Agent” or, in the case of existing certificates, the legend shall be amended by adding: “EquiServe Trust Company, N.A., is the successor Rights Agent”. The Company also confirms that any and all correspondence, notices, demands, and other written instruments given or made by the Company will be sent by first class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

      EquiServe Trust Company, N.A.
525 Washington Blvd.
Jersey City, New Jersey 07310

     IN WITNESS WHEREOF, THE GOODYEAR TIRE & RUBBER COMPANY has caused this Appointment of Successor Rights Agent to be executed by its officers thereunto duly authorized as of this 1st day of November, 2001.

     
[CORPORATE SEAL]   THE GOODYEAR TIRE & RUBBER COMPANY
 
 
Attest:   /s/ Bertram Bell   By:  /s/ Richard J. Kramer

 
Bertram Bell
Assistant Secretary
  Richard J. Kramer,
Vice President Corporate Finance

4.2-1


 

ACCEPTANCE OF APPOINTMENT AS RIGHTS AGENT

     KNOW ALL MEN BY THESE PRESENTS, that EquiServe Trust Company, N.A., (“EquiServe”):

     (1)  Has received a copy of the Rights Agreement, dated as of June 4, 1996 (the “Rights Agreement”) between The Goodyear Tire & Rubber Company (the “Company”) and First Chicago Trust Company, N.A. (“First Chicago”), certified as true, correct and complete by the Secretary of the Company; and

     (2)  Represents that it is a corporation duly organized and doing business under the laws of the United States, in good standing and having its principal office in the State of New Jersey, which is authorized under the laws of the United States to exercise corporate trust powers, is authorized to do business as a trust company in the State of New York with an address of 100 Williams Street, Galleria, New York 10038, and is subject to supervision or examination by Federal authorities and authorities of the States of New Jersey and New York, and has a combined capital and surplus of in excess of $50 million; and, therefore, in accordance with Section 21 of the Rights Agreement, is authorized to act as the Rights Agent thereunder, and

     (3)  Does hereby accept the appointment by the Company as the Rights Agent under the Rights Agreement, as the successor to First Chicago, effective as of the opening of business on November 1, 2001; and

     (4)  Does hereby advise the Company that any and all correspondence, notices, demands and other written instruments shall be sufficiently given or made to EquiServe in its capacity as the Rights Agent under the Rights Agreement if sent by first class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

      EquiServe Trust Company, N.A.
525 Washington Blvd.
Jersey City, New Jersey 07310

     IN WITNESS WHEREOF, EQUISERVE TRUST COMPANY, N.A. has caused this Acceptance of Appointment as Rights Agent to be duly executed by an officer thereunto duly authorized as of the 1st day of November, 2001.

   
EQUISERVE TRUST COMPANY, N.A
  
  
By: /s/ Thomas A. Ferrari

Senior Vice President

4.2-2 EX-10.1 5 l92979aex10-1.htm EX-10.1 GOODYEAR SUPPLEMENT PENSION PLAN EX-10.1 Goodyear Supplement Pension Plan

 

EXHIBIT 10.1

GOODYEAR SUPPLEMENTARY PENSION PLAN

January 1, 1995 Restatement

 

I.        ELIGIBLE EMPLOYEES

    Each employee of The Goodyear Tire & Rubber Company and its subsidiary and affiliated companies (collectively hereinafter sometimes called “Goodyear Companies”) who is a participant in the Retirement Plan for Salaried Employees, or a comparable Goodyear plan for salaried employees (herein collectively referred to as “RPSE”), and has been selected from time to time by the Compensation Committee of the Board of Directors as a participant in this Supplementary Pension Plan, shall be eligible to participate either as a participant for Group I or Group II benefits as determined by the Compensation Committee and shall participate in this Plan to the extent of the benefits provided herein (hereinafter referred to as “participant”).

II.      DEFINITIONS

  (a)   All terms used in this Plan which are defined in the RPSE shall have the same meanings herein as therein, unless otherwise expressly provided in this Plan.
 
  (b)   For establishing Group I Benefits under this Plan, Monthly Retirement Income shall mean the sum of an employee’s Non-Contributory Pension calculated in the manner provided in the RPSE and his Contributory Pension calculated in the manner provided under Section III of this Plan (without regard to Section 415 of the Code) except that for such purpose Adjusted Earnings shall consist of an amount equal to his highest average monthly earnings for any period of 60 consecutive months within the 120 months immediately preceding the participant’s retirement or death, whichever shall first occur.
 
  (c)   For an employee entitled to Group I Benefits under this Plan who retirees or dies before retirement or other termination of employment, the “Monthly Base Amount” shall mean 1/12 of Covered Compensation in the year of retirement.
 
  (d)   For establishing Group II Benefits under this Plan, an employee’s Monthly Retirement Income shall mean the sum of his Non-Contributory Pension calculated in the manner provided in the RPSE as amended May 1, 1985, and his Contributory Pension calculated in the manner provided under Section IV of this Plan (without regard to Section 415 of the Code) except that for such purpose Adjusted Earnings shall consist of an amount equal to his highest average monthly Earnings for any period of 60 consecutive months within the 120 months immediately preceding his retirement or death, whichever is earlier. “Monthly Base Amount” shall be 90 percent of 1/12th of the average of the Federal Social Security taxable wage base as in effect during said 60 consecutive month period.

III.      GROUP I BENEFITS

  (a)   Amount of Contributory Pension. Contributory Pension shall be an amount equal to the product of:

      (i) Employee Adjusted Earnings in excess of Monthly Base Amount.

multiplied by

      (ii) 2.2 percent for each of employee’s first 10 years of Continuous Service, plus

X-10.1-1


 

      1.6 percent for each of employee’s next 10 years of Continuous Service, plus
 
      1.0 percent for each of employee’s next 10 years of Continuous Service, plus
 
      0.6 percent for each year of Continuous Service in excess of 30.

  (b)   Amount of Supplementary Pension at Normal Retirement. The monthly Supplementary Pension payable to an eligible employee for Group I benefits who retires on his normal retirement date under the RPSE shall be determined as the excess, if any, of (i) over (ii) where:

      (i) is the employee’s total Monthly Retirement Income, and
 
      (ii) is the employee’s retirement benefit actually determined under the sum of Non-Contributory and Contributory Pensions calculated in the manner provided in the RPSE.

IV.    GROUP II BENEFITS

  (a)   Amount of Contributory Pension. Contributory Pension shall be equal to the greater of:

      (i) 1/12th of an amount equal to 60 percent of the aggregate contributions made by him under the Plan; or
 
      (ii) an amount equal to the product of

 
(A) his Adjusted Earnings in excess of his Monthly Base Amount, multiplied by
 
(B) 2.4 percent for each of his first 10 years of Continuous Service, plus
 
1.2 percent for each of his next 10 years of Continuous Service, plus
 
0.6 percent for each year of Continuous Service in excess of 30;
 
subject, however, to a maximum of 2.2 percent for each year of Continuous Service if he has less than 15 years of Continuous Service.

  (b)   Amount of Supplementary Pension at Normal Retirement. The monthly Supplementary Pension payable to an eligible employee for Group II benefits who retires on his normal retirement date under the RPSE shall be determined as the excess, if any, of (i) over (ii) where:

      (i) is the employee’s total Monthly Retirement Income, and
 
      (ii) is the employee’s retirement benefit actually determined under the sum of Non-Contributory and Contributory Pensions calculated in the manner provided in the RPSE.

V.      AMOUNT OF SUPPLEMENTARY PENSION AT EARLY RETIREMENT

    The monthly Supplementary Pension payable to a participant who retires before attaining normal retirement age under the RPSE shall first be computed in the manner provided by Section III or IV depending upon the participant’s Group, taking into account only Continuous Service and Adjusted Earnings to the actual date of early retirement. Such Supplementary Pension shall then be reduced by 4/10 percent for each entire calendar month by which the date of retirement precedes the first day of the month next following the month in which the day preceding the participant’s 62nd birthday occurs.

X-10.1-2


 

VI.     AMOUNT OF SUPPLEMENTARY PENSION AT DISABILITY RETIREMENT

    The monthly Supplementary Pension payable to a participant who retires on a deferred disability pension under the RPSE shall be computed in the manner provided by Section III or IV depending upon the participant’s Group, taking into account only Continuous Service and Adjusted Earnings to the actual date of disability retirement.

VII.   CALCULATION OF BENEFITS

    Participants in this Plan designated as Group I participants who were also participants in this Plan as of June 1, 1988, shall have their benefits calculated under the Group II benefit program as well as under the Group I benefit program and shall be entitled to receive the higher benefit.

VIII.  CHANGE IN SUPPLEMENTARY BENEFIT

    The retirement benefit provided under this Plan is subject to reduction after a participant’s retirement based on increases in his benefits under the RPSE due to Section 415 limit changes. Even though a change in the supplementary benefit may occur as provided in this Section, no change will occur to the participant’s aggregate benefit under this Plan and the RPSE. The Compensation Committee of the Board of Director. may, in its discretion, add years to a participant’s years of service for purposes of calculating the participant’s Supplementary Pension.

IX.    OPTIONAL METHODS OF PAYMENT

    If an optional method of payment applies with respect to an employee’s pension under the R.PSE, such optional method of payment shall automatically apply to any Supplementary Pension for which he may be eligible under this Plan. His Supplementary Pension shall be adjusted and paid in the same manner as his pension payable under the RPSE is adjusted and paid on account of such option.

X.      SURVIVOR BENEFIT

    If an eligible employee dies before retirement or other termination of employment and a regular survivor benefit is payable to his surviving spouse under the RPSE, a regular survivor benefit shall also be payable to such surviving spouse under this Supplementary Pension Plan. Any such regular survivor benefit payable under this Plan shall be computed in the same manner as the regular survivor benefit under the RPSE but shall be based on the Supplementary Pension payable under this Plan.

XI.    PAYMENT OF BENEFITS

  (a)   All payments shall be made by the Trustee under the Trust Agreement for Goodyear Supplementary Pension Plan to the extent the assets held by such Trustee are sufficient to pay Supplementary Pension Benefits hereunder and, to the extent such assets are not sufficient or in the event the Trustee is precluded from making payments due to the insolvency of The Goodyear Tire & Rubber Company or an employer, such payments shall be made by The Goodyear Tire & Rubber Company from its general assets or by the employer from its general assets.
 
  (b)   All Supplementary Pension Benefits provided for hereunder shall normally be payable in monthly installments. The provision of the RPSE regarding the dates of first and last payments of any pension or other amounts payable in installments shall be applicable to amounts payable under this Plan.

X-10.1-3


 

  (c)   During the period beginning 120 days prior to a participant’s retirement and ending 30 days prior to a participant’s retirement, the participant may elect to receive a lump sum settlement of the Supplementary Pension Benefits payable under this Plan, subject to the following:

 
(i) The election to receive a lump sum settlement must meet the requirements of Article IX of this Plan.
 
The election to receive a lump sum settlement must be approved and accepted by the Compensation Committee of the Board of Directors, which shall approve such election only if it determines, in its sole discretion, that a lump sum settlement is in the best interests of the participant and his spouse.
 
(iii) The election to receive a lump sum settlement, once approved, shall be irrevocable.
 
(iv) The amount of the lump sum settlement shall be computed by applying the rate in effect under the RPSE at the
       time the lump sum settlement is to be made and the other actuarial assumptions contained in the RPSE in effect
       at that time.

  (d)   An employee’s beneficiary for the purpose of this Plan shall be the beneficiary designated by him under the RPSE. The provisions of the R.PSE with respect to amounts payable to a surviving spouse or beneficiary and selection of a beneficiary shall apply to amounts payable under this Supplementary Pension Plan and the selection of a beneficiary under this Plan.

XII.   ADMINISTRATION OF HOSPITAL INSURANCE TAXES

    Due to the enactment of the Omnibus Budget Reconciliation Act of 1993, effective January 1, 1994, the benefits payable under this Plan became subject to Hospital Insurance taxes. The Company reserves the right to administer those taxes pursuant to its good faith interpretation of the applicable laws and its business judgment. Those taxes may be withheld from monthly benefits payable hereunder or may be deducted from lump-sum payments due hereunder. It may be necessary in administering such taxes to calculate the lump-sum present value of the benefit and pay taxes on such value, regardless of method of payment, in which event the Participant may be required to pay the applicable taxes at the time they are deemed to be due, prior to the time full payment of the benefits hereunder is received. The Company reserves the right to deduct taxes paid by it on the lump-sum present value of the benefit from monthly benefit payments until recouped if other arrangements are not made for payment of taxes by the Participant.

XIII.  FORFEITURE OF BENEFITS

    The right of any participant to a benefit under this Plan will be terminated, or, if payment thereof has begun, all further payments will be discontinued and forfeited in the event such participant (i) at any time subsequent to the effective date wrongfully discloses any secret process or trade secret of the Goodyear Companies, or (ii) engages, either directly or indirectly, as an officer, trustee, employee, consultant, partner, or substantial shareholder, on his own account or in any other capacity, in a business venture that, within the ten-year period following his retirement, sells products in competition with products manufactured or sold by the Goodyear Companies. A participant who applies for a lump sum benefit as provided under Article XI of the Plan shall be required at the time of such application to warrant that such participant will not commit any conduct which would cause a forfeiture of his benefits and also agree to refund to The

X-10.1-4


 

    Goodyear Tire & Rubber Company his lump sum benefit in the event his conduct constitutes a forfeiture of benefits as provided in this Article of the Plan.

XIV.    ADMINISTRATION

  (a)   The Goodyear Tire & Rubber Company shall be the general administrator of this Plan. The routine administration of the Plan, except as otherwise provided in Section XVI, shall be by the Pension Board which shall have authority to make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with this Plan.
 
  (b)   In the administration of this Plan, the Pension Board may, from time to time, employ agents and delegate to them such administrative duties as it sees fit and may from time to time consult with counsel who may be counsel to the Company.
 
  (c)   The decision or action of the Pension Board in respect of any. question arising Out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations thereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

XV.   TERMINATION, SUSPENSION OR AMENDMENT

    The Board of Directors may, in its sole discretion, terminate, suspend or amend this plan at any time or from time to time, in whole or in part. However, no such termination, suspension or amendment shall adversely affect (1) the benefits of any employee who has theretofore retired or (2) the right of any then current employee to receive upon retirement, or of his surviving spouse or beneficiary to receive upon his death, the amount as a Supplementary Pension or survivor benefit, as the case may be, to which such person would have been entitled under this Plan prior to its termination, suspension or amendment taking into account the employee’s Continuous Service and Adjusted Earnings calculated as of the date of such termination, suspension or amendment; provided, however, that this sentence shall not apply to any such termination, suspension or amendment certified by the Board of Directors as having been authorized by them by reason of a finding by said Board that a change has occurred in the laws (or the interpretation of such laws) applicable to the Company, this Plan or the eligible employees.

XVI.  ADJUSTMENTS IN SUPPLEMENTARY PENSION FOLLOWING RETIREMENT

    If the Pension payable under the RPSE to any employee is increased following his retirement as a result of a general increase in the pension payable to retired employees under these Plan, which becomes effective after January 1, 1978, the amount of the Supplementary Pension thereafter payable to such employee under this Supplementary Pension Plan shall be determined by the Board of Directors. In no event shall the amount equal to the sum of the employee’s retirement benefits the employee receives at retirement under the RPSE and under this Supplementary Pension Plan be reduced by any adjustments in the Supplementary Pension following retirement.

XVII.  GENERAL CONDITIONS

  (a)   No pension or other benefit provided under the Plan may be alienated, sold, transferred, assigned, pledged or encumbered, in whole or in part; nor shall any such pension or other benefit be subject to any claim of any creditor or to garnishment, attachment or other legal process; and any attempt to accomplish the same shall be void. All pensions and other benefits shall be payable in United States dollars.

X-10.1-5


 

  (b)   The adoption and maintenance of the Plan shall not be deemed to constitute a contract with any employee or to be consideration for, an inducement to, or a condition of, the employment of any employee. None of the Goodyear Companies shall have any liability to provide pensions or other benefits under the Plan except as expressly provided herein, and no employee, unless and until his retirement or other termination of employment occurs while the Plan is in full force and effect and under conditions or eligibility for pension or other benefit, shall have any right to a pension or other benefit under the Plan. Employment rights shall not be enlarged or affected by reason of any provision of the Plan.
 
  (c)   The obligation of the Goodyear Companies under the Plan to provide an employee or his beneficiary with a Supplementary Pension merely constitutes the unsecured promise of the Goodyear Companies to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Goodyear Companies or the Trustee under the Trust Agreement for Goodyear Supplementary Pension Plan.
 
  (d)   Notwithstanding anything to the contrary contained in the Plan, (i) an employee’s right to a normal retirement pension under the Plan shall be nonforfeitable (except as provided in Section XIII) upon and after the date he attains his normal retirement age, and (ii) in the event of the termination or a partial termination of the Plan, the rights of all employees who are affected by such termination to benefits accrued to the date of such termination, shall be nonforfeitable.

     EXECUTED at Akron, Ohio, this 8th day of April, 1997.

 
THE GOODYEAR TIRE & RUBBER COMPANY
 
 
By: /s/ Samir G. Gibara

Chairman of the Board, Chief Executive Officer
and President
 
 
Attest: /s/ James Boyazis

Secretary

X-10.1-6


 

First Amendment
to
The Goodyear Supplementary Pension Plan
January 1, 1995 Restatement

 

The Goodyear Supplementary Pension Plan amended and restated as of January 1, 1995 is hereby further amended effective January 1, 2001 as follows:

1.   That every instance of the term “Adjusted Earnings” be changed to “Average Earnings” which is to have the same definition as it has in The Goodyear Tire & Rubber Company Salaried Pension Plan (“Salaried Pension Plan”).
 
2.   That every instance of the term “Monthly Base Amount” is changed to “Break Point” which is to have the same definition as it has in the Salaried Pension Plan.
 
3.   That the Chief Executive Officer is given authority with respect to any participant other than himself and the Compensation Committee is given authority with respect to the Chief Executive Officer as a participant to designate for any given year that the earnings of such participant will be calculated by substituting the participant’s target bonus amount in place of the actual Performance Recognition Plan bonus paid.
 
4.   That participants be allowed to elect to have their benefit paid either as a lump sum, an annuity or as a combination of a lump sum and an annuity independent of the form of payment that their benefit in the Salaried Pension Plan is paid.

      Executed at Akron, Ohio, this 20th day of December, 2001.

 
The Goodyear Tire & Rubber Company
 
 
By: /s/ Samir G. Gibara

Chairman of the Board and Chief Executive Officer
 
ATTEST:
 
 
/s/ Bertram Bell

X-10.1-7 EX-10.2 6 l92979aex10-2.htm EX-10.2 STOCK OPTION PLAN EX-10.2 Stock Option Plan

 

EXHIBIT 10.2

THE GOODYEAR TIRE & RUBBER COMPANY
STOCK OPTION PLAN
FOR
HOURLY BARGAINING UNIT EMPLOYEES AT DESIGNATED LOCATIONS
(AS AMENDED DECEMBER 4, 2001)

 

1.   GENERAL PROVISIONS.

  (a)   Adoption; Effective Date. The Plan has been adopted by the Board of Directors of The Goodyear Tire & Rubber Company on and effective as of December 4, 2000.
 
  (b)   Purpose. The purpose of the Plan is to grant options to purchase shares of the Common Stock of the Company to eligible hourly employees of the Company and designated domestic subsidiaries at Designated Locations who are members of one or more of the local unions of the United Steelworkers of America, thereby strengthening the common interests of the shareholders of the Company and such employees in the long term growth, profitability and success of the Company.
 
  (c)   Term. The Plan shall remain in effect until September 30, 2001, unless sooner terminated by the Board of Directors. Termination of the Plan shall not affect stock options granted under the Plan which are then outstanding.

2.   DEFINITIONS. For the purposes of the Plan, the following terms shall have the following meanings.

  (a)   “Active Employee” means a full-time hourly employee of the Company or a Designated Subsidiary who is also a member of, and/or represented by, one or more of the Local Unions and is, on the relevant date, on the active payroll of the Company or a Designated Subsidiary.
 
  (b)   “Average Annual Hours Worked” means, with respect to the period and to the Eligible Employee in respect of which a determination thereof is being or to be made, the average of the hours worked by such Eligible Employee during the two years (i) ended October 31 in the three year period ended October 31, 2000 (in the case of a determination made pursuant to Section 5 (a) of the Plan) or (ii) ended August 31 in the three year period ended August 31, 2001 (in the case of a determination made pursuant to Section 5(b) of the Plan), during which the Eligible Employee worked the most hours. In respect of each Eligible Employee who has a continuous service date as a Bargaining Unit Employee that is less than two years and more than six months prior to October 31, 2000 or August 31, 2001, as the case may be, the hours worked for the year during which his or her continuous service date occurs shall be determined by annualizing the average hours worked by such Eligible Employee during each full calendar month during the period beginning on his or her continuous service date and ending on the next following October 31 or August 31, as the case may be. If the continuous service date of the Eligible Employee is one year or less, but more than six (6) months, prior to October 31, 2000 or August 31, 2001, as the case may be, then the “Average Annual Hours Worked” shall be equal to the actual hours worked in the case of a full year or the annualized average hours worked, determined as provided in the preceding sentence, in the case of a partial year.
 
  (c)   “Bargaining Unit Agreement” means any of, and “Bargaining Unit Agreements” means and includes all of, the Company-Wide Agreement (including the related Supplemental Agreement(s)), the Fayetteville Agreement, the Freeport

X-10.2-1


 

 
Agreement, the Tyler Agreement, the Buffalo General Agreement, and the Huntsville General Agreement, as the case may be, each as in effect on and as of December 4, 2000.

  (d)   “Bargaining Unit Employee” means any person who, at the relevant time, is (i) an Employee of the Company or a Designated Domestic Subsidiary at one of the Designated Locations and (ii) a member of, and/or represented by, the Local Union representing Employees at such Designated Location.
 
  (e)   “Board of Directors” means the Board of Directors of the Company.
 
  (f)   “Buffalo General Agreement” means the General Agreement, dated and effective as of October 25, 2000, between Goodyear Dunlop Tires North America, Ltd and Local Union No. 135 of the USWA, as in effect on and as of December 4, 2000.
 
  (g)   “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor statute thereto, together with the published rulings, regulations and interpretations duly promulgated thereunder.
 
  (h)   “Common Stock” means the Common Stock, without par value, of the Company, or any security issued by the Company in substitution or exchange therefore or in lieu thereof.
 
  (i)   “Company” means The Goodyear Tire & Rubber Company, an Ohio corporation, or any successor corporation.
 
  (j)   “Company-Wide Agreement” means the Agreement, dated effective October 25, 2000, together with the “Supplemental Agreement” relating to a Designated Location among the Company, the USWA and the relevant Local Union (or Unions, as the case may be), as in effect on and as of December 4, 2000.
 
  (k)   “Designated Location” means any of, and “Designated Locations” means two or more or all of, the tire and/or rubber products manufacturing facilities of the Company and its Designated Subsidiaries at the following locations: Akron (Plant 2), Ohio: Gadsden, Alabama; St. Marys, Ohio; Lincoln, Nebraska; Topeka, Kansas; Danville, Virginia; Marysville, Ohio; Union City, Tennessee; Sun Prairie, Wisconsin; Fayetteville, North Carolina; Freeport, Illinois; Tyler, Texas; Buffalo, New York; and Huntsville, Alabama.
 
  (l)   “Designated Subsidiary” means any of, and “Designated Subsidiaries” means any two or more or all of, Goodyear Dunlop Tires North America, Ltd., an Ohio limited liability company, and any successor entity, and any other domestic corporation or other entity so designated in writing by the Board of Directors.
 
  (m)   “Eligible Employee” means any person who (i) satisfies the eligibility criteria set forth at Section 6(a) of the Plan at December 4, 2000, or (ii) satisfies the eligibility criteria set forth at Section 6(b) of the Plan at September 3, 2001.
 
  (n)   “Employee” means each person who, at the relevant time, is on the active payroll of, or on Layoff or a Leave of Absence from, an Employer at one of the Designated Locations.
 
  (o)   “Employer” means the Company and/or a Designated Subsidiary.
 
  (p)   “Fair Market Value” means, in respect of any date on or as of which a determination thereof is being or to be made, the average of the high and low per share sale prices of the Common Stock reported on the New York Stock Exchange Composite Transaction tape on such date, or, if the Common Stock was not traded

X-10.2-2


 

 
on such date, on the next day on which sales of the shares of the Common Stock were reported on the New York Stock Exchange Composite Transactions tape.

  (q)   “Fayetteville Agreement” means the Agreement, dated and effective as of October 25, 2000, between the Company (as the successor to the Kelly-Springfield Tire Company) and Local Union No. 959 of the USWA, as in effect on and as of December 4, 2000.
 
  (r)   “Freeport Agreement” means the Agreement, dated and effective as of October 31, 2000, between the Company (as the successor to The Kelly-Springfield Tire Company) and Local Union No. 745 of the USWA, as in effect on and as of December 4, 2000.
 
  (s)   “Grantee” means any Eligible Employee of the Company who is granted a Stock Option under the Plan and has entered into a grant agreement in respect of such Stock Option, which Stock Option remains outstanding.
 
  (t)   “Huntsville General Agreement” means the General Agreement, dated and effective as of October 25, 2000, between Goodyear Dunlop Tires North America, Ltd and Local Union No. 915 of the USWA, as in effect on and as of December 4, 2000.
 
  (u)   “Layoff” shall mean: (i) with respect to Bargaining Unit Employees covered by the Company-Wide Agreement, a layoff with recall rights as described at Section 1(a) of Article X of the Company-Wide Agreement (and at any applicable section of the relevant “Supplemental Agreement”); (ii) with respect to Bargaining Unit Employees covered by the Fayetteville Agreement, a layoff with recall rights as described at Section 8 of Article VII of the Fayetteville Agreement; (iii) with respect to Bargaining Unit Employees covered by the Freeport Agreement, a layoff with recall rights as described at Section 8 of Article VII of the Freeport Agreement; (iv) with respect to Bargaining Unit Employees covered by the Tyler Agreement, a layoff with recall rights as described at Section 13 and Section 14 of Article VII of the Tyler Agreement; (v) with respect to Bargaining Unit Employees covered by the Buffalo General Agreement, a layoff with recall rights as described at Sections 7.08 through 7.15, inclusive, of Article VII of the Buffalo General Agreement; and (vi) with respect to Bargaining Unit Employees covered by the Huntsville General Agreement, a layoff with recall rights as described at Sections 9.09 and 9.10 of the Huntsville Agreement.
 
  (v)   “Leave of Absence” shall mean: (i) with respect to Bargaining Unit Employees covered by the Company-Wide Agreement, a leave of absence authorized by the Employer as provided for by the provisions of Section 1(b) of Article X of the Company-Wide Agreement (and at any applicable section of the relevant “Supplemental Agreement”); (ii) with respect to Bargaining Unit Employees covered by the Fayetteville Agreement, a leave of absence authorized by the Employer as provided for by the provisions of Section 3 of Article VII of the Fayetteville Agreement; (iii) with respect to Bargaining Unit Employees covered by the Freeport Agreement, a leave of absence authorized by the Employer as provided for by the provisions of Section 4 of Article VII of the Tyler Agreement; (v) with respect to Bargaining Unit Employees covered by the Buffalo General Agreement, a leave of absence authorized by the Employer as provided for by the provisions of Section 7.18 of the Buffalo General Agreement; and (vi) with respect to Bargaining Unit Employees covered by the Huntsville General Agreement, a leave of absence authorized by the Employer as provided for by the provisions of Section 9.11 of the Huntsville General Agreement.

X-10.2-3


 

  (w)   “Local Union” means any one of , and “Local Unions” means any two or more or all of, the local unions of the United Steelworkers of America, A.F.L-C.I.O.-C.L.C. representing certain Employees of the Employers at the respective Designated Locations listed below:

         
Designated Location   Local Union

 
Akron, Ohio
  Local 2
Gadsden, Alabama
  Local 12
Tonawonda (Buffalo), New York
  Local 135
St Marys, Ohio
  Local 200
Lincoln, Nebraska
  Local 286
Topeka, Kansas
  Local 307
Freeport, Illinois
  Local 745
Tyler, Texas
  Local 746
Danville, Virginia
  Local 831
Marysville, Ohio
  Local 843
Union City, Tennessee
  Local 878
Sun Prairie, Wisconsin
  Local 904
Huntsville, Alabama
  Local 915
Fayetteville, North Carolina
  Local 959

  (x)   “P&I Agreement” means any of the, and “P&I Agreements” means and includes any two or more or all of, the following agreements: (i) the Pension, Insurance and Service Award Agreement, dated effective October 25, 2000, among the Company the USWA and Local Unions Nos. 2, 12, 200, 286, 307, 831, 843, 878 and 904 (the “Goodyear P&I Agreement”); (ii) the Pension, Insurance and Service Award Agreement, dated effective May 9, 1997 (as amended), between the Company (as the successor of The Kelly-Springfield Tire Company), the USWA and Local Union No. 959 (the “Fayetteville P&I Agreement”), (iii) the Pension, Insurance and Service Award Agreement, dated September 7, 1997 (as amended), between the Company, the USWA and Local Union No. 746 (the “Tyler P&I Agreement”), (iv) the Pension, Insurance and Service Award Agreement, dated May 9, 1997 (as amended), between the Company, the USWA and Local Union No. 745 (the “Freeport P&I Agreement”), (v) the Agreement on Pension, Service Award and Insurance Benefits between Goodyear Dunlop Tires North America, Ltd. and Local Union No. 135, dated October 27, 2000 (the “Buffalo P&I Agreement”); and (vi) the Agreement for Pension, Service Award and Insurance Benefits between Goodyear Dunlop Tires North America, Ltd. and Local Union No. 915, dated October 27, 2000 (the “Huntsville P&I Agreement”).
 
  (y)   “Plan” means The Goodyear Tire & Rubber Company Stock Option Plan for Hourly Bargaining Unit Employees at Designated Locations.
 
  (z)   “Retirement” shall, for the purposes of the Plan, be deemed to have occurred with respect to any Grantee when such Grantee ceases to be an Employee of an Employer and is entitled to receive a Normal Retirement Pension, a Disability Retirement Pension or an Early Retirement Pension in accordance with the applicable provisions of the P&I Agreement that applies to such Grantee.
 
  (aa)   “Seniority Status” shall have the meaning specified at: (i) the first two paragraphs of Section 1 of Article X, and at subsection (d) of Section 1 of Article X, of the Company-Wide Agreement with respect to Bargaining Unit Employees covered by the Company-Wide Agreement; (ii) Article VIII of the Freeport Agreement with respect to Bargaining Unit Employees covered by the Freeport Agreement; (iii) Article VII of the Fayetteville Agreement with respect to Bargaining Unit Employees covered by the Fayetteville Agreement; (iv) Article VIII of the Tyler Agreement with respect to Bargaining Unit Employees covered by the Tyler

X-10.2-4


 

 
Agreement; (v) Section 9.01 of the Huntsville General Agreement with respect to Bargaining Unit Employees covered by the Huntsville General Agreement; or (vi) Article VII of the Buffalo General Agreement with respect to Bargaining Unit Employees covered by the Buffalo General Agreement.

  (bb)   “Stock Option” means any option to purchase shares of Common Stock granted pursuant to the provisions of the Plan, each of which shall be a nonstatutory stock option not governed by Section 421 or 422 of the Code.
 
  (cc)   “Tyler Agreement” means the Agreement, dated and effective as of October 25, 2000, between the Company and Local Union No. 746 of the USWA, as in effect on and as of December 4, 2000.
 
  (dd)   “USWA” means the United Steelworkers of America, A.F.L.-C.I.O.-C.L.C.

3.   SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

  (a)   Number of Shares Issuable Under the Plan. The maximum number of shares of Common Stock which may be issued pursuant to the Plan, subject to adjustment as provided in Section 3(b) of the Plan, shall be three million five-hundred thousand (3,500,000). The shares of Common Stock which may be issued under the Plan may be authorized and unissued shares or issued shares which have been reacquired by the Company. No fractional share of the Common Stock shall be issued under the Plan. Any fractional share of Common Stock shall be settled in cash at the Fair Market Value thereof on the relevant date.
 
  (b)   Adjustments Upon Changes in Capital Structure. In the event of any change in the capital structure, capitalization or Common Stock of the Company, such as a stock dividend, stock split, recapitalization, merger, consolidation, split-up, combination or exchange of shares or other form of reorganization, or any other change affecting the Common Stock, such proportionate adjustments, if any, as the Board of Directors in its discretion may deem appropriate to reflect such change may be made with respect to: (i) the maximum number of shares of Common Stock which may be (1) issued pursuant to the Plan, and (2) the subject of, or issued pursuant to, any Stock Option granted pursuant to the Plan; (ii) the number of shares of Common Stock subject to any outstanding Stock Option; (iii) the per share exercise price in respect of any outstanding Stock Option; and (iv) any other term or condition of any Stock Option affected by any such change.

4.   ADMINISTRATION.

  (a)   The Committee. The Plan shall be administered by a committee (the “Committee”) to be appointed from time to time by the Board of Directors. The Committee shall be comprised of at least five members. The Executive Vice President and Chief Financial Officer, the Senior Vice President for Global Human Resources and the Senior Vice President and General Counsel of the Company shall be permanent members of the Committee. Members of the Committee shall serve at the pleasure of the Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. A majority of the members of the Committee shall constitute a quorum for the transaction of business and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of the Committee. Any one or more members of the Committee may participate in a meeting by conference telephone or similar means where all persons participating in the meeting can hear and speak to each other, which participation shall constitute presence in person at such meeting. Action approved in writing by a majority of the members of the Committee then serving shall be fully

X-10.2-5


 

 
as effective as if the action had been taken by unanimous vote at a meeting duly called and held. Except as may be approved by the Board of Directors, the form of grant agreement to be used in respect of each Stock Option granted under this Plan shall be as set forth at Annex I (in the case of Stock Options granted on December 4, 2000) and Annex II (in this case of Stock Options granted on September 3, 2001) to the Plan.

  (b)   Committee Powers. The Committee shall have full power and authority to administer the Plan in accordance with its terms. The powers of the Committee include, but are not limited to, the power to: (i) identify to the Board of Directors the Eligible Employees to receive Stock Options; (ii) construe and interpret the Plan and all Stock Option grant agreements and make any determination of fact incident to the operation of the Plan; (iii) promulgate, amend and rescind rules and regulations relating to the implementation, operation and administration of the Plan; (iv) delegate to other persons the responsibility for performing administrative or ministerial acts in furtherance of the Plan; (v) engage the services of persons and firms in furtherance of the Plan’s activities; and (vi) make all other determinations and take all other actions as the Committee may deem necessary or advisable for the administration of the Plan.
 
  (c)   Committee’s Decisions Final. Any determination, decision or action of the Committee in connection with the construction, interpretation, administration or application of the Plan, and of any Stock Option grant agreement, shall be final, conclusive and binding upon all Grantees, and all persons claiming through Grantees, affected thereby.

5.   STOCK OPTIONS TO BE GRANTED.

       
  (a) On December 4, 2000, the Company will grant Stock Options to Eligible Employees as follows:
 
  (i) Each Eligible Employee at December 4, 2000 (as defined at Section 6(a) of the Plan) whose Average Annual Hours Worked in respect of the three year period ended October 31, 2000 was more than 2,500 hours will be granted a Stock Option in respect of 200 shares of Common Stock.
 
  (ii) Each Eligible Employee at December 4, 2000 (as defined at Section 6 (a) of the Plan) whose Average Annual Hours Worked in respect of the three year period ended October 31, 2000 was 2,500 hours or fewer, but not fewer than 1,500 hours, will be granted a Stock Option in respect of 160 shares of Common Stock.
 
  (iii) Each Eligible Employee at December 4, 2000 (as defined at Section 6(a) of the Plan) whose continuous service date is on or after June 5, 2000 or whose Average Annual Hours Worked in respect of the three year period ended October 31, 2000 was fewer than 1,500 hours will be granted a Stock Option in respect of 120 shares of Common Stock.
 
  (b) On September 3, 2001, the Company will grant Stock Options to Eligible Employees as follows:
 
  (i) Each Eligible Employee at September 3, 2001 (as defined at Section 6(b) of the Plan) whose Average Hours Worked in respect of the three year period ended August 31, 2001 was more than 2,500 hours will be granted a Stock Option in respect of 100 shares of Common Stock.

X-10.2-6


 

       
  (ii) Each Eligible Employee at September 3, 2001 (as defined at Section 6(b) of the Plan) whose Average Annual Hours Worked in respect of the three year period ending August 31, 2001 was 2,500 hours or fewer, but not fewer than 1,500 hours, will be granted a Stock Option in respect of 80 shares of Common Stock.
 
  (iii) Each Eligible Employee at September 3, 2001 (as defined at Section 6(b) of the Plan) whose continuous service date is on or after March 4, 2001 or whose Average Annual Hours Worked in respect of the three year period ending August 31, 2001 was fewer than 1,500 hours will be granted a Stock Option in respect of 60 shares of Common Stock.

6.   ELIGIBILITY REQUIREMENTS.

       
  (a) Each Employee of the Company or a Designated Subsidiary at December 4, 2000 who:
 
       
  (i) is a Bargaining Unit Employee; and
 
  (ii) has Seniority Status; and
 
  (iii) is an Active Employee, on Layoff or on a Leave of Absence;

 
shall be an “Eligible Employee” at December 4, 2000 and shall receive the grant of a Stock Option pursuant to Section 5(a) of the Plan for that number of shares indicated at Section 5(a) of the Plan, based on such Eligible Employee’s Average Annual Hours Worked; provided, however, that the Stock Option granted to any Eligible Employee shall automatically terminate on July 5, 2001 if such Eligible Employee is not an Active Employee (x) for a period of at least thirty (30) consecutive calendar days during the 180-day period commencing December 5, 2000 and (y) for a period of at least sixty (60) consecutive calendar days during the 210-day period commencing December 5, 2000 (unless such Eligible Employee is serving as a Local Union official during such period).

  (b)   Each Employee of the Company or a Designated Subsidiary at September 3, 2001 who:
 
  (i)   is a Bargaining Unit Employee; and
 
  (ii)   has Seniority Status; and
 
  (iii)   is an Active Employee, on Layoff or on a Leave of Absence; and
 
  (iv)   was not granted a Stock Option pursuant to Section 5(a) of the Plan or was granted a Stock Option pursuant to Section 5(a) of the Plan and such Stock Option was automatically terminated on July 5, 2001 in accordance with Section 6(a) of the Plan;

 
shall be an “Eligible Employee” at September 3, 2001 and shall receive a grant of a Stock Option pursuant to Section 5(b) of the Plan for that number of shares indicated at Section 5(b) of the Plan, based on such Eligible Employee’s Average Annual Hours worked; provided, however, that the Stock Option granted to any Eligible Employee shall automatically terminate on April 4, 2002 if such Eligible Employee is not an Active Employee (x) for a period of at least thirty (30) consecutive calendar days during the 180-day period commencing September 4, 2001 and (y) for a period of at least sixty (60) consecutive calendar days during the 210-day period commencing September 4, 2001 (unless such Eligible Employee is serving as a Local Union Official during such period).

X-10.2-7


 

7.   TERMS OF THE STOCK OPTIONS.
 
       
  (a) Option Exercise Price. The per share exercise price of each Stock Option granted under the Plan shall be 100% of the Fair Market Value of a share of the Common Stock on the date of the grant of such Stock Option.
 
  (b) Option Term. Each Stock Option granted under the Plan shall have a term of ten years (subject to early termination in accordance with the Plan and/or the Grant Agreement) and shall expire (unless theretofore exercised or terminated as provided for at Section 6 or Section 8 of the Plan or in the relevant grant agreement) on the tenth anniversary of the date of grant of such Stock Option.
 
  (c) Conditional Vesting. Each Stock Option granted shall vest, subject to the provisions of Section 6, Section 7(d) and Section 8 of the Plan, in the Grantee in accordance with the following schedule:

       
  (1) With respect to each Stock Option granted on December 4, 2000, when and to the extent the Stock Option becomes exercisable in accordance with Section 7(d)(1) of the Plan, and subject to the termination of the Stock Option pursuant to Section 6(a) of the Plan, if the Grantee has been continuously an Employee of the Company or a Designated Subsidiary since December 4, 2000:

 
  (i)   The Grantee shall be vested, subject to the provisions of Sections 6(a), 7(c)(3), 7(d)(1) and 8 of the Plan, in respect of 50% of the shares of Common Stock subject to the option granted pursuant to such Stock Option (x) on January 4, 2001 if the Grantee is an Active Employee on January 4, 2001 and the Stock Option is not thereafter terminated in accordance with Section 6(a) of the Plan or (y) on July 5, 2001 if the Grantee was not an Active Employee on January 4, 2001 and the Grantee has been an Active Employee for at least sixty (60) consecutive calendar days during the 210-day period commencing December 5, 2000 (unless the Grantee is serving as a Local Union official during such period).
  (ii)   The Grantee shall be vested, subject to the provisions of Sections 6(a), 7(c)(3), 7(d)(1) and 8 of the Plan and to any prior exercises of the Stock Option, in respect of 25% of the shares of Common Stock subject to the option granted pursuant to such Stock Option on January 4, 2002 if the Grantee is a Bargaining Unit Employee on January 4, 2002 and the Grantee is vested under Section 7(c)(1)(i) of the Plan.
  (iii)   The Grantee shall be vested, subject to the provisions of Sections 6(a), 7(c)(3), 7(d)(1) and 8 of the Plan and to any prior exercises of the Stock Option, in respect of 25% of the shares of Common Stock subject to the option granted pursuant to such Stock Option on January 4, 2003 if the Grantee is a Bargaining Unit Employee on January 4, 2003 and the Grantee is vested under Section 7(c)(1)(i) of the Plan.
       
  (2) With respect to each Stock Option granted on September 3, 2001, when and to the extent the Stock Option becomes exercisable in accordance with Section 7(d)(2) of the Plan, and subject to the termination of the Stock Option pursuant to Section 6(b) of the Plan, if the Grantee has been continuously an Employee of the Company or a Designated Subsidiary since September 3, 2001:

  (i)   The Grantee shall be vested, subject to the provisions of Sections 6(b), 7(c)(3), 7(d)(2) and 8 of the Plan, in respect of 50% of the shares of Common Stock subject to the option granted pursuant to such Stock Option (x) on October 3, 2001 if the Grantee is an Active Employee on

X-10.2-8


 

       
      October 3, 2001 and the Stock Option is not thereafter terminated in accordance with Section 6(b) of the Plan, or (y) on April 4, 2002 if the Grantee was not an Active Employee on October 3, 2001 and the Grantee has been an Active Employee for at least sixty (60) consecutive calendar days during the 210-day period commencing September 4, 2001 (unless the Grantee is serving as a Local Union official during such period).

  (ii)   The Grantee shall be vested, subject to the provision of Sections 6(b), 7(c)(3), 7(d)(2) and 8 of the Plan and to any prior exercises of the Stock Option, in respect of 50% of the shares of Common Stock subject to the option granted pursuant to such Stock Option (x) on October 3, 2002 if the Grantee is a Bargaining Unit Employee on October 3, 2002 and the Grantee is vested under Section 7(c)(2)(i) of the Plan.

       
    (3) Upon the vesting of a Stock Option as specified in Sections 7(c)(1) and 7(c)(2) of the Plan, the Grantee of such Stock Option shall have the right to exercise the Stock Option when and to the extent such Stock Option becomes exercisable in accordance with Sections 7(d)(1) and 7(d)(2), respectively, so long as the Grantee has been continuously an Employee from the date the Stock Option was granted through the date of the exercise of such Stock Option. If a Grantee fails to vest in respect of any percentage of the shares granted pursuant to Section 6 of the Plan due to a Grantee’s failure to satisfy any of the vesting requirements of Section 7(c)(1) or 7(c)(2) of the Plan, as the case may be, then the Stock Option shall terminate with respect to the shares of Common Stock subject to such Stock Option in respect of which the vesting requirements were not satisfied; provided that, if a Grantee shall fail to satisfy the vesting conditions specified in Section 7(c)(1)(i) or Section 7(c)(2)(i) of the Plan, as applicable, the Stock Option of Grantee shall automatically terminate in its entirety on July 5, 2001 or April 4, 2002, respectively.

       
  (d) Exercisability. If the Grantee of a Stock Option has been continuously an Employee from and after the date the Stock Option was granted and (x) if the Stock Option was not automatically terminated in accordance with Section 6(a) or Section 6(b) of the Plan, as the case may be, and (y) if and to the extent such Stock Option shall have vested in accordance with Section 7(c) of the Plan, the Grantee of such Stock Option shall be entitled to exercise, subject to the limitations set forth at Sections 6, 7(b), 7(c)(3) and 8 of the Plan, such Stock Option in accordance with the following schedule:

       
    (1) With resect to each Stock Option granted on December 4, 2000:

       
  (i)   On and after December 4, 2001, such Stock Option will be exercisable to the extent of the 50% of the shares of Common Stock subject to the option granted pursuant to such Stock Option that vest in accordance with Section 7(c)(1)(i) of the Plan.
  (ii)   On and after December 4, 2002, such Stock Option will be exercisable to the extent of the 25% of the shares of Common Stock subject to the option granted pursuant to such Stock Option that vest in accordance with Section 7(c)(1)(ii) of the Plan.
  (iii)   On and after December 4, 2003, such Stock Option will be exercisable to the extent of the 25% of the shares of Common Stock subject to the option granted pursuant to such Stock Option that vest in accordance with Section 7(c)(1)(iii) of the Plan.

       
  (2) With respect to each Stock Option granted on September 3, 2001:

X-10.2-9


 

  (i)   On and after September 3, 2002, such Stock Option will be exercisable to the extent of the 50% of the shares of Common Stock subject to the option granted pursuant to such Stock Option that vest in accordance with Section 7(c)(2)(i) of the Plan.
  (ii)   On and after September 3, 2003, such Stock Option will be exercisable to the extent of the 50% of the shares of Common Stock subject to the option granted pursuant to such Stock Option that vest in accordance with Section 7(c)(2)(ii) of the Plan.

  (e)   Conditions to Exercise. At the time of each exercise of a Stock Option: (i) the Grantee shall have been continuously an Employee from the date such Stock Option was granted through the earlier of (A) date of the exercise of such Stock Option, (B) the date of the Grantee’s Retirement, or (C) the date of the Grantee’s death; (ii) the vesting requirements of Sections 7(c) of the Plan applicable to such Stock Option shall have been satisfied in respect of the shares of Common Stock then being purchased pursuant to the exercise of such Stock Option; and (iii) the Stock Option shall be exercisable as provided at Section 7(d)(1) of the Plan or Section 7(d)(2) of the Plan, as applicable, in respect of the shares of Common Stock then being purchased pursuant to the exercise of such Stock Option. If any shares of Common Stock subject to a Stock Option granted to a Grantee do not vest in the Grantee at the time or times provided in the applicable subsection of Section 7(c), then the Grantee shall not be entitled to exercise the Stock Option at any time in respect of the shares of Common Stock that did not vest in accordance with such applicable subsection of Section 7(c) of the Plan.

8.   EXERCISE FOLLOWING EMPLOYMENT.

  (a)   Retirement. If a Grantee has been continuously an Employee from the date his or her Stock Option was granted through the date of his or her Retirement, then following Retirement such Grantee may exercise his or her Stock Option at any time during the remainder of the term of the Stock Option with respect to that number of shares of Common Stock that were vested under Section 7(c) of the Plan at the date of the Grantee’s Retirement.
 
  (b)   Death. If a Grantee has been continuously an Employee from the date his or her Stock Option was granted through the earlier of the date of his or her Retirement or the date of his or her death, then in the event of the death of the Grantee, the legal representative of Grantee may exercise such Stock Option with respect to that number of shares of Common Stock that were vested under Section 7(c) of the Plan at the date of Grantee’s death (or, if earlier, the date of the Grantee’s Retirement) at any time up to three years after the Grantee’s date of death, but in no event more than ten years after the date the Stock Option was granted.
 
  (c)   Other Termination of Employment. Except as provided in Subsections (a) and (b) of this Section 8, no Stock Option shall be exercisable after the Grantee ceases to be an Employee.

9.   METHOD OF EXERCISE. A Stock Option may be exercised, in whole or in part, by the Grantee (or his or her legal representative, if permitted by the Plan) giving written notice of exercise to the Company (or to an agent of the Company designated in writing to the Grantee), specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, plus any required withholding taxes, or by documents necessary to effect the simultaneous exercise of the Stock Option and the sale of the shares of Common Stock thereby acquired pursuant to a brokerage or similar arrangement approved in advance by

X-10.2-10


 

     
    the Committee and authorizing the use of the proceeds from such sale to pay to the Company the exercise price and withholding taxes.

10.   NON-TRANSFERABILITY OF STOCK OPTIONS. No Stock Option granted, and no right or interest therein, shall be (i) assignable, alienable or transferable by a Grantee, except by will or the laws of descent and distribution, or (ii) subject to any obligation, or the lien or claims of any creditor, of a Grantee, or (iii) subject to any lien, encumbrance or claim of any party made in respect of or through any Grantee, however arising. During the lifetime of a Grantee, the Stock Option shall be exercisable only by, and shares of Common Stock issued upon the exercise of Stock Option will be issued only to, the Grantee or his or her legal representative.
 
11.   AMENDMENT AND TERMINATION. The Board of Directors may at any time and from time to time amend the Plan. The Board of Directors may at any time terminate the Plan; provided, however, that no termination of the Plan shall affect Stock Options outstanding on the date of such termination.
 
12.   MISCELLANEOUS.

  (a)   Withholding Taxes. All Stock Options granted under the Plan are made subject to any and all applicable withholding for taxes of any kind. The Company shall have the right to deduct from any delivery of shares of Common Stock to be made under the Plan, all federal, state, city, local or foreign taxes of any kind required by law to be withheld with respect to such payment and to take such other actions as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Company shall have the right to require a Grantee to pay cash to satisfy withholding taxes as a condition to the issuance of any shares of Common Stock under the Plan.
 
  (b)   No Right to Employment. Neither the adoption of the Plan nor the grant of any Stock Option shall confer upon any Grantee, any Employee or any other person any right to continued employment with the Company or any subsidiary of the Company, nor shall it interfere in any way with the right of the Company or any subsidiary of the Company to terminate the employment of any Grantee, any Employee or any other person at any time, with or without cause.
 
  (c)   Unfunded Plan. The Plan shall be unfunded. Any liability of the Company to any person with respect to any Stock Option granted under the Plan shall be based solely upon any contractual obligation that may be effected pursuant to the Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company or any of its subsidiaries.
 
  (d)   Other Company Benefit and Compensation Programs. Any benefits received by a Grantee under the Plan shall not be deemed a part of such Grantee’s regular, recurring compensation and shall not be included in, nor have any effect on, the determination of benefits under any pension or other employee benefit plan or similar arrangement provided by the Company or any of its subsidiaries. Payments and benefits provided to any Employee under any other plan or agreement shall be governed solely by the terms of such other plan or agreement.
 
  (e)   Securities Law Restrictions. In no event shall the Company be obligated to issue or deliver any shares of Common Stock if such issuance or delivery shall constitute a violation of any provision of any law or regulation of any government, any governmental agency or authority, or any securities exchange. No shares of Common Stock shall be issued under the Plan unless counsel for the Company shall be satisfied that such issuance will be in compliance with all applicable Federal and state

X-10.2-11


 

       
      securities laws and regulations and all requirements of any securities exchange on which shares of the Common Stock are listed.

       
  (f) Grant Agreements. Each Eligible Employee receiving a Stock Option under the Plan shall enter into a grant agreement with the Company in the form, appropriately competed, of Annex I or Annex II, as applicable, or in such other form of grant agreement as shall be approved by the Board of Directors.
 
  (g) Severability. In the event any provision of the Plan shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the remaining provisions of the Plan.
 
  (h) Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Ohio.

     [ANNEX I AND ANNEX II ARE INTENTIONALLY OMITTED FROM THIS COPY OF THE PLAN]

X-10.2-12 EX-10.3 7 l92979aex10-3.htm EX-10.3 DEFERRED COMPENSATION PLAN FOR EXECUTIVES EX-10.3 Deferred Compensation Plan for Executives

 

EXHIBIT 10.3

 

 

 

 

THE GOODYEAR TIRE & RUBBER COMPANY

DEFERRED COMPENSATION PLAN FOR EXECUTIVES

(Amended and Restated as of January 1, 2002)

 

 

X-10.3-1


 

TABLE OF CONTENTS

         
        Page
       
ARTICLE I — GENERAL
Section 1.1   Purpose   1
Section 1.2   Intent   1
Section 1.3   Effective Date   1
Section 1.4   Contractual Obligation of Employer   2
 
ARTICLE II
DEFINITIONS AND USAGE
Section 2.1   Definitions   2
Section 2.2   Usage   10
 
ARTICLE III
ELIGIBILITY
Section 3.1   Eligibility to Defer Performance Compensation   10
Section 3.2   Eligibility to Defer Salary   11
 
ARTICLE IV
COMPENSATION ELIGIBLE FOR DEFERRAL; NOTICE AND PARTICIPATION
Section 4.1   Performance Compensation   11
Section 4.2   Deferrable Salary   12
Section 4.3   Participation; Notice and Agreement Procedure   12
Section 4.4   Time for Filing Elections   13
 
ARTICLE V
MANDATORY DEFERRALS
Section 5.1   Designated Participants Subject to Mandatory Deferrals   13
Section 5.2   Period of Deferral   14
Section 5.3   Election of Deferral Period   14
 
ARTICLE VI
ACCOUNTS AND REFERENCE INVESTMENT ELECTIONS
Section 6.1   Deferred Compensation   14
Section 6.2   Accounts   15
Section 6.3   Reference Investment Procedure   15
Section 6.4   Equivalents; Reference Investment Elections   16
Section 6.5   Failure to Elect Reference Investment   18
Section 6.6   Adjustments to Account Balances   18
Section 6.7   No Responsibility for Results of Reference Investment Funds   19

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ARTICLE VII
PAYMENT OF DEFERRED COMPENSATION
Section 7.1   Distribution Events   9
Section 7.2   Absence of Deferral Period Election   21
Section 7.3   Minimum Balance   21
 
ARTICLE VIII
PAYMENTS FROM THE PLAN
Section 8.1   Timing, Amount and Form of Payment   22
Section 8.2   Acceleration of Payment Upon Change of Control   23
 
ARTICLE IX
SOURCE OF PAYMENTS
Section 9.1   Payments from General Funds of Employers and Rabbi Trusts   23
Section 9.2   The Trusts   24
Section 9.3   Contributions and Expenses   24
Section 9.4   Trustee Duties   24
Section 9.5   Reversion of Trust Funds to Company or Participating Employer   24
 
ARTICLE X
DESIGNATION OF BENEFICIARIES
Section 10.1   Designation Procedure   25
Section 10.2   Payment to the Participant’s Representative   26
Section 10.3   Unclaimed Benefits   26
 
ARTICLE XI
ADMINISTRATION OF PLAN
Section 11.1   Administration   27
Section 11.2   Allocation of Fiduciary Responsibilities; Composition and Powers of Committee   27
Section 11.3   Indemnification   29
Section 11.4   Claims Procedures   29
 
ARTICLE XII
AMENDMENT AND TERMINATION
Section 12.1   Amendment of the Plan   30
Section 12.2   Termination of the Plan   30

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ARTICLE  XIII
MISCELLANEOUS PROVISIONS
Section 13.1   No Assignment     31  
Section 13.2   Adoption of and Withdrawal from Plan by a Participating Employer     31  
Section 13.3   Information Required     31  
Section 13.4   Elections by Eligible Employees     31  
Section 13.5   Notices by Committee or any Employer     32  
Section 13.6   No Employment Contract or Commitment     32  
Section 13.7   Severability     32  
Section 13.8   Effect of IRS Determination     32  
Section 13.9   Taxes and Withholding     32  
Section 13.10   No Rights to Assets Created     32  
Section 13.11   Precedent     33  
Section 13.12   No Guarantees     33  
Section 13.13   Expenses     33  
Section 13.14   Claims of Other Person     33  
Section 13.15   Captions     33  
Section 13.16   Choice of Law     33  
Section 13.17   Binding Agreement     34  

X-10.3-4


 

THE GOODYEAR TIRE & RUBBER COMPANY
DEFERRED COMPENSATION PLAN FOR EXECUTIVES

     THE GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation (“Goodyear” or the “Company”) hereby amends and restates the Deferred Compensation Plan for Executives of the

     Company (the “Plan”) as hereinafter provided.

ARTICLE I
GENERAL

     Section 1.1 Purpose. The purpose of the Plan is to promote the greater success of Goodyear and its participating wholly-owned subsidiaries by providing a means for a select group of management and highly compensated employees of Goodyear and such subsidiaries (whose positions enable them to make significant contributions to the profitability, competitiveness and growth of the Company and its subsidiaries) to defer certain incentive and salary compensation. In addition, compensation of executive officers of the Company which for any reason would not be deductible by the Company for Federal Income Tax purposes due to the limitations on deductibility set forth in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), shall be automatically deferred for future payment under the Plan when such payments will be deductible by the Company.

     Section 1.2. Intent. The Plan is intended to be an unfunded, non-qualified plan primarily for the purpose of providing the opportunity to officers and a select group of management and highly compensated employees of the Company and participating wholly-owned subsidiaries of the Company, as described under Sections 201(2), 301(a)(3), and 401(a)(l) of ERISA, to defer certain compensation. The Plan is not intended to be a plan described in Section 401(a) of the Code.

     Section 1.3. Effective Date. The provisions of the Plan shall be effective as of January 1, 2002, the date for which changes to the Plan were approved by the Compensation Committee of the Goodyear Board of Directors and adopted by the Goodyear Board of Directors. The rights, if any, of any Participant (as hereinafter defined) in the Plan whose status as an employee of the Company or any Participating Employer (as hereinafter defined) terminates for any reason shall be determined pursuant to the Plan as in effect on the date such Participant ceases to be an employee of the Company or any Participating Employer, unless a subsequently adopted provision of the Plan states otherwise.

     Section 1.4. Contractual Obligation of Employer. The obligation of the Company and Participating Employers to make payments of Deferred Compensation (as hereinafter defined) and Mandatory Deferred Compensation (as hereinafter defined) in accordance with the Plan are contractual, general unsecured obligations and liabilities of the Company and, as applicable, Participating Employers to pay for services in accordance with the terms of the Plan. It is intended that payments of Deferred Compensation and Mandatory Deferred Compensation under the Plan shall be paid from one or more Trusts (as hereinafter defined) established for that purpose. If, and to the extent that, the assets of such Trusts are not sufficient to make all payments of Deferred Compensation and Mandatory Deferred Compensation required by the terms of the Plan, such shortfall shall be paid by the Company and, as applicable, the Participating Employers. All Deferred Performance Amounts (as hereinafter defined), Deferred Salary Amounts (as hereinafter defined) and Mandatory Deferred Amounts (as hereinafter defined) will be recorded in Accounts (as hereinafter defined) and, ordinarily, amounts equivalent thereto will be transferred by the Company and, as applicable, the Participating Employers to their respective Trusts. Each Participant may elect, from alternatives available under the Plan, to have Deferred Performance Amounts, Deferred Salary Amounts and Mandatory Deferred Amounts, if any, adjusted by amounts equivalent to the amounts such Deferred Amounts and Mandatory Deferred Amounts, if any, would realize (as earnings, gains and losses, net of expens-

X-10.3-5


 

es and taxes) if invested (for the relevant period) in one or more of the mutual funds or other investment vehicles or reference rates designated from time to time as the Reference Investment Funds (as hereinafter defined) available under the Plan. No Participant or Beneficiary (as hereinafter defined) shall have any right, title or interest whatever in or to any investment reserves, accounts, trusts or other funds or assets that the Company or the Participating Employers may purchase, establish, or accumulate to aid in paying Deferred Compensation and Mandatory Deferred Compensation as and when due to the Participants under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust or a fiduciary relationship of any kind between the Company (or a Participating Employer) and a Participant, his or her Beneficiaries or any other person. Neither a Participant nor his or her Beneficiaries shall acquire any right or interest under the Plan other or greater than that of an unsecured creditor.

ARTICLE II
DEFINITIONS AND USAGE

     Section 2.1. Definitions. Wherever used in the Plan, the following words and phrases shall have the meaning set forth below, unless the context plainly requires a different meaning:
 
       “Account” means the following “Accounts” to be maintained by the Committee for each Participant for recordkeeping, measurement and accounting purposes; provided, that any Plan assets will not be segregated among such “Accounts” and each Participant will have only an unsecured contractual claim against his or her Employer for the amount of his or her “Account” balances:

     (a)  Performance Plan Account. An Account to record the amount of a Participant’s Performance Compensation deferred pursuant to the provisions of Article IV of the Plan in respect of a Plan Year, as from time to time adjusted to reflect any and all Equivalents attributable to such Deferred Performance Amount.

     (b)  Annual Salary Account. An Account to record the aggregate amount of a Participant’s Salary deferred pursuant to the provisions of Article IV of the Plan in respect of a Plan Year, as from time to time adjusted to reflect any and all Equivalents attributable to such Deferred Salary Amount.

     (c)  Mandatory Deferred Account. An Account to record the amount of all of a Participant’s Performance Compensation, Salary and other cash compensation in respect of a Plan Year deferred pursuant to the provisions of Article V of the Plan, as from time to time adjusted to reflect any and all Equivalents attributable to such Mandatory Deferred Amount.

       “Acquiring Person” means any person (any individual, firm, corporation or other entity) who or which, together with all Affiliates and Associates, shall be or become the beneficial owner of shares of the Common Stock of the Company.
 
       “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.
 
       “Aggregate Deferred Amount” means, with respect to any Participant, the sum of all Deferred Amounts with respect to such Participant during all Plan Years to the date (or Valuation Date) on or as of which any determination of the amount thereof is being or to be made.
 
       “Aggregate Mandatory Amount” means, with respect to any Participant, the sum of all Mandatory Deferred Amounts with respect to such Participant during all Plan Years to the date (or Valuation Date) on or as of which any determination of the amount thereof is being or to be made.

X-10.3-6


 

       “Agreement” and "Notice and Agreement” means an instrument executed and delivered in accordance with Section 4.3 of the Plan, whereunder an Eligible Employee elects and agrees with his or her Employer to (i) participate in the Plan in respect of a Plan Year by deferring Performance Compensation or Deferrable Salary, as the case may be, in accordance with Article IV of the Plan (a Participant must enter into a separate Agreement in respect of the deferral of Performance Compensation and a separate Agreement in respect of the deferral of Salary each Plan Year in order to defer Performance Compensation and Salary), (ii) defer all or a specific amount or percentage of his or her Performance Compensation or Deferrable Salary, and (iii) comply with and be bound by all the terms and conditions of the Plan.
 
       “Annual Salary Rate” means, with respect to each Plan Year: (i) if the Salary Measurement Date is January 1 of such Plan Year, the Salary payable to an Employee during or in respect of January of the Plan Year multiplied by twelve (12), or, (II) if the Salary Measurement Date is December 1 of the year preceding such Plan Year, the Salary payable to an Employee during or in respect of the month of December of the year preceding such Plan Year multiplied by twelve (12), or (iii) if the Salary Measurement Date is an Employment Date, the Salary payable to an Employee during or in respect of such person’s first full month of Employment multiplied by the number of full months remaining in such Plan Year subsequent to the Employment Date.
 
       “Beneficiary” means any person or entity (including a trust or the estate of a Participant) designated in a written instrument executed by a Participant and delivered to the Committee in accordance with the provisions of Section 10.1 of the Plan.
 
       “Board” means the Board of Directors of Goodyear.
 
       “Change of Control” shall mean, and shall be deemed to have occurred when (the “Change of Control Date”), any Acquiring Person (other than the Company, any subsidiary of the Company, any employee benefit plan of the Company or of any subsidiary of the Company, or any person or entity organized, appointed or established by the Company or any subsidiary of the Company for or pursuant to the terms of any such plans), alone or together with its Affiliates and Associates, shall become the beneficial owner of thirty-five percent (35%) or more of the shares of the Common Stock of the Company, without par value (the “Common Stock”) then outstanding (except pursuant to an offer for all outstanding shares of the Common Stock at a price and upon such terms and conditions as a majority of the Continuing Directors determine to be in the best interests of the Company and its shareholders (other than the Acquiring Person or any Affiliate or Associate thereof on whose behalf the offer is being made)), and the Continuing Directors no longer constitute a majority of the Board.
 
       “Code” means the Internal Revenue Code of 1986, as amended from time to time, and regulations and rulings promulgated thereunder.
 
       “Committee” means the Committee established under, and operating pursuant to the provisions of, Article XI of the Plan.
 
       “Company” means The Goodyear Tire & Rubber Company, its successors and any corporation into which it may be merged or consolidated.
 
       “Compensation Committee” means the Compensation Committee of the Board.
 
       “Continuing Director” means any individual who is a member of the Board, while such individual is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative or nominee of an Acquiring Person or of any such Affiliate or Associate and was a member of the Board prior to the occurrence of the Change of Control Date, any successor of a Continuing Director, while

X-10.3-7


 

  such successor is a member of the Board, and who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or representative or nominee of an Acquiring Person or of any such Affiliate or Associate, and is recommended or elected to succeed the Continuing Director by a majority of the Continuing Directors.
 
       “Deferrable Salary” means, with respect to each Eligible Employee and with respect to each Plan Year, such Eligible Employee’s Salary for such Plan Year. .
 
       “Deferred Amount” means, with respect to any Participant and any Plan Year, the sum of the Deferred Performance Amount and the Deferred Salary Amount of such Participant during such Plan Year.
 
       “Deferred Compensation” means, with respect to any Participant, the aggregate of all Deferred Performance Compensation and Deferred Salary of such Participant for all Plan Years to the date (or Valuation Date) on or as of which any determination of the amount thereof is being or to be made.
 
       “Deferred Performance Amount” means, with respect to any Participant and any Plan Year, the amount of Performance Compensation deferred by such Participant during such Plan Year pursuant to Article IV of the Plan.
 
       “Deferred Performance Compensation” means, with respect to any Participant and any Plan Year, the sum of the Deferred Performance Amount in respect of such Plan Year and all Equivalents attributable to, and credited (or charged) to the Performance Plan Account in respect of, such Deferred Performance Amount to the date (or Valuation Date) on or as of which any determination of the amount thereof is being or to be made.
 
       “Deferred Salary” means, with respect to any Participant and any Plan Year, the sum of the Deferred Salary Amount in respect of such Plan Year and all Equivalents attributable to, and credited (or charged) to the Annual Salary Account in respect of, such Deferred Salary Amount to the date (or Valuation Date) on or as of which any determination of the amount thereof is being or to be made.
 
       “Deferred Salary Amount” means, with respect to any Participant and any Plan Year, the amount of Salary deferred by such Participant during such Plan Year pursuant to Article IV of the Plan.
 
       “Disability” or “Disabled” means a physical or mental condition of a Participant resulting from a bodily injury, disease, or mental disorder which renders the Participant incapable of continuing in the Employment of any Employer or other Affiliate of the Company and results in such Participant receiving or being entitled to receive benefits under the Company’s Long Term Disability Income Plan or the Retirement Plan (or, if such Participant is then an Employee of a Participating Employer, under similar plans, if any, of such Participating Employer).
 
       “Eligible Employee” means any Employee of an Employer who, at the time the determination thereof is being or to be made, (i) is employed within the United States of America, (ii) is a citizen of or resident in the United States of America, (iii) is a participant in the Performance Plan for the then current Plan Year, (iv) has an Annual Salary Rate of at least $170,000 per year, and (v) is designated by the Committee as being eligible to participate in the Plan for the Plan Year.
 
       “Employee” means any person who is a full-time salaried employee of an Employer.
 
       “Employer” means and includes, as of the time at which a determination thereof is being or to be made, the Company or any Participating Employer, or their respective successors and assigns that adopt the Plan.

X-10.3-8


 

       “Employment” means the fact that and the period during which an Employee is regularly employed by an Employer.
 
       “Employment Date” means the date on which an Employee first earned compensation from an Employer.
 
       “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and regulations and rulings promulgated thereunder.
 
       “Executive Officer” means and includes the Chairman of the Board and Chief Executive Officer, any Vice Chairman of the Board, the President, any Vice President, the Treasurer, the Comptroller or the Secretary of the Company (or such other person as the General Counsel of the Company may designate).
 
       “Equivalent” means, as at any time as of which any determination thereof is being or to be made, the net amount (of the earnings, gains, losses, expenses and taxes in respect of applicable Reference Investment Funds) attributed to any Deferred Performance Amount, Deferred Salary Amount or Mandatory Deferred Amount, and credited (or charged) to the related Account, in accordance with the provisions of Article VI of the Plan.
 
       “Mandatory Deferred Amount” means, with respect to any Participant and any Plan Year, the sum of the Mandatory Deferred Performance Amount, the Mandatory Deferred Salary Amount and the Mandatory Deferred OC Amount of such Participant in respect of such Plan Year.
 
       “Mandatory Deferred Compensation” means, with respect to any Participant, the aggregate of all Mandatory Deferred Performance Compensation, all Mandatory Deferred Salary and all Mandatory Deferred Other Compensation of such Participant for all Plan Years to the date (or Valuation Date) on or as of which any determination of the amount thereof is being or to be made.
 
       “Mandatory Deferred OC Amount” means, with respect to any Participant and any Plan Year, the amount of cash compensation (other than Performance Compensation or Salary) automatically deferred in respect of such Participant during such Plan Year pursuant to Article V of the Plan.
 
       “Mandatory Deferred Other Compensation means, with respect to any Participant and any Plan Year, the sum of the Mandatory Deferred OC Amount in respect of such Plan Year and any and all Equivalents attributable to, and credited (or charged) to the Mandatory Deferred Account in respect of, such Mandatory Deferred OC Amount to the date (or Valuation Date) on or as of which any determination of the amount thereof is being or to be made.
 
       “Mandatory Deferred Performance Amount” means, with respect to any Participant and any Plan Year, the amount of Performance Compensation automatically deferred in respect of such Participant during such Plan Year pursuant to Article V of the Plan.
 
       “Mandatory Deferred Performance Compensation” means, with respect to any Participant and any Plan Year, the sum of the Mandatory Deferred Performance Amount of such Participant in respect of such Plan Year and all Equivalents attributable to, and credited (or charged) to the Mandatory Deferred Account in respect of, such Mandatory Deferred Performance Amount to the date (or Valuation Date) on or as of which any determination thereof is being or to be made.
 
       “Mandatory Deferred Salary” means, with respect to any Participant and any Plan Year, the sum of the Mandatory Deferred Salary Amount of such Participant in

X-10.3-9


 

  respect of such Plan Year and all Equivalents attributable to, and credited (or charged) to the Mandatory Deferred Account in respect of, such Mandatory Deferred Salary Amount to the date (or Valuation Date) on or as of which any determination thereof is being or to be made.
 
       “Mandatory Deferred Salary Amount” means, with respect to any Participant and any Plan Year, the amount of Salary automatically deferred in respect of such Participant during such Plan Year pursuant to Article V of the Plan.
 
       “Net Performance Compensation” means the amount of compensation after withholding for taxes and other deductions that would apply to Deferred Compensation.
 
       “Participant” means any, and includes each, (i) Eligible Employee participating or a former Eligible Employee who continues to have deferrals because of participation in the Plan in accordance with Articles III and IV of the Plan, and (ii) any Executive Officer whose Performance Compensation, Salary or other cash compensation, or any portion or portions thereof, in respect of any Plan Year have been or are being automatically deferred in accordance with Article V of the Plan.
 
       “Participating Employer” means each subsidiary of the Company which is directly or indirectly wholly-owned by the Company and is organized and existing under the laws of the United States of America or any state thereof that adopts the Plan by action of its board of directors and enters into a Trust Agreement.
 
       “Performance Plan” means the Goodyear Performance Recognition Plan for any Performance Plan Year (payouts, if any, in respect of which would be made of the year following the Performance Plan Year for such Performance Recognition Plan), as approved by the Compensation Committee, or any plan designated by the Compensation Committee as the successor to any such plan.
 
       “Performance Plan Year” means the period commencing January 1 and ending on December 31 in respect of which there is a Performance Plan in effect, where the payout, if any, thereunder will be made in February of the following year.
 
       “Performance Compensation” means any amount earned by and payable to an Eligible Employee under the Performance Plan in respect of any Plan Year thereof.
 
       “Plan Year” means each period of one year beginning January 1 and ending December 31.
 
       “Recordkeeper” means that person or entity selected from time to time by the Committee to establish and maintain Accounts and other records and to perform related services in respect of the Plan and the Trusts.
 
       “Reference Investment Funds” means those mutual funds, bank common trust funds, insurance contracts and other investment vehicles and reference rates which, in accordance with the provisions of Article VII of the Plan, are used as the reference for the determination and measurement of Equivalents to be attributed to the Deferred Amounts and Mandatory Deferred Amounts, if any, of Participants, as from time to time selected by the Compensation Committee pursuant to the provisions of Article VII of the Plan and identified at Annex I to the Plan.
 
       “Retirement” means, with respect to any Participant, the termination of employment with the Company (or other Participating Employer) after either 30 years of service or 10 years of service and the attainment of age 55 or attainment of age 65.
 
       “Retirement Plan” means the Company’s Salaried Pension Plan, as amended and in effect from time to time.

X-10.3-10


 

       “Salary” means the amount of base salary (as determined before any contributions to the Savings Plan (or any similar plan of any Participating Employer) and before any withholding for taxes, payroll taxes or charges and deductions for benefits provided by the Company or any other Employer) paid or payable to an Employee during the period in respect of which a determination with respect to such base salary is being or to be made.
 
       “Salary Measurement Date” shall mean, with respect to each Plan Year: (i) with respect to each person who is an Employee on the first day of such Plan Year, (a) if used in determining whether an Employee is an Eligible Employee for the purpose of deferring Performance Compensation during such Plan Year, January 1 of such Plan Year, and (b) if used in determining whether an Employee is an Eligible Employee for the purpose of deferring Salary during such Plan Year, December 1 of the year preceding such Plan Year; and (ii) in respect of each person who becomes an Employee during such Plan Year, the Employment Date of such Employee.
 
       “Savings Plan” means the Employee Savings Plan for Salaried Employees of the Company, as amended and in effect from time to time.
 
       “Subsidiary” means any corporation, joint venture or other entity of which (or in which) more than 50% of the outstanding capital stock, or interest in the profits, is owned by the Company and one or more other Subsidiaries, or by one or more other Subsidiaries.
 
       “Trust” or “Trust Fund” means each of (i) the “Rabbi Trust” to be established under a Trust Agreement to be entered into by the Company to receive and invest amounts transferred to it by the Company for future payment as Deferred Compensation and Mandatory Deferred Compensation under the Plan, which trust’s assets will be subject to the claims of general creditors of the Company, and (ii) each “Rabbi Trust” established under a Trust Agreement entered into by a Participating Employer to receive and invest amounts transferred to such “Rabbi Trust” by such Participating Employer for future payment as Deferred Compensation under the Plan, which trust’s assets will be subject to the claims of general creditors of the Participating Employer establishing such “Rabbi Trust”; and “Trusts” and “Trust Funds” means all such Trusts and Trust Funds.
 
       “Trust Agreement” means each of (i) a Rabbi Trust Agreement between the Company and the Trustee to provide for the Trust to be established by the Company, and (ii) a similar agreement between a Participating Employer and such Trustee; and “Trust Agreements” means all such Trust Agreements.
 
       “Trustee” means the individual(s), corporation(s) or other entity(ies) appointed by the Company and each of the Participating Employers, pursuant to the Trust Agreements, to hold and manage the Trust Funds as “Rabbi Trusts”.
 
       “Valuation Date” means the close of each business day during each Plan Year, of which the Trustee will determine the fair market value of the Trust Fund and the Recordkeeper will determine the amount (balance) of each Account.
 
       Section 2.2. Usage. Except where otherwise indicated by the context, any masculine terminology used herein shall also include the feminine and vice versa, and the definition of any term herein in the singular shall also include the plural and vice versa.

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ARTICLE III
ELIGIBILITY

     Section 3.1. Eligibility to Defer Performance Compensation.

     (b)  Any eligible Employee may elect to defer all or certain portions of his or her Performance Compensation in respect of each Performance Plan Year commencing on January 1 of any year in the amount, for the deferral period and in the manner provided in the Plan, if: (i) such Employee was an Eligible Employee at January 1 of such Performance Plan Year, using January 1 of such Performance Plan Year as the Salary Measurement Date; or (ii) the Employment Date of such Employee was during the period January 2 through August 31, inclusive, of such Performance Plan Year and on his or her Employment Date such Employee was an Eligible Employee, determined using his or her Employment Date as the Salary Measurement Date; provided, however, that in the event an Eligible Employee shall terminate his or her Employment (other than by reason of Retirement or Disability) during such Performance Plan Year (or thereafter if prior to February 15th of the next succeeding Plan Year, such Employee shall cease to be an Eligible Employee for the purpose of deferring, and shall not be entitled to defer, any Performance Compensation in respect of such Performance Plan Year.

     Section 3.2. Eligibility to Defer Salary. Any eligible Employee may elect to defer all or certain portions of his or her Deferrable Salary in respect of any Plan Year commencing on January 1of any year in the amount, for the deferral period and in the manner provided for herein if: (i) such Employee was an Eligible Employee at January 1 of such Plan Year using December 1 of the year preceding such Plan Year as the Salary Measurement Date, or (ii) the Employment Date of such Employee was during the period January 2 through August 31, inclusive, of such Plan Year and on his or her Employment Date such Employee was an Eligible Employee, determined using his or her Employment Date as the Salary Measurement Date.

ARTICLE IV
COMPENSATION ELIGIBLE FOR DEFERRAL: NOTICE AND PARTICIPATION

     Section 4.1. Performance Compensation. (a) Any Eligible Employee may elect (within the time period specified in Section 4.4 of the Plan) to defer the payment of all or a portion of his or her Performance Compensation in respect of any Performance Plan Year, in which event such Deferred Performance Amount (as adjusted by related Equivalents) shall be payable as Deferred Performance Compensation under the Plan. An Eligible Employee may specify all or any portion of his or her Performance Compensation in respect of a Performance Plan Year for deferral; provided, that: (i) if expressed as a dollar amount, the amount of Performance Compensation to be deferred shall be $3,600 or any greater dollar amount thereof which is a multiple of $100; and (ii) if expressed as a percentage of Performance Compensation in respect of such Performance Plan Year, the amount of Performance Compensation to be deferred shall be 5% or any greater whole percentage thereof. If a Participant selects a dollar amount of Performance Compensation for deferral and the amount so selected exceeds the amount of Performance Compensation available for deferral, the Participant shall be deemed to have elected to defer 100% of his or her net Performance Compensation for such Performance Plan Year.

     (b)  In the event the amount of a Participant’s Performance Compensation in any Plan Year not deferred pursuant to the Plan is not sufficient to pay all required withholding and payroll taxes and all deductions in respect of such Participant’s participation in other benefit plans of his or her Employer, then the amount of such Performance Compensation deferred in such Plan Year will be reduced by the amount necessary to provide for the payment of such taxes and deductions. If any election would result in the deferral of less than $3,600 of Performance Compensation in a Plan Year, such election will be invalid and no deferral of Performance Compensation will be made pursuant to such election.

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     Section 4.2. Deferrable Salary. (a) Any Eligible Employee may elect (within the time period specified in Section 4.4 of the Plan) to defer the payment of all or a portion of his or her Deferrable Salary in respect of any Plan Year, in which event such Deferred Salary Amount (as adjusted by related Equivalents) shall be payable as Deferred Salary Compensation under the Plan. An Eligible Employee may specify any portion of Deferrable Salary in respect of a Plan Year for deferral; provided, that: (i) if expressed as a dollar amount, the amount of Salary to be deferred shall be $3,600 or any greater amount which is a multiple of $120, and (ii) if expressed as a percentage of Deferrable Salary for such Plan Year, the amount of Salary to be deferred shall be 5 % of Deferrable Salary for such Plan Year or any greater whole percentage thereof.

     (b)  In the event the amount of Deferrable Salary during any Plan Year not deferred pursuant to the Plan is not sufficient to pay all required withholding and payroll taxes and all deductions in respect of such Participant’s participation in other benefit plans of his or her Employer, then the amount of Salary deferred tinder the Plan in such Plan Year will be reduced by the amount necessary to provide for the payment of such taxes and deductions. If any election would result in the deferral of less than $3,600 of Deferrable Salary during the Plan Year, such election will be invalid and no deferral of Salary will be made pursuant to such election.

     Section 4.3. Participation: Notice and Agreement Procedure. (a) Any Eligible Employee may become a Participant by giving timely notice of the Performance Compensation or Deferrable Salary such Eligible Employee desires to defer by executing and delivering to the Committee an Agreement as provided in this Section 4.3 and in Section 4.4 of the Plan.

     (b)  Each Eligible Employee may elect to defer all or a portion (within the limits specified at Sections 4.1 and 4.2 of this Article IV) of his or her Performance Compensation for any Performance Plan Year or Deferrable Salary for any Plan Year (as each is adjusted by related Equivalents) for payment as Deferred Compensation under the Plan by executing and delivering to the Committee (within the time limits specified in respect of elections to defer specified at Section 4.4 of the Plan) one or more Agreements. Each Agreement shall provide, among other things, for (i) the amount (expressed in dollars) or portion (expressed as a percentage) of Performance Compensation or Deferrable Salary to be deferred, (ii) the period such amount shall be deferred, and (iii) the Reference Investment Fund or Funds with reference to which the Deferred Amounts win be attributed Equivalents in accordance with Article VI of the Plan, all in accordance with the Plan and the Rules of the Committee.

     (c)  Each Agreement shall be in one of the alternative forms as prescribed by the Committee and shall be properly completed and executed by the Participant and delivered to the Committee within the periods for the filing thereof specified in Section 4.4 of the Plan. Any electronic election will be deemed executed upon sending by Participant from a secure platform which incorporates protected individual accounts.

     (d)  An Agreement shall be effective no earlier than the date on which it is delivered to the Committee and shall continue in effect (unless sooner terminated in accordance with the provisions of the Plan and the Agreement) until the Deferred Performance Compensation or Deferred Salary attributable to such Agreement has been paid in accordance with the Plan.

     Section 4.4. Time for Filing Elections. In order to be effective, any election to defer Performance Compensation or Deferrable Salary in respect of any Plan Year shall be made only by the filing of a duly executed and completed Agreement with the Committee:

     (a)  With respect to Performance Compensation in respect of any Performance Plan Year: (i) in the case of an Eligible Employee at January 1 of such Performance Plan Year, not earlier than February 15 or later than March 30 of such Performance Plan Year in respect of which such deferral election is being or to be made, ; and (ii) in the case of an Eligible Employee whose Employment Date occurs during such Performance Plan Year, not later than 30 days after

X-10.3-13


 

the Employment Date of such Eligible Employee, but in no event shall such election be permitted after September 30 of such Performance Plan Year.

     (b)  With respect to Deferrable Salary in respect of any Plan Year: (i) in the case of an Eligible Employee at January 1 of such Plan Year, not earlier than December 1 or later than December 31 of the calendar year prior to the Plan Year in respect of which such election to defer Salary is being made; and (ii) in the case of an Eligible Employee whose Employment Date occurs during such Plan Year, not later than 30 days after the Employment Date of such Eligible Employee and at least two weeks prior to the commencement of the payroll period in respect of which Deferrable Salary will be deferred, but in no event shall any such election be permitted after September 30 of such Plan Year.

ARTICLE V
MANDATORY DEFERRALS

     Section 5.1. Designated Participants Subject to Mandatory Deferrals. Any Performance Compensation, Salary or other cash compensation earned by any Executive Officer which, if paid as and when due, would not be deductible by the Company for Federal Income Tax purposes by reason of the limitations set forth at, or the provisions of, Section 162(m) of the Code and the regulations and rulings related thereto (for whatever reason such limitations are exceeded or the compensation payable to such Executive Officer is not excluded therefrom or the provisions thereof do not permit the deduction of such compensation) shall automatically be deferred until such time as may be necessary in order for the Company to assure the deductibility for Federal Income Tax purposes of all such compensation when paid to such Executive Officer. The Company’s determination of the deductibility by the Company of such compensation of any Participant for Federal Income Tax purposes shall be final and binding on such Participant. To the extent possible, if the Executive Officer whose compensation is being or to be deferred has elected to defer Performance Compensation or Salary in accordance with Article IV of the Plan, such amounts will be so deferred prior to any deferral under this Article V. The Mandatory Deferred Amount in respect of each Plan Year (as adjusted by Equivalents) shall be payable as Mandatory Deferred Compensation.

     Section 5.2. Period of Deferral. All Mandatory Deferred Compensation in respect of any Executive Officer shall be paid to such Executive Officer in a lump sum on the later of: (1) the fifteenth (15th) day of the second calendar year following the calendar year during which such person ceases to be an Executive Officer and, if applicable, a director of the Company; or (2) such later date as the officer shall elect in accordance with the provisions of Section 5.3 of this Article V. The provisions of this Article V shall control with respect to Mandatory Deferred Compensation and the deferral and distribution elections provided for in Articles IV and VII of the Plan shall not apply to any Mandatory Deferred Compensation.

     Section 5.3. Election of Deferral Period. Any Executive Officer shall have the right to select any of the following payment date or dates if such Executive Officer makes an election within twenty (20) days following his or her receipt of notice from the Committee that all or a portion of his or her Performance Compensation, Salary or other cash compensation in respect of any Plan Year, or any combination thereof, has been or will be deferred:

       (a) A lump sum payment of all Mandatory Deferred Compensation on the fifteenth (15th) day of the third, fourth or fifth calendar year following the calendar year during which such person ceased to be an Executive Officer and, if applicable, a director of the Company; or

       (b) A series of no less than five nor more than 15 annual installments commencing on the fifteenth (15th) day of the second calendar year following the calendar year during which such person ceases to be an Executive Officer and, if applicable, a director of the Company, each installment to equal the Mandatory Deferred Compensation of

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  such Executive Officer then remaining in his or her Mandatory Deferred Account, determined using the then most recent Valuation Date, divided by the number of installments then remaining to be made (including the installment to be paid on such distribution date).

ARTICLE VI
ACCOUNTS AND REFERENCE INVESTMENT ELECTIONS

     Section 6.1. Deferred Compensation. A Participant’s Deferred Compensation shall be equal to the total amount of all Deferred Amounts of such Participant, plus all Equivalents attributable to each Deferred Performance Amount and each Deferred Salary Amount of such Participant, and credited (or charged) to, each of the Performance Plan Accounts and Annual Salary Accounts of such Participant pursuant to this Article VI. A Participant’s Mandatory Deferred Compensation shall be equal to the total amount of all Mandatory Deferred Amounts and Equivalents attributable to the Mandatory Deferred Amounts of such Participant and credited (or charged) to such Participant’s Mandatory Deferred Accounts pursuant to this Article VI.

     Section 6.2. Accounts. The Company and each Participating Employer shall establish and maintain, or cause to be established and maintained, pursuant to the terms of the Plan Accounts for each Participant, consisting of Performance Plan Accounts, each of which will be credited with the Deferred Performance Amount of such Participant in a Plan Year, Annual Salary Accounts, each of which will be credited with the Deferred Salary Amount of such Participant during such Plan Year, and Mandatory Deferred Accounts, which will be credited with all Mandatory Deferred Amounts of such Participant during a Plan Year, in each case to be adjusted by Equivalents attributable thereto in accordance with this Article VI. In respect of each Participant, a separate Performance Plan Account shall be established and maintained in respect of each Plan Year, the balance of which at any Valuation Date represents the amount of such Participant’s Deferred Performance Compensation for such Plan Year. In respect of each Participant, a separate Annual Salary Account shall be established and maintained in respect of each Plan Year, the balance of which at any Valuation Date represents the amount of such Participant’s Deferred Salary Compensation for such Plan Year. A separate Mandatory Deferred Account shall be established for each Plan Year the Participant has a Mandatory Deferred Amount, the balance of which as of any Valuation Date represents the then current amount of such Participant’s Mandatory Deferred Compensation for such Plan Year. All amounts (of Equivalents) credited (or charged) to an Account shall be credited (or charged) solely for purposes of measurement, accounting, computation and recordkeeping. The obligation of an Employer to pay the amount in its Accounts is its general, unsecured contractual obligation and any assets maintained by such Employer to satisfy such claims shall be subject to the claims of such Employer’s general creditors.

     Section 6.3. Reference Investment Procedure. At the time a Participant makes his or her election to defer Performance Compensation or Salary in respect of any Plan Year, such Participant may express his or her choice of Reference Investment Fund or Funds and the allocation of his or her Performance Plan Account and Annual Salary Account among one or more such Reference Investment Funds. Similarly, within twenty (20) days after receipt of notice that a Mandatory Deferred Account in respect of a Plan Year will be established, such Participant may express his or her choice of Reference Investment Fund or Funds. The Compensation Committee shall have absolute discretion in the selection of Reference Investment Funds available and may, from time to time, change the available Reference Investment Funds as it deems appropriate. Any such change of Reference Investment Funds shall be communicated to Participants in accordance with procedures adopted by the Committee.

     Section 6.4. Equivalents: Reference Investment Elections. (a) In accordance with elections made by Participants in accordance with Section 6.3 and this Section 6.4, each Deferred Performance Amount, Deferred Salary Amount and Mandatory Deferred Amount will be credit-

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ed with earnings and gains and charged with losses, expenses and taxes in amounts equal to the amount such Deferred Performance Amount, Deferred Salary Amount or Mandatory Deferred Amount would have been credited, net of all losses, expenses and taxes, or charged (where such losses, expenses and taxes exceeded earnings and gains) if such Deferred Performance Amount, Deferred Salary Amount or Mandatory Deferred Amount had been invested during the relevant period in one or more of the Reference Investment Funds in accordance with such election (such amounts being herein referred to as “Equivalents”). On a Valuation Date an Account will be credited with all such earnings and gains, net of all losses, expenses and taxes, or charged for any losses, expenses and taxes to the extent such amounts exceed earnings and gains, such Deferred Performance Amount, Deferred Salary Amount or Mandatory Deferred Amount would have accrued if such amounts been invested in the Reference Investment Funds selected from time to time by such Participant (or, if applicable, in accordance with Section 6.5 of the Plan). Equivalents in respect of any Deferred Performance Amount, Deferred Salary Amount or Mandatory Deferred Amount (or portion thereof) shall be equal to the amount of increase or decrease, as the case may be, net of all expenses and taxes which would have been incurred, in the value of suc1~ Deferred Amount had such Deferred Amount been invested in the applicable Reference Investment Fund or Funds (in accordance with the Participant’s elections as from time to time in effect or, if applicable, in accordance with Section 6.5 of the Plan) from the date deferred through the applicable Valuation Date.

     (b)  Reference Investment Funds Available. The Company and the Recordkeeper will maintain records in respect of the Accounts of each Participant which measure in accordance with the elections made by such Participant in respect of his or her Deferred Amounts and, if applicable, Mandatory Deferred Amounts the earnings, gains and losses attributable to such Deferred Amounts as though invested in one or more of the Reference Investment Funds within the categories described below, as specifically selected by the Compensation Committee and identified at Annex I to the Plan:

       (1) Reference Money Market Fund. The reference investment shall be a mutual fund or bank common trust fund which invests in various short-term U.S. Government securities and/or similar instruments, including Treasury Bills, certificates of deposit and other high quality instruments.

       (2) Reference Equity Index Fund. The reference investment shall be a mutual fund or bank common trust fund which invests in common stocks of companies comprising the S&P 500 Index on a weighted basis substantially similar to the weighting of the S&P 500 Index.

       (3) Reference Bond Fund. The reference investment shall be a mutual fund or bank common trust fund which invests in a diversified portfolio of government and high quality corporate bonds (generally A rated or higher) with average maturities of up to 5 years.

       (4) Reference Balanced Fund. The reference investment shall be a mutual fund or bank common trust fund which invests primarily in S&P 500 equities and government and corporate bonds.

       (5) Reference Growth Fund. The reference investment shall be a mutual fund which focuses on growth equities.

     (c)  Changes in Reference Investment Funds Available. The Reference Investment Funds available to Participants may be changed at any time and from time to time by the Compensation Committee. The Committee will give timely notice of any such change to each Participant. A Participant must change his or her election before implementation of such change if such change eliminates the availability of a Reference Investment Fund which was being used to measure Equivalents to be credited (or charged) to any Account of such Participant.

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     (d)  Plan Investment Elections. Participants shall make their reference investment elections using the following procedures:

       (1) Initial Election for Deferred Amounts. At the time any election to defer Performance Compensation or Salary is made a Participant can elect to have the Deferred Performance Amount or the Deferred Salary Amount, as the case may be, accrue Equivalents related to one or more of the Reference Investment Funds in five percent (5%) increments; provided, that the Participant must complete his or her investment election no later than the deadline established by the Committee.

       (2) Initial Election for Mandatory Deferred Amounts. Within twenty (20) days after a Participant receives notice that a Mandatory Deferred Account in respect of a Plan Year will be established and a portion of such Participant’s Performance Compensation, Salary or other cash compensation will be deferred, such Participant can elect to have the Mandatory Deferred Amount accrue Equivalents related to one or more of the Reference Investment Funds in whole percentage increments; provided, that the Participant must complete his or her investment election no later than the deadline established by the Committee.

       (3) Change in Investment Election. Effective for the close of any business day, a Participant may change his or her investment election for all of his existing Accounts in whole percent increments. Such election will affect all Deferred Amounts and Mandatory Deferred Amounts and the balance of all existing Accounts, but shall not affect any Accounts thereafter established in respect of future deferrals. To effect a change, the Participant must complete his investment election under guidelines established by the Committee.

     (e)  Allocation of Reinvestments of Reference Investment Fund Distributions. All Equivalents (earnings, gains and losses net after expenses and taxes) attributable to any Account as measured in respect of any Reference Investment Funds will be deemed to include any distributions by such Reference Investment Fund, which distributions shall be deemed to be reinvested in the same Reference Investment Fund after deducting any expenses and taxes attributable to such reinvestment.

     (f)  Special Election Rules. The Committee may permit variations in the administration of the Plan as it considers proper, under regulations adopted by the Committee and published to Participants.

     Section 6.5. Failure to Elect Reference Investments. Any portion of an Account of a Participant with respect to which such Participant has not indicated to the Committee a Reference Investment Fund (whether due to the failure of the Participant to timely complete and file his or her election or otherwise) shall be deemed to accrue Equivalents as though such portion of the Account were invested in the Reference Money Market Fund, or in such other investment or reference rate as the Compensation Committee may select.

     Section 6.6. Adjustments to Account Balances.

     (a)  Regular Valuation Dates. As of each Valuation Date, the Company and the Recordkeeper will determine the fair market value of each Account of each Participant. On each Valuation Date, each Account will be adjusted to reflect the following events in order since the preceding Valuation:

       (1) The increase or decrease in the amount of Equivalents (the pro rata share of the net earnings, gains and losses, net of expenses and taxes of the Reference Investment Fund or Funds in which the Account is deemed to be invested);

       (2) Deferred Amounts in a new Account and Mandatory Deferred Amounts in respect of a Mandatory Deferred Account;

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       (3) Distributions, if any, from the Account; and

       (4) Changes in Reference Investment Fund or Funds under Section 6.4(d)(2) of the Plan.

     (b)  Valuations Binding. In determining the value of each Account of each Participant, the Committee will exercise its best judgment as to the value of such Account. All determinations of value of Accounts shall be binding upon Participants and their Beneficiaries.

     (c)  Allocation Date. All allocations of Equivalents will be considered to have been made as of the Valuation Date, regardless of when allocations are actually made.

     (d)  Statements of Account Balances. As soon as practicable after the end of each Plan Year, the Committee will provide to each Participant, or his or her Beneficiary, a statement showing with respect to each Account of such Participant: (1) the balance of such Account on January 1 of such Plan Year, (2) all Equivalents attributable to such Account during such Plan Year, (3) all distributions from such Account during such Plan Year and (4) the balance of such Account on December 31 of such Plan Year. During each Plan Year, the Committee may provide statements quarterly setting forth the balance of each Account of a Participant as at the end of a quarter and such other information in respect thereof as the Committee shall deem appropriate. If a Participant has Accounts with more than one Employer, the reports and records relating to such Accounts will be reported to the Participant without indicating which Employer established the Account, unless such Employer is bankrupt or insolvent.

     (e)  Correction of Mistakes. In the event the Committee discovers that a mistake has been made in an allocation to or distribution from any Account, or any other mistake which affects an Account, it will correct the mistake as soon as practicable. If an overpayment has been made, the Committee will seek cash reimbursement. If an underpayment has been made, the amount of the underpayment will be paid pursuant to Article XIII unless the committee determines the amount to be minimal, in which case it will be paid as a lump sum payment.

     Section 6.7. No Responsibility for Results of Reference Investment Funds. The Company shall not, and the Participating Employers, the Board of Directors, the Compensation Committee and the Committee shall not, have any responsibility or liability in the event any Reference Investment Fund selected by any Participant shall result in any reduction in any Deferred Amount or Mandatory Deferred Amount or reduce from one Valuation Date to the next Valuation Date the amount of such Participant’s Deferred Compensation or Mandatory Deferred Compensation, or both, or fail to result in any increase of Deferred Compensation or Mandatory Deferred Compensation.

ARTICLE VII
PAYMENT OF DEFERRED COMPENSATION

     Section 7.1. Distributions Events. Deferred Compensation under the Plan shall be payable as follows:

     (a)  Termination for Other than Retirement. Disability or Death. In the event that a Participant’s Employment with the Company on any Participating Employer shall be terminated by reason of voluntary termination, layoff due to job elimination or job relocation, involuntary termination for any reason or any other termination for any other reason other than his or her death, Disability or Retirement, the entire amount of his or her Deferred Compensation shall be paid within sixty (60) days after such termination of Employment; provided, however, that if a Participant is an employee of any Subsidiary of the Company, such Participant shall not be deemed to have terminated his or her employment with the Company for the purpose of this Section 7.1, although such Participant shall no longer be an Eligible Employee if such Subsidiary is not a Participating Employer.

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     (b)  Death of Participant. In the event of a Participant’s death (whether before or after his or her Retirement or Disability), the entire amount of his or her Deferred Compensation shall be paid to his or her Beneficiaries in a lump sum within sixty (60) days after the date of such Participant’s death.

     (c)  Termination of Employment by Retirement or Disability. In the event a Participant shall terminate after meeting the requirements for Retirement or qualifies for Disability benefits under the Retirement Plan (or similar plan of a Participating Employer) or the Company’s Long Term Disability Income Plan, the distribution of his or her Deferred Compensation shall be made in accordance with the election of such Participant made in accordance with subsection (d) or subsection (e) of this Section 7.1, or, if no election has been made by such Participant, in accordance with Section 7.2 of the Plan.

     (d)  In accordance with Elections. A Participant may, at the time he or she notifies the Committee of his or her election to have all or a portion of his or her Deferrable Salary or Performance Compensation in respect of any Plan Year payable as Deferred Compensation under the Plan, specify the payment of such Deferred Compensation only in the following forms thereof:

       (i) In a lump sum on the 15th of January following the second anniversary of the date such election of the Deferred Salary Amount or Deferred Performance Amount was made.

       (ii) In a lump sum on the fifteenth (15th) day of January of the year following the year of such Participant’s Retirement or Disability; or

       (iii) In annual installments over a period of not less than five (5) or more than fifteen (15) years, commencing in each case on the 15th day of January of the year following the date of such Participant’s Retirement or Disability, each installment to equal the aggregate amount of all Deferred Compensation of such Participant then remaining in his or her Account or Accounts subject to such election, determined as at the Valuation Date immediately prior to such distribution date, divided by the number of installments then remaining to be made (including the installment to be paid on such distribution date).

     (e)  Extension of Deferral Period. If the deferral period for any Deferred Amount specified by a Participant in an effective Agreement (or in any subsequent election form pursuant to this subsection (e)) is two years (as provided in clause (i) of subsection (d) of this Section 7.1), such Participant may extend the deferral of such Deferred Amount at his or her election to any date permitted by Section 7.1(d) if, and only if, such election is made at least twelve (12) months prior to the expiration of the deferral period provided under such Agreement (or subsequent election form) and in the calendar year prior to the calendar year during which such Deferred Compensation would have been paid but for this clause.

     Section 7.2 Elections of Deferral Period and Payment Forms. With respect to any Deferred Amount of an active Employee, the period of deferral and form of distribution will be paid in accordance with the elections in Section 7.1 except as otherwise determined under this Section 7.2 as follows:

     (a)  Absence of Deferral Period Election. With respect to any Deferred Amount of a Participant for which no effective election as to time of payment has been filed with the Committee, such related Deferred Compensation will be paid in a lump sum on the earlier of (a) the second (2nd) anniversary of (i) the date such Deferred Performance Amount would have been paid (but for such deferral election) or (ii) the fifteenth (15th) day of January of the year following the Plan Year during which such Deferred Salary Amount would have been paid (but for such deferral election), or (b) the fifteenth (15th) day of the year following the year of such Participant’s Retirement or Disability.

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     (b)  An employee may change an election made under 7.1(d)(ii) or (iii) for his form of distribution if the election is at least 12 months before retirement. Such extension or change in the election will not be valid until the 12 months have expired. If a distribution would have otherwise been made under this Article VII pursuant to the last election applicable to such deferred Compensation before the expiration of the 12 months, then the prior election will control the time and form of distribution.

     (c)  Notwithstanding the other provisions of this Section 7.2, employees or retirees may elect to have any or all of their Deferred Compensation paid out as soon as administratively possible in a lump sum payment made at 90% of their Deferred Compensation payable under the other provisions of this Section 7.2.

     Section 7.3. Minimum Balance. Notwithstanding the foregoing, in the event that an Participant’s Employment is terminated for any reason and the aggregate undistributed amount of all of his or her Deferred Compensation is $50,000 or less, as at the Valuation Date immediately prior to such termination of Employment, the entire amount of all of his or her Accounts shall be paid in a lump sum within sixty (60) days after his or her termination of Employment.

ARTICLE VIII
PAYMENTS FROM THE PLAN

     Section 8.1. Timing Amount and Form of Payment. Each payment of a Participant’s Deferred Compensation, and, if applicable, Mandatory Deferred Compensation, to such Participant will be subject to the following rules and any other rules adopted from time to time by the Committee and uniformly applied:

     (a)  Timing of Payment. The Committee will cause the Company (or other Employer, as applicable) to pay, or cause to be paid, the Deferred Compensation of a Participant to such Participant or his or her Beneficiaries at the time or times specified in Article VII of the Plan and in the Agreement or other payment election form submitted to the Committee in accordance with the terms of the Plan. The Committee will cause the Company (or other Employer, as applicable) to pay, or cause to be paid, Mandatory Deferred Compensation of a Participant to such Participant or his or her Beneficiaries at the time or times specified at Article V of the Plan and in any payment election form submitted to the Committee in accordance with the terms of the Plan.

     (b)  Amount of Payment. Each amount of Deferred Compensation, and, if applicable, Mandatory Deferred Compensation, to be paid to a Participant will be determined as of the Valuation Date on or next preceding the date such payment is due to such Participant.

     (c)  Medium of Payment. Each Participant or his or her Beneficiaries will receive all payments of such Participant’s Deferred Compensation and Mandatory Deferred Compensation in cash.

     Section 8.2. Acceleration of Payment upon Change of Control. In the event a Change of Control occurs, the entire amount of Deferred Compensation and Mandatory Deferred Compensation of each Participant shall be immediately paid to such Participant (or, if applicable, his or her Beneficiaries) and no additional deferrals of Performance Compensation, Salary or other cash compensation will be made under the Plan (notwithstanding any outstanding election for such deferrals) and the Plan shall automatically terminate effective as of the Change of Control Date.

ARTICLE IX
SOURCE OF PAYMENTS

     Section 9.1. Payments from General Funds of Employers and Rabbi Trusts. All payments of Deferred Compensation and Mandatory Deferred Compensation under and in accor-

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dance with the Plan shall be paid in cash from the general funds of the applicable Employer and there shall be no requirement that any special or separate trust, fund or account shall be established in the name of any Participant or Beneficiary or other segregation of assets made to assure such payments; provided, however, that each of the Company and the Participating Employers intends to establish a Trust and may establish a bookkeeping reserve to meet its obligations under the Plan. To the extent that any Participant, Beneficiary or other person has a right to receive payments of Deferred Compensation or Mandatory Deferred Compensation from the Company or a Participating Employer under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company or such Participating Employer.

     Section 9.2. The Trusts. (a) A Trust to be known as the Rabbi Trust for the Deferred Compensation Plan for Executives of the Company (the “Company Trust”) will be established pursuant to a Trust Agreement between the Company and the Trustee and is intended to be maintained as a “grantor trust” under section 671 of the Code. The assets of the Company Trust will be held, invested and disposed of by the Trustee in accordance with the terms of the Company Trust, for the exclusive purpose of paying Deferred Compensation and Mandatory Deferred Compensation to Participants or their Beneficiaries as and when due under the Plan. The assets of the Company Trust shall at all times be subject to the claims of the Company’s general creditors in the event of the Company’s insolvency or bankruptcy.

     (b)  Each Participating Employer shall prior to permitting any Eligible Employee to participate in the Plan, enter into and maintain a Trust for the Deferred Compensation Plan for Executives of the Company for Participants who are Employees of such Participating Employer (each an “Employer Trust”), which shall be established pursuant to a Trust Agreement between such Participating Employer and the Trustee and shall be intended to be maintained as a “grantor trust” under 671 of the Code. The assets of each Employer Trust will be held, invested and disposed of by the Trustee in accordance with the terms of the Employer Trust for the exclusive purpose of paying Deferred Compensation to Participants Employed by such Participating Employer or their Beneficiaries as and when due under the Plan. The Assets of each Employer Trust shall at all times be subject to the claims of the general creditors of the Participating Employer that established such trust in the event of such Participating Employer’s insolvency or bankruptcy.

     (c)  The Company Trust and each Participating Employer Trust (herein collectively referred to as the “Trusts”) shall each contain substantially the same provisions and have the same Trustee and shall, to the extent practicable, be administered and invested jointly, except that the assets shall be separate and subject only to the general creditors of the Employer which is the grantor of the applicable Trust.

     Section 9.3. Contributions and Expenses. The Company and Participating Employers may, from time to time, make contributions to their respective Trusts in accordance with the applicable Trust Agreement and the Plan. Deferred Compensation and Mandatory Deferred Compensation payable under the Plan and expenses chargeable to the Participants in accordance with the Plan are intended first to be paid from the applicable Trusts. To the extent the funds in such Trusts are not sufficient (or are not paid by the Trustee), all Deferred Compensation and Mandatory Deferred Compensation shall be paid by the Company or the applicable Participating Employer.

     Section 9.4. Trustee Duties. The powers, duties and responsibilities of the Trustee shall be as set forth in the Trust Agreements and nothing contained in the Plan, either expressly or by implication, shall impose any additional powers, duties or responsibilities upon the Trustee. The Trustee shall make investments in the Trusts as directed by the Committee, consistent with the provisions of the Plan and the Trust Agreements. The Trustee may hold cash and other liquid investments in such amounts as the Committee may deem appropriate.

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     Section 9.5. Reversion of Trust Funds to Company or Participating Employer. (a) The Company shall have no beneficial interest in the Company Trust and no part of the Company Trust shall revert or be repaid to the Company, except as expressly provided in the Plan or the Trust Agreement which establishes the Company Trust.

     (b)  No Participating Employer shall have a beneficial interest in such Employer’s Employer Trust and no part of such Employer Trust shall revert or be repaid to such Participating Employer, except as expressly provided in the Plan or the Trust Agreement which establishes such Employer Trust.

ARTICLE X
DESIGNATION OF BENEFICIARIES

     Section 10.1. Designation Procedure. Each Participant may designate one beneficiary or several beneficiaries (such beneficiary or beneficiaries of a Participant herein referred to as the Participant’s “Beneficiaries”) to receive any balance, or portion thereof, of his or her Accounts which may be payable under the Plan upon his or her death. To be effective, each designation must be in writing on a form provided by the Committee and must be signed and filed by the Committee prior to the Participant’s death. Each Participant may name one or more primary Beneficiaries and one or more contingent Beneficiaries; provided that if a Participant names more than one Beneficiary, the Participant shall designate the percentage payable to each. A Participant may from time to time revoke or change his or her Beneficiaries designation without the consent of any Beneficiary by filing a new designation with the Committee, and each change will revoke all prior designations of Beneficiaries. The last. such designation of Beneficiaries received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt.

     (b)  Absence of Designation. If no designation of Beneficiaries is in effect at the time of a Participant’s death, if no designated Beneficiary survives the Participant, or if the Participant’s designation of Beneficiaries conflicts with law, then the Participant’s estate shall be the Beneficiary entitled to receive all Deferred Compensation and, if applicable, Mandatory Deferred Compensation then unpaid. The Committee may direct the Company or any Participating Employer to retain such unpaid Deferred Compensation and, if applicable, Mandatory Deferred Compensation, without liability for any interest thereon or other earnings or gains thereon, until the rights thereto are determined, or the Committee may direct the Company or Participating Subsidiary to pay such unpaid Deferred Compensation and, if applicable, Mandatory Deferred Compensation, into any court of appropriate jurisdiction, and such payment shall completely discharge all liability of the Company and, if applicable, any Participating Employer for unpaid Deferred Compensation and, if applicable, Mandatory Deferred Compensation.

     (c)  Payment to Minor or Incompetent Beneficiaries. In the event a deceased Participant’s Beneficiary is a minor, is legally incompetent, or cannot be located after reasonable effort, the Committee will make payment to the court-appointed guardian or representative of such Beneficiary, or to a trust established for the benefit of such Beneficiary, as applicable.

     (d)  Judicial Determination. In the event the Committee for any reason considers it improper to direct any payment as specified in this Section 10.1, it may have a court of competent jurisdiction determine to whom payments should be made, in which event all expenses incurred in obtaining such determination may be deducted from the unpaid Deferred Compensation and, if applicable, Mandatory Deferred Compensation or charged to the payee. Any such payment shall constitute a complete discharge of all liability of the Employers to such Participant under the Plan.

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     Section 10.2. Payment to Participant’s Representative. If a Participant is incompetent to handle his or her affairs as of any date designated by such Participant as a date on which a payment of all or a portion of such Participant’s Deferred Compensation or Mandatory Deferred Compensation, or both, is to be made, the Committee will make any payments due to such Participant to his or her court-appointed personal representative or, if none is appointed, the Committee may in its discretion make payments to his or her spouse, a child, a parent, or a brother or sister, or any other person deemed by the Committee to have incurred expenses for the care or maintenance of such Participant, in such manner and proportions as the Committee may determine; provided that the Committee may request a court of competent jurisdiction to determine the payee, in which event all expenses incurred in obtaining the determination may be deducted from the unpaid Deferred Compensation and, if applicable, Mandatory Deferred Compensation or charged to the payee. Any such payment shall constitute a complete discharge of all liability of the Employers to such Participant under the Plan.

     Section 10.3. Unclaimed Benefits. In the event the Committee cannot locate, with reasonable effort, any person entitled to receive a Participant’s unpaid balance of Deferred Compensation and, if applicable, Mandatory Deferred Compensation, the obligation of the Employer to make any payment of such Participant’s Deferred Compensation and, if applicable, Mandatory Deferred Compensation, will be canceled on the fifth anniversary after the first day on which a payment of such Deferred Compensation was due to be paid, but will be reinstated within sixty (60) days after the Participant or a Beneficiary is located.

ARTICLE XII
ADMINISTRATION OF PLAN

     Section 11.1. Administration. The Plan shall be administered by the Committee, as appointed by the Compensation Committee. Determinations by the Committee as to any questions arising under the Plan shall be final, conclusive and binding upon all persons including Participants, Beneficiaries, the Company and Participating Employers. A member of the Committee who is also a Participant must abstain from voting on any matter relating to his or her participation in the Plan or to his or her Deferred Compensation or Mandatory Deferred Compensation.

     Section 11.2. Allocation of Fiduciary Responsibilities: Composition and Powers of Committee. The fiduciaries will have the powers and duties described below, and may delegate their duties to the extent permitted under ERISA:

       (a) Company. The Company, through the Compensation Committee, will be responsible for appointing and removing Committee members, approving the adoption of the Plan by each new Participating Employer and designating Eligible Employees.

       (b) The Committee.

       (1) Appointment and Termination of Office. The Committee will consist of not less than three (3) or more than five (5) individuals who will be appointed by and serve at the pleasure of the Compensation Committee. The Compensation Committee will have the right to remove any member of the Committee at any time. A member of the Committee may resign at any time by written resignation to the Committee and the Compensation Committee. The Compensation Committee will appoint a successor to fill any vacancy in the Committee’s membership.

       (2) Organization of Committee. The Committee will elect a Chairman from among its members, and will appoint a Secretary who may or may not be a Committee member. The Committee may appoint or retain such agents (including legal counsel and accountants) who may or may not be Committee members, as it considers necessary for the effective performance of its duties in administering the

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  Plan, and may delegate to such agents such ministerial powers and duties as it considers expedient or appropriate. The Committee may fix the compensation of the agents within the limits set by the Compensation Committee. Committee members who are employed by the Company or a Participating Employer shall serve as such without additional compensation.

     (3)  Committee Meetings. The Committee will hold meetings at least annually. A majority of the members then in office will constitute a quorum. All actions of the Committee may be taken with or without a meeting. Each action of the Committee taken at a meeting shall be taken on a majority vote of all members of the Committee then in office. Any action taken without a meeting shall be in writing and signed by a majority of the members of the Committee then in office. The Committee may establish such other rules and procedures for taking action with or without a meeting as it shall deem appropriate.

     (4)  Powers of the Committee. The Committee will have primary responsibility for administering the Plan, and all powers necessary to enable it to properly perform its duties, including but not limited to the following powers and duties:

       (A) Rules. The Committee may adopt rules, regulations and procedures as it deems necessary for the performance of its duties under the Plan, except to the extent that such rules, regulations and procedures conflict with the express provisions of the Plan or written policies or directives of the Compensation Committee.

       (B) Interpretation. The Committee will have the power to interpret the Plan and to decide all questions arising under the Plan; provided, however, that the Compensation Committee shall also have the power and authority to interpret the Plan and interpretations, rules and regulations adopted by the Compensation Committee shall control.

       (C) Individual Accounts. The Committee, or the Recordkeeper acting for it, will maintain individual Accounts for each Participant and will allocate Equivalents in respect of Deferred Amounts to the proper Accounts.

       (D) Participant Data. The Committee will request from the Company and the Participating Employers complete information regarding the Deferred Amounts and Mandatory Deferred Amounts of each Participant and such other information as it considers necessary from time to time, and will treat Employer records as conclusive with respect to such information.

       (E) Payments. The Committee will direct the payment of Account balances from the Trust (or from the Company or the Participating Employer, as the case may be), and will specify the Participant (or Beneficiary or Beneficiaries) to be paid and the amount, the time and the conditions, if any, of each payment.

       (F) Disclosure. The Committee will prepare and distribute, or cause to be prepaid and distributed, to the Participants copies of the Plan, notices and other information about the Plan in such manner as it deems appropriate and in compliance with applicable law.

       (G) Agreements and Other Forms. The Committee will provide forms of Agreements for use by Eligible Employees to elect to participate in the Plan and other forms for use by Participants in respect of their participation in the Plan.

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       (H) Financial Information. The Committee will periodically prepare, or cause to be prepared, reports of the Plan’s operation and will submit a copy of each report to the Compensation Committee and cause a copy to be maintained in the office of the Secretary of the Company and each Participating Employer.

       (I) Reporting and Tax Returns. The Committee will cause to be filed all reports and tax returns required under ERISA and the Code.

     Section 11.3. Indemnification. The Company and each of the Participating Employers will indemnify and hold harmless the Committee and each member, and each person to whom the Committee has delegated responsibility under this Article XI (each an “Other Person”), from and against any and all losses, costs, liabilities or expenses that may be imposed upon or incurred by them in connection with or resulting from any claim, action, suit, or proceeding to which any member of the Committee or such Other Person is or may be a party or may be involved by reason of any action taken or failure to act under the Plan, or for any other reason, and from and against any and all amounts paid by the members of the Committee (or any of them) or such Other Person or Persons in settlement (if with the Company’s approval) of, or paid by them in satisfaction of a judgment in, any such action, suit or proceeding and from and against any other joint or several liability for their acts and omissions and for the acts and omissions of their duly appointed agents in the administration of the Plan, except for their own willful breach of fiduciary duty or willful misconduct.

     Section 11.4. Claims Procedures. (a) Application for Payment of Deferred Compensation or Mandatory Deferred Compensation. The Committee will, if possible, furnish to each Participant timely information concerning distributions of Deferred Compensation or Mandatory Deferred Compensation due under the Plan to such Participant at least one year prior to the anticipated date of such distribution. The Committee may require any Participant, Beneficiary or other person claiming the right to receive payments of Deferred Compensation or Mandatory Deferred Compensation under the Plan to submit a written application, together with such information as the Committee considers necessary to process the claim.

     (b)  Action on Application. Within ninety (90) days after receipt of an application and all necessary information, the Committee will furnish the claimant a written notice of its decision. If the Committee denies the claim in whole or in part, the notice will set forth (1) specific reason for the denial, with specific reference to Plan provisions upon which the denial is based; (2) a description of any additional information or material necessary to process the application with an explanation why such material or information is necessary; and (3) an explanation of the claim review procedure under the Plan.

     (c)  Claim Review. Any Participant, Beneficiary or other claimant who does not agree with the decision rendered on the application may request that the Committee review the decision. Each request for review must be made in a writing addressed to and filed with the Committee within sixty (60) days after the claimant receives the decision, or if the application has neither been approved nor denied within the 90-day period specified in subsection (b), then the request must be made within 60 days after expiration of the 90-day period. Concurrently with filing the request for review the claimant may submit in writing to the Committee a statement of the issues raised by his appeal and supporting arguments and comments. Where the Committee believes that the issues raised by the claimant’s appeal may be more efficiently or fairly processed by taking testimony of the claimant or others, it will set the matter for oral hearing and give the claimant reasonable notice of the time and place. The Committee will proceed promptly to resolve all issues raised by the claimant’s appeal and will render a written decision on the merits within 60 days following the claimant’s request for review. Any determination by the Committee after completion of the review process set forth herein shall be binding upon the Company and the claimant.

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ARTICLE XII
AMENDMENT AND TERMINATION

     Section 12.1. Amendment of the Plan. The Plan may be amended, modified or suspended by the Company pursuant to action taken by the Board of Directors or by the Compensation Committee; provided, however, that no such action shall have the effect of reducing or eliminating any Account balance as at the effective date of any such amendment, modification or suspension or otherwise impairing or adversely affecting the rights of any Participant or Beneficiary to payment of Deferred Compensation or Mandatory Deferred Compensation under the Plan which had accrued prior to the date of such action. In the event of any amendment to, or modification or suspension of, the Plan, the Company will promptly notify each Participant of such amendment, modification or suspension of the Plan. Any such amendment shall be made by, and any such modification or suspension shall be evidenced by, written instrument executed by the Company.

     Section 12.2. Termination of the Plan. Although the Company expects the Plan to be continued indefinitely, the Company reserves the absolute right to terminate the Plan at any time by action taken by the Board of Directors or the Compensation Committee. In the event of any termination of the Plan, the Company will promptly notify each Participant of such termination of the Plan and will cause all Deferred Compensation and Mandatory Deferred Compensation to be paid to the Participants or their Beneficiaries on or before (or as soon as practicable following) the effective date of such termination of the Plan.

ARTICLE XIII
MISCELLANEOUS PROVISIONS

     Section 13.1. No Assignment. The right of any Participant or any of his or her Beneficiaries to receive Deferred Compensation and, if applicable, Mandatory Deferred Compensation under the Plan shall not be assigned, anticipated, transferred, pledged or encumbered, either voluntarily or by operation of law, nor shall any amount of a Participant’s Deferred Compensation or Mandatory Deferred Compensation be subject to the claim or legal process of any creditor of such Participant, or subject to seizure for payment of any debts or judgments, except as provided in Article X of the Plan with respect to designation of Beneficiaries and except as may otherwise be required by law. If any Participant shall, or shall attempt to, assign, transfer, pledge or encumber any amount payable under the Plan, or if by reason of such Participant’s bankruptcy or other event happening at any time any such payment would be made subject to his or her debts or liabilities or would otherwise devolve upon anyone else and not be enjoyed by him or her or his or her Beneficiary, the Compensation Committee may, in its sole discretion, terminate such Participant’s right to any such payment of Deferred Compensation, and, if applicable, Mandatory Deferred Compensation and direct that the same be held and applied to or for the benefit of such Participant or his or her spouse, children or other dependents, or any of them, in such manner as the Compensation Committee may deem appropriate.

     Section 13.2. Adoption of and Withdrawal from Plan by a Participating Employer. (a) Any domestic wholly-owned subsidiary of the Company which at the time is not a Participating Employer, may, with the consent of the Committee, adopt the Plan and become a Participating Employer by causing an appropriate written instrument evidencing such adoption to be executed pursuant to the authority of its board of directors and filed with the Company and by executing a Trust Agreement in form and substance satisfactory to the Committee.

     (b)  Any Participating Employer may, by action of its board of directors, withdraw from the Plan, such withdrawal to be effective upon notice in writing to the Committee, and shall thereupon cease to be an Employer for all purposes of the Plan. A Participating Employer shall be deemed automatically to withdraw from the Plan in the event it shall cease to be a wholly owned subsidiary of the Company. The withdrawal of a Participating Employer shall be treated as a termination of the Plan with respect to such Employer and with respect to Participants

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who at the time are employed by such Employer, except that any Participant employed by the withdrawing Employer who is transferred to or continues in Employment with any other Employer shall remain unaffected by such withdrawal and such Participant shall continue as a Participant under the Plan.

     Section 13.3. Information Required. Each Participant shall provide the Committee with such pertinent information concerning himself or herself and his or her Beneficiaries relating to Plan participation by the Participant as the Committee may specify, and no Participant or Beneficiary or other person shall have any rights in or be entitled to any payments of Deferred Compensation under the Plan unless such information is provided to the Committee.

     Section 13.4. Elections by Eligible Employees. AM elections, designations, requests, notices, instructions and other communications from an Eligible Employee, Participant, Beneficiary or other person to the Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Committee, shall be mailed by first-class mail, transmitted by facsimile or delivered to such location as shall be specified by the Committee and shall be deemed to have been given and delivered only upon actual receipt thereof by the Committee at such specified location.

     Section 13.5. Notices by Committee or any Employer. All notices, statements, reports and other communications from the Committee or any Employer to any Eligible Employee, Participant, Beneficiary or other person required or permitted under the Plan shall be deemed to have been duly given when delivered to, or when mailed first-class mail, postage prepaid and addressed to, such Eligible Employee, Participant, Beneficiary or other person at his or her address last appearing on the records of the Company or the applicable Participating Employer or when hand delivered to such person.

     Section 13.6. No Employment Contract or Commitment. The Plan is not, and shall not be deemed to constitute, a contract of employment between the Company, or any other Employer or other Subsidiary or Affiliate of the Company, and a Participant. Neither the Plan nor any action taken hereunder by the Company or any Participating Employer shall constitute a commitment or agreement to continue the Employment of any Participant or shall be held or construed to confer on a Participant any right to continued Employment with the Company or any Participating Employer or any other Subsidiary or Affiliate of the Company, or as a commitment to continue the rate of compensation of any Participant, or as affecting the right of the Company or any Participating Employer to terminate the Employment of any Participant, Eligible Employee or any other employee at any time, with or without cause.

     Section 13.7. Severability. In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had been omitted, and the Company shall have the privilege and opportunity to correct and remedy questions of illegality or invalidity by amendment as provided in the Plan.

     Section 13.8. Effect of IRS Determination. If any Deferred Amount is found in a “determination” (within the meaning of Section 1313(a) of the Code) to have been includible in gross income by a Participant prior to the payment thereof as provided under the Plan, such Deferred Amount (as adjusted by Equivalents to the applicable Valuation Date) shall be immediately paid to such Participant notwithstanding such Participant’s election or any other provision of the Plan.

     Section 13.9. Taxes and Withholding. All payments of Deferred Compensation and Mandatory Deferred Compensation in accordance with the Plan shall be subject to such withholding for taxes and deductions for payroll and other taxes (federal, state or local) as may be due thereon and the determination by the Committee as to the amounts withheld from such payments shall be binding upon each Participant and his or her Beneficiaries.

X-10.3-27


 

     Section 13.10. No Rights to Assets Created. The obligations of the Company or any Participating Employer to make payments of Deferred Compensation and Mandatory Deferred Compensation under the Plan shall constitute a liability of the Company or a Participating Employer, as the case may be, to the Participant and his or her Beneficiaries. Such payments of Deferred Compensation and Mandatory Deferred Compensation shall be made from the general funds of the Company or the Participating Employer, as the case may be, or from the Trusts. Neither the Company nor any Participating Employer shall be required to establish or maintain the Trusts or any special or separate fund or trust or otherwise to segregate assets to assure that such payments shall be made, and neither a Participant nor his or her Beneficiaries shall have any interest in any particular asset of the Company or any Participating Employer or in the Trusts or any other trust by reason of the Company’s (or a Participating Employer’s) obligations hereunder. Nothing contained in the Plan shall create or be construed as creating a trust of any kind or any other fiduciary relationship between the Company or any Participating Employer and a Participant or his or her Beneficiaries.

     Section 13.11. Precedent. Except as otherwise specifically provided, no action taken in accordance with the Plan by the Employers or the Committee shall be construed or relied upon as a precedent for similar action under similar circumstances.

     Section 13.12. No Guarantees. No employer guarantees that any Reference Investment Fund will not result in a reduction of, or loss to, any Deferred Amount, Mandatory Deferred Amount, Deferred Compensation or Mandatory Deferred Compensation or any Account. Neither the Company, nor any Participating Employer nor the Trustee guarantees the amount or payment of any Deferred Compensation, Mandatory Deferred Compensation or other amount payable to any Participant under the Plan.

     Section 13.13. Expenses. The expenses of administration of the Plan, including the payment of the fees of the Trustee and the Recordkeeper, shall be paid by the Company.

     Section 13.14. Claims of Other Persons. The provisions of the Plan shall in no event be construed as giving any person, firm or corporation any legal or equitable right as against the Company or any Participating Employer or their respective officers, directors or employees, except as expressly provided for in the Plan.

     Section 13.15. Captions. The captions preceding the Articles, Sections and subsections hereof have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions thereof.

     Section 13.16. Validity of the Plan. The validity of the Plan shall be determined, and the Plan shall be governed by and construed and interpreted, in accordance with the laws of the State of Ohio.

     Section 13.17. Plan Binding on Parties. The Plan shall be binding upon the Employees, all Participants and Beneficiaries, and, as the case may be, the heirs, executors, administrators, successors and assigns of each of them. Obligations incurred by the Company or any Participating Employer shall be binding upon the Company or such Participating Employer, as the case may be, and shall inure to the benefit of the Participants or their Beneficiaries.

X-10.3-28


 

* * *

Executed at Akron, Ohio, this 20th day of December, 2002.

         
        The Goodyear Tire & Rubber Company
 
    By:   /s/ Donald D. Harper

Vice President
 
ATTEST:        
 
/s/ Bertram Bell

       

X-10.3-29


 

ANNEX I
TO
THE GOODYEAR TIRE & RUBBER COMPANY
DEFERRED COMPENSATION PLAN FOR EXECUTIVES

The Reference Investment Funds are as follows:

1.   Money Market Fund. The Benchmark Fixed Income — Government Select Portfolio.
 
2.   Bond Fund. The Benchmark Short-Intermediate Bond Portfolio.
 
3.   Equity Index Fund. The Benchmark Equity Index Portfolio.
 
4.   Balanced Fund. The Benchmark Balance Portfolio.
 
5.   Growth Fund. The American Century Ultra Investment Fund.

X-10.3-30 EX-10.4 8 l92979aex10-4.htm EX-10.4 STOCK OPTION GRANT AGREEMENT EX-10.4 Stock Option Grant Agreement

 

EXHIBIT 10.4
PART I

The Goodyear Tire & Rubber Company

Stock Option Grant Agreement

Name
Title

The Directors of The Goodyear Tire & Rubber Company (the “Company”) desire to encourage and facilitate ownership of the Common Stock of the Company (the “Common Stock”) by key employees and to provide for additional compensation based on appreciation of the Common Stock, thereby providing incentive to promote continued growth and success of the Company’s business. Accordingly, the 1997 Performance Incentive Plan of The Goodyear Tire & Rubber Company (the “Plan”) was adopted effective April 14, 1997. A copy of the Plan is attached.

         
    Granted to:   Name
    SSN:   SS Number
    Grant Date:   December 3, 2001
    Options Granted:    
    Option Type:   Incentive
    Option Price per Share:   $22.05
    Expiration Date:   December 3, 2011
         
    Vesting Schedule:   25% on 12/03/2002
        25% on 12/03/2003
        25% on 12/03/2004
        25% on 12/03/2005
   
 
  The Goodyear Tire & Rubber Company
December 3, 2001

By my signature below, I hereby acknowledge receipt of this Option granted on the date shown above, which has been issued to me under the terms and conditions of the Plan. I further acknowledge receipt of the copy of the Plan and agree to conform to all of the terms and conditions of the Option and the Plan.

             
Signature:       Date:  
   
   
 

X-10.4-1


 

     
ISO Grant Agreement (Cont’d)   December 3, 2001

Part I — INCENTIVE STOCK OPTIONS

1.     These Incentive Stock Options for the number of shares of Common Stock indicated on the preceding page (the “Incentive Stock Options”) are granted to you under and are governed by the terms and conditions of the Plan and this Grant Agreement. Your execution and return of the enclosed copy of page one of this Grant Agreement acknowledging receipt of the Incentive Stock Options granted herewith constitutes your agreement to and acceptance of all terms and conditions of the Plan and this Grant Agreement. You also agree that you have read and understand this Grant Agreement.

2.     You may exercise the Incentive Stock Options granted pursuant to this Grant Agreement through (1) a cash payment in the amount of the full option exercise price of the shares being purchased (a “cash exercise”), (2) a payment in full shares of Common Stock having a Fair Market Value (as defined in the Plan) on the date of exercise equal to the full option exercise price of the shares of Common Stock being purchased (a “share swap exercise”), or (3) a combination of the cash exercise and share swap exercise methods. Any exercise of these Incentive Stock Options shall be by notice stating the number of shares of Common Stock to be purchased and the exercise method, accompanied with the payment, or proper proof of ownership if the share swap exercise method is used. You shall be required to meet the tax withholding obligations arising from any exercise of Incentive Stock Options.

3.     As further consideration for the Incentive Stock Options granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries from the Date of Grant to the date or dates the Incentive Stock Options become exercisable as set forth on page one of this Grant Agreement before you will be entitled to exercise the Incentive Stock Options granted. The Incentive Stock Options you have been granted shall not in any event be exercisable after your termination of employment except for Retirement, (defined as termination of employment at any age after 30 or more years, or at age 55 or older with at least 10 years of continuous service with the Company and its subsidiaries), death, or Disability (defined as termination of employment while receiving benefits under a long-term disability income plan maintained by the Company or one of its subsidiaries).

PART II — NON-QUALIFIED STOCK INVESTMENT OPTIONS

4.     A Non-Qualified Stock Investment Option will be automatically granted to you, immediately upon any satisfaction by you of the conditions specified below, on the following terms and conditions:

     
Date of Grant:   The date of your exercise, at any time prior to January 1, 2009, of an Incentive Stock option granted herein by tendering shares of Common Stock in payment of all or a portion of the exercise price of such Incentive Stock Option.
     
Number of Common Shares Subject to Option:   The number of shares of Common Stock you tendered in the exercise of such Incentive Stock Option.
     
Option Price Per Share:   The Fair Market Value (as defined in the Plan) of the Common Stock on the date you exercised such Incentive Stock Option by tendering shares of Common Stock.
     
Exercise Period:   100% exercisable at any time during the period beginning on the first anniversary of its date of grant and ending on December 3, 2011.

Page 2 of 4

X-10.4-2


 

     
SO Grant Agreement (Cont’d)   December 3, 2001

5.     The Non-Qualified Stock Investment Options are granted under and are governed by the terms and conditions of the Plan and this Grant Agreement. The number of shares of Common Stock subject to each grant is determined by the number of shares of Common Stock you tender to the Company in your exercise of an Incentive Stock Option granted pursuant to this Agreement. The Option price per share of the Non-Qualified Stock Investment Option shall be the Fair Market Value (as defined in the Plan) of Common Stock on the date you exercise an Incentive Stock Option as aforesaid. In order to accept this Option grant, you must tender shares of Common Stock in the exercise of an Incentive Stock Option prior to January 1, 2009.

6.     You may exercise the Non-Qualified Stock Investment Options granted pursuant to this Grant Agreement through (1) a cash payment in the amount of the full option exercise price of the shares being purchased (a “cash exercise”), (2) a payment in full shares of Common Stock having a Fair Market Value (as defined in the Plan) on the date of exercise equal to the full option exercise price of the shares of Common Stock being purchased (a “share swap exercise”), or (3) a combination of the cash exercise and share swap exercise methods. Any exercise of these Non-Qualified Stock Investment Options shall be by notice stating the number of shares of Common Stock to be purchased and the exercise method, accompanied with the payment, or proper proof of ownership if the share swap exercise method is used. You shall be required to meet the tax withholding obligations arising from any exercise of Non-Qualified Stock Investment Options.

7.     As further consideration for each Non-Qualified Stock Investment Option granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries for twelve months following the Date of Grant in respect thereof (as defined at paragraph 4 above) before you will be entitled to exercise such Non-Qualified Stock Investment Option. Any Non-Qualified Stock Investment Option granted shall not in any event be exercisable after your termination of employment except for Retirement, death, or Disability.

Part III — GENERAL PROVISIONS

8.     In the event of your Retirement, the Incentive Stock Options, to the extent they are exercisable, or they become exercisable pursuant hereof, shall remain exercisable for the first three months following the date of your Retirement as Incentive Stock Options and the remainder of the exercise period as Non-Qualified Stock Options. The Options terminate automatically and shall not be exercisable by you from and after the date on which you cease to be an employee of the Company or one of its subsidiaries for any reason other than your death, Retirement or Disability. In the event of your death, Retirement or Disability while an employee of the Company or one of its subsidiaries (and having been an employee continuously since the Date of Grant) during the exercise period on any date which is more than six (6) months after the Date of Grant of the Incentive Stock Options specified on the first page of this Grant Agreement or more than six (6) months after the Date of Grant of Non-Qualified Stock Investment Options specified at paragraph 4 of this Grant Agreement, the Options shall become immediately exercisable and, except as provided below in the event of your death, shall be exercisable by you for the remainder of the term of the Option grant. In the event of your death, the Options may be exercised up to three years after date of death by the person or persons to whom your rights in the options passed by your will or according to the laws of descent and distribution. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause.

Page 3 of 4

X-10.4-3


 

     
ISO Grant Agreement (Cont’d)   December 3, 2001

9.     The Options shall not in any event be exercisable after the expiration of ten years from the Date of Grant specified on the first page of this Grant Agreement and, to the extent not exercised, shall automatically terminate at the end of such ten-year period.

10.     Certificates for the shares of Common Stock purchased will be deliverable to you or your agent, duly accredited to the satisfaction of the Company, at the principal office of the Company in Akron, Ohio, or at such other place acceptable to the Company as may be designated by you.

11.     In the event you Retire or otherwise terminate your employment with the Company or a subsidiary and within 18 months after such termination date you accept employment with a competitor of, or otherwise engage in competition with, the Company, the Committee, in its sole discretion, may require you to return, or (if not received) to forfeit, to the Company the economic value of the Options granted hereunder which you have realized or obtained by your exercise at any time on or after the date which is six months prior to the date of your termination of employment with the Company. Additionally, if you have retired from the Company, all Options granted to you hereunder which you have not exercised prior to your competitive engagement shall be automatically cancelled.

12.     Each Option granted is not transferable by you otherwise than by will or the laws of descent and distribution, and is exercisable during your lifetime only by you.

13.     All rights conferred upon you under the provisions of this Grant Agreement are personal and, except under the provisions of paragraph 12 of this Grant Agreement, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company.

14.     Any notice to you under this Grant Agreement shall be sufficient if in writing and if delivered to you or mailed to you at the address on record in the Executive Compensation Department. Any notice to the Company under this agreement shall be sufficient if in writing and if delivered to the Executive Compensation Department of the Company in Akron, Ohio, or mailed by registered mail directed to the Company for the attention of the Executive Compensation Department at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address. This agreement shall be construed and shall take effect in accordance with the laws of the State of Ohio.

15.     Each Option may be exercised only at the times and to the extent, and is subject to all of the terms and conditions, set forth in this Grant Agreement, and in the Plan, including any rule or regulation adopted by the Committee.

  Page 4 of 4

X-10.4-4


 

EXHIBIT 10.4
PART II

The Goodyear Tire & Rubber Company

Stock Option Grant Agreement

Name
Title

The Directors of The Goodyear Tire & Rubber Company (the “Company”) desire to encourage and facilitate ownership of the Common Stock of the Company (the “Common Stock”) by key employees and to provide for additional compensation based on appreciation of the Common Stock, thereby providing incentive to promote continued growth and success of the Company’s business. Accordingly, the 1997 Performance Incentive Plan of The Goodyear Tire & Rubber Company (the “Plan”) was adopted effective April 14, 1997. A copy of the Plan is attached.

     
Granted to:   Name
SSN:   SS Number
Grant Date:   December 3, 2001
Options Granted:    
Option Type:   Non-Qualified
Option Price per Share:   $22.05
Expiration Date:   December 3, 2011
 
Vesting Schedule:   25% 12/3/2002
    25% 12/3/2003
    25% 12/3/2004
    25% 12/3/2005
   
  The Goodyear Tire & Rubber Company
December 3, 2001

By my signature below, I hereby acknowledge receipt of this Option granted on the date shown above, which has been issued to me under the terms and conditions of the Plan. I further acknowledge receipt of the copy of the Plan and agree to conform to all of the terms and conditions of the Option and the Plan.

             
Signature:       Date:  
   
   
 

X-10.4-5


 

     
NQ Grant Agreement (Cont’d)   December 3, 2001

PART I — NON-QUALIFIED STOCK OPTIONS

1.     These Non-Qualified Stock Options for the number of shares of Common Stock indicated on the preceding page (the “Non-Qualified Stock Options”) are granted to you under and are governed by the terms and conditions of the Plan and this Grant Agreement. Your execution and return of the enclosed copy of page one of this Grant Agreement acknowledging receipt of the Non-Qualified Stock Options granted herewith constitutes your agreement to and acceptance of all terms and conditions of the Plan and this Grant Agreement. You also agree that you have read and understand this Grant Agreement.

2.     You may exercise the Non-Qualified Stock Options granted pursuant to this Grant Agreement through (1) a cash payment in the amount of the full option exercise price of the shares being purchased (a “cash exercise”), (2) a payment in full shares of Common Stock having a Fair Market Value (as defined in the Plan) on the date of exercise equal to the full option exercise price of the shares being purchased (a “share swap exercise”), or (3) a combination of the cash exercise and share swap exercise methods. Any exercise of these Non-Qualified Stock Options shall be by notice stating the number of shares of Common Stock to be purchased and the exercise method, accompanied with the payment, or proper proof of ownership if the share swap exercise method is used. You shall be required to meet the tax withholding obligations arising from any exercise of Non-Qualified Stock Options.

3.     As further consideration for the Non-Qualified Stock Options granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries from the Date of Grant to the date or dates the Non-Qualified Stock Options become exercisable as set forth on page one of this Grant Agreement before you will be entitled to exercise the Non-Qualified Stock Options granted. The Non-Qualified Stock Options you have been granted shall not in any event be exercisable after your termination of employment except for Retirement (defined as termination of employment at any age after 30 or more years, or at age 55 or older with at least 10 years of continuous service with the Company and its subsidiaries), death, or Disability (defined as termination of employment while receiving benefits under a long-term disability income plan maintained by the Company or one of its subsidiaries).

PART II — NON-QUALIFIED STOCK INVESTMENT OPTIONS

4.     A Non-Qualified Stock Investment Option will be automatically granted to you, immediately upon any satisfaction by you of the conditions specified below, on the following terms and conditions:

     
Date of Grant:   The date of your exercise, at any time prior to January 1, 2009, of a Non-Qualified Stock Option granted herein by tendering shares of Common Stock in payment of all or a portion of the exercise price of such Non-Qualified Stock Option.
     
Number of Common Shares Subject to Option:   The number of shares of Common Stock you tendered in the exercise of such Non-Qualified Stock Option.
     
Option Price Per Share:   The Fair Market Value (as defined in the Plan) of the Common Stock on the date you exercised such Non-Qualified Stock Option by tendering shares of Common Stock.
     
Exercise Period:   100% exercisable at any time during the period beginning on the first anniversary of its date of grant and ending on December 3, 2011

Page 2 of 4

X-10.4-6


 

     
4NQ Grant Agreement (Cont’d)   December 3, 2001

PART II — NON-QUALIFIED STOCK INVESTMENT OPTIONS (Cont’d)

5.     The Non-Qualified Stock Investment Options are granted under and are governed by the terms and conditions of the Plan and this Grant Agreement. The number of shares of Common Stock subject to each grant is determined by the number of shares of Common Stock you tender to the Company in your exercise of a Non-Qualified Stock Option granted pursuant to this Agreement. The Option price per share of the Non-Qualified Stock Investment Option shall be the Fair Market Value (as defined in the Plan) of the Common Stock on the date you exercise a Non-Qualified Stock Option as aforesaid. In order to accept this Non-Qualified Stock Investment Option Grant, you must tender shares of Common Stock in the exercise of a Non-Qualified Stock Option prior to January 1, 2009.

6.     You may exercise the Non-Qualified Stock Investment Options granted pursuant to this Grant Agreement through (1) a cash payment in the amount of the full option exercise price of the shares being purchased (a “cash exercise”), (2) a payment in full shares of Common Stock having a Fair Market Value (as defined in the Plan) on the date of exercise equal to the full option exercise price of the shares of Common Stock being purchased (a “share swap exercise”), or (3) a combination of the cash exercise and share swap exercise methods. Any exercise of these Non-Qualified Stock Investment Options shall be by notice stating the number of shares of Common Stock to be purchased and the exercise method, accompanied with the payment, or proper proof of ownership if the share swap exercise method is used. You shall be required to meet the tax withholding obligations arising from any exercise of Non-Qualified Stock Investment Options.

7.     As further consideration for each Non-Qualified Stock Investment Option granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries for twelve months following the Date of Grant in respect thereof (as defined at paragraph 4 above) before you will be entitled to exercise such Non-Qualified Stock Investment Option. The Non-Qualified Stock Investment Options you have been granted shall not in any event be exercisable after your termination of employment except for Retirement, death, or Disability.

III — GENERAL PROVISIONS

8.     The Options terminate automatically and shall not be exercisable by you from and after the date on which you cease to be an employee of the Company or one of its subsidiaries for any reason other than your death, Retirement or Disability. In the event of your death, Retirement or Disability while an employee of the Company or one of its subsidiaries (and having been an employee continuously since the Date of Grant) during the exercise period on any date which is more than six (6) months after the Date of Grant of the Non-Qualified Stock Options specified on the first page of this Grant Agreement or more than six (6) months after the Date of Grant of Non-Qualified Stock Investment Options specified at paragraph 4 of this Grant Agreement, the Options shall become immediately exercisable and, except as provided below in the event of your death, shall be exercisable by you for the remainder of the term of the Option grant. In the event of your death, the Options may be exercised up to three years after date of death by the person or persons to whom your rights in the options passed by your will or according to the laws of descent and distribution. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause.

Page 3 of 4

X-10.4-7


 

     
NQ Grant Agreement (Cont’d)   December 3, 2001

PART III — GENERAL PROVISIONS (Cont’d)

9.     The Options shall not in any event be exercisable after the expiration of ten years from the Date of Grant specified on the first page of this Grant Agreement and, to the extent not exercised, shall automatically terminate at the end of such ten-year period.

10.     Certificates for the shares of Common Stock purchased will be deliverable to you or your agent, duly accredited to the satisfaction of the Company, at the principal office of the Company in Akron, Ohio, or at such other place acceptable to the Company as may be designated by you.

11.     In the event you Retire or otherwise terminate your employment with the Company or a subsidiary and within 18 months after such termination date you accept employment with a competitor of, or otherwise engage in competition with, the Company, the Committee, in its sole discretion, may require you to return, or (if not received) to forfeit, to the Company the economic value of the Options granted hereunder which you have realized or obtained by your exercise at any time on or after the date which is six months prior to the date of your termination of employment with the Company. Additionally, if you have retired from the Company, all Options granted to you hereunder which you have not exercised prior to your competitive engagement shall be automatically cancelled.

12.     Each Option granted is not transferable by you otherwise than by will or the laws of descent and distribution, and is exercisable during your lifetime only by you.

13.     All rights conferred upon you under the provision of this Grant Agreement are personal and, except under the provisions of paragraph 12 of this Grant Agreement, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company.

14.     Any notice to you under this Grant Agreement shall be sufficient if in writing and if delivered to you or mailed to you at the address on record in the Executive Compensation Department. Any notice to the Company under this agreement shall be sufficient if in writing and if delivered to the Executive Compensation Department of the Company in Akron, Ohio, or mailed by registered mail directed to the Company for the attention of the Executive Compensation Department at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address. This agreement shall be construed and shall take effect in accordance with the laws of the State of Ohio.

15.     Each Option may be exercised only at the times and to the extent, and is subject to all of the terms and conditions, set forth in this Grant Agreement, and in the Plan, including any rule or regulation adopted by the Committee.

Page 4 of 4

X-10.4-8


 

EXHIBIT 10.4
PART III

The Goodyear Tire & Rubber Company

Stock Option Grant Agreement

Name
Title

The Directors of The Goodyear Tire & Rubber Company (the “Company”) desire to encourage and facilitate ownership of the Common Stock of the Company (the “Common Stock”) by key employees and to provide for additional compensation based on appreciation of the Common Stock, thereby providing incentive to promote continued growth and success of the Company’s business. Accordingly, the 1997 Performance Incentive Plan of The Goodyear Tire & Rubber Company (the “Plan”) was adopted effective April 14, 1997. A copy of the Plan is attached.

     
Granted to:   Name
SSN:   SS Number
Grant Date:   December 3, 2001
Options Granted:    
Option Type:   Non-Qualified/SAR
Option Price per Share:   $22.05
Expiration Date:   December 3, 2011
 
Vesting Schedule:   25% 12/3/2002
    25% 12/3/2003
    25% 12/3/2004
    25% 12/3/2005
   
  The Goodyear Tire & Rubber Company
December 3, 2001

By my signature below, I hereby acknowledge receipt of this Option granted on the date shown above, which has been issued to me under the terms and conditions of the Plan. I further acknowledge receipt of the copy of the Plan and agree to conform to all of the terms and conditions of the Option and the Plan.

             
Signature:       Date:  
   
   
 

X-10.4-9


 

     
NQ/SAR Grant Agreement (Cont’d)   December 3, 2001

1.     These Non-Qualified Stock Options for the number of shares of Common Stock indicated on the preceding page (the “Options”) and the Stock Appreciation Rights granted in tandem with the Options (the “SARs”) are granted to you under and are governed by the terms and conditions of the Plan and this Grant Agreement. Your execution and return of the enclosed copy of page 1 of this Grant Agreement acknowledging receipt of the Options and SARs granted herewith constitutes your agreement to and acceptance of all terms and conditions of the Plan and this Grant Agreement, including a recognition of the Company’s right to specify whether or not you may exercise either the Options or the SARs at the time you notify the Company of your intent to exercise. You also agree that you have read and understand this Grant Agreement.

2.     If the Company approves the exercise of an Option, you may exercise the Non-Qualified Stock Options granted pursuant to this Grant Agreement through (1) a cash payment in the amount of the full option exercise price of the shares being purchased (a “cash exercise”), (2) a payment in full shares of Common Stock having a Fair Market Value (as defined in the Plan) on the date of exercise equal to the full option exercise price of the shares being purchased (a “share swap exercise”), or (3) a combination of the cash exercise and share swap exercise methods. Any exercise of these Non-Qualified Stock Options shall be by notice stating the number of shares of the Common Stock to be purchased and the exercise method, accompanied with the payment, or proper proof of ownership if the share swap exercise method is used. You shall be required to meet the tax withholding obligations arising from any exercise of Non-Qualified Stock Options.

3.     If the Company approves the exercise of the SARs, written notice must be given to the Company stating the number of shares in the Options in respect of which the SARs are being exercised. In due course, you will receive payment in cash in an amount equal to the difference between the Fair Market Value (as defined in the Plan) of one share of the Common Stock on the date of exercise of the SARs and the Option Exercise Price per Share specified in respect of the Options times the number of shares in respect of which the SARs shall have been exercised. Such payment shall be subject to reduction for withholding taxes.

4.     As further consideration for the Non-Qualified Stock Options and SARs granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries from the Date of Grant to the date or dates the Non-Qualified Stock Options and SARs become exercisable as set forth on page one of this Grant Agreement before you will be entitled to exercise the Non-Qualified Stock Options and SARs granted. The Non-Qualified Stock Options and SARs you have been granted shall not in any event be exercisable after your termination of employment except for Retirement (defined as termination of employment at any age after 30 or more years, or at age 55 or older with at least 10 years of continuous service with the Company and its subsidiaries), death, or Disability (defined as termination of employment while receiving benefits under a long-term disability income plan provided by a government or sponsored by the Company or one of its subsidiaries).

Page 2 of 4

X-10.4-10


 

     
NQ/SAR Grant Agreement (Cont’d)   December 3, 2001

5.     The Options and SARs terminate automatically and shall not be exercisable by you from and after the date on which you cease to be an employee of the Company or one of its subsidiaries for any reason other than your death, Retirement or Disability. In the event of your death, Retirement or Disability while an employee of the Company or one of its subsidiaries (and having been an employee continuously since the Date of Grant) during the exercise period on any date which is more than six (6) months after the Date of Grant specified on the first page of this Grant Agreement, the Options and SARs shall become immediately exercisable and, except as provided below in the event of your death, shall be exercisable by you for the remainder of the term of the Option/SAR grant. In the event of your death, the Options and SARs may be exercised up to three years after date of death by the person or persons to whom your rights in the options passed by your will or according to the laws of descent and distribution. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause.

6.     The Options and SARs you have been granted shall not in any event be exercisable after the expiration of ten years from the Date of Grant specified on the first page of this Grant Agreement and, to the extent not exercised, shall automatically terminate at the end of such ten-year period.

7.     Certificates for shares of the Common Stock purchased will be deliverable to you or your agent, duly accredited to the satisfaction of the Company, at the principal office of the Company in Akron, Ohio, or at such other place acceptable to the Company as may be designated by you.

8.     In the event you Retire or otherwise terminate your employment with the Company or a subsidiary and within 18 months after such termination date you accept employment with a competitor of, or otherwise engage in competition with, the Company, the Committee, in its sole discretion, may require you to return, or (if not received) to forfeit, to the Company the economic value of the Options or SARs which you have realized or obtained by your exercise of the Options or SARs granted hereunder at any time on or after the date which is six months prior to the date of your termination of employment with the Company. Additionally, if you have retired from the Company, all Options or SARs which are granted to you hereunder and which you have not exercised prior to your competitive engagement shall be automatically cancelled.

9.     Each Option and SAR are not transferable by you otherwise than by will or the laws of descent and distribution, and are exercisable during your lifetime only by you.

10.     All rights conferred upon you under the provisions of this Grant Agreement are personal and, except under the provisions of paragraph 9 of this Grant Agreement, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company.

Page 3 of 4

X-10.4-11


 

     
NQ/SAR Grant Agreement (Cont’d)   December 3, 2001

11.     Any notice to you under this Grant Agreement shall be sufficient if in writing and if delivered to you or mailed to you at the address on record in the Executive Compensation Department. Any notice to the Company under this agreement shall be sufficient if in writing and if delivered to the Executive Compensation Department of the Company in Akron, Ohio, or mailed by registered mail directed to the Company for the attention of the Executive Compensation Department at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address. This Grant Agreement shall be construed and shall take effect in accordance with the laws of the State of Ohio.

12.     Each Option and/or SAR may be exercised only at the times and to the extent, and is subject to all of the terms and conditions, set forth in this Grant Agreement, and in the Plan, including any rule or regulation adopted by the Committee.

13.     Your purchase of shares of Common Stock pursuant to the Options shall automatically reduce by a like number the shares subject to the SARs and, conversely, your exercise of any SARs shall automatically reduce by a like number the shares of the Common Stock available for purchase by you under the Options.

14.     In agreeing to accept this grant, you clearly acknowledge that The Goodyear Tire & Rubber Company assumes no responsibility for any regulatory or tax consequences that arise from either the grant or exercise of the Options or the SARs, whether under U.S. or foreign law, rules, regulations or treaties.

15.     Prior to the exercise of an Option or SAR, written notice must be given to the Company of your intent to exercise. The Company will then advise you whether or not you may exercise a Stock Option or an SAR and upon receiving such advice you may then exercise the Stock Option or the SAR.

Page 4 of 4

X-10.4-12 EX-10.5 9 l92979aex10-5.htm EX-10.5 GRANT AGREEMENT EX-10.5 Grant Agreement

 

EXHIBIT 10.5

THE GOODYEAR TIRE & RUBBER COMPANY

GRANT AGREEMENT
PERFORMANCE EQUITY PLAN UNIT GRANT

Name
Title

Dear_______________:

     The 1997 Performance Incentive Plan of The Goodyear Tire & Rubber Company (the “Company”) was adopted effective April 14, 1997 (the “Plan”). A copy of the Plan is attached. At the December 3, 2001 meeting of the Compensation Committee of the Board of Directors, you were awarded a Performance Equity Plan Unit Grant (each Unit equivalent in value to one share of Common Stock of the Company) as follows:

     
Date of Grant   December 3, 2001
Number of Units Granted    
Performance Period   1-1-02 through 12-31-04

     The number of Performance Equity Plan Units specified above (the “Units”) which you will earn at the end of the three-year Performance Period specified above (the “Performance Period”) will be determined by and contingent upon the extent to which Performance Goals are achieved. The number of Units actually earned may be adjusted between 0 and 150% of the number of Units stated above, depending on the level of achievement of Performance Goals. Payment of the Units earned will be made as provided under the General Terms and Conditions. The Performance Measure, Performance Goals and Distribution Schedule for the Performance Period for your Performance Equity Plan Unit Grant are described at Annex A.

The Goodyear Tire & Rubber Company
           December 3, 2001

 

Grant Agreement received and agreed to:

     

 
Grantee   Date

X-10.5-1


 

GRANT AGREEMENT
(Continued)

General Terms and Conditions

     1.     The Performance Equity Plan Unit Grant for the number of Units specified above is granted to you under, and governed by the terms and conditions of, the Plan and this Grant Agreement. Your execution and return of the enclosed copy of this Grant Agreement constitutes your agreement to, and acceptance of, all terms and conditions of the Plan and this Grant Agreement. You also agree that you have read and understand the provisions of the Plan, this Grant Agreement and Annex A.

     2.     All rights conferred upon you under the provisions of this Grant Agreement are personal to you and, no assignee, transferee or other successor in interest shall acquire any rights or interests whatsoever under this Grant Agreement, which is made exclusively for the benefit of you and the Company except by will or the laws of descent and distribution.

     3.     As further consideration for the Units granted to you hereunder, you must remain in the continuous employ of the Company or one or more of its subsidiaries until December 31, 2004, the end of the Performance Period. Any Units earned will be prorated in the event of your death, Retirement (defined as termination of employment at any age after 30 or more years, or at age 55 or older with at least 10 years of continuous service with the Company and its subsidiaries) or Disability (defined as termination of employment while receiving benefits under a long-term disability income plan maintained by the Company or one of its subsidiaries) prior to completion of the Performance Period. Any proration is based on the last day you worked. Nothing contained herein shall restrict the right of the Company or any of its subsidiaries to terminate your employment at any time, with or without cause.

     4.     You will forfeit the right to receive any distribution or payment under this Grant if you enter into a relationship either as an employee, consultant, agent or in any manner whatsoever with an entity that sells products in competition with products sold by the Company and its subsidiaries within six months after the earlier of (1) the date you receive your distribution of Units earned or (2) the date you cease to be an employee of the Company or one of its subsidiaries.

     5.     The number of Units earned will be paid as follows:

       (a) Each Unit earned will be valued at a dollar amount equal to the Fair Market Value of the Common Stock (as defined below) on December 31, 2004, (the “Unit Value”).

       (b) The Company will pay to you an amount equal to 50% of the Unit Value multiplied by the total number of Units earned in cash and an amount equal to 50% of the total number of units earned in shares of the Common Stock of the Company (the “Common Stock”) less such withholding and payroll taxes as the Company shall determine to be necessary or appropriate (withholding and payroll taxes to be deducted from the cash portion of the payment) in February of 2005; provided, however, that notwithstanding the foregoing, you may elect, by delivering a written notice of your election to the Company not later than

X-10.5-2


 

  March 30, 2004, to defer all or a specified whole percentage of the aforesaid Units earned until the Optional Deferral Date (as defined below), in which event the amount you elect to defer (which shall be equal to the product of UE x PDE, where UE equals the number of Units earned and PDE equals the percentage, expressed as a decimal, of the Units earned you elect to defer) will be credited in February of 2005 to an account maintained in the records of the Company (the “Optional Deferred Amount”) and will be converted into Deferral Units. The amount of such deferral will be reduced, if necessary, to pay such tax, payroll and other withholding obligations as the Company shall determine to be necessary or appropriate.

       (c) Notwithstanding the foregoing, the Compensation Committee of the Board of Directors may, at its sole election, at any time and from time to time require that the payment of the entire, or any portion of the, Unit Value of any number of the Units earned shall be deferred until the Optional Deferral Date, or such later date as it shall deem appropriate, in order for the Company to conform to the requirements of Section 162(m) of the Internal Revenue Code (the “Required Deferral Amount”). Any Required Deferral Amount so deferred will be credited to an account maintained in the records of the Company and will be converted into Deferral Units, the number of which shall be determined by dividing each amount so deferred by the Fair Market Value of the Common Stock on the date of such deferral.

     6.     As used herein, the term: (1) “Deferral Unit” means an equivalent to a hypothetical share of the Common Stock; (2) “Fair Market Value of the Common Stock” means, in respect of any date on or as of which a determination thereof is being or to be made, the average of the high and low per share sale prices of the Common Stock on the New York Stock Exchange Composite Transactions Tape on such date or, if the Common Stock was not traded on such date, the next preceding day on which the Common Stock was traded on the New York Stock Exchange; (3) “Dividend Equivalent” means, with respect to each dividend payment date for the Common Stock, an amount equal to the cash dividend per share of Common Stock which is payable on such dividend payment date; (4) “Optional Deferral Date” means the first business day of the twelfth month following the month during which you cease to be employed by the Company, or one of its subsidiary companies, for any reason (whether Retirement, Disability, death, voluntary termination or otherwise; (5) “Optional Deferral Unit” means each Deferral Unit resulting from any Optional Deferred Amount, including Dividend Equivalents credited in respect thereof; and (6) “Required Deferral Unit” means each Deferral Unit resulting from any Required Deferred Amount, including Dividend Equivalents credited in respect thereof. All computations relating to Deferral Units, fractions of shares of Common Stock and Dividend Equivalents will be rounded, if necessary, to the fourth decimal place.

     7.     Each Deferral Unit will be credited with one Dividend Equivalent on each date on which cash dividends are paid on shares of the Common Stock (and each fraction of a Deferral Unit shall be credited with a like fraction of a Dividend Equivalent). Dividend Equivalents (and fractions thereof, if any) will be automatically translated into Deferral Units by dividing the dollar amount of such Dividend Equivalents by the Fair Market Value of the Common Stock on the date the relevant Dividend Equivalents are accrued to your account. The number of Deferral Units (and any fractions thereof) resulting will be credited to your account (in lieu of

X-10.5-3


 

the dollar amount of such Dividend Equivalent) and shall continually be denominated in Deferral Units until converted for payment as provided in this Grant Agreement.

     8.     If you have duly elected to receive payment of all or a specified percentage of your Deferral Units on the Optional Deferral Date (or if payment of any of the Deferral Units has been deferred until the Optional Deferral Date pursuant to the conversion thereof into Required Deferral Units), you may elect, at the time and in the manner specified below, to receive such Deferral Units in (1) a lump sum on the fifth business day following the Optional Deferral Date, or (2) in a series of not less than five (5) or more than ten (10) annual installments commencing on the fifth business day following the Optional Deferral Date, or (3) a specified percentage of your Deferral Units on the fifth business day following the Optional Deferral Date and the balance of your Deferral Units in installments as specified in clause (2) of this sentence.

     9.     On the Optional Deferral Date (to the extent you have not elected to receive payment in installments), the whole Deferral Units then in your account (which have not been designated for payment in installments) will be converted at your election (which election shall be made in writing on or before the last day of the seventh month prior to the month during which the Optional Deferral Date occurs), into (1) a like number of shares of the Common Stock, or (2) a dollar amount determined by multiplying the number of whole Deferral Units credited to your account by the Fair Market Value of the Common Stock on the Optional Deferral Date, or (3) a combination of shares of the Common Stock and cash in accordance with your election (which shall be expressed as a percentage of the Deferral Units to be paid in shares of the Common Stock). In accordance with your election, within five business days following the Optional Deferral Date you will be paid (a) such number of shares of the Common Stock, (b) such amount of cash, or (c) the elected combination of shares of Common Stock and cash, the amounts of which shall be determined in accordance with the preceding sentence. If you did not make an election as to the form of payment on or before the required date, you will receive payment in shares of the Common Stock. Any fraction of a Deferral Unit will be paid to you on the relevant date in cash, the amount of which shall be calculated in the manner specified above.

     10.     If you desire to receive payment of your Deferral Units or a portion thereof in annual installments, you may elect (by delivering to the Company a written notice of your election, which shall specify the number of annual installments, not later than December 31 of the calendar year which is two calendar years prior to the year during which the Optional Deferral Date occurs) to receive all, or a specified whole percentage of, the Deferral Units in your account (which would otherwise be scheduled for distribution on the Optional Deferral Date) in not less than five (5) or more than ten (10) annual installments, payable commencing on the fifth business day following the Optional Deferral Date and thereafter on the fifth business day following each anniversary thereof until paid in full. You may also elect (in writing on or before the last day of the seventh month prior to the month during which the Optional Deferral Date occurs) to receive payment in shares of the Common Stock, cash or any combination of Common Stock and cash (expressed as a percentage of the Deferral Units to be paid in shares of the Common Stock. Each installment shall be in an amount equal to the total number of Deferral Units credited to your account on the Optional Deferral Date, or on the anniversary thereof which is the fifth business day prior to the date such installment is due and payable, as the case may be, divided by the number of annual installments remaining (including the annual installment then being calculated for payment) to be paid. In respect of each installment, the number of Deferral Units payable shall, in accordance with your election, be converted into (1) a like number of

X-10.5-4


 

shares of the Common Stock, (2) a dollar amount determined by multiplying the number of whole Deferral Units credited to your account by the Fair Market Value of the Common Stock on the relevant anniversary of the Optional Deferral Date (or the Optional Deferral Date in the case of the first installment), or (3) the elected combination of shares of the Common Stock and cash, the amounts of which shall be determined in the manner specified above. Any fraction of Deferral Unit will be paid to you on the relevant date in cash, the amount of which shall be calculated in the manner specified above.

     11.     You will be required to satisfy all Federal, state and local tax and payroll withholding obligations, and any other withholding obligations, arising in respect of any distribution of shares of the Common Stock or cash to you. To the extent there is sufficient cash available, such withholding obligations will be deducted from your distribution. To the extent the amount of cash to be distributed is not sufficient to satisfy all withholding obligations, you may elect in writing on or before the last day of the seventh month prior to the month during which the Optional Deferral Date occurs to pay such withholding obligations as a condition of your receipt of any distribution of shares of the Common Stock or to have the number of shares of the Common Stock reduced by the number of shares equivalent to the required tax withholding obligation based on the Fair Market Value of the Common Stock on the relevant anniversary of the Optional Deferral Date if payment is in installments or on the Optional Deferral Date in the case of the first installment or payment in the form of a lump sum.

     12.     In the event of your death at any time prior to the Optional Deferral Date, your account balance will be paid in cash in a lump sum on the fifth business day following the Optional Deferral Date. In the event of your death at any time following the Optional Deferral Date and prior to the distribution of your account, the entire balance of your account shall be paid in cash on the anniversary of the Optional Deferral Date next following your date of death.

     13.     In the event of any stock dividend, stock split, recapitalization, merger, split-up, spin-off or other change affecting the Common Stock of the Company, the Deferral Units in your account shall be adjusted in the same manner and proportion as the change to the Common Stock.

     14.     Any notice to you under this Grant Agreement shall be sufficient if in writing and if delivered to you or mailed by registered mail directed to you at the address on record in the Executive Compensation Department. Any notice to the Company under this Grant Agreement shall be sufficient in writing and if delivered to the Executive Compensation Department of the Company in Akron, Ohio, or mailed by registered mail directed to the Company for the attention of the Executive Compensation Department at 1144 East Market Street, Akron, Ohio 44316-0001. Either you or the Company may, by written notice, change the address.

X-10.5-5


 

ANNEX A

PERFORMANCE MEASURE

The Performance Measure for 50% of the units granted is Total Shareholder Return (TSR). Unit distributions may range from 0 to 150% of 50% of the units granted based on the average annual TSR performance for the three-year performance period relative to the selected peer companies (the “S&P Auto Parts & Equipment Companies”). TSR will be calculated for each year of the performance period as the stock price appreciation plus dividends divided by the stock price at the beginning of the year. The stock price used for the calculation will be the closing average for the ten business days prior to the beginning and the end of each year of the performance period.

The Performance Measure for 50% of the units granted is Return on Invested Capital (ROIC). Unit distributions may range from 0 to 150% of 50% of the units granted based on the annual average ROIC performance for the three-year performance period. ROIC will be calculated as the Company’s EBIT divided by its Total Investment with Total Investment consisting of debt plus equity.

Payout Schedule

Return on Invested Capital (50%)

           
ROIC   Payout

 
13.6
%     150 %
12.6
%     135 %
11.6
%     120 %
10.6
%     100 %
9.6
%     90 %
8.6
%     80 %
7.6
%     70 %
<7.6
%     0 %

Total Shareholder Return (50%)

         
Achievement   Payout

 
75th Percentile or Greater
    150 %
60th Percentile or Greater
    120 %
50th Percentile or Greater
    100 %
40th Percentile or Greater
    80 %
30th Percentile or Greater
    60 %
Less Than 30th Percentile
    0 %

X-10.5-6 EX-12 10 l92979aex12.htm EX-12 COMPUTATION-RATIO OF EARNINGS:FIXED CHARGES EX-12 Computation-Ratio of Earnings:Fixed Charges

 

EXHIBIT 12

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

                                           
(Dollars in millions)   Year Ended December 31,
     
EARNINGS   2001   2000   1999   1998   1997
   
 
 
 
 
Income (loss) from Continuing Operations before Income Taxes
  $ (273.0 )   $ 58.8     $ 300.1     $ 930.4     $ 703.0  
Add:
                                       
Amortization of previously capitalized interest
    9.8       9.7       11.0       10.7       11.0  
Minority interest in net income of consolidated subsidiaries with fixed charges
    26.7       45.6       42.9       33.6       45.1  
Proportionate share of fixed charges of investees accounted for by the equity method
    3.1       5.7       5.5       4.8       6.5  
Proportionate share of net loss of investees accounted for by the equity method
    44.6       28.4       0.3             0.1  
 
   
     
     
     
     
 
 
Total additions
  $ 84.2     $ 89.4     $ 59.7     $ 49.1     $ 62.7  
Deduct:
                                       
Capitalized interest
  $ 6.4     $ 12.0     $ 11.8     $ 6.6     $ 6.2  
Minority interest in net loss of consolidated subsidiaries
    19.5       8.3       4.2       2.9       3.6  
Undistributed proportionate share of net income of investees accounted for by the equity method
    1.1       4.3       2.2       --       --  
 
   
     
     
     
     
 
 
Total deductions
  $ 27.0     $ 24.6     $ 18.2     $ 9.5     $ 9.8  
 
   
     
     
     
     
 
TOTAL EARNINGS
  $ (215.8 )   $ 123.6     $ 341.6     $ 970.0     $ 755.9  
 
   
     
     
     
     
 
 
                                       
FIXED CHARGES
                                       
Interest expense
  $ 292.4     $ 282.6     $ 179.4     $ 147.8     $ 119.5  
Capitalized interest
    6.4       12.0       11.8       6.6       6.2  
Amortization of debt discount, premium or expense
    7.1       1.5       0.7       1.2       0.1  
Interest portion of rental expense
    73.6       73.5       62.1       57.7       63.0  
Proportionate share of fixed charges of investees accounted for by the equity method
    3.1       5.7       5.5       4.8       6.5  
 
   
     
     
     
     
 
TOTAL FIXED CHARGES
  $ 382.6     $ 375.3     $ 259.5     $ 218.1     $ 195.3  
 
   
     
     
     
     
 
TOTAL EARNINGS BEFORE FIXED CHARGES
  $ 166.8     $ 498.9     $ 601.1     $ 1,188.1     $ 951.2  
 
   
     
     
     
     
 
RATIO OF EARNINGS TO FIXED CHARGES
    *       1.33       2.32       5.45       4.87  

*   Earnings for the year ended December 31, 2001 were inadequate to cover fixed charges. The coverage deficiency was $215.8 million

X-12-1 EX-21 11 l92979aex21.htm EX-21 SUBSIDIARIES OF THE REGISTRANT EX-21 Subsidiaries of the Registrant

 

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT (1)(2)(3)

          The subsidiary companies of The Goodyear Tire & Rubber Company at December 31, 2001, and the places of incorporation or organization thereof, are:

     
    Place of
    Incorporation
Name of Subsidiary   or Organization
     
United States    
Allied Tire Sales, Inc.   Florida
Belt Concepts of America, Inc.   Delaware
Celeron Corporation   Delaware
Cosmoflex, Inc.   Delaware
Divested Atomic Corporation   Delaware
Divested Companies Holding Company   Delaware
The Kelly-Springfield Tire Corporation   Delaware
*Goodyear Dunlop Tires North America, Ltd   Ohio
Goodyear International Corporation   Delaware
The Goodyear Rubber Plantations Company   Ohio
Goodyear-SRI Global Purchasing Company   Ohio
Goodyear-SRI Global Technology LLC   Ohio
Goodyear Western Hemisphere Corporation   Delaware
Retreading L Inc   Delaware
Utica Converters Inc   Delaware
Wheel Assemblies Inc.   Delaware
Wingfoot A/R LLC   Delaware
Wingfoot Commercial Tire Systems LLC   Ohio
Wingfoot Corporation   Delaware
Wingfoot Ventures Four Inc.   Delaware
Wingfoot Ventures Eight Inc.   Delaware
Wingfoot Ventures Thirteen Inc.   Delaware
Wingfoot Ventures Fifteen Inc.   Delaware
     
International    
Air Treads Canada Inc.   Canada
*Banden Retail Nederland B.V   Netherlands
Compania Anonima Goodyear de Venezuela   Venezuela
Compania Goodyear del Peru, S.A.   Peru
Compania Goodyear, S.A. de C.V.   Mexico
Contred (Proprietary) Limited   South Africa
Corporacion Industriales Mercurio, S.A. de C.V.   Mexico
*Dunlop Airsprings   France
Dunlop Canada   Canada
*Dunlop France   France
*Dunlop GmbH & Co. KG   Germany
*Dunlop Grund und Service Verwaltungs GmbH   Germany
*Dunlop Pneumatici SpA   Italy
*Dunlop Tyres Limited   England
*Dunlop Grund und Versicherughs Service GmbH   Germany
*Dunlop Versicherungsservice GmbH   Germany
*Eurosava Srl   Italy
Firma Oponiarska Debica S.A.   Poland
*Fulda Reifen GmbH & Co. KG   Germany
*ForMa Formen und Maschinenbau GmbH   Germany
GHS Goodyear Handelssysteme GmbH   Germany
Goodyear Australia Pty Limited   Australia

X-21-1


 

     
    Place of
    Incorporation
Name of Subsidiary   or Organization
     
Goodyear Aviation Japan, Ltd   Japan
Goodyear Belting Pty Limited   Australia
Goodyear Canada Inc.   Canada
Goodyear Dalian Tire Company Ltd.   People’s Republic of China
Goodyear de Chile S.A.I.C.   Chile
Goodyear de Colombia S.A.   Colombia
Goodyear do Brasil Productos de Borracha Ltda   Brazil
*Goodyear Dunlop Financial Service GmbH   Germany
*Goodyear Dunlop Tires Austria GmbH   Austria
*Goodyear Dunlop Tires Baltic A.S.   Estonia
*Goodyear Dunlop Tires Belgium N.V.   Belgium
*Goodyear Dunlop Tires Czech s.r.o.   Czech Republic
*Goodyear Dunlop Tires Denmark A/S   Denmark
Goodyear Dunlop Tires Espana S.A.   Spain
*Goodyear Dunlop Tires Europe B.V.   Netherlands
*Goodyear Dunlop Tires Finland OY   Finland
*Goodyear Dunlop Tires Germany GmbH   Germany
*Goodyear Dunlop Tires Hellas S.A.I.C.   Greece
*Goodyear Dunlop Tires Ireland Limited   Ireland
*Goodyear Dunlop Tires Italia SRL   Italy
*Goodyear Dunlop Tires Hungary Trading Limited Liability Co.   Hungary
*Goodyear Dunlop Tyres Norge A/S   Norway
*Goodyear Dunlop Tires Polska Sp z.o.o.   Poland
*Goodyear Dunlop Tires Slovakia s.r.o.   Slovakia
*Goodyear Dunlop Tires Slovenia   Slovenia
*Goodyear Dunlop Tires Suisse S.A.   Switzerland
*Goodyear Dunlop Tires Sverige A.B.   Sweden
Goodyear Chemical Products S.A.S.   France
Goodyear Earthmover Pty Ltd   Australia
Goodyear Engineered Products B.V.   Belgium
Goodyear Engineered Products Europe d.o.o.   Slovenia
Goodyear Engineered Products Europe Joint Venture Holding d.o.o.   Slovenia
Goodyear Export Limited   Bermuda
Goodyear Export Sales Corporation   Barbados
Goodyear Finance Holding S.A.   Luxembourg
Goodyear France Aviation Products S.A.   France
*Goodyear France S.A.   France
*Goodyear GmbH & Co. KG   Germany
*Goodyear Great Britain Limited   England
Goodyear Holding Compania Anonima   Venezuela
Goodyear India Limited   India
Goodyear Industrial Rubber Products Ltd.   England
*Goodyear Italiana S.p.A.   Italy
Goodyear Jamaica Limited   Jamaica
Goodyear Korea Company   Korea
Goodyear Lastikleri Turk Anonim Sirketi   Turkey
*Goodyear Luxembourg Tires S.A.   Luxembourg
Goodyear Malaysia Berhad   Malaysia
Goodyear Marketing & Sales Snd. Bhd.   Malaysia
Goodyear Maroc S.A.   Morocco
*Goodyear Nederland B.V.   Netherlands
Goodyear New Zealand, Ltd.   New Zealand
Goodyear Philippines, Inc.   Philippines
Goodyear Productos Industriales S. de R.L. de C.V.   Mexico

X-21-2


 

     
    Place of
    Incorporation
Name of Subsidiary   or Organization
     
Goodyear Qingdao Engineered Elastomers Company Ltd.   People’s Republic of China
Goodyear Russia LLC   Russia
Goodyear S.A.   France
Goodyear S.A.   Luxembourg
Goodyear Singapore Pte Limited   Singapore
Goodyear Solid Woven Belting (Pty) Limited   South Africa
Goodyear South Africa (Proprietary) Limited   South Africa
Goodyear South Asia Tires Private Limited   India
Goodyear SRI Global Purchasing Yugen Vaisha & Co. Ltd   Japan
Goodyear Taiwan Limited   Republic of China
Goodyear (Thailand) Public Company Limited   Thailand
Goodyear Tyres Pty Ltd   Australia
Goodyear Wingfoot KK   Japan
Gran Industria de Neumaticos Centroamericana, S.A.   Guatemala
*Holert Konz GmbH   Germany
Intertyre (Pty) Ltd.   South Africa
*KDIS Distribution   France
*National Account Service GmbH   Germany
Neumaticos Goodyear S.R.L.   Argentina
Nippon Giant Tire Co., Ltd.   Japan
Numazu G.Y. KK   Japan
*Pneu Holding   France
*Pneumant Reifen GmbH   Germany
*Pneumant Reifen GmbH & Co KG   Germany
Productos Industriales, Compania Anonima   Venezuela
Property Leasing S.A.   Luxembourg
P.T. Goodyear Indonesia Tbk   Indonesia
P.T. Goodyear Sumatra Plantations   Indonesia
Rubber & Associated Manufacturing (Pty) Ltd.   South Africa
RVM Reifen Vertriebsmanagement GmbH   Germany
Sava Tires, d.o.o.   Slovenia
Sava Tires Joint Venture Holding, d.o.o.   Slovenia
*S. A. Vulco Belgium N.V.   Belgium
Servicios Y Montajes Eagle, S. de R.L.   Mexico
*Societe Isseenne de Particpations   France
*SP Brand Holding GEIE   Belgium
The Goodyear Orient Company Pte Limited   Singapore
Trentyre (Natal) (Pty) Ltd   South Africa
Tycon Retreading Products (Pty) Ltd   South Africa
*Vulco Development   France
*Vulco France   France
Wingfoot de Chihuahua, S. de R.L. de C.V.   Mexico
Wingfoot Canada Finance Ltd. NRO   Canada
Wingfoot Insurance Company Limited   Bermuda


(1)   Each of the 143 subsidiaries named in the foregoing list conducts its business under its corporate name and, in a few instances, under a shortened form of its corporate name or in combination with a trade name.
(2)   Each of the 143 subsidiaries named in the foregoing list is directly or indirectly wholly-owned by Registrant, except that: (i) each of the subsidiaries listed above marked by an asterisk preceding its name is 75% owned by the Company; and (ii) in respect of each of the following subsidiaries Registrant owns the indicated percentage of such subsidiary’s equity capital: Goodyear-SRI Global Purchasing Company, 80%; Goodyear-SRI Global

X-21-3


 

    Technology LLC, 51%; Wingfoot Commercial Tire Systems, LLC, 81%; Compania Goodyear del Peru S.A., 78%; Goodyear Aviation Japan Ltd., 85%; Goodyear India Limited, 74%; Goodyear Jamaica Limited, 60%; Goodyear Lastikleri Turk Anonim Sirketi, 59.41%; Goodyear Malaysia Berhad, 51%; Goodyear Maroc S.A., 55%; Goodyear Qingdao Engineered Elastomers Company Ltd., 60%; Goodyear Taiwan Limited, 75.5%; Goodyear (Thailand) Public Company Limited, 66.8%; Gran Industria de Neumaticos Centroamericana, S.A., 76%; P.T. Goodyear Indonesia Tbk, 85%; Goodyear Philippines Inc., 85.5%; Firma Oponiarska Debica S.A., 59.87%; P.T. Goodyear Sumatra Plantations, 95%; Nippon Giant Tire Co., Ltd., 65%; Goodyear-SRI Global Purchasing Yugen Vaisha & Co., 80%; Goodyear Market & Sales Snd Shd, 51%: Sava Tires, d.o.o., 60%; Sava Tires Joint Venture Holding d.o.o., 60% and Goodyear South Asia Tires Private Limited, 96.73%.
(3)   In accordance with paragraph (ii) of Part 22 of Item 601(b) of Regulation S-K, the names of approximately 71 subsidiaries have been omitted from the foregoing list. The unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary, as defined in the applicable regulations.

X-21-4 EX-23 12 l92979aex23.htm EX-23 CONSENT OF INDEPENDENT ACCOUNTANTS EX-23 Consent of Independent Accountants

 

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

         We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-67145 and 33-8111) and in the Registration Statements on Form S-8 (Nos. 333-62806, 333-62808, 333-29993, 33-65187, 33-65185, 33-65183, 33-65181, 33-31530, 33-17963, 2-79437 and 2-47905) of The Goodyear Tire & Rubber Company of our report dated February 4, 2002, relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

 

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

 

Cleveland, Ohio
March 11, 2002

 

 

 

X-23-1 EX-24 13 l92979aex24.htm EX-24 POWER OF ATTORNEY EX-24 Power of Attorney

 

EXHIBIT 24

THE GOODYEAR TIRE & RUBBER COMPANY

POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of THE GOODYEAR TIRE & RUBBER COMPANY, a corporation organized and existing under the laws of the State of Ohio (the “Company”), hereby constitute and appoint ROBERT W TIEKEN, C THOMAS HARVIE, STEPHANIE W. BERGERON, JOHN W. RICHARDSON and RICHARD J. KRAMER, and each of them, their true and lawful attorneys-in-fact and agents, each one of them with full power and authority to sign the names of the undersigned directors to the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K for its fiscal year ended December 31, 2001, and to any and all amendments, supplements and exhibits thereto and any other instruments filed in connection therewith; provided, however, that said attorneys-in-fact shall not sign the name of any director unless and until the Annual Report shall have been duly executed by the officers of the Company then serving as the chief executive officer of the Company, the principal financial officer of the Company and the principal accounting officer of the Company; and each of the undersigned hereby ratifies and confirms all that the said attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, the undersigned have subscribed these presents this 3rd day of December, 2001.

     
/s/ John G. Breen   /s/ William E. Butler

 
John G. Breen, Director   William E. Butler, Director
     
/s/ Thomas H. Cruikshank   /s/ Edward T. Fogarty

 
Thomas H. Cruikshank, Director   Edward T. Fogarty, Director
     
/s/ William J. Hudson, Jr.   /s/ Robert J. Keegan

 
William J. Hudson, Jr., Director   Robert J. Keegan, Director
     
/s/ Philip A. Laskawy   /s/ Steven A. Minter

 
Philip A. Laskawy, Director   Steven A. Minter, Director
     
/s/ Agnar Pytte   /s/ Martin D. Walker

 
Agnar Pytte, Director   Martin D. Walker, Director

 

 
/s/ James M. Zimmerman
James M. Zimmerman, Director

 

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