The Goodyear Tire & Rubber Company 10-Q/3-31-02

-----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, KLpoCqz+i9f4nqgnFLJqlhYuPiA+KipLh8Mvu4Ta5bZIv/hbrBO+C6oy34iI5/1g j7kVz9GI3sSwFaX7hSTmSg== 0000950152-02-003745.txt : 20020502 0000950152-02-003745.hdr.sgml : 20020501 ACCESSION NUMBER: 0000950152-02-003745 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020502 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01927 FILM NUMBER: 02632336 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-Q 1 l93883ae10-q.htm THE GOODYEAR TIRE & RUBBER COMPANY 10-Q/3-31-02 The Goodyear Tire & Rubber Company 10-Q/3-31-02

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2002

Commission File Number: 1-1927

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


OHIO (State or Other Jurisdiction of Incorporation or Organization)		34-0253240 (I.R.S. Employer Identification No.)

1144 East Market Street, Akron, Ohio (Address of Principal Executive Offices)		44316-0001 (Zip Code)

(330) 796-2121
(Registrant’s Telephone Number, Including Area Code)

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 þ		No o

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.


Number of Shares of Common Stock,




Without Par Value, Outstanding at March 31, 2002:			163,287,256

TABLE OF CONTENTS


		THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
		THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
		THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
		THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
		THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION.
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
S I G N A T U R E S
INDEX OF EXHIBITS (1)
Exhibit 4(1) Amended & Restated Rights Agreement
Exhibit 10.1 2002 Performance Plan
Exhibit 12 Computation of Ratio of Earnings

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Unaudited


(In millions, except per share)	Three Months Ended
	March 31,
	2002			2001

NET SALES	$	3,311.2		$	3,414.2
Cost of Goods Sold		2,761.1			2,785.6
Selling, Administrative and General Expense		529.4			547.9
Rationalizations		—			79.0
Interest Expense		61.0			68.7
Other (Income) Expense		13.9			(6.5	)
Foreign Currency Exchange		13.3			(9.9	)
Equity in Earnings of Affiliates		4.6			5.1
Minority Interest in Net Income of Subsidiaries		13.5			7.8

Loss before Income Taxes		(85.6	)		(63.5	)
United States and Foreign Taxes on Loss		(22.4	)		(16.8	)

NET LOSS		(63.2	)		(46.7	)
Retained Earnings at Beginning of Period		3,192.7			3,558.8
CASH DIVIDENDS		(19.6	)		(47.6	)

Retained Earnings at End of Period	$	3,109.9		$	3,464.5

NET LOSS PER SHARE OF COMMON STOCK — BASIC:		($0.39	)		($0.30	)

Average Shares Outstanding		163.2			158.2
NET LOSS PER SHARE OF COMMON STOCK — DILUTED:		($0.39	)		($0.30	)

Average Shares Outstanding		163.2			158.2
CASH DIVIDENDS PER SHARE	$	0.12		$	0.30

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

-1-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET


(In millions)
			March 31,			December 31,
			2002			2001
			Unaudited

ASSETS:
Current Assets:
	Cash and cash equivalents		$	646.4		$	959.4
	Accounts and notes receivable, less allowance — $87.3 ($84.9 in 2001)			1,732.8			1,486.8
	Inventories:
		Raw materials		367.9			398.8
		Work in process		111.8			112.5
		Finished product		1,843.9			1,869.6

				2,323.6			2,380.9
	Prepaid expenses and other current assets			392.1			427.9

		Total Current Assets		5,094.9			5,255.0
Long Term Accounts and Notes Receivable				166.7			143.8
Investments in Affiliates, at equity				95.1			82.7
Other Assets				261.2			263.0
Goodwill and Other Intangible Assets				705.0			698.1
Deferred Income Tax				685.9			674.9
Deferred Charges				1,276.7			1,279.3
Properties and Plants, less accumulated depreciation — $6,100.2 ($6,030.6 in 2001)				5,028.2			5,116.1

	TOTAL ASSETS		$	13,313.7		$	13,512.9

LIABILITIES:
Current Liabilities:
	Accounts payable — trade		$	1,392.6		$	1,359.2
	Compensation and benefits			875.4			897.2
	Other current liabilities			323.3			396.1
	United States and foreign taxes			275.6			309.3
	Notes payable			269.7			255.0
	Long term debt due within one year			407.4			109.7

		Total Current Liabilities		3,544.0			3,326.5
Long Term Debt and Capital Leases				2,883.9			3,203.6
Compensation and Benefits				2,842.4			2,848.9
Other Long Term Liabilities				485.5			482.3
Minority Equity in Subsidiaries				792.6			787.6

	TOTAL LIABILITIES			10,548.4			10,648.9
SHAREHOLDERS’ EQUITY:
Preferred Stock, no par value:
	Authorized 50.0 shares, unissued			—			—
Common Stock, no par value:
	Authorized 300.0 shares
	Outstanding shares - 163.3 (163.2 in 2001)
	after deducting 32.4 treasury shares (32.5 in 2001)			163.3			163.2
Capital Surplus				1,247.7			1,245.4
Retained Earnings				3,109.9			3,192.7
Accumulated Other Comprehensive Income				(1,755.6	)		(1,737.3	)

	TOTAL SHAREHOLDERS’ EQUITY			2,765.3			2,864.0

	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	13,313.7		$	13,512.9

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

-2-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Unaudited


(In millions)
											Accumulated
				Common		Capital		Retained			Other			Total
				Stock		Surplus		Earnings			Comprehensive			Shareholders'
											Income			Equity

Balance at December 31, 2001				$	163.2	$	1,245.4	$	3,192.7		$	(1,737.3	)	$	2,864.0
	Comprehensive loss for 2002:
		Net loss							(63.2	)
		Foreign currency translation										(22.1	)
		Minimum pension liability										0.7
		Unrealized investment loss										—
			(net of tax of $-)
		Deferred derivative gain										3.1
		Total comprehensive loss													(81.5	)
	Cash dividends								(19.6	)					(19.6	)
	Common stock issued from treasury:
		Stock compensation plans			0.1		2.3								2.4

Balance at March 31, 2002				$	163.3	$	1,247.7	$	3,109.9		$	(1,755.6	)	$	2,765.3


Accumulated Other Comprehensive Income									03/31/02						12/31/01
	Foreign currency translation adjustment							$	(1,472.3	)				$	(1,450.2	)
	Minimum pension liability adjustment								(256.6	)					(257.3	)
	Unrealized investment loss								(16.6	)					(16.6	)
	Deferred derivative loss								(10.1	)					(13.2	)

		Total						$	(1,755.6	)				$	(1,737.3	)

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited


(In millions)			Three Months Ended
			March 31,
			2002			2001
Net Loss			$	(63.2	)	$	(46.7	)
Other comprehensive income (loss):
	Foreign currency translation			(22.1	)		(118.0	)
	Minimum pension liability			0.7			3.0
	FAS 133 transition amount			—			7.6
	Deferred derivative gain (loss)			(4.2	)		(57.3	)
		Tax on deferred derivative gain (loss)		1.6			21.8
		Reclassification adjustment for amounts recognized in income		9.2			31.1
		Tax on derivative reclassification adjustment		(3.5	)		(11.8	)
	Unrealized investment gain (loss)			—			18.2
		Tax on unrealized investment gain (loss)		—			(6.9	)

Comprehensive Loss			$	(81.5	)	$	(159.0	)

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

-3-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited


(In millions)					Three Months Ended
					March 31,
					2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Loss					($63.2	)		($46.7	)
		Adjustments to reconcile net loss to cash flows from operating activities:
				Depreciation and amortization		146.8			160.4
				Rationalizations		—			57.1
				Asset sales		—			(13.9	)
		Net cash flows from sale of accounts receivable				(57.1	)		9.9
		Changes in operating assets and liabilities, net of asset acquisitions and dispositions:
				Accounts and notes receivable		(219.1	)		(213.8	)
				Inventories		46.5			(222.3	)
				Accounts payable-trade		48.3			(84.6	)
				Other assets and liabilities		(105.3	)		(66.4	)

				Total adjustments		(139.9	)		(373.6	)

			TOTAL CASH FLOWS FROM OPERATING ACTIVITIES			(203.1	)		(420.3	)

CASH FLOWS FROM INVESTING ACTIVITIES:
				Capital expenditures		(75.8	)		(103.9	)
				Asset sales		—			40.0
				Other transactions		(20.4	)		(26.0	)

			TOTAL CASH FLOWS FROM INVESTING ACTIVITIES			(96.2	)		(89.9	)

CASH FLOWS FROM FINANCING ACTIVITIES:
				Short term debt incurred		23.6			75.9
				Short term debt paid		(7.0	)		(325.3	)
				Long term debt incurred		0.9			822.8
				Long term debt paid		(7.6	)		(29.6	)
				Common stock issued		2.3			0.6
				Dividends paid to Goodyear shareholders		(19.6	)		(47.6	)

			TOTAL CASH FLOWS FROM FINANCING ACTIVITIES			(7.4	)		496.8

Effect of Exchange Rate Changes on Cash and Cash Equivalents						(6.3	)		(5.3	)

Net Change in Cash and Cash Equivalents						(313.0	)		(18.7	)
Cash and Cash Equivalents at Beginning of the Period						959.4			252.9

Cash and Cash Equivalents at End of the Period					$	646.4		$	234.2

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

-4-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

All per share amounts in these Notes to Financial Statements are diluted unless otherwise indicated.

NOTE 1. ACCOUNTING POLICIES

Goodwill and Intangible Assets

Goodyear adopted Statement of Financial Accounting Standards No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets” effective January 1, 2002. Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill and intangible assets with an indefinite useful life are tested for impairment annually or when events or circumstances indicate that impairment may have occurred. If considered impaired the goodwill or intangible asset with an indefinite useful life is written down to fair value.

Inventory

Worldwide inventories are stated at the lower of cost or market. Cost is determined using FIFO or the average cost method. Costs include direct material, direct labor and applicable manufacturing and engineering overhead.

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. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to the allowance for doubtful accounts, recoverability of intangibles and other long-lived assets, deferred tax asset valuation allowance, litigation, general and product liabilities, environmental liabilities, pension and postretirement benefits, and various other operating allowances and accruals, based on currently available information. Changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

NOTE 2. 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.

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 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.

-5-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

Associate-related rationalization costs totaling $53.1 million were recorded. Activity during 2002 is presented below:


	Balance at					Balance at
(In millions)	12/31/01		Incurred			3/31/02

Plant downsizing and consolidation	$	21.2	$	(16.7	)	$	4.5
Retail and administrative consolidation		30.3		(7.6	)		22.7

	$	51.5	$	(24.3	)	$	27.2

Under the above programs, Goodyear provided for the release of approximately 2,200 associates around the world, primarily production and administrative associates. To date, 1,400 associates have been released, including 1,100 associates at a cost of $24.3 million during the first quarter of 2002.

Rationalization costs, other than associate-related costs, totaling $78.8 million were recorded. Activity during 2002 is presented below:


	Balance at					Balance at
(In millions)	12/31/01		Incurred			3/31/02

Plant downsizing and consolidation	$	5.2	$	(.4	)	$	4.8
Retail and administrative consolidation		31.1		(1.9	)		29.2

	$	36.3	$	(2.3	)	$	34.0

These costs were primarily for the writeoff of $40.0 million of tire production equipment taken out of service, principally related to the closure of a tire manufacturing facility in the Asia region, and noncancellable lease costs. Goodyear incurred $2.3 million of other than associate-related costs during the first quarter of 2002, primarily for lease termination costs. Goodyear anticipates completing the actions under this program during 2002 with the exception of ongoing associate severance payments and future rental payments under noncancellable leases.

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 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 program 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.

-6-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

Associate-related rationalization costs for the first quarter 2001/fourth quarter 2000 program totaled $152.0 million. Activity during the first quarter of 2002 is presented below:


	Balance at					Balance at
(In millions)	12/31/01		Incurred			3/31/02

Plant downsizing and consolidation	$	1.1	$	(.1	)	$	1.0
Worldwide associate reductions		4.8		(2.4	)		2.4

	$	5.9	$	(2.5	)	$	3.4

Under the above programs, Goodyear provided for the release of approximately 7,100 associates around the world, primarily production and support associates. Goodyear has completed these plans with the exception of ongoing associate severance payments.

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. The tire production equipment taken out of service totaled aproximately $17 million and was primarily related to the closure of a tire manufacturing facility in Mexico which is included in the Latin American region for segment reporting. Goodyear has completed these plans with the exception of ongoing payments under noncancellable lease contracts. Activity during the first quarter of 2002 is presented below:

Balance at

(In millions)

12/31/01

Incurred

3/31/02

Plant downsizing and consolidation

3.4

(1.2

)

2.2

NOTE 3. OTHER (INCOME) AND EXPENSE


	Three Months Ended
	March 31,
(In millions)	2002			2001

Asset sales	$	—		$	(17.0	)
Interest income		(2.1	)		(2.9	)
Financing fees and financial instruments		11.0			12.4
Miscellaneous		5.0			1.0

	$	13.9		$	(6.5	)

The 2001 first quarter included 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.

NOTE 4. PER SHARE OF COMMON STOCK

Basic and diluted earnings per share for the three months ended March 31, 2002, and March 31, 2001, have been computed based on the average number of common shares outstanding, 163.2 million and 158.2 million at March 31, 2002 and March 31, 2001, respectively. The average shares outstanding-diluted does not include the antidilutive impact of 2.4 million shares in the 2002 period and 2.6 million shares in the 2001 period, of potential common stock associated with stock options.

NOTE 5. NONCASH INVESTING AND FINANCING ACTIVITIES

The Consolidated Statement of Cash Flows is presented net of the following transaction.

-7-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

On February 6, 2001, Sumitomo converted the Company’s 1.2% Convertible Note Due August 16, 2001 in the principal amount of Y6,536,535,767 into 1,140,866 shares of the Common Stock of the Company.

NOTE 6. ACCOUNTS RECEIVABLE

Goodyear maintains a program for the continuous sale of substantially all of its 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 (SFAS 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 ($560.0 million and $580.0 million at March 31, 2002 and December 31, 2001, respectively) are secured by the trade accounts receivable purchased from Goodyear, (b) the proceeds of Goodyear’s equity investment in Wingfoot A/R LLC, and (c) a subordinated note payable to Goodyear. 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 Company retains the risk of the non-payment of receivables it sells to Wingfoot A/R LLC to the extent of its investment in the equity of Wingfoot A/R LLC and in the subordinated note issued by Wingfoot A/R LLC to Goodyear. The aggregate amount of Goodyear’s investments in Wingfoot A/R LLC was $362.2 million at March 31, 2002 and $483.3 million at December 31, 2001.

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


	Three Months Ended
(In millions)	March 31, 2002

Proceeds from new securitizations	$	—
Proceeds from collections reinvested in previous securitizations		1,452.6
Servicing fees received		1.4
Reimbursement for rebates and discounts issued		24.5

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. At March 31, 2002, the value in U.S. dollars of which these international subsidiaries may borrow is approximately $220 million. The following table presents certain cash flows related to these programs:


	Three Months Ended
(In millions)	March 31, 2002

Proceeds from new securitizations	$	—
Proceeds from collections reinvested in previous securitizations		492.2
Reimbursement for rebates and discounts issued		12.7

-8-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

In addition, various other international subsidiaries of Goodyear sold certain of their trade receivables at March 31, 2002 and December 31, 2001.

The balance of net proceeds from all domestic and international agreements worldwide was $791.3 million at March 31, 2002, compared to $851.8 million at December 31, 2001.

NOTE 7. GOODWILL AND INTANGIBLE ASSETS

Goodyear adopted Statement of Financial Accounting Standards No. 142 (SFAS No. 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. In accordance with the provisions of SFAS No. 142, Goodyear will complete the initial impairment testing by June 30, 2002. Goodyear does not anticipate any impairment write-down as a result of the adoption of SFAS No. 142.

SFAS No. 142 also required Goodyear to reassess the useful lives of intangible assets and adjust the remaining amortization periods accordingly. For those intangible assets deemed to have an indefinite life, amortization ceased effective January 1, 2002, and the intangible asset will be periodically tested for impairment and written down to fair value if considered impaired. Goodyear ceased amortization related to $98.9 million of intangible assets as a result of this reassessment.

The following table presents goodwill, intangible asset and accumulated amortization balances at March 31, 2002 and December 31, 2001:


		March 31, 2002							December 31, 2001

									Gross
		Gross		Accumulated			Net		Carrying		Accumulated			Net
(In millions)		Carrying Amount		Amortization			Carrying Amount		Amount		Amortization			Carrying Amount

Goodwill		$	678.1	$	(107.6	)	$	570.5	$	676.7	$	(107.6	)	$	569.1
Intangible asset with an indefinite life			105.0		(6.1	)		98.9		105.0		(6.1	)		98.9
Trademarks and patents			32.7		(12.2	)		20.5		31.8		(11.8	)		20.0
Other			20.8		(5.7	)		15.1		15.8		(5.7	)		10.1

	Total Goodwill and Other Intangible Assets	$	836.6	$	(131.6	)	$	705.0	$	829.3	$	(131.2	)	$	698.1

Amortization expense for intangible assets totaled less than $.5 million and $.7 million during the first quarters of 2002 and 2001, respectively. Goodyear estimates that annual amortization expense related to intangible assets will be approximately $2 million during each of the next 5 years.

The total carrying amount of intangible assets not subject to amortization totaled $98.9 million at March 31, 2002 and December 31, 2001. This amount is related to a non-compete agreement resulting from the global alliance with Sumitomo Rubber Industries that commenced operations on September 1, 1999. In accordance with SFAS No. 142, this intangible asset was tested for impairment prior to March 31, 2002. Based on the results of the testing, no impairment was indicated.

-9-

THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

The following table presents the transitional disclosures required by SFAS No. 142:


	Three Months Ended
	March 31,
(In millions, except per share)	2002			2001

Reported net loss	$	(63.2	)	$	(46.7	)
Add back: Amortization of goodwill and intangible assets with indefinite lives		—			6.8

Adjusted net loss	$	(63.2	)	$	(39.9	)

Basic earnings per share:
Reported net loss	$	(0.39	)	$	(0.30	)
Add back: Amortization of goodwill and intangible assets with indefinite lives		—			0.04

Adjusted net loss	$	(0.39	)	$	(0.26	)

Diluted earnings per share:
Reported net loss	$	(0.39	)	$	(0.30	)
Add back: Amortization of goodwill and intangible assets with indefinite lives		—			0.04

Adjusted net loss	$	(0.39	)	$	(0.26	)

NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES

At March 31, 2002, Goodyear had binding commitments for investments in land, buildings and equipment of $152.6 million, and off-balance-sheet financial guarantees written and other commitments totaling $149.3 million.

At March 31, 2002, Goodyear had recorded liabilities aggregating $66.0 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.

At March 31, 2002, Goodyear had recorded liabilities aggregating $222.6 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 March 31, 2002, approximately 68,000 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 22,200 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 March 31, 2002, 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

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THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

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 appealed an approximately $20 million award made by a jury in a civil action in a Colorado State Court on February 25, 2002, related to alleged breaches of warranties and defects in the Company’s Entran II hose installed as a part of Heatway radiant heating systems in the homes of the claimants. The Company believes the verdict was based on material errors of fact and law. The Company is also a defendant in three class actions and twenty other civil actions in various Federal and state courts related to the Company’s Entran II hose installed as a part of Heatway radiant heating systems in the homes or other structures of the claimants.

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 March 31, 2002, 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 a liability in respect thereof or that any liability ultimately incurred will not exceed the amount, if any, recorded at March 31, 2002 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 9. ADJUSTMENTS

All adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of these unaudited interim periods have been included.

NOTE 10. RECLASSIFICATION

Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2002 presentation.

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THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

NOTE 11. BUSINESS SEGMENTS


			Three Months Ended
(In millions)			March 31,
			2002			2001

Sales:
	North American Tire		$	1,651.8		$	1,624.4
	European Union Tire			744.9			799.3
	Eastern Europe, Middle East & Africa Tire			174.5			163.4
	Latin American Tire			245.6			257.7
	Asia Tire			121.7			119.0

		Total Tires		2,938.5			2,963.8
	Engineered Products			283.1			299.4
	Chemical Products			196.3			291.6

		Total Segment Sales		3,417.9			3,554.8
	Inter-SBU Sales			(118.7	)		(150.1	)
	Other			12.0			9.5

		Net Sales	$	3,311.2		$	3,414.2

Income:
	North American Tire		$	(51.3	)	$	15.4
	European Union Tire			16.6			31.4
	Eastern Europe, Middle East & Africa Tire			10.8			5.9
	Latin American Tire			25.4			22.8
	Asia Tire			7.6			3.9

		Total Tires		9.1			79.4
	Engineered Products			10.2			9.5
	Chemical Products			13.6			16.4

		Total Segment Income (EBIT)		32.9			105.3
	Rationalizations and asset sales			—			(62.0	)
	Interest expense			(61.0	)		(68.7	)
	Foreign currency exchange			(13.3	)		9.9
	Minority interest in net income of subsidiaries			(13.5	)		(7.8	)
	Inter-SBU income			(11.4	)		(6.9	)
	Financing fees and financial instruments			(11.0	)		(12.4	)
	Equity in earnings of corporate affiliates			(4.9	)		(5.8	)
	Corporate goodwill amortization			—			(1.4	)
	Other			(3.4	)		(13.7	)

		Loss before Income Taxes	$	(85.6	)	$	(63.5	)

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THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

Portions of the items reported as Rationalizations and Other (Income) and Expense on the Consolidated Statement of Income in the first quarter of 2001, were not charged (credited) to segment operating income (EBIT) but were attributable to the Company’s seven segments as follows:


		Three Months Ended
(In millions)		March 31,2001

North American Tire		$	4.0
European Union Tire			6.2
Eastern Europe, Africa and Middle East Tire			8.9
Latin American Tire			—
Asia Tire			3.6

	Total Tires		22.7
Engineered Products			3.0
Chemical Products			—

	Total Segments	$	25.7

Segment operating income (EBIT) in 2002, compared to 2001, benefited from the non-amortization of goodwill and intangible assets with indefinite useful lives under the provisions of SFAS No. 142. Segment operating income in the 2001 period included amortization expense for goodwill and intangible assets with indefinite useful lives as follows:


		Three Months Ended
(In millions)		March 31,2001

North American Tire		$	1.0
European Union Tire			3.1
Eastern Europe, Africa and Middle East Tire			1.1
Latin American Tire			—
Asia Tire			.4

	Total Tires		5.6
Engineered Products			.2
Chemical Products			—

	Total Segments		5.8
Corporate			1.4

Amortization Expense of Goodwill and Intangible Assets with Indefinite Useful Lives		$	7.2

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THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

NOTE 12. NON-CONSOLIDATED OPERATIONS — SOUTH PACIFIC TYRES

In addition to its consolidated operations in the Asia region, the Company owns a 50% interest in South Pacific Tyres (SPT), a partnership with Pacific Dunlop Ltd of Australia. SPT is the largest tire manufacturer, marketer and exporter in Australia and New Zealand. The Company is required to use the equity method to account for its interest in the results of operations and financial position of SPT.

The following table presents sales and EBIT of the Company’s Asia Tire segment and 100% of the operations of SPT:


		Three Months Ended
(In millions)		March 31,
		2002			2001

Net Sales:
	Asia Tire	$	121.7		$	119.0
	SPT		121.0			118.3

		$	242.7		$	237.3

EBIT:
	Asia Tire	$	7.6		$	3.9
	SPT		(3.3	)		(7.0	)

		$	4.3		$	(3.1	)

SPT debt totaled $103.9 million and $67.4 million at March 31, 2002 and December 31, 2001, respectively.

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THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

CONSOLIDATED

(All per share amounts are diluted)

Sales in the first quarter of 2002 were $3.31 billion, decreasing 3.0% from $3.41 billion in the 2001 quarter. A net loss of $63.2 million or $.39 per share was recorded in the 2002 first quarter, compared to a net loss of $46.7 million or $.30 per share in the 2001 period. The 2001 quarter included after-tax rationalization charges of $57.1 million or $.36 per share and after-tax goodwill and intangible assets with indefinite useful lives amortization of $6.8 million or $.04 per share.

Revenues in the first quarter of 2002 decreased from the 2001 period primarily due to the effects of currency translation on international results and lower revenues from the Chemical segment as a result of the sale of the Specialty Chemical Business in the fourth quarter of 2001. Goodyear estimates that versus 2001, currency translation adversely affected revenues by approximately $95 million in the first quarter. The Specialty Chemical Business contributed approximately $32 million of sales in the first quarter of 2001. Revenues were favorably affected by higher tire unit volume and price improvements.

Worldwide tire unit sales in the first quarter of 2002 were 53.0 million units, an increase of 376.5 thousand units or 0.7% compared to the 2001 period. North American (U.S. and Canada) volume increased 392.1 thousand units or 1.5% in the quarter, while international unit sales were relatively flat. Worldwide replacement unit sales decreased 1.8% from the 2001 quarter, due to decreases in the European Union, North America and Latin America. Original equipment (OE) unit sales increased 6.4% in the quarter, due to increases in all regions except Eastern Europe.

Cost of goods sold (CGS) decreased in dollars, but increased to 83.4% of sales in the first quarter of 2002, compared to 81.6% in the 2001 period. Compared to the 2001 period, CGS in the first quarter 2002 was adversely affected by approximately $95 million in higher unit costs primarily resulting from significantly lower levels of plant utilization in the fourth quarter of 2001 due to inventory reduction programs and lower demand during the period. CGS in the 2002 period benefited by approximately $70 million from currency translation on CGS, approximately $40 million from lower raw material costs and cost reduction programs.

Selling, administrative and general expense (SAG) in the first quarter of 2002 was down in dollars compared to the 2001 period but was 16.0% of sales in both periods. SAG decreased in

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the first quarter of 2002 by 3.4% compared to the 2001 period, primarily as a result of advertising and communication expense decreasing by approximately $15 million and the benefit of cost reduction programs.

Consolidated EBIT is computed as follows: net sales less CGS and SAG. Consolidated EBIT in the first quarter of 2002 was $20.7 million, decreasing from $80.7 million in the 2001 period. Compared to the 2001 period, EBIT was adversely affected by approximately $95 million of higher unit costs resulting from significantly lower levels of plant utilization in the fourth quarter of 2001 due to inventory reduction programs and lower demand during the period. Consolidated EBIT also declined from the 2001 first quarter due to the adverse impact of foreign currency translation of approximately $15 million and the absence of EBIT contributed by the Specialty Chemical Business which was approximately $6 million in the 2001 period. EBIT was favorably impacted by lower raw material costs and SAG costs of approximately $40 million and $18 million, respectively, compared to the 2001 first quarter. Consolidated margin was .6% compared to 2.4% in 2001.

Revenues in future periods may continue to be adversely affected by competitive pricing pressures and changes in product mix and channels of distribution. Revenues and earnings in future periods are likely to be unfavorably impacted if the dollar strengthens versus various foreign currencies. In addition, lower demand from the original equipment industry, loss of market share in the replacement market and increases in energy and labor costs, which may not be recoverable in the market due to pricing pressures present in today’s highly competitive market, may also adversely affect earnings in future periods. Currency fluctuations and general economic and industry conditions may adversely impact sales and earnings in future periods.

Interest expense of $61.0 million decreased 11.2% in the 2002 first quarter compared to the first quarter last year. The decrease is due both to lower debt levels and lower interest rates.

Other (income) and expense was $13.9 million expense (net) in the 2002 first quarter compared to $(6.5) million income (net) in the 2001 period. Other (income) and expense included financing fees and financial instruments of $11.0 million and $12.4 million in the first quarters of 2002 and 2001, respectively. The 2001 period included 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.

Foreign currency exchange loss was $13.3 million, compared to income of $9.9 million in last year’s first quarter. Foreign currency exchange was adversely impacted in 2002 by approximately $13 million due to currency movements on U.S. dollar denominated monetary items in Argentina. Foreign currency exchange in the 2001

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quarter benefited from the impact of currency movements on U.S. dollar denominated monetary items, primarily in Brazil with an impact of over $10 million.

For the first quarter of 2002, Goodyear had a tax benefit at an effective rate of 31.1%. Goodyear’s effective tax benefit was at a rate of 30.2% in the first quarter of 2001.

Rationalization Activity

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 provided for worldwide associate reductions through retail and administrative consolidation and manufacturing plant downsizing and consolidation. Goodyear anticipates that, upon completion of these actions, annual operating costs will be reduced by approximately $85 million, primarily in lower compensation and benefit costs. Goodyear estimates that these savings will impact the Consolidated Statement of Income as reductions of $40 million in CGS, of which $5 million relates to depreciation, and $45 million in SAG. Goodyear estimates that operating costs were reduced by approximately $4 million in the first quarter of 2002 as a result of the implementation of this program.

The 2001 fourth quarter actions included associate-related costs of $53.1 million for the release of approximately 2,200 associates around the world, primarily production and administrative associates in Europe. To date, approximately 1,400 associates have been released, including 1,100 associates at a cost of $24.3 million during the first quarter of 2002. Rationalization costs, other than associate-related costs, totaled $78.8 million, of which $40.0 million related to the writeoff of tire manufacturing equipment taken out of service, principally in the Asia tire segment and noncancellable lease contracts. Goodyear incurred $2.3 million of these costs during the first quarter of 2002, primarily for lease termination costs. The remaining reserve for costs related to the completion of these actions was $61.2 million and $87.8 million at March 31, 2002 and December 31, 2001, respectively.

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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 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. 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 incurred $2.5 million of associate-related costs and $1.2 million of other than associate-related costs during the first quarter of 2002. These programs are substantially complete with the exception of ongoing associate severance and noncancellable lease payments. The remaining reserve for costs related to the completion of these actions totaled $5.6 million and $9.3 million at March 31, 2002 and December 31, 2001, respectively.

When the first quarter 2001/fourth quarter 2000 program was approved, Goodyear estimated that upon completion of the program, annual pretax savings would be approximately $260 million (approximately $200 million of CGS and approximately $60 million of SAG). These savings are the result of lower compensation and benefit costs related to associates who were released in accordance with the program. Plan savings have been substantially offset by higher conversion costs including increased compensation and benefit costs.

For further information, refer to the note to the financial statements No. 2 Rationalizations.

CRITICAL ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND UNCERTAINTIES

General Market Uncertainties

Goodyear’s results of operations, financial position and liquidity could be adversely affected in future periods by lower demand in the replacement market, loss of market share or lower demand from the OE industry which would result in lower levels of plant utilization that would increase unit costs. Also, 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

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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.

Critical Accounting Policies, Use of Estimates and Assumptions

General and Product Liability and Other Litigation. 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 assumptions and methods it has concluded are appropriate, in accordance with the provisions of Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” and related pronouncements. As additional information becomes available, Goodyear will reassess its evaluation of the pending claims, lawsuits and other proceedings.

At March 31, 2002, Goodyear had recorded liabilities aggregating $222.6 million for potential product liability and other tort claims, including related legal fees expected to be incurred, presently asserted against Goodyear. Generally, the amount recorded was determined on the basis of an assessment of the potential liability using an analysis of available information with respect to pending claims, historical experience and, where available, current trends.

Goodyear has established a liability, as part of its general and product liability, in respect of the approximately 68,000 asbestos claims pending at March 31, 2002, 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

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manufactured by Goodyear in the past or in certain Goodyear facilities. During the first quarter of 2002, Goodyear received approximately 5,200 new claims and resolved approximately 200 asbestos claims. The amount spent on asbestos litigation defense and claim resolution during the first quarter of 2002 was approximately $2.4 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 asbestos 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. The Company appealed an approximately $20 million award made by a jury in a civil action in a Colorado State Court on February 25, 2002, related to alleged breaches of warranties and defects in the Company’s Entran II hose installed as a part of Heatway radiant heating systems in the homes of the claimants. The Company believes the verdict was based on material errors of fact and law. The Company is also a defendant in three class actions and twenty other civil actions in various Federal and state courts related to the Company’s Entran II hose installed in the homes or other structures of the claimants. The Company is also party to actions relating to alleged breaches of warranty of product defects relating to certain of Goodyear’s Load Range D and E light truck tires.

Goodyear’s recorded liability for general and product liability (other than asbestos claims) is based on assumptions about the number of claims filed and expected to be filed and the amount expected to be paid per claim. The expected number of claims is developed based in part on industry statistics and past claims experience. The amount expected to be paid per claim is based in part on whether the claim involves Goodyear’s products or other alleged tort liability. It also includes assumptions about future judicial actions related to the potential aggregation of claims, expected trends in litigation costs and the nature of claims not yet received or reviewed by Goodyear. If the actual experience differs from expectations, Goodyear’s results of

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operations, financial position and liquidity could be affected.

Environmental Matters. At March 31, 2002, Goodyear had recorded liabilities aggregating $66.0 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.

Deferred Tax Asset Valuation Allowance. At March 31, 2002, Goodyear had recorded a net deferred tax asset aggregating $842.4 million. The realization of this net asset is dependent upon taxable income as well as the ability to implement certain tax planning strategies. Goodyear’s ability to generate the expected level of taxable income from future operations is dependant upon general economic conditions, the state of the tire industry and other major markets, other factors beyond management’s control and the implementation of certain tax planning strategies. There can be no assurance that Goodyear will meet its expectations for future taxable income, however management considered these factors in reaching its conclusion that no additional valuation reserves beyond that amount recorded as a reduction to the existing deferred tax asset is required. In the future, additional valuation allowances may be required to be established against the deferred tax asset if estimates of future taxable income during the carryforward period are reduced.

Pensions and Postretirement Benefits. Goodyear’s recorded liability for pensions and postretirement benefits other than pensions is based on a number of assumptions, including future health care costs, life expectancies, retirement rates, long term interest rates, long term rates of return on investments and future compensation levels. Certain of these assumptions are determined with the assistance of outside actuaries. Assumptions about health care costs, life expectancies, retirement rates and future compensation levels are based on past experience and anticipated future trends, including an assumption about inflation. Long term interest rates and rates of return on investments are based on market indicators at the time these assumptions are established. These assumptions are regularly

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reviewed and revised when appropriate, and changes in one or more of them could affect the amount of Goodyear’s recorded expenses for these benefits. If the actual experience differs from expectations, Goodyear’s results of operations, financial position and liquidity in future periods could be affected.

As part of its most recent regular review, in the first quarter of 2002 Goodyear reduced its expected long term rate of return on pension plan assets from 10.0% to 9.5% to reflect expectations for long term investment returns. 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 2004, Goodyear may be required to make substantial contributions to its domestic pension plans in order to satisfy minimum funding requirements.

New Accounting Standards

On January 1, 2002, Goodyear adopted Statement of Financial Accounting Standards No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets”. SFAS No. 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. Accordingly, amortization expense in 2002 will be lower than that recorded in 2001 by approximately $27 million after tax (approximately $.17 per share). SFAS No. 142 also requires goodwill and intangible assets with an indefinite useful life to be tested annually for impairment and, if impaired, to be written down to fair value. In accordance with SFAS No. 142, Goodyear tested its intangible asset with an indefinite useful life prior to March 31, 2002, and no impairment was indicated. Goodyear will complete the initial impairment testing of Goodwill by June 30, 2002, as required by SFAS No. 142, and does not anticipate any impairment write-down.

SEGMENT INFORMATION

Segment EBIT was $32.9 million in the first quarter of 2002, decreasing 68.8% from $105.3 million in the 2001 quarter. Segment operating margin in the first quarter of 2002 was 1.0%, compared to 3.0% in the 2001 period.

Segment EBIT does not include the previously discussed rationalizations and certain other items. Segment EBIT is computed as follows: net sales less cost of goods sold, less selling, administrative and general expense (excluding corporate administrative expenses). For further information, refer to the note to the financial statements No. 11, Business Segments.

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North American Tire

North American Tire segment sales in the first quarter of 2002 were $1.65 billion, increasing 1.7% from $1.62 billion in the 2001 quarter.

Unit sales in the 2002 first quarter were 26.2 million, increasing 1.5% from the 2001 period. Replacement unit sales decreased 2.5% but OE volume increased 10.5%.

Sales in the 2002 quarter increased from the 2001 period due to increased volume from the OE market as auto manufacturers increased production to satisfy rebate-driven vehicle sales. The replacement market was favorably impacted by tire units delivered lower in connection with the Ford Motor Company (“Ford”) replacement program and price increases enacted during the quarter. Sales in the replacement market were adversely affected as certain wholesalers took advantage of the soft consumer demand to postpone purchases from Goodyear.

During the first quarter of 2002, Goodyear supplied approximately 500 thousand tire units with an EBIT impact of approximately $10 million in connection with the Ford replacement program. Ford ended the replacement program on March 31, 2002.

North American Tire segment EBIT was a loss of $51.3 million in the first quarter of 2002, decreasing substantially from EBIT income of $15.4 million in the 2001 quarter. Operating margin was (3.1)%, compared to .9% in 2001.

EBIT in the first quarter of 2002 was negatively impacted by approximately $75 million due to lower levels of plant utilization caused by substantial production cutbacks made during the fourth quarter of 2001 and a charge of approximately $10 million principally related to the return of tires previously sold by Goodyear to Penske, following the April 6, 2002, closure of Penske Automotive Centers in the United States. EBIT was favorably impacted by higher volume, the Ford tire replacement program, $30 million lower raw material costs and price increases in the replacement market.

EBIT in 2001 did not include rationalization charges totaling $4.0 million.

On April 6, 2002, Penske Automotive Centers announced plans to cease operations and close its 563 stores in the United States. Annual sales to Penske totaled approximately $60 million.

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 in the replacement market, changes in product mix, unanticipated increases in raw material and energy prices, anticipated higher wage and benefit costs and general economic conditions.

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European Union Tire

European Union Tire segment sales in the first quarter of 2002 were $744.9 million, decreasing 6.8% from $799.3 million in the 2001 quarter.

Unit sales in the 2002 first quarter were 15.1 million, decreasing 3.2% from the 2001 period. Replacement unit sales decreased 6.7% while OE volume increased 4.0%.

Revenues in the first quarter of 2002 decreased compared to 2001 primarily due to the adverse affect of currency translation, which Goodyear estimates to be approximately $15 million and volume. Higher price levels compared to the first quarter of 2001 favorably impacted revenues.

European Union Tire segment EBIT was $16.6 million in the first quarter of 2002, decreasing 47.1% from $31.4 million in the 2001 quarter. Operating margin was 2.2%, compared to 3.9% in 2001.

EBIT in the first quarter was negatively impacted by approximately $10 million due to lower levels of plant utilization caused by substantial production cutbacks made during the fourth quarter of 2001 and $6 million related to lower sales volume. In addition, marketing and advertising expense increased compared to the 2001 period. EBIT was favorably impacted by the effect of non-amortization of goodwill under SFAS No. 142 and lower raw material costs.

Rationalization charges totaling $23.2 million and the $17.0 million gain on the sale of closed manufacturing and warehouse facilities in the United Kingdom were not included in EBIT for 2001.

Revenues and EBIT in the European Union 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, currency translation and the general economic slowdown in the region.

Eastern Europe, Africa and Middle East Tire

Eastern Europe, Africa and Middle East Tire segment (“Eastern Europe Tire”) sales in the first quarter of 2002 were $174.5 million, increasing 6.8% from $163.4 million in the 2001 quarter.

Unit sales in the 2002 first quarter were 3.8 million, increasing 12.1% from the 2001 period. Replacement unit sales increased 18.4% while OE volume decreased 7.2%.

Revenues increased in the 2002 quarter primarily due to higher volume in the replacement market particularly in Turkey and Poland. Revenue was adversely affected by currency translation,

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which Goodyear estimates to be approximately $45 million, primarily in South Africa where the Rand has devalued approximately 30% against the U.S. dollar compared to the 2001 period.

Eastern Europe Tire segment EBIT was $10.8 million in the first quarter of 2002, increasing 83.1% from $5.9 million in the 2001 quarter. Operating margin was 6.2%, compared to 3.6% in 2001.

EBIT in the 2002 quarter increased due to higher volume and a change in mix to higher margin replacement tires, with an impact of approximately $6.0 million compared to the 2001 period. Raw material cost also had a modestly favorable effect in the period.

EBIT in the 2001 quarter did not include rationalization charges totaling $8.9 million.

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, labor disturbances and currency translation.

Latin American Tire

Latin American Tire segment sales in the first quarter of 2002 were $245.6 million, decreasing 4.7% from $257.7 million in the 2001 quarter.

Unit sales in the 2002 first quarter were 4.9 million, decreasing 1.6% from the 2001 period. Replacement unit sales decreased 2.5% while original equipment volume increased 0.6%.

Revenues in the 2002 quarter were adversely impacted by currency translation, particularly in Argentina, Brazil and Venezuela, and lower volume. Revenues benefited from price adjustments partially offsetting currency movements. Goodyear estimates that currency translation reduced sales by approximately $30 million in the first quarter compared to 2001.

Latin American Tire segment EBIT was $25.4 million in the first quarter of 2002, increasing 11.4% from $22.8 million in the 2001 quarter. Operating margin was 10.3%, compared to 8.8% in 2001.

EBIT in the 2002 quarter was favorably impacted by approximately $9 million related to pricing and mix, approximately $5 million related to lower raw material costs and the benefits of cost reduction programs. Price adjustments were made to partially offset the adverse impact of currency movements. Goodyear estimates that the effects of currency translation reduced operating income by approximately $8 million in the first quarter compared to 2001. EBIT was also adversely affected by lower

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volume.

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 the region and currency translation.

Asia Tire

Asia Tire segment sales in the first quarter of 2002 were $121.7 million, increasing 2.3% from $119.0 million in the 2001 quarter.

Unit sales in the 2002 first quarter were 3.0 million, increasing 5.4% from the 2001 period. Replacement unit sales increased 5.5% and original equipment volume increased 5.1%.

Revenues increased in the 2002 period due to higher volume, partially offset by the adverse impacts of currency translation. Goodyear estimates that currency translation reduced sales by approximately $5 million in the first quarter compared to 2001.

Asia Tire segment EBIT was $7.6 million in the first quarter of 2002, increasing 94.9% from $3.9 million in the 2001 quarter. Operating margin was 6.2%, compared to 3.3% in 2001.

EBIT increased in the first quarter of 2002 due to approximately $3 million lower raw material costs, lower conversion costs as a result of cost containment programs and higher volume. EBIT was adversely affected by intensive price competition and currency translation.

EBIT in the 2001 quarter did not include rationalization charges totaling $3.6 million.

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 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), the largest tire manufacturer, marketer and exporter 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.

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


		Three Months Ended
(In millions)		March 31,
		2002			2001

Net Sales:
	Asia Tire	$	121.7		$	119.0
	SPT		121.0			118.3

		$	242.7		$	237.3

EBIT:
	Asia Tire	$	7.6		$	3.9
	SPT		(3.3	)		(7.0	)

		$	4.3		$	(3.1	)

SPT debt totaled $103.9 million at March 31, 2002 and $67.4 million at December 31, 2001.

Engineered Products

Engineered Products segment sales in the first quarter of 2002 were $283.1 million, decreasing 5.4% from $299.4 million in the 2001 quarter.

Revenues in the first quarter were down from 2001 due to the continued economic slowdown in the U.S. All major product lines except conveyor belts reported lower revenue compared to 2001.

Engineered Products segment EBIT was $10.2 million in the first quarter of 2002, increasing 7.4% from $9.5 million in the 2001 quarter. Operating margin was 3.6%, compared to 3.2% in 2001.

EBIT in the 2002 period increased primarily due to cost containment and productivity improvement programs.

EBIT in the 2001 quarter did not include rationalization charges totaling $3.0 million.

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 the first quarter of 2002 were $196.3 million, decreasing 32.7% from $291.6 million in the 2001 quarter. Revenues in the 2002 first quarter decreased

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compared to 2001 due to lower net selling values which were caused by decreased raw material cost and the impact of selling the Specialty Chemical Business in 2001, which contributed approximately $32 million of revenue in the first quarter of 2001. Approximately 50% of Chemical Products segment sales were made to Goodyear’s other segments.

Chemical Products segment EBIT was $13.6 million in the first quarter of 2002, decreasing 17.1% from $16.4 million in the 2001 quarter. Operating margin was 6.9%, compared to 5.6% in 2001.

EBIT in the 2002 quarter decreased due to the sale of the Specialty Chemical Business. This business contributed approximately $6 million of EBIT in the first quarter of 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

Net cash used by operating activities was $203.1 million during the first three months of 2002, as reported on the Consolidated Statement of Cash Flows. Working capital (accounts receivable and inventory less accounts payable) at March 31, 2002, increased approximately $155 million from December 31, 2001, due to increased accounts receivable. Working capital improved $1.2 billion, from $3.9 billion at March 31, 2001 to $2.7 billion at March 31, 2002, as a result of lower accounts receivable and inventory.

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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 Company retains the risk of the non-payment of receivables it sells to Wingfoot A/R LLC to the extent of its investment in the equity of Wingfoot A/R LLC and in the subordinated note issued by Wingfoot A/R LLC to Goodyear. The aggregate amount of Goodyear’s investments in Wingfoot A/R LLC was $362.2 million at March 31, 2002 and $483.3 million at December 31, 2001.

The obligation of the five bank-affiliated issuers of commercial paper to purchase notes issued by Wingfoot is conditioned upon, among other things, that the Company’s long term debt have a rating of at least Ba2 by Moody’s and BB by Standard & Poor’s. If the Company’s long term debt does not maintain at least those ratings, the lenders may (unless the condition is waived or the note facility is amended) require Wingfoot to repay its secured notes (from collected receivables) and terminate the note purchase facility, in which event the Company would be required to obtain funds pursuant to new or existing bank credit facilities.

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 March 31, 2002, the value in U.S. dollars of which these international subsidiaries may borrow is approximately $220 million. In addition, various other international subsidiaries of Goodyear sold certain of their trade receivables during the first quarter of 2002.

At March 31, 2002, the net cash proceeds for all sales of receivables by Goodyear were $791 million. During the first quarter of 2002, activity related to these programs resulted in net cash outflows of $57.1 million. For further information, refer to the note to the financial statements No. 6, Accounts Receivable.

Net cash used in investing activities was $96.2 million during the first three months of 2002. Capital expenditures totaled $75.8 million, and were primarily for plant modernizations and new tire molds. Capital expenditures in 2002 have been reduced in response to current economic and business conditions.


	Three Months Ended
	March 31,
(In millions)	2002		2001

Capital Expenditures	$	75.8	$	103.9
Depreciation and amortization		146.8		160.4

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Depreciation and amortization in the 2001 period included $7.2 million of amortization related to goodwill and intangible assets with indefinite lives that are no longer amortized in accordance with the provisions of SFAS No. 142.

Net cash used by financing activities was $7.4 million during the first three months of 2002.

Consolidated Debt and the Debt to Debt and Equity Ratio for the periods indicated:


(Dollars in millions)	3/31/02			12/31/01			3/31/01

Consolidated Debt	$	3,561.0		$	3,568.3		$	4,056.4
Debt to Debt and Equity		56.3	%		55.5	%		54.7	%

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 March 31, 2002, of which $2.5 billion were unused. At March 31, 2002, Goodyear had short term committed and uncommitted bank credit arrangements totaling $1.3 billion, of which $1.0 billion were unused. Goodyear also had available long term credit arrangements at March 31, 2002 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. During the first quarter of 2002, commitment fees averaged 20 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. During the first quarter of 2002, commitment fees averaged 15 basis points.

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 March 31, 2002. These revolving credit facilities support, among

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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.

In the event the Company fails to maintain the minimum interest coverage ratio or comply with its other covenants in these credit facilities, it would be unable to borrow under the facilities. The same covenants are contained in the agreement relating to the Company’s $800 million term loan, which could become due upon action by lenders representing two-thirds of the principal amount of the term loan in the event of an unwaived breach of one or more covenants. Similarly, certain other bilateral bank loans are subject to the same covenants and would also be terminable by the lending banks.

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 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.

Funds generated by operations are anticipated to be positive during 2002 and, together with funds available under existing credit arrangements (assuming such facilities remain in effect), are expected to be sufficient to meet Goodyear’s currently anticipated requirements.

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The following table presents, at December 31, 2001, Goodyear’s obligations and commitments to make future payments under contracts and contingent commitments. No material changes have occurred during the first quarter ended March 31, 2002, with the exception of binding commitments for investments in land, building and equipment which increased $31.1 million to $152.6 million at March 31, 2002, and are primarily due within one year.



(In millions)	Payment Due by Period as of December 31, 2001

Contractual Obligations	Total		1 Year		2 Years		3 Years		4 Years		5 Years		After 5 Years

Long Term Debt	$	3,264.5	$	103.9	$	409.6	$	803.8	$	404.5	$	344.0	$	1,198.7


Capital Lease Obligations (1)		79.4		9.5		7.9		6.6		5.2		4.5		45.7

Operating Leases (2)		1,303.2		272.1		201.2		158.5		123.3		116.0		432.1

Binding Commitments		121.5		112.4		4.2		4.2		0.7		—		—

Total Contractual Cash Obligations	$	4,768.6	$	497.9	$	622.9	$	973.1	$	533.7	$	464.5	$	1,676.5

	Amount of Commitment Expiration per Period

Other Off Balance Sheet Financial Guarantees Written and Other Commitments (3)	$	151.4	$	76.0	$	53.7	$	1.2	$	0.7	$	—	$	19.8

(1) The present value of capital lease obligations is $48.7 million.

(2) Operating leases do not include minimum sublease rentals of $44.1 million, $36.4 million, $27.2 million, $18.9 million, $10.8 million, and $17.2 million in each of the periods above, respectively, for a total of $154.6 million. Net operating lease payments total $1,148.6 million. The present value of operating leases is $763.6 million. The operating leases relate to, among other things, computers and office equipment, real estate, aircraft, and miscellaneous other assets, which are in some instances leased from special purpose entities owned and controlled by independent, unaffiliated lessors that are owned or financed by financial institutions. No director, officer or employee of Goodyear or any of its subsidiaries or other affiliate holds any direct or indirect interest in such entities. No assets is leased from any related party.

(3) Other off-balance-sheet financial guarantees written and other commitments includes, at December 31, 2001,

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approximately $74.4 million (approximately $75 million at March 31, 2002) related to an option held by Goodyear’s minority partner in Sava Tires to require Goodyear to purchase the partner’s 40% equity interest in Sava Tires. On April 29, 2002, the minority partner gave notice of its intent to exercise half of its option and, accordingly, on May 29, 2002, Goodyear will pay approximately $38.5 million to the partner to obtain additional equity in Sava Tires, which will bring Goodyear’s ownership interest to 80%. The minority partner may exercise the remainder of its option during various periods beginning in 2003 and extending through 2005.

In addition, the following contingent contractual obligations, the amounts of which can not be estimated, are not included in the table above:

• 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.

The Company does not engage in the trading of commodity contracts or any related derivative contracts. The Company generally purchases raw materials and energy through intermediate and long term supply contracts at a fixed price or at formula prices related to market prices or negotiated prices.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 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 alter its exposure to the impact of changing 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. Floating rate swaps are used to convert the fixed rates of long term borrowings into short term variable rates. Interest rate swap contracts are thus used by Goodyear to separate interest rate risk management from debt funding decisions. At March 31, 2002, the interest rate on 68% of Goodyear’s debt was fixed by either the nature of the obligation or through the interest rate swap contracts, compared to 75% at December 31, 2001 and 46% at March 31, 2001. Goodyear also from time to time enters into interest rate lock contracts to hedge the risk-free component of anticipated long term debt issuances.

The following table presents interest rate swap contract information at March 31:

(Dollars in millions)

Interest Rate Swap Contracts


		2002			2001

Fixed rate swap contracts:
	Notional principal amount	$	325.0		$	50.0
	Pay fixed rate		5.0	%		6.3	%
	Receive variable LIBOR		2.0	%		6.7	%
	Average years to maturity		2.0			.6
	Fair value — (liability)	$	(6.3	)	$	—
	Pro forma fair value — (liability)		(7.5	)		(.5	)
Floating rate swap contracts:
	Notional principal amount	$	250.0			—
	Pay variable LIBOR		3.7	%		—
	Receive fixed rate		6.6	%		—
	Average years to maturity		4.7			—
	Fair value — (liability)	$	(3.7	)		—
	Pro forma fair value — (liability)		(1.9	)		—

The pro forma fair value assumes a 10% decrease in variable market interest rates at March 31, 2002 and 2001, respectively, and reflects the estimated fair value of contracts outstanding at that date under that assumption.

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Weighted average interest rate swap contract information for the three months ended March 31, 2002 and March 31, 2001 follows:


	Three Months Ended
	March 31, 2002
(Dollars in millions)	Fixed Rate			Floating Rate
	Contracts			Contracts

Notional principal	$	325.0		$	88.0
Pay fixed rate		5.0	%		—
Receive variable LIBOR		2.0	%		—
Pay variable LIBOR		—			3.8	%
Receive fixed rate		—			6.6	%


	Three Months Ended
	March 31, 2001
(Dollars in millions)	Fixed Rate			Floating Rate
	Contracts			Contracts

Notional principal	$	50.0			—
Pay fixed rate		6.3	%		—
Receive variable LIBOR		6.7	%		—

The following table presents fixed rate debt information at March 31:

(In millions)


Fixed Rate Debt	2002		2001

Fair value — liability	$	2,317.5	$	1,697.0
Pro forma fair value — liability		2,416.7		1,759.4

The pro forma fair value assumes a 100 basis point decrease in market interest rates at March 31, 2002 and 2001, respectively, 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. 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 enters into forward exchange 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

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and interest on Goodyear’s Swiss franc bond due 2006 and Euro300 million of the 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. Contracts hedging short term trade receivables and payables normally have no hedging designation.

The following table presents foreign exchange contract information at March 31:

(In millions)

Foreign Exchange Contracts


	2002			2001

Fair value (unfavorable)	$	(25.0	)	$	(9.1	)
Pro forma change in fair value		19.6			28.2
Contract maturities	4/02-3/06			4/01-3/06
Fair value asset (liability):
Swiss franc swap-current	$	(2.7	)	$	—
Swiss franc swap-long		10.1			5.3
Euro swaps-current		(7.3	)		—
Euro swaps-long term		(20.5	)		(18.3	)
Other-current		(2.6	)		2.5

The pro forma change in fair value assumes a 10% change in foreign exchange rates at March 31, 2002 and 2001, respectively, 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.

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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 that 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 quarterly report. Such statements are based on current expectations, 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. Goodyear 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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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to the Annual Report of The Goodyear Tire & Rubber Company (“Goodyear”) on Form 10-K for the year ended December 31, 2001 (the “2001 10-K”), wherein at Item 3, pages 23- 27, Goodyear reported certain legal proceedings. Goodyear reports the following developments in respect of the legal proceedings described at paragraphs (A) and (H) of Item 3 of the 2001 10-K:

(1) As reported at paragraph (A) of Item 3, at page 23, of the 2001 10-K, on December 21, 2000, the United States District Court for the District of Maryland reaffirmed its opinion and again granted Goodyear’s motion for summary judgment and issued an order and final judgment in favor of Goodyear, dismissing each of the 66 civil actions filed against Goodyear since 1990 relating to the development of cancer and other diseases by former employees of a subsidiary (now a part) of Goodyear alleged to be the result of exposure to allegedly toxic substances while working at a plant closed in 1987. The plaintiffs appealed the decision of the District Court to the United States Court of Appeals for the Fourth Circuit. On March 5, 2002, the Court of Appeals for the Fourth Circuit affirmed the District Court’s decision dismissing each case with prejudice and assessing costs against the plaintiffs.

(2) At paragraph (H), page 26, of the 2001 10-K, Goodyear reported that it was one of numerous defendants in legal proceedings in certain state and federal courts involving approximately 65,000 claimants relating to their alleged exposure to materials containing asbestos in products allegedly manufactured by Goodyear or present in Goodyear’s facilities. During the first quarter of 2002, approximately 5,200 new claims were filed against Goodyear and approximately 200 claims were settled or dismissed. The amount expended on asbestos defense and claim resolution during the first quarter of 2002 was approximately $2.4 million (before recovery of insurance proceeds). There are approximately 68,000 claims currently pending against Goodyear relating to alleged asbestos-related diseases resulting from their alleged exposure to asbestos in products manufactured by Goodyear or in materials containing asbestos present in Goodyear facilities. The plaintiffs are seeking unspecified actual and punitive damages and other relief.

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

The Annual Meeting of Shareholders of Goodyear was held on April 15, 2002 (the “Annual Meeting”). Proxies for the Annual Meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Act”), there was no solicitation in opposition to the three nominees of the Board of Directors of Goodyear listed in Goodyear’s Proxy Statement, dated February 26, 2002, for the Annual Meeting (the “Proxy Statement”), filed with the Securities and Exchange Commission, and said three nominees were elected.

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The following matters were acted upon by Goodyear shareholders at the Annual Meeting, at which 146,796,178 shares of the Common Stock, without par value, of Goodyear (the “Common Stock”, the only class of voting securities of Goodyear outstanding), or approximately 89.9 percent of the 163,211,253 shares of Common Stock outstanding and entitled to vote at the Annual Meeting, were present in person or by proxies:

1. Election of Directors. Three persons were nominated by the Goodyear Board of Directors for election as directors of Goodyear. Samir G. Gibara, William J. Hudson, Jr. and Martin D. Walker were nominated as Class I directors, each to hold office for a three year term expiring at the 2005 annual meeting of Goodyear shareholders and until his successor is duly elected and qualified. Each nominee was an incumbent director. No other person was nominated. Each nominee was elected. The votes cast for, or withheld or abstained with respect to, each nominee were as follows:


	Shares of Common		Shares of Common Stock
Name of Director	Stock Voted For		Withheld or Abstained

Samir G. Gibara		134,701,093		12,095,085




William J. Hudson, Jr.		136,385,142		10,411,036




Martin D. Walker		136,435,520		10,360,658

The eight directors whose terms of office continue after the Annual Meeting are: (A) Steven A. Minter, Agnar Pytte, Kathryn D. Wriston and James M. Zimmerman, whose terms expire in 2003; and (B) John G. Breen, Edward T. Fogarty, Robert J. Keegan and Philip A. Laskawy, whose terms expire in 2004.

2. Ratification of Appointment of Independent Accountants. A resolution proposed by the Goodyear Board of Directors that the shareholders ratify the action of the Board of Directors in selecting and appointing PricewaterhouseCoopers LLP as independent accountants for Goodyear for the year ending December 31, 2002 was submitted to, and voted upon by, the shareholders. There were 140,902,169 shares of Common Stock voted in favor of, and 4,803,172 shares of Common Stock voted against, said resolution. The holders of 1,090,837 shares of Common Stock abstained. There were no “broker non-votes”. The resolution, having received the affirmative vote of the holders of a majority of the shares of Common Stock outstanding and entitled to vote at the Annual Meeting, was adopted and the appointment of PricewaterhouseCoopers LLP as the independent accountants for Registrant for 2002 was ratified by the shareholders.

3. Approval of Adoption of 2002 Performance Incentive Plan. A resolution proposed by the Board of Directors of the Company that the shareholders approve the 2002 Performance Plan of The Goodyear Tire & Rubber Company (the “Plan”), which had been adopted by the Board of Directors on February 5, 2002 subject to shareholder approval, was submitted to, and voted upon by, the shareholders of the Company at the Annual Meeting. The Plan provides, among other

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things, for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock grants and awards, performance grants and awards and other stock-based grants and awards relating to or in respect of shares of the Common Stock of the Company to employees of the Company and its subsidiaries. There were 92,800,548 votes cast in favor of, and 21,098,700 votes cast against, said resolution. The holders of 1,773,385 shares of Common Stock abstained and there were “broker non-votes” in respect of 31,123,545 shares of Common Stock. Accordingly, the resolution received the affirmative vote of the holders of a majority of the Common Stock outstanding and entitled to vote at the Annual Meeting and, therefore, the resolution was adopted and the Plan was approved by the shareholders. The resolution and information relating to the Plan are set forth at pages 7 through 13, inclusive, of the Proxy Statement. The Plan is set forth in its entirety as Appendix A to, at pages A-1 through A-11 of, the Proxy Statement. A copy of the Plan as adopted by the Board of Directors and approved by the Shareholders is filed with this Quarterly Report as Exhibit 10.1 and incorporated herein by specific reference.

4. Shareholder Proposal No. 1. A resolution submitted by a shareholder requesting the Goodyear Board of Directors to take the necessary steps to declassify the Board of Directors and establish annual elections of all directors was voted on at the Annual Meeting. There were 84,421,119 shares of Common Stock voted in favor of, and 29,023,751 shares of Common Stock voted against, the resolution. In addition, the holders of 2,227,763 shares of Common Stock abstained from voting on the resolution and there were “broker non-votes” in respect of 31,123,545 shares of Common Stock. The resolution, having received the affirmative vote of at least a majority of the shares of Common Stock entitled to vote at the Annual Meeting, was adopted. The resolution and related statements in support thereof and in opposition thereto are set forth under the caption “Shareholder Proposal No.1” at page 14 of the Proxy Statement.

5. Shareholder Proposal No. 2. A resolution submitted by a shareholder requesting the Goodyear Board of Directors to redeem the Company’s Shareholder Rights Plan unless such plan is approved by its shareholders was voted on at the Annual Meeting. There were 80,191,853 shares of Common Stock voted in favor of, and 32,926,868 shares of Common Stock voted against, the resolution. In addition, the holders of 2,553,912 shares of Common Stock abstained from voting on the resolution and there were “broker non-votes” in respect of 31,123,545 shares of Common Stock. The resolution, having failed to receive the affirmative vote of at least a majority of the shares of Common Stock entitled to vote at the Annual Meeting, was not adopted. The resolution and related statements in support thereof and in opposition thereto are set forth under the caption “Shareholder Proposal No. 2” at pages 15 and 16 of the Proxy Statement.

ITEM 5. OTHER INFORMATION.

The Company entered into an Amended and Restated Rights Agreement dated as of April 15, 2002, with EquiServe Trust Company, N.A., as Rights Agent. The Amended and Restated Rights Agreement, among other things, allows qualified institutions in certain limited circumstances to own up to 20% of the outstanding common stock of the Company without triggering a distribution of the rights. A copy of the Amended and Restated Rights Agreement is attached hereto as Exhibit 4.1 and is incorporated herein by reference.

-40-

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits. See the Index of Exhibits at page E-1, which is by specific reference incorporated into and made a part of this Quarterly Report on Form 10-Q.

(b) Reports on Form 8-K. No Current Report on Form 8-K was filed by The Goodyear Tire & Rubber Company during the quarter ended March 31, 2002.

S I G N A T U R E S

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		THE GOODYEAR TIRE & RUBBER COMPANY (Registrant)

Date: May 2, 2002		By /s/ Richard J. Kramer Richard J. Kramer, Vice President

		(Signing on behalf of Registrant as a duly authorized officer of Registrant and signing as the principal accounting officer of registrant.)

-41-

THE GOODYEAR TIRE & RUBBER COMPANY

Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2002

INDEX OF EXHIBITS (1)


EXHIBIT		EXHIBIT
Table Item No. *	Description of Exhibit	Number

3	ARTICLES OF INCORPORATION AND BY-LAWS

	(a) Certificate of Amended Articles of Incorporation of The Goodyear Tire & Rubber Company (“Goodyear”), dated December 20, 1954, and Certificate of Amendment to Amended Articles of Incorporation of Goodyear, dated April 6, 1993, and Certificate of Amendment to Amended Articles of Incorporation of Goodyear dated June 4, 1996, three documents comprising Goodyear’s Articles of Incorporation as amended (incorporated by reference, filed as Exhibit 3.1 to Goodyear’s Form 10-Q for the quarter ended June 30, 1996).

	(b) Code of Regulations of Goodyear, adopted November 22, 1955, as amended April 5, 1965, April 7, 1980, April 6, 1981 and April 13, 1987 (incorporated by reference, filed as Exhibit 4.1(B) to Goodyear’s Registration Statement on Form S-3, File No. 333-1995).

4	INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES	`




	(a) Specimen nondenominational Certificate for shares of the Common Stock, Without Par Value, of Goodyear; EquiServe Trust Company, N.A. as transfer agent and registrar (incorporated by reference, filed as Exhibit 4.1 to Goodyear’s Form 10-K for the year ended December 31, 2001, File No. 1-1927).

	(b) Conformed copy of Amended and Restated Rights April 15, 2002, between Goodyear and EquiServe Trust Company, N.A., as successor Rights Agent, amending and restating the Rights Agreement dated as of, dated as of June 4, 1996, between Goodyear and First Chicago Trust Company of New York, Rights Agent	4.1

Pursuant to Item 601 of Regulation S-K.

E-1


EXHIBIT		EXHIBIT
Table Item No. *	Description of Exhibit	Number

4	(c) Conformed copy of Amended and Restated Five-Year Revolving Credit Agreement, dated as of August 14, 2001, among Goodyear, the Lenders named therein and The Chase Manhattan Bank, as Agent (incorporated by reference, filed as Exhibit 4.1 to Goodyear’s Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).

	(d) Conformed copy of Amended and Restated 364-Day Revolving Credit Agreement, dated as of August 14, 2001, among Goodyear, the Lenders named therein and The Chase Manhattan Bank, as Agent (incorporated by reference, filed as Exhibit 4.2 to Goodyear’s Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).

	(e) 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 Goodyear, the Lenders named therein and The Chase Manhattan Bank, as Agent (incorporated by reference, filed as Exhibit 4.5 to Goodyear’s Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).

	(f) Form of First Amendment, dated as of November 9, 2001, to the Amended and Restated 364-Day Revolving Credit Agreement dated as of August 14, 2001, among Goodyear, the Lenders named therein and The Chase Manhattan Bank, as Agent (incorporated by reference, filed as Exhibit 4.6 to Goodyear’s Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).

	(g) Form of Indenture, dated as of March 15, 1996, between Goodyear 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 Goodyear’s Form 10-Q for the quarter ended March 31, 1998, File No. 1-1927).

Pursuant to Item 601 of Regulation S-K.

E-2


EXHIBIT		EXHIBIT
Table Item No. *	Description of Exhibit	Number

4	(h) Form of Indenture, dated as of March 1, 1999, between Goodyear and The Chase Manhattan Bank, as Trustee, as supplemented on March 14, 2000 (incorporated by reference, filed as Exhibit 4.1 to Goodyear’s Form 10-Q for the quarter ended March 31, 2000, File No. 1-1927 and as further supplemented on August 15, 2001 (incorporated by reference, filed as Exhibit 4.3 to Goodyear’s Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).

	(i) Conformed copy of Term Loan Agreement, dated as of March 30, 2001, among Goodyear, 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 Goodyear’s Form 10-Q for the quarter ended March 31, 2001, File No. 1-1927).

	(j) Form of First Amendment, dated as of November 9, 2001, to the Term Loan Agreement, dated as of March 30, 2001, among Goodyear, the Lenders named therein, The Chase Manhattan Bank, as Agent, and Chase Manhattan International Limited, as London Agent (incorporated by reference, filed as Exhibit 4.4 to Goodyear’s Form 10-Q for the quarter ended September 30, 2001, File No. 1-1927).

	In accordance with paragraph (iii) to Part 4 of Item 601 of Regulation S-K, agreements and instruments defining the rights of holders of certain items of long term debt entered into during the quarter ended March 31, 2002 which relate to securities having an aggregate principal amount less than 10% of the consolidated assets of Registrant and its Subsidiaries are not filed herewith. The Registrant hereby agrees to furnish a copy of any such agreements or instruments to the Securities and Exchange Commission upon request.

Pursuant to Item 601 of Regulation S-K.

E-3


EXHIBIT			EXHIBIT
Table Item No. *	Description of Exhibit		Number

		MATERIAL CONTRACTS




10		2002 Performance Plan of The Goodyear Tire & Rubber Company, as adopted by the Board of Directors on February 5, 2002, and approved by shareholders on April 15, 2002.	10.1

12		STATEMENT RE COMPUTATION OF RATIOS




		Statement setting forth the computation of Ratio of Earnings to Fixed Charges.	12

Pursuant to Item 601 of Regulation S-K.

E-4 EX-4.1 3 l93883aex4-1.txt EXHIBIT 4(1) AMENDED & RESTATED RIGHTS AGREEMENT Exhibit 4.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE GOODYEAR TIRE & RUBBER COMPANY AND EQUISERVE TRUST COMPANY, N.A., SUCCESSOR RIGHTS AGENT AMENDED AND RESTATED RIGHTS AGREEMENT (EFFECTIVE APRIL 15, 2002) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS -----------------
Page ---- RIGHTS AGREEMENT Section 1. Certain Definitions.............................................................................1 Section 2. Appointment of Rights Agent.....................................................................9 Section 3. Issue of Right Certificates.....................................................................9 Section 4. Form of Right Certificates.....................................................................11 Section 5. Countersignature and Registration..............................................................12 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates........................................12 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..................................13 Section 8. Cancellation and Destruction of Right Certificates.............................................15 Section 9. Reservation and Availability of Shares of Capital Stock........................................15 Section 10. Preferred Stock Record Date....................................................................16 Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.........................................................................................17 Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....................................25 Section 13. Combination, Consolidation, Merger or Sale or Transfer of Assets or Earning Power..................................................................................25 Section 14. Fractional Rights and Fractional Shares........................................................27 Section 15. Rights of Action...............................................................................28 Section 16. Agreement of Right Holders.....................................................................29
-i- Section 17. Right Certificate Holder Not Deemed a Shareholder..............................................30 Section 18. Concerning the Rights Agent....................................................................30 Section 19. Merger or Consolidation or Change of Name of Rights Agent......................................30 Section 20. Duties of Rights Agent.........................................................................31 Section 21. Change of Rights Agent.........................................................................33 Section 22. Issuance of New Right Certificates.............................................................34 Section 23. Redemption and Termination.....................................................................34 Section 24. Exchange.......................................................................................36 Section 25. Notice of Certain Events.......................................................................37 Section 26. Notices........................................................................................38 Section 27. Supplements and Amendments.....................................................................38 Section 28. Successors.....................................................................................39 Section 29. Determinations and Actions by the Board of Directors, etc......................................39 Section 30. Benefits of This Agreement.....................................................................40 Section 31. Severability...................................................................................40 Section 32. Governing Law..................................................................................40 Section 33. Counterparts...................................................................................40 Section 34. Descriptive Headings...........................................................................40 Exhibit A Form of Articles of Amendment.................................................................A-1 Exhibit B Form of Rights Certificate....................................................................B-1 Exhibit C Summary of Rights to Purchase Preferred Stock.................................................C-1

-ii- AMENDED AND RESTATED RIGHTS AGREEMENT ------------------------------------- AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of April 15, 2002 (the "Agreement"), between THE GOODYEAR TIRE & RUBBER COMPANY, a Ohio corporation (the "Company"), and EQUISERVE TRUST COMPANY, N.A., a Delaware corporation (the "Rights Agent"). W I T N E S S E T H: ------------------- WHEREAS, the Board of Directors of the Company on June 4, 1996 (the "Rights Dividend Declaration Date") authorized and declared a dividend distribution (the "Distribution") of one Right for each outstanding share of the Common Stock, without par value, of the Company (the "Common Stock") outstanding at the close of business on July 29, 1996 (the "Record Date") and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(i) hereof) in respect of each share of Common Stock issued (whether originally issued or delivered from the Company's treasury shares) between the Record Date and the earlier of the Distribution Date or the Expiration Date (as such terms are hereinafter defined), each Right initially representing the right to purchase, under certain circumstances, one one-hundredth of a share of Series B Preferred Stock having the rights, powers and preferences set forth in the Articles of Amendment attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth (the "Rights"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates (as such term is hereinafter defined) and Associates (as such term is hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of securities of the Company constituting a Substantial Block (as such term is hereinafter defined), but shall not include (i) the Company, any Subsidiary (as such term is hereinafter defined) of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any Person organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan, (ii) any Person who or which, together with all Affiliates and Associates of such Person, is a Permitted Institutional Investor (and has not thereafter become a Restricted Investor), (iii) any Person who or which, together with all 1 Affiliates and Associates of such Person, becomes the Beneficial Owner of a Substantial Block solely as a result of a change in the aggregate number of shares of the Common Stock or other voting securities of the Company outstanding since the last date on which such Person acquired Beneficial Ownership of any securities of the Company constituting such Substantial Block, or (iv) any Person who or which, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of a Substantial Block in the good faith belief that such acquisition would not (x) cause such Person and its Affiliates and Associates to become the Beneficial Owner of a Substantial Block and such Person relied in good faith in computing the percentage of its voting power on publicly filed reports or documents of the Company which are inaccurate or out-of-date or (y) otherwise cause a Distribution Date or the adjustment provided for in Section 11(a) to occur. Notwithstanding clause (iv) of the prior sentence, if any Person that is not an Acquiring Person due to such clause (iv) does not cease to be the Beneficial Owner of a Substantial Block by the close of business on the last Business Day of a period to be determined by the Board of Directors of the Company and specified in a notice from the Company that such Person is the Beneficial Owner of a Substantial Block, such Person shall, at the end of such specified period, become an Acquiring Person (and such clause (iv) shall no longer apply to such Person). No failure by the Board of Directors of the Company to give such notice for a period of time, and no notice specifying a particular time period by which such Person must cease to be the Beneficial Owner of a Substantial Block, shall be deemed a waiver of the right of the Board of Directors to subsequently give or modify such notice. For purposes of this definition, the determination whether any Person acted in "good faith" shall be conclusively determined by the Board of Directors of the Company, acting by a vote of those directors of the Company whose approval would be required to redeem the Rights under Section 23 hereof. (b) "Act" shall have the meaning set forth in Section 9(c) hereof. (c) "Adjustment Shares" shall have the meaning set forth in Section 11(a)(ii) hereof. (d) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof. (e) "Agreement" shall have the meaning set forth in the introduction hereto. (f) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates has, directly or indirectly, the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the occurrence of an event) pursuant to any agreement, arrangement or understanding (whether or not in 2 writing), or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (1) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (2) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (3) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event (as such term is hereinafter defined), which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) hereof ("Original Rights") or pursuant to Section 11(i) or Section 22 hereof in connection with an adjustment made with respect to any Original Rights; or (ii) which such Person or any of such Person's Affiliates or Associates has, directly or indirectly, the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the Beneficial Owner of, or to "beneficially own," any security under this subparagraph (ii) if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (f)) or disposing of any securities of the Company; or (iv) which are directly, indirectly or constructively owned by such Person or any of such Person's Affiliates or Associates, within the meaning of Section 958 of the Internal Revenue Code of 1986, as amended. Notwithstanding the foregoing, nothing contained in this definition shall cause a Person ordinarily engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own, any securities acquired in a bona fide firm commitment underwriting pursuant to an underwriting agreement with the Company. (g) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in either the State of Ohio or the state (if other than Ohio) in which the principal office of the Rights Agent are authorized or obligated by law or 3 executive order to close. (h) "Certification" shall have the meaning set forth in Section 18 hereof. (i) "close of business" on any given date shall mean 5:00 P.M., Akron time, on such date; provided, however, if such date is not a Business Day it shall mean 5:00 P.M., Akron time, on the next succeeding Business Day. (j) "Common Stock" when used with reference to the Company shall mean the Common Stock, without par value, of the Company. "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock with the greatest voting power of such Person or the equity securities or other equity interest having power to control or direct the management of such Person. (k) "common stock equivalent" shall have the meaning set forth in Section 11(a)(iii). (l) "Company" shall mean The Goodyear Tire & Rubber Company, an Ohio corporation. (m) "Current Value" shall have the meaning set forth in Section 11(a)(iii) hereof. (n) "current market price" shall have the meaning set forth in Section 11(d) hereof. (o) "Distribution" shall have the meaning set forth in the recitals hereto. (p) "Distribution Date" shall mean the earlier of (i) the close of business on the tenth Business Day after the Shares Acquisition Date (or, if the tenth Business Day after the Shares Acquisition Date occurs before the Record Date, the close of business on the Record Date) or (ii) the close of business on the tenth Business Day after the date of the commencement of, or first public announcement of the intent of any Person to commence, a tender or exchange offer if, upon consummation thereof, such Person would be an Acquiring Person. (q) "Divestiture Period" shall mean the 180 day period following the date any Permitted Institutional Investor files, or is required to file, a Schedule 13D with the Securities and Exchange Commission in respect of the Common Stock. (r) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (s) "Exchange Ratio" shall have the meaning set forth in Section 24(a) hereof. (t) "Expiration Date" shall mean the earlier of (i) the Final Expiration Date, (ii) the 4 time at which the Rights are redeemed as provided in Section 23 hereof, or (iii) the time at which all exercisable Rights are exchanged as provided in Section 24 hereof. (u) "Final Expiration Date" shall mean the close of business on July 29, 2006. (v) "Independent Director" shall mean any member of the Board of Directors of the Company, while such person 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 any such Affiliate or Associate, and was a member of the Board prior to the time that any Person becomes an Acquiring Person, and any successor of any Independent Director, while such successor 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 is elected by a vote of the shareholders of the Company or by a majority of the Independent Directors; provided, that any member of the Board who is a Qualified Acquiring Person, or an Affiliate or Associate of a Qualified Acquiring Person or a representative or nominee of a Qualified Acquiring Person or of any such Affiliate or Associate, who was elected by the shareholders of the Company or by a majority of the Independent Directors shall also be an Independent Director. (w) "Original Rights" shall have the meaning set forth in the definition of "Beneficial Owner" above. (x) "Permitted Institutional Investor" shall mean any Qualified Institutional Investor that is not required to file with the Securities and Exchange Commission a Schedule 13D (or any successor form) in respect of the Common Stock; provided that such Person (a) is not and does not become the Beneficial Owner of a Prohibited Block and (b) is not and does not become Restricted Investor; and provided further that such person shall have delivered a Permitted Institutional Investor Certification to the Company prior to becoming the Beneficial Owner of a Substantial Block. For avoidance of doubt, in the event a Permitted Institutional Investor becomes the Beneficial Owner of securities of the Company constituting a Prohibited Block, such Person shall immediately be deemed to be an Acquiring Person. (y) "Permitted Institutional Investor Certification" shall mean a written representation of a Person, together with all Affiliates and Associates of such Person, including its control persons and parent holding companies, to the Company in substantially the following form: [Each of] the Undersigned is not required, and does not presently intend or expect to be required, to filed a Schedule 13D with the Securities and Exchange Commission with respect to the common stock of The Goodyear Tire & Rubber Company it now or hereafter beneficially owns (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act 5 of 1934). (z) "Person" shall mean any individual, firm, corporation, partnership, association, joint stock company, trust, business trust, government or political subdivision, any unincorporated organization, or any other association or entity, including any "group" within the meaning of Section 13(d)(3) of the Exchange Act and the General Rules and Regulations thereunder. (aa) "Preferred Stock" shall mean shares of Series B Preferred Stock, without par value, of the Company having the rights and preferences set forth in the form of Certificate of Amendment To Amended Articles of Incorporation attached to this Agreement as Exhibit A. (bb) "Principal Party" shall have the meaning set forth in Section 13(b) hereof. (cc) "Prohibited Block" shall mean a number of shares of the Common Stock equal to or in excess of 20% of the number of shares of the Common Stock then outstanding. (dd) "Purchase Price" shall mean initially $250 per one one-hundredth of a share of Preferred Stock and shall be subject to adjustment from time to time as provided in this Agreement. (ee) "Qualified Acquiring Person" shall mean any Person (including an Acquiring Person) who or which has made a Qualified Offer. (ff) "Qualified Institutional Investor" shall mean any of the following Persons, together with all Affiliates and Associates of such Person, including its control persons and parent holding companies: (i) a bank as defined in Section 3(a)(6) of the Exchange Act, (ii) an insurance company as defined in Section 3(a)(19) of the Exchange Act, (iii) an investment company registered under Section 8 of the Investment Company Act of 1940, or (iv) any Person registered as an investment adviser under Section 203 of the Investment Advisors Act of 1940. (gg) "Qualified Offer" shall mean an offer for all of the outstanding shares of the Common Stock which meets all of the following requirements: (i) such offer is: (1) an all-cash offer for all of the shares of the Common Stock outstanding and the Person making the offer (prior to the date such offer is commenced within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act) has (A) cash or cash equivalents on hand for the full amount necessary to consummate such all-cash offer and has irrevocably 6 committed in writing to the Company to utilize such cash or cash equivalents for such purpose, or (B) has obtained financing in the full amount necessary to consummate such offer and has entered into, and provided to the Company with complete copies of, definitive financing agreements for funds for such offer which, when added to the amount of cash and cash equivalents available as provided in clause (A) above, are in an amount not less than the full amount necessary to consummate such offer, which agreements are with one or more responsible financial institutions having the capacity to provide such funds; where "the full amount" shall be an amount sufficient to pay for all shares of the Common Stock outstanding on a fully diluted basis in cash pursuant to the offer and to pay all related expenses; or (2) an exchange or other similar offer to acquire all of the shares of the Common Stock outstanding for securities or a combination of securities and cash (which cash component, if any, shall be fully-financed as provided at subpart (1) above); and (ii) such offer remains open for at least 60 Business Days; provided, however, that (A) if there is an increase in the price of such offer, such amended offer shall remain open for at least an additional 30 Business Days after the last such increase, and (B) such offer must remain open for at least an additional 30 Business Days after the date, if any, on which such Person reduces the per share price offered; and (iii) such offer is accompanied by a written opinion, in customary form, of a nationally recognized investment banking firm which is addressed to the Company and the holders of the Common Stock (other than the Person making such offer) and states that the consideration to be paid (whether in cash, securities or a combination of cash and securities) to the holders of the Common Stock pursuant to the offer is fair to such holders from a financial point of view and includes any written presentation of such firm showing the analysis and range of values underlying such conclusion and such written opinion is dated, and is provided to the Company, within five Business Days and not less than two Business Days prior to the date such offer is commenced, and an updated 7 version of such opinion is dated and provided to the Company with two Business Days prior to the date the offer is consummated. (hh) "Record Date" shall mean the close of business on July 29, 1996. (ii) "Redemption Price" shall have the meaning set forth in Section 23(a) hereof. (jj) "Restricted Investor" shall mean a Permitted Institutional Investor that is the Beneficial Owner of securities of the Company constituting a Substantial Block, but not a Prohibited Block, that files, or is or becomes required to file, with the Securities and Exchange Commission a Schedule 13D in respect of the Common Stock, and either (i) has not reduced its beneficial ownership of Common Stock to an amount below a Substantial Block within the Divestiture Period or (ii) during the Divestiture Period (while the Beneficial Owner of a Substantial Block) takes any of the following actions: (A) calls, or supports the call, of a special meeting of shareholders of the Company; (B) nominates (or votes for) candidates for director of the Company not nominated by the Nominating Committee of the Board of Directors of the Company; (C) engages in any conduct intended to change or influence control (as defined in 12 CFR 225.2(e)) over the Company; or (D) publicly announces its intent to acquire additional shares of Common Stock or to not reduce its holdings to less than a Substantial Block, or to sell or otherwise transfer any shares of Common Stock beneficially owned by it to another Person that, together with all Affiliates and Associates of such Person, intends to acquire more than a Substantial Block. A Permitted Institutional Investor shall become a Restricted Investor upon the occurrence of any of the events described in (i) or (ii) of the immediately preceding sentence. A Permitted Institutional Investor shall be deemed to be an Acquiring Person on the date such Person becomes a Restricted Investor. (kk) "Right Certificate" shall have the meaning set forth in Section 3(a) hereof. (ll) "Rights" shall have the meaning set forth in the recitals hereto. (mm) "Rights Agent" shall mean EquiServe Trust Company, N.A, and its successors and assigns, the successor rights agent to First Chicago Trust Company of New York. (nn) "Rights Dividend Declaration Date" shall mean June 4, 1996. (oo) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii). (pp) "Section 11(a)(ii) Trigger Date"shall have the meaning set forth in Section 11(a)(iii). (qq) "Section 13 Event" shall mean any event described in Section 13(a). 8 (rr) "Shares Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, includes a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. (ss) "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof. (tt) "Subsidiary" shall mean, with reference to any Person, any corporation (or other legal entity) of which an amount of voting securities (or comparable ownership interests) sufficient to elect at least a majority of the directors (or comparable persons) of such corporation (or other legal entity) is beneficially owned or otherwise controlled, directly or indirectly, by such Person. (uu) "Substantial Block" shall mean a number of shares of the Common Stock equal to or in excess of 15% of the number of shares of the Common Stock then outstanding. (vv) "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof. (ww) "Summary of Rights" shall have the meaning set forth in Section 3(b) hereof. (xx) "Trading Day" shall have the meaning set forth in Section 11(d) hereof. (yy) "Triggering Event" shall mean any Section 11(a)(ii) Event or Section 13 Event. (zz) "Voting Shares" shall mean all capital stock of the Company authorized to be issued from time to time under the Amended Articles of Incorporation of the Company which by its terms may be voted on all matters submitted to shareholders of the Company generally. SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time act as Co-Rights Agent and may from time to time, upon ten calendar days' written notice to the Rights Agent, appoint such other Co-Rights Agents as it may deem necessary or desirable. In no event shall the Rights Agent have any duty to supervise or in any way be liable for such Co-Rights Agents. SECTION 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the Distribution Date, (i) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates 9 for the Common Stock shall be deemed also to be Right Certificates) and not by separate Right Certificates, and (ii) the right to receive Right Certificates will be transferable only in connection with the transfer of the Common Stock. As soon as practicable after receipt by the Rights Agent of written notice from the Company of the Distribution Date, the Rights Agent, at the Company's expense, will send by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto, evidencing one Right for each share of the Common Stock so held, subject to adjustment as provided herein. As of and after the close of business on the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) As soon as practicable following the Record Date, the Company will send a copy of a Summary of Rights to Purchase Common Stock, in substantially the form attached hereto as Exhibit C (the "Summary of Rights"), by prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates for the Common Stock, and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any of the certificates for the Common Stock outstanding on the Record Date shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. (c) Rights shall be issued in respect of all shares of Common Stock issued after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date, or, in certain circumstances provided in Section 22 hereof, after the Distribution Date. Certificates representing such shares of Common Stock shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Amended and Restated Rights Agreement between THE GOODYEAR TIRE & RUBBER COMPANY and EQUISERVE TRUST COMPANY, N.A., as Rights Agent, dated as of April 15, 2002 (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 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. 10 After the due execution of any supplement or amendment to this Agreement in accordance with the terms hereof, the reference to this Agreement in the foregoing legend shall mean the Agreement as so supplemented or amended. Until the Distribution Date, the Rights associated with the Common Stock represented by certificates containing the foregoing legend shall be evidenced by such certificates alone, and the surrender for transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. SECTION 4. FORM OF RIGHT CERTIFICATES. (a) The Right Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. The Right Certificates shall be in machine-printable format and in a form reasonably satisfactory to the Rights Agent. Subject to the provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever distributed, shall be dated as of the Record Date, shall show the date of countersignature, and on their face shall entitle the holders thereof to purchase such number of one one-hundredth of a share of Preferred Stock (or following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as shall be set forth therein at the Purchase Price per share set forth therein, but the number of such shares and the Purchase Price shall be subject to adjustment as provided herein. (b) Any Right Certificate issued pursuant to Section 3(a), 6, 7(e), 11(i) or 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding (whether or not in writing) which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Right Certificate issued pursuant to Section 6, Section 11 or Section 22 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Right Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights 11 Agreement). Accordingly, this Right Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement. SECTION 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates shall be executed on behalf of the Company in the manner provided in the Code of Regulations of the Company for Common Stock certificates. The Right Certificates shall be manually countersigned by an authorized signatory of the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless may be countersigned by the Rights Agent, issued and delivered with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a) Subject to the provisions of Section 4(b), 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Right Certificate or Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a share of Preferred Stock (or following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Right Certificate or Right Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner or former Beneficial Owner or Affiliates or Associates of such Beneficial, or of any other Person with which such holder or any of such holder's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of securities of the Company, 12 as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 20(k) hereof, countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment from a Right Certificates holder of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. (b) Upon receipt by the Company and the Right's Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request, and if requested by the Company, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS. (a) Subject to Section 7(e) hereof, the registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein, including, without limitation, the restrictions on exercisability set forth in Sections 9(c), 11(a)(iii), 23(a) and 24(b) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price for the total number of one one-hundredths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the Expiration Date. (b) The Purchase Price for each one one-hundredth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $250.00, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with Section 7(c) below. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and the certificate on the reverse side thereof duly executed and completed accompanied by payment of the Purchase Price per one one-hundredth of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) to be purchased and an amount equal to any applicable transfer tax in cash, or by certified check or bank draft payable to the order of the Company, the Rights Agent shall thereupon, subject to Section 20(k) hereof, thereupon promptly (i) requisition from the Company certificates for the total number of one one-hundredths of a share of Preferred Stock to be purchased, (ii) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number 13 of one one-hundredths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (iii) when appropriate, requisition from any transfer agent of the Common Stock of the Company certificates for the total number of shares of Common Stock to be paid in accordance with Section 11(a)(i) and 11(a)(iii), (iv) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14, (v) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, and (vi) when appropriate, after receipt promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. The payment of the then Purchase Price must be made in cash or by certified bank check or bank draft or money order payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Stock), pay cash or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash or other property are available for distribution or payment by the Rights Agent, if and when appropriate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person or of any such Associate or Affiliate who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person which whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding (whether or not in writing) which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person, or any of its Affiliates, Associates or transferees hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon 14 the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner), Affiliates or Associates, or of any other Person with which such holder or any of such holder's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of any securities of the Company, as the Company shall reasonably request. SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. SECTION 9. RESERVATION AND AVAILABILITY OF SHARES OF CAPITAL STOCK. The Company covenants and agrees that: (a) It will, subject to Section 11(a)(iii), prior to the Distribution Date, seek to cause to be reserved and kept available out of its authorized and unissued Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock or its authorized and issued Common Stock held in treasury and/or other securities), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement, will be sufficient to permit the exercise in full of all outstanding Rights (it being understood that any of the foregoing shares or securities may also be reserved for other purposes) or will take such other steps as are appropriate to assure that the number of such shares or securities (or their equivalents) sufficient to permit the exercise in full of all outstanding Rights will be available upon such exercise. (b) So long as Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable upon the exercise of Rights may be listed on any national securities exchange, it will use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) It will use its best efforts to (i) file, as soon as practicable following the first occurrence of a section 11(a)(ii) Event, or as soon as required by law, as the case may be, a registration statement under the Securities Act of 1933, as amended (the "Act"), with respect to the securities 15 purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the Expiration Date. The Company will also take such action as may be appropriate under the blue sky laws of the various states. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement and shall give simultaneous written notice to the Rights Agent stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement and notice to the Rights Agent at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualifications in such jurisdiction shall have been obtained. Unless otherwise notified in writing by the Company, the Rights Agent may assume that any Right exercised is permitted to be exercised under applicable law and shall have no liability for acting in reliance upon such assumptions. (d) It will take all such action as may be necessary to ensure that all one one-hundredths of a share of Preferred Stock (and following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable. (e) It will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required (a) to pay any transfer tax which may be payable in respect of any transfer involved in the transfer or delivery of Right Certificates or the issuance or delivery of certificates for the one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder of the Right Certificate evidencing Rights surrendered for exercise or (b) to issue or deliver any certificates for one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. SECTION 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any certificate for a number of one one-hundredths of a share of Preferred Stock (or shares of Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional shares of the Preferred Stock (or shares of Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such 16 Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the Rights Dividend Declaration Date (A) declare a dividend on the Preferred Stock payable in shares of the Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a combination, consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive upon payment of the Purchase Price then in effect the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) Subject to Section 24 of this Agreement, in the event any Person, alone or together with its Affiliates and Associates, becomes at any time after the Rights Dividend Declaration Date an Acquiring Person, except as the result of a transaction set forth in Section 13(a) hereof, then, prior to the date on which the Company's right of redemption pursuant to Section 23(a) expires (as the same may be extended pursuant to Section 27) with respect to an event described in this Section 11(a)(ii), proper provision shall be made so that each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have a right to receive, upon exercise thereof at the then current 17 Purchase Price in accordance with the terms of this Agreement, in lieu of shares of Preferred Stock, such number of shares of the Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a share of Preferred Stock for which such Right is then exercisable and dividing that product by (y) 50% of the current market price per share of the Common Stock of the Company (determined pursuant to Section 11(d)) on the date of the occurrence of any one of the events listed above in this subparagraph (ii) (such number of shares is hereinafter referred to as the "Adjustment Shares"), provided that the Purchase Price and the number of Adjustment Shares shall be further adjusted as provided in this Agreement to reflect any events occurring after the date of such first occurrence. (iii) In the event that the number of shares of the Common Stock which are authorized by the Company's Amended Articles of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Company shall (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon exercise of the Rights and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including, without limitation, preference shares, or units of preference shares, which a majority of the Independent Directors and the Board of Directors of the Company have deemed to have the same value as the Common Stock (such preference shares, "common stock equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by a majority of the Independent Directors and the Board of Directors of the Company based upon the advice of a nationally recognized investment banking firm selected by the Board of Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires, as the same may be extended pursuant to Section 27 (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of the Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional shares of the Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (u) shall provide, subject to section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (v) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to 18 seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company will issue a public announcement and will give concurrent written notice to the Rights Agent stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement and notice to the Rights Agent at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the shares of the Common Stock shall be the current market price (as determined pursuant to Section 11(d) hereof) per share on the Section 11(a)(ii) Trigger Date and the value of any "common stock equivalent' shall be deemed to be the same as the value of the Common Stock on such date. The Company shall give the Rights Agent notice of the selection of any "common stock equivalent" under this Section 11(a)(iii). (b) In the event that the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Stock (or securities having substantially the same or more favorable rights, privileges and preferences as Preferred Stock ("preferred stock equivalents")) or securities convertible into Preferred Stock or preferred stock equivalents at a price per share of Preferred Stock or per share of preferred stock equivalents (or having a conversion price per share, if a security convertible into Preferred Stock or preferred stock equivalents) less than the current market price (as defined in Section 11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of the Preferred Stock outstanding on such record date plus the number of shares of the Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock so to be offered (or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of shares of the Preferred Stock outstanding on such record date plus the number of additional shares of the Preferred Stock and preferred stock equivalents to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In the event that Company shall fix a record date for the making of a distribution to all holders of Preferred Stock (including any such distribution made in connection with a combination, consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular periodic cash dividend out of the retained earnings of the Company at a rate not in excess of 125% of the last cash dividend theretofore paid), 19 assets, stock (other than a dividend payable in Preferred Stock, but including any dividend payable in Common Stock) or convertible securities, subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price, as defined in Section 11(d), per one one-hundredth of a share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one one-hundredth of a share of Preferred Stock and the denominator of which shall be such current market price per one one-hundredth of a share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii), the "current market price" per share of the Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days (as such term is hereinafter defined in this paragraph (d)) immediately prior to such date and, for purposes of computations made pursuant to Section 11(a)(iii) hereof, the "current market price" per share of the Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the current market price per share of the Common Stock is determined during the period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into such Common Stock (other than the Rights) or (B) any subdivision, combination or reclassification of such Common Stock, and prior to the expiration of the requisite 30 Trading Day or 10 Trading Day period, as set forth above, after the ex-dividend date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, and in each such case, the current market price shall be appropriately adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of the Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of the Common Stock are listed or admitted to trading or, if the shares of the Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the shares of the Common Stock are not quoted by such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the 20 shares of the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the shares of the Common Stock, the fair value of such shares on such date shall be as determined in good faith by the Independent Directors if the Independent Directors constitute a majority of the Board of Directors or, in the event the Independent Directors do not constitute a majority of the Board of Directors, by an independent investment banking firm selected by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of the Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of the Common Stock are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York, are not authorized or obligated by law or executive order to close. If the Common Stock is not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by the Independent Directors if the Independent Directors constitute a majority of the Board of Directors or, in the event the Independent Directors do not constitute a majority of the Board of Directors, by an independent investment banking firm selected by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (ii) For the purpose of any computation hereunder, the "current market price" per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the current market price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the "current market price" per share of Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the current market price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, "current market price" per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the "current market price" of one one-hundredth of a share of Preferred Stock shall be equal to the "current market price" of one share of Preferred Stock divided by 100. (iii) If a security is not publicly held or not so listed or trade, "current market price" shall mean the fair value per share or other unit of such security, determined reasonably and in good faith the Board of Directors of the Company; provided, however, that if at the time of such determination there is an Acquiring Person, the current market price of such security on such date shall be determined by a nationally recognized investment banking firm selected by the Board of Directors, which determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. (iv) In the case of property other than securities, the current market price thereof shall be 21 determined reasonably and in good faith by the Board of Directors of the Company, provided, however, that if at the time of such determination there is an Acquiring Person, the current market value of such property on such date shall be determined by a nationally recognized investment banking firm selected by the Board of Directors, which determination shall be described in a statement filed with the Rights Agent and shall be binding upon the Rights Agent and the holders of the Rights. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one ten-thousandth of a share of Common Stock or one-millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date. (f) If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than shares of Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11(a) through (o) inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the shares of the Preferred Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a share of Preferred Stock (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths of a share of Preferred Stock covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the 22 number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest tenthousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after the adjustment of the Purchase Price. The Company shall make a public announcement and shall give simultaneous written notice to the Rights Agent of its election to adjust the number of Rights, indicating the record date for the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a share of Preferred Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of one one-hundredths of a share which were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such number of fully paid and nonassessable shares of such Preferred Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date of the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a share of Preferred Stock and other share capital or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. 23 (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board of Directors of the Company shall determine to be advisable in order that any consolidation or subdivision of Preferred Stock, issuance wholly for cash of any of Preferred Stock at less than the current market price, issuance wholly for cash of Preferred Stock or securities which by their terms are convertible into or exchangeable for Preferred Stock, stock dividends or issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such shareholders. (n) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Sections 23, 24 and 27 hereof, take (nor will it permit any of its Subsidiaries to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (o) The Company covenants and agrees that it shall not, at any time after a Section 11(a)(ii) Event, (i) combine or consolidate with any other Person, (ii) merge with or into any other Person, or (iii) sell or transfer (or permit any of its Subsidiaries to sell or transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its wholly-owned subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(n)) if (x) at the time of or immediately after such combination, consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such combination, consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (p) Notwithstanding anything in this Agreement to the contrary, prior to the Distribution Date, the Company may, in lieu of making any adjustment to the Purchase Price, the number of one one-hundredths of a share of Preferred Stock eligible for purchase on exercise of each Right or the number of Rights outstanding, which adjustment would otherwise be required by Sections 11(a)(i), 11(b), 11(c), 11(h) or 11(i), make.such other equitable adjustment or adjustments thereto as the Board of Directors (whose determination shall be conclusive) deems appropriate in the circumstances and not inconsistent with the objectives of the Board of Directors in adopting this Agreement and such Sections. (q) In the event the Company shall at any time after the date of this Agreement and prior to the Distribution Date (i) declare a dividend on the outstanding Common Stock payable in shares of Common Stock or (ii) effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of dividends in shares of 24 Common Stock) into a greater or lesser number of shares of Common Stock, the number of Rights associated with each share of Common Stock shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of any such event listed in clause (i) or (ii) above and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event listed in clause (i) or (ii) above. The adjustments provided for in this Section 11(q) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consideration is effected. SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as provided in Sections 11 and 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment and the adjusted Purchase Price, (b) promptly file with the Rights Agent and with each transfer agent for the Common Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 26. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. SECTION 13. COMBINATION, CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER. (a) In the event that, following a Section 11(a)(ii) Event, directly or indirectly, (x) the Company shall combine or consolidate with, or merge with or into, any other Person (other than a Subsidiary of the Company in a transaction not prohibited by Section 11(n) hereof) and the Company shall not be the continuing or surviving corporation of such combination, consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction not prohibited by Section 11(n) hereof) shall combine, consolidate or merge with or into the Company and the Company shall be the continuing or surviving corporation of such combination, consolidation or merger and, in connection with such combination, consolidation or merger, all or part of the Common Stock shall be changed into or exchanged for shares or other securities of the Company of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or any of its wholly-owned Subsidiaries in one or more transactions each of which complies with Section 11(n) hereof), then, and in each such case, proper provision shall be made so that (i) each holder of a Right (except as provided in Section 7(e)) shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly issued, fully paid, nonassessable and freely tradeable Common Stock of the Principal Party (as hereinafter defined), not subject to any liens, encumbrances, rights of call or first refusal, or other adverse claims as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-hundredths of a share of Preferred Stock for which a Right is then exercisable immediately prior to the first occurrence of a 25 Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such shares for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by (2) 50% of the current market price per share of Common Stock of such Principal Party (determined in the manner described in Section 11(d)) on the date of consummation of such combination, consolidation, merger, sale or transfer; (ii) the Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 shall thereafter apply to such Principal Party; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance with Section 9) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to shares of its Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean (1) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger, combination or consolidation, and, if no securities are so issued, the Person that is the other party to the merger, combination or consolidation; and (2) in the case of any transaction described in clause (z) of the first sentence in Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction; provided, however, that in any such case, (x) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another corporation the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; (y) if such Person is a direct or indirect Subsidiary or Affiliate of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value of shares outstanding; and (z) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (x) and (y) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a "Subsidiary" of both or all of such joint ventures and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect 26 interests in such Person bear to the total of such interests. (c) The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized shares of Common Stock which are neither outstanding nor reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any combination, consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will at its own expense: (i) prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; (ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate; (iii) use its best efforts to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or to meet the eligibility requirements for quotations on NASDAQ; and (iv) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive Section 13 Events. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and 27 asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use, or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredths of a share of Preferred Stock) upon exercise or exchange of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredths of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-hundredths of a share of Preferred Stock, the Company may pay to the registered holders of Right Certificates at the time the Rights evidenced thereby are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market value of one one-hundredth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one one-hundredth of a share of Preferred Stock shall be one one-hundredth of the closing price of a share of Preferred Stock, as determined pursuant to Section 11(d) hereof, for the Trading Day immediately prior to the date of such exercise or exchange, as the case may be. (c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) share of Common Stock. For purposes of this Section 14(c), the current market value of one share of Common Stock shall be the closing price of one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. (d) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise or exchange of a Right, except as otherwise permitted by this Section 14. SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution 28 Date, the registered holders of Common Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Stock; (b) after the Distribution Date, the Right Certificates will be transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; (c) subject to Section 6, Section 7(e) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatever; and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, that the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. 29 SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Stock, Common Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised or exchanged in accordance with the provisions hereof. SECTION 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent (including the reasonable fees and expenses of counsel), for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for the Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, instruction, adjustment notice, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. (c) In addition to the foregoing, the Rights Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement in reliance upon (i) the proper execution of the certification appended to the Form of Assignment and the Form of Election to Purchase included as part of Exhibit B hereto (the "Certification"), unless the Rights Agent shall have actual knowledge that, as executed, the Certification is untrue, or (ii) the non-execution or failure to complete the Certification including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution or failure. SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation 30 to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business and/or the stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. The Company shall only be responsible for reasonable fees and expenses of counsel engaged by the Rights Agent with the Company's prior express written consent. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. 31 (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required under the provisions of Sections 11 or 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it be responsible for any determination by the Board of Directors of the Company of the current market value of the Rights or Preferred Stock pursuant to the provisions of Section 14 hereof; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of the Preferred Stock or Common Stock or other securities to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares of Preferred Stock or Common Stock will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder and certificates delivered pursuant to any provision hereof from any one of the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the Company, and is authorized to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. 32 (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either by itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting the Company. The Company shall give the Rights Agent prompt written instructions as to the action to be taken regarding the Right Certificates involved. The Rights Agent shall not be liable for acting in accordance with such instructions. SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to each transfer agent of the Preferred Stock and the Common Stock by registered or certified mail, and, at the Company's expense, to the holders of the Right Certificates by first class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Preferred Stock and the Common Stock by registered or certified mail, and to the holders of the Right Certificates by first class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, 33 submit his Right Certificate for inspection by the Company), then the Company shall become the temporary Rights Agent and the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of the State of New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of New York), in good standing, having a principal office in the State of New York, which is authorized under such laws to exercise corporate trust powers and/or stock transfer powers and is subject to supervision or examination by federal or state authority or which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Preferred Stock and Common Stock and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of the Common Stock following the Distribution Date and prior to the Expiration Date of the Rights, the Company (a) shall, with respect to shares of the Common Stock so issued or sold pursuant to the exercise of options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Right Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued, and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. SECTION 23. REDEMPTION AND TERMINATION. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (x) the close of business on the tenth Business Day following the Shares Acquisition Date (or if the Shares Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth Business Day following the 34 Record Date), or (y) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right as appropriately adjusted to reflect any stock split, dividend of shares or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"), and the Company may, at its option, pay the Redemption Price either in shares of the Common Stock (valued at their current market price as defined in Section 11(d) on the date of the redemption), other securities, cash, other assets or any other form of consideration deemed appropriate by the Board of Directors; provided, however, that if the Board of Directors of the Company authorizes redemption of the Rights in either of the circumstances set forth in clauses (x) or (y) below then there must be Independent Directors in office and such authorization shall require the concurrence of a majority of the Independent Directors: (x) such authorization occurs on or after the Shares Acquisition Date or (y) such authorization occurs on or after the date of a change (resulting from a proxy or consent solicitation) in a majority of the Directors of the Company in office at the commencement of such solicitation if any Person who is a participant in such solicitation has stated (or if upon the commencement of such solicitation a majority of the directors of the Company has determined in good faith) that such Person (or any of its Affiliates or Associates) intends to take, or may consider taking, any action which would result in such Person becoming an Acquiring Person or which would cause the occurrence of a Triggering Event. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired, as the same may be extended pursuant to Section 27 hereof. (b) In deciding whether or not to exercise the Company's right of redemption hereunder, the directors of the Company shall act in good faith, in a manner they reasonably believe to be in the best interests of the Company and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances, and they may consider the long-term and short-term effects of any action upon employees, customers and creditors of the Company and upon communities in which offices or other establishments of the Company are located, and all other pertinent factors. (c) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right held. Within ten Business Days after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to holders of the then outstanding Rights by mailing such notice to the Rights Agent and to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23, and other than in connection with the repurchase of Common Stock prior to the Distribution Date. 35 (d) In the event the Company shall at any time after the date of this Rights Agreement (i) pay any dividend on Common Stock in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock into a greater number of shares or (iii) combine the outstanding shares of Common Stock into a smaller number of shares of the outstanding shares of Common Stock, then and in each such event the Redemption Price after such event shall equal the Redemption Price immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event; provided, however, that in each case such adjustment to the Redemption Price shall be made only if the amount of the Redemption Price shall be reduced or increased by $0.0001 per Right. SECTION 24. EXCHANGE. (a) The Board of Directors of the Company may, at its option, at any time on or after the occurrence of a Section 11(a)(ii) Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than an Exempt Person), together with all Affiliates and Associates of such Person, becomes the beneficial owner of 50% or more of the Common Stock of the Company. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give notice of any such exchange in accordance with Section 26 hereof; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute for any share of the Common Stock exchangeable for a Right (i) common stock equivalents, (ii) Preferred Stock (or preferred stock equivalents, as such term is defined in Section 11(b) hereof), (iii) cash, (iv) debt or other securities of the Company, (v) other property, or (vi) any combination of the foregoing, having an aggregate value which a majority of the Independent Directors and the Board of Directors of the Company shall have determined in good faith to be equal to the current market price of one share of the Common Stock on the Trading Day immediately preceding the date of exchange pursuant to this Section 24. 36 (d) In the event that there shall not be sufficient shares of Common Stock or Preferred Stock (or preferred stock equivalents) issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock or Preferred Stock (or preferred stock equivalents) for issuance upon exchange of the Rights. (e) The Company shall not be required to issue fractions of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. If the Company elects not to issue such fractional shares of Common Stock, the Company shall pay, in lieu of such fractional shares of Common Stock, to the registered holders of the Right Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market price of a whole share of Common Stock. For the purposes of this paragraph (e), the current market price of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. SECTION 25. NOTICE OF CERTAIN EVENTS. In case the Company shall propose at any time following the Distribution Date (a) to declare or pay any dividend payable in shares of any class to the holders of its Preferred Stock or to make any other distribution to the holders of its Preferred Stock (other than a regular periodic cash dividend at a rate in excess of 125% of the rate of the last cash dividend theretofore paid), or (b) to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of the Preferred Stock or share capital of any class or any other securities, rights or options, or (c) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding Preferred Stock), or (d) to effect any combination, consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Sections 11(n) hereof), or (e) to declare or pay any dividend on the Common Stock payable in Common Stock or to effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise), or (f) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to the Rights Agent and to each holders of a Right, in accordance with Section 26, a notice of such proposed action, which shall specify the record date for the purposes of such dividend of shares, distribution of rights or Rights, or the date on which such reclassification, combination, consolidation, merger, sale, transfer, liquidation', dissolution, or winding up is to take place and the date of participation therein by the holders of the Preferred Stock and/or Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least twenty (20) days prior to the record date for determining holders of the Preferred Stock and/or Common Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days 37 prior to the date of the taking of such proposed action or the date of participation therein by the holders of its Common Stock, whichever shall be the earlier. In case a Section 11(a)(ii) Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to the Rights Agent and to each holder of a Right, to the extent feasible and in accordance with Section 26, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii). SECTION 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: The Goodyear Tire & Rubber Company 1144 East Market Street Akron, Ohio 44316-0001 Attention: General Counsel Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made 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 Attention: President Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate (or, prior to the Distribution Date, to the holder of any certificate representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the earlier of the Distribution Date or the Shares Acquisition Date and subject to the penultimate sentence of this Section 27, the Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates. From and after the earlier of the Distribution Date or the Shares Acquisition Date, and subject to the penultimate sentence of this Section 27, the Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to lengthen the time period during which the Rights may be redeemed following the Shares 38 Acquisition Date for up to an additional twenty Business Days beyond the time period set forth in Section 23(a) (provided, that any such lengthening shall be effective only if a majority of the Board of Directors of the Company is comprised of Independent Directors and a majority of such Independent Directors concur in such lengthening) or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, however, that this Agreement shall not be supplemented or amended in any way (other than pursuant to clauses (i) and (ii) above) unless such amendment is approved by a majority of the Independent Directors whose determination shall be final and the Independent Directors constitute a majority of the Board of Directors. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything in this Agreement to the contrary, no supplement or amendment shall be made on or after the Distribution Date which changes the Redemption Price, the Final Expiration Date, the Purchase Price or the number of one one-hundredths of a share of Preferred Stock for which a Right is then exercisable. Prior to the earlier of the Shares Acquisition Date or the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. SECTION 28. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the provisions of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company (and, where specifically provided for herein, the Independent Directors) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or the Company (or, as expressly provided, the Independent Directors), or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for the purpose of clause (ii) below, all omissions with respect to the foregoing) which are done or made by the Board (or, as provided for, by the Independent Directors) in good faith, shall (i) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Right Certificates and all other parties, and (ii) not subject the Board or the Independent Directors to any liability to the holders of the Right Certificates or to any other Person. 39 SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, registered holders of the Common Stock). The Rights Agent is the Agent of the Company and not of the holders of the Rights and/or Rights Certificates. SECTION 31. SEVERABILITY. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth day following the date of such determination by the Board of Directors. SECTION 32. GOVERNING LAW. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Ohio and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 40 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. [SEAL] THE GOODYEAR TIRE & RUBBER COMPANY Attest: By: /s/ C. Thomas Harvie ----------------------------------------- Name: C. Thomas Harvie Title: Senior Vice President, General By: /s/ Bertram Bell Counsel and Secretary ---------------------------- Name: Bertram Bell Title: Assistant Secretary [SEAL] EQUISERVE TRUST COMPANY, N.A. (AS RIGHTS AGENT) Attest: By: /s/ Collin Ekeogu ---------------------------------------- Name: Collin Ekeogu Title: Director By: /s/ Mario Vitale ---------------------------- Name: Mario Vitale Title: Manager 41 EXHIBIT A --------- CERTIFICATE OF AMENDMENT TO AMENDED ARTICLES OF INCORPORATION OF THE GOODYEAR TIRE & RUBBER COMPANY Samir F. Gibara, President, and James Boyazis, Secretary, of The Goodyear Tire & Rubber Company, an Ohio corporation, with its principal office located at Akron, Summit County, Ohio, do hereby certify that, pursuant to the authority conferred upon the Board of Directors of said corporation by Section 1 of Part B of ARTICLE FOURTH of the Amended Articles of Incorporation of the said corporation and by the Ohio General Corporation Law, at a meeting of the Board of Directors of said corporation duly called and held on the 4th day of June, 1996, at which meeting a quorum of the Board of Directors was at all times present, the Board of Directors was without shareholder action, which shareholder action was not required, the following resolution: RESOLVED, that The Goodyear Tire & Rubber Company hereby adopts the following amendment to its Amended Articles of Incorporation, as amended to date, and that the Chairman of the Board, the President or a Vice President and the Secretary or an Assistant Secretary of the Company are hereby authorized and directed to sign and file in the office of the Secretary of State of the State of Ohio a certificate containing a copy of the resolution adopting the amendment and a statement of the manner of its adoption: The Amended Articles of Incorporation of the Company are hereby amended to create a new series of Preferred Stock by adding a new Section 1-B to PART B of ARTICLE FOURTH as follows: Section 1-B. Series B Preferred Stock, Without Par Value. A series of Preferred Stock is hereby created having the following terms: 1. Designation. The shares of such series are designated as: "Series B Preferred Stock, without par value." 2. Authorized Number of Shares - Fractional Shares. The authorized number of shares constituting the Series B Preferred Stock is 7,000,000. Series B Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, A-1 to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series B Preferred Stock. 3. Dividends and Distributions. (A) Subject to any prior and superior rights of the holders of any series of Preferred Stock ranking prior and superior to the shares of Series B Preferred Stock with respect to dividends that may be authorized by the Amended Articles of Incorporation, the holders of shares of Series B Preferred Stock shall be entitled prior to the payment of any dividends on shares ranking junior to the Series B Preferred Stock to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $25.00 or (b) subject to the provisions for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. In the event the Corporation shall at any time after July 29, 1996 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $25.00 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series B Preferred Stock, unless the date of issue of such shares is prior to the record date A-2 for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. (D) Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof. (E) Dividends in full shall not be declared or paid or set apart for payment on the Series B Preferred Stock for a dividend period terminating on the quarterly Dividend Payment Date unless dividends in full have been declared or paid or set apart for payment on the Preferred Stock of all series (other than series with respect to which dividends are not cumulative from a date prior to such dividend date) on such dividend date. When the dividends are not paid in full on all series of the Preferred Stock, the shares of all series shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on said shares if all dividends were declared and paid in full. 4. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $25.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series B Liquidation Preference"). Following the payment of the full amount of the Series B Liquidation Preference, no additional distributions shall be made to the holders of shares of Series B Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series B Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii) is hereinafter referred to as the "Adjustment Number"). Following the payment of the full amount of the Series B Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series B Preferred Stock and Common Stock, respectively, holders of Series B Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of A-3 the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series B Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series B Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series B Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 5. Conversion on Merger, Consolidation, etc. In case the Corporation shall enter into any merger, consolidation, combination or other transaction in which the shares of Common Stock are exchanged or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 6. Redemption. The outstanding shares of Series B Preferred Stock shall not be redeemable. 7. Condition to Issuance of any other Series. The Articles of Incorporation of the Corporation shall not be further amended to provide for the issuance of any other series of Preferred Stock without the affirmative vote of the holders of at least two-thirds of the outstanding A-4 shares of Series B Preferred Stock, voting separately as one voting group. IN WITNESS WHEREOF, said Samir F. Gibara, President, and James Boyazis, Secretary, of The Goodyear Tire & Rubber Company, acting on behalf of said corporation, have hereunto subscribed their names and caused the seal of said corporation to be hereunto affixed this 4th day of June, 1996. By: ------------------------------------- Samir F. Gibara, President By: ------------------------------------- James Boyazis, Secretary [SEAL] A-5 EXHIBIT B --------- (Form of Right Certificate] Certificate No. R- Rights NOT EXERCISABLE AFTER JULY 29, 2006 OR EARLIER IF NOTICE OF REDEMPTION OR EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES RIGHTS MAY NOT BE EXERCISABLE. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]* EQUISERVE TRUST COMPANY, N.A. Right Certificate This certifies that ______________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Amended and Restated Rights Agreement dated as of April 15, 2002 (the "Rights Agreement") between THE GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation (the "Company"), and EQUISERVE TRUST COMPANY, N.A., a Delaware corporation (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M. (Akron time) on July 29, 2006 at the office of the Rights Agent, or its successors as Rights Agent, in New York, B-1 - -------------------- *The portion of the legend in brackets shall be inserted only if applicable. New York, one one-hundredth of a fully paid and nonassessable share of the Series B Preferred Stock, without par value (the "Preferred Stock"), of the Company, at a purchase price of $250.00 per share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase and related certificate duly executed. The number of Rights evidenced by this Right Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of July 29, 1996, based on the Preferred Stock of the Company as constituted at such date. Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Right Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate of Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who after such transfer, became an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event. As provided in the Rights Agreement, the Purchase Price and the number of shares of Preferred Stock or other securities which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events (as such term is defined in the Rights Agreement). This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and at the executive offices of the Company. This Right Certificate, with or without other Right Certificates, upon surrender at the designated office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-hundredths of a share of Preferred Stock as the.Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request, another Right Certificate or Right Certificates for the number of whole Rights not exercised. B-2 - -------------------- *The portion of the legend in brackets shall be inserted only if applicable. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (a) may be redeemed by the Company at its option at a redemption price of $.001 per Right at any time prior to the earlier of the close of business on (i) the tenth Business Day following the Shares Acquisition Date or (ii) the Final Expiration Date, or (b) may be exchanged in whole or in part for shares of the Common Stock, and/or other securities, cash or other assets of the Company deemed to have the same value as shares of the Common Stock, at any time after a Section 11(a)(ii) Event. No fractional shares of the Preferred Stock (or other securities) will be issued upon the exercise or exchange of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a share of Preferred Stock which may, at the option of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Common Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised or exchanged for shares of the Common Stock as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. B-3 WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of , . [SEAL] ATTEST: THE GOODYEAR TIRE & RUBBER COMPANY By: By: --------------------------- ---------------------------------------- Name: Name: Title: Title: Countersigned: EQUISERVE TRUST COMPANY, N.A. as Rights Agent By: Authorized Signature Date: B-4 (Form of Reverse Side of Right Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificates.) FOR VALUE RECEIVED ________________________________ hereby sells, assigns and transfers unto _______________________________________________ ___________________________________________________ (Please print name and address of transferee) ________________________________________________________________________ this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________________________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: -------------------, ----- ---------------------------------------- Signature Signature Guaranteed: (Signatures must be guaranteed.) B-5 CERTIFICATE ----------- The undersigned hereby certifies by checking the appropriate boxes that: (1) This Right Certificate |_| is |_| is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (2) After due inquiry and to the best knowledge of the undersigned, it |_| did |_| did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. (3) Exercising this Right Certificate will |_| will not |_| enable the undersigned, its Affiliates, its Associates, and/or any other Person with which the undersigned or any of the undersigned's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of securities of the Company, to become an Acquiring Person. Dated: ------------------------- ---------------------------------------- Signature Signature Guaranteed: (Signatures must be guaranteed.) NOTICE ------ The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. B-6 FORM OF ELECTION TO PURCHASE ---------------------------- (To be executed if holder desires to exercise Rights evidenced by the Right Certificate.) To The Goodyear Tire & Rubber Company: The undersigned hereby irrevocably elects to exercise _____________ Rights represented by this Right Certificate to purchase the shares of the Series B Preferred Stock issuable upon the exercise of such Rights (or such other securities of the Company or of any other Person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of: Please insert social security or other taxpayer identifying number - -------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------- If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other taxpayer identifying number - -------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------- Dated: ------------------------- --------------------------------------- Signature B-7 Signature Guaranteed: (Signature must conform in all respects to (Signatures must be guaranteed.) name of holder as specified on the face of this Right Certificate) B-8 CERTIFICATE ----------- The undersigned hereby certifies by checking the appropriate box that: (1) This Right Certificate |_| is |_| is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (2) After due inquiry and to the best knowledge of the undersigned, it |_| did |_| did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. (3) Exercising this Right Certificate will |_| will not |_| enable the undersigned, its Affiliates, its Associates, and/or any other Person with which the undersigned or any of the undersigned's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of securities of the Company, to become an Acquiring Person. Dated: ------------------------- --------------------------------------- Signature Signature Guaranteed: (Signatures must be guaranteed.) - ------------------------------------- NOTICE ------ The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or.enlargement or any change whatsoever. B-9 EXHIBIT C --------- SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK On June 4, 1996 the Board of Directors of THE GOODYEAR TIRE & RUBBER COMPANY (the "Company") declared a dividend distribution of one Right for each outstanding share of Common Stock, without par value (the "Common Stock"), of the Company. The distribution is payable on July 29, 1996 (the "Record Date") to the shareholders of record on the Record Date. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series B Preferred Stock, without par value (the "Preferred Stock"), or in certain circumstances, Common Stock, other securities, cash or assets as summarized below, at a price of $250.00 (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Amended and Restated Rights Agreement (the "Rights Agreement") between the Company and EquiServe Trust Company, N.A., as Rights Agent (the "Rights Agent"). DISTRIBUTION DATE; TRANSFER OF RIGHTS Until the earlier to occur of (i) ten days following the date (the "Shares Acquisition Date") of the public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of a number of shares of the Common Stock equal to 15% or more (20% or more in certain limited circumstances) of the outstanding shares of the Common Stock or (ii) ten Business Days following the commencement or announcement of an intention to make a tender offer or exchange offer if, upon consummation thereof, such person would be an Acquiring Person (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Stock certificates outstanding as of the Record Date, by such Common Stock certificate. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Stock. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates issued after the Record Date upon transfer or new issuance of the common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any of the Common Stock certificates outstanding as of the Record Date will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire at the C-1 close of business on July 29, 2006, unless earlier redeemed or exchanged by the Company as described below. EXERCISE OF RIGHTS FOR SHARES OF THE COMMON STOCK OF THE COMPANY In the event that a Person becomes an Acquiring Person at any time following the Rights Dividend Declaration Date, each holder of a Right will, after the Distribution Date, have the right to receive, upon exercise, shares of Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the Purchase Price of the Right then in effect. Notwithstanding any of the foregoing, following the occurrence of the event set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. EXERCISE OF RIGHTS FOR SHARES OF THE ACQUIRING COMPANY In the event that, at any time following a Section 11(a)(ii) Event, (i) the Company is acquired in a merger or other business combination transaction, or (ii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, the common stock or other capital stock of the acquiring company having a value equal to two times the Purchase Price of the Right then in effect. The events set forth in this paragraph and in the preceding paragraph are referred to as "Triggering Events." ADJUSTMENTS TO PURCHASE PRICE The Purchase Price payable, and the number of shares of Preferred Stock (or Common Stock or other securities, as the case may be) issuable upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a dividend of shares on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for shares of the Preferred Stock or convertible securities at less than the current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in the Preferred Stock) or of subscription rights or warrants (other than those referred to above). Prior to the Distribution Date, the Board of Directors of the Company may make such equitable adjustments as it deems appropriate in the circumstances in lieu of any adjustment otherwise required by the foregoing. With certain exceptions, no adjustment in the Purchase Price will be required until the time at which cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Common Stock on the last trading date prior to the date of exercise. C-2 REDEMPTION AND EXCHANGE OF RIGHTS At any time prior to 5:00 P.M. Akron time on the tenth day following the Shares Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $.001 per Right (the "Redemption Price"). Under certain circumstances set forth in the Rights Agreement, the decision to redeem shall require the concurrence of a majority of the Independent Directors. Immediately upon the action of the Board of Directors of the Company electing to redeem the Rights with, if required, the concurrence of the Independent Directors, the Company shall make announcement thereof, and upon such action, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. At any time after the occurrence of any of the events set forth under the heading "Exercise of Rights for shares of the Common Stock of the Company" above, the Board of Directors may exchange the Rights (other than Rights owned by an Acquiring Person, which have become void), in whole or in part, at an exchange ratio of one share of the Common Stock, and/or other securities, cash or other property deemed to have the same value as one share of the Common Stock, per Right, subject to adjustment. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. AMENDMENTS TO TERMS OF THE RIGHTS Any of the provisions of the Amended and Restated Rights Agreement may be amended by the Board of Directors of the Company prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, defect or inconsistency, or to make changes which do not adversely affect the interests of holders of Rights (excluding the interest of any Acquiring Person); provided, that no supplement or amendment may be made on or after the Distribution Date which changes those provisions relating to the principal economic terms of the Rights. The Board may also, with the concurrence of a majority of the Independent Directors, extend the redemption period for up to an additional twenty Business Days. A copy of the Rights Agreement will be filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated on May 2, 2002. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. C-3 EX-10.1 4 l93883aex10-1.txt EXHIBIT 10.1 2002 PERFORMANCE PLAN Exhibit 10.1 2002 PERFORMANCE PLAN OF THE GOODYEAR TIRE & RUBBER COMPANY 1. PURPOSE. The purposes of the 2002 Performance Plan of The Goodyear Tire & Rubber Company (the "Plan") are to advance the interests of the Company and its shareholders by strengthening the ability of the Company to attract, retain and reward highly qualified officers and other employees, to motivate officers and other selected employees to achieve business objectives established to promote the long term growth, profitability and success of the Company, and to encourage ownership of the Common Stock of the Company by participating officers and other selected employees. The Plan authorizes performance based stock and cash incentive compensation in the form of stock options, stock appreciation rights, restricted stock, performance grants and awards, and other stock-based grants and awards. 2. DEFINITIONS. For the purposes of the Plan, the following terms shall have the following meanings: (a) "ADJUSTED NET INCOME" means, with respect to any calendar or other fiscal year of the Company, the amount reported as "Net Income" in the audited Consolidated Income Statement of the Company and Subsidiaries for such year (as set forth in the Company's Annual Report to Shareholders for such year), adjusted to exclude any of the following items: (i) extraordinary items (as described in Accounting Principles Board Opinion No. 30); (ii) gains or losses on the disposition of discontinued operations; (iii) the cumulative effects of changes in accounting principles; (iv) the writedown of any asset; and (v) charges for restructuring and rationalization programs. (b) "ANNUAL NET INCOME PER SHARE" means, with respect to any calendar or other fiscal year of the Company in respect of which a determination thereof is being or to be made, the Adjusted Net Income for such year divided by the average number of shares of Common Stock outstanding during such year. (c) "AWARD" means any payment or settlement in respect of a grant made pursuant to the Plan, whether in the form of shares of Common Stock or in cash, or in any combination thereof. (d) "BOARD OF DIRECTORS" means the Board of Directors of the Company. (e) "CODE" means the Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor statute thereto, together with the published rulings, regulations and interpretations duly promulgated thereunder. (f) "COMMITTEE" means the committee of the Board of Directors established and constituted as provided in Section 5 of the Plan. (g) "COMMON STOCK" means the common stock, without par value, of the Company, or any security issued by the Company in substitution or exchange therefor or in lieu thereof. (h) "COMMON STOCK EQUIVALENT" means a Unit (or fraction thereof, if authorized by the Committee) substantially equivalent to a hypothetical share of Common Stock, credited to a Participant and having a value at any time equal to the Fair Market Value of a share of Common Stock (or such fraction thereof) at such time. (i) "COMPANY" means The Goodyear Tire & Rubber Company, an Ohio corporation, or any successor corporation. (j) "COVERED EMPLOYEE" means any person who is a "covered employee" within the meaning of Section 162(m) of the Code. (k) "CUMULATIVE NET INCOME" means, in respect of any Performance Period, the aggregate cumulative amount of the Adjusted Net Income for the calendar or other fiscal years of the Company during such Performance Period. (l) "CUMULATIVE NET INCOME PER SHARE" means, in respect of any Performance Period, the aggregate cumulative amount of the Annual Net Income Per Share for the calendar or other fiscal years of the Company during such Performance Period. (m) "DIVIDEND EQUIVALENT" means, in respect of a Common Stock Equivalent and with respect to each dividend payment date for the Common Stock, an amount equal to the cash dividend on one share of Common Stock payable on such dividend payment date. (n) "EMPLOYEE" means any individual, including any officer of the Company, who is on the active payroll of the Company or a Subsidiary at the relevant time. (o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended and in effect from time to time, including all rules and regulations promulgated thereunder. (p) "FAIR MARKET VALUE" means, in respect of any date on or as of which a determination thereof is being or to be made, the average of the high and low per share sale prices of the Common Stock reported on the New York Stock Exchange Composite Transactions tape on such date, or, if the Common Stock was not traded on such date, on the next preceding day on which sales of shares of the Common Stock were reported on the New York Stock Exchange Composite Transactions tape. (q) "INCENTIVE STOCK OPTION" means any option to purchase shares of Common Stock granted pursuant to the provisions of Section 6 of the Plan that is intended to be and is specifically designated as an "incentive stock option" within the meaning of Section 422(b) of the Code. (r) "NON-QUALIFIED STOCK OPTION" means any option to purchase shares of Common Stock granted pursuant to the provisions of Section 6 of the Plan that is not an Incentive Stock Option. (s) "PARTICIPANT" means any Employee of the Company or a Subsidiary who receives a grant or Award under the Plan. (t) "PERFORMANCE GRANT" means a grant made pursuant to Section 9 of the Plan, the Award of which is contingent on the achievement of specific Performance Goals during a Performance Period, determined using a specific Performance Measure, all as specified in the grant agreement relating thereto. (u) "PERFORMANCE GOALS" mean, with respect to any applicable grant made pursuant to the Plan, the one or more targets, goals or levels of attainment required to be achieved in terms of the specified Performance Measure during the specified Performance Period, all as set forth in the related grant agreement. (v) "PERFORMANCE MEASURE" means, with respect to any applicable grant made pursuant to the Plan, one or more of the criteria identified at Section 9(c) of the Plan selected by the Committee for the purpose of establishing, and measuring attainment of, Performance Goals for a Performance Period in respect of such grant, as provided in the related grant agreement. (w) "PERFORMANCE PERIOD" means, with respect to any applicable grant made pursuant to the Plan, the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select during which the attainment of one or more Performance Goals will be measured to determine whether, and the extent to which, a Participant is entitled to receive payment of an Award pursuant to such grant. (x) "PLAN" means this 2002 Performance Plan of the Company, as set forth herein and as hereafter amended from time to time in accordance with the terms hereof. (y) "RESTRICTED STOCK" means shares of Common Stock issued pursuant to a Restricted Stock Grant under Section 8 of the Plan so long as such shares remain subject to the restrictions and conditions specified in the grant agreement pursuant to which such Restricted Stock Grant is made. (z) "RESTRICTED STOCK GRANT" means a grant made pursuant to the provisions of Section 8 of the Plan. (aa) "STOCK APPRECIATION RIGHT" means a grant in the form of a right to benefit from the appreciation of the Common Stock made pursuant to Section 7 of the Plan. (bb) "STOCK OPTION" means and includes any Non-Qualified Stock Option and any Incentive Stock Option granted pursuant to Section 6 of the Plan. 2 (cc) "SUBSIDIARY" means any corporation or entity in which the Company directly or indirectly owns or controls 50% or more of the equity securities issued by such corporation or entity having the power to vote for the election of directors. (dd) "UNIT" means a bookkeeping entry used by the Company to record and account for the grant, settlement or, if applicable, deferral of an Award until such time as such Award is paid, canceled, forfeited or terminated, as the case may be, which, except as otherwise specified by the Committee, shall be equal to one Common Stock Equivalent. 3. EFFECTIVE DATE; TERM. (a) EFFECTIVE DATE. The Plan shall be effective on April 15, 2002, upon approval by the shareholders of the Company at the 2002 annual meeting of shareholders or any adjournments thereof. (b) TERM. The Plan shall remain in effect until April 15, 2005, unless sooner terminated by the Board of Directors. Termination of the Plan shall not affect grants and Awards then outstanding. 4. SHARES OF COMMON STOCK SUBJECT TO PLAN. (a) MAXIMUM NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE PLAN. The maximum aggregate number of shares of Common Stock which may be issued pursuant to the Plan, subject to adjustment as provided in Section 4(b) of the Plan, shall be twelve million, plus (i) any shares of Common Stock issued under the Plan that are forfeited back to the Company or are canceled, and (ii) any shares of Common Stock that are tendered, whether by physical delivery or by attestation, to the Company by a Participant as full or partial payment of the exercise price of any Stock Option granted pursuant to the Plan, in connection with the payment or settlement of any other grant or Award made pursuant to the Plan, or in payment of any applicable withholding for federal, state, city, local or foreign income, payroll or other taxes incurred in connection with the exercise of any Stock Option or Stock Appreciation Right granted under the Plan or the receipt or settlement of any other grant or Award under the Plan. The shares of Common Stock which may be issued under the Plan may be authorized and unissued shares or issued shares reacquired by the Company. No fractional share of the Common Stock shall be issued under the Plan. Awards of fractional shares of the Common Stock, if any, shall be settled in cash. (b) ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event of any change in the capital structure, capitalization or Common Stock of the Company such as a stock dividend, stock split, recapitalization, merger, consolidation, split-up, combination or exchange of shares or other form of reorganization, or any other change affecting the Common Stock, such proportionate adjustments, if any, as the Board of Directors in its discretion may deem appropriate to reflect such change shall be made with respect to: (i) the maximum number of shares of Common Stock which may be (1) issued pursuant to the Plan, (2) the subject of any type of grant or Award under the Plan, and (3) granted, Awarded or issued to any Participant pursuant to any provision of the Plan; (ii) the number of shares of Common Stock subject to any outstanding Stock Option, Stock Appreciation Right or other grant or Award made to any Participant under the Plan; (iii) the per share exercise price in respect of any outstanding Stock Options and Stock Appreciation Rights; (iv) the number of shares of Common Stock and the number of Units or the value of such Units, as the case may be, which are the subject of other grants and Awards then outstanding under the Plan; and (v) any other term or condition of any grant affected by any such change. 5. ADMINISTRATION. (a) THE COMMITTEE. The Plan shall be administered by the Committee to be appointed from time to time by the Board of Directors and comprised of not less than three of the then members of the Board of Directors who qualify as "non-employee directors" within the meaning of Rule 16(b)-3 promulgated under the Exchange Act and as "outside directors" within the meaning of Section 162(m) of the Code. Members of the Committee shall serve at the pleasure of the Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. A majority of the members of the Committee shall constitute a quorum for the transaction of business and the acts of a majority of the members present at any meeting at which a quorum is present shall be the acts of the Committee. Any one or more members of the Committee may participate in a meeting by conference telephone or similar means where all persons participating in the meeting can hear and speak to each other, which participation shall constitute presence in person at such meeting. Action approved in writing by a majority of the members of the Committee then serving 3 shall be fully as effective as if the action had been taken by unanimous vote at a meeting duly called and held. The Company shall make grants and effect Awards under the Plan in accordance with the terms and conditions specified by the Committee, which terms and conditions shall be set forth in grant agreements and/or other instruments in such forms as the Committee shall approve. (b) COMMITTEE POWERS. The Committee shall have full power and authority to operate and administer the Plan in accordance with its terms. The powers of the Committee include, but are not limited to, the power to: (i) select Participants from among the Employees of the Company and Subsidiaries; (ii) establish the types of, and the terms and conditions of, all grants and Awards made under the Plan, subject to any applicable limitations set forth in, and consistent with the express terms of, the Plan; (iii) make grants and pay or otherwise effect Awards subject to, and consistent with, the express provisions of the Plan; (iv) establish Performance Goals, Performance Measures and Performance Periods, subject to, and consistent with, the express provisions of the Plan; (v) reduce the amount of any grant or Award; (vi) prescribe the form or forms of grant agreements and other instruments evidencing grants and Awards under the Plan; (vii) pay and to defer payment of Awards on such terms and conditions, not inconsistent with the express terms of the Plan, as the Committee shall determine; (viii) direct the Company to make conversions, accruals and payments pursuant to the Plan; (ix) construe and interpret the Plan and make any determination of fact incident to the operation of the Plan; (x) promulgate, amend and rescind rules and regulations relating to the implementation, operation and administration of the Plan; (xi) adopt such modifications, procedures and subplans as may be necessary or appropriate to comply with the laws of other countries with respect to Participants or prospective Participants employed in such other countries; (xii) delegate to other persons the responsibility for performing administrative or ministerial acts in furtherance of the Plan; (xiii) engage the services of persons and firms, including banks, consultants and insurance companies, in furtherance of the Plan's activities; and (xiv) make all other determinations and take all other actions as the Committee may deem necessary or advisable for the administration and operation of the Plan. (c) COMMITTEE'S DECISIONS FINAL. Any determination, decision or action of the Committee in connection with the construction, interpretation, administration or application of the Plan, and of any grant agreement, shall be final, conclusive and binding upon all Participants, and all persons claiming through Participants, affected thereby. (d) ADMINISTRATIVE ACCOUNTS. For the purpose of accounting for Awards deferred as to payment, the Company shall establish bookkeeping accounts expressed in Units bearing the name of each Participant receiving such Awards. Each account shall be unfunded, unless otherwise determined by the Committee in accordance with Section 15(d) of the Plan. (e) CERTIFICATIONS. In respect of each grant under the Plan to a Covered Employee which the Committee intends to be "performance based compensation" under Section 162(m) of the Code, the provisions of the Plan and the related grant agreement shall be construed to confirm such intent, and to conform to the requirements of Section 162(m) of the Code, and the Committee shall certify in writing (which writing may include approved minutes of a meeting of the Committee) that the applicable Performance Goal(s), determined using the Performance Measure specified in the related grant agreement, was attained during the relevant Performance Period at a level that equaled or exceeded the level required for the payment of such Award in the amount proposed to be paid and that such Award does not exceed any applicable Plan limitation. 6. STOCK OPTIONS. (a) IN GENERAL. Options to purchase shares of Common Stock may be granted under the Plan and may be Incentive Stock Options or Non-Qualified Stock Options. All Stock Options shall be subject to the terms and conditions of this Section 6 and shall contain such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall determine. Stock Options may be granted in addition to, or in tandem with or independent of, Stock Appreciation Rights or other grants and Awards under the Plan. The Committee may grant Stock Options that provide for the automatic grant of a replacement Stock Option if payment of the exercise price and/or any related withholding taxes is made by tendering (whether by physical delivery or by attestation) shares of Common Stock or by having shares of Common Stock withheld by the Company. The replacement Stock Option would cover the number of shares of Common Stock tendered or withheld, would have a per share exercise price equal to at least 100% of the Fair Market Value of a share of Common Stock on the date of the exercise of the original Stock Option, and would have such other terms and conditions as may be specified by the Committee and set forth in the related grant agreement. 4 (b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other Employee of the Company or a Subsidiary may be granted Stock Options. The Committee shall determine, in its discretion, the Employees to whom Stock Options will be granted, the timing of such grants, and the number of shares of Common Stock subject to each Stock Option granted; provided, that (i) the maximum aggregate number of shares of Common Stock which may be issued and delivered upon the exercise of Non-Qualified Stock Options granted under the Plan shall be ten million, (ii) the maximum aggregate number of shares of Common Stock which may be issued and delivered upon the exercise of Incentive Stock Options shall be five million, (iii) the maximum number of shares of Common Stock in respect of which Stock Options may be granted to any Employee during any calendar year shall be 500,000, and (iv) in respect of Incentive Stock Options, the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the shares of Common Stock with respect to which an Incentive Stock Option becomes exercisable for the first time by a Participant during any calendar year shall not exceed $100,000, or such other limit as may be required by the Code, except that, if authorized by the Committee and provided for in the related grant agreement, any portion of any Incentive Stock Option that cannot be exercised as such because of this limitation may be converted into and exercised as a Non-Qualified Stock Option. In no event shall any Stock Option or Stock Appreciation Right be granted to a Participant in exchange for the Participant's agreement to the cancellation of one or more Stock Options or Stock Appreciation Rights then held by such Participant if the exercise price of the new grant is lower than the exercise price of the grant to be cancelled and in no event shall any Stock Option or Stock Appreciation Right be amended to reduce the option price, except as contemplated by Section 4(b) of the Plan. (c) OPTION EXERCISE PRICE. The per share exercise price of each Stock Option granted under the Plan shall be determined by the Committee prior to or at the time of grant, but in no event shall the per share exercise price of any Stock Option be less than 100% of the Fair Market Value of the Common Stock on the date of the grant of such Stock Option. (d) OPTION TERM. The term of each Stock Option shall be fixed by the Committee; except that in no event shall the term of any Stock Option exceed ten years after the date such Stock Option is granted. (e) EXERCISABILITY. A Stock Option shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the date of grant; provided, however, that no Stock Option shall be exercisable during the first six months after the date such Stock Option is granted. No Stock Option may be exercised unless the holder thereof is at the time of such exercise an Employee and has been continuously an Employee since the date such Stock Option was granted, except that the Committee may permit the exercise of any Stock Option for any period following the Participant's termination of employment not in excess of the original term of the Stock Option on such terms and conditions as it shall deem appropriate and specify in the related grant agreement. (f) METHOD OF EXERCISE. A Stock Option may be exercised, in whole or in part, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, plus any required withholding taxes, in cash or, if permitted by the terms of the related grant agreement or otherwise approved in advance by the Committee, in shares of Common Stock already owned by the Participant valued at the Fair Market Value of the Common Stock on the date of exercise. The Committee may also permit Participants, either on a selective or aggregate basis, to simultaneously exercise Stock Options and sell the shares of Common Stock thereby acquired pursuant to a brokerage or similar arrangement approved in advance by the Committee and to use the proceeds from such sale to pay the exercise price and withholding taxes. 7. STOCK APPRECIATION RIGHTS. (a) IN GENERAL. Stock Appreciation Rights in respect of shares of Common Stock may be granted under the Plan alone, in tandem with, in addition to or independent of a Stock Option or other grant or Award under the Plan. A Stock Appreciation Right entitles a Participant to receive an amount equal to the excess of the Fair Market Value of a share of Common Stock on the date of exercise over the Fair Market Value of a share of Common Stock on the date of grant of the Stock Appreciation Right, or such other higher price as may be set by the Committee, multiplied by the number of shares of Common Stock with respect to which the Stock Appreciation Right shall have been exercised. (b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other Employee of the Company or a Subsidiary selected by the Committee may be granted Stock Appreciation Rights. The Committee shall determine, in its discretion, the Employees to whom Stock Appreciation Rights will be granted, the timing of 5 such grants and the number of shares of Common Stock in respect of which each Stock Appreciation Right is granted; provided that (i) the maximum aggregate number of shares of Common Stock in respect of which Stock Appreciation Rights may be granted shall be four million, (ii) the maximum aggregate number of shares of Common Stock which may be issued and delivered in payment or settlement of Stock Appreciation Rights shall be two million, and (iii) the maximum number of shares of Common Stock in respect of which Stock Appreciation Rights may be granted to any Employee during any calendar year shall be 100,000. (c) EXERCISABILITY; EXERCISE; FORM OF PAYMENT. A Stock Appreciation Right may be exercised by a Participant at such time or times and in such manner as shall be authorized by the Committee and set forth in the related grant agreement, except that in no event shall a Stock Appreciation Right be exercisable within the first six months after the date of grant. The Committee may provide that a Stock Appreciation Right shall be automatically exercised on one or more specified dates. No Stock Appreciation Right may be exercised unless the holder thereof is at the time of exercise an Employee and has been continuously an Employee since the date the Stock Appreciation Right was granted, except that the Committee may permit the exercise of any Stock Appreciation Right for any period following the Participant's termination of employment not in excess of the original term of the Stock Appreciation Right on such terms and conditions as it shall deem appropriate and specify in the related grant agreement. A Stock Appreciation Right may be exercised, in whole or in part, by giving the Company a written notice specifying the number of shares of Common Stock in respect of which the Stock Appreciation Right is to be exercised. Stock Appreciation Rights may be paid upon exercise in cash, in shares of Common Stock, or in any combination of cash and shares of Common Stock as determined by the Committee. 8. RESTRICTED STOCK GRANTS AND AWARDS. (a) IN GENERAL. A Restricted Stock Grant is the issue of shares of Common Stock in the name of an Employee, which issuance is subject to such terms and conditions as the Committee shall deem appropriate, including, without limitation, restrictions on the sale, assignment, transfer or other disposition of such shares and the requirement that the Employee forfeit such shares back to the Company (i) upon termination of employment for specified reasons within a specified period of time, or (ii) if any specified Performance Goals are not achieved during a specified Performance Period, or (iii) if such other conditions as the Committee may specify are not satisfied. (b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other key Employee of the Company or a Subsidiary selected by the Committee may receive a Restricted Stock Grant. The Committee, in its sole discretion, shall determine whether a Restricted Stock Grant shall be made, the Employee to receive the Restricted Stock Grant, and the conditions and restrictions imposed on the Restricted Stock Grant. The maximum number of shares of Common Stock which may be issued as Restricted Stock under the Plan shall be 500,000. The maximum number of shares of Common Stock which may be issued to any Employee as Restricted Stock during any calendar year shall not exceed 100,000. The maximum amount any Employee may receive as a Restricted Stock Grant in any calendar year shall not exceed $8 million, determined using the Fair Market Value of such Restricted Stock Grant as at the date of the grant thereof. (c) RESTRICTION PERIOD. Restricted Stock Grants shall provide that in order for a Participant to receive shares of Common Stock free of restrictions, the Participant must remain in the employment of the Company or its Subsidiaries, subject to such exceptions as the Committee may deem appropriate and specify in the related grant agreement, for a period of not less than three years commencing on the date of the grant and ending on such later date or dates as the Committee may designate at the time of the grant (the "Restriction Period"). The Committee, in its sole discretion, may provide for the lapse of restrictions in installments during the Restriction Period. The Committee may also establish one or more Performance Goals that are required to be achieved during one or more Performance Periods within the Restriction Period as a condition to the lapse of the restrictions. (d) RESTRICTIONS. The following restrictions and conditions shall apply to each Restricted Stock Grant during the Restriction Period: (i) the Participant shall not be entitled to delivery of the shares of the Common Stock; (ii) the Participant may not sell, assign, transfer, pledge, hypothecate, encumber or otherwise dispose of or realize on the shares of Common Stock subject to the Restricted Stock Grant; and (iii) the shares of the Common Stock issued as Restricted Stock shall be forfeited to the Company if the Participant for any reason ceases to be an Employee prior to the end of the Restriction Period, except due to circumstances specified in 6 the related grant agreement or otherwise approved by the Committee. The Committee may, in its sole discretion, include such other restrictions and conditions as it may deem appropriate. (e) PAYMENT. Upon expiration of the Restriction Period and if all conditions have been satisfied and any applicable Performance Goals attained, the shares of the Restricted Stock will be made available to the Participant, subject to satisfaction of applicable withholding tax requirements, free of all restrictions; provided, that the Committee may, in its discretion, require (i) the further deferral of any Restricted Stock Grant beyond the initially specified Restriction Period, (ii) that the Restricted Stock be retained by the Company, and (iii) that the Participant receive a cash payment in lieu of unrestricted shares of Common Stock. (f) RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect to shares of Restricted Stock, all of the rights of a shareholder of the Company, including the right to vote the shares and receive any cash dividends paid thereon. Stock dividends distributed with respect to shares of Restricted Stock shall be treated as additional shares under the Restricted Stock Grant and shall be subject to the restrictions and other terms and conditions set forth therein. 9. PERFORMANCE GRANTS AND AWARDS. (a) ELIGIBILITY AND TERMS. The Committee may grant to officers of the Company and other key Employees of the Company and its Subsidiaries the prospective contingent right, expressed in Units, to receive payments of shares of Common Stock, cash or any combination thereof, with each Unit equivalent in value to one share of Common Stock, or equivalent to such other value or monetary amount as may be designated or established by the Committee ("Performance Grants"), based upon Company performance over a specified Performance Period. The Committee shall, in its sole discretion, determine the officers of the Company and other key Employees eligible to receive Performance Grants. At the time each Performance Grant is made, the Committee shall establish the Performance Period, the Performance Measure and the targets to be attained relative to such Performance Measure (the "Performance Goals") in respect of such Performance Grant. The number of shares of Common Stock and/or the amount of cash earned and payable in settlement of a Performance Grant shall be determined at the end of the Performance Period (a "Performance Award"). (b) LIMITATIONS ON GRANTS AND AWARDS. The maximum number of shares of Common Stock which may be issued pursuant to Performance Grants shall be 1.5 million. The maximum number of shares which may be the subject of Performance Grants made to any Participant in respect of any Performance Period or during any calendar year shall be 200,000. The maximum amount any Participant may receive during any calendar year as Performance Awards pursuant to Performance Grants shall not exceed $10 million, determined using the Fair Market Value of such Performance Awards as at the last day of the applicable Performance Period or Periods or as at date or dates of the payment thereof, whichever is higher. (c) PERFORMANCE GOALS, PERFORMANCE MEASURES AND PERFORMANCE PERIODS. Each Performance Grant shall provide that, in order for a Participant to receive an Award of all or a portion of the Units subject to such Performance Grant, the Company must achieve certain Performance Goals over a designated Performance Period having a minimum duration of one year, with attainment of the Performance Goals determined using a specific Performance Measure. The Performance Goals and Performance Period shall be established by the Committee in its sole discretion. The Committee shall establish a Performance Measure for each Performance Period for determining the portion of the Performance Grant which will be earned or forfeited based on the extent to which the Performance Goals are achieved or exceeded. In setting Performance Goals, the Committee may use a Performance Measure based on any one, or on any combination, of the following Company performance factors as the Committee deems appropriate: (i) Cumulative Net Income Per Share; (ii) Cumulative Net Income; (iii) return on sales; (iv) total shareholder return; (v) return on assets; (vi) economic value added; (vii) cash flow; (viii) return on equity; (ix) cumulative operating income (which shall equal consolidated sales minus cost of goods sold and selling, administrative and general expense); (x) operating income before depreciation and amortization; and (xi) return on invested capital. Performance Goals may include minimum, maximum and target levels of performance, with the size of Performance Award based on the level attained. Once established by the Committee and specified in the grant agreement, and if and to the extent provided in or required by the grant agreement, the Performance Goals and the Performance Measure in respect of any Performance Grant (or any Restricted Stock Grant or Stock-Based Grant that requires the attainment of Performance Goals as a condition to the Award) shall not be changed. The Committee may, in its discretion, eliminate or reduce (but not increase) the amount of any Performance Award (or Restricted Stock or Stock-Based Award) that otherwise would be payable to a Participant upon attainment of the Performance Goal(s). 7 (d) FORM OF GRANTS. Performance Grants may be made on such terms and conditions not inconsistent with the Plan, and in such form or forms, as the Committee may from time to time approve. Performance Grants may be made alone, in addition to, in tandem with, or independent of other grants and Awards under the Plan. Subject to the terms of the Plan, the Committee shall, in its discretion, determine the number of Units subject to each Performance Grant made to a Participant and the Committee may impose different terms and conditions on any particular Performance Grant made to any Participant. The Performance Goals, the Performance Period or Periods, and the Performance Measure(s) applicable to a Performance Grant shall be set forth in the relevant grant agreement. (e) PAYMENT OF AWARDS. Each Participant shall be entitled to receive payment in an amount equal to the aggregate Fair Market Value (if the Unit is equivalent to a share of Common Stock), or such other value as the Committee shall specify, of the Units earned in respect of such Performance Award. Payment in settlement of a Performance Award may be made in shares of Common Stock, in cash, or in any combination of Common Stock and cash, and at such time or times, as the Committee, in its discretion, shall determine. 10. OTHER STOCK-BASED GRANTS AND AWARDS. (a) IN GENERAL. The Committee may make other grants and Awards pursuant to which Common Stock is, or in the future may be, acquired by Participants, and other grants and Awards to Participants denominated in Common Stock Equivalents or other Units ("Stock-Based Grants"). Such Stock-Based Grants may be granted alone or in addition to, in tandem with, or independent of any other grant made or Award effected under the Plan. (b) ELIGIBILITY AND TERMS. The Committee may make Stock-Based Grants to officers of the Company and other key Employees of the Company and its Subsidiaries. Subject to the provisions of the Plan, the Committee shall have authority to determine the Employees to whom, and the time or times at which, Stock-Based Grants will be made, the number of shares of Common Stock, if any, to be subject to or covered by each Stock-Based Grant, and any and all other terms and conditions of each Stock-Based Grant. (c) LIMITATIONS. The aggregate number of shares of Common Stock issued to Participants pursuant to Stock-Based Grants made and Awards effected pursuant to this Section 10 shall not exceed 500,000. No Participant shall receive more than 50,000 shares of Common Stock in settlement of Stock-Based Awards during any calendar year. The maximum amount any Participant may receive in Stock-Based Awards during any calendar year shall not exceed $4 million, determined using the Fair Market Value of any shares of Common Stock delivered in payment of the Stock-Based Awards on the date or dates of the payment thereof. (d) FORM OF GRANTS; PAYMENT OF AWARDS. Stock-Based Grants may be made in such form or forms and on such terms and conditions, including the attainment of specific Performance Goals, as the Committee, in its discretion, shall approve. Payment of Stock-Based Awards may be made in cash, in shares of Common Stock, or in any combination of cash and shares of Common Stock, and at such time or times, as the Committee shall determine. 11. DEFERRALS. The Committee may, whether at the time of grant or at anytime thereafter prior to payment or settlement, require a Participant to defer, or permit (subject to such conditions as the Committee may from time to time establish) a Participant to elect to defer, receipt of all or any portion of any payment of cash or shares of Common Stock that would otherwise be due to such Participant in payment or settlement of any Award under the Plan. If any such deferral is required by the Committee (or is elected by the Participant with the permission of the Committee), the Committee shall establish rules and procedures for such payment deferrals. The Committee may provide for the payment or crediting of interest, at such rate or rates as it shall in its discretion deem appropriate, on such deferred amounts credited in cash and the payment or crediting of dividend equivalents in respect of deferred amounts credited in Common Stock Equivalents. Deferred amounts may be paid in a lump sum or in installments in the manner and to the extent permitted, and in accordance with rules and procedures established, by the Committee. 12. NON-TRANSFERABILITY OF GRANTS AND AWARDS. No grant or Award under the Plan, and no right or interest therein, shall be (i) assignable, alienable or transferable by a Participant, except by will or the laws of descent and distribution, or (ii) subject to any obligation, or the lien or claims of any creditor, of any Participant, or (iii) subject to any lien, encumbrance or 8 claim of any party made in respect of or through any Participant, however arising. During the lifetime of a Participant, Stock Options and Stock Appreciation Rights are exercisable only by, and shares of Common Stock issued upon the exercise of Stock Options and Stock Appreciation Rights or in settlement of other Awards will be issued only to, and other payments in settlement of any Award will be payable only to, the Participant or his or her legal representative. The Committee may, in its sole discretion, authorize written designations of beneficiaries and authorize Participants to designate beneficiaries with the authority to exercise Stock Options and Stock Appreciation Rights granted to a Participant in the event of his or her death. Notwithstanding the foregoing, the Committee may, in its sole discretion and on and subject to such terms and conditions as it shall deem appropriate, which terms and conditions shall be set forth in the related grant agreement: (i) authorize a Participant to transfer all or a portion of any Non-Qualified Stock Option or Stock Appreciation Right, as the case may be, granted to such Participant; provided, that in no event shall any transfer be made to any person or persons other than such Participant's spouse, children or grandchildren, or a trust for the exclusive benefit of one or more such persons, which transfer must be made as a gift and without any consideration; and (ii) provide for the transferability of a particular grant or Award pursuant to a qualified domestic relations order. All other transfers and any retransfer by any permitted transferee are prohibited and any such purported transfer shall be null and void. Each Stock Option or Stock Appreciation Right which becomes the subject of permitted transfer (and the Participant to whom it was granted by the Company) shall continue to be subject to the same terms and conditions as were in effect immediately prior to such permitted transfer. The Participant shall remain responsible to the Company for the payment of all withholding taxes incurred as a result of any exercise of such Stock Option or Stock Appreciation Right. In no event shall any permitted transfer of a Stock Option or Stock Appreciation Right create any right in any party in respect of any Stock Option, Stock Appreciation Right or other grant or Award, other than the rights of the qualified transferee in respect of such Stock Option or Stock Appreciation Right specified in the related grant agreement. 13. CHANGE IN CONTROL. (a) EFFECT ON GRANTS. In the event of a Change in Control (as defined below) of the Company, except as the Board of Directors comprised of a majority of Independent Directors may expressly provide otherwise, and notwithstanding any other provision of the Plan to the contrary: (i) all Stock Options and Stock Appreciation Rights then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable; (ii) all restrictions and conditions in respect of all Restricted Stock Grants then outstanding shall be deemed satisfied as of the date of the Change in Control; and (iii) all Performance Grants and Stock-Based Grants shall be deemed to have been fully earned, at the maximum amount of the award opportunity specified in the grant agreement, as of the date of the Change in Control. (b) CHANGE IN CONTROL DEFINED. A "Change in Control" of the Company shall occur when: (i) any Person (or group of Persons acting together or in concert) becomes the Beneficial Owner, directly or indirectly, of fifteen percent (15%) or more of the combined voting power of the Company's securities (including its Common Stock and any other voting securities) then outstanding; or (ii) the shareholders of the Company approve a definitive agreement for a merger involving the Company and/or any of its direct or indirect subsidiaries which would result in the Common Stock outstanding immediately prior to such merger continuing to represent less than fifty percent of the voting power of the Company outstanding immediately after such merger, or approve a merger, consolidation or other similar transaction which would result in the Common Stock then outstanding being converted into or exchanged for the securities of any other entity; or (iii) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company; or (iv) the Independent Directors no longer constitute a majority of the Board of Directors. "Affiliate" shall have the meaning set forth in Rule 12b-2 under the Exchange Act. "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. "Independent Director" means any individual who is a member of the Board of Directors on the date the Plan becomes effective and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to, a consent solicitation relating to the election of directors of the Company, or a director who is a Person, or represents a Person or Group of Persons acting together, who is, or who publicly announces the intention to become, the Beneficial Owner, directly or indirectly, of 15% or more of the voting power of the Company's outstanding voting securities) whose election to the Board of Directors, or nomination for election to the Board of Directors by the Company's shareholders, was approved or recommended by the affirmative vote of a majority of the directors then in office who either (i) were directors on the date the Plan becomes effective or (ii) were elected or nominated for election as a director by a Board 9 of Directors comprised of a majority of directors in office on the date this Plan becomes effective and/or their successors whose election, or nomination for election by the Company's shareholders, was previously so approved or recommended by a Board of Directors comprised of a majority of Independent Directors. Persons shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company and its Affiliates, (ii) the trustee or other fiduciary holding securities under an employee benefit plan sponsored by the Company or any of its subsidiaries, or (iii) underwriters temporarily holding securities pursuant to an offering of such securities by the Company. 14. AMENDMENT AND TERMINATION. The Board of Directors may terminate the Plan at any time, except with respect to grants then outstanding. The Board of Directors may amend the Plan at any time and from time to time in such respects as the Board of Directors may deem necessary or appropriate without approval of the shareholders, unless such approval is necessary in order to comply with applicable laws, including the Exchange Act and the Code. In no event may the Board of Directors amend the Plan without the approval of the shareholders to (i) increase the maximum number of shares of Common Stock which may be issued pursuant to the Plan, (ii) increase any limitation set forth in the Plan on the number of shares of Common Stock which may be issued, or the aggregate value of Awards which may be made, in respect of any type of grant to all Participants during the term of the Plan or to any Participant during any specified period, (iii) reduce the minimum exercise price for Stock Options and Stock Appreciation Rights, or (iv) change the Performance Measure criteria identified at Section 9(c) of the Plan. 15. MISCELLANEOUS. (a) WITHHOLDING TAXES. All Awards under the Plan will be made subject to any applicable withholding for taxes of any kind. The Company shall have the right to deduct from any amount payable under the Plan, including delivery of shares of Common Stock to be made under the Plan, all federal, state, city, local or foreign taxes of any kind required by law to be withheld with respect to such payment and to take such other actions as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. If shares of Common Stock are used to satisfy withholding taxes, such shares shall be valued based on the Fair Market Value thereof on the date when the withholding for taxes is required to be made. The Company shall have the right to require a Participant to pay cash to satisfy withholding taxes as a condition to the payment of any amount (whether in cash or shares of Common Stock) under the Plan. (b) NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the making of any grant or Award shall confer upon any Employee any right to continued employment with the Company or any Subsidiary, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any Employee at any time, with or without cause. (c) UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Any liability of the Company to any person with respect to any Award under the Plan shall be based solely upon any contractual obligations that may be effected pursuant to the Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. (d) PAYMENTS TO TRUST. The Committee is authorized to cause to be established a trust agreement or several trust agreements whereunder the Committee may make payments of amounts due or to become due to Participants in the Plan. (e) ENGAGING IN COMPETITION WITH COMPANY. In the event a Participant terminates his or her employment with the Company or a Subsidiary for any reason whatsoever, and within eighteen (18) months after the date thereof accepts employment with any competitor of, or otherwise engages in competition with, the Company, the Committee, in its sole discretion, may require such Participant to return, or (if not received) to forfeit, to the Company the economic value of any Award which is realized or obtained (measured at the date of exercise, vesting or payment) by such Participant (i) at any time after the date which is six months prior to the date of such Participant's termination of employment with the Company or (ii) during such other period as the Committee may determine. The provisions of this Section 15(e) shall cease to have any force or effect whatsoever immediately upon the occurrence of any Change in Control described at Section 13 hereof. 10 (f) OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant's regular, recurring compensation for purposes of any termination indemnity or severance pay law of any country and shall not be included in, nor have any effect on, the determination of benefits under any pension or other employee benefit plan or similar arrangement provided by the Company or any Subsidiary, unless (i) expressly so provided by such other plan or arrangement or (ii) the Committee expressly determines that an Award or a portion thereof should be included as recurring compensation. Nothing contained in the Plan shall prohibit the Company or any Subsidiary from establishing other special awards, incentive compensation plans, compensation programs and other similar arrangements providing for the payment of performance, incentive or other compensation to Employees. Payments and benefits provided to any Employee under any other plan, including, without limitation, any stock option, stock award, restricted stock, deferred compensation, savings, retirement or other benefit plan or arrangement, shall be governed solely by the terms of such other plan. (g) SECURITIES LAW RESTRICTIONS. In no event shall the Company be obligated to issue or deliver any shares of Common Stock if such issuance or delivery shall constitute a violation of any provisions of any law or regulation of any governmental authority or securities exchange. No shares of Common Stock shall be issued under the Plan unless counsel for the Company shall be satisfied that such issuance will be in compliance with all applicable Federal and state securities laws and regulations and all requirements of any securities exchange on which the Common Stock is listed. (h) GRANT AGREEMENTS. Each Participant receiving a grant under the Plan shall enter into a grant agreement with the Company in a form specified by the Committee agreeing to the terms and conditions of the grant and such related matters as the Committee shall, in its sole discretion, determine. (i) SEVERABILITY. In the event any provision of the Plan shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the remaining provisions of the Plan. (j) GOVERNING LAW. The Plan shall be governed by and construed in accordance with the laws of the State of Ohio. 11 EX-12 5 l93883aex12.txt EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS EXHIBIT 12 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
3 MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, DECEMBER 31, ------------------------------------------------------------------------- 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- EARNINGS - -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ (85.6) $ (273.0) $ 58.8 $ 300.1 $930.4 $ 703.0 Add: Amortization of previously capitalized interest 2.5 9.8 9.7 11.0 10.7 11.0 Minority interest in net income of consolidated subsidiaries with fixed charges 17.6 26.7 45.6 42.9 33.6 45.1 Proportionate share of fixed charges of investees accounted for by the equity method 0.8 3.1 5.7 5.5 4.8 6.5 Proportionate share of net loss of investees accounted for by the equity method 5.0 44.6 28.4 0.3 - 0.1 ------- ------- ------- ------- --------- ------- Total additions 25.9 84.2 89.4 59.7 49.1 62.7 Deduct: Capitalized interest 2.3 6.4 12.0 11.8 6.6 6.2 Minority interest in net loss of consolidated subsidiaries 5.1 19.5 8.3 4.2 2.9 3.6 Undistributed proportionate share of net income of investees accounted for by the equity method 0.1 1.1 4.3 2.2 - - ------- ------- ------- ------- --------- ------- Total deductions 7.5 27.0 24.6 18.2 9.5 9.8 TOTAL EARNINGS $ (67.2) $ (215.8) $ 123.6 $ 341.6 $ 970.0 $ 755.9 ======= ======= ======= ======= ========= ======= FIXED CHARGES - ------------- Interest expense $ 61.0 $ 292.4 $ 282.6 $ 179.4 $ 147.8 $ 119.5 Capitalized interest 2.3 6.4 12.0 11.8 6.6 6.2 Amortization of debt discount, premium or expense 2.2 7.1 1.5 0.7 1.2 0.1 Interest portion of rental expense 18.4 73.6 73.5 62.1 57.7 63.0 Proportionate share of fixed charges of investees accounted for by the equity method 0.8 3.1 5.7 5.5 4.8 6.5 ------- ------- ------- ------- --------- ------- TOTAL FIXED CHARGES $ 84.7 $ 382.6 $ 375.3 $ 259.5 $ 218.1 $ 195.3 ======= ======= ======= ======= ========= ======= TOTAL EARNINGS BEFORE FIXED CHARGES $ 17.5 $ 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 THREE MONTHS ENDED MARCH 31, 2002 WERE INADEQUATE TO COVER FIXED CHARGES. THE COVERAGE DEFICIENCY WAS $67.2 MILLION. **EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2001 WERE INADEQUATE TO COVER FIXED CHARGES. THE COVERAGE DEFICIENCY WAS $215.8 MILLION. 10-Q 6 l93883ae10-q_pdf.pdf PDF COURTESY COPY OF GOODYEAR 10-Q begin 644 l93883ae10-q_pdf.pdf M)5!$1BTQ+C(-)>+CS],-"C$V,2`P(&]B:@T\/"`-+TQI;F5A7!E M("]#871A;&]G(`TO4&%G97,@,30U(#`@4B`-+TI4(#$U.2`P(%(@#3X^(`UE M;F1O8FH-,3@Q(#`@;V)J#3P\("]3(#@R,R`O1FEL=&5R("]&;&%T941E8V]D M92`O3&5N9W1H(#$X,B`P(%(@/CX@#7-T7*_L6]C:V_VQQK&*2GIQJO&OY8ED*S$)9*Y6M M%`V$>E@G<'?P"O-5,M@(?&-?P)O.P/!K]:Y;JU:M6GU]57G5JEFW[E;5WEVU MZM2J"7#KF359U;?I-3QQ%%W?O5!18/'LV^).3HKN9GLO-BPU$OV0O4A3J&1E M/+O;69%E3OMX2UPU)ZQOCA7T2M%^<-TE:";7#].+."4F=%A.7=\2X]@5O%:7 M?>M%E:YONU1T6LT/KNOD5O0%FASD^;:[4VGONDZ5\*T7%5,TT4QQ@* M=%#',L^@;34)U[F"%>/9=BE-.0&T$J)XL:6`;_5B8#B%AH9V=#0P,($(1A#! 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	(1)		The present value of capital lease obligations is $48.7 million.

	(2)		Operating leases do not include minimum sublease rentals of $44.1 million, $36.4 million, $27.2 million, $18.9 million, $10.8 million, and $17.2 million in each of the periods above, respectively, for a total of $154.6 million. Net operating lease payments total $1,148.6 million. The present value of operating leases is $763.6 million. The operating leases relate to, among other things, computers and office equipment, real estate, aircraft, and miscellaneous other assets, which are in some instances leased from special purpose entities owned and controlled by independent, unaffiliated lessors that are owned or financed by financial institutions. No director, officer or employee of Goodyear or any of its subsidiaries or other affiliate holds any direct or indirect interest in such entities. No assets is leased from any related party.

	(3)		Other off-balance-sheet financial guarantees written and other commitments includes, at December 31, 2001,

	•		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.

•		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.