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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x | |
Filed by a Party other than the Registrant o | |
Check the appropriate box: |
o Preliminary Proxy Statement | |
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
x Definitive Proxy Statement | |
o Definitive Additional Materials | |
o Soliciting Material Pursuant to §240.14a-12 |
LEAR CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required. | |
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1) Title of each class of securities to which transaction applies: |
2) Aggregate number of securities to which transaction applies: |
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
4) Proposed maximum aggregate value of transaction: |
5) Total fee paid: |
o Fee paid previously with preliminary materials. |
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1) Amount Previously Paid: |
2) Form, Schedule or Registration Statement No.: |
3) Filing Party: |
4) Date Filed: |
SEC 1913 (02-02) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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1. elect four directors; |
2. ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2006; |
3. approve an amendment to our Long-Term Stock Incentive Plan; | |
4. consider two stockholder proposals, if presented at the meeting; and | |
5. conduct any other business properly before the meeting. |
Robert E. Rossiter | |
Chairman and Chief Executive Officer |
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1. | elect four directors; | |
2. | ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2006; | |
3. | approve an amendment to our Long-Term Stock Incentive Plan; | |
4. | consider two stockholder proposals, if presented at the meeting; and | |
5. | conduct any other business properly before the meeting. |
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• | delivering to Daniel A. Ninivaggi, our Senior Vice President, Secretary and General Counsel, a signed, written revocation letter dated later than the date of your proxy; | |
• | submitting a proxy to the Company with a later date; or | |
• | attending the meeting and voting either in person or by ballot. |
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David E. Fry | Age: 62 |
Dr. Fry, who has been a director of Lear since August 2002, has been the President and Chief Executive Officer of Northwood University, a university of business administration with campuses in Midland, Michigan, Dallas, Texas and Palm Beach, Florida, since 1982. Dr. Fry also serves as a director of Reynolds and Reynolds Company and Decker Energy International. Dr. Fry is also a director and member of the executive committee of the Automotive Hall of Fame and past Chairman of the Michigan Higher Education Facilities Authority. |
David P. Spalding | Age: 51 |
Mr. Spalding has been a director of Lear since 1991. Mr. Spalding is the Vice President of Alumni Relations for Dartmouth College, a position he has held since October 2005. Prior to joining Dartmouth College, Mr. Spalding was a Vice Chairman of The Cypress Group L.L.C., a private equity fund manager, since 1994. Mr. Spalding is also the Chairman of the Board and a member of the executive committee of the Make-A-Wish Foundation of Metro New York. |
James A. Stern | Age: 55 |
Mr. Stern has been a director of Lear since 1991. Mr. Stern is Chairman of The Cypress Group L.L.C., a private equity fund manager, a position he has held since 1994. He is also a director of Affinia Group Inc., AMTROL, Inc., WESCO International, Inc. and ClubCorp, Inc. |
Henry D.G. Wallace | Age: 60 |
Mr. Wallace has been a director of Lear since February 2005. Mr. Wallace worked for 30 years at Ford Motor Company until his retirement in 2001 and held several executive-level operations and financial oversight positions, most recently as Group Vice President, Mazda & Asia Pacific Operations in 2001, Chief Financial Officer in 2000 and Group Vice President, Asia Pacific Operations in 1999. Mr. Wallace |
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also serves as a director of AMBAC Financial Group, Inc., Diebold, Inc. and Hayes-Lemmerz International, Inc. |
Anne K. Bingaman | Age: 62 |
Ms. Bingaman has been a director of Lear since February 2004. She has been Chairman and Chief Executive Officer of Soundpath Conferencing Services, LLC since 2002, and she is the founder of VALOR Telecom, a telecommunications company serving the southwestern United States and a subsidiary of Valor Communications Group, Inc. She served as VALOR Telecom’s Chief Executive Officer from September 1999 to January 2002, and Chairman from September 1999 to February 2005. Prior to founding VALOR Telecom, Ms. Bingaman served as President of the Local Services Division of LCI International, Inc., a long distance telephone company, from January 1997 to June 1998. Prior to joining LCI International, Ms. Bingaman served as Assistant Attorney General and Head of the Antitrust Division of the United States Department of Justice from June 1993 to October 1996. |
Conrad L. Mallett, Jr. | Age: 53 |
Justice Mallett, who has been a director of Lear since August 2002, has been the President and CEO of Sinai Grace Hospital since August 2003. Prior to his current position, Justice Mallett served as the Chief Administrative Officer of the Detroit Medical Center since March 2003. Previously, he served as President and General Counsel of Hawkins Food Group LLC from April 2002 to March 2003, and Transition Director for Detroit Mayor Kwame M. Kilpatrick and Chief Operating Officer for the City of Detroit from January 2002 to April 2002. From August 1999 to April 2002, Justice Mallett was General Counsel and Chief Administrative Officer of the Detroit Medical Center. Justice Mallett was also a Partner in the law firm of Miller, Canfield, Paddock & Stone from January 1999 to August 1999. Justice Mallett was a Justice of the Michigan Supreme Court from December 1990 to January 1999 and served a two-year term as Chief Justice beginning in 1997. Justice Mallett also serves as a director of TechTeam Global, Inc. and serves as a General Board Member of the Metropolitan Detroit YMCA. |
Larry W. McCurdy | Age: 70 |
Mr. McCurdy has been a director of Lear since 1988. In July 2000, Mr. McCurdy retired from Dana Corporation, a motor vehicle parts manufacturer and after-market supplier, where he served as President, Dana Automotive Aftermarket Group, since July 1998. Mr. McCurdy was Chairman of the Board, President and Chief Executive Officer of Echlin, a motor vehicle parts manufacturer, from March 1997 until July 1998 when it was merged into Dana Corporation. Prior to this, Mr. McCurdy was Executive Vice President, Operations of Cooper Industries, a diversified manufacturing company, from April 1994 to March 1997. Mr. McCurdy also serves as a director of Mohawk Industries, Inc., as well as the non-executive Chairman of Affinia Group Inc., a privately-held supplier of after-market motor vehicle parts. |
Roy E. Parrott | Age: 65 |
Mr. Parrott has been a director of Lear since February 1997. In January 2003, Mr. Parrott retired from Metaldyne Corporation where he served as President of Business Operations since December 2000. Metaldyne Corporation, an integrated metal solutions supplier, purchased Simpson Industries, Inc. in |
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December 2000. Previously, Mr. Parrott was the Chief Executive Officer of Simpson Industries, Inc. from 1994 to December 2000 and Chairman of Simpson Industries, Inc. from November 1997 to December 2000. |
Robert E. Rossiter | Age: 60 |
Mr. Rossiter is the Chairman of the Board, a position he has held since January 1, 2003. Mr. Rossiter also serves as our Chief Executive Officer, a position he has held since October 2000. Mr. Rossiter served as our President from 1984 until December 2002 and served as Chief Operating Officer from 1988 to April 1997 and from November 1998 to October 2000. Mr. Rossiter has been a director of Lear since 1988. Mr. Rossiter also served as our Chief Operating Officer — International Operations from April 1997 to November 1998. |
James H. Vandenberghe | Age: 56 |
Mr. Vandenberghe is our Vice Chairman, a position he has held since November 1998. Mr. Vandenberghe has also acted as our Interim Chief Financial Officer since March 10, 2006 and is expected to continue in such capacity until we appoint a new Chief Financial Officer. Mr. Vandenberghe has been a director of Lear since 1995. He served as our President and Chief Operating Officer — North American Operations from April 1997 to November 1998. He also served as our Chief Financial Officer from 1988 to April 1997 and as our Executive Vice President from 1993 to April 1997. |
Richard F. Wallman | Age: 55 |
Mr. Wallman has been a director of Lear since November 2003. Mr. Wallman has more than 25 years of executive-level operations and financial oversight experience, most recently as Senior Vice President and Chief Financial Officer of Honeywell International, Inc. from 2000 to 2003 and of AlliedSignal, Inc. from 1995 to 1999. He has also held positions with International Business Machines Corporation, Chrysler Corporation and Ford Motor Company. Mr. Wallman also serves as a director of Hayes-Lemmerz International, Inc., Ariba, Inc., Avaya Inc. and ExpressJet Holdings, Inc. |
Corporate Governance |
Board Meetings |
Meetings of Non-Employee Directors |
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Independence of Directors |
Communications to the Board |
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Audit Committee |
Compensation Committee |
Executive Committee |
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Nominating and Corporate Governance Committee |
Recommendation of Directors by Stockholders |
Criteria for Selection of Directors |
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• | Strong automotive background, with an understanding of Lear’s customers and markets. | |
• | Extensive general business background with a record of achievement. | |
• | Financial and accounting expertise. | |
• | Gender, racial and geographic diversity. | |
• | Strong international experience, particularly in those regions in which Lear seeks to conduct business. | |
• | Understands the potential role of technology in the development of Lear’s business. | |
• | Marketing or sales background in the automotive industry. | |
• | Schedule is sufficiently flexible to permit attendance at Board meetings at regularly scheduled times. | |
• | A contributor but accepting of opinions of others and supportive of decisions that are in the stockholders’ best interests. | |
• | Able to assimilate complex business problems and analyze them in the context of the Company’s strategic goals. | |
• | A team player yet possessing independence to appropriately question and challenge corporate strategy, as required. |
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• | credited to a notional account and bear interest at an annual rate equal to the prime rate (as defined in the Outside Directors Compensation Plan); or | |
• | credited to a stock unit account. |
• | the date elected by such director; | |
• | the date the director ceases to be a director; or | |
• | the date a change of control (as defined in the Outside Directors Compensation Plan) occurs. |
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Number of Shares | Percentage of | |||||||||||
of Common Stock | Common Stock | Number of | ||||||||||
Owned Beneficially | Owned Beneficially | Stock Units Owned(19) | ||||||||||
Pzena Investment Management, LLC(1) | 10,885,504 | 16.21 | % | N/A | ||||||||
AXA Financial, Inc.(2) | 8,270,629 | 12.3 | % | N/A | ||||||||
Wellington Management Company, LLP(3) | 7,059,030 | 10.51 | % | N/A | ||||||||
Vanguard Windsor Funds(4) | 6,772,100 | 10.08 | % | N/A | ||||||||
CAM/Salomon/Smith Barney/ TIMCO/Citigroup(5) | 6,084,609 | 9.06 | % | N/A | ||||||||
Robert E. Rossiter(6)(7) | 340,947 | (9) | * | 189,146 | ||||||||
James H. Vandenberghe(6)(7) | 231,199 | (10) | * | 112,686 | ||||||||
Douglas G. DelGrosso(7) | 153,781 | (11) | * | 73,214 | ||||||||
David C. Wajsgras(7)(8) | 4,098 | * | 30,762 | |||||||||
Daniel A. Ninivaggi(7) | 71 | * | 27,484 | |||||||||
Anne K. Bingaman(6) | 1,500 | * | 4,645 | |||||||||
David E. Fry(6) | 3,103 | (12) | * | 6,006 | ||||||||
Conrad L. Mallett(6) | 2,475 | (13) | * | 6,843 | ||||||||
Larry W. McCurdy(6) | 11,500 | (14) | * | 15,789 | ||||||||
Roy E. Parrott(6) | 7,730 | (15) | * | 4,645 | ||||||||
David P. Spalding(6) | 14,250 | (16) | * | 12,828 | ||||||||
James A. Stern(6) | 14,650 | (17) | * | 14,834 | ||||||||
Henry D.G. Wallace(6) | 1,000 | * | 5,223 | |||||||||
Richard F. Wallman(6) | 1,500 | * | 4,645 | |||||||||
Total Executive Officers and Directors as a Group (19 individuals) | 995,887 | (18) | 1.5 | % | 621,154 | (20) |
* | Less than 1% | |
(1) | We have been informed by Pzena Investment Management, LLC (“PIM”), in an amended report on Schedule 13G dated February 14, 2006, that (a) PIM is a registered investment advisor, and (b) PIM exercises sole voting power over 8,920,159 shares, shared voting power over no shares, sole dispositive power over 10,885,504 shares and shared dispositive power over no shares. The address of Pzena Investment Management, LLC is 120 West 45th Street, 20th Floor, New York, New York 10036. | |
(2) | We have been informed by AXA Financial, Inc. and certain of its affiliates, in an amended report on Schedule 13G dated February 14, 2006, that (a) they are parent holding companies of (i) Alliance Capital Management L.P., a registered investment advisor, which acquired the shares solely for investment purposes on behalf of client discretionary investment advisory accounts and (ii) AXA Equitable Life Insurance Company which acquired the shares solely for investment purposes, (b) they exercise sole voting power over 4,719,283 shares and shared voting power over 855,247 shares, (c) they exercise sole dispositive power over 8,270,629 shares and shared dispositive power over no shares, and (d) they beneficially own the shares reported pursuant to (x) the investment advisory role of their |
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subsidiary, Alliance Capital Management L.P. and (y) the direct holdings of their subsidiaries. The address of AXA Financial, Inc. is 1290 Avenue of the Americas, New York, New York 10104. | ||
(3) | We have been informed by Wellington Management Company, LLP (“WMC”), in an amended report on Schedule 13G dated January 10, 2006, that (a) WMC is a registered investment advisor and that WMC may be deemed to beneficially own the shares held by its clients, and (b) WMC exercises sole voting power over no shares, shared voting power over 298,500 shares, sole dispositive power over no shares and shared dispositive power over 7,059,030 shares. The address of Wellington Management Company, LLP is 75 State Street, Boston, Massachusetts 02109. | |
(4) | We have been informed by Vanguard Windsor Funds — Vanguard Windsor Fund 51-00082715 (“Vanguard”), in a report on Schedule 13G dated February 13, 2006, that (a) Vanguard is a registered investment company under Section 8 of the Investment Company Act of 1940, and (b) Vanguard exercises sole voting power over 6,772,100 shares, shared voting power over no shares, sole dispositive power over no shares and shared dispositive power over no shares. The address of Vanguard Windsor Funds — Vanguard Windsor Fund 51-00082715 is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. | |
(5) | We have been informed by CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC, TIMCO Asset Management Inc. and Citigroup Asset Management Ltd., in a report on Schedule 13G dated February 15, 2006, that (a) they report as a group pursuant to Rule 13d-1(b)(1)(ii)(J) under the Securities Exchange Act of 1934, and (b) they exercise sole voting power over no shares, shared voting power over 5,031,232 shares, sole dispositive power over no shares and shared dispositive power over 6,084,609 shares. The principal place of business of the group consisting of CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC, TIMCO Asset Management Inc. and Citigroup Asset Management Ltd., is 399 Park Avenue, New York, New York 10022. | |
(6) | The individual is a director. | |
(7) | The individual is a named executive officer. | |
(8) | Mr. Wajsgras resigned as our Executive Vice President and Chief Financial Officer effective March 10, 2006. | |
(9) | Includes 251,250 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. Also includes 45,000 shares of common stock held by a grantor retained annuity trust. |
(10) | Includes 165,000 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. |
(11) | Includes 132,500 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. Also includes 8,781 shares of common stock held in his wife’s revocable trust. |
(12) | Includes 2,000 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. |
(13) | Includes 2,000 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. |
(14) | Includes 9,500 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. |
(15) | Includes 4,500 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. |
(16) | Includes 8,250 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. |
(17) | Includes 8,250 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. Also, includes 2,400 shares of common stock held in a revocable trust for the benefit of Mr. Stern’s children. Mr. Stern disclaims beneficial ownership of these shares. |
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(18) | Includes 754,950 shares of common stock issuable under options currently exercisable or exercisable within 60 days of the record date. |
(19) | Includes the restricted stock units owned by our executive officers and the restricted units and deferred stock units owned by our non-employee directors. These restricted stock units, restricted units and deferred stock units are subject to all the economic risks of stock ownership but may not be voted or sold and, therefore, ownership of such units is not deemed to constitute beneficial ownership of common stock. In addition, the restricted stock units and restricted units are subject to vesting provisions as set forth in the respective grant agreements. |
(20) | Consists of 545,696 restricted stock units owned by our executive officers in the aggregate, 41,819 restricted units owned by our non-employee directors in the aggregate and 33,639 deferred stock units owned by our non-employee directors in the aggregate. |
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Long-Term Compensation | |||||||||||||||||||||||||||||||||
Awards | Payouts | ||||||||||||||||||||||||||||||||
Annual Compensation | Securities | ||||||||||||||||||||||||||||||||
Restricted | Underlying | ||||||||||||||||||||||||||||||||
Other Annual | Stock Unit | Options/ | LTIP | All Other | |||||||||||||||||||||||||||||
Name and Principal Positions | Period | Salary(1) | Bonus(1) | Compensation(2) | Awards(3) | SARs(4) | Payouts(5) | Compensation | |||||||||||||||||||||||||
Robert E. Rossiter, | 2005 | $ | 1,100,000 | $ | 0 | $ | 287,437 | $ | 499,929 | 151,875 | $ | 0 | $ | 47,094 | (6) | ||||||||||||||||||
Chairman and | 2004 | 1,008,334 | 1,506,000 | 117,527 | 2,852,586 | 0 | 442,358 | 84,071 | |||||||||||||||||||||||||
Chief Executive Officer | 2003 | 1,000,000 | 1,638,750 | 82,244 | 2,977,895 | 0 | 660,858 | 73,648 | |||||||||||||||||||||||||
James H. Vandenberghe, | 2005 | $ | 925,000 | $ | 0 | $ | 86,298 | $ | 279,208 | 84,375 | $ | 0 | $ | 40,881 | (7) | ||||||||||||||||||
Vice Chairman and Interim | 2004 | 902,083 | 813,240 | — | 1,569,632 | 0 | 364,952 | 55,187 | |||||||||||||||||||||||||
Chief Financial Officer | 2003 | 831,251 | 973,418 | — | 1,713,942 | 0 | 505,533 | 49,209 | |||||||||||||||||||||||||
Douglas G. DelGrosso, | 2005 | $ | 705,834 | $ | 0 | $ | 770,686 | $ | 262,282 | 84,375 | $ | 0 | $ | 24,737 | (8) | ||||||||||||||||||
President and | 2004 | 677,083 | 542,160 | 748,058 | 1,095,898 | 0 | 254,296 | 35,044 | |||||||||||||||||||||||||
Chief Operating Officer | 2003 | 629,168 | 655,500 | 388,079 | 1,151,526 | 0 | 317,192 | 29,272 | |||||||||||||||||||||||||
David C. Wajsgras(9), | 2005 | $ | 605,000 | $ | 0 | $ | 92,293 | $ | 187,515 | 60,750 | $ | 0 | $ | 22,636 | (10) | ||||||||||||||||||
Former Executive | 2004 | 577,083 | 461,840 | — | 876,401 | 0 | 185,828 | 24,481 | |||||||||||||||||||||||||
Vice President and | 2003 | 506,251 | 458,850 | — | 1,012,092 | 0 | 198,276 | 13,456 | |||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||||||||||
Daniel A. Ninivaggi, | 2005 | $ | 449,584 | $ | 0 | $ | 98,881 | $ | 125,010 | 40,500 | $ | 0 | $ | 12,711 | (11) | ||||||||||||||||||
Senior Vice President, | 2004 | 438,334 | 223,390 | 294,190 | 590,580 | 0 | 0 | 7,709 | |||||||||||||||||||||||||
Secretary and General | 2003 | 183,621 | (12) | 127,685 | (12) | 301,418 | 600,041 | 0 | 0 | 2,883 | |||||||||||||||||||||||
Counsel |
(1) | Under the Management Stock Purchase Plan, named executive officers elected to defer portions of their 2005 salaries and bonuses. Salaries and bonuses are reported without giving effect to any amounts deferred under the Management Stock Purchase Plan. The named executive officers deferred the following amounts of their total salary and bonus earned in 2005: Mr. Rossiter, $440,000; Mr. Vandenberghe, $277,500; and Mr. DelGrosso, $175,000. For further information regarding the Management Stock Purchase Plan, see “Compensation Committee Report — Long-Term Incentives — Management Stock Purchase Plan” beginning on page 27. | |
(2) | This column includes the perquisites and personal benefits, including any associated taxgross-up payments, received by the named executive officers which exceeded the lesser of $50,000 or 10% of the named executive’s salary and bonus for the year. Of the amounts reported in this column, the following exceeded 25% of the value of the total perquisites and benefits provided in a given year: for Mr. Rossiter, personal use of the corporate aircraft in the amounts of $197,930 in 2005, $60,428 in 2004 and $46,025 in 2003, payments related to country club memberships of $31,831 in 2004 and payments for expenses related to financial planning of $23,558 in 2003; for Mr. Vandenberghe, payments related to country club memberships of $39,857 and personal use of the corporate aircraft in the amount of $28,058 in 2005; for Mr. DelGrosso, payments of $735,277 in 2005, $730,921 in 2004 and $363,787 in 2003 related to his overseas assignment which commenced on October 1, 2001 and ended July 31, 2004; for Mr. Wajsgras, payments related to country club memberships of $46,649 and personal use of the corporate aircraft in the amount of $28,497 in 2005; and for Mr. Ninivaggi, payments related to country club memberships of $88,516 in 2005, relocation expenses of $247,663 in 2004 and a relocation allowance and signing bonus totaling $300,121 in 2003. Overseas assignment compensation primarily reflects tax equalization payments, reimbursement for foreign housing costs, acost-of-living differential, |
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certain moving and relocation expenses, an international assignment allowance and certain associated tax gross-ups. | ||
(3) | Restricted stock unit awards consist of (i) awards under the Management Stock Purchase Plan based on deferral elections with respect to salary and bonus earned in the respective years and (ii) restricted stock unit awards valued based on the price of our common stock on the grant date. With respect to the Management Stock Purchase Plan, the restricted stock unit awards reported reflect the premium portion (as a result of the discounted unit price) awarded to each named executive officer based on such officer’s deferral election, and the value of each such award is reported as of its respective grant date. Pursuant to deferral elections made under the Management Stock Purchase Plan relating to compensation earned in the year ending December 31, 2005, Mr. Rossiter, Mr. Vandenberghe and Mr. DelGrosso received 10,136, 6,374 and 3,805 restricted stock units, respectively. The premium portions awarded to these individuals resulting from their deferrals were $31,141, $18,770 and $1,844 for Mr. Rossiter, Mr. Vandenberghe and Mr. DelGrosso respectively. On November 10, 2005, Mr. Rossiter, Mr. Vandenberghe, Mr. DelGrosso, Mr. Wajsgras and Mr. Ninivaggi received 16,875, 9,375, 9,375, 6,750, and 4,500 restricted stock units, respectively, under the Long-Term Stock Incentive Plan. Values in the table for such units are based on the per share closing price of $27.78 for our common stock on November 10, 2005. However, these restricted stock units are subject to vesting over a four-year time period, with one half vesting on the second anniversary of the grant date and one half vesting on the fourth anniversary. For additional information regarding the Management Stock Purchase Plan and the deferral elections thereunder as well as the grant of restricted stock units in 2005, see “Compensation Committee Report” beginning on page 23. |
Holders of restricted stock units are entitled to dividend equivalents if and when cash dividends are declared and paid on our common stock, which dividend equivalents are calculated by multiplying the dividend amount by the number of restricted stock units held. These dividend equivalents are credited to an account established by the Company for bookkeeping purposes only and credited monthly with interest at the prime rate, with respect to the 2005, 2004 and 2003 restricted stock units. Dividend equivalents vest in accordance with the vesting schedule of the restricted stock units to which they relate. As of December 31, 2005, Mr. Rossiter held 221,660 restricted stock units with an aggregate value of $6,308,444, Mr. Vandenberghe held 111,112 restricted stock units with an aggregate value of $3,162,248, Mr. DelGrosso held 63,193 restricted stock units with an aggregate value of $1,798,473, Mr. Wajsgras held 65,886 restricted stock units with an aggregate value of $1,875,116, and Mr. Ninivaggi held 26,381 restricted stock units with an aggregate value of $750,803. The aggregate value of restricted stock units is based on the per share closing price of $28.46 for our common stock on December 30, 2005. |
(4) | On November 10, 2005, Mr. Rossiter, Mr. Vandenberghe, Mr. DelGrosso, Mr. Wajsgras and Mr. Ninivaggi received 151,875, 84,375, 84,375, 60,750 and 40,500 stock-settled stock appreciation rights, respectively, under the Long-Term Stock Incentive Plan. These stock-settled stock appreciation rights are subject to vesting over a three-year time period. For additional information regarding the grant of stock appreciation rights in 2005, see “Compensation Committee Report” beginning on page 23. No options or stock appreciation rights were granted to our named executive officers in 2003 or 2004. | |
(5) | There were no LTIP payouts for 2005. | |
(6) | Represents: Executive Supplemental Savings Plan matching contributions of $24,406; Retirement Savings Plan matching contributions of $3,094; life insurance premiums paid by Lear of $11,808; imputed income of $2,786 with respect to life insurance coverage; and consideration of $5,000 in respect of entering into a new employment agreement. | |
(7) | Represents: Executive Supplemental Savings Plan matching contributions of $20,090; Retirement Savings Plan matching contributions of $3,035; life insurance premiums paid by Lear of $12,756; and consideration of $5,000 in respect of entering into a new employment agreement. | |
(8) | Represents: Executive Supplemental Savings Plan matching contributions of $15,732; Retirement Savings Plan matching contributions of $1,914; life insurance premiums paid by Lear of $1,251; imputed |
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income of $840 with respect to life insurance coverage; and consideration of $5,000 in respect of entering into a new employment agreement. |
(9) | Mr. Wajsgras resigned as our Executive Vice President and Chief Financial Officer effective March 10, 2006. |
(10) | Represents: Executive Supplemental Savings Plan matching contributions of $13,283; Retirement Savings Plan matching contributions of $1,842; life insurance premiums paid by Lear of $1,251; imputed income of $1,260 with respect to life insurance coverage; and consideration of $5,000 in respect of entering into a new employment agreement. |
(11) | Represents: Executive Supplemental Savings Plan matching contributions of $4,920; Retirement Savings Plan matching contributions of $700; life insurance premiums paid by Lear of $1,251; imputed income of $840 with respect to life insurance coverage; and consideration of $5,000 in respect of entering into a new employment agreement. |
(12) | Mr. Ninivaggi joined Lear in July 2003. |
Number of Securities | ||||||||||||
Available for Future | ||||||||||||
Number of | Weighted Average | Issuance Under | ||||||||||
Securities to be | Exercise Price of | Equity | ||||||||||
Issued Upon | Outstanding | Compensation Plans | ||||||||||
Exercise of | Options, | (Excluding | ||||||||||
Outstanding Options, | Warrants and | Securities Reflected | ||||||||||
Warrants and Rights | Rights | in Column (a)) | ||||||||||
As of December 31, 2005 | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders(1) | 6,556,245 | (2) | $ | 28.73 | (3) | 351,494 | ||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 6,556,245 | $ | 28.73 | 351,494 |
(1) | Includes the 1994 Stock Option Plan, the 1996 Stock Option Plan and the Long-Term Stock Incentive Plan. |
(2) | Includes 2,983,405 of outstanding options, 1,215,046 of outstanding stock-settled stock appreciation rights, 2,234,122 of outstanding restricted stock units and 123,672 of outstanding performance shares. Does not include 334,542 of outstanding cash-settled stock appreciation rights. |
(3) | Reflects outstanding options at a weighted average exercise price of $40.69, outstanding stock-settled stock appreciation rights at a weighted average exercise price of $27.65, outstanding restricted stock units at a weighted average price of $14.94 and outstanding performance shares at a weighted average price of zero. |
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Stock Appreciation Right (SAR) Grants |
Number of | % of Total | |||||||||||||||||||
Securities | SARs | |||||||||||||||||||
Underlying | Granted to | Exercise or | ||||||||||||||||||
SARs | Employees in | base price | Expiration | (1)Grant Date | ||||||||||||||||
Name | Granted | Fiscal Year | ($/Share) | Date | Present Value | |||||||||||||||
Robert E. Rossiter | 151,875 | 9.8% (total | ) | $ | 27.74 | 11/10/2012 | $ | 1,418,513 | ||||||||||||
James H. Vandenberghe | 84,375 | 5.4% (total | ) | $ | 27.74 | 11/10/2012 | $ | 788,063 | ||||||||||||
Douglas G. DelGrosso | 84,375 | 5.4% (total | ) | $ | 27.74 | 11/10/2012 | $ | 788,063 | ||||||||||||
David C. Wajsgras | 60,750 | 3.9% (total | ) | $ | 27.74 | 11/10/2012 | $ | 567,405 | ||||||||||||
Daniel A. Ninivaggi | 40,500 | 2.6% (total | ) | $ | 27.74 | 11/10/2012 | $ | 378,270 |
(1) | The grant-date valuation shown is based upon a Black-Scholes based option pricing model using the following assumptions: (i) an expected volatility of 40.0%; (ii) risk-free interest rate of 4.40%; (iii) expected dividend yields of 1.91%; and (iv) an expected life of 41/2 years. For a discussion of the terms of the SARs granted, see “Compensation Committee Report — Long-Term Incentives” beginning on page 25. |
Restricted Stock Unit Grants |
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Number of Unexercised | Value of Unexercised | |||||||||||||||
Options/SARs at | In-the-Money Options/SARs | |||||||||||||||
Shares Acquired | Value | December 31, 2005 | at December 31, 2005(1) | |||||||||||||
on Exercise | Realized | |||||||||||||||
Name | (#) | ($) | Exercisable/Unexercisable | Exercisable/Unexercisable | ||||||||||||
Robert E. Rossiter | 0 | 0 | 251,250/151,875 | $ | 0/0 | |||||||||||
James H. Vandenberghe | 0 | 0 | 165,000/84,375 | $ | 0/0 | |||||||||||
Douglas G. DelGrosso | 0 | 0 | 132,500/84,375 | $ | 0/0 | |||||||||||
David C. Wajsgras | 0 | 0 | 35,000/60,750 | $ | 0/0 | |||||||||||
Daniel A. Ninivaggi | 0 | 0 | 0/40,500 | $ | 0/0 |
(1) | Based on the closing price of $28.46 per share for our common stock on December 30, 2005, as reported by the New York Stock Exchange. |
Estimated Future Payouts under Non-Stock | ||||||||||||||||||||
Price-Based Plans(1) | ||||||||||||||||||||
Number of shares, | Performance or Other | |||||||||||||||||||
units or other | Period until Maturation | Threshold | Target | Maximum | ||||||||||||||||
Name | rights (#) | or Payout | (#) | (#) | (#) | |||||||||||||||
Robert E. Rossiter | 9,049 | 1/1/2005—12/31/07 | 2,263/2,263 | 4,525/4,525 | 6,788/6,788 | |||||||||||||||
James H. Vandenberghe | 3,805 | 1/1/2005—12/31/07 | 952/952 | 1,903/1,903 | 2,855/2,855 | |||||||||||||||
Douglas G. DelGrosso | 2,879 | 1/1/2005—12/31/07 | 720/720 | 1,440/1,440 | 2,160/2,160 | |||||||||||||||
David C. Wajsgras | 2,468 | 1/1/2005—12/31/07 | 617/617 | 1,234/1,234 | 1,851/1,851 | |||||||||||||||
Daniel A. Ninivaggi | 1,830 | 1/1/2005—12/31/07 | 458/458 | 915/915 | 1,373/1,373 |
(1) | Represents performance share awards under our Long-Term Stock Incentive Plan. The threshold column refers to the amount payable for a specific minimum level of performance under the plan, the target column refers to the amount payable if the specified targets are reached, and the maximum column refers to the maximum payout under the plan. The first number in each column represents the number of shares under the performance share awards that a named executive officer may receive based upon satisfaction of the return on invested capital performance criteria. The second number in each column represents the number of shares under the performance share award that a named executive officer may receive based upon satisfaction of the relative return to shareholders performance criteria. See “Compensation Committee Report — Long-Term Incentives — Performance Share Awards” beginning on page 27. |
Qualified Pension Plan |
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• | (a) 1.10% times final average annual earnings times years of credited service before 1997 (to a maximum of 35 years), plus (b) 1.00% times final average annual earnings times years of credited service after 1996 (with a maximum of 35 years reduced by years of credited service before 1997), plus (c) 0.65% times final average annual earnings in excess of covered compensation (as defined in I.R.S. Notice 89-70) times years of credited service (with a maximum of 35 years); and | |
• | $360.00 times years of credited service. |
Pension Equalization Plan |
Executive Supplemental Savings Plan |
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Years of Credited Service | ||||||||||||||||||||||||||||
Covered | ||||||||||||||||||||||||||||
Annual Compensation | Compensation* | 10 | 15 | 20 | 25 | 30 | 35 | |||||||||||||||||||||
$ 500,000 | $ | 62,712 | $ | 78,924 | $ | 120,636 | $ | 162,347 | $ | 204,059 | $ | 245,771 | $ | 287,483 | ||||||||||||||
600,000 | 62,712 | 95,524 | 145,986 | 196,447 | 246,909 | 297,371 | 347,833 | |||||||||||||||||||||
700,000 | 62,712 | 112,124 | 171,336 | 230,547 | 289,759 | 348,971 | 408,183 | |||||||||||||||||||||
800,000 | 62,712 | 128,724 | 196,686 | 264,647 | 332,609 | 400,571 | 468,533 | |||||||||||||||||||||
900,000 | 62,712 | 145,324 | 222,036 | 298,747 | 375,459 | 452,171 | 528,883 | |||||||||||||||||||||
1,000,000 | 62,712 | 161,924 | 247,386 | 332,847 | 418,309 | 503,771 | 589,233 | |||||||||||||||||||||
1,200,000 | 62,712 | 195,124 | 298,086 | 401,047 | 504,009 | 606,971 | 709,933 | |||||||||||||||||||||
1,400,000 | 62,712 | 228,324 | 348,786 | 469,247 | 589,709 | 710,171 | 830,633 | |||||||||||||||||||||
1,600,000 | 62,712 | 261,524 | 399,486 | 537,447 | 675,409 | 813,371 | 951,333 | |||||||||||||||||||||
1,800,000 | 62,712 | 294,724 | 450,186 | 605,647 | 761,109 | 916,571 | 1,072,033 | |||||||||||||||||||||
2,000,000 | 62,712 | 327,924 | 500,886 | 673,847 | 846,809 | 1,019,771 | 1,192,733 | |||||||||||||||||||||
2,200,000 | 62,712 | 361,124 | 551,586 | 742,047 | 932,509 | 1,122,971 | 1,313,433 | |||||||||||||||||||||
2,400,000 | 62,712 | 394,324 | 602,286 | 810,247 | 1,018,209 | 1,226,171 | 1,434,133 | |||||||||||||||||||||
2,600,000 | 62,712 | 427,524 | 652,986 | 878,447 | 1,103,909 | 1,329,371 | 1,554,833 | |||||||||||||||||||||
2,800,000 | 62,712 | 460,724 | 703,686 | 946,647 | 1,189,609 | 1,432,571 | 1,675,533 | |||||||||||||||||||||
3,000,000 | 62,712 | 493,924 | 754,386 | 1,014,847 | 1,275,309 | 1,535,771 | 1,796,233 | |||||||||||||||||||||
3,200,000 | 62,712 | 527,124 | 805,086 | 1,083,047 | 1,361,009 | 1,638,971 | 1,916,933 | |||||||||||||||||||||
3,400,000 | 62,712 | 560,324 | 855,786 | 1,151,247 | 1,446,709 | 1,742,171 | 2,037,633 | |||||||||||||||||||||
3,600,000 | 62,712 | 593,524 | 906,486 | 1,219,447 | 1,532,409 | 1,845,371 | 2,158,333 | |||||||||||||||||||||
3,800,000 | 62,712 | 626,724 | 957,186 | 1,287,647 | 1,618,109 | 1,948,571 | 2,279,033 | |||||||||||||||||||||
4,000,000 | 62,712 | 659,924 | 1,007,886 | 1,355,847 | 1,703,809 | 2,051,771 | 2,399,733 |
* | Indicates the covered compensation for Mr. Rossiter who has the lowest covered compensation of all the named executive officers. The covered compensation for each of the other named executive officers will be higher and their number of years of credited service at the 1.10% formula will be fewer than Mr. Rossiter’s, resulting in a slightly lower payout amount for comparable compensation levels and years of credited service. Such differences are not expected to be material. |
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• | following the death of the employee, we will pay to his estate or designated beneficiary his full base salary and a pro rata portion of any bonus earned prior to the date of death; | |
• | upon termination for incapacity (as defined in the employment agreement), the employee will receive all compensation payable under our disability and medical plans and programs plus an additional payment from us so that the aggregate amount received by the employee from all sources equals, for the remainder of such calendar year, his base salary at the rate in effect on the date of termination plus any bonus and other amounts the employee would have been entitled to if his employment continued until the end of the calendar year, and so that the aggregate amount received by the employee from all sources equals, for the period from the end of such calendar year until the date two years after the date of termination, his base salary at the rate in effect on the date of termination; | |
• | upon termination by the employee for good reason (as defined in the employment agreement) or by us other than for cause or incapacity (each as defined in the employment agreement), if the employee executes a release, in form and substance satisfactory to us, he will receive severance payments for two years after the termination date equal to the sum of the base salary (at the highest rate received during |
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the term of the agreement) and aggregate bonus he would have received for the same period (based on the highest annual bonus received during the period of two calendar years preceding the termination); | ||
• | in addition to the foregoing, upon termination by the employee for good reason (as defined in the employment agreement) or by us other than for cause or incapacity (each as defined in the employment agreement), (i) all outstanding equity-based awards and other benefits that are subject to time-based vesting criteria will continue to vest during the severance period and, following the conclusion of the severance period, unvested awards will vest on a pro rata basis, and (ii) all benefits that would vest under compensation and benefit plans based on the satisfaction of specific performance measures would be paid to the employee after the end of the performance period on a pro rata basis, if and to the extent all relevant performance targets are actually achieved; | |
• | upon termination by the employee without good reason or by us for cause, the employee is entitled to receive only unpaid salary and benefits, if any, accrued through the effective date of the employee’s termination; | |
• | the Company may generally reduce the employee’s base salary or bonus, defer payment of his compensation, or eliminate or modify his benefits, without giving rise to a claim of constructive termination, so long as such changes are made for all executive officers of the Company; however, any such actions by the Company within one year after a change in control (as defined in the employment agreement) would give the employee a basis for termination for good reason; | |
• | the employee agrees to comply with certain confidentiality covenants both during employment and after termination; | |
• | the employee agrees to comply with certain non-compete and non-solicitation covenants during his employment and for two years after the date of termination, unless the employee is terminated by us for cause, pursuant to a notice of non-renewal from us, or if the employee terminates employment for other than good reason, in which cases the employee agrees to comply with such covenants for one year after the date of termination; and | |
• | upon transfer of all or substantially all of our assets to a successor entity, we will require the successor entity expressly to assume performance of the employment agreement. |
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• | the compensation committee of another entity in which one of the executive officers of such entity served on our Compensation Committee; | |
• | the board of directors of another entity, one of whose executive officers served on our Compensation Committee; or | |
• | the compensation committee of another entity in which one of the executive officers of such entity served as a member of our Board. |
• | optimize profitability and growth; | |
• | link the interests of management with those of stockholders; | |
• | align management’s compensation mix with our business strategy and compensation philosophy; | |
• | provide management with incentives for excellence in individual performance; | |
• | maintain a strong link between executive pay and performance; | |
• | promote teamwork among managers; and | |
• | attract and retain highly qualified and effective officers, key employees and directors. |
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• | base salary; | |
• | annual incentives; | |
• | long-term incentives; and | |
• | certain other benefits. |
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• | approved stock ownership guidelines for members of senior management; | |
• | granted stock-settled stock appreciation rights to certain members of senior management; | |
• | granted restricted stock units to certain members of senior management; | |
• | granted performance share awards to certain members of senior management; and | |
• | permitted certain members of senior management to defer a portion of their base salary and annual incentive bonus under the Management Stock Purchase Plan. |
Management Stock Ownership Requirements |
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Multiple of | ||||
Position | Base Salary | |||
Chief Executive Officer | 5x | |||
Vice Chairman | 4x | |||
Chief Operating Officer/Chief Financial Officer | 3x | |||
Senior Vice Presidents and Division Presidents | 2.5x | |||
Corporate Vice Presidents | 2x |
Stock Appreciation Rights (SARs) |
Restricted Stock Units |
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Performance Share Awards |
Management Stock Purchase Plan |
Total Dollar Amount of Salary and Bonus | Value of Restricted Stock Units | |||||||
Deferrals, Expressed as a Percentage of | Applicable | Received as a Percentage of the | ||||||
the Participant’s Base Salary | Discount Rate | Amount Deferred | ||||||
15% or less | 20 | % | 125 | % | ||||
Over 15% and up to 100% | 30 | % | 143 | % | ||||
Over 100% | 20 | % | 125 | % |
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Retirement Benefits |
Estate Preservation Plan |
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David P. Spalding, Chairman | |
Anne K. Bingaman | |
Larry W. McCurdy | |
Richard F. Wallman |
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12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | 12/31/05 | |||||||||||||||||||
LEAR CORPORATION | $ | 100.00 | $ | 153.73 | $ | 134.14 | $ | 248.00 | $ | 249.95 | $ | 120.69 | ||||||||||||
S&P 500 | $ | 100.00 | $ | 88.15 | $ | 68.79 | $ | 88.29 | $ | 97.77 | $ | 102.50 | ||||||||||||
PEER GROUP | $ | 100.00 | $ | 138.19 | $ | 127.18 | $ | 186.58 | $ | 206.15 | $ | 206.48 | ||||||||||||
(1) | We do not believe that there is a single published industry or line of business index that is appropriate for comparing stockholder returns. The peer group that we have selected is comprised of representative independent automobile suppliers of comparable products whose common stock is publicly-traded. Our peer group consists of ArvinMeritor, Inc., Borg-Warner Automotive, Inc., Collins & Aikman Corporation, Dana Corporation, Delphi Corporation (f/k/a Delphi Automotive Systems Corporation), Eaton Corp., Gentex Corp., Johnson Controls, Inc., Magna International, Inc., Superior Industries International, Tower Automotive and Visteon Corporation. |
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Larry W. McCurdy, Chairman | |
James A. Stern | |
Henry D.G. Wallace | |
Richard F. Wallman |
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Fiscal Year Ended December 31, | ||||||||
2005 | 2004 | |||||||
Audit fees(1) | $ | 8,639,000 | $ | 9,342,000 | ||||
Audit-related fees(2) | 202,000 | 339,000 | ||||||
Tax fees(3) | 1,828,000 | 2,238,733 | ||||||
All other fees | — | — |
(1) | Audit fees include services related to the annual audit of our consolidated financial statements, the audit of our internal controls over financial reporting, the reviews of our quarterly reports on Form 10-Q, international statutory audits and other services that are normally provided by the independent accountants in connection with our regulatory filings. |
(2) | Audit-related fees include services related to the audits of U.S. and Canadian employee benefit plans, accounting consultations and other assurance and related services that are reasonably related to the performance of the audits of our financial statements. |
(3) | Tax fees include services related to tax compliance, tax advice and tax planning. |
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• | the date when all of the shares reserved for issuance under the plan have been exhausted, | |
• | May 3, 2011, and | |
• | the date as of which the plan is terminated by our Compensation Committee. |
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• | a participant’s spouse, children or grandchildren; | |
• | a trust or trusts for the exclusive benefit of a participant’s spouse, children or grandchildren; or | |
• | a partnership in which participant’s spouse, children or grandchildren are the only partners. |
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• | outstanding options and SARs granted under the plan will become immediately exercisable and remain exercisable throughout their term; | |
• | in most cases, any restriction period and any other restrictions imposed on restricted stock or restricted units will lapse; and | |
• | generally, the vesting of all performance units and performance shares will be accelerated as of the effective date of the change in control, and there will be paid out in cash to participants a pro rata amount based upon an assumed achievement of all relevant performance objectives at target levels and upon the length of time within the performance period which has elapsed prior to the effective date of the change in control. |
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• | restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value of shares over the purchase price (if any) only at the time the restrictions lapse (unless the Participant elects to accelerate recognition as of the date of grant); and | |
• | restricted units, performance shares, performance units and dividend equivalents generally are subject to tax at the time of payment. |
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• Shareholders were only allowed to vote on individual directors once in3-years — Accountability concern. | |
• An awesome 67% shareholder vote was required to make certain key changes — Entrenchment concern. | |
• The person who is both our Lead Director and Chairman of our key Audit Committee had17-years director tenure and was allowed to hold 5 outside board seats — Independence concern and over-extension concern. | |
• Our 4-member Audit Committee had — |
Two directors, including the committee chairman, with 14 to 17 years tenure (independence concern) |
• Our full board met 7-times and our Audit Committee met 8-times in a year — A relatively lean number of meetings. | |
• Our Lead Director owned only 2,000 shares after 17 years to accumulate stock — Company confidence concern. | |
• Five directors owned from zero to 1500 shares — Company confidence concern. | |
• Our CEO’s stock ownership declined. | |
• Six directors were allowed to hold from 4 to 7 director seats each — Over-extension concern. |
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and |
awareness of the problems of child labor, “sweatshop” conditions, and the denial of labor rights in U.S. corporate overseas operations, and |
consumer confidence which can have a negative impact on shareholder value, and |
organizations to strengthen compliance with international human rights norms in subsidiary and supplier factories, and |
the United Nations’ Norms on the Responsibilities of Transnational Corporations with Regard to Human Rights (“UN Norms”), which include the following principles: |
1. | All workers have the right to form and join trade unions and to Bargain collectively. (ILO Conventions 87 and 98; UN Norms, section D9). | |
2. | Workers representatives shall not be the subject of discrimination and shall have access to all workplaces necessary to enable them to carry out their representation functions. (ILO Convention 135; UN Norms, section D9). | |
3. | There shall be no discrimination or intimidation in employment. Equality of opportunity and treatment shall be provided regardless of race, color, sex, religion, political opinion, age, |
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nationality, social origin or other distinguishing characteristics. (ILO Conventions 100 and 111; UN Norms, section B2). | ||
4. | Employment shall be freely chosen. There shall be no use of force, including bonded or prison labor. (ILO Conventions 29 and 105; UN Norms, section D5). | |
5. | There shall be no use of child labor. (ILO Convention 138; UN Norms, section D6), and, |
confidence in our company’s commitment to human rights is to be maintained, |
aforementioned ILO human rights standards and United Nations’ Norms on the Responsibilities of Transnational Corporations with Regard to Human Rights, by its international suppliers and in its own international production facilities, and commit to a program of outside, independent monitoring of compliance with these standards. |
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By Order of the Board of Directors | |
Daniel A. Ninivaggi | |
Senior Vice President, Secretary & General Counsel |
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(1) the director, or his or her immediate family member(1), is affiliated with an entity with which the Company does business, unless the amount of purchases or sales of goods and services from or to the Company, in any of the three fiscal years preceding the determination and for which financial statements are available, has exceeded 1% of the consolidated gross revenues of such entity; | |
(2) the director, or his or her immediate family member, serves as a trustee, director, officer or employee of a foundation, university, non-profit organization or tax-exempt entity to which the Company has made a donation, unless the Company’s aggregate annual donations to the organization, in any of the three fiscal years preceding the determination and for which financial statements are available, have exceeded the greater of $250,000 or 1% of that organization’s consolidated gross revenues; | |
(3) the director, or his or her immediate family member, is a director, officer or employee of an entity with which the Company or any officer of the Company has a banking or investment relationship, unless (x) the amount involved, in any of the three fiscal years preceding the determination, exceeds the lesser of $1 million or 1% of such entity’s total deposits or investments or (y) such banking or investment relationship is on terms and conditions that are not substantially similar to those available to an unaffiliated third party; or | |
(4) the director or his or her immediate family member is an officer of a company that is indebted to the Company, or to which the Company is indebted, and the total amount of either company’s indebtedness to the other does not exceed 2% of the other company’s total consolidated assets as of the end of the fiscal year immediately preceding the date of determination and for which financial statements are available. |
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Page | ||||||
Article 1. | Establishment, Objectives and Duration | B-3 | ||||
Article 2. | Definitions | B-3 | ||||
Article 3. | Administration | B-7 | ||||
Article 4. | Shares Subject to the Plan and Maximum Awards | B-7 | ||||
Article 5. | Eligibility and Participation | B-8 | ||||
Article 6. | Stock Options | B-8 | ||||
Article 7. | Stock Appreciation Rights | B-10 | ||||
Article 8. | Restricted Stock, Restricted Stock Units and Restricted Units | B-11 | ||||
Article 9. | Performance Units and Performance Shares | B-12 | ||||
Article 10. | Performance Measures | B-13 | ||||
Article 11. | Beneficiary Designation | B-14 | ||||
Article 12. | Deferrals | B-14 | ||||
Article 13. | Rights of Employees | B-14 | ||||
Article 14. | Change in Control | B-14 | ||||
Article 15. | Amendment, Modification and Termination | B-15 | ||||
Article 16. | Withholding | B-16 | ||||
Article 17. | Indemnification | B-16 | ||||
Article 18. | Successors | B-16 | ||||
Article 19. | Legal Construction | B-16 |
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“Affiliates”means any corporation (or partnership, joint venture, or other enterprise) of which the Company owns or controls, directly or indirectly, at least fifty percent of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). Notwithstanding the foregoing, for purposes of determining whether an employee has terminated employment with the Company and all Affiliates, “Affiliates” means any corporation (or partnership, joint venture, or other enterprise) of which the Company owns or controls, directly or indirectly, at least ten percent of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). | |
“Award”means, individually or collectively, a grant under this Plan to a Participant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Units, Restricted Stock Units, Performance Shares and Performance Units. | |
“Award Agreement”means an agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award or Awards granted to the Participant or the terms and provisions applicable to an election to defer compensation under Section 8.2. |
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“Beneficial Owner”or“Beneficial Ownership”has the meaning ascribed to that term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. | |
“Board”or“Board of Directors”means the Board of Directors of the Company. | |
“Cause”has the meaning set forth in any unexpired employment or severance agreement between the Participant and the Company or an Affiliate. If there is no such agreement, “Cause” means: |
(a) the willful and continued failure of the Participant substantially to perform his or her duties with or for the Company or an Affiliate; | |
(b)��the Participant’s engaging in conduct that is significantly injurious to the Company or an Affiliate, monetarily or otherwise; | |
(c) the Participant’s commission of a crime that is significantly injurious to the Company or an Affiliate, monetarily, reputationally or otherwise; | |
(d) the Participant’s abuse of illegal drugs or other controlled substances; or | |
(e) the Participant’s habitual intoxication. |
Unless otherwise defined in the Participant’s employment or severance agreement, an act or omission is “willful” for this purpose if it was knowingly done, or knowingly omitted to be done, by the Participant not in good faith and without reasonable belief that the act or omission was in the best interest of the Company or an Affiliate. For purposes of this Plan, if a Participant is convicted of a crime or pleadsnolo contendereto a criminal charge, he or she will conclusively be deemed to have committed the crime. The Committee has the discretion, in other circumstances, to determine in good faith, from all the facts and circumstances reasonably available to it, whether a Participant who is under investigation for, or has been charged with, a crime will be deemed to have committed it for purposes of this Plan. |
“Change in Control”of the Company will be deemed to have occurred (as of a particular day, as specified by the Board) as of the first day any one or more of the following paragraphs is satisfied. |
(a) Any Person (other than the Company or a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the Beneficial Owner, directly or indirectly, of securities of the Company, representing more than twenty percent of the combined voting power of the Company’s then outstanding securities. | |
(b) During any period of twenty-six consecutive months beginning on or after the Effective Date, individuals who at the beginning of the period constituted the Board cease for any reason (other than death, Disability or voluntary Retirement) to constitute a majority of the Board. For this purpose, any new Director whose election by the Board, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the Directors then still in office, and who either were Directors at the beginning of the period or whose election or nomination for election was so approved, will be deemed to have been a Director at the beginning of any twenty-six month period under consideration. | |
(c) The shareholders of the Company approve: (i) a plan of complete liquidation or dissolution of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company’s assets; or (iii) a merger, consolidation or reorganization of the Company with or involving any other corporation, other than a merger, consolidation or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. |
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Notwithstanding the foregoing, to the extent necessary to avoid subjecting Participants to interest and additional tax under Section 409A of the Code, no “Change in Control” will be deemed to occur unless and until paragraph (a), (b) or (c), above, is satisfied and Section 409A(a)(2)(A)(v) of the Code is satisfied. | |
“Code”means the Internal Revenue Code of 1986, as amended from time to time. | |
“Committee”means, as specified in Article 3, the Compensation Committee of the Board or such other committee as may be appointed by the Board to administer the Plan. | |
“Company”means Lear Corporation, a Delaware corporation, and any successor thereto as provided in Article 17. | |
“Director”means any individual who is a member of the Board of Directors. | |
“Disability”means (a) long-term disability as defined under the long-term disability plan of the Company or an Affiliate that covers that individual, or (b) if the individual is not covered by such a long-term disability plan, disability as defined for purposes of eligibility for a disability award under the Social Security Act. Notwithstanding the foregoing, for purposes of determining the period of time after termination of employment during which a Participant may exercise an ISO, “Disability” will have the meaning set forth in Section 22(e)(3) of the Code, which is, generally, that the Participant is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of at least twelve months. | |
Notwithstanding the foregoing, to the extent necessary to avoid subjecting an individual to interest and additional tax under Section 409A of the Code, such individual shall not be deemed to have a Disability unless and until Section 409A(a)(2)(C) is satisfied. | |
“Effective Date”means May 3, 2001 for purposes of this amendment and restatement of the Plan. The Plan was originally effective January 1, 1996. | |
“Eligible Employee”means any employee of the Company or any of its Affiliates. Directors who are not employed by the Company or its Affiliates will be considered Eligible Employees under this Plan, but only for purposes of Awards of Nonqualified Stock Options. | |
“Exchange Act”means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. | |
“Exercise Price”means the price at which a Share may be purchased by a Participant pursuant to an Option. | |
“Fair Market Value”means: |
(a) the average of the high and low trading prices of the Shares on the New York Stock Exchange or, if the Shares are not traded on the New York Stock Exchange, on any other exchange on which they are traded, or, if the Shares are not traded on any other exchange and are regularly quoted on the NASDAQ National Market System, on the NASDAQ National Market System; or | |
(b) if the Shares are not traded on any exchange or regularly quoted on the NASDAQ National Market System, the mean between the closing bid and asked prices of the shares in theover-the-counter market; or | |
(c) if those bid and asked prices are not available, then the fair market value as reported by any nationally recognized quotation service selected by the Committee or as determined by the Committee. |
“Freestanding SAR”means an SAR that is granted independently of any Options, as described in Article 7. |
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“Incentive Stock Option”or“ISO”means an option to purchase Shares granted under Article 6 that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422. | |
“Nonqualified Stock Option”or“NQSO”means an option to purchase Shares granted under Article 6 that is not intended to meet the requirements of Code Section 422. | |
“Option”means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6. | |
“Participant”means an Eligible Employee who has been selected by the Committee to participate in the Plan pursuant to Section 5.2 and who has outstanding an Award granted under the Plan. The term “Participant” will include Directors who are not employees of the Company or an Affiliate only if they are chosen to receive Awards of Nonqualified Stock Options, and only for purposes of Nonqualified Stock Options. | |
“Performance-Based Exception”means the performance-based exception from the tax deductibility limitations of Code Section 162(m) and any regulations promulgated thereunder. | |
“Performance Period”means the time period during which performance objectives must be met in order for a Participant to earn Performance Units or Performance Shares granted under Article 9. | |
“Performance Share”means an Award with an initial value equal to the Fair Market Value on the date of grant which is based on the Participant’s attainment of performance objectives, as described in Article 9. | |
“Performance Unit”means an Award with an initial value established by the Committee at the time of grant which is based on the Participant’s attainment of performance objectives, as described in Article 9. | |
“Person”has the meaning ascribed to that term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof. | |
“Plan”means the Lear Corporation Long-Term Stock Incentive Plan, as set forth in this document. | |
“Prior Plan”means the Lear Corporation 1994 Stock Option Plan or the Lear Corporation 1996 Stock Option Plan. | |
“Restriction Period”means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance objectives, or the occurrence of other events as determined by the Committee, at its discretion) or the Restricted Stock is not vested. | |
“Restricted Stock”means a contingent grant of stock awarded to a Participant pursuant to Article 8. | |
“Restricted Stock Unit”means a Restricted Unit granted to a Participant, as described in Article 8, that is payable in Shares. | |
“Restricted Unit”means a notional account established pursuant to an Award granted to a Participant, as described in Article 8, that is (a) credited with amounts equal to Shares or some other unit of measurement specified in the Award Agreement, (b) subject to restrictions and (c) payable in cash or Shares. | |
“Retirement”means termination of employment on or after (a) reaching the age established by the Company as the normal retirement age in any unexpired employment agreement between the Participant and the Company or an Affiliate, or, in the absence of such an agreement, the normal retirement age under the tax-qualified defined benefit retirement plan or, if none, the tax-qualified defined contribution retirement plan, sponsored by the Company or an Affiliate in which the Participant participates, or (b) reaching age sixty-two with ten years of service with the Company or an Affiliate, provided the retirement is approved by the Chief Executive Officer of the Company, unless the Participant is an officer |
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subject to Section 16 of the Exchange Act, in which case the retirement must be approved by the Committee. | |
“Shares”means the shares of common stock, $0.01 par value, of the Company, including their associated preferred share purchase rights, if applicable. | |
“Stock Appreciation Right”or“SAR”means an Award, granted alone or in connection with a related Option, designated as an SAR pursuant to the terms of Article 7. | |
“Tandem SAR”means an SAR that is granted in connection with a related Option pursuant to Article 7, the exercise of which requires forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR will similarly be canceled). |
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Article 6. | Stock Options |
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(a) it must not be added to an already outstanding Option, but must be part of the Option as originally granted; | |
(b) the reload must be automatic, not subject to the discretion of the Committee or anyone else; | |
(c) it must have an Exercise Price at least equal to the Fair Market Value of a Share at the time of reload; | |
(d) it may be granted with respect only to previously-owned Shares used to pay the Exercise Price of the original Option, and only if the Participant has owned the Shares used to pay the Exercise Price for at least six months; | |
(e) the Award Agreement that contains the reload feature must not permit multiple reloads (i.e., no reload Options may be granted on Shares acquired through reload Options) and must subject any Option granted on reload to a vesting period of at least six months; and | |
(f) it must limit the duration of reload Options, by providing that an Option granted on reload expires at the same time as the initial Option would have. |
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Article 7. | Stock Appreciation Rights |
(a) the excess (or some portion of the excess as determined at the time of the grant by the Committee) if any, of the Fair Market Value on the date of exercise of the SAR over the grant price specified in the Award Agreement; by | |
(b) the number of Shares as to which the SAR is exercised. |
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Article 8. | Restricted Stock, Restricted Stock Units and Restricted Units |
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Article 9. | Performance Units and Performance Shares |
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Article 10. | Performance Measures |
(a) net earnings; | |
(b) operating earnings or income; | |
(c) earnings growth; | |
(d) net income (absolute or competitive growth rates comparative); | |
(e) net income applicable to Common Stock; | |
(f) cash flow, including operating cash flow, free cash flow, discounted cash flow return on investment, and cash flow in excess of cost of capital; | |
(g) earnings per Common share; | |
(h) return on shareholders equity (absolute or peer-group comparative); | |
(i) stock price (absolute or peer-group comparative); | |
(j) absolute and/or relative return on common shareholders equity; | |
(k) absolute and/or relative return on capital; | |
(l) absolute and/or relative return on assets; | |
(m) economic value added (income in excess of cost of capital); | |
(n) customer satisfaction; |
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(o) expense reduction; and | |
(p) ratio of operating expenses to operating revenues. |
Article 11. | Beneficiary Designation |
Article 12. | Deferrals |
Article 13. | Rights of Employees |
Article 14. | Change in Control |
(a) any and all outstanding Options and SARs will become immediately exercisable, and will remain exercisable throughout their entire term; | |
(b) any Restriction Periods or other restrictions imposed on Restricted Stock, Restricted Stock Units and Restricted Units will lapse, except that the degree of vesting associated with those awards that |
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is conditioned on the achievement of performance conditions will be determined as set forth in Section 14.1(c); | |
(c) except as otherwise provided in the Award Agreement, the vesting of all Performance Units and Performance Shares will be accelerated as of the effective date of the Change in Control, and Participants will be paid in cash, within thirty days after the effective date of the Change in Control, a pro rata amount based on an assumed achievement of all relevant performance objectives at target levels, and upon the length of time within the Performance Period that elapsed prior to the effective date of the Change in Control; and | |
(d) notwithstanding the foregoing, if the Committee determines that actual performance to the effective date of the Change in Control exceeds target levels, the prorated payouts made pursuant to Sections 14.1(b) and (c) will be made at levels commensurate with the actual performance (determined by extrapolating the actual performance to the end of the Performance Period) based on the length of time within the Performance Period that elapsed prior to the Change in Control. |
Article 15. | Amendment, Modification and Termination |
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Article 16. | Withholding |
Article 17. | Indemnification |
Article 18. | Successors |
Article 19. | Legal Construction |
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ADMISSION TICKET
LEAR CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 2006 AT 10:00 A.M. (EASTERN TIME)
GRAND HYATT TAMPA BAY
2900 BAYPORT DRIVE
TAMPA, FLORIDA 33607
ADMITS ONE STOCKHOLDER AND UP TO TWO GUESTS
▼ DETACH PROXY CARD HERE ▼
Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. | x Votes must be indicated (x) in Black or Blue Ink. | ||
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NO. 2 AND PROPOSAL NO. 3. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “AGAINST” PROPOSAL NO. 4 AND PROPOSAL NO. 5. |
1. | Election of Directors | ||||||||||||||||
FOR | AGAINST | ABSTAIN | |||||||||||||||
FOR all nominees listed below | o | WITHHOLD AUTHORITY to vote for all nominees listed below | o | *EXCEPTIONS | o | 3. | Approve an amendment to the Lear Corporation Long-Term Stock Incentive Plan. | o | o | o | |||||||
Nominees: David E. Fry, David P. Spalding, James A. Stern and Henry D.G. Wallace | | | |||||||||||||||
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below). | 4. | Stockholder proposal to elect each director annually. | o | o | o | ||||||||||||
* Exceptions | 5. | Stockholder proposal regarding global human rights standards. | o | o | o | ||||||||||||
FOR | AGAINST | ABSTAIN | YES | NO | |||||||||||||
2. | Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2006. | o | o | o | 6. | Do you plan to attend the Meeting? | o | o |
SCAN LINE (FPO) |
Please sign this proxy and return it promptly whether or not you expect to attend the meeting. You may nevertheless vote in person if you attend. Please sign exactly as your name appears herein. Give full title if an Attorney, Executor, Administrator, Trustee, Guardian, etc. For an account in the name of two or more persons, each should sign, or if one signs, he should attach evidence of his authority. | ||||||
Date Share Owner sign here | Co-Owner sign here |
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Dear Stockholder:
The Annual Meeting of Stockholders (the “Meeting”) of Lear Corporation (the “Company”) will be held at 10:00 a.m. (Eastern time) on Thursday, May 11, 2006 at the Grand Hyatt Tampa Bay, 2900 Bayport Drive, Tampa, Florida, 33607.
To be sure that your vote is counted, we urge you to complete and sign the proxy/voting instruction card below, detach it from this letter and return it in the postage paid envelope enclosed in this package. The giving of such proxy does not affect your right to vote in person if you attend the Meeting. The prompt return of your signed proxy will aid the Company in reducing the expense of additional proxy solicitation.
In order to assist the Company in preparing for the Meeting, please indicate in item 6 on the proxy whether you currently plan to attend the Meeting.
If you attend the Meeting in person, detach and bring this letter to the Meeting as an admission ticket for you and up to two of your guests.
March 27, 2006
LEAR CORPORATION
PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors of Lear Corporation for the Annual Meeting of Stockholders on May 11, 2006 or any adjournment or postponement thereof (the “Meeting”).
The undersigned appoints James H. Vandenberghe and Daniel A. Ninivaggi, and each of them, with full power of substitution in each of them, the proxies of the undersigned, to vote for and on behalf of the undersigned all shares of Lear Corporation Common Stock which the undersigned may be entitled to vote on all matters properly coming before the Meeting, as set forth in the related Notice of Annual Meeting and Proxy Statement, both of which have been received by the undersigned.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is given, this proxy will be voted FOR the nominees in proposals 1, FOR proposals 2 and 3, and AGAINST proposals 4 and 5.
To change your address, please mark this box. o
Change of address | ||||
LEAR CORPORATION P.O. BOX 11211 NEW YORK, NY 10203-0211 |