THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 19th day of December 2006, between COOPER TIRE & RUBBER COMPANY, a Delaware corporation (the “Company”), and Roy V. Armes (the “Executive”).
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive as its President and Chief Executive Officer and the Executive desires to be so employed; and
WHEREAS, the Company and the Executive desire to enter into this Agreement setting forth the terms and conditions of such employment.
NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound hereby, the Company and the Executive hereby agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters:
(a) “Affiliate” means any corporation, limited liability company, joint venture, partnership, or other legal entity in which the Company owns, directly or indirectly, or has previously owned, at least fifty percent (50%) of the capital stock, profits, interest or capital interest.
(b) “Annual Incentive Compensation” means the amount paid or (but for any deferral) payable to the Executive for a year under any annual bonus compensation programs or arrangements. Annual Incentive Compensation shall not include or take into account long-term incentive compensation, stock option or other equity awards (regardless of whether granted annually), pension or other retirement benefit contributions or accruals, perquisites or other fringe benefits. For the avoidance of doubt, “Annual Incentive Compensation” may be zero.
(c) “Average Annual Incentive Compensation” means:
(i) the average of the Annual Incentive Compensation earned and certified by the Compensation Committee of the Board for the Executive for the three (3) fiscal years preceding the year in which a Termination Date occurs; (provided that, for purposes of this Section 1(c), if a fiscal year is less than 12 complete months, the bonus will be annualized by dividing the bonus amount for such year by the fraction the numerator of which is the number of days constituting such short fiscal year and the denominator of which is 365);
(ii) if the Executive has been employed by the Company and the Annual Incentive Compensation that has been earned and certified by the
Compensation Committee of the Board for the Executive for fewer than three (3) fiscal years, the average of the Annual Incentive Compensation that has been earned and certified by the Compensation Committee of the Board for the Executive for the number of fiscal years through the Termination Date; or
(iii) if the Termination Date occurs prior to the date Annual Incentive Compensation is earned and certified by the Compensation Committee of the Board for the Executive for the 2007 fiscal year, the target Annual Incentive Compensation for fiscal year 2007.
(d) “Base Pay” means the Executive’s rate of annual base salary payable under this Agreement (which rate shall not be deemed to be reduced for purposes of Sections 5 or Section 6 hereof by reason of any elective deferrals of annual base salary) at the time a termination of employment occurs or, if applicable, immediately before any reduction in such amount that serves as a basis for a termination for Good Reason.