<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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 [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FORD MOTOR COMPANY
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FORD MOTOR COMPANY
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
<PAGE> 2
FORD LOGO
Ford Motor Company The American Road
Dearborn, Michigan 48121-1899
April 14, 1998
TO OUR STOCKHOLDERS:
The 1998 annual meeting will be held on May 14, 1998 at 10:00 a.m., eastern
daylight savings time, at the Westin Hotel, 21 East Fifth Street, Cincinnati,
Ohio.
We're holding this year's annual meeting in Cincinnati in recognition of our
substantial and long-standing presence in both the Cincinnati area and Ohio.
Known informally as Ford's second home, Ohio has more Ford plants and employees
than any other state in the United States, other than Michigan. Nearly 19,000
Ford employees work in eleven manufacturing facilities and administrative
offices in the state. The Cincinnati area is home to the Sharonville and Batavia
Transmission plants and regional sales offices for Ford Division,
Lincoln-Mercury Division, Ford Customer Service and Ford Credit. The Sharonville
plant produces transmissions for the most popular vehicle in North America for
the last 16 years - Ford's F-Series pickup truck - as well as the Econoline Van,
Expedition and Navigator. The Batavia plant produces transmissions for the
Contour, Mystique and Mondeo.
Please read these materials so that you'll know what we plan to do at the
meeting. Also, please either sign and return the accompanying proxy card in the
postage-paid envelope or instruct us by telephone or via the Internet as to how
you would like your shares voted. This way, your shares will be voted as you
direct even if you can't attend the meeting. Instructions on how to vote your
shares by telephone or via the Internet are on the proxy card enclosed with this
proxy statement. If you would like to attend the meeting, please see the
instructions on p. 48.
/s/ ALEX TROTMAN
ALEX TROTMAN
Chairman of the Board
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROVIDE
YOUR PROXY BY EITHER CALLING THE TOLL-FREE TELEPHONE NUMBER,
USING THE INTERNET, OR FILLING IN, SIGNING, DATING, AND PROMPTLY
MAILING THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Notice of Annual Meeting of Stockholders.................... i
Defined Terms............................................... ii
Proxy Statement............................................. 1
Election of Directors....................................... 3
Committees of the Board of Directors........................ 7
Management Stock Ownership.................................. 9
Section 16(a) Beneficial Ownership Reporting Compliance..... 11
Compensation of Directors................................... 11
Certain Relationships and Related Transactions.............. 12
Compensation and Option Committee Report on Executive
Compensation
(How Ford Determines Executive Compensation).............. 13
Compensation of Executive Officers.......................... 18
Stock Options............................................... 19
Contingent Stock Rights and Restricted Stock Units.......... 21
Stock Performance Graphs.................................... 24
Retirement Plans............................................ 26
Proposals Requiring Your Vote............................... 27
Stockholder Proposals for 1999.............................. 47
Annual Report and Other Matters............................. 47
Expenses of Solicitation.................................... 47
How to Attend the Annual Meeting............................ 48
Ford Motor Company Annual Incentive
Compensation Plan.................................. Appendix I
Ford Motor Company 1998 Long-Term
Incentive Plan..................................... Appendix II
Excerpts from the Ford Motor Company Savings
and Stock Investment Plan for Salaried Employees... Appendix III
</TABLE>
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Ford Motor Company will be held at the
Westin Hotel, 21 East Fifth Street, Cincinnati, Ohio, on Thursday, May 14, 1998,
at 10:00 a.m., eastern daylight savings time. The purpose of the meeting is to
vote on the following proposals:
PROPOSAL 1. The election of directors.
PROPOSAL 2. The approval of Coopers & Lybrand L.L.P. as Ford's independent
public accountants for 1998.
PROPOSAL 3. A management proposal relating to the Company's Annual Incentive
Compensation Plan.
PROPOSAL 4. A management proposal relating to the Company's 1998 Long-Term
Incentive Plan.
PROPOSAL 5. A management proposal relating to the Company's Savings and Stock
Investment Plan for Salaried Employees.
PROPOSAL 6. A stockholder proposal relating to political non-partisanship.
PROPOSAL 7. A stockholder proposal relating to China and the former Soviet
Union.
PROPOSAL 8. A stockholder proposal relating to global warming.
PROPOSAL 9. A stockholder proposal relating to a proposed review of executive
compensation.
PROPOSAL 10. A stockholder proposal relating to directors on key board
committees.
The record date for the annual meeting is March 16, 1998. Only stockholders of
record at the close of business on that date can vote at the meeting.
/s/ JOHN M. RINTAMAKI
JOHN M. RINTAMAKI
Secretary
April 14, 1998
i
<PAGE> 5
DEFINED TERMS
"CLASS B STOCK" means Ford's Class B Stock.
"FORD" or "WE" or "COMPANY" means Ford Motor Company.
"CONTINGENT STOCK RIGHT" means, under the Long-Term Incentive Plan, an award of
the right to earn up to a certain number of shares of common stock based on
performance against specified goals created by the Compensation Committee.
"DIVIDEND EQUIVALENT" means cash or shares of common stock (or common stock
units) equal in value to dividends that would have been paid on shares of common
stock.
"FINAL AWARD" means shares of common stock awarded by the Compensation Committee
under a Contingent Stock Right.
"LONG-TERM INCENTIVE PLAN" means Ford's 1986 or 1990 Long-Term Incentive Plan.
"NAMED EXECUTIVES" means the executives named in the Summary Compensation Table
on p. 18.
"RESTRICTED STOCK UNIT" or "UNIT" means the right to receive cash equal to the
then-current value of one share of common stock if specified goals set by the
Compensation Committee are met.
"SERIES B PREFERRED STOCK" means Ford's Series B Cumulative Preferred Stock.
"1998 PLAN" means Ford's 1998 Long-Term Incentive Plan.
ii
<PAGE> 6
PROXY STATEMENT
FORD MOTOR COMPANY April 14, 1998
THE AMERICAN ROAD
DEARBORN, MICHIGAN 48121-1899
The Board of Directors is soliciting proxies to be used at the 1998 annual
meeting. This proxy statement and the form of proxy will be mailed to
stockholders beginning April 14, 1998.
Definitions of capitalized terms in this Proxy Statement are on the facing page.
WHO CAN VOTE
Record holders of common stock and record holders of Class B Stock at the close
of business on March 16, 1998 may vote at the meeting. Holders of Series B
Preferred Stock cannot vote at this meeting.
On March 16, 1998, 1,142,137,292 shares of common stock and 70,852,076 shares of
Class B Stock were outstanding. Each stockholder has one vote for each share of
common stock and 10.747 votes for each share of Class B Stock.
Holders of common stock have 60% of the general voting power; holders of Class B
Stock have the remaining 40% of the general voting power. Holders of common
stock and holders of Class B Stock will vote together, without regard to class,
on the matters to be voted upon at the meeting.
HOW YOU CAN VOTE
Starting this year, stockholders of record can give a proxy to be voted at the
meeting by calling a toll-free telephone number or by using the Internet or, if
you prefer, you may mail in the enclosed proxy card as you have in the past.
Stockholders who hold their shares in "street name" will continue to vote their
shares in the manner prescribed by their brokers.
The telephone and Internet voting procedures have been set up for your
convenience and have been designed to authenticate your identity, to allow you
to give voting instructions, and to confirm that those instructions have been
recorded properly. If you are a stockholder of record and you would like to vote
by telephone or by using the Internet, please refer to the specific instructions
set forth on the enclosed proxy card. If you wish to vote using a paper format
and you return your signed proxy to us before the annual meeting, we will vote
your shares as you direct.
Whether you chose to vote by telephone, over the Internet or by mail, you can
specify whether your shares should be voted for all, some, or none of the
nominees for director (Proposal 1 on the proxy card). You can also specify
whether you approve, disapprove, or abstain from each of nine additional
proposals. Proposals 2 through 5 will be presented at the meeting by management,
and the rest may be presented by stockholders. Proposal 1 for the election of
directors is described in this proxy statement beginning at p. 3 and the
remaining proposals are described beginning at p. 27.
IF YOU DO NOT SPECIFY ON YOUR PROXY CARD (OR WHEN GIVING YOUR PROXY BY TELEPHONE
OR OVER THE INTERNET) HOW YOU WANT TO VOTE YOUR SHARES, WE WILL VOTE THEM "FOR"
THE ELECTION OF ALL NOMINEES FOR DIRECTOR AS SET FORTH UNDER "ELECTION OF
DIRECTORS" BELOW; "FOR" PROPOSALS 2 THROUGH 5; AND "AGAINST" PROPOSALS 6 THROUGH
10.
1
<PAGE> 7
REVOCATION OF PROXIES
You can revoke your proxy at any time before it is exercised in any of three
ways:
(1) by submitting written notice of revocation to the Secretary;
(2) by submitting another proxy by telephone, via the Internet or by mail
that is later dated and, if by mail, that is properly signed; or
(3) by voting in person at the meeting.
REQUIRED VOTES
A majority of the votes that could be cast in the election or on a proposal by
stockholders who are either present in person or represented by proxy at the
meeting is required to elect the nominees for director and to approve each
proposal. The votes are computed for each share as described on p. 1.
The total number of votes that could be cast at the meeting is the number of
votes actually cast plus the number of abstentions. Abstentions are counted as
"shares present" at the meeting for purposes of determining whether a quorum
exists and have the effect of a vote "against" any matter as to which they are
specified. Proxies submitted by brokers that do not indicate a vote for some or
all of the proposals because they don't have discretionary voting authority and
haven't received instructions as to how to vote on those proposals (so-called
"broker nonvotes") are not considered "shares present" and will not affect the
outcome of the vote.
OTHER MATTERS TO BE ACTED UPON AT THE MEETING
We do not know of any other matters to be presented or acted upon at the
meeting. Under our By-Laws, no business besides that stated in the meeting
notice may be transacted at any meeting of stockholders. If any other matter is
presented at the meeting on which a vote may properly be taken, the shares
represented by proxies will be voted in accordance with the judgment of the
person or persons voting those shares.
2
<PAGE> 8
ELECTION OF DIRECTORS
(PROPOSAL 1 ON THE PROXY CARD)
Eleven directors will be elected at this year's annual meeting. Each director
will serve until the next annual meeting or until he or she is succeeded by
another qualified director who has been elected.
We will vote your shares as you specify when providing your proxy. If you do not
specify how you want your shares voted when you provide your proxy, we will vote
them for the election of all the nominees listed below. If unforeseen
circumstances (such as death or disability) make it necessary for the Board of
Directors to substitute another person for any of the nominees, we will vote
your shares for that other person.
Each of the nominees for director is now a member of the Board of Directors,
which met nine times during 1997. The following information about the nominees
was provided by the nominees.
NOMINEES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
MICHAEL D. DINGMAN PHOTO
Age: 66
Director Since: 1981
Principal Occupation: President and CEO, Shipston Group Ltd., Nassau,
Bahamas
Recent Business Experience: Mr. Dingman is the President and CEO of Shipston
Group Ltd., a diversified international holding
company. He is also Chairman of the Board of Fisher
Scientific International, a leader in serving
science and providing products and services to
research, health care, industry, education, and
governments worldwide.
Other Directorships: Teekay Shipping Corporation
===========================================================================================================
EDSEL B. FORD II PHOTO
Age: 49
Director Since: 1988
Principal Occupation: Vice President, Ford Motor Company and President
and Chief Operating Officer, Ford Motor Credit
Company
Recent Business Experience: Mr. Ford has been President and Chief Operating
Officer of Ford Motor Credit Company since May 1991
and a Vice President of the Company since 1993.
Prior to 1991, he held numerous senior executive
positions at Ford and Lincoln-Mercury, both
domestic and abroad.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 9
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
WILLIAM CLAY FORD PHOTO
Age: 73
Director Since: 1948
Principal Occupation: Retired Chairman of the Finance Committee, Ford
Motor Company
Recent Business Experience: Mr. Ford served as Chairman of the Finance
Committee of Ford's Board of Directors from
November 1987 to January 1995. He was elected a
Vice Chairman of Ford in 1980, retiring from that
position in 1989. He also owns and is President of
The Detroit Lions, Inc.
- -----------------------------------------------------------------------------------------------------------
WILLIAM CLAY FORD, JR. PHOTO
Age: 40
Director Since: 1988
Principal Occupation: Chairman of the Finance Committee and Chairman of
the Environmental and Public Policy Committee, Ford
Motor Company
Recent Business Experience: Mr. Ford has held a number of management positions
within Ford, including Vice President -- Commercial
Truck Vehicle Center, until January 1, 1995, when
he became Chairman of the Finance Committee of the
Board of Directors of the Company. Mr. Ford also is
Vice Chairman of The Detroit Lions, Inc.
- -----------------------------------------------------------------------------------------------------------
IRVINE O. HOCKADAY, JR. PHOTO
Age: 61
Director Since: 1987
Principal Occupation: President and CEO, Hallmark Cards, Inc., Kansas
City, Missouri
Recent Business Experience: Mr. Hockaday has been President and CEO of Hallmark
Cards, Inc. since January 1, 1986, and a director
since 1978.
Other Directorships: Dow Jones, Inc.; Sprint Corporation; UtiliCorp
United, Inc.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 10
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
MARIE-JOSEE KRAVIS PHOTO
Age: 48
Director Since: 1995
Principal Occupation: Senior Fellow, Hudson Institute Inc., Indianapolis,
Indiana
Recent Business Mrs. Kravis was appointed a senior fellow of the
Experience: Hudson Institute Inc. in 1994. Prior to that time,
and since 1978, she served as Executive Director of
the Hudson Institute of Canada.
Other Directorships: Canadian Imperial Bank of Commerce; Hasbro Inc.;
Hollinger International Inc.; The Seagram Co. Ltd.;
UniMedia Inc.
- -----------------------------------------------------------------------------------------------------------
ELLEN R. MARRAM PHOTO
Age: 51
Director Since: 1988
Principal Occupation: President and CEO, Tropicana Beverage Group, New
York, New York
Recent Business Ms. Marram was appointed CEO of Tropicana Beverage
Experience: Group in 1997 after serving as President of the
Group since joining Seagram in 1993. She also
serves as Executive Vice President of The Seagram
Company Ltd. and Joseph C. Seagram & Sons, Inc. She
served as Senior Vice President of the Nabisco
Foods Group and President of Nabisco Biscuit
Company from June 1988 until April 1993.
===========================================================================================================
HOMER A. NEAL PHOTO
Age: 55
Director Since: 1997
Principal Occupation: Director, ATLAS Project, Professor of Physics, and
Interim President Emeritus, The University of
Michigan, Ann Arbor, Michigan
Recent Business Experience: Dr. Neal is the Director of the ATLAS Project,
Professor of Physics, and Interim President
Emeritus at the University of Michigan. He served
as Interim President of the University of Michigan
from July 1, 1996 to February 1, 1997. From 1987 to
1993, Dr. Neal was Chair of the University of
Michigan's Physics Department and from 1993 to 1997
he served as Vice President of Research for the
University of Michigan.
Other Directorships: Ogden Corporation; Center for Strategic and
International Studies; Smithsonian Institution
- -----------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 11
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
CARL E. REICHARDT PHOTO
Age: 66
Director Since: 1986
Principal Occupation: Retired Chairman and CEO, Wells Fargo & Company,
San Francisco, California
Recent Business Experience: Mr. Reichardt served as Chairman and CEO of Wells
Fargo & Company from 1983 until his retirement on
December 31, 1994.
Other Directorships: Wells Fargo & Company; Wells Fargo Bank, N.A.;
Columbia/HCA Healthcare Corporation; ConAgra, Inc.;
McKesson Corporation; Newhall Management
Corporation; Pacific Gas and Electric Company; PG&E
Corporation; SunAmerica Inc.
- -----------------------------------------------------------------------------------------------------------
JOHN L. THORNTON PHOTO
Age: 44
Director Since: 1996
Principal Occupation: Chairman, Goldman Sachs - Asia,
London, England
Recent Business Experience: Mr. Thornton is a member of the executive committee
of Goldman, Sachs & Co. and Chairman of Goldman
Sachs - Asia. He was previously co-chief executive
of Goldman Sachs International, the firm's business
in Europe, the Middle East and Africa. Mr. Thornton
joined Goldman Sachs in 1980 and was named a
partner in 1988.
Other Directorships: British Sky Broadcasting Group PLC; Diamond Cable
Communications PLC; Laura Ashley PLC; Pacific
Century Group
- -----------------------------------------------------------------------------------------------------------
ALEX TROTMAN PHOTO
Age: 64
Director Since: 1993
Principal Occupation: Chairman, President and CEO, Ford Motor Company
Recent Business Experience: Mr. Trotman has been Chairman of the Board of
Directors, President and CEO of the Company since
November 1, 1993. Prior to that time, Mr. Trotman
held a number of senior management positions within
Ford, including President, Ford Automotive Group;
Executive Vice President -- North American
Automotive Operations; President and Chairman of
Ford of Europe; and President of Ford-Asia Pacific.
Other Directorships: International Business Machines, Inc.; New York
Stock Exchange, Inc.; Imperial Chemical Industries,
PLC
- -----------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 12
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
Number of Members: 4
Members: Irvine O. Hockaday, Jr. (Chairman)
Ellen R. Marram
Homer A. Neal
John L. Thornton
Number of Meetings in 1997: 4
Functions: Selects independent public accountants to audit
Ford's books and records, subject to stockholder
approval.
Consults with these accountants and reviews and
approves the scope of their audit.
Reviews internal controls, accounting practices,
financial structure, and financial reporting.
Reports to the Board of Directors about these
matters.
COMPENSATION AND OPTION COMMITTEE
Number of Members: 2
Members: Michael D. Dingman (Chairman)
Carl E. Reichardt
Number of Meetings in 1997: 8
Functions: Establishes the salaries and determines any bonus
awards for Ford's executive officers.
Considers and makes recommendations on Ford's
executive compensation plans.
Makes recommendations on grants of stock options
and makes grants of Contingent Stock Rights and
Restricted Stock Units.
ENVIRONMENTAL AND PUBLIC POLICY COMMITTEE
Number of Members: 3
Members: William Clay Ford, Jr. (Chairman)
Ellen R. Marram
Homer A. Neal
Number of Meetings in 1997: 2
Functions: Reviews environmental and public policy issues
facing the Company around the world. Reports to
the Board of Directors about these matters.
7
<PAGE> 13
FINANCE COMMITTEE
Number of Members: 7
Members: William Clay Ford, Jr. (Chairman)
Michael D. Dingman
Edsel B. Ford II
William Clay Ford
Marie-Josee Kravis
Carl E. Reichardt
Alex Trotman
Number of Meetings in 1997: 6
Functions: Between meetings of the Board of Directors,
exercises all Board powers concerning Ford's
financial policies and financial management
(except matters within the powers of the Audit
Committee or the Compensation and Option
Committee).
ORGANIZATION REVIEW AND NOMINATING COMMITTEE
Number of Members: 10
Members: Alex Trotman (Chairman)
Michael D. Dingman
William Clay Ford
William Clay Ford, Jr.
Irvine O. Hockaday, Jr.
Marie-Josee Kravis
Ellen R. Marram
Homer A. Neal
Carl E. Reichardt
John L. Thornton
Number of Meetings in 1997: 8
Functions: Makes recommendations on:
- Ford's management organization;
- the nominations or elections of directors and
officers;
- the size and composition of the Board; and
- the appointments of other Company employees
referred to the Committee.
Considers stockholder suggestions for nominees
for director (other than self-nominations).
Suggestions should be submitted to the Secretary
of the Company, The American Road, Dearborn,
Michigan 48121. Suggestions received by the
Secretary's office before December 31 will be
considered by the Committee at a regular meeting
in the following year, before the proxy materials
are mailed to stockholders.
8
<PAGE> 14
MANAGEMENT STOCK OWNERSHIP
The table below shows how much stock of Ford and of its majority-owned
subsidiary, The Hertz Corporation ("Hertz"), each director, nominee, and Named
Executive beneficially owned as of March 2, 1998. No director, nominee, or Named
Executive beneficially owned any Ford preferred stock. No director, nominee or
executive officer, including Named Executives, beneficially owned more than 0.2%
of Ford's total outstanding common stock or of Hertz's total outstanding Class A
Common Stock. Present directors and executive officers as a group, including the
Named Executives, beneficially owned 0.4% of Ford common stock and 0.1% of
Hertz's Class A Common Stock. In addition, these persons held options
exercisable on or within 60 days after March 2, 1998 to buy 5,047,464 shares of
Ford common stock under stock option plans.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Percent of
Ford Outstanding Hertz
Ford Common Ford Ford Class A
Common Stock Class B Class B Common
Name Stock(1)(2) Units(3) Stock(4) Stock Stock
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
W. Wayne Booker 164,388 0 0 0 0
- ------------------------------------------------------------------------------------------------------------
Michael D. Dingman* 13,000 53,579 0 0 0
- ------------------------------------------------------------------------------------------------------------
Edsel B. Ford II* 189,044 0 5,415,002 7.64 0
- ------------------------------------------------------------------------------------------------------------
William Clay Ford* 1,827,947 585 15,142,510 21.37 0
- ------------------------------------------------------------------------------------------------------------
William Clay Ford, Jr.* 110,610 585 3,301,713 4.66 0
- ------------------------------------------------------------------------------------------------------------
Edward E. Hagenlocker 176,308 0 0 0 2,000
- ------------------------------------------------------------------------------------------------------------
Irvine O. Hockaday, Jr.* 8,000 4,852 0 0 0
- ------------------------------------------------------------------------------------------------------------
Marie-Josee Kravis* 4,600 3,319 0 0 0
- ------------------------------------------------------------------------------------------------------------
Ellen R. Marram* 6,000 7,822 0 0 0
- ------------------------------------------------------------------------------------------------------------
Jacques A. Nasser 53,568 0 0 0 10,000
- ------------------------------------------------------------------------------------------------------------
Homer A. Neal* 2,500 256 0 0 0
- ------------------------------------------------------------------------------------------------------------
Carl E. Reichardt* 20,000 585 0 0 0
- ------------------------------------------------------------------------------------------------------------
John L. Thornton(5)* 10,400 3,121 0 0 0
- ------------------------------------------------------------------------------------------------------------
Alex Trotman* 782,178 0 0 0 30,000
- ------------------------------------------------------------------------------------------------------------
Kenneth Whipple 273,051 0 0 0 0
- ------------------------------------------------------------------------------------------------------------
All Directors and Executive Officers as a
group (55 persons) 5,162,426 74,704 23,859,225 33.7 56,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Indicates Directors
9
<PAGE> 15
NOTES
(1)Includes restricted shares of common stock issued under the Restricted Stock
Plan for Nonemployee Directors, as follows: 2,000 shares for Homer A. Neal;
1,200 shares each for William Clay Ford, Jr. and Marie-Josee Kravis; 800 shares
each for the other eligible nonemployee directors, except John L. Thornton, for
whom the number includes 1,600 restricted common stock equivalents under that
plan. For nominees who are Ford employees, this includes shares of common stock
contingently credited that may be delivered after termination of employment
under the bonus plan.
(2)Michael D. Dingman has reported and disclaimed beneficial ownership of 1,264
shares of common stock owned by members of his immediate family.
Present directors and executive officers as a group have reported and disclaimed
beneficial ownership of a total of 1,990 shares of common stock.
Also, on March 2, 1998 (or within 60 days after that date), nominees who are
also Ford employees and the Named Executives have rights to acquire shares of
common stock through the exercise of stock options under Ford's stock option
plans as follows:
<TABLE>
<CAPTION>
Person Number of Shares
------ ----------------
<S> <C>
W. Wayne Booker............................................. 256,250
Edsel B. Ford II............................................ 53,080
Edward E. Hagenlocker....................................... 249,500
Jacques A. Nasser........................................... 276,000
Alex Trotman................................................ 186,500
Kenneth Whipple............................................. 348,250
</TABLE>
(3)These are common stock units credited under a deferred compensation plan for
nonemployee directors.
(4)As of March 2, 1998, the following persons owned more than 5% of the
outstanding Class B Stock: Josephine F. Ford, c/o Ford Estates, Dearborn,
Michigan, beneficially owned 14,391,055 shares (20.31%); and Lynn F. Alandt, c/o
Ford Estates, Dearborn, Michigan, beneficially owned 7,833,044 shares (11.05%).
Of the outstanding Class B Stock, 45,769,307 shares are held in a voting trust
of which Edsel B. Ford II, William Clay Ford, and William Clay Ford, Jr. are
among the trustees. The trust, which terminates May 31, 1998, requires the
trustees to vote the shares as directed by a plurality of the shares in the
trust. Edsel B. Ford II is a nephew and William Clay Ford, Jr. is the son of
William Clay Ford.
(5)Shares reported as beneficially owned by John L. Thornton do not include
securities held by Goldman, Sachs & Co. in the ordinary course of business.
IMPACT RESULTING FROM SPIN-OFF OF ASSOCIATES FIRST CAPITAL CORPORATION STOCK
To account for any change in the value of the Company's common stock that may
result from the spin-off of the Company's interest in Associates First Capital
Corporation on April 7, 1998, the following items held by officers or directors
of the Company as of April 9, 1998 are being adjusted to ensure that the
aggregate value of the item before and after the spin-off will be approximately
equal: common stock units, contingent stock rights, deferred contingent credits,
performance stock rights, restricted common stock equivalents, restricted stock
units, and stock options. Because the adjustments are underway on the date of
this proxy statement, they are not reflected in the data.
10
<PAGE> 16
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on Company records and other information, Ford believes that all SEC
filing requirements applicable to its directors and officers were complied with
for 1997 and prior years.
COMPENSATION OF DIRECTORS
GOAL. Ford wants the directors' compensation to be tied to your interests as
stockholders. Accordingly, 25% ($10,000) of each director's annual fee is
deferred in the form of common stock units. This deferral, together with the
restricted stock given to directors and director stock ownership goals, is part
of Ford's commitment to link director and stockholder interests. These
compensation programs are described below.
FEES. Directors' fees, paid only to directors who are not Ford employees, are as
follows:
<TABLE>
<S> <C>
Annual Board membership fee $40,000
Annual Committee membership fee $10,000
Attendance fee for each Board meeting $ 1,000
</TABLE>
DEFERRED COMPENSATION PLAN. Under this plan, 25% of a director's annual Board
membership fee must be deferred in common stock units. Directors also can choose
to have the payment of all or some of the remainder of their fees deferred in
the form of cash and/or common stock units. Each common stock unit is equal in
value to a share of common stock and is ultimately paid in cash. These common
stock units generate Dividend Equivalents in the form of additional common stock
units. These units are credited to the directors' accounts on the date common
stock cash dividends are paid. Any fees deferred in cash are held in the general
funds of the Company. Interest on fees deferred in cash is credited semiannually
to the directors' accounts at the then-current U.S. Treasury Bill rate plus
0.75%. In general, deferred amounts are not paid until after the director
retires from the Board. The amounts are then paid, at the director's option,
either in a lump sum or in annual installments over a period of up to ten years.
RESTRICTED STOCK PLAN. Nonemployee directors also receive restricted shares of
common stock. Each nonemployee director who has served for at least six months
receives 2,000 shares of common stock subject to restrictions on sale. In
general, the restrictions expire for 20% of the shares each year following the
year of the grant. Each nonemployee director receives an additional 2,000 shares
on the same terms when the restrictions on all of the prior 2,000 shares end.
STOCK OWNERSHIP GOALS. To further link director and stockholder interests, Ford
established stock ownership goals for nonemployee directors in 1995. Each
nonemployee director has a goal to own common stock equal in value to five times
the sum of the director's annual Board and Committee fees within five years.
LIFE INSURANCE. Ford provides nonemployee directors with $200,000 of life
insurance and $500,000 of accidental death or dismemberment coverage. The life
insurance coverage continues after the director retires from the Board if the
director is at least age 55 and has served for at least five years. A director
who retires from the Board after age 70, or, with Board approval, after age 55,
and who has served for at least five years may elect to have the life insurance
reduced to $100,000 and receive $15,000 a year for life. The accidental death or
dismemberment coverage may, at the director's expense, be supplemented up to an
additional $500,000 and ends when the director retires from the Board.
11
<PAGE> 17
MATCHING GIFT PROGRAM. Nonemployee directors may give up to $25,000 per year to
certain tax-exempt organizations under the Ford Fund Matching Gift Program. For
each dollar given, the Ford Motor Company Fund contributes two dollars.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1993, Ford has had a consulting agreement with William Clay Ford.
Under this agreement, Mr. Ford is available for consultation, representation,
and other duties (including service as a director). For these services, Ford
pays him $100,000 per year and provides facilities (including office space), an
administrative assistant, and security arrangements. This agreement will
continue until either party ends it with 30 days' notice.
Mrs. Lynn Ford Alandt's husband owns a Ford-franchised dealership. In 1997, the
dealership paid Ford about $53.3 million for products and services in the
ordinary course of business. In turn, Ford paid the dealership about $6 million
for services in the ordinary course of business. Also in 1997, Ford Motor Credit
Company, a wholly-owned subsidiary of Ford, provided about $46.5 million of
financing to the dealership and paid about $186,000 to it in the ordinary course
of business. The dealership paid Ford Credit about $52 million in the ordinary
course of business.
John L. Thornton is a partner of Goldman, Sachs & Co. Goldman, Sachs has
provided Ford with investment banking services for many years. Ford expects
Goldman, Sachs to continue providing similar services in the future.
12
<PAGE> 18
COMPENSATION AND OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
(HOW FORD DETERMINES EXECUTIVE COMPENSATION)
PURPOSES
Ford's executive compensation program aims to:
- Link managers' goals with your interests as stockholders.
- Support business plans and long-term Company goals.
- Tie executive compensation to Company performance.
- Attract and retain talented management.
TYPES OF COMPENSATION
There are two main types of compensation:
(1) Annual compensation. This includes salary and bonus. Ford awards
bonuses only when a year's profits meet a certain level required under
the bonus plan.
(2) Long-term compensation. This includes stock options and other long-term
incentive awards based on common stock. The value of these awards
depends on Company performance and future stock value.
FACTORS CONSIDERED IN DETERMINING COMPENSATION
The Compensation Committee wants the compensation of Ford executives to be
competitive in the worldwide auto industry and with major U.S. companies. Each
year, the Committee reviews a report from an outside consultant on Ford's
compensation program for executives. The report discusses all aspects of
compensation as well as how Ford's program compares with those of other large
companies. Based on this report, its own review of various parts of the program,
and its assessment of the skills, experience, and achievements of individual
executives, the Committee decides the compensation of executives.
The consultant develops compensation data using a survey of several leading
companies picked by the consultant and Ford. General Motors and Chrysler were
included in the survey. Eighteen leading companies in other industries also were
included because the job market for executives goes beyond the auto industry.
Companies were picked based on size, reputation, and business complexity.
The Committee looks at the size and success of the companies and the types of
jobs covered by the survey in determining executive compensation. One goal of
Ford's compensation program is to approximate the survey group's average
compensation, adjusted for company size and performance. In 1997, Ford's
executive salaries and long-term incentive awards generally were a little below
this average. Data on bonuses for the surveyed companies are not yet available,
but the Committee expects Ford's 1997 bonuses to be above the average of the
survey group.
The Committee also considers the tax deductibility of compensation paid to the
Named Executives. In 1995, you approved changes to the bonus plan and the
Long-Term Incentive Plan so that certain compensation paid to these individuals
would be deductible by the Company under federal tax law. These changes limit
the amount of bonuses and stock options that may be granted to any person in any
year under each plan.
Further, in 1994, the Committee created stock ownership goals for executives at
the vice president level and above. The goals are for these executives to own
common stock worth a multiple of salary,
13
<PAGE> 19
ranging from one times salary to up to five times salary for the CEO, within
five years. The CEO applied similar goals to about 25 other key managers. The
CEO and most other key managers have achieved their stock ownership goals.
ANNUAL COMPENSATION
GENERAL
Annual compensation for Ford executives includes salary and bonus. This is
similar to the compensation programs of most leading companies.
The Committee aims to pay salaries at the average of the survey companies,
adjusted for company size and performance. The Committee also looks at the
specific job duties, the person's achievements, and other criteria.
BONUSES
The total amount of all bonus awards for a given year cannot exceed the amount
set aside under Ford's bonus plan. In general, the amount set aside cannot
exceed 6% of pretax income for the year after subtracting 10% of "capital
employed in the business."
Because Ford's business depends heavily on the economy, there can be large
differences in the bonus amounts from year to year. Awards can be above average
for years when Ford has high profits. But there also are years -- such as
1990-1992 -- when no bonuses are paid because no amount could be set aside under
the plan.
Each year, the Committee determines the total amount of all bonuses for that
year. It also determines the bonus for each officer. No target awards are set
under the bonus plan. The Committee normally sets aside the maximum amount
allowed under the bonus plan, and then decides what bonuses are appropriate. It
does not award bonuses for years when no amount is set aside under the plan.
The total amount set aside for bonuses in a given year depends on Ford's
performance and competitive data. For 1997, the Committee set aside $404
million. Individual awards depend on each person's level of responsibility. For
persons other than the Named Executives, the Committee increases or decreases
awards from a formula amount, based on rank and salary, to reward a person's or
group's performance. The highest award for any Named Executive is limited by a
formula that you approved. This limit is 2% of the highest amount that can be
set aside for the year. This limit is not a target award and all 1997 bonuses to
Named Executives were below the limit.
LONG-TERM COMPENSATION
GENERAL
Today's business decisions affect Ford over a number of years. This is why the
long-term incentive awards are tied to Ford's performance and the value of
Ford's common stock over several years.
In general, the amount of the long-term incentive awards does not change as much
as the amount of the annual bonus awards.
The charts on pp. 24 and 25 show the long-term performance of Ford's common
stock.
STOCK OPTIONS
Stock options are an important part of Ford's long-term incentive program. The
managers who get them gain only when you gain -- when the common stock value
goes up.
14
<PAGE> 20
In 1995, 1996 and 1997, the Named Executives and other employees received
ten-year options in amounts similar to prior years. In deciding the size of
individual option grants for 1997, the Committee considered the number of
options granted to the person in prior years, as well as the total number of
options awarded to all employees. A formula approved by you limits the number of
options that may be granted to any Named Executive. This limit, which is not a
target, is 2.5% of the highest number of shares available in any year for grants
under the 1990 Long-Term Incentive Plan. All 1997 stock option grants to the
Named Executives were below this limit.
STOCK AWARDS
Common stock awards are based on performance against goals created by the
Committee over a period of years. Stock awarded in 1997 could not be sold until
1998.
In 1997, the Committee granted Contingent Stock Rights to Company officers and
certain other top executives. These Contingent Stock Rights cover the
performance period 1997-1999. Up to 100% of these rights may be awarded in the
form of common stock after this period ends. The awards are made if goals
relating to the following six items are met:
- return on equity compared to the top 50 non-oil Fortune 500 companies,
- selected internal financial measures,
- product programs,
- product quality,
- customer satisfaction, and
- relationships with employees.
The size of a person's Contingent Stock Right award depends on competitive
long-term compensation values determined by the outside consultant, the person's
job, and the person's expected role in Ford's long-term performance. In general,
the Committee grants less than all the shares covered by the Contingent Stock
Right award if one or more of the goals is only partly met.
During a performance period, persons with Contingent Stock Rights receive
Dividend Equivalents in cash or in common stock of the same value, as decided by
the Committee. For the 1997-1999 period, the Committee decided to pay Dividend
Equivalents in cash during 1997 on Contingent Stock Rights covering up to
200,000 shares per executive. Dividend Equivalents paid during 1997 on
Contingent Stock Rights above that level are paid in common stock. That stock
could not be sold, and was subject to conditions under the 1990 Long-Term
Incentive Plan, until 1998. After 1997, all dividend equivalents on Contingent
Stock Rights will be paid in cash.
The Final Awards of common stock in 1997 covered 1992-1996 and 1994-1996. Using
business data, the Committee reviewed Ford's performance during the 1992-1996
period against goals for product programs (25%), cost reduction (25%), product
quality and customer acceptance worldwide (35%), and relationships with
employees (15%). The Committee decided that Ford partly achieved the product
program and product quality goals, met the cost reduction goals, mostly met the
customer acceptance goals, and met the employee relationships goals. Based on
this performance, the Committee decided to award 83% of the shares covered by
the Contingent Stock Rights and then make adjustments for individual
performance.
Using business data, the Committee also reviewed Ford's performance during the
1994-1996 period against goals for corporate return on equity (25%), product
programs (25%), product quality and customer acceptance worldwide (35%), and
relationships with employees (15%). The Committee
15
<PAGE> 21
decided that Ford partly achieved the return on equity, product program and
product quality goals, met the cost reduction goals, mostly met the customer
acceptance goals, and met the employee relationships goals. Based on this
performance, the Committee decided to award 80% of the shares covered by the
Contingent Stock Rights and then make adjustments for individual performance.
For the Named Executives, the adjusted awards for 1992-1996 and 1994-1996 were
100% of the initial grants. The Final Awards for the period ending in 1997 will
be made in mid-1998 after Company performance data are available. These amounts
will appear in next year's proxy statement.
RESTRICTED STOCK UNITS
The Committee granted Restricted Stock Units to ten executives in 1997. Four of
the ten -- Messrs. Trotman, Booker, Hagenlocker, and Nasser -- are Named
Executives.
A Restricted Stock Unit is worth one share of common stock. Again, this ties the
executive's interests to your interests as stockholders. If the executive meets
certain goals decided by the Committee, Ford pays the executive cash for each
Restricted Stock Unit equal to the then-current value of a share of common
stock.
The Committee grants the Restricted Stock Units and decides the goals, the
restriction period, and the other terms of each Unit. The Committee also decides
the extent to which the goals have been met and the final number of Units to
award after the restriction period ends. During the restriction period, the
Units cannot be sold or otherwise disposed of, and they are subject to the same
conditions that apply to the Contingent Stock Rights.
The grant of Restricted Stock Units depends on the achievement of several major
Ford goals:
- worldwide product excellence,
- low-cost producer,
- industry leadership in customer satisfaction,
- empowered people,
- nimble through process leadership,
- industry leadership in corporate citizenship, and
- worldwide growth.
The Committee also reviews each person's contribution to meeting these goals.
Restricted Stock Units may not be sold until 18 months after retirement and are
subject to conditions under the 1990 Long-Term Incentive Plan. Dividend
Equivalents are paid in cash until the payout of the Units. The Units have no
voting rights.
SELECT RETIREMENT PLAN
To speed up the development of future leaders and reduce the number of top
manager jobs, the Committee supported making offers under the Select Retirement
Plan, a voluntary retirement program for certain U.S. management employees, in
1997. In general, the program added three years of age and contributory service
for retirement benefits purposes. To be eligible, employees generally had to be
at least age 55 with 10 or more years of service. The Committee reviewed and
approved Select Retirement Plan offers for certain executives. Some of the
executives retired during 1997 under this program. More information on the
program is on p. 27.
16
<PAGE> 22
CEO COMPENSATION
ANNUAL COMPENSATION
Mr. Trotman's salary remained at $2 million in 1997. The Committee last
increased his salary in 1996, the first increase since 1993.
The Committee considered Mr. Trotman's vision and strong leadership in
determining his 1997 bonus. It also considered other factors in applying its
"negative discretion" permitted under the Internal Revenue Code (section
162(m)). It also considered his job as head of a restructured global company
with a wide area of control and broad duties. The Committee and other
nonemployee directors of Ford reviewed his 1997 accomplishments, and the
Committee considered these combined views. Mr. Trotman's bonus for 1997 was
below the formula limit in the bonus plan, partly because of the annuity award
described below.
The Committee awarded a conditional annuity under the Supplemental Executive
Retirement Plan to Mr. Trotman in lieu of a portion of his 1997 bonus. The
annuity provides additional retirement income (see p. 26), and is subject to the
plan's conditions. The present value of the annuity is charged against the
amount set aside for bonuses under the bonus plan. In deciding the amount of the
annuity, the Committee reviewed individual and Company performance as well as
the amount of Mr. Trotman's bonus compared to the bonuses of other executives.
The Committee also considered the relationship of his bonus to those of other
executives in the past. No other annuities were awarded in 1997.
LONG-TERM COMPENSATION
The Final Award of common stock in 1997 for Mr. Trotman was based on Ford's
performance from 1992 to 1996 and 1994 to 1996, using the method described above
under "Long-Term Compensation-Stock Awards." (The amount of the Final Award is
shown in column (h) of the Summary Compensation Table on p. 18, under the
heading "LTIP Payouts.") The Committee adjusted the amount based on the factors
described above. The Final Award was in shares of common stock that could not be
sold and that generally were subject to restrictions until 1998.
The value of the stock options and Contingent Stock Rights granted to Mr.
Trotman in 1997 also depends on Ford's future success -- and whether that
success is reflected in the value of the common stock. For the Contingent Stock
Rights, the value of any Final Award also depends on the level of achievement of
goals created by the Committee for 1997-1999.
In applying its "negative discretion" under the Internal Revenue Code in
deciding the number of stock options to grant Mr. Trotman (shown in column (b)
of the Options/SAR Grants Table on p. 20), the Committee considered the value of
his other long-term incentive compensation compared with competitive long-term
compensation values. It also considered the complexity and duties of his job. In
deciding the number of Restricted Stock Units to grant Mr. Trotman (shown in the
Long-Term Incentive Plan Awards Table on p. 22), the Committee also considered
the importance of his contribution to the achievement of major Company goals. No
further grants of Restricted Stock Units to Mr. Trotman are contemplated prior
to his planned retirement in 2000.
Finally, the Committee considered the deductibility of Mr. Trotman's
compensation under the tax laws. As discussed above, you approved plan
amendments allowing Ford to deduct, for federal income tax purposes, certain
parts of Mr. Trotman's compensation (as well as that of other Named Executives)
for tax years starting with 1995.
Compensation and Option Committee
Michael D. Dingman, Chairman
Carl E. Reichardt
17
<PAGE> 23
COMPENSATION OF EXECUTIVE OFFICERS
The table below shows the before-tax compensation for the last three years for
Alex Trotman, who served as CEO in 1997, and the four next highest paid
executive officers at the end of 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Long-Term Compensation
--------------------------------
Annual Compensation Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Compensation Award(s) SARs Payouts Compensation
Name and Principal Position Year Salary($) Bonus($) ($) ($)(1) (#)(2) ($)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------
Alex Trotman 1997 2,000,000 7,000,000 940,135 630,754 300,000 -- 119,996
Chairman, President and 1996 1,916,667 2,500,000 502,884 704,429 300,000 9,793,875 114,996
CEO 1995 1,500,000 3,000,000 384,910 456,444 350,000 1,260,000 90,000
- ---------------------------------------------------------------------------------------------------------------------------------
W. Wayne Booker(5) 1997 677,917 2,300,000 354,135 -- 75,000 -- 40,675
Vice Chairman 1996 650,000 950,000 303,070 -- 75,000 1,751,750 39,000
1995 603,750 1,100,000 227,141 -- 90,000 535,000 36,225
- ---------------------------------------------------------------------------------------------------------------------------------
Edward E. Hagenlocker(6) 1997 803,333 2,600,000 428,860 21,126 150,000 -- 48,196
Vice Chairman 1996 758,333 1,050,000 347,730 20,332 150,000 2,030,438 45,499
1995 704,167 1,250,000 266,741 -- 175,000 693,000 42,247
- ---------------------------------------------------------------------------------------------------------------------------------
Jacques A. Nasser(7) 1997 716,664 3,000,000 362,871 -- 150,000 -- 42,998
Executive Vice President 1996 591,667 950,000 231,196 -- 85,000 1,035,125 35,500
and President, Ford 1995 537,917 850,000 138,469 -- 100,000 189,000 32,273
Automotive Operations
- ---------------------------------------------------------------------------------------------------------------------------------
Kenneth Whipple 1997 677,917 2,300,000 378,145 -- 75,000 -- 40,675
Executive Vice President; 1996 647,500 950,000 321,700 86,904 75,000 4,737,688 38,850
President, Ford Financial 1995 603,750 1,100,000 273,750 81,795 90,000 1,165,500 36,225
Services Group; and
Chairman and CEO, Ford
Motor Credit Company
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES
(1)Amounts shown as Restricted Stock Awards represent Dividend Equivalents paid
in restricted stock under the Long-Term Incentive Plans. Restrictions on this
stock generally lapsed in 1998. Holders of restricted stock receive the same
cash dividends as other stockholders owning common stock.
Listed below are the total number of shares of restricted stock owned by the
Named Executives as of December 31, 1997, including shares reported as "LTIP
Payouts" in column (h) of this table and shares of common stock contingently
credited under the bonus plan, as well as the market values of these shares
(determined by the closing price of common stock on the New York Stock Exchange
on December 31, 1997):
<TABLE>
<CAPTION>
Named Executive Number of Shares Market Value
--------------- ---------------- ------------
<S> <C> <C>
Alex Trotman......................................... 458,683 $22,274,793
W. Wayne Booker...................................... 61,664 $ 2,994,558
Edward E. Hagenlocker................................ 83,944 $ 4,076,531
Jacques A. Nasser.................................... 32,000 $ 1,554,000
Kenneth Whipple...................................... 239,726 $11,641,694
</TABLE>
18
<PAGE> 24
The ultimate worth of the restricted stock depends on the value of common stock
when the restrictions lapse. Under the Long-Term Incentive Plans generally, the
Compensation Committee determines the restriction period for shares included in
each Final Award. For each of the Named Executives, restrictions ended on
January 1, 1998 on up to 18,000 shares awarded for the 1990-94 performance
period. Restrictions ended on February 13, 1998 on all remaining shares of
restricted stock held by the Named Executives.
(2)In general, under the 1985 Stock Option Plan and the 1990 Long-Term Incentive
Plan, stock appreciation rights may be granted along with the grant of options
to executive officers. Exercise of a stock appreciation right cancels the
related stock option, and vice versa.
(3)These amounts represent Final Awards under the Long-Term Incentive Plans. The
Final Awards are in restricted stock and are based on the attainment of
performance goals and on individual performance. (See note 1 for more details on
restricted stock.) The amounts shown represent Final Awards for performance
periods ending in 1996 and 1995. No amount is shown for the performance period
ending in 1997 because the awards will not be decided until the middle of 1998.
Those amounts will appear in next year's proxy statement.
(4)These amounts are (1) matching contributions by Ford under the Savings and
Stock Investment Plan ("SSIP") and (2) the values of certain credits provided to
the Named Executives under the Benefit Equalization Plan ("BEP"). Under the BEP,
Ford provides benefits substantially equal to benefits that could not be
provided under the SSIP because of limitations under the Internal Revenue Code.
For 1997, the amounts shown in column (i) as SSIP matching contributions and BEP
credits, respectively, are as follows:
<TABLE>
<CAPTION>
SSIP
Matching BEP
Person Contributions Credits
------ ------------- -------
<S> <C> <C> <C>
Alex Trotman.......................................... $9,598 and $110,398
W. Wayne Booker....................................... $9,598 and $ 31,077
Edward E. Hagenlocker................................. $9,598 and $ 38,598
Jacques A. Nasser..................................... $9,598 and $ 33,400
Kenneth Whipple....................................... $9,598 and $ 31,077
</TABLE>
(5)All of Mr. Booker's 1995 compensation, and 83% of his 1996 compensation, was
for his service as Executive Vice President. The rest of his 1996 compensation
and all of his 1997 compensation was for his service as Vice Chairman.
(6)All of Mr. Hagenlocker's 1995 compensation, and 83% of his 1996 compensation
was for his service as President of Ford Automotive Operations. The rest of his
1996 compensation and all of his 1997 compensation was for his service as Vice
Chairman.
(7)100% of Mr. Nasser's 1995 compensation, and 80% of his 1996 compensation, was
for his service as Group Vice President, Product Development. The rest of his
1996 compensation and all of his 1997 compensation was for his service as
Executive Vice President and President of Ford Automotive Operations.
STOCK OPTIONS
The 1990 Long-Term Incentive Plan allows grants of stock options and other
rights relating to common stock. In general, whether exercising stock options is
profitable depends on the relationship between the common stock's market price
and the options' exercise price, as well as on the grantee's investment
decisions. Options that are "in the money" on a given date can become "out of
the money"
19
<PAGE> 25
if prices change on the stock market. For these reasons, we believe that placing
a current value on outstanding options is highly speculative and may not
represent the true benefit, if any, that may be realized by the grantee.
The following two tables give more information on stock options.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Grant Date
Individual-Grants Value (2)
- -------------------------------------------------------------------------------------------------------------------
(a) (c) (d) (e) (f)
(b) % of Total
Number of Options/SARs
Securities Granted to Exercise
Underlying Employees or Base Grant Date
Options/SARs in Fiscal Price Expiration Present
Name Granted(#) Year ($/Sh) Date Value $
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Alex Trotman 300,000 3.5% 31.9375 3/14/2007 1,728,000
- -------------------------------------------------------------------------------------------------------------------
W. Wayne Booker 75,000 0.9% 31.9375 3/14/2007 432,000
- -------------------------------------------------------------------------------------------------------------------
Edward E. Hagenlocker 150,000 1.7% 31.9375 3/14/2007 864,000
- -------------------------------------------------------------------------------------------------------------------
Jacques A. Nasser 150,000 1.7% 31.9375 3/14/2007 864,000
- -------------------------------------------------------------------------------------------------------------------
Kenneth Whipple 75,000 0.9% 31.9375 3/14/2007 432,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES
(1)The exercise price of the stock options is the average of the high and low
selling prices on the New York Stock Exchange on the grant date. Stock
appreciation rights were granted in tandem with these stock options.
33% of a stock option grant can be exercised one year after the grant date, 66%
after two years, and 100% after three years. Any unexercised options expire
after ten years.
If a grantee retires, becomes disabled, or dies, his or her options continue to
be exercisable up to the normal expiration date. In most other instances of
employment termination, all rights end upon termination.
Options are subject to certain conditions, including not engaging in competitive
activity. Options generally cannot be transferred except through inheritance.
In general, each grantee agrees to remain a Ford employee for at least one year
from the grant of the option.
(2)These values were determined using the Black-Scholes methodology and the
assumptions described in Note 11 to Ford's Consolidated Financial Statements
contained in Ford's 1997 Annual Report. The ultimate value of the options, if
any, will depend on the future value of the common stock and the grantee's
investment decisions, neither of which can be accurately predicted.
20
<PAGE> 26
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of Securities Value
Underlying Unexercised of Unexercised
Options/SARs at FY-End In-the-Money Options/
(#) SARs at FY-End($)(1)
Shares -----------------------------------------------
Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise(#) $ Unexercisable Unexercisable
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Alex Trotman 0 0 644,500/ 13,605,031/
787,500 13,508,594
- ------------------------------------------------------------------------------------------------------------------------------
W. Wayne Booker 0 0 212,750/ 5,100,609/
196,250 3,361,016
- ------------------------------------------------------------------------------------------------------------------------------
Edward E. Hagenlocker 110,500 1,702,750 162,500/ 2,846,875/
387,500 6,629,688
- ------------------------------------------------------------------------------------------------------------------------------
Jacques A. Nasser 0 0 205,250/ 4,584,234/
288,750 4,947,734
- ------------------------------------------------------------------------------------------------------------------------------
Kenneth Whipple 68,750 1,353,085 304,750/ 7,056,044/
196,250 3,361,016
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES
(1)These year-end values represent the difference between the fair market value
of common stock subject to options (based on the stock's closing price on the
New York Stock Exchange on December 31, 1997) and the exercise prices of the
options. "In-the-money" means that the fair market value of the stock is greater
than the option's exercise price on the valuation date.
CONTINGENT STOCK RIGHTS AND RESTRICTED STOCK UNITS
Under the Long-Term Incentive Plan, eligible employees may receive
nontransferable Contingent Stock Rights. A Contingent Stock Right is the right
to receive, after a specified performance period, a Final Award of up to a
specified number of shares of common stock. The number of shares depends on
whether the Contingent Stock Right's performance goals are achieved and on the
employee's individual performance.
Under the Long-Term Incentive Plan, eligible employees also may receive
nontransferable Restricted Stock Units. A Restricted Stock Unit is the right to
receive, after the restriction period expires and subject to the achievement of
certain goals, cash equal in value to one share of common stock. The final
number of Restricted Stock Units that can be paid out in cash depends on whether
the goals are achieved and on the employee's individual contribution.
21
<PAGE> 27
The following table shows information on 1997 grants of Contingent Stock Rights
and Restricted Stock Units to the Named Executives.
LONG-TERM INCENTIVE PLAN-AWARDS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Estimated Future Payouts
(c) under Non-Stock Price-Based Plans
(b) Performance ------------------------------------------
Number of or Other
Shares, Units Period Until (d) (e) (f)
(a) or Other Maturation Threshold Target(2) Maximum
Name Rights(#) or Payout (#) (#) (#)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Alex Trotman CSRs 150,000 1997-99 0 120,000 150,000
RSUs 200,000 Ret. + 18 mos. 0 n/a 200,000
- --------------------------------------------------------------------------------------------------------------------------
W. Wayne Booker CSRs 30,000 1997-99 0 24,000 30,000
RSUs 10,000 Ret. + 18 mos. n/a 10,000
- --------------------------------------------------------------------------------------------------------------------------
Edward E. Hagenlocker CSRs 50,000 1997-99 0 40,000 50,000
RSUs 10,000 Ret. + 18 mos. n/a 10,000
- --------------------------------------------------------------------------------------------------------------------------
Jacques A. Nasser CSRs 50,000 1997-99 0 40,000 50,000
RSUs 40,000 Ret. + 18 mos. n/a 40,000
- --------------------------------------------------------------------------------------------------------------------------
Kenneth Whipple CSRs 30,000 1997-99 0 24,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES
(1)These entries represent the number of shares specified in Contingent Stock
Rights or Restricted Stock Units granted in 1997.
(2)No payout targets were created for the Restricted Stock Units.
CONTINGENT STOCK RIGHTS
The Compensation Committee decides the number of shares to be included in a
Final Award by determining how completely certain performance goals were
achieved. Usually, Contingent Stock Rights are granted each year. The
performance period is ordinarily five years for grants made before 1994 and
three years for grants made in 1994 or afterward. For 1997, performance goals
for the Contingent Stock Rights reported in column (b) of the table cover the
1997-99 period and include essentially the same performance measures for each of
the Named Executives. The performance goals and the mechanics of receiving a
Final Award are more fully discussed on pp. 15 and 16.
Dividend Equivalents paid in 1997 to the Named Executives in cash and in
restricted stock are reported in columns (e) and (f) of the Summary Compensation
Table on p. 18. Final Awards of common stock made to the Named Executives for
the 1992-96 and 1994-96 performance periods are reported in column (h) of the
Summary Compensation Table.
The amount ultimately realized for a Final Award will depend on the value of the
common stock when the restrictions lapse and on the "earning out conditions."
Under these conditions, if an employee quits, retires without Company approval,
is released in Ford's best interest, is discharged, or engages in competitive
activity after termination, all of the employee's undistributed Final Awards, as
well as outstanding Contingent Stock Rights, will be forfeited and canceled
unless a waiver is granted by the Committee. Further, all of the employee's
rights under any award will be forfeited if the Committee
22
<PAGE> 28
determines that the employee acted in a manner inimical to Ford's best
interests. After the restriction period ends, however, shares of common stock
representing a Final Award are distributed to the employee free of restrictions
and conditions.
RESTRICTED STOCK UNITS
The Committee creates the performance goals for the Restricted Stock Units and
selects the persons who receive the Units. The 1997 grants, reported in column
(b) of the table on p. 22, depend on the achievement of seven major Company
goals described on p. 16. Dividend Equivalents paid to the Named Executives are
included in column (e) of the Summary Compensation Table. No Restricted Stock
Units were paid out in 1997 to any of the Named Executives.
As with Contingent Stock Rights, the amount ultimately realized under a
Restricted Stock Unit depends on the achievement of performance goals, the
compliance with certain conditions, and the value of common stock when the
restrictions end.
23
<PAGE> 29
STOCK PERFORMANCE GRAPHS
SEC rules require proxy statements to contain a performance graph comparing,
over a five-year period, the performance of our common stock against Standard &
Poor's 500 Stock Index and against either a published industry or
line-of-business index or a group of peer issuers. Ford chose the other two
principal U.S. auto manufacturers -- Chrysler and General Motors -- as the peer
issuers for the graph. We think this approach is more informative since relevant
line of business indexes merely combine the three U.S. automakers. A similar
performance graph covering a ten-year period also is provided. Both graphs
assume an initial investment of $100 and quarterly reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE SHAREHOLDER RETURN
FORD, GENERAL MOTORS, CHRYSLER AND S&P 500 STOCK INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD GENERAL
(FISCAL YEAR COVERED) FORD MOTORS CHRYSLER S&P 500
<S> <C> <C> <C> <C>
1992 100 100 100 100
1993 155 173 169 110
1994 138 135 159 112
1995 149 174 186 153
1996 174 189 232 189
1997 274 225 260 252
</TABLE>
24
<PAGE> 30
COMPARISON OF TEN-YEAR CUMULATIVE SHAREHOLDER RETURN
FORD, GENERAL MOTORS, CHRYSLER AND S&P 500 STOCK INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD GENERAL
(FISCAL YEAR COVERED) FORD MOTORS CHRYSLER S&P 500
<S> <C> <C> <C> <C>
1987 100 100 100 100
1988 140 145 121 117
1989 129 157 94 154
1990 85 137 69 149
1991 96 120 67 194
1992 152 140 187 209
1993 236 242 316 230
1994 210 189 297 233
1995 227 243 348 321
1996 266 264 435 394
1997 418 315 487 526
</TABLE>
25
<PAGE> 31
RETIREMENT PLANS
Ford's General Retirement Plan ("GRP") provides a benefit for each year of
noncontributory participation, and added benefits for those who make additional
contributions. Ford also has two other retirement plans. One is the Supplemental
Executive Retirement Plan ("SERP"), under which certain executives, including
the Named Executives, may receive (1) an additional annual payment after
retirement based on years of credited service and final average base salary,
and/or (2) annuities based on Company earnings, the executive's performance, and
other factors. The other plan is the Benefit Equalization Plan ("BEP"), under
which eligible employees, including the Named Executives, receive benefits
substantially equal to those that would have been provided under the GRP but
that could not be provided because of Internal Revenue Code limitations.
The following table shows the annual retirement benefits that would be payable
at normal retirement (age 65 or later) on January 1, 1998. Benefits are shown
for various rates of final average base salary and assume that employee
contributions were made for the indicated periods. Employees who have completed
at least three months of service, effective January 1, 1996, contribute at the
rate of 1 1/2% of base salary (3 1/2% of base salary over $1,150 a month before
1989). The table shows total annual amounts payable under the GRP, SERP and BEP,
including amounts relating to employee contributions.
ANNUAL CONTRIBUTORY PENSIONS
YEARS OF SERVICE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Final
Average
Base Salary 20 Years 25 Years 30 Years 35 Years 40 Years
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
$ 200,000 $ 83,850 $ 105,110 $ 126,380 $ 147,640 $ 167,090
- -----------------------------------------------------------------------------------------------------------
400,000 194,530 243,840 293,160 342,470 387,690
- -----------------------------------------------------------------------------------------------------------
600,000 305,210 382,570 459,940 537,300 608,290
- -----------------------------------------------------------------------------------------------------------
800,000 423,890 531,300 638,720 746,130 844,890
- -----------------------------------------------------------------------------------------------------------
1,000,000 530,570 665,030 799,500 933,960 1,057,490
- -----------------------------------------------------------------------------------------------------------
1,200,000 637,250 798,760 960,280 1,121,790 1,270,090
- -----------------------------------------------------------------------------------------------------------
1,400,000 743,930 932,490 1,121,060 1,309,620 1,482,690
- -----------------------------------------------------------------------------------------------------------
1,600,000 850,610 1,066,220 1,281,840 1,497,450 1,695,290
- -----------------------------------------------------------------------------------------------------------
1,800,000 957,290 1,199,950 1,442,620 1,685,280 1,907,890
- -----------------------------------------------------------------------------------------------------------
2,000,000 1,063,970 1,333,680 1,603,400 1,873,110 2,120,490
- -----------------------------------------------------------------------------------------------------------
</TABLE>
GRP and BEP benefits are computed by averaging the employee's highest five
consecutive annual base salaries in the ten years immediately before retirement.
SERP benefits generally are computed by averaging the employee's final five
year-end annual base salaries immediately before retirement. No annuities were
awarded in 1993 or 1994. Mr. Trotman received annuities for 1995, 1996 and 1997.
Assuming a retirement age of 65 and satisfaction of all conditions, the
estimated percentage of total annual retirement benefits to be paid to Mr.
Trotman from his annuities is 4%.
As of December 31, 1997, the credited years of service for each of the Named
Executives were as follows: Alex Trotman, 42 years; W. Wayne Booker, 39 years;
Edward E. Hagenlocker, 33 years;
26
<PAGE> 32
Jacques A. Nasser, 4 years (does not include 26 years of credited service under
the Ford Australia retirement plan); and Kenneth Whipple, 39 years.
The GRP and BEP benefits are computed as a joint-and-survivor annuity. The SERP
benefit is computed as a straight-life annuity. Benefits payable under the plans
are not reduced for Social Security or other offsets.
In addition to the GRP and BEP, Ford maintains a voluntary retirement program
for select U.S. management employees called the Select Retirement Plan ("SRP").
The SRP adds three years of age and contributory service to the employee for
retirement benefits purposes, with a 15% floor on the increase of the employee's
monthly benefits under any applicable retirement plans. The SRP calculates
average pay on the basis of final pay for three of the five years. SRP benefits
also include continuation of health and life insurance on the same terms as
other retiring employees, as well as predecision counseling and reemployment
assistance. To participate in the SRP, an employee must be selected by
management and generally must be at least age 55 and have ten or more years of
credited service under the retirement plans.
PROPOSALS REQUIRING YOUR VOTE
In addition to voting for directors, the following nine proposals may be voted
on at the meeting. Ford will present Proposals 2 through 5; we expect the
remaining five to be presented by stockholders. In accordance with SEC rules,
the text of each of the proposals is printed exactly as it was submitted.
A majority of the votes that could be cast by stockholders who are either
present in person or represented by proxy at the meeting is required to approve
each proposal. The votes will be computed for each share as described on p. 1.
When providing your proxy, whether by telephone, the Internet, or by mail, you
will be able to designate whether your shares are voted to approve, disapprove,
or abstain from each of the proposals. Instructions for voting for directors can
be found on p. 3.
PROPOSAL 2
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors selects and hires independent
public accountants to audit Ford's books of account and other corporate records.
The Audit Committee's selection for 1998 must be approved by you.
The Audit Committee selected Coopers & Lybrand L.L.P. to audit Ford's books of
account and other corporate records for 1998. This firm has audited Ford's books
since 1946 and is well qualified. Representatives of Coopers & Lybrand L.L.P.
will be present at the meeting with the opportunity to make a statement and
answer questions.
For 1997, Ford paid Coopers & Lybrand L.L.P., $31.4 million for world-wide audit
and nonaudit services.
Ford management will present the following resolution to the meeting:
"RESOLVED: That the selection, by the Audit Committee of the Board of Directors,
of Coopers & Lybrand L.L.P. as independent public accountants to audit the books
of account and other corporate records of the Company for 1998 is ratified."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
27
<PAGE> 33
PROPOSAL 3
APPROVAL OF ANNUAL INCENTIVE AWARDS TO CERTAIN EXECUTIVES UNDER THE COMPANY'S
ANNUAL INCENTIVE COMPENSATION PLAN AND TERMINATION OF SUPPLEMENTAL COMPENSATION
PLAN
The Company has adopted a new incentive compensation plan, subject to your
approval.
The terms under which the Named Executives may receive annual incentive awards
under the Company's Annual Incentive Compensation Plan are described below. The
text of the Plan is shown in Appendix I.
The Plan replaces the Company's Supplemental Compensation Plan for awards for
1998 and future years. If the new Plan is approved by you, the Company will
terminate the Supplemental Compensation Plan, except for prior bonus deferrals.
The Company also plans to return any remaining funds in the Reserve under that
plan to the income of the Company. You are asked to approve this termination.
To permit the Company to deduct compensation over $1 million paid to certain
executives under performance-based compensation plans, you must approve key
terms of the new Plan. These terms include a limit on the amount of compensation
that may be awarded to any Named Executive for any year under the Plan.
PLAN BEING REPLACED
Currently the Supplemental Compensation Plan provides that:
- Bonus awards are based on annual worldwide profits.
- In general, salaried employees of the Company and eligible
subsidiaries who are included in the Supplemental Compensation Roll and
above are eligible to receive awards.
- The total amount of all bonus awards for a given year cannot exceed
the amount set aside under the Reserve under the Plan. In general, the
amount set aside cannot exceed 6% of pretax income for the year after
subtracting 10% of "capital employed in the business." This formula
cannot be changed without your approval.
- Each year, the Compensation and Option Committee of the Board of
Directors determines the total amount of all bonuses for that year. It
also determines the bonus for each officer.
- No target awards are set under the Plan. The Committee normally sets
aside the maximum amount allowed under the Plan, and decides what
bonuses are appropriate. It does not award bonuses for years when no
amount is set aside under the Plan.
- The highest award for any Named Executive is limited by a formula that
you approved. This limit is 2% of the highest amount that can be set
aside for the year.
NEW ANNUAL INCENTIVE COMPENSATION PLAN
CRITERIA FOR GRANTING AWARDS
The new Annual Incentive Compensation Plan provides for annual cash awards to
participants based on achievement of specific performance goals relating to a
specific year.
The goals for any award to a Named Executive may be based on one or more of the
Performance Criteria defined in paragraph (o) of Section 2 of the Plan (See
Appendix I). Unlike the current plan, awards under the proposed plan would not
be limited to a specific formula or percentage of pretax income. For example,
awards could be based on performance against quality and customer satisfaction,
various financial measures, productivity, or any other factor set forth in the
Plan.
28
<PAGE> 34
ELIGIBILITY
The Compensation and Option Committee of the Board of Directors selects officers
to participate in the Plan. The Annual Incentive Compensation Committee
appointed by the Compensation and Option Committee selects other salaried
employees to participate. We expect about 5,200 employees annually will
participate in the Plan, including about 45 officers.
EXPENSES
The Company and any participating subsidiaries will pay the expenses of the
Plan.
AWARDS TO NAMED EXECUTIVES
For awards to Named Executives, the Compensation and Option Committee will
select the performance criteria and establish the related goals to be used to
measure performance. It also will establish the formula for determining the
percentage of the target award that is earned by each individual and identify
any minimum performance levels below which no award will be paid.
Awards may be less than or greater than 100% of the target award.
There will be a limit on the amount of compensation that may be awarded to any
of the Named Executives for any year under the Plan. The annual limit for any
year is $10,000,000. The Compensation and Option Committee, in its discretion,
may make individual awards to Named Executives that are less than the annual
limit.
CONDITIONS
The Plan has certain conditions which must be met prior to the distribution of
any award in order for a participant to receive an award following termination
of employment. These conditions include continuing employment with the Company
or a subsidiary or, if termination was for a reason other than death, being
available to consult and supply information to the Company. In addition, the
participant must refrain from competitive activity, unless the Company approves
the activity. A participant also may forfeit an award, including deferred
amounts, for conduct contrary to the best interests of the Company.
AMENDMENT OR TERMINATION OF PLAN
The Compensation and Option Committee may terminate or amend the Plan at any
time as long as it does not adversely affect awards previously made under the
Plan.
STOCKHOLDER APPROVAL CONDITION
The Compensation and Option Committee granted target awards under the Plan to
officers, including Named Executives, and the Annual Incentive Compensation
Committee granted target awards to other employees, for the 1998 performance
period. These awards are subject to your approval of this proposal. The amount
of the awards which ultimately may be payable for 1998 cannot be determined at
this time. However, no award for 1998 to any Named Executive will exceed the
annual limit.
If you approve this proposal, the Supplemental Compensation Plan will terminate
on May 14, 1998, except for prior bonus deferrals. Any remaining funds in the
Reserve under that plan will be returned to the income of the Company. In
addition, the terms of the new Plan, including the annual limit, will become
effective for awards to Named Executives for 1998 and future years.
29
<PAGE> 35
If you do not approve this Proposal 3, the present Supplemental Compensation
Plan will continue and the Committee will make bonus awards for 1998 and future
years under that plan. (See p. 14 for a discussion of awards under that plan.)
RESOLUTION
Ford management will present the following resolution to the meeting:
"RESOLVED, that the termination of the Company's Supplemental Compensation Plan,
except for prior bonus deferrals, and the terms under which annual incentive
compensation may be awarded to the Named Executives under the Company's Annual
Incentive Compensation Plan, as described in Proposal 3 of the Proxy Statement
and shown in Appendix I thereto, is approved."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
PROPOSAL 4
APPROVAL OF STOCK OPTIONS AND STOCK AWARDS TO CERTAIN EXECUTIVES UNDER THE
COMPANY'S 1998 LONG-TERM INCENTIVE PLAN
The Company has adopted a new long-term incentive plan, subject to your
approval.
The terms under which the Named Executives may receive stock options and stock
awards under the new 1998 Plan are described below. The text of the 1998 Plan is
shown in Appendix II.
To permit the Company to deduct, for federal income tax purposes, compensation
over $1 million paid to certain executives under performance-based compensation
plans, you must approve key terms of the 1998 Plan. These terms include the
amount of stock options and stock awards that may be granted to any of the Named
Executives for any year under the 1998 Plan.
PLAN BEING REPLACED
The 1998 Plan replaces the Company's 1990 Long-Term Incentive Plan for awards
for 1998 and future years. The old plan was terminated, subject to your approval
of the new 1998 Plan. For a discussion of stock option and stock award programs
and limits on awards to the Named Executives under the old plan, see pp. 14-16.
NEW 1998 LONG-TERM INCENTIVE PLAN
Under the 1998 Plan, stock options and stock rights may be granted any time from
1998 through May 1, 2008. It is expected that grants of options and stock rights
would be made on an annual basis.
LIMIT ON PLAN AWARDS
The 1998 Plan provides that the maximum number of shares of common stock that
may be available for the granting of options to purchase common stock and other
rights with respect to such stock (Plan Awards) each year is equal to 2% of the
total number of issued shares of common stock as of December 31 of the prior
year. This limit, as adjusted under the 1998 Plan, is called the 2% Limit. The
2% Limit may be increased to up to 3% in any year, with a corresponding
reduction in the number of shares available in later years under the 1998 Plan.
The 2% Limit, as increased or adjusted under the 1998 Plan, is called the
Overall Limit. As of December 31, 1997, the total number of issued shares of
common stock was 1,132,479,605 shares and 2% of such number was 22,649,592
shares.
30
<PAGE> 36
Any unused portion of the 2% Limit for any year may be carried forward and used
in later years. Shares involved in the unexercised or undistributed portion of
any terminated, expired or forfeited Plan Award also are available for further
Plan Awards.
In the event of a merger, consolidation, reorganization, stock split, stock
dividend or any other event affecting the Company's common stock, the total
number of shares available for Plan Awards and the number of shares covered by
outstanding Plan Awards will be appropriately adjusted as determined by the
Compensation and Option Committee.
On April 1, 1998, the fair market value of common stock (based on the average of
the highest price and the lowest price at which common stock was sold on the New
York Stock Exchange) was $64.375 a share.
CONDITIONS
Outstanding awards under the 1998 Plan will be forfeited if a participant
terminates his or her employment and fails to consult with the Company upon
request or engages in competitive activity unless the Company approved the
activity, or if it is determined that the participant engaged in conduct
contrary to the best interests of the Company.
EXPENSES
All expenses of the 1998 Plan will be paid for by the Company and its
participating subsidiaries.
AMENDMENT OR TERMINATION OF PLAN
The 1998 Plan provides that:
- the Board of Directors, upon recommendation of the Compensation and
Option Committee, at any time may terminate, amend or modify the 1998
Plan in any respect; and
- the Committee may amend or modify the provisions of the 1998 Plan,
except that neither the Board nor the Committee may take certain actions
specified in the 1998 Plan without stockholder approval.
STOCK OPTIONS
ELIGIBILITY
The Board of Directors may grant stock options with or without related stock
appreciation rights to officers and other key salaried employees. In addition,
the Committee may grant options and related stock appreciation rights if
authorized to do so by the Board. The Committee also may delegate to a committee
of Company officers the determination of the amount of individual grants for
employees who are not officers of the Company, within limitations described by
the Committee.
Under the prior plan, the number of participants in the stock option program
ranged from 1,500 to 2,000. The 1998 Plan is intended to cover a broader group
of employees on a global basis. This ties a larger number of executives'
compensation with your interests as stockholders. It is anticipated that about
5,200 employees annually will be eligible to participate in the stock option
program under the 1998 Plan, including about 45 officers.
TERMS OF OPTIONS AND STOCK APPRECIATION RIGHTS
Options granted under the 1998 Plan will be designated at the time of grant as
either "incentive stock options" (ISOs) qualified under the Code or options
which do not so qualify (NQOs). Under the
31
<PAGE> 37
Code, if the aggregate fair market value (determined at time of grant) of stock
with respect to which ISOs first become exercisable by a participant during any
calendar year exceeds $100,000, such options will be treated as NQOs. Therefore,
some participants may be granted both ISOs and NQOs.
In general, the option price of common stock covered by an option granted under
the 1998 Plan is the fair market value on the date of grant of such option.
Payment for shares purchased upon exercise of an option will be made in full at
the time of exercise, either in cash or in shares of the Company's common stock
(if owned at least six months) valued at their fair market value on the date of
exercise.
Options and related stock appreciation rights granted under the 1998 Plan
terminate not later than ten years from the date of grant.
A stock appreciation right entitles the participant to receive from the Company
that number of shares of common stock determined by dividing (i) the total
number of shares covered by the related option (or portion of it) multiplied by
the amount by which the fair market value of a share of common stock on the
exercise date exceeds the option price by (ii) the fair market value of a share
of common stock on the exercise date.
The granting of stock appreciation rights will require a charge or credit to
income each year with respect to the rights which have been granted, based on
the amount, if any, by which the fair market value of common stock has increased
or decreased that year compared with the option price.
In consideration of having been granted an option or an option with a related
stock appreciation right, each participant must agree to remain in the employ of
the Company for the period of time provided in the option agreement.
MAXIMUM OPTION GRANT TO NAMED EXECUTIVES
There is a limit on the number of shares of common stock subject to stock
options that may be granted with or without stock appreciation rights to any of
the Named Executives for any year under the 1998 Plan. The limit, as adjusted
under the 1998 Plan, is called the Option Limit. The Option Limit is equal to
2.5% of the Overall Limit. In addition, any unused portion of the 2% Limit
carried over from any prior year cannot be granted to any of the Named
Executives in any later year. The Committee, in its discretion, may make
individual stock option awards to Named Executives that are lower than the
Option Limit.
The Option Limit exceeds the amount the Company granted to any person in any
prior year under the prior plan (e.g., in 1997, approximately 53.6% of the
Option Limit was granted to the CEO). In addition, the Option Limit exceeds the
amount the Company granted to any Named Executive in March 1998. (The CEO was
granted 35.3% of the Option Limit.)
The Committee believes that the Option Limit proposed for the Named Executives
will provide flexibility for it to make stock option grants within that limit if
the Committee deems it appropriate in order to provide competitive compensation
or to recognize unique individual contributions. If this proposal is approved,
it is expected that the Committee generally will make individual stock option
grants under the 1998 Plan that are lower than the Option Limit.
EFFECT OF TERMINATION OF EMPLOYMENT
If, prior to the date that any option or stock appreciation right first becomes
exercisable, a participant's employment terminates for any reason, all rights
thereunder will cease, except as explained below.
In the case of a participant whose employment terminates by reason of
retirement, disability or death, or under mutually satisfactory conditions, if
the participant has remained an employee for at least six
32
<PAGE> 38
months following the date of the related option agreement, the participant's
rights under the agreement will continue until the date ten years from the date
of grant or such shorter period as the Committee may specify (except that such
period will be three months in the case of termination under mutually
satisfactory conditions).
In the case of a participant whose employment with the Company terminates by
reason of a sale or other disposition (including a transfer to a joint venture
in which the Company owns a substantial interest) of the division, operation or
subsidiary in which the participant was employed or to which the participant was
assigned, the participant's rights under the agreement will (subject to certain
conditions) continue for five years, or such shorter or longer period as the
Committee may specify, provided that (i) the participant had remained an
employee of the Company for at least three months following the date of grant,
and (ii) the participant continues to be or becomes employed by the division,
operation or subsidiary and remains in such employ until the date of exercise.
If, after an option or stock appreciation right first becomes exercisable, a
participant's employment terminates for any reason except retirement,
disability, death, release because of a sale or other disposition of the
division, operation or subsidiary in which the participant was employed, release
under mutually satisfactory conditions, discharge, release in the best interest
of the Company or voluntary quit, any rights not then exercised will remain
available for three months.
If a participant's employment terminates by reason of discharge, release in the
best interest of the Company or voluntary quit, all the participant's rights
will end on the date of termination of employment.
If a participant dies following termination of employment, the participant's
rights generally will continue as if the participant had not died, except that
such rights continue for not less than one year (unless the option by its terms
expires earlier.)
OPTION GRANT DATA
The number of shares subject to stock options with related stock appreciation
rights granted to each of the Named Executives in March 1998 is as follows:
<TABLE>
<CAPTION>
Person Shares Subject to Options
------ -------------------------
<S> <C>
Alex Trotman............................................ 300,000
W. Wayne Booker......................................... 75,000
Edward E. Hagenlocker................................... 125,000
Jacques A. Nasser....................................... 150,000
Kenneth Whipple......................................... 75,000
</TABLE>
The number of shares subject to options, with or without related stock
appreciation rights, granted in March 1998 to all current executive officers as
a group is 1,973,500. Of these 940,000 have related stock appreciation rights.
The number of shares subject to options, with or without related stock
appreciation rights, granted in March 1998 to all employees, including executive
officers, is 11,753,600.
All options granted in March 1998 were NQOs to purchase common stock of the
Company. These options have a price of $59.0625 per share, the average of the
high and low selling prices on the New York Stock Exchange on the date of the
grant. 33% of the stock option grant can be exercised one year after the grant
date, 66% after two years and 100% after three years.
33
<PAGE> 39
FEDERAL TAX CONSEQUENCES FOR OPTIONS AND STOCK APPRECIATION RIGHTS
The grant of an option or stock appreciation right will not have any tax
consequences for the participant or the Company under present federal tax laws.
In general, upon the exercise of an NQO, the participant will realize ordinary
taxable income measured by the difference between the option price and the fair
market value of the stock received at the time of exercise, and the Company will
be entitled to a tax deduction in the same amount.
The participant does not incur any taxable income at the time of exercise of an
ISO. If the participant holds the shares acquired upon exercise of the ISO for
more than one year after exercise, the difference between the option price and
the amount realized upon disposition of the shares is treated as long-term
capital gain or loss by the participant and the Company is not allowed a tax
deduction. The excess of the fair market value of the shares received at the
time of exercise of an ISO over the option price will be an "item of tax
preference" which may result in the "alternative minimum tax" being imposed on
the participant under the Code.
Upon the exercise of a stock appreciation right, generally the participant will
realize ordinary taxable income measured by the fair market value of the stock
or the amount of cash received at the time of exercise. The Company will be
entitled to a tax deduction in the same amount.
PERFORMANCE STOCK RIGHTS AND RELATED STOCK AWARDS
ELIGIBILITY
The Compensation and Option Committee may grant Performance Stock Rights (Stock
Rights) to officers and other key salaried employees of the Company. The
Committee also may delegate to a committee of Company officers the determination
of the amount of individual grants for employees who are not officers of the
Company, within limitations described by the Committee. Under the prior plan,
the number of participants in the stock award program ranged from 60 to 70. It
is anticipated that about 375 employees annually will be eligible to receive
Stock Rights under the 1998 Plan, including about 45 officers. This reflects the
Company's commitment to tie more executive compensation with your interests as
stockholders.
TERMS OF STOCK RIGHTS
A Stock Right is the right to receive up to the number of shares of Ford common
stock described therein, if specific business objectives are met.
The Compensation and Option Committee determines the performance period for a
Stock Right. In general, we expect grants of Stock Rights to be made annually
and have a three-year performance period.
TARGET AWARD AND PERFORMANCE THRESHOLD
Within 90 days of the beginning of a performance period, the Committee decides
the targeted performance level at which a target award may be earned. The
Committee decides the target award based on the employee's level of
responsibility and other factors. The target award, designated as a number of
shares, is based on achieving 100% of the performance goals established by the
Committee for the performance period. The Committee also decides any minimum
performance level below which no stock award would be paid, and a maximum above
which no more would be paid.
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PERFORMANCE CRITERIA
The performance goals for a Stock Right granted to a Named Executive may be
based on one or more of the Performance Criteria defined in paragraph (b) of
Article 4 of the 1998 Plan. (See Appendix II.)
FORMULA
The Committee also decides the formula to apply against the performance goals in
deciding the percentage of the target award that is earned. This amount may not
exceed 150% of the target award, as adjusted under the 1998 Plan.
DIVIDEND EQUIVALENTS
If the Committee determines, during the Performance Period relating to a Stock
Right, the participant will receive dividend equivalents. (These are equal to
cash dividends that the participant would have received if he or she had owned
the number of shares equal to 100% of the related target award, as adjusted
under the 1998 Plan.)
MAXIMUM AMOUNT OF STOCK AWARDS TO NAMED EXECUTIVES
The maximum number of shares of common stock that may be available as stock
awards to any of the Named Executives pursuant to Stock Rights in any year under
the 1998 Plan is 500,000. This limit, as adjusted under the 1998 Plan, is called
the Stock Right Limit.
The Stock Right Limit exceeds the actual number of shares the Company awarded to
any individual in 1997 when it made similar stock awards under the prior plan
for the 1992 to 1996 and 1994 to 1996 performance periods. In 1998, the CEO was
granted a Stock Right that covers up to 45% of the Stock Right Limit. The number
of shares which ultimately may be paid out to any Named Executive pursuant to
the Stock Rights granted in 1998 cannot be determined at this time. However, it
is subject to both the Stock Right Limit and the Overall Limit and cannot exceed
150% of the related target award.
The Committee believes that the Stock Rights proposed for the Named Executives
will provide flexibility for it to make stock awards within that limit if the
Committee deems it appropriate in order to provide competitive compensation or
to recognize unique individual contributions. If this proposal is approved, it
is expected that the Committee generally will make individual stock awards under
the 1998 Plan that are lower than the Stock Right Limit.
DISTRIBUTION OF STOCK AWARD
If the Committee determines, the shares of common stock awarded after the end of
the related performance period will be restricted from sale or other disposition
for a period determined by the Committee.
Certificates for the shares of common stock representing any Final Award will be
distributed to the participant free of all restrictions on the earlier of (1)
the expiration of any related restriction period, (2) the acceleration of
distribution of the Final Award by the Committee or (3) the termination of
employment, provided the participant's employment terminates for any reason
other than discharge, release in the best interest of the Company, voluntary
quit or retirement without the approval of the Company. If the participant's
employment terminates for any of these reasons, all the participant's
undistributed Final Awards and outstanding Rights will be forfeited unless a
waiver is granted as explained below.
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EFFECT OF TERMINATION OF EMPLOYMENT
Generally, if a participant terminates his or her employment for any reason
other than a reason specified above prior to the end of the Performance Period
relating to any Stock Right (having remained an employee for at least six months
after the commencement of the Performance Period and six months after the date
of grant of the Right), the Stock Right will continue in effect without
diminution. Upon completion of the Performance Period, the former employee will
be eligible to be considered for a Final Award (which may cover the same number
of shares as the Target Award or a lesser number).
If a participant dies prior to the expiration of the Performance Period relating
to any Stock Right (having remained an employee for at least the minimum periods
specified above and having complied with the consulting and competitive activity
conditions described above, if applicable) the Stock Right will continue in
effect. The Stock Right, any shares then issued in the name of the participant
but not yet distributed and any shares issuable thereafter with respect to the
Right as a Final Award will be transferred or issued to the participant's
designated beneficiaries or, if none were designated, to the participant's
executor or administrator.
ACCOUNTING TREATMENT
The Company recognizes a contingent liability equal to the market value of the
common stock on the date of grant of any Stock Right. The amount of this
liability will be amortized and charged to income over the related Performance
Period. The total liability will be increased or decreased quarterly to reflect
changes in such market value and will be subject to adjustment in certain other
events. Dividend equivalents will be charged to income. The maximum number of
shares that can be earned under Stock Rights will be treated as outstanding for
purposes of calculating fully diluted earnings per share.
STOCKHOLDER APPROVAL CONDITION
In March 1998, the Committee granted stock options and Stock Rights under the
1998 Plan to 44 officers, including Named Executives. These awards are subject
to approval of the 1998 Plan by you. If you approve this proposal, the terms of
the 1998 Plan, including the Option Limit and the Stock Right Limit, will become
effective for awards to Named Executives for 1998 and future years under the
1998 Plan.
If you do not approve this proposal, the Committee intends to grant stock
options and contingent stock rights to the Named Executives and other key
employees under the Company's 1990 Long-Term Incentive Plan. (See pp. 14-16 for
a discussion of these programs.)
RESOLUTION
Ford management will present the following resolution to the meeting:
"RESOLVED, that the terms under which stock options with or without stock
appreciation rights have been granted or may be granted, and the terms under
which stock may be awarded pursuant to Performance Stock Rights granted or that
may be granted, to the Named Executives under the Company's 1998 Long-Term
Incentive Plan described in Proposal 4 of the Proxy Statement and shown in
Appendix II thereto are approved."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 4.
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<PAGE> 42
PROPOSAL 5
AMENDMENT OF THE SAVINGS AND STOCK INVESTMENT PLAN TO PERMIT INCREASES IN THE
COMPANY MATCHING CONTRIBUTION RATE
We seek your approval to amend the Savings and Stock Investment Plan for
Salaried Employees (the "Plan") to permit increases in the Company matching
contribution rate. The amendment will permit the Board of Directors to approve
increases in the maximum rate for Company matching contributions under the Plan.
Since 1956 when the Plan was written, government regulations have simplified the
amendment and approval authority for such plans. A Plan amendment is being
proposed to provide the Board of Directors greater flexibility in modifying the
Plan as competitive and Company financial circumstances warrant.
EXISTING PLAN
The Company adopted the Plan in 1956 for Ford salaried employees in the U.S.
Currently, the Board of Directors may modify the Plan with certain exceptions.
One of the exceptions is that an increase in the rate of Company matching
contributions above the maximum rate under the Plan requires your approval. The
current ceiling was approved by you in 1978 and is 60 percent on the first 10
percent of employee contributions.
SHAREHOLDER APPROVAL CONDITION
If this proposal is approved by you, the proposed amendment to the Plan will
become effective and the Board of Directors will have the authority to amend the
Plan to increase the rate of Company matching contributions in the future
without your approval.
RESOLUTION
Ford management will present the following resolution to the meeting:
"RESOLVED, That the amendment to the Savings and Stock Investment Plan for
Salaried Employees to give the Board of Directors authority to establish and
vary the maximum rate for Company matching contributions under that Plan, as
described in Proposal 5 of the Proxy Statement and shown in Appendix III
thereto, is approved."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 5.
PROPOSAL 6
AFFIRMATION OF THE COMPANY'S POLITICAL NON-PARTISANSHIP
Mrs. Evelyn Y. Davis, Suite 215, Watergate Office Building, 2600 Virginia Ave.,
NW, Washington, D.C. 20037, and Highlights and Lowlights, who state that they
together own 200 shares of common stock, have informed the Company that they
plan to present the following proposal at the meeting:
"RESOLVED: That the stockholders of Ford assembled in Annual Meeting in person
and by proxy, hereby recommend that the Corporation affirm its political
non-partisanship. To this end the following practices are to be avoided:
(a) The handing of contribution cards of a single political party to an
employee by a supervisor.
(b) Requesting an employee to send a political contribution to an
individual in the Corporation for a subsequent delivery as part of a
group of contributions to a political party or fund raising committee.
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<PAGE> 43
(c) Requesting an employee to issue personal checks blank as to payee for
subsequent forwarding to a political party, committee or candidate.
(d) Using supervisory meetings to announce that contribution cards of one
party are available and that anyone desiring cards of a different party
will be supplied one on request to his supervisor.
(e) Placing a preponderance of contribution cards of one party at mail
station locations.
REASONS: The Corporation must deal with a great number of governmental units,
commissions and agencies. It should maintain scrupulous political neutrality to
avoid embarrassing entanglements detrimental to its business. Above all, it must
avoid the appearance of coercion in encouraging its employees to make political
contributions against their personal inclinations. The Troy (Ohio) News has
condemned partisan solicitation for political purposes by managers in a local
company (not Ford). And if the Company did not engage in any of the above
practices, to disclose this to ALL shareholders in each quarterly report.
If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 6.
This proposal seeks to outline certain practices that the Company should not
engage in with respect to the political process and would require the Company to
publish and distribute a quarterly report disclosing that such practices have
not been engaged in by the Company. Because Ford Motor Company does not, and has
never, engaged in any of the practices set forth in this proposal, we believe
that this proposal would not result in any appreciable benefit to the
stockholders or the Company and would be costly to implement and is, therefore,
not in your best interest or those of Ford.
Existing Ford policy dictates that the Company not make contributions to
political candidates or political organizations, even when permitted by law.
This policy further provides that Ford does not take positions or use its
resources for partisan political purposes. However, senior management may
approve certain contributions to support or oppose ballot questions if the
issues raised directly affect Ford.
With respect to contributions by employees, Ford has established the Ford Civic
Action Fund as a political action committee in accordance with the Federal
Election Campaign Act of 1971, as amended (the "Fund"). The Fund is not
affiliated with any political party nor with any specific candidate for
election. The Fund provides a means by which individuals may make contributions
which the Fund distributes to candidates for public office. All of the
contributions made by the Fund are derived from voluntary employee
contributions. No coercion is exerted on any employee to induce or compel a
contribution. Contributions to the Fund may not be solicited or secured through
the use of job discrimination or financial reprisal, or the threat thereof, or
as a condition of employment.
Given that the Company does not engage in the practices described in the
proposal and its existing policies with respect to political non-partisanship,
we believe that the proposal would not result in any meaningful benefit to the
stockholders or the Company. As a result, we believe that the expenditures
required to implement the proposal are unnecessary and would serve no useful
purpose for stockholders or Ford.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 6.
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PROPOSAL 7
ADOPTION OF POLICY FOR ALL DEALINGS WITH CHINA AND THE FORMER SOVIET UNION
Carl Olson, P. O. Box 6102, of Woodland Hills, California 91365, who states that
he owns 50 shares of common stock, has informed the Company that he plans to
present the following proposal at the meeting:
"The Stockholders hereby recommend that the Board of Directors adopt the
following policies for all dealings with China and the former Soviet Union:
1. Goods and services produced in whole or part by slave or forced labor shall
not be acceptable for delivery to the corporation, its subsidiaries,
affiliates, or joint ventures. A suitable certificate of origin shall be
required.
2. Goods provided by the corporation, its subsidiaries, affiliates, or joint
ventures shall not be sold to or otherwise provided to any facility utilizing
slave or forced labor. A suitable certificate of use shall be required.
3. The right of on-site inspection to determine the existence of slave or forced
labor shall be vigorously pursued.
4. The corporation shall cooperate promptly, energetically, and fully with the
United States government and any international organization in their laws or
policies to discourage the use of slave or forced labor.
For purposes of this resolution, the term "former Soviet Union" shall mean the
countries of, and any combination thereof, Russia, Ukraine, Kazakhstan, Georgia,
Armenia, Azerbaijan, Uzbekistan, Belarus (Byelorussia), Kyrgyzstan (Kirghizia),
Moldova (Moldavia), Tajikistan (Tadzhikistan), and Turkmenistan (Turkmenia).
Supporting Statement:
The outrageous arrest and jailing of American Harry Wu by the Chinese Communist
regime put the spotlight again on the immense Chinese "laogai" forced labor
system. Mr. Wu has exposed this hideous system for years.
Slave and forced labor are widespread in China and, to a lesser extent, in the
former Soviet Union. China's 1,100 laogai camps and factories include about
8,000,000 slave and forced laborers, and the gulags of the former Soviet Union
have not been eliminated.
These slave and forced labor facilities produce a wide range of products,
including sophisticated machinery and electronics, and much of it is intended
for export. This vast problem has prompted the state of California to pass a law
refusing to buy slave-made goods from overseas.
Ford has multi-million dollar deals with China and the former Soviet Union.
Ford's history in the former Soviet Union includes major input in the Kama River
truck factory, which was built with forced labor. Currently, Ford has an Escort
factory in Belarus and plans production in Russia. In China, Ford has a $95
million deal to build vans, plus five parts ventures. Ford lobbied for Chinese
most-favored-nation status despite the $40 billion U.S.-China trade deficit.
Current U.S. law does not cover the billions of dollars of Ford activities
overseas for use or sale overseas. It also does not prohibit the sale of goods
to slave labor facilities overseas.
I think Ford can do without slave labor. If you can imagine any convincing
argument against this policy, I can't. But, believe me, Ford's board will think
of something. Please read the board's argument thoroughly to see if it has any
substance, and then vote with your best judgment."
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<PAGE> 45
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 7.
Ford Motor Company opposes the use of slave or forced labor. As a matter of
policy, the Company does not employ prison or forced labor at any of its
facilities, including its joint ventures. Moreover, we believe our policies as
they relate to employment matters in the countries where we do business,
including China and the former Soviet Union, fully protect and properly provide
for employees.
The proposal, however, extends well beyond the operations of the Company, is
unnecessary, unduly burdensome and beyond the Company's powers to implement.
In respect of vendors to Company operations and joint ventures in China and the
former Soviet Union, the Company as a matter of policy will not purchase goods
or services from vendors utilizing slave or forced labor. We have no reason to
believe that any goods or services being purchased by Company operations or
joint ventures involve in any way the use of slave or forced labor and, if we
were to discover that slave or forced labor was being used (for instance, as
part of our periodic visits to our vendors), we would resource to another
vendor. Given this, the proposal's requirement that Company operations and joint
ventures obtain certificates that slave or forced labor is not being used, and
to conduct on-site inspections to determine the existence of slave or forced
labor, is not necessary, would be unduly burdensome and would not result in any
appreciable benefit to the Company or its stockholders not already provided by
existing Company policies and practices.
The proposal also would apply to those who purchase our products. In that
context, the proposal is beyond the Company's powers to implement. Once products
are sold to our dealers, it would be administratively impossible and
prohibitively expensive to monitor sales to our dealers' customers. Moreover,
even were we to impose such a regime, any restrictions could be easily
circumvented through the use of brokers or through resale of the products
following their sale by our dealers.
Taking a broader perspective, we believe the use of slave or forced labor is a
significant policy issue to be addressed by the governments of the United
States, China, the republics of the former Soviet Union and any other affected
governments. As stated above, Ford does not use or support slave or forced
labor; we would support any governmental initiatives to discourage the use of
slave or forced labor.
For the reasons stated above, we oppose the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 7.
PROPOSAL 8
REPORT ON GLOBAL WARMING
The Sisters of St. Dominic of Caldwell, N. J., of 52 Old Swartswood Station
Road, Newton, N. J. 07860-9337, who state that they own 100 shares of common
stock, have informed the Company that they plan to present the following
proposal at the meeting:
"WHEREAS:
The overwhelming majority of independent, peer reviewed atmospheric scientists
agree that global warming, or climate change, is not hypothetical but a real,
existing problem posing serious challenges for modern civilization.
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The Intergovernmental Panel on Climate Change (IPCC), composed of scientists
nominated and reviewed by governments, warn that global warming caused by fossil
fuels and emitting greenhouse gases is already under way. The IPCC anticipates
that climate change will result in:
- global warming over the next century exceeding that over the whole
last 100 centuries;
- (with the World Health Organization) increased spread of infectious
diseases, like malaria spreading northward in to the United States,
and more frequent and deadly heat waves;
- sea-level rises, putting 92 million people at risk in low-lying
coastal areas, and stronger storm surges, exacerbating the damage from
hurricanes and tropical storms;
- and a more vigorous hydrological cycle, likely causing stronger
precipitation, increased flooding in some areas, greater drought in
others, and greater intensity and force of storms.
WE BELIEVE:
Climate change is currently costing the U.S. taxpayers billions of dollars to
subsidize fossil fuels through federal appropriations and the tax code;
advertising which flies in the face of overwhelming scientific evidence harms
the company's reputation.
We risk losing competitive advantage to British Petroleum, which has broken
ranks with other large companies based on fossil fuels, in saying that, "The
time to consider the policy dimensions of climate change is... when the
possibility cannot be discounted... We in BP have reached that point." John
Brown, Group Chief Executive, British Petroleum (Berlin, 9/30/97). Thus even a
major oil company is calling for action.
RESOLVED: that the shareholders of the company request that the Board of
Directors make a report (at reasonable costs and omitting proprietary
information), available to shareholders by August 1998, on the greenhouse gas
emissions from our company's products, including (with dollar amounts where
appropriate) (i) what our company is doing in research and/or action to reduce
those emissions and ameliorate the problem, (ii) the financial exposure of our
company and its shareholders due to the likely costs of reducing those emissions
and potential liability for damages associated with climate change, and (iii)
activities by the company, or by the industry associations to which it pays
dues, which suggest that the issue of climate change is exaggerated or not real.
Supporting Statement:
We believe that our company is not only exposing its shareholders to financial
risk by continuing to produce products emitting enormous amounts of greenhouse
gases as the problem of climate change becomes more severe, more widely
understood, and more likely to lead to legislation that penalize greenhouse gas
emitters. Furthermore we believe that our company is placing an additional
financial burden on shareholders by incurring costs for advertising and lobbying
to suggest that the problem is exaggerated, too costly to deal with or not
real."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 8.
We are firmly committed to the principle that we must operate in an
environmentally responsible, efficient and safe manner. Ford recognizes that
concern for the quality of the environment warrants extraordinary efforts on the
part of those in a position to protect and improve it. Accordingly, we have
adopted and implemented environmental policies which, in many respects, go
beyond legal mandates. Moreover, we pursue a policy under which our products,
plants and production processes continually are updated, rebuilt, redesigned or
replaced to be more energy efficient, produce less waste and lessen the
environmental impact from air and water discharges. Most recently, the Board of
Directors created a
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committee of the Board -- the Environmental and Public Policy Committee --
devoted to consideration of environmental issues facing the Company.
Our environmental concern and stewardship extends to global climate change. We
are keenly aware of the possible consequences of global warming and take our
responsibilities to our customers and the planet very seriously. We have made
tremendous progress already in this area and we see extraordinary promise in our
future product plans for making still more environmentally friendly vehicles,
including new technologies that will significantly reduce fuel consumption and,
therefore, CO2 emissions.
Ford today is engaged in numerous environmental initiatives, many of which are
beneficial in reducing CO2 emissions and energy use:
- Ford is the worldwide leader in producing vehicles that operate on
lower-carbon fuels, such as natural gas and propane;
- Ford is participating in the Partnership for a New Generation Vehicle
(PNGV) joint program between government and industry and is developing
high-mileage, low emission hybrid and fuel cell vehicles through its
P2000 research program;
- Fully half of the research done in our three worldwide scientific
research laboratories is environmental research; and
- Our plant facilities are continuously improving their energy
efficiency and reducing waste.
At the same time, we continue to believe that any actions taken in respect of
global warming must include all nations and that wide-ranging development of
advanced energy-saving technologies is the right approach. We think that the
evidence on climate change, while still scientifically inconclusive, is
sufficient to be taken seriously and that there are actions we can pursue now,
such as those highlighted above.
Ford's position on climate change and environmental stewardship is well known
and has been publicly stated numerous times. The report called for by the
stockholder proposal would not provide significantly different information than
that already readily available to the public.
For these reasons, we believe the proposal is unnecessary, would be burdensome
to implement, and would not result in any appreciable benefit for our
stockholders or the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 8.
PROPOSAL 9
PROPOSED REVIEW OF EXECUTIVE COMPENSATION
A number of stockholders have informed the Company that they plan to present the
following proposal at the meeting. The names, addresses and information on the
number of shares owned by them will be provided upon request.
"WHEREAS: We believe financial, social and environmental criteria should all be
taken into account in setting compensation packages for corporate officers.
Public scrutiny of executive compensation is intensifying, with serious concerns
being expressed about the widening chasm between salaries of top corporate
officers, U.S. employees and workers in developing countries. Concerns include:
- In 1995, Pearl Meyer and Partners reported that CEO compensation
packages at large corporations increased 23%, to an average of $4.37
million. U.S. private sector worker pay and benefits inched up 2.8%,
the lowest increase since Department of Labor created the employment
cost index in 1980.
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- In 1978, CEO's earned about 60 times the pay of the average (U.S.)
worker. In 1989, their pay reached 122 times the average worker's
earnings. By 1995, the ratio had increased to 173 (Update of Working
America 1996-97, Economic Policy Institute)
- Our company's Chairman, President and Chief Executive Officer received
a total compensation package of $6,038,976 in 1996, or $116,134 per
week. Mexican maquiladora workers have seen their purchasing power
drop dramatically. In January 1996, a Ford maquiladora worker in
Nuevo Laredo received a weekly salary of 280.46 pesos, $37.20, plus
97.50 pesos worth of food coupons. This salary does not even provide
purchasing power sufficient for workers to meet their families'
immediate needs.
- Our company needs to address the implications of paying high executive
salaries and marginal survival wages to workers in developing nations.
Consequences of paying widely divergent compensation levels might
include decreased worker commitment, poor labor-management relations,
and harm to Ford's public image. We believe our company should adopt
an executive compensation policy based on financial, social and
environmental criteria and a fair remuneration policy for its
employees worldwide.
- Our Board should address such important questions as: Should top
officers' pay be reduced if our company experiences costly fines,
expensive, protracted litigation and significant loss of market share?
Should CEO compensation be affected by our company's record related to
the environment, labor rights or public relations problems? We believe
these considerations deserve the careful scrutiny of our Board and
committees dealing with compensation. Other companies including
Proctor & Gamble, Bristol-Myers Squibb and Westinghouse have reported
to shareholders on how they integrate similar factors into
compensation packages.
RESOLVED: Shareholders request the Board institute a special Executive
Compensation Review, and prepare a report available to shareholders by October
1998 summarizing the results and recommended changes. The review shall cover
pay, benefits, perks, stock options, and special arrangements in the
compensation packages for all top officers. The review will include:
1. Ways to link our company's executive compensation more closely to financial,
social and environmental performance with proposed criteria.
2. Comparison of compensation packages for company officers with the lowest and
average wages for company employees in the U.S. and with three developing
countries where it has operations.
3. Whether a cap should be placed on compensation packages for officers to
prevent our company from paying excessive compensation."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 9.
This proposal is substantially identical to a proposal submitted at the annual
meeting in 1997 and rejected by 92.27% of the votes cast. The proposal deals
with working conditions in low wage countries, such as Mexico. There are two
issues raised by this proposal and we believe Ford's current approach to both is
in the best interests of its stockholders. Also, in our view, the proposal would
not produce any significant change in policy or practice or otherwise benefit
the Company or its stockholders.
Executive Compensation
We believe the compensation paid to senior executives is appropriate and
competitive.
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The Compensation and Option Committee Report on Executive Compensation (pp.
13-17) describes the factors considered in deciding executive compensation.
Compensation at Ford is based on Company performance over a wide range of
criteria, including certain of the criteria proposed by the proponents.
In addition, compensation packages for Company officers are reviewed regularly
and compared to compensation packages of officers at companies comparable to
Ford to ensure the Company is not paying "excessive" compensation. Also,
compensation packages must be competitive in order to attract and retain high
quality executives. The Committee decided, and still believes, that placing a
cap on compensation packages could prevent the Company from attracting and
retaining high quality executives.
We do not believe a further study, as requested by the proponents, would produce
any significantly different information or results, and would be costly and
burdensome to undertake.
Compensation Paid in Developing Countries
Ford needs to be competitive with other global companies in the world market.
That said, Ford recognizes that it must also be a responsible international
citizen. We believe our policies as they relate to employment matters in the
countries where the Company does business adequately protect and properly
provide for employees at all Ford locations throughout the world. While it is
not practical to list all such policies and related practices, a few examples
that address matters raised by the proposal are worth noting:
- Ford policy requires that all of its facilities comply with applicable
laws, including laws dealing with worker health, safety, welfare, wages
and benefits and the environment.
- Ford provides wages and benefits that are fully competitive with and
often exceed compensation paid in the local labor market.
- Ford recognizes the right of workers to organize, to bargain
collectively and to join labor organizations.
- Working conditions at Ford facilities meet or exceed local law
requirements.
- Ford has extensive employee training programs at Company locations.
Training is offered on a non-discriminatory basis.
- Ford does not employ child labor (even where local law might otherwise
permit it). It also does not employ prison or forced labor.
For these reasons, we believe that the proposal is not in the best interests of
Ford or its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 9.
PROPOSAL 10
INDEPENDENT DIRECTORS TO SERVE ON ALL KEY BOARD COMMITTEES
John Chevedden of 2215 Nelson Avenue, Number 205, Redondo Beach, California
90278, on behalf of Ray T. Chevedden and Veronica G. Chevedden, who own 1,000
shares of common stock, has informed the Company that he plans to present the
following proposal at the meeting:
"Resolved: Appoint completely Independent Directors for all Key Board Committee
positions to enhance management oversight. Key board committees include the
Audit, Compensation and Nomination Committees. These important
oversight-committees require heightened independence, free of Directors with
significant vendor, insider-management and/or long-term ties to Ford.
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The following 1997 news reports remind Ford shareholders of the importance of
independent oversight -- the primary function of the key board committees:
Ford-Europe lost $472 Million in the third quarter -- causing a drag on the
whole company.
<TABLE>
<S> <C>
Forbes Feb. 10, 1997
</TABLE>
Mazda (33% Ford-owned) lost $151 Million for the year.
<TABLE>
<S> <C>
New York Times May 31, 1997
</TABLE>
National Highway Traffic Safety Administration opens rare investigation into a
potential Ford defect cover-up. It involves 20 million (20,000,000) cars built
from 1983 to 1995.
<TABLE>
<S> <C>
AutoWeek Oct. 6, 1997
</TABLE>
Ford is recalling 1.1 million trucks, including all the fast-selling '97 Ford
Expedition sport-utilities, Ford F-150/F-250 pickups and '98 Lincoln Navigators.
The transmission shift cable may break and cause out-of-control driving.
<TABLE>
<S> <C>
Wall Street Journal Oct. 31, 1997
</TABLE>
In a potentially nasty confrontation at Ford's 1997 shareholder meeting: The
Neighborhood Assistance Corp of America accused the Ford-owned Associates of
charging high fees and above-market interest rates to poor homeowners. Ford's
Associates manage 1.2 million home-equity loans and mortgages.
<TABLE>
<S> <C>
USA Today May 9, 1997
</TABLE>
ABC's "Prime Time Live" said that the Ford-owned Associates put pressure on
low-income borrowers to refinance (again-and-again) at increasingly higher
interest rates and used forged documents.
<TABLE>
<S> <C>
New York Times May 9, 1997
</TABLE>
This resolution is consistent with the widely-acclaimed Campbell Soup Corporate
Governance Standards which states:
THE AUDIT, COMPENSATION/ORGANIZATION AND GOVERNANCE COMMITTEES WILL CONSIST
ENTIRELY OF INDEPENDENT DIRECTORS. COMMITTEE MEMBERS WILL BE APPOINTED BY THE
BOARD.
The Campbell Soup Standards were highlighted in the 12-page Business Week report
"The Best & The Worst Boards," December 8, 1997.
Also, Business Week highlighted Ford Director Carl Reichardt as "Stretched too
thin?" with his 8 board seats. Mr. Reichardt also sits on Business Week's 11th
worst board, the troubled HMO Columbia/HCA.
According to CalPERS, a leader in corporate governance standards and manager of
a $100 Billion portfolio, sitting on the Board 10 or more years indicates an
insider. According to CalPERS standards Ford's:
1) Compensation Committee is insider-controlled with 2 insiders and no
independent members.
2) Audit Committee has one Ford vendor and 3 independent members.
3) Nominating Committee is insider-controlled with 5 insiders and one vendor
(totaling 6) who out-number the 4 independents.
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The 1997 Ford proxy statement lists the following Directors with significant
financial, insider-management and/or long term ties to Ford:
1) John Thornton
- Managing Director of Goldman, Sacks -- Entrenched Ford investment banking
firm with $10 million-plus Ford business at stake
2) William Clay Ford
- 50-year Ford director
3) Michael Dingman
- 17-year Ford director
4) Roberto Goizueta
- 15-year Ford director
5) William Clay Ford, Jr.
- 10-year Ford director
6) Alex Trotman
- Ford Chairman, President and Chief Executive Officer
Four of these 6 insider or vendor directors (Messrs. Thornton, Dingman, Goizueta
and Trotman) serve on 2 of the 3 key committees.
To enhance independent Board oversight:
APPOINT INDEPENDENT DIRECTORS TO ALL KEY BOARD COMMITTEE POSITIONS
YES ON 10"
------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 10.
We believe that adoption of this proposal is contrary to the interests of Ford
and you. This proposal is unduly restrictive and would deprive Ford of the
services of highly qualified directors on the committees of its board of
directors.
Ford is a large and complex company. Its directors come from a wide array of
industries, companies and educational and other institutions, and have a broad
range of experience and knowledge. Ford has been well served by its present
policy on board and committee membership, which selects nominees for election
based on criteria, including overall business experience and specific expertise,
and giving due consideration of any relationships with the Company. Any material
relationships between Ford and any director are disclosed under SEC rules. (See
p. 12 of this Proxy Statement.)
We note that there are only two Ford employees on the Board of Directors.
Adoption of this proposal would unduly restrict the candidates available for
service on the committees of the Board. It also would exclude from consideration
as potential board committee members candidates who have sound judgment,
extensive experience, and a thorough knowledge of the operations of the Company.
We believe that Ford's current policies regarding the independence of directors
is appropriate.
For these reasons, we believe that the proposal is unnecessary and not in the
best interests of Ford or you.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 10.
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<PAGE> 52
STOCKHOLDER PROPOSALS FOR 1999
Any stockholder proposal intended for inclusion in the proxy material for the
1999 annual meeting must be received no later than December 15, 1998.
ANNUAL REPORT AND OTHER MATTERS
Ford's 1997 Annual Report, including consolidated financial statements, was
recently mailed to you. A list of the stockholders of record entitled to vote at
the annual meeting will be available for review by any stockholder, for any
purpose related to the meeting, between 9:00 a.m. and 5:00 p.m. at the Westin
Hotel, 21 East Fifth Street, Cincinnati, Ohio, for ten days prior to the
meeting.
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be paid by Ford. We
do not expect to pay any fees for the solicitation of proxies, but may pay
brokers, nominees, fiduciaries and other custodians their reasonable fees and
expenses for sending proxy materials to beneficial owners and obtaining their
instructions. In addition to solicitation by mail, proxies may be solicited in
person, or by telephone, facsimile transmission or other means of electronic
communication, by directors, officers and other employees of the Company.
/s/ JOHN M. RINTAMAKI
John M. Rintamaki
Secretary
April 14, 1998
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<PAGE> 53
HOW TO ATTEND THE ANNUAL MEETING
STOCKHOLDERS OF RECORD
When you provide your proxy, please let us know if you plan to attend the annual
meeting. If you indicate that you plan to attend, we'll mail you a ticket that
will admit the named stockholder(s) and one guest. If your ticket does not
arrive in time, we can issue you a ticket at the door.
"STREET NAME" HOLDERS
Since most brokers don't participate in our advance ticket plan, tell your
broker you're planning to attend the meeting and would like a "legal proxy."
Then simply bring that form to the meeting, and we'll give you a ticket at the
door that will admit you and one guest. If you can't get a legal proxy in time,
we can still give you a ticket at the door if you bring a copy of your most
recent brokerage account statement showing that you own Ford stock.
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<PAGE> 54
APPENDIX I
FORD MOTOR COMPANY ANNUAL INCENTIVE COMPENSATION PLAN
(EFFECTIVE AS OF JANUARY 1, 1998, SUBJECT TO SHAREHOLDER APPROVAL)
1. Purpose. This Plan, which shall be known as the "Ford Motor Company Annual
Incentive Compensation Plan" and is hereinafter referred to as the "Plan", is
intended to provide annual incentive compensation to Plan participants based on
the achievement of established performance objectives.
2. Definitions. As used in the Plan, the following terms shall have the
following meanings, respectively:
(a) The term "Affiliate" shall mean, as applied with respect to any person or
legal entity specified, a person or legal entity that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person or legal entity specified.
(b) The term "Annual Incentive Compensation Committee" shall mean the committee
comprised of two or more officers of the Company designated members of such
Committee by the Compensation and Option Committee.
(c) The term "Award" shall mean the cash compensation awarded under the Plan
with respect to a Performance Period to a participant eligible under Section
5(b).
(d) The term "Committee" shall mean, unless the context otherwise requires:
(i) The Compensation and Option Committee for all matters affecting any
Section 16 Person.
(ii) The Annual Incentive Compensation Committee for all matters affecting
employees other than Section 16 Persons.
(e) The term "Company" or "Ford" generally shall mean Ford Motor Company. When
used in the Plan with respect to employment, the term "Company" shall include
subsidiaries of the Company.
(f) The term "Compensation and Option Committee" shall mean the Compensation and
Option Committee of the Board of Directors of the Company.
(g) The term "Covered Employee" shall mean a Key Employee who is a "covered
employee" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended.
(h) The term "DC Plan" shall mean the Company's Deferred Compensation Plan, as
amended.
(i) The term "Employee"' shall mean any person who is regularly employed by the
Company or one of its Subsidiaries at a salary (as distinguished from a pension,
retirement allowance, severance pay, retainer, commission, fee under a contract
or other arrangement, or hourly, piecework or other wage) and is enrolled on the
active employment rolls of the Company or a Subsidiary, including, but without
limitation, any employee who also is an officer or director of the Company or
one of its Subsidiaries.
(j) The term "Exceptional Contribution Fund" shall mean, with respect to Awards
for a Performance Period, the dollar amount designated by the Compensation and
Option Committee pursuant to Section 13 for purposes of increasing the amount of
Awards to be made to participants who are not Covered Employees based on
exceptional individual, unit, group or Company performance.
(k) The term "Key Employee" shall mean an Employee of the Company determined by
the Committee to be a Key Employee for purposes of the Plan.
<PAGE> 55
(l) The term "Maximum Award Pool" shall mean the maximum aggregate amount of all
Awards which may be made to participants for a Performance Period determined by
the Compensation and Option Committee pursuant to Section 12.
(m) The term "Maximum Individual Award" shall mean the maximum amount of an
Award to a Covered Employee for a Performance Period, as set forth in Section
10.
(n) The term "participant" shall mean a Key Employee selected by the Committee
to participate in the Plan for a Performance Period.
(o) The term "Performance Criteria" shall mean, with respect to any Award for a
Performance Period that may be made to a participant who is a Covered Employee,
one or more of the following objective business criteria established by the
Compensation and Option Committee with respect to the Company and/or any
Subsidiary, division, business unit or component thereof upon which the
Performance Goals for a Performance Period are based: asset charge, asset
turnover, automotive return on sales, capacity utilization, capital employed in
the business, capital spending, cash flow, cost structure improvements,
complexity reductions, customer loyalty, diversity, earnings growth, earnings
per share, economic value added, environmental health and safety, facilities and
tooling spending, hours per vehicle, increase in customer base, inventory
turnover, market price appreciation, market share, net cash balance, net income,
net income margin, net operating cash flow, operating profit margin, order to
delivery time, plant capacity, process time, profits before tax,
quality/customer satisfaction, return on assets, return on capital, return on
equity, return on net operating assets, return on sales, revenue growth, sales
margin, sales volume, total shareholder return, vehicles per employee, warranty
performance to budget, variable margin and working capital. The term
"Performance Criteria" shall mean, with respect to any Award that may be made to
a participant who is not a Covered Employee, one or more of the business
criteria applicable to Covered Employees for the Performance Period and any
other criteria based on individual, business unit, group or Company performance
selected by the Compensation and Option Committee.
(p) The term "Performance Goals" shall mean the one or more goals established by
the Compensation and Option Committee based on one or more Performance Criteria
pursuant to Section 7 for the purpose of measuring performance in determining
the amount, if any, of an Award for a Performance Period.
(q) The term "Performance Formula" shall mean, with respect to a Performance
Period, the one or more objective formulas established by the Compensation and
Option Committee pursuant to Section 7 and applied against the Performance Goals
in determining whether and the extent to which Awards have been earned for the
Performance Period.
(r) The term "Performance Period" or "Period" shall mean, with respect to which
a particular Award may be made under the Plan, the Company's fiscal year or
other twelve consecutive month period designated by the Compensation and Option
Committee for the purpose of measuring performance against Performance Goals.
(s) The term "Pro Forma Award Amount" shall mean, with respect to an Award to be
made for a Performance Period, the amount determined by the Committee pursuant
to Section 9.
(t) The term "SC Plan" shall mean the Company's Supplemental Compensation Plan,
as amended.
(u) The term "Section 16 Person" shall mean any employee who is subject to the
reporting requirements of Section 16(a) or the liability provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended.
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(v) The term "Subsidiary" shall mean (i) any corporation a majority of the
voting stock of which is owned or controlled, directly or indirectly, by the
Company or (ii) any limited liability company a majority of the membership
interest of which is owned or controlled, directly or indirectly, by the
Company.
(w) The term "Target Award" shall mean, with respect to a Performance Period,
the Target Award amount established for each applicable salary grade or band of
participants by the Committee pursuant to Section 6 hereof.
(x) The term "Total Pro Forma Award Pool" shall mean, with respect to Awards for
a Performance Period, the amount described in Section 11.
3. Effective Date. The Plan shall be effective as of January 1, 1998.
4. Administration. Except as otherwise expressly provided, the Compensation and
Option Committee shall have full power and authority to construe, interpret and
administer the Plan. The Compensation and Option Committee shall make all
decisions relating to matters affecting Section 16 Persons, but may otherwise
delegate any of its authority under the Plan. The Compensation and Option
Committee and the Annual Incentive Compensation Committee each may at any time
adopt or terminate, and may from time to time, amend, modify or suspend such
rules, regulations, policies and practices as they in their sole discretion may
determine in connection with the administration of, or the performance of their
respective responsibilities under, the Plan.
5. Eligibility.
(a) Eligibility to Participate. All Key Employees are eligible to be selected to
participate in the Plan. The Committee shall, in its sole discretion, designate
which Key Employees will be participants for the applicable Performance Period.
(b) Eligibility for Awards. An Award with respect to a Performance Period may be
made pursuant to Section 14 of the Plan to (i) participants for such Performance
Period who shall have been an employee at any time during such Performance
Period, or to (ii) the spouse, children or legal representatives, as the
Committee in its sole discretion shall determine, of any such person whose
employment shall have been terminated by reason of his or her death during such
Performance Period.
(c) Eligibility of Compensation and Option Committee Members. No person while a
member of the Compensation and Option Committee shall be eligible to participate
under the Plan or receive an Award.
6. Determination of Target Awards. Within 90 days of the commencement of a
Performance Period, the Committee shall establish the Target Award for each
applicable salary grade or band of Key Employees selected to participate in the
Plan with respect to a Performance Period, subject to any limitations
established by the Compensation and Option Committee. The fact that a Target
Award is established for a participant's salary grade or band for a Performance
Period shall not entitle such participant to receive an Award.
7. Selection of Performance Criteria and Establishment of Performance Goals and
Performance Formula; Minimum Threshold Objective. Within 90 days of the
commencement of a Performance Period, the Compensation and Option Committee
shall select the Performance Criteria and establish the related Performance
Goals be used to measure performance for a Performance Period and the
Performance Formula to be used to determine what portion, if any, of an Award
has been earned for the Performance Period. The Performance Criteria may be
expressed in absolute terms or relate to the performance of other companies or
to an index. Within that same 90 day period, the Compensation and Option
Committee may establish a minimum threshold objective for any Performance Goal
for any
I-3
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Performance Period, which if not met, would result in no Award being made to any
participant with such Performance Goal for such Performance Period.
8. Adjustments to Performance Goals, Performance Formula or Performance
Criteria. For purposes of determining Awards for participants who are not
Covered Employees, the Compensation and Option Committee may adjust or modify
any of the Performance Goals, Performance Formula and/or the Performance
Criteria for any Performance Period in order to prevent the dilution or
enlargement of the rights of such participants under the Plan (i) in the event
of, or in anticipation of, any unusual or extraordinary item, transaction, event
or development, (ii) in recognition of, or in anticipation of, any other unusual
or nonrecurring event affecting the Company or the financial statements of the
Company or Ford Credit, or in anticipation of, changes in applicable laws,
regulations, accounting principles or business conditions, and (iii) for any
other reason or circumstance deemed relevant to the Compensation and Option
Committee in its sole discretion.
9. Determination of Pro Forma Award Amount. As soon as practicable following the
end of a Performance Period, the Committee shall determine the Pro Forma Award
Amount for any Award to be made to a participant for a Performance Period by
applying the applicable Performance Formula for the participant for the
Performance Period against the accomplishment of the related Performance Goals
for such participant.
10. Maximum Individual Award for Covered Employees. The Maximum Individual Award
for a Performance Period to a participant who is a Covered Employee is
$10,000,000.
11. Total Pro Forma Award Pool. The Total Pro Forma Award Pool for all Awards
for a Performance Period shall equal the sum of the Pro Forma Award Amounts for
all participants for the Performance Period.
12. Determination of Maximum Award Pool. The Compensation and Option Committee
shall determine the amount of the Maximum Award Pool for a Performance Period
which shall not exceed the sum of the Total Pro Forma Award Pool plus the amount
of the Exceptional Contribution Fund for such Period.
13. Determination of Exceptional Contribution Fund. The Compensation and Option
Committee shall determine the amount of the Exceptional Contribution Fund which
may be used for increasing the size of Awards for a Performance Period above the
applicable Pro Forma Award Amount to participants who are not Covered Employees.
Unless otherwise determined by the Compensation and Option Committee, the amount
of the Exceptional Contribution Fund shall not exceed 15% of the Total Pro Forma
Award Pool for the applicable Performance Period.
14. Determination of Individual Awards. Subject to achievement of any applicable
minimum threshold objectives established under Section 7, fulfillment of the
conditions set forth in Section 17 and compliance with the Maximum Individual
Award limitation under Section 10 and the eligibility requirements set forth in
paragraph (b) of Section 5, the Committee shall, as soon as practicable
following the end of a Performance Period, determine the amount of each Award to
be made to a participant under the Plan for the Performance Period, which amount
shall, except as otherwise provided below, be the Pro Forma Award Amount
determined for such participant for such Period pursuant to Section 9. The
Committee may in its sole discretion reduce the amount of any Award that
otherwise would be awarded to any participant for any Performance Period. In
addition, the Committee may in its sole discretion increase the amount of any
Award that otherwise would be awarded to any participant who is not a Covered
Employee for a Performance Period to an amount that is higher than the
applicable Pro Forma Award Amount based on exceptional individual, unit, group
or Company performance; provided, however, that the total amount of all Awards
made for a Performance Period
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shall not exceed the related Maximum Award Pool. Individual Award amounts may be
less than or greater than 100% of the related Target Award. The determinations
by the Annual Incentive Compensation Committee of individual Award amounts for
Employees who are not Section 16 Persons shall be subject to a maximum funding
amount and any other limitations specified by the Compensation and Option
Committee. Notwithstanding anything contained in the Plan to the contrary, the
Committee may determine in its sole discretion not to make an Award to a
particular participant or to all participants selected to participate in the
Plan for any Performance Period.
15. Distribution and Form of Awards.
(a) General. Except as otherwise provided in paragraph (b) or (c) of this
Section 15 or in Section 17, distribution of Awards for a Performance Period
shall be made on or as soon as practicable after the distribution date for such
Awards determined by the Compensation and Option Committee, which date shall in
no event be later than the March 15 following the end of the applicable
Performance Period, and shall be payable in cash.
(b) Deferral of Awards. Subject to the terms, conditions and eligibility
requirements of the DC Plan, Key Employees who receive an Award under the Plan
are eligible to defer payment of all or part of such Award under the DC Plan
under the same terms as if such Award had been an award of supplemental
compensation made under the SC Plan.
(c) Mandatory Deferral of Awards. The Compensation and Option Committee shall
determine whether and the extent to which any Awards under the Plan will be
mandatorily deferred and the terms of any such deferral. Unless otherwise
determined by the Compensation and Option Committee, Awards may be mandatorily
deferred by such Committee in the same manner as if they had been awards of
supplemental compensation made under the SC Plan.
16. Designation of Beneficiaries and Effect of Death.
(a) Designation of Beneficiaries. A participant may file with the Company a
written designation of a beneficiary or beneficiaries (subject to such
limitations as to the classes and number of beneficiaries and contingent
beneficiaries and such other limitations as the Compensation and Option
Committee from time to time may prescribe) to receive, in the event of the death
of the participant, undistributed amounts of any Award that would have been
payable to such participant had he or she been living and that was not deferred
under any Company deferral arrangement or plan. A participant shall be deemed to
have designated as beneficiary or beneficiaries under the Plan the person or
persons who receive such participant's life insurance proceeds under the basic
Company Life Insurance Plan unless such participant shall have assigned such
life insurance or shall have filed with the Company a written designation of a
different beneficiary or beneficiaries under the Plan. A participant may from
time to time revoke or change any such designation of beneficiary and any
designation of beneficiary under the Plan shall be controlling over any
testamentary or other disposition; provided, however, that if the Committee
shall be in doubt as to the right of any such beneficiary to receive any such
payment, the same may be paid to the legal representatives of the participant,
in which case the Company, the Committee and the members thereof shall not be
under any further liability to anyone.
(b) Distribution Upon Death. Subject to the provisions of Section 15, paragraph
(a) of this Section 16 and, if applicable, the DC Plan or any other deferral
plan or arrangement, in the event of the death of any participant prior to
distribution of an Award, the total value of such participant's Award shall be
distributed in cash in one lump sum in accordance with paragraph (a) of Section
15 to any beneficiary or beneficiaries designated or deemed designated by the
participant pursuant to paragraph (a) of this Section 16 who shall survive such
participant (to the extent such designation is effective and enforceable at the
time of such participant's death) or, in the absence of such designation or such
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surviving beneficiary, to the legal representative of such person, at such time
(or as soon thereafter as practicable) and otherwise as if such person were
living and had fulfilled all applicable conditions as to earning out set forth
in, or established pursuant to Section 17 and, if applicable, the DC Plan or any
other deferral plan or arrangement, provided such conditions shall have been
fulfilled by such person until the time of his or her death.
17. Conditions to Payment of Awards.
(a) Effect of Competitive Activity. Anything in the Plan notwithstanding, and
subject to paragraph (c) hereof and, if applicable, any conditions under the DC
Plan or any other deferral plan or arrangement relating to payment of an Award,
if the employment of any participant shall terminate, for any reason other than
death, prior to the distribution date established pursuant to paragraph (a) of
Section 15 for payment of an Award, such participant shall receive payment of an
Award only if, during the entire period from the making of an Award until such
distribution date, such participant shall have earned out such Award
(i) by continuing in the employ of the Company or a Subsidiary thereof, or
(ii) if his or her employment shall have been terminated for any reason
other than death, by (a) making himself or herself available, upon request,
at reasonable times and upon a reasonable basis, to consult with, supply
information to and otherwise cooperate with the Company or any Subsidiary
thereof with respect to any matter that shall have been handled by him or
her or under his or her supervision while he or she was in the employ of
the Company or any Subsidiary thereof, and (b) refraining from engaging in
any activity that is directly or indirectly in competition with any
activity of the Company or any Subsidiary thereof.
(b) Nonfulfillment of Competitive Activity Conditions; Waiver of Conditions
Under the Plan. In the event of a participant's nonfulfillment of any condition
set forth in paragraph (a) above, such participant's rights under the Plan to
receive or defer payment of an Award under the Plan shall be forfeited and
canceled; provided, however, that the nonfulfillment of such condition may at
any time (whether before, at the time of or subsequent to termination of
employment) be waived in the following manner:
(i) with respect to a participant who at any time shall have been a Section
16 Person, such waiver may be granted by the Compensation and Option
Committee upon its determination that in its sole judgment there shall not
have been and will not be any substantial adverse effect upon the Company
or any Subsidiary thereof; and
(ii) with respect to any other participant, such waiver may be granted by
the Annual Incentive Compensation Committee (or any committee appointed by
it) upon its determination that in its sole judgment there shall not have
been and will not be any such substantial adverse effect.
(c) Effect of Inimical Conduct. Anything in the Plan to the contrary, the right
of a participant, following termination of such participant's employment with
the Company, to receive payment or to defer payment of an Award under Section 15
shall terminate on and as of the date on which it his been determined that such
participant at any time (whether before or subsequent to termination of such
participant's employment) acted in a manner inimical to the best interests of
the Company. Any such determination shall be made by (i) the Compensation and
Option Committee with respect to any participant who at any time shall have been
a Section 16 Person, and (ii) the Annual Incentive Compensation Committee (or
any committee appointed by it for the purpose) with respect to any other
participant. Such Committee (or any such other committee) may make such
determination at any time prior to payment in full of an Award. Conduct which
constitutes engaging in any activity that is directly or indirectly in
competition with any activity of the Company or any Subsidiary thereof shall be
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governed by paragraph (a)(ii) of this Section 17 and shall not be subject to any
determination under this paragraph (c).
18. Limitations. A participant shall not have any interest in any Award until it
is distributed in accordance with the Plan. The fact that a Key Employee has
been selected to be a participant for a Performance Period shall not in any
manner entitle such participant to receive an Award for such period. The
determination as to whether or not such participant shall be paid an Award for
such Performance Period shall be determined solely in accordance with the
provisions of Sections 14 and 17 hereof. All payments and distributions to be
made thereunder shall be paid from the general assets of the Company. Nothing
contained in the Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any employee, former employee or any other
person. The Plan shall not constitute part of any participant's or employee's
employment contract with the Company or any participating subsidiary.
Participation in the Plan shall not create or imply a right to continued
employment.
19. Withholding of Taxes, etc. The Company shall have the right to withhold an
amount sufficient to satisfy any federal, state or local income taxes, FICA or
Medicare taxes or other amounts that the Company may be required by law to pay
with respect to any Award, including withholding payment from a participant's
current compensation.
20. No Assignment of Benefits. No rights or benefits under the Plan shall,
except as otherwise specifically provided by law, be subject to assignment
(except for the designation of beneficiaries pursuant to paragraph (a) of
Section 16), nor shall such rights or benefits be subject to attachment or legal
process for or against a participant or his or her beneficiary or beneficiaries,
as the case may be.
21. Administration Expense. The entire expense of offering and administering the
Plan shall be borne by the Company and its participating Subsidiaries and shall
not be charged against the Reserve under the SC Plan.
22. Access of Independent Certified Public Accountants and Committee to
Information. The Company's independent certified public accountants shall have
full access to the books and records of the Company and its Subsidiaries, and
the Company shall furnish to such accountants such information as to the
financial condition and operations of the Company and its Subsidiaries as such
accountants may from time to time request, in order that such accountants may
take any action required or requested to be taken by them under the Plan. The
Executive Vice President and Chief Financial Officer or, in the event of his or
her absence or disability to act, the principal accounting officer of the
Company shall furnish to the Committee such information as the Committee may
request to assist it in carrying out or interpreting this Plan. Neither such
accountants, in reporting amounts required or requested under the Plan, nor the
Executive Vice President and Chief Financial Officer, or any other director,
officer or employee of the Company, in furnishing information to such
accountants or to the Committee, shall be liable for any error therein, if such
accountants or other person, as the case may be, shall have acted in good faith.
23. Amendment, Modification, Suspension and Termination of the Plan; Rescissions
and Corrections. The Compensation and Option Committee, at any time may
terminate, and at any time and from time to time, and in any respect, may amend
or modify the Plan or suspend any of its provisions; provided, however, that no
such amendment, modification, suspension or termination shall, without the
consent of a participant, adversely affect any right or obligation with respect
to any Award theretofore made. The Committee at any time may rescind or correct
any actions made in error or that jeopardize the intended tax status or legal
compliance of the Plan.
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24. Indemnification and Exculpation.
(a) Indemnification. Each person who is or shall have been a member of the
Compensation and Option Committee or a member of the Annual Incentive
Compensation Committee shall be indemnified and held harmless by the Company
against and from any and all loss, cost, liability or expense that may be
imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may be
or become a party or in which such person may be or become involved by reason of
any action taken or failure to act under the Plan and against and from any and
all amounts paid by such person in settlement thereof (with the Company's
written approval) or paid by such person in satisfaction of a judgment in any
such action, suit or proceeding, except a judgment in favor of the Company based
upon a finding of such person's lack of good faith; subject, however, to the
condition that upon the institution of any claim, action, suit or proceeding
against such person, such person shall in writing give the Company an
opportunity, at its own expense, to handle and defend the same before such
person undertakes to handle and defend it on such person's behalf. The right of
indemnification shall not be exclusive of any other right to which such person
may be entitled as a matter of law or otherwise, or any power that the Company
may have to indemnify or hold such person harmless.
(b) Exculpation. Each member of the Compensation and Option Committee and each
member of the Annual Incentive Compensation Committee shall be fully justified
in relying or acting in good faith upon any information furnished in connection
with the administration of the Plan or any appropriate person or persons other
than such person. In no event shall any person who is or shall have been a
member of the Compensation and Option Committee or a member of the Annual
Incentive Compensation Committee be held liable for any determination made or
other action taken or any omission to act in reliance upon any such information,
or for any action (including the furnishing of information) taken or any failure
to act, if in good faith.
25. Finality of Determinations. Each determination, interpretation or other
action made or taken pursuant to the provisions of the Plan by the Compensation
and Option Committee or the Annual Incentive Compensation Committee shall be
final and shall be binding and conclusive for all purposes and upon all persons,
including, but without limitation thereto, the Company, its stockholders, the
Compensation and Option Committee and each of the members thereof, the Annual
Incentive Compensation Committee and each of the members thereof, and the
directors, officers, and employees of the Company, the Plan participants, and
their respective successors in interest.
26. Governing Law. The Plan shall be governed by and construed in accordance
with the laws of the State of Michigan.
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APPENDIX II
FORD MOTOR COMPANY
1998 LONG-TERM INCENTIVE PLAN
(EFFECTIVE AS OF JANUARY 1, 1998, SUBJECT TO SHAREHOLDER APPROVAL)
PURPOSE
1.(a) Purpose. This Plan, known as the "1998 Long-Term Incentive Plan" (the
"Plan"), is intended to provide an incentive to certain salaried employees of
Ford Motor Company (the "Company"), and of its subsidiaries, in order to
encourage them to remain in the employ of the Company and to increase their
interest in the Company's success. It is intended that this purpose be effected
through awards or grants of stock options and various other rights with respect
to shares of the Company's Common Stock (collectively, the "Plan Awards"), as
provided herein, to eligible employees ("Participants").
(b) Company; Subsidiary; Employee. The term "Company" when used with reference
to employment shall include subsidiaries of the Company. The term "subsidiary"
shall mean (i) any corporation a majority of the voting stock of which is owned
directly or indirectly by the Company or (ii) any limited liability company a
majority of the membership interest of which is owned, directly or indirectly,
by the Company. The term "employee" shall be deemed to include any person who is
an employee of any joint venture corporation or partnership, or comparable
entity, in which the Company has a substantial equity interest (a "Joint
Venture"), provided such person was an employee of the Company immediately prior
to becoming employed by such Joint Venture.
ADMINISTRATION
2.(a) Compensation and Option Committee. The Compensation and Option Committee
of the Company's Board of Directors (the "Committee") shall administer the Plan
and perform such other functions as are assigned to it under the Plan. The
Committee is authorized, subject to the provisions of the Plan, from time to
time to establish such rules and regulations as it may deem appropriate for the
proper administration of the Plan, and to make such determinations under, and
such interpretations of, and to take such steps in connection with, the Plan and
the Plan Awards as it may deem necessary or advisable, in each case in its sole
discretion.
(b) Delegation of Authority. The Committee may delegate any or all of its powers
and duties under the Plan, including, but not limited to, its authority to grant
waivers pursuant to Article 8, to one or more other committees as it shall
appoint, pursuant to such conditions or limitations as the Committee may
establish; provided, however, that the Committee shall not delegate its
authority to (1) make Plan Awards under the Plan, except as otherwise provided
in Articles 4 and 5, (2) act on matters affecting any Participant who is subject
to the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the liability provisions of Section
16(b) of the Exchange Act (any such Participant being called a "Section 16
Person") or (3) amend or modify the Plan pursuant to the provisions of paragraph
(b) of Article 14.
(c) Eligibility of Committee Members. No person while a member of the Committee
or any committee of the Board of Directors administering the Plan shall be
eligible to hold or receive a Plan Award.
STOCK AVAILABLE FOR PLAN AWARDS
3.(a) Stock Subject to Plan. The stock to be subject to or related to Plan
Awards shall be shares of the Company's Common Stock of the par value of $1.00
per share ("Stock"), and may be either authorized and unissued or held in the
treasury of the Company. The maximum number of shares of Stock with
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respect to which Plan Awards may be granted under the Plan, subject to
adjustment in accordance with the provisions of Article 11, in each calendar
year during any part of which the Plan is in effect shall be 2% of the total
number of issued shares of Stock as of December 31 of the calendar year
immediately preceding such year (the number of shares determined by application
of such percentage in any calendar year being called the "2% Limit" for such
year); provided, however, that such percentage may be increased to up to 3% in
any one or more calendar years, in which event the excess over 2% in any such
calendar year shall be applied to the reduction of the aggregate number of
shares that otherwise would have been available for Plan Awards pursuant to this
paragraph (a) and paragraph (c) of this Article 3 in subsequent calendar years
during the term of the Plan, in inverse order commencing with the year 2008.
Notwithstanding the foregoing, (i) the aggregate number of shares that may be
issued upon exercise of "incentive stock options" (as defined in paragraph
(a)(l) of Article 5) shall not exceed 2% of the number of shares authorized
under the Company's Certificate of Incorporation at the date of adoption of the
Plan (subject to adjustment in accordance with the provisions of Article 11),
(ii) the maximum number of shares subject to Options (as defined below), with or
without any related Stock Appreciation Rights (as defined below), that may be
granted pursuant to Article 5 to any Covered Executive during any calendar year
during any part of which the Plan is in effect shall be 2.5% of the maximum
number of shares of Stock with respect to which Plan Awards may be granted
during such year under the Plan determined in accordance with this paragraph
(a), subject to adjustment in accordance with the provisions of Article 11 and
(iii) the maximum number of shares of Stock that may be granted as Final Awards
(as defined below) pursuant to Article 4 to any Covered Executive during any
calendar year during any part of which the Plan is in effect shall be 500,000,
subject to adjustment in accordance with the provisions of Article 11.
(b) Computation of Stock Available for Plan Awards. For the purpose of computing
the total number of shares of Stock remaining available for Plan Awards at any
time in each calendar year during which the Plan is in effect, there shall be
debited against the total number of shares determined to be available pursuant
to paragraphs (a) and (c) of this Article 3 (i) the maximum number of shares of
Stock subject to issuance upon exercise of Options (as defined below) granted in
such year, (ii) the number of shares of Stock representing 150% of the Target
Awards under Performance Stock Rights (as defined below) granted in such
calendar year, and (iii) the number of shares of Stock related to Other
Stock-Based Awards (as defined below) granted in such year, as determined by the
Committee in each case as at the dates on which such Plan Awards were granted.
(c) Unused, Forfeited and Reacquired Shares. Any unused portion of the 2% Limit
for any calendar year shall be carried forward and shall be made available for
Plan Awards in succeeding calendar years. The shares involved in the unexercised
or undistributed portion of any terminated, expired or forfeited Plan Award
(including, without limitation, the shares representing 150% of any Target Award
that are not included in the related Final Award also shall be made available
for further Plan Awards. Any shares of Stock made available for Plan Awards
pursuant to this paragraph (c) shall be in addition to the shares available
pursuant to paragraph (a) of this Article 3.
PERFORMANCE STOCK RIGHTS AND FINAL AWARDS
4.(a) Grant of Performance Stock Rights. The term "Performance Stock Right"
("Right"), shall mean the right to receive, without payment to the Company, up
to the number of shares of Stock described therein, subject to the terms and
provisions of the Right and the Plan. The Committee, at any time and from time
to time while the Plan is in effect, may grant, or authorize the granting of,
Rights to such officers and other key salaried employees of the Company, whether
or not members of the Board of Directors, as it may select and for such numbers
of shares based on such dollar amounts as it shall designate, subject to the
provisions of this Article 4 and Article 3. Notwithstanding anything contained
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in the Plan to the contrary, the Committee may authorize a committee of two or
more Company officers appointed by it to determine the amount of individual
grants of Rights and related Final Awards to key employees of the Company
selected by such committee who are not officers or directors of the Company,
subject to the provisions of Articles 3 and 4 and subject to a maximum number of
shares of Stock and any other limitations specified by the Committee.
(b) Terms and Provisions of Performance Stock Rights. Prior to the grant of any
Right, the Committee shall determine the terms and provisions of each Right,
including, without limitation, (i) the number of shares of Stock to be earned
under such Right if 100% of each of the Performance Goals is achieved (the
"Target Award"), as adjusted pursuant to Article 11, (ii) one or more
performance goals ("Performance Goals") based on one or more Performance
Criteria (as defined below) to be used to measure performance under such Right,
(iii) the formula (the "Performance Formula") to be applied against the
Performance Goals in determining the percentage (which shall not exceed 150%) of
the Target Award (as adjusted pursuant to Article 11) used to determine the
number of shares of Stock earned under such Right, (iv) the period of time for
which such performance is to be measured (the "Performance Period"), which shall
commence not earlier than 90 days prior to the date of grant of such Right, and
(v) the period of time, if any, during which the disposition of shares of Stock
covered by any Final Award relating to such Right shall be restricted as
provided in paragraph (a) of Article 9 (the "Restriction Period"); provided,
however, that the Committee may establish the Restriction Period applicable to
any Right at the time of or at any time prior to the granting of the related
Final Award rather that at the time of granting such Right. Within 90 days of
commencement of a Performance Period, the Committee may establish a minimum
threshold objective for any Performance Goal for such Performance Period, which
if not met, would result in no Final Award being made to any Participant with
such Goal for such Period. During and after the Performance Period, but prior to
the grant of a Final Award relating to any Right granted to a Participant who is
not a "Covered Executive" (as defined below), the Committee may adjust the
Performance Goals, Performance Formula and Target Award and otherwise modify the
terms and provisions of such Right, subject to the terms and conditions of the
Plan. Each Right shall be evidenced by a letter, an agreement or such other
document as the Committee may determine. The term "Performance Criteria" shall
mean, with respect to any Right granted to a Participant who is a Covered
Executive, one or more of the following objective business criteria established
by the Committee with respect to the Company and/or any subsidiary, division,
business unit or component thereof upon which the Performance Goals for a
Performance Period are based: asset charge, asset turnover, automotive return on
sales, capacity utilization, capital employed in the business, capital spending,
cash flow, cost structure improvements, complexity reductions, customer loyalty,
diversity, earnings growth, earnings per share, economic value added,
environmental health and safety, facilities and tooling spending, hours per
vehicle, increase in customer base, inventory turnover, market price
appreciation, market share, net cash balance, net income, net income margin, net
operating cash flow, operating profit margin, order to delivery time, plant
capacity, process time, profits before tax, quality/customer satisfaction,
return on assets, return on capital, return on equity, return on net operating
assets, return on sales, revenue growth, sales margin, sales volume, total
shareholder return, vehicles per employee, warranty performance to budget,
variable margin and working capital. The term "Performance Criteria" shall mean,
with respect to any Right granted to a Participant who is not a Covered
Executive, one or more of the business criteria applicable to Covered Executives
for the Performance Period and any other criteria based on individual, business
unit, group or Company performance selected by the Committee. The Performance
Criteria may be expressed in absolute terms or relate to the performance of
other companies or to an index. The term "Covered Executive" shall mean the
Chief Executive Officer and the other four highest compensated officers of the
Company at year-end whose compensation is required to be reported in the Summary
Compensation Table of the Proxy Statement.
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(c) Dividend Equivalents on Rights. (1) If the Committee shall determine, each
Participant to whom a Right is granted shall be entitled to receive payment of
the same amount of cash that such Participant would have received as cash
dividends if, on each record date during the entire Performance Period relating
to such Right, such Participant had been the holder of record of a number of
shares of Stock equal to 100% of the related Target Award (as adjusted pursuant
to Article 11). In the case of any Right granted to a Participant after the
commencement of the related Performance Period, any such payment relating to any
dividend payable prior to the date of grant of such Right shall be made at the
same time as the payment relating to the first dividend paid after such date of
grant. Such cash payments are hereinafter called "dividend equivalents".
(2) Notwithstanding the provisions of paragraph (c)(1) of this Article 4
relating to dividend equivalents, the Committee may determine that, in lieu of
receiving all or any portion of any such dividend equivalent in cash, a
Participant shall receive an award of full shares of Stock having a value (as
determined by the Committee) approximately equal to the portion of such dividend
equivalent that was not paid in cash. Certificates for shares of Stock so
awarded shall be issued as of the payment date for the related cash dividend,
and the shares of Stock covered thereby shall be treated in the same manner as
shares of Stock representing Final Awards, subject to the terms and conditions
of the Plan, including, without limitation, the provisions of paragraphs (b),
(d) and (e) of Article 4 and Articles 8, 9, and 11.
(d) Final Awards. (1) As soon as practicable following the completion of the
Performance Period relating to any Right, but not later than 12 months following
such completion, the Committee shall determine the percentage (which shall not
exceed 150%) of the Target Award (as adjusted pursuant to Article 11) which
shall be used to determine the number of shares of Stock to be awarded finally
to the Participant who holds such Right. Such number of shares of Stock is
called the "Final Award". Each Final Award shall represent only full shares of
Stock, and any fractional share that would otherwise result from such Final
Award calculation shall be disregarded. In making such determination, the
Committee shall apply the applicable Performance Formula for the Participant for
the Performance Period against the accomplishment of the related Performance
Goals. The Committee may, in its sole discretion, reduce the amount of any Final
Award that otherwise would be awarded to any Participant for any Performance
Period. In addition, the Committee may, in its sole discretion, increase the
amount of any Final Award that otherwise would be awarded to any Participant who
is not a Covered Executive, subject to the maximum Final Award amount of 150% of
the related Target Award (as adjusted pursuant to Article 11), taking into
account (i) the extent to which the Performance Goals provided in such Right
was, in the Committee's sole opinion, achieved, (ii) the individual performance
of such Participant during the related Performance Period and (iii) such other
factors as the Committee may deem relevant, including, without limitation, any
change in circumstances or unforeseen events, relating to the Company, the
economy or otherwise, since the date of grant of such Right. The Committee shall
notify such Participant of such Participant's Final Award as soon as practicable
following such determination.
(2) Following the determination of each Final Award, the Company shall issue or
cause to be issued certificates for the number of shares of Stock representing
such Final Award, registered in the name of the Participant who received such
Final Award. Such Participant shall thereupon become the holder of record of the
number of shares of Stock evidenced by such certificates, entitled to dividends,
voting rights and other rights of a holder thereof, subject to the terms and
provisions of the Plan, including, without limitation, the provisions of
paragraph (e) of this Article 4 and Articles 8, 9 and 11. If the Committee has
determined that dividend equivalents shall be payable to a Participant with
respect to any Right pursuant to paragraph (c) of this Article 4, concurrently
with the issuance of such certificates, the Company shall deliver to such
Participant an amount equal to the amount of the cash
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dividends that such Participant would have received with respect to the shares
of Stock representing such Final Award, prior to the date on which such
Participant shall have become the holder of record of such shares, if such
Participant had become such a holder of record immediately following completion
of the Performance Period relating to such Final Award. The Committee may
require that such certificates bear such restrictive legend as the Committee may
specify and be held by the Company in escrow or otherwise pursuant to any form
of agreement or instrument that the Committee may specify.
(3) Notwithstanding the provisions of paragraphs (d)(l) and (2) of this Article
4 or any other provision of the Plan, in the case of any Right held by a
Participant who is an employee of a foreign subsidiary or foreign branch of the
Company or of a foreign Joint Venture, or held by a Participant who is in any
other category specified by the Committee, the Committee may specify that such
Participant's Final Award shall not be represented by certificates for shares of
Stock but shall be represented by rights approximately equivalent (as determined
by the Committee) to the rights that such Participant would have received if
certificates for shares of Stock had been issued in the name of such Participant
in accordance with paragraphs (d)(l) and (2) of this Article 4 (such rights
being called "Stock Equivalents"). Subject to the provisions of Article 11 and
the other terms and provisions of the Plan, if the Committee shall so determine,
each Participant who holds Stock Equivalents shall be entitled to receive the
same amount of cash that such Participant would have received as dividends if
certificates for shares of Stock had been issued in the name of such Participant
pursuant to paragraphs (d)(l) and (2) of this Article 4 covering the number of
shares equal to the number of shares to which such Stock Equivalents relate.
Notwithstanding any other provision of the Plan to the contrary, the Stock
Equivalents representing any Final Award may, at the option of the Committee, be
converted into an equivalent number of shares of Stock or, upon the expiration
of the applicable Restriction Period, into cash, under such circumstances and in
such manner as the Committee may determine.
(4) If the Restriction Period relating to any Final Award shall expire while the
Participant who was granted such Award is employed by the Company, the
certificates for the shares of Stock issued in such Participant's name with
respect to such Final Award, and certificates for a number of shares of Stock
equal to the number of shares represented by any Stock Equivalents then held by
such Participant with respect to such Final Award, shall be delivered to such
Participant as soon as practicable, free of all restrictions and restrictive
legends.
(e) Effect of Termination of Employment or Death. (1) If a Participant's
employment with the Company shall be terminated, prior to the expiration of the
Restriction Period relating to any Right granted to such Participant, by reason
of discharge, release in the best interest of the Company, voluntary quit or
retirement without the approval of the Company, such Right, and any shares of
Stock or Stock Equivalents issued in the name of such Participant as a Final
Award relating to such Right, shall be forfeited and cancelled forthwith unless
the Committee shall grant an appropriate waiver. Any such waiver shall be
granted in accordance with the procedure specified in paragraph (b) of Article 8
(in which event the reference in such paragraph (b) to "the nonfulfillment of
such condition" shall be deemed to refer to such Participant's termination for
any of the reasons specified above).
(2) If a Participant's employment with the Company shall be terminated for any
reason other than a reason specified in paragraph (e)(l) of this Article 4,
except death, prior to or concurrently with the expiration of the Restriction
Period relating to any Right granted to such Participant,
(i) certificates for any shares of Stock issued in such Participant's name
prior to such termination of employment as a Final Award relating to such
Right, and certificates for a number of shares of Stock equal to the number
of shares represented by any Stock Equivalents then held by such
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Participant with respect to such Final Award, shall be delivered to such
Participant as soon as practicable, free of all restrictions and restrictive
legends; and
(ii) subject to the provisions of Article 8, certificates for any shares of
Stock issued in such Participant's name following such termination of
employment as a Final Award relating to such Right (whether relating to a
Performance Period ended prior to such termination or subsequent thereto)
shall be delivered to such Participant as soon as practicable, free of all
restrictions and restrictive legends.
(3) If a Participant's employment with the Company shall be terminated at any
time by reason of a sale or other disposition (including, without limitation, a
transfer to a Joint Venture) of the division, operation or subsidiary in which
such Participant was employed or to which such Participant was assigned, unless
the Committee shall specify otherwise, any Rights then held by such Participant,
and any shares of Stock or Stock Equivalents issued in the name of such
Participant as a Final Award relating to such Rights, shall be dealt with as
provided in paragraph (e)(2) of this Article 4.
(4) If a Participant shall die while in the employ of the Company, any Rights
then held by such Participant shall remain in effect. Such Rights, and any
shares of Stock then issued in the name of such Participant (but not yet
distributed to such Participant), and any such shares thereafter issuable with
respect to such Rights, as Final Awards under the Plan, shall be transferred or
issued and delivered to the beneficiary designated pursuant to Article 10 or, if
no such designation is in effect, to the executor or administrator of the estate
of such Participant, free of all restrictions and restrictive legends. With
regard to any Stock Equivalents then held by such Participant, certificates for
a number of shares of Stock equal to the number of shares represented thereby
shall be issued and delivered to such beneficiary, executor or administrator,
free of all restrictions and restrictive legends.
(5) Subject to the provisions of Article 8, if a Participant shall die following
termination of employment, any Rights then held by such Participant shall remain
in effect. Such Rights, and any shares of Stock then issued in the name of such
Participant (but not yet distributed to such Participant), and any such shares
thereafter issuable with respect to such Rights, as Final Awards under the Plan,
shall be transferred or issued and delivered to the beneficiary designated
pursuant to Article 10 or, if no such designation is in effect, to the executor
or administrator of the estate of such Participant, free of all restrictions and
restrictive legends. With regard to any Stock Equivalents then held by such
Participant, certificates for a number of shares of Stock equal to the number of
shares represented thereby shall be issued and delivered to such beneficiary,
executor or administrator, free of all restrictions and restrictive legends.
(6) Notwithstanding any other provision of the Plan to the contrary, if a
Participant's employment with the Company shall for any reason terminate prior
to the later of (a) the date of expiration of the period of six months following
the commencement of the Performance Period relating to any Right (or such other
period as the Committee may specify) or (b) the date six months following the
date of grant of such Right, such Right shall be forfeited and cancelled
forthwith unless the Committee shall determine otherwise.
(7) Notwithstanding any provision of the Plan to the contrary, (i) the Committee
may at any time establish a Restriction Period applicable to the Stock to be
represented by any Final Award, and such Restriction Period shall remain in
effect until such time (which may be later than the date of the Participant's
retirement or other termination of employment) as the Committee may determine;
and (ii) the Committee may determine that no shares of Stock or certificates
therefor shall be delivered to any Participant until the date of expiration of
the applicable Restriction Period (or such earlier date as the Committee may
determine).
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OPTIONS AND STOCK APPRECIATION RIGHTS
5.(a) Grant of Options. (1) The Board of Directors, at any time and from time to
time while the Plan is in effect, may authorize the granting of Options to such
officers and other key salaried employees of the Company, whether or not members
of the Board of Directors, as it may select from among those nominated by the
Committee, and for such numbers of shares as it shall designate, subject to the
provisions of this Article 5 and Article 3; provided, however, that no Option
shall be granted to a Participant for a larger number of shares than the
Committee shall recommend for such Participant. Each Option granted pursuant to
the Plan shall be designated at the time of grant as either an "incentive stock
option" ("ISO"), as such term is defined in the Internal Revenue Code of 1986,
as amended (the "Code"), or its successors (or shall otherwise be designated as
an option entitled to favorable treatment under the Code) or as a "nonqualified
stock option" ("NQO") (ISOs and NQOs being individually called an "Option" and
collectively called "Option").
(2) Without in any way limiting the authority provided in paragraph (a)(l) of
this Article 5, the Board of Directors may authorize the Committee to authorize
the granting of Options, at any time and from time to time while the Plan is in
effect, to such officers and other key salaried employees of the Company,
whether or not members of the Board of Directors, as the Committee may select,
subject to the provisions of this Article 5 and Article 3 and subject to such
other limitations as the Board of Directors may specify. In addition, to the
extent such authority has been delegated to the Committee pursuant to this
Article 5, the Committee may authorize a committee of two or more Company
officers appointed by it to determine the amount and date of individual Option
grants for key employees selected by such committee who are not officers or
directors of the Company, subject to Articles 3 and 5 and subject to a maximum
number of shares of Stock and any other limitations specified by the Committee.
(3) The date on which an Option shall be granted shall be the date of
authorization of such grant or such later date as may be determined at the time
such grant is authorized. Any individual may hold more than one Option.
(b) Price. In the case of each Option granted under the Plan the option price
shall be the fair market value of Stock on the date of grant of such Option;
provided, however, that in the case of any Option granted to an employee of a
foreign subsidiary or a foreign branch of the Company or of a foreign Joint
Venture the Board of Directors may in its discretion fix an option price in
excess of the fair market value of Stock on such date. The term "fair market
value" when used with reference to the option price shall mean the average of
the highest price and the lowest price at which Stock shall have been sold
regular way on the New York Stock Exchange on the date of grant of such Option.
In the event that any Option shall be granted on a date on which there were no
such sales of Stock on such Exchange, the fair market value of Stock on such
date shall be deemed to be the average of such highest price and lowest price on
the next preceding day on which there were such sales.
(c) Grant of Stock Appreciation Rights. (1) The Board of Directors may authorize
the granting of Stock Appreciation Rights (as defined below) to such
Participants who are granted Options under the Plan as it may select from among
those nominated therefor by the Committee. The Committee may authorize the
granting of Stock Appreciation Rights to such Participants as are granted
Options under the Plan pursuant to paragraph (a) of this Article 5. Each Stock
Appreciation Right shall relate to a specific Option granted under the Plan and
may be granted concurrently with the Option to which it relates or at any time
prior to the exercise, termination or expiration of such Option.
(2) The term "Stock Appreciation Right" shall mean the right to receive, without
payment to the Company and as the Participant may elect, either (a) that number
of shares of Stock determined by dividing (i) the total number of shares of
Stock subject to the related Option (or the portion or
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portions thereof which the Participant from time to time elects to use for
purposes of this clause (a), multiplied by the amount by which the fair market
value of a share of Stock on the day the right is exercised exceeds the option
price (such amount being hereinafter referred to as the "Spread"), by (ii) the
fair market value of a share of Stock on the exercise date; or (b) cash in an
amount determined by multiplying (i) the total number of shares of Stock subject
to the related Option (or the portion or portions thereof which the Participant
from time to time elects to use for purposes of this clause (b)), by (ii) the
amount of the Spread; or (c) a combination of shares of Stock and cash, in
amounts determined as set forth in clauses (a) and (b) above; provided, however,
that the total number of shares which may be received upon exercise of a Stock
Appreciation Right for Stock shall not exceed the total number of shares subject
to the related Option or portion thereof, and the total amount of cash which may
be received upon exercise of a Stock Appreciation Right for cash shall not
exceed the fair market value on the date of exercise of the total number of
shares subject to the related Option or portion thereof.
(3) The Committee may impose such conditions as it may deem appropriate upon the
exercise of an Option or a Stock Appreciation Right, including, without
limitation, a condition that the Stock Appreciation Right may be exercised only
in accordance with rules and regulations adopted by the Committee from time to
time.
(4) The right of a Participant to exercise a Stock Appreciation Right shall be
cancelled if and to the extent the related Option is exercised. The right of a
Participant to exercise an Option shall be cancelled if and to the extent that
shares covered by such Option are used to calculate shares or cash received upon
exercise of a related Stock Appreciation Right.
(5) The fair market value of Stock on the date of exercise of a Stock
Appreciation Right shall be determined as of such exercise date in the same
manner as the fair market value of Stock on the date of grant of an Option is
determined pursuant to paragraph (b)of this Article 5.
(6) If any fractional share of Stock would otherwise be payable to a Participant
upon the exercise of a Stock Appreciation Right, the Participant shall be paid a
cash amount equal to the same fraction of the fair market value (determined as
described above) of the Stock on the date of exercise.
(d) Stock Option Agreement. Each Option and related Stock Appreciation Right
shall be evidenced by a Stock Option Agreement in such form and containing such
provisions not inconsistent with the provisions of the Plan as the Committee
from time to time shall approve. Each Stock Option Agreement shall provide that
the Participant shall agree to remain in the employ of the Company for such
period from the date of grant of such Option or combination of Options or
related Stock Appreciation Rights as shall be provided in the Stock Option
Agreement; provided, however, that the Company's right to terminate the
employment of the Participant at any time, with or without cause, shall not be
restricted by such agreement.
(e) Terms of Options and Stock Appreciation Rights. Each Option and related
Stock Appreciation Right granted under the Plan shall be exercisable on such
date or dates, during such period, for such number of shares and subject to such
further conditions as shall be determined pursuant to the provisions of the
Stock Option Agreement with respect to such Option and related Stock
Appreciation Right; provided, however, that a Stock Appreciation Right shall not
be exercisable prior to or later than the time the related Option could be
exercised; and provided, further, that in any event no Option or related Stock
Appreciation Right shall be exercised beyond ten years from the date of grant of
the Option.
(f) Effect of Termination of Employment or Death. (1) Except as provided in
paragraphs (f)(2), (3) and (4) of this Article 5, if, prior to the date that any
Option or Stock Appreciation Right shall first
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<PAGE> 70
have become exercisable, the Participant's employment with the Company shall be
terminated by the Company, with or without cause, or by the act, death,
incapacity or retirement of the Participant, the Participant's right to exercise
such Option or Stock Appreciation Right shall terminate on the date of such
termination of employment and all rights thereunder shall cease.
(2) Notwithstanding the provisions of paragraph (f)(l) of this Article 5, if the
Participant's employment with the Company shall be terminated by reason of
retirement, release because of disability or death, and the Participant had
remained in the employ of the Company for at least six months following the date
of any Stock Option Agreement under the Plan between such Participant and the
Company, and subject to the provisions of Article 8, all such Participant's
rights under such Stock Option Agreement shall continue in effect or continue to
accrue for the period ending on the date ten years from the date of grant of any
Option (or such shorter period as the Committee may specify), subject, in the
event of the Participant's death prior to such date, to the provisions of
paragraph (f)(7) of this Article 5 and subject to any other limitation on the
exercise of such rights in effect at the date of exercise.
(3) Notwithstanding the provisions of paragraph (f)(l) of this Article 5, if the
Participant's employment with the Company shall be terminated under mutually
satisfactory conditions, and the Participant had remained in the employ of the
Company for at least six months following the date of any Stock Option Agreement
under the Plan between the Participant and the Company, and subject to the
provisions of Article 8, all such Participant's rights under such Stock Option
Agreement shall continue in effect or continue to accrue until the date three
months after the date of such termination (but not later than the date ten years
from the date of grant of any Option), subject, in the event of the
Participant's death during such three-month period, to the provisions of
paragraph (f)(7) of this Article 5 and subject to any other limitation on the
exercise of such rights in effect at the date of exercise.
(4) Notwithstanding any other provision of the Plan to the contrary, if a
Participant's employment with the Company shall be terminated at any time by
reason of a sale or other disposition (including, without limitation, a transfer
to a Joint Venture) of the division, operation or subsidiary in which such
Participant was employed or to which such Participant was assigned, all such
Participant's rights under any Option and any related Stock Appreciation Right
granted to him or her shall continue in effect and continue to accrue until the
date five years after the date of such termination or such earlier or later date
as the Committee may specify (but not later than the date ten years from the
date of grant of any Option), provided such Participant shall satisfy both of
the following conditions:
(a) such Participant, at the date of such termination, had remained in the
employ of the Company for at least three months following the grant of such
Option and Stock Appreciation Right, and
(b) such Participant continues to be or becomes employed in such division,
operation or subsidiary following such sale or other disposition and remains in
such employ until the date of exercise of such Option or Stock Appreciation
Right (unless the Committee, or any committee appointed by it for the purpose,
shall waive this condition (b)).
Upon termination of such Participant's employment with such (former) division,
operation or subsidiary following such sale or other disposition, any then
existing right of such Participant to exercise any such Option or Stock
Appreciation Right shall be subject to the following limitations: (i) if such
Participant's employment is terminated by reason of disability, death or
retirement with the approval of his or her employer, such Participant's rights
shall continue as provided in the preceding sentence with the same effect as if
his or her employment had not terminated; (ii) if such Participant's employment
is terminated by reason of discharge or voluntary quit, such Participant's
rights shall terminate on the date of such termination of employment and all
rights under such Option and Stock
II-9
<PAGE> 71
Appreciation Right shall cease; and (iii) if such Participant's employment is
terminated for any reason other than a reason set forth in the preceding clauses
(i) and (ii), such Participant shall have the right, within three months after
such termination, to exercise such Option or Stock Appreciation Right to the
extent that it or any installment thereof shall have accrued at the date of such
termination and shall not have been exercised, subject in the case of any such
termination to the provisions of Article 8 and any other limitation on the
exercise of such Option and Stock Appreciation Right in effect at the date of
exercise.
(5) If, on or after the date that any Option or Stock Appreciation Right shall
first have become exercisable, a Participant's employment with the Company shall
be terminated for any reason except retirement, release because of disability,
death, release because of a sale or other disposition of the division, operation
or subsidiary in which such Participant was employed or to which such
Participant was assigned, release under mutually satisfactory conditions,
discharge, release in the best interest of the Company or voluntary quit, such
Participant shall have the right, within three months after such termination, to
exercise such Option or Stock Appreciation Right to the extent that it or any
installment thereof shall have accrued at the date of such termination of
employment and shall not have been exercised, subject to the provisions of
Article 8 and any other limitation on the exercise of such Option or Stock
Appreciation Right in effect at the date of exercise.
(6) If a Participant's employment with the Company shall be terminated at any
time by reason of discharge, release in the best interest of the Company or
voluntary quit, the Participant's right to exercise such Option or Stock
Appreciation Right shall terminate on the date of such termination of employment
and all rights thereunder shall cease.
(7) If a Participant shall die within the applicable period specified in
paragraph (f)(2), (3), (4) or (5) of this Article 5, the beneficiary designated
pursuant to Article 10 or, if no such designation is in effect, the executor or
administrator of the estate of the decedent or the person or persons to whom the
Option or Stock Appreciation Right shall have been validly transferred by the
executor or administrator pursuant to will or the laws of descent and
distribution shall have the right, within the same period of time as the period
during which the Participant would have been entitled to exercise such Option or
Stock Appreciation Right (except that (a) in the case of a Participant to whom
paragraph (f)(5) of this Article 5 applies, such Participant's Option or Stock
Appreciation Right may be exercised only to the extent that it or any
installment thereof shall have accrued at the date of death and shall not have
been exercised; and (b) the period of time within which any Option or Stock
Appreciation Right shall be exercisable following the date of the Participant's
death shall not be less than one year (unless the Option by its terms expires
earlier)), subject to the provision that no Option or related Stock Appreciation
Right shall be exercised under any circumstances beyond ten years from the date
of grant of such Option, and to any other limitation on the exercise of such
Option or Stock Appreciation Right in effect at the date of exercise. No
transfer of an Option or Stock Appreciation Right by the Participant, other than
by filing a written designation of beneficiary pursuant to Article 10, shall be
effective to bind the Company unless the Company shall have been furnished with
written notice of such transfer and a copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer. No transfer shall be effective without the acceptance by the
designated beneficiary or other transferee of the terms and conditions of such
Option or Stock Appreciation Right.
(g) Payment for Option Shares. (1) Payment for shares of Stock purchased upon
exercise of an Option granted hereunder shall be made, either in full or, if the
Committee shall so determine and at the election of the Participant, in
installments, in such manner as provided in the applicable Stock Option
Agreement.
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<PAGE> 72
(2) Unless the Committee shall provide otherwise in any form of Stock Option
Agreement, any payment for shares of Stock purchased upon exercise of an Option
granted hereunder may be made in cash, by delivery of shares of Stock
beneficially owned by the Participant or by a combination of cash and Stock, at
the election of the Participant; provided, however, that any shares of Stock so
delivered shall have been beneficially owned by the Participant for a period of
not less than six months prior to the date of exercise. Any such shares of Stock
so delivered shall be valued at their fair market value on the date of such
exercise, which shall be determined as of such date in the same manner as the
fair market value of Stock on the date of grant of an Option is determined
pursuant to paragraph (b) of this Article 5. The Committee shall determine
whether and if so the extent to which actual delivery of share certificates to
the Company shall be required.
STOCK AND OTHER STOCK-BASED
AND COMBINATION AWARDS
6.(a) Grants of Other Stock-Based Awards. The Committee, at any time and from
time to time while the Plan is in effect, may grant to such officers and other
salaried employees of the Company, whether or not members of the Board of
Directors, as it may select, Plan Awards pursuant to which Stock is or may in
the future be acquired, or Plan Awards valued or determined in whole or part by
reference to, or otherwise based on, Stock (including but not limited to Plan
Awards denominated in the form of "stock units", grants of so-called "phantom
stock" and options containing terms or provisions differing in whole or in part
from Options granted pursuant to Article 5) (such Plan Awards being hereinafter
called "Other Stock-Based Awards"). Other Stock-Based Awards may be granted
either alone, in addition to, in tandem with or as an alternative to any other
kind of Plan Award, grant or benefit granted under the Plan or under any other
employee plan of the Company, including a plan of any acquired entity.
(b) Terms and Conditions. Subject to the provisions of the Plan, the Committee
shall have authority to determine the time or times at which Other Stock-Based
Awards shall be made, the number of shares of Stock or stock units and the like
to be granted or covered pursuant to such Plan Awards (subject to the provisions
of Article 3) and all other terms and conditions of such Plan Awards, including,
but not limited to, whether such Plan Awards shall be payable or paid in cash,
Stock or otherwise.
(c) Consideration for Other Stock-Based Awards. In the discretion of the
Committee, any Other-Stock Based Award may be granted as a Stock bonus for no
consideration other than services rendered; provided, however, that in the event
an Other Stock-Based Award shall be granted to a Participant who is a Section 16
Person under which shares of Stock are or may in the future be issued for any
other type of consideration, the amount of such consideration shall either be
(i) equal to the amount (such as the par value of such shares) required to be
received by the Company in order to assure compliance with applicable state law
or (ii) equal to or greater than 50% of the fair market value of such shares (as
determined in accordance with paragraph (b) of Article 5) on the date of grant
of such Other Stock-Based Award.
CASH AWARDS TO EMPLOYEES OF
FOREIGN SUBSIDIARIES OR BRANCHES OR JOINT VENTURES
7. Notwithstanding any other provision of the Plan to the contrary, the
Committee may determine to permit a Participant, other than a Section 16 Person,
who is an employee of a foreign subsidiary or a foreign branch of the Company or
of a foreign Joint Venture to receive cash in lieu of any Plan Award
II-11
<PAGE> 73
or shares of Stock that would otherwise have been granted to or delivered to
such Participant under the Plan, in such amount as the Committee may determine
in its sole discretion.
PAYMENT OF PLAN AWARDS AND CONDITIONS THEREON
8.(a) Effect of Competitive Activity. Anything contained in the Plan to the
contrary notwithstanding, if the employment of any Participant shall terminate,
for any reason other than death, while any Plan Award to such Participant is
outstanding hereunder, and such Participant has not yet received the Stock
covered by such Plan Award or otherwise received the full benefit of such Plan
Award, such Participant, if otherwise entitled thereto, shall receive such Stock
or benefit only if, during the entire period from the date of such Participant's
termination to the date of such receipt, such Participant shall have earned out
such Plan Award by (i) making himself or herself available, upon request, at
reasonable times and upon a reasonable basis, to consult with, supply
information to and otherwise cooperate with the Company or any subsidiary
thereof with respect to any matter that shall have been handled by him or her or
under his or her supervision while he or she was in the employ of the Company or
of any subsidiary thereof, and (ii) refraining from engaging in any activity
that is directly or indirectly in competition with any activity of the Company
or any subsidiary thereof.
(b) Nonfulfillment of Competitive Activity Conditions: Waivers Under the
Plan. In the event of a Participant's nonfulfillment of any condition set forth
in paragraph (a) of this Article 8 such Participant's rights under any Plan
Award shall be forfeited and cancelled forthwith; provided, however, that the
nonfulfillment of such condition may at any time (whether before, at the time of
or subsequent to termination of employment) be waived in the following manner:
(i) with respect to any such Participant who at any time shall have been a
Section 16 Person, such waiver may be granted by the Committee upon its
determination that in its sole judgment there shall not have been and will
not be any substantial adverse effect upon the Company or any subsidiary
thereof by reason of the nonfulfillment of such condition; and
(ii) with respect to any other such Participant, such waiver may be granted
by the Committee (or any committee appointed by it for the purpose) upon
its determination that in its sole judgment there shall not have been and
will not be any such substantial adverse effect.
(c) Effect of Inimical Conduct. Anything contained in the Plan to the contrary
notwithstanding, all rights of a Participant under any Plan Award shall cease on
and as of the date on which it has been determined by the Committee that such
Participant at any time (whether before or subsequent to termination of such
Participant's employment) acted in a manner inimical to the best interests of
the Company or any subsidiary thereof.
(d) Tax and Other Withholding. Prior to any distribution of cash, Stock or Other
Stock-Based Awards (including payments under paragraph (c) of Article 4) to any
Participant, appropriate arrangements (consistent with the Plan and any rules
adopted hereunder) shall be made for the payment of any taxes and other amounts
required to be withheld by federal, state or local law.
(e) Substitution. The Committee, in its sole discretion, may substitute a Plan
Award (except ISOs) for another Plan Award or Plan Awards of the same or
different type.
NON-TRANSFERABILITY OF PLAN AWARDS;
RESTRICTIONS ON DISPOSITION AND EXERCISE OF PLAN AWARDS
9.(a) Restrictions on Transfer of Rights or Final Awards. (i) No Right or (ii)
until the expiration of the applicable Restriction Period, no shares of Stock
covered by any Final Award determined under
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<PAGE> 74
paragraph (d) of Article 4, shall be transferred, pledged, assigned or otherwise
disposed of by a Participant, except as permitted by the Plan, without the
consent of the Committee, otherwise than by will or the laws of descent and
distribution; provided, however, that the Committee may permit, on such terms as
it may deem appropriate, use of Stock included in any Final Award as partial or
full payment upon exercise of an Option under the Plan or a stock option under
any Stock Option Plan of the Company prior to the expiration of the Restriction
Period relating to such Final Award.
(b) Restrictions on Transfer of Options or Stock Appreciation Rights. Unless the
Committee determines otherwise, no Option or related Stock Appreciation Right
shall be transferable by a Participant otherwise than by will or the laws of
descent and distribution, and during the lifetime of a Participant the Option or
Stock Appreciation Right shall be exercisable only by such Participant or such
Participant's guardian or legal representative.
(c) Restrictions on Transfer of Certain Other Stock-Based Awards. Unless the
Committee determines otherwise, no Other-Stock Based Award which constitutes an
option or similar right shall be transferable by a Participant otherwise than by
will or the laws of descent and distribution, and during the lifetime of a
Participant any such Other-Stock Based Award shall be exercisable only by such
Participant or such Participant's guardian or legal representative.
DESIGNATION OF BENEFICIARIES
10. Anything contained in the Plan to the contrary notwithstanding, a
Participant may file with the Company a written designation of a beneficiary or
beneficiaries under the Plan (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries and such other limitations
as the Committee from time to time may prescribe), subject to the provisions of
paragraph (e) of Article 4 and paragraph (f) of Article 5. A Participant shall
be deemed to have designated as beneficiary or beneficiaries under the Plan the
person or persons who receive such Participant's life insurance proceeds under
the basic Company Life Insurance Plan unless such Participant shall have
assigned such life insurance or shall have filed with the Company a written
designation of a different beneficiary or beneficiaries under the Plan. A
Participant may from time to time revoke or change any such designation of
beneficiary. Any designation of beneficiary under the Plan shall be controlling
over any other disposition, testamentary or otherwise; provided, however, that
if the Committee shall be in doubt as to the entitlement of any such beneficiary
to any Right, Final Award, Option, Stock Appreciation Right or Other Stock-Based
Award, the Committee may determine to recognize only the legal representative of
such Participant, in which case the Company, the Committee and the members
thereof shall not be under any further liability to anyone. In the event of the
death of any Participant, the term "Participant" as used in the Plan shall
thereafter be deemed to refer to the beneficiary designated pursuant to this
Article 10 or, if no such designation is in effect, the executor or
administrator of the estate of such Participant, unless the context otherwise
requires.
MERGER, CONSOLIDATION, STOCK DIVIDENDS, ETC.
11.(a) Adjustments. In the event of any merger, consolidation, reorganization,
stock split, stock dividend or other event affecting Stock, an appropriate
adjustment shall be made in the total number of shares available for Plan Awards
and in all other provisions of the Plan that include a reference to a number of
shares, and in the numbers of shares covered by, and other terms and provisions
of, outstanding Plan Awards.
(b) Committee Determinations. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by the Committee in
its sole discretion. Any such adjustment
II-13
<PAGE> 75
may provide for the elimination of any fractional share which might otherwise
become subject to a Plan Award.
ACCELERATION OF PAYMENT
OR MODIFICATION OF PLAN AWARDS
12. Notwithstanding any other provision of the Plan, the Committee, in the event
of the death of a Participant or in any other circumstance, may accelerate
distribution of any Plan Award in its entirety or in a reduced amount, in cash
or in Stock, or modify any Plan Award, in each case on such basis and in such
manner as the Committee may determine in its sole discretion.
RIGHTS AS A STOCKHOLDER
13. A Participant shall not have any rights as a stockholder with respect to any
share covered by any Plan Award until such Participant shall have become the
holder of record of such share.
TERM, AMENDMENT, MODIFICATION
AND TERMINATION OF THE PLAN
14.(a) Term. The Plan shall terminate on May 1, 2008, except with respect to
Plan Awards then outstanding.
(b) Amendment, Modification and Termination. The Board of Directors, upon
recommendation of the Committee, at any time may amend, modify or terminate the
Plan, and the Committee at any time may amend or modify the Plan; provided,
however, that no such action of the Board of Directors or the Committee, without
approval of the stockholders, may (a) increase the total number of shares of
Stock with respect to which Plan Awards may be granted under the Plan, (b)
extend the term of the Plan as set forth in paragraph (a) of this Article 14 or
(c) permit any person while a member of the Committee or any committee of the
Board of Directors administering the Plan to be eligible to receive or hold a
Plan Award; provided, however, that neither the Board of Directors nor the
Committee may amend or modify the Plan so as to increase the maximum number of
shares determinable pursuant to the last sentence of paragraph (a) of Article 3.
INDEMNIFICATION AND EXCULPATION
15.(a) Indemnification. Each person who is or shall have been a member of the
Board of Directors or of the Committee or of any committee of the Board of
Directors administering the Plan or of any committee appointed by the foregoing
committees shall be indemnified and held harmless by the Company against and
from any and all loss, cost, liability or expense that may be imposed upon or
reasonably incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which such person may be or become a party
or in which such person may be or become involved by reason of any action taken
or failure to act under the Plan and against and from any and all amounts paid
by such person in settlement thereof (with the Company's written approval) or
paid by such person in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment in favor of the Company based upon a finding of
such person's lack of good faith; subject, however, to the condition that, upon
the institution of any claim, action, suit or proceeding against such person,
such person shall in writing give the Company an opportunity, at its own
expense, to handle and defend the same before such person undertakes to handle
and defend it on such person's behalf. The foregoing right of indemnification
shall not be exclusive of any other right to which such person may be entitled
as a matter of law or otherwise, or any power that the Company may have to
indemnify or hold such person harmless.
II-14
<PAGE> 76
(b) Exculpation. Each member of the Board of Directors or of the Committee or of
any committee of the Board of Directors administering the Plan or any committee
appointed by the foregoing committees, and each officer and employee of the
Company, shall be fully justified in relying or acting in good faith upon any
information furnished in connection with the administration of the Plan by any
appropriate person or persons other than such person. In no event shall any
person who is or shall have been a member of the Board of Directors or of the
Committee or of any committee of the Board of Directors administering the Plan
or of any committee appointed by the foregoing committees, or an officer or
employee of the Company, be held liable for any determination made or other
action taken or any omission to act in reliance upon any such information, or
for any action (including the furnishing of information) taken or any failure to
act, if in good faith.
EXPENSES OF PLAN
16. The entire expense of offering and administering the Plan shall be borne by
the Company and its participating subsidiaries.
FINALITY OF DETERMINATIONS
17. Each determination, interpretation, or other action made or taken pursuant
to the provisions of the Plan by the Board of Directors or the Committee or any
committee of the Board of Directors administering the Plan or any committee
appointed by the foregoing committees shall be final and shall be binding and
conclusive for all purposes and upon all persons, including, but without
limitation thereto, the Company, the stockholders, the Committee and each of the
members thereof, and the directors, officers, and employees of the Company and
its subsidiaries, the Participants, and their respective successors in interest.
II-15
<PAGE> 77
APPENDIX III
EXCERPTS FROM PARAGRAPHS XXVI AND XXVII OF THE SAVINGS
AND STOCK INVESTMENT PLAN FOR SALARIED EMPLOYEES
(LANGUAGE IN BRACKETS SHOWS WORDS TO BE DELETED.)
XXVI. OPERATION AND ADMINISTRATION.
Pursuant to ERISA the Company shall be the sole named fiduciary with respect to
the Plan and shall have authority to control and manage the operation and
administration of the Plan.
The Vice President -- Human Resources, the Treasurer and the Vice President --
General Counsel shall have the authority, on behalf of the Company, to appoint
and remove trustees and investment advisors under the Plan, to approve policies
relating to the allocation of contributions and the distribution of assets among
trustees and investment advisors, to approve Plan amendments and to modify the
Plan or suspend the operation of any provisions of the Plan; provided, however,
only the Board of Directors shall have authority to amend provisions relating to
the extent of Company matching contributions [within the maximum rate set by
stockholders] and the offering of Company stock as an investment election.
- - -
XXVII. TERMINATION, SUSPENSION AND MODIFICATION.
The Company, by action of its Board of Directors, may terminate or modify the
Plan or suspend the operation of any provision of the Plan, and the Company, by
action of the Vice President -- Human Resources, the Treasurer and the Vice
President -- General Counsel, may modify the Plan or suspend the operation of
any provision of the Plan, other than provisions relating to the extent of
Company matching contributions [within the maximum rate set by stockholders] and
the offering of Company stock as an investment election, as follows:
- - -
3. Anything herein to the contrary notwithstanding, no such termination or
modification of the Plan or suspension of any provision thereof may
diminish the cash value of assets in the account or accounts of a member as
of the effective date of such termination, modification or suspension[, and
no such modification may increase the rate of Company matching
contributions in relation to employee contributions to more than 60% of
employee contributions].
III-1
<PAGE> 78
NOTICE OF
1998
ANNUAL MEETING
OF STOCKHOLDERS
AND
PROXY STATEMENT
RECYCLED LOGO SOY INK LOGO
This Proxy Statement is printed
entirely on recycled and recyclable
paper. Soy ink, rather than
petroleum-based ink, is used. FORD LOGO
<PAGE> 79
[X] Please mark your
votes as in this
example.
<TABLE>
<S><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE BOARD OF DIRECTORS RECOMMENDS A
MANAGEMENT NOMINEES AND FOR PROPOSALS 2, 3,4 AND 5. VOTE AGAINST
PROPOSALS 6,7,8,9, AND 10.
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Proposal 1 Election [ ] [ ] Proposal 2 Ratification of [ ] [ ] [ ] Proposal 6 [ ] [ ] [ ]
of Directors Section of Independent Relating to
(see reverse) Public Accountants Political Non-
Partisanship
For, except vote withheld from
the following nominee(s):
Proposal 3 Relating to the [ ] [ ] [ ] Proposal 7 [ ] [ ] [ ]
Company's Annual Incentive Relating to
Compensation Plan China and the
former Soviet
Union
- ------------------------------------
Proposal 4 Relating to the [ ] [ ] [ ] Proposal 8 [ ] [ ] [ ]
Company's 1998 Long-Term Relating to
Incentive Plan Global Warming
Proposal 5 Relating to the [ ] [ ] [ ] Proposal 9 [ ] [ ] [ ]
Company's Savings and Relating to a
Stock Investment Plan for Proposed Review
Salaried Employees. of Executive
Compensation
Proposal 10 [ ] [ ] [ ]
Relating to
Directors on
Key Board
Committees
Request Y [ ] N [ ]
Annual E O
Meeting S
Ticket
Address [ ] Discontinue duplicate [ ]
Change Annual Report mailing
for this account
SIGNATURE(S) ________________________________ DATE _______
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[FORD LOGO]
INSTRUCTIONS FOR TELEPHONE AND INTERNET VOTING
Available 24 hours a day, 7 days a week
ON A TOUCH-TONE PHONE CALL TOLL-FREE 1-800-652-8683 (OUTSIDE THE US AND
CANADA CALL 201-324-0377) AND YOU WILL HEAR THESE INSTRUCTIONS:
- Enter the last four digits of your social security number; and
- Enter the control number from the box just below the perforation on the
proxy card.
- You will then have two options:
OPTION 1: to vote as the Board of Directors recommends on all proposals;
or
OPTION 2: to vote on each proposal separately.
- Your vote will be repeated to you and you will be asked to confirm it.
LOG ONTO THE INTERNET AND TYPE: HTTP://VOTE-BY-NET.COM
- Have your proxy card ready and follow the simple instructions.
Your electronic vote authorizes the named proxies to vote your shares to the
same extent as if you marked, signed, dated and returned the proxy card.
IF YOU HAVE VOTED BY PHONE OR INTERNET, YOU DO NOT NEED TO RETURN YOUR
PROXY CARD.
THANK YOU FOR VOTING!
<PAGE> 80
[FORD LOGO]
FORD MOTOR COMPANY
P
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS
R
O
The undersigned hereby appoints JOHN M. DEVINE AND JOHN M. RINTAMAKI,
X or either of them, proxies with power of substitution, to vote all the
shares of Common Stock which the undersigned is entitled to vote on all
matters, unless the contrary is indicated on the reverse side hereof,
Y which may come before Ford Motor Company's Annual Meeting of
Stockholders to be held at the Westin Hotel, 21 East Fifth Street,
Cincinnati, Ohio at 10:00 a.m., eastern daylight savings time, on
May 14, 1998, and any adjournments thereof.
THE PROXIES SHALL VOTE THE SHARES REPRESENTED BY THIS PROXY IN THE
MANNER INDICATED ON THE REVERSE SIDE HEREOF. UNLESS A CONTRARY
DIRECTION IS INDICATED, THE PROXIES SHALL VOTE THE SHARES (A) "FOR" THE
ELECTION AS DIRECTORS OF ALL THE NOMINEES NAMED IN THE PROXY STATEMENT
AND LISTED BELOW OR ANY OTHER PERSON SELECTED BY THE BOARD OF DIRECTORS
IN SUBSTITUTION FOR ANY OF THE NOMINEES (PROPOSAL 1) AND (B) "FOR"
PROPOSALS 2,3,4 AND 5 AND "AGAINST" PROPOSALS 6,7,8,9 AND 10, EACH OF
WHICH IS SET FORTH IN THE PROXY STATEMENT.
---------------
Proposal 1 - Election of Directors - Nominees:
<TABLE>
<S> <C> <C>
01. Michael D. Dingman 05. Irvine O. Hockaday, Jr. 09. Carl E. Reichardt
02. Edsel B. Ford II 06. Marie-Josee Kravis 10. John L. Thornton
03. William Clay Ford 07. Ellen R. Marram 11. Alex Trotman
04. William Clay Ford, Jr. 08. Homer A. Neal
</TABLE>
<TABLE>
<S><C>
- --------------------------------------------------------------------
ADDRESS CHANGE: PLEASE NOTE CHANGE HERE AND MARK BOX ON REVERSE SIDE
- -------------------------------------------------------------------- (Continued and to be signed on reverse side)
- ------------------------------------------------------------------------------------
- - DETACH PROXY CARD HERE IF YOU ARE VOTING BY MAIL AND RETURN IN ENCLOSED ENVELOPE -
</TABLE>
[FORD LOGO]
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1998, 10:00 A.M.
WESTIN HOTEL
21 EAST FIFTH STREET
CINCINNATI, OHIO
