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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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CHRYSLER CORPORATION
(Name of Subject Company)
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CHRYSLER CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, $1.00 PAR VALUE
(AND ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
171196 10 8
(CUSIP Number of Class of Securities)
WILLIAM J. O'BRIEN, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CHRYSLER CORPORATION
12000 CHRYSLER DRIVE
HIGHLAND PARK, MICHIGAN 48288-0001
(313) 956-5741
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing)
With a copy to:
MEREDITH M. BROWN, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6528
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Chrysler Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 12000 Chrysler Drive, Highland Park, Michigan 48288-0001. The
title of the class of equity securities to which this Statement relates is the
common stock, par value $1.00 (the "Common Stock") of the Company, together with
the associated preferred stock purchase rights (the "Rights" and, together with
the Common Stock, the "Shares") issued pursuant to a Rights Agreement, dated as
of February 4, 1988, as amended on September 7, 1989, and as amended and
restated as of December 14, 1990, and as further amended by Amendment No. 1,
dated as of December 1, 1994, to the Amended and Restated Rights Agreement, each
between the Company and First Chicago Trust Company of New York (formerly known
as Morgan Shareholder Services Trust Company), as Rights Agent (as so amended,
and amended and restated and as so further amended, the "Rights Agreement").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Tracinda Corporation, a
Nevada corporation wholly owned by Kirk Kerkorian ("Tracinda"), disclosed in a
Tender Offer Statement on Schedule 14D-1, filed with the Securities and Exchange
Commission (the "Commission") on June 26, 1995 (as the same may be amended from
time to time, the "Schedule 14D-1"), to purchase up to 14,000,000 of the
outstanding Shares at a price of $50 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated June 27, 1995, as supplemented on June 28, 1995 (the
"Offer to Purchase"), and the related Letter of Transmittal (which collectively
constitute the "Offer").
According to the Schedule 14D-1, the address of the principal executive
offices of Tracinda is 4835 Koval Lane, Las Vegas, Nevada 89109.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, is set forth in Item 1 above, which information is
incorporated herein by reference.
(b)(1) Except as described herein or in Annex A hereto, to the knowledge of
the Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of interest
between the Company or its affiliates and the Company, its executive officers,
directors or affiliates. Certain contracts, agreements and understandings
between the Company and certain of its executive officers, directors or
affiliates are described in Annex A hereto, which is incorporated herein by
reference.
(b)(2) The following describes material contracts, agreements, arrangements
or understandings or actual or potential conflicts of interest between the
Company or its affiliates and Tracinda, its executive officers, directors or
affiliates:
According to the Offer to Purchase, Lee A. Iacocca, the former
Chairman of the Board and Chief Executive Officer of the Company, is not a
participant in the Offer, but Mr. Iacocca may be deemed to be acting as
part of a group with Tracinda under Section 13(d) of the Securities
Exchange Act of 1934, as amended. Pursuant to a Consulting Agreement, dated
May 9, 1995, between Tracinda and Mr. Iacocca (the "Consulting Agreement"),
which appears as Exhibit (c)(1) to the Schedule 14D-1, Mr. Iacocca has
agreed to render certain consulting and advisory services to Tracinda, and
Tracinda has agreed to pay Mr. Iacocca a monthly fee of $41,667.67.
According to the Offer to Purchase, Tracinda and Mr. Iacocca have entered
into a Value Sharing Agreement, dated as of June 24, 1995 (the "Value
Sharing Agreement"), which appears as Exhibit (c)(3) to the Schedule 14D-1.
Pursuant to the Value Sharing Agreement (as described in the Offer to
Purchase), Mr. Iacocca will receive, with respect to 32,000,000 of the
Shares held by Tracinda, 4% of the amount by which the market value of a
Share exceeds $47.00 in June 1999 (or, in the case of a sale of Shares by
Tracinda for cash prior to that time, the amount by which the cash proceeds
of the sale exceeds $47.00, subject to adjustment in certain
circumstances). As stated in the Offer to Purchase, pursuant to the
Consulting Agreement, Tracinda has agreed to indemnify
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Mr. Iacocca with respect to matters arising out of Mr. Iacocca's services
under the Consulting Agreement.
On June 28, 1995, a representative of Mr. Iacocca informed the Company
that Mr. Iacocca intended to exercise stock options, granted to him when he
was Chairman and Chief Executive Officer of the Company, for 112,500 Shares
(the "Options"). Under the Company's 1991 Stock Compensation Plan (the
"Plan") and the Company's predecessor Stock Option Plan (the "Predecessor
Plan"), Mr. Iacocca has options to purchase a total of 1,488,368 Shares at
a weighted average exercise price of $28.22. Under both the Plan and the
Predecessor Plan, exercise of an option after termination of employment is
subject to, among other things, the conditions precedent that the optionee
neither takes other employment or renders services to others without the
written consent of the Company, nor conducts himself in a manner adversely
affecting the Company.
The Company's Board of Directors, after considering the plan
requirements for the exercise of the Options, and after reviewing a letter
from counsel for Mr. Iacocca, has determined that conditions precedent to
the exercise of the Options have not been satisfied, and that accordingly,
the Options are not exercisable.
Copies of letters sent to Mr. Iacocca informing him of the Board's
position are filed as Exhibits 1.1 and 1.2 hereto and are incorporated
herein by reference. A copy of the Predecessor Plan is filed as Exhibit
10-D-8 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1983. A copy of the Plan is filed as Exhibit 2 hereto and is
incorporated herein by reference. (Each of the Plan and the Predecessor
Plan contains the same conditions precedent referred to above.) The
foregoing description of the Plan and the Predecessor Plan is qualified in
its entirety by reference to the full text of the Plan and the Predecessor
Plan.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a)(1) Background.
According to Tracinda's Schedule 13D filings, Tracinda has beneficially
owned Shares of the Company since 1990. On April 12, 1995, Tracinda issued a
press release announcing that it proposed to acquire all of the outstanding
Shares of the Company not then owned by Tracinda at a price of $55 per Share.
Also on April 12, Tracinda sent to the Company a letter to the same effect.
On April 12, the Company issued the following press release:
CHRYSLER BOARD STATES COMPANY IS NOT FOR SALE
HIGHLAND PARK, Mich. -- In a meeting today, the Board of Directors of
Chrysler Corporation discussed an unsolicited letter received from Tracinda
Corporation, a company owned by Kirk Kerkorian, outlining a possible
acquisition of the equity interest in Chrysler not owned by Tracinda.
The Chrysler Board of Directors stated that the Company is not for
sale.
Chrysler said that its Board would review in due course Tracinda's letter
with the Company's financial and legal advisors. The Board noted that the
suggested transaction, based on information thus far provided by Tracinda,
amounts to a request to discuss a leveraged buyout. Moreover, it:
-- Contemplates at least $11 billion in new debt financing, none of
which has been lined up.
-- Contemplates $3 billion in equity financing, beyond the Shares
already owned by Tracinda and by Lee Iacocca, none of which has
been lined up.
-- Assumes the Company's credit lines would remain in place,
despite changes in the Company's financial position that would
result if Tracinda's proposal was implemented.
-- Contemplates reducing Chrysler's cash reserves by more than 70%
to $2 billion. Chrysler noted its need to maintain adequate cash
reserves to weather downturns in the business cycle, as well as
to maintain its ability to develop new products and to compete.
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Robert J. Eaton, Chairman and Chief Executive Officer of Chrysler,
stated: "I want to make it absolutely clear that Chrysler management is in
no way involved in Tracinda's proposal. I told Mr. Kerkorian that last
night when he informed me by telephone of his intention to make an
announcement.
"We don't want to put Chrysler at risk," Eaton added. "We've worked
hard to build this Company's financial strength, to increase shareholder
value and to build the confidence of customers, employees, dealers and
suppliers. We have no desire to reverse the process."
In the following days, a significant level of concern about Tracinda's
proposed leveraged buy-out of the Company was expressed by the Company's
lenders, employees, dealers and suppliers. Credit rating agencies placed the
Company's debt securities on credit watch with negative implications. Tracinda
did not report having obtained a single dollar of non-Chrysler financing for its
proposed buy-out of the Shares it did not already own. Discussions between
representatives of the Company and Tracinda failed to produce any resolution.
On April 24, 1995, the Board of Directors unanimously rejected Tracinda's
leveraged buy-out proposal, concluding that pursuing the proposal would not be
in the best interests of the Company, its shareholders, employees, dealers,
suppliers or customers. The Board reaffirmed that the Company was not for sale,
and stated the Board's belief that "unsolicited publicly announced proposals
such as Tracinda's are disruptive and not in the best interest of our
shareholders."
Mr. Eaton sent a letter on April 24, 1995 to Kirk Kerkorian, the sole
stockholder of Tracinda, informing him of the Board's unanimous decision to
reject Tracinda's leveraged buy-out proposal. Mr. Eaton explained that the Board
had grave doubts that financing such a transaction was feasible, and that even
if it could be accomplished, the result would be a crippled company. In
addition, Mr. Eaton told Mr. Kerkorian that the Company's directors had no
interest in gambling with Chrysler's future.
Mr. Kerkorian responded with an April 25 letter to Mr. Eaton, contesting
Mr. Eaton's characterization of Tracinda's proposed transaction.
On May 31, 1995, Tracinda announced that it was withdrawing its proposal to
acquire all of the Shares at a price of $55 per Share, and that it had hired
Wasserstein Perella & Co., an investment bank, to act as strategic advisor to
Tracinda.
Copies of the press releases and letters referred to above are filed as
Exhibits 3-8 hereto and are incorporated herein by reference.
On June 26, 1995, Tracinda announced the Offer.
(2) Position of the Board.
At regularly scheduled meetings of the Board of the Directors held on July
5 and July 6, 1995, the Board met with its financial and legal advisers and
considered the Offer and various matters related thereto. Among the matters
considered by the Board were the terms and conditions of the Offer; the
percentage of the Shares now owned by Tracinda, and the percentage sought to be
acquired in the Offer; the prior conduct of Tracinda and Mr. Kerkorian with
respect to the Company; and the prior conduct of Tracinda and Mr. Kerkorian with
respect to other companies in which Tracinda and/or Mr. Kerkorian had purchased
substantial blocks of stock, which conduct in certain instances has included
unsolicited acquisitions of control, litigation against the issuer and sale of
stock positions to issuers at a premium over market.
At the July 6 meeting, the Board unanimously determined that, in light of
the small percentage of the Company's Shares sought by Tracinda in the Offer and
the fact that the Offer would not result in the ownership by Tracinda or by its
group of 15% or more of the outstanding Shares, the Board would not make a
recommendation to the stockholders with respect to the Offer. Accordingly, the
Company is making no recommendation to stockholders with respect to the Offer.
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At the July 6 meeting, the members of the Board of Directors also expressed
the intention not to tender any of their own Shares pursuant to the Offer, in
light of the Board's view of the long-term prospects of the Company.
(b) In reaching the determination referred to in Item 4(a) above, the Board
of Directors took into account numerous factors, including but not limited to:
(i) The small percentage of Shares sought in the Offer; and
(ii) The fact that, according to the information set forth in the
Offer to Purchase, the Offer would not result in Tracinda or the group of
which it is a member becoming the beneficial owner of more than 15% of the
outstanding Shares and, accordingly, would not cause Tracinda to be deemed
an "Acquiring Person" within the meaning of the Rights Agreement or an
"interested person" within the meaning of Section 203 of the Delaware
General Corporation Law.
The fact that the Board has determined not to make a recommendation with
respect to the Offer is not, and should not be interpreted to be, any indication
of the position the Company's Board would take with respect to any effort by
Tracinda's group to bring its holdings above 15%, or to seek control of the
Company by any means.
A copy of a letter to stockholders communicating the Board's position and a
press release by the Company relating thereto are filed as Exhibits 9 and 10
hereto and are incorporated herein by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has been receiving advice from CS First Boston Corporation ("CS
First Boston"), Morgan Stanley & Co. Incorporated ("Morgan Stanley") and Salomon
Brothers Inc ("Salomon Brothers") in connection with Tracinda's proposals since
April 12, 1995. None of CS First Boston, Morgan Stanley and Salomon Brothers has
been requested to make any solicitations or recommendations to security holders
of the Company with respect to the Offer.
The Company has retained Kekst & Company ("Kekst") as public relations
adviser and Georgeson & Company Inc. ("Georgeson") and Morrow & Co. ("Morrow")
to assist the Company with its communications to stockholders and to provide
other services to the Company, including with respect to the Offer. The Company
will pay each of Kekst, Georgeson and Morrow their reasonable and customary
compensation for their respective services, and will reimburse Kekst, Georgeson
and Morrow for their reasonable out-of-pocket expenses incurred in connection
therewith.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as described below, there have been no transactions in the
Shares or the associated Rights during the past 60 days by the Company or, to
the best knowledge of the Company, by any executive officer, director, affiliate
or subsidiary of the Company:
Joseph E. Cappy, Vice President, and his wife, gave 100 Shares to a
relative on May 24, 1995.
James D. Donlon, Vice President and Controller, sold 3,660 Shares on
May 23, 1995, and sold 3,200 Shares on May 24, 1995.
In accordance with the terms of the Plan, upon election as director at
the Annual Meeting of Stockholders on May 18, 1995, each nonemployee
director was granted automatically an option to purchase 1,500 Shares at an
exercise price equal to 100% of the fair market value of such Shares on
that date ($43.19 per Share).
Consistent with its past practice of awarding stock options under the
Plan to executives annually in July, the Company granted options to
purchase approximately 3.9 million Shares to 1,751 Company
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executives (including officers) on July 6, 1995, at an exercise price equal
to 100% of the fair market value of such Shares on that date. Information
regarding the options granted to executive officers of the Company during
the past 60 days appears in Annex A hereto, which is incorporated herein by
reference.
Upon W. Frank Fountain's election as a Vice President on July 6, 1995,
the Company granted Mr. Fountain an option to purchase 10,000 Shares at an
exercise price equal to 100% of the fair market value of such Shares on
that date.
In December 1994, the Board of Directors approved a $1 billion Share
repurchase program, subject to market and business conditions. During the
past 60 days, the Company repurchased approximately 3.2 million Shares
under this program at a cost of approximately $139 million.
During the past 60 days, holders of the Company's Series A Convertible
Preferred Stock converted 607,093 shares of Preferred Stock into 16,865,018
Shares.
Some officers and directors participate in the dividend reinvestment
program administered by the Company's transfer agent, and some officers
participate, through payroll deductions of salary or bonus, in the
Company's self-directed employee savings plans, which offer a variety of
investment elections, including the Company's Shares. During the past 60
days, approximately 460 Shares were purchased and approximately 217 Shares
were sold for the account of officers and directors under such program or
plans.
(b) The Company has no intention of tendering any Shares pursuant to the
Offer, nor, to the best knowledge of the Company, does any executive officer,
director, affiliate or subsidiary of the Company have any intention of tendering
any Shares pursuant to the Offer. The foregoing statement does not include any
Shares over which, or with respect to which, any such executive officer,
director or affiliate acts in a fiduciary or representative capacity or is
subject to the instructions of a third party with respect to such decision to
tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) No negotiation is being undertaken or is underway by the Company in
response to the Offer which relates to or would result in:
(i) An extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(ii) A purchase, sale or transfer of a material amount of assets by
the Company or any subsidiary of the Company;
(iii) A tender offer for or other acquisition of securities by or of
the Company; or
(iv) Any material change in the present capitalization or dividend
policy of the Company.
(b) There is no transaction, Board resolution, agreement in principle or
signed contract in response to the Offer which relates to or would result in one
or more of the matters referred to in Item 7(a)(i), (ii), (iii) or (iv).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Regulatory Matters. The Offer is conditioned on, among other things, the
Michigan Insurance Bureau having issued an order exempting, on terms
satisfactory to Tracinda, in its sole discretion, the Offer from the provisions
of the Michigan Insurance Code or Tracinda being satisfied, in its sole
discretion, that the provisions of the Michigan Insurance Code are otherwise
inapplicable to the Offer (the "Insurance Condition").
The Company has two indirect, wholly-owned insurance subsidiaries domiciled
in Michigan. The Michigan Insurance Code provides that, absent prior approval by
the Michigan Commissioner of Insurance, a person may not make a tender offer for
or acquire securities of a Michigan domestic insurer if, after the
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consummation of the offer, the person would be in control of the insurer.
Control is presumed to exist if the person holds 10% or more of another person's
voting securities.
On June 26, 1995, Tracinda filed with the Michigan Insurance Bureau an
application for exemption from the relevant provisions of the Michigan Insurance
Code. Also on June 26, 1995, Tracinda commenced a lawsuit in the United States
District Court for the Western District of Michigan against the Michigan
Commissioner of Insurance and the Company, seeking to have the relevant
provisions of the Michigan Insurance Code declared inapplicable to the Offer. In
its complaint, Tracinda argued that the relevant provisions of the Michigan
Insurance Code are preempted by federal securities laws and are unconstitutional
under the Constitution of the United States.
On June 27, 1995, the Michigan Commissioner of Insurance issued an Order
Approving Disclaimer (the "Order"), and Tracinda announced that the Order would
satisfy the Insurance Condition. On June 28, Tracinda withdrew, without
prejudice, the related lawsuit.
The Order states that the scope of its approval is strictly limited to
Tracinda's proposed acquisition of 14,000,000 additional Shares of the Company,
and does not apply to any other future activity Tracinda may choose to pursue
with respect to the Company, including the purchase of additional Shares or
undertaking a proxy or consent solicitation in which Tracinda would name a slate
of candidates for the Company's Board.
A copy of the Order is filed as Exhibit 11 hereto and is incorporated
herein by reference. The foregoing description of the Order is qualified in its
entirety by reference to the text of the Order.
The Rights Agreement. On February 4, 1988, the Board of Directors of the
Company declared a dividend distribution of one Right for each outstanding share
of the Common Stock of the Company. On September 7, 1989, December 14, 1990 and
December 1, 1994, the Board of Directors amended the terms of the Rights. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Junior Participating Cumulative Preferred Stock, par
value $1.00 per share, of the Company (the "Preferred Stock") at a price of $120
per one one-hundredth of a share of Preferred Stock, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in the
Rights Agreement.
The Rights are currently attached to certificates representing outstanding
shares of Common Stock, and no separate certificates representing the Rights
("Right Certificates") have been distributed. The Rights will separate from the
Common Stock and a "Distribution Date" will occur upon the earlier to occur of
(i) ten days following the time (the "Stock Acquisition Time") of a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock of the
Company and (ii) ten business days (or, if determined by the Board of Directors
(with the concurrence of a majority of the Continuing Directors (as hereinafter
defined)), a specified or unspecified later date) following the commencement or
announcement of an intention to make a tender offer or exchange offer which, if
successful, would cause the bidder to own 15% of more of the outstanding shares
of Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on February 22, 1998, unless earlier redeemed or exchanged by the Company
as described below.
In the event that, after the Stock Acquisition Time, the Company is
acquired in a merger or other business combination transaction (except certain
transactions with a person who became an Acquiring Person as a result of a
tender offer described in the next succeeding paragraph) or 50% or more of its
assets, cash flow or earning power is sold, proper provision shall be made so
that each holder of a Right shall thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value (as defined in the Rights Agreement) of
two times the Purchase Price of the Right. In the event that, after the Stock
Acquisition Time, the Company were the surviving corporation of a merger and its
shares of Common Stock were changed or exchanged, proper provision shall be made
so that each holder of a Right will thereafter have the right to receive upon
exercise that number of shares of Common Stock of the Company having a market
value of two times the exercise price of the Right.
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In the event that a person or group becomes an Acquiring Person (except
pursuant to a tender offer for all outstanding shares of Common Stock determined
to be at a fair price and otherwise in the best interests of the Company and its
stockholders by a majority of the Outside Directors), proper provision shall be
made so that each holder of a Right (other than the Acquiring Person) will
thereafter have the right to receive upon exercise that number of shares of
Common Stock (or, in certain circumstances, cash, a reduction in the Purchase
Price, Common Stock, other equity securities of the Company, debt securities of
the Company, other property or a combination thereof) having a market value (as
defined in the Rights Agreement) of two times the Purchase Price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person (or an affiliate, associate or transferee thereof) will be null
and void. A person will not be an Acquiring Person if the Board of Directors of
the Company determines that such person or group became an Acquiring Person
inadvertently and such person or group promptly divests itself of a sufficient
number of shares of Common Stock so that such person or group is no longer an
Acquiring Person.
At any time prior to the earlier of the Stock Acquisition Time and the
Expiration Date (as defined in the Rights Agreement), the Board of Directors may
redeem the Rights in whole, but not in part, at a price of $.05 per Right (the
"Redemption Price"). Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.05 Redemption Price.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such Person of 50% or more of the outstanding shares of Common
Stock, the Board of Directors of the Company may exchange the Rights (other than
Rights beneficially owned by such Person which have become void), in whole or
part, at an exchange ratio of one share of Common Stock per Right (subject to
adjustment). The Company, at its option, may substitute one one-hundredth of a
share of Preferred Stock (or other series of substantially similar preferred
stock of the Company) for each share of Common Stock to be exchanged.
Each share of Preferred Stock purchasable upon exercise of the Rights will
have a minimum preferential dividend of $10 per year, but will be entitled to
receive, in the aggregate, a dividend of 100 times the dividend declared on the
Common Stock. In the event of liquidation, the holders of the shares of
Preferred Stock will be entitled to receive a minimum liquidation payment of
$100 per share, but will be entitled to receive an aggregate liquidation payment
equal to 100 times the payment made per share. Each share of Preferred Stock
will have one hundred votes, voting together with the Common Stock. In the event
of any merger, consolidation or other transaction in which shares of Common
Stock are exchanged, each share of Preferred Stock will be entitled to receive
100 times the amount and type of consideration received per share of Common
Stock. The rights of the shares of Preferred Stock as to dividends and
liquidation, and in the event of mergers and consolidations, are protected by
anti-dilution provisions.
The term "Continuing Director" means any member of the Board of Directors
of the Company who was a member of the Board prior to the Stock Acquisition
Time, and any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Directors then on the
Board of Directors, but shall not include an Acquiring Person or an affiliate,
associate, representative or nominee of an Acquiring Person.
A copy of the Rights Agreement (as in effect prior to Amendment No. 1
thereto) has been filed with the Commission as Exhibit 1 to a Current Report on
Form 8-K dated December 14, 1990. A copy of Amendment No. 1 to the Rights
Agreement has been filed with the Commission as Exhibit 1 to a Current Report on
Form 8-K dated December 1, 1994. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the text
of the Rights Agreement.
Delaware Takeover Statute. Section 203 of the Delaware General Corporation
Law, in general, prohibits a Delaware corporation such as the Company from
engaging in a "Business Combination" (defined as a variety of transactions,
including mergers, as set forth below) with an "Interested Stockholder" (defined
generally as a person that is the beneficial owner of 15% or more of a
corporation's outstanding voting stock) for a period of three years following
the date that such person became an Interested Stockholder unless
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(a) prior to the date such person became an Interested Stockholder, the board of
directors of the corporation approved either the Business Combination or the
transaction that resulted in the stockholder becoming an Interested Stockholder,
(b) upon consummation of the transaction that resulted in the stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding stock held by directors who are also officers
of the corporation and employee stock ownership plans that do not provide
employees with the right to determine confidentially whether Shares held subject
to the plan will be tendered in a tender or exchange offer or (c) on or
subsequent to the date such person became an Interested Stockholder, the
Business Combination is approved by the board of directors of the corporation
and authorized at a meeting of stockholders, and not by written consent, by the
affirmative vote of the holders of at least 66 2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder.
Section 203 provides that, during such three-year period, the corporation
may not merge or consolidate with an Interested Stockholder or any affiliate or
associate thereof, and also may not engage in certain other transactions with an
Interested Stockholder or any affiliate or associate thereof, including, without
limitation, (a) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets (except proportionately as a stockholder of the
corporation) having an aggregate market value equal to 10% or more of the
aggregate market value of all assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock of
a corporation, (b) any transaction which results in the issuance or transfer by
the corporation or by certain subsidiaries thereof of any stock of the
corporation or such subsidiaries to the Interested Stockholder, except pursuant
to a transaction which effects a pro rata distribution to all stockholders of
the corporation, (c) any transaction involving the corporation or certain
subsidiaries thereof which has the effect of increasing the proportionate share
of the stock of any class or series, or securities convertible into the stock of
any class or series, of the corporation or any such subsidiary which is owned
directly or indirectly by the Interested Stockholder (except as a result of
immaterial changes due to fractional share adjustments), or (d) any receipt of
the Interested Stockholder of the benefit (except proportionately as a
stockholder of such corporation) of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO.
- ------------
<S> <C>
Exhibit 1.1 June 30, 1995 Letter to Mr. Iacocca
Exhibit 1.2 July 6, 1995 Letter to Mr. Iacocca
Exhibit 2 Chrysler Corporation 1991 Stock Compensation Plan
Exhibit 3 April 12, 1995 Tracinda Press Release
Exhibit 4 April 12, 1995 Letter to the Company
Exhibit 5 April 24, 1995 Company Press Release
Exhibit 6 April 24, 1995 Letter to Mr. Kerkorian
Exhibit 7 April 25, 1995 Letter to Mr. Eaton
Exhibit 8 May 31, 1995 Tracinda Press Release
Exhibit 9 Letter to Stockholders of the Company, dated July 6, 1995*
Exhibit 10 Press Release issued by the Company on July 6, 1995
Exhibit 11 Order Approving Disclaimer issued by the Michigan Commissioner of Insurance
Exhibit 12 Employment Agreement, dated as of June 1, 1995, between the Company and
Robert J. Eaton
Exhibit 13 Employment Agreement, dated as of June 1, 1995, between the Company and
Robert A. Lutz
Exhibit 14 Employment Agreement, dated as of June 1, 1995, between the Company and
Thomas G. Denomme
Exhibit 15 Employment Agreement, dated as of June 1, 1995, between the Company and
Gary C. Valade
Exhibit 16 Term Sheet Relating to Severance Agreements
Exhibit 17 Supplemental Executive Retirement Plan
</TABLE>
- -------------------------
* Included in mailing to stockholders.
9
<PAGE> 11
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Dated: July 6, 1995 CHRYSLER CORPORATION
By: William J. O'Brien
------------------------------------
Name: William J. O'Brien
Title: Vice President, General
Counsel and Secretary
10
<PAGE> 12
ANNEX A
DIRECTORS' COMPENSATION
The fees currently being paid to directors who are not officers of the
Company or its subsidiaries are as follows: annual fee for serving as a
director, $25,000; fee for each Board meeting attended, $1,000; Board strategy
session fee, $1,000; fee for each other day of service, $2,000; annual fee for
serving on a Board committee (Management Resources and Compensation Committees
considered as one), $10,000; and additional annual fee for serving as
chairperson of a committee, $2,000.
Under the Chrysler Corporation 1991 Stock Compensation Plan (the "Plan")
approved by the stockholders, nonemployee directors receive options with related
stock appreciation rights ("SARs") for 1,500 Shares as of the date of their
election or reelection as a director at any annual or special meeting of
stockholders. The Company also provides business travel accident insurance
coverage in the amount of $250,000 to each nonemployee director. In addition,
the Company provides an annual retirement benefit payable for life to
nonemployee directors with five or more years of service equal to one hundred
percent of the annual retainer for directors in effect at the time of the
individual's retirement from the Board. A director retiring from the Board with
less than five years service receives an annual retirement benefit in the same
amount, but only for a period equal to the time served as a director.
Under the Chrysler Salaried Employees' Supplemental Savings Plan,
nonemployee directors may elect in advance to defer all or a portion of the
above fees and proceeds in connection with the exercise of options or SARs,
whether payable in the form of cash or Shares. Such directors may self-direct
assets in their deferral accounts among a variety of investments. Directors may
elect to receive payment of their deferred compensation in a lump sum or in
annual installments not to exceed ten years.
SECURITY OWNERSHIP OF MANAGEMENT AND BOARD
The following table shows the number of Shares beneficially owned, as that
term is defined for proxy statement reporting purposes by the Commission, by the
directors and executive officers of the Company as of July 6, 1995 (unless
otherwise noted):
<TABLE>
<CAPTION>
NUMBER OF SHARES
IN LEFT COLUMN
AMOUNT AND NATURE WHICH MAY BE
OF BENEFICIAL ACQUIRED WITHIN
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)(3) 60 DAYS(4)
- ---------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Lilyan H. Affinito........................................ 10,066 6,600
Robert E. Allen........................................... 1,600 600
Joseph E. Antonini........................................ 8,230 2,100
Joseph A. Califano, Jr. .................................. 8,566 5,100
Theodor R. Cunningham..................................... 268,875 241,699
Thomas G. Denomme......................................... 115,742 92,698
Robert J. Eaton........................................... 653,282 549,410
Earl G. Graves............................................ 8,130 6,150
Kent Kresa................................................ 8,330 6,150
Robert J. Lanigan......................................... 6,337 3,000
Robert A. Lutz............................................ 582,066 493,034
Peter A. Magowan.......................................... 18,430 3,000
Malcolm T. Stamper........................................ 6,677 2,100
Gary C. Valade............................................ 138,185 125,298
Lynton R. Wilson.......................................... 2,100 600
All Directors and Executive Officers,
including those named above, as a Group................. 3,861,972(5) 3,158,841
</TABLE>
- -------------------------
A-1
<PAGE> 13
(1) No director or executive officer is the beneficial owner of other equity
securities of the Company or any of its subsidiaries. No director or
executive officer beneficially owns more than 1.0% of the Shares
outstanding.
(2) Unless otherwise indicated, each person included in the group has sole
investment power and sole voting power with respect to the Shares
beneficially owned by such person.
(3) Does not include Shares held by the dividend reinvestment plan and the
trustees under the Company's savings plans.
(4) This column lists the number of Shares which the directors and executive
officers have the right to acquire within sixty days after July 6, 1995
through the exercise of stock options. The Shares shown in this column are
included in the Amount and Nature of Beneficial Ownership column.
(5) Includes 13,497 Shares held by family members of executive officers, the
beneficial ownership of which has been disclaimed by such officers in
reports filed with the Commission.
Consistent with its past practice of awarding stock options under the Plan
to executives annually in July, on July 6, 1995, the Company granted to its
Chief Executive Officer and its next four most highly compensated executive
officers options to purchase the following numbers of Shares: Mr. Eaton,
225,000; Mr. Lutz, 100,000; Mr. Denomme, 70,000; Mr. Valade, 65,000; and Mr.
Cunningham, 52,000. At the same time, the Company granted options to purchase an
aggregate of 815,000 Shares to 25 other executive officers. All options have an
exercise price equal to 100% of the fair market value of such Shares on the date
of grant.
OTHER MATTERS
The Company, in the ordinary course of business, purchases materials,
supplies and services from numerous suppliers throughout the world. Purchases
are made from some concerns of which certain nonemployee directors are directors
or officers. The Company does not consider the amounts involved in such
transactions material in relation to its business and believes that such amounts
are not material in relation to the businesses of such other corporations or the
interests of the nonemployee directors involved.
Mr. Joseph E. Cappy, a Vice President of the Company, is the principal
stockholder of, and made a loan of $1 million in 1994 to, an automobile
dealership which was granted a franchise by the Company to sell Chrysler
products. Mr. Cappy has agreed with the Company to certain restrictions which
preclude his involvement in the management and operation of the dealership.
The Company incurred expenses of approximately $689,000 in 1994 for
advertising and related marketing activities with Black Enterprise magazine. Mr.
Graves is the Chairman, Chief Executive Officer and sole stockholder of the
magazine's ultimate parent company.
A-2
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation awarded to, earned by, or paid
during the three preceding fiscal years to the Company's Chief Executive Officer
and its next four most highly compensated executive officers serving at the end
of 1994 for all services rendered by them to the Company and its subsidiaries in
all capacities in which they served.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ---------- ---------
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
SALARY COMPENSATION OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($)(2) SARS (#) ($)(3) ($)(4)
- --------------------------- ---- --------- --------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Eaton............ 1994 1,063,750 2,200,000 60,424 214,638 966,641 51,060
Chairman of the Board and 1993 928,750 1,900,000 121,474 202,772 1,809,000 22,290
Chief Executive Officer 1992 597,000 575,000 25,200 550,000 694,328 68,295
Robert A. Lutz............. 1994 808,750 1,600,000 39,319 90,000 869,465 38,820
President and Chief 1993 747,500 1,500,000 75,923 99,301 1,444,500 17,137
Operating Officer 1992 650,000 450,000 28,470 88,733 711,876 14,550
Thomas G. Denomme.......... 1994 496,250 1,000,000 27,942 60,000 470,534 23,820
Vice Chairman and Chief 1993 448,750 900,000 12,240 61,198 756,000 10,770
Administrative Officer 1992 348,333 275,000 14,310 50,452 339,771 8,360
Gary C. Valade............. 1994 387,500 750,000 23,982 60,000 352,901 18,600
Executive Vice President 1993 325,417 680,000 8,100 56,198 506,250 7,810
and Chief Financial 1992 242,500 190,000 8,280 30,226 202,214 5,820
Officer
Theodor R. Cunningham...... 1994 412,500 700,000 24,927 58,470 409,160 19,800
Executive Vice President 1993 381,250 650,000 10,680 54,397 661,500 9,150
-- Sales & Marketing and 1992 325,833 225,000 11,940 48,632 265,952 7,820
General Manager of
Minivan Operations
</TABLE>
- -------------------------
(1) Compensation deferred at the election of an executive is included in the
year earned.
(2) The amounts for 1994 are dividend equivalents paid in respect of awards of
Shares ("Performance Shares") under the Plan and tax payment reimbursements.
(3) LTIP payouts of Performance Shares for 1994 were in respect of the 1992-1994
performance cycle under the Plan and were based on the Company's performance
in relation to improvements in vehicle quality. Amounts are based on the
fair market value of Shares on the date of delivery.
(4) The amounts for 1994 are matching contributions by the Company under its
employee savings plans.
The Company has entered into Employment Agreements (each, an "Employment
Agreement") with each of Robert J. Eaton, Robert A. Lutz, Thomas G. Denomme and
Gary C. Valade (each, an "Executive"). Except in the case of Mr. Lutz, each
Employment Agreement has an initial three year term commencing on June 1, 1995,
is automatically extended for successive periods of one year each unless either
party gives at least 90 days' written notice to the other of its intention not
to renew, and will expire on the last day of the month in which the Executive
attains age 65, or in the event of the Executive's disability. The term of Mr.
Lutz's Employment Agreement commenced on June 1, 1995, and will expire at the
end of February, 1997, the month in which he will attain age 65. Each
Executive's position, duties, compensation and benefits are set forth in the
Employment Agreements. The Employment Agreements each contain a noncompetition
provision which precludes each Executive from voluntarily terminating his
employment without "Good Reason" and thereafter working for a competitor for at
least one year.
A-3
<PAGE> 15
In the event of the Termination Without Cause (as defined in each
Employment Agreement) of any Executive, or Termination for Good Reason (as
defined in each Employment Agreement) by any Executive, such Executive will be
entitled to receive all salary earned or other compensation due and payable
under the Company's plans, policies or agreements and a lump sum severance
benefit generally equal to two times the sum of the Executive's current annual
base salary and the average of the bonuses payable to the Executive for the
three calendar years preceding his termination, although higher benefits will be
payable in the event of the termination of any Executive (except Mr. Lutz) prior
to June 1, 1996.
Included among the events giving rise to the Executive's right to terminate
his employment for "Good Reason" are a material adverse reduction in his
responsibilities and, with a limited exception, a reduction in his base salary
or annual bonus opportunity.
Copies of the Employment Agreements are filed as Exhibits 12-15 to the
Statement to which this Annex A is attached, and are incorporated herein by
reference. The foregoing description of the Employment Agreements is qualified
in its entirety by reference to the text of the Employment Agreements.
On June 20, 1995, after having considered and discussed the issue at three
prior meetings, the Management Resources Committee ("MRC") approved and adopted
a recommendation that the Board of Directors approve severance agreements for
the Company's 30 officers (including the Executives) that would provide each
such officer a predetermined level of severance benefits if his or her
employment were terminated involuntarily or constructively in connection with a
change of control. The Board of Directors, which had also discussed
preliminarily the adoption of such agreements at two prior meetings, approved
the recommendation of the MRC, with certain modifications, on July 6, 1995.
As approved by the Board, these agreements will require each officer who is
then still actively employed generally to commit to remain employed by the
Company for the period commencing upon a "Potential Change of Control" and
ending not earlier than two months following an actual "Change of Control" or,
if earlier, the first anniversary of the occurrence of a Potential Change of
Control or the date the Board determines that no Change of Control is likely to
occur. For purposes of these agreements, the definition of a Change of Control
will generally be the same as that contained in the Plan (as more fully
described in footnote 1 to the option grant table below), and the definition of
a Potential Change of Control will include the occurrence of certain events,
such as the commencement of certain tender offers (not including the Offer in
its present form as of the date hereof), the execution of a merger or similar
agreement or the commencement of a proxy contest relating to the election of
directors, that would, if the proposed action were effected, result in a Change
of Control.
Under these agreements, the Company will commit to preserve each officer's
existing position, compensation and benefits during such continued period of
employment or, if earlier, until the second anniversary of an actual Change of
Control. If these agreements become effective, the Employment Agreements
described above will be suspended, subject to reinstatement if these severance
agreements cease to be effective due to the fact that no Change of Control has
occurred. If the Company terminates the employment of any such officer after the
agreement becomes effective, or the officer terminates his employment after a
Change of Control for "Good Reason" (e.g., a reduction in his duties or
responsibilities, a reduction in his compensation or level of benefits occurring
after the agreement becomes effective), the officer will receive a single lump
severance payment equal to three times, in the case of Messrs. Eaton, Lutz,
Denomme and Valade, and two times, in the case of all other officers, the sum of
the officer's annual base salary and an amount equal to the average of the
bonuses payable to the officer over a three year period preceding the officer's
date of termination. An officer who receives such severance benefits will also
receive certain other payments and benefits, intended to compensate the officer
for other benefits foregone or lost due to such termination.
In the event that the payments made to the officer under the agreement
result in the officer being subject to the excise tax on certain "excess
parachute payments" payable under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company will also pay such officer an
additional amount such that the officer receives the same net after-tax benefit
as the officer would have received had no excise tax been applicable. If such
additional payments are required, the Company will not be able to deduct such
A-4
<PAGE> 16
additional payments for Federal income tax purposes and will also be denied such
a deduction for some or all of the other payments made pursuant to this
agreement and its other plans and policies.
A term sheet setting forth the principal terms of the severance agreements
is filed as Exhibit 16 to the Statement to which this Annex A is attached, and
is incorporated herein by reference.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock options granted
in 1994 to the named executive officers. No SARs were granted to executive
officers in 1994.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR PRESENT
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION VALUE
NAME (#)(1)(2) FISCAL YEAR ($/SH) DATE ($)(3)
- -------------------------------------- ------------ ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Robert J. Eaton....................... 185,000 5.65% 47.75 07-06-04 2,408,585
29,638 0.91% 61.38 12-02-02 467,419
Robert A. Lutz........................ 90,000 2.75% 47.75 07-06-04 1,171,744
Thomas G. Denomme..................... 60,000 1.83% 47.75 07-06-04 781,163
Gary C. Valade........................ 60,000 1.83% 47.75 07-06-04 781,163
Theodor R. Cunningham................. 48,000 1.47% 47.75 07-06-04 624,930
1,764 0.05% 59.94 12-04-01 27,089
3,578 0.11% 47.38 06-12-01 46,103
5,128 0.16% 47.38 06-10-02 66,075
</TABLE>
- -------------------------
(1) All amounts shown represent the number of Shares which may be acquired upon
the exercise of stock options. Options for a total of 3,271,896 Shares were
granted to directors, officers and employees in fiscal 1994. Each option was
granted at an exercise price of not less than 100% of fair market value of
the Shares on the date the option was granted. An option must be exercised
within ten years after the date of grant (or, if less, within five years
after retirement) and is exercisable on and after the first anniversary of
the grant to the extent of not more than 40% of the number of Shares covered
by the option, on and after the second anniversary of the grant to the
extent of not more than 70% thereof, and on and after the third anniversary
of the grant to the extent of 100% thereof. Exercise of an option after
termination of employment is subject to, among other things, the conditions
precedent that the optionee neither takes other employment or renders
services to others without the written consent of the Company, nor conducts
himself in a manner adversely affecting the Company. The exercise price may
be paid in cash or by delivery of Shares. Tax withholding obligations
related to exercise may be paid by a reduction in the number of Shares
received, subject to certain conditions. The Stock Option Committee may
provide, at the time it grants an option, that if an optionee, while
employed by the Corporation, surrenders Shares owned for a minimum of six
months in payment of the exercise price of that option, then the optionee,
subject to the availability of Shares and other restrictions, will be
entitled to receive a new stock option (a "Reload Option") covering a number
of Shares equal to the number so surrendered. Under the Plan as currently
administered, Reload Options may not be granted in connection with the
exercise of a Reload Option. None of the options granted to the named
executive officers in 1994 contain a Reload Option feature. See also
footnote 2 below.
In the event of a Change in Control (as defined below), (i) all options and
SARs will become fully exercisable and vested (provided that SARs held by
executive officers and directors must, except in the event of death or
disability, be held for at least six months prior to exercise), (ii) Limited
Stock Appreciation Rights ("LSARs") will be exercisable during the 60-day
period following the Change in Control (provided that LSARs held by
executive officers and directors must, except in the event of death or
disability, be held for at least six months prior to a Change in Control),
and (iii) any participant terminated by the Company within two years
immediately following a Change in Control will be permitted to exercise any
option, SAR or LSAR for a period of three months after such termination or
until the stated term thereof, whichever is shorter. Upon the exercise of a
LSAR, the holder is entitled to receive an amount equal to (i) the Change in
Control Stock
A-5
<PAGE> 17
Appreciation (as defined below) times (ii) the number of Shares in respect
of which such LSAR shall have been exercised.
A Change in Control is deemed to have occurred if (i) any person becomes the
owner of 20% or more of the combined voting power of the Company's then
outstanding securities (unless the 20% threshold is crossed due to an
acquisition of securities directly from the Company); (ii) during any
two-year period the majority of the membership of the Board, subject to
certain conditions, ceases for any reason to constitute a majority of the
Board; (iii) the stockholders approve a merger of the Company with any other
corporation (other than a merger which would result in the voting securities
of the Company continuing to represent, in combination with voting
securities held by any employee benefit plan of the Company, at least 80% of
the combined voting power of the Company or the surviving entity outstanding
immediately after such merger); or (iv) the stockholders approve a plan of
complete liquidation of the Company or an agreement for the sale of
substantially all its assets. The Change in Control Stock Appreciation to be
received in settlement of LSARs with respect to any Share will be an amount
equal to the excess, if any, of (i) the higher of (x) the market value of
such Share on the date the LSAR is exercised or (y) the highest price paid,
or its equivalent, for Shares in the transaction constituting the Change in
Control or, in the case of a Change in Control resulting from a change in
the membership of the Board, the average of the closing price of the Shares
for the 30-day period prior to such Board Change in Control, over (ii) the
price specified in the LSAR on the date of grant or, in the case of a LSAR
related to an option, the price specified in the related option.
(2) All but the first grant listed for each named executive officer are grants
of Reload Options resulting from the exercise of an initial option granted
before 1994 containing a Reload Option feature. Each Reload Option was
granted in connection with the exercise of an existing option by surrender
of Shares then owned by the executive in payment of the exercise price of
the existing option. Such Reload Option may be exercised (i) for the number
of Shares shown, (ii) at the fair market value of such Shares on the date of
such surrender, (iii) six months after the date of grant, and then only for
the remaining term of the original option, and (iv) only while the fair
market value of Shares is at least 25% higher than on the date of grant of
the Reload Option.
(3) These values were determined under the Black-Scholes option pricing model
based on the following assumptions: expected stock price volatility of 26%;
interest rate based on the five year Treasury bond rate; exercise in the
fifth year; and dividends at the rate in effect on the date of grant. No
adjustments were made for nontransferability or risk of forfeiture. The
Company's use of this model does not constitute an endorsement or an
acknowledgment that such model can accurately determine the value of options
or SARs. No assurance can be given that the actual value, if any, realized
by an executive upon the exercise of these options will approximate the
estimated values established by the Black-Scholes model.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information concerning stock option exercises
in 1994 by the named executive officers and the value of their unexercised
options at December 31, 1994. No named executive officer exercised SARs in 1994
and no such officer currently holds any SARs.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Eaton.......... 60,000 1,863,600 313,410 434,000 5,208,276 5,267,750
Robert A. Lutz........... 0 0 412,034 157,500 10,365,255 961,875
Thomas G. Denomme........ 38,100 1,439,532 41,698 102,000 522,180 553,500
Gary C. Valade........... 0 0 79,998 95,100 1,804,041 414,075
Theodor R. Cunningham.... 38,100 1,406,232 189,793 92,706 4,495,207 531,456
</TABLE>
- -------------------------
(1) The mean of the high and low price of a Share on the NYSE was $49.50 on
December 30, 1994.
A-6
<PAGE> 18
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table provides information concerning the number of Shares
awarded in 1994 to the named executive officers which they may receive in the
future depending on the extent to which long-term corporate goals are achieved.
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE BASED PLANS
NUMBER OF PERIOD UNTIL ------------------------------
SHARES MATURATION THRESHOLD TARGET MAXIMUM
NAME (#)(1) OR PAYOUT(2) (#) (#) (#)
- -------------------------------------------- --------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert J. Eaton............................. 11,600 3 years 5,800 11,600 14,500
Robert A. Lutz.............................. 7,300 3 years 3,650 7,300 9,125
Thomas G. Denomme........................... 4,400 3 years 2,200 4,400 5,500
Gary C. Valade.............................. 3,600 3 years 1,800 3,600 4,500
Theodor R. Cunningham....................... 3,600 3 years 1,800 3,600 4,500
</TABLE>
- -------------------------
(1) These awards reflect the number of Performance Shares payable to each of the
named executive officers under the Plan at the end of the 1994-1996
performance cycle upon achievement of the corporate goal established for
that cycle. Under the Plan, a target award (expressed as a percentage of
salary) is established for each such officer. Each may earn nothing, or a
number of Performance Shares ranging from a set minimum to a maximum of 125%
of the target award, based on the Company's performance in relation to
improvements in vehicle quality, which is the performance goal established
for such cycle. During such cycle, each of the named executive officers is
also entitled to receive amounts equal to the cash dividends that would have
been paid to him if one Share for every Performance Share awarded to him had
been issued to him at the time of such dividend.
(2) In the event of a Change in Control (as defined above in footnote 1 to the
Option/SAR Grants in Last Fiscal Year table) the performance objectives
applicable to any award of Performance Shares under the Plan will be deemed
attained, any other restrictions applicable to such Shares will be waived
and such Shares will be deemed fully vested.
PENSION PLAN TABLE
The Company's executive officers receive benefits based on years of service
and salary under the tax-qualified Chrysler Salaried Employees' Retirement Plan
(the "Retirement Plan"). Any portion of such benefits not payable under the
Retirement Plan due to limitations imposed by the Internal Revenue Code of 1986
on tax-qualified plans are payable under the nonqualified Supplemental Executive
Retirement Plan ("SERP"). The following table shows the aggregate annual
benefits (including 50% of estimated primary Social Security benefits), based on
years of service and salary, that would be payable under the Retirement Plan and
the SERP to executive officers currently retiring at age 65, assuming they
contribute continuously to the plans after age 35 when eligible.
<TABLE>
<CAPTION>
ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED(2)
ASSUMED FINAL AVERAGE -------------------------------------------------------------------
ANNUAL SALARY(1) 10 15 20 25 30 35
- ------------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000..................... 45,000 67,500 90,000 110,000 124,000 124,000
400,000..................... 90,000 135,000 180,000 220,000 248,000 248,000
600,000..................... 135,000 202,500 270,000 330,000 372,000 372,000
800,000..................... 180,000 270,000 360,000 440,000 496,000 496,000
1,000,000..................... 225,000 337,500 450,000 550,000 620,000 620,000
1,200,000..................... 270,000 405,000 540,000 660,000 744,000 744,000
1,400,000..................... 315,000 472,500 630,000 770,000 868,000 868,000
1,600,000..................... 360,000 540,000 720,000 880,000 992,000 992,000
</TABLE>
- -------------------------
(1) Salary averaged over the consecutive five-year period during which salary
was highest in the 15 years immediately preceding retirement. The salaries
for each of the Company's five highest paid executive officers in 1994 are
set forth for each of the last three years in the Summary Compensation
Table.
A-7
<PAGE> 19
(2) Except for primary Social Security benefits, annual benefits are payable for
the lifetime of the retiree with a guaranteed payment period of 10 years. If
expressed as straight life annuity amounts the annual benefits would be
higher in amounts varying from approximately 5% to 8%.
As of February 28, 1995, the executives named in the Summary Compensation
Table have accrued the following years of service under the Retirement Plan and
the SERP: Mr. Eaton, 8 years, consisting of 3 years of service under the
Retirement Plan and the remainder as additional years of service under the SERP
pursuant to his employment agreement with the Company; Mr. Lutz, 13 9/12 years,
consisting of 8 9/12 years of service under the Retirement Plan and the
remainder as additional years of service granted by the Company under the SERP
Plan; Mr. Denomme, 14 6/12 years of service under the Retirement Plan; Mr.
Cunningham, 13 7/12 years of service under the Retirement Plan; and Mr. Valade,
17 4/12 years of service under the Retirement Plan.
In addition to providing a portion of the benefits based on years of
service and salary reflected in the Pension Table, the SERP provides other
retirement benefits to an executive based on a percentage of the incentive
compensation awards (annual bonus and Performance Shares) paid to that executive
each year. The Management Resources and Compensation Committees may establish a
percentage of those awards ranging from 0 to 6%. If the executive officers named
in the Summary Compensation Table remain with the Company until their retirement
at age 65, they could become entitled to receive the following estimated annual
retirement benefits under the SERP based on those awards (the portion accrued to
date is shown in parentheses): Mr. Eaton, $850,400 ($293,142); Mr. Lutz,
$369,000 ($299,496); Mr. Denomme, $455,000 ($211,549); Mr. Valade, $420,000
($140,966); and Mr. Cunningham, $586,200 ($157,429). These estimates were
computed based on the following assumptions for each executive through age 65:
(a) annual base salary increases of 6%, (b) annual incentive compensation equal
to 120% of annual base salary; and (c) a 3% factor applied to incentive
compensation. The nonaccrued amounts in the annual retirement benefit estimates
shown above will change in proportion to percentage differences between actual
award levels through age 65 and the assumed levels set forth in (b) and (c)
above.
The Company has amended its SERP to provide that, in the event of a Change
of Control (as defined in the Plan), Messrs. Eaton, Denomme and Valade will be
deemed to be eligible for special early retirement under the terms of the SERP.
As of July 1, 1995, none of Messrs. Eaton, Denomme or Valade would be eligible
to retire early under generally applicable terms of the SERP based on his age
and service credited as of such date.
A copy of the SERP is filed as Exhibit 17 to the Statement to which this
Annex A is attached and is incorporated herein by reference. The foregoing
description of the SERP is qualified in its entirety by reference to the text of
the SERP.
A-8
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGES
- ------------ --------------------------------------------------------------------- ------------
<S> <C> <C>
Exhibit 1.1 June 30, 1995 Letter to Mr. Iacocca
Exhibit 1.2 July 6, 1995 Letter to Mr. Iacocca
Exhibit 2 Chrysler Corporation 1991 Stock Compensation Plan
Exhibit 3 April 12, 1995 Tracinda Press Release
Exhibit 4 April 12, 1995 Letter to the Company
Exhibit 5 April 24, 1995 Company Press Release
Exhibit 6 April 24, 1995 Letter to Mr. Kerkorian
Exhibit 7 April 25, 1995 Letter to Mr. Eaton
Exhibit 8 May 31, 1995 Tracinda Press Release
Exhibit 9 Letter to Stockholders of the Company, dated July 6, 1995
Exhibit 10 Press Release issued by the Company on July 6, 1995
Exhibit 11 Order Approving Disclaimer issued by the Michigan Commissioner of
Insurance
Exhibit 12 Employment Agreement, dated as of June 1, 1995, between the Company
and Robert J. Eaton
Exhibit 13 Employment Agreement, dated as of June 1, 1995, between the Company
and Robert A. Lutz
Exhibit 14 Employment Agreement, dated as of June 1, 1995, between the Company
and Thomas G. Denomme
Exhibit 15 Employment Agreement, dated as of June 1, 1995, between the Company
and Gary C. Valade
Exhibit 16 Term Sheet Relating to Severance Agreements
Exhibit 17 Supplemental Executive Retirement Plan
</TABLE>
<PAGE> 1
EXHIBIT 1.1
[CHRYSLER CORPORATION LETTERHEAD]
William J. O'Brien
Vice President
General Counsel and Secretary
BY FACSIMILE AND REGISTERED MAIL
June 30, 1995
Mr. Lee A. Iacocca
Lee Iacocca & Associates, Inc.
1440 S. Sepulveda Blvd., 3rd Floor
Los Angeles, CA 90025
Outstanding Stock Options
Dear Lee:
We were advised on Wednesday that you would like to exercise one of
your outstanding stock options. Upon receipt of this request, we reviewed the
status of your stock options with the Directors of Chrysler Corporation.
The Directors considered whether the conditions precedent to the
exercise of your stock options described in Paragraph 8 of the Chrysler
Corporation Stock Option Plan have been satisfied. Paragraph 8 states that "the
exercise of any option after termination of employment [including termination
by reason of retirement] shall be subject to satisfaction of the conditions
precedent that the Option Holder neither, (a) takes other employment or renders
services to others without the written consent of the Corporation, nor (b)
conducts himself in a manner adversely affecting the Corporation." These
conditions apply to the exercise of all outstanding options granted by
Chrysler.
Based on available information, including the Schedule 13D and
amendments filed by Tracinda Corporation and yourself, the Schedule 14D-1 and
amendments filed by Tracinda, your Consulting Agreement and Value Sharing
Agreement with Tracinda filed as exhibits to this Schedule 14D-1, and public
comments made by you and Tracinda, it is the view of the Directors that the
conditions to exercise set forth in Paragraph 8 have not been satisfied and
that the Company should not process the option exercise request made on your
behalf earlier this week.
If you wish to submit any information regarding this matter for review
by the Board at its July meeting, please forward such information to me in time
for receipt by no later than 12:00 noon EDST on Wednesday, July 5.
Sincerely,
Bill
WJO:mc
Chrysler Corporation
12000 Chrysler Drive
Highland Park, MI 48288
313-956-5252
<PAGE> 1
EXHIBIT 1.2
[CHRYSLER CORPORATION LETTERHEAD]
William J. O'Brien
Vice President
General Counsel and Secretary
July 6, 1995
Mr. Lee A. Iacocca
Lee Iacocca & Associates, Inc.
1440 S. Sepulveda Blvd., 3rd Floor
Los Angeles, CA 90025
OUTSTANDING STOCK OPTIONS
Dear Lee:
At a meeting this morning, the Board of Directors of Chrysler Corporation
carefully reviewed the letter submitted on your behalf. Based upon the Board's
review of the requirements of the Plan, the Board has determined that the
conditions precedent to stock option exercise specified in the Plan have not
been satisfied, and that, accordingly, the Company will not process the option
exercise request made on your behalf last week.
Sincerely,
Bill
WJO: mc
<PAGE> 1
EXHIBIT 2
CHRYSLER CORPORATION
1991 STOCK COMPENSATION PLAN
EFFECTIVE MAY 16, 1991
(AS AMENDED THROUGH MAY 31, 1995)
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of the plan is the Chrysler Corporation 1991 Stock Compensation
Plan (the "Plan"). The purpose of the Plan is to enable the Company (as
hereinafter defined) and its Subsidiaries (as hereinafter defined) to obtain and
retain competent personnel who will contribute to the Company's success by their
ability, ingenuity and industry and to provide incentives to the participating
officers, key salaried employees and nonemployee directors which are related to
increases in stockholder value and will therefore inure to the benefit of all
stockholders of the Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Award" means any grant under the Plan in the form of Stock
Options, Stock Appreciation Rights, Limited Stock Appreciation Rights,
Performance Stock Units, Restricted Stock Units or any combination of the
foregoing.
(b) "Board" means the Board of Directors of the Company.
(c) "Change in Control" has the meaning given in Section 12 of the
Plan.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(e) "Committee" means the Stock Option Committee, or any other
committee the Board may subsequently appoint to administer the Plan. The
Committee shall be composed entirely of directors who meet the
qualifications referred to in Section 2 of the Plan.
(f) "Company" means Chrysler Corporation, a corporation incorporated
under the laws of the State of Delaware (or any successor corporation).
(g) "Disability" means being permanently and totally disabled under
any insurance program of the Company, any Subsidiary or any Related Entity.
(h) "Disinterested Person" shall have the meaning set forth in Rule
16b-3 ("Rule 16b-3"), as promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended from time
to time (the "Exchange Act"), or any successor definition adopted by the
Securities and Exchange Commission.
(i) "Eligible Employee" means an employee of the Company, any
Subsidiary or any Related Entity as described in Section 4 of the Plan.
(j) "Fair Market Value" means, as of any given date, with respect to
any Awards granted hereunder, the mean of the high and low trading price of
the Stock on such date as reported on the New York Stock Exchange or, if
the Stock is not then traded on the New York Stock Exchange, on such other
national securities exchange on which the Stock is admitted to trade or, if
none, on the National Association of Securities Dealers Automated Quotation
System if the Stock is admitted for quotation thereon; provided, however,
that if any such exchange or quotation system is closed on any day on which
Fair Market Value is to be determined, Fair Market Value shall be
determined as of the first day immediately preceding such day on which such
exchange or quotation system was open for trading.
(k) "Incentive Stock Option" means any Stock Option intended to
qualify as an "incentive stock option" within the meaning of Section 422 of
the Code.
<PAGE> 2
(l) "Limited Stock Appreciation Right" means a Stock Appreciation
Right that can be exercised only in the event of a Change in Control.
(m) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(n) "Optionee" means a Participant granted a Stock Option pursuant to
Section 5 of the Plan which remains outstanding.
(o) "Participant" means any Eligible Employee selected by the
Committee, pursuant to the Committee's authority in Section 2 of the Plan,
to receive Awards and, solely to the extent provided by Section 9 of the
Plan, nonemployee directors of the Company.
(p) "Performance Stock Unit" means the right to receive one share of
Stock as set forth in an Award granted pursuant to Section 8 of the Plan,
the vesting of which is subject to restrictions that will lapse upon the
attainment of performance objectives.
(q) "Related Entity" means any corporation, joint venture or other
entity, domestic or foreign, other than a Subsidiary, in which the Company
owns, directly or indirectly, a substantial equity interest.
(r) "Restricted Stock Unit" means the right to receive one share of
Stock as set forth in an Award granted pursuant to Section 8 of the Plan,
the vesting of which is subject to restrictions that will lapse with the
passage of time.
(s) "Retirement" means (i) retirement from active employment under a
pension plan of the Company, any Subsidiary or Related Entity or under an
employment contract with any of them or (ii) termination of employment at
or after age 55 under circumstances which the Committee, in its sole
discretion, deems equivalent to retirement.
(t) "Stock" means the common stock of the Company.
(u) "Stock Appreciation Right" means the right pursuant to an Award
granted under Section 6 of the Plan, (i) in the case of a Related Stock
Appreciation Right (as defined in Section 6 of the Plan), to surrender to
the Company all or a portion of the related Stock Option and receive an
amount equal to the excess of the Fair Market Value of one share of Stock
as of the date such Stock Option or portion thereof is surrendered over the
option price per share specified in such Stock Option, multiplied by the
number of shares of Stock in respect of which such Stock Option is being
surrendered, and (ii) in the case of a Freestanding Stock Appreciation
Right (as defined in Section 6 of the Plan), to exercise such Freestanding
Stock Appreciation Right and receive an amount equal to the excess of the
Fair Market Value of one share of Stock as of the date of exercise over the
price per share specified in such Freestanding Stock Appreciation Right,
multiplied by the number of shares of Stock in respect of which such
Freestanding Stock Appreciation Right is being exercised.
(v) "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 of the Plan, including any Reload Option (as
defined in Section 5 of the Plan).
(w) "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Company, if each of the corporations
(other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Committee, composed of not less than
three directors who are Disinterested Persons, who shall be appointed by the
Board and who shall serve at the pleasure of the Board.
The Committee shall have the power and authority in its sole discretion to
grant Awards to Eligible Employees pursuant to the terms and provisions of the
Plan.
2
<PAGE> 3
In particular, the Committee shall have full authority, not inconsistent
with the Plan:
(a) to select Participants from among the Eligible Employees;
(b) to determine whether and to what extent Awards are to be granted
to Eligible Employees hereunder;
(c) to determine the number of shares of Stock to be covered by each
such Award granted hereunder, but in no case shall the aggregate of all
shares of Stock issued under the Plan be greater than that allowed under
the Plan, and in no case shall the number of shares of Stock to be covered
by all such Awards (excluding grants of Restricted Stock Units) made to the
same Eligible Employee during the five year period beginning January 1,
1994 and ending December 31, 1998 exceed ten percent of the total number of
shares of Stock approved by the stockholders of the Company for issuance
under the Plan (as such number may be increased from time to time in
accordance with Section 10 hereof, and as such number may be adjusted from
time to time in accordance with Section 3 hereof for changes in corporate
structure or capitalization affecting the Stock);
(d) to determine the terms and conditions of any Award granted
hereunder (including, without limitation, (i) the restricted periods
applicable to Restricted Stock Unit Awards and (ii) the performance
objectives and periods applicable to Performance Stock Unit Awards);
(e) to waive compliance by a Participant with any obligation to be
performed by him or her under any Award and to waive any term or condition
of any such Award (provided, however, that no such waiver shall
detrimentally affect the rights of a Participant without such Participant's
consent); and
(f) to determine the terms and conditions which shall govern all
written agreements evidencing the Awards.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the provisions of the Plan and
the terms and conditions of any Award issued, expired, terminated, cancelled or
surrendered under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan
and as to the terms and conditions of any Award (and any agreements relating
thereto) shall be final and binding on all persons, including the Company and
the Participants.
Notwithstanding anything else contained in this Plan to the contrary, if
any award of Performance Stock Units is intended at the time of grant to be
other performance based compensation within the meaning of Section 162(m)(4)(C)
of the Code, to the extent required to so qualify any award hereunder, the
Committee shall not be entitled to exercise any discretion otherwise authorized
under this Plan with respect to such award if the ability to exercise such
discretion (as opposed to the exercise of such discretion) would cause such
award to fail to qualify as other performance based compensation.
SECTION 3. NUMBER OF SHARES OF STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under the Plan shall be twenty-eight (28) million, consisting of (a) eleven (11)
million shares as constituted at the time of the annual meeting of stockholders
on May 16, 1991, plus (b) seventeen (17) million shares as constituted at the
time of the annual meeting of stockholders on May 19, 1994. Such shares of Stock
may consist, in whole or in part, of authorized and unissued shares of Stock or
issued shares of Stock reacquired by the Company at any time, as the Board may
determine.
To the extent that (a) a Stock Option expires or is otherwise terminated,
cancelled or surrendered without being exercised (including, without limitation,
in connection with the grant of a replacement option) or (b) any Restricted
Stock Unit Award or Performance Stock Unit Award granted hereunder expires or is
otherwise terminated or is cancelled, the shares of Stock underlying such Stock
Option or subject to such
3
<PAGE> 4
Restricted Stock Unit Award or Performance Stock Unit Award shall again be
available for issuance in connection with future Awards under the Plan.
Upon the exercise of a Related Stock Appreciation Right or Related Limited
Stock Appreciation Right (as defined in Section 7 of the Plan), the Stock
Option, or the part thereof to which such Related Stock Appreciation Right or
Related Limited Stock Appreciation Right is related, shall be deemed to have
been exercised for the purpose of the limitation on the number of shares of
Stock to be issued under the Plan, but only to the extent of the number of
shares of Stock in respect of which the Related Stock Appreciation Right or
Related Limited Stock Appreciation Right was exercised.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure or
capitalization affecting the Stock, the Committee in its sole discretion may
make an adjustment or substitution in the number and class of shares reserved
for issuance under the Plan, the number and class of shares covered by
outstanding Awards and the option price per share of Stock Options or the
applicable price per share specified in Stock Appreciation Rights or Limited
Stock Appreciation Rights to reflect the effect of such change in corporate
structure or capitalization on the Stock; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated; provided, further,
however, that if by reason of any such change in corporate structure or
capitalization a Participant holding a Restricted Stock Unit Award or
Performance Stock Unit Award shall be entitled, subject to the terms and
conditions of such Award, to additional or different shares of any security, the
issuance of such additional or different shares shall thereupon be subject to
all of the terms and conditions (including restrictions and performance
criteria) which were applicable to such Award prior to such change in corporate
structure or capitalization; and, provided, further, however, that unless the
Committee in its sole discretion determines otherwise, any issuance by the
Company of shares of stock of any class or securities convertible into shares of
stock of any class shall not affect, and no such adjustment or substitution by
reason thereof shall be made with respect to, the number or class of shares
reserved for issuance under the Plan, the number or class of shares covered by
outstanding Awards or any option price or applicable price.
SECTION 4. ELIGIBILITY.
Officers and other key salaried employees of the Company, its Subsidiaries
and its Related Entities who are responsible for or contribute to the
management, growth or profitability of the business of the Company, its
Subsidiaries or its Related Entities shall be eligible to be granted Awards and
any former officers and key salaried employees of the Company, its Subsidiaries
and its Related Entities shall be eligible to be granted Reload Options with
respect to Stock Options granted to them while they were employees; provided,
however, with respect to an employee of a Related Entity, that such person was
an employee of the Company, a Subsidiary or, if originally an employee of the
Company or a Subsidiary, or another Related Entity immediately prior to becoming
employed by such Related Entity and accepted employment with such Related Entity
at the request of the Company or a Subsidiary. The Participants under the Plan
shall be selected, from time to time, by the Committee, in its sole discretion,
from among those Eligible Employees.
SECTION 5. STOCK OPTIONS.
(a) Grant and Exercise. Stock Options may be granted either alone or in
addition to other Awards granted under the Plan. Any Stock Option granted under
the Plan shall be in such form as the Committee may, from time to time, approve,
and the terms and conditions of Stock Option Awards need not be the same with
respect to each Optionee. Optionees shall enter into a Stock Option agreement
("Stock Option Agreement") with the Company, in such form as the Committee shall
determine, which agreement shall set forth, among other things, the option price
of the option, the term of the option and conditions regarding exercisability of
the option granted thereunder.
(i) Nature of Options. The Committee shall have the authority to grant
any Participant either Incentive Stock Options, Nonqualified Stock Options
or both types of Stock Options (in each case with or without Stock
Appreciation Rights or Limited Stock Appreciation Rights), except that the
Committee shall not grant any Incentive Stock Options to an employee of a
Related Entity. Any Stock Option which
4
<PAGE> 5
does not qualify as an Incentive Stock Option, or the terms of which at the
time of its grant provide that it shall not be treated as an Incentive
Stock Option, shall constitute a Nonqualified Stock Option.
(ii) Exercisability. Subject to such terms and conditions as shall be
determined by the Committee in its sole discretion at or after the time of
grant, Stock Options shall be exercisable from time to time to the extent
of 40% of the number of shares of Stock covered by the Stock Option on and
after the first anniversary and before the second anniversary of the date
of grant of the Stock Option, to the extent of 70% of the number of shares
of Stock covered by the Stock Option on and after the second anniversary
and before the third anniversary of the date of grant of the Stock Option
and to the extent of 100% of the number of shares of Stock covered by the
Stock Option on and after the third anniversary of the date of grant of the
Stock Option and before the expiration of the stated term of the Stock
Option (or to such lesser extent as the Committee in its sole discretion
shall determine at the time of grant or to such greater extent as the
Committee in its sole discretion shall determine at or after the time of
grant).
(iii) Method of Exercise. Stock Options may be exercised by giving
written notice of exercise delivered in person or by mail as required by
the terms of any Stock Option Agreement at the Company's principal
executive office, specifying the number of shares of Stock with respect to
which the Stock Option is being exercised, accompanied by payment in full
of the option price in cash or its equivalent as determined by the
Committee in its sole discretion. If requested by the Committee, the
Optionee shall deliver to the Company the Stock Option Agreement evidencing
the Stock Option being exercised for notation thereon of such exercise and
return thereafter of such agreement to the Optionee. As determined by the
Committee in its sole discretion at or after the time of grant, payment of
the option price in full or in part may also be made in the form of shares
of unrestricted Stock already owned by the Optionee (based on the Fair
Market Value of the Stock on the date the Stock Option is exercised);
provided, however, that in the case of an Incentive Stock Option, the right
to make payment of the option price in the form of already owned shares of
Stock may be authorized only at the time of grant. An Optionee shall
generally have the rights to dividends or other rights of a stockholder
with respect to shares of Stock subject to the Stock Option when the
Optionee has given written notice of exercise, has paid in full for such
shares of Stock, and, if requested, has made the representations described
in Section 13(a) of the Plan.
(iv) Reload Options. The Committee shall have the authority to
specify, at the time of grant or, with respect to Nonqualified Stock
Options, at or after the time of grant, that an Optionee shall be granted a
Nonqualified Stock Option (a "Reload Option") in the event such Optionee
exercises all or a part of a Stock Option (an "Original Option") by
surrendering in accordance with Section 5(a)(iii) of the Plan already owned
shares of unrestricted Stock in full or partial payment of the option price
under such Original Option, subject to the availability of shares of Stock
under the Plan at the time of such exercise; provided, however, that no
Reload Option shall be granted to a Nonemployee Director (as defined in
Section 9 of the Plan). Each Reload Option shall cover a number of shares
of Stock equal to the number of shares of Stock surrendered in payment of
the option price under such Original Option, shall have an option price per
share of Stock equal to the Fair Market Value of the Stock on the date of
grant of such Reload Option and shall expire on the stated expiration date
of the Original Option. A Reload Option shall be exercisable at any time
and from time to time from and after the date of grant of such Reload
Option (or, as the Committee in its sole discretion shall determine at or
after the time of grant, at such time or times as shall be specified in the
Reload Option); provided, however, that a Reload Option granted to a
director or officer of the Company shall not be exercisable during the
first six months from the date of grant of such Reload Option. Any Reload
Option may provide for the grant, when exercised, of subsequent Reload
Options to the extent and upon such terms and conditions, consistent with
this Section 5(a)(iv), as the Committee in its sole discretion shall
specify at or after the time of grant of such Reload Option. A Reload
Option shall contain such other terms and conditions, which may include a
restriction on the transferability of the shares of Stock received upon
exercise of the Original Option representing at least the after-tax profit
received upon exercise of the Original Option, as the Committee in its sole
discretion shall deem desirable and which may be set forth in rules or
guidelines adopted by the Committee or in the Stock Option Agreements
evidencing the Reload Options.
5
<PAGE> 6
(b) Terms and Conditions. Stock Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable.
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option (other than a Reload Option) shall be determined by
the Committee at the time of grant, but shall be not less than 100% of the
Fair Market Value of the Stock on the date of the grant; provided, however,
that if any Participant owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any
Subsidiary when an Incentive Stock Option is granted to such Participant,
the option price of such Incentive Stock Option (to the extent required by
the Code at the time of grant) shall be not less than 110% of the Fair
Market Value of the Stock on the date such Incentive Stock Option is
granted.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee at the time of grant, but no Stock Option shall be exercisable
more than ten years after the date such Stock Option is granted; provided,
however, that if any Participant owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any
Subsidiary when an Incentive Stock Option is granted to such Participant,
such Stock Option (to the extent required by the Code at time of grant)
shall not be exercisable more than five years from the date such Incentive
Stock Option is granted.
(iii) Transferability of Options. No Stock Options shall be
transferable by the Optionee otherwise than by will or by the laws of
descent and distribution and all Stock Options shall be exercisable, during
the Optionee's lifetime, only by the Optionee.
(iv) Option Exercise After Termination by Reason of Disability or
Retirement. If an Optionee's employment with the Company, any Subsidiary or
any Related Entity terminates by reason of Disability or Retirement, any
Stock Option held by such Optionee may thereafter be exercised for a period
of five years (or such shorter period as the Committee in its sole
discretion shall specify at or after the time of grant) from the date of
such termination or until the expiration of the stated term of such Stock
Option, whichever period is shorter, to the extent to which the Optionee
would on the date of exercise have been entitled to exercise the Stock
Option if such Optionee had continued to be employed by the Company, such
Subsidiary or such Related Entity (or to such greater or lesser extent as
the Committee in its sole discretion shall determine at or after the time
of grant). In the event of a termination of employment by reason of
Disability or Retirement, if an Incentive Stock Option is exercised after
the expiration of the exercise period that applies for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a
Nonqualified Stock Option.
(v) Option Exercise After Termination by Consent. If an Optionee's
employment with the Company or any Subsidiary is terminated by the Company
or such Subsidiary under mutually satisfactory conditions or if an
Optionee's employment with a Related Entity is terminated under conditions
mutually satisfactory to such Related Entity and the Optionee, the
Committee, in its sole discretion, may permit the Optionee to exercise any
Stock Option held by such Optionee for a period of one year (or such
shorter period as the Committee in its sole discretion shall specify at or
after the time of grant) from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is
shorter, to the extent to which the Optionee would on the date of exercise
have been entitled to exercise the Stock Option if such Optionee had
continued to be employed by the Company, such Subsidiary or such Related
Entity (or to such greater or lesser extent as the Committee in its sole
discretion shall determine at or after the time of grant). If an Optionee's
employment with the Company or any Subsidiary is terminated in connection
with such Optionee's acceptance of employment, at the request of the
Company or a Subsidiary, with a Related Entity (or an Optionee's employment
with one Related Entity is terminated in connection with such Optionee's
acceptance of employment, at the request of the Company or a Subsidiary,
with another Related Entity), the Committee in its sole discretion may
permit the Optionee to exercise any Stock Option held by such Optionee
after the date of such termination at any time until the expiration of the
stated term of such Stock Option (or such shorter
6
<PAGE> 7
period as the Committee in its sole discretion shall specify at or after
the time of grant), to the extent that the Optionee would on the date of
exercise have been entitled to exercise such Stock Option if such Optionee
had continued to be employed by the Company or such Subsidiary (or such
initial Related Entity), provided that the Optionee has been in continuous
employ with the Related Entity to which such Optionee has moved from the
date of acceptance of employment therewith until the date of exercise. In
the event of a termination of employment by the Company, any Subsidiary or
any Related Entity under mutually satisfactory conditions, if an Incentive
Stock Option is exercised after the expiration of the exercise period that
applies for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Nonqualified Stock Option.
(vi) Option Exercise After Termination by Death. If (x) an Optionee's
employment with the Company, any Subsidiary or any Related Entity
terminates by reason of death, (y) an Optionee dies within the five year
period (or such shorter period as the Committee shall have specified for
exercise in accordance with Section 5(a)(iv) of the Plan) following
termination by reason of Disability or Retirement as set forth in Section
5(a)(iv) of the Plan or (z) an Optionee dies within the one year period (or
such shorter period as the Committee shall have specified for exercise in
accordance with Section 5(a)(v) of the Plan) following termination under
mutually satisfactory conditions as set forth in the first sentence of
Section 5(a)(v) of the Plan, any Stock Option held by such Optionee may
thereafter be exercised by the legal representative of the estate or by the
legatee of the Optionee under the will of the Optionee for a period of one
year (or such shorter period as the Committee in its sole discretion shall
specify at or after the time of grant) from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is
shorter, to the extent to which the Optionee would on the date of exercise
have been entitled to exercise the Stock Option if such Optionee had
continued to be employed by the Company, such Subsidiary or such Related
Entity (or to such greater or lesser extent as the Committee in its sole
discretion shall determine at or after the time of grant).
(vii) Restriction on Exercise After Termination. Notwithstanding the
provisions of this Section 5, but subject to the provisions of Section 12
of the Plan, the exercise of any Stock Option after termination of
employment shall be subject to satisfaction of the conditions precedent
that the Optionee neither, (x) takes other employment or renders services
to others without the written consent of the Company, nor (y) conducts
himself in a manner adversely affecting the Company.
(viii) Other Termination. Except as otherwise provided in this Section
5 or Section 12 of the Plan, or as determined by the Committee in its sole
discretion, if an Optionee's employment with the Company, any Subsidiary or
any Related Entity terminates, all Stock Options held by the Optionee will
terminate.
(ix) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the shares of Stock with respect to which Incentive
Stock Options granted under the Plan and all other option plans of the
Company or any Subsidiary become exercisable for the first time by an
Optionee during any calendar year shall not exceed $100,000; provided,
however, that if the aggregate Fair Market Value (so determined) of the
shares of Stock covered by such options exceeds $100,000 during any year in
which they become exercisable, such options with a Fair Market Value in
excess of $100,000 will be Nonqualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted either in
conjunction with all or part of any Stock Option granted under the Plan
("Related Stock Appreciation Rights") or alone ("Freestanding Stock Appreciation
Rights") and, in either case, in addition to other Awards granted under the
Plan. Participants shall enter into a Stock Appreciation Rights agreement with
the Company if requested by the Committee, in such form as the Committee shall
determine.
(i) Time of Grant. Related Stock Appreciation Rights related to a
Nonqualified Stock Option may be granted either at or after the time of the
grant of such Nonqualified Stock Option. Related Stock
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Appreciation Rights related to an Incentive Stock Option may be granted
only at the time of the grant of such Incentive Stock Option. Freestanding
Stock Appreciation Rights may be granted at any time.
(ii) Exercisability. Related Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Stock
Options to which they relate shall be exercisable in accordance with the
provisions of Section 5(a)(ii) of the Plan and Freestanding Stock
Appreciation Rights shall be exercisable, subject to such terms and
conditions as shall be determined by the Committee in its sole discretion
at or after the time of grant, from time to time, to the extent that Stock
Options are exercisable in accordance with the provisions of Section
5(a)(ii) of the Plan; provided, however, that any Stock Appreciation Right
granted to a director or officer of the Company shall not be exercisable
during the first six months from the date of grant of such Stock
Appreciation Right, except that this additional limitation shall not apply
in the event of death or Disability of the director or officer prior to the
expiration of the six-month period. A Related Stock Appreciation Right
granted in connection with an Incentive Stock Option may be exercised only
if and when the Fair Market Value of the Stock subject to the Incentive
Stock Option exceeds the option price of such Stock Option.
(iii) Method of Exercise. Stock Appreciation Rights shall be exercised
by a Participant by giving written notice of exercise delivered in person
or by mail as required by the terms of any agreement evidencing the Stock
Appreciation Right at the Company's principal executive office, specifying
the number of shares of Stock in respect of which the Stock Appreciation
Right is being exercised. If requested by the Committee, the Participant
shall deliver to the Company the agreement evidencing the Stock
Appreciation Right being exercised and, in the case of a Related Stock
Appreciation Right, the Stock Option Agreement evidencing any related Stock
Option, for notation thereon of such exercise and return thereafter of such
agreements to the Participant.
(iv) Amount Payable. Upon the exercise of a Related Stock Appreciation
Right, an Optionee shall be entitled to receive an amount in cash or shares
of Stock equal in value to the excess of the Fair Market Value of one share
of Stock on the date of exercise over the option price per share specified
in the related Stock Option, multiplied by the number of shares of Stock in
respect of which the Related Stock Appreciation Right shall have been
exercised, with the Committee having in its sole discretion the right to
determine the form of payment.
Upon the exercise of a Freestanding Stock Appreciation Right, a Participant
shall be entitled to receive an amount in cash or shares of Stock equal in
value to the excess of the Fair Market Value of one share of Stock on the
date of exercise over the price per share specified in the Freestanding
Stock Appreciation Right, which shall be not less than 100% of the Fair
Market Value of the Stock on the date of grant, multiplied by the number of
shares of Stock in respect of which the Freestanding Stock Appreciation
Right shall have been exercised, with the Committee having in its sole
discretion the right to determine the form of payment.
(b) Terms and Conditions. Stock Appreciation Rights granted under the Plan
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable.
(i) Term of Stock Appreciation Rights. The term of a Related Stock
Appreciation Right shall be the same as the term of the related Stock
Option. A Related Stock Appreciation Right or applicable portion thereof
shall terminate and no longer be exercisable upon the exercise,
termination, cancellation or surrender of the related Stock Option, except
that, unless otherwise provided by the Committee in its sole discretion at
or after the time of grant, a Related Stock Appreciation Right granted with
respect to less than the full number of shares of Stock covered by a
related Stock Option shall terminate and no longer be exercisable if and to
the extent that the number of shares of Stock covered by the exercise,
termination, cancellation or surrender of the related Stock Option exceeds
the number of shares of Stock not covered by the Related Stock Appreciation
Right.
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The term of each Freestanding Stock Appreciation Right shall be fixed by
the Committee, but no Freestanding Stock Appreciation Right shall be
exercisable more than ten years after the date such right is granted.
(ii) Transferability of Stock Appreciation Rights. Stock Appreciation
Rights shall be transferable only when and to the extent that a Stock
Option would be transferable under Section 5(b) (iii) of the Plan.
(iii) Termination of Employment. In the event of the termination of
employment of an Optionee holding a Related Stock Appreciation Right, such
right shall be exercisable to the same extent that the related Stock Option
is exercisable after such termination.
In the event of the termination of employment of the holder of a
Freestanding Stock Appreciation Right, such right shall be exercisable to
the same extent that a Stock Option with the same terms and conditions as
such Freestanding Stock Appreciation Right would have been exercisable in
the event of the termination of employment of the holder of such Stock
Option.
SECTION 7. LIMITED STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Limited Stock Appreciation Rights may be granted
either in conjunction with all or part of any Stock Option granted under the
Plan ("Related Limited Stock Appreciation Rights") or alone ("Freestanding
Limited Stock Appreciation Rights") and, in either case, in addition to other
Awards granted under the Plan. Participants shall enter into a Limited Stock
Appreciation Rights agreement with the Company if requested by the Committee, in
such form as the Committee shall determine.
(i) Time of Grant. Related Limited Stock Appreciation Rights related
to a Nonqualified Stock Option may be granted either at or after the time
of the grant of such Nonqualified Stock Option. Related Limited Stock
Appreciation Rights related to an Incentive Stock Option may be granted
only at the time of the grant of such Incentive Stock Option. Freestanding
Limited Stock Appreciation Rights may be granted at any time.
(ii) Exercisability. Limited Stock Appreciation Rights can only be
exercised within the sixty-day period following a Change in Control;
provided, however, that any Limited Stock Appreciation Right granted to a
director or officer of the Company must be held for a period of six months
prior to a Change in Control, except that this additional limitation shall
not apply in the event of death or Disability of the director or officer
prior to the expiration of the six-month period.
(iii) Amount Payable. Upon the exercise of a Limited Stock
Appreciation Right, a Participant shall be entitled to receive an amount in
cash equal to the Change in Control Stock Appreciation (as defined in
Section 12 of the Plan) of one share of Stock on the date of exercise,
multiplied by the number of shares of Stock in respect of which the Limited
Stock Appreciation Right shall have been exercised.
(b) Other Provisions. The other provisions of Section 6 of the Plan shall
apply to Limited Stock Appreciation Rights to the extent not inconsistent with
the provisions of this Section 7.
SECTION 8. RESTRICTED STOCK UNITS AND PERFORMANCE STOCK UNITS.
(a) Grant. Awards of Restricted Stock Units or Performance Stock Units may
be granted either alone or in addition to other Awards granted under the Plan.
Each Restricted Stock Unit or Performance Stock Unit represents the right to
receive, subject to the terms and provisions of the Plan and any agreements
evidencing such Awards, one share of Stock. If the Committee in its sole
discretion so determines at the time of grant, a Participant to whom a
Restricted Stock Unit Award or Performance Stock Unit Award has been granted may
be credited with an amount equivalent to all cash dividends ("Dividend
Equivalents") that would have been paid to the holder of such Restricted Stock
Unit Award or Performance Stock Unit Award if one share of Stock for every
Restricted Stock Unit or Performance Stock Unit awarded had been issued to the
holder on the date of grant of such Restricted Stock Unit Award or Performance
Stock Unit Award. The Committee shall determine the terms and conditions of each
Restricted Stock Unit Award and Performance Stock Unit
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Award including, without limitation, the number of Restricted Stock Units or
Performance Stock Units to be covered by such Award, the restricted period
applicable to Restricted Stock Unit Awards and the performance objectives
applicable to Performance Stock Unit Awards. The Committee in its sole
discretion may prescribe terms and conditions applicable to the vesting of such
Restricted Stock Unit Awards or Performance Stock Unit Awards in addition to
those provided in the Plan. The Committee shall establish such rules and
guidelines governing the crediting of Dividend Equivalents, including the
timing, form of payment and payment contingencies of Dividend Equivalents, as it
may deem desirable. The Committee in its sole discretion may at any time
accelerate the time at which the restrictions on all or any part of a Restricted
Stock Unit Award lapse or determine the performance objectives with respect to
all or any part of a Performance Stock Unit Award to have been attained;
provided, however, that the Committee shall not be entitled to exercise such
discretion to the extent that the ability to exercise such discretion would
cause the Performance Stock Unit Award to fail to qualify as other performance
based compensation under Section 162(m) of the Code. Restricted Stock Unit
Awards and Performance Stock Unit Awards shall not be transferable otherwise
than by will or by the laws of descent and distribution. Shares of Stock shall
be deliverable upon the vesting of Restricted Stock Unit Awards and Performance
Stock Unit Awards for no consideration other than services rendered or, in the
Committee's sole discretion, the minimum amount of consideration other than
services (such as the par value per share of Stock) required to be received by
the Company in order to assure compliance with applicable state law, which
amount shall not exceed 10% of the Fair Market Value of such shares of Stock on
the date of issuance. Each such Award shall be evidenced by a Restricted Stock
Unit Award agreement ("Restricted Stock Unit Award Agreement") or Performance
Stock Unit Award agreement ("Performance Stock Unit Award Agreement").
(b) Terms and Conditions. Unless otherwise determined by the Committee in
its sole discretion:
(i) a breach of any term or condition provided in the Plan, the
Restricted Stock Unit Award Agreement or the Performance Stock Unit Award
Agreement or established by the Committee with respect to such Restricted
Stock Unit Award or Performance Stock Unit Award will cause a cancellation
of the unvested portion of such Restricted Stock Unit Award or Performance
Stock Unit Award (including any unvested Dividend Equivalents credited in
respect thereof) and the Participant shall not be entitled to receive any
consideration in respect of such cancellation; and
(ii) subject to Section 12 of the Plan, termination of such holder's
employment with the Company, any Subsidiary or any Related Entity prior to
the lapsing of the applicable restriction period or attainment of
applicable performance objectives will cause a cancellation of the unvested
portion of such Restricted Stock Unit Award or Performance Stock Unit Award
(including any Dividend Equivalents credited in respect thereof) and the
Participant shall not be entitled to receive any consideration in respect
of such cancellation.
(c) Completion of Restriction Period and Attainment of Performance
Objectives. To the extent that restrictions with respect to any Restricted Stock
Unit Award lapse or performance objectives with respect to any Performance Stock
Unit Award are attained and provided that other applicable terms and conditions
have then been satisfied:
(i) such of the Restricted Stock Units or Performance Stock Units as
to which restrictions have lapsed or performance objectives have been
attained shall become vested and the Committee shall cause to be issued and
delivered to the Participant a stock certificate representing a number of
shares of Stock equal to such number of Restricted Stock Units or
Performance Stock Units, free of all restrictions, except as provided in
Section 13(a) of the Plan; and
(ii) any Dividend Equivalents credited in respect of such Restricted
Stock Units or Performance Stock Units shall become vested to the extent
that such Restricted Stock Units or Performance Stock Units shall have
become vested and the Committee shall cause such Dividend Equivalents to be
delivered to the Participant.
Any such Restricted Stock Unit Award or Performance Stock Unit Award
(including any Dividend Equivalents credited in respect thereof) that shall not
have become vested at the end of the applicable
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restricted period or the period given for the attainment of performance
objectives shall expire, terminate and be cancelled and the Participant shall
not thereafter have any rights with respect to the Restricted Stock Units or
Performance Stock Units (or any Dividend Equivalents credited in respect
thereof) covered thereby.
SECTION 9. GRANT OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND LIMITED STOCK
APPRECIATION RIGHTS TO NONEMPLOYEE DIRECTORS.
Each person who is not an employee of the Company, any Subsidiary or any
Related Entity and who on and after May 16, 1991 is elected or reelected as a
director (a "Nonemployee Director") of the Company at any annual or special
meeting of stockholders of the Company, shall as of the date of each such
election or reelection automatically be granted an Award consisting of (a) a
Stock Option to purchase 1,500 shares of Stock (as constituted at the time of
the annual meeting of stockholders on May 16, 1991) for an option price equal to
100% of the Fair Market Value of the Stock on the date of such election or
reelection and, (b) with respect to such number of shares of Stock, (i) a
Related Stock Appreciation Right, the stock appreciation on which shall be
payable all in cash, and (ii) a Limited Stock Appreciation Right, subject, in
each case, to applicable law. The action of the stockholders in electing or
reelecting a Nonemployee Director shall constitute the granting of the Award and
the date on which the stockholders shall take such action shall be the date of
granting of such Award. All such Stock Options shall be designated as
Nonqualified Stock Options. Subject to Section 12 of the Plan, a Nonemployee
Director must serve continuously as a Nonemployee Director of the Company for a
period of twelve consecutive months from the date such Award is granted before
he or she can exercise any part of such Award. Thereafter, on and after the
first anniversary of the date of granting the Award and before the second
anniversary, the Nonemployee Director may exercise the Award with respect to not
more than 40% of the number of shares of Stock covered thereby, on and after the
second anniversary and before the third anniversary, the Nonemployee Director
may exercise the Award with respect to not more than 70% of the number of shares
of Stock covered thereby, and on and after the third anniversary and before the
expiration of the stated term of the Award, which shall be ten years from the
date of its granting, the Nonemployee Director may at any time or from time to
time exercise the Award with respect to all or any portion of the shares of
Stock covered thereby. The Related Limited Stock Appreciation Right component of
the Award shall be exercisable only as set forth in Section 7(a)(ii) of the
Plan. If a Nonemployee Director's service with the Company terminates by reason
of permanent and total disability or retirement from active service as a
director of the Company, any Award held by such Nonemployee Director may be
exercised for a period of five years from the date of such termination or until
the expiration of the Award, whichever is shorter, to the extent to which the
individual would on the date of exercise have been entitled to exercise the
Award if such individual had continued to serve as a Nonemployee Director. If a
Nonemployee Director's service with the Company terminates by reason of death or
under mutually satisfactory conditions, or if a Nonemployee Director dies within
the five-year period following termination by reason of permanent and total
disability or retirement from active service as a director of the Company or
within the one-year period following termination under mutually satisfactory
conditions, any Award held by such Nonemployee Director may be exercised for a
period of one year from the date of such termination or post-termination death,
as the case may be, or until the expiration of the stated term of the Award,
whichever is shorter, to the extent to which the individual would on the date of
exercise have been entitled to exercise the Award if such individual had
continued to serve as a Nonemployee Director. All applicable provisions of the
Plan not inconsistent with this Section 9 shall apply to Awards granted to
Nonemployee Directors; provided, however, that the Committee may not exercise
discretion under any provision of the Plan with respect to Awards granted under
this Section 9 to the extent that such discretion is inconsistent with Rule
16b-3. The maximum number of shares of Stock as to which Stock Options may be
granted to any Nonemployee Director under both the Plan, as in effect through
May 16, 2001, and under the Company's 1972 Stock Option Plan, as in effect
through April 17, 1992, shall be 22,500 shares of Stock (as constituted at the
time of the annual meeting of stockholders on May 16, 1991).
SECTION 10. AMENDMENT AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, in its sole
discretion, but no amendment, alteration, or discontinuation shall be made which
would impair the rights of a Participant under any Award theretofore
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granted without such Participant's consent, or which, without the approval of
the stockholders of the Company (where such approval is necessary to satisfy
then-applicable requirements of Rule 16b-3, any Federal tax law relating to
Incentive Stock Options or applicable state law), would:
(a) except as provided in Section 3 of the Plan, increase the total
number of shares of Stock which may be issued under the Plan;
(b) except as provided in Section 3 of the Plan, decrease the option
price of any Stock Option to less than 100% of the Fair Market Value on the
date of the grant of the option;
(c) change the class of employees eligible to participate in the Plan;
or
(d) extend (i) the period during which Stock Options may be granted or
(ii) the maximum period of any Award under Sections 5(b)(ii) or 6(b)(i) of
the Plan.
Except as restricted herein with respect to Incentive Stock Options or
otherwise, the Committee may amend or alter the terms and conditions of any
Award theretofore granted, and of any agreement evidencing such Award,
prospectively or retroactively, but no such amendment or alteration shall impair
the rights of any Participant under such Award or agreement without such
Participant's consent.
SECTION 11. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan. With respect to any
payments not yet made and due to a Participant by the Company, nothing contained
herein shall give any such Participant any rights that are greater than those of
a general unsecured creditor of the Company.
SECTION 12. CHANGE IN CONTROL.
The following acceleration and valuation provisions shall apply in the
event of a Change in Control notwithstanding other provisions of the Plan or any
provisions of any applicable agreement to the contrary:
(a) In the event of a Change in Control:
(i) any Stock Appreciation Right and any Stock Option awarded under
the Plan not previously exercisable in full shall become fully
exercisable, provided that any Stock Appreciation Right granted to a
director or officer within six months prior to the date of a Change in
Control shall not, except in the event of death or disability, be
exercisable during the first six months from the date of granting of
such Stock Appreciation Right;
(ii) the restriction period applicable to any Restricted Stock Unit
Award shall lapse, the performance objectives applicable to any
Performance Stock Unit Award shall be deemed attained, and any other
restrictions or conditions applicable to any Restricted Stock Unit Award
or Performance Stock Unit Award shall be waived and the shares of Stock
covered thereby and all unrestricted Dividend Equivalents credited in
respect thereof shall be deemed fully vested;
(iii) (A) any Restricted Stock Unit Award and any Performance Stock
Unit Award granted under the Plan that has become fully vested and
freely transferable or has not been paid in full prior to the Change in
Control shall be cancelled in exchange for an immediate cash payment
equal to the product of (x) the number of shares of Stock covered by
such Restricted Stock Unit Award or Performance Stock Unit Award,
whichever is applicable, multiplied by (y) the amount determined in
accordance with clause (y) of subsection (e) of this Section 12,
provided that any Restricted Stock Unit Award that has been granted
within six months of the date of the Change in Control to a Participant
who, on the date of the Change in Control, is subject to the reporting
requirements of Section 16(a) of the Exchange Act (a "Reporting Person")
shall not be cancelled for a payment in cash, and (B) Dividends
Equivalents credited in respect of any such Restricted Stock Unit Award
or Performance Stock Unit Award shall be deemed fully vested and payable
immediately upon such Change in Control; and
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(iv) any Participant holding an Award who is terminated by the
Company or any Subsidiary for any reason within the two year period
immediately following a Change in Control shall be permitted to exercise
any Stock Option, Stock Appreciation Right or Limited Stock Appreciation
Right after such termination of employment at any time (x) within the
three month period commencing on the later of the date of termination of
his or her employment or the date on which such Award would first be
exercisable in accordance with the terms of the Plan had such
termination not occurred or (y) until the expiration of the stated term
of such Award, whichever period is shorter; provided, however, that any
Limited Stock Appreciation Right held by a Participant who, on the date
of termination, is a Reporting Person shall be deemed exercised
immediately upon such termination for the consideration described in
Section 7(a)(iii) of the Plan.
(b) For purposes of the Plan, "Change in Control" shall mean a Change
in Control of the Company, which shall be deemed to have occurred if:
(i) any Person (as defined in this Section 12) is or becomes the
Beneficial Owner (as defined in this Section 12) of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities (unless the event causing the 20%
threshold to be crossed is an acquisition of securities directly from
the Company);
(ii) during any period of two consecutive years beginning after May
16, 1991, individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this Change in
Control definition) whose election or nomination for election was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved cease for
any reason to constitute a majority of the Board;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the entity surviving such merger or consolidation),
in combination with voting securities of the Company or such surviving
entity held by a trustee or other fiduciary pursuant to any employee
benefit plan of the Company or such surviving entity or of any
Subsidiary of the Company or such surviving entity, at least 80% of the
combined voting power of the securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets.
(c) For purposes of the definition of Change in Control, "Person"
shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act as supplemented by Section 13(d)(3) of the Exchange Act;
provided, however, that Person shall not include (i) the Company, any
Subsidiary or any other Person controlled by the Company, (ii) any trustee
or other fiduciary holding securities under any employee benefit plan of
the Company or of any Subsidiary, or (iii) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of securities of the Company.
(d) For purposes of the definition of Change in Control, a Person
shall be deemed the "Beneficial Owner" of any securities which such Person,
directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" (within the meaning of Rule 13d-3 under the Exchange
Act) of, including pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that: (i) a Person shall
not be deemed the Beneficial Owner of any security as a result of an
agreement, arrangement or understanding to vote such security (x) arising
solely from a revocable proxy or consent given in response to a public
proxy or consent solicitation made pursuant to, and in accordance
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with, the Exchange Act and the applicable rules and regulations thereunder
or (y) made in connection with, or to otherwise participate in, a proxy or
consent solicitation made, or to be made, pursuant to, and in accordance
with, the applicable provisions of the Exchange Act and the applicable
rules and regulations thereunder; in either case described in clause (x) or
clause (y) above, whether or not such agreement, arrangement or
understanding is also then reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor report); and (ii) a Person
engaged in business as an underwriter of securities shall not be deemed to
be the Beneficial Owner of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) For purposes of this Section 12, "Change in Control Stock
Appreciation" with respect to any share of Stock shall mean an amount equal
to the excess, if any, of
(i) the higher of (x) the Fair Market Value of such share on the
date the Limited Stock Appreciation Right is exercised or (y) (A) in the
case of transactions described in clauses (i) or (iii) of the Change in
Control definition, the highest per share price paid (below called the
"Highest Price") for shares of Stock in the transaction constituting the
Change in Control, (B) in the case of a transaction described in clause
(ii) of the Change in Control definition which occurs in connection with
a transaction described in clauses (i), (iii), or (iv) of the Change in
Control definition, the Highest Price, (C) in the case of a transaction
described in clause (ii) of the Change in Control definition which does
not occur in connection with a transaction described in clauses (i),
(iii) or (iv) of the Change in Control definition, the average of the
daily closing prices per share of Stock of the Company on the New York
Stock Exchange, if such shares are traded thereon, or, if not, such
other national securities exchange on which such shares are admitted to
trade or, if none, the National Association of Securities Dealers
Automated Quotation System if such shares are admitted for quotation
thereon, on the thirty consecutive trading days immediately preceding
the Change in Control or (D) in the case of a transaction described in
clause (iv) of the Change in Control definition, the equivalent of the
Highest Price as determined by the Committee, over
(ii) in the case of a Related Limited Stock Appreciation Right, the
option price specified in the related Stock Option and, in the case of a
Freestanding Limited Stock Appreciation Right, the price per share
specified therein, which shall not be less than 100% of the Fair Market
Value of the Stock on the date of grant; provided, however, that with
respect to a Related Limited Stock Appreciation Right associated with a
Stock Option which is an Incentive Stock Option immediately prior to the
exercise of such Limited Related Stock Appreciation Right, the Change in
Control Stock Appreciation thereon shall not exceed the maximum amount
which will permit such Stock Option to continue to qualify as an
Incentive Stock Option.
SECTION 13. GENERAL PROVISIONS.
(a) The Committee may require each Optionee purchasing shares of Stock
pursuant to a Stock Option to represent to and agree with the Company in writing
that such Optionee is acquiring the shares of Stock without a view to
distribution thereof.
All certificates for shares of Stock delivered under the Plan and, to the
extent applicable, all evidences of ownership with respect to Dividend
Equivalents delivered under the Plan, shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed or quotation
system on which the Stock is admitted for trading and any applicable federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required, and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee of the Company, any Subsidiary or any Related
Entity any right to continued employment with
14
<PAGE> 15
the Company, any Subsidiary or any Related Entity, as the case may be, nor shall
it interfere in any way with the right of the Company, any Subsidiary or any
Related Entity to terminate the employment of any of its employees at any time.
(c) Each Participant shall be deemed to have been granted any Award on the
date the Committee took action to grant such Award under the Plan or such later
date as the Committee in its sole discretion shall determine at the time such
grant is authorized; provided, however, that a Reload Option shall be deemed to
have been granted on the date on which is exercised the Original Option in
respect of the exercise of which such Reload Option is granted or such later
date as the Committee in its sole discretion shall determine prior to the date
on which such exercise occurs.
(d) Unless the Committee otherwise determines, each Participant shall, no
later than the date as of which the value of an Award first becomes includible
in the gross income of the Participant for federal income tax purposes, pay to
the Company, or make arrangements satisfactory to the Committee regarding
payment of, any federal, state or local taxes of any kind required by law to be
withheld with respect to the Award. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company (and,
where applicable, its Subsidiaries and its Related Entities) shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant.
A Participant (other than a Nonemployee Director) may elect to have such
tax withholding obligation satisfied, in whole or in part, by (i) authorizing
the Company to withhold from shares of Stock to be issued upon the exercise of a
Stock Option or Stock Appreciation Right or upon the vesting of any Restricted
Stock Unit Award or Performance Stock Unit Award a number of shares of Stock
with an aggregate Fair Market Value that would satisfy the withholding amount
due, or (ii) transferring to the Company shares of Stock owned by the
Participant with an aggregate Fair Market Value that would satisfy the
withholding amount due. With respect to any Participant who is a director or
officer, the following additional restrictions shall apply:
(i) the election to satisfy tax withholding obligations relating to
the exercise of a Stock Option or Stock Appreciation Right or to the
vesting of a Restricted Stock Unit Award or Performance Stock Unit Award in
the manner permitted by this subsection (d) shall be made either (x) during
the period beginning on the third business day following the date of
release of quarterly or annual summary statements of sales and earnings and
ending on the twelfth business day following such date, or (y) at least six
months prior to the date on which the amount of tax to be withheld upon the
exercise of such Stock Option or Stock Appreciation Right or the vesting of
such Restricted Stock Unit Award or Performance Stock Unit Award is
determinable;
(ii) such election shall be irrevocable;
(iii) such election shall be subject to the consent or disapproval of
the Committee; and
(iv) such election shall not be made within six months of the date of
the grant of such Award.
(e) No member of the Board or the Committee, nor any officer or employee of
the Company acting on behalf of the Board or the Committee, shall be personally
liable for any action, failure to act, determination or interpretation taken or
made in good faith with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company in respect of any such action, failure to act, determination or
interpretation.
(f) The Plan is intended to satisfy the conditions of Rule 16b-3, and all
interpretations of the Plan shall, to the extent permitted by law, regulations
and rulings, be made in a manner consistent with and so as to satisfy the
conditions of Rule 16b-3. The phrase "director or officer" as used in the Plan
means any director or officer who is subject to the provisions of Section 16(b)
of the Exchange Act. Any provision of the Plan or the application of any
provision of the Plan inconsistent with Rule 16b-3 shall be inoperative and
shall not affect the validity of the Plan.
In interpreting and applying the provisions of the Plan, any Stock Option
granted as an Incentive Stock Option pursuant to the Plan shall to the extent
permitted by law, regulations and rulings be construed as, and
15
<PAGE> 16
any ambiguity shall be resolved in favor of preserving its status as, an
"incentive stock option" within the meaning of Section 422 of the Code. Once an
Incentive Stock Option has been granted, no action by the Committee that would
cause such Stock Option to lose its status under the Code as an "incentive stock
option" shall be effective as to such Incentive Stock Option unless taken at the
request of or with the consent of the Optionee.
Notwithstanding any provision to the contrary in the Plan or in any
Incentive Stock Option granted pursuant to the Plan, if any change in law or any
regulation or ruling of the Internal Revenue Service shall have the effect of
disqualifying any Stock Option granted under the Plan which is intended to be an
"incentive stock option" within the meaning of Section 422 of the Code, the
Stock Option granted shall nevertheless continue to be outstanding as and shall
be deemed to be a Nonqualified Stock Option under the Plan.
(g) A Participant may elect, on or after the date of grant of any Award, to
defer receipt of all or any portion of the proceeds of such Award or any
Dividend Equivalents in connection therewith, whether in the form of cash or
shares of Stock, deliverable to such Participant upon the exercise, vesting or
payment of any such Award or Dividend Equivalents, in each case to the extent
permitted by and subject to the terms and conditions set forth in any deferral
or similar plan or arrangement enacted by the Board or the Committee in its sole
discretion.
(h) Nothing in this Plan shall be interpreted to preclude the Corporation
from granting Awards under, or paying compensation outside the parameters of,
the Plan including, without limitation, base salaries, awards under any other
plan of the Corporation or its Subsidiaries (whether or not approved by
stockholders), incentive compensation (whether or not based on the attainment of
pre-established performance objectives) or retention or other special payments,
that is not deductible for Federal, State or local income tax purposes by reason
of Section 162(m) of the Code or otherwise, should the Board or any committee
thereof (including the Committee), whichever is applicable, determine that such
action is in the best interests of the Corporation and its stockholders.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by the affirmative
vote of the holders of a majority of the shares of Stock of the Company present
in person or by proxy at the Annual Meeting of Stockholders on May 16, 1991.
SECTION 15. TERM OF PLAN.
No Award shall be granted under the Plan on or after the tenth anniversary
of the date the Plan is approved by the Company's stockholders, provided,
however, that Awards granted prior to such tenth anniversary may extend beyond
that date; and provided, further, however, that Reload Options may be granted on
or after such tenth anniversary, but no Reload Option shall be exercisable after
any date which is later than the date on which a Stock Option granted prior to
such tenth anniversary could be exercised.
16
<PAGE> 1
EXHIBIT 3
[TRACINDA LETTERHEAD]
FOR IMMEDIATE RELEASE Contact: Alex Yemenidjian
(702) 737-8060
TRACINDA INTENDS TO ACQUIRE 100 PERCENT OF CHRYSLER
Las Vegas, Nevada -- April 12, 1995 -- Tracinda Corporation, which owns
approximately 10% of the outstanding common stock of Chrysler Corporation
(NYSE:C), announced today that it intends to acquire the remaining 90% of
Chrysler's equity through an entity organized by Tracinda. Holders of
Chrysler's common stock would receive $55.00 per share in cash, a premium of
approximately 40% over the closing price of common stock on April 11, 1995.
Tracinda's approximately $2 billion investment will remain as equity after the
transaction. Based upon the 415 million fully diluted outstanding shares of
Chrysler common stock, the total value of Chrysler's equity would be more
than $22.8 billion.
Alex Yemenidjian, an executive of Tracinda, said: "As Chrysler's
largest shareholder, our goal over the last 5 years has been to seek to enhance
value for all Chrysler shareholders. We continue to believe that Chrysler's
Board of Directors and Bob Eaton and his management team have done an excellent
job of managing the Company's operations. However, despite the efforts of
Chrysler's Board and management to enhance the market value of the Company, the
market continues to undervalue Chrysler stock. We think that Chrysler
shareholders will welcome our offer which enables them to realize significantly
increased value for their stock."
Mr. Yemenidjian continued: "We believe this value can be achieved in a
transaction which involves no fundamental changes in Chrysler, its business
prospects, its management, and its relationships with its various
constituencies; there would be no
1 of 4
<PAGE> 2
planned workforce reductions and no concessions would be sought from Chrysler
employees. We are eager to work with the leaders of Chrysler's union workers
and with management to ensure that all employees see tangible benefits from
this transaction. The only proposed change would be to provide Chrysler's
shareholders with a substantial premium for their shares."
Former Chrysler Chairman and CEO, Lee Iacocca, who is also a director
of MGM Grand, will join Tracinda as a substantial investor in this transaction.
Mr. Iacocca said, "Kirk Kerkorian has been a friend of both Chrysler
and of mine for years. Since his initial investment in 1990, he has been a
loyal shareholder and a strong supporter of the company, its management and its
employees.
"I have invested 17 years in this company. I have no interest in
actively participating in management. I view this transaction as an
opportunity to continue my investment in Chrysler as a show of support for its
first rate management, its excellent labor force, its strong dealer network,
and its investors."
Mr. Yemenidjian stressed that this will not be a highly leveraged
transaction. "This is not a leveraged buyout, where assets need to be sold to
help finance the transaction. The buyers are principals who are investing
their own money. In fact, after the proposed transaction is completed,
Chrysler will have a lower debt-to-capital ratio than either General Motors or
Ford, and its free cash flow will remain virtually unchanged without any
reduction in the company's capital expenditures program."
Mr. Yemenidjian added: "Given the strong financial position of
Chrysler and the significant equity component of this transaction, which would
include Tracinda's entire investment in Chrysler, it is apparent to us that
this transaction is readily financeable. We anticipate that Chrysler would
continue to have a conservative balance sheet after the transaction. We also
expect to consider foreign strategic alliances or partnerships in order to
maximize Chrysler's global business opportunities."
2 of 4
<PAGE> 3
CHRONOLOGY OF TRACINDA'S INVESTMENT IN CHRYSLER
The following dates refer to 13D filings with the SEC issued by Tracinda
Corporation and substantive communications between Mr. Kirk Kerkorian and the
Board of Directors of Chrysler Corporation.
DECEMBER 14, 1990:
Tracinda announced that it had become the beneficial owner of 22 million shares
of Chrysler common stock valued at approximately $272,165,000 at an average
cost of $12.37 per share. The purchase was made solely for the purpose of
investment and reflected the high regard held by Mr. Kerkorian and Tracinda for
the Chrysler management and its Chairman.
OCTOBER 10, 1991:
Tracinda announced the purchase of an additional 6 million shares of Chrysler
common stock at an average price of $10.125 per share, for investment purposes
only. The Wall Street Journal said that this investment gave a big boost to
the Chrysler Corporation's oversubscribed 35 million share stock offering.
AUGUST 6, 1992:
In a letter filed with the SEC, Mr. Kerkorian requested a meeting with board
members of Chrysler. He said that he was interested in learning whether
shareholder interests required more attention following the retirement of the
Company's Chairman at the end of the year. Mr. Kerkorian reiterated his
confidence in Mr. Iacocca's ability to achieve shareholder value as well as to
revitalize the Company. The Financial Times commented that Chrysler's
financial picture had improved substantially since Mr. Kerkorian made his
initial investment.
3 of 4
<PAGE> 4
AUGUST 18, 1992:
As a result of his discussions with members of Chrysler's Board, Mr. Kerkorian
said he was convinced that the interests of the shareholders would be well
represented by the current Board and Mr. Iacocca's successor. He withdrew his
request for representation and added that he was pleased with his investment in
Chrysler and enthusiastic about the Company's prospects.
FEBRUARY 5, 1993:
Tracinda announced the purchase of 4 million shares, which were part of an
offering of Chrysler of 46 million shares, at $38.75 per share. It said that
it was for investment purposes only.
NOVEMBER 14, 1994:
In a letter to Chrysler's Board of Directors, Mr. Kerkorian spelled out
specific steps he would like the Board to take to revitalize the stock. An
analyst at S.G. Warburg said, "Chrysler can afford a modest buyback and still
have plenty of cash." At the same time Mr. Kerkorian filed under the
Hart-Scott-Rodino Act for permission to increase his holdings in Chrysler to 15
percent. He reiterated Tracinda's high regard for Chrysler's management and
confidence in the Company's future.
DECEMBER 29, 1994:
Pursuant to clearance under the Hart-Scott-Rodino Act and the agreement by the
Board and management of Chrysler to a series of steps to enhance shareholder
value, Tracinda reported purchases of Chrysler aggregating 4 million shares at
an average of approximately $47 per share. A number of analysts said this was
a positive move and credited Mr. Kerkorian with stimulating the Chrysler Board
to take action.
4 of 4
<PAGE> 1
EXHIBIT 4
[TRACINDA LETTERHEAD]
April 12, 1995
Mr. Robert J. Eaton
Chairman of the Board and
Chief Executive Officer
Chrysler Corporation
12000 Chrysler Drive
Highland Park, Michigan 48288
Dear Mr. Eaton:
Tracinda Corporation ("Tracinda") is pleased to make an offer to
purchase all outstanding shares of Common Stock of Chrysler Corporation
("Chrysler" or the "Company"), at a purchase price of $55 per share in cash.
The purchase price represents a premium of approximately 40% over the closing
price of the Common Stock on April 11, 1995, the last trading day prior to the
date of this letter, and, based upon the approximately 415 million fully
diluted outstanding shares of Chrysler Common Stock, values the equity of the
Company at more than $22.8 billion.
The transaction we are proposing involves no fundamental changes in the
Company, its business prospects, its management and its relationships with its
various constituencies. As we have stated previously, we recognize the role
the Company's management has performed. We believe management's continued
efforts are crucial to the future operational success of the Company, and our
proposal contemplates no change in senior management of the Company.
Importantly, there are no planned workforce reductions and no concessions would
be sought from employees. We are eager to work with the leaders of Chrysler's
union workers and with management to ensure that all employees see tangible
benefits from this transaction. The only change we propose is to provide the
Company's shareholders with a substantial premium for their shares.
Our proposal is subject to the execution and delivery of a definitive
agreement relating to this transaction. The agreement would contain customary
terms and conditions, including conditions with respect to the receipt of all
necessary corporate approvals by the Company, the obtaining of all required
governmental and regulatory approvals, and the obtaining of financing. Given
the strong financial position of Chrysler and the significant equity component
of the transaction, which will include Tracinda's entire equity investment in
the Company, it is apparent to us that this transaction is readily financeable.
Now that information regarding our proposal is
<PAGE> 2
Page 2
Mr. Robert Eaton
April 12, 1995
publicly available, we will promptly contact potential sources of financing so
that our financing arrangements can be completed as soon as possible. We
anticipate that Chrysler will continue to have a conservative balance sheet
following the transaction. In fact, after the transaction is completed,
Chrysler will have a lower debt-to-capital ratio than either General Motors or
Ford, and its free cash flow will remain virtually unchanged without any
reduction in the Company's capital expenditures program.
We recognize that the Board of Directors has the fiduciary duty to
maximize value for all shareholders. Accordingly, we will not request any lock
up or no shop provisions that could in any way curtail the ability of the Board
to discharge its duties. We believe that, if the Company responds promptly to
our proposal, this transaction can be completed by year end.
This transaction affords Chrysler shareholders the opportunity to
receive a significant premium for their Chrysler stock, without adversely
impacting the Company's employees and retirees, labor organizations, creditors,
customers, suppliers, dealers and the communities in which Chrysler does
business. Under these circumstances, we believe that this transaction is in
the best interests of Chrysler, its shareholders and all other constituencies.
We look forward to meeting with you to discuss this proposal further.
We are eager to proceed promptly and, accordingly, would appreciate hearing
from you at your earliest convenience.
Sincerely,
TRACINDA CORPORATION
By: Anthony Mandekic
-------------------------------
Anthony Mandekic
Secretary/Treasurer
<PAGE> 1
EXHIBIT 5
MONDAY, APRIL 24, 1995
Contact: Steven J. Harris/Rita McKay
(313) 956-3164/(313) 252-8790
CHRYSLER BOARD REJECTS TRACINDA PROPOSAL;
CONFIRMS CASH RESERVE POSITION
AUBURN HILLS, Mich. -- Chrysler Corporation announced today that its
Board of Directors, after a thorough and careful review, has unanimously
rejected the leveraged buy-out proposal announced on April 12 by Tracinda
Corporation, a company owned by Mr. Kirk Kerkorian.
The Board concluded that pursuing the proposal would not be in the best
interests of the Company, its shareholders, employees, dealers, suppliers or
customers and reiterated its support of the management team and its long term
strategic vision for the company.
Also at today's meeting, the Board took the opportunity to confirm
Chrysler's cash reserve policy. Robert J. Eaton, Chairman and Chief Executive
Officer of Chrysler said:
"Chrysler does not accumulate cash needlessly. Our current cash reserve
was set after careful study of what is necessary to remain globally
competitive, especially during the cyclical downturns that affect our business
from time to time.
-more-
(XXXXXXX)
<PAGE> 2
-2-
"We review our needs and our target periodically in light of changing
business conditions. Our current cash reserve target is $7.5 billion. To the
extent that the Company generates cash in excess of the target, and after
taking into account opportunities for investment in our core businesses and
changes in business conditions, Chrysler plans to use the excess to create
additional shareholder value, through share repurchases or increased
dividends."
Chrysler confirmed that it intends to complete its previously announced $1
billion share repurchase program. To date the Company has purchased $403
million of its stock under this program.
Chrysler's directors noted that speculation and uncertainty about the
Tracinda proposal had led to concerns on the part of credit rating agencies,
lenders, employees, and dealers. To address these concerns and the harm to the
company that could result, Chrysler's directors reaffirmed that the company is
not for sale.
The Board stated that it is Chrysler's policy to be open to communications
with all shareholders, and to consider shareholder suggestions carefully.
However, the Board believes unsolicited publicly announced proposals such as
Tracinda's are disruptive and do not serve the best interests of our
shareholders.
<PAGE> 3
-3-
"The primary objective of the directors and management of Chrysler is to
build value for shareholders. The Board is convinced that the company's
current policies and strategies will achieve that goal," Mr. Eaton said.
The complete text of the letter outlining the Board's position, sent today
to Mr. Kerkorian by Mr. Eaton, follows:
Dear Mr. Kerkorian:
Chrysler's Board of Directors and our entire senior management team
are committed to achieving increased profitability for Chrysler and
increased value for Chrysler shareholders. We regularly consider how
best to achieve these goals. In this context, the Board of Directors has
reviewed your April 12 letter. The Board has unanimously determined to
reject the proposal outlined in your letter.
Now and always, Chrysler is focused on the long-term. We are
committed to a sound business strategy that will allow Chrysler to
continue to produce innovative, quality products throughout the business
cycle. And that means ensuring the financial strength that will enable
Chrysler to fulfill that commitment. Today, Chrysler is more financially
stable than it has ever been and once more stands proudly among the top
automakers in the U.S. and in the world, producing exceptional products
and profitability.
In the directors' judgment, pursuing your proposal is not in the best
interests of the Company, its shareholders, its employees, its dealers or
its customers. Here are several of the reasons that underlie this
conclusion:
<PAGE> 4
-4-
Your letter speaks of an "offer," but it only amounts to an
invitation to Chrysler to join you in a search to see if financing might be
available for a transaction. When you add up what would be required to pay
shareholders and to refinance debt facilities, more than $30 billion
would be needed. Not a single non-Chrysler dollar of that financing --
according to Tracinda's announcements -- has been lined up. We have
grave doubts that such a financing is feasible.
Your letter contains no information whatsoever as to where you would
look for the needed funds. Your representatives have publicly stated that
you would use $5.5 billion of Chrysler's cash reserves, seek $12-13
billion of debt financing, and seek $3 billion in equity. Beyond these
amounts, we believe your proposal would most likely also require
refinancing approximately $10 billion of bank facilities at Chrysler and
at Chrysler Financial.
Even if this immense financing could be accomplished, the result
would be a crippled company:
--Given the cyclicality of the automotive business, we think it would
be rash to strip Chrysler of over 70% of its cash reserves, and leave it
vulnerable to the next downturn in the business cycle.
--Chrysler's financial strength is also essential to developing new
products and maintaining a leadership position in the intensely competitive
world automotive marketplace. Our planned product spending alone over
the next five years is $23 billion. Without the new products from the
investment, Chrysler simply couldn't compete.
<PAGE> 5
-5-
To explore an LBO this big would be a long and deeply disruptive
process. Tracinda has acknowledged that close to eight months would be
needed. The risks of failing to complete a transaction, and of major harm
to the Company in the process, are very high.
Since Tracinda announced its letter, Chrysler's relations with lenders
have suffered. In additon, credit rating agencies have placed Chrysler's
debt on credit watch with negative implications. Key partners in
Chrysler's ongoing success -- our employees, our dealers, our suppliers --
have also voiced their alarm and concern about the prospects of a
leveraged transaction.
Our directors believe it would be a serious mistake to subject
Chrysler to the kind of leveraged transaction your proposal contemplates.
Your representatives have said that you are willing to bet your stake in
Chrysler on such a transaction. Our directors do not have any interest in
gambling with Chrysler's future.
We believe strongly in Chrysler's future. We also believe that the
benefits from that bright future should be and will be realized by all of
Chrysler's shareholders.
Yours sincerely,
Robert J. Eaton
Chairman and Chief Executive Officer
# # #
(XXXXXX)
<PAGE> 1
[CHRYSLER CORPORATION LETTERHEAD]
EXHIBIT 6
April 24, 1995
Mr. Kirk Kerkorian
Chief Executive Officer and President
Tracinda Corporation
4835 Koval Lane
Las Vegas, Nevada 89109
Dear Mr. Kerkorian:
Chrysler's Board of Directors and our entire senior management team are
committed to achieving increased profitability for Chrysler and increased value
for Chrysler shareholders. We regularly consider how best to achieve these
goals. In this context, the Board of Directors has reviewed your April 12
letter. The Board has unanimously determined to reject the proposal outlined
in your letter.
Now and always, Chrysler is focused on the long-term. We are committed
to a sound business strategy that will allow Chrysler to continue to produce
innovative, quality products throughout the business cycle. And that means
ensuring the financial strength that will enable Chrylser to fulfill that
commitment. Today, Chrysler is more financially stable than its ever been and
once more stands proudly among the top automakers in the U.S. and in the world,
producing exceptional products and profitability.
In the directors' judgment, pursuing your proposal is not in the best
interests of the Company, its shareholders, its employees, its dealers or its
customers. Here are several of the reasons that underlie this conclusion:
Your letter speaks of an "offer," but it only amounts to an invitation
to Chrysler to join you in a search to see if financing might be available for
a transaction. When you add up what would be required to pay shareholders and
to refinance debt facilities, more than $30 billion would be needed. Not a
single non-Chrysler dollar of that financing - according to Tracinda's
announcements - has been lined up. We have grave doubts that such a financing
is feasible.
Your letter contains no information whatsoever as to where you would
look for the needed funds. Your representatives have publicly stated that you
would use $5.5 billion of Chrysler's cash reserves, seek $12-13 billion of debt
financing, and seek $3 billion in equity. Beyond these amounts, we believe
your proposal would most likely also require refinancing approximately $10
billion of bank facilities at Chrysler and at Chrysler Financial.
<PAGE> 2
K. Kerkorian
April 24, 1995
Page 2
Even if this immense financing could be accomplished, the result would
be a crippled company:
- Given the cyclicality of the automotive business, we think it would
be rash to strip Chrysler of over 70% of its cash reserves, and leave
it vulnerable to the next downturn in the business cycle.
- Chrysler's financial strength is also essential to developing new
products and maintaining a leadership position in the intensely
competitive world automotive marketplace. Our planned product spending
alone over the next five years is $23 billion. Without the new
products from that investment, Chrysler simply couldn't compete.
To explore an LBO this big would be a long and deeply disruptive
process. Tracinda has acknowledged that close to eight months would be needed.
The risks of failing to complete a transaction, and of major harm to the
Company in the process, are very high.
Since Tracinda announced its letter, Chrysler's relations with lenders
have suffered. In addition, credit rating agencies have placed Chrysler's debt
on credit watch with negative implications. Key partners in Chrysler's ongoing
success - our employees, our dealers, our suppliers - have also voiced their
alarm and concern about the prospects of a leveraged transaction.
Our directors believe it would be a serious mistake to subject Chrysler
to the kind of leveraged transaction your proposal contemplates. Your
representatives have said that you are willing to bet your stake in Chrysler on
such a transaction. Our directors do not have any interest in gambling with
Chrysler's future.
* * *
We believe strongly in Chrysler's future. We also believe that the
benefits from that bright future should be and will be realized by all of
Chrysler's shareholders.
Yours sincerely,
Robert J. Eaton
Robert J. Eaton
Chairman and Chief Executive Officer
<PAGE> 1
[TRACINDA CORPORATION LETTERHEAD]
EXHIBIT 7
April 25, 1995
Mr. Robert J. Eaton
Chairman and Chief Executive Officer
Chrysler Corporation
12000 Highland Drive
Highland Park, MI 48288-1919
Dear Bob:
Tracinda Corporation has been a loyal and supportive shareholder of
Chrysler since 1990, and has always given its financial support to the company
when asked to do so. Specifically, in connection with the March, 1991 offering
of 60 million shares, your predecessor made a personal appeal to us to purchase
6 million shares and to issue a press release to show our support for the
offering. We were told that Tracinda's participation was vital to the
successful completion of the offering. Subsequently, you personally visited me
to secure my commitment to purchase 4 million shares in the 1993 public
offering. In addition, every time that Tracinda has requested something from
the company, it has never been for Tracinda alone - it has always been for all
the shareholders.
In light of the events that have transpired during the past two weeks,
it is clear to us that the shareholders, who are the true owners of the
company, are not being given the consideration they deserve and are not being
given an accurate picture of the facts.
The facts are indisputable: Your management team was first provided
with a detailed written presentation regarding the economics of an acquisition
transaction in December, 1994. On March 14, 1995, a member of Chrysler's
management informed us that a buyout scenario was included on a list of
strategic alternatives approved for further study by you.
On March 30, 1995, members of your top management team were again given
a detailed written presentation of the transaction and, based on their review,
described the transaction as "doable" and "intriguing". On April 6, 1995, you
personally discussed the proposed transaction with the independent directors of
the Board's executive committee, who suggested that you not discuss the matter
with the entire Board ostensibly to prevent leaks.
On Monday, April 10, 1995, two members of Chrysler's top management met
with representatives of Tracinda. By that time, Chrysler's management was
sufficiently knowledgeable about the economic aspects of the transaction that
the discussions had progressed beyond the numbers to addressing the cultural
issues and the needs of the various constituencies, which both we and your
management team considered very important to the success of the transaction.
During the April 10th meeting, it was clearly communicated to Chrysler
management, and they understood, that time was of the essence.
<PAGE> 2
Mr. Robert J. Eaton
April 25, 1995
Page 2
In order to address the needs of labor, one of the most important
constituencies, our proposal included the following features:
- Twenty-percent ownership of the company to be given to the
employees at no cost.
- No concessions from the employees. In fact, we discussed
improving long-term security for the employees by guaranteeing
pension contributions and providing other assurances.
- Five-percent ownership of the company to be given to management
at no cost.
On Tuesday, April 11, 1995, immediately after reaching our decision to
extend the offer, I called you to notify you of our intention to proceed. At
this time, we discussed the form of the response you would make.
We were and continue to be shocked by your "surprise" reaction to our
announcement. As the foregoing chronology indicates, your management team was
kept fully informed at all times. Ask you know, we never intended, and still
don't intend, for this transaction to be hostile. You turned it into a hostile
transaction.
Yesterday, you sent me a letter accompanied by a press release. Both
your letter and the press release are so replete with contradictions and
ommissions that I feel compelled to set the record straight:
- Nowhere in the letter is there a statement regarding the
adequacy of our price. We believe that it is unprecedented
that a Board rejects an acquisition proposal without dealing
with what is clearly its most important aspect - price. Is
this because none of the three investment banking firms (First
Boston, Salomon Brothers and Morgan Stanley) being used by
Chrysler concluded that our offer was inadequate?
- The reason why the financing has not yet been arranged is
because Chrysler, presumably at your direction, and even before
the Board's rejection of our proposal, has openly intimidated
commercial and investment banks into refusing to discuss the
financing of the transaction with us with threats of both
commercial retaliation and legal action. Aside from the
questionable legality of this financial interference, I fail to
see how this is in the best interest of all shareholders. So
I find it very hypocritical on your part when you say that you
"...have grave doubts that such a financing is feasible."
<PAGE> 3
Mr. Robert J. Eaton
April 25, 1995
Page 3
- You state that "...it would be rash to strip Chrysler of over
70% of its cash reserves, and leave it vulnerable to the next
downturn in the business cycle". Again, this statement is
incorrect. By the time our proposed transaction would close,
Chrysler would have over $4 billion in cash reserves after
using $5.5 billion to help finance the acquisition. As you
must surely know, during its worst downturn at the time of the
Gulf War, Chrysler used $4 billion over a 3-year period. Our
financing plan has prudently taken this into account; even our
worst-case scenario does not show nearly this level of cash
requirement to weather a downturn. This is because Chrysler is
a different company today. With 70% of its costs outsourced,
it is much more nimble and cost effective. Your letter
contains no explanation whatsoever of how your $7.5 billion was
arrived at. Why not $5 billion? Why not $10 billion?
- You state that "Chrysler's financial strength is also essential
to developing new products..." and "...planned product spending
alone over the next five years is $23 billion." As you and
your management team have known for months, our financing plan
did not cut capital expenditures for new products by one penny.
In fact, our proposal includes $500 million more in capital
expenditures than Chrysler's own plan. Knowing this, for you
to suggest that we are trying to finance the acquisition by
sacrificing future product development is simply incorrect.
Why would we want to make a $2 billion investment in a
"crippled company" that could not compete?
- You continue to call our proposal an "LBO" in order to taint
the proposal with a pejorative label that simply doesn't apply.
One reason why members of your top management team found our
proposal "intriguing" (their word, not ours) as recently as
two days prior to our announcement is undoubtedly because they
clearly saw that, after our proposed transaction, Chrysler
would have less leverage than either Ford or GM. In addition,
it must have been clear to them that the transaction was self
financing; that is, the company would be paying interest
instead of dividends and the free cash flow would remain
virtually unchanged. Frankly, we fail to see how this puts
Chrysler in harm's way, particularly since our projections were
significantly more conservative than those of Wall Street
analysts.
<PAGE> 4
Mr. Robert J. Eaton
April 25, 1995
Page 4
- You state that "the primary objective of the directors and
management of Chrysler is to build value for shareholders."
Yet you have never made a specific proposal to enhance
shareholder value, except in response to my letter to the Board
on November 14, 1994. Your new "plans" (obviously in response
to our offer) for share repurchases or increased dividends are
hopelessly vague and noncommittal. Many great companies (GM,
IBM, Eastman Kodak, Kmart, American Express, Borden) have
learned that it is wise to listen to their shareholders. Why
hasn't Chrysler learned that lesson?
The key decisions regarding the future of Chrysler are being made by a
group of people who own less than 1% of the stock of the company. Many of
those people are not even employees. We have been the largest shareholder of
the company much longer than you have been the CEO. Accordingly, we challenge
you and your Board of Directors to permit the shareholders of the company to
vote on the following matters:
1. Do they favor the sale of the company at $55 per share? If the
shareholders to not support the buyout, we would withdraw our offer.
2. Alternatively, if it is not believed to be desireable to sell
the company for $55 per share, do the shareholders favor an increase in the
annual common stock dividend to $5 per share? In presenting this alternative,
it is worthy of note that, according to our projections, which are more
conservative than the consensus of Wall Street analysts, a $5 per share
dividend would only utilize approximately 50% of Chrysler's projected free cash
flow. Clearly, based on these figures, you would not have to dip into
Chrysler's $7.5 billion cash reserve to maintain this level of dividend
payout.
Very Truly Yours,
Kirk Kerkorian
<PAGE> 1
EXHIBIT 8
IMMEDIATE RELEASE
CONTACT: MICHAEL CLAES GEORGE SARD
BURSON MARSTELLER SARD VERBINNEN & CO.
212/614-5236 212/687-8080
TRACINDA WITHDRAWS OFFER FOR CHRYSLER;
SAYS ITS CHRYSLER STOCK IS NOT FOR SALE
WASSERSTEIN PERELLA RETAINED AS
STRATEGIC ADVISOR TO TRACINDA
LAS VEGAS, NV, May 31, 1995 - Tracinda Corporation announced today that
it is withdrawing its $55 per share offer for Chrysler Corporation and will
evaluate the full range of available options. Tracinda reiterated that its
Chrysler shares are not for sale and that its goal of maximizing value for all
Chrysler shareholders remains unchanged.
"We have been Chrysler's largest shareholder for nearly five years and
remain committed to maximizing value for all shareholders while keeping the
company well-managed, conservatively financed and fully competitive in the U.S.
and abroad," said Alex Yemenidjian, an executive at Tracinda. "Tracinda's 36
million shares of Chrysler stock are not for sale. Withdrawing our offer will
permit us to take a fresh look at the situation and evaluate our alternatives."
Tracinda also announced that it has retained the investment banking
firm of Wasserstein Perella & Co. as a general strategic adviser. Wasserstein
Perella will provide financial advisory services as to Tracinda's investments
and will assist Tracinda in evaluating alternatives with respect to its stake
in Chrysler.
"Kirk Kerkorian is a serious long-term investor whose track record
speaks for itself," said Bruce Wasserstein, chairman of Wasserstein Perella.
"We hope to provide a new perspective and play a constructive role in achieving
Tracinda's objectives."
Wasserstein Perella & Co. is a leading international investment bank,
with an emphasis on merger and acquisition advisory work, underwriting of
equity and high yield debt securities and asset management services.
Headquartered in New York, Wasserstein Perella has U.S. offices in Chicago,
Dallas and Los Angeles, and international offices in London, Paris, Frankfurt,
and Tokyo. Recently, Wasserstein Perella has advised on advisory transactions
in excess of $14 billion, including acting as the mutually-designated
<PAGE> 1
[CHRYSLER CORPORATION LETTERHEAD]
Robert J. Eaton
Chairman and Chief Executive Officer
EXHIBIT 9
July 6, 1995
Dear Stockholder:
As you may be aware, Tracinda Corporation, Kirk Kerkorian's holding
company, has commenced a tender offer to purchase up to 14 million shares of
Chrysler common stock. The number of shares Tracinda seeks to buy is less than
4% of Chrysler's outstanding shares, and would bring Tracinda's holdings to less
than 14% of Chrysler's outstanding shares. Including the shares reported by
Tracinda as owned by other members of Tracinda's "group," the total would be
less than the 15% that would trigger Chrysler's stockholder rights plan.
Chrysler has neither solicited nor encouraged Mr. Kerkorian's tender offer,
and does not endorse his acquisition of additional Chrysler stock. However,
because of the small percentage of shares sought by Tracinda, which Tracinda
could have bought in the open market without triggering the rights plan, the
Board of Directors of Chrysler has determined to take no position with respect
to this offer. This is not, and should not be interpreted to be, any indication
of the position Chrysler's Board would take with respect to any effort by
Tracinda's group to bring its holdings above 15%, or to seek control of Chrysler
by any means.
Your directors are mindful of Mr. Kerkorian's past actions, both with
respect to Chrysler and with respect to other companies in which he has acquired
shares. These actions lead your Board to be especially vigilant with respect to
Mr. Kerkorian's actions and proposals for Chrysler. We are well aware that
what's good for Mr. Kerkorian and for other members of Tracinda's "group" isn't
necessarily good for Chrysler's other stockholders. We remind stockholders that
on April 24, following a detailed review, the Board unanimously determined that
Tracinda's April 12 unsolicited proposal to explore a leveraged buyout of
Chrysler was not in the best interests of Chrysler or its stockholders,
employees, dealers, suppliers or customers.
Mr. Kerkorian, having withdrawn his earlier unfinanced $55 per share
leveraged buyout proposal, now evidently thinks Chrysler shares are a good buy
at $50 per share. The price offered by Tracinda is only slightly above the
$47.625 price at which Chrysler shares closed on the last trading date before
Tracinda announced its offer, and the $49 price at which Chrysler shares closed
yesterday. In addition, you should know that, in light of the Board's view of
the long-term prospects of Chrysler, none of Chrysler's directors or executive
officers intend to tender their shares to Tracinda.
<PAGE> 2
Enclosed is a Schedule 14D-9 containing important detailed information
relating to the Tracinda offer and the Board's position. We suggest that you
read the Schedule 14D-9 carefully.
We believe Chrysler is well positioned for continued long-term growth. In
the near term, the high inventory levels with which we began the second quarter
have been reduced, with the help of sales incentives that have affected profit
margins. Retail sales of Chrysler vehicles in the month of June were at an
all-time high. In the fourth quarter, we expect to be at full North American
production capacity for our new minivan, and the short-term effect on earnings
from the switch-over to a major new product and from incentivized inventory
reduction should then be behind us. Our investment in developing outstanding
products is paying off. Our focus is on increasing stockholder value through
building and selling great cars and trucks, and returning value to stockholders
by dividends and share repurchases consistent with our long-term strategy.
Our strategic plan has worked to turn the Company around and to build
shareholder value, and our plan is on track for the future. Since 1992, we have
launched an entirely new array of breakthrough designs, and a multi-billion
dollar cost reduction program has transformed Chrysler into the low-cost North
American producer in our industry. As a result of major strengthening of the
Company's balance sheet, Chrysler has attained its highest credit ratings in
over 20 years. We have increased our quarterly dividend four times between
December 1993 and May 1995, and believe that our current annual dividend level
of $2.00 per share is sustainable within the framework of our long-term strategy
and the cyclicality of our industry.
We are confident that our strategic plan will continue to build long-term
value for shareholders. We will not be distracted from that objective.
We appreciate your continuing support.
On behalf of the Board of Directors,
Bob Eaton
<PAGE> 1
EXHIBIT 10
THURSDAY, JULY 6, 1995
Contact: Steve Harris
(313) 956-3164
CHRYSLER CORPORATION LETTER TO SHAREHOLDERS
REGARDING TRACINDA OFFER
The following letter is being sent to all Chrysler shareholders along with
a copy of the Company's Schedule 14D-9 containing important detailed information
relating to Tracinda Corporation's recent tender offer to purchase up to 14
million shares of Chrysler common stock. This material provides a review of the
offer and the Chrysler Board of Directors' position.
<PAGE> 2
[CHRYSLER CORPORATION LETTERHEAD]
Robert J. Eaton
Chairman and Chief Executive Officer
July 6, 1995
Dear Stockholder:
As you may be aware, Tracinda Corporation, Kirk Kerkorian's holding
company, has commenced a tender offer to purchase up to 14 million shares of
Chrysler common stock. The number of shares Tracinda seeks to buy is less than
4% of Chrysler's outstanding shares, and would bring Tracinda's holdings to less
than 14% of Chrysler's outstanding shares. Including the shares reported by
Tracinda as owned by other members of Tracinda's "group," the total would be
less than the 15% that would trigger Chrysler's stockholder rights plan.
Chrysler has neither solicited nor encouraged Mr. Kerkorian's tender offer,
and does not endorse his acquisition of additional Chrysler stock. However,
because of the small percentage of shares sought by Tracinda, which Tracinda
could have bought in the open market without triggering the rights plan, the
Board of Directors of Chrysler has determined to take no position with respect
to this offer. This is not, and should not be interpreted to be, any indication
of the position Chrysler's Board would take with respect to any effort by
Tracinda's group to bring its holdings above 15%, or to seek control of Chrysler
by any means.
Your directors are mindful of Mr. Kerkorian's past actions, both with
respect to Chrysler and with respect to other companies in which he has acquired
shares. These actions lead your Board to be especially vigilant with respect to
Mr. Kerkorian's actions and proposals for Chrysler. We are well aware that
what's good for Mr. Kerkorian and for other members of Tracinda's "group" isn't
necessarily good for Chrysler's other stockholders. We remind stockholders that
on April 24, following a detailed review, the Board unanimously determined that
Tracinda's April 12 unsolicited proposal to explore a leveraged buyout of
Chrysler was not in the best interests of Chrysler or its stockholders,
employees, dealers, suppliers or customers.
Mr. Kerkorian, having withdrawn his earlier unfinanced $55 per share
leveraged buyout proposal, now evidently thinks Chrysler shares are a good buy
at $50 per share. The price offered by Tracinda is only slightly above the
$47.625 price at which Chrysler shares closed on the last trading date before
Tracinda announced its offer, and the $49 price at which Chrysler shares closed
yesterday. In addition, you should know that, in light of the Board's view of
the long-term prospects of Chrysler, none of Chrysler's directors or executive
officers intend to tender their shares to Tracinda.
<PAGE> 3
Enclosed is a Schedule 14D-9 containing important detailed information
relating to the Tracinda offer and the Board's position. We suggest that you
read the Schedule 14D-9 carefully.
We believe Chrysler is well positioned for continued long-term growth. In
the near term, the high inventory levels with which we began the second quarter
have been reduced, with the help of sales incentives that have affected profit
margins. Retail sales of Chrysler vehicles in the month of June were at an
all-time high. In the fourth quarter, we expect to be at full North American
production capacity for our new minivan, and the short-term effect on earnings
from the switch-over to a major new product and from incentivized inventory
reduction should then be behind us. Our investment in developing outstanding
products is paying off. Our focus is on increasing stockholder value through
building and selling great cars and trucks, and returning value to stockholders
by dividends and share repurchases consistent with our long-term strategy.
Our strategic plan has worked to turn the Company around and to build
shareholder value, and our plan is on track for the future. Since 1992, we have
launched an entirely new array of breakthrough designs, and a multi-billion
dollar cost reduction program has transformed Chrysler into the low-cost North
American producer in our industry. As a result of major strengthening of the
Company's balance sheet, Chrysler has attained its highest credit ratings in
over 20 years. We have increased our quarterly dividend four times between
December 1993 and May 1995, and believe that our current annual dividend level
of $2.00 per share is sustainable within the framework of our long-term strategy
and the cyclicality of our industry.
We are confident that our strategic plan will continue to build long-term
value for shareholders. We will not be distracted from that objective.
We appreciate your continuing support.
On behalf of the Board of Directors,
Bob Eaton
<PAGE> 1
EXHIBIT 11
STATE OF MICHIGAN
DEPARTMENT OF COMMERCE
INSURANCE BUREAU
BEFORE THE COMMISSIONER OF INSURANCE
IN THE MATTER OF A DISCLAIMER
BY TRACINDA CORPORATION WITH
RESPECT TO ITS ACQUISITION OF AN ORDER NO. 95-368-M
ADDITIONAL 14 MILLION SHARES OF
THE COMMON STOCK OF CHRYSLER
CORPORATION
ISSUED AND ENTERED
THIS 27TH DAY OF JUNE 1995
BY D. JOSEPH OLSON
COMMISSIONER OF INSURANCE
ORDER APPROVING DISCLAIMER
I
BACKGROUND
Tracinda Corporation ("Tracinda") currently owns 9.75% of the common stock
of Chrysler Corporation ("Chrysler"). On June 26, 1995, Tracinda announced a
tender offer by which it plans to acquire an additional 14 million shares of the
common stock of Chrysler. The acquisition will raise its percentage of ownership
of the outstanding shares of Chrysler's common stock to approximately 13.5%
Chrysler owns two Michigan domiciled insurance companies, Chrysler
Insurance Company and Chrysler Life Insurance Company (the "Insurers"). Before
the change in control of a Michigan insurer, the acquiring party must secure the
approval of the Commissioner of Insurance ("commissioner"). This applies also
where a person acquires control of a corporation, such as Chrysler, that owns or
controls a Michigan domestic insurer. There is a presumption of control if any
person owns 10% or more of the voting securities of a corporation.
In letters to the commissioner dated June 26, 1995 (the "Petition for
Disclaimer"), Tracinda contends that it will not control Chrysler or the
Insurers by its acquisition of the 14 million additional shares of common stock.
If so, the acquisition of these additional shares is not subject to the approval
of the commissioner. Tracinda the same date also filed a lawsuit in federal
district court challenging the validity of the applicable state laws.
II
ISSUE
This key issue in this matter is whether, by its acquisition of 14 million
additional shares of Chrysler common stock, Tracinda will gain control of
Chrysler as "control" is defined in Section 115 of the insurance Code of 1956,
as amended ("Code"), MCL 500.115; MSA 24.1115.
III
ANALYSIS
The acquisition of control of a Michigan domestic insurer is governed by
the Holding Company Act, which is contained in Chapter 13 of the Insurance Code
of 1956, as amended ("Code"), MCL 500.1301 et seq.; MSA 24.11301 et seq.
According to Section 1311(1) of the Code, MCL 500.1311(1);
<PAGE> 2
Tracinda Order
June 27, 1995
Page 2
MSA 24.11311(1), this may occur through the direct acquisition of control of the
insurer or by acquiring control of a person, such as Chrysler, that controls an
insurer:
A person shall not enter into an agreement to merge with or otherwise
to acquire control of a domestic insurer or any person controlling a
domestic insurer unless, at the time and offer, request, or invitation is
made or an agreement is entered into, or prior to the acquisition of the
securities if no offer of agreement is involved, the person has filed with
the commissioner and has sent to the insurer which has sent to its
shareholders, a statement containing the information required by this
chapter and the offer, request, invitation, agreement or acquisition has
been approved by the commissioner in the manner prescribed in this chapter.
If Tracinda's purchase of an additional 14 million shares of Chrysler
common stock will give it control of Chrysler, then it must secure the
commissioner's approval of the tender offer. The definition of "control" is set
forth in Section 115(b) of the Code, MCL 500.115(b); MSA 24.1115(b), as follows:
"Control" including the terms "controlling", "controlled by", and
"under common control with" mean the possession or the contingent or
noncontingent right to acquire possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract
including acquisition of assets or bulk reinsurance, other than a
commercial contract for goods or nonmanagement services, by pledge or
securities, or otherwise, unless the power is the result of an official
position with or corporate office held by the person. Control is presumed
to exist if any person, by formal or informal arrangement, device, or
understanding, directly or indirectly, owns, controls, holds with the power
to vote, or holds proxies representing 10% or more of the voting securities
of any other person or for a mutual insurer owns 10% or more of the
insurer's surplus through surplus notes, guarantee fund certificates or
other evidence of indebtedness issued by the insurer. This presumption may
be rebutted by a showing made in the manner provided by Section 1332 that
control does not in fact exist. The commissioner may determine after
furnishing to all persons in interest notice and an opportunity to be heard
and making specific findings of fact to support the determination that
control in fact exists notwithstanding the absence of a presumption to that
effect.
After the purchase of the additional shares, Tracinda will own
approximately 13.5% of the common stock of Chrysler. Thus, control of Chrysler
would be presumed to exist. However, Tracinda has sought to rebut this
presumption by its Petition for Disclaimer filed in accordance with Section 1332
of the Code, MCL 500.1332; MSA 24.11332, which provides:
Any person may file with the commissioner a petition for disclaimer of
affiliation with an authorized insurer or an insurer or any member of an
insurance holding company system may file such a petition for disclaimer.
The petition for disclaimer shall fully disclose all material relationships
and bases for affiliation between the person and the insurer as well as the
basis for disclaiming the affiliation and shall be subject to approval by
the commissioner. The burden of proof for establishing that an affiliation
does not exist shall rest with the petitioner. After a petition for
disclaimer is filed with and approved by the commissioner, the insurer is
relieved of any duty to register or report under this chapter that may
arise out of the insurer's relationship with the person unless the
commissioner subsequently disallows the disclaimer. The commissioner may
disallow a disclaimer that has been previously approved only after
furnishing all parties in interest with notice and opportunity to be heard
and after making specific findings of fact to support the disallowance.
Tracinda sets forth several bases for disclaiming that its purchase of the
additional shares will give it control of Chrysler or the Insurers. By
information presented in its Petition for Disclaimer, Tracinda has met its
Burden of Proof. Principal reasons for this are as follows:
1. Under Chrysler's certificate of incorporation and bylaws, in most
cases the taking of any action by shareholders requires the approval of a
majority of the shares of common stock present and voting.
<PAGE> 3
Tracinda Order
June 27, 1995
Page 3
2. Chrysler has resisted Tracinda attempts to purchase a majority of
its common stock. It has a "poison pill" shareholder rights plan. On
December 1, 1994, Chrysler raised the trigger point for the poison pill
from 10% to 15%. This shows that Chrysler itself does not believe that
Tracinda will obtain control by attaining 13.5% of its common stock.
3. Approximately five times the number of shares held by Tracinda are
owned by independent financial institutions and investment funds. Tracinda
reports that it has no control over how they vote their shares and does not
have any arrangement with any of those institutions or funds with respect
to their Chrysler shares.
4. Tracinda has no officers or directors on the boards of Chrysler or
its Insurers.
In addition to establishing that it will not obtain control of Chrysler or
the Insurers by its purchase of an additional 14 million shares of Chrysler's
common stock, Tracinda provides certain assurances in its Petition for
disclaimer regarding its future conduct with respect to the Insurers. For the
protection of policyholders and securityholders of the Insurers, it is
appropriate to condition any approval of the disclaimer upon Tracinda's formal
agreement to adhere to those assurances. It should be further conditioned upon
Tracinda's agreement to immediately take action to dismiss the federal lawsuit
in its entirety. Lastly, it should also be provided that this order approving
the disclaimer is limited to the stock purchase described in the Petition for
Disclaimer.
IV
ORDER
Therefore, it is ORDERED that:
1. The scope of this approval is strictly limited to Tracinda's
proposed acquisition of 14 million additional shares of Chrysler common
stock described in its Petition for Disclaimer. This approval does not
apply to any other future activity Tracinda may choose to pursue with
respect to Chrysler, including the purchase of additional Chrysler shares
or undertaking a proxy or consent solicitation in which Tracinda would name
a slate of candidates for the Chrysler board.
2. The Petition for Disclaimer is approved effective the date that
Tracinda agrees to adhere to the conditions set forth below.
3. Tracinda shall not take any of the following actions with respect
to the Insurers without first obtaining the consent of the commissioner:
a. change management personnel or otherwise be involved with the
Insurers,
b. seek any extraordinary dividends or distributions; or
c. pledge the assets or stock.
4. Tracinda shall immediately take action to dismiss without prejudice
the federal lawsuit in its entirety.
D. JOSEPH OLSON
-----------------------------------
D. Joseph Olson
Commissioner of Insurance
<PAGE> 4
Tracinda Order
June 27, 1995
Page 4
AGREEMENT
In consideration of the commissioner's issuing and entering this Order
Approving Disclaimer, Tracinda agrees to adhere to the conditions set forth
immediately above in Part IV of this order. In consideration of Tracinda's
dismissing without prejudice the federal lawsuit in its entirety, the
commissioner agrees to give Tracinda ten (10) calendar days' notice of intent to
file any lawsuit in state court against Tracinda to enforce provisions of the
Michigan Insurance Holding Company Act and further agrees that if such a lawsuit
is filed he will not oppose its removal to federal court. The commissioner
further agrees he will not raise federal constitutional issues in any lawsuit
filed in state court with respect to Tracinda or contend what such federal
constitutional issues should be litigated in state court.
<TABLE>
<S> <C>
D. JOSEPH OLSON SCOTT L. MANDEL
- ----------------------------------------- -----------------------------------------
D. Joseph Olson Scott L. Mandel
Commissioner of Insurance Foster, Swift, Collins & Smith, P.C.
Attorneys for Tracinda
Date signed: June 27, 1995 Date signed: 6/27/95
</TABLE>
<PAGE> 1
EXHIBIT 12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1995, by and between Chrysler
Corporation, a Delaware corporation (the "Company"), and Robert J. Eaton
("Executive").
WITNESSETH:
WHEREAS, the Company wishes to recognize the substantial services that
Executive has provided to the Company; and
WHEREAS, the Company desires that Executive continue to perform such
services and to enter into an agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, Executive desires to continue such employment and enter into such
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Executive hereby agree as follows:
1. EMPLOYMENT.
a. Agreement to Employ. Upon the terms and subject to the conditions of
this Agreement, the Company hereby agrees to continue to employ Executive and
Executive hereby agrees to continue his employment by the Company.
b. Term of Employment. Except as provided in Paragraph 5(a), the Company
shall employ Executive for the period commencing on June 1, 1995 (the
"Commencement Date") and ending on the third anniversary of the Commencement
Date. At the expiration of the original term or any extended term, Executive's
employment hereunder shall be automatically extended, upon the same terms and
conditions, for successive periods of one year each, unless either party, at
least 90 days prior to the expiration of the original term or any extended term,
shall give written notice to the other of its intention not to renew such
employment. Notwithstanding the foregoing, the term of this Agreement shall
expire on the earlier to occur of (i) the last day of the month in which
Executive attains age 65 and (ii) the date on which the Company terminates this
Agreement because Executive has been incapable of substantially fulfilling the
positions, duties, responsibilities and obligations set forth in this Agreement
because of physical, mental or emotional incapacity resulting from injury,
sickness or disease for a period of (A) at least four consecutive months or (B)
more than six months in any twelve month period. The period during which
Executive is employed pursuant to this Agreement, including any extension
thereof in accordance with this Paragraph 1(b), shall be referred to as the
"Employment Period."
2. POSITION AND DUTIES.
During the Employment Period, Executive shall serve as Chief Executive
Officer of the Company and Chairman of the Board of Directors of the Company
(the "Board") or in such other position or positions as he and the Board shall
mutually agree. In addition, Executive shall serve in such other position or
positions with the Company and its subsidiaries commensurate with his position
and experience as the Board shall from time to time specify. During the
Employment Period, Executive shall have the duties, responsibilities and
obligations customarily assigned to individuals serving in the position or
positions in which Executive serves hereunder and such other duties,
responsibilities and obligations as the Board shall from time to time specify.
Executive shall devote his full time to the services required of him hereunder,
except for vacation time and reasonable periods of absence due to sickness,
personal injury or other disability, and shall use his best efforts, judgement,
skill and energy to perform such services in a manner consonant with the duties
of his position and to improve and advance the business and interests of the
Company and its subsidiaries. Unless and to the extent inconsistent with the
terms of the Company's policy 1-10, as in effect on the date hereof, nothing
contained herein shall preclude Executive from (i) serving on the board of
directors of any business
<PAGE> 2
corporation with the consent of the Board, (ii) serving on the board of, or
working for, any charitable or community organization or (iii) pursuing his
personal financial and legal affairs, so long as such activities, individually
or collectively, do not interfere with the performance of Executive's duties
hereunder or violate any of the provisions of Paragraph 6 hereof.
3. COMPENSATION.
a. Base Salary. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate as in effect on May 31, 1995. The
annual base salary payable under this paragraph shall be reduced, however, to
the extent Executive elects to defer such salary under the terms of any deferred
compensation or savings plan or arrangement maintained or established by the
Company. The appropriate committee of the Board shall annually review
Executive's base salary in light of competitive practices, the base salaries
paid to other executive officers of the Company and the performance of Executive
and the Company, and may, in its discretion, increase such base salary by an
amount it determines to be appropriate. Any such increase shall not reduce or
limit any other obligation of the Company hereunder. Executive's base salary (as
set forth above or as may be increased from time to time) shall not be reduced,
other than pursuant to a cost-saving plan that includes all senior executives
and only if such reduction is proportionate to the reductions applicable to
other senior executives. Executive's annual base salary payable hereunder, as it
may be increased or reduced from time to time and without reduction for any
amounts deferred as described above, is referred to herein as "Base Salary." The
Company shall pay Executive the portion of his Base Salary not deferred not less
frequently than in equal monthly installments.
b. Annual Bonus. For each calendar year ending during the Employment
Period, Executive shall have the opportunity to receive an annual bonus ("Annual
Target Bonus Opportunity"), based on the achievement of target levels of
performance, equal to no less than 160% of his Base Salary. The actual bonus, if
any, payable for any such year shall be determined in accordance with the terms
of the Company's Incentive Compensation Plan or any successor annual incentive
plan (the "Annual Plan") based upon the performance of the Company and/or
Executive against target objectives established under such Annual Plan. Subject
to Executive's election to defer all or a portion of any annual bonus payable
hereunder pursuant to the terms of any deferred compensation or savings plan or
arrangement maintained or established by the Company, any annual bonus payable
under this Paragraph 3(b) shall be paid to Executive in accordance with the
terms of the Annual Plan.
c. Long-term Incentive Compensation. During the term of the Employment
Period, Executive shall participate in all of the Company's existing and future
long-term incentive compensation programs for key executives at a level
commensurate with his position at the Company and consistent with the Company's
then current policies and practices, as determined in good faith by the Board or
a committee thereof.
4. BENEFITS, PERQUISITES AND EXPENSES.
a. Benefits. During the Employment Period, Executive shall be eligible to
participate in (i) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each group life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, and (ii) each pension, retirement, deferred compensation
or savings plan sponsored or maintained by the Company, in each case, whether
now existing or established hereafter, to the extent that Executive is eligible
to participate in any such plan under the generally applicable provisions
thereof. Nothing in this Paragraph 4(a) shall limit the Company's right to amend
or terminate any such plan in accordance with the procedures set forth therein.
b. Perquisites. During the Employment Period, Executive shall be entitled
to at least four weeks' paid vacation annually and shall also be entitled to
receive such perquisites as are generally provided to other senior officers of
the Company in accordance with the then current policies and practices of the
Company, including, without limitation, eligibility to participate in the
Company's product evaluation program and leased car program and to receive one
Company furnished vehicle.
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<PAGE> 3
c. Business Expenses. During the Employment Period, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may require and
in accordance with the generally applicable policies and procedures of the
Company.
d. Indemnification. During the Employment Period, the Company shall
indemnify Executive and hold Executive harmless from and against any claim, loss
or cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive serves at the
request of the Company to the maximum extent permitted by applicable law and the
Company's Certificate of Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection afforded to Executive hereunder
be less than that afforded under the Governing Documents as in effect on the
Commencement Date.
5. TERMINATION OF EMPLOYMENT.
a. Early Termination of the Employment Period. Notwithstanding Paragraph
1(b), the Employment Period shall end upon the earliest to occur of (i) a
termination of Executive's employment on account of Executive's death, (ii) a
Termination for Cause, (iii) a Termination Without Cause or (iv) a Termination
for Good Reason.
b. Benefits Payable Upon Termination. Following the end of the Employment
Period pursuant to Paragraph 5(a), Executive (or, in the event of his death, his
surviving spouse, if any, or his estate) shall be paid the type or types of
compensation determined to be payable in accordance with the following table at
the times established pursuant to Paragraph 5(c):
<TABLE>
<CAPTION>
EARNED VESTED INCENTIVE SEVERANCE ADDITIONAL
SALARY BENEFITS COMPENSATION BENEFIT BENEFITS
-------- -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Not Not
Termination due to death Payable Payable Payable Payable Available
Not Not Not
Termination for Cause Payable Payable Payable Payable Available
Termination Without Cause Payable Payable Payable Payable Available
Termination for Good Reason Payable Payable Payable Payable Available
</TABLE>
c. Timing of Payments. Earned Salary shall be paid in cash in a single lump
sum as soon as practicable, but in no event more than 10 days, following the end
of the Employment Period. Incentive Compensation shall be payable at the same
time as similar awards are paid to other executives participating in the plans
under which the awards are payable. Vested Benefits shall be payable in
accordance with the terms of the plan, policy, practice, program, contract or
agreement (including, without limitation, the extension of the exercise period
of options under the Equity Documents (as defined below) following a termination
due to death or disability) under which such benefits have been awarded or
accrued except as otherwise expressly modified by this Agreement. Severance
Benefits shall be paid in a single lump sum cash payment as soon as practicable,
but in no event later than 10 days after the Executive's termination. Additional
Benefits shall be provided or made available at the times specified below as to
each such Additional Benefit.
d. Definitions. For purposes of Paragraphs 5 and 6, capitalized terms have
the following meanings:
"Additional Benefits" consists of the following rights and benefits:
(i) Executive (or, in the event of Executive's death during such
period, Executive's beneficiary or estate) shall have the right to exercise
any outstanding options to purchase shares of Common Stock of the Company
then exercisable by Executive or which would become exercisable in
accordance with the applicable option agreement and the applicable equity
incentive plan of the Company (such agreements and plans referred to
collectively as the "Equity Documents") for a period of one year after
Executive's termination of employment (or, if less, until the end of the
stated term of the option);
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<PAGE> 4
(ii) except as otherwise provided below, Executive (and, to the extent
applicable, his dependents) will be entitled to continue participation in
all of the Company's pension and welfare benefit plans (the "Benefit
Plans"), excluding any defined contribution plans, until the later of (A)
the second anniversary of Executive's termination of employment or (B) May
31, 1998 (the "End Date"); provided that Executive's participation in the
Company's welfare benefit plans shall cease on any earlier date that
Executive becomes eligible for comparable welfare benefits from a
subsequent employer. To the extent any such benefits cannot be provided
under the terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the Company's
general assets. Executive's participation in the Benefit Plans will be on
the same terms and conditions that would have applied had Executive
continued to be employed by the Company through the End Date, except that
Executive shall cease to accrue all service for purposes of determining his
entitlement to, and the amount of, his pension benefits upon Executive's
commencement of receipt of benefits under any of the Company's pension
plans. Except as expressly provided above, Executive's vested right to
benefits under the Benefit Plans and the amount of such benefits shall be
determined based on Executive's age and service as though he had been
employed with the Company through the End Date;
(iii) for purposes of the Benefit Plans and the Equity Documents,
Executive will be deemed to have terminated employment under mutually
satisfactory conditions; and
(iv) Executive will be entitled to use of two Company-furnished
vehicles until the End Date on the same terms and conditions existing
immediately prior to his termination of employment with respect to his
Company-furnished vehicle.
"Earned Salary" means any Base Salary earned, but unpaid, for services
rendered to the Company on or prior to the date on which the Employment Period
ends pursuant to Paragraph 5(a)(other than Base Salary deferred pursuant to
Executive's election, as provided in Paragraph 3(a) or (b) hereof).
"Incentive Compensation" consists of the following:
(i) a pro-rated amount equal to the product of
(A) the amount Executive would have been entitled to receive under
Paragraph 3(b) for the calendar year in which his employment terminates
pursuant to Paragraph 5(a) had he remained employed for the entire year,
based upon actual Company performance results (but without regard to any
individual performance criteria), multiplied by
(B) a fraction, the numerator of which is equal to the number of
days in the calendar year of Executive's termination of employment which
have elapsed as of the date of such termination and the denominator of
which is 365; and
(ii) all outstanding long-term incentive compensation awards held by
Executive at the date of his termination, which shall be payable, if at
all, based upon actual Company performance results (but without regard to
any individual performance criteria) for the applicable performance period.
Any and all amounts treated as Incentive Compensation shall be taken into
account as incentive compensation, on the same terms as apply to other
executives, for purposes of determining the incentive compensation retirement
benefit payable to Executive under the Company's Supplemental Executive
Retirement Plan.
"Severance Benefit" means an amount equal to the product of:
(i) the greater of
(A) two and
(B) a fraction, the numerator of which is the number of months
remaining in the Employment Period (determined assuming that Executive's
date of termination is a notice of nonrenewal for purposes of Paragraph
1(b) as to all periods following such termination) and the denominator
of which is 12, multiplied by
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<PAGE> 5
(ii) the sum of
(X) Executive's Base Salary and
(Y) an amount equal to the Annual Target Bonus Opportunity payable
under Paragraph 3(b) hereof for the calendar year in which Executive's
employment terminates.
"Termination for Cause" means a termination of Executive's employment by
the Company due to (i) Executive's conviction of a felony or (ii) Executive's
(A) willful and continued failure to perform the material duties of his
position, (B) willful and serious fraud against the Company or (C) material
breach of any provision of this Agreement which has had (or is expected to have)
a material adverse effect on the business of the Company or its subsidiaries.
Executive shall be permitted to respond and defend himself before the Board
within 30 days after delivery to Executive of written notification of any
proposed Termination for Cause which specifies in detail the reasons for such
termination. If the majority of the members of the Board (excluding Executive)
do not confirm that the Company had grounds for a "Cause" termination within 30
days after Executive has had his hearing before the Board, Executive shall have
the option of treating his employment as not having terminated or as having been
terminated pursuant to a Termination Without Cause.
"Termination for Good Reason" means a termination of Executive's employment
by Executive within 90 days following (i) a material diminution in Executive's
positions, duties and responsibilities from those described in Paragraph 2
hereof, (ii) the removal of Executive from, or the failure to re-elect Executive
as a member of, the Board, (iii) a reduction in Executive's annual Base Salary
(other than a reduction which is permitted under Paragraph 3(a)), (iv) a
material reduction in the aggregate value of the pension and welfare benefits
provided to Executive from those in effect as of the Commencement Date or any
renewal date of this Agreement (other than a reduction which is proportionate to
the reductions applicable to other senior executives pursuant to a cost-saving
plan that includes all senior executives) or (v) a material breach of any
provision of this Agreement by the Company. Notwithstanding the foregoing, a
termination shall not be treated as a Termination for Good Reason (i) if
Executive shall have consented in writing to the occurrence of the event giving
rise to the claim of Termination for Good Reason or (ii) unless Executive shall
have delivered a written notice to the Board within 30 days of his having actual
knowledge of the occurrence of one of such events stating that he intends to
terminate his employment for Good Reason and specifying the factual basis for
such termination, and such event, if capable of being cured, shall not have been
cured within 30 days of the receipt of such notice.
"Termination Without Cause" means any termination of Executive's employment
by the Company other than a Termination for Cause.
"Vested Benefits" means amounts which are vested or which Executive is
otherwise entitled to receive under the terms of or in accordance with any plan,
policy, practice or program of, or any contract or agreement with, the Company
or any of its subsidiaries, at or subsequent to the date of his termination
without regard to the performance by Executive of further services or the
resolution of a contingency.
e. Nondeductibility of Payments. Notwithstanding anything to the contrary
contained herein, any amounts payable to Executive pursuant to this Paragraph 5
that, if paid when otherwise provided under this Paragraph 5, would be
nondeductible by the Company under Section 162(m) of the Internal Revenue Code
of 1986, as amended, shall be paid to Executive on April 1 of the next following
taxable year, together with simple interest thereon at the 90-day United States
Treasury Bill rate as in effect from time to time during such period of
deferral.
f. Full Discharge of Company Obligations. Except as expressly provided in
the last sentence of this Paragraph 5(f), the amounts payable to Executive
pursuant to this Paragraph 5 following termination of his employment (including
amounts payable with respect to Vested Benefits) shall be in full and complete
satisfaction of Executive's rights under this Agreement and any other claims he
may have in respect of his employment by the Company or any of its subsidiaries.
Such amounts shall constitute liquidated damages with respect to any and all
such rights and claims and, upon Executive's receipt of such amounts, the
Company shall be released and discharged from any and all liability to Executive
in connection with this Agreement or otherwise in connection with Executive's
employment with the Company and its subsidiaries. Nothing in this
5
<PAGE> 6
Paragraph 5(f) shall be construed to release the Company from its commitment to
indemnify Executive and hold Executive harmless from and against any claim, loss
or cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive served at the
request of the Company to the maximum extent permitted by applicable law and the
Governing Documents.
6. NONCOMPETITION AND CONFIDENTIALITY.
By and in consideration of the salary and benefits to be provided by the
Company hereunder, including the severance arrangements set forth herein,
Executive agrees that:
a. Noncompetition. During the Employment Period and during the one year
period (the "Restriction Period") following any termination of Executive's
employment, other than a Termination Without Cause or a Termination for Good
Reason, Executive shall not become associated with any entity, whether as a
principal, partner, employee, agent, consultant, shareholder (other than as a
holder, or a member of a group which is a holder, of not in excess of 1% of the
outstanding voting shares of any publicly traded company) or in any other
relationship or capacity, that is actively engaged in any geographic area in any
business which is in competition with the business of the Company.
b. Confidentiality. Without the prior written consent of the Company,
except to the extent required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency, Executive
shall not disclose any trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including data and
other information relating to members of the Board and management), operating
policies or manuals, business plans, financial records, packaging design or
other financial, commercial, business or technical information relating to the
Company or any of its subsidiaries or information designated as confidential or
proprietary that the Company or any of its subsidiaries may receive belonging to
suppliers, customers or others who do business with the Company or any of its
subsidiaries (collectively, "Confidential Information") to any third person
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of Executive's
breach of this Paragraph 6(b)).
c. Non-Solicitation of Employees. During the Employment Period and the two
year period following any termination of Executive's employment, Executive shall
not directly or indirectly solicit, encourage or induce any employee of the
Company or any of its subsidiaries to terminate employment with such entity, and
shall not directly or indirectly, either individually or as owner, agent,
employee, consultant or otherwise, employ or offer employment to any person who
is or was employed by the Company or a subsidiary thereof unless such person
shall have ceased to be employed by such entity for a period of at least six
months.
d. Company Property. Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company, and all copies thereof in Executive's
possession or under his control.
e. Injunctive Relief and Other Remedies with Respect to
Covenants. Executive acknowledges and agrees that the covenants and obligations
of Executive with respect to noncompetition, nonsolicitation, confidentiality
and Company property, relate to special, unique and extraordinary matters and
that a violation of any of the terms of such covenants and obligations will
cause the Company irreparable injury for which adequate remedies are not
available at law. Therefore, Executive agrees that the Company shall (i) be
entitled to an injunction, restraining order or such other equitable relief
(without the requirement to post bond) restraining Executive from committing any
violation of the covenants and obligations contained in this Paragraph 6 and
(ii) have no further obligation to make any payments to Executive hereunder
following any material violation of the covenants and obligations contained in
this Paragraph 6. These remedies are cumulative and are in addition to any other
rights and remedies the Company may have at law or in equity. In connection with
the foregoing provisions of this Paragraph 6, Executive represents that his
economic means and circumstances are such that such provisions will not prevent
him from providing for himself and his family on a basis satisfactory to him.
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<PAGE> 7
7. MISCELLANEOUS.
a. Survival. Paragraphs 5 (relating to early termination), 6 (relating to
noncompetition, nonsolicitation and confidentiality), 7(b) (relating to
arbitration), 7(c) (relating to legal fees) and 7(o) (relating to governing law)
shall survive the termination hereof.
b. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be resolved by binding arbitration. The arbitration
shall be held in the city of Auburn Hills, Michigan and except to the extent
inconsistent with this Agreement, shall be conducted in accordance with the
Voluntary Labor Arbitration Rules of the American Arbitration Association then
in effect at the time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and Executive. If the parties cannot
agree on an acceptable arbitrator, the dispute shall be heard by a panel of
three arbitrators one appointed by each of the parties and the third appointed
by the other two arbitrators.
c. Legal Fees and Expenses. If Executive shall prevail, in whole or in
part, as to any material issue in any contest (whether initiated by Executive or
by the Company) as to the validity, enforceability or interpretation of any
provision of this Agreement, the Company shall pay all reasonable expenses
incurred by Executive with respect to such contest, including, without
limitation, his reasonable attorney's fees.
d. Binding Effect. This Agreement shall be binding on, and shall inure to
the benefit of, the Company and any person or entity that succeeds to the
interest of the Company (regardless of whether such succession does or does not
occur by operation of law) by reason of the sale of all or a portion of the
Company's stock, a merger, consolidation or reorganization involving the Company
or, unless the Company otherwise elects in writing, a sale of the assets of the
business of the Company (or portion thereof) in which Executive performs a
majority of his services. This Agreement shall also inure to the benefit of
Executive's heirs, executors, administrators and legal representatives.
e. Assignment. Except as provided under Paragraph 7(d), neither this
Agreement nor any of the rights or obligations hereunder shall be assigned or
delegated by any party hereto without the prior written consent of the other
party.
f. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein. No
other agreement relating to the terms of Executive's employment by the Company,
oral or otherwise, shall be binding between the parties unless it is in writing
and signed by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the parties other
than those that are expressly contained herein. Executive acknowledges that he
is entering into this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it and its legal
consequences.
g. Severability; Reformation. In the event that one or more of the
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event that any
of the provisions of any of Paragraph 6(a), (b) or (c) is not enforceable in
accordance with its terms, Executive and the Company agree that such Paragraph
shall be reformed to make such Paragraph enforceable in a manner which provides
the Company the maximum rights permitted at law.
h. Waiver. Waiver by any party hereto of any breach or default by the other
party of any of the terms of this Agreement shall not operate as a waiver of any
other breach or default, whether similar to or different from the breach or
default waived. No waiver of any provision of this Agreement shall be implied
from any course of dealing between the parties hereto or from any failure by
either party hereto to assert its or his rights hereunder on any occasion or
series of occasions.
i. Notices. Any notice required or desired to be delivered under this
Agreement shall be in writing and shall be delivered personally, by courier
service, by registered mail, return receipt requested, or by telecopy and shall
be effective upon actual receipt by the party to which such notice shall be
directed, and shall be
7
<PAGE> 8
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):
If to the Company:
Chrysler Corporation
12000 Chrysler Drive
Highland Park, MI 48288-1919
Attention: Secretary
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence K. Cagney, Esq.
If to Executive:
The home address of Executive noted on the records of the Company
j. Amendments. This Agreement may not be altered, modified or amended
except by a written instrument signed by each of the parties hereto.
k. Change in Control Protection. Nothing contained herein shall be
construed to preclude the Company from providing Executive different or
additional severance benefits as a result of a change in control of the Company,
whether pursuant to an agreement that is in addition to, or as a supplement to,
this Agreement.
l. Headings. Headings to paragraphs in this Agreement are for the
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
m. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
n. Withholding. Any payments provided for herein shall be reduced by any
amounts required to be withheld by the Company from time to time under
applicable Federal, State or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
o. Governing Law. This Agreement shall be governed by the laws of the State
of Delaware, without reference to principles of conflicts or choice of law under
which the law of any other jurisdiction would apply.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and Executive has hereunto set his hand as of the
day and year first above written.
CHRYSLER CORPORATION
<TABLE>
<S> <C>
WITNESS:
[SIG] By: [SIG]
Kathleen Oswald
Vice President
Corporate Personnel
WITNESS:
[SIG] [SIG]
Robert J. Eaton
</TABLE>
8
<PAGE> 1
EXHIBIT 13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1995, by and between Chrysler
Corporation, a Delaware corporation (the "Company"), and Robert A. Lutz
("Executive").
WITNESSETH:
WHEREAS, the Company wishes to recognize the substantial services that
Executive has provided to the Company; and
WHEREAS, the Company desires that Executive continue to perform such
services and to enter into an agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, Executive desires to continue such employment and enter into such
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Executive hereby agree as follows:
1. EMPLOYMENT.
a. Agreement to Employ. Upon the terms and subject to the conditions of
this Agreement, the Company hereby agrees to continue to employ Executive and
Executive hereby agrees to continue his employment by the Company.
b. Term of Employment. Except as provided in Paragraph 5(a), the Company
shall employ Executive for the period commencing on June 1, 1995 (the
"Commencement Date") and ending on the earlier to occur of (i) February 28, 1997
and (ii) the date on which the Company terminates this Agreement because
Executive has been incapable of substantially fulfilling the positions, duties,
responsibilities and obligations set forth in this Agreement because of
physical, mental or emotional incapacity resulting from injury, sickness or
disease for a period of (A) at least four consecutive months or (B) more than
six months in any twelve month period. The period during which Executive is
employed pursuant to this Agreement shall be referred to as the "Employment
Period."
2. POSITION AND DUTIES.
During the Employment Period, Executive shall serve as President and Chief
Operating Officer of the Company or in such other position or positions as he
and the Company shall mutually agree. In addition, Executive shall serve in such
other position or positions with the Company and its subsidiaries commensurate
with his position and experience as the Chief Executive Officer or the Board of
Directors of the Company (the "Board") shall from time to time specify. During
the Employment Period, Executive shall have the duties, responsibilities and
obligations customarily assigned to individuals serving in the position or
positions in which Executive serves hereunder and such other duties,
responsibilities and obligations as the Chief Executive Officer or the Board
shall from time to time specify. Executive shall devote his full time to the
services required of him hereunder, except for vacation time and reasonable
periods of absence due to sickness, personal injury or other disability, and
shall use his best efforts, judgement, skill and energy to perform such services
in a manner consonant with the duties of his position and to improve and advance
the business and interests of the Company and its subsidiaries. Unless and to
the extent inconsistent with the terms of the Company's policy 1-10, as in
effect on the date hereof, nothing contained herein shall preclude Executive
from (i) serving on the board of directors of any business corporation with the
consent of the Board, (ii) serving on the board of, or working for, any
charitable or community organization or (iii) pursuing his personal financial
and legal affairs, so long as such activities, individually or collectively, do
not interfere with the performance of Executive's duties hereunder or violate
any of the provisions of Paragraph 6 hereof.
<PAGE> 2
3. COMPENSATION.
a. Base Salary. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate as in effect on May 31, 1995. The
annual base salary payable under this paragraph shall be reduced, however, to
the extent Executive elects to defer such salary under the terms of any deferred
compensation or savings plan or arrangement maintained or established by the
Company. The appropriate committee of the Board shall annually review
Executive's base salary in light of competitive practices, the base salaries
paid to other executive officers of the Company and the performance of Executive
and the Company, and may, in its discretion, increase such base salary by an
amount it determines to be appropriate. Any such increase shall not reduce or
limit any other obligation of the Company hereunder. Executive's base salary (as
set forth above or as may be increased from time to time) shall not be reduced,
other than pursuant to a cost-saving plan that includes all senior executives
and only if such reduction is proportionate to the reductions applicable to
other senior executives. Executive's annual base salary payable hereunder, as it
may be increased or reduced from time to time and without reduction for any
amounts deferred as described above, is referred to herein as "Base Salary." The
Company shall pay Executive the portion of his Base Salary not deferred not less
frequently than in equal monthly installments.
b. Annual Bonus. For each calendar year ending during the Employment
Period, Executive shall have the opportunity to receive an annual bonus ("Annual
Target Bonus Opportunity"), based on the achievement of target levels of
performance, equal to no less than 160% of his Base Salary. The actual bonus, if
any, payable for any such year shall be determined in accordance with the terms
of the Company's Incentive Compensation Plan or any successor annual incentive
plan (the "Annual Plan") based upon the performance of the Company and/or
Executive against target objectives established under such Annual Plan. Subject
to Executive's election to defer all or a portion of any annual bonus payable
hereunder pursuant to the terms of any deferred compensation or savings plan or
arrangement maintained or established by the Company, any annual bonus payable
under this Paragraph 3(b) shall be paid to Executive in accordance with the
terms of the Annual Plan.
c. Long-term Incentive Compensation. During the term of the Employment
Period, Executive shall participate in all of the Company's existing and future
long-term incentive compensation programs for key executives at a level
commensurate with his position at the Company and consistent with the Company's
then current policies and practices, as determined in good faith by the Board or
a committee thereof.
4. BENEFITS, PERQUISITES AND EXPENSES.
a. Benefits. During the Employment Period, Executive shall be eligible to
participate in (i) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each group life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, and (ii) each pension, retirement, deferred compensation
or savings plan sponsored or maintained by the Company, in each case, whether
now existing or established hereafter, to the extent that Executive is eligible
to participate in any such plan under the generally applicable provisions
thereof. Nothing in this Paragraph 4(a) shall limit the Company's right to amend
or terminate any such plan in accordance with the procedures set forth therein.
b. Perquisites. During the Employment Period, Executive shall be entitled
to at least four weeks' paid vacation annually and shall also be entitled to
receive such perquisites as are generally provided to other senior officers of
the Company in accordance with the then current policies and practices of the
Company, including, without limitation, eligibility to participate in the
Company's product evaluation program and leased car program and to receive one
Company furnished vehicle.
c. Business Expenses. During the Employment Period, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may require and
in accordance with the generally applicable policies and procedures of the
Company.
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<PAGE> 3
d. Indemnification. During the Employment Period, the Company shall
indemnify Executive and hold Executive harmless from and against any claim, loss
or cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive serves at the
request of the Company to the maximum extent permitted by applicable law and the
Company's Certificate of Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection afforded to Executive hereunder
be less than that afforded under the Governing Documents as in effect on the
Commencement Date.
5. TERMINATION OF EMPLOYMENT.
a. Early Termination of the Employment Period. Notwithstanding Paragraph
1(b), the Employment Period shall end upon the earliest to occur of (i) a
termination of Executive's employment on account of Executive's death, (ii) a
Termination for Cause, (iii) a Termination Without Cause or (iv) a Termination
for Good Reason.
b. Benefits Payable Upon Termination. Following the end of the Employment
Period pursuant to Paragraph 5(a), Executive (or, in the event of his death, his
surviving spouse, if any, or his estate) shall be paid the type or types of
compensation determined to be payable in accordance with the following table at
the times established pursuant to Paragraph 5(c):
<TABLE>
<CAPTION>
EARNED VESTED INCENTIVE SEVERANCE ADDITIONAL
SALARY BENEFITS COMPENSATION BENEFIT BENEFITS
-------- -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Not Not
Termination due to death Payable Payable Payable Payable Available
Not Not Not
Termination for Cause Payable Payable Payable Payable Available
Termination Without Cause Payable Payable Payable Payable Available
Termination for Good Reason Payable Payable Payable Payable Available
</TABLE>
c. Timing of Payments. Earned Salary shall be paid in cash in a single lump
sum as soon as practicable, but in no event more than 10 days, following the end
of the Employment Period. Incentive Compensation shall be payable at the same
time as similar awards are paid to other executives participating in the plans
under which the awards are payable. Vested Benefits shall be payable in
accordance with the terms of the plan, policy, practice, program, contract or
agreement (including, without limitation, the extension of the exercise period
of options under the Equity Documents (as defined below) following a termination
due to death or disability) under which such benefits have been awarded or
accrued except as otherwise expressly modified by this Agreement. Severance
Benefits shall be paid in a single lump sum cash payment as soon as practicable,
but in no event later than 10 days after the Executive's termination. Additional
Benefits shall be provided or made available at the times specified below as to
each such Additional Benefit.
d. Definitions. For purposes of Paragraphs 5 and 6, capitalized terms have
the following meanings:
"Additional Benefits" consists of the following rights and benefits:
(i) Executive (or, in the event of Executive's death during such
period, Executive's beneficiary or estate) shall have the right to exercise
any outstanding options to purchase shares of Common Stock of the Company
then exercisable by Executive or which would become exercisable in
accordance with the applicable option agreement and the applicable equity
incentive plan of the Company (such agreements and plans referred to
collectively as the "Equity Documents") for a period of one year after
Executive's termination of employment (or, if less, until the end of the
stated term of the option);
(ii) except as otherwise provided below, Executive (and, to the extent
applicable, his dependents) will be entitled to continue participation in
all of the Company's pension and welfare benefit plans (the "Benefit
Plans"), excluding any defined contribution plans, until the second
anniversary of Executive's termination of employment (the "End Date");
provided that Executive's participation in the Company's welfare benefit
plans shall cease on any earlier date that Executive becomes eligible for
comparable welfare benefits from a subsequent employer. To the extent any
such benefits cannot be provided under
3
<PAGE> 4
the terms of the applicable plan, policy or program, the Company shall
provide a comparable benefit under another plan or from the Company's
general assets. Executive's participation in the Benefit Plans will be on
the same terms and conditions that would have applied had Executive
continued to be employed by the Company through the End Date, except that
Executive shall cease to accrue all service for purposes of determining his
entitlement to, and the amount of, his pension benefits upon Executive's
commencement of receipt of benefits under any of the Company's pension
plans. Except as expressly provided above, Executive's vested right to
benefits under the Benefit Plans and the amount of such benefits shall be
determined based on Executive's age and service as though he had been
employed with the Company through the End Date;
(iii) for purposes of the Benefit Plans and the Equity Documents,
Executive will be deemed to have terminated employment under mutually
satisfactory conditions; and
(iv) Executive will be entitled to use of two Company-furnished
vehicles until the End Date on the same terms and conditions existing
immediately prior to his termination of employment with respect to his
Company-furnished vehicle.
"Earned Salary" means any Base Salary earned, but unpaid, for services
rendered to the Company on or prior to the date on which the Employment Period
ends pursuant to Paragraph 5(a)(other than Base Salary deferred pursuant to
Executive's election, as provided in Paragraph 3(a) or (b) hereof).
"Incentive Compensation" consists of the following:
(i) a pro-rated amount equal to the product of
(A) the amount Executive would have been entitled to receive under
Paragraph 3(b) for the calendar year in which his employment terminates
pursuant to Paragraph 5(a) had he remained employed for the entire year,
based upon actual Company performance results (but without regard to any
individual performance criteria), multiplied by
(B) a fraction, the numerator of which is equal to the number of
days in the calendar year of Executive's termination of employment which
have elapsed as of the date of such termination and the denominator of
which is 365; and
(ii) all outstanding long-term incentive compensation awards held by
Executive at the date of his termination, which shall be payable, if at
all, based upon actual Company performance results (but without regard to
any individual performance criteria) for the applicable performance period.
Any and all amounts treated as Incentive Compensation shall be taken into
account as incentive compensation, on the same terms as apply to other
executives, for purposes of determining the incentive compensation retirement
benefit payable to Executive under the Company's Supplemental Executive
Retirement Plan.
"Severance Benefit" means an amount equal to the product of:
(i) two, multiplied by
(ii) the sum of
(X) Executive's Base Salary and
(Y) an amount equal to the Annual Target Bonus Opportunity payable
under Paragraph 3(b) hereof for the calendar year in which Executive's
employment terminates.
"Termination for Cause" means a termination of Executive's employment by
the Company due to (i) Executive's conviction of a felony or (ii) Executive's
(A) willful and continued failure to perform the material duties of his
position, (B) willful and serious fraud against the Company or (C) material
breach of any provision of this Agreement which has had (or is expected to have)
a material adverse effect on the business of the Company or its subsidiaries.
Executive shall be permitted to respond and defend himself before the Board
within 30 days after delivery to Executive of written notification of any
proposed Termination for Cause which specifies in detail the reasons for such
termination. If the majority of the members of the Board
4
<PAGE> 5
(excluding Executive) do not confirm that the Company had grounds for a "Cause"
termination within 30 days after Executive has had his hearing before the Board,
Executive shall have the option of treating his employment as not having
terminated or as having been terminated pursuant to a Termination Without Cause.
"Termination for Good Reason" means a termination of Executive's employment
by Executive within 90 days following (i) a material diminution in Executive's
positions, duties and responsibilities from those described in Paragraph 2
hereof, (ii) the removal of Executive from, or the failure to re-elect Executive
as a member of, the Board, (iii) a reduction in Executive's annual Base Salary
(other than a reduction which is permitted under Paragraph 3(a)), (iv) a
material reduction in the aggregate value of the pension and welfare benefits
provided to Executive from those in effect as of the Commencement Date (other
than a reduction which is proportionate to the reductions applicable to other
senior executives pursuant to a cost-saving plan that includes all senior
executives) or (v) a material breach of any provision of this Agreement by the
Company. Notwithstanding the foregoing, a termination shall not be treated as a
Termination for Good Reason (i) if Executive shall have consented in writing to
the occurrence of the event giving rise to the claim of Termination for Good
Reason or (ii) unless Executive shall have delivered a written notice to the
Board within 30 days of his having actual knowledge of the occurrence of one of
such events stating that he intends to terminate his employment for Good Reason
and specifying the factual basis for such termination, and such event, if
capable of being cured, shall not have been cured within 30 days of the receipt
of such notice.
"Termination Without Cause" means any termination of Executive's employment
by the Company other than a Termination for Cause.
"Vested Benefits" means amounts which are vested or which Executive is
otherwise entitled to receive under the terms of or in accordance with any plan,
policy, practice or program of, or any contract or agreement with, the Company
or any of its subsidiaries, at or subsequent to the date of his termination
without regard to the performance by Executive of further services or the
resolution of a contingency.
e. Nondeductibility of Payments. Notwithstanding anything to the contrary
contained herein, any amounts payable to Executive pursuant to this Paragraph 5
that, if paid when otherwise provided under this Paragraph 5, would be
nondeductible by the Company under Section 162(m) of the Internal Revenue Code
of 1986, as amended, shall be paid to Executive on April 1 of the next following
taxable year, together with simple interest thereon at the 90-day United States
Treasury Bill rate as in effect from time to time during such period of
deferral.
f. Full Discharge of Company Obligations. Except as expressly provided in
the last sentence of this Paragraph 5(f), the amounts payable to Executive
pursuant to this Paragraph 5 following termination of his employment (including
amounts payable with respect to Vested Benefits) shall be in full and complete
satisfaction of Executive's rights under this Agreement and any other claims he
may have in respect of his employment by the Company or any of its subsidiaries.
Such amounts shall constitute liquidated damages with respect to any and all
such rights and claims and, upon Executive's receipt of such amounts, the
Company shall be released and discharged from any and all liability to Executive
in connection with this Agreement or otherwise in connection with Executive's
employment with the Company and its subsidiaries. Nothing in this Paragraph 5(f)
shall be construed to release the Company from its commitment to indemnify
Executive and hold Executive harmless from and against any claim, loss or cause
of action arising from or out of Executive's performance as an officer, director
or employee of the Company or any of its subsidiaries or in any other capacity,
including any fiduciary capacity, in which Executive served at the request of
the Company to the maximum extent permitted by applicable law and the Governing
Documents.
6. NONCOMPETITION AND CONFIDENTIALITY.
By and in consideration of the salary and benefits to be provided by the
Company hereunder, including the severance arrangements set forth herein,
Executive agrees that:
a. Noncompetition. During the Employment Period and during the one year
period (the "Restriction Period") following any termination of Executive's
employment, other than a Termination Without Cause or a Termination for Good
Reason, Executive shall not become associated with any entity, whether as a
principal,
5
<PAGE> 6
partner, employee, agent, consultant, shareholder (other than as a holder, or a
member of a group which is a holder, of not in excess of 1% of the outstanding
voting shares of any publicly traded company) or in any other relationship or
capacity, that is actively engaged in any geographic area in any business which
is in competition with the business of the Company.
b. Confidentiality. Without the prior written consent of the Company,
except to the extent required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency, Executive
shall not disclose any trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including data and
other information relating to members of the Board and management), operating
policies or manuals, business plans, financial records, packaging design or
other financial, commercial, business or technical information relating to the
Company or any of its subsidiaries or information designated as confidential or
proprietary that the Company or any of its subsidiaries may receive belonging to
suppliers, customers or others who do business with the Company or any of its
subsidiaries (collectively, "Confidential Information") to any third person
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of Executive's
breach of this Paragraph 6(b)).
c. Non-Solicitation of Employees. During the Employment Period and the two
year period following any termination of Executive's employment, Executive shall
not directly or indirectly solicit, encourage or induce any employee of the
Company or any of its subsidiaries to terminate employment with such entity, and
shall not directly or indirectly, either individually or as owner, agent,
employee, consultant or otherwise, employ or offer employment to any person who
is or was employed by the Company or a subsidiary thereof unless such person
shall have ceased to be employed by such entity for a period of at least six
months.
d. Company Property. Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company, and all copies thereof in Executive's
possession or under his control.
e. Injunctive Relief and Other Remedies with Respect to
Covenants. Executive acknowledges and agrees that the covenants and obligations
of Executive with respect to noncompetition, nonsolicitation, confidentiality
and Company property, relate to special, unique and extraordinary matters and
that a violation of any of the terms of such covenants and obligations will
cause the Company irreparable injury for which adequate remedies are not
available at law. Therefore, Executive agrees that the Company shall (i) be
entitled to an injunction, restraining order or such other equitable relief
(without the requirement to post bond) restraining Executive from committing any
violation of the covenants and obligations contained in this Paragraph 6 and
(ii) have no further obligation to make any payments to Executive hereunder
following any material violation of the covenants and obligations contained in
this Paragraph 6. These remedies are cumulative and are in addition to any other
rights and remedies the Company may have at law or in equity. In connection with
the foregoing provisions of this Paragraph 6, Executive represents that his
economic means and circumstances are such that such provisions will not prevent
him from providing for himself and his family on a basis satisfactory to him.
7. MISCELLANEOUS.
a. Survival. Paragraphs 5 (relating to early termination), 6 (relating to
noncompetition, nonsolicitation and confidentiality), 7(b) (relating to
arbitration), 7(c)(relating to legal fees) and 7(o) (relating to governing law)
shall survive the termination hereof.
b. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be resolved by binding arbitration. The arbitration
shall be held in the city of Auburn Hills, Michigan and except to the extent
inconsistent with this Agreement, shall be conducted in accordance with the
Voluntary Labor Arbitration Rules of the American Arbitration Association then
in effect at the time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and Executive. If the parties cannot
agree on an acceptable
6
<PAGE> 7
arbitrator, the dispute shall be heard by a panel of three arbitrators one
appointed by each of the parties and the third appointed by the other two
arbitrators.
c. Legal Fees and Expenses. If Executive shall prevail, in whole or in
part, as to any material issue in any contest (whether initiated by Executive or
by the Company) as to the validity, enforceability or interpretation of any
provision of this Agreement, the Company shall pay all reasonable expenses
incurred by Executive with respect to such contest, including, without
limitation, his reasonable attorney's fees.
d. Binding Effect. This Agreement shall be binding on, and shall inure to
the benefit of, the Company and any person or entity that succeeds to the
interest of the Company (regardless of whether such succession does or does not
occur by operation of law) by reason of the sale of all or a portion of the
Company's stock, a merger, consolidation or reorganization involving the Company
or, unless the Company otherwise elects in writing, a sale of the assets of the
business of the Company (or portion thereof) in which Executive performs a
majority of his services. This Agreement shall also inure to the benefit of
Executive's heirs, executors, administrators and legal representatives.
e. Assignment. Except as provided under Paragraph 7(d), neither this
Agreement nor any of the rights or obligations hereunder shall be assigned or
delegated by any party hereto without the prior written consent of the other
party.
f. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein. No
other agreement relating to the terms of Executive's employment by the Company,
oral or otherwise, shall be binding between the parties unless it is in writing
and signed by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the parties other
than those that are expressly contained herein. Executive acknowledges that he
is entering into this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it and its legal
consequences.
g. Severability; Reformation. In the event that one or more of the
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event that any
of the provisions of any of Paragraph 6(a), (b) or (c) is not enforceable in
accordance with its terms, Executive and the Company agree that such Paragraph
shall be reformed to make such Paragraph enforceable in a manner which provides
the Company the maximum rights permitted at law.
h. Waiver. Waiver by any party hereto of any breach or default by the other
party of any of the terms of this Agreement shall not operate as a waiver of any
other breach or default, whether similar to or different from the breach or
default waived. No waiver of any provision of this Agreement shall be implied
from any course of dealing between the parties hereto or from any failure by
either party hereto to assert its or his rights hereunder on any occasion or
series of occasions.
i. Notices. Any notice required or desired to be delivered under this
Agreement shall be in writing and shall be delivered personally, by courier
service, by registered mail, return receipt requested, or by telecopy and shall
be effective upon actual receipt by the party to which such notice shall be
directed, and shall be addressed as follows (or to such other address as the
party entitled to notice shall hereafter designate in accordance with the terms
hereof):
If to the Company:
Chrysler Corporation
12000 Chrysler Drive
Highland Park, MI 48288-1919
Attention: Secretary
7
<PAGE> 8
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence K. Cagney, Esq.
If to Executive:
The home address of Executive noted on the records of the Company
j. Amendments. This Agreement may not be altered, modified or amended
except by a written instrument signed by each of the parties hereto.
k. Change in Control Protection. Nothing contained herein shall be
construed to preclude the Company from providing Executive different or
additional severance benefits as a result of a change in control of the Company,
whether pursuant to an agreement that is in addition to, or as a supplement to,
this Agreement.
l. Headings. Headings to paragraphs in this Agreement are for the
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
m. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
n. Withholding. Any payments provided for herein shall be reduced by any
amounts required to be withheld by the Company from time to time under
applicable Federal, State or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
o. Governing Law. This Agreement shall be governed by the laws of the State
of Delaware, without reference to principles of conflicts or choice of law under
which the law of any other jurisdiction would apply.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and Executive has hereunto set his hand as of the
day and year first above written.
CHRYSLER CORPORATION
<TABLE>
<S> <C>
WITNESS:
[SIG] By: [SIG]
Kathleen Oswald
Vice President
Corporate Personnel
WITNESS:
[SIG] [SIG]
Robert A. Lutz
</TABLE>
8
<PAGE> 1
EXHIBIT 14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1995, by and between Chrysler
Corporation, a Delaware corporation (the "Company"), and Thomas G. Denomme
("Executive").
WITNESSETH:
WHEREAS, the Company wishes to recognize the substantial services that
Executive has provided to the Company; and
WHEREAS, the Company desires that Executive continue to perform such
services and to enter into an agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, Executive desires to continue such employment and enter into such
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Executive hereby agree as follows:
1. EMPLOYMENT.
a. Agreement to Employ. Upon the terms and subject to the conditions of
this Agreement, the Company hereby agrees to continue to employ Executive and
Executive hereby agrees to continue his employment by the Company.
b. Term of Employment. Except as provided in Paragraph 5(a), the Company
shall employ Executive for the period commencing on June 1, 1995 (the
"Commencement Date") and ending on the third anniversary of the Commencement
Date. At the expiration of the original term or any extended term, Executive's
employment hereunder shall be automatically extended, upon the same terms and
conditions, for successive periods of one year each, unless either party, at
least 90 days prior to the expiration of the original term or any extended term,
shall give written notice to the other of its intention not to renew such
employment. Notwithstanding the foregoing, the term of this Agreement shall
expire on the earlier to occur of (i) the last day of the month in which
Executive attains age 65 and (ii) the date on which the Company terminates this
Agreement because Executive has been incapable of substantially fulfilling the
positions, duties, responsibilities and obligations set forth in this Agreement
because of physical, mental or emotional incapacity resulting from injury,
sickness or disease for a period of (A) at least four consecutive months or (B)
more than six months in any twelve month period. The period during which
Executive is employed pursuant to this Agreement, including any extension
thereof in accordance with this Paragraph 1(b), shall be referred to as the
"Employment Period."
2. POSITION AND DUTIES.
During the Employment Period, Executive shall serve as Chief Administrative
Officer of the Company and Vice Chairman of the Board of Directors of the
Company (the "Board") or in such other position or positions as he and the Board
shall mutually agree. In addition, Executive shall serve in such other position
or positions with the Company and its subsidiaries commensurate with his
position and experience as the Chief Executive Officer or the Board shall from
time to time specify. During the Employment Period, Executive shall have the
duties, responsibilities and obligations customarily assigned to individuals
serving in the position or positions in which Executive serves hereunder and
such other duties, responsibilities and obligations as the Chief Executive
Officer or the Board shall from time to time specify. Executive shall devote his
full time to the services required of him hereunder, except for vacation time
and reasonable periods of absence due to sickness, personal injury or other
disability, and shall use his best efforts, judgement, skill and energy to
perform such services in a manner consonant with the duties of his position and
to improve and advance the business and interests of the Company and its
subsidiaries. Unless and to the extent inconsistent with the terms of the
Company's policy 1-10, as in effect on the date hereof, nothing contained herein
shall preclude
<PAGE> 2
Executive from (i) serving on the board of directors of any business corporation
with the consent of the Board, (ii) serving on the board of, or working for, any
charitable or community organization or (iii) pursuing his personal financial
and legal affairs, so long as such activities, individually or collectively, do
not interfere with the performance of Executive's duties hereunder or violate
any of the provisions of Paragraph 6 hereof.
3. COMPENSATION.
a. Base Salary. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate as in effect on May 31, 1995. The
annual base salary payable under this paragraph shall be reduced, however, to
the extent Executive elects to defer such salary under the terms of any deferred
compensation or savings plan or arrangement maintained or established by the
Company. The appropriate committee of the Board shall annually review
Executive's base salary in light of competitive practices, the base salaries
paid to other executive officers of the Company and the performance of Executive
and the Company, and may, in its discretion, increase such base salary by an
amount it determines to be appropriate. Any such increase shall not reduce or
limit any other obligation of the Company hereunder. Executive's base salary (as
set forth above or as may be increased from time to time) shall not be reduced,
other than pursuant to a cost-saving plan that includes all senior executives
and only if such reduction is proportionate to the reductions applicable to
other senior executives. Executive's annual base salary payable hereunder, as it
may be increased or reduced from time to time and without reduction for any
amounts deferred as described above, is referred to herein as "Base Salary." The
Company shall pay Executive the portion of his Base Salary not deferred not less
frequently than in equal monthly installments.
b. Annual Bonus. For each calendar year ending during the Employment
Period, Executive shall have the opportunity to receive an annual bonus ("Annual
Target Bonus Opportunity"), based on the achievement of target levels of
performance, equal to no less than 160% of his Base Salary. The actual bonus, if
any, payable for any such year shall be determined in accordance with the terms
of the Company's Incentive Compensation Plan or any successor annual incentive
plan (the "Annual Plan") based upon the performance of the Company and/or
Executive against target objectives established under such Annual Plan. Subject
to Executive's election to defer all or a portion of any annual bonus payable
hereunder pursuant to the terms of any deferred compensation or savings plan or
arrangement maintained or established by the Company, any annual bonus payable
under this Paragraph 3(b) shall be paid to Executive in accordance with the
terms of the Annual Plan.
c. Long-term Incentive Compensation. During the term of the Employment
Period, Executive shall participate in all of the Company's existing and future
long-term incentive compensation programs for key executives at a level
commensurate with his position at the Company and consistent with the Company's
then current policies and practices, as determined in good faith by the Board or
a committee thereof.
4. BENEFITS, PERQUISITES AND EXPENSES.
a. Benefits. During the Employment Period, Executive shall be eligible to
participate in (i) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each group life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, and (ii) each pension, retirement, deferred compensation
or savings plan sponsored or maintained by the Company, in each case, whether
now existing or established hereafter, to the extent that Executive is eligible
to participate in any such plan under the generally applicable provisions
thereof. Nothing in this Paragraph 4(a) shall limit the Company's right to amend
or terminate any such plan in accordance with the procedures set forth therein.
b. Perquisites. During the Employment Period, Executive shall be entitled
to at least four weeks' paid vacation annually and shall also be entitled to
receive such perquisites as are generally provided to other senior officers of
the Company in accordance with the then current policies and practices of the
Company, including, without limitation, eligibility to participate in the
Company's product evaluation program and leased car program and to receive one
Company furnished vehicle.
2
<PAGE> 3
c. Business Expenses. During the Employment Period, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may require and
in accordance with the generally applicable policies and procedures of the
Company.
d. Indemnification. During the Employment Period, the Company shall
indemnify Executive and hold Executive harmless from and against any claim, loss
or cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive serves at the
request of the Company to the maximum extent permitted by applicable law and the
Company's Certificate of Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection afforded to Executive hereunder
be less than that afforded under the Governing Documents as in effect on the
Commencement Date.
5. TERMINATION OF EMPLOYMENT.
a. Early Termination of the Employment Period. Notwithstanding Paragraph
1(b), the Employment Period shall end upon the earliest to occur of (i) a
termination of Executive's employment on account of Executive's death, (ii) a
Termination for Cause, (iii) a Termination Without Cause or (iv) a Termination
for Good Reason.
b. Benefits Payable Upon Termination. Following the end of the Employment
Period pursuant to Paragraph 5(a), Executive (or, in the event of his death, his
surviving spouse, if any, or his estate) shall be paid the type or types of
compensation determined to be payable in accordance with the following table at
the times established pursuant to Paragraph 5(c):
<TABLE>
<CAPTION>
EARNED VESTED INCENTIVE SEVERANCE ADDITIONAL
SALARY BENEFITS COMPENSATION BENEFIT BENEFITS
-------- -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Not Not
Termination due to death Payable Payable Payable Payable Available
Not Not Not
Termination for Cause Payable Payable Payable Payable Available
Termination Without Cause Payable Payable Payable Payable Available
Termination for Good Reason Payable Payable Payable Payable Available
</TABLE>
c. Timing of Payments. Earned Salary shall be paid in cash in a single lump
sum as soon as practicable, but in no event more than 10 days, following the end
of the Employment Period. Incentive Compensation shall be payable at the same
time as similar awards are paid to other executives participating in the plans
under which the awards are payable. Vested Benefits shall be payable in
accordance with the terms of the plan, policy, practice, program, contract or
agreement (including, without limitation, the extension of the exercise period
of options under the Equity Documents (as defined below) following a termination
due to death or disability) under which such benefits have been awarded or
accrued except as otherwise expressly modified by this Agreement. Severance
Benefits shall be paid in a single lump sum cash payment as soon as practicable,
but in no event later than 10 days after the Executive's termination. Additional
Benefits shall be provided or made available at the times specified below as to
each such Additional Benefit.
d. Definitions. For purposes of Paragraphs 5 and 6, capitalized terms have
the following meanings:
"Additional Benefits" consists of the following rights and benefits:
(i) Executive (or, in the event of Executive's death during such
period, Executive's beneficiary or estate) shall have the right to exercise
any outstanding options to purchase shares of Common Stock of the Company
then exercisable by Executive or which would become exercisable in
accordance with the applicable option agreement and the applicable equity
incentive plan of the Company (such agreements and plans referred to
collectively as the "Equity Documents") for a period of one year after
Executive's termination of employment (or, if less, until the end of the
stated term of the option);
3
<PAGE> 4
(ii) except as otherwise provided below, Executive (and, to the extent
applicable, his dependents) will be entitled to continue participation in
all of the Company's pension and welfare benefit plans (the "Benefit
Plans"), excluding any defined contribution plans, until the later of (A)
the second anniversary of Executive's termination of employment or (B) May
31, 1998 (the "End Date"); provided that Executive's participation in the
Company's welfare benefit plans shall cease on any earlier date that
Executive becomes eligible for comparable welfare benefits from a
subsequent employer. To the extent any such benefits cannot be provided
under the terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the Company's
general assets. Executive's participation in the Benefit Plans will be on
the same terms and conditions that would have applied had Executive
continued to be employed by the Company through the End Date, except that
Executive shall cease to accrue all service for purposes of determining his
entitlement to, and the amount of, his pension benefits upon Executive's
commencement of receipt of benefits under any of the Company's pension
plans. Except as expressly provided above, Executive's vested right to
benefits under the Benefit Plans and the amount of such benefits shall be
determined based on Executive's age and service as though he had been
employed with the Company through the End Date;
(iii) for purposes of the Benefit Plans and the Equity Documents,
Executive will be deemed to have terminated employment under mutually
satisfactory conditions; and
(iv) Executive will be entitled to use of two Company-furnished
vehicles until the End Date on the same terms and conditions existing
immediately prior to his termination of employment with respect to his
Company-furnished vehicle.
"Earned Salary" means any Base Salary earned, but unpaid, for services
rendered to the Company on or prior to the date on which the Employment Period
ends pursuant to Paragraph 5(a)(other than Base Salary deferred pursuant to
Executive's election, as provided in Paragraph 3(a) or (b) hereof).
"Incentive Compensation" consists of the following:
(i) a pro-rated amount equal to the product of
(A) the amount Executive would have been entitled to receive under
Paragraph 3(b) for the calendar year in which his employment terminates
pursuant to Paragraph 5(a) had he remained employed for the entire year,
based upon actual Company performance results (but without regard to any
individual performance criteria), multiplied by
(B) a fraction, the numerator of which is equal to the number of
days in the calendar year of Executive's termination of employment which
have elapsed as of the date of such termination and the denominator of
which is 365; and
(ii) all outstanding long-term incentive compensation awards held by
Executive at the date of his termination, which shall be payable, if at
all, based upon actual Company performance results (but without regard to
any individual performance criteria) for the applicable performance period.
Any and all amounts treated as Incentive Compensation shall be taken into
account as incentive compensation, on the same terms as apply to other
executives, for purposes of determining the incentive compensation retirement
benefit payable to Executive under the Company's Supplemental Executive
Retirement Plan.
"Severance Benefit" means an amount equal to the product of:
(i) the greater of
(A) two and
(B) a fraction, the numerator of which is the number of months
remaining in the Employment Period (determined assuming that
Executive's date of termination is a notice of nonrenewal for
purposes of Paragraph 1(b) as to all periods following such
termination) and the denominator of which is 12, multiplied by
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<PAGE> 5
(ii) the sum of
(X) Executive's Base Salary and
(Y) an amount equal to the Annual Target Bonus Opportunity payable
under Paragraph 3(b) hereof for the calendar year in which
Executive's employment terminates.
"Termination for Cause" means a termination of Executive's employment by
the Company due to (i) Executive's conviction of a felony or (ii) Executive's
(A) willful and continued failure to perform the material duties of his
position, (B) willful and serious fraud against the Company or (C) material
breach of any provision of this Agreement which has had (or is expected to have)
a material adverse effect on the business of the Company or its subsidiaries.
Executive shall be permitted to respond and defend himself before the Board
within 30 days after delivery to Executive of written notification of any
proposed Termination for Cause which specifies in detail the reasons for such
termination. If the majority of the members of the Board (excluding Executive)
do not confirm that the Company had grounds for a "Cause" termination within 30
days after Executive has had his hearing before the Board, Executive shall have
the option of treating his employment as not having terminated or as having been
terminated pursuant to a Termination Without Cause.
"Termination for Good Reason" means a termination of Executive's employment
by Executive within 90 days following (i) a material diminution in Executive's
positions, duties and responsibilities from those described in Paragraph 2
hereof, (ii) the removal of Executive from, or the failure to re-elect Executive
as a member of, the Board, (iii) a reduction in Executive's annual Base Salary
(other than a reduction which is permitted under Paragraph 3(a)), (iv) a
material reduction in the aggregate value of the pension and welfare benefits
provided to Executive from those in effect as of the Commencement Date or any
renewal date of this Agreement (other than a reduction which is proportionate to
the reductions applicable to other senior executives pursuant to a cost-saving
plan that includes all senior executives) or (v) a material breach of any
provision of this Agreement by the Company. Notwithstanding the foregoing, a
termination shall not be treated as a Termination for Good Reason (i) if
Executive shall have consented in writing to the occurrence of the event giving
rise to the claim of Termination for Good Reason or (ii) unless Executive shall
have delivered a written notice to the Board within 30 days of his having actual
knowledge of the occurrence of one of such events stating that he intends to
terminate his employment for Good Reason and specifying the factual basis for
such termination, and such event, if capable of being cured, shall not have been
cured within 30 days of the receipt of such notice.
"Termination Without Cause" means any termination of Executive's employment
by the Company other than a Termination for Cause.
"Vested Benefits" means amounts which are vested or which Executive is
otherwise entitled to receive under the terms of or in accordance with any plan,
policy, practice or program of, or any contract or agreement with, the Company
or any of its subsidiaries, at or subsequent to the date of his termination
without regard to the performance by Executive of further services or the
resolution of a contingency.
e. Nondeductibility of Payments. Notwithstanding anything to the contrary
contained herein, any amounts payable to Executive pursuant to this Paragraph 5
that, if paid when otherwise provided under this Paragraph 5, would be
nondeductible by the Company under Section 162(m) of the Internal Revenue Code
of 1986, as amended, shall be paid to Executive on April 1 of the next following
taxable year, together with simple interest thereon at the 90-day United States
Treasury Bill rate as in effect from time to time during such period of
deferral.
f. Full Discharge of Company Obligations. Except as expressly provided in
the last sentence of this Paragraph 5(f), the amounts payable to Executive
pursuant to this Paragraph 5 following termination of his employment (including
amounts payable with respect to Vested Benefits) shall be in full and complete
satisfaction of Executive's rights under this Agreement and any other claims he
may have in respect of his employment by the Company or any of its subsidiaries.
Such amounts shall constitute liquidated damages with respect to any and all
such rights and claims and, upon Executive's receipt of such amounts, the
Company shall be released and discharged from any and all liability to Executive
in connection with this Agreement or otherwise in connection with Executive's
employment with the Company and its subsidiaries. Nothing in this
5
<PAGE> 6
Paragraph 5(f) shall be construed to release the Company from its commitment to
indemnify Executive and hold Executive harmless from and against any claim, loss
or cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive served at the
request of the Company to the maximum extent permitted by applicable law and the
Governing Documents.
6. NONCOMPETITION AND CONFIDENTIALITY.
By and in consideration of the salary and benefits to be provided by the
Company hereunder, including the severance arrangements set forth herein,
Executive agrees that:
a. Noncompetition. During the Employment Period and during the one year
period (the "Restriction Period") following any termination of Executive's
employment, other than a Termination Without Cause or a Termination for Good
Reason, Executive shall not become associated with any entity, whether as a
principal, partner, employee, agent, consultant, shareholder (other than as a
holder, or a member of a group which is a holder, of not in excess of 1% of the
outstanding voting shares of any publicly traded company) or in any other
relationship or capacity, that is actively engaged in any geographic area in any
business which is in competition with the business of the Company.
b. Confidentiality. Without the prior written consent of the Company,
except to the extent required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency, Executive
shall not disclose any trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including data and
other information relating to members of the Board and management), operating
policies or manuals, business plans, financial records, packaging design or
other financial, commercial, business or technical information relating to the
Company or any of its subsidiaries or information designated as confidential or
proprietary that the Company or any of its subsidiaries may receive belonging to
suppliers, customers or others who do business with the Company or any of its
subsidiaries (collectively, "Confidential Information") to any third person
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of Executive's
breach of this Paragraph 6(b)).
c. Non-Solicitation of Employees. During the Employment Period and the two
year period following any termination of Executive's employment, Executive shall
not directly or indirectly solicit, encourage or induce any employee of the
Company or any of its subsidiaries to terminate employment with such entity, and
shall not directly or indirectly, either individually or as owner, agent,
employee, consultant or otherwise, employ or offer employment to any person who
is or was employed by the Company or a subsidiary thereof unless such person
shall have ceased to be employed by such entity for a period of at least six
months.
d. Company Property. Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company, and all copies thereof in Executive's
possession or under his control.
e. Injunctive Relief and Other Remedies with Respect to
Covenants. Executive acknowledges and agrees that the covenants and obligations
of Executive with respect to noncompetition, nonsolicitation, confidentiality
and Company property, relate to special, unique and extraordinary matters and
that a violation of any of the terms of such covenants and obligations will
cause the Company irreparable injury for which adequate remedies are not
available at law. Therefore, Executive agrees that the Company shall (i) be
entitled to an injunction, restraining order or such other equitable relief
(without the requirement to post bond) restraining Executive from committing any
violation of the covenants and obligations contained in this Paragraph 6 and
(ii) have no further obligation to make any payments to Executive hereunder
following any material violation of the covenants and obligations contained in
this Paragraph 6. These remedies are cumulative and are in addition to any other
rights and remedies the Company may have at law or in equity. In connection with
the foregoing provisions of this Paragraph 6, Executive represents that his
economic means and circumstances are such that such provisions will not prevent
him from providing for himself and his family on a basis satisfactory to him.
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<PAGE> 7
7. MISCELLANEOUS.
a. Survival. Paragraphs 5 (relating to early termination), 6 (relating to
noncompetition, nonsolicitation and confidentiality), 7(b) (relating to
arbitration), 7(c) (relating to legal fees) and 7(o) (relating to governing law)
shall survive the termination hereof.
b. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be resolved by binding arbitration. The arbitration
shall be held in the city of Auburn Hills, Michigan and except to the extent
inconsistent with this Agreement, shall be conducted in accordance with the
Voluntary Labor Arbitration Rules of the American Arbitration Association then
in effect at the time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and Executive. If the parties cannot
agree on an acceptable arbitrator, the dispute shall be heard by a panel of
three arbitrators one appointed by each of the parties and the third appointed
by the other two arbitrators.
c. Legal Fees and Expenses. If Executive shall prevail, in whole or in
part, as to any material issue in any contest (whether initiated by Executive or
by the Company) as to the validity, enforceability or interpretation of any
provision of this Agreement, the Company shall pay all reasonable expenses
incurred by Executive with respect to such contest, including, without
limitation, his reasonable attorney's fees.
d. Binding Effect. This Agreement shall be binding on, and shall inure to
the benefit of, the Company and any person or entity that succeeds to the
interest of the Company (regardless of whether such succession does or does not
occur by operation of law) by reason of the sale of all or a portion of the
Company's stock, a merger, consolidation or reorganization involving the Company
or, unless the Company otherwise elects in writing, a sale of the assets of the
business of the Company (or portion thereof) in which Executive performs a
majority of his services. This Agreement shall also inure to the benefit of
Executive's heirs, executors, administrators and legal representatives.
e. Assignment. Except as provided under Paragraph 7(d), neither this
Agreement nor any of the rights or obligations hereunder shall be assigned or
delegated by any party hereto without the prior written consent of the other
party.
f. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein. No
other agreement relating to the terms of Executive's employment by the Company,
oral or otherwise, shall be binding between the parties unless it is in writing
and signed by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the parties other
than those that are expressly contained herein. Executive acknowledges that he
is entering into this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it and its legal
consequences.
g. Severability; Reformation. In the event that one or more of the
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event that any
of the provisions of any of Paragraph 6(a), (b) or (c) is not enforceable in
accordance with its terms, Executive and the Company agree that such Paragraph
shall be reformed to make such Paragraph enforceable in a manner which provides
the Company the maximum rights permitted at law.
h. Waiver. Waiver by any party hereto of any breach or default by the other
party of any of the terms of this Agreement shall not operate as a waiver of any
other breach or default, whether similar to or different from the breach or
default waived. No waiver of any provision of this Agreement shall be implied
from any course of dealing between the parties hereto or from any failure by
either party hereto to assert its or his rights hereunder on any occasion or
series of occasions.
i. Notices. Any notice required or desired to be delivered under this
Agreement shall be in writing and shall be delivered personally, by courier
service, by registered mail, return receipt requested, or by telecopy and shall
be effective upon actual receipt by the party to which such notice shall be
directed, and shall be
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<PAGE> 8
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):
If to the Company:
Chrysler Corporation
12000 Chrysler Drive
Highland Park, MI 48288-1919
Attention: Secretary
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence K. Cagney, Esq.
If to Executive:
The home address of Executive noted on the records of the Company
j. Amendments. This Agreement may not be altered, modified or amended
except by a written instrument signed by each of the parties hereto.
k. Change in Control Protection. Nothing contained herein shall be
construed to preclude the Company from providing Executive different or
additional severance benefits as a result of a change in control of the Company,
whether pursuant to an agreement that is in addition to, or as a supplement to,
this Agreement.
l. Headings. Headings to paragraphs in this Agreement are for the
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
m. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
n. Withholding. Any payments provided for herein shall be reduced by any
amounts required to be withheld by the Company from time to time under
applicable Federal, State or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
o. Governing Law. This Agreement shall be governed by the laws of the State
of Delaware, without reference to principles of conflicts or choice of law under
which the law of any other jurisdiction would apply.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and Executive has hereunto set his hand as of the
day and year first above written.
CHRYSLER CORPORATION
WITNESS:
[SIG] By: [SIG]
Kathleen Oswald
Vice President
Corporate Personnel
WITNESS:
[SIG] [SIG]
Thomas G. Denomme
8
<PAGE> 1
EXHIBIT 15
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1995, by and between Chrysler
Corporation, a Delaware corporation (the "Company"), and Gary C. Valade
("Executive").
WITNESSETH:
WHEREAS, the Company wishes to recognize the substantial services that
Executive has provided to the Company; and
WHEREAS, the Company desires that Executive continue to perform such
services and to enter into an agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, Executive desires to continue such employment and enter into such
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Company and Executive hereby agree as follows:
1. EMPLOYMENT.
a. Agreement to Employ. Upon the terms and subject to the conditions of
this Agreement, the Company hereby agrees to continue to employ Executive and
Executive hereby agrees to continue his employment by the Company.
b. Term of Employment. Except as provided in Paragraph 5(a), the Company
shall employ Executive for the period commencing on June 1, 1995 (the
"Commencement Date") and ending on the third anniversary of the Commencement
Date. At the expiration of the original term or any extended term, Executive's
employment hereunder shall be automatically extended, upon the same terms and
conditions, for successive periods of one year each, unless either party, at
least 90 days prior to the expiration of the original term or any extended term,
shall give written notice to the other of its intention not to renew such
employment. Notwithstanding the foregoing, the term of this Agreement shall
expire on the earlier to occur of (i) the last day of the month in which
Executive attains age 65 and (ii) the date on which the Company terminates this
Agreement because Executive has been incapable of substantially fulfilling the
positions, duties, responsibilities and obligations set forth in this Agreement
because of physical, mental or emotional incapacity resulting from injury,
sickness or disease for a period of (A) at least four consecutive months or (B)
more than six months in any twelve month period. The period during which
Executive is employed pursuant to this Agreement, including any extension
thereof in accordance with this Paragraph 1(b), shall be referred to as the
"Employment Period."
2. POSITION AND DUTIES.
During the Employment Period, Executive shall serve as Executive Vice
President and Chief Financial Officer of the Company or in such other position
or positions as he and the Company shall mutually agree. In addition, Executive
shall serve in such other position or positions with the Company and its
subsidiaries commensurate with his position and experience as the Chief
Executive Officer or the Board of Directors of the Company (the "Board") shall
from time to time specify. During the Employment Period, Executive shall have
the duties, responsibilities and obligations customarily assigned to individuals
serving in the position or positions in which Executive serves hereunder and
such other duties, responsibilities and obligations as the Chief Executive
Officer or the Board shall from time to time specify. Executive shall devote his
full time to the services required of him hereunder, except for vacation time
and reasonable periods of absence due to sickness, personal injury or other
disability, and shall use his best efforts, judgement, skill and energy to
perform such services in a manner consonant with the duties of his position and
to improve and advance the business and interests of the Company and its
subsidiaries. Unless and to the extent inconsistent with the terms of the
Company's policy 1-10, as in effect on the date hereof, nothing contained herein
shall preclude
<PAGE> 2
Executive from (i) serving on the board of directors of any business corporation
with the consent of the Board, (ii) serving on the board of, or working for, any
charitable or community organization or (iii) pursuing his personal financial
and legal affairs, so long as such activities, individually or collectively, do
not interfere with the performance of Executive's duties hereunder or violate
any of the provisions of Paragraph 6 hereof.
3. COMPENSATION.
a. Base Salary. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate as in effect on May 31, 1995. The
annual base salary payable under this paragraph shall be reduced, however, to
the extent Executive elects to defer such salary under the terms of any deferred
compensation or savings plan or arrangement maintained or established by the
Company. The appropriate committee of the Board shall annually review
Executive's base salary in light of competitive practices, the base salaries
paid to other executive officers of the Company and the performance of Executive
and the Company, and may, in its discretion, increase such base salary by an
amount it determines to be appropriate. Any such increase shall not reduce or
limit any other obligation of the Company hereunder. Executive's base salary (as
set forth above or as may be increased from time to time) shall not be reduced,
other than pursuant to a cost-saving plan that includes all senior executives
and only if such reduction is proportionate to the reductions applicable to
other senior executives. Executive's annual base salary payable hereunder, as it
may be increased or reduced from time to time and without reduction for any
amounts deferred as described above, is referred to herein as "Base Salary." The
Company shall pay Executive the portion of his Base Salary not deferred not less
frequently than in equal monthly installments.
b. Annual Bonus. For each calendar year ending during the Employment
Period, Executive shall have the opportunity to receive an annual bonus ("Annual
Target Bonus Opportunity"), based on the achievement of target levels of
performance, equal to no less than 160% of his Base Salary. The actual bonus, if
any, payable for any such year shall be determined in accordance with the terms
of the Company's Incentive Compensation Plan or any successor annual incentive
plan (the "Annual Plan") based upon the performance of the Company and/or
Executive against target objectives established under such Annual Plan. Subject
to Executive's election to defer all or a portion of any annual bonus payable
hereunder pursuant to the terms of any deferred compensation or savings plan or
arrangement maintained or established by the Company, any annual bonus payable
under this Paragraph 3(b) shall be paid to Executive in accordance with the
terms of the Annual Plan.
c. Long-term Incentive Compensation. During the term of the Employment
Period, Executive shall participate in all of the Company's existing and future
long-term incentive compensation programs for key executives at a level
commensurate with his position at the Company and consistent with the Company's
then current policies and practices, as determined in good faith by the Board or
a committee thereof.
4. BENEFITS, PERQUISITES AND EXPENSES.
a. Benefits. During the Employment Period, Executive shall be eligible to
participate in (i) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each group life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, and (ii) each pension, retirement, deferred compensation
or savings plan sponsored or maintained by the Company, in each case, whether
now existing or established hereafter, to the extent that Executive is eligible
to participate in any such plan under the generally applicable provisions
thereof. Nothing in this Paragraph 4(a) shall limit the Company's right to amend
or terminate any such plan in accordance with the procedures set forth therein.
b. Perquisites. During the Employment Period, Executive shall be entitled
to at least five weeks' paid vacation annually and shall also be entitled to
receive such perquisites as are generally provided to other senior officers of
the Company in accordance with the then current policies and practices of the
Company, including, without limitation, eligibility to participate in the
Company's product evaluation program and leased car program and to receive one
Company furnished vehicle.
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<PAGE> 3
c. Business Expenses. During the Employment Period, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may require and
in accordance with the generally applicable policies and procedures of the
Company.
d. Indemnification. During the Employment Period, the Company shall
indemnify Executive and hold Executive harmless from and against any claim, loss
or cause of action arising from or out of Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any other
capacity, including any fiduciary capacity, in which Executive serves at the
request of the Company to the maximum extent permitted by applicable law and the
Company's Certificate of Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection afforded to Executive hereunder
be less than that afforded under the Governing Documents as in effect on the
Commencement Date.
5. TERMINATION OF EMPLOYMENT.
a. Early Termination of the Employment Period. Notwithstanding Paragraph
1(b), the Employment Period shall end upon the earliest to occur of (i) a
termination of Executive's employment on account of Executive's death, (ii) a
Termination for Cause, (iii) a Termination Without Cause or (iv) a Termination
for Good Reason.
b. Benefits Payable Upon Termination. Following the end of the Employment
Period pursuant to Paragraph 5(a), Executive (or, in the event of his death, his
surviving spouse, if any, or his estate) shall be paid the type or types of
compensation determined to be payable in accordance with the following table at
the times established pursuant to Paragraph 5(c):
<TABLE>
<CAPTION>
EARNED VESTED INCENTIVE SEVERANCE ADDITIONAL
SALARY BENEFITS COMPENSATION BENEFIT BENEFITS
-------- -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Not Not
Termination due to death Payable Payable Payable Payable Available
Not Not Not
Termination for Cause Payable Payable Payable Payable Available
Termination Without Cause Payable Payable Payable Payable Available
Termination for Good Reason Payable Payable Payable Payable Available
</TABLE>
c. Timing of Payments. Earned Salary shall be paid in cash in a single lump
sum as soon as practicable, but in no event more than 10 days, following the end
of the Employment Period. Incentive Compensation shall be payable at the same
time as similar awards are paid to other executives participating in the plans
under which the awards are payable. Vested Benefits shall be payable in
accordance with the terms of the plan, policy, practice, program, contract or
agreement (including, without limitation, the extension of the exercise period
of options under the Equity Documents (as defined below) following a termination
due to death or disability) under which such benefits have been awarded or
accrued except as otherwise expressly modified by this Agreement. Severance
Benefits shall be paid in a single lump sum cash payment as soon as practicable,
but in no event later than 10 days after the Executive's termination. Additional
Benefits shall be provided or made available at the times specified below as to
each such Additional Benefit.
d. Definitions. For purposes of Paragraphs 5 and 6, capitalized terms have
the following meanings:
"Additional Benefits" consists of the following rights and benefits:
(i) Executive (or, in the event of Executive's death during such
period, Executive's beneficiary or estate) shall have the right to exercise
any outstanding options to purchase shares of Common Stock of the Company
then exercisable by Executive or which would become exercisable in
accordance with the applicable option agreement and the applicable equity
incentive plan of the Company (such agreements and plans referred to
collectively as the "Equity Documents") for a period of one year after
Executive's termination of employment (or, if less, until the end of the
stated term of the option);
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<PAGE> 4
(ii) except as otherwise provided below, Executive (and, to the extent
applicable, his dependents) will be entitled to continue participation in
all of the Company's pension and welfare benefit plans (the "Benefit
Plans"), excluding any defined contribution plans, until the later of (A)
the second anniversary of Executive's termination of employment or (B) May
31, 1998 (the "End Date"); provided that Executive's participation in the
Company's welfare benefit plans shall cease on any earlier date that
Executive becomes eligible for comparable welfare benefits from a
subsequent employer. To the extent any such benefits cannot be provided
under the terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the Company's
general assets. Executive's participation in the Benefit Plans will be on
the same terms and conditions that would have applied had Executive
continued to be employed by the Company through the End Date, except that
Executive shall cease to accrue all service for purposes of determining his
entitlement to, and the amount of, his pension benefits upon Executive's
commencement of receipt of benefits under any of the Company's pension
plans. Except as expressly provided above, Executive's vested right to
benefits under the Benefit Plans and the amount of such benefits shall be
determined based on Executive's age and service as though he had been
employed with the Company through the End Date;
(iii) for purposes of the Benefit Plans and the Equity Documents,
Executive will be deemed to have terminated employment under mutually
satisfactory conditions; and
(iv) Executive will be entitled to use of two Company-furnished
vehicles until the End Date on the same terms and conditions existing
immediately prior to his termination of employment with respect to his
Company-furnished vehicle.
"Earned Salary" means any Base Salary earned, but unpaid, for services
rendered to the Company on or prior to the date on which the Employment Period
ends pursuant to Paragraph 5(a)(other than Base Salary deferred pursuant to
Executive's election, as provided in Paragraph 3(a) or (b) hereof).
"Incentive Compensation" consists of the following:
(i) a pro-rated amount equal to the product of
(A) the amount Executive would have been entitled to receive
under Paragraph 3(b) for the calendar year in which his employment
terminates pursuant to Paragraph 5(a) had he remained employed for
the entire year, based upon actual Company performance results (but
without regard to any individual performance criteria), multiplied
by
(B) a fraction, the numerator of which is equal to the number
of days in the calendar year of Executive's termination of
employment which have elapsed as of the date of such termination and
the denominator of which is 365; and
(ii) all outstanding long-term incentive compensation awards held by
Executive at the date of his termination, which shall be payable, if at
all, based upon actual Company performance results (but without regard to
any individual performance criteria) for the applicable performance period.
Any and all amounts treated as Incentive Compensation shall be taken into
account as incentive compensation, on the same terms as apply to other
executives, for purposes of determining the incentive compensation retirement
benefit payable to Executive under the Company's Supplemental Executive
Retirement Plan.
"Severance Benefit" means an amount equal to the product of:
(i) the greater of
(A) two and
(B) a fraction, the numerator of which is the number of months
remaining in the Employment Period (determined assuming that Executive's
date of termination is a notice of nonrenewal for purposes of Paragraph
1(b) as to all periods following such termination) and the denominator
of which is 12, multiplied by
4
<PAGE> 5
(ii) the sum of
(X) Executive's Base Salary and
(Y) an amount equal to the Annual Target Bonus Opportunity payable
under Paragraph 3(b) hereof for the calendar year in which Executive's
employment terminates.
"Termination for Cause" means a termination of Executive's employment by
the Company due to (i) Executive's conviction of a felony or (ii) Executive's
(A) willful and continued failure to perform the material duties of his
position, (B) willful and serious fraud against the Company or (C) material
breach of any provision of this Agreement which has had (or is expected to have)
a material adverse effect on the business of the Company or its subsidiaries.
Executive shall be permitted to respond and defend himself before the Board
within 30 days after delivery to Executive of written notification of any
proposed Termination for Cause which specifies in detail the reasons for such
termination. If the majority of the members of the Board do not confirm that the
Company had grounds for a "Cause" termination within 30 days after Executive has
had his hearing before the Board, Executive shall have the option of treating
his employment as not having terminated or as having been terminated pursuant to
a Termination Without Cause.
"Termination for Good Reason" means a termination of Executive's employment
by Executive within 90 days following (i) a material diminution in Executive's
positions, duties and responsibilities from those described in Paragraph 2
hereof, (ii) a reduction in Executive's annual Base Salary (other than a
reduction which is permitted under Paragraph 3(a)), (iii) a material reduction
in the aggregate value of the pension and welfare benefits provided to Executive
from those in effect as of the Commencement Date or any renewal date of this
Agreement (other than a reduction which is proportionate to the reductions
applicable to other senior executives pursuant to a cost-saving plan that
includes all senior executives) or (iv) a material breach of any provision of
this Agreement by the Company. Notwithstanding the foregoing, a termination
shall not be treated as a Termination for Good Reason (i) if Executive shall
have consented in writing to the occurrence of the event giving rise to the
claim of Termination for Good Reason or (ii) unless Executive shall have
delivered a written notice to the Board within 30 days of his having actual
knowledge of the occurrence of one of such events stating that he intends to
terminate his employment for Good Reason and specifying the factual basis for
such termination, and such event, if capable of being cured, shall not have been
cured within 30 days of the receipt of such notice.
"Termination Without Cause" means any termination of Executive's employment
by the Company other than a Termination for Cause.
"Vested Benefits" means amounts which are vested or which Executive is
otherwise entitled to receive under the terms of or in accordance with any plan,
policy, practice or program of, or any contract or agreement with, the Company
or any of its subsidiaries, at or subsequent to the date of his termination
without regard to the performance by Executive of further services or the
resolution of a contingency.
e. Nondeductibility of Payments. Notwithstanding anything to the contrary
contained herein, any amounts payable to Executive pursuant to this Paragraph 5
that, if paid when otherwise provided under this Paragraph 5, would be
nondeductible by the Company under Section 162(m) of the Internal Revenue Code
of 1986, as amended, shall be paid to Executive on April 1 of the next following
taxable year, together with simple interest thereon at the 90-day United States
Treasury Bill rate as in effect from time to time during such period of
deferral.
f. Full Discharge of Company Obligations. Except as expressly provided in
the last sentence of this Paragraph 5(f), the amounts payable to Executive
pursuant to this Paragraph 5 following termination of his employment (including
amounts payable with respect to Vested Benefits) shall be in full and complete
satisfaction of Executive's rights under this Agreement and any other claims he
may have in respect of his employment by the Company or any of its subsidiaries.
Such amounts shall constitute liquidated damages with respect to any and all
such rights and claims and, upon Executive's receipt of such amounts, the
Company shall be released and discharged from any and all liability to Executive
in connection with this Agreement or otherwise in connection with Executive's
employment with the Company and its subsidiaries. Nothing in this Paragraph 5(f)
shall be construed to release the Company from its commitment to indemnify
Executive and
5
<PAGE> 6
hold Executive harmless from and against any claim, loss or cause of action
arising from or out of Executive's performance as an officer, director or
employee of the Company or any of its subsidiaries or in any other capacity,
including any fiduciary capacity, in which Executive served at the request of
the Company to the maximum extent permitted by applicable law and the Governing
Documents.
6. NONCOMPETITION AND CONFIDENTIALITY.
By and in consideration of the salary and benefits to be provided by the
Company hereunder, including the severance arrangements set forth herein,
Executive agrees that:
a. Noncompetition. During the Employment Period and during the one year
period (the "Restriction Period") following any termination of Executive's
employment, other than a Termination Without Cause or a Termination for Good
Reason, Executive shall not become associated with any entity, whether as a
principal, partner, employee, agent, consultant, shareholder (other than as a
holder, or a member of a group which is a holder, of not in excess of 1% of the
outstanding voting shares of any publicly traded company) or in any other
relationship or capacity, that is actively engaged in any geographic area in any
business which is in competition with the business of the Company.
b. Confidentiality. Without the prior written consent of the Company,
except to the extent required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency, Executive
shall not disclose any trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including data and
other information relating to members of the Board and management), operating
policies or manuals, business plans, financial records, packaging design or
other financial, commercial, business or technical information relating to the
Company or any of its subsidiaries or information designated as confidential or
proprietary that the Company or any of its subsidiaries may receive belonging to
suppliers, customers or others who do business with the Company or any of its
subsidiaries (collectively, "Confidential Information") to any third person
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of Executive's
breach of this Paragraph 6(b)).
c. Non-Solicitation of Employees. During the Employment Period and the two
year period following any termination of Executive's employment, Executive shall
not directly or indirectly solicit, encourage or induce any employee of the
Company or any of its subsidiaries to terminate employment with such entity, and
shall not directly or indirectly, either individually or as owner, agent,
employee, consultant or otherwise, employ or offer employment to any person who
is or was employed by the Company or a subsidiary thereof unless such person
shall have ceased to be employed by such entity for a period of at least six
months.
d. Company Property. Except as expressly provided herein, promptly
following Executive's termination of employment, Executive shall return to the
Company all property of the Company, and all copies thereof in Executive's
possession or under his control.
e. Injunctive Relief and Other Remedies with Respect to Covenants.
Executive acknowledges and agrees that the covenants and obligations of
Executive with respect to noncompetition, nonsolicitation, confidentiality
and Company property, relate to special, unique and extraordinary matters and
that a violation of any of the terms of such covenants and obligations will
cause the Company irreparable injury for which adequate remedies are not
available at law. Therefore, Executive agrees that the Company shall (i) be
entitled to an injunction, restraining order or such other equitable relief
(without the requirement to post bond) restraining Executive from committing any
violation of the covenants and obligations contained in this Paragraph 6 and
(ii) have no further obligation to make any payments to Executive hereunder
following any material violation of the covenants and obligations contained in
this Paragraph 6. These remedies are cumulative and are in addition to any other
rights and remedies the Company may have at law or in equity. In connection with
the foregoing provisions of this Paragraph 6, Executive represents that his
economic means and circumstances are such that such provisions will not prevent
him from providing for himself and his family on a basis satisfactory to him.
6
<PAGE> 7
7. MISCELLANEOUS.
a. Survival. Paragraphs 5 (relating to early termination), 6 (relating to
noncompetition, nonsolicitation and confidentiality), 7(b) (relating to
arbitration), 7(c) (relating to legal fees) and 7(o) (relating to governing law)
shall survive the termination hereof.
b. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be resolved by binding arbitration. The arbitration
shall be held in the city of Auburn Hills, Michigan and except to the extent
inconsistent with this Agreement, shall be conducted in accordance with the
Voluntary Labor Arbitration Rules of the American Arbitration Association then
in effect at the time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and Executive. If the parties cannot
agree on an acceptable arbitrator, the dispute shall be heard by a panel of
three arbitrators one appointed by each of the parties and the third appointed
by the other two arbitrators.
c. Legal Fees and Expenses. If Executive shall prevail, in whole or in
part, as to any material issue in any contest (whether initiated by Executive or
by the Company) as to the validity, enforceability or interpretation of any
provision of this Agreement, the Company shall pay all reasonable expenses
incurred by Executive with respect to such contest, including, without
limitation, his reasonable attorney's fees.
d. Binding Effect. This Agreement shall be binding on, and shall inure to
the benefit of, the Company and any person or entity that succeeds to the
interest of the Company (regardless of whether such succession does or does not
occur by operation of law) by reason of the sale of all or a portion of the
Company's stock, a merger, consolidation or reorganization involving the Company
or, unless the Company otherwise elects in writing, a sale of the assets of the
business of the Company (or portion thereof) in which Executive performs a
majority of his services. This Agreement shall also inure to the benefit of
Executive's heirs, executors, administrators and legal representatives.
e. Assignment. Except as provided under Paragraph 7(d), neither this
Agreement nor any of the rights or obligations hereunder shall be assigned or
delegated by any party hereto without the prior written consent of the other
party.
f. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein. No
other agreement relating to the terms of Executive's employment by the Company,
oral or otherwise, shall be binding between the parties unless it is in writing
and signed by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the parties other
than those that are expressly contained herein. Executive acknowledges that he
is entering into this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it and its legal
consequences.
g. Severability; Reformation. In the event that one or more of the
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event that any
of the provisions of any of Paragraph 6(a), (b) or (c) is not enforceable in
accordance with its terms, Executive and the Company agree that such Paragraph
shall be reformed to make such Paragraph enforceable in a manner which provides
the Company the maximum rights permitted at law.
h. Waiver. Waiver by any party hereto of any breach or default by the other
party of any of the terms of this Agreement shall not operate as a waiver of any
other breach or default, whether similar to or different from the breach or
default waived. No waiver of any provision of this Agreement shall be implied
from any course of dealing between the parties hereto or from any failure by
either party hereto to assert its or his rights hereunder on any occasion or
series of occasions.
i. Notices. Any notice required or desired to be delivered under this
Agreement shall be in writing and shall be delivered personally, by courier
service, by registered mail, return receipt requested, or by telecopy and shall
be effective upon actual receipt by the party to which such notice shall be
directed, and shall be
7
<PAGE> 8
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):
If to the Company:
Chrysler Corporation
12000 Chrysler Drive
Highland Park, MI 48288-1919
Attention: Secretary
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Lawrence K. Cagney, Esq.
If to Executive:
The home address of Executive noted on the records of the Company
j. Amendments. This Agreement may not be altered, modified or amended
except by a written instrument signed by each of the parties hereto.
k. Change in Control Protection. Nothing contained herein shall be
construed to preclude the Company from providing Executive different or
additional severance benefits as a result of a change in control of the Company,
whether pursuant to an agreement that is in addition to, or as a supplement to,
this Agreement.
l. Headings. Headings to paragraphs in this Agreement are for the
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
m. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
n. Withholding. Any payments provided for herein shall be reduced by any
amounts required to be withheld by the Company from time to time under
applicable Federal, State or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
o. Governing Law. This Agreement shall be governed by the laws of the State
of Delaware, without reference to principles of conflicts or choice of law under
which the law of any other jurisdiction would apply.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and Executive has hereunto set his hand as of the
day and year first above written.
CHRYSLER CORPORATION
<TABLE>
<S> <C>
WITNESS:
[SIG] By: [SIG]
Kathleen Oswald
Vice President
Corporate Personnel
WITNESS:
[SIG] [SIG]
Gary C. Valade
</TABLE>
8
<PAGE> 1
EXHIBIT 16
SUMMARY OF PRINCIPAL TERMS
OF
KEY EXECUTIVE
EMPLOYMENT PROTECTION AGREEMENTS
TERM OF AGREEMENT:
On the date on which a Potential Change of Control or Change of Control
occurs (the "Effective Date"), the Agreement becomes effective as an employment
agreement between the Company and the Executive. In the event that the Agreement
becomes effective on a Potential Change of Control, the Agreement will also
expire at any time that the Board determines in good faith that a Change of
Control is not likely to occur or, at the Executive's election, at any
anniversary of the Potential Change of Control. If the Executive ceases to be
employed prior to the date a Potential Change of Control or Change of Control
occurs, the Agreement will terminate and have no effect.
If a Potential Change of Control or Change of Control occurs, the Agreement
provides for the Executive's continued employment for the period (the
"Employment Period") commencing on the Effective Date and ending on the second
anniversary of the date on which a Change of Control occurs (the "Change of
Control Date"). The Agreement will cease to be effective upon the termination of
the Executive's employment for Cause (as defined below), upon the Executive's
voluntary resignation without Good Reason on 60 days' advance notice following
the Change of Control or upon the Executive's retirement under any of the
Company's retirement plans as in effect from time to time.
EFFECT OF AGREEMENT ON EXISTING CONTRACTS:
Any other employment agreement between the Company and Executive shall be
automatically suspended upon the Effective Date, subject to automatic
reinstatement if the Agreement ceases to be effective because it is apparent
that no Change of Control will occur. To the extent necessary, the Agreement
will preserve any rights under such other employment agreement that are more
favorable to the Executive than the usual terms of the Agreement.
DEFINITION OF CHANGE OF CONTROL:
The definition of a "Change of Control" will generally be the same as used
in the Long-Term Incentive Plan (except that a liquidation will not be treated
as a Change of Control). Thus, a Change of Control shall be deemed to have
occurred if:
(i) any person becomes the beneficial owner of securities of the
Company having at least 20% of the voting power of the Company's then
outstanding securities (unless the event causing the 20% threshold to be
crossed is an acquisition of securities directly from the Company);
(ii) the shareholders of the Company shall approve any merger or other
business combination of the Company, sale of the Company's assets or
combination of the foregoing transactions (a "Transaction") other than a
Transaction immediately following which the shareholders of the Company
immediately prior to the Transaction and any trustee or fiduciary of any
Company employee benefit plan own at least 80% of the voting securities of
the surviving company (or its parent) immediately following the
Transaction;
(iii) within any 24 month period, the persons who were directors
immediately before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at least a
majority of the Board or the board of directors of a successor to the
Company. For this purpose, any director who was not a director at the
beginning of such period shall be deemed to be an Incumbent Director if
such director was elected to the Board by, or on the recommendation of or
with the approval
<PAGE> 2
of, at least two-thirds of the directors who then qualified as Incumbent
Directors (so long as such director was not nominated by a person who has
entered into an agreement to effect a Change of Control).
DEFINITION OF POTENTIAL CHANGE OF CONTROL:
A Potential Change of Control shall be deemed to have occurred if:
(i) any person commences a tender offer, which if consummated would
result in such person being the beneficial owner of at least 20% of the
Company's voting securities;
(ii) the Company enters into an Agreement the consummation of which
will constitute a Change of Control;
(iii) proxies for the election of directors are solicited by anyone
other than the Company; or
(iv) any other event occurs which is deemed to be a Potential Change
of Control by the Board.
TITLE AND RESPONSIBILITIES:
Executive will have at least the same titles and responsibilities as those
in effect immediately prior to the Potential Change of Control or the Change of
Control.
BASE SALARY:
Executive will receive an annual base salary which is not less than that in
effect immediately prior to the Potential Change of Control or the Change of
Control. The Company will commit to review salary annually, with discretion for
the appropriate committee of the Board to increase such salary. Once increased,
base salary cannot be decreased.
ANNUAL BONUS:
Executive will have a minimum annual target bonus opportunity (to be stated
as a percentage of base salary) equal to the target percentage of base salary
that could have been earned by or awarded to Executive in respect of the fiscal
year in which such Effective Date occurs.
However, following a Change of Control, in no event shall the amount
actually payable to Executive as an annual bonus during the Employment Period be
less than the average of the annual bonuses payable to Executive for the three
fiscal years of the Company ending immediately prior to the Effective Date (the
"Minimum Bonus Amount").
LONG-TERM INCENTIVE:
Executive will participate in all long-term incentive compensation programs
for key executives at a level that is commensurate with Executive's
participation in such plans immediately prior to the Potential Change of Control
or the Change of Control or, if more favorable to Executive, at the level made
available to other similarly situated executive officers after the Change of
Control.
OTHER BENEFITS AND PERQUISITES:
Executive will be provided pension, welfare and fringe benefits and
perquisites at a level that is commensurate with Executive's participation in
such plans immediately prior to the Potential Change of Control or the Change of
Control or, if more favorable to Executive, at the level made available to other
similarly situated executive officers after the Change of Control. Following the
Change of Control, Incentive Compensation Retirement Benefits will be based on
the average of the percentage of incentive compensation used for benefit
accruals in the three fiscal years ended prior to the Effective Date (the "IC
Accrual Rate"), or, if more favorable to Executive, based on the percentage used
for similarly situated executive officers after the Change of Control.
2
<PAGE> 3
PAYMENTS UPON CERTAIN TERMINATIONS:
(A) Death or Disability:
Upon termination of an Executive's employment due to death or permanent
lay-off due to disability, the Executive will receive immediate payment of
(i) all accrued salary;
(ii) a pro-rated annual bonus for the year of termination, which
following
(A) a Potential Change of Control and prior to an actual Change of
Control shall be determined in accordance with the Company's otherwise
applicable plans and policies; or
(B) an actual Change of Control shall be determined based on the
Minimum Bonus Amount, but if the termination occurs in the same year as
the Change of Control, such amount shall be reduced by the amount paid
to Executive under the Change of Control provisions of the Incentive
Compensation Plan (the "Pro-Rated Bonus"); and
(iii) a payment in respect of all awards outstanding at the date of
termination under any long-term incentive compensation or performance plan
of the Company, which following
(A) a Potential Change of Control and prior to an actual Change of
Control shall be determined in accordance with the Company's otherwise
applicable plans and policies; or
(B) an actual Change of Control shall be a pro-rated payment,
determined assuming that the Company had met its target performance
goals under each such award and the target amount payable under each
such award was paid, but reduced by any amounts actually paid under any
such plan with respect to such awards (the "Pro-Rated Incentive").
Executive shall also be entitled to receive the present value of
the additional Incentive Compensation Retirement Benefit that would have
been earned in respect of the Pro-Rated Bonus and Pro-Rated Incentive,
which, following the Change of Control shall be determined based on the
IC Accrual Rate.
Executive also will be entitled to all vested benefits under the
Company's otherwise applicable plans and programs, including any
compensation previously deferred by the Executive (together with any
accrued earnings thereon) and any accrued vacation pay not yet paid by
the Company. Such payments and benefits shall be called the Accrued
Obligations.
(B) Termination Without Cause or For Good Reason:
Upon a termination of Executive's employment (i) by the Company without
Cause after the Effective Date or (ii) by Executive for Good Reason after the
occurrence of a Change of Control, Executive will receive the Accrued
Obligations, a Pro-Rated Bonus, a Pro-Rated Incentive, the additional Incentive
Compensation Retirement Benefit that would have been earned in respect of the
Pro-Rated Bonus and Pro-Rated Incentive based on the IC Accrual Rate, the lump
sum severance payment determined below and the additional benefits described
below.
The severance payment will be a lump sum cash payment equal to three times,
in the case of Messrs. Eaton, Lutz, Denomme and Valade, and two times, in all
other cases, the sum of (i) Executive's then current annual base salary and (ii)
the greater of (x) the Minimum Bonus Amount and (y) the average of the annual
bonuses earned by Executive for the last three fiscal years of the Company ended
immediately prior to Executive's termination date.
Executive also will be entitled to receive a cash amount equal to the
present value of the incremental retirement benefits (including, without
limitation, any pension, retiree life or retiree medical benefits) that would
have been payable or available to the Executive under any qualified plan and the
Supplemental Executive Retirement Plan, based on the age and service the
Executive would have attained or completed had
3
<PAGE> 4
the Executive continued in the Company's employ until the expiration of the
Employment Period (determined following the Change of Control based upon the IC
Accrual Rate).
Any stock options exercisable at the date of Executive's termination of
employment will remain exercisable for at least one year following such
termination of employment. Executive will also be entitled to continue
participation (including participation of dependents, where applicable) in all
of the Company's employee and executive welfare and fringe benefit plans until
the earlier of (i) the third anniversary, in the case of Messrs. Eaton, Lutz,
Denomme and Valade, and the second anniversary, in all other cases, of the date
Executive's employment terminates and (ii) the date the Executive becomes
eligible for comparable benefits under a similar plan, policy or program of a
subsequent employer. At the Company's option, it may provide Executive
equivalent benefits by alternate means.
(C) Termination for Cause:
The Company may terminate an Executive's employment at any time for Cause.
Cause shall be defined to mean
(i) Executive's conviction or plea of nolo contendere to a felony;
(ii) any act or acts of dishonesty or gross misconduct on the
Executive's part which result or are intended to result in material damage
to the Company's business or reputation; or
(iii) repeated material violations by the Executive of his obligations
under the Agreement which violations are demonstrably willful and
deliberate on the Executive's part and which result in material damage to
the Company's business or reputation.
DEFINITION OF GOOD REASON:
The Executive may terminate his employment for "Good Reason" following (but
not before) the occurrence of a Change of Control. Good reason shall mean the
occurrence of any of the following, without the express written consent of the
Executive, after the occurrence of a Potential Change of Control or Change of
Control,
(i) (A) the assignment to the Executive of any duties inconsistent in
any material adverse respect with the Executive's position, authority or
responsibilities or (B) any other material adverse change in such position,
including titles, authority or responsibilities;
(ii) any failure by the Company to comply with any of the provisions
of the Agreement pertaining to compensation and benefits, other than an
insubstantial or inadvertent failure remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office
or location more than 35 miles from that location at which he performed his
services immediately prior to the Change of Control, except for travel
reasonably required in the performance of the Executive's responsibilities;
or
(iv) any failure by the Company to obtain a successor's commitment to
perform the Company's obligations under the Agreement.
Without limiting the generality of the foregoing, the mere occurrence of a
Change of Control shall not be deemed to constitute Good Reason.
TREATMENT OF EXCISE TAX:
In the event that the Executive becomes subject to the excise tax on
payments made in respect of a Change of Control, the Executive shall receive
such additional payments as are necessary to place the Executive in the same net
after tax position as the Executive would have been in had no excise tax been
payable.
4
<PAGE> 5
MISCELLANEOUS:
An Executive's legal fees incurred to enforce the Agreement will be
reimbursed by the Company, provided the Executive prevails as to at least one
material issue in any dispute.
The Company shall pay the Executive's legal fees quarterly, subject to the
Executive's obligation to repay such amounts, plus interest, if the Executive is
found not to be entitled to receive payment of such fees.
Disputes under the Agreement will be resolved by arbitration.
Full indemnification of Executive to the maximum extent permitted under the
Company's By-Laws as in effect on the Effective Date.
5
<PAGE> 1
EXHIBIT 17
(AS AMENDED THROUGH MAY 31, 1995)
CHRYSLER SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
CONSOLIDATED
AS OF JUNE 1, 1995
Chrysler Corporation (or between June 1, 1986 and December 31, 1989 its
subsidiary Chrysler Motors Corporation), a corporation organized and existing
under the laws of the State of Delaware (hereinafter called the "Corporation"),
has had in effect since January 1, 1985 a plan called the Chrysler Supplemental
Executive Retirement Plan (prior to June 1, 1986 called the Chrysler Corporation
Supplemental Executive Retirement Plan and hereinafter called the "Plan"). The
Corporation amended the Plan in certain respects as of June 12, 1986, July 11,
1986, August 26, 1986, August 14, 1987, January 5, 1988, July 29, 1988, December
14, 1988, January 19, 1989, May 30, 1989, August 15, 1989, October 17, 1989,
December 29, 1989, January 17, 1990, March 30, 1990, June 7, 1990, April 5,
1991, December 6, 1991, February 20, 1992, March 5, 1992, March 31, 1992, May
19, 1992, June 11, 1992, January 15, 1993, February 17, 1993, April 30, 1993,
November 19, 1993, December 2, 1993, and December 20, 1993. The Plan was
consolidated as of January 1, 1994 and was subsequently amended as of July 7,
1994, July 27, 1994, December 1, 1994, and May 31, 1995.
The Corporation now desires to consolidate the Plan as of this date.
<PAGE> 2
CHRYSLER SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
AS OF JUNE 1, 1995
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
ARTICLE I Purpose of Plan.......................................................... 1
ARTICLE II Definitions............................................................. 2
ARTICLE III Participation.......................................................... 5
ARTICLE IV Retirement and Deferred Retirement Benefits............................. 5
4.01 Normal Retirement........................................................... 5
4.02 Special Early Retirement.................................................... 6
4.03 Early Retirement at Employee Option......................................... 7
4.04 PTD Retirement.............................................................. 8
4.05 Retirement Under Employment Contract........................................ 8
4.06 Deferred Vested Benefits.................................................... 9
4.07 - 4.14 Other Provisions..................................................... 10-12
ARTICLE V Death Benefits........................................................... 12
ARTICLE VI Payment of Benefits..................................................... 14
ARTICLE VII Contributions.......................................................... 17
ARTICLE VIII Plan Administration................................................... 17
ARTICLE IX Amendment, Termination.................................................. 19
ARTICLE X General.................................................................. 20
ARTICLE XI Special Provisions Applicable to Designated Participants................ 21
APPENDIX A Actuarial Assumptions Under the Plan.................................... 22
</TABLE>
i
<PAGE> 3
CHRYSLER SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
ARTICLE I. PURPOSE OF PLAN
1.01. The Plan is maintained for the purpose of providing the following
supplemental retirement benefits to Employees:
A. Incentive Compensation Retirement Benefit. This benefit is based on
the aggregate awards earned out and paid to Employees under the Incentive
Compensation Plan, the Long Term Incentive Plan, the Long Term Performance
Plan, the Discretionary Incentive Compensation Plan, and any benefits paid
pursuant to Subsection 401A.5. of the Plan.
B. ERISA Excess Retirement Benefit. This benefit is based on the
excess of retirement benefits calculated under the Salaried Employees'
Retirement Plan without regard to the limitations under Section 415 or
Section 401(a)(17) of the Internal Revenue Code, as amended, over the
benefits payable under the Salaried Employees' Retirement Plan because of
such limitations.
This benefit includes a contributory benefit based on any Employee
contributions made pursuant to Section VII of this Plan that otherwise
could have been contributed under the Salaried Employees' Retirement Plan
were it not for contribution limitations imposed under Section 401(a)(17)
of the Internal Revenue Code, as amended. Although this benefit shall be
calculated and paid based solely on contributions made within this Plan, it
shall be computed in the same manner as the contributory benefit is
calculated under the Salaried Employees' Retirement Plan.
The Benefit as calculated above, shall be further increased (prior to
the time the Salaried Employees' Retirement Plan is amended to comply with
applicable provisions of the Tax Reform Act of 1986) to include the amount,
if any, of additional non-contributory benefits excluded from payment under
the Salaried Employees' Retirement Plan by provisions of the Internal
Revenue Service Model Amendment #2, included in IRS Notice 88-31, as
referenced in Subsection 4.01C of the Salaried Employees' Retirement Plan.
In respect to Employees who are participants in the Chrysler First
Retirement Account, all above references in this paragraph to the Salaried
Employees' Retirement Plan shall be deemed to mean the Chrysler First
Retirement Account. In respect to Employees who are participants in the
Gulfstream Aerospace Corporation Pension Plan, all such references in this
paragraph to the Salaried Employees' Retirement Plan shall be deemed to
mean the Gulfstream Aerospace Corporation Pension Plan. The forms of
benefits payable under this Plan to Employees who are participants in the
Chrysler First Retirement Account or the Gulfstream Aerospace Corporation
Pension Plan are the forms of benefits payable under such plans.
C. Post Retirement Supplemental Benefit. This benefit is payable to
Employees who retired as elected officers of Chrysler Corporation and is
based on the excess, if any, of the Basic Pension Rate in effect on January
1, 1986 under the Chrysler Pension Plan over the Basic Pension Rate in
effect under the Pension Plan on the date the officers retired, multiplied
by the Employees' years of Credited Service.
D. American Motors Supplemental Pension Plan Benefit. This benefit is
payable to Employees eligible for benefits under the American Motors
Corporation Supplemental Pension Plan, a plan terminated by merger into
this Plan effective December 31, 1989. Benefits under the American Motors
Supplemental Pension Plan shall be frozen as of date of merger. If any
Employee is eligible to receive a benefit under the non-contributory part
of the Chrysler Salaried Employees' Retirement Plan and under an American
Motors Corporation Pension Plan (including for this purpose any frozen
American Motors Corporation Pension Plan that has been merged into this or
any other Chrysler Pension Plan) and if his total benefit amount under
Chrysler and American Motors Corporation Pension Plans exceeds the amount
he would have received under Chrysler plans had he participated under
Chrysler plans for the entire period he was employed by American Motors
Corporation and Chrysler, his benefit under the non-contributory part of
the Chrysler Salaried Employees' Retirement Plan will be reduced (but not
below zero) by the amount of such excess. This reduction shall supersede
the minimum benefit guarantee that
1
<PAGE> 4
would otherwise be applicable under the American Motors Supplemental
Pension Plan benefit payable under this Plan.
E. Modified Special Early Retirement Program Special Leave of Absence
Benefit. This benefit is payable, prior to retirement under the Salaried
Employees' Retirement Plan, to all very highly compensated employees
(within the meaning of the Internal Revenue Code) and highly compensated
employees (as defined by such Code) designated by the Corporation who
choose to cease active employment with the Corporation between July 31,
1989 and October 31, 1989 or between January 31, 1990 and May 31, 1990
under terms of the 1989 or 1990 Chrysler Modified Special Early Retirement
Programs. The benefit payable pursuant to this paragraph shall equal the
benefit which would have been payable under the Salaried Employees'
Retirement Plan, the Pension Plan and the ERISA Excess Retirement Benefits
portion of this Plan had the Employees retired at Corporation option under
the Salaried Employees' Retirement Plan at the date he ceased active
employment.
SUPPLEMENTARY MINIMUM BENEFIT
This benefit is payable to Salaried Employees (as defined in the Salaried
Employees' Retirement Plan) who cease active employment with the Corporation
under the 1989 or 1990 Chrysler Modified Special Early Retirement Programs
(either through retirement or through a Special Leave of Absence as described in
the first paragraph of this Section 1.01E). Such benefit is equal to the amount
by which a Salaried Employee's combined monthly benefit for retirement at
Corporation option under whichever is applicable of the Salaried Employees'
Retirement Plan, the Pension Plan, the ERISA Excess Retirement Benefits portion
of this Plan and the Special Leave of Absence Benefit provisions of this Section
1.01E are less than 115% of what his total retirement benefits would have been
under the Salaried Employees' Retirement Plan, the Pension Plan and, if
applicable, the ERISA Excess Retirement Benefits portion of this Plan had he
retired at his own option.
Notwithstanding the foregoing provisions of this Section 1.01E, no benefits
of any kind shall be payable pursuant to this Section 1.01E for periods
commencing on or after January 1, 1992.
ARTICLE II. DEFINITIONS
Unless the text clearly indicates otherwise:
2.01. "Actuarial Equivalent" means an amount of equal value
actuarially, determined pursuant to actuarial tables or factors adopted by
the Committee as set forth in Appendix A to this Plan.
2.02. "Actuary" means the actuary for the Plan appointed by Chrysler
Corporation.
2.03. "Basic Pension Rate" means the monthly basic pension rate for
each year of service as established from time to time under the Pension
Plan.
2.04. "Beneficiary" means any one or more individuals, partnerships,
corporations, fiduciaries or other entities designated under the Salaried
Employees' Retirement Plan as the beneficiary or contingent beneficiary to
receive any death benefits payable under this Plan, unless a separate
designation under the Plan is received by the Committee. If no beneficiary
designation has been filed under the Salaried Employees' Retirement Plan or
under the Plan, the beneficiary shall be the executor of the former
Employee's will or the probate administrator, on behalf of the former
Employee's estate.
2.05. "Committee" means the Employee Benefits Committee established by
the Board of Directors of Chrysler Corporation by Resolution dated December
10, 1975, as constituted from time to time.
2.06. "Commuted Value" means an amount equal to the lump sum value at
the date of determination of periodic payments payable thereafter
discounted from the respective payment dates of such periodic payments to
the date of determination at the rate of interest adopted by the Committee
and set forth in Appendix A to this Plan.
2.07. "Corporation" means Chrysler Corporation and (i) any corporation
organized under the laws of the United States or any state thereof, all or
substantially all of the stock of which is owned by Chrysler
2
<PAGE> 5
Corporation directly or through one or more subsidiaries which the
Committee has designated by resolution as a corporation to which, and to
the salaried employees of which, this Plan shall apply, and (ii) any
corporation organized under the laws of a foreign government or subdivision
thereof, all or substantially all of the stock of which is owned by
Chrysler Corporation directly or through one or more subsidiaries, which is
a subsidiary corporation with respect to which there is in effect an
agreement entered into by Chrysler Corporation under Section 3121(1) of the
Internal Revenue Code or under any amendment thereof in effect at the
relevant time, and which at the time the Committee shall have designated by
resolution as a corporation to which, and to the salaried employees of
which, this Plan shall apply, but such corporation shall be included in the
term "Corporation" only with respect to those of its Employees who have
been transferred to such employment with such subsidiary from employment in
the United States with Chrysler Corporation or one of its subsidiary
corporations, and (iii) for purposes of the Incentive Compensation
Retirement Benefits only, any corporation organized under the laws of a
foreign government or subdivision thereof, all or substantially all of the
stock of which is owned by Chrysler Corporation directly or through one or
more subsidiaries, which the Committee has designated by resolution as a
corporation to which, and to the salaried employees of which, this Plan
shall apply.
2.08. "Credited Service" means the credited service an Employee has
under a Pension Plan or, in the case of an Employee who is an elected
officer or director of the Corporation, the credited service he would have
if elected officers and directors were eligible under a pension plan.
Notwithstanding the above, however, in the case of an individual who has
become an Employee of the Corporation or of Chrysler Corporation or one of
its subsidiaries (excluding American Motors Corporation and its
subsidiaries as of August 5, 1987) upon transfer after August 5, 1987 from
employment with American Motors Corporation or one of its subsidiaries,
employment by American Motors Corporation or any of its subsidiaries up to
and including the last day he was so employed shall be deemed to be
included in Credited Service under this Plan for all purposes other than
for computation of benefit amounts.
2.09. "Employee" means a person (i) who, at the time, is employed by
the Corporation or a Non-Participating Subsidiary, or (ii) who, for the
purposes of the Incentive Compensation Retirement Benefits only, is
employed by Chrysler Canada Ltd., or Chrysler Credit Canada Ltd., and (iii)
who is, or who has been but no longer is, a Salaried Employee.
Notwithstanding the foregoing, the term "Employee" shall in no event
include (i) persons employed on a temporary, fixed term, project or daily
basis, (ii) persons who are retained under a consultant or independent
contractor agreement, or on a Service Agreement basis or who are assigned
by an employment agency, supplier, subcontractor or other provider of
personnel. Where used in this Plan the terms "former Employee," "retired
Employee" or "terminated Employee" shall mean a person who at one time was
an Employee but who, by reason of retirement or other termination of
employment is no longer employed by the Corporation, a Non-Participating
Subsidiary, Chrysler Canada Ltd., or Chrysler Credit Canada Ltd., as
applicable.
2.10. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
2.11. "ERISA Excess Death Benefits" means the death benefit calculated
by reference to the ERISA Excess Retirement Benefit of an Employee or
former Employee as determined in whichever is applicable of Sections 5.01,
5.02, or 5.03.
2.12. "ERISA Excess Retirement Benefit" means a monthly retirement
benefit equal to the excess of the retirement benefit calculated under the
Salaried Employees' Retirement Plan without regard to the benefit and
compensation limitations set forth in that plan or imposed under Section
415 or Sub-paragraph 401(a)(17) of the Internal Revenue Code over the
benefit payable under the Salaried Employees' Retirement Plan, determined
as provided in Section 4.01, because of such limitation.
2.13. "Incentive Compensation Plan" means the Chrysler Corporation
Incentive Compensation Plan, as in effect from time to time, established
under a stockholders' resolution adopted in 1929, as amended.
3
<PAGE> 6
2.14. "Incentive Compensation Death Benefit" means the death benefit
calculated by reference to Incentive Compensation Retirement Benefits of an
Employee or retired Employee as determined in whichever is applicable of
Sections 5.01, 5.02, 5.03, or 5.04.
2.15. "Incentive Compensation Retirement Benefit" means a monthly
retirement benefit calculated by reference to the aggregate awards made to
an Employee under (a) the Incentive Compensation Plan, (b) the Chrysler
Corporation Long-Term Incentive Plan under the Incentive Compensation Plan
(herein called the "Long-Term Incentive Plan") (c) the Chrysler Corporation
Long-Term Performance Plan under the Chrysler Corporation 1991 Stock
Compensation Plan (herein called the "Long-Term Performance Plan"), and (d)
the Chrysler Corporation Discretionary Incentive Compensation Plan (herein
called the "Discretionary Incentive Compensation Plan"), and (e) any
benefits paid pursuant to Subsection 4.01A.5. of the Plan determined as
provided in Section 4.01.
2.16. "Non-Participating Subsidiary" means any branch of Chrysler
Corporation, or any of its wholly-owned subsidiaries, located outside the
United States and its possessions and any subsidiary of Chrysler
Corporation whether organized under the laws of the United States or of any
state thereof or of a foreign government or subdivision thereof, a majority
of the voting stock of which Chrysler Corporation owns at the time directly
or through one or more wholly-owned subsidiaries, and which branch or
subsidiary the Committee shall at the time have designated by resolution as
a branch or corporation to which and to the Employees of which the
provisions of the Plan relating to a Non-Participating Subsidiary shall
apply. A branch of Chrysler Corporation, or any of its wholly-owned
subsidiaries, located outside the United States and its possessions or a
subsidiary described in clause (ii) of Section 2.07 may be a
Non-Participating Subsidiary with respect to those of its Employees who
were not transferred to such branch or subsidiary from employment in the
United States with Chrysler Corporation or one of its subsidiary
corporations.
2.17. "Normal Retirement Date" means the last day of the month in
which an Employee attains his 65th birthday.
2.18. "Pension Plan" means the Chrysler Pension Plan or the Chrysler
Financial Corporation Pension Plan, as applicable.
2.19. "Permanent Total Disability" means that the person is receiving
permanent total disability benefits under a Pension Plan or a group
insurance program of the Corporation.
2.20. "Plan" means this Supplemental Executive Retirement Plan.
2.21. "Plan Year" means the period of 12 calendar months ending with
the last day of the month of December in each year.
2.22. "Post Retirement Supplemental Benefit" means a monthly
retirement benefit payable to an Employee who retired or retires as an
elected officer of Chrysler Corporation, determined as provided in Section
4.08.
2.23. "Salaried Employee" means a person (i) who at the relevant time
is employed by the Corporation or a Non-Participating Subsidiary, or (ii)
who, for purposes of the Incentive Compensation Retirement Benefits only,
is employed by Chrysler Canada Ltd., or Chrysler Credit Canada Ltd., and
who receives regular compensation in the form of a base Salary, except that
a person who is employed either by a subsidiary of Chrysler Corporation
described in clause (ii) of Section 2.07 or a branch of Chrysler
Corporation located outside the United States and its possessions shall, in
either such case, be deemed to be a Salaried Employee only if he has been
transferred to such employment, either with such subsidiary or such branch,
from employment in the United States.
2.24. "Salaried Employees' Retirement Plan (SERP)" means the Chrysler
Salaried Employees' Retirement Plan or the Chrysler Financial Corporation
Salaried Employees' Retirement Plan, as applicable, as in effect from time
to time.
4
<PAGE> 7
2.25. "Salary" means the base salary payable monthly (after any
deductions or any salary deferral pursuant to an agreement entered into
under the Chrysler Salaried Employees' Savings Plan, as amended, or the
Chrysler Salaried Employees' Supplemental Savings Plan, as amended) not
including any contingent, incentive or deferred compensation, bonuses, or
other forms of extra compensation. The term "Salary" shall include base
salary amounts deferred pursuant to the Chrysler Stock Unit Investment
Program. The term "Salary" shall further include amounts deducted from base
salary under provisions of the Chrysler Best By Choice Program but shall
not include amounts added to base compensation payments pursuant to the
Best By Choice Program.
ARTICLE III. PARTICIPATION
3.01. An Employee who has received or receives an award of incentive
compensation under the Incentive Compensation Plan for the year 1983 or any
subsequent year shall participate in the Plan with respect to the Incentive
Compensation Retirement Benefit and the Incentive Compensation Death Benefit.
3.02. An Employee who retires under the SERP and whose retirement or
termination benefits as calculated under SERP are in excess of the benefit and
compensation limitations set forth in that plan or imposed under Section 415 or
Sub-paragraph 401(a)(17) of the Internal Revenue Code shall participate in the
Plan with respect to the ERISA Excess Retirement Benefit and ERISA Excess Death
Benefit.
3.03. An Employee who retired as an elected officer of Chrysler Corporation
prior to January 1, 1986 shall participate in the Plan with respect to the Post
Retirement Supplemental Benefit.
ARTICLE IV. RETIREMENT AND DEFERRED RETIREMENT BENEFITS
4.01. An Employee who retires under the SERP, or for purposes of the
Incentive Compensation Retirement Benefits also under the Chrysler Canada Ltd.
Salaried Employees' Retirement Plan on or after his Normal Retirement Date shall
be entitled to receive under this Plan, commencing on the first day of the month
next following his retirement date, retirement benefits equal to the sum of (i)
any Incentive Compensation Retirement Benefit for which he may be eligible as
provided in Subsection A, and (ii) any ERISA Excess Retirement Benefit for which
he may be eligible as provided in Subsection B.
A. The Incentive Compensation Retirement Benefit of an Employee
retiring as provided above in this Section 4.01 shall be a monthly amount
equal to the sum of the following:
1. An amount equal to .5 of 1 percent (.5%) of his Incentive
Compensation Plan awards for 1983 and 1984, plus
2. An amount equal to such percentage of his combined (a) Incentive
Compensation Plan award for each of the years 1985 through 1992 and (b)
Long-Term Incentive Plan award (whether such award is payable in cash or
Chrysler Stock) earned out and paid for performance cycles ending in
each of the years 1987 through 1992, as the Incentive Compensation
Committee of the Board of Directors shall determine, but not more than
.5 of 1 percent (.5%) of his combined award for any such year, plus
3. An amount equal to such percentage of his combined (a) Incentive
Compensation Plan award for 1993 and (b) Long-Term Performance Plan
award for performance cycle ending in 1993 as the Incentive Compensation
Committee of the Board of Directors shall determine, but not more than
.5 of 1 percent (.5%) of his combined award for any 1993 plus
4. An amount equal to such percentage of his combined (a) Incentive
Compensation Plan award for 1994 and each year thereafter, (b) Long Term
Performance Plan award for performance cycles ending in 1994 and each
year thereafter, and (c) Discretionary Incentive Compensation Plan award
for 1994 and each year thereafter as the Incentive Compensation
Committee of the Board of Directors shall determine, but not more than
.5 of 1 percent (.5%) of his combined award for any such year plus
5
<PAGE> 8
5. An amount equal to .5 of a percent (.5%) of his Incentive
Compensation Plan awards, Long Term Performance Plan awards, Long Term
Incentive Plan awards, and Discretionary Incentive Compensation Plan
awards, payable under such plans in the event of a Change in Control (as
defined in Section 4.13).
B. The ERISA Excess Retirement Benefit of an Employee retiring as
provided above in this Section 4.01 shall be a monthly amount equal to the
excess of:
1. The retirement benefit calculated under the provisions of
Section 4.01 of the SERP (irrespective of whether payments under the
SERP are actually made in the form described in Section 4.01 of the
SERP) without regard to the benefit and compensation limitations set
forth in that plan or imposed under Section 415 or Sub-paragraph
401(a)(17) of the Internal Revenue Code over
2. The retirement benefit calculated under Section 4.01 of the SERP
because of such ERISA limitations.
Notwithstanding anything to the contrary in this Plan, the retirement
benefits of an Employee of the Corporation or a Non-Participating Subsidiary,
who continues active service until his 65th birthday, shall be nonforfeitable.
4.02. An Employee who retires under the Special Early Retirement provisions
of the SERP or, for purposes of the Incentive Compensation Retirement Benefit,
retires at the option of the Corporation under the Chrysler Canada Ltd. Salaried
Employees' Retirement Plan on or after his 55th birthday but before his 62nd
birthday and who at the date of his early retirement has 10 years or more of
Credited Service (or who shall have attained such lesser age or years of
Credited Service as may be required under terms of a specific Early Retirement
Program if he retires pursuant to such program) shall be entitled to receive
under this Plan, commencing on the first day of the month next following the
date of his retirement, retirement benefits equal to the sum of (i) any
Incentive Compensation Retirement Benefit for which he may be eligible as
provided in Subsection A., and (ii) any ERISA Excess Retirement Benefit for
which he may be eligible as provided in Subsection B.
A. The Incentive Compensation Retirement Benefit of an Employee
retiring early as provided in this Section 4.02 shall be a monthly amount
calculated as described in Section 4.01A.
B. The ERISA Excess Retirement Benefit of an Employee retiring early
as provided in this Section 4.02 shall be a monthly amount calculated as
described in Section 4.01B.
C. The reduced age, Credited Service, and date specifications
applicable to specific Special Early Retirement Programs are as follows:
1. 1991 Program
a. Minimum age: 53
b. Minimum Credited Service: 10 years
c. Eligibility date: August 31, 1991
d. Retirement date: April 30, 1991 or, if later, the end of the
month prior to September, 1991 when age and Credited Service
requirements are first met (Retirements may occur at a later date as
approved by the Corporation and agreed to by the Employee but not
beyond December 31, 1991)
2. 1992 Program
a. Minimum age: 55
b. Minimum Credited Service: 7 years
6
<PAGE> 9
c. Eligibility date: December 31, 1992 (Must be actively at work
during the March 1, 1992 to May 31, 1992 period)
d. Retirement date: August 31, 1992 or as early as May 31, 1992
if age and Credited Service requirements are met or, in the case of
an Employee who first meets the age and Credited Service requirements
of the Program between September 1, 1992 and December 31, 1992, the
end of the month the Employee first meets such requirements
(Retirement may occur at a later date as approved by the Corporation
and agreed to by the Employee but not beyond December 31, 1992)
3. 1993 Program
a. Minimum age: 54
b. Minimum Credited Service: 10 years
c. Eligibility date: December 31, 1993
d. Retirement date: April 30, 1993 or, if later, the end of the
month prior to January 1, 1994 when age and Credited Service
requirements are first met (Retirements may occur at a later date as
approved by the Corporation and agreed to by the Employee but not
beyond December 31, 1993)
4. 1994 Program
a. Minimum age 54
b. Minimum Credited Service: 10 years
c. Eligibility Date: December 31, 1994
d. Retirement Date: Not later than December 31, 1994 (Retirement
can not be earlier than September 15, 1994. However, incentives under
the program are also applicable, effective January 1, 1995, to
employees who retired under Section 4.03 of the plan between May 31,
1994 and July 31, 1994).
Provided, however, that in the case of an Employee retiring under this
Section 4.02 who is employed or becomes employed by any competing firm, as
determined by the Committee, payment of his monthly retirement benefits
provided under Section 4.02A shall not be made for any month during which
he is so employed by any such competing firm prior to the first day of the
month next following his 65th birthday.
4.03. An Employee who retires under the SERP, or for purposes of the
Incentive Compensation Retirement Benefit also under the Chrysler Canada Ltd.
Salaried Employees' Retirement Plan at his option on or after his 55th birthday
but before his 65th birthday and (a) who has not attained age 60 and whose
combined years of age and years of Credited Service (to the nearest 1/12 in each
case) shall total 85 or more, or (b) who has attained age 60 but not 65 and has
10 or more years of Credited Service, shall in any such case be entitled to
receive under this Plan, commencing on the first day of the month next following
the date of his retirement, retirement benefits equal to the sum of (i) any
Incentive Compensation Retirement Benefit for which he may be eligible as
provided in Subsection A, and (ii) any ERISA Excess Retirement Benefit for which
he may be eligible as provided in Subsection B, subject to the provisions of
Subsection C, below.
A. The Incentive Compensation Retirement Benefit of an Employee
retiring early as provided in this Section 4.03 shall be a monthly amount
calculated as described in Section 4.01A.
B. The ERISA Excess Retirement Benefit of an Employee retiring early
as provided in this Section 4.03 shall be a monthly amount calculated as
described in Section 4.01B.
7
<PAGE> 10
C. The retirement benefits described above in Sections 4.03A and 4.03B
shall be reduced by multiplying such benefits by a percentage as set forth
in the following table:
<TABLE>
<CAPTION>
AGE WHEN
BENEFIT COMMENCES PERCENTAGE*
----------------- ----------
<S> <C>
55............................. 57.9%
56............................. 63.5
57............................. 69.4
58............................. 75.2
59............................. 80.8
60............................. 86.7
61............................. 93.3
62............................. 100.0
63............................. 100.0
64............................. 100.0
</TABLE>
- -------------------------
* Prorated for intermediate ages computed to the nearest whole month
Provided, however, that in the case of an Employee retiring under this
Section 4.03 who is employed or becomes employed by any company other than the
Corporation, payment of his monthly retirement benefit provided under Section
4.03A shall not be made for any month during which he is so employed by any
company other than the Corporation prior to the first day of the month next
following his 65th birthday, unless the Committee approves such payment
annually.
4.04. An Employee who retires under the SERP, or for purposes of the
Incentive Compensation Retirement Benefit also under the Chrysler Canada Ltd.
Salaried Retirement Plan because of Permanent Total Disability with 10 years or
more of Credited Service (i) on or after his 55th birthday but before his Normal
Retirement Date or (ii) before his 55th birthday and who has been a participant
for at least 10 years since he attained age 35, or (iii) before his 55th
birthday and who has been a participant for five years but less than 10 years
since he attained age 35, shall be entitled to receive under this Plan,
retirement benefits equal to the sum of (i) any Incentive Compensation
Retirement Benefit for which he may be eligible as provided in Subsection A and
(ii) any ERISA Excess Retirement Benefit for which he may be eligible as
provided in Subsection B below.
A. The Incentive Compensation Retirement Benefits of an Employee
retiring as provided in this Section 4.04 shall be a monthly amount
calculated as described in Section 4.01A and
B. The ERISA Excess Retirement Benefits of an Employee retiring as
provided in this Section 4.04 shall be a monthly amount as calculated in
Section 4.01B and such monthly retirement benefits shall commence on the
first day of the month next following the date of his retirement, except
that with respect to an Employee retiring as described in (iii) above in
this Section 4.04, such monthly retirement benefits shall commence on the
first day of the month immediately following the month in which he attains
age 55.
Provided, however, that in the case of an Employee retiring under this
Section 4.04 who is employed or becomes employed by any competing firm, as
determined by the Committee, payment of his monthly retirement benefits provided
under Section 4.04A shall not be made for any month during which he is so
employed by such competing firm prior to the first day of the month next
following his 65th birthday.
4.05. A. An Employee who retires under an employment contract at the option
of the Corporation or because of Permanent Total Disability on or after his 55th
birthday but before his 65th birthday shall be entitled to receive under this
Plan, commencing on the first day of the month next following his retirement
date, an Incentive Compensation Retirement Benefit in a monthly amount
calculated as described in Section 4.01A.
Provided, however, that in the case of an Employee retiring under this
Section 4.05A who is employed or becomes employed by any competing firm, as
determined by the Committee, payment of his monthly
8
<PAGE> 11
retirement benefits provided under Section 4.05A shall not be made for any month
during which he is so employed by any such competing firm prior to the first day
of the month next following his 65th birthday.
B. An Employee who retires under an employment contract at his option on or
after his 55th birthday but before his 65th birthday shall be entitled to
receive under this Plan, commencing on the first day of the month next following
his retirement date, an Incentive Compensation Retirement Benefit in a monthly
amount calculated as described in Section 4.01A, reduced by multiplying such
benefits by a percentage as set forth in the following table:
<TABLE>
<CAPTION>
AGE WHEN
BENEFIT COMMENCES PERCENTAGE*
----------------- -----------
<S> <C>
55............................. 57.9
56............................. 63.5
57............................. 69.4
58............................. 75.2
59............................. 80.8
60............................. 86.7
61............................. 93.3
62............................. 100.0
63............................. 100.0
64............................. 100.0
</TABLE>
- -------------------------
* Prorated for intermediate ages computed to the nearest whole month
Provided, however, that in the case of an Employee retiring under this
Section 4.05B who is employed or becomes employed by any company other than the
Corporation, payment of his monthly retirement benefit provided under Section
4.05B shall not be made for any month during which he is so employed by any
company other than the Corporation prior to the first day of the month next
following his 65th birthday, unless the Committee approves such payment
annually.
C. An Employee who retires under an employment contract, and who on
his retirement date has not attained age 55, shall be entitled to receive
under this Plan, commencing on the first day of the month next following
his Normal Retirement Date, an Incentive Compensation Retirement Benefit in
a monthly amount calculated as described in Section 4.01A.
4.06. An Employee whose employment terminates under the SERP, or for
purposes of the Incentive Compensation Retirement Benefits also under the
Chrysler Canada Ltd. Salaried Employees' Retirement Plan otherwise than by death
or retirement shall be entitled to receive under this Plan a deferred retirement
benefit equal to the sum of (i) any Incentive Compensation Retirement Benefit
for which he is eligible as provided in Subsection A below, and (ii) any ERISA
Excess Retirement Benefit for which he is eligible as provided in Subsection B
below, subject to the provisions of Subsections C and D below.
A. If he has 5 years or more of Credited Service at the date his
employment terminates and (i) his employment terminated other than because
of discharge for cause or resignation to work for a competitor or (ii) his
employment terminated because of discharge for cause, or resignation to
work for a competitor and, in either case, the Committee approves vesting
of the terminated Employee's accrued Incentive Compensation Retirement
Benefit, he shall be entitled to receive Incentive Compensation Retirement
Benefits in a monthly amount calculated as described in Section 4.01A. Any
non-vested Incentive Compensation Retirement Benefits are forfeited.
Notwithstanding the preceding provisions of this Subsection A (a) all
Incentive Compensation Retirement Benefits accrued as of December 31, 1993
shall be fully vested as of such date in respect to Band 96 and above
employees who are actively at work and who have five or more years of
Credited Service as of such date and (b) all Incentive Compensation
Retirement Benefits accrued as of January 1, 1994 shall be fully vested as
of such date in respect to employees below Band 96 who are actively at work
and who have five or more years of Credited Service as of such date.
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<PAGE> 12
B. The deferred age 65 ERISA Excess Retirement Benefit he shall be
entitled to receive shall be a monthly amount equal to the excess of (i)
the deferred retirement benefit calculated under the provisions of Section
4.06 of the SERP without regard to the benefit limitations contained in
Section 415(b)(1) and/or Section 415(e) of the Internal Revenue Code, as
amended, over (ii) the deferred retirement benefit payable under SERP
because of such limitation.
C. Any deferred retirement benefits under this Section 4.06 except as
otherwise provided below in Subsection D, shall be a monthly pension
commencing as of the first day of the first month after the Employee
attains age 65 in the full unreduced amount for which he is eligible under
this Section 4.06.
D. Deferred retirement benefits paid to a terminated Employee may, if
such Employee makes written application, begin prior to age 65 (but in no
event earlier than the month the terminated Employee attains age 60) on a
reduced Actuarial Equivalent basis but shall not be paid for any month
prior to age 65 in which the terminated Employee is employed by any company
other than the Corporation, unless the Committee approves such payment
annually, or is employed by any competing firm, as determined by the
Committee.
4.07. A. If a retired Employee who has commenced receiving retirement
benefits under this Plan is reemployed on or after the effective date of the
Plan he shall continue to receive during such reemployment the retirement
benefits to which he is otherwise entitled, provided, however, that such
reemployment shall not result in the accrual of any additional benefits under
the Plan.
B. If a former Employee eligible for a deferred retirement benefit under
this Plan, who has not yet commenced receiving such benefit, is reemployed, then
his eligibility therefore shall cease and the accrued retirement benefit, if
any, he had at the date his employment terminated shall be reinstated.
C. If a former employee whose employment had terminated as a result of
resignation or discharge is subsequently reemployed, the Committee may, at its
discretion, reinstate all or apart of any Incentive Compensation Retirement
Benefit that had been previously forfeited pursuant to provisions of Section
4.06 of this Plan.
4.08. A retired Employee who on the date of his retirement was an elected
officer of Chrysler Corporation and who retired under Section 4.01, 4.02, 4.03,
4.04, or 4.05 of the SERP shall be entitled to receive under this Plan,
commencing on January 1, 1986, a Post Retirement Supplemental Benefit which
shall be a monthly amount equal to the excess of (i) the highest Basic Pension
Rate in effect on January 1, 1986 under the Chrysler Pension Plan for employees
who retired when the Employee retired over (ii) the highest Basic Pension Rate
in effect under the Chrysler Pension Plan on the date the Employee retired,
multiplied by the Employee's years of Credited Service.
4.09. No Employee shall be entitled to retirement benefits under this Plan
except as set forth in Sections 4.01, 4.02, 4.03, 4.04, 4.05, 4.08 and 4.12, of
this Plan, and no Employee shall have any vested right under the Plan except
such rights, if any, as may accrue to him under Section 4.06 or Section 4.12. At
his Normal Retirement Date, he shall not be entitled to receive any retirement
benefits until his subsequent retirement. At that time he shall be entitled to
receive a monthly retirement benefit commencing on the first day of the month
next following the date of his retirement in the amount computed as provided in
Section 4.01.
4.10. An Employee who performs any service after December 31, 1987 shall be
entitled to have both his Salary and service taken into account for purposes of
calculating his retirement benefit under this Plan, irrespective of whether such
service occurs before or after the Employee's Normal Retirement Date.
4.11. A Special Incentive Compensation Benefit is payable, prior to
retirement under the Salaried Employees' Retirement plan, to those entitled to a
Special Leave of Absence benefit pursuant to the first paragraph of Section
1.01E who would, if they were retired, be entitled to an Incentive Compensation
Retirement Benefit under this Article IV. The Special Incentive Compensation
Benefit shall be calculated and paid in the same manner as the Incentive
Compensation Retirement Benefit under this Article IV.
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<PAGE> 13
4.12. Notwithstanding any other provisions hereof, upon the occurrence of a
'Change in Control' (as defined in Section 4.13), each Employee who has
participated in the Plan with respect to the Incentive Compensation Retirement
Benefit shall be vested in his accrued Incentive Compensation Retirement
Benefit. If the employment of any such Employee by the Corporation is terminated
by the Corporation without 'cause' (as defined below) within the two-year period
immediately following a Change in Control, the Corporation shall pay such
Employee, within ten (10) days of such termination, the Commuted Value of his
Incentive Compensation Retirement Benefit, calculated as described in Section
4.01A and as if payment of such monthly retirement benefit were to commence on
the first day of the month next following the later of his termination date or
the date he attains age 65. The Commuted Value shall be determined for this
purpose by using the interest rate set forth in Appendix A to this Plan. Cause,
for purposes of this Section 4.12, shall mean the willful engaging by the
Employee in conduct which is demonstrably injurious to the Corporation,
monetarily or otherwise.
4.13. 'Change in Control' shall mean a change in control of Chrysler
Corporation, which shall be deemed to have occurred if the conditions set forth
in any one of the following paragraphs shall have been satisfied:
A. Any Person (defined below) shall become the Beneficial Owner
(defined below) of securities of Chrysler Corporation representing 20% or
more of the combined voting power of Chrysler Corporation's then
outstanding securities (unless the event causing the 20% threshold to be
crossed is an acquisition of securities directly from Chrysler
Corporation);
B. During any period of two consecutive years beginning after June 7,
1990, individuals who at the beginning of such period constitute the Board
of Directors of Chrysler Corporation and any new director (other than a
director designated by a Person who has entered into an agreement with
Chrysler Corporation to effect a transaction described in paragraph A, C or
D of this Change in Control definition) whose election or nomination for
election was approved by a vote of at least two-thirds of the directors
then in office who either were directors at the beginning of such two year
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board of
Directors;
C. The stockholders of Chrysler Corporation approve a merger or
consolidation of Chrysler Corporation (other than a merger or consolidation
which would result in the voting securities of Chrysler Corporation
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the entity surviving such merger or consolidation), in
combination with voting securities of Chrysler Corporation or such
surviving entity held by a trustee or other fiduciary pursuant to any
employee benefit plan of Chrysler Corporation or such surviving entity of
any subsidiary of Chrysler Corporation or such surviving entity, at least
80% of the combined voting power of the securities of Chrysler Corporation
or such surviving entity outstanding immediately after such merger or
consolidation); or
D. The stockholders of Chrysler Corporation approve a plan of complete
liquidation or dissolution of Chrysler Corporation or an agreement for the
sale or disposition by Chrysler Corporation of all or substantially all of
Chrysler Corporation's assets.
"The following terms, as used in this Change in Control definition, shall
have the meanings stated below:
"Beneficial Owner", with respect to any securities, means any Person
who, directly or indirectly, has the right to vote or dispose of such
securities or otherwise has "Beneficial Ownership" of such securities
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the 'Exchange Act')), pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided however,
that (i) a Person shall not be deemed the Beneficial Owner of any security
as a result of an agreement, arrangement or understanding to vote such
security (x) arising solely from a revocable proxy or consent given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the Exchange Act and the applicable rules and regulations
thereunder or (y) made in connection with, or to otherwise participate in,
a proxy or consent solicitation made, or to be made,
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<PAGE> 14
pursuant to, and in accordance with, the applicable provisions of the
Exchange Act and the applicable rules and regulations thereunder, in either
case described in clause (x) or clause (y) above, whether or not such
agreement, arrangement or understanding is also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or
successor report), and (ii) a Person engaged in business as an underwriter
of securities shall not be deemed to be the Beneficial Owner of any
securities acquired through such Person's participation in good faith in a
firm commitment underwriting until the expiration of forty days after the
date of such acquisition.
"Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3) of the
Exchange Act, provided, however, that Person shall not include (i) Chrysler
Corporation, any subsidiary of Chrysler Corporation or any other Person
controlled by Chrysler Corporation, (ii) any trustee or other fiduciary
holding securities under any employee benefit plan of Chrysler Corporation
or any subsidiary of Chrysler Corporation, or (iii) a corporation owned,
directly or indirectly, by the stockholders of Chrysler Corporation in
substantially the same proportions as their ownership of securities of
Chrysler Corporation.
4.14. Notwithstanding any other provision of this Article IV or of this
Plan, a Salaried Employee who retires prior to age 55 pursuant to provisions of
the Chrysler Canada, Ltd. Salaried Employees' Retirement Plan, shall be
considered an employment termination rather than a retirement for purposes of
determining the nature, amount, and timing of any benefits to which he may be
entitled under this Plan.
ARTICLE V. DEATH BENEFITS
5.01. If a former Employee dies (a) on or after the date of his retirement
under the SERP, or for purposes of the Incentive Compensation Retirement
Benefits also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan
in the case of a former Employee who retired under any of such plans, or (b) on
or after the date his employment terminated, in the case of a former Employee
whose employment terminated otherwise than by retirement under the SERP, or for
purposes of the Incentive Compensation Retirement Benefit also under the
Chrysler Canada Ltd. Salaried Employees' Retirement Plan, and who was eligible
for a deferred retirement benefit under Section 4.06 at the time of such
termination, and if in either such case no election under Section 6.04 was in
effect for such former Employee at the time of his death, then in any such case
the Beneficiary of any such former Employee shall be entitled to receive under
this Plan (i) any Incentive Compensation Death Benefit for which he was eligible
as a former Employee as provided in Subsection A below, (ii) any ERISA Excess
Death Benefits for which he was eligible as provided in Subsection B below, and
(iii) any Modified Special Early Retirement Program Death Benefit, for which he
was eligible as provided in Subsection C below.
A. The Incentive Compensation Death Benefit of such a former Employee
shall be:
1. If at the time of his death the former Employee was receiving an
Incentive Compensation Retirement Benefit (whether due to retirement or
termination of employment) or if commencement of receipt of an Incentive
Compensation Retirement Benefit was deferred as provided in Section
6.03, an amount equal to the Commuted Value of any unpaid guaranteed
payments of the Incentive Compensation Retirement Benefit.
B. The ERISA Excess Death Benefit of such a former Employee shall be:
1. If at the time of his death he was receiving an ERISA Excess
Retirement Benefit (whether due to retirement or termination of
employment) or if commencement of receipt of an ERISA Excess Retirement
Benefit was deferred as provided in Section 6.03, an amount equal to the
Commuted Value of any unpaid guaranteed payments of the ERISA Excess
Retirement Benefit.
2. If he was entitled to an ERISA Excess Retirement Benefit under
Section 4.06B and if he dies prior to the date payment of such ERISA
Excess Retirement Benefit commences, and
a. If such ERISA Excess Retirement Benefit includes a monthly
amount of contributory retirement benefit as provided for under the
provisions of either or both of Section(s) 4.06A of
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<PAGE> 15
the SERP, or 1.01B of this Plan, his ERISA Excess Death Benefit based
on such contributory retirement benefit shall be in an amount equal
to 100 times the amount of such monthly benefit, and
b. If such ERISA Excess Retirement Benefit includes a monthly
amount of the SERP non-contributory retirement benefit calculated
under the provisions of Section 4.06B of the SERP, his ERISA Excess
Death Benefit based on such non-contributory retirement benefit shall
be in an amount equal to the Commuted Value of the 120 monthly
payments of such benefit that he would have received under the Plan
had he elected to receive immediate payment of benefits commencing on
the date immediately preceding the date of his death.
C. The Modified Special Early Retirement Program Death Benefit of such
a former Employee shall be:
1. An amount equal to the Commuted Value of the remainder of 120
guaranteed monthly payments for the contributory and non-contributory
Supplementary Minimum Benefit to which the Employee is entitled pursuant
to Section 1.01E of this Plan and/or
2. An amount equal to the Commuted Value of the remainder of 120
guaranteed monthly payments for the contributory and non-contributory
Special Leave of Absence Benefit (excluding, however, monthly payments
under the Pension Plan which shall not be guaranteed) to which the
Employee is entitled pursuant to Section 1.01E of this Plan.
5.02. If an Employee dies while participating in the SERP, or for purposes
of the Incentive Compensation Retirement Benefits also under the Chrysler Canada
Ltd. Salaried Employees' Retirement Plan and after his Normal Retirement Date
and if he is not deemed to have made the election provided in Section 6.05, his
Beneficiary shall be entitled to receive the sum of (i) any Incentive
Compensation Death Benefit for which the Employee was eligible as provided in
Subsection A and (ii) any ERISA Excess Death Benefit for which the Employee was
eligible as provided in Subsection B below.
A. The Incentive Compensation Death Benefit of such an Employee shall
be an amount equal to the Commuted Value of 120 monthly payments of the
monthly Incentive Compensation Retirement Benefit which would have been
payable to the Employee if he had retired under the Plan on the date of his
death.
B. The ERISA Excess Death Benefit of such an Employee shall be an
amount equal to the Commuted Value of 120 monthly payments of the monthly
ERISA Excess Retirement Benefit that he would have received under the Plan
had he retired on the date of his death.
5.03. If an Employee dies while participating in the SERP, or for purposes
of the Incentive Compensation Retirement Benefit also under the Chrysler Canada
Ltd. Salaried Employees' Retirement Plan and on or prior to his Normal
Retirement Date, his Beneficiary shall be entitled to receive the sum of (i) any
Incentive Compensation Death Benefit for which the Employee was eligible at the
time of his death as provided in Subsection A and (ii) any ERISA Excess Death
Benefit for which the Employee was eligible as provided in Subsection B below.
A. The Incentive Compensation Death Benefit of such an Employee shall
be an amount equal to the Actuarial Equivalent of his accrued age 65
monthly Incentive Compensation Retirement Benefit.
B. The ERISA Excess Death Benefit of such an Employee shall be an
amount equal to the excess of (i) the death benefit calculated under the
SERP without regard to the benefit and compensation limitations set forth
in that plan or imposed under Section 415 or Sub-paragraph 401(a)(17) of
the Internal Revenue Code over (ii) the death benefit payable under the
SERP because of such ERISA limitations. Any death benefit payable under
this Plan shall be computed based on any contributions under Section VII of
this Plan.
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<PAGE> 16
ARTICLE VI. PAYMENT OF BENEFITS
6.01. An Employee desiring to retire and receive a retirement benefit under
the Plan or a terminated Employee desiring to apply for a deferred retirement
benefit under the Plan shall, in either such case, obtain a form of application
for that purpose and shall file his written application with the Committee,
furnishing the information the Committee shall request together with documentary
evidence in support of the same, satisfactory to the Committee, and any
authority in writing that the Committee may request authorizing it to obtain
pertinent information or records, certificates or transcripts from any public
office.
6.02. A Retirement benefit, except as provided under Section 6.10 of the
Plan, shall be paid in monthly installments. The first installment shall be
payable on the first day of the month following the actual retirement of an
Employee retiring from the employ of the Corporation or of a Non-Participating
Subsidiary or, in the case of an Employee whose employment terminates otherwise
than by retirement, on the first day of the first month after the Employee
attains age 65. Subsequent installments of the retirement benefit shall be
payable on the first day of each month thereafter during the lifetime of the
retired or former Employee, and the standard form of payment of the retirement
benefit shall be for the lifetime of the retired or former Employee with a
guarantee of 120 monthly payments, except for the Post Retirement Supplemental
Benefit described in Section 4.05., for which the standard form of payment shall
be monthly payments during the lifetime of the former Employee without any
guaranteed number of payments.
6.03. Anything to the contrary in this Plan notwithstanding, monthly
retirement benefit payments under the Plan shall not commence until the first
day of the month following the ceasing of any sickness or accident benefits
(including payments under the Disability Absence Plan of the Corporation,
disability benefits under the Salary Continuation Plan of the Corporation, and
payments or benefits of like purpose or kind under any similar plan of the
Corporation or of a Non-Participating Subsidiary in effect at the time) toward
which the Corporation or a Non-Participating Subsidiary contributes by payment
of premiums, taxes or otherwise; provided, however, that commencement of a
monthly retirement benefit shall not be deferred by reason of receipt of (a) a
Permanent Total Disability Benefit under any pension plan or group life
insurance policy of the Corporation or of a Non-Participating Subsidiary, or (b)
a disability benefit under the Federal Social Security Act, or (c) a benefit
under the Long Term Disability Plan or the Extended Disability Plan of the
Corporation or a benefit or payment of like purpose or kind under any similar
plan of the Corporation or of a Non-Participating Subsidiary at the time in
effect.
6.04. In lieu of payment of a retirement benefit in the standard form as
described in Section 6.02 and lieu of payment of a death benefit as described in
Article V, payment of all such benefits shall be made in the form of a surviving
spouse option, as provided in Subsection A below, to an Employee who retires and
who is entitled to a retirement benefit. The Employee or former Employee shall
automatically be deemed to have elected the form of surviving spouse option
provided in Subsection A below (sometimes called "Qualifying Option" in this
Article VI) except where otherwise provided in such Subsection A. The surviving
spouse option in the form provided below shall be applicable only with respect
to an Employee or former Employee who is married on the date such election is
deemed to have been made.
A. The retirement benefit under the Qualifying Option for an Employee
or former Employee who automatically elects it, as hereinabove provided,
shall consist of reduced monthly payments after the effective date of his
election during his lifetime with a guarantee of 120 monthly payments, with
provision that if his death occurs on or after the effective date of his
election and if the person who was his spouse at the date of his retirement
(or in the case of a former Employee entitled to a deferred retirement
benefit under Section 4.06, on the date he files his application) is living
at the last to occur of his death or the expiration of such 120-month
period, benefits in the amount specified below shall be payable monthly to
such surviving spouse during her remaining lifetime. Notwithstanding
anything to the contrary in this Subsection A, the above provisions
relating to a guarantee of 120 monthly payments do not apply to the Post
Retirement Supplemental Benefit. The Qualifying Option shall automatically
apply, in respect to the Post Retirement Supplemental Benefit, in respect
to employees or former employees who have the Qualifying Option under the
Chrysler Salaried Employees' Retirement Plan pursuant to Section 6.05 of
that plan. Those participants in this Plan who do not have the Qualifying
Option under the Chrysler
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<PAGE> 17
Salaried Employees' Retirement Plan may elect to receive Post Retirement
Supplemental Benefit payments payable until the death of both the Employee
or former Employee and his spouse but such election shall not be automatic.
1. The reduced monthly payment of a retirement benefit payable to
the Employee or former Employee whose age does not differ from that of
his spouse by more than 5 years shall be an amount equal to the monthly
payment that would have been payable to him in the standard form,
reduced by an amount equal to 5% of the amount of the retirement
benefits that would be payable to him in the standard form at his Normal
Retirement Date if he had elected the standard form of payment. If the
age of the spouse is less than the age of such Employee or former
Employee, the percentage shall be 5% increased by 1/2 of 1% for each
year in excess of 5 years that the age of the spouse is less than the
age of the Employee or former Employee. If the age of the spouse is
greater than the age of the Employee or former Employee, the percentage
shall be 5% decreased by 1/2 of 1% for each year in excess of 5 years
that the age of the spouse exceeds the age of the Employee or former
Employee (but not less than 0%). For this purpose, the ages of the
Employee or former Employee and his spouse shall each be the age at his
or her last birthday prior to the effective date of election as provided
in Subsection B below. The reductions provided in this paragraph shall
be made in all monthly payments paid to the Employee or former Employee
on or after the date on which his election becomes effective, except as
otherwise provided below in Subsections E and F of this Section 6.04.
2. The benefits payable to the surviving spouse, if the death of
the Employee or former Employee occurs on or after the effective date of
his election (or in the case of a former Employee entitled to a deferred
retirement benefit under Section 4.06, on or after the date he files his
application) and the person who was his spouse is living at the last to
occur of his death or the expiration of the 120 guaranteed monthly
payments, shall be monthly payments equal to 60% of the reduced monthly
payments determined as provided in paragraph 1 above.
Notwithstanding anything to the contrary in this Subsection 2, any
monthly amount payable to a surviving spouse which is calculated on the
basis of the Post Retirement Supplemental Benefit under the provisions
of Section 4.05 shall commence on the first day of the month following
the month in which the Employee died and terminate with the last monthly
payment before her death.
B. An election of the surviving spouse option that is deemed to have
been made as provided in Subsection A above, shall be deemed to have been
made at the time the Employee or former Employee files his application for
a retirement benefit or a deferred retirement benefit, and the effective
date of the election shall be the date payment of the retirement benefit
commences, except that, in the case of an Employee or former Employee who
is married when his election would otherwise become effective, but whose
marriage at that date has been continuously in effect for less than one
year, the effective date of his election shall be the first day of the
month following the month in which such marriage has been continuously in
effect for one year. However, in the case of an Employee or former Employee
who marries during the twelve month period immediately preceding the date
payment of a retirement benefit commences and has been married to that
spouse for at least one year ending on the date of the Employee's or former
Employee's death, he shall be deemed to have been married for one year
ending on the date payment of his retirement benefit commenced.
C. If an Employee or former Employee is deemed to have made the
election provided above in Subsection A of this Section 6.04 and if his
spouse dies or should otherwise cease to be his spouse after he has made
such election but before the effective date of such election, the election
shall be revoked automatically. The election shall be irrevocable on or
after the effective date of the election if the Employee or former Employee
and his designated spouse are both living on such date except as otherwise
provided below in Subsections E and F of this Section 6.04. If such
designated spouse dies or should otherwise cease to be the spouse of the
Employee or former Employee after the effective date of the election and
during his lifetime, the reduced monthly payments payable to him shall not
be affected, except as otherwise provided below in Subsections E and F of
this Section 6.04.
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<PAGE> 18
D. Upon the request of the Committee an Employee or former Employee
deemed to have made the election provided in Subsection A of this Section
6.04 must produce an official marriage certificate or other evidence of his
marriage to his spouse satisfactory to the Committee.
E. An Employee or former Employee who is deemed to have made the
election provided above in Subsection A of this Section 6.04 and whose
designated spouse predeceases him may have his monthly payments restored to
the amount payable without reduction for such election, and shall become
eligible for all death benefits as provided in Article V, effective the
first day of the third month following the month in which the Committee
receives evidence satisfactory to it of the spouse's death.
F. If an Employee or former Employee is deemed to have made the
election provided above in Subsection A of this Section 6.04 and if the
Employee or former Employee and his spouse are divorced by court decree or
judgment, such Employee or former Employee is deemed to have canceled such
election and will have his monthly payments restored to the amount payable
without reduction for such election and shall become eligible for death
benefits as provided in Article V, effective the first day of the third
month following the month in which the Committee receives such Employee's
or former Employee's written revocation of the election because of divorce,
on a form approved by the Committee, and accompanied by evidence
satisfactory to the Committee of a final decree or judgment of divorce.
G. A retired Employee who (i) was deemed to have made the election
provided above in Subsection A of this Section 6.04 and whose designated
spouse dies or otherwise ceases to be his designated spouse or (ii) was not
married on the date provided for such election in Subsection B of this
Section 6.04, and who marries or remarries shall automatically be deemed to
have reelected the form of surviving spouse option provided above in
Subsection A of this Section 6.04. Such election shall become effective on
the first day of the month following the month in which the retired
Employee has been married one year.
6.05. Every Employee may designate a Beneficiary to receive payments in the
event of his death by filing with the Committee a designation in writing signed
by him in such form as the Committee shall prescribe, and may change or revoke
the designation from time to time and at any time by filing with the Committee a
new designation; provided, however, that an Employee shall be deemed to have
designated as his Beneficiary the beneficiary designated in the SERP, or for
purposes of the Incentive Compensation Retirement Benefit also under the
Chrysler Canada Ltd. Salaried Employees' Retirement Plan, unless the Participant
specifically designates another Beneficiary.
6.06. Any death benefit provided in Article V with respect to an Employee
for whom there is in effect no election as provided in Section 6.04 shall be
paid in a lump sum.
6.07. No benefit or right to payment under this Plan shall be subject to
any claim of any creditor of any Employee, Beneficiary or surviving spouse of a
deceased Employee or former Employee and shall not be subject to attachment or
garnishment or other legal process by any creditor, nor shall any Employee,
former Employee, Beneficiary or surviving spouse have any right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits under this
Plan.
6.08. In the event of the death of a person entitled to any benefit under
the Plan, or in the event that the Committee shall find that any such person is
unable to care for his affairs because of illness or accident, the Committee may
cause any benefit payments due, unless claim shall have been made therefor by a
duly appointed legal representative, to be paid to the spouse, a child, a parent
or other blood relative, or to any person deemed by the Committee to have
incurred expense for such person, and any such payments so made shall be a
complete discharge of the liabilities of the Plan therefor. In the event that,
at the time a benefit becomes payable to any persons under the Plan, the
Committee after reasonably diligent search is unable, within six years from the
time the benefit is payable, to find the person to whom the benefit is payable,
then the benefit shall be treated as a forfeiture and all right, title, and
interest of the person therein and thereto shall terminate.
6.09. Notwithstanding anything to the contrary herein, the Committee shall
pay the Actuarial Equivalent of any amount(s) payable under this Plan to a
participant or Beneficiary before such amount(s) would
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<PAGE> 19
otherwise be paid (and in discharge of all obligations with respect thereto) if,
based on any of the following events, the Committee determines, in good faith
based on consultation with counsel, that such participant or Beneficiary has or
will recognize income for federal income tax purposes with respect to such
amount(s) before such amount(s) are otherwise to be paid:
A. a change in the Internal Revenue Code or Title 1 of ERISA, or the
Treasury or Department of Labor Regulations thereunder, respectively, or a
binding or predominant judicial construction thereof,
B. a published ruling or similar announcement issued by the Internal
Revenue Service or the Department of Labor,
C. a decision by a court of competent jurisdiction involving a
participant in the Plan, a Beneficiary of the Plan, the Corporation, or any
entity involved in making payments under the Plan, or
D. a final determination of tax liability following a contested tax or
ERISA dispute or audit (or a closing agreement made under section 7121 of
the Internal Revenue Code) that involves a participant in the Plan, a
Beneficiary of the Plan, the Corporation, or any entity involved in making
payments under the Plan.
6.10 A. An employee eligible to receive an Incentive Compensation
Retirement Benefit under Article IV of the Plan may elect to receive such
benefit in a lump sum payment. Such lump sum payment shall be equal to the
lesser of (a) an amount equal to 80% of the cost of a typical commercial
insurance policy equivalent in value to the Plan's 10 years certain and life
standard form of payment or (b) an amount calculated based on the Plan's
cost/funding assumptions, except that a 10% interest rate shall be used. An
election to receive an immediate lump sum payment may be made at retirement. If
such election is not made at retirement, a subsequent election may be made
subject to a waiting period of one year. Eligible recipients of Incentive
Compensation Retirement benefits who retired prior to January 1, 1994 shall be
provided a one time 90 day window election period, as determined by the
Corporation, to make a lump sum payment election without a one year waiting
period. The value of the lump sum payment will be determined based on the
remaining value of the Plan's 10 years certain and life normal provision.
B. A terminated employee eligible to receive a deferred Incentive
Compensation Retirement Benefit under Section 4.06 of the Plan may elect to
receive such benefit in a lump sum payment subject to Committee approval. Such
lump sum payments, however, may not be elected prior to age 65. In addition, if
such lump sum payment election is made later than age 65, it is subject to a
waiting period of one year. If benefits have commenced prior to the lump sum
payment, the value of the lump sum payment will be determined based on the
remaining value of the Plan's 10 years certain and life normal provision,
assuming the terminated employee had elected such normal provision when his
benefits commenced.
ARTICLE VII. CONTRIBUTIONS
7.01. Employee contributions shall be permitted under this Plan solely for
the purpose of providing an ERISA Excess Retirement Contributory Benefit
pursuant to Section 1.01B of this Plan and an ERISA Excess Death Benefit
pursuant to Paragraph 5.01B.2.a of this Plan.
7.02. Employee contributions under this Plan shall be voluntary and shall
be permitted in the amount and to the extent they would have been permitted
under the Salaried Employees' Retirement Plan ("SERP") had they not been
curtailed by limitations imposed by Sub-paragraph 401(a)(17) of the Internal
Revenue Code, as amended, as embodied in Subsection 4.01C of SERP.
ARTICLE VIII. PLAN ADMINISTRATION
8.01. The Committee shall have exclusive authority to control and manage
the operation and administration of this Plan except as specifically set forth
in Section 8.04 below.
8.02. The Committee may make rules and regulations for the administration
of the Plan which are not inconsistent with the terms and provisions of the
Plan. The Committee shall have discretionary authority to construe and interpret
the Plan and decide all questions of eligibility, benefit settlement and
payment. It may
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<PAGE> 20
correct any defect or supply any omission or reconcile any inconsistency in such
manner and to such extent as it shall deem expedient to carry the Plan into
effect and it shall be the sole and final judge of such expediency. In addition
the Committee, or such person or persons it shall designate for that purpose as
provided in Section 8.03, shall maintain the following claim review procedure:
A. Claim Review Procedure. (a) If any former Employee or any
Beneficiary has not received a benefit under the Plan to which he thinks he
is entitled, he or his authorized representative, within 180 days after the
event that he thinks entitled him to the benefit, may file with the
Committee a written claim for the benefit, in any form reasonably
calculated to bring the nature of his claim to the attention of the
Committee. If the claim is wholly or partially denied, the Committee within
180 days of its receipt of the claim, shall give to the claimant written
notice of the denial, setting forth in a manner calculated to be understood
by the claimant the specific reason or reasons for the denial. A claimant
whose claim to benefits under the Plan has been wholly or partially denied,
or his authorized representative, may request a review of his claim by the
Committee by making written application for review to the Committee within
90 days after the claimant's receipt of written notification of denial of
his Claim. In connection with the review, the claimant or his authorized
representative may submit issues and comments in writing. Not later than 90
days after the receipt by the Committee of the claimant's request for
review, the Committee shall give its decision in writing, setting forth the
specific reasons for the decision, written in a manner calculated to be
understood by the claimant. Subject to any rights to remedies accorded by
applicable law, the final decision of the Committee shall be conclusive and
binding upon the Corporation, the claimant and all other persons interested
in the claim.
B. The Committee shall also make arrangements for authorizing the
payment of benefits to retired Employees, former Employees, surviving
spouses and Beneficiaries entitled thereto. The payment of such benefits
shall commence as of the first day of the first calendar month beginning
after the date which is 90 days following the Committee's decision in 8.02
A.
8.03. The Committee may appoint a secretary and one or more assistant
secretaries and such other agents and representatives as it may deem advisable,
who may but need not be Employees otherwise covered by this Plan, to keep its
records or assist it in doing any other acts or things, and any such appointment
shall be deemed a designation.
8.04. A. In the performance of its duties under this Plan the Committee may
act by a majority of its members then in office and any action expressed from
time to time by a vote at a meeting or in writing without a meeting shall
constitute action of such Committee and shall have the same effect for all
purposes as if assented to by all of the members of such Committee then in
office.
B. Any action which this Plan authorizes or requires the Committee to do
shall, if done in good faith by such committee, be final and binding upon
Employees, retired Employees, former Employees, surviving spouses,
Beneficiaries, and the Corporation. The fact that any member of either such
Committee is an Employee, officer, director or stockholder of Chrysler
Corporation or is covered by this Plan shall not disqualify him from doing any
act or thing which this Plan authorizes or requires him to do as a member of
such Committee or render him accountable for any benefit received by him as an
Employee covered by this Plan. No Committee member shall participate in any
decision of the Committee that would directly and specifically affect the timing
or amount of his benefits under the Plan.
C. The members of the Committee shall discharge their duties under the Plan
solely in the interest of the Employees and their Beneficiaries and (i) for the
exclusive purpose of providing benefits to such Employees and their
Beneficiaries and defraying reasonable expenses of administering the Plan (ii)
with the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character and with
like aims; and (iii) in accordance with the provisions of the Plan, as the same
may be from time to time amended.
D. The Committee and the members of the Committee shall be entitled to rely
upon all information certified to it by the Corporation, all certificates and
reports furnished by the Actuary or by any qualified public accountant and all
opinions given by any duly appointed legal counsel (who may be also counsel for
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<PAGE> 21
Chrysler Corporation); and neither the Committee nor any member of the Committee
shall be deemed imprudent in respect of any action taken or permitted by them in
good faith in reliance upon any such certificates, reports or opinions. Except
to the extent otherwise provided by law neither the Committee nor any of the
members of the Committee shall be liable to the Corporation or to any Employee
or to any Beneficiary on account of any act done or omitted or determination
made by the Committee acting in good faith in the performance of its duties
under the Plan, nor for any act done or omitted by any agent or representative
of the Committee selected by such Committee with reasonable care, nor shall any
member of the Committee be liable to any person for any act done or omitted by
any other member of the Committee in which he did not concur. The Corporation
agrees, to the extent permitted by law, to indemnify and hold the Committee and
each of the members of the Committee harmless from and against any liability it
or they may incur in connection with the Plan, unless arising from their own
negligent or willful breach of their fiduciary responsibility as set forth in
subsection C of this section.
E. Any act that the Plan authorizes or requires the Committee to do, or any
determination in good faith by the Committee of any matter or question under the
Plan shall, in any such case, be final and binding upon any Employee, retired
Employee, former Employee, surviving spouse or Beneficiary.
F. All expenses of the Committee in the performance of its duties under
this Plan shall be payable by the Corporation.
8.05. The Corporation, as long as the Plan remains in effect, shall pay or
cause to be paid the benefits provided by the Plan and the incurred costs and
expenses of the Plan.
ARTICLE IX. AMENDMENT, TERMINATION
9.01. The Board of Directors of Chrysler Corporation shall have the right
to amend the Plan at any time and from time to time, to any extent that it may
deem advisable, except that no such amendment shall adversely affect the rights
of any Employee with respect to retirement benefits theretofore accrued under
the Plan.
9.02. The Committee shall have the right to amend this Plan at any time and
from time to time, to any extent that it may deem advisable, except that no such
amendment shall
A. adversely affect the rights of any Employee with respect to
retirement benefits theretofore accrued under the Plan; or
B. change the benefit formula for determining the amount of retirement
or death benefits provided under the Plan unless approved by the Board of
Directors of Chrysler Corporation. (The Committee shall, however, have full
authority to approve amendments that provide additional benefit incentives
under special early retirement programs and, except as limited by the first
sentence of this Section 9.02B, to approve basic design and administrative
amendments that affect retirement eligibility and the amount of benefits);
or
C. decrease the age or length of service that employees are required
to have under the Plan in order to be eligible for benefits upon early
retirement or termination of employment (notwithstanding the preceding
sentence, however, the Committee shall have specific authority to establish
reduced age or service requirements pursuant to special early retirement
programs designed to achieve work force reductions provided, however, that
(i) special early retirement offers for officers and other Board roll
employees must be approved in advance by the Management Resources Committee
and (ii) special early retirement programs that lower the age of retirement
below 50 or the number of years of Credited Service below seven must be
approved by the Board of Directors of Chrysler Corporation); or
D. permit the termination of this Plan other than by the authority of
the Board of Directors of Chrysler Corporation; or
E. alter the provisions of Article VIII or of this Article IX.
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<PAGE> 22
9.03. Any amendment to this Plan shall be set out in an instrument in
writing executed on behalf of Chrysler Corporation under its corporate seal by
the President or a Vice President or the Treasurer and by the Secretary or an
Assistant Secretary, and authorized by a resolution of the Committee or of the
Board of Directors.
9.04. Chrysler Corporation by action of its Board may direct the Committee
to terminate the Plan in whole or in part at any time. In the case of complete
or partial termination of the Plan, no further benefits shall be accrued under
the affected portions of the Plan with respect to affected Employees, and
benefits theretofore accrued shall be paid in accordance with the provisions of
Articles IV through VI of the Plan. Except with the consent of the Employee, no
such termination of the Plan shall adversely affect the rights of any Employee
with respect to retirement benefits theretofore accrued under the Plan.
9.05. Notwithstanding any other provisions hereof, during the two-year
period beginning on the date of a Change in Control, the Plan shall not be
terminated (whether in whole or in part) and the Plan shall not be amended in
any way which detrimentally affects the right of any Employee (i) to participate
in the Plan, (ii) to accrue, or to continue to accrue, supplemental retirement
benefits under the Plan, or (iii) to vest in any such supplemental retirement
benefits.
ARTICLE X. GENERAL
10.01. This Plan is purely voluntary on the part of the Corporation.
Neither the establishment of this Plan nor the payment of any benefit shall be
construed as giving any Employee or any other person any legal or equitable
right against the Corporation or the Committee, unless the same shall be
expressly provided for in this Plan or conferred by affirmative action of the
Committee or the Corporation in accordance with the terms and provisions of the
Plan, or as giving any Employee the right to be retained in the service of the
Corporation, and all Employees shall remain subject to discharge to the same
extent as if this Plan had never been established.
10.02. The validity and construction of this Plan shall be determined
according to the laws of the United States and of the State of Michigan.
10.03. Titles of articles are for general information only and this Plan is
not to be construed by reference thereto.
10.04. In all cases where they would so apply, words used in the masculine
or feminine shall be construed to include the opposite gender, and words used in
the singular shall be construed to include the plural.
10.05. In case any provisions of this Plan shall be held illegal or invalid
for any reason, such illegality or invalidity shall not affect the remaining
parts of this Plan, but this Plan shall be construed and enforced as if such
illegal or invalid provisions had never been inserted herein.
10.06. Any payment or distribution to any Employee, retired Employee,
former Employee, Beneficiary, or surviving spouse in accordance with the
provisions of this Plan shall be in full satisfaction of all claims against the
Committee and the Corporation.
10.07. No liability shall attach to or be incurred by members of the
Committee, stockholders, officers or directors, as such, of the Corporation,
under or by reason of any of the provisions of this Plan or implied therefrom,
and all liability of every kind and nature and all rights and claims against the
Corporation and every member of the Committee, any stockholder, officer or
director, past, present or future, as such, whether arising in common law or in
equity or created by statute or constitution or otherwise are hereby expressly
waived and released as a condition of and part of the consideration for the
contributions of the Corporation under this Plan. Each Employee, retired
Employee, former Employee, surviving spouse, or Beneficiary, as a condition of
receiving any benefits under the Plan, shall be conclusively deemed for all
purposes to have assented to the Plan and shall be bound hereby with the same
force and effect as if he had executed a consent to all the terms and provisions
of the Plan.
10.08. The Corporation shall not be required to segregate any assets which
may at any time be represented as compensation reduction amounts, accrued
benefits or earnings credited to a participant. The
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<PAGE> 23
Corporation shall not, by any provisions of this Plan, be deemed to be a trustee
of any property, and the liabilities of the Corporation to any participant shall
be those of a debtor pursuant to such contract obligations as are created by the
Plan, and no such obligation of the Corporation shall be deemed to be secured by
any pledge or other encumbrance on any property of the Corporation.
10.09. The Committee is authorized to satisfy all requirements for tax
withholding on distributions under the Plan, through a deduction from the
participant's benefit payment, excluding any tax imposed on the employer.
ARTICLE XI. SPECIAL PROVISIONS APPLICABLE TO DESIGNATED PARTICIPANTS
11.01. Additional years of Credited Service shall be granted in respect of
any individual listed below, for all purposes under the Plan, including, without
limitation, determining the individual's (i) total retirement benefits under
Chrysler pension plans and (ii) right to vest in the benefits, and to be
eligible for any early retirement or other benefits based on Credited Service,
provided under this Plan.
The total amount of additional Chrysler pension benefits attributable to
such additional years of Credited Service shall be paid under the ERISA Excess
Retirement Benefit part of this plan described in Section 1.01B. Individuals
eligible for such additional years of Credited Service and the amount of such
additional Credited Service to be recognized shall be as follows:
A. L. A. Iacocca (Social Security ####-##-####) -- 4 years, 10 months
(After recognition of 3 additional years of credited service under the 1992
Salaried Employees' Special Early Retirement Program.)
B. R. J. Eaton (Social Security ####-##-####) -- 5 years
C. R. A. Lutz (Social Security ####-##-####) -- 5 years
11.02. Special conditions shall apply, in respect to any individual listed
below, for purposes of determining certain Chrysler retirement benefits payable
to him from this Plan. Individuals to whom such special conditions apply and a
description of such special conditions are as follows:
A. J.A. Pilulas. (Social Security ####-##-####) Additional benefits
that would have been paid Mr. Pilulas under the Chrysler Pension Plan and
the Chrysler Salaried Employees Retirement Plan had he retired on June 1,
1989 under the Special Early Retirement provisions of such plans will be
paid under the ERISA Excess Retirement Benefit part of this Plan described
in Section 1.01B. In addition, benefits he had forfeited under the
Incentive Compensation Retirement Benefit part of this Plan described in
Section 1.01A shall be paid on an unreduced basis. Benefits provided under
this Section 11.02A shall be provided prospectively only commencing
November 1, 1992.
B. R. J. Eaton, (Social Security ####-##-####)
R. A. Lutz, (Social Security ####-##-####)
T. G. Denomme, (Social Security ####-##-####) and
G. C. Valade, (Social Security ####-##-####)
In the event that any of the above named individuals retires or otherwise
terminated employment on or prior to the second anniversary of the date as of
which a Change of Control (as defined in Section 4.13) occurs, such individual
shall be deemed to have retired under the Special Early Retirement provisions of
the SERP. Any benefits not payable under SERP will be paid under the ERISA
Excess Retirement Benefit part of this Plan.
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<PAGE> 24
APPENDIX A
ACTUARIAL ASSUMPTIONS UNDER THE PLAN
<TABLE>
<CAPTION>
ACTUARIAL ASSUMPTIONS OR
SECTION PURPOSE BASIS FOR DETERMINATION
------------- ------------------------------------ ------------------------------------
<S> <C> <C> <C>
1. 2.06 To determine the single sum value or The basis for determining these
lump sum value of periodic payments commuted values will be amounts
payable in the future. determined using an interest rate as
set forth hereafter in this
Appendix.
2. 4.12 To determine the Commuted Value of The rate of interest used in
Incentive Compensation Retirement computing the Commuted Value will be
Benefits for payout to participants the FAS 87 Discount Rate which was
at the time of the participants' used in determining the Plan's
termination of employment following liabilities for Chrysler
a change in control. Corporation's financial statement
purposes as of the latest December
31, or, if no determination was made
as of such date -- 9% compounded
annually.
3. 5.01A1 To determine the Commuted Value of The number of payments remaining in
any unpaid guaranteed payments of the certain period at the time of
Incentive Compensation Retirement death will be discounted to the last
Benefits at the time of a former day of the month in which death
Employee's death. occurs at a rate of interest of 10%
compounded annually.
4. 5.01B1 To determine the Commuted Value of The number of payments remaining in
any unpaid guaranteed payments of the certain period at the time of
ERISA Excess Retirement Benefits at death will be discounted to the last
the time of a former Employee's day of the month in which death
death. occurs at a rate of 9% compounded
annually.
5. 5.01B2 To determine the Commuted Value of The Commuted Value will be based on
120 monthly payments of ERISA Excess the rate of interest of 9%
Retirement Benefit of a former compounded annually and the monthly
Employee whose death occurs prior to payment the former Employee would
the date monthly payments commence. have received had he elected to have
benefits commence on the date
immediately preceding the date of
his death.
6. 5.02A To determine the Commuted Value of The Commuted Value will be
120 monthly payments of the monthly determined based on a rate of 10%
Incentive Compensation Retirement compounded annually and the monthly
Benefits with respect to an Employee Incentive Compensation Retirement
who dies while still employed after Benefit the Employee would have
his Normal Retirement Date. received had he retired on the date
of his death.
7. 5.02B To determine the Commuted Value of The Commuted Value will be
120 monthly payments of the monthly determined based on a rate of
* ERISA Excess Retirement Benefits interest of 9% compounded annually
with respect to an Employee who dies and the monthly ERISA Excess
while still employed but after his Retirement Benefit the Employee
Normal Retirement Date. would have received had he retired
on the date of his death.
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
ACTUARIAL ASSUMPTIONS OR
SECTION PURPOSE BASIS FOR DETERMINATION
------------- ------------------------------------ ------------------------------------
<S> <C> <C> <C>
8. 5.03A To determine an Actuarial The actuarial assumptions that will
Equivalent. be used in determining an Actuarial
Equivalent will be the 1971 Group
Annuity Mortality Table (weighted
70% for males and 30% for females),
an interest rate of 10% compounded
annually, and an expected retirement
date of the latter of a) the date
immediately preceding the date of
the Employee's death or b) the date
the Employee would have first become
eligible to retire at his option.
9. 5.03B To determine the ERISA Excess Death The death benefit of such an
Benefit of an Employee whose death Employee shall be the Commuted
occurs on or after his 60th birthday Value, at 9% interest compounded
with ten years or more of Credited annually, of 120 monthly payments
Service. equal to the monthly
Non-Contributory Retirement Benefit
that he would have received had he
retired on the date of his death
reduced by 5/8 of 1% for each full
month by which the date of his death
precedes his Normal Retirement Date.
10. 6.02 To determine the equivalent lump The actuarial assumptions used in
sum, quarterly, half yearly, or determining the equivalent benefits
yearly benefits with respect to will be the 1971 Group Annuity
monthly benefits that are less than Mortality Table (weighted 70% for
$10. males and 30% for females), and 9%
(10% for an Incentive Compensation
Retirement Benefit) interest
compounded annually.
11. 6.10 To determine the value of a lump sum The lump sum value will be
Incentive Compensation Retirement determined based on a rate of
Benefit interest of 10% compounded annually
and the provisions specified in
Section 6.10 of the Plan.
12. Sections not To determine an Actuarial The actuarial assumptions that will
listed above Equivalent. be used in determining an Actuarial
Equivalent will be the 1971 Group
Annuity Mortality table (weighted
70% for males and 30% for females),
an interest rate of 9% (10% for an
Incentive Compensation Retirement
Benefit) compounded annually, and an
expected Normal Retirement Date of
the 1st day of the month following
Age 65.
</TABLE>
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<PAGE> 26
IN WITNESS WHEREOF, the Corporation has caused this Instrument to be
executed by its duly authorized officers and its corporate seal to be hereunto
affixed as of the 1st day of June, 1995.
CHRYSLER CORPORATION
By K. M. Oswald
-------------------------------------
K. M. Oswald
Vice President -- Corporate Personnel
Attest:
H. E. Leese
- --------------------------------------
H. E. Leese
Assistant Secretary
(CORPORATE SEAL)
24
