<PAGE> 1
CONFIDENTIAL DRAFT
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHRYSLER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
CHRYSLER LOGO
March 28, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Chrysler Corporation to be held at the Sheraton Baltimore North Hotel, Towson,
Maryland, on May 16, 1996, at 10:00 A.M., Eastern Daylight Saving Time. For your
convenience, directions to the meeting site are shown on the inside back cover
of the Proxy Statement.
Matters to be acted on at the meeting include: (a) the election of
directors; (b) the appointment of independent public accountants; and (c) a
Board of Directors proposal to authorize stock compensation for nonemployee
directors. Detailed information concerning these matters is set forth in the
attached Notice of Annual Meeting of Stockholders and Proxy Statement.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR SHARES IN FAVOR OF
THE ELECTION OF DIRECTORS, THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS AND
THE BOARD OF DIRECTORS PROPOSAL.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY SIGN AND
RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. If you then attend the meeting
and wish to vote your shares in person, you still may do so. Also, if you plan
to attend the meeting, please mark the appropriate box on the proxy card. If you
plan to have anyone accompany you, please enclose a note indicating the name of
that person. Admission cards for the meeting will then be sent to you. The
meeting will focus on the business matters noted above, although some time will
also be allotted for general shareholder comments relating to the Company. No
ancillary activities, such as plant tours, exhibits, or lunches, are planned.
This Proxy Statement and the 1995 Annual Report to Shareholders are also
available on the Internet through the Investor Relations section within Chrysler
Corporation's World Wide Web site @ http://www.chryslercorp.com/.
I look forward to seeing you at the meeting.
Sincerely yours,
Robert J. Eaton
Chairman
<PAGE> 3
CHRYSLER CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1996
The Annual Meeting of Stockholders of Chrysler Corporation ("Chrysler" or
the "Corporation") will take place at the Sheraton Baltimore North Hotel, 903
Dulaney Valley Road, Towson, Maryland 21204, on May 16, 1996, at 10:00 A.M.,
Eastern Daylight Saving Time, for the following purposes:
Item No. 1. To elect a board of 14 directors to serve until the next Annual
Meeting of Stockholders (pages 2-7);
Item No. 2. To appoint independent public accountants to audit the books,
records and accounts of the Corporation for the year 1996 (page 8);
Item No. 3. To approve an amendment to the Chrysler Corporation 1991 Stock
Compensation Plan to authorize the payment of Board of Directors'
compensation in shares of Chrysler Common Stock and restricted
stock units (pages 8-13);
and to transact such other business as may properly come before the meeting.
Only holders of record of Chrysler Common Stock at the close of business on
March 18, 1996 will be entitled to vote at the meeting.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.
BY ORDER OF THE BOARD OF DIRECTORS,
William J. O'Brien
Vice President, General Counsel and Secretary
March 28, 1996
<PAGE> 4
CHRYSLER CORPORATION
1000 CHRYSLER DRIVE, AUBURN HILLS, MICHIGAN 48326-2766
PROXY STATEMENT
March 28, 1996
The Board of Directors of Chrysler Corporation solicits your proxy in the
form enclosed to use at the Annual Meeting of Stockholders on May 16, 1996. The
Corporation will begin mailing this Proxy Statement and the accompanying form of
proxy on or about March 28, 1996 to stockholders entitled to vote at the
meeting.
Only holders of record of Chrysler Corporation common stock, par value
$1.00 per share ("Common Stock" or "Shares") at the close of business on March
18, 1996 will be entitled to vote at the meeting; holders of the Corporation's
Series A Convertible Preferred Stock will not be entitled to vote. On that date
there were 375,003,775 Shares outstanding.
Every stockholder is entitled to one vote for each Share held. In
accordance with the Corporation's By-Laws, the election of directors and each
other matter before the meeting will be decided by a plurality vote, unless the
description of such matter indicates otherwise. A plurality vote means that the
election of any director or the approval of a matter before the meeting will
require the affirmative vote of a majority of the votes cast with respect to
such election or matter. Abstentions and broker non-votes are not votes cast and
therefore will not be counted in determining voting results, unless the
description of a matter indicates otherwise. Abstentions and broker non-votes
will be counted, however, in the determination of a quorum. Inspectors of
election appointed by the Board of Directors will tabulate the votes cast.
The Board urges you to date, sign and mail your proxy promptly, in the form
of the proxy/voting instruction card enclosed with this Proxy Statement, to make
certain that your Shares will be voted at the meeting. Proxies in the enclosed
or other acceptable form that are received in time for the meeting will be
voted. However, you may revoke your proxy by a revocation in writing or a later
dated proxy that is received by the Corporation prior to the meeting, or by
voting your Shares in person at the meeting.
If your proxy is received in time for the meeting, it will be voted for the
nominees for director whose names appear below under "Election of Directors",
unless the proxy indicates that it is not to be voted for the election of such
nominees or for any specific nominees. Where your proxy specifies that it is to
be voted for or against, or that you abstain from voting on, any other matter
included in this Proxy Statement, the proxy will be voted as you have specified.
Where you do not specify a choice, the proxy will be voted as indicated in the
form of proxy.
Your proxy/voting instruction card represents the Shares you hold of record
as well as any whole Shares held for you as a participant in the Corporation's
Dividend Reinvestment Plan. The card will also serve as voting instruction to
the trustees under the Corporation's employee savings, deferred pay and similar
plans for
1
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any Shares held for employees who participate in those plans. Those trustees
will vote Shares for which no instructions are received in the same proportion
as the Shares for which instructions are received, excluding any Shares the
trustees have been instructed not to vote.
ITEM NO. 1
ELECTION OF DIRECTORS
A full board of fourteen directors will be elected at the meeting to serve
for the following year and until their successors are elected and qualified. All
of the nominees are now directors of the Corporation and all were elected by the
stockholders at the last annual meeting, except for Messrs. Neff and Aljian, who
were elected to the Board on February 7 and 8, 1996, respectively.
The biographical information set forth on the following pages with respect
to each nominee's present principal occupation, business and other affiliations,
and beneficial ownership of equity securities of the Corporation has been
furnished by the nominee.
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NOMINEES FOR DIRECTOR
<TABLE>
<C> <S>
Former Vice Chairman of the Board, Maxxam Group Inc.
[PHOTO]
LILYAN H. Ms. Affinito served as President and Chief Operations Officer of Maxxam Group Inc.
AFFINITO, 64 (formerly Simplicity Pattern Co. Inc.) from June 1976 to June 1987 and as Vice
Elected a Director Chairman of the Board from June 1987 until June 1991. Ms. Affinito is a director of
June 3, 1982 Caterpillar Inc., Jostens Inc., Lillian Vernon Corporation, Tambrands Inc., Kmart
Corporation, and New York/New England Telephone Cos. She is a member of the Board of
Trustees of the Mayo Foundation.
Executive, Tracinda Corporation
[PHOTO]
JAMES D. ALJIAN, 63 Mr. Aljian is an executive of Tracinda Corporation, an investment company wholly
Elected a Director owned by Kirk Kerkorian, Chrysler Corporation's largest shareholder. He has served
February 8, 1996 Tracinda in various capacities from 1965-1985 and from 1987 to the present. He served
as President of that company from 1979- 1982. Mr. Aljian was an executive of
Southwest Leasing Corporation from 1985-1987. He is Chairman of the Lincy Foundation
and a director of MGM Grand Inc. Mr. Aljian is a member of the American Institute of
Certified Public Accountants and the California Society of Certified Public
Accountants.
Chairman of the Board and Chief Executive Officer, AT&T
[PHOTO]
ROBERT E. ALLEN, 61 Mr. Allen was elected Chairman and Chief Executive Officer of AT&T in April 1988. Mr.
Elected a Director Allen began his career at Indiana Bell in 1957. Subsequently, he served in officer
February 3, 1994 posts at Indiana Bell, Bell of Pennsylvania, Illinois Bell, the Chesapeake and
Potomac Telephone Companies and AT&T. He was named President and Chief Operating
Officer of AT&T in 1986. Mr. Allen's board memberships include Bristol-Myers Squibb
Co. and Pepsico, Inc. He is a member of The Business Council, The Business
Roundtable, the US-Japan Business Council, and serves on the Boards of Trustees of
the Mayo Foundation and Wabash College.
</TABLE>
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<TABLE>
<S> <C>
[PHOTO] Chairman and President, Center on Addiction and Substance Abuse at Columbia
JOSEPH A. University (CASA)
CALIFANO, JR., 64
Elected a Director Mr. Califano received a law degree from Harvard Law School in 1955 and after service
June 4, 1981 in the Navy he practiced law in New York City. From April 1961 to July 1965 he served
the Department of Defense in various capacities and from July 1965 to January 1969 he
was Special Assistant for Domestic Affairs to the President of the United States. Mr.
Califano engaged in the practice of law from June 1971 to January 1977 at which time
he was appointed Secretary of Health, Education and Welfare and served in that post
until August 1979. He practiced law in Washington, D.C. from January 1980 through
December 1982. From January 1983 until September 1992, he was a senior partner of the
law firm Dewey Ballantine. He is a director of Authentic Fitness Corporation,
Automatic Data Processing Inc., Health Plan Services, Inc., Kmart Corporation, New
York/New England Telephone Cos., Travelers Group Inc., and Warnaco Inc. He is a
trustee of New York University, The Twentieth Century Fund, The Urban Institute and
The American Ditchley Foundation, a governor of New York Hospital, Chairman of the
Institute for Social and Economic Policy in the Middle East at Harvard University,
and Adjunct Professor of Public Health (Health Policy and Management) at Columbia
University Medical School and School of Public Health. He is the author of nine books
and numerous articles.
[PHOTO] Vice Chairman of the Board and Chief Administrative Officer
THOMAS G. DENOMME,
56 Mr. Denomme joined the Corporation in September 1980 and was elected Vice President
Elected a Director -- Corporate Strategic Planning in 1981, Executive Vice President -- Corporate Staff
February 4, 1993 Group in February 1991, Executive Vice President and Chief Administrative Officer in
January 1993 and Vice Chairman of the Board and Chief Administrative Officer in
October 1994. On February 4, 1993 he was elected a director of Chrysler. He is also a
member of the Office of the Chairman. Prior to joining Chrysler, Mr. Denomme held a
number of positions at Ford Motor Company, including Director, Marketing Policy and
Strategy Office and Director, Sales Operations Planning. He is Chairman of the Board
of Trustees of the University of Detroit-Mercy, Co-Chairman of the Michigan
Thanksgiving Parade Foundation, and a Trustee of the Detroit Investment Fund. He is
also a Director of the American Automobile Manufacturers Association, the
Congressional Economic Leadership Institute and the Committee For Economic
Development.
[PHOTO] Chairman of the Board and Chief Executive Officer
ROBERT J. EATON, 56
Elected a Director Mr. Eaton was elected Vice Chairman of the Board and Chief Operating Officer of the
March 16, 1992 Corporation, effective March 16, 1992, and he became Chairman of the Board and Chief
Executive Officer on January 1, 1993. Prior to joining Chrysler, he served as
President of General Motors Europe since June 1988. He was employed by General Motors
Corporation from 1963 to 1992, and served that company in various executive
capacities, including Vice President and Group Executive in charge of the GM
Technical Staffs from May 1986 to June 1988, and Vice President in charge of the
Advanced Engineering Staff from May 1982 to May 1986. Mr. Eaton was elected to the
National Academy of Engineering in 1989 and is a fellow of the Society of Automotive
Engineers and the Engineering Society of Detroit. He is a director of the American
Automobile Manufacturers Association, International Paper Company, Detroit
Renaissance, United Way of Southeastern Michigan, Economic Club of Detroit, Detroit
Symphony Orchestra and the Michigan Leaders Health Care Group. He is also a member of
The Business Council, The Business Roundtable, the U.S./Japan Business Council, and
the President's Advisory Committee on Trade Policy and Negotiations.
</TABLE>
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<TABLE>
<S> <C>
[PHOTO] Chairman and Chief Executive Officer, Earl G. Graves Ltd.
EARL G.
GRAVES, 61 Mr. Graves is Chairman and Chief Executive Officer of Earl G. Graves Ltd., a
Elected a Director multi-faceted communications company, and is the Publisher of BLACK ENTERPRISE
March 1, 1990 magazine which he founded in 1970. Additionally, since 1990, Mr. Graves has served as
Chairman and Chief Executive Officer of Pepsi-Cola of Washington, D.C., L.P., a
Pepsi-Cola bottling franchise. Also, Mr. Graves is a general partner of Egoli
Partners, L.P., which is a general partner of New Age Beverages, the Pepsi- Cola
franchisee in the Republic of South Africa. Moreover, Mr. Graves serves as a director
of AMR Corporation, Aetna Life and Casualty Company, Federated Department Stores,
Rohm and Haas Corporation, the New York State Urban Development Corporation and New
American Schools Development Corporation. Mr. Graves also is a trustee of Howard
University and the American Museum of Natural History and Planetarium. Mr. Graves is
a member of the Executive Committee of the Council on Competitiveness. Mr. Graves
currently serves as the Vice President of Relationships/ Marketing and is on the
Executive Board of the National Office of the Boy Scouts of America.
[PHOTO] Chairman of the Board, President and Chief Executive Officer, Northrop Grumman
KENT Corporation
KRESA, 58
Elected a Director Mr. Kresa earned degrees from Massachusetts Institute of Technology and from 1959 to
November 30, 1989 1968 was associated with various scientific and defense oriented research
organizations and government agencies. He joined Northrop Grumman Corporation, a
diversified aerospace manufacturer, in 1975 and after several positions with
increased responsibility in the company, Mr. Kresa was elected Chairman, President
and Chief Executive Officer of that company in 1990. Mr. Kresa is a member of the
Massachusetts Institute of Technology Visiting Committee for the Department of
Aeronautics and Astronautics, and a Fellow of the American Institute of Aeronautics
and Astronautics. He is Chairman of the Board of Governors of the Aerospace
Industries Association, and is a director of the John Tracy Clinic for the
hearing-impaired and the Atlantic Richfield Company. He serves on the CEO Board of
Advisors of the University of Southern California's School of Business
Administration, the Board of Trustees for the California Institute of Technology, the
Board of Directors of the Los Angeles World Affairs Council, and the Board of
Governors of the Los Angeles Music Center.
[PHOTO] Chairman Emeritus, Owens-Illinois, Inc.
ROBERT J.
LANIGAN, 67 Mr. Lanigan joined Owens-Illinois, Inc., a manufacturer of packaging materials, in
Elected a Director 1950 and has served that company in various executive capacities and as head of a
April 5, 1984 number of divisions and operations. Mr. Lanigan was elected a Vice President of
Owens-Illinois in 1968 and a director in 1974, and became President and Chief
Operating Officer of Owens-Illinois in 1982. He served as President and Chief
Executive Officer from January to April of 1984, as Chairman of the Board and Chief
Executive Officer from April 1984 through September 1990, as Chairman from October 1,
1990 to October 15, 1991, and was elected Chairman of the Finance Committee on
October 15, 1991. Mr. Lanigan also serves as Chairman Emeritus of Owens-Illinois. He
is a director of Owens- Illinois, Inc., Barry-Wehmiller Co., The Dun & Bradstreet
Corporation, Sonat Inc., Sonat Offshore Drilling Inc., and The Coleman Company, Inc.
</TABLE>
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<TABLE>
<S> <C>
[PHOTO] President and Chief Operating Officer
ROBERT A.
LUTZ, 64 Mr. Lutz joined the Chrysler group on June 3, 1986 when he was elected an Executive
Elected a Director Vice President of Chrysler Motors Corporation, the then wholly owned automotive
June 12, 1986 manufacturing and sales subsidiary which was merged into the Corporation on December
31, 1989. He was elected a director of the Corporation on June 12, 1986. Mr. Lutz
served as President -- Operations of Chrysler Motors from January 1988 to November
1988 and as President -- Chrysler Motors from November 1988 to February 7, 1991 when
he was elected President of Chrysler Corporation. Since January 1, 1993, Mr. Lutz
also has served as Chief Operating Officer and a member of the Office of the
Chairman. He was employed by Ford Motor Company and its subsidiaries from 1974 to
1986, serving in several top executive positions. He was a member of the Ford Motor
Company board of directors from 1982 to 1986. Prior to joining Ford Motor Company,
Mr. Lutz was employed by General Motors Corporation in Europe and by Bayerische
Motorenwerke (BMW) of Germany. He is an executive director of the National
Association of Manufacturers and a director of ASCOM Holdings, A.G., and Silicon
Graphics, Inc. He is also a member of the Highway Users Federation for Safety and
Mobility, the Advisory Board for the University of California, Berkeley, School of
Business Administration and a member of the National Advisory Council of the
University of Michigan School of Engineering.
[PHOTO] Chairman of the Board, Safeway Inc.
PETER A.
MAGOWAN, 53 Mr. Magowan has been employed by Safeway Inc., a supermarket chain, since 1968 in
Elected a Director various management positions, including Store, District, Retail Division and Regional
May 14, 1986 Manager. He was elected a Vice President of the company in 1973. In 1976, he was
placed in charge of the company's Canadian and overseas subsidiaries. He was elected
a director of Safeway Inc. in 1979, and Chairman of the Board on January 1, 1980. He
served as Chief Executive Officer from January 1, 1980 until May 1, 1993. He is a
director of The Vons Companies, Inc. and Caterpillar Inc. He is also the President
and Managing General Partner of the San Francisco Giants.
[PHOTO] Former Managing Partner, Senior Vice President, Executive Committee Member,
JOHN B. Wellington Management Company
NEFF, 64
Elected a Director Mr. Neff held positions of increasing responsibility with Wellington Management
February 7, 1996 Company from 1963 to his retirement from management duties in 1995, including
Portfolio Manager of Windsor and Gemini II Funds, Managing Partner, Senior Vice
President and member of the Executive Committee. Mr. Neff continues to provide
services to Wellington. He is Chairman of the Investment Board, a member of the
Executive Committee and a Charter Trustee of the University of Pennsylvania. He
serves as a director of General Accident Insurance and Greenwich Associates, and is a
former Trustee and member of Chartered Financial Analysts, and a member and past
President of Financial Analysts of Philadelphia.
</TABLE>
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<TABLE>
<S> <C>
[PHOTO] Vice Chairman (Retired), The Boeing Company
MALCOLM T.
STAMPER, 70 Mr. Stamper graduated from Georgia Institute of Technology and worked for General
Elected a Director Motors Corporation for 14 years before joining The Boeing Company in 1962. In 1966,
March 1, 1984 he was Vice President in charge of developing the 747 airplane. Mr. Stamper was
elected a director of The Boeing Company in 1972 and served as President from 1972 to
1985 and as Vice Chairman from 1985 to 1990. He is Chairman and CEO of Storytellers
Ink Publishing Company. He is a director of Esterline Corporation and Whittaker
Corporation. He has served as a director of the Federal Reserve Bank of San Francisco
and on the National Advisory Board of the Smithsonian Museum, and Chairman of the
Board of The Seattle Art Museum.
[PHOTO] Chairman, President and Chief Executive Officer, BCE Inc.
LYNTON R.
WILSON, 55 Mr. Wilson received a masters degree from Cornell University in 1967. He served as
Elected a Director Deputy Minister, Ministry of Industry and Tourism, Government of Ontario, Canada from
March 3, 1994 1978 to 1981. He joined Redpath Industries Limited as President and Chief Executive
Officer in 1981 and was elected Chairman of the Board of Redpath in 1988. Mr. Wilson
served as Vice-Chairman of the Bank of Nova Scotia in 1989-90. Mr. Wilson served as a
director of BCE Inc., a telecommunications company, from May 1985 to September 1989
and has served in that capacity continuously since November 1990. He was elected
President and Chief Operating Officer of BCE Inc. in 1990, President and Chief
Executive Officer of that Company in 1992 and Chairman, President and Chief Executive
Officer on April 1, 1993. Mr. Wilson is also a director of Chrysler Canada Ltd., Bell
Canada International Inc., BCE Mobile Communications Inc., Bell Canada, Bell-Northern
Research Inc., Northern Telecom Limited, Stelco Inc., Tate & Lyle PLC, Teleglobe Inc.
and the C.D. Howe Institute. He also serves as a Governor of the Olympic Trust of
Canada, and of McGill University and is a member of the International Council, J.P.
Morgan and the Trilateral Commission.
</TABLE>
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ITEM NO. 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders appoint the firm of
Deloitte & Touche LLP as independent public accountants to audit the books,
records and accounts of the Corporation for the year 1996. The firm has offices
or associates convenient to most of the Corporation's facilities and the Board
of Directors considers the firm to be well qualified.
Representatives of Deloitte & Touche LLP expect to attend the meeting, will
be afforded an opportunity to make a statement if they desire to do so, and will
be available to respond to appropriate questions by stockholders.
YOUR DIRECTORS RECOMMEND A VOTE FOR THE APPOINTMENT OF DELOITTE & TOUCHE
LLP AS INDEPENDENT PUBLIC ACCOUNTANTS TO AUDIT THE BOOKS, RECORDS AND ACCOUNTS
OF THE CORPORATION FOR THE YEAR 1996, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU
SPECIFY OTHERWISE.
ITEM NO. 3
BOARD OF DIRECTORS PROPOSAL REGARDING AMENDMENT OF
THE CHRYSLER CORPORATION 1991 STOCK COMPENSATION PLAN
GENERAL
The Chrysler Corporation 1991 Stock Compensation Plan (the "1991 Plan"),
approved by the stockholders in 1991, provides for awards of stock options and
other stock related incentives to executives and nonemployee directors. The 1991
Plan is an important element in the Corporation's overall compensation program.
That program is designed to attract and retain individuals with the ability to
achieve corporate objectives and increase shareholder value. Equity based
compensation provided under the 1991 Plan encourages participants to manage the
Corporation's business in a way that increases shareholder value, by allowing
them to share in such increases.
The Board of Directors has amended the 1991 Plan, subject to stockholder
approval, to authorize:
(1) The payment of the current and future Annual Retainer Fee (as
defined below) to directors who are not employees of the Corporation or any
of its subsidiaries (each, a "Nonemployee Director") in Shares, net of
certain applicable taxes;
(2) A one-time award of 3,000 restricted stock units to each
Nonemployee Director first elected to the Board after December 31, 1995,
which together with related dividend equivalents, will be payable to each
such Nonemployee Director in Shares or cash following termination of his or
her status as a director, provided that the applicable vesting criteria in
respect of such award have been satisfied.
The Company believes that these amendments will not only enable it to
continue to attract and retain knowledgeable and experienced Nonemployee
Directors, but will also further serve to align their interests with
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those of shareholders by ensuring that Nonemployee Directors have an economic
interest in Shares at all times while serving as directors. No increase in share
authorization is sought in connection with these amendments.
DISCUSSION OF AMENDMENTS
Payment of Retainer Fees in Shares. Each Nonemployee Director currently
receives an annual retainer fee of $25,000 for service as a director, $10,000
for service as a member of a committee, and, if applicable, $2,000 for service
as chairperson of a committee. If this Item No. 3 is approved, those fees, as in
effect from time to time (collectively, the "Annual Retainer Fee"), will be paid
in Shares. A director first elected to the Board between annual meetings of
shareholders will be paid a pro rata portion of the Annual Retainer Fee in
Shares. Fees for attendance at meetings of the Board or any of its committees
will continue to be paid in cash.
The actual number of whole Shares issuable in respect of the Annual
Retainer Fee for a given year will be determined pursuant to the following
formula. The aggregate dollar amount of such Annual Retainer Fee will be divided
by the fair market value of a Share on the date of the annual meeting of
shareholders or, in the case of a director first elected to the Board following
the annual meeting of shareholders for a given year, on the date of such
election. The resulting quotient will then be reduced by subtracting therefrom
the greatest number of whole Shares equal to, but not in excess of, the
hypothetical income and employment tax liability that a Nonemployee Director
would incur with respect to the award of such Shares. This hypothetical tax will
be determined assuming that each Nonemployee Director pays income and Medicare
taxes on the Annual Retainer Fee at an aggregate rate equal to the sum of the
highest marginal Federal income tax rate then in effect, the highest marginal
state and local income tax rate then in effect for the location in which the
Nonemployee Director resides, and Medicare taxes at the then applicable rate.
Any fractional Shares resulting after such calculation will be settled in cash.
The table below shows the number of Shares that would have been issued,
before reduction for taxes as described above, to current Nonemployee Directors,
as a group, in lieu of cash in 1995, if this amendment to the 1991 Plan had been
in effect in 1995:
<TABLE>
<CAPTION>
ANNUAL NUMBER OF
RETAINER FEE WHOLE SHARES(2)
------------ ---------------
<S> <C> <C>
Nonemployee Director Group(1)..................................... $505,000 11,686
</TABLE>
- ---------------
(1) There are currently eleven Nonemployee Directors. The number of Nonemployee
Directors, however, may vary from year to year.
(2) The fair market value of a Share was $43.19 on May 18, 1995, the date of the
last annual meeting of shareholders. Under the 1991 Plan, fair market value
means the mean of the high and low trading price of a Share on any given
date as reported on the New York Stock Exchange.
Election Grant of Restricted Stock Units. The Board has also amended the
1991 Plan to provide that each Nonemployee Director who is first elected to the
Board after December 31, 1995 will receive a one-time
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grant of 3,000 "restricted stock units" on the date of such Nonemployee
Director's initial election representing the right to receive a corresponding
number of Shares. Each restricted stock unit will be credited with dividend
equivalents (as defined below on page 12), which will be deemed reinvested in
additional restricted stock units. Upon termination of service, such Nonemployee
Director may elect to receive either (a) a number of Shares equal to the number
of whole restricted stock units granted to him or her (including those related
to reinvested dividend equivalents) and the cash value of any fractional
restricted stock units, or (b) an amount in cash equal to (i) the fair market
value of a Share on the date of his or her termination of service, multiplied by
(ii) the number of restricted stock units granted to him or her (including those
related to reinvested dividend equivalents). Messrs. Neff and Aljian will each
receive such a grant as of the date of his election as a Director (February 7
and 8, 1996, respectively) if Item No. 3 is approved and they are elected at the
1996 Annual Meeting of Stockholders.
Generally, if such a Nonemployee Director ceases to be a director prior to
the completion of five years of service following the grant of the restricted
stock units (and any units attributable to dividend equivalents) such units will
be forfeited. However, if a Nonemployee Director ceases to be a director prior
to completing five years of service due to death, permanent and total
disability, within the meaning of the Internal Revenue Code of 1986, as amended,
or retirement at age 72, the Nonemployee Director's rights to his or her
restricted stock units will become fully vested. A Nonemployee Director's rights
with respect to any unvested restricted stock units will also vest upon a Change
in Control of the Company, as defined in footnote 1 on page 28 below.
PLAN DESCRIPTION
GENERAL. The 1991 Plan provides for the award of stock options, including,
as described below, Reload Options, stock appreciation rights ("SARs"), limited
stock appreciation rights ("LSARs"), restricted stock units ("Restricted Stock
Units") and performance stock units ("Performance Stock Units") to employees.
The 1991 Plan also provides for the automatic grant of stock options (and
related SARs and LSARs) and, subject to approval of this Item No. 3, for the
automatic grant of Shares and Restricted Stock Units to Nonemployee Directors.
No awards may be granted on or after May 15, 2001, except that Reload Options
may be granted on or after such date, provided that no Reload Option shall be
exercisable later than the date on which an option granted prior to May 15, 2001
could be exercised. The Stock Option Committee (a committee of Nonemployee
Directors) determines the employees to receive awards under the Plan and the
number of Shares to be subject to each award.
Shares of stock which are attributable to options (including Reload
Options) and SARs which expire or are otherwise terminated, cancelled or
surrendered without being exercised, or which are attributable to awards of
Restricted Stock Units or Performance Stock Units which expire or are otherwise
terminated or cancelled, will be available for issuance in connection with
future grants or awards under the 1991 Plan.
Approximately 1,750 officers and other key salaried executives were
eligible in 1995 to participate in the 1991 Plan, and 89 executives were
eligible to participate in the Long-Term Performance Plan, which the Board
established previously pursuant to the Performance Stock Unit provisions of the
1991 Plan.
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<PAGE> 14
NONEMPLOYEE DIRECTORS. Under the 1991 Plan as amended, each Nonemployee
Director will receive his or her Annual Retainer Fee in Shares and, if first
elected to the Board after December 31, 1995, a one-time grant of 3,000
Restricted Stock Units as described above. The 1991 Plan will continue to
provide that each Nonemployee Director who is elected or reelected by the
stockholders at any annual or special meeting of stockholders, is to receive, as
of the date of each such election or reelection, an option, together with a
related SAR and LSAR, covering 1,500 Shares. The maximum number of Shares as to
which options (and related SARs and LSARs) may be granted to any Nonemployee
Director under the 1991 Plan is 22,500 Shares. An option and related SAR is
exercisable by a Nonemployee Director in accordance with the vesting provisions
described below, provided that the holder has been a director of the Corporation
continuously since the grant of the award. A LSAR is exercisable by a
Nonemployee Director during the 60-day period following a Change in Control of
the Corporation. The requirement of continuous service as a director does not
apply if service as a director has been terminated by reason of retirement,
permanent total disability or death, and may not apply if service as a director
has been terminated under mutually satisfactory circumstances or under
circumstances equivalent to retirement, in which event options (and related SARs
and LSARs) are exercisable by the director for the same periods and to the same
extent to which awards held by employees are exercisable. All additional
provisions of the Plan apply to stock options, SARs, LSARs and Restricted Stock
Units granted to Nonemployee Directors to the extent not inconsistent with
provisions of the Plan expressly governing awards to Nonemployee Directors or
Rule 16b-3 of the Securities Exchange Act of 1934 (the "Exchange Act").
STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION
RIGHTS. Options granted under the 1991 Plan may be either incentive stock
options or nonqualified stock options. No stock option can be granted at an
exercise price of less than 100% of fair market value on the day the stock
option is 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. 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. If an option holder, while employed by the Corporation,
surrenders Shares owned by him or her for a minimum of six months in payment of
the exercise price of an option, then, concurrent with such surrender, the
option holder, subject to the availability of Shares and other restrictions, may
be entitled to receive a new stock option (a Reload Option) covering a number of
Shares equal to the number so surrendered.
The 1991 Plan also authorizes the Stock Option Committee to grant SARs,
LSARs or both to participants. Each SAR or LSAR may relate to and be associated
with a specific option or may be freestanding. In the case of a SAR or LSAR that
is related to an option, such SAR or LSAR may be granted either at the time of
grant of such option or, if related to a nonqualified stock option, at any time
thereafter. A SAR related to an option is exercisable only to the extent the
related option is exercisable. A LSAR is exercisable only during the 60-day
period following a Change in Control of the Corporation. A SAR or LSAR
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<PAGE> 15
is not exercisable by a director or executive officer during the first six
months of the term of such SAR or LSAR except that this limitation does not
apply in the event of the death or disability of the director or executive
officer prior to the expiration of the six-month period. Upon the exercise of a
SAR, the holder is entitled to receive from the Corporation, without the payment
of any cash (except for any applicable withholding taxes), an amount equal to
(i) the excess of (x) the per share fair market value of the Common Stock on the
date of such exercise over (y) the price specified in the SAR on the date of
grant or, in the case of a SAR related to an option, the option price of any
related option times (ii) the number of shares in respect of which such SAR
shall have been exercised. Any payment with respect to a SAR will be made in
cash or Common Stock or partly in cash and partly in Common Stock, as the Stock
Option Committee determines. Any payment with respect to a LSAR will be made
solely in cash. On the exercise of a SAR or LSAR related to a stock option, the
related stock option, or the portion thereof in respect of which such SAR or
LSAR is exercised, terminates and, similarly, on the exercise of a stock option
related to a SAR or LSAR, such SAR or LSAR, or such portion thereof in respect
of which such stock option is exercised, terminates.
RESTRICTED STOCK UNITS AND PERFORMANCE STOCK UNITS. Each Restricted Stock
Unit or Performance Stock Unit represents the right to receive one Share. The
Stock Option Committee determines the number of Units to be covered by each
award. If the Stock Option Committee so determines at the time of award, a
participant may be credited with an amount equal to the amount of cash dividends
("dividend equivalents") that would have been paid to the participant if one
Share for every Unit held by the participant had been issued to such participant
at the time of such dividend, payable in such form as the Stock Option Committee
shall determine. Restricted Stock Units are restricted as to transfer and
subject to cancellation during a specified period or periods. Performance Stock
Units are restricted as to transfer and subject to cancellation during the
period prior to the achievement of performance objectives and, in some cases,
assessment of individual performance, as determined by the Stock Option
Committee. Each award is subject to such terms and conditions, including the
lapse of restrictions, as determined by the Stock Option Committee. During the
period of restriction, the recipient has no rights as a stockholder. To the
extent restrictions with respect to any Restricted Stock Unit award lapse or
performance objectives with respect to any Performance Stock Unit award are
attained, Shares with respect to such vested Units will be issued to the
employee participant free of all restrictions and the dividend equivalents with
respect to such Shares will be delivered to the participant. (As noted above, a
Nonemployee Director participant may elect to receive either Shares or cash with
respect to his or her Restricted Stock Units upon termination of service.) The
Stock Option Committee has the discretion to accelerate the lapse of
restrictions (including restrictions relating to the attainment of performance
objectives; provided, however, that the Plan eliminates such discretion to the
extent that the ability to exercise such discretion would cause the Performance
Stock Unit to fail to qualify as other performance based compensation under
Section 162(m) of the Internal Revenue Code). Termination of employment prior to
the lapse of restrictions causes a cancellation of the unvested portion of any
Restricted Stock Unit award and Performance Stock Unit award. To date, no
Restricted Stock Units have been awarded to employees under the Plan. If this
Item No. 3 is approved, Messrs. Aljian and Neff will each receive a one-time
grant of 3,000 Restricted Stock Units as described above.
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<PAGE> 16
TERMINATION AND AMENDMENT. The Board may amend, suspend or terminate the
1991 Plan and the Stock Option Committee may amend or alter the terms of any
award or any agreement relating thereto at any time, but no such action may
affect or in any way impair the rights of a participant under any award
previously granted without such participant's consent. No amendment may, without
stockholder approval (to the extent required), increase the total number of
Shares which may be issued under the 1991 Plan or reduce the minimum purchase
price for stock subject to options (other than in the case of adjustments to
reflect future stock dividends or other relevant capitalization changes), change
the class of employees eligible to participate in the 1991 Plan, extend the
maximum period during which options may be exercised or extend the period during
which options or other awards may be granted.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary
of the principal federal income tax consequences of those transactions under the
1991 Plan covered by the amendments described above, based on current federal
income tax laws. This summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences. Accordingly,
a participant should consult a tax advisor with respect to the tax aspects of
the 1991 Plan.
Payment of Annual Retainer Fee in Shares. A Nonemployee Director will
include in ordinary income an amount equal to the fair market value of the
Shares in the taxable year in which the Shares are issued and delivered. The
Corporation will be entitled to a deduction in an amount equal to the
recipient's ordinary income in the Corporation's taxable year in which the
Shares are issued and delivered.
Restricted Stock Units. A recipient of Restricted Stock Units should not be
subject to taxation upon the grant of such units. Instead, the recipient
generally will include in ordinary income an amount equal to the fair market
value of the corresponding number of Shares in the taxable year in which the
Shares are issued (or the value thereof paid) to the participant. With respect
to the foregoing provisions, the Corporation generally will be entitled to a
deduction in an amount equal to a recipient's ordinary income in the
Corporation's taxable year in which or with which ends the taxable year of the
recipient in which such recipient includes such amount in income.
VOTE REQUIRED FOR APPROVAL
The Corporation is seeking shareholder approval of the above amendments in
order assure that the 1991 Plan will continue to satisfy the conditions of Rule
16b-3 under the Securities and Exchange Act of 1934. The above amendments to the
1991 Plan will become effective if Item No. 3 is approved by the affirmative
vote of a majority of the Shares present, or represented, and entitled to vote
at this meeting. Abstentions will have the effect of a vote "against", while
broker non-votes will not affect the outcome.
YOUR DIRECTORS RECOMMEND A VOTE FOR THE PROPOSAL TO APPROVE THE AMENDMENT
OF THE CHRYSLER CORPORATION 1991 STOCK COMPENSATION PLAN, ALL AS SET FORTH
ABOVE, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
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<PAGE> 17
COMMITTEES OF THE BOARD
COMMITTEE MEMBERSHIP
Messrs. Aljian, Graves, Kresa, Magowan and Wilson are members of the Audit
Committee.
Messrs. Eaton, Lanigan, Magowan and Stamper are members of the Executive
Committee.
Ms. Affinito and Messrs. Allen, Califano, Kresa and Neff are members of the
Finance Committee.
Messrs. Allen, Lanigan and Stamper are members of the Incentive
Compensation Committee, Stock Option Committee and Salary Committee.
Messrs. Allen, Lanigan and Stamper are members of the Corporate Governance
Committee.
Ms. Affinito and Messrs. Califano, Graves and Wilson are members of the
Public Policy Committee.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors for its nomination
independent public accountants to audit the books, records and accounts of the
Corporation, and reviews and approves the overall scope and adequacy of the
independent and internal audit programs and the proposed form of the
Corporation's consolidated financial statements. The Audit Committee also
reviews the results, findings and recommendations of audits performed by the
independent public accountants and the internal audit department, the system of
internal accounting controls, the significant accounting policies of the
Corporation as they apply to its consolidated financial statements, the audit
fees to be paid to the independent public accountants and the nature of
non-audit services performed by the independent public accountants. The Audit
Committee held 7 meetings in 1995.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee was established on February 7, 1996 in
place of the Nominating Committee to evaluate and make recommendations to the
Board concerning: (a) the organization of the Board and responsibilities of its
committees, assignment of committee memberships, and agendas for meetings of
nonemployee directors; (b) appropriate qualifications and eligibility
requirements for selection of nominees; (c) the performance of the Board and its
committees; and (d) matters relating to corporate governance and shareholder
relations. A stockholder may recommend a person for nomination by giving notice
thereof and providing certain required information, in writing, to the Secretary
of the Corporation, so that it is received not less than 60 nor more than 90
days before the annual meeting, but if less than 70 days notice or public
disclosure of the date of such meeting is given or made to stockholders, the
notice of nomination must be received not later than the 10th day following the
day such meeting notice was mailed or such public disclosure was made. The
Nominating Committee held 6 meetings in 1995.
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<PAGE> 18
COMPENSATION COMMITTEES
The Incentive Compensation Committee, Stock Option Committee and Salary
Committee (collectively, the "Management Resources and Compensation Committees")
meet jointly to review and approve the compensation of senior management of the
Corporation, including the compensation of officers, and make reports and
recommendations to the Board of Directors concerning compensation plans. In
carrying out such responsibilities the Management Resources and Compensation
Committees, among other things, fix salaries, establish performance goals, award
incentive compensation and grant stock options, all within the authority granted
to them by the respective plans or by resolutions of the Board. The Management
Resources and Compensation Committees held 12 meetings in 1995.
DIRECTORS MEETINGS AND COMPENSATION
The Board of Directors held 18 meetings in 1995. Each director attended 75%
or more of the total of all meetings held by the Board and the committees on
which he or she served.
The fees currently paid to directors who are not officers of Chrysler
Corporation or its subsidiaries are as follows: annual fee for serving as a
director, $25,000; fee for each Board meeting attended, $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 an additional annual fee for serving as chairperson of a committee, $2,000.
Item No. 3 above is a proposal to amend the Chrysler Corporation 1991 Stock
Compensation Plan (the "1991 Plan") to authorize the payment of Board of
Directors' annual retainer compensation in Common Stock. Subject to approval of
that proposal by stockholders, the Board has determined that the annual fees
described above will be paid in Common Stock in order to more closely align the
interests of directors with those of stockholders.
In addition, subject to such approval, nonemployee directors first elected
to the Board after December 31, 1995 will receive a one-time award of 3,000
stock units under the 1991 Plan upon joining the Board. Each unit represents the
right to receive one Share and will be credited with dividend equivalents. If
such nonemployee director ceases to be a director before the completion of five
years of service (other than by reason of death, disability, or retirement at
age 72) following such one-time award, then such units (including any reinvested
dividend equivalents) will be forfeited. A director who terminates service after
the five year vesting period (or by reason of death, disability, or retirement
at age 72) may elect to receive either (a) a number of Shares equal to the
number of whole restricted stock units granted to him or her (including those
related to reinvested dividend equivalents) and the cash value of any fractional
restricted stock units, or (b) an amount in cash equal to (i) the fair market
value of a Share on the date of his or her retirement, multiplied by (ii) the
number of restricted stock units granted to him or her (including those related
to reinvested dividend equivalents). Messrs. Neff and Aljian will each receive
such an award as of the date of his election as a director (February 7 and 8,
1996, respectively); provided that Item No. 3 is approved, and they are elected,
at the annual meeting.
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<PAGE> 19
Under the 1991 Plan, 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 Corporation also provides nonemployee directors with product
evaluation and lease vehicles, as well as business travel accident insurance
coverage in the amount of $250,000.
The Corporation established a director retirement benefit program in 1988,
under which a director with five or more years of service receives an annual
cash retirement benefit payable for life equal to one hundred percent of the
annual retainer in effect at the time the director retires from the Board. A
director with less than five years of service receives the same cash benefit,
but only for a period equal to the time served as a director.
Following completion of its corporate governance review earlier this year,
and before the election of Messrs. Aljian and Neff, the Board terminated such
program with respect to current and future nonemployee directors, and the then
current nonemployee directors agreed to convert their rights under that program
into phantom stock units. Each such director's rights will be converted into
phantom stock units representing 3,000 Shares, or if greater, a certain number
of Shares determined by dividing (1) the present value of the benefit that would
have been payable to the director under the former program (assuming the earlier
of completion of 18 years of service as a director or retirement at no later
than age 72, the mandatory retirement age for directors, and based on a discount
rate of 8% and assuming annual increases in fees of 5%) by (2) the fair market
value of a Share on the date of the 1996 Annual Meeting of Stockholders. Each
phantom stock unit will be credited with dividend equivalents, which will be
deemed reinvested in additional phantom stock units. At retirement, each such
director will receive an amount equal to (a) the fair market value of a Share on
the date of his or her retirement, multiplied by (b) the number of phantom stock
units granted to him or her on the date of the 1996 Annual Meeting of
Stockholders (including those related to reinvested dividend equivalents). Each
director may elect to receive such amount in Shares or cash, in either a single
lump sum or in ten or fewer annual installments, provided that an election to
receive Shares cannot be made until at least six months after retirement from
the Board.
At the conclusion of its review, the Board also adopted stock ownership
guidelines for directors that require each director to own at least 5,000
Shares. Directors must achieve that ownership target by the later of February 8,
1999 or the third anniversary of their election to the Board.
Under the Chrysler Salaried Employees' Supplemental Savings Plan,
nonemployee directors may elect in advance to defer all or a portion of the
annual retainer and meeting 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.
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<PAGE> 20
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of Shares beneficially owned, as that
term is defined for proxy statement reporting purposes by the Securities and
Exchange Commission (the "SEC"), by the directors and executive officers of the
Corporation as of February 29, 1996 (unless otherwise noted):
<TABLE>
<CAPTION>
AMOUNT AND NATURE NUMBER OF SHARES IN LEFT COLUMN
OF BENEFICIAL WHICH MAY BE ACQUIRED
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)(3) WITHIN 60 DAYS(4)
- ---------------------------------------------- ----------------- -------------------------------
<S> <C> <C>
Lilyan H. Affinito............................ 11,158 6,600
James D. Aljian............................... 5,000 0
Robert E. Allen............................... 2,080 600
Joseph A. Califano, Jr........................ 8,566 5,100
Theodor R. Cunningham......................... 175,183 113,699
Thomas G. Denomme............................. 94,149 70,198
Robert J. Eaton............................... 708,764 594,410
Earl G. Graves................................ 8,425 6,150
Kent Kresa.................................... 10,358 6,150
Robert J. Lanigan............................. 9,107 3,000
Robert A. Lutz................................ 544,704 455,534
Peter A. Magowan.............................. 18,430 3,000
John B. Neff.................................. 16,000 0
Malcolm T. Stamper............................ 8,475 2,100
Gary C. Valade................................ 143,695 125,298
Lynton R. Wilson.............................. 2,100 600
All Directors and Executive Officers,
including those named above, as a Group..... 3,588,286(5)(6) 2,731,088(7)
</TABLE>
- ---------------
(1) No director or executive officer is the beneficial owner of other equity
securities of the Corporation 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) Includes Shares held as of December 31, 1995 by the dividend reinvestment
plan and the trustees under the Corporation'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 February 29, 1996
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 14,800 Shares held by family members of executive officers, the
beneficial ownership of which has been disclaimed by such officers in
reports filed with the SEC.
(6) The number of Shares shown constitutes 0.94% of the Shares outstanding on
December 31, 1995.
(7) The number of Shares shown constitutes 0.72% of the Shares outstanding on
December 31, 1995.
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<PAGE> 21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Corporation has been advised that the following persons beneficially
owned more than 5% of the Common Stock outstanding as of December 31, 1995 in
the case of FMR Corp., and as of January 31, 1996 in the case of Kirk
Kerkorian/Tracinda Corporation:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
- -------------------------------------------------------------------- ------------------ --------
<S> <C> <C>
Kirk Kerkorian(1)................................................... 51,900,000 13.73%
Tracinda Corporation
4835 Koval Lane
Las Vegas, Nevada 89109
FMR Corp.(2)........................................................ 49,584,120 13.07%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) According to Amendment No. 33 to their Schedule 13D dated March 13, 1996,
Mr. Kerkorian and Tracinda Corporation, a Nevada corporation wholly-owned by
Mr. Kerkorian, are members of a "group" as that term is used in Section
13(d)(3) of the Securities and Exchange Act of 1934, and are the beneficial
owners of 51,900,000 Shares. On February 8, 1996, the Corporation entered
into a five-year standstill agreement with Mr. Kerkorian and Tracinda
Corporation under which they have agreed (i) not to increase their
beneficial ownership of voting securities outstanding at any time during the
term of the agreement ("Voting Securities") beyond 13.75%, (ii) to sell
shares of Voting Securities pro rata, as required, in order not to exceed
such percentage as a result of Chrysler repurchases of Voting Securities,
(iii) to vote their shares of Voting Securities on all matters submitted to
shareholders for vote or consent in the same proportion as such shares are
voted by other shareholders not affiliated with them, (iv) to not solicit
proxies or enter into any activity aimed at a change of control of the
Corporation or its Board, and (v) that during the term of the Agreement, so
long as Tracinda or Mr. Kerkorian beneficially own more than 5% of the
outstanding Voting Securities, the Corporation's Board of Directors will
nominate Mr. James D. Aljian (or a successor) for election at each meeting
of stockholders at which directors are to be elected.
(2) Based on a Schedule 13G filing dated February 14, 1996, as of that date, FMR
Corp., through its subsidiaries Fidelity Management & Research Company
("Fidelity"), Fidelity Management Trust Company ("Fidelity Trust"), and
Fidelity International Limited ("Fidelity International"), had sole
dispositive power over all of the Shares set forth above opposite its name,
shared voting power as to none of such Shares, and sole voting power as to
1,408,195 of such Shares. Fidelity is the beneficial owner of 46,912,425 of
the above Shares (12.37% of the Shares outstanding), Fidelity Trust is the
beneficial owner of 2,605,595 of such Shares (0.69% of the Shares
outstanding), and Fidelity International is the beneficial owner of 66,100
of such Shares (0.02% of the Shares outstanding). The number of Shares
beneficially owned by these companies includes 367,807 Shares that Fidelity
and 252,798 Shares that Fidelity Trust have the right to acquire through the
conversion of all of the Corporation's Series A Convertible Preferred Stock
held by them.
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<PAGE> 22
The report on Executive Compensation and the Performance Graph which follow
shall not be deemed to be incorporated by reference into any filing made by the
Corporation under the Securities Act of 1933 or the Securities Exchange Act of
1934, notwithstanding any general statement contained in any such filing
incorporating this proxy statement by reference, except to the extent the
Corporation incorporates such report and graph by specific reference.
REPORT ON EXECUTIVE COMPENSATION
The Management Resources and Compensation Committees of the Board of
Directors (consisting of the Incentive Compensation Committee, the Stock Option
Committee and the Salary Committee) submit the following report to stockholders
on the compensation policies applicable to the Corporation's executive officers
with respect to compensation reported for the year ended December 31, 1995. The
Management Resources and Compensation Committees consist entirely of nonemployee
directors.
COMPENSATION PHILOSOPHY
The Committees believe that the Corporation's compensation program is a
critical part of the effective management of its key executives. In conjunction
with other sound management practices, Chrysler maintains a compensation program
that rewards senior management behavior which builds the long-term value of the
Corporation. The program is designed to:
- Maintain a strong relationship between performance and rewards;
- Link a significant portion of compensation to increases in
shareholder value;
- Clearly communicate corporate performance goals;
- Actively encourage stock ownership;
- Establish a comparative framework of companies for pay/performance
analysis; and
- Balance all compensation elements to create a total pay program
based on aggressive performance goals.
STOCK OWNERSHIP GUIDELINES
In order to more closely align the interests of executives with those of
stockholders, the Corporation adopted stock ownership guidelines several years
ago, which established target levels for ownership of Chrysler Common Stock by
officers and senior executives. Those guidelines have been increased for 1996
for those individuals (approximately 100) and expanded to include certain other
executives eligible to receive annual incentive compensation (approximately
450).
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<PAGE> 23
EXECUTIVE COMPENSATION PROGRAM
In response to the Omnibus Budget Reconciliation Act of 1993, the
Corporation amended its performance-based compensation plans to be able to
qualify compensation paid under those plans to the Corporation's Chief Executive
Officer and its next four most highly compensated executive officers for
deductibility under Section 162(m) of the Internal Revenue Code. From time to
time, however, the Committees may authorize the payment of nondeductible
compensation if they determine that such action would be in the best interests
of the Corporation. The Committees expect that all amounts earned under those
plans for 1995 will be deductible by the Corporation. The Committees determined
that it was appropriate to pay Mr. Eaton a base salary above the limit set by
Section 162(m) and forego the deduction for amounts above the limit in order to
achieve the underlying objectives of the compensation program described in this
Report.
In addition to base salary, the Corporation's executive compensation
program in 1995 included incentive compensation in the form of annual bonuses
(short-term incentives), awards of Chrysler Common Stock paid at the end of
multi-year performance cycles (medium-term incentives), and grants of stock
options exercisable over ten years (long-term incentives). The total amount of
compensation paid to executives was determined with reference to a peer group of
fifteen Fortune 500 companies which included the Corporation's two principal
domestic competitors. Companies were selected on the basis of, among other
things, their market capitalization, percentage of revenues derived from the
sale of durable goods, use of benchmarking as a management tool, selection by
Fortune magazine as one of its "Most Admired" companies, and selection for
similar comparative purposes by General Motors Corporation or Ford Motor
Company. The Committees believe that the various compensation programs within
the peer group fairly represent the types and levels of compensation the
Corporation must be prepared to provide in order to attract and retain qualified
executives. Although peer group compensation data for 1995 is not yet available,
the Committees expect that on average the base salaries of the Corporation's
executive officers will approximate the 50th percentile of the peer group, while
the total of all incentive compensation is expected to approximate the 80th
percentile of such compensation within the peer group.
BASE SALARY
The Committees establish base salaries for executive officers annually in
relation to average base salaries paid within the peer group. In general, base
salaries were set at levels near the 50th percentile of the peer group, with
performance-based incentive compensation providing an opportunity for
above-market total compensation. Base salaries for executive officers were
adjusted last year to reflect the increased average salary levels within the
peer group. Notwithstanding such adjustments, the base salaries established for
executive officers in 1995 in general are expected to be near the 50th
percentile of the peer group as determined by an independent consulting firm
engaged to assist the Committees.
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<PAGE> 24
ANNUAL BONUS
Bonuses are paid in accordance with the formula set forth in the resolution
initially approved by the stockholders in 1929 and most recently approved by the
stockholders in 1994 (the Stockholders' Resolution). The formula limits the
amount permitted to be set aside for incentive compensation under the
Stockholders' Resolution in any year to 8% of the amount by which consolidated
net earnings exceed $.4444 per share of Chrysler Common Stock. Bonuses are
determined by multiplying the executive's target bonus (a percentage of that
person's base salary or the average base salary of a class) by the corporate
performance level achieved with respect to the goal designated by the Committees
from those previously approved by the stockholders.
The Corporation paid annual bonuses to approximately 1,950 executives based
on its 1995 net consolidated earnings, which was the corporate performance goal
designated by the Committees at the beginning of 1995. The Committees decided at
that time that the attainment of specified levels of net consolidated earnings
would correspond to corporate performance levels ranging from 50% to 125%,
subject to reduction based on an assessment of the Corporation's 1995
performance in relation to that of its domestic and foreign competitors in the
areas of total shareholder return, financial success, and total vehicle quality
excellence.
Although the Corporation attained a corporate performance level of 125%,
following the comparative assessment, the Committees decided to reduce bonuses
based on the Corporation's performance in some measures of total vehicle quality
excellence. While recognizing the Corporation's significant improvement in
vehicle quality from year ago levels, the Committees also noted the need for
continuous improvement in customer service, initial quality, and warranty
expense. Accordingly, only 82% of the amount available for incentive
compensation under the Stockholder's Resolution was paid out in bonuses in
respect of the Corporation's performance in 1995.
In addition, the Committees determined that a portion of any 1996 annual
incentive compensation awarded to officers and certain other executives will be
paid in Chrysler Common Stock instead of cash. A portion of such stock will vest
over two years provided the executive remains employed with the Corporation.
PERFORMANCE SHARES
The Committees each year establish a performance cycle of between two and
five years and performance goals for that cycle based on long-term corporate
objectives. At the commencement of a performance cycle, the Committee awards
each eligible executive (officers and a limited number of senior executives) the
number of performance stock units in the form of Performance Shares that would
be deliverable to each of them at the end of the cycle if the performance goals
for that cycle are achieved. The number of Performance Shares awarded at the
beginning of a cycle is determined by dividing an amount (expressed as a
percentage -- not in excess of 80% -- of the executive's base salary, or the
average base salary or midpoint of the salary range of a class of employees, at
the time of the award) by the then fair market value of Chrysler Common Stock,
without regard to any dividend equivalents that may be paid in connection with
such Performance
21
<PAGE> 25
Shares during the cycle. At the end of each cycle, participants may earn
nothing, or a number of Performance Shares ranging from a set minimum to a
maximum of 125% of the target award for that cycle, as determined by the
Committee based on the Corporation's performance in relation to the performance
goals.
Performance Shares were awarded under the performance stock unit provisions
of the Chrysler Corporation 1991 Stock Compensation Plan (the "1991 Plan") to 89
executives in 1995 for the 1995-1996 and 1995-1997 performance cycles, and are
to be earned out based upon the level of achievement of vehicle quality
improvements, the corporate goal established for those cycles. Awards under the
1995-1996 performance cycle are in replacement of awards under the previously
established 1994-1996 performance cycle. Performance Share awards for the
1993-1995 performance cycle were paid at a corporate performance level of 75%
based on improvements in vehicle quality during the cycle as determined from
warranty claims data. Although less than 100% of the aggressive target level
established at the beginning of the cycle, that performance level represents a
significant improvement in vehicle quality over the last several years, i.e.,
the reduction in model year repair conditions per 100 retail vehicles sold
(C's/100) as determined by the number of actual warranty repairs made by
Chrysler dealers under the Corporation's 12-month/12,000 mile warranty.
STOCK OPTIONS
The Corporation may grant stock options and other stock-related incentives
under the 1991 Plan adopted by the Board of Directors and approved by the
stockholders. The 1991 Plan is intended to provide long-term incentives the
ultimate value of which is determined by increases in the price of Chrysler's
Common Stock.
No stock option can be granted at an exercise price of less than 100% of
fair market value on the day the option is granted. Each option must be
exercised within ten years after the date of grant, unless earlier terminated in
connection with termination of employment, 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.
Stock options were granted in 1995 to approximately 1,750 officers and
executives in amounts which were, in the judgment of the Stock Option Committee,
directly related to the level of responsibility of the grantees as compared with
their peer group counterparts. The number of options granted to a named
executive officer was established after determining that the projected value of
such options (as derived from the Black Scholes option pricing model) would rank
near the 80th percentile of the projected value of options granted to his peer
group counterparts.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Chrysler Supplemental Executive Retirement Plan provides, among other
things, for annual supplemental retirement benefits to officers and senior
executives equal to a percentage (not to exceed 6%), determined each year by the
Incentive Compensation Committee, of their respective annual bonus and
22
<PAGE> 26
Performance Share awards. Annual retirement benefits based on awards paid for
the year ended December 31, 1995, will be paid at the rate of 6% of such awards.
CHIEF EXECUTIVE OFFICER COMPENSATION
Under Mr. Eaton's leadership as Chief Executive Officer, the Corporation in
1995 returned approximately $1.8 billion to stockholders in the form of
dividends and share repurchases, improved vehicle quality and customer
satisfaction, and continued to strengthen its financial position by reducing
debt. The Corporation also registered its third best retail sales year in
history, selling 2,389,465 vehicles at retail in the United States and Canada
and increased sales outside of North America by 24% over 1994.
In addition, Mr. Eaton worked with the Chrysler management team to maintain
a successful product development program, which included the launch of the
Corporation's award-winning redesigned minivans. Chrysler's minivans won Popular
Mechanic's Design and Engineering Award, and the 1996 Dodge Caravan won Motor
Trend's Car of the Year Award. Further, the Dodge Ram won the J. D. Power
A.P.E.A.L. (Automotive Performance Execution and Layout) Award for the full-size
pickup category.
In establishing each of the components of Mr. Eaton's compensation for
1995, the Committees relied on information developed with the assistance of an
independent executive compensation consulting firm. The Committees determined
that equity-based incentive compensation should constitute a significant portion
of Mr. Eaton's total compensation so that the value ultimately realized by Mr.
Eaton would depend directly on the long-term performance of the Corporation and
would be commensurate with the value realized by stockholders.
Mr. Eaton's base salary was increased in 1995 to reflect increased salary
levels among his peer group counterparts. Consistent with the Corporation's
salary policy, following such adjustment Mr. Eaton's base salary was slightly
below the 50th percentile for that group.
Mr. Eaton received an annual bonus of $2,360,000 based on the Corporation's
performance with respect to net consolidated earnings as described above under
"Annual Bonus". Mr. Eaton also earned 8,325 Performance Shares with respect to
the 1993-1995 performance cycle based on the Corporation's performance with
respect to quality as described above under "Performance Shares". In addition,
Mr. Eaton was awarded 22,500 and 16,900 Performance Shares to be earned over the
1995-1996 and 1995-1997 performance cycles, respectively. The number of
Performance Shares awarded was determined by dividing an amount equal to a
certain percentage (established by the Committees) of his base salary by the
market price of Chrysler Common Stock. The Committees also granted to Mr. Eaton
options to purchase 225,000 shares of Chrysler Common Stock after determining
that the projected value of such options (as derived from the Black-Scholes
option pricing model) to Mr. Eaton would rank slightly above the 75th percentile
of the projected value of options granted to his peer group counterparts.
23
<PAGE> 27
Under the financial strategy advanced by Mr. Eaton, the Corporation posted
an impressive financial performance in 1995, reporting pre-tax earnings of $3.4
billion and total sales and revenues of $53 billion. Including the 50% dividend
increase last year, the Corporation has increased the dividend by a total of
300% over the last two years. Chrysler also achieved its goal of repurchasing $1
billion of Chrysler Common Stock in 1995 under a share repurchase program, and
increased that program by an additional $2 billion for 1996. As of December 31,
1995, the yield on Chrysler Common Stock was 4.4%, which was twice that of the
average S&P equity. The cumulative total shareholder return on Chrysler Common
Stock for the last five years, as shown in the performance graph accompanying
this Report, was 408%.
CONCLUSION
Under the Corporation's executive compensation program, the total
compensation ultimately attainable by executive officers depends to a
significant degree on consistent achievement of corporate objectives established
by the Management Resources and Compensation Committees to enhance stockholder
value. For example, 70% of the total compensation (excluding option grants) paid
in 1995 under this program to the executive officers named in the Summary
Compensation Table is directly related to the achievement of corporate
performance objectives, including profitability. Including option grants valued
under the Black-Scholes option pricing model, in excess of 81% of such
compensation consists of elements the ultimate realizable value of which is
based on achievement of such objectives and increases in share price.
MANAGEMENT RESOURCES AND
COMPENSATION COMMITTEES
Robert J. Lanigan, Chairperson
Robert E. Allen
Malcolm T. Stamper
24
<PAGE> 28
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Chrysler Common Stock over the five preceding fiscal years with the cumulative
total shareholder return on the common stock of each of General Motors
Corporation and Ford Motor Company and the return on the Standard & Poor's 500
Stock Index, assuming an investment of $100 in each of the above at their
closing prices on December 31, 1990 and reinvestment of dividends. The
performance shown in the graph is not necessarily indicative of future
performance.
[GRAPH]
<TABLE>
<CAPTION>
General Mo-
Measurement Period Chrysler Cor- Ford Motor tors Corpora- S&P 500 In-
(Fiscal Year Covered) poration Company tion dex
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 98 113 88 130
1992 273 179 102 140
1993 461 278 176 155
1994 434 247 137 157
1995 508 268 177 215
</TABLE>
25
<PAGE> 29
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation awarded to, earned by, or paid
during the three preceding fiscal years to the Corporation's Chief Executive
Officer and its next four most highly compensated executive officers serving at
the end of 1995 for all services rendered by them to the Corporation and its
subsidiaries in all capacities in which they served.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ---------- ---------
---------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) SARS(#) ($)(3) ($)(4)
- ------------------------------------- ---- --------- --------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Eaton...................... 1995 1,212,500 2,360,000 105,006 225,000 434,981 58,200
Chairman of the Board and 1994 1,063,750 2,200,000 60,424 214,638 966,641 51,060
Chief Executive Officer 1993 928,750 1,900,000 121,474 202,772 1,809,000 22,290
Robert A. Lutz....................... 1995 881,250 1,675,000 64,308 100,000 278,231 42,300
President and 1994 808,750 1,600,000 39,319 90,000 869,465 38,820
Chief Operating Officer 1993 747,500 1,500,000 75,923 99,301 1,444,500 17,137
Thomas G. Denomme.................... 1995 562,500 1,075,000 42,059 70,000 168,506 27,000
Vice Chairman and 1994 496,250 1,000,000 27,942 60,000 470,534 23,820
Chief Administrative Officer 1993 448,750 900,000 12,240 61,198 756,000 10,770
Gary C. Valade....................... 1995 456,250 800,000 37,866 65,000 133,238 21,900
Executive Vice President 1994 387,500 750,000 23,982 60,000 352,901 18,600
and Chief Financial Officer 1993 325,417 680,000 8,100 56,198 506,250 7,810
Theodor R. Cunningham(5)............. 1995 442,500 730,000 37,407 59,170 133,238 21,240
Executive Vice President -- 1994 412,500 700,000 24,927 58,470 409,160 19,800
Sales & Marketing and 1993 381,250 650,000 10,680 54,397 661,500 9,150
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 1995 are dividend equivalents paid in respect of awards of
shares of Common Stock ("Performance Shares") under the 1991 Plan and tax
payment reimbursements.
(3) LTIP payouts of Performance Shares for 1995 were in respect of the 1993-1995
performance cycle under the 1991 Plan and were based on the Corporation'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 1995 are matching contributions by the Corporation under its
employee savings plans.
(5) Mr. Cunningham assumed the position of President and Managing Director of
Chrysler de Mexico on January 18, 1996.
The Company entered into Employment Agreements in 1995 (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
26
<PAGE> 30
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.
It is currently expected, however, that Mr. Lutz will continue as an employee of
the Company beyond 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.
In the event the Company terminates an Executive's employment without Cause
(as defined in each Employment Agreement), or an Executive terminates his
employment for Good Reason (as defined in each Employment Agreement), 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.
The Company also entered into severance agreements with the Executives and
Mr. Cunningham that provide each such officer a predetermined level of severance
benefits if his employment is terminated involuntarily or constructively in
connection with a change of control.
These agreements 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 1991 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, 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 commits 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
27
<PAGE> 31
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 without Cause 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
sum severance payment equal to three times, in the case of Messrs. Eaton, Lutz,
Denomme and Valade, and two times, in the case of Mr. Cunningham, 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
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 the agreement
and its other plans and policies.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock options granted
in 1995 to the named executive officers. No SARs were granted to executive
officers in 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1)(2) FISCAL YEAR ($/SH) DATE ($)(3)
- --------------------------------- ------------ ---------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Robert J. Eaton.................. 225,000 6.15% 48.88 07-05-05 3,051,000
Robert A. Lutz................... 100,000 2.74% 48.88 07-05-05 1,356,000
Thomas G. Denomme................ 70,000 1.91% 48.88 07-05-05 949,200
Gary C. Valade................... 65,000 1.78% 48.88 07-05-05 881,400
Theodor R. Cunningham............ 52,000 1.42% 48.88 07-05-05 705,100
4,996 0.14% 48.63 12-04-01 69,300
2,174 0.06% 48.63 06-10-02 30,100
</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 3,655,571 Shares were
granted to directors, officers and employees in fiscal
28
<PAGE> 32
1995. Each option was granted at an exercise price of not less than 100% of
fair market value of the Common Stock 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. The
exercise price may be paid in cash or by delivery of Common Stock. 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 1991 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 1995 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 Corporation 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 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 Corporation's then
outstanding securities (unless the 20% threshold is crossed due to an
acquisition of securities directly from the Corporation); (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 Corporation with any
other corporation (other than a merger which would result in the voting
securities of the Corporation continuing to represent, in combination with
voting securities held by any employee benefit plan of the Corporation, at
least 80% of the combined voting power of the Corporation or the surviving
entity outstanding immediately after such merger); or (iv) the stockholders
approve a plan of complete liquidation of the Corporation 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
29
<PAGE> 33
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 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) The grants shown in italics for Mr. Cunningham are grants of Reload Options
resulting from the exercise of an initial option granted before 1995, which
contained 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 him 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 35%;
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
Corporation'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.
30
<PAGE> 34
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 1995 by the named executive officers and the value of their unexercised
options at December 31, 1995. No named executive officer exercised SARs in 1995
and no such officer currently holds any SARs.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END($)(1)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Eaton.......... 0 0 594,410 378,000 13,200,236 2,575,710
Robert A. Lutz........... 37,500 1,103,625 455,534 176,500 12,806,580 1,212,730
Thomas G. Denomme........ 22,500 741,750 70,198 121,000 607,558 829,120
Gary C. Valade........... 0 0 125,298 114,800 2,784,826 787,586
Theodor R. Cunningham.... 46,000 1,491,230 195,699 99,970 4,501,732 684,711
</TABLE>
- ---------------
(1) The mean of the high and low price of a Share on the NYSE was $55.07 on
December 29, 1995, the last trading day of the year.
31
<PAGE> 35
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table provides information concerning the number of Shares
awarded in 1995 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............................. 22,500 2 yrs 11,250 22,500 28,125
16,900 3 yrs 8,450 16,900 21,125
Robert A. Lutz.............................. 13,600 2 yrs 6,800 13,600 17,000
10,200 3 yrs 5,100 10,200 12,750
Thomas G. Denomme........................... 8,600 2 yrs 4,300 8,600 10,750
6,500 3 yrs 3,250 6,500 8,125
Gary C. Valade.............................. 6,800 2 yrs 3,400 6,800 8,500
5,100 3 yrs 2,550 5,100 6,375
Theodor R. Cunningham....................... 6,800 2 yrs 3,400 6,800 8,500
5,100 3 yrs 2,550 5,100 6,375
</TABLE>
- ---------------
(1) These awards reflect the number of Performance Shares payable to each of the
named executive officers under the 1991 Plan at the end of the 1995-1996 and
1995-1997 performance cycles depending on the level of achievement
ultimately attained by the Corporation with respect to the corporate goal
established for each cycle. Under the 1991 Plan, a target award (expressed
as a percentage of salary) was 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 Corporation's
performance in relation to improvements in vehicle quality, the performance
goal established for each cycle. Each of the named executive officers is
entitled to receive amounts equal to the cash dividends that would have been
paid to him during each cycle if one share of Common Stock 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 1991 Plan will be
deemed attained, any other restrictions applicable to such shares will be
waived and such shares will be deemed fully vested.
32
<PAGE> 36
PENSION PLAN TABLE
The Corporation'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
Chrysler Supplemental Executive Retirement Plan (the "Supplemental Plan"). 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 Supplemental Plan 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 Corporation's five highest paid executive officers in 1995
are set forth for each of the last three years in the Summary Compensation
Table.
(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 29, 1996, the executives named in the Summary Compensation
Table have accrued the following years of service under the Retirement Plan and
the Supplemental Plan: Mr. Eaton, 9 years, consisting of 4 years of service
under the Retirement Plan and the remainder as additional years of service
granted to him under the Supplemental Plan at the time he joined the
Corporation; Mr. Lutz, 14 9/12 years, consisting of 9 9/12 years of service
under the Retirement Plan and the remainder as additional years of service
granted under the Supplemental Plan; Mr. Denomme, 15 6/12 years of service under
the Retirement Plan; Mr. Cunningham, 14 7/12 years of service under the
Retirement Plan; and Mr. Valade, 18 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 Supplemental Plan
provides other retirement benefits to an executive based on a
33
<PAGE> 37
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 Corporation until their retirement at age 65, they could become
entitled to receive the following estimated annual retirement benefits under the
Supplemental Plan based on those awards (the portion accrued to date is shown in
parentheses): Mr. Eaton, $1,038,600 ($485,500); Mr. Lutz, $525,300 ($485,700);
Mr. Denomme, $529,200 ($298,100); Mr. Valade, $500,100 ($205,900); and Mr.
Cunningham, $637,000 ($219,600). 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 Supplemental Plan provides 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 that plan. As of
December 31, 1995, none of Messrs. Eaton, Denomme or Valade would be eligible to
retire early under generally applicable terms of the Supplemental Plan based on
his age and service credited as of such date.
------------------
34
<PAGE> 38
OTHER MATTERS
The Corporation, in the ordinary course of business, purchased materials,
supplies and services from numerous suppliers throughout the world in 1995.
Purchases were made from some concerns of which certain nonemployee directors
are directors or officers. The Corporation 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.
------------------
The Corporation incurred advertising and promotional expenses of
approximately $265,000 to advertise its products during the nationally televised
"Concert of Hope" benefit for the Center on Addiction and Substance Abuse at
Columbia University (CASA), a non-profit foundation. Mr. Califano is the
Chairman and President of CASA.
------------------
The Chrysler Corporation Fund, a non-profit charitable affiliate of the
Corporation, authorized in 1995 a matching donation of up to $250,000 over the
next two years to the American Humane Education Society in support of Operation
Outreach-USA, a community-based literacy program designed to improve reading
skills and build character among elementary school children. The Fund will match
donations by Chrysler dealers. The program, which provides free books to
students and a planned curriculum for teachers, utilizes books published by
Storytellers Ink Publishing Company. Mr. Stamper is the Chairman and Chief
Executive Officer of that company.
------------------
On March 1, 1996 Northrop Grumman Corporation acquired a division of
Westinghouse Electric Corporation that had 1995 sales of $2.5 billion and a
supply agreement with the Corporation. Under that agreement, the Corporation may
purchase approximately $100 million of electronic components over the next
several years. Mr. Kresa is the Chairman, Chief Executive Officer, and President
of Northrop Grumman Corporation.
------------------
Mr. Joseph E. Cappy, a Vice President of the Corporation, 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 Corporation to sell Chrysler
products. Mr. Cappy has agreed with the Corporation to certain restrictions
which preclude his involvement in the management and operation of the
dealership.
------------------
The Corporation incurred expenses of approximately $691,000 in 1995 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.
------------------
35
<PAGE> 39
Under a marketing arrangement with MGM Grand Hotel, Inc., the Corporation
is entitled to vehicle displays, advertising space, and promotional packages at
that company's hotel complex in Las Vegas, Nevada. In exchange, the Corporation
provides MGM Grand Hotel, Inc. with the use of thirty-five vehicles. That
company is a wholly-owned subsidiary of MGM Grand, Inc., whose principal
stockholders are Kirk Kerkorian and Tracinda Corporation. Mr. Aljian is a
director of MGM Grand, Inc.
------------------
In April 1995, 34 class action lawsuits were commenced by separate
plaintiffs against Chrysler, certain of its current and former directors and, in
some cases, Tracinda Corporation, a holding company wholly owned by Kirk
Kerkorian and the beneficial owner of more than 13% of the outstanding common
stock of Chrysler as of December 31, 1995, and its affiliates, in the Court of
Chancery of the State of Delaware for New Castle County, Delaware. The
Complaints in these suits fall into two general categories: (a) those which
allege that the directors breached their fiduciary duties to stockholders by
failing to negotiate with Tracinda regarding its proposal to acquire all of the
outstanding stock of Chrysler not then owned by it; and (b) those which allege
that the directors breached their fiduciary duties to stockholders by
contemplating, planning and/or effecting Tracinda's proposal at a time when the
market price of Chrysler's stock was depressed and did not reflect its true
value. The Complaints in the former category ask for, among other things, (a) an
injunction or an order obligating the Board of Directors to undertake an
evaluation of alternatives, including measures with respect to Chrysler's Rights
Plan, designed to maximize shareholder value, (b) a declaration that the
defendants have breached their fiduciary duties to the plaintiffs, (c)
compensatory damages and interest, and (d) costs and fees. The Complaints in the
latter category ask for, among other things, (a) a declaration that the
transaction proposed by Tracinda is unfair, unjust and inequitable, (b) an
injunction against implementation of the transaction proposed by Tracinda and
any improper device which impedes maximization of shareholder value, (c) damages
and interest, (d) costs and fees, and (e) such other relief as may be just and
proper. Seven of these actions have been dismissed without prejudice by the
plaintiffs.
------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers, and persons who beneficially own
more than ten percent of a registered class of the Corporation's equity
securities, to file reports of ownership and changes in ownership with the SEC
and the New York Stock Exchange (the "NYSE"). Directors, executive officers, and
greater than ten percent beneficial owners are required by SEC regulation to
furnish the Corporation with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Corporation believes that during 1995 all filing
requirements applicable to its officers, directors, and greater than ten percent
beneficial owners were met.
36
<PAGE> 40
STOCKHOLDER PROPOSALS
Earlier this year Chrysler's Board completed a comprehensive Corporate
Governance Review and implemented certain changes in governance policy including
the adoption of an anti-greenmail by-law. As a result of such action, Evelyn Y.
Davis withdrew a stockholder proposal related to greenmail.
As part of that process the Board also determined that, subject to
stockholder approval, annual retainer fees to Nonemployee Directors will be paid
in Chrysler Common Stock. As a result of such action, Emil Rossi withdrew a
stockholder proposal relating to director compensation.
The Board's Report on the results of its Corporate Governance Review is
attached as Appendix A to this Proxy Statement.
37
<PAGE> 41
SOLICITATION EXPENSES AND PROCEDURES
In addition to soliciting by mail, directors, officers, and employees of
the Corporation may solicit proxies in person, by telephone or by telecopier. No
additional compensation will be paid to such persons for such solicitations. The
Corporation has retained Georgeson & Company Inc. to assist it in connection
with the solicitation, at an estimated fee of $15,000, plus reimbursement of
out-of-pocket expenses. In addition, the Corporation reimburses banks, brokers,
and other custodians that hold Common Stock in nominee name for their expenses
in forwarding proxy material to beneficial owners.
1997 STOCKHOLDER PROPOSALS
Any stockholder proposal to be considered for inclusion in the proxy
soliciting material for the Annual Meeting of Stockholders in 1997 must be
received by Chrysler Corporation on or before November 28, 1996 and should be
addressed to:
William J. O'Brien
Vice President, General Counsel and Secretary
Chrysler Corporation
1000 Chrysler Drive
Auburn Hills, MI 48326-2766
GENERAL AND OTHER MATTERS
Neither the Corporation nor the members of its Board of Directors intend to
bring before the meeting any matters other than those referred to in the
accompanying Notice. They know of no other matter to be presented at the
meeting.
However, if any other matters properly come before the meeting, the persons
appointed as proxies in the enclosed form of proxy/voting instruction card
intend to vote in accordance with their judgment. If any nominee has become
unavailable at the date of the meeting, which there is no reason to expect, your
proxy, in the enclosed or any other form that so provides, may be voted for a
new nominee, unless the Board reduces the number of directors.
BY ORDER OF THE BOARD OF DIRECTORS,
William J. O'Brien
Vice President, General Counsel and Secretary
March 28, 1996
38
<PAGE> 42
APPENDIX A
CORPORATE GOVERNANCE REPORT BY THE BOARD OF DIRECTORS
FEBRUARY 8, 1996
I. INTRODUCTION
Over the past several months Chrysler Corporation's Board of Directors has
undertaken a review of the Company's corporate governance policies. The purpose
of this Report is to set forth a broad mission statement on corporate governance
- -- a framework the Board believes is appropriate for evaluating Chrysler's
current corporate governance policies and guiding future governance change. It
is the Board's hope that this Report demonstrates Chrysler's commitment to
leadership in governance issues.
II. THE REVIEW PROCESS
Since announcing its corporate governance review in November 1995, the
Board, working with Chrysler management and Company advisers, has reviewed the
Company's present governance policies and Board structure, evaluated new
corporate governance ideas that have been gaining popularity among corporations
and institutional investors, and consulted broadly with Chrysler shareholders to
ascertain their views on the Company's present governance structure and
prospective changes and reforms.
The shareholder consultation process has constituted the most important --
and, the Board believes, the most unusual -- component of the corporate
governance review. At the outset, the Board determined that a key part of the
review process should be direct consultation with Chrysler's owners -- its
shareholders -- to learn their views on corporate governance generally and on
the Company's governance policies in particular.
During the past several months, members of the Chrysler Board held
one-on-one meetings with approximately forty of Chrysler's major institutional
shareholders. An outside, independent member of the Board attended each of these
meetings and engaged in a candid exchange of views with the representatives of
the relevant investment organization. Members of management were present at the
outset of a number of such meetings to make introductions, but excused
themselves for the bulk of the meeting in order to ensure a frank and unbiased
discussion of governance issues between shareholders and the Board. The Board
believes that this direct contact with shareholders resulted in a healthy
self-evaluation process.
III. GENERAL STATEMENT OF POLICY:
GOVERNANCE, PERFORMANCE, AND THE GOALS OF CHRYSLER CORPORATION
A. Chrysler's Economic Goals: Maximizing Value through Superior Performance
The Board believes that performance is the fundamental basis on which
Chrysler should be judged. Performance, in turn, must be judged by its
effectiveness in creating long-term shareholder value.
The Board further believes that Chrysler must focus its attention on two
complementary goals. First, the Company must seek to position itself as a
premier company in the world automotive marketplace, producing vehicles that
receive wide acceptance with consumers and recognition for industry-leading
design and execution. Second, the Company must seek at all times to formulate
and implement its business and financial strategies so as to maximize long-term
shareholder value.
<PAGE> 43
In seeking to maximize shareholder value, the Board applies the following
tests in reviewing Chrysler's strategies and management performance:
- Chrysler's planning process should emphasize delivering strong earnings
and maximum long-term cash flows;
- New investment projects must earn an appropriate return in relation to
Chrysler's cost of capital;
- Free cash flows not required for investment activities or for maintaining
financial strength should be returned to shareholders;
- Cash balances should be maintained at adequate but not excessive levels
to maintain Chrysler's credit rating and its ability to remain
competitive even during downturns in the business cycle; and
- Company operations should continually be scrutinized for
cost-effectiveness.
B. Governance Policies
Chrysler's corporate governance policies and practices should facilitate
the creation of long-term value by helping to assure that:
- The best possible management team is in place at the Company;
- The Board is strong and expert with outside directors who are independent
and who represent the interests of all shareholders;
- The Board can effectively monitor management's progress and key corporate
decisions;
- The Board and management are aware of the concerns of Chrysler's
shareholders;
- Management and employees have a stable environment in which to plan and
execute strategy;
- Management pursues value-maximizing policies and has the right incentives
to pursue such policies;
- Chrysler's policies benefit all of Chrysler's shareholders; and
- Shareholders can take action if they believe that the Board is failing to
respond to their concerns.
IV. CHRYSLER'S PRESENT GOVERNANCE STRUCTURE
Whether these goals are met in turn depends on governance policies -- both
as to the rights of Chrysler's shareholders, and as to the structure and
operation of the Board.
A. The Rights of Shareholders: Chrysler's Charter and By-laws
The Board is committed to maintaining an open corporate governance process
that preserves important rights for shareholders. The Company has refrained from
instituting measures that place limits on shareholder rights and procedural
options. The Company's policies give shareholders the power to act if they
believe that the Board is failing to respond to their concerns.
Chrysler's governance profile includes the following:
- The Board is not classified. All directors must stand for election to the
Board at each annual meeting.
- Chrysler's charter does not require a special super-majority vote for a
merger or other business combination.
<PAGE> 44
- Chrysler's shareholders have the power to amend the Company's by-laws by
majority vote.
- Chrysler's shareholders have the right to act by written consent. That
means shareholders can take action on corporate matters not only at the
time of the Company's annual meeting, but rather, with appropriate
notice, may do so at any time.
- Shareholders of Chrysler may remove directors without cause and by
majority vote, if they wish to do so.
The Board believes that these policies constitute an important foundation
of shareholder rights at Chrysler and reaffirms its commitment to these
provisions.
In light of its open governance structure and its widely dispersed
shareholder base, Chrysler in 1988 adopted a shareholder rights plan. Rights
plans provide a board with additional bargaining power on behalf of shareholders
in the event of a takeover offer, by rendering it costly to a bidder to proceed
without the board's consent. Also, rights plans protect existing shareholders
from a "creeping control" acquisition by a shareholder who accumulates an
ownership position large enough to gain significant influence over a company
without having paid a premium for such control to other shareholders.
B. The Structure and Operation of the Board
The Board believes that it has demonstrated a high level of involvement,
activism, and independence. Over the past five years, the Board has:
- Overseen the development and implementation of business and product
strategies that have made the Company a leader in the world automotive
industry;
- Instituted a successful change in senior management with no disruption in
product momentum; and
- Maintained a stable environment for planning and execution by the
Company's management.
In 1993, the Board also reviewed its own internal policies and practices in
response to a request by the California Public Employees' Retirement System. The
Board revisited its policies and practices in conjunction with the present
corporate governance review. The Board believes that its practices ensure that
Board members are involved and effective in leading the Company's strategic
decision-making processes.
Particularly relevant Board practices are as follows:
- The Board meets a minimum of 8 times per year -- more in most years. In
1995, the Board met 18 times.
- Board members' activities at Chrysler are not restricted to Board
meetings. Directors are involved in a continuing, informal dialogue with
management and have frequent contact with the Company.
- Chrysler's outside directors meet frequently, separately from management,
to discuss Company progress.
- The entire Board is actively involved in reviewing, debating, and
approving the Company's strategic plan, its major financial policies, and
new strategic initiatives.
The Board has also reviewed its structure and membership.
- The Board has averaged 13 members over the past several years. The
Board's policy on Board size focuses on a target of 13 directors, plus or
minus one director. The Board believes that this target
<PAGE> 45
provides the opportunity for a diverse and talented director pool, while
ensuring that Board size does not become unwieldy.
- Over the past several years, Chrysler has limited its inside directors to
three. A Chrysler by-law provides that a majority of the Board be
composed of independent directors at all times and specifies strict
criteria for independence.
- The Company's Nominating, Audit, Finance, Public Policy and Management
Resources Committees are composed solely of independent directors.
The Board believes that its structure is sound and that the Board's outside
directors represent a diversity of skills, experience, and senior-level
management and expertise.
V. CHANGES TO CHRYSLER'S GOVERNANCE POLICIES: DECISIONS AND RATIONALE
In conducting its corporate governance review, the Board considered a
variety of possible changes concerning both the rights of shareholders and the
structure and operating policies of the Board.
A. Changes Affecting the Rights of Shareholders
The Board reaffirms its belief that, given the openness of Chrysler's
governance policies, it is in the best interests of all shareholders to maintain
the Chrysler Shareholder Rights Plan. The Board has considered with particular
care the triggering threshold contained in the Rights Plan. The Board believes
that a 15% ownership level in a corporation such as Chrysler already constitutes
a large and significant degree of economic and voting power. At concentrations
beyond 15% the Board believes that the risk begins to increase that one or more
shareholders acting in concert can exert significant control over the Company
without the payment of a control premium.
In arriving at this determination, the Board noted that most rights plans
adopted or amended in recent years have thresholds of 15% or less, and that
business combination statutes in most states (including Delaware, Chrysler's
state of incorporation) set 15% (or less) as the threshold of ownership in
determining whether a shareholder may be able to overreach in proposing a merger
with a company. The Board also considered how the Company's financial policies
are likely to affect ownership structure in the near future. As has been
publicly stated by management, Chrysler intends to utilize excess cash flow,
above its cash reserve target and amounts needed for investment in its core
business, for dividends and share repurchases. Share repurchases could
substantially increase the ownership positions of existing shareholders who do
not choose to participate in buy-back programs.
The Board has altered one aspect of Chrysler's Rights Plan after
consultation with the Company's shareholders. The Board has decided to include a
"qualifying offer exception" or "chewability" provision in the Rights Plan.
Under this provision, the Rights Plan would not be triggered if the ownership
threshold was exceeded as a result of a fully-financed, all-cash offer for all
of Chrysler's shares that remains open for a minimum time period and that is
accompanied by a fairness opinion from a qualified investment banker.
After consultation with shareholders, the Chrysler Board has further
determined to enact two existing Company policies as by-laws. The first
prohibits the payment of "greenmail." Chrysler has previously condemned
greenmail; the Board's action formalizes this prohibition. In addition, the
Board has adopted a
<PAGE> 46
by-law placing limitations on issuance of preferred stock to block takeover
transactions. This limitation, which was already reflected in a Board
resolution, was negotiated last year with a large Chrysler shareholder, the
College Retirement Equities Fund.
B. The Structure and Operation of the Board
The Board of Directors believes that, while the current composition of the
Chrysler Board is sound, new Board members can bring new perspectives and
expertise to the Company. Accordingly, the Board will always be open to
considering Board nominees who can bring a value- and shareholder-based
perspective to the Company in addition to broad-based business expertise.
The Board also identified one particular area where there is significant
shareholder sentiment for change. That area is director compensation. The Board
recognizes a trend toward stock-based compensation and the establishment of
meaningful ownership targets for directors. The Board supports these
developments. Accordingly, after consultation with its shareholders, the Board
has adopted the following changes, intended further to align the interests of
directors with the interests of Chrysler's shareholders:
- The Board has voted to change its compensation structure so that
directors are paid their annual retainer in Chrysler common stock;
- The Board has voted to establish a minimum ownership requirement of 5,000
shares for directors; and
- The Board has voted to terminate the cash retirement program for
directors.
The Board also voted to create a Corporate Governance Committee, which will
perform the functions of the Nominating Committee and, in addition, evaluate
matters relating to corporate governance and shareholder relations.
VI. CONCLUSION
The Chrysler Board believes that the process of shareholder consultation
and rigorous review of corporate governance practices has been valuable, and
that the actions it has taken are beneficial to the Company and reflect the
preferences of its shareholders.
The Board recognizes the importance of governance issues and intends to
continue to review these issues on an ongoing basis, and to consult with its
major holders on governance issues as events warrant in the future. The Board
believes that the open, consultative process that it has followed in its
corporate governance review -- a process which the Board believes to be
unprecedented for a major American corporation -- demonstrates the strength of
the Board's commitment to effective governance, value creation, and
responsiveness to Chrysler shareholders.
<PAGE> 47
CHRYSLER CORPORATION ANNUAL MEETING OF STOCKHOLDERS
Sheraton Baltimore North Hotel
903 Dulaney Valley Road
Towson, Maryland 21204
(410) 321-7400
DIRECTIONS TO THE SHERATON
BALTIMORE NORTH
FROM EXIT 27A Go 1/2 mile on Dulaney Valley
Road. Make second left onto
Southerly Road, take second
right and follow drive up to
hotel.
FROM WASHINGTON, DC 495 North to 95 North To 695
West to Towson to Exit 27A
FROM ALL POINTS SOUTH 95 North towards Baltimore
Virginia To 695 West to Towson to Exit
27A
FROM ALL POINTS NORTH 95 South towards Baltimore
New Jersey, New York, To 695 West to Towson to Exit
Philadelphia, Delaware 27A
FROM PENNSYLVANIA 83 South towards Baltimore to
695 East to Towson to Exit 27A
FROM BALTIMORE CITY 83 North (Jones Falls
Expressway) to 695 East to
Towson to Exit 27A
FROM BWI AIRPORT Airport exit will put you on
195 (North Baltimore) from 195,
take 295 North towards
Baltimore then take 695 to
Towson to Exit 27A
FROM PENN STATION Charles Street to 83 North to
695 East to Towson to Exit 27A
FROM EASTERN SHORE From Bay Bridge take Route
50/301 West, to 97 North to 695
North to Towson to Exit 27A
FROM YORK ROAD York Road (towards Towson) to
Dulaney Valley Road, pass
Fairmount Avenue and make the
first right and follow drive up
to hotel
INNER HARBOR 8 Miles
BWI AIRPORT 28 Miles
WASHINGTON, DC 47 Miles
NEW YORK 180 Miles
PHILADELPHIA 100 Miles
HARRISBURG 67 Miles
FREDERICK 55 Miles
[Sheraton Baltimore Map]
From 695 take exit 27A South (Dulaney Valley Road). Once you exit off of the
ramp, we are the second left prior to the traffic light. This street is
Southerly Road. Once on Southerly Road, make the second right into the Sheraton
Baltimore North's driveway.
<PAGE> 48
NOTICE
OF ANNUAL
MEETING OF
STOCKHOLDERS
AND PROXY
STATEMENT
[CHRYSLER LOGO]
MAY 16, 1996
ALL STOCKHOLDERS ARE
REQUESTED TO DATE,
SIGN AND RETURN
PROMPTLY THE ENCLOSED
[RECYCLED LOGO] PROXY.
recycled paper
<PAGE> 49
<TABLE>
<S> <C>
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.
This proxy when properly executed will be voted as you specify below. If you do not specify
otherwise, the proxy will be voted FOR election of directors, FOR Item 2 and FOR Item 3.
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Appointment of
Directors / / / / Independent public / / / / / /
(See Reverse) accountants.
For, except vote withheld from the following nominee(s)
3. Amendment of the
Chrysler Corporation / / / / / /
1991 Stock
_____________________________________________________ Compensation Plan.
I will
attend / /
Meeting.
SIGNATURE(S)________________________________________________________DATE________________________,1996
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR THE LIKE GIVE FULL TITLE.
____________________________________________________________________________________________________________________________________
</TABLE>
PROXY/VOTING INSTRUCTION CARD
CHRYSLER CORPORATION
THE BOARD OF DIRECTORS SOLICITS THIS PROXY.
The undersigned, whose signature appears on the reverse side, hereby appoints
Robert J. Eaton, Robert A. Lutz, and Thomas G. Denomme, jointly and severally,
proxies with full power of substitution to vote all shares of Common Stock the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
CHRYSLER CORPORATION on May 16, 1996, or adjournments thereof, on Items 1
through 3 as specified on the reverse side hereof (with discretionary authority
under Item 1 to vote for a new nominee if any nominee has become unavailable)
and on such other matters as may properly come before the meeting.
Nominees for Director:
Lilyan H. Affinito, James D. Aljian, Robert E. Allen, Joseph A. Califano, Jr.,
Thomas G. Denomme, Robert J. Eaton, Earl G. Graves, Kent Kresa, Robert J.
Lanigan, Robert A. Lutz, Peter A. Magowan, John B. Neff, Malcolm T. Stamper and
Lynton R. Wilson.
This card constitutes voting instructions for any shares held for the
undersigned in the dividend reinvestment plan and/or in the employee savings and
deferred pay plans.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
[SEE REVERSE SIDE], BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATIONS. THE PERSONS APPOINTED
ABOVE AS PROXIES CANNOT VOTE YOUR SHARES OR ANY SHARES HELD FOR YOU IN THE
DIVIDEND REINVESTMENT PLAN UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
Printed on recycled paper SIDE
<PAGE> 50
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
99.1 Chrysler Corporation 1991 Stock Compensation Plan
</TABLE>
<PAGE> 1
EXHIBIT 99.1
Notice: Copies of the Chrysler Corporation 1991 Stock Compensation Plan are
being filed together with Chrysler Corporation's 1996 Proxy Statement in
accordance with Item 10 of Schedule 14A of the Securities and Exchange Act, but
does not constitute part of such Proxy Statement.
<PAGE> 2
(AS AMENDED BY THE BOARD OF DIRECTORS ON FEBRUARY 7, 1996
SUBJECT TO STOCKHOLDER APPROVAL ON MAY 16, 1996)
CHRYSLER CORPORATION
1991 STOCK COMPENSATION PLAN
EFFECTIVE MAY 16, 1991
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 14 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) "Director" means any member of the Board, whether or not such
member is a Nonemployee Director, and "Nonemployee Director" means a
Director who is not an employee of the Company, any Subsidiary or any
Related Entity.
(h) "Disability" means being permanently and totally disabled under
any insurance program of the Company, any Subsidiary or any Related Entity,
except that, in the case of a Nonemployee Director, Disability shall mean a
permanent and total disability within the meaning of Section 22(e) of the
Code.
(i) "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.
(j) "Eligible Employee" means an employee of the Company, any
Subsidiary or any Related Entity as described in Section 4 of the Plan.
(k) "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
<PAGE> 3
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.
(l) "Incentive Stock Option" means any Stock Option intended to
qualify as an "incentive stock option" within the meaning of Section 422 of
the Code.
(m) "Limited Stock Appreciation Right" means a Stock Appreciation
Right that can be exercised only in the event of a Change in Control.
(n) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Optionee" means a Participant granted a Stock Option pursuant to
Section 5 of the Plan which remains outstanding.
(p) "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 Sections 9, 10, and
11 of the Plan, Nonemployee Directors of the Company.
(q) "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.
(r) "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.
(s) "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; except that, in the case of a Nonemployee Director,
Restricted Stock Unit shall mean the right to receive one share of Stock as
set forth in Section 10 of the Plan.
(t) "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; except that, in the case of a
Nonemployee Director, Retirement shall mean termination of service as a
Director after attaining age 72 (or such other age as the Board may
establish from time to time by resolution) for purposes of Section 10 of
the Plan.
(u) "Stock" means the common stock of the Company.
(v) "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.
(w) "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).
(x) "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.
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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.
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 12 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.
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<PAGE> 5
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 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.
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<PAGE> 6
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 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
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<PAGE> 7
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.
(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
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<PAGE> 8
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 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 14
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 14 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;
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<PAGE> 9
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 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.
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(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.
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 14 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.
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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 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 may 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 14 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
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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 15(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 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 Nonemployee Director who is elected or reelected as a Director on or
after May 16, 1991 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 14 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
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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. GRANT OF RESTRICTED STOCK UNITS TO NONEMPLOYEE DIRECTORS.
(a) Unit Awards. Each Nonemployee Director who is first elected to the
Board after December 31, 1995 shall be awarded 3,000 Restricted Stock Units on
the date of his or her initial election.
(b) Delivery of Stock. Subject to satisfaction of the applicable vesting
requirements set forth in (c) below and except as otherwise provided in Section
14, a number of shares of Stock corresponding to the number of Restricted Stock
Units awarded to a Nonemployee Director (including those credited under Section
10(e) below) shall be delivered to such Nonemployee Director and transferred on
the books of the Company on the first business day of the month immediately
following the termination of such Nonemployee Director's service as a Director;
provided that any fractional shares of Stock shall be paid in cash based upon
the Fair Market Value on the date such shares would otherwise have been
delivered to the Nonemployee Director or the Nonemployee Director's beneficiary.
Alternatively, in lieu of such Stock the Nonemployee Director may elect, on or
before the date of his or her termination of service, to receive an amount in
cash equal to (i) the Fair Market Value of a share of Stock on such date,
multiplied by (ii) the number of Restricted Stock Units awarded and credited to
him or her. Upon the delivery of a share of Stock (or cash with respect to a
fractional share) or the equivalent amount in cash, as such Nonemployee Director
may elect, the corresponding Restricted Stock Unit (or fraction thereof) shall
be canceled and be of no further force or effect.
(c) Vesting. Except as otherwise provided in this Section or Section 14, if
the service of a Nonemployee Director terminates prior to the completion of five
consecutive Years of Service as a Director following his or her initial
election, all Restricted Stock Units awarded and credited to such Nonemployee
Director pursuant to this Section 10 shall be immediately forfeited. As used in
this Section 10, 'Year of Service as a Director' means the period of service as
a Director measured from the date of one annual meeting of the Company's
stockholders to the next annual meeting of stockholders. Notwithstanding the
foregoing, if the Nonemployee Director's service terminates by reason of his/her
death, Disability or Retirement prior to the completion of five Years of Service
as a Director following his or her initial election, the rights of the
Nonemployee Director in respect of his or her Restricted Stock Units shall
become fully and immediately vested in connection with such Director's
termination of service. In the event of the death of a Nonemployee Director, the
shares of Stock corresponding to such Director's outstanding Restricted Stock
Units, if any, shall be delivered to the beneficiary designated by the
Nonemployee Director on a form provided by the Company, or, in the absence of
such designation, to the Nonemployee Director's estate.
(d) Nontransferability. Restricted Stock Units may not be assigned or
transferred, in whole or in part, either directly or by operation of law (except
in the event of a Nonemployee Director's death by will or applicable laws of
descent and distribution), including, but not by way of limitation, by
execution, levy, garnishment, attachment, pledge, bankruptcy or in any other
manner, and no such right or interest of any Nonemployee Director in the Plan
shall be subject to any obligation or liability of such Nonemployee Director.
(e) Dividend Equivalents. A Nonemployee Director shall have no rights as a
stockholder of the Company with respect to any Restricted Stock Units until
shares of Stock are delivered to the Director pursuant to this Section 10. On or
as soon as practicable after each date on which dividends are paid to
stockholders with respect to Stock, the account of each Nonemployee Director
shall be credited with an additional number of Restricted Stock Units computed
pursuant to the following formula. With respect to dividends paid in cash or
property other than Stock, the number of Restricted Stock Units to be credited
to
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<PAGE> 14
each Nonemployee Director's account shall be determined by dividing (i) the
product of (x) the amount of any cash dividend (or the value of any other
property) payable per share of Stock for the applicable dividend payment date
and (y) the number of Restricted Stock Units in such Nonemployee Director's
account on the record date for the payment of such dividend by (ii) the Fair
Market Value of a share of Stock on such record date. With respect to any stock
dividend declared, each Nonemployee Director's account shall be credited with a
number of Restricted Stock Units equal to the product of (i) the number of
Restricted Stock Units in such Nonemployee Director's account on the record date
for the payment of such dividend and (ii) any stock dividend declared on a share
of Stock.
SECTION 11. PAYMENT OF ANNUAL RETAINER FEE TO NONEMPLOYEE DIRECTORS.
(a) Fees Payable in Stock. Effective with respect to services rendered
after the Company's 1996 Annual Meeting of Stockholders, the annual retainer fee
payable to a Nonemployee Director for service as a Director, for service as a
member of a committee of the Board, and for service as chairperson of such a
committee during a given year (collectively, the "Annual Retainer Fee"), will be
paid in shares of the Company's Common Stock pursuant to the formula set forth
below. In the case of a Nonemployee Director first elected to the Board
following any annual meeting of shareholders, the portion of the Annual Retainer
Fee otherwise payable from the date of such election to the next annual meeting
will be paid in Stock. Fees payable to a Nonemployee Director for attendance at
meetings of the Board or any of its committees will not be paid in Common Stock.
(b) Calculation of Shares Issuable. The number of whole shares of Stock
issuable in respect of a Nonemployee Director's Annual Retainer Fee for a given
year will be equal to the remainder of (i) the number of shares of Stock
determined by dividing the aggregate dollar amount of the Annual Retainer Fee by
the Fair Market Value of a share of Stock on the date of the annual meeting of
shareholders in such year (or, in the case of a Director first elected to the
Board following the annual meeting of shareholders for a given year, at the date
of such election) minus (ii) the greatest number of whole shares of Stock equal
to, but not in excess of, each Nonemployee Director's hypothetical income and
employment tax liability with respect to the Annual Retainer Fee payable
assuming that each Nonemployee Director pays Federal income tax at the highest
marginal rate in effect at such time, State and local income taxes at the
highest marginal rate in effect at such time for the locale in which the
Nonemployee Director resides and Medicare taxes at the rate in effect at such
time under Section 3101(b) of the Code. Any fractional shares resulting from the
above calculation will be settled in cash.
SECTION 12. 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 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.
Any modification of any of the terms and provisions of Sections 9, 10 or 11
hereunder shall not be made more than once every six months.
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
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<PAGE> 15
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 13. 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 14. 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 14,
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
(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 14) is or becomes the
Beneficial Owner (as defined in this Section 14) of securities of the
Company representing 20% or more of the combined voting
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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 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 14, "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
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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 15. 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 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
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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 and to assure that any Director participating in the
Plan shall continue to be deemed to be a "disinterested person" under such Rule
16b-3, for purposes of such Director's ability to serve on any committee charged
with administering the Plan or any of the Company's other stock based incentive
plans intended to qualify for the exemptive relief available under such 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 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.
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(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.
(i) This Plan shall not impose any obligations on the Company to retain any
Nonemployee Director as a Director nor shall it impose any obligation on the
part of any Nonemployee Director to remain as a Director of the Company,
provided that each Nonemployee Director, by accepting each award under the Plan,
shall represent to the Company that it is his or her good faith intention to
continue to serve as a Director of the Company until its next annual meeting of
stockholders and that he or she agrees to do so unless a change in circumstances
arises.
SECTION 16. 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 17. 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.
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