<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
CHRYSLER CORPORATION LOGO
April 11, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Chrysler Corporation to be held at the Washington State Convention and Trade
Center, 800 Convention Place, Seattle, Washington, on May 15, 1997, at 9:00 A.M.
local time. The matters to be addressed at the meeting and the procedure for
obtaining admission tickets are explained in the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement.
YOUR VOTE IS IMPORTANT TO US. IN ORDER TO EXPEDITE THE VOTING PROCESS,
PLEASE PROMPTLY SIGN, DATE, AND RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE,
EVEN IF YOU PLAN TO ATTEND THE MEETING.
This Proxy Statement and the 1996 Annual Report to Shareholders are also
available on the Internet through the Investor Relations section within the
Company's World Wide Web site @ http://www.chryslercorp.com.
I look forward to seeing you at the meeting.
Sincerely,
Robert J. Eaton
Chairman
<PAGE> 3
CHRYSLER CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1997
The Annual Meeting of Stockholders of Chrysler Corporation (the "Company")
will take place at the Washington State Convention and Trade Center, 800
Convention Place, Seattle, Washington, on May 15, 1997, at 9:00 A.M. local time,
for the following purposes:
<TABLE>
<S> <C>
Item No. 1. To elect directors (pages 2-6);
Item No. 2. To appoint independent public accountants for the year 1997
(page 26);
Item No. 3. To approve amendments to certain performance-based
compensation plans (page 26);
Item No. 4. To approve amendments to the Company's stock compensation
plan and a related performance plan (page 29);
Item Nos. 5-8 To act upon four stockholder proposals, if they are
presented at the meeting (pages 38-42);
</TABLE>
and to transact such other business as may properly come before the meeting.
Holders of record of Chrysler Common Stock at the close of business on
March 17, 1997 are entitled to vote at the meeting.
ADMISSION TICKETS. Attendance is limited to shareholders who owned Chrysler
Common Stock at the close of business on March 17, 1997, or their authorized
representatives. Admission tickets will be issued in advance of the meeting upon
written request addressed to: Chrysler Corporation, 1000 Chrysler Drive, Auburn
Hills, MI 48326-2766, Attention: Investor Relations, CIMS 485-06-07. If your
shares are registered in the name of a broker or other intermediary, please
include proof of ownership such as a copy of the voting form sent by your
broker.
BY ORDER OF THE BOARD OF DIRECTORS,
William J. O'Brien
Vice President, General Counsel and Secretary
April 11, 1997
YOUR VOTE IS IMPORTANT. IN ORDER TO EXPEDITE THE VOTING PROCESS PLEASE PROMPTLY
SIGN, DATE, AND RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE, EVEN IF YOU
PLAN TO ATTEND THE MEETING.
<PAGE> 4
CHRYSLER CORPORATION
1000 CHRYSLER DRIVE, AUBURN HILLS, MICHIGAN 48326-2766
PROXY STATEMENT
April 11, 1997
The Board of Directors of Chrysler Corporation solicits your proxy in
connection with the Annual Meeting of Stockholders on May 15, 1997. The Company
began mailing this Proxy Statement and the accompanying proxy/voting instruction
card to stockholders on or about April 11, 1997.
You are entitled to one vote for each share of Chrysler common stock
("Common Stock" or "Shares") that you held of record at the close of business on
March 17, 1997. On that date 691,949,009 Shares were outstanding.
The election of directors and any other matter properly before the meeting
will, unless otherwise noted, be decided by a plurality vote, which means that a
nominee will be elected or a matter approved if a majority of the votes cast are
in favor of such nominee or matter. Abstentions and broker non-votes are not
counted in determining whether a nominee is elected or a matter approved, but
are counted 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 so that your
Shares can be voted at the meeting. Your Shares will be voted as you specify on
the proxy/voting instruction card. If you do not specify a choice, your Shares
will be voted as recommended by the Board of Directors. You may revoke your
proxy by voting your Shares in person at the meeting, or by submitting a written
revocation or a later dated proxy that is received by the Company before the
meeting.
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 Company's
Dividend Reinvestment Plan. The card will also serve as a voting instruction to
the trustees under the Company's employee savings, deferred pay and similar
plans with respect to any Shares held for the benefit of employees participating
in those plans. The 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.
The Company will bear the cost of this solicitation. Georgeson & Company,
Inc. will assist in the solicitation for a fee of $15,000, plus reimbursement of
reasonable out-of-pocket expenses. The Company also reimburses brokers and other
custodians that hold Common Stock in nominee name for their expenses in
forwarding proxy material to beneficial owners. Directors, officers, and
employees of the Company may also solicit proxies in person, by telephone, or
electronically.
<PAGE> 5
ITEM NO. 1
ELECTION OF DIRECTORS
It is proposed that a board of thirteen directors, which at the time of the
meeting will be a full board, be elected at the meeting to serve for the
following year and until their successors are elected and qualified. Mr. Malcolm
T. Stamper is retiring from the Board effective at the time of the meeting.
Unless you specify otherwise, your proxy will be voted for the election of
the thirteen nominees named below, each of whom was elected by the shareholders
at the last annual meeting. If any nominee becomes unavailable for election,
your proxy will be voted for a new nominee designated by the Board unless the
Board reduces the number of directors to be elected.
NOMINEES FOR DIRECTOR
<TABLE>
<C> <S>
LILYAN H. AFFINITO Former Vice Chairman of the Board, Maxxam Group Inc.
PHOTO
LILYAN H. Ms. Affinito served as President and Chief Operations
AFFINITO, 65 Officer of Maxxam Group Inc. (formerly Simplicity Pattern
Elected a Director Co. Inc.) from June 1976 to June 1987 and as Vice Chairman
June 3, 1982 of the Board from June 1987 until June 1991. Ms. Affinito is
a director of Caterpillar Inc., Jostens Inc., Lillian Vernon
Corporation, Tambrands Inc., Kmart Corporation, New York
Telephone Company and New England Telephone and Telegraph
Company (NYNEX telephone subsidiaries). She is a member of
the Pension Fund Review and Public and Legal Affairs
Committees.
JAMES D. ALJIAN Executive, Tracinda Corporation
PHOTO
JAMES D. Mr. Aljian is an executive of Tracinda Corporation, an
ALJIAN, 64 investment company wholly owned by Kirk Kerkorian, Chrysler
Elected a Director Corporation's largest shareholder. He has served Tracinda in
February 8, 1996 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., and
Metro-Goldwyn-Mayer, Inc. Mr. Aljian is a member of the
American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants. He is a
member of the Audit and Pension Fund Review Committees.
</TABLE>
2
<PAGE> 6
<TABLE>
<C> <S>
ROBERT E. ALLEN Chairman of the Board and Chief Executive Officer, AT&T
PHOTO
ROBERT E. Mr. Allen was elected Chairman and Chief Executive Officer
ALLEN, 62 of AT&T in April 1988. Mr. Allen began his career at Indiana
Elected a Director Bell in 1957. Subsequently, he served in officer posts at
February 3, 1994 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 is a director of 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. He is a member of the Corporate Governance
and Management Resources and Compensation Committees.
JOSEPH A. CALIFANO Chairman and President, The National Center on Addiction and
PHOTO Substance Abuse at Columbia University (CASA)
JOSEPH A.
CALIFANO, JR., 65 Mr. Califano received a law degree from Harvard Law School
Elected a Director in 1955 and after service in the Navy he practiced law in
June 4, 1981 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 Telephone
Company and New England Telephone and Telegraph Company
(NYNEX telephone subsidiaries), 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. He is a
member of the Pension Fund Review and Public and Legal
Affairs Committees.
THOMAS G. DENOMME Vice Chairman of the Board and Chief Administrative Officer
PHOTO
THOMAS G. Mr. Denomme joined the Corporation in September 1980 and was
DENOMME, 57 elected Vice President -- Corporate Strategic Planning in
Elected a Director 1981, Executive Vice President -- Corporate Staff Group in
February 4, 1993 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, Chairman of the Michigan Gaming Control
Board, Immediate Past Chairman of the Michigan Thanksgiving
Parade Foundation, and a Trustee of the Detroit Investment
Fund. He is also a director of Pro-Air, Inc., the American
Automobile Manufacturers Association, the Congressional
Economic Leadership Institute and the Committee For Economic
Development.
</TABLE>
3
<PAGE> 7
<TABLE>
<C> <S>
ROBERT J. EATON Chairman of the Board, President and Chief Executive Officer
PHOTO
ROBERT J. Mr. Eaton was elected Vice Chairman of the Board and Chief
EATON, 57 Operating Officer of the Company, effective March 16, 1992,
Elected a Director and became Chairman of the Board and Chief Executive Officer
March 16, 1992 on January 1, 1993. He became President effective January 1,
1997. Mr. Eaton held various executive positions in
engineering, manufacturing, product planning, and quality
and reliability at General Motors Corporation, which he
joined in 1963. He became a Vice President of that company
in 1982, a Vice President and Group Executive in 1986, and
President of General Motors Europe in 1988. Mr. Eaton is a
fellow of the Society of Automotive Engineers and the
Engineering Society of Detroit, and a member of the National
Academy of Engineering. He is Chairman of Detroit
Renaissance and Co-Chairman of the Joint Auto/Supplier
Government Action Council, and Secretary/Treasurer of the
American Automobile Manufacturers Association. He is a
director of International Paper Company, the Economic
Strategy Institute, and the U.S./Japan Business Council. He
is also a member of the President's Advisory Committee on
Trade Policy and Negotiations, The Business Council, The
Business Roundtable, and the Council on Competitiveness.
EARL G. GRAVES Chairman and Chief Executive Officer, Earl G. Graves Ltd.
PHOTO
EARL G.
GRAVES, 62 Mr. Graves is Chairman and Chief Executive Officer of Earl
Elected a Director G. Graves Ltd., a multi-faceted communications company, and
March 1, 1990 the publisher of BLACK ENTERPRISE magazine. He has served as
Chairman and Chief Executive Officer of Pepsi-Cola of
Washington, D.C., L.P., a Pepsi-Cola bottling franchise,
since 1990. Mr. Graves is also a general partner of Egoli
Partners, L.P. (general partner of New Age Beverages, the
Pepsi-Cola franchisee in South Africa). He is 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 serves as the Vice President of
Relationships/Marketing and is on the Executive Board of the
National Office of the Boy Scouts of America. He is a member
of the Audit and Public and Legal Affairs Committees.
KENT KRESA PHOTO Chairman of the Board, President and Chief Executive
KENT Officer, Northrop Grumman Corporation
KRESA, 59
Elected a Director Mr. Kresa earned degrees from Massachusetts Institute of
November 30, 1989 Technology and from 1959 to 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 the past 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 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. He is a member of the Audit and
Pension Fund Review Committees.
</TABLE>
4
<PAGE> 8
<TABLE>
<C> <S>
ROBERT J. LANIGAN Chairman Emeritus, Owens-Illinois, Inc.
PHOTO
ROBERT J. Mr. Lanigan joined Owens-Illinois, Inc., a manufacturer of
LANIGAN, 68 packaging materials, in 1950 and served that company in
Elected a Director various executive capacities and as head of a number of
April 5, 1984 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., Transocean Offshore
Inc., Cognizant Corporation, and The Coleman Company, Inc.
He is a member of the Corporate Governance and Management
Resources and Compensation Committees.
ROBERT A. LUTZ PHOTO Vice Chairman
ROBERT A.
LUTZ, 65 Mr. Lutz joined Chrysler on June 3, 1986 as an Executive
Elected a Director Vice President of Chrysler Motors Corporation, its former
June 12, 1986 wholly owned automotive manufacturing and sales subsidiary.
He was elected a director of Chrysler Corporation on June
12, 1986. Mr. Lutz was elected President of Chrysler Motors
in 1988, and President of Chrysler Corporation in February
1991. He also served as Chief Operating Officer and a member
of the Office of the Chairman from January 1, 1993 to
January 1, 1997, at which time he was elected a Vice
Chairman. Mr. Lutz served as a director of Ford Motor
Company from 1982 to 1986, and held several senior executive
positions with that company and its subsidiaries from 1974
to 1986. Mr. Lutz was previously 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., Silicon Graphics, Inc., and Northrop Grumman
Corporation. He is also a member of the American Highway
Users Alliance; the Advisory Board for the University of
California, Berkeley, School of Business Administration; the
National Advisory Council of the University of Michigan
School of Engineering; and the United States Marine Corps
University Foundation.
PETER A. MAGOWAN Chairman of the Board, Safeway Inc.
PHOTO
PETER A. Mr. Magowan has been employed by Safeway Inc., a supermarket
MAGOWAN, 55 chain, since 1968 in various management positions, including
Elected a Director Store, District, Retail Division and Regional Manager. He
May 14, 1986 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. He is
a member of the Audit and Corporate Governance Committees.
</TABLE>
5
<PAGE> 9
<TABLE>
<C> <S>
JOHN B. NEFF PHOTO Former Managing Partner, Senior Vice President, Executive
JOHN B. Committee Member, Wellington Management Company
NEFF, 65
Elected a Director Mr. Neff held positions of increasing responsibility with
February 7, 1996 Wellington Management 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, serves on the Board of
Governors of the Association for Investment Management and
Research and the Board of Trustees of Case Western Reserve
University. He is a former Trustee and member of Chartered
Financial Analysts, and a member and past President of
Financial Analysts of Philadelphia. He is a member of the
Pension Fund Review and the Public and Legal Affairs
Committees.
LYNTON R. WILSON Chairman and Chief Executive Officer, BCE Inc.
PHOTO
LYNTON R. Mr. Wilson received a masters degree from Cornell University
WILSON, 57 in 1967. He served as Deputy Minister, Ministry of Industry
Elected a Director and Tourism, Government of Ontario, Canada from 1978 to
March 3, 1994 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. He was
elected President and Chief Operating Officer of BCE Inc. in
1990, President and Chief Executive Officer of that Company
in 1992, Chairman, President and Chief Executive Officer in
1993, and Chairman and Chief Executive Officer on May 7,
1996. He is also Chairman of the Board of Bell Canada. Mr.
Wilson is also a director of Chrysler Canada Ltd., Bell
Canada International Inc., BCE Mobile Communications Inc.,
Bell-Northern Research Ltd., 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 is a member of the International
Council, J. P. Morgan, and the Trilateral Commission. He is
a member of the Public and Legal Affairs and the Management
Resources and Compensation Committees.
</TABLE>
BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
The Board of Directors held 18 meetings in 1996. 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 Board's standing committees, comprised solely of
nonemployee directors, provide oversight in key areas as described below.
Committee memberships are reviewed annually.
The Audit Committee recommends the appointment of independent public
accountants and reviews their fees for audit and non-audit services and the
scope and results of audits performed by them and by the Company's internal
auditors. It also reviews the Company's system of internal accounting controls,
the effect of significant accounting policies on its financial reporting, the
proposed form of its financial statements, and the results of internal audits
and compliance programs. The Committee held 6 meetings in 1996.
6
<PAGE> 10
The Corporate Governance Committee evaluates the organization, function and
performance of the Board and its committees, the qualifications for director
nominees, and matters involving corporate governance and shareholder relations.
The Committee does not solicit director nominations but will consider
recommendations from shareholders that are sent to the Secretary of the Company.
Under the Company's By-Laws, nominations must be received no less than 60 nor
more than 90 days before the annual meeting. (If the meeting date is not
disclosed at least 70 days before the meeting, then such recommendations will be
considered if received not later than the 10th day following the day on which
the meeting date is disclosed.) The Committee held 5 meetings in 1996.
The Incentive Compensation, Stock Option and Salary Committees
(collectively, the "Management Resources and Compensation Committees") meet
jointly to review, approve and make recommendations to the Board regarding the
Company's executive compensation programs. In particular, the Committees
determine salaries, incentive compensation awards, and stock option grants for
officers and senior executives, and establish corporate goals under
performance-based compensation plans. The Committees held 10 meetings in 1996.
The Pension Fund Review Committee oversees the investment policies of the
Company's funded pension and retirement plans and determines the form and
provisions of related trust agreements. The Committee held 4 meetings in 1996.
The Public and Legal Affairs Committee reviews the Company's practices in
areas of public concern, such as consumer affairs, equal opportunity, safety,
and the environment and recommends appropriate courses of action with due regard
for the Company's civic responsibilities. It also reviews the adequacy, quality,
and cost effectiveness of the Company's health care programs. The Committee held
3 meetings in 1996.
COMPENSATION
The fees currently paid to nonemployee directors 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. The annual fees are paid in Common Stock in order to more closely align
the interests of directors with those of stockholders.
In addition, nonemployee directors first elected to the Board after
December 31, 1995 receive a one-time award of 6,000 stock units upon joining the
Board. Each unit represents the right to receive one Share and is 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), then all such units 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 or
credited to him or her and the cash value of any fractional restricted
7
<PAGE> 11
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 or credited to him or her.
Nonemployee directors receive options with related stock appreciation
rights ("SARs") for 3,000 Shares as of the date of their election or reelection
as a director at any annual or special meeting of stockholders. The Company also
provides nonemployee directors with product evaluation and lease vehicles, as
well as business travel accident insurance coverage in the amount of $250,000.
In 1996 the Board terminated a director retirement benefit program with
respect to current and future nonemployee directors. Under that program, which
was established in 1988, 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.
Upon termination of such program the then current nonemployee directors
agreed to convert their rights under that program into phantom stock units. Each
such director's rights were converted into phantom stock units representing the
greater of 3,000 Shares and 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.
The Board in 1996 also adopted stock ownership guidelines for directors
that require each director to own at least 10,000 Shares. A director must
achieve his or her ownership target by the later of February 8, 1999 and the
third anniversary of his or her election to the Board.
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. Directors may
self-direct assets in their deferral accounts among a variety of investments and
may receive payment of their deferred compensation in a lump sum or in annual
installments not to exceed ten years.
8
<PAGE> 12
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of Shares beneficially owned (as
defined by the Securities and Exchange Commission) by the Company's directors
and executive officers as of March 31, 1997 (unless otherwise noted):
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) STOCK OPTIONS(2) STOCK UNITS(3)
- ------------------------ ------------ ---------------- --------------
<S> <C> <C> <C>
Lilyan H. Affinito................................. 30,060 16,200 8,434
James D. Aljian.................................... 11,982 1,200 6,268
Robert E. Allen.................................... 11,066 6,300 6,208
Joseph A. Califano, Jr. ........................... 17,682 9,300 8,184
Thomas G. Denomme.................................. 55,490 0 0
Robert J. Eaton.................................... 1,624,738 1,383,820 0
Earl G. Graves..................................... 20,047 18,300 6,208
Kent Kresa......................................... 29,454 18,300 6,216
Robert J. Lanigan.................................. 25,030 12,000 6,903
Robert A. Lutz..................................... 751,373 573,068 0
Peter A. Magowan................................... 40,816 9,300 7,996
John B. Neff....................................... 33,944 1,200 6,268
Dennis K. Pawley................................... 62,395 0 0
Gary C. Valade..................................... 285,911 244,590 0
Lynton R. Wilson................................... 10,658 6,300 6,208
All Directors and Executive Officers, including
those named above, as a Group.................... 6,495,821(4) 4,653,055 68,893
</TABLE>
- ---------------
(1) Unless otherwise indicated, each person has sole investment power and sole
voting power with respect to the Shares beneficially owned by such person.
(2) This column lists the number of Shares that can be acquired within sixty
days through the exercise of stock options. These Shares are included in the
Shares Beneficially Owned column.
(3) Stock Units credited to nonemployee directors as described above.
(4) Less than 1.0% of the Shares outstanding. The number shown includes Shares
held as of December 31, 1996 under the Company's dividend reinvestment and
savings plans, and 44,990 Shares held by immediate family members (whether
or not beneficial ownership has been disclaimed).
9
<PAGE> 13
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, 1996. 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
which rewards senior management behavior that builds the long-term value of the
Corporation. The program is designed to:
- Establish a comparative framework of companies for pay/performance
analysis;
- Maintain a strong relationship between performance and rewards;
- Communicate the link between pay and performance;
- Actively encourage stock ownership; and
- Balance all compensation elements to create a total pay program based
on specific 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 were increased during 1996 for
those individuals (approximately 100) and expanded to include certain other
executives eligible to receive annual incentive compensation (approximately
350).
10
<PAGE> 14
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 1996 will be deductible by the Corporation. Incentive compensation
earned by a named executive officer for 1996 which, if paid currently, would not
be deductible by the Corporation, has been deferred until retirement. 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 1996 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.
BASE SALARY
The Committees establish base salaries for executive officers annually in
relation to base salaries paid within the peer group. In general, base salaries
were targeted at levels in the third quartile and adjusted to reflect the
increased salary levels within the peer group as determined by an independent
consulting firm engaged to assist the Committees. Base salaries may vary from
the target based on such factors as responsibility, individual performance, and
tenure.
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 $.2222 per share of Chrysler Common Stock. Bonuses are
determined by multiplying the executive's target bonus (a percentage
11
<PAGE> 15
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 1,975 executives based
on its 1996 consolidated net earnings, which was the corporate performance goal
designated by the Committees at the beginning of 1996. 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 1996
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.
The Corporation's earnings performance surpassed the 125% level, and its
performance in respect of such other areas compared favorably with that of its
competitors. Accordingly, the Committees decided to pay annual incentive
compensation for 1996 at the corporate performance level of 125%. Only 65% of
the total amount available for incentive compensation under the Stockholder's
Resolution was paid out in bonuses in respect of the Corporation's performance
in 1996.
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 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
approximately 90 executives in 1996 for the 1996-1998 performance cycle. They
are to be earned out based upon the level of achievement of vehicle quality
improvements, the corporate goal established for that cycle. Performance Share
awards for the 1995-1996 performance cycle were paid at a corporate performance
level of 125%, based on improvements in vehicle quality during the cycle as
determined from warranty claims data.
12
<PAGE> 16
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 1996 to approximately 1,785 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 each of the
named executive officers was established after determining that the projected
value of such options (as derived from the Black Scholes option pricing model),
together with Performance Shares granted, would rank in the third quartile of
the projected value of all long-term incentive compensation granted to his peer
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
Performance Share awards. Annual retirement benefits based on awards paid for
the year ended December 31, 1996, 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
1996 returned approximately $3 billion to stockholders in the form of dividends
and share repurchases, improved vehicle quality and customer satisfaction, and
maintained an "A" level credit rating from all four rating agencies. The
Corporation also registered its best retail sales year in history, selling
2,690,340 vehicles at retail in the United States and Canada and increasing
sales outside of North America by 19.4% over 1995. Further, by focusing on the
fundamentals, the Corporation was able to increase its combined United States
and Canadian retail (including fleet) car and truck market share by 1.4
percentage points to 16.1%, even though market share growth was not designated
as a corporate objective in 1996.
In addition, Mr. Eaton worked with the Chrysler management team to maintain
a successful product development program, which included introduction of the
Chrysler Sebring convertible, Dodge Dakota, Jeep(R)
13
<PAGE> 17
Wrangler, Jeep(R) Cherokee, and the Dodge Viper GLS Coupe. The Corporation's
product excellence was recognized with numerous awards in 1996. The Jeep(R)
Wrangler was named Peterson's 4-Wheel & Off-Road 4X4 of the year and the all-new
Dodge Dakota won Off-Road Magazine's "Truck of the Year" award, Sport Truck
Magazine's "Sport Truck of the Year" award, Four Wheeler magazine's "1997 Pick
Up of the Year" honors and Automobile Magazine's "Pick Up Truck of the Year"
award. Chrysler minivans were named by Car and Driver among the "Ten Best Cars
for 1997." Four Wheeler magazine also named the 1997 Jeep Cherokee as "1997 Four
Wheeler of the Year."
Mr. Eaton also played a key role in the shareholder consultation process
that was an essential part of the corporate governance review completed by the
Board and reported to shareholders in early 1996. That process -- believed to be
unprecedented for a major American corporation -- was well-received by the
corporate governance community and reflects the Corporation's commitment to
effective governance, value creation, and responsiveness to shareholders.
Under Mr. Eaton's guidance, the Corporation posted record 1996 pre-tax
earnings of $6.1 billion and total revenues of $61.4 billion. Including the 33%
dividend increase last year, the Corporation has increased the dividend by a
total of 433% since September 1993. Chrysler also achieved its goal of
repurchasing $2 billion of Chrysler Common Stock in 1996 and announced plans to
repurchase an additional $2 billion during 1997. As of December 31, 1996, the
dividend yield on Chrysler Common Stock was 4.8%, which was over twice the
dividend yield of the S&P 500 Index. The cumulative total shareholder return on
Chrysler Common Stock for the last five years, as shown in the performance graph
accompanying this Report, was 551%.
In recognition of excellent performance in 1996, Forbes magazine named
Chrysler "Company of the Year," and Mr. Eaton was named as one of Business
Week's "Top 25 Managers of the Year."
In establishing each of the components of Mr. Eaton's compensation for
1996, 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 1996 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 ranked in the
third quartile for that group.
Mr. Eaton received an annual bonus, as reported in the Summary Compensation
Table, based on the Corporation's performance with respect to consolidated net
earnings. Mr. Eaton also earned 56,250 Performance Shares with respect to the
1995-1996 performance cycle based on the Corporation's performance with respect
to vehicle quality improvements. In addition, Mr. Eaton was awarded 31,200
Performance Shares to be earned over the 1996-1998 performance cycle. The number
of Performance Shares awarded was determined by dividing an amount equal to a
certain percentage (established by the Committees) of his base
14
<PAGE> 18
salary by the market price of Chrysler Common Stock. The Committees also granted
to Mr. Eaton options to purchase 650,000 shares of Chrysler Common Stock after
determining that the projected value of such options (as derived from the
Black-Scholes option pricing model), together with Performance Shares awarded to
Mr. Eaton, would rank in the third quartile of the projected value of all
long-term compensation granted to his peer group counterparts.
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, over 85% of the total compensation (excluding option grants)
paid in 1996 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 and increases in share price.
Including option grants valued under the Black-Scholes option pricing model,
approximately 90% 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
Lynton R. Wilson
15
<PAGE> 19
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 $100 in each of the above at their
closing prices on December 31, 1991 and reinvestment of dividends.
<TABLE>
<CAPTION>
General Mo-
Measurement Period Chrysler Cor- Ford Motor tors Corpora- S&P 500 In-
(Fiscal Year Covered) poration Company tion dex
<S> <C> <C> <C> <C>
1991 100 100 100 100
1992 280 159 115 108
1993 472 246 201 118
1994 444 219 157 120
1995 520 237 201 165
1996 651 278 219 203
</TABLE>
16
<PAGE> 20
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ---------- ---------
---------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) SARS(#)(3) ($) ($)(4)
- --------------------------- ---- ------ ----- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Eaton(5).................. 1996 1,437,500 4,500,000 161,183 696,018 2,018,250 69,000
Chairman of the Board and 1995 1,212,500 2,360,000 105,006 450,000 434,981 58,200
Chief Executive Officer 1994 1,063,750 2,200,000 60,424 429,276 966,641 51,060
Robert A. Lutz(5)................... 1996 956,250 2,800,000 94,415 276,210 1,219,920 45,900
President and 1995 881,250 1,675,000 64,308 200,000 278,231 42,300
Chief Operating Officer 1994 808,750 1,600,000 39,319 180,000 869,465 38,820
Thomas G. Denomme................... 1996 631,253 1,800,000 62,480 175,000 771,420 30,300
Vice Chairman and 1995 562,500 1,075,000 42,059 140,000 168,506 27,000
Chief Administrative Officer 1994 496,250 1,000,000 27,942 120,000 470,534 23,820
Gary C. Valade...................... 1996 512,500 1,200,000 53,225 140,000 609,960 24,600
Executive Vice President 1995 456,250 800,000 37,866 130,000 133,238 21,900
and Chief Financial Officer 1994 387,500 750,000 23,982 120,000 352,901 18,600
Dennis K. Pawley.................... 1996 460,003 1,000,000 47,759 110,000 609,960 22,080
Executive Vice President -- 1995 422,500 750,000 33,199 110,000 133,238 20,280
Manufacturing 1994 392,500 700,000 21,292 96,000 352,901 18,840
</TABLE>
- ---------------
(1) The table presents information about the compensation of the Company's Chief
Executive Officer and its next four most highly compensated executive
officers serving at the end of 1996. Compensation deferred at the election
of an executive is included in the year earned.
(2) The amounts for 1996 are dividend equivalents paid in respect of awards of
shares of Common Stock ("Performance Shares") under the Chrysler Corporation
1991 Stock Compensation Plan (the "1991 Plan") and tax payment
reimbursements.
(3) Awards for 1995 and 1994 have been adjusted to reflect a 2-for-1 stock split
in 1996 in the form of a 100% stock dividend.
(4) The amounts for 1996 are matching contributions by the Company under its
employee savings plans. Not included are amounts associated with the funding
of retirement benefits, which are described below under the heading "Pension
Plan Table".
(5) On January 1, 1997 Mr. Eaton assumed the additional position of President,
and Mr. Lutz became a Vice Chairman of the Company.
17
<PAGE> 21
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS
OPTIONS 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....................... 650,000 7.05% 28.50 07-10-06 4,459,000
46,018 0.50% 33.13 03-15-02 328,000
Robert A. Lutz........................ 265,000 2.87% 28.50 07-10-06 1,818,000
2,591 0.03% 32.69 06-12-01 18,000
8,619 0.09% 32.69 12-04-01 59,000
Thomas G. Denomme..................... 175,000 1.90% 28.50 07-10-06 1,201,000
Gary C. Valade........................ 140,000 1.52% 28.50 07-10-06 960,000
Dennis K. Pawley...................... 110,000 1.19% 28.50 07-10-06 755,000
</TABLE>
- ---------------
(1) The exercise price of an option is the fair market value of Common Stock on
the date of grant. Options have a ten year term and become exercisable over
the first three anniversaries from the grant date at the rate of 40%, 70%
and 100%, respectively. Optionees may surrender Shares to pay the exercise
price and satisfy tax withholding obligations. Options become fully
exercisable in the event of a Change in Control (as defined below).
In the event of a Change in Control, (i) all options (and any stock
appreciation rights ("SARs") held by nonemployee directors) will become
fully exercisable and vested, (ii) Limited Stock Appreciation Rights
("LSARs") will be exercisable during the 60-day period following the Change
in Control, and (iii) any participant terminated by the Company within two
years immediately following a Change in Control will be permitted to
exercise any option, SAR or LSAR for a period of three months after such
termination or until the stated term thereof, whichever is shorter. Upon the
exercise of a LSAR, the holder is entitled to receive an amount equal to (i)
the Change in Control Stock Appreciation (as defined below) times (ii) the
number of Shares in respect of which such LSAR shall have been exercised.
A Change in Control is deemed to have occurred if (i) any person becomes the
owner of 20% or more of the combined voting power of the Company's then
outstanding securities (unless the 20% threshold is crossed due to an
acquisition of securities directly from the Company); (ii) during any
two-year period the majority of the membership of the Board, subject to
certain conditions, ceases for any reason to constitute a majority of the
Board; (iii) the stockholders approve a merger of the Company with any other
corporation (other than a merger which would result in the voting securities
of the Company continuing to represent, in combination with voting
securities held by any employee benefit plan of the Company, at least 80% of
the combined voting power of the Company or the surviving entity outstanding
18
<PAGE> 22
immediately after such merger); or (iv) the stockholders approve a plan of
complete liquidation of the Company or an agreement for the sale of
substantially all its assets. The Change in Control Stock Appreciation to be
received in settlement of LSARs with respect to any Share will be an amount
equal to the excess, if any, of (i) the higher of (x) the market value of
such Share on the date the LSAR is exercised or (y) the highest price paid,
or its equivalent, for Shares in the transaction constituting the Change in
Control or, in the case of a Change in Control resulting from a change in
the membership of the Board, the average of the closing price of 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 are grants of Reload Options resulting from the
exercise of an initial option granted before 1996 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 the
option holder in payment of the exercise price of the existing option. A
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. None of
the options granted in 1996 contain a Reload Option feature.
(3) These values were determined under the Black-Scholes option pricing model
based on the following assumptions: stock price volatility of 30.72%;
interest rate based on the five year Treasury bond rate; exercise in the
fifth year; and dividends at the rate in effect on the date of grant. No
adjustments were made for nontransferability or risk of forfeiture. The
Company's use of this model does not constitute an endorsement or an
acknowledgment that such model can accurately determine the value of options
or SARs. No assurance can be given that the actual value, if any, realized
by an executive upon the exercise of these options will approximate the
estimated values established by the Black-Scholes model.
19
<PAGE> 23
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Eaton............. 180,000 4,438,800 1,383,280 1,077,018 18,481,613 6,249,630
Robert A. Lutz.............. 280,000 5,733,020 810,068 450,210 13,377,622 2,716,195
Thomas G. Denomme........... 262,396 2,360,555 0 295,000 0 1,835,200
Gary C. Valade.............. 87,800 2,174,475 278,396 254,000 3,000,403 1,626,360
Dennis K. Pawley............ 191,200 1,776,216 0 204,800 0 1,322,904
</TABLE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<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............................. 31,200 3 yrs 15,600 31,200 39,000
Robert A. Lutz.............................. 17,000 3 yrs 8,500 17,000 21,250
Thomas G. Denomme........................... 11,400 3 yrs 5,700 11,400 14,250
Gary C. Valade.............................. 8,000 3 yrs 4,000 8,000 10,000
Dennis K. Pawley............................ 8,000 3 yrs 4,000 8,000 10,000
</TABLE>
- ---------------
(1) These awards reflect the number of Performance Shares payable to each of the
named executive officers at the end of the 1996-1998 performance cycle
depending on the level of achievement ultimately attained by the Company
with respect to the corporate goal established for the cycle. A target award
(expressed as a percentage of salary) was established for each officer, and
each may earn nothing, or a number of Performance Shares ranging from a set
minimum to a maximum of 125% of the target award, based on the Company's
earnings, the performance goal established for the cycle. Each officer 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), the performance
objectives and any restrictions applicable to outstanding awards will be
deemed attained or waived and such awards will be deemed fully vested.
20
<PAGE> 24
PENSION PLAN TABLE
The Company's executive officers receive benefits based on years of service
and salary under the tax-qualified Chrysler Salaried Employees' Retirement Plan
(the "Retirement Plan"). Any portion of such benefits not payable under the
Retirement Plan due to limitations imposed by the Internal Revenue Code 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 is averaged over the consecutive five-year period during which salary
was highest in the 15 years immediately preceding retirement. The salaries
of the Company's five highest paid executive officers are shown 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 28, 1997, the executives named in the Summary Compensation
Table had accrued the following years of service under the Retirement Plan and
the Supplemental Plan: Mr. Eaton, 10 years, consisting of 5 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 Company;
Mr. Lutz, 15 9/12 years, consisting of 10 9/12 years of service under the
Retirement Plan and the remainder as additional years of service granted under
the Supplemental Plan; Mr. Denomme, 16 6/12 years of service under the
Retirement Plan; Mr. Valade, 19 4/12 years of service under the Retirement Plan;
and Mr. Pawley, 7 11/12 years of service under the Retirement Plan.
In addition to the retirement benefits reflected in the table above, the
Supplemental Plan provides other annual retirement benefits based on a
percentage of the incentive compensation awards (annual bonus and
21
<PAGE> 25
Performance Shares) paid to an executive each year. The percentage, which may
range from 0 to 6%, is established by the Management Resources and Compensation
Committees each year for awards paid that year. If the named executive officers
remain with the Company until their retirement at age 65, they could become
entitled to receive the following estimated annual retirement benefits under the
Supplemental Plan based on such award (the portion accrued to date is shown in
parentheses): Mr. Eaton, $1,403,100 ($830,200); Mr. Denomme, $683,800
($434,600); Mr. Valade, $590,200 ($300,500); and Mr. Pawley, $463,300
($247,900). Mr. Lutz is eligible to retire under the Supplemental Plan now with
an accrued annual retirement benefit of $651,800. He will continue to accrue
benefits until he retires. These estimates were computed based on the following
assumptions for each executive through age 65: (a) annual base salary increases
of 6%, (b) annual incentive compensation equal to 120% of annual base salary;
and (c) a 3% factor applied to incentive compensation. The nonaccrued amounts in
the annual retirement benefit estimates shown above will change in proportion to
percentage differences between actual award levels through age 65 and the
assumed levels set forth in (b) and (c) above.
The Company purchased annuities in 1996 to satisfy its obligations as of
December 31, 1996 under the Supplemental Plan with respect to the accrued
retirement benefits of approximately 1,250 current, retired and former
employees. The annuities, which were purchased with funds from a trust
previously established to pay such benefits, are structured to provide
annuitants the same benefit amounts they would have realized on an after-tax
basis had they received payments under the Supplemental Plan. Although annuity
payments will not begin until the annuitant retires (or satisfies other Plan
requirements relating to age and years of service, death or disability), the
purchase price of the annuity is considered to be imputed income and is
immediately taxable under IRS regulations. The Company paid the taxes associated
with both the annuity purchase and the additional taxes associated with payment
of such taxes. The following tax payments were made in respect of annuities
provided to the named executive officers: Mr. Eaton, $4,048,068; Mr. Lutz,
$4,232,340; Mr. Denomme, $2,441,794; Mr. Valade, $1,537,395; and Mr. Pawley,
$1,161,377. The Company is generally entitled to the benefit of an immediate tax
deduction in respect of the annuity premiums and tax payments.
In the event of a Change of Control (as defined in the Supplemental Plan),
Messrs. Eaton, Denomme and Valade, will be deemed to be eligible for special
early retirement. As of December 31, 1996, none of Messrs. Eaton, Denomme or
Valade would be eligible for early retirement under the Plan based on his age
and years of credited service.
EMPLOYMENT AND TERMINATION ARRANGEMENTS
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
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
22
<PAGE> 26
Mr. Lutz's Employment Agreement expired at the end of February, 1997, the month
in which he attained age 65. The Board waived the Company's retirement policy
and elected Mr. Lutz a Vice Chairman, enabling him to continue as an employee
beyond age 65. 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.
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. Pawley 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 described above), 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 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. Pawley, the
sum of the officer's annual base salary and an amount
23
<PAGE> 27
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.
24
<PAGE> 28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company has been advised that the following persons beneficially owned
more than 5% of the Common Stock outstanding as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
<S> <C> <C>
Kirk Kerkorian(1)........................................... 96,496,992 13.73%
Tracinda Corporation
4835 Koval Lane
Las Vegas, NV 89109
FMR Corp.(2)................................................ 49,419,734 6.83%
82 Devonshire Street
Boston, MA 02109
Wellington Management Company, LLP(3)....................... 38,582,782 5.41%
75 State Street
Boston, MA 02109
</TABLE>
- ---------------
(1) Based on Amendment No. 34 to a Schedule 13D dated January 23, 1997 filed by
Mr. Kerkorian and Tracinda Corporation, a Nevada corporation wholly-owned by
Mr. Kerkorian. On February 8, 1996, the Company 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 Company 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 Company'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, 1997. 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 2,639,594 of
such Shares. Fidelity is the beneficial owner of 45,479,140 of the above
Shares (6.29% of the Shares outstanding), Fidelity Trust is the beneficial
owner of 3,545,094 of such Shares (0.49% of the Shares outstanding), and
Fidelity International is the beneficial owner of 395,500 of such Shares
(0.05% of the Shares outstanding).
(3) Based on a Schedule 13G filing dated January 24, 1997. In its capacity as
investment advisor, Wellington may be deemed to beneficially own these
Shares. It has shared dispositive power as to all the Shares and shared
voting power as to 1,392,400 of the Shares.
25
<PAGE> 29
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 Company's
books, records and accounts for the year 1997. The firm has offices or
associates convenient to most of the Company'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, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 3
BOARD OF DIRECTORS PROPOSAL REGARDING AMENDMENTS TO
CERTAIN PERFORMANCE-BASED COMPENSATION PLANS
GENERAL. Under Section 162(m) of the Internal Revenue Code, which was
enacted in 1993, a publicly held corporation is generally not entitled to a tax
deduction with respect to any fiscal year for compensation in excess of $1
million paid to its Chief Executive Officer or its next four most highly paid
executives in office at the end of such year unless it is "qualified
performance-based compensation". Qualified performance-based compensation is
compensation that is payable solely upon the attainment of one or more
performance goals established by a committee of "outside directors" as defined
in Section 162(m). Moreover, the material terms of the performance goal(s),
including the maximum amount payable to an individual (or the formula for
determining that amount) must be approved by the shareholders. Shareholder
approval is required every five years if the committee retains the authority to
select each year from among several shareholder approved goals or to establish
different targets under the same goal.
In 1994, the shareholders approved amendments to the Company's Incentive
Compensation and Long-Term Incentive Plans (the "Plans") in order to preserve
the Company's federal income tax deduction for compensation paid under the
Plans. Following an analysis of the compensation practices of a peer group of
fifteen companies, including the Company's two principal domestic competitors,
the Plans were further amended by the Board earlier this year, subject to
shareholder approval, to change the individual maximum amount payable in order
to maintain a competitive performance-based compensation program. Accordingly,
the Board recommends that the shareholders (a) approve these amendments (as
described below), and (b) re-approve the list of performance goals originally
approved by the shareholders in 1994 so that the Company can continue to claim a
tax deduction for compensation paid under the Plans.
26
<PAGE> 30
DISCUSSION OF AMENDMENTS AND PERFORMANCE GOALS. As amended, the Plans
provide that:
(i) the maximum amount payable to an employee upon achievement of the
corporate performance goal applicable to a given fiscal year under the
annual Incentive Compensation Plan, shall not exceed 0.15% of the Company's
consolidated net earnings for such year as determined in accordance with
the Stockholders' Resolution authorizing the payment of incentive
compensation;
(ii) the maximum amount payable to an employee in Performance Shares
upon achievement of the corporate performance goal or goals applicable to
performance cycles established after January 1, 1997 under the Long-Term
Incentive Plan, shall be determined by multiplying (x) the number of
Performance Shares awarded at the beginning of the cycle by (y) the actual
performance level (not to exceed 150%) attained at the end of the cycle;
and that the number of Performance Shares awarded at the beginning of a
cycle shall be determined by dividing an amount (expressed as a percentage
-- not to exceed 150% -- of the employee's base salary, or the average base
salary or midpoint of the salary range of a class of employees, fixed at
the time of the award) by the then fair market price of Common Stock; and
(iii) the corporate performance goals applicable to the Plans shall be
established with respect to one or more of the following: quality, customer
satisfaction, profitability, net margin as a percentage of revenue, return
on sales, return on capital, breakeven, productivity, and/or debt to
capitalization.
DESCRIPTION OF THE PLANS. The Company awards incentive compensation to
officers and executives of the Company and its subsidiaries whenever permitted
by the formula in the Stockholders' Resolution as then in effect. The formula in
the Stockholders' Resolution, as most recently amended by the shareholders in
1994 and as adjusted for the two for one stock split in the form of a 100% stock
divided declared by the Board in 1996, provides that awards may be made only for
those years in which the consolidated net earnings of the Company and
consolidated subsidiaries excluding amounts accrued to recognize postretirement
benefit obligations (as reported in the annual report to the stockholders) plus
the provision for incentive compensation exceed earnings of $.2222 per share of
Chrysler Common Stock on the average number of shares of Common Stock
outstanding during the year. The total provision for any year is limited to 8%
of such excess. The Board may set aside such total provision or any lesser
amount for incentive compensation. Any part of the amount set aside for any year
that is not awarded for that year, as well as any amount awarded that is
subsequently forfeited, may be carried forward to and awarded in a subsequent
year.
The Company's Incentive Compensation Plan, established by the Board of
Directors under authority granted to it by the Stockholders' Resolution,
provides that awards be determined annually by the Incentive Compensation
Committee (a committee of directors, none of whom may be employees of the
Company or eligible to receive an award) and be paid, at its discretion, in cash
or in shares of Common Stock or partly in cash and partly in shares of Common
Stock. The Incentive Compensation Plan as amended in 1994 with shareholder
approval provides that (i) awards can be made in respect one or more of the
following corporate performance goals as established by the Incentive
Compensation Committee: quality, customer satisfaction, profitability, net
margin as a percentage of revenue, return on sales, return on capital,
breakeven, productivity,
27
<PAGE> 31
and/or debt to capitalization, and (ii) that the maximum amount payable to an
employee upon achievement of the corporate performance goal applicable to a
given fiscal year can not exceed an amount equal to two hundred percent of the
employee's base salary.
The Incentive Compensation Plan further provides that an award is to be
paid to the participant in a lump sum, unless the Incentive Compensation
Committee, in its discretion, determines that such award shall be paid in
installments. The Incentive Compensation Plan permits a participant to elect to
defer receipt of payment of all or any part of an award payable in a lump sum or
any installment of an award payable in installments, upon such terms as the
Incentive Compensation Committee may prescribe.
The Board of Directors also established, pursuant to the authority granted
to it by the Stockholders' Resolution, a Long-Term Incentive Plan under which
awards in Common Stock ("Performance Shares") may be made to officers and a
limited number of key executives, to be earned out by the attainment of those
corporate performance goals over performance cycles of between two and five
years. The Long-Term Incentive Plan as amended in 1994 with shareholder approval
provides that (i) one or more of the above performance goals are to be
established by the Incentive Compensation Committee for each performance cycle
based on long-term corporate objectives, (ii) at the commencement of a
performance cycle, the Committee award each plan participant a number of
Performance Shares determined by dividing an amount (expressed as a percentage
- -- not to exceed 80% -- of the participant's base salary, or the average base
salary or midpoint of a range of salaries of a class of employees, at the time
of the award) by the then fair market price of Common Stock, and (iii) at the
end of each cycle a participant may earn up to 125% of his or her Performance
Share award for that cycle, as determined by the Incentive Compensation
Committee, based on the Company's performance in relation to the performance
goals. The value of any Performance Share awards not earned and deliverable at
the end of a performance cycle will be returned to the funds available for
incentive compensation and may be awarded in a future year.
The Incentive Compensation Plan and the Long-Term Incentive Plan are both
subject to the limitations in the Stockholders' Resolution. The most recent
awards under the Long-Term Incentive Plan were for the 1990-1992 performance
cycle. Performance Share awards for subsequent performance cycles were made
pursuant to the Long-Term Performance Plan established under the Company's 1991
Stock Compensation Plan. The 1991 Plan is not subject to the limitations of the
Stockholders' Resolution, but is subject to a separate shareholder approved
limitation on the number of shares that may be issued under that Plan.
Approximately 1,975 executives were eligible to participate in the
Incentive Compensation Plan in 1996, and approximately 90 executives were
eligible to participate in the Long-Term Incentive Plan in 1996. Those
executives would continue to be eligible under the Plans, as amended. If the
Incentive Compensation Plan, as amended, had been in effect with respect to
fiscal year 1996, then the maximum amount that could have been awarded to a
participant under that Plan for 1996 would have been $5.82 million. No awards or
payments would have been made under the Long-Term Incentive Plan, since that
Plan was not utilized for 1996.
28
<PAGE> 32
Under the Incentive Compensation Plan, upon a Change in Control payment
will be made of (1) unpaid installments of awards payable in installments, (2)
voluntary deferrals of awards, and (3) unpaid awards made for any completed
fiscal year, plus accruals for the current year. Subject to the availability of
funds set aside under the Stockholders' Resolution or, if less, amounts accrued
on the books of the Company to be set aside thereunder with respect to the year
in which the Change in Control occurs, each Long-Term Incentive Plan participant
will receive a cash payment equal to the Change in Control Value (as defined
below) of (1) his or her undelivered Performance Shares for completed
performance cycles and (2) a pro rata percentage of his or her Performance
Shares for outstanding performance cycles. There are no outstanding performance
cycles under the Long-Term Incentive Plan. Subject to the foregoing, each
Incentive Compensation Plan participant will also receive a pro rata cash award
with respect to the year in which the Change in Control occurs. Change in
Control Value means the higher of (1) the average of the high and low prices of
Common Stock on the NYSE on the date it is to be valued and (2) the highest
price paid for shares of Common Stock 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 which does not occur in connection with any other
Change in Control, the average of the closing price of the Common Stock for the
30 day period prior to such Board Change in Control).
The Board of Directors will retain the authority to amend, alter or
discontinue the Plans, as amended.
VOTE REQUIRED FOR APPROVAL. The affirmative vote of a majority of the votes
cast is necessary to approve this proposal. If this proposal is not approved by
the shareholders, then no amounts will be paid under these Plans in a given
taxable year to a person who is then a "covered employee" within the meaning of
Section 162(m) of the Internal Revenue Code to the extent that such person's
compensation from the Company for that year exceeds the deduction limit of
Section 162(m).
YOUR DIRECTORS RECOMMEND A VOTE FOR THIS PROPOSAL, AND YOUR PROXY WILL BE
SO VOTED UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 4
BOARD OF DIRECTORS PROPOSAL REGARDING AMENDMENTS TO
THE CHRYSLER CORPORATION 1991 STOCK COMPENSATION PLAN
AND A RELATED PERFORMANCE PLAN
GENERAL. The Chrysler Corporation 1991 Stock Compensation Plan (the "1991
Plan"), as approved by the stockholders, provides for stock options and other
stock related incentives in order to attract and retain executives with the
ability to achieve the corporate objectives necessary to increase stockholder
value. Such incentives encourage the holder to manage the Company's business in
the best interest of stockholders by creating an identity of interest with the
stockholders. The Board of Directors has amended the 1991 Plan, subject to
shareholder approval, in order to (i) increase the number of shares of Common
Stock authorized for issuance by 30 million shares, and (ii) maintain a
competitive performance-based compensation program
29
<PAGE> 33
that preserves the Company's federal income tax deduction under Section 162(m)
of the Internal Revenue Code.
AMENDMENT RELATING TO SHARE AUTHORIZATION. In order to maximize the
incentive effect of the 1991 Plan and provide competitive compensation, the
Stock Option Committee (a committee of nonemployee directors) increased the
number of employees eligible for awards and the size of awards beyond the levels
contemplated at the time the 1991 Plan was adopted. As a result, the number of
shares available for future grants (approximately 11 million shares of the 56
million currently authorized) will not be sufficient to carry out the 1991
Plan's purposes beyond the near term, and therefore the Board recommends that
the stockholders approve amending the 1991 Plan to authorize the issuance of an
additional 30 million shares (approximately 4.3% of all shares currently
outstanding).
AMENDMENT RELATING TO SECTION 162(M). Under Section 162(m) of the Internal
Revenue Code, which was enacted in 1993, a publicly held corporation is
generally not entitled to a tax deduction with respect to any fiscal year for
compensation in excess of $1 million paid to its Chief Executive Officer or its
next four most highly paid executives in office at the end of such year unless
it is "qualified performance-based compensation". Qualified performance-based
compensation is compensation that is payable solely upon the attainment of one
or more performance goals established by a committee of "outside directors" as
defined in Section 162(m). Moreover, the material terms of the performance
goal(s), including the maximum amount payable to an individual (or the formula
for determining that amount) must be approved by the shareholders. Shareholder
approval is required every five years if the committee retains the authority to
select each year from among several shareholder approved goals or to establish
different targets under the same goal.
In 1994, the shareholders approved amendments to the 1991 Plan in order to
preserve the Company's federal income tax deduction in respect of stock options
grants and performance stock units paid out in Common Stock ("Performance
Shares"). (The terms and conditions established by the Stock Option Committee
with respect to performance stock unit awards under the 1991 Plan are referred
to as the "Long-Term Performance Plan", and the 1991 Plan and the Long-Term
Performance Plan are referred to collectively as the "Plans".) Those amendments
limited the total number of shares that can be awarded to an employee under the
1991 Plan during the five year period beginning January 1, 1994 and ending
December 31, 1998 to 10% of the shares authorized by shareholders for issuance
under the Plan, and further limited the maximum number of Performance Shares
payable to an employee for a given performance cycle.
Following an analysis of the compensation practices of a peer group of
fifteen companies, including the Company's two principal domestic competitors,
the Plans were further amended by the Board earlier this year, subject to
stockholder approval, in order to maintain a competitive performance-based
compensation program to change the maximum number of Performance Shares payable
to an employee for a given performance cycle, and to establish a new five year
period. Accordingly, the Board recommends that the shareholders (a) approve
these amendments (as described below) and (b) re-approve the list of performance
goals originally approved by the shareholders in 1994 so that the Company can
continue to claim a tax deduction for compensation paid under the Plans.
30
<PAGE> 34
DISCUSSION OF AMENDMENTS AND PERFORMANCE GOALS. As amended, the Plans
provide that:
(i) no more than ten percent of the total number of shares approved by
the stockholders for distribution under the 1991 Plan in connection with
the grant of stock options, performance stock units, stock appreciation
rights, limited stock appreciation rights and reload options may be granted
to any employee during the five fiscal years beginning January 1, 1997 and
ending December 31, 2001 (as such number may be adjusted for future
increases in the number of shares reserved and available for issuance under
the 1991 Plan and for changes in corporate structure or capitalization
affecting Common Stock);
(ii) the maximum amount payable to an employee in Performance Shares
upon achievement of the corporate performance goal or goals applicable to
performance cycles established after January 1, 1997 under the Long-Term
Performance Plan, shall be determined by multiplying (x) the number of
Performance Shares awarded at the beginning of the cycle by (y) the actual
performance level (not to exceed 150%) attained at the end of the cycle;
and that the number of Performance Shares awarded at the beginning of a
cycle shall be determined by dividing an amount (expressed as a percentage
-- not to exceed 150% -- of the employee's base salary, or the average base
salary or midpoint of the salary range of a class of employees, fixed at
the time of the award) by the then fair market price of Common Stock; and
(iii) the corporate performance goals applicable to the Long-Term
Performance Plan shall be established with respect to one or more of the
following: quality, customer satisfaction, profitability, net margin as a
percentage of revenue, return on sales, return on capital, breakeven,
productivity, and/or debt to capitalization.
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,
and for the automatic grant of stock options (and related SARs and LSARs) 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 persons to receive awards
under the Plans and the number of shares to be subject to each award.
Shares of stock which are attributable to options and other awards which
expire or are otherwise terminated, cancelled or surrendered, will be available
for issuance in connection with future grants or awards under the Plans.
Approximately 1,785 executives, including the named executive officers,
were eligible to participate in the 1991 Plan and approximately 90 executives
were eligible to participate in the Long-Term Performance Plan in
31
<PAGE> 35
1996, and would continue to be eligible under those Plans, as amended. If the
1991 Plan, as amended, had been in effect with respect to fiscal year 1996, the
number of Performance Shares awarded in 1996 would have increased by
approximately 150,000 shares and, although not mandated by the subject
amendment, the Company would have reduced the number of options granted by two
million shares in order to adjust for the increased number of Performance Shares
awarded.
The Board of Directors will retain the authority to amend, alter, or
discontinue the 1991 Plan and the Long-Term Performance Plan, as amended.
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 Common Stock. Tax withholding obligations
related to exercise may be paid by a reduction in the number of shares received.
The 1991 Plan as amended in 1994 with shareholder approval establishes a limit
of ten percent of the total number of shares approved by the shareholders for
distribution thereunder on the aggregate number of shares with respect to which
stock options and other awards may be granted to any employee during the five
fiscal years beginning January 1, 1994 and ending December 31, 1998 (as such
number may be adjusted for future increases in the number of shares reserved and
available for issuance under the 1991 Plan and for changes in corporate
structure or capitalization affecting Common Stock).
The Stock Option Committee may determine with respect to an option grant
that if an option holder surrenders shares of Common Stock 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, will be entitled to receive a new stock option
(a Reload Option) covering a number of shares of Common Stock 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. A
Reload Option may be exercised (i) at the fair market price of such shares on
the date of such surrender, (ii) six months after the date of grant, and then
only for the remaining term of the original option, and (iii) only while the
fair market value of Common Stock is at least 25% higher than on the date of
grant of the Reload Option.
Stock options granted under the 1991 Plan are not transferable except by
will or the laws of descent and distribution unless otherwise determined by the
Stock Option Committee, and may be exercised only by the option holder during
his or her lifetime. If the employment of an option holder terminates by reason
of permanent total disability, retirement, or at or after age 55 under
circumstances which the Stock Option
32
<PAGE> 36
Committee deems equivalent to retirement, the option is exercisable for five
years (or such shorter period as the Stock Option Committee determines) after
such a termination of employment, but not beyond the term of the option, to the
same extent it could be exercised if the option holder had continued to be
employed (or to such greater or lesser extent as the Stock Option Committee may
determine). If the employment of an option holder is terminated under mutually
satisfactory circumstances, the Stock Option Committee, in its discretion, may
grant to the option holder a period of one year (or such shorter period as the
Stock Option Committee determines) from the date of termination, but not beyond
the term of the option, to exercise the option to the same extent the option
holder could if he or she had continued to be employed (or to such greater or
lesser extent as the Stock Option Committee may determine). If an option holder
dies while still employed or within the five-year or one-year periods referred
to above, the legal representative of the option holder may exercise the option
within one year (or such shorter period as the Stock Option Committee may
determine) of the date of the holder's death, but not beyond the term of the
option, to the same extent the option holder could if he or she had continued to
be employed (or to such greater or lesser extent as the Stock Option Committee
may determine).
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 (as defined below) of the Corporation. 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.
CHANGE IN CONTROL. 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) 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), (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
33
<PAGE> 37
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 of Common Stock will be an amount
equal to the excess, if any, of (i) the higher of (x) the market value of such
share on the date the LSAR is exercised or (y) the highest price paid, or its
equivalent, for shares of Common Stock in the transaction constituting the
Change in Control or, in the case of a Change in Control resulting from a change
in the membership of the Board, the average of the closing price of the Common
Stock 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.
RESTRICTED STOCK UNITS AND PERFORMANCE STOCK UNITS. Each Restricted Stock
Unit or Performance Stock Unit represents the right to receive one share of
Common Stock. 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 of Common Stock 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 of Common Stock with respect to such
vested Units will be issued to the participant free of all restrictions and the
dividend equivalents with respect to such shares will be delivered to the
participant. 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
34
<PAGE> 38
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 under the Plan. See
footnote 1 to the above table relating to Long-Term Incentive Plan awards in
1996 in the form of Performance Shares.
Under the Long-Term Performance Plan as amended in 1994 with shareholder
approval, Performance Share awards to executives may only vest subject to the
attainment of performance targets established (and certified as having been
achieved) by the Stock Option Committee. These performance targets must be based
upon one or more of the following specific performance goals: quality, customer
satisfaction, profitability, net margin as a percentage of revenue, return on
sales, return on capital, breakeven, productivity, and/or debt to
capitalization. Awards to such executives under the Plan as amended in 1994 are
established by the Stock Option Committee and may not exceed (but, at the
discretion of the Stock Option Committee may be less than) a number of
Performance Shares determined by dividing a percentage (not to exceed 80%) of
the employee's base salary (or the average base salary or midpoint of the salary
range of a class of employes) by the fair market value of the Common Stock at
the beginning of the performance cycle. Fifty percent (or such lesser percentage
as the Stock Option Committee shall determine) of such Performance Shares shall
become vested upon the attainment of such threshold level of performance as the
Stock Option Committee shall determine at the beginning of the cycle, and up to
a maximum of 125% of such number of Performance Shares shall become vested if
actual performance against the stated targets equals or exceeds the maximum
performance target established by the Stock Option Committee.
NONEMPLOYEE DIRECTORS. 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 related LSAR, covering 3,000 shares of Common
Stock. 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 45,000
shares. An option and related SAR is exercisable by a nonemployee director in
accordance with the vesting provisions described above, provided that the holder
has been in the service as 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 and LSARs 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").
35
<PAGE> 39
TERMINATION AND AMENDMENT. The Board may amend, suspend or terminate the
Plans 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 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 transactions under the 1991
Plan 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.
Nonqualified Stock Options. In general, an optionee (i) will not be subject
to tax at the time a nonqualified stock option (including a Reload Option) is
granted and (ii) will include in ordinary income in the taxable year in which he
exercises a nonqualified stock option an amount equal to the difference between
the exercise price and the fair market value of the Common Stock on the date of
exercise. Upon disposition of the Common Stock acquired upon exercise,
appreciation or depreciation after the date ordinary income is recognized will
be treated as capital gain (or loss). 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
optionee in which such optionee includes such amount in income.
If the optionee pays the exercise price, in full or in part, with shares of
previously acquired Common Stock, the exchange should not affect the tax
treatment of the exercise. Upon such exchange, no gain or loss generally will be
recognized upon the delivery of the previously acquired shares to the
Corporation, and shares received by the optionee, equal in number to the
previously surrendered shares to the Corporation therefor, will have the same
basis for capital gain purposes as the shares surrendered to the Corporation.
Shares received by the optionee in excess of the number of shares surrendered to
the Corporation will have a basis equal to the fair market value of such
additional shares as of the date ordinary income is recognized.
Incentive Stock Options. No taxable income will be realized by an option
holder upon the grant or exercise of an incentive stock option. If shares are
issued to an option holder pursuant to the exercise of an incentive stock option
granted under the 1991 Plan and if no disqualifying disposition of such shares
is made by such option holder within two years after the date of grant or within
one year after the receipt of such shares by such option holder, then (i) upon
sale of such shares, any amount realized in excess of the exercise price of the
incentive stock option will be taxed to such option holder as a long-term
capital gain and any loss sustained will be a long-term capital loss and (ii) no
deduction will be allowed to the Corporation. However, if shares acquired upon
the exercise of an incentive stock option are disposed of prior to the
expiration of either holding
36
<PAGE> 40
period described above, generally (i) the option holder will realize ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of the shares at exercise (or, if less, the amount
realized on the disposition of the shares) over the exercise price thereof, and
(ii) the Corporation will be entitled to deduct such amount. Any additional gain
or loss recognized by the option holder will be taxed as a short-term or
long-term capital gain or loss, as the case may be, and will not result in any
deduction by the Corporation.
If an incentive stock option is exercised at a time when it no longer
qualifies as an incentive stock option, the stock option will be treated as a
nonqualified stock option. Subject to certain exceptions, an incentive stock
option generally will not be eligible for the federal income tax treatment
described above if it is exercised more than three months following termination
of employment.
If the optionee pays the exercise price, in full or in part, with shares of
previously acquired Common Stock, proposed Internal Revenue Service regulations
would provide the following rules. If the shares surrendered in payment of the
exercise price of an incentive stock option are "statutory option stock"
(including stock acquired pursuant to the exercise of an incentive stock option)
and if, at the date of surrender, the applicable holding period for such shares
had not been met, such surrender will constitute a "disqualifying disposition"
and any gain realized on such transfer will be taxable to the optionee, as
discussed above. Otherwise, when shares of Common Stock are surrendered upon
exercise of an incentive stock option, in general, (i) no gain or loss will be
recognized as a result of the exchange, (ii) the number of shares received that
is equal in number to the shares surrendered will have a basis equal to the
shares surrendered and (except for purposes of determining whether a disposition
will be a disqualifying disposition) will have a holding period that includes
the holding period of the shares exchanged, and (iii) any additional shares
received will have a zero basis and will have a holding period that begins on
the date of the exchange. If any of the shares received are disposed of within
two years of the date of grant of the incentive stock option or within one year
after exercise, the shares with the lowest basis will be deemed to be disposed
of first, and such disposition will be a disqualifying disposition giving rise
to ordinary income as discussed above.
The amount by which the fair market value of the Common Stock on the
exercise date of an incentive stock option exceeds the option price generally
will constitute an adjustment which would increase the option holder's
"alternative minimum taxable income."
Reload Options. The receipt of a Reload Option by a holder of an incentive
stock option or a nonqualified stock option (including a Reload Option) who pays
the exercise price in full or in part with shares of previously acquired Common
Stock should not affect the tax treatment of the exercise (including the amount
of ordinary income recognized upon exercise). An optionee will not be subject to
the tax at the time a Reload Option is granted (except for any income recognized
upon the exercise of a nonqualified stock option at the time of grant of the
Reload Option). A Reload Option will constitute a nonqualified stock option for
federal income tax purposes and will be taxed as such. The amount of any
ordinary income recognized upon exercise of a Reload Option should be calculated
as set forth above in "Nonqualified Stock Options."
37
<PAGE> 41
Stock Appreciation Rights and Limited Stock Appreciation Rights. No income
will be realized by a recipient in connection with the grant of any SAR or LSAR.
The recipient must include in ordinary income the amount of cash received upon
the exercise of a SAR or LSAR. If the recipient receives shares of Common Stock
upon the exercise of a SAR, the federal income tax treatment with respect to the
receipt of such stock after such exercise will be identical to that applicable
to Common Stock acquired pursuant to the exercise of a nonqualified option. The
Corporation will be entitled to a deduction equal to the amount included in such
participant's income by reason of the exercise of any SAR or LSAR in its taxable
year in which or with which ends the taxable year of the grantee in which such
income was recognized.
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 shares in the taxable year in which such units vest and the shares
are issued to the participant. Dividend equivalents paid upon issuance of shares
will be included in ordinary income upon receipt. 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.
Performance Stock Units. A holder of Performance Stock Units will be taxed
in the same manner as a holder of Restricted Stock Units.
VOTE REQUIRED FOR APPROVAL. The affirmative vote of a majority of the votes
cast is necessary to approve this proposal. If this proposal is not approved by
the shareholders, then (i) no amounts will be paid under the Plans in a given
taxable year to a person who is then a "covered employee" within the meaning of
Section 162(m) of the Internal Revenue Code to the extent that such person's
compensation from the Company for that year exceeds the deduction limit of
Section 162(m), and (ii) after exhausting existing share authority, the Stock
Option Committee will be unable to make further awards under the 1991 Plan.
YOUR DIRECTORS RECOMMEND A VOTE FOR THIS PROPOSAL, AND YOUR PROXY WILL BE
SO VOTED UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 5 -- STOCKHOLDER PROPOSAL
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, who is the owner of 250 Shares, has notified
the Company that she intends to present the following proposal:
"RESOLVED: That the stockholders of Chrysler, assembled in Annual Meeting
in person and by proxy, hereby request the Board of Directors to take the
necessary steps to provide for cumulative voting in the election of directors,
which means each stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of directors to be
elected, and he or she may cast all of such votes for a single candidate, or any
two or more of them as he or she may see fit."
38
<PAGE> 42
In support of this proposal, Mrs. Davis has submitted the following
statement:
"REASONS: Many states have mandatory cumulative voting, so do National
Banks. In addition, many corporations have adopted cumulative voting. In 1995
the owners of 42,591,744 shares, representing approximately 19.06% of shares
voting, voted FOR this proposal. If you AGREE, please mark your proxy FOR this
resolution."
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS STOCKHOLDER PROPOSAL. The
Corporation's Board of Directors believes that cumulative voting for directors
would not serve any useful purpose and would be contrary to the best interests
of the Corporation and its shareholders.
It is the responsibility of the Board of Directors to direct the business
of the Corporation on behalf of all stockholders. This can best be achieved by
the election of directors who represent the stockholders as a whole, without
favoritism or allegiance to any particular group of stockholders. A provision
for cumulative voting in the election of directors could result in, and indeed
may encourage, the members of special interest groups cumulating their vote to
elect a director or directors. Your Board believes that the representation of
special interest groups would weaken, rather than strengthen, the Board's
ability to represent stockholders as a whole and that the divisiveness and
factionalism such representation might encourage could be detrimental to the
Corporation.
YOUR PROXY WILL BE VOTED AGAINST THIS PROPOSAL IF IT IS PRESENTED AT THE
MEETING, UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 6 -- STOCKHOLDER PROPOSAL
The American Home Baptist Mission Society, P.O. Box 851, Valley Forge, PA
19482-0851, owner of 20,800 Shares, notified the Company that it intends to
present the following proposal at the meeting:
"ENDORSEMENT OF THE CERES PRINCIPLES FOR
PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS WE BELIEVE:
Responsible implementation of a sound, credible environmental policy increases
long-term shareholder value by raising efficiency, decreasing clean-up costs,
reducing litigation, and enhancing public image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than standards created by industry alone. For maximum
credibility and usefulness, such standards should specifically meet the concerns
of investors and other stakeholders;
39
<PAGE> 43
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investment from investors seeking companies which are
environmentally responsible and which minimize risk of environmental liability.
WHEREAS:
The coalition for Environmentally Responsible Economies (CERES) - which includes
shareholders of this Company; public interest representatives, and environmental
experts -- consulted with corporations to produce the CERES Principles as
comprehensive public standards for both environmental performance and reporting.
Fifty-four companies, including Sun [Sunoco], General Motors, H. B. Fuller,
Polaroid, and Bethlehem Steel, have endorsed these principles to demonstrate
their commitment to public environmental accountability. Fortune-500 endorsers
say that benefits of working with CERES are public credibility; 'value-added'
for the company's environmental initiatives;
In endorsing the CERES Principles, a company commits to work toward:
<TABLE>
<S> <C> <C>
1. Protection of the biosphere 5. Risk reduction 8. Informing the public
2. Sustainable natural resource use 6. Safe products & services 9. Management commitment
3. Waste reduction and disposal 7. Environmental restoration 10. Audits and reports
4. Energy conservation
</TABLE>
[Full text of the CERES Principles and accompanying CERES Report Form obtainable
from CERES, 711 Atlantic Avenue, Boston, MA 02110, tel: 617/451-0927].
CERES is distinguished from other initiatives for corporate environmental
responsibility, in being (1) a successful model of shareholder relations; (2) a
leader in public accountability through standardized environmental reporting;
and (3) a catalyst for significant and measurable environmental improvement
within firms.
RESOLVED: Shareholders request the company to endorse the CERES Principles as a
part of its commitment to be publicly accountable for its environmental impact.
SUPPORTING STATEMENT
Many investors support this resolution. Those sponsoring similar resolutions at
various companies have portfolios totaling $75 billion. The number of public
pension funds and foundations supporting this resolution increases every year.
The objectives are: standards for environmental performance and disclosure;
methods for measuring progress toward these goals; and a format for public
reporting of progress. We believe this is comparable to the European Community
regulation for voluntary participation in verified and publicly-reported
eco-management and auditing, and fully compatible with ISO 14000 certification.
40
<PAGE> 44
Your vote FOR this resolution will encourage scrutiny of our Company's
environmental policies and reports and adherence to standards upheld by
management and stakeholders alike."
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS STOCKHOLDER PROPOSAL. The
Company formally adopted a policy on environmental principles in 1992. The
policy reflects the Company's commitment to the environment and its goal of
integrating sound environmental practices, materials and technology into the
Company's products and manufacturing processes. The policy's objectives include:
resource conservation; pollution prevention; recycling improvements; efficient
energy use; and continuous improvement.
In furtherance of that policy, Chrysler's environmental staff conducts or
oversees periodic audits of each operating unit to assess their environmental
performance. The Company believes that such audits are effective in enabling
management to identify areas of concern and prevent or remedy potential
problems.
Since many of the topics covered by the Proposal are already included in
the extensive reports the Company is required to prepare under federal and state
law, the Proposal would burden the Company with additional reporting obligations
and their associated costs in connection with a mandatory annual CERES Report.
The Company also believes that endorsing the CERES Principles would impose
unnecessary costs on the Company by obligating it to pay an annual fee to CERES
of $25,000.
In summary, the Company believes that the costs and uncertainties
associated with the Proposal outweigh any potential environmental benefits which
might result from its adoption.
YOUR PROXY WILL BE VOTED AGAINST THIS PROPOSAL IF IT IS PRESENTED AT THE
MEETING, UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 7 -- STOCKHOLDER PROPOSAL
Robert D. Morse, 212 Highland Avenue, Moorestown, NJ 08057-2717, owner of
1,011 Shares has notified the Company that he intends to present the following
proposal at the meeting:
"I propose that the Officers and Directors consider the discontinuance of
all options, rights, SAR's. etc. after termination of any existing programs.
This does not include any programs for employees.
Reasons: These increase benefits have failed to produce the claim that it
adds to shareholder value and retains qualified personnel, simply because
another firm can offer higher benefits. These programs reduce your equity at
every redemption, increase administration costs of record keeping, and proxy
space; as much as 29 pages were used by one company on these programs of
self-benefits. Officers and directors are compensated enough to buy on the open
market, just as you and I, if they are so inclined. Please vote YES and vote NO
on nominees until they stop this practice.
If officers filled out a daily work-sheet, what would the output show?
Thank You!"
41
<PAGE> 45
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS STOCKHOLDER PROPOSAL. As
explained above in the Report on Executive Compensation, the Company's
compensation program was structured with reference to a peer group of companies
and with the assistance of an independent consulting firm. Programs within the
peer group fairly represent the types of compensation the Company must be
prepared to provide in order to attract and retain executives who can achieve
the corporate objectives necessary to increase shareholder value.
The peer group companies, as well as many others, utilize stock options or
other equity-based forms of compensation to align the interests of executives
and shareholders by directly linking compensation with share price. For example,
by granting stock options to executives at fair market value, the Company places
a portion of their total compensation "at risk" and incentivizes them to manage
the business in a manner that increases shareholder value.
The Company believes that its compensation program is structured
appropriately and that implementation of this proposal would significantly
impair its ability to attract and retain qualified executives.
YOUR PROXY WILL BE VOTED AGAINST THIS PROPOSAL IF IT IS PRESENTED AT THE
MEETING, UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 8 -- STOCKHOLDER PROPOSAL
Edward S. George, 89 Corning Hill, Glenmont, NY 12077, owner of 4,000
Shares, has notified the Company that he intends to present the following
proposal at the meeting:
"Whereas the dividend is the first casualty in any economic downturn and
the stockholder is the first casualty and the last to benefit from an upturn, be
it Resolved: That when a dividend is cut, it is recommended that no salaries
will be increased or any stock options allowed to executives or directors until
the dividend is restored to its original amount before the cut.
The bullet must be large enough to enable the executives and directors as
well as the stockholders to get their teeth on it.
The administration will maintain that the increases in salary and stock
options are necessary to attract and hold good people. This cliche belongs with
the one 'The check is in the mail', the New York State Legislature and certain
elected officials to justify an increase in their salaries, and 'I'm from the
government and I'm here to help."'
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS STOCKHOLDER PROPOSAL. The
Company believes its dividend level provides an attractive return to
shareholders. Following a reduction in 1991, the Company has increased its
Common Stock dividend by 433%, including a 33% increase in 1996. As of December
31, 1996, its Common Stock dividend yield was 4.8%, more than twice the dividend
yield of the S&P 500 Index. Further, the cumulative total shareholder return on
Common Stock for the last five years was 551%, as shown above in the Performance
Graph.
42
<PAGE> 46
The Company's ability to provide competitive compensation, including base
salary increases and stock option grants, played a significant role in achieving
that shareholder return. By offering competitive compensation, the Company was
able to attract or retain the services of many of the executives now credited
with producing that return.
The Company believes that the proposal, which seeks to dictate dividend
policy by imposing artificial limitations on executive compensation, would
significantly impair the Company's ability to secure the services of executives
with the ability to increase long-term shareholder value.
YOUR PROXY WILL BE VOTED AGAINST THIS PROPOSAL IF IT IS PRESENTED AT THE
MEETING, UNLESS YOU SPECIFY OTHERWISE.
OTHER MATTERS
The Company, in the ordinary course of business, purchased materials,
supplies and services from numerous suppliers throughout the world in 1996.
Purchases were made from some concerns of which certain nonemployee directors
are directors or officers. The Company does not consider the amounts involved in
such transactions material in relation to its business and believes that such
amounts are not material in relation to the businesses of such other
corporations or the interests of the nonemployee directors involved.
Mr. Joseph E. Cappy, a Vice President of the Company, is the principal
stockholder of, and made a loan of $1 million in 1994 to, an automobile
dealership which was granted a franchise by the Company to sell Chrysler
products. Mr. Cappy has agreed with the Company to certain restrictions which
preclude his involvement in the management and operation of the dealership.
The Company incurred expenses of approximately $727,210 in 1996 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.
Under marketing arrangements with MGM Grand Hotel, Inc. and New York-New
York Hotel & Casino, LLC, the Company is entitled to vehicle displays,
advertising space, and promotional packages at hotel complexes in Las Vegas,
Nevada. In exchange, the Company provides those companies with the use of
thirty-five vehicles, and five vehicles respectively. MGM Grand, Inc., whose
principal stockholders are Kirk Kerkorian and Tracinda Corporation, is the sole
stockholder of MGM Grand Hotel, Inc. and a partner of New York-New York Hotel &
Casino, LLC. Mr. Aljian is a director of MGM Grand, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and beneficial owners of more than ten percent of
its equity securities, to report changes in their ownership of such securities
to the SEC on a timely basis. Mr. F. J. Castaing, an Executive Vice President,
43
<PAGE> 47
filed one form one month late reporting two charitable gifts, and Mr. A. C.
Liebler, a Vice President, filed one form twelve days late reporting one
transaction.
1998 STOCKHOLDER PROPOSALS
Any stockholder proposal to be considered for inclusion in the proxy
soliciting material for the Annual Meeting of Stockholders in 1998 must be
received by Chrysler Corporation on or before December 12, 1997 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 Company 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.
BY ORDER OF THE BOARD OF DIRECTORS,
William J. O'Brien
Vice President, General Counsel and Secretary
April 11, 1997
44
<PAGE> 48
NOTICE
OF ANNUAL
MEETING OF
STOCKHOLDERS
AND PROXY
STATEMENT
CHRYSLER LOGO
MAY 15, 1997
ALL STOCKHOLDERS ARE
REQUESTED
TO DATE, SIGN AND RETURN
PROMPTLY
(LOGO) THE ENCLOSED PROXY.
recycled paper
<PAGE> 49
[X] PLEASE MARK YOUR
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 ITEMS 2 THROUGH 4 AND AGAINST ITEMS 5 THROUGH 8.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1-4.
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Appointment of [ ] [ ] [ ] 4. Amendment [ ] [ ] [ ]
Directors Independent Public of Stock
(See Reverse) Accountants. Compensation Plan
and Related
Performance Plan.
For, except vote withheld from 3. Amendment of [ ] [ ] [ ]
the following nominee(s): Performance-
Based Compensation
______________________________ Plans.
- -----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST ITEMS 5 - 8
----------------------------------------
FOR AGAINST ABSTAIN
5. Proposal [ ] [ ] [ ]
relating to
cumulative
voting.
6. Proposal [ ] [ ] [ ]
relating to
the CERES
Principles.
7. Proposal [ ] [ ] [ ]
relating to
officer and
director
compensation.
8. Proposal [ ] [ ] [ ]
relating to
executive
compensation
and dividends.
SIGNATURE(S)__________________________________DATE_________________1997
NOTE: Please sign exactly as name appears hereon. When signing as
executor, administrator, trustee or the like please 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 15, 1997, or adjournments thereof, on Items 1
through 8 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 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.
[RECYCLED PAPER LOGO] PRINTED ON RECYCLED PAPER [SEE REVERSE SIDE]
<PAGE> 1
EXHIBIT 99.1
Notice: Copies of the Chrysler Corporation 1991 Stock Compensation Plan,
the Chrysler Corporation Incentive Compensation Plan, the Chrysler Corporation
Long-Term Incentive Plan, and the Chrysler Corporation Long-Term Performance
Plan are being filed together with Chrysler Corporation's 1997 Proxy Statement
in accordance with Item 10 of Schedule 14A of the Securities and Exchange Act,
but do not constitute part of such Proxy Statement.
<PAGE> 2
CHRYSLER CORPORATION
INCENTIVE COMPENSATION PLAN
Effective January 1, 1970
(As Amended Through May 31, 1995)
1. PURPOSE
The purpose of the Chrysler Corporation Incentive Compensation Plan (below
called the Plan or this Plan) is to encourage the continued and energetic
efforts of officers and key salaried employees (below called collectively
Employees) of Chrysler Corporation (below called Chrysler) and its subsidiaries
(Chrysler and its subsidiaries collectively below called the Corporation) on
behalf of the Corporation by enabling them to share in the profits of the
Corporation, in accordance with the resolution adopted by the Stockholders of
Chrysler at their Annual Meeting on April 16, 1929, as they amended it at their
Annual Meeting on April 17, 1956, and at their Special Meeting on April 16,
1963, and at their Annual Meetings on April 15, 1969, April 18, 1972, June 7,
1984, May 20, 1993 and May 19, 1994, and as it may be further amended from time
to time (below called the Stockholders' Resolution).
2. INCENTIVE COMPENSATION COMMITTEE
The Board of Directors of Chrysler (below called the Board) shall appoint
not less than three Directors of Chrysler, none of whom shall be entitled to
receive funds or securities pursuant to any Incentive Plan (as defined in the
Stockholders' Resolution) of Chrysler, to be an Incentive Compensation Committee
(below called the Committee) to administer this Plan. All of the members of the
Committee shall be "disinterested persons" (which term as used herein shall have
the meaning ascribed to it in Rule 16b-3 under the Securities Exchange Act of
1934, or in any amendment thereof in effect at the relevant time). The Committee
may designate a Secretary, one or more Assistant Secretaries and an
Administrator, none of whom need be Directors of Chrysler. Subject to the
provisions of this Plan, the Committee shall have authority, in its discretion,
to prescribe, amend, and rescind rules and regulations relating to this Plan.
3. INCENTIVE COMPENSATION FUND
For each fiscal year the Board shall authorize and approve the amount to be
provided out of the earnings of the Corporation for such fiscal year for
purposes of this Plan and the Chrysler Corporation Long-Term Incentive Plan
(below called the Long-Term Plan, this Plan and the Long-Term Plan collectively
below called the Plans), not to exceed the amount permitted by the Stockholders'
Resolution, and shall authorize and direct the proper officers of the
Corporation (a) to set aside such amount and to add to it (b) any amount
authorized and approved by the Board for any prior fiscal year but not
previously awarded and (c) any amount awarded for any prior fiscal year that has
been forfeited. The sum of all such amounts (or such part thereof as the Board
may determine should be made available for awards for any fiscal year) shall be
the Incentive Compensation Fund for that fiscal year (below called the Fund).
Any part of such sum that the Board determines shall not be made available for
awards for any fiscal year shall be carried forward and may be awarded in a
subsequent fiscal year.
4. ELIGIBILITY
The Committee, in its sole and absolute discretion, shall have full power
to determine by salary, salary grade, salary band, classification, or otherwise,
the Employees (including those who have retired or died or have been granted a
leave of absence or were laid off during the year) who shall be eligible for
consideration to participate in the Plans in any year, except that the Committee
may not determine as eligible for consideration to participate in the Plans any
Employee who was eligible at any time in that year to participate in any other
Incentive Plan of the Corporation as defined in the Stockholders' Resolution.
Employees shall not be ineligible for consideration to participate in the Plans
by reason of their eligibility to participate in any Performance
<PAGE> 3
Award Plan or in any Savings and Investment Plan, both as defined in the
Stockholders' Resolution, or in any Stock Option Plan, or any Performance Award
Plan adopted under any Stock Option Plan, of Chrysler or any of its subsidiaries
or in any successor plan or programs adopted to replace any such plan or
programs.
5. SELECTING PARTICIPANTS AND DETERMINING AWARDS
Each year the Committee, in accordance with such rules as it may prescribe,
shall:
(a) select from the Employees eligible for consideration to
participate in the Plans those Employees who are to participate for that
year;
(b) award under this Plan to certain of the Employees so selected
(below called Participant) such share of the Fund as the Committee shall
determine (below called an Award); provided, however, that the maximum
amount of such share that may be awarded to a Participant for any year
shall not exceed a dollar amount equal to two hundred percent (200%) of the
Participant's base salary as approved at the time the Performance Goals (as
defined below) for that year are established; and
(c) award under the Long-Term Plan to certain of the Employees so
selected, in accordance with the terms of the Long-Term Plan, such share of
the Fund as the Committee shall determine.
An Employee may receive an Award under this Plan and an award under the
Long-Term Plan in the same year.
The Committee shall have full and final authority in performing these
duties, but shall report to the Board the share of the Fund awarded to each
Employee under this Plan and under the Long-Term Plan, expressed in dollar
amounts and/or percentage of base salary or performance share awards or award
units or otherwise, as the Committee shall determine.
Notwithstanding anything else contained in this Plan to the contrary, if
any Award is intended at the time of grant to be other performance based
compensation within the meaning of Section 162(m)(4)(C) of the Internal Revenue
Code of 1986, as the same may be amended from time to time (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.
6. TARGET AWARDS
A Target Award for each Participant will be established each fiscal year by
the Committee. Each Target Award will be expressed as a percent (not in excess
of 160%) of the Participant's base salary, or the average base salary or
midpoint of the salary range of a class of Employees. An Employee who first
becomes eligible for an Award, and is selected as a Participant, after the
beginning of a given year will have his or her Target Award established on a pro
rata basis for the number of months he or she is eligible during such year.
7. CORPORATE PERFORMANCE GOALS
The Committee will establish one or more performance goals ("Performance
Goals") consisting of such criteria and for the accomplishment of such corporate
objectives as the Committee may designate prior to the beginning of each award
year relating to the following: quality, customer satisfaction, profitability,
net margin as a percentage of revenue, return on sales, return on capital,
breakeven, productivity, and/or debt to capitalization. However, the Committee
shall have the discretion to change and/or add goals and to modify the
objectives designated in relation to previously established goals.
8. CORPORATE PERFORMANCE EVALUATION
After the end of each year, the Committee will determine the percentage of
attainment of each Performance Goal established for that year. Target Award
amounts will then be adjusted by multiplying the Target Award amounts by the
corporate performance percentage. For purposes of the above calculation, (a) a
2
<PAGE> 4
corporate performance percentage of less than 25% will result in no Awards being
paid, and (b) a corporate performance percentage in excess of 125% will result
in Target Award amounts being adjusted by 125%.
9. PAYING AND EARNING OUT OF AWARDS UNDER THIS PLAN
Awards under this Plan shall be paid to Participants in one lump sum,
unless the Committee, in its discretion, determines that an Award shall be paid
in installments.
A Participant will have earned out under this Plan an Award payable in one
lump sum, or the first installment of an Award payable in installments, if his
or her employment with the Corporation has been continuous (a) up to the date of
payment of the Award payable in one lump sum, or of the first installment of the
Award payable in installments, as the case may be, or (b) up to the date of the
Participant's retirement or death if he or she should retire or die before the
date of such payment, or (c) up to the date the Participant was granted a leave
of absence if such leave of absence was granted before the date of such payment,
or (d) up to the date the Participant was laid off if he was laid off before the
date of such payment. A Participant will have earned out a subsequent
installment if his or her employment with the Corporation has been continuous up
to and including (a) the December 31 immediately preceding the date the
installment is payable, or (b) the date of the Participant's death if he or she
should die before such December 31, or (c) such date as the Corporation may
determine under all other circumstances.
A Participant whose employment with the Corporation is terminated other
than by death will not thereafter earn out under this Plan any installment of an
Award payable in installments unless the Corporation expressly consents in
writing to waive the condition of continuous employment with the Corporation,
and the Participant thereafter will earn out each installment only if up to and
including the December 31 immediately preceding the date the installment is
payable the Participant neither (a) takes other employment or renders services
to others without the written consent of the Corporation, nor (b) conducts
himself or herself in a manner adversely affecting the Corporation, the
determination by the Committee that a Participant has so conducted himself or
herself to be final and conclusive.
Any installment which a Participant fails to earn out under this Plan shall
be forfeited and included in the Fund for a subsequent year as provided in
paragraph 3.
Nothing in this Plan shall prevent the Corporation from discharging or
requesting the resignation of any Participant.
An Award payable in one lump sum, or the first installment of an Award
payable in installments, shall be paid to the Participant on such date as the
Committee shall determine, and if the Participant complies with the conditions
for earning out a subsequent installment, it shall be paid to him or her on such
date in the year in which it is payable as the Committee shall determine.
Any lump sum payment or installment earned out under this Plan and payable
to a Participant who is deceased shall be paid to his or her legal
representative in such manner and at such time as it would have been paid to the
Participant were he or she then alive and in the employ of the Corporation.
10. FORM OF PAYMENTS UNDER THIS PLAN
The Committee in its sole and absolute discretion shall determine for any
year whether under this Plan the lump sum payment or the installment of any
Awards payable in that year shall be paid in cash or in shares of Chrysler
stock, or partly in cash and partly in shares of Chrysler stock, the shares to
be shares held by the Corporation in its treasury or purchased by the
Corporation in the market for distributing in place of cash, the shares to be
valued for this purpose in accordance with the Stockholders' Resolution, with
cash in place of fractional shares.
3
<PAGE> 5
11. DEFERRAL OF PAYMENT
A Participant may voluntarily elect to defer receipt of payment under this
Plan of all or any part of an Award payable in one lump sum or of any
installment of an Award payable in installments upon such terms and conditions
as the Committee may prescribe.
12. COSTS
All costs of administering the Plans shall be borne by the Corporation and
shall not be charged against the Fund.
13. PAYMENTS UPON A CHANGE IN CONTROL
Notwithstanding any other provisions hereof, if a "Change in Control" (as
defined in paragraph 13(D) hereof) of Chrysler shall occur, the following shall
be paid, in cash, no later than the tenth day following such Change in Control:
(a) all unpaid installments of an Award payable in installments pursuant to
paragraph 9 of this Plan, (b) all voluntary deferrals made by a Participant
pursuant to paragraph 11 of this Plan (other than deferrals made into the
Chrysler Corporation Salaried Employees Savings Plan and the Chrysler
Corporation Salaried Employees Supplemental Savings Plan, which deferrals will
be governed by the terms of such plans), (c) all unpaid Awards made (including
any made pursuant to paragraph 13(C) hereof) for any completed fiscal year which
preceded the Change in Control, and (d) "Change in Control Awards" (as
determined pursuant to paragraph 13(A) hereof).
A. CHANGE IN CONTROL AWARDS. Upon a Change in Control of Chrysler, each
Employee (below called a "Change in Control Participant") eligible pursuant to
paragraph 4 hereof for consideration to participate in the Plans for the fiscal
year in which the Change in Control occurs (the "Change in Control Year") shall
be paid a cash award, in a lump sum (the "Change in Control Award").
The tentative Change in Control Award of each Change in Control Participant
to whom an Award was made for the last fiscal year immediately preceding the
Change in Control for which Awards (including Awards, if any, made pursuant to
paragraph 13(C) hereof) were made generally (the "Base Year") shall be
determined by multiplying the "Change in Control Fund" (calculated in accordance
with paragraph 13(B) hereof) by a fraction, the numerator of which shall be the
amount of the Award of such Change in Control Participant for the Base Year, and
the denominator of which shall be the aggregate amount of Awards made for the
Base Year. A tentative Change in Control Award for each Change in Control
Participant to whom an Award was not made for the Base Year shall also be
determined and shall be comparable to the tentative Change in Control Awards of
similarly situated (in terms of the criteria employed by the Committee to
determine participation under paragraph 4 hereof, such as salary, salary grade
or classification) Change in Control Participants to whom Awards were made for
the Base Year.
The actual Change in Control Award of each Change in Control Participant
shall then be determined by multiplying the Change in Control Fund by a
fraction, the numerator of which shall be his tentative Change in Control Award
and the denominator of which shall be the aggregate tentative Change in Control
Awards.
B. CHANGE IN CONTROL FUND. The Change in Control Fund shall be the sum of
the amounts described in (i) and (ii) below, adjusted by the amount described in
(iii):
(i) the sum (measured immediately prior to a Change in Control) of (x)
any amount authorized and approved by the Board for any fiscal year
completed prior to the Change in Control but not previously awarded from,
or charged against, the Incentive Compensation Fund pursuant to this or any
other plan of the Corporation and (y) any amount awarded from, or charged
against, the Incentive Compensation Fund for any fiscal year completed
prior to the Change in Control that has been forfeited;
(ii) the aggregate amount calculated for the fiscal year in which the
Change in Control occurs, from its inception up to and including the date
of the Change in Control, in the ordinary course of business and based on
the Stockholders' Resolution. The determination (made prior to the Change
in Control) of the Corporation's internal accountants in making any such
calculation shall be conclusive;
4
<PAGE> 6
(iii) the "applicable amount" (the sum of (i) and (ii) above) shall be
adjusted as follows: (a) if an additional charge is made against the
Incentive Compensation Fund with respect to Performance Shares under the
Long-Term Plan upon the occurrence of a Change in Control, the "applicable
amount" shall be reduced by such charge; and (b) if any amount previously
charged against the Incentive Compensation Fund for Performance Shares is
not earned and delivered upon the occurrence of a Change in Control and is
returned to the Incentive Compensation Fund, the "applicable amount" shall
be increased by such returned amount.
C. MAKING AWARDS FOR COMPLETED YEARS. Upon the occurrence of a "Potential
Change in Control" (as defined in paragraph 13(E) hereof), if there is any
completed fiscal year of the Corporation for which the audited financial
statements of the Corporation are available and for which the Board has not yet
determined the Incentive Compensation Fund and/or for which the Committee has
not yet determined the Awards, such determinations and the payments of any
Awards so determined shall be made as soon as reasonably possible.
D. CHANGE IN CONTROL DEFINITION. "Change in Control" shall mean a change in
control of Chrysler, which shall be deemed to have occurred if the conditions
set forth in any one of the following paragraphs shall have been satisfied:
(i) any Person (as defined below) is or becomes the Beneficial Owner
(as defined below) of securities of Chrysler representing 20% or more of
the combined voting power of Chrysler's then outstanding securities (unless
the event causing the 20% threshold to be crossed is an acquisition of
securities directly from Chrysler); or
(ii) during any period of two consecutive years beginning after June
7, 1990, 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 Chrysler to effect a transaction
described in paragraph (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 (2/3) 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; or
(iii) the stockholders of Chrysler approve a merger or consolidation
of Chrysler with any other corporation (other than a merger or
consolidation which would result in the voting securities of Chrysler
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 Chrysler or such surviving entity held by a trustee or other
fiduciary pursuant to any employee benefit plan of Chrysler or such
surviving entity or any subsidiary of Chrysler or such surviving entity, at
least 80% of the combined voting power of the voting securities of Chrysler
or such surviving entity outstanding immediately after such merger or
consolidation); or
(iv) the stockholders of Chrysler approve a plan of complete
liquidation or dissolution of Chrysler or an agreement for the sale or
disposition by Chrysler of all or substantially all Chrysler's assets.
For purposes of the definition of Change in Control in this paragraph
13(D): (a) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as supplemented by Section 13(d)(3) of the Exchange Act, provided,
however, that Person shall not include (i) Chrysler, any subsidiary of
Chrysler or any other Person controlled by Chrysler, (ii) any trustee or
other fiduciary holding securities under any employee benefit plan of
Chrysler or any subsidiary of Chrysler, or (iii) a corporation owned,
directly or indirectly, by the stockholders of Chrysler in substantially
the same proportions as their ownership of securities of Chrysler; and (b)
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
otherwise has "beneficial ownership" of (within the meaning of Rule 13d-3
under the Exchange Act), 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 securities (x)
arising solely from a revocable proxy or consent given in response to a
public proxy or
5
<PAGE> 7
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. POTENTIAL CHANGE IN CONTROL DEFINITION. A "Potential Change in Control"
shall be deemed to have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(i) Chrysler enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) Chrysler or any Person (as defined in paragraph 13(D) hereof)
publicly announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(iii) any Person who is or becomes the Beneficial Owner (as defined in
paragraph 13(D) hereof), directly or indirectly, of securities of Chrysler
representing 10% or more of the combined voting power of Chrysler's then
outstanding securities, increases such Person's beneficial ownership of
such securities by 5% or more over the percentage so owned by such Person
on the date hereof; or
(iv) the Board adopts a resolution to the effect that, for purposes of
this Plan, a Potential Change in Control has occurred.
14. INTERPRETATION
The Board shall have full power and authority to interpret and construe
this Plan and its interpreting and construing of this Plan and acts pursuant to
this Plan in good faith shall be final and conclusive. The Board may correct any
defect or supply any omission or reconcile any inconsistency in such a manner
and to such an extent as it shall find expedient to carry this Plan into effect,
and it shall be the sole and final judge of the expediency. If any such
interpreting or construing shall involve a question of law, the Board may rely
and act upon the opinion of counsel (who may be counsel to Chrysler) on the
question of law.
15. EFFECTIVE PERIOD
The Plan shall become effective, upon approval by the Board, beginning
January 1, 1970, and shall remain in effect until terminated as provided in
Paragraph 16.
16. AMENDMENT AND TERMINATION
At any time the Board may amend, alter or terminate this Plan (consistent
with the Stockholders' Resolution) as the Board shall deem advisable; provided,
however, that the Board may not: (a) without the approval of the holders of a
majority of the shares of Common Stock of Chrysler voting on the matter,
increase the total amount that under the Stockholders' Resolution may be
provided out of the earnings of the Corporation for incentive compensation and
(b) without the approval of the holders of a majority of the shares of Common
Stock of Chrysler issued and outstanding, issue shares of Chrysler stock for
distributing in place of cash; and provided further, however, that terminating
or amending this Plan shall not terminate the right of any Participant to earn
out and thereby become entitled to receive, in the same manner as if this Plan
had not been terminated or amended, any unpaid installment of an Award made to
him under this Plan prior to the terminating or amending of this Plan or any
Retirement Benefit he would become eligible to receive under the Supplemental
Plan by complying with the terms thereof.
Nothing in this Plan shall be interpreted to preclude Chrysler from
granting awards under, or paying compensation outside the parameters of, the
Plan including, without limitation, base salaries, awards under
6
<PAGE> 8
any other plan of Chrysler (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 Chrysler and its stockholders.
7
<PAGE> 9
CHRYSLER CORPORATION
LONG-TERM INCENTIVE PLAN
EFFECTIVE JUNE 11, 1987
(AS AMENDED THROUGH MAY 31, 1995)
1. PURPOSE
The purpose of the Chrysler Corporation Long-Term Incentive Plan (below
called the Plan) is to provide an incentive to the officers and other key
salaried employees (below called collectively Employees) of Chrysler Corporation
(below called Chrysler) and its subsidiaries (Chrysler and its subsidiaries
collectively below called the Corporation) by enabling them to earn shares of
common stock of Chrysler (below called the Chrysler Common Stock) as a reward
for the achievement of long-term goals and objectives of the Corporation, in
accordance with the resolution most recently adopted by the stockholders of
Chrysler at their Annual Meeting on May 19, 1994, amending a resolution
originally adopted on April 16, 1929, as it has been and may be further amended
from time to time (below called the Stockholders' Resolution). All capitalized
terms used below shall have the meanings ascribed to them in Section 3 below.
2. INTEGRATION WITH INCENTIVE COMPENSATION PLAN
This Plan shall be fully integrated with the Incentive Compensation Plan.
The funds for the purchase of Chrysler Common Stock to be awarded as Performance
Shares under this Plan shall be provided out of the earnings of the Corporation
available for incentive compensation under the Incentive Compensation Plan, as
the Board from time to time shall determine. Awards made hereunder shall
complement awards made under the Incentive Compensation Plan as the Committee
shall determine in its sole discretion. An amount equal to 125% of the total
Fair Market Value of Performance Shares granted, on the day they were granted,
shall be charged against the Incentive Compensation Fund (as that term is
defined in the Incentive Compensation Plan). Any amount charged against the
Incentive Compensation Fund for any Performance Shares not earned and delivered
shall be returned to the funds available for incentive compensation under the
Incentive Compensation Plan, and shall be carried forward and may be awarded in
a subsequent fiscal year.
3. DEFINITIONS
"Beneficial Owner" -- with respect to any securities, shall mean any Person
who, directly or indirectly, has the right to vote or dispose of such securities
or otherwise has "beneficial ownership" of such securities (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), 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."
"Board" means the Board of Directors of Chrysler.
<PAGE> 10
"Change in Control" -- means a change in control of Chrysler, which shall
be deemed to have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(a) any Person shall become the Beneficial Owner of securities of
Chrysler representing 20% or more of the combined voting power of
Chrysler's then outstanding securities (unless the event causing the 20%
threshold to be crossed is an acquisition of securities directly from
Chrysler);
(b) during any period of two consecutive years beginning after [June
7, 1990], individuals who at the beginning of such period constitute the
Board of Directors and any new director (other than a director designated
by a Person who has entered into an agreement with Chrysler to effect a
transaction described in paragraph (a), (c) or (d) of this Change in
Control definition) whose election or nomination for election was approved
by a vote of at least two-thirds (2/3) 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; or
(c) the stockholders of Chrysler approve a merger or consolidation of
Chrysler with any other corporation (other than a merger or consolidation
which would result in the voting securities of Chrysler 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 Chrysler or such surviving entity held by a trustee or other
fiduciary pursuant to any employee benefit plan of Chrysler or such
surviving entity or any subsidiary of Chrysler or such surviving entity, at
least 80% of the combined voting power of the voting securities of Chrysler
or such surviving entity outstanding immediately after such merger or
consolidation); or
(d) the stockholders of Chrysler approve a plan of complete
liquidation or dissolution of Chrysler or an agreement for the sale or
disposition by Chrysler of all or substantially all Chrysler's assets.
"Change in Control Fund" -- with respect to any Performance Cycle, means
the outstanding amount charged against the Fund with respect to such Performance
Cycle immediately prior to the occurrence of a Change in Control, increased by
the sum of the amounts described in "(i)" and "(ii)" below:
(i) the sum of (x) any amount authorized and approved by the Board for
any fiscal year completed prior to the Change in Control but not previously
awarded from, or charged against, the Incentive Compensation Fund pursuant
to this or any other plan of the Corporation, and (y) any amount awarded
from, or charged against, the Incentive Compensation Fund for any fiscal
year completed prior to the Change in Control that has been forfeited;
(ii) the aggregate amount calculated for the fiscal year in which
Change in Control occurs, from its inception up to and including the date
of the Change in Control, in the ordinary course of business and based on
the Stockholders' Resolution. The determinations (made prior to the Change
in Control) of the Corporation's internal accountants in making any such
calculation shall be conclusive.
"Change in Control Value" -- means, with respect to the Performance Shares,
the higher of (i) the Fair Market Value of a share of Chrysler Common Stock on
the relevant valuation date or (ii) the value of a share of Chrysler Common
Stock, determined as follows:
(w) in the case of transactions described in paragraphs (a) or (c) of
the Change in Control definition, the highest per share price paid (the
"Transaction Value") for shares of Chrysler Common Stock in the transaction
constituting the Change in Control,
(x) in the case of a transaction described in paragraph (b) of the
Change in Control definition which occurs in connection with a transaction
described in paragraph (a), (c) or (d) of the Change in Control definition,
the Transaction Value,
(y) in the case of a Change in Control described in paragraph (b) of
the Change in Control definition which does not occur in connection with a
transaction described in paragraph (a), (c) or (d) of the Change in Control
definition, the average of the daily closing prices per share of Chrysler
Common Stock on the New York Stock Exchange, if such shares are traded
thereon, or, if not, such other national
2
<PAGE> 11
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, during the thirty
(30) consecutive trading days immediately preceding the Change in Control,
or
(z) in the case of a transaction described in paragraph (d) of the
Change in Control definition, the equivalent of the Transaction Value as
determined by the Committee.
"Committee" -- means the Incentive Compensation Committee of the Board.
"Fair Market Value" -- means for purposes of Performance Shares, the mean
of the high and low trading prices of Chrysler Common Stock on the date on which
it is to be valued hereunder, as reported on the New York Stock Exchange, or if
the Exchange is closed on such day, the next preceding day on which the Exchange
was open for trading.
"Incentive Compensation Plan" -- means the Chrysler Corporation Incentive
Compensation Plan adopted in accordance with the Stockholders' Resolution.
"Participant" -- means an Employee who is selected by the Committee to
receive an award of Performance Shares under the Plan.
"Performance Cycle" or "Cycle" -- means the period of years determined by
the Committee during which the performance of the Corporation is measured for
the purpose of determining the extent to which an award of Performance Shares
has been earned.
"Performance Goals" -- means one or more corporate objectives established
by the Committee for a Performance Cycle, for the purpose of determining the
extent to which Performance Shares which have been contingently awarded for such
Cycle are earned. Such objectives shall relate to: quality, customer
satisfaction, profitability, net margin as a percentage of revenue, return on
sales, return on capital, breakeven, productivity, and/or debt to
capitalization.
"Performance Share" -- means an award expressed as a share of Chrysler
Common Stock contingently awarded under this Plan.
"Person" -- shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act, as supplemented by Section 13(d)(3) of the Exchange Act,
provided, however, that Person shall not include (i) Chrysler, any subsidiary of
Chrysler or any other Person controlled by Chrysler, (ii) any trustee or other
fiduciary holding securities under any employee benefit plan of Chrysler or any
subsidiary of Chrysler, or (iii) a corporation owned, directly or indirectly, by
the stockholders of Chrysler in substantially the same proportions as their
ownership of securities of Chrysler.
4. INCENTIVE COMPENSATION COMMITTEE
The Board has appointed not less than three Directors of Chrysler to be the
Committee to administer this Plan. All of the members of the Committee are
"disinterested persons" (which term as used herein shall have the meaning
ascribed to it in Rule 16b-3 under the Securities Exchange Act of 1934, or in
any amendment thereof in effect at the relevant time). Subject to the provisions
of this Plan, the Committee shall have authority, in its discretion, to
prescribe, amend, and rescind rules and regulations relating to this Plan.
5. ELIGIBILITY
All Employees who are eligible to participate in the Incentive Compensation
Plan, as determined by the Committee, are eligible to be Participants in this
Plan. The Committee shall have sole and complete authority to determine the
Employees who shall be awarded Performance Shares under this Plan.
6. PERFORMANCE CYCLES
During 1987 the Committee shall establish Performance Cycles for the years
1987, 1987 through 1988 and 1987 through 1989. During each of the years 1988 and
thereafter the Committee may, but shall not be required to, establish a new
Performance Cycle with respect to a future period, which shall not be less than
3
<PAGE> 12
two nor more than five years. The Committee shall have sole and complete
authority to determine the duration of each Performance Cycle. More than one
Performance Cycle may be in effect at any one time, and the duration of one
Performance Cycle may differ from another.
7. PERFORMANCE GOALS
The Committee shall establish one or more Performance Goals for each
Performance Cycle consisting of such criteria and for the accomplishment of such
corporate objectives as the Committee may designate prior to the beginning of
each Performance Cycle. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in recognition of unusual
or non-recurring events affecting the Corporation or changes in applicable tax
laws or accounting principles.
8. PERFORMANCE AWARDS
At the commencement of each Performance Cycle the Committee shall (a) award
to each Participant the number of Performance Shares that would be deliverable
to the Participant if the Performance Goals for that Cycle are fully achieved at
a 100% level of performance, which number shall be determined by dividing an
amount (expressed as a percentage -- not to exceed 80% -- of the Participant's
base salary, or the average base salary or midpoint of the salary range of a
class of Participants, at the time of the award) by the then fair market price
of Chrysler Common Stock and (b) establish a range within which greater or
lesser percentages (including a minimum and maximum percentage) of the number of
shares awarded as Performance Shares would be earned based on the actual
performance level attained. The maximum of such range shall not exceed 125% of
the number of shares awarded as Performance Shares.
When a person becomes employed by the Corporation in, or is promoted by the
Corporation to, a position that constitutes him an Employee eligible to
participate in the Plan, the Committee may, in its sole discretion, award to
such person Performance Shares for one or more Performance Cycles commenced and
then in progress.
The Committee may, in its sole discretion, supplement any award previously
made to any Participant, provided that such award has not yet been earned out
and paid; and provided further, that the Committee may not exercise such
discretion to the extent that the ability to exercise such discretion would
cause the Performance Share award to fail to qualify as other performance based
compensation under Section 162(m) of the Internal Revenue Code.
9. PAYMENT OF PERFORMANCE SHARES
The Committee shall determine the percentage of the Performance Shares
which were earned by each Participant with respect to each Performance Cycle.
Such determination shall be made by considering the Corporation's performance in
relation to the Performance Goals established for that Performance Cycle and
deriving therefrom a percentage of attainment of the Performance Goals. Such
percentage (but not more than 125%) multiplied by the number of shares awarded
as Performance Shares to each Participant shall be the number of shares of
Chrysler Common Stock earned and to be delivered to such Participant. Such
shares shall be shares held by the Corporation in its treasury.
A Participant may elect, on or after the date of grant of any award and
before the year in which such award is to be paid, to defer receipt of all or
any portion of the Performance Shares deliverable to such Participant upon
earning such award, subject to the terms and conditions contained in any
applicable deferral or similar plan or arrangement.
10. DIVIDEND EQUIVALENTS
Participants shall be entitled to receive cash payments equivalent to the
dividend payments, if any, made to the owners of Chrysler Common Stock during
the Performance Cycle, on the dates such dividend payments are made. Such
payments are payable from and after the date Performance Shares are awarded
(i.e., during
4
<PAGE> 13
the relevant Performance Cycle) without regard to the attainment of Performance
Goals. Such cash payments equivalent to dividends shall not be charged against
the funds available for incentive compensation.
11. TERMINATION OF EMPLOYMENT
A Participant must be an Employee at the end of a Performance Cycle in
order to be entitled to payment of Performance Shares in respect of such Cycle;
provided, however, that in the event a Participant ceases to be an Employee
prior to the end of that Cycle (a) by reason of death, disability under any
disability plan of the Corporation, or retirement at or after age 65 under a
pension plan of the Corporation, he (or the legal representative of his estate
or his legatees) shall continue to earn, as if he had not ceased to be an
Employee, any Performance Shares awarded to him for that Cycle, or (b) by reason
of layoff, or by reason of retirement before age 65 under a pension plan of the
Corporation, the Committee, in its discretion and after taking into
consideration the performance of such Participant and the performance of the
Corporation during the Cycle, may authorize payment to such Participant with
respect to some or all of the Performance Shares awarded to him for that Cycle.
No award of Performance Shares shall confer upon any Employee any right to
continued employment with the Corporation nor shall it interfere with the right
of the Corporation to terminate the employment of any Employee at any time.
12. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
Notwithstanding any other provision of this Plan, in the event of any
change in the outstanding Chrysler Common Stock by reason of a stock dividend,
recapitalization, merger, consolidation, split-up, combination or exchange of
shares, and the like, the number and class of shares subject to each outstanding
award of Performance Shares shall be appropriately adjusted by the Board, whose
determination shall be conclusive.
13. CHANGE IN CONTROL
(A) First, subject to Section 13(D) hereof, upon the occurrence of a Change
in Control, any Performance Shares for a completed Performance Cycle which the
Committee has previously determined that a Participant has earned (but with
respect to which no delivery of Chrysler Common Stock has been made) shall be
paid no later than the tenth day following such Change in Control to such
Participant, in cash, in an amount equal to the Change in Control Value of each
such Performance Share multiplied by the number of such Performance Shares
(together with dividend equivalents on such shares calculated pursuant to
Section 10 hereof).
(B) Second, subject to Section 13(D) hereof, upon the occurrence of a
Change in Control, any Performance Shares for a completed Performance Cycle
previously awarded to a Participant who was an Employee (or otherwise entitled
to payment under Section 11 hereof) at the end of such Performance Cycle (but as
to which the Committee has made no determination with respect to the number of
such shares earned by such Participant) shall be deemed earned out, at the
higher of a 100% level of performance or at the highest level of performance
attained in any of the three most recently completed previous Performance
Cycles. The Performance Shares so earned out shall be paid immediately to each
such Participant, in cash, in an amount equal to the Change in Control Value of
each Performance Share multiplied by the number of such shares deemed to have
been earned out (together with dividend equivalents on such shares calculated
pursuant to Section 10 hereof).
(C) Third, subject to Section 13(D) hereof, upon the occurrence of a Change
in Control, a pro rata percentage (determined as provided below) of all
Performance Shares for each outstanding Performance Cycle previously awarded to
a Participant who is an Employee on the date immediately preceding the date of
the Change in Control which have not yet been earned out shall be deemed earned
out, at the higher of a 100% level of performance or at the highest level of
performance attained in any of the three most recently completed Performance
Cycles. The Performance Shares so earned out shall be paid immediately to each
such Participant in cash, in an amount equal to the Change in Control Value of
each Performance Share multiplied by the number of such shares deemed to have
been earned out (together with dividend equivalents on such shares calculated
pursuant to Section 10 hereof).
5
<PAGE> 14
The number of Performance Shares deemed to have been earned out by a
Participant with respect to each outstanding Performance Cycle, upon a Change in
Control, shall be determined by first multiplying the total Performance Shares
awarded to the Participant for such Performance Cycle by a fraction, the
numerator of which shall be the number of complete months in such Performance
Cycle which have elapsed at the date of the Change in Control and the
denominator of which shall be the total number of months in such Performance
Cycle. Next, the number of Performance Shares determined in the first step shall
be multiplied by the applicable percentage level of performance for such
Performance Cycle.
(D) Notwithstanding Sections 13(A), (B) and (C) hereof, the aggregate
amount payable with respect to any Performance Cycle pursuant to this Section 13
shall not exceed such Performance Cycle's Change in Control Fund and, if
necessary, the individual amounts otherwise payable with respect to a particular
Performance Cycle shall be reduced proportionally until the aggregate amount
equals such Performance Cycle's Change in Control Fund.
14. ADMINISTRATIVE COSTS
All costs of administering this Plan shall be borne by the Corporation and
shall not be charged against the funds available for incentive compensation.
15. INTERPRETATION
The Board shall have full power and authority to interpret and construe
this Plan and its interpreting and construing of this Plan and acts pursuant to
this Plan in good faith shall be final and conclusive. The Board may correct any
defect or supply any omission or reconcile any inconsistency in such a manner
and to such an extent as it shall find expedient to carry this Plan into effect,
and it shall be the sole and final judge of expediency. If any such interpreting
or construing shall involve a question of law, the Board may rely and act upon
the opinion of counsel (who may be counsel to Chrysler) on the question of law.
Notwithstanding anything else contained in this Plan to the contrary, if
any award of Performance Shares 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.
16. EFFECTIVE PERIOD
This Plan shall become effective beginning June 11, 1987, and shall remain
in effect until terminated as provided in Paragraph 17.
17. AMENDMENT AND TERMINATION
At any time the Board may terminate this Plan or make such changes in it
and additions to it (consistent with the Stockholders' Resolution) as the Board
shall deem advisable; provided, however, that the Board may not: (a) without the
approval of the holders of a majority of the shares of Common Stock of Chrysler
voting on the matter, increase the total amount that under the Stockholders'
Resolution may be provided out of the earnings of the Corporation for incentive
compensation and (b) without the approval of the holders of a majority of the
shares of Common Stock of Chrysler issued and outstanding, issue shares of
Chrysler Common Stock for purposes of this Plan; and provided further, however,
that terminating or amending this Plan shall not terminate the right of any
Participant to earn and thereby become entitled to receive, in the same manner
as if this Plan had not been terminated or amended, any unearned Performance
Shares awarded to him under this Plan prior to the terminating or amending of
this Plan.
Nothing in this Plan shall be interpreted to preclude Chrysler from
granting awards under, or paying compensation outside the parameters of, the
Plan including, without limitation, base salaries, awards under any other plan
of Chrysler (whether or not approved by stockholders), incentive compensation
(whether or
6
<PAGE> 15
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 Internal Revenue
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 Chrysler and its stockholders.
7
<PAGE> 16
CHRYSLER CORPORATION
LONG-TERM PERFORMANCE PLAN
(BEING THE TERMS AND CONDITIONS OF THE PERFORMANCE STOCK UNIT PROVISIONS
OF THE CHRYSLER CORPORATION 1991 STOCK COMPENSATION PLAN)
EFFECTIVE MAY 16, 1991
(AS AMENDED THROUGH MAY 19, 1994)
1. PURPOSE
The purpose of the Chrysler Corporation Long-Term Performance Plan (below
called the Plan) is to provide an incentive to the officers and other key
salaried employees (below called collectively Employees) of Chrysler Corporation
(below called Chrysler), its subsidiaries and its Related Entities (as defined
in the Stock Compensation Plan) (Chrysler, its subsidiaries and Related Entities
collectively below called the Corporation) by enabling them to earn shares of
common stock of Chrysler (below called the Chrysler Common Stock) as a reward
for the achievement of long-term goals and objectives of the Corporation. The
Plan sets forth the terms and conditions of performance stock unit awards
granted by the Committee (as defined below) under the Stock Compensation Plan
(as defined below). All capitalized terms used below shall have the meanings
ascribed to them in Section 2 below.
2. DEFINITIONS
"Board" -- means the Board of Directors of Chrysler.
"Change in Control" -- has the meaning set forth in the Stock Compensation
Plan.
"Committee" -- means the Stock Option Committee of the Board, being the
committee appointed by the Board to administer the performance stock unit
provisions of the Stock Compensation Plan.
"Fair Market Value" -- means for purposes of Performance Shares, the mean
of the high and low trading prices of Chrysler Common Stock on the date on which
it is to be valued hereunder, as reported on the New York Stock Exchange, or if
the Exchange is closed on such day, the next preceding day on which the Exchange
was open for trading.
"Participant" -- means an Employee who is selected by the Committee to
receive an award of Performance Shares under the Stock Compensation Plan.
"Performance Cycle" or "Cycle" -- means the period of years determined by
the Committee during which the performance of the Corporation is measured for
the purpose of determining the extent to which an award of Performance Shares
has been earned.
"Performance Goals" -- means one or more corporate objectives established
by the Committee for a Performance Cycle, for the purpose of determining the
extent to which Performance Shares which have been contingently awarded for such
Cycle are earned. Such objectives shall relate to: quality, customer
satisfaction, profitability, net margin as a percentage of revenue, return on
sales, return on capital, breakeven, productivity, and/or debt to
capitalization.
"Performance Share" -- means an award expressed as one share of Chrysler
Common Stock contingently awarded under the Stock Compensation Plan (also
termed, under the Stock Compensation Plan, a Performance Stock Unit), the terms
and conditions of which award are governed by this Plan.
"Stock Compensation Plan" -- means the Chrysler Corporation 1991 Stock
Compensation Plan.
<PAGE> 17
3. STOCK OPTION COMMITTEE
The Board has appointed not less than three Directors of Chrysler to be the
Committee to administer this Plan. All of the members of the Committee are
"disinterested persons" (which term as used herein shall have the meaning
ascribed to it in Rule 16b-3 under the Securities Exchange Act of 1934, or in
any amendment thereof in effect at the relevant time). The Committee shall have
authority, in its discretion, to amend the terms of this Plan and to prescribe,
amend, and rescind rules and regulations relating to this Plan.
4. ELIGIBILITY
All Eligible Employees (as defined in the Stock Compensation Plan) are
eligible to be Participants under this Plan.
5. PERFORMANCE CYCLES
During 1991 the Committee shall establish Performance Cycles for the years
1991 through 1993. During each of the years 1992 and thereafter the Committee
may, but shall not be required to, establish a new Performance Cycle with
respect to a future period, which shall not be less than two nor more than five
years. The Committee shall have sole and complete authority to determine the
duration of each Performance Cycle. More than one Performance Cycle may be in
effect at any one time, and the duration of one Performance Cycle may differ
from another.
6. PERFORMANCE GOALS
The Committee shall establish one or more Performance Goals for each
Performance Cycle consisting of such criteria and for the accomplishment of such
corporate objectives as the Committee may designate prior to the beginning of
each Performance Cycle. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in recognition of unusual
or non-recurring events affecting the Corporation or changes in applicable tax
laws or accounting principles.
7. PERFORMANCE AWARDS
At the commencement of each Performance Cycle the Committee shall (a) award
to each Participant the number of Performance Shares that would be deliverable
to the Participant if the Performance Goals for that Cycle are fully achieved at
a 100% level of performance, which number shall be determined by dividing an
amount (expressed as a percentage -- not to exceed 80% -- of the Participant's
base salary, or the average base salary or midpoint of the salary range of a
class of Participants, at the time of the award), by the then fair market price
of Chrysler Common Stock and (b) establish a range within which greater or
lesser percentages (including a minimum and maximum percentage) of the number of
shares awarded as Performance Shares would be earned based on the actual
performance level attained. The maximum of such range shall not exceed 125% of
the number of shares awarded as Performance Shares.
When a person becomes employed by the Corporation in, or is promoted by the
Corporation to, a position that constitutes him an Employee eligible to
participate in the Plan, the Committee may, in its sole discretion, award to
such person Performance Shares for one or more Performance Cycles commenced and
then in progress.
Except as otherwise provided in Section 13 below, the Committee may, in its
sole discretion, supplement any award previously made to any Participant,
provided that such award has not yet been earned out and paid.
8. PAYMENT OF PERFORMANCE SHARES
The Committee shall determine the percentage of the Performance Shares
which were earned by each Participant with respect to each Performance Cycle.
Such determination shall be made by considering the Corporation's performance in
relation to the Performance Goals established for that Performance Cycle and
deriving therefrom a percentage of attainment of the Performance Goals. Such
percentage (but not more than 125%) multiplied by the number of shares awarded
as Performance Shares to each Participant shall be the
2
<PAGE> 18
number of shares of Chrysler Common Stock earned and to be delivered to such
Participant. Such shares shall be shares held by the Corporation in its
treasury.
A Participant may elect, on or after the date of grant of any award and
before the year in which such award is to be paid, to defer receipt of all or
any portion of the Performance Shares deliverable to such Participant upon
earning such award, subject to the terms and conditions contained in any
applicable deferral or similar plan or arrangement.
9. DIVIDEND EQUIVALENTS
Participants shall be entitled to receive cash payments equivalent to the
dividend payments, if any, made to the owners of Chrysler Common Stock during
the Performance Cycle, on the dates such dividend payments are made. Such
payments are payable from and after the date Performance Shares are awarded
(i.e., during the relevant Performance Cycle) without regard to the attainment
of Performance Goals.
10. TERMINATION OF EMPLOYMENT
A Participant must be an Employee at the end of a Performance Cycle in
order to be entitled to payment of Performance Shares in respect of such Cycle;
provided, however, that in the event a Participant ceases to be an Employee
prior to the end of that Cycle (a) by reason of death, disability under any
disability plan of the Corporation, or retirement at or after age 65 under a
pension plan of the Corporation, he (or the legal representative of his estate
or his legatees) shall continue to earn, as if he had not ceased to be an
Employee, any Performance Shares awarded to him for that Cycle, or (b) by reason
of layoff, or by reason of retirement before age 65 under a pension plan of the
Corporation, the Committee, in its discretion and after taking into
consideration the performance of such Participant and the performance of the
Corporation during the Cycle, may authorize payment to such Participant with
respect to some or all of the Performance Shares awarded to him for that Cycle.
No award of Performance Shares shall confer upon any Employee any right to
continued employment with the Corporation nor shall it interfere with the right
of the Corporation to terminate the employment of any Employee at any time.
11. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure or
capitalization affecting the Chrysler Common Stock, outstanding awards of
Performance Shares shall be adjusted as and to the extent provided in Section 3
of the Stock Compensation Plan.
12. CHANGE IN CONTROL
A Change in Control shall have the effects set forth in Section 12 of the
Stock Compensation Plan.
13. INTERPRETATION
The Committee shall have full power and authority to interpret and construe
this Plan and its interpreting and construing of this Plan and acts and
determinations pursuant to this Plan in good faith shall be final and
conclusive, and binding upon the Participants. This Plan sets forth the terms
and conditions of awards of Performance Shares under the Stock Compensation
Plan; the provisions of the Stock Compensation Plan and the interpretations
thereof, to the extent applicable, shall govern in the event of any conflict
with the provisions of this Plan and the interpretations thereof.
Notwithstanding anything else contained in this Plan to the contrary, if
any award of Performance Shares 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.
3
<PAGE> 19
Nothing in this Plan shall be interpreted to preclude Chrysler from
granting awards under, or paying compensation outside the parameters of, the
Plan including, without limitation, base salaries, awards under any other plan
of Chrysler (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 Chrysler and its stockholders.
4
<PAGE> 20
EXHIBIT 10-A-10
CHRYSLER CORPORATION
1991 STOCK COMPENSATION PLAN
EFFECTIVE MAY 16, 1991
AS AMENDED THROUGH FEBRUARY 6, 1997
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) "Eligible Employee" means an employee of the Company, any
Subsidiary or any Related Entity as described in Section 4 of the Plan.
(j) "Fair Market Value" means, as of any given date, with respect to
any Awards granted hereunder, the mean of the high and low trading price of
the Stock on such date as reported on the New York Stock Exchange or, if
the Stock is not then traded on the New York Stock Exchange, on such other
national securities exchange on which the Stock is admitted to trade or, if
none, on the National Association of Securities Dealers Automated Quotation
System if the Stock is admitted for quotation thereon; provided, however,
that if any such exchange or quotation system is closed on any day on which
Fair Market Value is to be determined, Fair Market Value shall be
determined as of the first day immediately preceding such day on which such
exchange or quotation system was open for trading.
(k) "Incentive Stock Option" means any Stock Option intended to
qualify as an "incentive stock option" within the meaning of Section 422 of
the Code.
<PAGE> 21
(l) "Limited Stock Appreciation Right" means a Stock Appreciation
Right that can be exercised only in the event of a Change in Control.
(m) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(n) "Optionee" means a Participant granted a Stock Option pursuant to
Section 5 of the Plan which remains outstanding.
(o) "Participant" means any Eligible Employee selected by the
Committee, pursuant to the Committee's authority in Section 2 of the Plan,
to receive Awards and, solely to the extent provided by Sections 9, 10, and
11 of the Plan, Nonemployee Directors of the Company.
(p) "Performance Stock Unit" means the right to receive one share of
Stock as set forth in an Award granted pursuant to Section 8 of the Plan,
the vesting of which is subject to restrictions that will lapse upon the
attainment of performance objectives.
(q) "Related Entity" means any corporation, joint venture or other
entity, domestic or foreign, other than a Subsidiary, in which the Company
owns, directly or indirectly, a substantial equity interest.
(r) "Restricted Stock Unit" means the right to receive one share of
Stock as set forth in an Award granted pursuant to Section 8 of the Plan,
the vesting of which is subject to restrictions that will lapse with the
passage of time; 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.
(s) "Retirement" means (i) retirement from active employment under a
pension plan of the Company, any Subsidiary or Related Entity or under an
employment contract with any of them or (ii) termination of employment at
or after age 55 under circumstances which the Committee, in its sole
discretion, deems equivalent to retirement; 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.
(t) "Stock" means the common stock of the Company.
(u) "Stock Appreciation Right" means the right pursuant to an Award
granted under Section 6 of the Plan, (i) in the case of a Related Stock
Appreciation Right (as defined in Section 6 of the Plan), to surrender to
the Company all or a portion of the related Stock Option and receive an
amount equal to the excess of the Fair Market Value of one share of Stock
as of the date such Stock Option or portion thereof is surrendered over the
option price per share specified in such Stock Option, multiplied by the
number of shares of Stock in respect of which such Stock Option is being
surrendered, and (ii) in the case of a Freestanding Stock Appreciation
Right (as defined in Section 6 of the Plan), to exercise such Freestanding
Stock Appreciation Right and receive an amount equal to the excess of the
Fair Market Value of one share of Stock as of the date of exercise over the
price per share specified in such Freestanding Stock Appreciation Right,
multiplied by the number of shares of Stock in respect of which such
Freestanding Stock Appreciation Right is being exercised.
(v) "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 of the Plan, including any Reload Option (as
defined in Section 5 of the Plan).
(w) "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Company, if each of the corporations
(other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Committee, composed of not less than
two Nonemployee Directors, each of whom shall be a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), or meet any other
2
<PAGE> 22
applicable standard for administrators under that or any similar rule which may
be in effect from time to time. Each member of the Committee shall be appointed
by the Board and 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.
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.
3
<PAGE> 23
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.
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
4
<PAGE> 24
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. Each Reload Option shall cover
a number of shares of Stock equal to the number of shares of Stock
surrendered in payment of the option price under such Original Option,
shall have an option price per share of Stock equal to the Fair Market
Value of the Stock on the date of grant of such Reload Option and shall
expire on the stated expiration date of the Original Option. A Reload
Option shall be exercisable at any time and from time to time from and
after the date of grant of such Reload Option (or, as the Committee in its
sole discretion shall determine at or after the time of grant, at such time
or times as shall be specified in the Reload Option). 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
5
<PAGE> 25
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 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
6
<PAGE> 26
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; 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.
7
<PAGE> 27
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. A Related Stock Appreciation Right granted in
connection with an Incentive Stock Option may be exercised only if and when
the Fair Market Value of the Stock subject to the Incentive Stock Option
exceeds the option price of such Stock Option.
(iii) Method of Exercise. Stock Appreciation Rights shall be exercised
by a Participant by giving written notice of exercise delivered in person
or by mail as required by the terms of any agreement evidencing the Stock
Appreciation Right at the Company's principal executive office, specifying
the number of shares of Stock in respect of which the Stock Appreciation
Right is being exercised. If requested by the Committee, the Participant
shall deliver to the Company the agreement evidencing the Stock
Appreciation Right being exercised and, in the case of a Related Stock
Appreciation Right, the Stock Option Agreement evidencing any related Stock
Option, for notation thereon of such exercise and return thereafter of such
agreements to the Participant.
(iv) Amount Payable. Upon the exercise of a Related Stock Appreciation
Right, an Optionee shall be entitled to receive an amount in cash or shares
of Stock equal in value to the excess of the Fair Market Value of one share
of Stock on the date of exercise over the option price per share specified
in the related Stock Option, multiplied by the number of shares of Stock in
respect of which the Related Stock Appreciation Right shall have been
exercised, with the Committee having in its sole discretion the right to
determine the form of payment.
Upon the exercise of a Freestanding Stock Appreciation Right, a Participant
shall be entitled to receive an amount in cash or shares of Stock equal in
value to the excess of the Fair Market Value of one share of Stock on the
date of exercise over the price per share specified in the Freestanding
Stock Appreciation Right, which shall be not less than 100% of the Fair
Market Value of the Stock on the date of grant, multiplied by the number of
shares of Stock in respect of which the Freestanding Stock Appreciation
Right shall have been exercised, with the Committee having in its sole
discretion the right to determine the form of payment.
(b) Terms and Conditions. Stock Appreciation Rights granted under the Plan
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable.
(i) Term of Stock Appreciation Rights. The term of a Related Stock
Appreciation Right shall be the same as the term of the related Stock
Option. A Related Stock Appreciation Right or applicable portion thereof
shall terminate and no longer be exercisable upon the exercise,
termination, cancellation or surrender of the related Stock Option, except
that, unless otherwise provided by the Committee in its sole discretion at
or after the time of grant, a Related Stock Appreciation Right granted with
respect to less than the full number of shares of Stock covered by a
related Stock Option shall terminate and no longer be exercisable if and to
the extent that the number of shares of Stock covered by the exercise,
termination, cancellation or surrender of the related Stock Option exceeds
the number of shares of Stock not covered by the Related Stock Appreciation
Right.
8
<PAGE> 28
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.
(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.
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
9
<PAGE> 29
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 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.
10
<PAGE> 30
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. Unless the Board shall otherwise
determine and 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, unless the Board shall
establish a different schedule as to all, any or any class of Nonemployee
Directors, on and after the first anniversary of the date of granting the Award
and before the second anniversary, the Nonemployee Director may exercise the
Award with respect to not more than 40% of the number of shares of Stock covered
thereby, on and after the second anniversary and before the third anniversary,
the Nonemployee Director may exercise the Award with respect to not more than
70% of the number of shares of Stock covered thereby, and on and after the third
anniversary and before the expiration of the stated term of the Award, which
shall be ten years from the date of its granting, the Nonemployee Director may
at any time or from time to time exercise the Award with respect to all or any
portion of the shares of Stock covered thereby. The Related Limited Stock
Appreciation Right component of the Award shall be exercisable only as set forth
in Section 7(a)(ii) of the Plan. If a Nonemployee Director's service with the
Company terminates by reason of permanent and total disability or retirement
from active service as a Director of the Company, any Award held by such
Nonemployee Director may be exercised for a period of five years from the date
of such termination or until the expiration of the Award, whichever is shorter,
to the extent to which the individual would on the date of exercise have been
entitled to exercise the Award if such individual had continued to serve as a
Nonemployee Director. If a Nonemployee Director's service with the Company
terminates by reason of death or under mutually satisfactory conditions, or if a
Nonemployee Director dies within the five-year period following termination by
reason of permanent and total disability or retirement from active service as a
director of the Company or within the one-year period following termination
under mutually satisfactory conditions, any Award held by such Nonemployee
Director may be exercised for a period of one year from the date of such
termination or post-termination death, as the case may be, or until the
expiration of the stated term of the Award, whichever is shorter, to the extent
to which the individual would on the date of exercise have been entitled to
exercise the Award if such individual had continued to serve as a Nonemployee
Director. All applicable provisions of the Plan not inconsistent with this
Section 9 shall apply to Awards granted to Nonemployee Directors.
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
11
<PAGE> 31
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 by action of the Board 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 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.
12
<PAGE> 32
(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 or the Committee 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
applicable state law), would:
(a) except as provided in Section 3 of the Plan, increase the total
number of shares of Stock which may be issued under the Plan;
(b) except as provided in Section 3 of the Plan, decrease the option
price of any Stock Option to less than 100% of the Fair Market Value on the
date of the grant of the option;
(c) change the class of employees eligible to participate in the Plan;
or
(d) extend (i) the period during which Stock Options may be granted or
(ii) the maximum period of any Award under Sections 5(b)(ii) or 6(b)(i) of
the Plan.
Except as restricted herein, the Committee may amend or alter the terms and
conditions of any Award theretofore granted, and of any agreement evidencing
such Award, prospectively or retroactively, but no such amendment or alteration
shall impair the rights of any Participant under such Award or agreement without
such Participant's consent.
SECTION 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;
(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;
13
<PAGE> 33
(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, 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.
(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 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.
14
<PAGE> 34
(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 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
15
<PAGE> 35
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 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.
(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. 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
16
<PAGE> 36
stock option" within the meaning of Section 422 of the Code, the Stock Option
granted shall nevertheless continue to be outstanding as and shall be deemed to
be a Nonqualified Stock Option under the Plan.
(g) A Participant may elect, on or after the date of grant of any Award, to
defer receipt of all or any portion of the proceeds of such Award or any
Dividend Equivalents in connection therewith, whether in the form of cash or
shares of Stock, deliverable to such Participant upon the exercise, vesting or
payment of any such Award or Dividend Equivalents, in each case to the extent
permitted by and subject to the terms and conditions set forth in any deferral
or similar plan or arrangement enacted by the Board or the Committee in its sole
discretion.
(h) Nothing in this Plan shall be interpreted to preclude the Corporation
from granting Awards under, or paying compensation outside the parameters of,
the Plan including, without limitation, base salaries, awards under any other
plan of the Corporation or its Subsidiaries (whether or not approved by
stockholders), incentive compensation (whether or not based on the attainment of
pre-established performance objectives) or retention or other special payments,
that is not deductible for Federal, State or local income tax purposes by reason
of Section 162(m) of the Code or otherwise, should the Board or any committee
thereof (including the Committee), whichever is applicable, determine that such
action is in the best interests of the Corporation and its stockholders.
(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.
17
