<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
---------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to _________________
Commission file number 1-9161
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CHRYSLER CORPORATION
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-2673623
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Chrysler Drive, Auburn Hills, Michigan 48326-2766
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(248) 576-5741
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
The registrant had 646,730,468 shares of common stock outstanding as of June 30,
1998.
<PAGE> 2
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 1-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14-16
Item 6. Exhibits and Reports on Form 8-K 17
Signature Page 18
Exhibit Index 19
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (unaudited)
For the Three and Six Months Ended June 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
1998 1997 1998 1997
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Sales of manufactured products $ 15,987 $ 13,393 $ 31,895 $ 28,549
Finance and insurance revenues 501 400 945 810
Other revenues 513 595 961 1,145
----------- ----------- ----------- ----------
TOTAL REVENUES 17,001 14,388 33,801 30,504
----------- ----------- ----------- ----------
Costs, other than items below 12,803 11,092 25,359 23,060
Depreciation and special tools amortization 874 706 1,722 1,384
Selling and administrative expenses 1,093 1,214 2,224 2,421
Employee retirement benefits 311 311 626 636
Interest expense 318 254 596 488
----------- ----------- ----------- ----------
TOTAL EXPENSES 15,399 13,577 30,527 27,989
----------- ----------- ----------- ----------
EARNINGS BEFORE INCOME TAXES 1,602 811 3,274 2,515
Provision for income taxes 599 328 1,219 1,003
----------- ----------- ----------- ----------
NET EARNINGS $ 1,003 $ 483 $ 2,055 $ 1,512
========== ========== ========== ==========
(In dollars or millions of shares)
BASIC EARNINGS PER COMMON SHARE $ 1.55 $ 0.71 $ 3.18 $ 2.20
=========== =========== =========== ==========
Average common shares outstanding 646.3 678.9 646.2 688.3
DILUTED EARNINGS PER COMMON SHARE $ 1.51 $ 0.70 $ 3.12 $ 2.17
=========== =========== =========== ==========
Average common and dilutive equivalent
shares outstanding 662.9 688.1 659.6 698.3
DIVIDENDS DECLARED PER COMMON SHARE $ 0.40 $ 0.40 $ 0.80 $ 0.80
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
------------- ------------------------
June 30 Dec. 31 June 30
------------- -------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 6,999 $ 4,898 $ 5,623
Marketable securities 3,390 2,950 2,412
------------- ------------- ------------
Total cash, cash equivalents and marketable securities 10,389 7,848 8,035
Accounts receivable - trade and other 1,674 1,646 2,021
Inventories 5,868 4,738 6,079
Prepaid employee benefits, taxes and other expenses 1,240 2,193 1,661
Finance receivables and retained interests in
sold receivables 17,051 13,518 14,421
Property and equipment 19,020 17,968 16,060
Special tools 4,488 4,572 4,144
Intangible assets 1,525 1,573 1,949
Other noncurrent assets 6,546 6,362 6,658
------------- ------------- ------------
TOTAL ASSETS $ 67,801 $ 60,418 $ 61,028
============= ============= ============
LIABILITIES:
Accounts payable $ 10,531 $ 9,512 $ 9,564
Accrued liabilities and expenses 11,050 9,717 9,410
Short-term debt 4,107 3,841 3,903
Payments due within one year on long-term debt 3,153 2,638 3,538
Long-term debt 11,796 9,006 9,367
Accrued noncurrent employee benefits 10,006 9,841 9,729
Other noncurrent liabilities 4,380 4,501 3,957
------------- ------------- ------------
TOTAL LIABILITIES 55,023 49,056 49,468
------------- ------------- ------------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized
20.0 shares; Series A Convertible Preferred Stock;
issued and outstanding: 1998 - 0.01 shares; 1997 - 0.02
and 0.02 shares, respectively (aggregate liquidation
preference 1998 - $4 million; 1997 - $8 million and $8
million, respectively)
* * *
Common stock - $1 per share par value; authorized
1,000.0 shares; issued: 1998 - 823.5 shares; 1997 - 823.1
and 823.1 shares, respectively 824 823 823
Additional paid-in capital 5,219 5,231 5,169
Retained earnings 12,139 10,605 9,793
Treasury stock - at cost: 1998 - 176.8 shares;
1997 - 174.7 and 148.6 shares, respectively (5,404) (5,297) (4,225)
------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY 12,778 11,362 11,560
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 67,801 $ 60,418 $ 61,028
============= ============= =============
</TABLE>
* Less than $50 thousand
See notes to consolidated financial statements.
2
<PAGE> 5
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the Six Months Ended June 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
------------- ------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,895 $ 3,505
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (2,255) (1,559)
Sales and maturities of marketable securities 2,359 1,741
Finance receivables acquired (15,490) (14,313)
Finance receivables collected 4,946 4,259
Proceeds from sales of finance receivables 8,810 8,156
Expenditures for property and equipment (1,427) (1,404)
Expenditures for special tools (603) (808)
Purchases of vehicle operating leases (1,384) (891)
Proceeds from sales of vehicles under purchased
operating leases 162 77
Other 197 (182)
------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (4,685) (4,924)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt 266 689
Proceeds from long-term borrowings 4,729 4,336
Payments on long-term borrowings (1,467) (1,607)
Repurchases of common stock (197) (1,007)
Dividends paid (519) (560)
Other 79 33
------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,891 1,884
------------- ------------
Change in cash and cash equivalents 2,101 465
Cash and cash equivalents at beginning of period 4,898 5,158
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,999 $ 5,623
============= ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION
The unaudited consolidated financial statements of Chrysler Corporation and its
consolidated subsidiaries ("Chrysler") include the accounts of all significant
majority-owned subsidiaries that are controlled by Chrysler. Affiliates that are
20 percent to 50 percent owned and subsidiaries where control is expected to be
temporary or does not reside with Chrysler are generally accounted for on an
equity basis. Intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements of Chrysler for the three
and six months ended June 30, 1998 and 1997 reflect all adjustments, consisting
of only normal and recurring items, which are, in the opinion of management,
necessary to present a fair statement of the results for the interim periods.
The operating results for the three and six months ended June 30, 1998 are not
necessarily indicative of the results of operations for the entire year.
Reference should be made to the consolidated financial statements included in
the Annual Report on Form 10-K for the year ended December 31, 1997. Certain
amounts for 1997 have been reclassified to conform with current period
classifications.
NOTE 2. INVENTORIES
Inventories, summarized by major classification, were as follows:
<TABLE>
<CAPTION>
1998 1997
------------- ------------------------------
June 30 Dec. 31 June 30
------------- ------------- -----------
(In millions of dollars)
<S> <C> <C> <C>
Finished products, including service parts $ 1,965 $ 1,883 $ 1,770
Raw materials, finished production parts and supplies 1,446 1,445 1,423
Vehicles held for short-term lease 2,457 1,410 2,886
------------- ------------- ------------
TOTAL $ 5,868 $ 4,738 $ 6,079
============= ============= ============
</TABLE>
NOTE 3. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, Chrysler adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This Statement requires
that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
Statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. For example, other
comprehensive earnings may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
marketable securities classified as available-for-sale. Annual financial
statements for prior periods will be reclassified, as required. Chrysler's
total comprehensive earnings were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
------------------------------ --------------------------------
1998 1997 1998 1997
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
(In millions of dollars)
Net earnings $ 1,003 $ 483 $ 2,055 $ 1,512
Other comprehensive earnings (loss) (8) 16 (17) (8)
------------- ------------- ------------- --------------
Total comprehensive earnings $ 995 $ 499 $ 2,038 $ 1,504
============= ============= ============= ==============
</TABLE>
In the second quarter of 1998, Chrysler adopted Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", effective January 1, 1998. This SOP provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. This SOP requires that entities capitalize certain internal-use software
costs once certain criteria are met. Historically, Chrysler generally expensed
the costs of developing or obtaining internal-use software as incurred. Adoption
of the standard did not have a material effect on Chrysler's consolidated
financial statements.
4
<PAGE> 7
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 4. PROPOSED BUSINESS COMBINATION
On May 7, 1998, Chrysler, Daimler-Benz Aktiengesellschaft
("Daimler-Benz") and DaimlerChrysler Aktiengesellschaft ("DaimlerChrysler")
entered into a Business Combination Agreement providing for (i) the merger of a
newly created Delaware corporation with and into Chrysler ("the Chrysler
Merger"); (ii) an offer by DaimlerChrysler to exchange one DaimlerChrysler
ordinary share for each Daimler-Benz ordinary share; and (iii) the merger of
Daimler-Benz with and into DaimlerChrysler. In the Chrysler merger, each share
of outstanding Chrysler common stock will be converted into the right to
receive 0.6235 DaimlerChrysler shares. As a result of these transactions,
DaimlerChrysler will be owned by the former shareholders of Chrysler and
Daimler-Benz, and Chrysler will be a wholly owned subsidiary of
DaimlerChrysler.
On May 7, 1998, Chrysler entered into a Stockholder Agreement with Kirk
Kerkorian and Tracinda Corporation (together, "Tracinda"), the owner of
approximately 14 percent of the common stock of Chrysler, pursuant to which
Tracinda has agreed to vote its shares in favor of the transactions contemplated
by the Business Combination Agreement.
Also on May 7, 1998, Chrysler amended its Rights Agreement, dated as of February
5, 1998, with First Chicago Trust Company of New York. The amendment renders the
Rights Agreement inapplicable to the transactions contemplated by the Business
Combination Agreement.
The transaction is expected to close later in 1998, subject to the approval of
Chrysler's and Daimler-Benz's shareholders, regulatory approvals and the
satisfaction or waiver of various other conditions as more fully described in
the Business Combination Agreement, including completion of the exchange of a
least 80 percent of the outstanding shares of Daimler-Benz on a fully diluted
basis for DaimlerChrysler shares. Chrysler's shareholders will be asked to vote
on the proposed business combination at a Special Shareholders' Meeting to be
held on September 18, 1998.
NOTE 5. COMMON STOCK REPURCHASES
During the first six months of 1998, Chrysler repurchased 5.3 million shares of
its common stock at a cost of $188 million. Further repurchases of its common
stock have been suspended as a result of the pending business combination of
Chrysler and Daimler-Benz described in Note 4.
NOTE 6. PREFERRED STOCK REDEMPTION
On July 2, 1998, Chrysler announced the redemption of all of the outstanding
Depositary Shares representing its Series A Convertible Preferred Stock. The
redemption price will be $51.85 per Depositary Share, plus accrued interest to
the redemption date. The redemption date will be July 24, 1998. Holders of the
Depositary Shares can convert their Depositary Shares into Chrysler common stock
on or before July 17, 1998.
5
<PAGE> 8
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. EARNINGS PER COMMON SHARE
Earnings per common share ("EPS") data were computed as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
----------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------- ------------- -------------
(In millions of dollars and shares,
except per-common-share amounts)
<S> <C> <C> <C> <C>
Net Earnings $ 1,003 $ 483 $ 2,055 $ 1,512
Less: Preferred stock dividends -- (1) -- (1)
------------- ------------- ------------- -------------
Net earnings on common stock $ 1,003 $ 482 $ 2,055 $ 1,511
============= ============= ============= =============
Basic EPS:
Weighted-average common shares outstanding 646.3 678.9 646.2 688.3
============= ============= ============= =============
Basic EPS $ 1.55 $ 0.71 $ 3.18 $ 2.20
============= ============= ============= =============
Diluted EPS:
Weighted-average common shares outstanding 646.3 678.9 646.2 688.3
Shares issued on exercise of dilutive options 36.3 25.6 32.2 26.1
Shares purchased with proceeds of options (22.8) (19.7) (21.8) (19.4)
Shares applicable to convertible preferred stock 0.6 1.5 0.7 1.7
Shares contingently issuable 2.5 1.8 2.3 1.6
------------- ------------- ------------- -------------
Shares applicable to diluted earnings 662.9 688.1 659.6 698.3
============= ============= ============= =============
Diluted EPS $ 1.51 $ 0.70 $ 3.12 $ 2.17
============= ============= ============= =============
</TABLE>
6
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto.
FINANCIAL REVIEW
Chrysler reported earnings before income taxes of $1,602 million for the
second quarter of 1998, compared with $811 million for the second quarter of
1997. For the first six months of 1998, Chrysler reported earnings before income
taxes of $3,274 million, compared with $2,515 million for the first six months
of 1997. Net earnings for the second quarter of 1998 were $1,003 million, or
$1.55 per common share ($1.51 per diluted common share), compared with $483
million, or $0.71 per common share ($0.70 per diluted common share), for the
second quarter of 1997. Net earnings for the first six months of 1998 were
$2,055 million, or $3.18 per common share ($3.12 per diluted common share),
compared with $1,512 million, or $2.20 per common share ($2.17 per diluted
common share), for the first six months of 1997.
Earnings for the second quarter and first six months of 1998 compared to
the corresponding 1997 periods reflect an increase in vehicle shipments,
improved product mix and decreased warranty costs, partially offset by an
increase in average sales incentives and higher profit-based employee
compensation. The increase in average sales incentives per vehicle was
attributable to an increasingly competitive market environment. The decrease in
warranty costs was primarily related to several voluntary customer service
actions and recalls initiated in the second quarter of 1997.
Earnings for the second quarter and first six months of 1997 included an
estimated unfavorable impact of approximately $730 million ($438 million after
taxes) related to a 29-day strike at an engine plant in Detroit, Michigan. The
full-year estimated impact of the strike was $590 million ($364 million after
taxes) after taking into account the effect of a partial recovery of production
losses that occurred during the remainder of 1997.
Chrysler's worldwide vehicle shipments in the second quarter and first six
months of 1998 were 849,369 units and 1,675,089 units, respectively, compared
with 738,453 units and 1,519,692 units, respectively, in the second quarter and
first six months of 1997. The increases in worldwide shipments primarily reflect
the unfavorable impact of a 29-day strike in 1997 and shipments of Chrysler's
all-new Dodge Durango in 1998. Chrysler's vehicle shipments outside of the U.S.,
Canada and Mexico in the second quarter and first six months of 1998 were 50,911
units and 107,691 units, respectively, compared with 72,308 units and 125,160
units, respectively, in the second quarter and first six months of 1997. The
decrease in shipments outside of the U.S., Canada and Mexico is primarily caused
by continued economic difficulties in Asian markets.
Chrysler's revenues and results of operations are principally derived from
the U.S. and Canada automotive marketplaces. In the second quarter of 1998,
retail industry sales (including fleet) of new cars and trucks in the U.S. and
Canada, on a Seasonally Adjusted Annual Rate basis, were 18.0 million
units compared with 16.2 million units for the second quarter of 1997. In the
first six months of 1998, retail industry sales (including fleet) of new cars
and trucks in the U.S. and Canada, on a Seasonally Adjusted Annual Rate basis,
were 17.4 million units compared with 16.6 million units for the first six
months of 1997.
Chrysler's U.S. and combined U.S. and Canada retail sales and market
share data for the second quarter and first six months of 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
Second Quarter Six Months
---------------------------------- ------------------------------------
Increase/ Increase/
1998 1997 (Decrease) 1998 1997 (Decrease)
--------- ------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Retail Market (1):
Car sales 215,182 215,338 (156) 390,759 418,315 (27,556)
Car market share 9.3% 9.7% (0.4)% 9.3% 9.9% (0.6)%
Truck sales (including minivans) 508,136 413,152 94,984 910,859 782,830 128,029
Truck market share 22.9% 21.8% 1.1 % 22.9% 21.9% 1.0 %
Combined car and truck sales 723,318 628,490 94,828 1,301,618 1,201,145 100,473
Combined car and truck
market share 15.9% 15.3% 0.6 % 15.9% 15.4% 0.5 %
U.S. and Canada Retail Market (1):
Combined car and truck sales 802,572 702,210 100,362 1,444,661 1,329,054 115,607
Combined car and truck
market share 16.1% 15.5% 0.6 % 16.2% 15.6% 0.6 %
</TABLE>
(1) All retail sales and market share data include fleet sales.
7
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
FINANCIAL REVIEW - CONTINUED
Chrysler's U.S. car market share for the second quarter and first six
months of 1998 decreased compared with the second quarter and first six months
of 1997 primarily as a result of reduced fleet sales of Chrysler's full-size
sedans. Chrysler's U.S. truck market share for the second quarter and first six
months of 1998 increased compared with the second quarter and first six months
of 1997 primarily as a result of the unfavorable impact of a 29-day strike in
the second quarter of 1997 and sales of the all-new Dodge Durango in 1998.
Chrysler Financial Corporation ("CFC") reported earnings before income
taxes of $178 million for the second quarter of 1998 compared with $156 million
for the second quarter of 1997. For the first six months of 1998, CFC reported
earnings before income taxes of $338 million compared with $297 million for the
first six months of 1997. CFC's net earnings for the second quarter and first
six months of 1998 were $120 million and $228 million, respectively, compared
with $103 million and $196 million, respectively, for the second quarter and
first six months of 1997. The increase in net earnings primarily reflects higher
gains and servicing fees from sales of finance receivables.
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES
Chrysler's total revenues for the second quarter and first six months of
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Second Quarter Six Months
---------------------------------------- ---------------------------------------
Increase/ Increase/
(In millions of dollars) 1998 1997 (Decrease) 1998 1997 (Decrease)
----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sales of manufactured products $ 15,987 $ 13,393 19 % $ 31,895 $ 28,549 12 %
Finance and insurance revenues 501 400 25 % 945 810 17 %
Other revenues 513 595 (14)% 961 1,145 (16)%
----------- ----------- ----------- -----------
Total revenues $ 17,001 $ 14,388 18 % $ 33,801 $ 30,504 11 %
=========== =========== =========== ===========
</TABLE>
The increase in Sales of manufactured products in the second quarter and
first six months in 1998 compared with the corresponding 1997 periods primarily
reflects an increase in vehicle shipments of 15 percent and 10 percent,
respectively, and increased average revenue per unit. The increase in average
revenue per unit is the result of improved product mix, partially offset by
increased average sales incentives.
The increase in Finance and insurance revenues in the second quarter and
first six months of 1998 compared with the corresponding 1997 periods was
primarily attributable to increased levels of vehicles under purchased operating
leases.
The decrease in Other revenues in the second quarter and first six months
of 1998 compared with the corresponding 1997 periods was primarily attributable
to the divestiture of Chrysler's Car Rental Operations in December 1997,
partially offset by higher gains and servicing fees from sales of finance
receivables at CFC.
Chrysler's total expenses for the second quarter and first six months of
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Second Quarter Six Months
------------------------------------- ---------------------------------------
Increase/ Increase/
1998 1997 (Decrease) 1998 1997 (Decrease)
------ ------ ---------- ----------- ------------ ------------
(In millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Costs, other than items below $ 12,803 $ 11,092 15 % $ 25,359 $ 23,060 10 %
Depreciation and special tools
amortization 874 706 24 % 1,722 1,384 24 %
Selling and administrative expenses 1,093 1,214 (10)% 2,224 2,421 (8)%
Employee retirement benefits 311 311 -- 626 636 (2)%
Interest expense 318 254 25 % 596 488 22 %
----------- ----------- ---------- -----------
Total expenses $ 15,399 $ 13,577 13 % $ 30,527 $ 27,989 9 %
=========== =========== =========== ===========
</TABLE>
Costs, other than items below increased in the second quarter and first six
months of 1998 compared with the corresponding 1997 periods primarily as a
result of an increase in vehicle shipments of 15 percent and 10 percent,
respectively. Costs, other than items below were 80 percent of Sales of
manufactured products for both the second quarter and first six months of 1998
compared with 83 percent and 81 percent for the second quarter and first six
months of 1997, respectively.
8
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES - CONTINUED
Depreciation and special tools amortization for the second quarter and
first six months of 1998 increased compared with the corresponding 1997 periods
primarily as a result of higher levels of property and equipment and tooling in
use, including increased depreciation related to higher levels of vehicles under
purchased operating leases.
Selling and administrative expenses for the second quarter and first six
months of 1998 decreased compared with the corresponding 1997 periods primarily
as a result of the divestiture of Chrysler's Car Rental Operations as well as
reduced advertising costs.
Interest expense for the second quarter and first six months of 1998
increased compared with the corresponding 1997 periods primarily as a result of
higher average debt levels at CFC, partially offset by lower average effective
cost of borrowings at CFC.
Chrysler's effective income tax rates were 37.4 percent and 37.2 percent in
the second quarter and first six months of 1998, respectively, compared with
40.4 percent and 39.9 percent in the second quarter and first six months of
1997, respectively. These decreases reflect ongoing income tax reduction
initiatives by Chrysler.
LIQUIDITY AND CAPITAL RESOURCES
Chrysler's consolidated combined cash, cash equivalents and marketable
securities totaled $10,389 million at June 30, 1998 (including $1,187 million
held by CFC), compared with $7,848 million at December 31, 1997 (including $788
million held by CFC). The increase in Chrysler's combined cash, cash equivalents
and marketable securities in the first six months of 1998 was primarily the
result of cash generated by operating activities and cash provided by a net
increase in total debt, partially offset by capital expenditures, net finance
receivables acquired and dividend payments.
During the first six months of 1998, Chrysler repurchased 5.3 million
shares of its common stock at a cost of $188 million. Further repurchases of its
common stock have been suspended as a result of the pending business combination
of Chrysler and Daimler-Benz Aktiengesellschaft ("Daimler-Benz") described in
the Proposed Business Combination section below.
At June 30, 1998, Chrysler (excluding CFC) had debt maturities totaling
$144 million through 2000. At June 30, 1998, Chrysler had a $2.6 billion
revolving credit agreement which expires in April 2002. There were no amounts
outstanding under this revolving credit agreement at June 30, 1998. Chrysler
believes that cash from operations and its cash position will be sufficient to
meet its capital expenditure, debt maturity, dividend payment and other funding
requirements.
Receivable sales continued to be a significant source of funding for CFC,
which realized $5.1 billion of net proceeds from the sale of automotive retail
receivables in the first six months of 1998 compared with $3.2 billion of net
proceeds in the first six months of 1997. In addition, securitization of
revolving wholesale account balances provided funding for CFC which aggregated
$4.4 billion and $6.8 billion at June 30, 1998 and 1997, respectively.
At June 30, 1998, CFC had contractual debt maturities of $4.7 billion for
the remainder of 1998 (including $3.3 billion of short-term notes), $3.4 billion
in 1999 and $3.6 billion in 2000. During the second quarter of 1998, CFC
replaced its existing $2 billion revolving credit agreement, which expired in
April 1998, with a new $2 billion revolving credit agreement expiring in April
1999. Additionally, CFC has a $6 billion revolving credit facility expiring in
April 2002. At June 30, 1998, $5 million was outstanding under these facilities.
CFC believes that cash provided by operations, receivable sales, access to term
debt markets and issuance of commercial paper will provide sufficient liquidity
to meet its debt maturity and other funding requirements.
9
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
OUTLOOK
The statements contained in this Outlook section are based on management's
current expectations. With the exception of the historical information contained
herein, the statements presented in this Outlook section are forward-looking
statements that involve numerous risks and uncertainties. Actual results may
differ materially.
Chrysler's average sales incentives per vehicle increased during 1998 as a
result of an increasingly competitive automotive environment, including the
continued unfavorable effects of changes in the Japanese yen to U.S. dollar
exchange rate. Chrysler expects to continue to face an increasingly competitive
automotive environment, which is likely to continue to limit vehicle pricing
flexibility in the near term. In addition, the weakness of the Japanese yen and
other Asian currencies against the U.S. dollar and the continued deterioration
in the Asian economies could result in substantial increases in imports from
Asia to the U.S. and Canada. The Asian economic difficulties could result in
more intense competition in the automotive industry and could have an
unfavorable effect on overall economic conditions in the U.S. and Canada, where
Chrysler's sales are concentrated.
In the second quarter of 1998, Chrysler began volume production of the
all-new Chrysler LHS and 300M sedans. Also, in the second quarter of 1998,
Chrysler ceased production of its current Jeep(R) Grand Cherokee and began the
changeover to its all-new Jeep Grand Cherokee. Volume production of the all-new
Jeep Grand Cherokee will begin in July 1998. Chrysler currently estimates that
this changeover will result in a decline in Jeep Grand Cherokee production in
1998 of approximately 50,000 units as compared to 1997 production.
Chrysler's worldwide vehicle production in the second quarter of 1998 was
811,472 units, an increase of 105,966 units or 15 percent, as compared with the
second quarter of 1997. Worldwide vehicle production for the third quarter of
1998 is expected to be approximately 631,300 units, an increase of 58,800 units
or 10 percent, as compared with the third quarter of 1997. Future expected
production levels are heavily dependent on Chrysler's ability to maintain its
competitive position, continued favorable economic conditions in the U.S. and
Canada, the avoidance of work stoppages by represented employees and the
successful launch of Chrysler's new products.
In the first six months of 1998, retail (including fleet) industry sales of
new cars and trucks in the U.S., on a Seasonally Adjusted Annual Rate basis,
were 16.0 million units. Chrysler projects that 1998 retail (including fleet)
industry sales for the U.S. will range from 15.2 million to 15.5 million
units. Retail (including fleet) industry sales in the second half of 1998 are
expected to be negatively impacted by the labor strike at General Motors
Corporation as well as the "pull-ahead" effect of unusually large sales
incentives in the second quarter of 1998. Actual levels of retail (including
fleet) industry sales will depend on, among other things, economic conditions
in the U.S. Accordingly, there can be no assurance that Chrysler's estimates
will be accurate.
In addition, Chrysler wishes to caution readers that several factors, as
well as those factors described elsewhere in this discussion or in other
Securities and Exchange Commission filings, in some cases have affected, and in
the future could affect, Chrysler's actual results and could cause Chrysler's
actual results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, Chrysler. Those factors include: government
regulations as they may affect Chrysler's ability to produce and sell the kinds
of vehicles that consumers demand, business conditions and growth in the
automotive industry and general economy; changes in gasoline and oil prices;
changes in consumer debt levels and interest rates; changes in consumer
preferences away from pickup trucks, sport-utility vehicles and minivans;
competitive factors, such as domestic and foreign rival car and truck offerings,
price pressures and sales incentives, and acceptance of new products; excess or
shortage of manufacturing capacity; risks and uncertainties associated with
Chrysler's expansion into international markets; and changes in foreign currency
exchange rates and the resulting impact on pricing strategies of major foreign
competitors. Additionally, several of Chrysler's competitors have larger
worldwide sales volumes and greater financial resources, which may, over time,
place Chrysler at a competitive disadvantage in responding to its competitors'
offerings, substantial changes in consumer preferences, government regulations,
or adverse economic conditions in the U.S. and Canada. Finally, the automotive
industry historically has been highly cyclical and the duration of these cycles
has been difficult to predict.
10
<PAGE> 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
PROPOSED BUSINESS COMBINATION
On May 7, 1998, Chrysler, Daimler-Benz and DaimlerChrysler
Aktiengesellschaft ("DaimlerChrysler") entered into a Business Combination
Agreement providing for (i) the merger of a newly created Delaware corporation
with and into Chrysler ("the Chrysler Merger"); (ii) an offer by
DaimlerChrysler to exchange one DaimlerChrysler ordinary share for each
Daimler-Benz ordinary share; and (iii) the merger of Daimler-Benz with and into
DaimlerChrysler. In the Chrysler merger, each share of outstanding Chrysler
common stock will be converted into the right to receive 0.6235 DaimlerChrysler
shares. As a result of these transactions, DaimlerChrysler will be owned by
the former shareholders of Chrysler and Daimler-Benz, and Chrysler will be a
wholly owned subsidiary of DaimlerChrysler.
On May 7, 1998, Chrysler entered into a Stockholder Agreement with Kirk
Kerkorian and Tracinda Corporation (together, "Tracinda"), the owner of
approximately 14 percent of the common stock of Chrysler, pursuant to which
Tracinda has agreed to vote its shares in favor of the transactions contemplated
by the Business Combination Agreement.
Also on May 7, 1998, Chrysler amended its Rights Agreement, dated as of
February 5, 1998, with First Chicago Trust Company of New York. The amendment
renders the Rights Agreement inapplicable to the transactions contemplated by
the Business Combination Agreement.
The transaction is expected to close later in 1998, subject to the
approval of Chrysler's and Daimler-Benz's shareholders, regulatory approvals
and the satisfaction of waiver of various other conditions as more fully
described in the Business Combination Agreement, including completion of the
exchange of at least 80 percent of the outstanding shares of Daimler-Benz on a
fully diluted basis for DaimlerChrysler shares. Chrysler's shareholders will
be asked to vote on the proposed business combination at a Special
Shareholder's Meeting to be held on September 18, 1998.
NEW ACCOUNTING STANDARDS
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This Statement revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. This Statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. This Statement is effective for
Chrysler's financial statements for the year ended December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This Statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. This Statement is
not expected to have a material impact on Chrysler's consolidated financial
statements. This Statement is effective for fiscal years beginning after June
15, 1999, with earlier adoption encouraged. Chrysler will adopt this accounting
standard as required by January 1, 2000.
REVIEW BY INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, Chrysler's independent public accountants, performed
a review of the financial statements for the three and six months ended June 30,
1998 and 1997 in accordance with the standards for such reviews established by
the American Institute of Certified Public Accountants. The review did not
constitute an audit, and accordingly, Deloitte & Touche LLP did not express an
opinion on the aforementioned data. Refer to the Independent Accountants' Report
included at Exhibit 15A.
11
<PAGE> 14
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously reported, on October 8, 1997 a jury awarded $12.5 million in
compensatory damages and $250 million in punitive damages against Chrysler in
"Jimenez vs. Chrysler Corporation", a case filed in U.S. District Court in South
Carolina. The complaint alleged that the liftgate latch striker of a 1985 Dodge
Caravan was defective and opened when the Caravan was struck by another vehicle
resulting in the ejection and death of an occupant. Chrysler has filed motions
challenging the verdict and the damage awards, and intends to pursue such
motions vigorously. A number of other complaints are pending against Chrysler
involving latches that were the subject of a service action for minivans built
before the 1996 model year. Where specified, damages in such complaints
(including jurisdictional minimums) aggregate approximately $100 million in
compensatory and $250 million in punitive damages as of June 30, 1998. Specified
damages represent amounts sought by plaintiffs and do not necessarily constitute
an accurate measure of Chrysler's ultimate cost to resolve these complaints.
Moreover, some of the complaints do not specify damages.
Three new purported class action lawsuits, in addition to the seven
purported class actions previously reported, allege that the paint applied to
all vehicles manufactured by Chrysler between 1982 and 1997 delaminates, peels
or chips as the result of defective paint, paint primer, or application
processes. One of the new cases is pending in the U.S. District Court for the
Northern District of California, one is pending in the Supreme Court, Queens
County, New York, and one is pending in the Court of Common Pleas, Philadelphia
County, Pennsylvania. Plaintiffs seek unspecified compensatory and punitive
damages, costs of repair or replacement, attorneys' fees and costs.
On June 19, 1998, the Wisconsin Supreme Court reversed a summary judgment
granted in favor of Chrysler in an action filed by the State of Wisconsin in
Waukesha County Circuit Court. The State alleges violations of state
environmental law in connection with the disposal of hazardous materials in the
late 1960's.
Two purported class action lawsuits were filed against Chrysler and its
directors on or about May 8,1998 alleging breach of fiduciary duties in
connection with the proposed business combination with Daimler-Benz
Aktiengesellschaft announced May 7, 1998. To date, Chrysler has not been served
with either lawsuit.
12
<PAGE> 15
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of Chrysler Corporation was held on May
21, 1998.
(c) The following matters were submitted to a vote at the meeting:
(1) the election of the following nominees as directors of Chrysler
Corporation. The vote with respect to each nominee was as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
- ------------------------------------------ ------------------ -------------
<S> <C> <C>
Lilyan H. Affinito 538,784,910 15,442,876
James D. Aljian 538,642,629 15,585,157
Robert E. Allen 537,829,329 16,398,457
Joseph A. Califano, Jr. 537,796,988 16,430,798
Robert J. Eaton 539,332,325 14,895,461
Earl G. Graves 538,911,805 15,315,981
Kent Kresa 539,397,371 14,830,415
Robert J. Lanigan 538,614,742 15,613,044
Robert A. Lutz 539,080,900 15,146,886
Peter A. Magowan 539,258,806 14,968,980
John B. Neff 539,222,924 15,004,862
Lynton R. Wilson 539,067,800 15,159,986
</TABLE>
(2) a recommendation of the Board of Directors that the stockholders
appoint the firm of Deloitte & Touche LLP as independent accountants
to audit the books, records and accounts of Chrysler Corporation for
the year 1998. The vote on this matter was as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ --------- --------- ---------
<S> <C> <C> <C>
552,102,962 943,190 1,181,634 -0-
</TABLE>
(3) a stockholder proposal related to cumulative voting in the election
of directors. The vote on this matter was as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
---------- ------------- ----------- -----------
<S> <C> <C> <C>
88,678,975 381,398,802 17,406,141 66,743,868
</TABLE>
(4) a stockholder proposal requesting that Chrysler Corporation endorse
the Coalition for Environmentally Responsible Economies ("CERES")
Principles for corporate environmental accountability. The vote on
this matter was as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
----------- ------------ ------------ ------------
<S> <C> <C> <C>
27,915,759 440,214,041 19,354,118 66,743,868
</TABLE>
(5) a stockholder proposal requesting that Chrysler Corporation obtain
shareholder consent/approval for political contributions in excess of
$10,000 annually to a political party. This proposal further requests
that Chrysler publish in its Annual Report to Shareholders a list of
political contributions for the previous 12 month period. The vote on
this matter was as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
---------- ------------ --------- -----------
<S> <C> <C> <C>
10,491,639 452,330,162 24,662,117 66,743,868
</TABLE>
13
<PAGE> 16
Item 5. OTHER INFORMATION
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF EARNINGS (unaudited)
For the Three and Six Months Ended June 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ -----------------------
1998 1997 1998 1997
--------- -------- --------- ------
<S> <C> <C> <C> <C>
Sales of manufactured products $ 15,695 $ 13,671 $ 31,410 $ 28,932
Equity in earnings of unconsolidated subsidiaries
and affiliates 191 176 373 309
Interest income and other revenues 255 206 456 407
----------- ----------- ----------- ----------
TOTAL REVENUES 16,141 14,053 32,239 29,648
----------- ----------- ----------- ----------
Costs, other than items below 12,401 11,197 24,643 23,063
Depreciation and special tools amortization 778 659 1,551 1,300
Selling and administrative expenses 978 1,016 2,002 2,015
Employee retirement benefits 308 304 617 626
Interest expense 74 66 152 129
----------- ----------- ----------- ----------
TOTAL EXPENSES 14,539 13,242 28,965 27,133
----------- ----------- ----------- ----------
EARNINGS BEFORE INCOME TAXES 1,602 811 3,274 2,515
Provision for income taxes 599 328 1,219 1,003
----------- ----------- ----------- ----------
NET EARNINGS $ 1,003 $ 483 $ 2,055 $ 1,512
=========== =========== =========== ==========
</TABLE>
This Supplemental Information does not present the results of operations of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information reflects the results of operations of Chrysler with its
investments in Chrysler Financial Corporation ("CFC") and short-term vehicle
rental subsidiaries (the "Car Rental Operations") accounted for on an equity
basis rather than as consolidated subsidiaries and, therefore, does not comply
with Statement of Financial Accounting Standards ("SFAS") No. 94, "Consolidation
of All Majority-Owned Subsidiaries." Because the operations of CFC and the Car
Rental Operations are different in nature than Chrysler's manufacturing
operations, management believes that this disaggregated financial data enhances
an understanding of the consolidated financial statements. In December 1997,
Chrysler completed an initial public offering of its common stock interest in
the Car Rental Operations.
14
<PAGE> 17
Item 5. OTHER INFORMATION - CONTINUED
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
BALANCE SHEET (unaudited)
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
------------- ---------------------------
June 30 Dec. 31 June 30
------------- ------------- -----------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 6,264 $ 4,533 $ 5,013
Marketable securities 2,980 2,542 2,027
------------ ------------- ------------
Total cash, cash equivalents and marketable securities 9,244 7,075 7,040
Accounts receivable - trade and other 1,134 936 1,103
Inventories 5,868 4,738 5,053
Prepaid employee benefits, taxes and other expenses 1,220 2,174 1,627
Property and equipment 16,017 15,923 14,429
Special tools 4,488 4,572 4,144
Investments in and advances to unconsolidated subsidiaries 3,610 3,405 3,669
Intangible assets 1,525 1,573 1,596
Deferred tax assets 1,690 1,977 1,727
Other noncurrent assets 5,501 5,474 5,930
------------- ------------- ------------
TOTAL ASSETS $ 50,297 $ 47,847 $ 46,318
============= ============= ============
LIABILITIES:
Accounts payable $ 8,966 $ 8,599 $ 8,410
Accrued liabilities and expenses 10,831 9,303 9,076
Short-term debt 363 378 357
Payments due within one year on long-term debt 42 19 533
Amounts due CFC 1,132 1,667 830
Long-term debt 2,273 2,258 1,766
Accrued noncurrent employee benefits 9,946 9,783 9,666
Other noncurrent liabilities 3,966 4,478 4,120
------------- ------------- ------------
TOTAL LIABILITIES 37,519 36,485 34,758
------------- ------------- ------------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized
20.0 shares; Series A Convertible Preferred Stock;
issued and outstanding: 1998 - 0.01 shares;
1997 - 0.02 and 0.02 shares, respectively (aggregate
liquidation preference 1998 - $4 million;
1997 - $8 million and $8 million, respectively) * * *
Common stock - $1 per share par value; authorized
1,000.0 shares; issued: 1998 - 823.5 shares; 1997 - 823.1
and 823.1 shares, respectively 824 823 823
Additional paid-in capital 5,219 5,231 5,169
Retained earnings 12,139 10,605 9,793
Treasury stock - at cost: 1998 - 176.8 shares;
1997 - 174.7 and 148.6 shares, respectively (5,404) (5,297) (4,225)
-------------- -------------- --------------
TOTAL SHAREHOLDERS' EQUITY 12,778 11,362 11,560
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,297 $ 47,847 $ 46,318
============= ============= ============
</TABLE>
* Less than $50 thousand
This Supplemental Information does not present the financial position of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information reflects the financial position of Chrysler with its
investments in CFC and the Car Rental Operations accounted for on an equity
basis rather than as consolidated subsidiaries and, therefore, does not comply
with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries." The
financial covenant contained in Chrysler's revolving credit facility is based on
this Supplemental Information. In addition, because the operations of CFC and
the Car Rental Operations are different in nature than Chrysler's manufacturing
operations, management believes that this disaggregated financial data enhances
an understanding of the consolidated financial statements. In December 1997,
Chrysler completed an initial public offering of its common stock interest in
the Car Rental Operations.
15
<PAGE> 18
Item 5. OTHER INFORMATION - CONTINUED
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
CONDENSED STATEMENT OF CASH FLOWS (unaudited)
For the Six Months Ended June 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,738 $ 2,697
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (551) (390)
Sales and maturities of marketable securities 654 481
Expenditures for property and equipment (1,423) (1,354)
Expenditures for special tools (603) (808)
Purchases of vehicle operating leases (45) (131)
Proceeds from sales of vehicles under purchased
operating leases 57 29
Other 96 98
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,815) (2,075)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (15) 11
Proceeds from long-term borrowings 6 1,088
Payments on long-term borrowings (11) (11)
Change in advances from CFC (535) 12
Repurchases of common stock (197) (1,007)
Dividends paid (519) (560)
Other 79 33
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (1,192) (434)
------------ ------------
Change in cash and cash equivalents 1,731 188
Cash and cash equivalents at beginning of period 4,533 4,825
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,264 $ 5,013
============ ============
</TABLE>
This Supplemental Information does not present the cash flows of Chrysler in
accordance with generally accepted accounting principles. This Supplemental
Information reflects the cash flows of Chrysler with its investments in CFC and
the Car Rental Operations accounted for on an equity basis rather than as
consolidated subsidiaries and, therefore, does not comply with SFAS No. 94,
"Consolidation of All Majority-Owned Subsidiaries." Because the operations of
CFC and the Car Rental Operations are different in nature than Chrysler's
manufacturing operations, management believes that this disaggregated financial
data enhances an understanding of the consolidated financial statements. In
December 1997, Chrysler completed an initial public offering of its common stock
interest in the Car Rental Operations.
16
<PAGE> 19
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed with this Report are listed in the Exhibit Index
which immediately precedes such exhibits.
(b) Reports on Form 8-K
A report on Form 8-K, dated May 7, 1998, was filed during the three
months ended June 30, 1998, reporting the Business Combination
Agreement between Chrysler, Daimler-Benz Aktiengesellschaft, and
DaimlerChrysler Aktiengesellschaft. This item was reported under Item
1 of such Form 8-K.
17
<PAGE> 20
CONFORMED
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHRYSLER CORPORATION
---------------------
(Registrant)
Date: July 13, 1998 By J. D. Donlon, III
----------------------- ----------------------
J. D. Donlon, III
Vice President and Controller
(Principal Accounting Officer)
18
<PAGE> 21
EXHIBIT INDEX
For Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 1998
EXHIBIT
10A Copy of Chrysler Corporation Stock Option Plan, as amended and
in effect on and after May 6, 1998. (Filed with this report).
10B Copy of Chrysler Corporation 1991 Stock Compensation Plan, as
amended and in effect on and after May 6, 1998. (Filed with
this report).
10C Copy of Chrysler Corporation Incentive Compensation Plan, as
amended and in effect on and after May 6, 1998. (Filed with
with this report).
10D Copy of Chrysler Corporation Discretionary Incentive
Compensation Plan, as amended and in effect on and after May
6, 1998. (Filed with this report).
10E Copy of Long-Term Incentive Compensation Plan, as amended and
in effect on and after May 6, 1998. (Filed with this report).
15A Letter, dated July 10, 1998, re unaudited interim information.
(Filed with this report.)
15B Letter, dated July 10, 1998, re unaudited interim information.
(Filed with this report.)
27 Financial Data Schedule for the six months ended June 30,
1998. (Filed with this report.)
19
<PAGE> 1
EXHIBIT 10A
CHRYSLER CORPORATION
STOCK OPTION PLAN
(as amended through May 6, 1998)
1. PURPOSE
The purpose of the Stock Option Plan is to enable Chrysler Corporation
(below called the Corporation) to be thoroughly competitive in encouraging
salaried officers and key employees and nonemployee Directors who are
responsible for the Corporation's future growth and success to remain in its
service and to attract others to it.
2. AMOUNT OF STOCK SUBJECT TO THIS PLAN
The total number of shares of Common Stock of the Corporation that may be
sold pursuant to options granted under this Plan shall not exceed (a) 1,500,000
shares as constituted at the time of the annual meeting of stockholders on April
19, 1966 reduced by the number of shares as to which options have been granted
and exercised since that time under any other stock option plan of the
Corporation, plus (b) 1,500,000 shares as constituted at the time of the annual
meeting of stockholders on May 3, 1977, plus (c) 3,500,000 shares as constituted
at the time of the annual meeting of stockholders on June 3, 1982 (all before
the three-for-two split of the Common Stock that became effective on February
20, 1986), plus (d) 7,500,000 shares as constituted at the time of the annual
meeting of stockholders on May 14, 1986. The shares sold under this Plan may be
either authorized and unissued shares or issued shares reacquired by the
Corporation at any time, as the Board of Directors from time to time may
determine. Unless and until the Board of Directors shall determine to purchase
shares in the market for the purpose of this Plan or to use treasury shares, the
shares sold under this Plan shall be authorized and unissued shares reserved for
that purpose. If any options granted under this Plan shall terminate, lapse or
expire for any reason without having been exercised in full, the shares not
purchased under the options shall be available again for the purposes of this
Plan; provided, however, that this sentence shall not apply to any shares as to
which an option is forfeited upon the exercise of a Stock Appreciation Right or
a Limited Stock Appreciation Right, as defined below.
3. ELIGIBILITY AND PARTICIPATION
Nonemployee Directors of the Corporation and salaried officers and key
employees of the Corporation, its subsidiaries and its Related Entities (as
defined below) who are responsible for or contribute to the management, growth
or profitability of the business of the Corporation, its subsidiaries or its
Related Entities shall be eligible to be granted options, and any former
employees of the Corporation, its subsidiaries and its Related Entities shall be
eligible to be granted Reload Options (as defined in paragraph 4 below) with
<PAGE> 2
respect to stock options granted to such former employees; provided, however,
with respect to an employee of a Related Entity, that such person was an
employee of the Corporation, a subsidiary or, if originally an employee of the
Corporation 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 Corporation or a subsidiary. The term
"Related Entity" when used herein shall mean any corporation, joint venture or
other entity, domestic or foreign, other than a subsidiary, in which the
Corporation owns, directly or indirectly, a substantial equity interest. The
term "Nonemployee Director" means a Director who is not an employee of the
Corporation, any of its subsidiaries or any Related Entity.
4. GRANTING OF OPTIONS
The Board of Directors of the Corporation shall appoint a Stock Option
Committee (below called the Committee), consisting 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 applicable standard
for administrators under that or any similar rule 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 granted
to it in this and other paragraphs of this Plan; provided, however, that the
Board of Directors shall have the right to exercise any and all such power and
authority and to perform each and every function of the Committee whenever, in
the sole discretion of the Board, this seems expedient.
Subject to the express provisions of this Plan, the Committee shall have
authority in its discretion from time to time, (a) to determine the salaried
officers and key employees of the Corporation, its subsidiaries and its Related
Entities to receive options, the times when they shall receive them, the number
of shares to be subject to each option, and the option price, (b) to determine
the terms and provisions of the option agreements applicable to options granted
under this Plan, to construe such terms and provisions, and to correct any
defect or supply any omission or reconcile any inconsistency in any option
agreement, and (c) to prescribe, amend, and rescind rules and regulations
relating to this Plan. The determination of the Committee with respect to such
matters shall be conclusive. The Committee may permit a person to whom an option
has been granted and whose employment with the Corporation or any subsidiary is
terminated in connection with the acceptance of employment, at the Corporation's
or any subsidiary's request, with a Related Entity, to exercise his or her
options through their stated terms, provided the option holder maintains his or
her employment with such Related Entity through the date of exercise of the
option.
2
<PAGE> 3
Unless otherwise expressly provided by the Committee in any specific
instance, the action of the Committee naming a salaried officer or key employee
of the Corporation, any subsidiary or any Related Entity to receive an option
pursuant to this Plan (or any of the appreciation rights permitted under
paragraph 6 of this Plan), determining the number of shares to be subject to the
option (or such appreciation rights), and setting the option price of the shares
subject to the option (or such appreciation rights) shall constitute the
granting of the option (or such appreciation rights), and the date when the
Committee shall take the action shall be the date of granting the option (or
such appreciation rights).
The Committee shall designate each option granted to a salaried officer or
key employee of the Corporation, any subsidiary or any Related Entity under this
Plan as either an Incentive Stock Option or a Nonqualified Stock Option. An
Incentive Stock Option shall be subject to all of the requirements of this Plan,
including those specified in paragraph 5 of this Plan. A Nonqualified Stock
Option shall be subject to all of the requirements of this Plan, except those
specified in paragraph 5 of this Plan.
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
the person to whom an option is or was granted under this Plan (which may
include a former salaried officer or key employee of the Corporation, any
subsidiary or any Related Entity) shall be granted a Nonqualified Stock Option
(a "Reload Option") in the event such person exercises all or a part of a stock
option (an "Original Option") by surrendering in accordance with paragraph 6 of
this Plan already owned shares of unrestricted Common Stock in full or partial
payment of the option price under such Original Option, subject to the
availability of shares of stock under this 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 (as defined below) 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 paragraph 5, as the Committee in
its sole discretion shall specify at or after the time of grant of such Reload
Option. A Reload Option shall contain such other terms and conditions, which may
include a restriction on the transferability of the shares of stock received
upon exercise of the Original Option representing at least the after-tax profit
received upon exercise of the Original Option, as the Committee in its sole
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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. The term "Fair Market Value" when used herein
shall mean, as of any given date, the mean of the high and low trading price of
the Common Stock of the Corporation 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.
5. INCENTIVE STOCK OPTIONS
An option designated by the Committee as an Incentive Stock Option is
intended to qualify as an "incentive stock option" within the meaning of
Subsection (b) of Section 422(A) of the Internal Revenue Code, and shall, in
addition to all other requirements of this Plan, be subject to the requirements
of this paragraph 5. An Incentive Stock Option may not be exercised by a person
while there is "outstanding", within the meaning of Section 422(A)(c)(7) of the
Internal Revenue Code or any amendment thereof in effect at the relevant time,
any Incentive Stock Option which was granted before the granting of such option,
to such person to purchase stock of the Corporation. An Incentive Stock Option
may not be granted to a person who at the time the option is granted owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Corporation, unless the option price of the shares of Common Stock
for which the option is granted to such person is not less than 110% of the Fair
Market Value of such stock at the time the option is granted and such option by
its terms is not exercisable after the expiration of five years from the date
such option is granted. The aggregate Fair Market Value, determined as of the
time the option is granted, of shares of Common Stock as to which any person may
be granted Incentive Stock Options in any calendar year shall not exceed
$100,000 plus any unused limit carryover to such year. In applying such calendar
year limitation, (a) the term "unused limit carryover" shall mean one-half of
the amount by which $100,000 exceeds the aggregate Fair Market Value, determined
as of the time the option is granted, of shares of Common Stock as to which the
person was granted options in any calendar year after 1980, (b) the amount of
options granted during a calendar year to a person shall be treated as first
using up the $100,000 limitation for that year, (c) to the extent that the
aggregate Fair Market Value, determined as of the time the option is granted, of
shares of Common Stock as to which options are granted to a person in any
calendar year, exceeds $100,000, the excess shall be treated as using up unused
limit carryovers to such year in the order of the calendar years in which the
carryovers arose, and (d) the amount of the unused limit carryover from any
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calendar year which may be taken into account in any succeeding calendar year
shall be the amount of such carryover reduced by the amount of such carryover
which was used in prior calendar years; provided, however, that no unused limit
carryover may be carried over except to the three calendar years succeeding the
year in which it arose.
6. OPTION PRICE, PAYMENT AND APPRECIATION DISTRIBUTION
The option price of the shares of Common Stock subject to each option
granted to a salaried officer or key employee of the Corporation, any subsidiary
or any Related Entity pursuant to this Plan shall be set by the Committee and,
except as otherwise provided in paragraph 5 of this Plan, shall not be less than
100% of the Fair Market Value on the date of the granting of the option, as
determined by the Committee. Except as otherwise provided in this paragraph 6,
the option price shall be paid in full upon exercise of the option, in cash or
shares of Common Stock. The proceeds of sale of stock subject to the options are
to be added to the general funds of the Corporation and used for its corporate
purposes.
In connection with the payment of any federal, state or local taxes of any
kind required by law to be withheld with respect to any option, award or other
right under this Plan, the person to whom such option, award or other right is
granted may elect to have such tax withholding obligation satisfied, in whole or
in part, by (i) authorizing the Corporation to withhold from the shares of
Common Stock to be issued upon the exercise or vesting of such option, award or
right a number of shares of Common Stock with an aggregate Fair Market Value
that would satisfy the withholding amount due, or (ii) transferring to the
Corporation shares of Common Stock owned by that person with an aggregate Fair
Market Value that would satisfy the withholding amount due.
The person to whom an option is granted under this Plan may, at the
discretion of the Committee, be granted at the time the option is granted, the
right (below called a Stock Appreciation Right) to elect as an alternative means
of exercising the option, to forfeit his option with respect to a number of
shares up to the Maximum Number of Shares, as defined below, in which case he
shall receive in cash or shares of Common Stock or any combination thereof, at
the sole discretion of the Committee, with respect to those shares as to which
he elects to forfeit his option, the Stock Appreciation, as defined below.
The person to whom an option is granted under this Plan may, at the
discretion of the Committee, be granted, at the time the option is granted, the
right (below called an Additional Appreciation Right) to receive at the time the
option is exercised, in cash or shares of Common Stock or any combination
thereof, at the sole discretion of the Committee, an amount equal to (a) the
number of shares he then purchased, multiplied by (b) the Stock Appreciation on
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an equal number of shares; provided, however, that nonemployee Directors may not
be granted Additional Appreciation Rights.
The person to whom an option is granted under this Plan may, at the
discretion of the Committee, be granted at the time the option is granted (or,
in the case of a Nonqualified Stock Option, at any time after such option has
been granted, or in the case of an Incentive Stock Option, at any time after
such option has been granted and the holder thereof has requested that he be
granted the appreciation right provided for in this subparagraph and consents to
any conversion of such option into a Nonqualified Stock Option as a result of
such grant), the right (below called a Limited Stock Appreciation Right) to
elect during the sixty day period following a Change in Control, as defined
below, as an alternative means of exercising the option, to forfeit his option
with respect to a number of shares up to the total number of shares subject
thereto, in which case he shall receive in cash with respect to those shares as
to which he elects to forfeit his option, the Change in Control Stock
Appreciation, as defined below.
Any shares as to which an option is forfeited through the exercise of a
Stock Appreciation Right or a Limited Stock Appreciation Right shall no longer
be subject to the option or the related Stock Appreciation Right or Limited
Stock Appreciation Right and shall not be available for granting further options
under this Plan.
For purposes of this paragraph 6, (a) "Maximum Number of Shares" shall mean
(i) if the option is a Nonqualified Stock Option and the Committee has directed
that the Stock Appreciation shall be paid all in cash, the total number of
shares that the holder then could have purchased under the option, or (ii) if
the option is a Nonqualified Stock Option and the Committee has directed that
the Stock Appreciation shall be paid all in shares of Common Stock or in a
combination of cash and shares of Common Stock, or if the option is an Incentive
Stock Option, the lesser of (A) the number of shares he then purchased or (B)
the remaining number of shares that he then could have purchased under the
option, and (b) "Stock Appreciation" with respect to any shares of Common Stock
shall mean an amount equal to the difference between the option price of such
shares and the Fair Market Value of such shares on the date the option is
exercised.
For purposes of this Plan, "Change in Control" shall mean a Change in
Control of the Corporation, which shall be deemed to have occurred:
(a) if any Person, as defined below, is or becomes the Beneficial
Owner, as defined below, of securities of the Corporation representing 20%
or more of the combined voting power of the Corporation's then outstanding
securities (unless the event causing the 20% threshold to be crossed is an
acquisition of securities directly from the Corporation);
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(b) if 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 the
Corporation to effect a transaction described in clauses (a), (c) or (d)
of this Change in Control definition) whose election or nomination for
election was approved by a vote of at least two-thirds of the Directors
then 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 of
Directors;
(c) upon the approval by the stockholders of the Corporation of a
merger or consolidation of the Corporation with any other corporation
(other than a merger or consolidation which would result in the voting
securities of the Corporation 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 Corporation
or such surviving entity held by a trustee or other fiduciary pursuant to
any employee benefit plan of the Corporation or such surviving entity or
of any subsidiary of the Corporation or such surviving entity, at least
80% of the combined voting power of the securities of the Corporation or
such surviving entity outstanding immediately after such merger or
consolidation) if, and only if, such merger or consolidation is ultimately
consummated; or
(d) if the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or an agreement for the sale
or disposition by the Corporation of all or substantially all the
Corporation's assets.
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 (a) the Corporation, any subsidiary of the Corporation
or any other Person controlled by the Corporation, (b) any trustee or other
fiduciary holding securities under any employee benefit plan of the Corporation
or of any subsidiary of the Corporation, or (c) a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially the same
proportions as their ownership of securities of the Corporation.
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" 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);
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provided, however, that: (a) 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 (i) 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 (ii) 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
(i) or clause (ii) 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 (b) 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.
For purposes of this paragraph 6, "Change in Control Stock Appreciation"
with respect to any share of Common Stock shall mean an amount equal to the
excess, if any, of
(a) the higher of (i) the Market Value of such share on the date the
option is exercised or (ii) (A) in the case of transactions described in
clauses (a) or (c) of the Change in Control definition, the highest per
share price paid (below called the Highest Price) for shares of Common
Stock of the Corporation in the transaction constituting the Change in
Control, (B) in the case of a transaction described in clause (b) of the
Change in Control definition which occurs in connection with a transaction
described in clauses (a), (c) or (d) of the Change in Control definition,
the Highest Price, (C) in the case of a transaction described in clause (b)
of the Change in Control definition which does not occur in connection with
a transaction described in clauses (a), (c) or (d) of the Change in Control
definition, the average of the daily closing prices per share of Common
Stock of the Corporation 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 (d) of the Change in Control definition,
the equivalent of the Highest Price as determined by the Committee, over
(b) the option price of such share, provided, however, that with
respect to a Limited Stock Appreciation Right associated with an option
which is an Incentive Stock Option immediately prior to the exercise of
such Limited Stock Appreciation Right, the Change in Control Stock
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Appreciation thereon shall not exceed the maximum amount which will permit
such option to continue to qualify as an Incentive Stock Option.
7. PERIOD OF OPTION AND CERTAIN LIMITATIONS ON THE RIGHT TO EXERCISE
The person to whom an option is granted under this Plan (below called the
Option Holder) must remain in the continuous employ of the Corporation, any
subsidiary or any Related Entity of the Corporation for twelve consecutive
months from the date the option is granted before he can exercise any part of
the option, except that such requirement shall not apply to the exercise of
options, Stock Appreciation Rights, Additional Appreciation Rights or Limited
Stock Appreciation Rights following a Change in Control and except as provided
in paragraphs 8, 9 and 10 of this Plan. Thereafter,
(a) on and after the first anniversary of the date of granting the
option and before the second anniversary, he may buy not more than 40% of
the number of shares covered by the option,
(b) on and after the second anniversary and before the third
anniversary, he may buy not more than 70% thereof, and
(c) on and after the third anniversary and before the expiration of
the term of the option, which shall be not more than ten years from the
date of granting the option, he may buy all or from time to time any part
thereof
(the provisions of the foregoing clauses (a), (b) and (c) being hereinafter
called the Normal Exercise Provisions); provided, however, that
(x) the Committee shall have authority in its discretion to determine
that an option shall be exercisable under provisions other than the Normal
Exercise Provisions, so long as such other provisions do not at any time
permit the Option Holder to purchase a greater percentage of the shares
subject to the option than the Option Holder could purchase at such time
under the Normal Exercise Provisions, and in connection with any such
determination the Committee
(i) may retain the discretion to subsequently change any such other
provisions to the Normal Exercise Provisions or to other provisions not
more favorable than the Normal Exercise Provisions, and
(ii) may alter the application of paragraphs 8 and 9 of this Plan
with respect to any of the types of termination of employment referred
to therein but only during the period that any such other provisions
determined or changed pursuant to this proviso are in effect,
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(y) except as otherwise determined pursuant to proviso (x) above, no
options may be exercised unless the Option Holder has been in the employ of
the Corporation, a subsidiary or a Related Entity continuously from the
date of granting the option or his employment was terminated for one of the
reasons referred to in paragraphs 8 and 9 of this Plan, and
(z) upon the occurrence of a Change in Control, all options, Stock
Appreciation Rights and Additional Appreciation Rights outstanding on the
date of such Change in Control shall become immediately and fully
exercisable.
In no case may an option be exercised for a fraction of a share.
8. TERMINATION OF EMPLOYMENT
All the rights of an Option Holder under his option shall lapse if his
employment with the Corporation, any subsidiary or any Related Entity is
terminated for any reason other than those referred to in this paragraph 8 or in
paragraph 9 of this Plan.
If the employment of an Option Holder with the Corporation, any subsidiary
or any Related Entity is terminated (a) by reason of retirement or permanent
total disability, or (b) at or after age 55 under circumstances which the
Committee, in its discretion, deems equivalent to retirement, and in either case
he has been in the employ of the Corporation, any subsidiary or any Related
Entity continuously from the date of granting the option until the termination
of his employment, the Option Holder may exercise the option (and any associated
Stock Appreciation Right, Additional Appreciation Right or Limited Stock
Appreciation Right) after such termination of employment at any time within the
five year period commencing on the date of termination of his employment, but
not beyond the term of his option, and only to the extent that he would on the
date of exercise have been entitled under paragraph 7 of this Plan to exercise
the option (or any associated Stock Appreciation Right, Additional Appreciation
Right or Limited Stock Appreciation Right) if he had continued to be employed by
the Corporation, such subsidiary or such Related Entity.
If the employment of an Option Holder with the Corporation or any
subsidiary is terminated by the Corporation or such subsidiary under mutually
satisfactory conditions, or if an Option Holder's employment with a Related
Entity is terminated under conditions mutually satisfactory to such Related
Entity and the Option Holder, and he has been in the employ of the Corporation,
any subsidiary or any Related Entity continuously from the date of granting the
option until the termination of his employment, the Committee or its designee,
in its discretion, may permit the Option Holder to exercise the option (and any
associated Stock Appreciation Right, Additional Appreciation Right or Limited
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Stock Appreciation Right) after such termination of employment at any time
within the one year period commencing on the date of termination of his
employment, but not beyond the term of his option, and only to the extent that
he would on the date of exercise have been entitled under paragraph 7 of this
Plan to exercise the option (or any associated Stock Appreciation Right,
Additional Appreciation Right or Limited Stock Appreciation Right) if he had
continued to be employed by the Corporation, such subsidiary or such Related
Entity. The Committee may delegate to an officer of the Corporation the
discretionary authority provided under this Section 8 to permit an Option
Holder to exercise a Stock Option following termination of employment. Such
delegation shall be in writing, shall designate the corporate officer by office
title, shall continue in effect with respect to any individual thereafter
elected to such office until revoked by the Committee, and shall be limited in
scope to Option Holders who were not officers of the Corporation at the time of
termination. All decisions made by such designee shall be final and binding on
the Option Holder.
Notwithstanding the above, the exercise of any option after termination of
employment shall be subject to satisfaction of the conditions precedent that the
Option Holder neither, (a) takes other employment or renders services to others
without the written consent of the Corporation, nor (b) conducts himself in a
manner adversely affecting the Corporation.
Notwithstanding the foregoing provisions of this paragraph 8 (including,
without limitation, the immediately preceding subparagraph of this paragraph 8),
if the employment of an Option Holder is terminated by the Corporation, any
subsidiary or any Related Entity for any reason within the two year period
immediately following a Change in Control, and he has been in the employ of the
Corporation, any subsidiary or any Related Entity continuously from the date of
granting the option until the termination of his employment, the Option Holder
shall be permitted to exercise the option (and any associated Stock Appreciation
Right, Additional Appreciation Right or Limited Stock Appreciation Right) after
such termination of employment at any time within the three month period
commencing on the date of termination of his employment, but not beyond the term
of his option, and only to the extent that he would on the date of exercise have
been entitled under paragraph 7 of this Plan to exercise the option (or any
related Stock Appreciation Right, Additional Appreciation Right or Limited Stock
Appreciation Right) if he had continued to be employed by the Corporation.
Options granted under this Plan shall not be affected by any change of
employment so long as the Option Holder continues to be an employee of the
Corporation, any subsidiary or any Related Entity. The option agreements may
contain such provisions as the Committee shall approve regarding the effect of
approved leaves of absence. Nothing in this Plan or in any option granted under
it shall confer any right to continue in the employ of the Corporation, any
subsidiary or any Related Entity, or interfere in any way with the right of the
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Corporation, any subsidiary or any Related Entity, to terminate any employment
at any time.
9. DEATH OF OPTION HOLDER
If (a) the employment of an Option Holder terminates by reason of death,
(b) an Option Holder dies within the five year period following termination of
employment (i) by reason of retirement or permanent total disability, or (ii) at
or after age 55 under circumstances which the Committee, in its discretion,
deems equivalent to retirement, (c) an Option Holder dies within the one year
period following termination of employment under mutually satisfactory
conditions and the Committee has determined that he may exercise the option
after such termination of employment, or (d) an Option Holder dies within the
three month period following termination of employment for any reason within the
two year period immediately following a Change in Control and if in any such
case he has been in the employ of either the Corporation, any subsidiary or any
Related Entity continuously from the date of granting the option until the
termination of his employment, the option theretofore granted to him may be
exercised by the legal representative of the deceased Option Holder at any time
within a period of one year after his death, but not beyond the term of the
option, and only to the extent that he was entitled to exercise the option on
the date of his death, plus, a pro rata portion of the additional number of
shares, if any, he would have become entitled to purchase under the option on
the anniversary of the date of granting the option that next follows the date of
his death (such pro rata portion to be 2 1/2% of the full number of shares for
which the option was granted for each full month during the twelve month period
preceding such anniversary that the Option Holder was alive).
10. GRANTING OF OPTIONS TO NONEMPLOYEE DIRECTORS
Each person who is not an employee of the Corporation or any of its
subsidiaries and who on and after May 14, 1986 is elected or reelected as a
Director of the Corporation at any annual or special meeting of stockholders of
the Corporation, shall as of the date of each such election or reelection
automatically be granted an option to purchase 1,000 shares of Common Stock (as
constituted at the time of the annual meeting of stockholders on May 14, 1986)
for an option price equal to 100% of Market Value on such date (and,
notwithstanding the discretion of the Committee under paragraph 6 of this Plan,
each such option granted on or after May 14, 1986 shall automatically have
associated with it a Stock Appreciation Right, the Stock Appreciation on which
shall be payable all in cash, and each such option granted on or after June 7,
1990 shall automatically have associated with it 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 option (and the associated Stock Appreciation Right and Limited Stock
Appreciation Right), and the date when the stockholders shall take such action
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shall be the date of granting the option (and the associated Stock Appreciation
Right and Limited Stock Appreciation Right). All such options shall be
designated as Nonqualified Stock Options and, except as otherwise expressly
provided in this Plan, shall be subject to the same terms and provisions as are
then in effect with respect to granting of Nonqualified Stock Options to
salaried officers and key employees of the Corporation. Subject to the
foregoing, all provisions of this Plan not inconsistent with the foregoing shall
apply to options granted to nonemployee Directors, except that with respect to
an option (and the associated Stock Appreciation Right and Limited Stock
Appreciation Right) granted to a nonemployee Director, (a) any requirement for
employment with the Corporation, any subsidiary or any Related Entity shall be
deemed to be a requirement for service as a Director, (b) any requirement of
continuous employment shall be deemed to be a requirement of continuous service
as a Director, and (c) any reference to termination of employment shall be
deemed to mean termination of service as a Director. The maximum number of
shares as to which options may be granted to any nonemployee Director under this
Plan, as in effect through April 17, 1992, shall be 6,000 shares (as constituted
at the time of the annual meeting of stockholders on May 14, 1986).
11. NONTRANSFERABILITY OF OPTIONS; DEFERRAL OF PROCEEDS
No option granted under this Plan shall be transferable by the Option
Holder otherwise than by will or the laws of descent and distribution, and any
option may be exercised during the lifetime of the Option Holder only by him.
The Option Holder may elect, on or after the date of grant of an option
hereunder, to defer receipt of all or any portion of the proceeds, whether in
the form of cash or shares of Common Stock, deliverable to such Option Holder
upon the exercise of an option or Stock Appreciation Right hereunder set forth,
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
of Directors or the Committee in its sole discretion.
12. ADJUSTMENT FOR CHANGES IN CAPITALIZATION
Notwithstanding any other provision of this Plan, in the event of any
change in the outstanding Common Stock of the Corporation by reason of a stock
dividend, recapitalization, merger, consolidation, split-up, combination or
exchange of shares, and the like, the aggregate number and class of shares
available under this Plan and the number and class of shares subject to each
outstanding option and the option prices shall be appropriately adjusted by the
Board of Directors, whose determination shall be conclusive.
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13. INTERPRETATION
The Board of Directors 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 of
Directors 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 of Directors may rely and act upon the opinion of counsel (who
may be of counsel to the Corporation) on the question of law.
This Plan is intended to satisfy the conditions of Rule 16b-3 under the
Exchange Act, and all interpretations of this 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. In interpreting and applying the
provisions of this Plan any option granted as an Incentive Stock Option pursuant
to this 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 Subsection (b) of
Section 422(A) of the Internal Revenue Code.
Notwithstanding any provision to the contrary in this Plan or in any
Incentive Stock Option granted pursuant to this Plan, if any change in law or
any regulation or ruling of the Internal Revenue Service shall have the effect
of disqualifying any Incentive Stock Option granted under this Plan as an
"incentive stock option" within the meaning of Subsection (b) of Section 422(A)
of the Internal Revenue Code, the option granted shall nevertheless continue to
be outstanding as and shall be deemed to be a Nonqualified Stock Option under
this Plan, and in such event paragraph 5 of this Plan shall cease to be
operative with respect to such option.
14. AMENDMENT AND TERMINATION
The Board of Directors of the Corporation or the Committee may at any time
terminate this Plan or make such changes in it and additions to it as it shall
deem advisable, including but not limited to, provisions changing the percentage
of shares as to which an option that so provides must be exercised relative to
shares forfeited in connection with the receipt of the appreciation on the
forfeited shares; provided, however, that except as provided in paragraph 12
hereof, the Board of Directors may not, without further approval by the holders
of a majority of the shares of Common Stock of the Corporation then outstanding
and entitled to vote, increase the maximum number of shares as to which options
may be granted under this Plan or reduce the minimum option price or extend the
period during which options may be granted or exercised or change the class of
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persons eligible to receive options under this Plan. Unless terminated earlier
by the Board of Directors, this Plan shall terminate on April 17, 1992, and no
options under it shall be granted thereafter; provided, however, that options
granted prior to April 17, 1992 may extend beyond that date; and provided,
further, however, that Reload Options may be granted prior to and on and after
April 17, 1992, but no Reload Option shall be exercisable after any date which
is later than the date on which a Stock Option granted prior to April 17, 1992
could be exercised. No termination or amendment of this Plan may, without the
written consent of the Option Holder of an option then existing, terminate his
option or materially and adversely affect his rights under the Option.
15. EFFECTIVE PERIOD
The effective date of this Plan was originally January 13, 1972, subject,
however, to approval of this Plan by the vote of the holders of a majority of
the shares of Common Stock of the Corporation outstanding and entitled to vote,
which approval was obtained at the annual meeting of the stockholders on April
18, 1972. This Plan was readopted by the Board of Directors following approval
by the vote of the holders of a majority of the shares of Common Stock of the
Corporation outstanding and entitled to vote at the annual meeting of the
stockholders on June 3, 1982. Subject to the express provisions of this Plan,
options may be granted under this Plan at any time and from time to time prior
to termination of this Plan.
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EXHIBIT 10B
CHRYSLER CORPORATION
1991 STOCK COMPENSATION PLAN
EFFECTIVE MAY 16, 1991
AS AMENDED THROUGH May 6, 1998
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.
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(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.
(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
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<PAGE> 3
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.
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<PAGE> 4
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 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,
1997 and ending December 31, 2001 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
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<PAGE> 5
(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 eighty-six (86) million shares as constituted at the
time of the annual meeting of stockholders on May 15, 1997, inclusive of the 56
million shares previously reserved for issuance under the Plan. Such shares of
Stock may consist, in whole or in part, of authorized and unissued shares of
Stock or issued shares of Stock reacquired by the Company at any time, as the
Board may determine.
To the extent that (a) a Stock Option expires or is otherwise terminated,
cancelled or surrendered without being exercised (including, without limitation,
in connection with the grant of a replacement option) or (b) any Restricted
Stock Unit Award or Performance Stock Unit Award granted hereunder expires or is
otherwise terminated or is cancelled, the shares of Stock underlying such Stock
Option or subject to such Restricted Stock Unit Award or Performance Stock Unit
Award shall again be available for issuance in connection with future Awards
under the Plan.
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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
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<PAGE> 7
Company or a Subsidiary, or another Related Entity immediately prior to becoming
employed by such Related Entity and accepted employment with such Related Entity
at the request of the Company or a Subsidiary. The Participants under the Plan
shall be selected, from time to time, by the Committee, in its sole discretion,
from among those Eligible Employees.
SECTION 5. STOCK OPTIONS.
(a) Grant and Exercise. Stock Options may be granted either alone or in
addition to other Awards granted under the Plan. Any Stock Option granted under
the Plan shall be in such form as the Committee may, from time to time,
approve, and the terms and conditions of Stock Option Awards need not be the
same with respect to each Optionee. Optionees shall enter into a Stock Option
agreement ("Stock Option Agreement") with the Company, in such form as the
Committee shall determine, which agreement shall set forth, among other things,
the option price of the option, the term of the option and conditions regarding
exercisability of the option granted thereunder.
(i) Nature of Options. The Committee shall have the authority to grant
any Participant either Incentive Stock Options, Nonqualified Stock Options
or both types of Stock Options (in each case with or without Stock
Appreciation Rights or Limited Stock Appreciation Rights), except that the
Committee shall not grant any Incentive Stock Options to an employee of a
Related Entity. Any Stock Option which 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
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<PAGE> 8
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 Option representing at least the after-tax profit received upon
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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
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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 or its designee, 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 or its designee 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 or its designee in its sole discretion shall
determine at or after the time of grant). If an Optionee's employment with
the Company or any Subsidiary is terminated in connection with such
Optionee's acceptance of employment, at the request of the Company or a
Subsidiary, with a Related Entity (or an Optionee's employment with one
Related Entity is terminated in connection with such Optionee's acceptance
of employment, at the request of the Company or a Subsidiary, with another
Related Entity), the Committee or its designee 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 the Stock Option (or such shorter period as the Committee
or its designee 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
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applies for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Nonqualified Stock Option. The Committee may
delegate to an officer of the Company the discretionary authority provided
under this Section 5(b)(v) to permit an Optionee to exercise a Stock
Option following termination of employment. Such delegation shall be in
writing, shall designate the corporate officer by office title, shall
continue in effect with respect to any individual thereafter elected to
such office until revoked by the Committee, and shall be limited in scope
to Optionees who were not officers of the Company at the time of
termination. All decisions made by such designee shall be final and
binding on the Optionee.
(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
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terminate.
(ix) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the shares of Stock with respect to which Incentive
Stock Options granted under the Plan and all other option plans of the
Company or any Subsidiary become exercisable for the first time by an
Optionee during any calendar year shall not exceed $100,000; provided,
however, that if the aggregate Fair Market Value (so determined) of the
shares of Stock covered by such options exceeds $100,000 during any year in
which they become exercisable, such options with a Fair Market Value in
excess of $100,000 will be Nonqualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted either
in conjunction with all or part of any Stock Option granted under the Plan
("Related Stock Appreciation Rights") or alone ("Freestanding Stock
Appreciation Rights") and, in either case, in addition to other Awards granted
under the Plan. Participants shall enter into a Stock Appreciation Rights
agreement with the Company if requested by the Committee, in such form as the
Committee shall determine.
(i) Time of Grant. Related Stock Appreciation Rights related to a
Nonqualified Stock Option may be granted either at or after the time of the
grant of such Nonqualified Stock Option. Related Stock 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
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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
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Right.
The term of each Freestanding Stock Appreciation Right shall be fixed by
the Committee, but no Freestanding Stock Appreciation Right shall be
exercisable more than ten years after the date such right is granted.
(ii) Transferability of Stock Appreciation Rights. Stock Appreciation
Rights shall be transferable only when and to the extent that a Stock
Option would be transferable under Section 5(b) (iii) of the Plan.
(iii) Termination of Employment. In the event of the termination of
employment of an Optionee holding a Related Stock Appreciation Right, such
right shall be exercisable to the same extent that the related Stock Option
is exercisable after such termination.
In the event of the termination of employment of the holder of a
Freestanding Stock Appreciation Right, such right shall be exercisable to
the same extent that a Stock Option with the same terms and conditions as
such Freestanding Stock Appreciation Right would have been exercisable in
the event of the termination of employment of the holder of such Stock
Option.
SECTION 7. LIMITED STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Limited Stock Appreciation Rights may be granted
either in conjunction with all or part of any Stock Option granted under the
Plan ("Related Limited Stock Appreciation Rights") or alone ("Freestanding
Limited Stock Appreciation Rights") and, in either case, in addition to other
Awards granted under the Plan. Participants shall enter into a Limited Stock
Appreciation Rights agreement with the Company if requested by the Committee, in
such form as the Committee shall determine.
(i) Time of Grant. Related Limited Stock Appreciation Rights related
to a Nonqualified Stock Option may be granted either at or after the time
of the grant of such Nonqualified Stock Option. Related Limited Stock
Appreciation Rights related to an Incentive Stock Option may be granted
only at the time of the grant of such Incentive Stock Option. Freestanding
Limited Stock Appreciation Rights may be granted at any time.
(ii) Exercisability. Limited Stock Appreciation Rights can only be
exercised within the sixty-day period following a Change in Control.
(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,
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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
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
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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
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be delivered to the Participant.
Any such Restricted Stock Unit Award or Performance Stock Unit Award
(including any Dividend Equivalents credited in respect thereof) that shall not
have become vested at the end of the applicable restricted period or the period
given for the attainment of performance objectives shall expire, terminate and
be cancelled and the Participant shall not thereafter have any rights with
respect to the Restricted Stock Units or Performance Stock Units (or any
Dividend Equivalents credited in respect thereof) covered thereby.
SECTION 9. GRANT OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND LIMITED STOCK
APPRECIATION RIGHTS TO NONEMPLOYEE DIRECTORS.
Each Nonemployee Director who is elected or reelected as a Director on or
after May 16, 1991 at any annual or special meeting of stockholders of the
Company, shall as of the date of each such election or reelection automatically
be granted an Award consisting of (a) a Stock Option to purchase 1,500 shares of
Stock (as constituted at the time of the annual meeting of stockholders on May
16, 1991) for an option price equal to 100% of the Fair Market Value of the
Stock on the date of such election or reelection and, (b) with respect to such
number of shares of Stock, (i) a Related Stock Appreciation Right, the stock
appreciation on which shall be payable all in cash, and (ii) a Limited Stock
Appreciation Right, subject, in each case, to applicable law. The action of the
stockholders in electing or reelecting a Nonemployee Director shall constitute
the granting of the Award and the date on which the stockholders shall take such
action shall be the date of granting of such Award. All such Stock Options shall
be designated as Nonqualified Stock Options. 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
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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 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
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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.
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SECTION 11. PAYMENT OF ANNUAL RETAINER FEE TO NONEMPLOYEE DIRECTORS.
(a) Fees Payable in Stock. Effective with respect to services rendered
after the Company's 1996 Annual Meeting of Stockholders, the annual retainer fee
payable to a Nonemployee Director for service as a Director, for service as a
member of a committee of the Board, and for service as chairperson of such a
committee during a given year (collectively, the "Annual Retainer Fee"), will be
paid in shares of the Company's Common Stock pursuant to the formula set forth
below. In the case of a Nonemployee Director first elected to the Board
following any annual meeting of shareholders, the portion of the Annual Retainer
Fee otherwise payable from the date of such election to the next annual meeting
will be paid in Stock. Fees payable to a Nonemployee Director for attendance at
meetings of the Board or any of its committees will not be paid in Common Stock.
(b) Calculation of Shares Issuable. The number of whole shares of Stock
issuable in respect of a Nonemployee Director's Annual Retainer Fee for a given
year will be equal to the remainder of (i) the number of shares of Stock
determined by dividing the aggregate dollar amount of the Annual Retainer Fee by
the Fair Market Value of a share of Stock on the date of the annual meeting of
shareholders in such year (or, in the case of a Director first elected to the
Board following the annual meeting of shareholders for a given year, at the date
of such election) minus (ii) the greatest number of whole shares of Stock equal
to, but not in excess of, each Nonemployee Director's hypothetical income and
employment tax liability with respect to the Annual Retainer Fee payable
assuming that each Nonemployee Director pays Federal income tax at the highest
marginal rate in effect at such time, State and local income taxes at the
highest marginal rate in effect at such time for the locale in which the
Nonemployee Director resides and Medicare taxes at the rate in effect at such
time under Section 3101(b) of the Code. Any fractional shares resulting from the
above calculation will be settled in cash.
SECTION 12. AMENDMENT AND TERMINATION.
The Board 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;
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(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;
(iii) (A) any Restricted Stock Unit Award and any Performance Stock
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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:
(i) if 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) if 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) upon the approval by the stockholders of the Company of 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
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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)
if, and only if, such merger or consolidation is ultimately consummated;
or
(iv) if the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets.
(c) For purposes of the definition of Change in Control, "Person"
shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act as supplemented by Section 13(d)(3) of the Exchange Act;
provided, however, that Person shall not include (i) the Company, any
Subsidiary or any other Person controlled by the Company, (ii) any trustee
or other fiduciary holding securities under any employee benefit plan of
the Company or of any Subsidiary, or (iii) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of securities of the Company.
(d) For purposes of the definition of Change in Control, a Person
shall be deemed the "Beneficial Owner" of any securities which such Person,
directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" (within the meaning of Rule 13d-3 under the Exchange
Act) of, including pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that: (i) a Person shall
not be deemed the Beneficial Owner of any security as a result of an
agreement, arrangement or understanding to vote such security (x) arising
solely from a revocable proxy or consent given in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
Exchange Act and the applicable rules and regulations thereunder or (y)
made in connection with, or to otherwise participate in, a proxy or consent
solicitation made, or to be made, pursuant to, and in accordance with, the
applicable provisions of the Exchange Act and the applicable rules and
regulations thereunder; in either case described in clause (x) or clause
(y) above, whether or not such agreement, arrangement or understanding is
also then reportable by such Person on Schedule 13D under the Exchange Act
(or any comparable or successor report); and (ii) a Person engaged in
business as an underwriter of securities shall not be deemed to be the
Beneficial Owner of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
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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.
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All certificates for shares of Stock delivered under the Plan and, to
the extent applicable, all evidences of ownership with respect to Dividend
Equivalents delivered under the Plan, shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed or quotation
system on which the Stock is admitted for trading and any applicable federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required, and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee of the Company, any Subsidiary or any Related
Entity any right to continued employment with the Company, any Subsidiary or any
Related Entity, as the case may be, nor shall it interfere in any way with the
right of the Company, any Subsidiary or any Related Entity to terminate the
employment of any of its employees at any time.
(c) Each Participant shall be deemed to have been granted any Award on the
date the Committee took action to grant such Award under the Plan or such later
date as the Committee in its sole discretion shall determine at the time such
grant is authorized; provided, however, that a Reload Option shall be deemed to
have been granted on the date on which is exercised the Original Option in
respect of the exercise of which such Reload Option is granted or such later
date as the Committee in its sole discretion shall determine prior to the date
on which such exercise occurs.
(d) Unless the Committee otherwise determines, each Participant shall, no
later than the date as of which the value of an Award first becomes includible
in the gross income of the Participant for federal income tax purposes, pay to
the Company, or make arrangements satisfactory to the Committee regarding
payment of, any federal, state or local taxes of any kind required by law to be
withheld with respect to the Award. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the 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
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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 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
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<PAGE> 27
or similar plan or arrangement enacted by the Board or the Committee in its sole
discretion.
(h) Nothing in this Plan shall be interpreted to preclude the Corporation
from granting Awards under, or paying compensation outside the parameters of,
the Plan including, without limitation, base salaries, awards under any other
plan of the Corporation or its Subsidiaries (whether or not approved by
stockholders), incentive compensation (whether or not based on the attainment of
pre-established performance objectives) or retention or other special payments,
that is not deductible for Federal, State or local income tax purposes by reason
of Section 162(m) of the Code or otherwise, should the Board or any committee
thereof (including the Committee), whichever is applicable, determine that such
action is in the best interests of the Corporation and its stockholders.
(i) This Plan shall not impose any obligations on the Company to retain any
Nonemployee Director as a Director nor shall it impose any obligation on the
part of any Nonemployee Director to remain as a Director of the Company,
provided that each Nonemployee Director, by accepting each award under the Plan,
shall represent to the Company that it is his or her good faith intention to
continue to serve as a Director of the Company until its next annual meeting of
stockholders and that he or she agrees to do so unless a change in circumstances
arises.
SECTION 16. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by the affirmative
vote of the holders of a majority of the shares of Stock of the Company present
in person or by proxy at the Annual Meeting of Stockholders on May 16, 1991.
SECTION 17. TERM OF PLAN.
No Award shall be granted under the Plan on or after the tenth anniversary
of the date the Plan is approved by the Company's stockholders, provided,
however, that Awards granted prior to such tenth anniversary may extend beyond
that date; and provided, further, however, that Reload Options may be granted on
or after such tenth anniversary, but no Reload Option shall be exercisable after
any date which is later than the date on which a Stock Option granted prior to
such tenth anniversary could be exercised.
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EXHIBIT 10C
CHRYSLER CORPORATION
INCENTIVE COMPENSATION PLAN
Effective January 1, 1970
(As Amended Through May 6, 1998)
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. Each member of the
Committee shall be a "Non-Employee Director" (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> 2
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 a given
fiscal year shall not exceed a dollar amount equal to 0.15% of the
Corporation's consolidated net earnings for such year as determined in
accordance with the Stockholders' Resolution; 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. CORPORATE PERFORMANCE GOALS
The Committee may establish one or more corporate performance goals
("Performance Goals") each year relating 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. A Performance
Goal may consist of such criteria, terms and conditions as the Committee may
designate. The Committee shall have the discretion to add additional goals and
to modify any objectives or performance levels designated in relation to
previously established goals. If an Award for a given year is intended to be
qualified performance-based compensation under Section 162(m) of the Code, then
the related Performance Goal and Award levels shall be established, as described
below, no later than the 90th day of such year.
7. AWARDS
At the time it establishes a Performance Goal, the Committee shall
determine that the attainment of specified levels of performance in respect of
such Performance Goal shall correspond to specified Award levels, subject to
reduction as described below. Awards shall be expressed as a percentage of a
Participant's base salary (or the average base salary or midpoint of the salary
range of a class of Employees) in effect at the time the Performance Goal is
established. In no event, however, may an Award exceed the maximum amount
referenced in Section 5(b) above. An Employee who first becomes eligible for
an Award, and is selected as a Participant, after the beginning of a given year
may receive an Award established on a pro rata basis for the number of months
he or she is eligible during such year.
8. CORPORATE PERFORMANCE EVALUATION
The Committee shall confirm the performance level attained by the
Corporation in respect of the Performance Goal established for a given year and
the corresponding Awards to be paid in respect of such performance; provided,
however, that the Committee, in its sole discretion, may reduce the amount of
any Award otherwise payable in respect of such performance.
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<PAGE> 3
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.
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<PAGE> 4
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;
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<PAGE> 5
(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:
(i) if 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) if 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) upon the approval by the stockholders of Chrysler of 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), if, and only if, such merger or
consolidation is ultimately consummated; or
(iv) if 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
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<PAGE> 6
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
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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.
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<PAGE> 1
EXHIBIT 10D
May 6, 1998
CHRYSLER CORPORATION
DISCRETIONARY INCENTIVE COMPENSATION PLAN
1. PURPOSE
The purpose of the Chrysler Corporation Discretionary Incentive
Compensation Plan (the "Plan") is to encourage the continued and energetic
efforts of officers and key salaried employees ("Employees") of Chrysler
Corporation ("Chrysler") and its subsidiaries (Chrysler and its subsidiaries are
referred to collectively as 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 amended and as it may be further amended from time to time
(the "Stockholders' Resolution").
2. INCENTIVE COMPENSATION COMMITTEE
The Board of Directors of Chrysler (the "Board") will appoint not less than
three Directors, none of whom will 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 (the "Committee") to
administer this Plan. All of the members of the Committee will 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. The Committee will 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 will authorize and approve the amount to be
provided out of the earnings of the Corporation for such fiscal year for
purposes of this Plan, the Chrysler Corporation Incentive Compensation Plan, and
the Chrysler Corporation Long-Term Incentive Plan (collectively, the "Plans"),
not to exceed the amount permitted by the Stockholders' Resolution, and will
authorize and direct the proper officers of the Corporation to set aside the
amount and to add to it (a) any amount authorized and approved by the Board for
any prior fiscal year but not previously awarded and (b) any amount awarded for
any prior fiscal year that has been forfeited. The sum of those amounts (or such
part thereof as the Board may determine should be made available for awards for
any fiscal year) will be the Incentive Compensation Fund for that fiscal year
(the "Fund"). Any part of the Fund that the Board determines shall not be made
available for awards for any fiscal year will be carried forward and may be
awarded in a subsequent fiscal year.
4. PARTICIPANTS
The committee, in its sole and absolute discretion, has full power to
determine by salary, salary grade, salary band, classification, or otherwise,
the Employees (including those who have joined the Corporation or retired or
died or have been granted a leave of absence or were laid off during the year)
who may participate in the Plan in any year ("Participants").
5. AWARDS
Each year the Committee may award under this Plan to each Participant such
share of the Fund as the Committee shall determine (below called an Award). The
Award to a Participant may be based on an
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assessment of the Participant's individual performance during the year, or on
corporate performance, or both, as the Committee may determine.
The Committee shall have full and final authority in performing these
duties, but shall report to the Board the share of the Fund awarded under this
Plan.
6. 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 or she 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.
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 the 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.
7. 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 Stockholder's Resolution, with
cash in place of fractional shares.
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8. 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.
9. COSTS
All costs of administering the Plan shall be borne by the Corporation and
shall not be charged against the Fund.
10. PAYMENTS UPON A CHANGE IN CONTROL
Notwithstanding any other provisions hereof, if a "Change in Control" (as
defined in paragraph 10(B) 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 under this Plan,
(b) all voluntary deferrals made by a Participant under this Plan (except
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), and (c) all unpaid
Awards made (including any made pursuant to paragraph 10(A) hereof) for any
completed fiscal year which preceded the Change in Control.
A. MAKING AWARDS FOR COMPLETED YEARS. Upon the occurrence of a "Potential
Change in Control" (as defined in paragraph 10(C) 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.
B. CHANGE IN CONTROL DEFINITION. "Change in Control" shall mean a change in
control of Chrysler, which shall be deemed to have occurred:
(i) if 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 in
an acquisition of securities directly from Chrysler); or
(ii) if 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) upon the approval by the stockholders of Chrysler of 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) if, and only if, such merger or consolidation is
ultimately consummated; or
(iv) if 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.
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For purposes of the definition of Change in Control in this paragraph
10(B): (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 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.
C. 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 be 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 10(B) 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 10(B) 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.
11. 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.
12. EFFECTIVE PERIOD
The Plan shall become effective, upon approval by the Board, beginning
December 1, 1994, and shall remain in effect until terminated as provided in
Paragraph 16.
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13. 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.
5
<PAGE> 1
EXHIBIT 10E
CHRYSLER CORPORATION
LONG-TERM INCENTIVE PLAN
EFFECTIVE JUNE 11, 1987
(AS AMENDED THROUGH MAY 6, 1998)
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 150% 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> 2
"Change in Control" -- means a change in control of Chrysler, which shall
be deemed to have occurred:
(a) if 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) if 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) upon the approval by the stockholders of Chrysler of 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) if, and only if, such merger or consolidation is
ultimately consummated; or
(d) if 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
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<PAGE> 3
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 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 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. 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
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<PAGE> 4
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. If a Performance Share
award for a given Performance Cycle is intended to be qualified
performance-based compensation under Section 162(m) of the Internal Revenue
Code, then the related Performance Goal shall be established no later than the
90th day of the first year of such 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 150% -- 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 150% 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 150%) 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
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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> 6
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> 7
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> 1
EXHIBIT 15A
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT ACCOUNTANTS' REPORT
Shareholders and Board of Directors
Chrysler Corporation
Auburn Hills, Michigan
We have reviewed the accompanying condensed consolidated balance sheet of
Chrysler Corporation and consolidated subsidiaries as of June 30, 1998 and 1997
and the related condensed consolidated statements of earnings for the
three-month and six-month periods and of cash flows for the six-month periods
ended June 30, 1998 and 1997. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Chrysler Corporation and
consolidated subsidiaries as of December 31, 1997, and the related consolidated
statements of earnings and cash flows for the year then ended (not presented
herein); and in our report dated January 22, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1997 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
July 10, 1998
<PAGE> 1
EXHIBIT 15B
[DELOITTE & TOUCHE LLP LETTERHEAD]
July 10, 1998
Chrysler Corporation
1000 Chrysler Drive
Auburn Hills, Michigan
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Chrysler Corporation and consolidated subsidiaries for the
three-month and six-month periods ended June 30, 1998 and 1997, as indicated in
our report dated July 10, 1998. Because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, is
incorporated by reference in the following Registration Statements:
<TABLE>
<CAPTION>
REGISTRATION
FORM STATEMENT NO. DESCRIPTION
<S> <C> <C>
S-8 33-5588 Chrysler Salaried Employees' Savings Plan
S-8 33-6117 Chrysler Corporation Stock Option Plan
S-3 33-13739 Chrysler Corporation Common Stock
deliverable to Selling stockholder named
therein
S-3 33-15716 Chrysler Corporation Common Stock
deliverable to Selling stockholders named
therein
S-8 33-15544 Chrysler Corporation Common Stock
(Post-Effective deliverable pursuant to the 1972 and 1980
Amendment No. 1) American Motors Corporation Stock Option
Plans
S-3 33-15849 Chrysler Corporation Debt Securities
S-3 33-22233 Chrysler Corporation Common Stock
deliverable to Selling stockholders named
therein
S-3 33-39688 Chrysler Corporation Common Stock
deliverable to Selling stockholders named
therein
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
REGISTRATION
FORM STATEMENT NO. DESCRIPTION
<S> <C> <C>
S-8 33-47986 Chrysler Corporation 1991 Stock
Compensation Plan
S-3 33-59294 Chrysler Corporation Common Stock
deliverable to Selling stockholder named
therein
S-8 33-55817 Chrysler Corporation 1991 Stock
Compensation Plan
S-3 33-21589 Chrysler Corporation Debt Securities
S-4 333-21849 Chrysler Corporation Debt Securities
</TABLE>
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,999
<SECURITIES> 3,390
<RECEIVABLES> 1,674
<ALLOWANCES> 79
<INVENTORY> 5,868
<CURRENT-ASSETS> 0
<PP&E> 28,641
<DEPRECIATION> 9,621
<TOTAL-ASSETS> 67,801
<CURRENT-LIABILITIES> 0
<BONDS> 11,796
0
0<F2>
<COMMON> 824
<OTHER-SE> 11,954
<TOTAL-LIABILITY-AND-EQUITY> 67,801
<SALES> 31,895
<TOTAL-REVENUES> 33,801
<CGS> 25,359<F1>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 596
<INCOME-PRETAX> 3,274
<INCOME-TAX> 1,219
<INCOME-CONTINUING> 2,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,055
<EPS-PRIMARY> 3.18
<EPS-DILUTED> 3.12
<FN>
<F1>Excludes depreciation and special tools amortization and employee retirement
benefits
<F2>Less than $50 thousand
</FN>
</TABLE>
