<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHRYSLER CORPORATION
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(Name of Registrant as Specified in Its Charter)
CHRYSLER CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[CHRYSLER CORPORATION LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DATE: THURSDAY, MAY 21, 1998
TIME: 9:00 A.M., LOCAL TIME
PLACE: THE INVERNESS HOTEL
200 INVERNESS DRIVE WEST,
ENGLEWOOD, COLORADO
April 17, 1998
Dear Stockholder:
You are cordially invited to attend the annual meeting to:
- - elect directors,
- - appoint independent public accountants,
- - vote on three stockholder proposals, if they are presented at the meeting, and
- - conduct any other business properly brought before the meeting.
YOUR VOTE IS IMPORTANT. PLEASE VOTE NOW BY PROXY EVEN IF YOU PLAN TO ATTEND
THE MEETING. FOR YOUR CONVENIENCE YOU MAY VOTE BY TOLL-FREE TELEPHONE, OVER THE
INTERNET, OR BY SIGNING, DATING, AND MAILING YOUR PROXY CARD IN THE ENCLOSED
ENVELOPE.
This Proxy Statement and the 1997 Annual Report to Shareholders are
available on the Internet at our Investor Relations web site @
http://www.investor-rel.com/chrysler.
I look forward to seeing you at the meeting.
Sincerely,
Robert J. Eaton
Chairman and Chief Executive Officer
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Information About the Meeting............................... 1
Quorum.................................................... 1
Vote Required............................................. 1
Proxy Voting.............................................. 1
Admission................................................. 2
Item No. 1 -- Election of Directors......................... 3
Board of Directors.......................................... 7
Meetings and Committees................................... 7
Compensation.............................................. 8
Security Ownership of Management............................ 10
Report on Executive Compensation............................ 11
Performance Graph........................................... 17
Compensation of Executive Officers.......................... 18
Summary Compensation Table................................ 18
Option Grants in Last Fiscal Year Table................... 19
Aggregated Option Exercises/Values........................ 20
Long-Term Incentive Plans -- Awards in Last Fiscal Year
Table.................................................. 20
Pension Plan Table........................................ 21
Employment and Termination Arrangements................... 22
Security Ownership of Certain Beneficial Owners............. 25
Item No. 2 -- Appointment of Independent Public
Accountants............................................... 26
Item No. 3 -- Stockholder Proposal.......................... 26
Item No. 4 -- Stockholder Proposal.......................... 27
Item No. 5 -- Stockholder Proposal.......................... 30
Other Matters............................................... 32
Section 16(a) Beneficial Ownership Reporting Compliance..... 32
1998 Stockholder Proposals.................................. 32
General Matters............................................. 33
</TABLE>
DEFINED TERMS
"Chrysler" or the "Company" means Chrysler Corporation, a Delaware corporation.
"Common Stock" or "Shares" means Chrysler common stock, par value $1.00 per
share.
"1991 Plan" means the Chrysler Corporation 1991 Stock Compensation Plan.
"Performance Shares" means Shares awarded under the 1991 Plan that may be earned
out based on Chrysler's performance in relation to shareholder approved goals.
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Your vote is important. Please vote by toll-free telephone or by Internet as
explained on your proxy card, or sign, date, and mail your proxy card in the
enclosed envelope.
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<PAGE> 4
PROXY STATEMENT
INFORMATION ABOUT THE MEETING
Chrysler's Board of Directors solicits your proxy for use at the 1998
annual meeting. Chrysler will begin mailing this Proxy Statement and the
accompanying proxy card on or about April 17, 1998.
QUORUM
The record date for the meeting is March 23, 1998. On that date 646,392,281
Shares were outstanding. A majority of those Shares (a quorum) must be present,
in person or by proxy, to conduct business at the meeting. Abstentions and
broker non-votes are counted as present in determining whether there is a
quorum.
VOTE REQUIRED
You are entitled to one vote for each Share you held of record at the close
of business on the record date. Directors are elected by a plurality vote, which
means that if there are more nominees than positions to be filled, the nominees
for whom the most affirmative votes are cast will be elected. Each other matter
voted on at the meeting will be approved if a majority of the votes cast are in
favor of such matter. Abstentions and broker non-votes are not votes cast and
are not counted in determining whether a nominee is elected or a matter
approved. Inspectors of election appointed by the Board will tabulate the votes
cast.
PROXY VOTING
You can authorize the individuals named on your proxy card to vote your
Shares by calling a toll-free telephone number, by using the Internet, or by
signing, dating and mailing your proxy card. Your Shares will then be voted at
the meeting as you specify or, if you do not specify a choice, as recommended by
the Board. You may revoke your proxy by voting in person at the meeting, or by
submitting a written revocation or a later dated proxy (including a proxy by
telephone or Internet) that is received by Chrysler before the meeting.
Telephone and Internet voting provide convenient, cost effective alternatives to
returning your card by mail. (If you hold Shares through a broker or other
custodian, please check the voting form used by that firm to see if it offers
telephone or Internet voting.)
<PAGE> 5
Your proxy card represents the Shares you hold of record and, if you are a
participant, any whole Shares in your dividend reinvestment plan account. If you
are a Chrysler employee, the card also serves as a voting instruction to the
trustee for any Shares held for you under an employee benefit plan. Plan
trustees will vote Shares for which no instructions are received in the same
proportion as the Shares for which instructions are received, excluding any
Shares the trustees have been instructed not to vote.
ADMISSION
Attendance is limited to shareholders entitled to vote at the meeting, or
their authorized representatives. Admission tickets will be issued upon written
request addressed to: Chrysler Corporation, 1000 Chrysler Drive, Auburn Hills,
MI 48326-2766, Attention: Investor Relations, CIMS 485-06-07. If you hold Shares
through a broker or other custodian, please include a copy of your voting form
or other proof of ownership.
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<PAGE> 6
ITEM NO. 1
ELECTION OF DIRECTORS
A full board of twelve directors will be elected to serve until the next
annual meeting or until their successors are elected and qualified. Unless you
specify otherwise, your proxy will be voted for the election of the nominees
named below, each of whom is now a Director. If any nominee becomes unavailable,
your proxy will be voted for a new nominee designated by the Board unless the
Board reduces the number of directors to be elected.
NOMINEES
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<TABLE>
<S> <C> <C>
LILYAN H. AFFINITO
LILYAN H. AFFINITO
PHOTO
Age: 66
1st Elected: 1982
Experience: Maxxam Group Inc. -- former Vice Chairman of the Board
(1987-1991), President and Chief Operating Officer
(1976-1987)
Directorships: Caterpillar, Inc., Jostens, Inc., Kmart Corporation
Committees: Pension Fund Review, Public and Legal Affairs
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JAMES D. ALJIAN
JAMES D. ALJIAN
PHOTO
Age: 65
1st Elected: 1996
Experience: Tracinda Corporation -- Executive (1987-present)
Directorships: MGM Grand, Inc., Metro-Goldwyn-Mayer, Inc.
Affiliations: American Institute of Certified Public Accountants,
California Society of Certified Public Accountants, Lincy
Foundation
Committees: Audit, Pension Fund Review
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ROBERT E. ALLEN
ROBERT E. ALLEN
PHOTO Age: 63
1st Elected: 1994
Experience: AT&T -- retired Chairman of the Board and Chief Executive
Officer (1988-97)
Directorships: Bristol-Myers Squibb Co., Pepsico, Inc.
Affiliations: The Mayo Foundation and Wabash College
Committees: Corporate Governance, Management Resources and Compensation
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</TABLE>
3
<PAGE> 7
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<TABLE>
<C> <S> <C>
JOSEPH A. CALIFANO, JR.
JOSEPH A. CALIFANO
PHOTO
Age: 66
1st Elected: 1981
Experience: The National Center on Addiction and Substance Abuse at
Columbia University (CASA) -- Chairman & President since
1993, Senior Partner of the law firm Dewey Ballantine
(1983-1992), Secretary of Health, Education and Welfare
(1977-1979), author of nine books
Directorships: Authentic Fitness Corporation, Automatic Data Processing
Inc., Health Plan Services, Inc., Kmart Corporation,
Travelers Group Inc., Warnaco Inc.
Affiliations: New York University, The Twentieth Century Fund, The Urban
Institute, The American Ditchley Foundation, The New York
and Presbyterian Hospital, The Institute for Social and
Economic Policy in the Middle East at Harvard University,
Columbia University Medical School & School of Public Health
(Adjunct Professor)
Committees: Audit, Public and Legal Affairs
- ------------------------------------------------------------------------------------------------------
ROBERT J. EATON
ROBERT J. EATON
PHOTO
Age: 58
1st Elected: 1992
Experience: Chrysler Corporation -- Chairman of the Board and Chief
Executive Officer since 1993 and Vice Chairman & Chief
Operating Officer (1992), General Motors Europe -- President
(1988-1992), General Motors Corporation -- Vice President
(1982-1992)
Directorships: International Paper Company
Affiliations: President's Advisory Committee on Trade Policy and
Negotiations, Economic Strategy Institute, U.S./Japan
Business Council, The Business Council, The Business
Roundtable, The Council on Competitiveness, Joint
Auto/Supplier Government Action Council, American Automobile
Manufacturers Association, Society of Automotive Engineers,
National Academy of Engineering, Engineering Society of
Detroit, Detroit Renaissance
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EARL G. GRAVES
EARL G. GRAVES
PHOTO Age: 63
1st Elected: 1990
Experience: Earl G. Graves Ltd. -- Chairman and Chief Executive Officer,
BLACK ENTERPRISE magazine -- Publisher, Egoli Partners, L.P.
(South African Pepsi-Cola franchisee) -- General Partner,
Pepsi-Cola of Washington, D.C. -- Chairman & Chief Executive
Officer
Directorships: AMR Corporation, Aetna Life and Casualty Company, Federated
Department Stores, Rohm and Haas Corporation
Affiliations: A trustee of Howard University and of the American Museum of
Natural History and Planetarium, Executive Board of the
National Office of the Boy Scouts of America, New York State
Urban Development Corporation, New American Schools
Development Corporation
Committees: Audit, Public and Legal Affairs
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</TABLE>
4
<PAGE> 8
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
KENT KRESA
KENT KRESA
PHOTO Age: 60
1st Elected: 1989
Experience: Northrop Grumman Corporation -- Chairman of the Board,
President and Chief Executive Officer since 1990
Directorships: Atlantic Richfield Company
Affiliations: National Academy of Engineering, Los Angeles World Affairs
Counsel, California Institute of Technology, Aerospace
Industries Association, Los Angeles Music Center, American
Institute of Aeronautics and Astronautics, The John Tracy
Clinic for the hearing-impaired, W. M. Keck Foundation
Committees: Audit, Pension Fund Review
- ------------------------------------------------------------------------------------------------------
ROBERT J. LANIGAN
ROBERT J. LANIGAN
PHOTO
Age: 69
1st Elected: 1984
Experience: Owens-Illinois, Inc. -- retired Chairman of the Board and
Chief Executive Officer (1984-1990), Chairman through
October 1991
Directorships: Owens-Illinois, Inc., Barry-Wehmiller Co., The Dun &
Bradstreet Corporation, Sonat Inc., Transocean Offshore
Inc., Cognizant Corporation
Committees: Corporate Governance, Management Resources and Compensation
- ------------------------------------------------------------------------------------------------------
ROBERT A. LUTZ
ROBERT A. LUTZ
PHOTO Age: 66
1st Elected: 1986
Experience: Chrysler Corporation -- Vice Chairman since 1997, President
& Chief Operating Officer (1993-1996), President
(1991-1993), Executive Vice President (1986-1991), Ford
Motor Company -- Director (1982-1986), various executive
positions (1974-1986)
Directorships: ASCOM Holdings, A.G., Silicon Graphics, Inc., Northrop
Grumman Corporation
Affiliations: National Association of Manufacturers, American Highway
Users Alliance, Advisory Board for the University of
California, Berkeley, School of Business Administration,
National Advisory Council of the University of Michigan
School of Engineering, United States Marine Corps University
Foundation
- ------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 9
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<TABLE>
<C> <S> <C>
PETER A. MAGOWAN
PETER A. MAGOWAN
PHOTO
Age: 56
1st Elected: 1986
Experience: Safeway, Inc. -- Chairman of the Board since 1980 (Mr.
Magowan will retire as Chairman in May, but continue as
director), Chairman and Chief Executive Officer (1980-1993),
San Francisco Giants -- President and Managing General
Partner
Directorships: Caterpillar, Inc.
Committees: Corporate Governance, Management Resources and Compensation
- -----------------------------------------------------------------------------------------------------
JOHN B. NEFF
JOHN B. NEFF
PHOTO Age: 66
1st Elected: 1996
Experience: Wellington Management Company -- various positions from 1963
until retirement in 1995, including Portfolio Manager of
Windsor and Gemini II Funds, Managing Partner, Senior Vice
President, and member of the Executive Committee
Directorships: General Accident Insurance, Greenwich Associates
Affiliations: Chairman of the Investment Board, University of Pennsylvania
and of Case Western Reserve University, Association for
Investment Management and Research, Chartered Financial
Analysts, Financial Analysts of Philadelphia
Committees: Corporate Governance, Pension Fund Review
- ------------------------------------------------------------------------------------------------------
LYNTON R. WILSON
LYNTON R. WILSON
PHOTO
Age: 58
1st Elected: 1994
Experience: BCE, Inc. -- Chairman and Chief Executive Officer since 1993
Directorships: Chrysler Canada Ltd., Bell Canada, Bell Canada International
Inc., BCE Mobile Communications Inc., Bell-Northern Research
Ltd., Northern Telecom Limited, CAE Inc., Tate & Lyle PLC,
Teleglobe Inc.
Affiliations: Team Canada Inc Advisory Board, Business Council on National
Issues, International Council, J. P. Morgan, Trilateral
Commission, C.D. Howe Institute, Canadian Olympic Foundation
Committees: Public and Legal Affairs, Management Resources and
Compensation
- ------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 10
BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
The Board held 15 meetings in 1997. Each director attended 75% or more of
the total of all meetings held by the Board and the committees on which he or
she served. The Board's standing committees, comprised solely of nonemployee
directors, provide oversight in key areas as described below. Committee
memberships are reviewed annually.
The Audit Committee recommends the appointment of independent public
accountants and reviews their fees for audit and non-audit services and the
scope and results of audits performed by them and by the Company's internal
auditors. It also reviews Chrysler's system of internal accounting controls, the
effect of significant accounting policies on its financial reporting, the
proposed form of its financial statements, and the results of internal audits
and compliance programs. The Committee held six meetings in 1997.
The Corporate Governance Committee evaluates the organization, function and
performance of the Board and its committees, the qualifications for director
nominees, and matters involving corporate governance and shareholder relations.
The Committee does not solicit director nominations but will consider
recommendations from shareholders that are sent to the Secretary of the Company.
Under Chrysler's By-Laws, nominations must be received no less than 60 nor more
than 90 days before the annual meeting. (If the meeting date is not disclosed at
least 70 days before the meeting, then such recommendations will be considered
if received not later than the 10th day following the day on which the meeting
date is disclosed.) The Committee held seven meetings in 1997.
The Incentive Compensation, Stock Option and Salary Committees
(collectively, the "Management Resources and Compensation Committees") meet
jointly to review, approve and make recommendations to the Board regarding
Chrysler's executive compensation program. In particular, the Committees
determine salaries, incentive compensation awards, and stock option grants for
officers and senior executives, and establish corporate goals under
performance-based compensation plans. The Committees held nine meetings in 1997.
The Pension Fund Review Committee reviews funding strategies and directs
the investment policies of Chrysler's funded pension and retirement plans and
determines the form and provisions of related trust agreements. The Committee
oversees and appoints members of the Company committees responsible for
investing fund assets. It also monitors the performance of these plans and
reviews and makes recommendations concerning proposed amendments. The Committee
held two meetings in 1997.
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<PAGE> 11
The Public and Legal Affairs Committee reviews Chrysler's practices in
areas of public concern, such as consumer affairs, equal opportunity, safety,
and the environment and recommends appropriate courses of action with due regard
for its civic responsibilities. It also reviews the adequacy, quality, and cost
effectiveness of Chrysler's health care programs. The Committee held three
meetings in 1997.
COMPENSATION
FEES. Nonemployee directors earn the following fees: annual membership fee,
$25,000; fee for each Board meeting attended, $1,000; fee for each other day of
service, $2,000; annual fee for serving on a committee, $10,000; and an
additional annual fee for chairing a committee, $2,000. Annual fees are paid in
Shares to more closely align the interests of nonemployee directors with those
of stockholders.
STOCK OPTIONS AND STOCK UNITS. Nonemployee directors receive options with
related stock appreciation rights ("SARs") for 3,000 Shares as of the date of
their election or reelection as a director by stockholders. Those nonemployee
directors first elected to the Board after December 31, 1995 also receive a
one-time award of 6,000 stock units. Each unit represents the right to receive
one Share and is credited with dividend equivalents. A director who leaves the
Board before completing 5 years of service (other than by reason of death,
disability, or retirement at age 72) forfeits all stock units. A director who
terminates service after 5 years (or by reason of death, disability, or
retirement at age 72) will receive Shares (corresponding to the number of whole
stock units granted or credited to him or her, and a cash payment for any
fractional units), or if the director prefers, a cash payment equal to the then
fair market value of a Share multiplied by the total number of stock units
granted or credited to the director.
TERMINATION OF RETIREMENT PROGRAM. In 1996 the Board terminated a director
retirement benefit program with respect to current and future nonemployee
directors. Under that program, which was established in 1988, a director with
five or more years of service receives an annual cash retirement benefit payable
for life equal to the annual retainer in effect at the time the director retired
from the Board. A director with less than five years of service receives the
same cash benefit, but only for a period equal to the time served as a director.
Upon termination of such program the then current nonemployee directors
agreed to convert their rights under that program into phantom stock units. Each
such director's rights were converted into phantom stock units representing the
greater of 3,000 Shares and a certain number of Shares determined by dividing
(1) the present value of the benefit that
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<PAGE> 12
would have been payable to the director under the former program (assuming the
earlier of completion of 18 years of service as a director or retirement at no
later than age 72, the mandatory retirement age for directors, and based on a
discount rate of 8% and assuming annual increases in fees of 5%) by (2) the fair
market value of a Share on the date of the 1996 Annual Meeting of Stockholders.
Each phantom stock unit will be credited with dividend equivalents, which will
be deemed reinvested in additional phantom stock units. At retirement, each such
director will receive an amount equal to (a) the fair market value of a Share on
the date of his or her retirement, multiplied by (b) the number of phantom stock
units granted to him or her on the date of the 1996 Annual Meeting of
Stockholders (including those related to reinvested dividend equivalents). Each
director may elect to receive such amount in Shares or cash.
STOCK OWNERSHIP GUIDELINES. Nonemployee directors are required to own at
least 10,000 Shares by the later of February 8, 1999 and the third anniversary
of their election to the Board.
OTHER. Nonemployee directors may elect in advance to defer all or a portion
of their fees and proceeds in connection with the exercise of options or SARS,
whether payable in the form of cash or Shares. Directors may self-direct assets
in their deferral accounts among a variety of investments and may receive
payment of their deferred compensation in a lump sum or in annual installments
not to exceed ten years. Chrysler also provides nonemployee directors with
product evaluation and lease vehicles, as well as business travel accident
insurance coverage in the amount of $250,000.
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<PAGE> 13
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of Shares beneficially owned (as
defined by the Securities and Exchange Commission) by Chrysler's directors and
executive officers as of February 28, 1998 (unless otherwise noted):
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) STOCK OPTIONS(2) STOCK UNITS(3)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lilyan H. Affinito............................ 32,295 16,200 8,742
James D. Aljian............................... 12,805 1,200 6,497
Robert E. Allen............................... 12,759 6,300 6,435
Joseph A. Califano, Jr........................ 19,281 9,300 8,483
Robert J. Eaton............................... 2,038,266 1,796,289 0
Earl G. Graves................................ 20,770 18,300 6,435
Kent Kresa.................................... 31,583 18,300 6,443
Robert J. Lanigan............................. 25,889 12,000 7,155
Robert A. Lutz................................ 555,904 387,038 0
Peter A. Magowan.............................. 33,406 1,200 8,289
John B. Neff.................................. 84,727 1,200 6,497
Dennis K. Pawley.............................. 50,881 0 0
Gary C. Valade................................ 258,812 207,000 0
Lynton R. Wilson.............................. 12,089 6,300 6,435
All Directors and Executive Officers as a
Group....................................... 6,072,463(4) 4,406,153 71,411
</TABLE>
(1) Unless otherwise indicated, each person has sole investment power and sole
voting power with respect to the Shares beneficially owned by such person.
(2) Stock options exercisable within sixty days. They are also in the Shares
Beneficially Owned column.
(3) Stock Units credited to nonemployee directors as described above.
(4) Less than 1.0% of the Shares outstanding. Includes Shares held as of
December 31, 1997 under dividend reinvestment and savings plans, and 32,628
Shares held by immediate family members (whether or not beneficial ownership
has been disclaimed).
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<PAGE> 14
REPORT ON EXECUTIVE COMPENSATION
This report explains Chrysler's executive compensation program for the year
ended December 31, 1997. The Management Resources and Compensation Committees,
which consist entirely of nonemployee directors, determine the compensation of
officers and senior executives.
COMPENSATION PHILOSOPHY
Chrysler's executive compensation program is a critical part of the
effective management of its key executives. The program rewards senior
management for building long-term shareholder value. It is designed to:
- Establish a comparative framework of companies for pay/performance
analysis;
- Maintain a strong relationship between performance and rewards;
- Communicate the link between pay and performance;
- Actively encourage stock ownership;
- Balance all compensation elements to create a total pay program based
on specific performance goals.
STOCK OWNERSHIP GUIDELINES
Chrysler maintains stock ownership guidelines to more closely align the
interests of executives with those of stockholders. The guidelines establish
stock ownership targets for officers and certain other executives. The
Committees monitor compliance annually.
EXECUTIVE COMPENSATION PROGRAM
Chrysler amended its performance-based compensation plans so that it would
be able to qualify compensation paid under those plans to the Chief Executive
Officer and its next four most highly compensated executive officers for
deductibility under Section 162(m) of the Internal Revenue Code. From time to
time, however, the Committees may authorize the payment of nondeductible
compensation if they determine that such action would be in Chrysler's best
interests. The Committees expect that Chrysler will be entitled to a federal
income tax deduction for all amounts earned under those plans for 1997. The
Committees determined that it was appropriate to pay Mr. Eaton and Mr. Lutz base
salaries above the
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limit set by Section 162(m) and forego the deduction for amounts above the limit
in order to achieve the underlying objectives of the compensation program
described in this Report.
In addition to base salary, Chrysler's executive compensation program in
1997 included incentive compensation in the form of annual bonuses (short-term
incentives), awards of Chrysler Common Stock paid at the end of multi-year
performance cycles (medium-term incentives), and grants of stock options
exercisable over ten years (long-term incentives). The total amount of
compensation paid to executives was determined with reference to a peer group of
fifteen Fortune 500 companies, which included Chrysler's two principal domestic
competitors. Companies were selected on the basis of, among other things, their
market capitalization, percentage of revenues derived from the sale of durable
goods, use of benchmarking as a management tool, selection by Fortune magazine
as one of its "Most Admired" companies, and selection for similar comparative
purposes by General Motors Corporation or Ford Motor Company. The Committees
believe that the various compensation programs within the peer group fairly
represent the types and levels of compensation Chrysler must be prepared to
provide in order to attract and retain qualified executives.
BASE SALARY
The Committees establish base salaries for executive officers annually in
relation to base salaries paid within the peer group. In general, base salaries
were set taking into consideration Chrysler's major U.S. competitors and the
fifteen company average, adjusted to reflect the increased salary levels within
the peer group as determined by an independent consulting firm engaged to assist
the Committees. Base salaries may vary based on such factors as responsibility,
current performance, and tenure.
ANNUAL BONUS
Chrysler has paid bonuses in accordance with a stockholder approved formula
since 1929. The formula, as most recently amended by the stockholders in 1994,
authorizes the Board to set aside for incentive compensation up to 8% of the
excess of consolidated net earnings in any year over $.2222 per share of
Chrysler Common Stock.
In general, annual bonuses are based on corporate performance in relation
to one of the following stockholder approved goals: quality, customer
satisfaction, profitability, net margin as a percentage of revenue, return on
sales, return on capital, breakeven, productivity, and/or debt to
capitalization. The Committees establish several increasingly aggressive
achievement levels for the selected goal. Each achievement level corresponds to
a certain bonus award, which is expressed as a percentage of the executive's
base salary (or
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<PAGE> 16
the average base salary or midpoint of the salary range of a class) and which
varies depending on the executive's level of responsibility. An executive's
annual bonus may not exceed 0.15% of Chrysler's consolidated net earnings. The
Committees may reduce the amount of any bonus based on individual performance or
any of the above goals or other measures of corporate performance.
Chrysler paid bonuses to approximately 2,000 executives based on its 1997
performance goal of consolidated net earnings, which were $2.8 billion. Only 60%
of the total amount available for incentive compensation under the formula was
paid out in annual bonuses for 1997 performance.
PERFORMANCE SHARES
Officers and senior executives have the opportunity to earn Chrysler Common
Stock (Performance Shares) at the end of multi-year performance cycles, based on
corporate performance in relation to one of the above stockholder approved
goals. The number of Performance Shares awarded each year by the Committees at
the beginning of a cycle is determined by dividing an amount (expressed as a
percentage -- not in excess of 150% -- of the executive's base salary, or the
average base salary or midpoint of the salary range of a class of employees, at
the time of the award) by the then fair market value of Chrysler Common Stock.
Dividend equivalents may also be paid in respect of the award during a cycle.
At the end of each cycle, participants may earn nothing, or a number of
Performance Shares ranging from a set minimum to a maximum of 150% of the target
award, based on the level of achievement in relation to the goal for that cycle.
The Committees may reduce the number of Performance Shares to be delivered based
on individual performance or any of the above goals or other measures of
corporate performance.
Performance Shares were awarded to 88 executives for the 1997-1999
performance cycle. The corporate goal established for that cycle is vehicle
quality improvement. Performance Share awards for the 1995-1997 performance
cycle were paid at a corporate performance level of 100%, based on improvements
in vehicle quality during the cycle as determined from warranty claims data.
STOCK OPTIONS
The Corporation may grant stock options and other stock-related incentives
under the Shareholder approved 1991 Plan. The 1991 Plan is intended to provide
long-term
13
<PAGE> 17
incentives, the ultimate value of which is determined by increases in the price
of Chrysler's Common Stock.
No stock option can be granted at an exercise price of less than 100% of
fair market value on the day the option is granted. Each option must be
exercised within ten years after the date of grant, unless earlier terminated in
connection with termination of employment, and is exercisable on and after the
first anniversary of the grant to the extent of not more than 40% of the number
of shares covered by the option, on and after the second anniversary of the
grant to the extent of not more than 70% thereof, and on and after the third
anniversary of the grant to the extent of 100% thereof.
Stock options were granted in 1997 to approximately 1,800 officers and
executives in amounts which were, in the judgment of the Stock Option Committee,
directly related to the level of responsibility of the grantees as compared with
their peer group counterparts. The number of options granted to a named
executive officer was established after determining that the projected value of
such options (as derived from the Black Scholes option pricing model) together
with performance shares granted are targeted at the 75th percentile of the
projected value of all long-term incentive compensation granted to his peer
counterparts.
SUPPLEMENTAL RETIREMENT BENEFITS
Officers and other executives may accrue annual supplemental retirement
benefits equal to a percentage (not to exceed 6%) of their respective annual
bonus and/or Performance Share awards. The Incentive Compensation Committee
determined that annual retirement benefits based on the annual bonus for 1997
will be paid at the rate of 4%. No benefits will be paid in respect of
Performance Shares earned in 1997.
CHIEF EXECUTIVE OFFICER COMPENSATION
Under Mr. Eaton's leadership in 1997, Chrysler achieved increases in
shareholder value, vehicle quality improvement, registered its second best U.S.
and Canada retail sales year in history and increased sales outside of North
America by 7% over 1996.
Chrysler had pre-tax earnings of $4.6 billion and total revenues of $61.1
billion last year, and returned approximately $3.2 billion to stockholders in
the form of dividends and share repurchases. Chrysler achieved its goal of
repurchasing $2 billion of Chrysler Common Stock in 1997 ($5 billion since 1995)
and announced plans to repurchase an additional $2 billion during 1998. As of
December 31, 1997, the dividend yield on Chrysler
14
<PAGE> 18
Common Stock was 4.5%, which was nearly three times the dividend yield of the
S&P 500 Index. The cumulative total shareholder return on Chrysler Common Stock
for the last five years was 160%.
Mr. Eaton worked with the Chrysler management team to improve vehicle
quality by 20% over the prior year, and to maintain a successful product
development program. The product development program included the introduction
of the Jeep Grand Cherokee 5.9 Limited, the Dodge Durango, and the all new 1998
Dodge Intrepid and Chrysler Concorde. Chrysler's product excellence was
recognized with numerous awards. The Jeep(R) Grand Cherokee 5.9 Limited was
named 4 Wheel & Off Road Magazine's 4 x 4 of the year. The Dodge Dakota R/T won
Sport Truck Magazine's "Sport Truck of the Year" and the Dodge Durango was named
Four Wheeler's "SUV of the Year". Popular Science named the Chrysler Concorde
and Dodge Intrepid as "Best of What's New" while Consumer's Digest named the
Dodge Caravan and Plymouth Voyager as "Best Buys."
The Board of Directors also recognized Mr. Eaton's key role in forming a
talented management team that is prepared to lead Chrysler into the 21st
century, as evidenced by the appointment of Mr. Stallkamp as President.
In establishing each of the components of Mr. Eaton's compensation for
1997, the Committees relied on information developed with the assistance of an
independent executive compensation consulting firm. Based on such information
and an evaluation of his 1997 performance, the Committees increased Mr. Eaton's
base salary to reflect increased salary levels among his peer group
counterparts. Consistent with Chrysler's salary policy, following such
adjustment Mr. Eaton's base salary ranked in the third quartile for that group.
Mr. Eaton received an annual bonus, as reported in the Summary Compensation
Table, based on Chrysler's performance with respect to consolidated net
earnings. Mr. Eaton also earned 33,800 Performance Shares with respect to the
1995-1997 performance cycle based on Chrysler's performance with respect to
vehicle quality improvements. In addition, Mr. Eaton was awarded 78,100
Performance Shares to be earned over the 1997-1999 performance cycle. The
Committees also granted to Mr. Eaton options to purchase 700,000 shares of
Chrysler Common Stock after targeting the projected value of such options (as
derived from the Black-Scholes option pricing model), together with Performance
Shares awarded to Mr. Eaton at the 75th percentile of the projected value of all
long-term compensation granted to his peer group counterparts.
15
<PAGE> 19
CONCLUSION
Under Chrysler's executive compensation program, the total compensation
ultimately attainable by executive officers depends to a significant degree on
consistent achievement of corporate objectives that contribute to stockholder
value. For example, over 85% of the total compensation (excluding option grants)
paid in 1997 under this program to the executive officers named in the Summary
Compensation Table is directly related to the achievement of corporate
performance objectives, including profitability and increases in share price.
Including option grants valued under the Black-Scholes option pricing model,
approximately 90% of such compensation consists of elements the ultimate
realizable value of which is based on achievement of such objectives and
increases in share price.
MANAGEMENT RESOURCES AND
COMPENSATION COMMITTEES
Robert J. Lanigan, Chairperson
Robert E. Allen
Peter A. Magowan
Lynton R. Wilson
16
<PAGE> 20
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Chrysler Common Stock over the five preceding fiscal years with the cumulative
total shareholder return on the common stock of each of General Motors
Corporation and Ford Motor Company and the return on the Standard & Poor's 500
Stock Index, assuming an investment of $100 in each of the above at their
closing prices on December 31, 1992 and reinvestment of dividends.
<TABLE>
<CAPTION>
General
Measurement Period Chrysler Ford Motor Motors S&P 500
(Fiscal Year Covered) Corporation Company Corporation Index
<S> <C> <C> <C> <C>
1992 100 100 100 100
1993 169 155 173 110
1994 159 138 135 112
1995 186 149 174 153
1996 223 175 189 189
1997 260 275 225 252
</TABLE>
The above Report on Executive Compensation and Performance Graph shall not
be deemed to be incorporated by reference into any filing made by Chrysler under
the Securities Act of 1933 or the Securities Exchange Act of 1934,
notwithstanding any general statement contained in any such filing incorporating
this proxy statement by reference, except to the extent Chrysler incorporates
the report and graph by specific reference.
17
<PAGE> 21
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
----------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ---------- ---------
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) SARS(#) ($) ($)(3)
- --------------------------- ---- ------ ----- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Eaton............. 1997 1,612,500 3,000,000 218,903 740,451 1,209,702 77,400
Chairman, Chief Executive 1996 1,437,500 4,500,000 161,183 696,018 2,068,250 69,000
Officer and President(4) 1995 1,212,500 2,360,000 105,006 450,000 434,981 58,200
Robert A. Lutz.............. 1997 1,012,503 1,600,000 146,655 394,828 730,116 48,600
Vice Chairman 1996 956,250 2,800,000 94,415 276,210 1,219,920 45,900
1995 881,250 1,675,000 64,308 200,000 278,231 42,300
Thomas G. Denomme........... 1997 725,004 1,200,000 185,128 250,000 465,270 34,800
Vice Chairman and Chief 1996 631,253 1,800,000 62,480 175,000 771,420 30,300
Administrative Officer 1995 562,500 1,075,000 42,059 140,000 168,506 27,000
Gary C. Valade.............. 1997 562,503 850,000 53,035 200,000 365,058 27,000
Executive Vice President 1996 512,500 1,200,000 53,225 140,000 609,960 24,600
and Chief Financial
Officer 1995 456,250 800,000 37,866 130,000 133,238 21,900
Dennis K. Pawley............ 1997 492,504 760,000 49,657 200,000 365,058 23,640
Executive Vice President
-- 1996 460,003 1,000,000 47,759 110,000 609,960 22,080
Manufacturing 1995 422,500 750,000 33,199 110,000 133,238 20,280
</TABLE>
(1) Compensation deferred at the election of an executive is included in the
year earned.
(2) The amounts for 1997 are dividend equivalents paid in respect of Performance
Share awards and tax payment reimbursements. The amount shown for Mr.
Denomme for 1997 also includes a club initiation fee of $40,000, and other
benefits.
(3) The amounts for 1997 are matching contributions by Chrysler under its
employee savings plans.
(4) Mr. Thomas T. Stallkamp became President on January 1, 1998.
18
<PAGE> 22
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER
OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE OR PRESENT
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION VALUE
NAME (#)(1) FISCAL YEAR ($/SH) DATE ($)(2)
---- ---------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert J. Eaton................... 700,000 6.80% 33.63 07-02-07 4,753,000
40,451 0.40% 37.69 03-15-02 302,169
Robert A. Lutz.................... 265,000 2.61% 33.63 07-02-07 1,799,350
5,369 0.05% 35.50 06-12-01 39,462
25,656 0.25% 35.50 06-10-02 188,572
98,803 0.97% 35.10 07-07-03 695,573
Thomas G. Denomme................. 250,000 2.46% 33.63 07-02-07 1,697,500
Gary C. Valade.................... 200,000 1.97% 33.63 07-02-07 1,358,000
Dennis K. Pawley.................. 200,000 1.97% 33.63 07-02-07 1,358,000
</TABLE>
(1) The exercise price of these options is the fair market value of Common Stock
on the grant date. Options (other than reload options) have a ten year term
and become exercisable at the rate of 40%, 70% and 100% over 3 years.
Options shown in italics are reload options granted to the individual when
he exercised an existing option and paid the exercise price in Shares. These
options are exercisable for the remaining term of the original option,
beginning 6 months after grant, while the fair market value of Shares is at
least 25% higher than at the time of grant. Options granted last year do not
contain a reload option feature. Options terminate upon termination of
employment, except in the case of the individual's death, disability,
retirement, and become fully exercisable upon a change in control (as
explained below).
(2) These values were determined under the Black-Scholes option pricing model
based on the following assumptions: annualized weighted stock price
volatility of 26.12%; interest rate based on the 5 year Treasury bond rate;
exercise in the fifth year, and dividends at the rate in effect on the date
of grant. Chrysler's use of this model is not meant to suggest that such
model can accurately determine the value of options.
19
<PAGE> 23
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Eaton........... 180,000 5,259,600 1,755,838 1,265,451 21,240,155 5,149,288
Robert A. Lutz............ 604,068 13,083,352 468,235 582,803 4,278,672 2,129,546
Thomas G. Denomme......... 148,000 1,341,075 0 397,000 0 1,542,948
Gary C. Valade............ 142,396 2,328,720 267,000 323,000 2,710,623 1,292,403
Dennis K. Pawley.......... 105,800 1,005,958 0 299,000 0 1,107,543
</TABLE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE BASED PLANS
NUMBER OF PERIOD UNTIL ------------------------------
SHARES MATURATION THRESHOLD TARGET MAXIMUM
NAME (#)(1) OR PAYOUT(2) (#) (#) (#)
---- --------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert J. Eaton....................... 78,100 3 yrs 39,050 78,100 117,150
Robert A. Lutz........................ 32,400 3 yrs 16,200 32,400 48,600
Thomas G. Denomme..................... 22,900 3 yrs 11,450 22,900 34,350
Gary C. Valade........................ 11,800 3 yrs 5,900 11,800 17,700
Dennis K. Pawley...................... 11,800 3 yrs 5,900 11,800 17,700
</TABLE>
(1) These awards reflect the number of Performance Shares payable to each of the
named executive officers at the end of the 1997-1999 performance cycle
depending on the level of achievement ultimately attained by Chrysler with
respect to vehicle quality, the corporate goal established for the cycle. A
target award (expressed as a percentage of salary) was established for each
officer, and each may earn nothing, or a number of Performance Shares
ranging from a set minimum to a maximum of 150% of the target award. Each
officer is entitled to receive amounts equal to the cash dividends that
would have been paid to him during the cycle if one Share for every
Performance Share awarded to him had been issued to him at the time of such
dividend.
(2) In the event of a change in control (as explained below), the performance
objectives and any restrictions applicable to outstanding awards will be
deemed attained or waived and such awards will be deemed fully vested.
20
<PAGE> 24
PENSION PLAN TABLE
Chrysler provides retirement benefits to officers based on years of service
and salary. These benefits are provided under a tax qualified retirement plan,
or to the extent not payable under that plan because of Internal Revenue Code
limitations, under a nonqualified supplemental plan. The table below shows the
benefits payable to an officer who retires at age 65 after contributing
continuously to the plans since age 35.
<TABLE>
<CAPTION>
ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED(2)
ASSUMED FINAL AVERAGE ---------------------------------------------------------------------
ANNUAL SALARY(1) 10 15 20 25 30 35
- --------------------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 45,000 67,500 90,000 110,000 124,000 124,000
400,000 90,000 135,000 180,000 220,000 248,000 248,000
600,000 135,000 202,500 270,000 330,000 372,000 372,000
800,000 180,000 270,000 360,000 440,000 496,000 496,000
1,000,000 225,000 337,500 450,000 550,000 620,000 620,000
1,200,000 270,000 405,000 540,000 660,000 744,000 744,000
1,400,000 315,000 472,500 630,000 770,000 868,000 868,000
1,600,000 360,000 540,000 720,000 880,000 992,000 992,000
1,800,000 405,000 607,500 810,000 990,000 1,116,000 1,116,000
2,000,000 450,000 675,000 900,000 1,100,000 1,240,000 1,240,000
</TABLE>
(1) Salary is averaged over the consecutive 5-year period during which salary
was highest in the 15 years immediately preceding retirement. The salaries
of Chrysler's five highest paid officers are shown in the Summary
Compensation Table.
(2) Retirement benefits are computed as a ten year certain and life annuity and
are subject to deduction for primary Social Security benefits.
As of February 28, 1998, the officers named in the Summary Compensation
Table had accrued the following years of service: Mr. Eaton, 11 years (including
additional years granted when he joined Chrysler); Mr. Lutz, 16 9/12 years
(including additional years granted under the supplemental plan); Mr. Denomme,
17 6/12 years; Mr. Valade, 20 4/12 years; and Mr. Pawley, 8 11/12 years.
In addition to the benefits reflected in the table, the supplemental plan
provides other annual retirement benefits based on a percentage of the incentive
compensation awards (annual bonus and Performance Shares) paid to an officer
each year. The percentage, which may range from 0 to 6%, is established by the
Management Resources and Compensation Committees each year for awards paid that
year. If the named officers remain
21
<PAGE> 25
with Chrysler until their retirement at age 65, they could become entitled to
receive the following estimated annual benefits based on such awards (the
portion accrued to date is shown in parentheses): Mr. Eaton, $1,486,100
($950,200); Mr. Valade, $613,400 ($334,500); and Mr. Pawley, $477,700
($279,300). Mr. Lutz is eligible to retire under the Supplemental Plan now with
an accrued benefit of $715,800. He will continue to accrue benefits until he
retires. Mr. Denomme retired as of December 31, 1997 with an accrued benefit of
$482,600. These estimates were computed based on the following assumptions for
each executive through age 65: (a) annual base salary increases of 6%, (b)
annual incentive compensation equal to 120% of annual base salary; and (c) a 3%
factor applied to incentive compensation. The nonaccrued portion of these
estimates shown above will change in proportion to percentage differences
between actual award levels through age 65 and the assumed levels set forth in
(b) and (c) above.
In the event of a change of control as defined in the supplemental plan,
Mr. Eaton and Mr. Valade will be eligible for special early retirement. Neither
of them are currently eligible for early retirement based on age and years of
credited service.
EMPLOYMENT AND TERMINATION ARRANGEMENTS
EMPLOYMENT AGREEMENTS. Chrysler entered into employment agreements in 1995
with Messrs. Eaton, Lutz, Denomme and Valade. Except in the case of Mr. Lutz,
each employment agreement has an initial three year term commencing on June 1,
1995, is automatically extended for successive periods of one year each unless
either party decides not to renew, and expires when the executive turns 65 or
becomes disabled. Mr. Lutz's employment agreement expired at the end of
February, 1997, the month in which he attained age 65. The Board waived
Chrysler's retirement policy and elected Mr. Lutz a Vice Chairman, enabling him
to continue as an employee beyond age 65. Mr. Denomme's employment agreement
terminated upon his retirement. The employment agreements prohibit the officer
from working for a competitor for at least one year if he voluntarily terminates
his employment without good reason (e.g., a significant reduction in his
responsibilities or compensation).
If Chrysler terminates the officer's employment without cause, or the
officer terminates his employment for good reason, he will be entitled to
receive all salary earned or other compensation owed by Chrysler. He will also
receive a lump sum severance benefit generally equal to two times the sum of his
current annual base salary and his average bonus over the prior three years.
22
<PAGE> 26
SEVERANCE AGREEMENTS. Chrysler also entered into severance agreements in
1995 with those officers and Mr. Pawley that provide each such officer a
predetermined level of severance benefits if his employment is terminated
involuntarily or constructively in connection with a change of control.
These agreements require each officer who is then still actively employed
generally to commit to remain employed by Chrysler for a certain period
following a potential change of control. For purposes of these agreements, the
definition of a change of control will generally be the same as that contained
in the 1991 Plan, and the definition of a potential change of control includes
the commencement of certain tender offers, a proxy contest relating to the
election of directors, or signing a merger or similar agreement, or other
actions that would result in a change of control if completed.
Under these agreements, Chrysler commits to preserve each officer's
existing position, compensation and benefits during such continued period of
employment or, if earlier, until the second anniversary of an actual change of
control. If these agreements become effective, the employment agreements
described above will be suspended, subject to reinstatement if these severance
agreements cease to be effective due to the fact that no change of control has
occurred. If Chrysler terminates the employment of any such officer without
cause after the agreement becomes effective, or the officer terminates his
employment after a change of control for good reason, the officer will receive a
single lump sum severance payment equal to three times, in the case of Messrs.
Eaton, Lutz and Valade, and two times, in the case of Mr. Pawley, the sum of the
officer's annual base salary and an amount equal to the average of the bonuses
payable to the officer over a three year period preceding the officer's date of
termination. An officer who receives such severance benefits will also receive
certain other payments and benefits intended to compensate the officer for other
benefits foregone or lost due to such termination.
In the event that the payments made to the officer under the agreement
result in the officer being subject to the excise tax on certain "excess
parachute payments" payable under Section 4999 of the Internal Revenue Code of
1986, as amended, Chrysler will also pay such officer an additional amount such
that the officer receives the same net after-tax benefit as the officer would
have received had no excise tax been applicable. If such additional payments are
required, Chrysler will not be able to deduct such additional payments for
Federal income tax purposes and will also be denied such a deduction for some or
all of the other payments made pursuant to the agreement and its other plans and
policies.
23
<PAGE> 27
CHANGE OF CONTROL. Under the 1991 Plan, a change in control means (i) a
person becomes the owner of 20% or more of outstanding Chrysler voting
securities (unless the 20% threshold is crossed due to an acquisition from
Chrysler); (ii) during any two-year period the majority of the membership of the
Board no longer constitutes a majority of the Board; (iii) the stockholders
approve a merger of Chrysler with any other corporation (unless Chrysler
securities continue to represent at least 80% of the combined voting power of
the surviving entity); or (iv) the stockholders approve a plan of complete
liquidation of Chrysler or an agreement for the sale of substantially all its
assets.
Upon a change in control, (i) all stock options become fully exercisable,
(ii) limited stock appreciation rights (LSARS) will be exercisable for 60 days,
and (iii) any executive terminated by Chrysler within the next two years will be
permitted to exercise options or LSARs for a limited time. Upon the exercise of
a LSAR, the holder is entitled to receive an amount equal to the change in
control stock appreciation times the number of Shares in respect of which the
LSAR was exercised. The change in control stock appreciation means an amount
equal to the excess, if any, of (a) the higher of (x) the market value of a
Share on the date the LSAR is exercised or (y) the highest price paid for Shares
in the change of control transaction or, in the case of a change in control
relating to Board membership, the average closing price of a Share for the prior
30-day period, over (b) the exercise price of the LSAR or any related option.
24
<PAGE> 28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company has been advised that the following persons beneficially owned
more than 5% of the Common Stock as of the dates indicated:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
<S> <C> <C>
Kirk Kerkorian(l)........................................... 89,156,992 13.74%
Tracinda Corporation
4835 Koval Lane
Las Vegas, NV 89109
The Capital Group Companies, Inc.(2)........................ 38,932,700 6.0%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
(1) As of January 29, 1998, based on a Form 4 filed by Mr. Kerkorian and
Tracinda Corporation, a Nevada corporation wholly owned by Mr. Kerkorian. On
February 8, 1996, Chrysler entered into a five-year standstill agreement
with Mr. Kerkorian and Tracinda Corporation under which they have agreed (i)
not to increase their beneficial ownership of voting securities beyond
13.75%, (ii) to sell voting securities pro rata, as required, in order not
to exceed such percentage as a result of Chrysler repurchases, (iii) to vote
on all matters submitted to shareholders in the same proportion as shares
are voted by other shareholders not affiliated with them, (iv) to not
solicit proxies or enter into any activity aimed at a change of control of
Chrysler or its Board, and (v) that during the term of the agreement, so
long as Tracinda or Mr. Kerkorian beneficially own more than 5% of the
outstanding voting securities, Chrysler's Board of Directors will nominate
Mr. James D. Aljian (or a successor) for election at each meeting of
stockholders at which directors are to be elected.
(2) As of December 31, 1997, based on a Schedule 13G filing. The Capital Group
Companies, Inc., the parent holding company of a group of investment
management companies, does not have investment or voting power over any of
the Shares. Its wholly owned subsidiary, Capital Research and Management
Company, is an investment adviser that beneficially owns and has sole
dispositive power over 37,778,800 of the Shares. The remaining Shares are
beneficially owned by its other subsidiaries.
25
<PAGE> 29
ITEM NO. 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders appoint the firm of
Deloitte & Touche LLP as independent public accountants to audit the Company's
books, records and accounts for the year 1998. The firm has offices or
associates convenient to most of the Company's facilities and the Board of
Directors considers the firm to be well qualified.
Representatives of Deloitte & Touche LLP expect to attend the meeting, will
be afforded an opportunity to make a statement if they desire to do so, and will
be available to respond to appropriate questions by stockholders.
YOUR DIRECTORS RECOMMEND A VOTE FOR THE APPOINTMENT OF DELOITTE & TOUCHE
LLP, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 3
STOCKHOLDER PROPOSAL
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, owner of 500 Shares, has submitted the
following proposal:
"RESOLVED: That the stockholders of Chrysler, assembled in Annual Meeting
in person and by proxy, hereby request the Board of Directors to take the
necessary steps to provide for cumulative voting in the election of directors,
which means each stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of directors to be
elected, and he or she may cast all of such votes for a single candidate, or any
two or more of them as he or she may see fit."
In support of this proposal, Mrs. Davis has submitted the following statement:
"REASONS: Many states have mandatory cumulative voting, so do National
Banks. In addition, many corporations have adopted cumulative voting. Last year
the owners of 113,148,660 shares, representing approximately 22.44% of shares
voting, voted FOR this proposal. If you AGREE, please mark your proxy FOR this
resolution."
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL. Your Board of
Directors believes that cumulative voting for directors would not serve any
useful purpose and would be contrary to the best interests of Chrysler and its
shareholders.
26
<PAGE> 30
The Board is responsible for directing Chrysler's business on behalf of all
stockholders. This can best be achieved by the election of directors who
represent the stockholders as a whole, without favoritism or allegiance to any
particular group of stockholders. A provision for cumulative voting in the
election of directors could result in, and indeed may encourage, the members of
special interest groups cumulating their vote to elect a director or directors.
Your Board believes that the representation of special interest groups would
weaken, rather than strengthen, the Board's ability to represent stockholders as
a whole and that the divisiveness and factionalism such representation might
encourage could be detrimental to Chrysler.
YOUR PROXY WILL BE VOTED AGAINST THIS PROPOSAL IF IT IS PRESENTED AT THE
MEETING, UNLESS YOU SPECIFY OTHERWISE.
ITEM NO. 4
STOCKHOLDER PROPOSAL
The American Home Baptist Mission Society, P.O. Box 851, Valley Forge, PA
19482-0851, owner of 200 Shares, has submitted the following proposal:
"ENDORSEMENT OF THE CERES PRINCIPLES
FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS WE BELIEVE: Responsible implementation of a sound, credible
environmental policy increases long-term shareholder value by raising
efficiency, decreasing clean-up costs, reducing litigation, and enhancing public
image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than standards created by industry alone. For maximum
credibility and usefulness, such standards should specifically meet the concerns
of investors and other stakeholders;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investment from investors seeking companies which are
environmentally responsible and which minimize risk of environmental liability.
27
<PAGE> 31
WHEREAS:
The Coalition for Environmentally Responsible Economies (CERES) -- which
includes shareholders of this Company; public interest representatives, and
environmental experts -- consulted with corporations to produce the CERES
Principles as comprehensive public standards for both environmental performance
and reporting. Scores of companies, including Bank of America, Baxter
International, Bethlehem Steel, General Motors, H. B. Fuller, ITT Industries,
Pennsylvania Power and Light, Polaroid, and Sun [Sunoco], have endorsed these
principles to demonstrate their commitment to public environmental
accountability and standardized reporting. Fortune-500 endorsers say that the
benefits of working with CERES are *public credibility,* direct access to major
environmental and shareholder organizations, *leadership in designing the
rapidly advancing standardization of environmental disclosures, and *measurable
value-added for the company's environmental initiatives;
A company endorsing the CERES Principles commits to work toward:
<TABLE>
<S> <C> <C>
1. Protection of the biosphere 4. Energy conservation 7. Environmental restoration
2. Sustainable natural resource use 5. Risk reduction 8. Informing the public
3. Waste reduction and disposal 6. Safe products/services 9. Management commitment
10. Audits and reports
</TABLE>
[Materials on the CERES Principles and CERES Report Form are obtainable from
CERES, 711 Atlantic Avenue, Boston, MA 02110, tel: 617/451-0927, Fax:
617-482-2028].
CERES is distinguished from other initiatives for corporate environmental
responsibility, by being (1) a successful model of shareholder relations; (2) a
leader in public accountability through standardized environmental reporting;
and (3) a catalyst for significant and measurable environmental improvement
within firms.
RESOLVED: Shareholders request the Company to endorse the CERES Principles as a
part of its commitment to be publicly accountable for its environmental impact.
SUPPORTING STATEMENT
Many investors support this resolution. Those sponsoring similar resolutions at
various companies have portfolios totaling $75 billion. Furthermore, the number
of public pension funds and foundations supporting this resolution increases
every year. We believe the CERES Principles exceed the European Community
regulation for voluntary participation in
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verified and publicly reported eco-management and auditing, and that they also
exceed the requirements of ISO 14000.
Your vote FOR this resolution will encourage both scrutiny of our Company's
environmental policies and reports and adherence to goals supported by
management and shareholders alike. We believe the CERES Principles will protect
both your investment and your environment."
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL. The Company formally
adopted a policy on environmental principles in 1992. The policy reflects the
Company's commitment to the environment and its goal of integrating sound
environmental practices, materials and technology into the Company's products
and manufacturing processes. The policy's objectives include: resource
conservation; pollution prevention; recycling improvements; efficient energy
use; and continuous improvement.
In furtherance of that policy, Chrysler's environmental staff conducts or
oversees periodic audits of each operating unit to assess their environmental
performance. The Company believes that such audits are effective in enabling
management to identify areas of concern and prevent or remedy potential
problems.
Since many of the topics covered by this proposal are already included in
the extensive reports the Company is required to prepare under federal and state
law, the Proposal would burden the Company with additional reporting obligations
and their associated costs in connection with a mandatory annual CERES Report.
The Company also believes that endorsing the CERES Principles would impose
unnecessary costs on the Company by obligating it to pay an annual fee to CERES
of $25,000.
In summary, the Company believes that the costs and uncertainties
associated with the proposal outweigh any potential environmental benefits which
might result from its adoption.
YOUR PROXY WILL BE VOTED AGAINST THIS PROPOSAL IF IT IS PRESENTED AT THE
MEETING, UNLESS YOU SPECIFY OTHERWISE.
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ITEM NO. 5
STOCKHOLDER PROPOSAL
Bernardine J. Sloan and John P. Sloan, 2741 S. Fourth St. Apt. D,
Springfield, IL 62703, who own 303 Shares, have notified Chrysler that they
intend to present the following proposal:
"Recommended: It is requested that Chrysler Corporation (hereafter referred to
as the corporation) obtain shareholder consent/approval for political
contributions in excess of $10,000.00 annually to a political party. Be it
further requested that the corporation shall publish in its annual report to
shareholders a list of political contributions for the previous 12 month period.
Supporting statement of shareholder:
The Corporation, through its Board of Directors, contributes many thousands
of dollars to the political process in an effort to influence political
decisions dealing with a variety of items ranging from socio-economic issues to
environmental factors.
Oftentimes, an individual shareholder many [sic] differ with the corporate
view toward the above issues. But, by virtue of ownership of shares, the
shareholder is giving tacit approval to the Directors to contribute to a
political party which is in opposition to the shareholder's individual views.
At the very least, a shareholder of a public-traded corporation is entitled
to know where and when his/her views differ from the corporate view regarding
the political process and its bearing on socio-economic and environmental
factors.
This proposal would reveal any differences between the shareholder's
individual views and corporate activity in the political process. Consequently,
the shareholder would have an opportunity to defend his/her views by taking
appropriate action.
Without this proposal, a corporate decision to support a political party
could be tantamount to coercive cooptation [sic] of shareholders in accepting or
supporting a political party contrary to a shareholder's individual view.
The publication of political contributions should be in tandem with a limit
on political contributions of $10,000.00. The $10,000.00 limit will help abate
"influence peddling". Huge corporate contributions to a political party
(referred to as "soft money") are ultimately and indirectly used to buy
influence on a particular issue from a candidate (referred to as "hard money").
Until such a time that effective campaign finance laws are
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enacted (which appears remote at this junction) shareholders must initiate
action at the grass roots level in order to curb the abuse of corporate
contributions to the political process.
A past statesman cautioned us on this subject: All that remains to insure
corrupt government is for all good (wo)men to do nothing. The words may not be
the exact quotation, but the message is clear: sit on your rights too long and
you may lose the privilege to exercise them.
If shareholders fail to act on this proposal, its failure could seriously
undermine the principle of "One (wo)man -- one vote!"
If shareholders wish to contribute or participate in the political process,
most of us are mature enough to do so on an individual basis. We should not be
subjected to coercive cooptation [sic] in supporting a political party which
stands in opposition to our individual beliefs."
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL. Federal and state
laws and regulations impose restrictions on political contributions. It has been
and will continue to be Chrysler's policy to comply fully with all laws and
regulations concerning political contributions.
U.S. corporations are prohibited from making any contributions in
connection with any federal election. However, Chrysler's employees are legally
permitted to contribute to a political action committee. All of the money
contributed to the Chrysler Political Support Committee is donated voluntarily
by Chrysler employees. Employees control the Committee and determine which
candidates receive support.
Chrysler may, on occasion, make minimal contributions in respect of certain
state or local ballot questions or grass roots campaigns that it believes could
affect its business operations or the well being of its employees. Chrysler also
may make payments to defray the costs of certain partisan political forums,
provided such payments are made in accordance with law and do not exceed
$100,000 in the aggregate annually. Chrysler reports these contributions to the
extent required by law.
Adoption of the proposal would result in unnecessary expense to Chrysler
without providing a sufficient corresponding benefit.
YOUR PROXY WILL BE VOTED AGAINST THIS PROPOSAL IF IT IS PRESENTED AT THE
MEETING, UNLESS YOU SPECIFY OTHERWISE.
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OTHER MATTERS
Chrysler, in the ordinary course of business, purchased materials, supplies
and services from numerous suppliers throughout the world in 1997. Purchases
were made from some concerns of which certain nonemployee directors are
directors or officers. Chrysler does not consider the amounts involved in such
transactions material in relation to its business and believes that such amounts
are not material in relation to the businesses of such other corporations or the
interests of the nonemployee directors involved.
Chrysler incurred expenses of approximately $731,800 in 1997 for
advertising and related marketing activities with Black Enterprise magazine. Mr.
Graves is the Chairman, Chief Executive Officer and sole stockholder of the
magazine's ultimate parent company.
Under marketing arrangements with MGM Grand Hotel, Inc. and New York-New
York Hotel & Casino, LLC, the Company is entitled to vehicle displays,
advertising space, and promotional packages at hotel complexes in Las Vegas,
Nevada. In exchange, the Company provides those companies with the use of
thirty-five vehicles, and five vehicles respectively. MGM Grand, Inc., whose
principal stockholders are Kirk Kerkorian and Tracinda Corporation, is the sole
stockholder of MGM Grand Hotel, Inc. and a partner of New York-New York Hotel &
Casino, LLC. Mr. Aljian is a director of MGM Grand, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Chrysler's directors, executive officers, and beneficial owners of more
than ten percent of its equity securities, are required by law to report changes
in their ownership of Shares to the SEC on a timely basis. Chrysler believes
that all 1997 transactions were reported on time.
1998 STOCKHOLDER PROPOSALS
The deadline for submitting proposals for possible inclusion in next year's
proxy statement is December 18, 1998. Proposals should be addressed to: William
J. O'Brien, Vice President, General Counsel and Secretary, Chrysler Corporation,
1000 Chrysler Drive, Auburn Hills, MI 48326-2766.
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<PAGE> 36
GENERAL MATTERS
Chrysler will pay the cost of printing and mailing proxy materials to you
and soliciting your proxy. These costs include fees and expenses charged by
brokers and other custodians to forward proxy materials to stockholders.
Georgeson & Company, Inc. will help distribute proxy materials and solicit
proxies for a fee of $15,000, plus reasonable expenses. Chrysler's directors,
officers, and employees may also solicit proxies in person, by telephone, or
electronically.
Chrysler does not intend to bring before the meeting any matters other than
those referred to in the accompanying Notice. If any other matters properly come
before the meeting, the persons appointed as proxies in the accompanying proxy
card intend to vote in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
William J. O'Brien
Vice President, General Counsel and Secretary
April 17, 1998
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NOTICE
OF ANNUAL
MEETING OF
STOCKHOLDERS
AND PROXY
STATEMENT
CHRYSLER LOGO
May 21, 1998
PLEASE VOTE BY TOLL-FREE TELEPHONE
OR BY INTERNET AS EXPLAINED ON YOUR
PROXY CARD, OR BY SIGNING, DATING
AND MAILING YOUR PROXY CARD IN THE
(LOGO) ENCLOSED ENVELOPE.
recycled paper
<PAGE> 38
[CHRYSLER CORPORATION LOGO]
The undersigned appoints Robert J. Eaton and Robert A. Lutz, or
either of them, proxies with full power of substitution to vote all shares the
undersigned is entitled to vote at Chrysler's Annual Meeting of Stockholders on
May 21, 1998 (or at a reconvened meeting if the meeting is adjourned), on all
matters properly before the meeting. This card also constitutes voting
instructions for any shares held for the undersigned in the dividend
reinvestment plan and the employee savings and deferred pay plans.
YOUR BOARD OF DIRECTORS SOLICITS THIS PROXY. IF YOU WANT YOUR SHARES
TO BE VOTED IN ACCORDANCE WITH THE BOARD'S RECOMMENDATIONS, SIMPLY SIGN, DATE
AND RETURN THIS CARD, OTHERWISE PLEASE SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES. IF YOU DO NOT SPECIFY OTHERWISE, YOUR SHARES WILL BE VOTED
TO ELECT THE NOMINEES NAMED BELOW (OR A SUBSTITUTE IF ANY NOMINEE BECOMES
UNAVAILABLE), "FOR" ITEM 2, AND "AGAINST" ITEMS 3-5. INSTEAD OF USING THIS
CARD, YOU MAY SPECIFY YOUR CHOICES BY TELEPHONE OR BY INTERNET.
Nominees for Director: 01 Lilyan H. Affinito, 02 James D. Aljian, 03
Robert E. Allen, 04 Joseph A. Califano, Jr., 05 Robert J. Eaton, 06 Earl G.
Graves, 07 Kent Kresa, 08 Robert J. Lanigan, 09 Robert A. Lutz, 10 Peter A.
Magowan, 11 John B. Neff and 12 Lynton R. Wilson.
* PRINTED ON RECYCLED PAPER. [PLEASE SIGN ON REVERSE SIDE.]
<PAGE> 39
<TABLE>
<S><C>
[X] Please mark your D146
votes as in this
example.
This proxy when properly executed will be voted as
you specify below. If you do not specify otherwise, the
proxy will be voted FOR election of directors, FOR Item 2
and AGAINST Items 3 through 5.
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Appointment of [ ] [ ] [ ]
Directors Independent
(See Reverse) Public Accountants.
For, except vote withheld from the following nominee(s):
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 3-5
-----------------------------------------------------------
3. Proposal relating to FOR AGAINST ABSTAIN
cumulative voting. [ ] [ ] [ ]
4. Proposal relating to the [ ] [ ] [ ]
CERES Principles.
5. Proposal relating to [ ] [ ] [ ]
political contributions
-----------------------------------------------------------
SIGNATURE(S) DATE 1998
---------------------------------------- -----------
NOTE: Please sign exactly as name appears hereon. When signing as
executor, administrator, trustee or the like please give full title.
- ------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL /\
</TABLE>
CHRYSLER CORPORATION
Dear Shareholder:
Chrysler Corporation encourages you to take advantage of new and convenient
ways by which you can vote your shares. You can vote your shares electronically
through the internet or the telephone. This eliminates the need to return the
proxy card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the internet:
*Log on to the internet and go to the web site
http://www.vote.by.net.com
2. To vote over the telephone:
*On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683) 24 hours
a day 7 days a week
Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
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