Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D9 Tender-Offer Solicitation/Recommendation Statement 20 108K
2: EX-1.1 Underwriting Agreement 2± 11K
3: EX-1.2 Underwriting Agreement 1 8K
4: EX-2 Plan of Acquisition, Reorganization, Arrangement, 16 85K
Liquidation or Succession
5: EX-3 Articles of Incorporation/Organization or By-Laws 4 17K
6: EX-4 Instrument Defining the Rights of Security Holders 2 13K
7: EX-5 Opinion re: Legality 5 16K
8: EX-6 Opinion re: Discount on Capital Shares 2 13K
9: EX-7 Opinion re: Liquidation Preference 4 20K
10: EX-8 Opinion re: Tax Matters 1 10K
11: EX-9 Voting Trust Agreement 2 12K
12: EX-10 Material Contract 3 13K
13: EX-11 Statement re: Computation of Earnings Per Share 4 22K
14: EX-12 Statement re: Computation of Ratios 8 47K
15: EX-13 Annual or Quarterly Report to Security Holders 8 46K
16: EX-14 Material Foreign Patent 8 47K
17: EX-15 Letter re: Unaudited Interim Financial Information 8 47K
18: EX-16 Letter re: Change in Certifying Accountant 5 24K
19: EX-17 Letter re: Departure of Director 26 128K
SC 14D9 — Tender-Offer Solicitation/Recommendation Statement
Document Table of Contents
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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CHRYSLER CORPORATION
(Name of Subject Company)
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CHRYSLER CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, $1.00 PAR VALUE
(AND ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
171196 10 8
(CUSIP Number of Class of Securities)
WILLIAM J. O'BRIEN, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CHRYSLER CORPORATION
12000 CHRYSLER DRIVE
HIGHLAND PARK, MICHIGAN 48288-0001
(313) 956-5741
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing)
With a copy to:
MEREDITH M. BROWN, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6528
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Chrysler Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 12000 Chrysler Drive, Highland Park, Michigan 48288-0001. The
title of the class of equity securities to which this Statement relates is the
common stock, par value $1.00 (the "Common Stock") of the Company, together with
the associated preferred stock purchase rights (the "Rights" and, together with
the Common Stock, the "Shares") issued pursuant to a Rights Agreement, dated as
of February 4, 1988, as amended on September 7, 1989, and as amended and
restated as of December 14, 1990, and as further amended by Amendment No. 1,
dated as of December 1, 1994, to the Amended and Restated Rights Agreement, each
between the Company and First Chicago Trust Company of New York (formerly known
as Morgan Shareholder Services Trust Company), as Rights Agent (as so amended,
and amended and restated and as so further amended, the "Rights Agreement").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Tracinda Corporation, a
Nevada corporation wholly owned by Kirk Kerkorian ("Tracinda"), disclosed in a
Tender Offer Statement on Schedule 14D-1, filed with the Securities and Exchange
Commission (the "Commission") on June 26, 1995 (as the same may be amended from
time to time, the "Schedule 14D-1"), to purchase up to 14,000,000 of the
outstanding Shares at a price of $50 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated June 27, 1995, as supplemented on June 28, 1995 (the
"Offer to Purchase"), and the related Letter of Transmittal (which collectively
constitute the "Offer").
According to the Schedule 14D-1, the address of the principal executive
offices of Tracinda is 4835 Koval Lane, Las Vegas, Nevada 89109.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, is set forth in Item 1 above, which information is
incorporated herein by reference.
(b)(1) Except as described herein or in Annex A hereto, to the knowledge of
the Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of interest
between the Company or its affiliates and the Company, its executive officers,
directors or affiliates. Certain contracts, agreements and understandings
between the Company and certain of its executive officers, directors or
affiliates are described in Annex A hereto, which is incorporated herein by
reference.
(b)(2) The following describes material contracts, agreements, arrangements
or understandings or actual or potential conflicts of interest between the
Company or its affiliates and Tracinda, its executive officers, directors or
affiliates:
According to the Offer to Purchase, Lee A. Iacocca, the former
Chairman of the Board and Chief Executive Officer of the Company, is not a
participant in the Offer, but Mr. Iacocca may be deemed to be acting as
part of a group with Tracinda under Section 13(d) of the Securities
Exchange Act of 1934, as amended. Pursuant to a Consulting Agreement, dated
May 9, 1995, between Tracinda and Mr. Iacocca (the "Consulting Agreement"),
which appears as Exhibit (c)(1) to the Schedule 14D-1, Mr. Iacocca has
agreed to render certain consulting and advisory services to Tracinda, and
Tracinda has agreed to pay Mr. Iacocca a monthly fee of $41,667.67.
According to the Offer to Purchase, Tracinda and Mr. Iacocca have entered
into a Value Sharing Agreement, dated as of June 24, 1995 (the "Value
Sharing Agreement"), which appears as Exhibit (c)(3) to the Schedule 14D-1.
Pursuant to the Value Sharing Agreement (as described in the Offer to
Purchase), Mr. Iacocca will receive, with respect to 32,000,000 of the
Shares held by Tracinda, 4% of the amount by which the market value of a
Share exceeds $47.00 in June 1999 (or, in the case of a sale of Shares by
Tracinda for cash prior to that time, the amount by which the cash proceeds
of the sale exceeds $47.00, subject to adjustment in certain
circumstances). As stated in the Offer to Purchase, pursuant to the
Consulting Agreement, Tracinda has agreed to indemnify
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Mr. Iacocca with respect to matters arising out of Mr. Iacocca's services
under the Consulting Agreement.
On June 28, 1995, a representative of Mr. Iacocca informed the Company
that Mr. Iacocca intended to exercise stock options, granted to him when he
was Chairman and Chief Executive Officer of the Company, for 112,500 Shares
(the "Options"). Under the Company's 1991 Stock Compensation Plan (the
"Plan") and the Company's predecessor Stock Option Plan (the "Predecessor
Plan"), Mr. Iacocca has options to purchase a total of 1,488,368 Shares at
a weighted average exercise price of $28.22. Under both the Plan and the
Predecessor Plan, exercise of an option after termination of employment is
subject to, among other things, the conditions precedent that the optionee
neither takes other employment or renders services to others without the
written consent of the Company, nor conducts himself in a manner adversely
affecting the Company.
The Company's Board of Directors, after considering the plan
requirements for the exercise of the Options, and after reviewing a letter
from counsel for Mr. Iacocca, has determined that conditions precedent to
the exercise of the Options have not been satisfied, and that accordingly,
the Options are not exercisable.
Copies of letters sent to Mr. Iacocca informing him of the Board's
position are filed as Exhibits 1.1 and 1.2 hereto and are incorporated
herein by reference. A copy of the Predecessor Plan is filed as Exhibit
10-D-8 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1983. A copy of the Plan is filed as Exhibit 2 hereto and is
incorporated herein by reference. (Each of the Plan and the Predecessor
Plan contains the same conditions precedent referred to above.) The
foregoing description of the Plan and the Predecessor Plan is qualified in
its entirety by reference to the full text of the Plan and the Predecessor
Plan.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a)(1) Background.
According to Tracinda's Schedule 13D filings, Tracinda has beneficially
owned Shares of the Company since 1990. On April 12, 1995, Tracinda issued a
press release announcing that it proposed to acquire all of the outstanding
Shares of the Company not then owned by Tracinda at a price of $55 per Share.
Also on April 12, Tracinda sent to the Company a letter to the same effect.
On April 12, the Company issued the following press release:
CHRYSLER BOARD STATES COMPANY IS NOT FOR SALE
HIGHLAND PARK, Mich. -- In a meeting today, the Board of Directors of
Chrysler Corporation discussed an unsolicited letter received from Tracinda
Corporation, a company owned by Kirk Kerkorian, outlining a possible
acquisition of the equity interest in Chrysler not owned by Tracinda.
The Chrysler Board of Directors stated that the Company is not for
sale.
Chrysler said that its Board would review in due course Tracinda's letter
with the Company's financial and legal advisors. The Board noted that the
suggested transaction, based on information thus far provided by Tracinda,
amounts to a request to discuss a leveraged buyout. Moreover, it:
-- Contemplates at least $11 billion in new debt financing, none of
which has been lined up.
-- Contemplates $3 billion in equity financing, beyond the Shares
already owned by Tracinda and by Lee Iacocca, none of which has
been lined up.
-- Assumes the Company's credit lines would remain in place,
despite changes in the Company's financial position that would
result if Tracinda's proposal was implemented.
-- Contemplates reducing Chrysler's cash reserves by more than 70%
to $2 billion. Chrysler noted its need to maintain adequate cash
reserves to weather downturns in the business cycle, as well as
to maintain its ability to develop new products and to compete.
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Robert J. Eaton, Chairman and Chief Executive Officer of Chrysler,
stated: "I want to make it absolutely clear that Chrysler management is in
no way involved in Tracinda's proposal. I told Mr. Kerkorian that last
night when he informed me by telephone of his intention to make an
announcement.
"We don't want to put Chrysler at risk," Eaton added. "We've worked
hard to build this Company's financial strength, to increase shareholder
value and to build the confidence of customers, employees, dealers and
suppliers. We have no desire to reverse the process."
In the following days, a significant level of concern about Tracinda's
proposed leveraged buy-out of the Company was expressed by the Company's
lenders, employees, dealers and suppliers. Credit rating agencies placed the
Company's debt securities on credit watch with negative implications. Tracinda
did not report having obtained a single dollar of non-Chrysler financing for its
proposed buy-out of the Shares it did not already own. Discussions between
representatives of the Company and Tracinda failed to produce any resolution.
On April 24, 1995, the Board of Directors unanimously rejected Tracinda's
leveraged buy-out proposal, concluding that pursuing the proposal would not be
in the best interests of the Company, its shareholders, employees, dealers,
suppliers or customers. The Board reaffirmed that the Company was not for sale,
and stated the Board's belief that "unsolicited publicly announced proposals
such as Tracinda's are disruptive and not in the best interest of our
shareholders."
Mr. Eaton sent a letter on April 24, 1995 to Kirk Kerkorian, the sole
stockholder of Tracinda, informing him of the Board's unanimous decision to
reject Tracinda's leveraged buy-out proposal. Mr. Eaton explained that the Board
had grave doubts that financing such a transaction was feasible, and that even
if it could be accomplished, the result would be a crippled company. In
addition, Mr. Eaton told Mr. Kerkorian that the Company's directors had no
interest in gambling with Chrysler's future.
Mr. Kerkorian responded with an April 25 letter to Mr. Eaton, contesting
Mr. Eaton's characterization of Tracinda's proposed transaction.
On May 31, 1995, Tracinda announced that it was withdrawing its proposal to
acquire all of the Shares at a price of $55 per Share, and that it had hired
Wasserstein Perella & Co., an investment bank, to act as strategic advisor to
Tracinda.
Copies of the press releases and letters referred to above are filed as
Exhibits 3-8 hereto and are incorporated herein by reference.
On June 26, 1995, Tracinda announced the Offer.
(2) Position of the Board.
At regularly scheduled meetings of the Board of the Directors held on July
5 and July 6, 1995, the Board met with its financial and legal advisers and
considered the Offer and various matters related thereto. Among the matters
considered by the Board were the terms and conditions of the Offer; the
percentage of the Shares now owned by Tracinda, and the percentage sought to be
acquired in the Offer; the prior conduct of Tracinda and Mr. Kerkorian with
respect to the Company; and the prior conduct of Tracinda and Mr. Kerkorian with
respect to other companies in which Tracinda and/or Mr. Kerkorian had purchased
substantial blocks of stock, which conduct in certain instances has included
unsolicited acquisitions of control, litigation against the issuer and sale of
stock positions to issuers at a premium over market.
At the July 6 meeting, the Board unanimously determined that, in light of
the small percentage of the Company's Shares sought by Tracinda in the Offer and
the fact that the Offer would not result in the ownership by Tracinda or by its
group of 15% or more of the outstanding Shares, the Board would not make a
recommendation to the stockholders with respect to the Offer. Accordingly, the
Company is making no recommendation to stockholders with respect to the Offer.
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At the July 6 meeting, the members of the Board of Directors also expressed
the intention not to tender any of their own Shares pursuant to the Offer, in
light of the Board's view of the long-term prospects of the Company.
(b) In reaching the determination referred to in Item 4(a) above, the Board
of Directors took into account numerous factors, including but not limited to:
(i) The small percentage of Shares sought in the Offer; and
(ii) The fact that, according to the information set forth in the
Offer to Purchase, the Offer would not result in Tracinda or the group of
which it is a member becoming the beneficial owner of more than 15% of the
outstanding Shares and, accordingly, would not cause Tracinda to be deemed
an "Acquiring Person" within the meaning of the Rights Agreement or an
"interested person" within the meaning of Section 203 of the Delaware
General Corporation Law.
The fact that the Board has determined not to make a recommendation with
respect to the Offer is not, and should not be interpreted to be, any indication
of the position the Company's Board would take with respect to any effort by
Tracinda's group to bring its holdings above 15%, or to seek control of the
Company by any means.
A copy of a letter to stockholders communicating the Board's position and a
press release by the Company relating thereto are filed as Exhibits 9 and 10
hereto and are incorporated herein by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has been receiving advice from CS First Boston Corporation ("CS
First Boston"), Morgan Stanley & Co. Incorporated ("Morgan Stanley") and Salomon
Brothers Inc ("Salomon Brothers") in connection with Tracinda's proposals since
April 12, 1995. None of CS First Boston, Morgan Stanley and Salomon Brothers has
been requested to make any solicitations or recommendations to security holders
of the Company with respect to the Offer.
The Company has retained Kekst & Company ("Kekst") as public relations
adviser and Georgeson & Company Inc. ("Georgeson") and Morrow & Co. ("Morrow")
to assist the Company with its communications to stockholders and to provide
other services to the Company, including with respect to the Offer. The Company
will pay each of Kekst, Georgeson and Morrow their reasonable and customary
compensation for their respective services, and will reimburse Kekst, Georgeson
and Morrow for their reasonable out-of-pocket expenses incurred in connection
therewith.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as described below, there have been no transactions in the
Shares or the associated Rights during the past 60 days by the Company or, to
the best knowledge of the Company, by any executive officer, director, affiliate
or subsidiary of the Company:
Joseph E. Cappy, Vice President, and his wife, gave 100 Shares to a
relative on May 24, 1995.
James D. Donlon, Vice President and Controller, sold 3,660 Shares on
May 23, 1995, and sold 3,200 Shares on May 24, 1995.
In accordance with the terms of the Plan, upon election as director at
the Annual Meeting of Stockholders on May 18, 1995, each nonemployee
director was granted automatically an option to purchase 1,500 Shares at an
exercise price equal to 100% of the fair market value of such Shares on
that date ($43.19 per Share).
Consistent with its past practice of awarding stock options under the
Plan to executives annually in July, the Company granted options to
purchase approximately 3.9 million Shares to 1,751 Company
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executives (including officers) on July 6, 1995, at an exercise price equal
to 100% of the fair market value of such Shares on that date. Information
regarding the options granted to executive officers of the Company during
the past 60 days appears in Annex A hereto, which is incorporated herein by
reference.
Upon W. Frank Fountain's election as a Vice President on July 6, 1995,
the Company granted Mr. Fountain an option to purchase 10,000 Shares at an
exercise price equal to 100% of the fair market value of such Shares on
that date.
In December 1994, the Board of Directors approved a $1 billion Share
repurchase program, subject to market and business conditions. During the
past 60 days, the Company repurchased approximately 3.2 million Shares
under this program at a cost of approximately $139 million.
During the past 60 days, holders of the Company's Series A Convertible
Preferred Stock converted 607,093 shares of Preferred Stock into 16,865,018
Shares.
Some officers and directors participate in the dividend reinvestment
program administered by the Company's transfer agent, and some officers
participate, through payroll deductions of salary or bonus, in the
Company's self-directed employee savings plans, which offer a variety of
investment elections, including the Company's Shares. During the past 60
days, approximately 460 Shares were purchased and approximately 217 Shares
were sold for the account of officers and directors under such program or
plans.
(b) The Company has no intention of tendering any Shares pursuant to the
Offer, nor, to the best knowledge of the Company, does any executive officer,
director, affiliate or subsidiary of the Company have any intention of tendering
any Shares pursuant to the Offer. The foregoing statement does not include any
Shares over which, or with respect to which, any such executive officer,
director or affiliate acts in a fiduciary or representative capacity or is
subject to the instructions of a third party with respect to such decision to
tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) No negotiation is being undertaken or is underway by the Company in
response to the Offer which relates to or would result in:
(i) An extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(ii) A purchase, sale or transfer of a material amount of assets by
the Company or any subsidiary of the Company;
(iii) A tender offer for or other acquisition of securities by or of
the Company; or
(iv) Any material change in the present capitalization or dividend
policy of the Company.
(b) There is no transaction, Board resolution, agreement in principle or
signed contract in response to the Offer which relates to or would result in one
or more of the matters referred to in Item 7(a)(i), (ii), (iii) or (iv).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Regulatory Matters. The Offer is conditioned on, among other things, the
Michigan Insurance Bureau having issued an order exempting, on terms
satisfactory to Tracinda, in its sole discretion, the Offer from the provisions
of the Michigan Insurance Code or Tracinda being satisfied, in its sole
discretion, that the provisions of the Michigan Insurance Code are otherwise
inapplicable to the Offer (the "Insurance Condition").
The Company has two indirect, wholly-owned insurance subsidiaries domiciled
in Michigan. The Michigan Insurance Code provides that, absent prior approval by
the Michigan Commissioner of Insurance, a person may not make a tender offer for
or acquire securities of a Michigan domestic insurer if, after the
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consummation of the offer, the person would be in control of the insurer.
Control is presumed to exist if the person holds 10% or more of another person's
voting securities.
On June 26, 1995, Tracinda filed with the Michigan Insurance Bureau an
application for exemption from the relevant provisions of the Michigan Insurance
Code. Also on June 26, 1995, Tracinda commenced a lawsuit in the United States
District Court for the Western District of Michigan against the Michigan
Commissioner of Insurance and the Company, seeking to have the relevant
provisions of the Michigan Insurance Code declared inapplicable to the Offer. In
its complaint, Tracinda argued that the relevant provisions of the Michigan
Insurance Code are preempted by federal securities laws and are unconstitutional
under the Constitution of the United States.
On June 27, 1995, the Michigan Commissioner of Insurance issued an Order
Approving Disclaimer (the "Order"), and Tracinda announced that the Order would
satisfy the Insurance Condition. On June 28, Tracinda withdrew, without
prejudice, the related lawsuit.
The Order states that the scope of its approval is strictly limited to
Tracinda's proposed acquisition of 14,000,000 additional Shares of the Company,
and does not apply to any other future activity Tracinda may choose to pursue
with respect to the Company, including the purchase of additional Shares or
undertaking a proxy or consent solicitation in which Tracinda would name a slate
of candidates for the Company's Board.
A copy of the Order is filed as Exhibit 11 hereto and is incorporated
herein by reference. The foregoing description of the Order is qualified in its
entirety by reference to the text of the Order.
The Rights Agreement. On February 4, 1988, the Board of Directors of the
Company declared a dividend distribution of one Right for each outstanding share
of the Common Stock of the Company. On September 7, 1989, December 14, 1990 and
December 1, 1994, the Board of Directors amended the terms of the Rights. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Junior Participating Cumulative Preferred Stock, par
value $1.00 per share, of the Company (the "Preferred Stock") at a price of $120
per one one-hundredth of a share of Preferred Stock, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in the
Rights Agreement.
The Rights are currently attached to certificates representing outstanding
shares of Common Stock, and no separate certificates representing the Rights
("Right Certificates") have been distributed. The Rights will separate from the
Common Stock and a "Distribution Date" will occur upon the earlier to occur of
(i) ten days following the time (the "Stock Acquisition Time") of a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock of the
Company and (ii) ten business days (or, if determined by the Board of Directors
(with the concurrence of a majority of the Continuing Directors (as hereinafter
defined)), a specified or unspecified later date) following the commencement or
announcement of an intention to make a tender offer or exchange offer which, if
successful, would cause the bidder to own 15% of more of the outstanding shares
of Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on February 22, 1998, unless earlier redeemed or exchanged by the Company
as described below.
In the event that, after the Stock Acquisition Time, the Company is
acquired in a merger or other business combination transaction (except certain
transactions with a person who became an Acquiring Person as a result of a
tender offer described in the next succeeding paragraph) or 50% or more of its
assets, cash flow or earning power is sold, proper provision shall be made so
that each holder of a Right shall thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value (as defined in the Rights Agreement) of
two times the Purchase Price of the Right. In the event that, after the Stock
Acquisition Time, the Company were the surviving corporation of a merger and its
shares of Common Stock were changed or exchanged, proper provision shall be made
so that each holder of a Right will thereafter have the right to receive upon
exercise that number of shares of Common Stock of the Company having a market
value of two times the exercise price of the Right.
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In the event that a person or group becomes an Acquiring Person (except
pursuant to a tender offer for all outstanding shares of Common Stock determined
to be at a fair price and otherwise in the best interests of the Company and its
stockholders by a majority of the Outside Directors), proper provision shall be
made so that each holder of a Right (other than the Acquiring Person) will
thereafter have the right to receive upon exercise that number of shares of
Common Stock (or, in certain circumstances, cash, a reduction in the Purchase
Price, Common Stock, other equity securities of the Company, debt securities of
the Company, other property or a combination thereof) having a market value (as
defined in the Rights Agreement) of two times the Purchase Price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person (or an affiliate, associate or transferee thereof) will be null
and void. A person will not be an Acquiring Person if the Board of Directors of
the Company determines that such person or group became an Acquiring Person
inadvertently and such person or group promptly divests itself of a sufficient
number of shares of Common Stock so that such person or group is no longer an
Acquiring Person.
At any time prior to the earlier of the Stock Acquisition Time and the
Expiration Date (as defined in the Rights Agreement), the Board of Directors may
redeem the Rights in whole, but not in part, at a price of $.05 per Right (the
"Redemption Price"). Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.05 Redemption Price.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such Person of 50% or more of the outstanding shares of Common
Stock, the Board of Directors of the Company may exchange the Rights (other than
Rights beneficially owned by such Person which have become void), in whole or
part, at an exchange ratio of one share of Common Stock per Right (subject to
adjustment). The Company, at its option, may substitute one one-hundredth of a
share of Preferred Stock (or other series of substantially similar preferred
stock of the Company) for each share of Common Stock to be exchanged.
Each share of Preferred Stock purchasable upon exercise of the Rights will
have a minimum preferential dividend of $10 per year, but will be entitled to
receive, in the aggregate, a dividend of 100 times the dividend declared on the
Common Stock. In the event of liquidation, the holders of the shares of
Preferred Stock will be entitled to receive a minimum liquidation payment of
$100 per share, but will be entitled to receive an aggregate liquidation payment
equal to 100 times the payment made per share. Each share of Preferred Stock
will have one hundred votes, voting together with the Common Stock. In the event
of any merger, consolidation or other transaction in which shares of Common
Stock are exchanged, each share of Preferred Stock will be entitled to receive
100 times the amount and type of consideration received per share of Common
Stock. The rights of the shares of Preferred Stock as to dividends and
liquidation, and in the event of mergers and consolidations, are protected by
anti-dilution provisions.
The term "Continuing Director" means any member of the Board of Directors
of the Company who was a member of the Board prior to the Stock Acquisition
Time, and any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Directors then on the
Board of Directors, but shall not include an Acquiring Person or an affiliate,
associate, representative or nominee of an Acquiring Person.
A copy of the Rights Agreement (as in effect prior to Amendment No. 1
thereto) has been filed with the Commission as Exhibit 1 to a Current Report on
Form 8-K dated December 14, 1990. A copy of Amendment No. 1 to the Rights
Agreement has been filed with the Commission as Exhibit 1 to a Current Report on
Form 8-K dated December 1, 1994. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the text
of the Rights Agreement.
Delaware Takeover Statute. Section 203 of the Delaware General Corporation
Law, in general, prohibits a Delaware corporation such as the Company from
engaging in a "Business Combination" (defined as a variety of transactions,
including mergers, as set forth below) with an "Interested Stockholder" (defined
generally as a person that is the beneficial owner of 15% or more of a
corporation's outstanding voting stock) for a period of three years following
the date that such person became an Interested Stockholder unless
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(a) prior to the date such person became an Interested Stockholder, the board of
directors of the corporation approved either the Business Combination or the
transaction that resulted in the stockholder becoming an Interested Stockholder,
(b) upon consummation of the transaction that resulted in the stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding stock held by directors who are also officers
of the corporation and employee stock ownership plans that do not provide
employees with the right to determine confidentially whether Shares held subject
to the plan will be tendered in a tender or exchange offer or (c) on or
subsequent to the date such person became an Interested Stockholder, the
Business Combination is approved by the board of directors of the corporation
and authorized at a meeting of stockholders, and not by written consent, by the
affirmative vote of the holders of at least 66 2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder.
Section 203 provides that, during such three-year period, the corporation
may not merge or consolidate with an Interested Stockholder or any affiliate or
associate thereof, and also may not engage in certain other transactions with an
Interested Stockholder or any affiliate or associate thereof, including, without
limitation, (a) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets (except proportionately as a stockholder of the
corporation) having an aggregate market value equal to 10% or more of the
aggregate market value of all assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock of
a corporation, (b) any transaction which results in the issuance or transfer by
the corporation or by certain subsidiaries thereof of any stock of the
corporation or such subsidiaries to the Interested Stockholder, except pursuant
to a transaction which effects a pro rata distribution to all stockholders of
the corporation, (c) any transaction involving the corporation or certain
subsidiaries thereof which has the effect of increasing the proportionate share
of the stock of any class or series, or securities convertible into the stock of
any class or series, of the corporation or any such subsidiary which is owned
directly or indirectly by the Interested Stockholder (except as a result of
immaterial changes due to fractional share adjustments), or (d) any receipt of
the Interested Stockholder of the benefit (except proportionately as a
stockholder of such corporation) of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation.
8
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
[Enlarge/Download Table]
EXHIBIT NO.
------------
Exhibit 1.1 June 30, 1995 Letter to Mr. Iacocca
Exhibit 1.2 July 6, 1995 Letter to Mr. Iacocca
Exhibit 2 Chrysler Corporation 1991 Stock Compensation Plan
Exhibit 3 April 12, 1995 Tracinda Press Release
Exhibit 4 April 12, 1995 Letter to the Company
Exhibit 5 April 24, 1995 Company Press Release
Exhibit 6 April 24, 1995 Letter to Mr. Kerkorian
Exhibit 7 April 25, 1995 Letter to Mr. Eaton
Exhibit 8 May 31, 1995 Tracinda Press Release
Exhibit 9 Letter to Stockholders of the Company, dated July 6, 1995*
Exhibit 10 Press Release issued by the Company on July 6, 1995
Exhibit 11 Order Approving Disclaimer issued by the Michigan Commissioner of Insurance
Exhibit 12 Employment Agreement, dated as of June 1, 1995, between the Company and
Robert J. Eaton
Exhibit 13 Employment Agreement, dated as of June 1, 1995, between the Company and
Robert A. Lutz
Exhibit 14 Employment Agreement, dated as of June 1, 1995, between the Company and
Thomas G. Denomme
Exhibit 15 Employment Agreement, dated as of June 1, 1995, between the Company and
Gary C. Valade
Exhibit 16 Term Sheet Relating to Severance Agreements
Exhibit 17 Supplemental Executive Retirement Plan
-------------------------
* Included in mailing to stockholders.
9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Dated: July 6, 1995 CHRYSLER CORPORATION
By: William J. O'Brien
------------------------------------
Name: William J. O'Brien
Title: Vice President, General
Counsel and Secretary
10
ANNEX A
DIRECTORS' COMPENSATION
The fees currently being paid to directors who are not officers of the
Company or its subsidiaries are as follows: annual fee for serving as a
director, $25,000; fee for each Board meeting attended, $1,000; Board strategy
session fee, $1,000; fee for each other day of service, $2,000; annual fee for
serving on a Board committee (Management Resources and Compensation Committees
considered as one), $10,000; and additional annual fee for serving as
chairperson of a committee, $2,000.
Under the Chrysler Corporation 1991 Stock Compensation Plan (the "Plan")
approved by the stockholders, nonemployee directors receive options with related
stock appreciation rights ("SARs") for 1,500 Shares as of the date of their
election or reelection as a director at any annual or special meeting of
stockholders. The Company also provides business travel accident insurance
coverage in the amount of $250,000 to each nonemployee director. In addition,
the Company provides an annual retirement benefit payable for life to
nonemployee directors with five or more years of service equal to one hundred
percent of the annual retainer for directors in effect at the time of the
individual's retirement from the Board. A director retiring from the Board with
less than five years service receives an annual retirement benefit in the same
amount, but only for a period equal to the time served as a director.
Under the Chrysler Salaried Employees' Supplemental Savings Plan,
nonemployee directors may elect in advance to defer all or a portion of the
above fees and proceeds in connection with the exercise of options or SARs,
whether payable in the form of cash or Shares. Such directors may self-direct
assets in their deferral accounts among a variety of investments. Directors may
elect to receive payment of their deferred compensation in a lump sum or in
annual installments not to exceed ten years.
SECURITY OWNERSHIP OF MANAGEMENT AND BOARD
The following table shows the number of Shares beneficially owned, as that
term is defined for proxy statement reporting purposes by the Commission, by the
directors and executive officers of the Company as of July 6, 1995 (unless
otherwise noted):
[Enlarge/Download Table]
NUMBER OF SHARES
IN LEFT COLUMN
AMOUNT AND NATURE WHICH MAY BE
OF BENEFICIAL ACQUIRED WITHIN
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)(3) 60 DAYS(4)
---------------------------------------------------------- ----------------- ----------------
Lilyan H. Affinito........................................ 10,066 6,600
Robert E. Allen........................................... 1,600 600
Joseph E. Antonini........................................ 8,230 2,100
Joseph A. Califano, Jr. .................................. 8,566 5,100
Theodor R. Cunningham..................................... 268,875 241,699
Thomas G. Denomme......................................... 115,742 92,698
Robert J. Eaton........................................... 653,282 549,410
Earl G. Graves............................................ 8,130 6,150
Kent Kresa................................................ 8,330 6,150
Robert J. Lanigan......................................... 6,337 3,000
Robert A. Lutz............................................ 582,066 493,034
Peter A. Magowan.......................................... 18,430 3,000
Malcolm T. Stamper........................................ 6,677 2,100
Gary C. Valade............................................ 138,185 125,298
Lynton R. Wilson.......................................... 2,100 600
All Directors and Executive Officers,
including those named above, as a Group................. 3,861,972(5) 3,158,841
-------------------------
A-1
(1) No director or executive officer is the beneficial owner of other equity
securities of the Company or any of its subsidiaries. No director or
executive officer beneficially owns more than 1.0% of the Shares
outstanding.
(2) Unless otherwise indicated, each person included in the group has sole
investment power and sole voting power with respect to the Shares
beneficially owned by such person.
(3) Does not include Shares held by the dividend reinvestment plan and the
trustees under the Company's savings plans.
(4) This column lists the number of Shares which the directors and executive
officers have the right to acquire within sixty days after July 6, 1995
through the exercise of stock options. The Shares shown in this column are
included in the Amount and Nature of Beneficial Ownership column.
(5) Includes 13,497 Shares held by family members of executive officers, the
beneficial ownership of which has been disclaimed by such officers in
reports filed with the Commission.
Consistent with its past practice of awarding stock options under the Plan
to executives annually in July, on July 6, 1995, the Company granted to its
Chief Executive Officer and its next four most highly compensated executive
officers options to purchase the following numbers of Shares: Mr. Eaton,
225,000; Mr. Lutz, 100,000; Mr. Denomme, 70,000; Mr. Valade, 65,000; and Mr.
Cunningham, 52,000. At the same time, the Company granted options to purchase an
aggregate of 815,000 Shares to 25 other executive officers. All options have an
exercise price equal to 100% of the fair market value of such Shares on the date
of grant.
OTHER MATTERS
The Company, in the ordinary course of business, purchases materials,
supplies and services from numerous suppliers throughout the world. Purchases
are made from some concerns of which certain nonemployee directors are directors
or officers. The Company does not consider the amounts involved in such
transactions material in relation to its business and believes that such amounts
are not material in relation to the businesses of such other corporations or the
interests of the nonemployee directors involved.
Mr. Joseph E. Cappy, a Vice President of the Company, is the principal
stockholder of, and made a loan of $1 million in 1994 to, an automobile
dealership which was granted a franchise by the Company to sell Chrysler
products. Mr. Cappy has agreed with the Company to certain restrictions which
preclude his involvement in the management and operation of the dealership.
The Company incurred expenses of approximately $689,000 in 1994 for
advertising and related marketing activities with Black Enterprise magazine. Mr.
Graves is the Chairman, Chief Executive Officer and sole stockholder of the
magazine's ultimate parent company.
A-2
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation awarded to, earned by, or paid
during the three preceding fiscal years to the Company's Chief Executive Officer
and its next four most highly compensated executive officers serving at the end
of 1994 for all services rendered by them to the Company and its subsidiaries in
all capacities in which they served.
[Enlarge/Download Table]
LONG TERM COMPENSATION
----------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ---------- ---------
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
SALARY COMPENSATION OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($)(2) SARS (#) ($)(3) ($)(4)
--------------------------- ---- --------- --------- ------------ ---------- --------- ------------
Robert J. Eaton............ 1994 1,063,750 2,200,000 60,424 214,638 966,641 51,060
Chairman of the Board and 1993 928,750 1,900,000 121,474 202,772 1,809,000 22,290
Chief Executive Officer 1992 597,000 575,000 25,200 550,000 694,328 68,295
Robert A. Lutz............. 1994 808,750 1,600,000 39,319 90,000 869,465 38,820
President and Chief 1993 747,500 1,500,000 75,923 99,301 1,444,500 17,137
Operating Officer 1992 650,000 450,000 28,470 88,733 711,876 14,550
Thomas G. Denomme.......... 1994 496,250 1,000,000 27,942 60,000 470,534 23,820
Vice Chairman and Chief 1993 448,750 900,000 12,240 61,198 756,000 10,770
Administrative Officer 1992 348,333 275,000 14,310 50,452 339,771 8,360
Gary C. Valade............. 1994 387,500 750,000 23,982 60,000 352,901 18,600
Executive Vice President 1993 325,417 680,000 8,100 56,198 506,250 7,810
and Chief Financial 1992 242,500 190,000 8,280 30,226 202,214 5,820
Officer
Theodor R. Cunningham...... 1994 412,500 700,000 24,927 58,470 409,160 19,800
Executive Vice President 1993 381,250 650,000 10,680 54,397 661,500 9,150
-- Sales & Marketing and 1992 325,833 225,000 11,940 48,632 265,952 7,820
General Manager of
Minivan Operations
-------------------------
(1) Compensation deferred at the election of an executive is included in the
year earned.
(2) The amounts for 1994 are dividend equivalents paid in respect of awards of
Shares ("Performance Shares") under the Plan and tax payment reimbursements.
(3) LTIP payouts of Performance Shares for 1994 were in respect of the 1992-1994
performance cycle under the Plan and were based on the Company's performance
in relation to improvements in vehicle quality. Amounts are based on the
fair market value of Shares on the date of delivery.
(4) The amounts for 1994 are matching contributions by the Company under its
employee savings plans.
The Company has entered into Employment Agreements (each, an "Employment
Agreement") with each of Robert J. Eaton, Robert A. Lutz, Thomas G. Denomme and
Gary C. Valade (each, an "Executive"). Except in the case of Mr. Lutz, each
Employment Agreement has an initial three year term commencing on June 1, 1995,
is automatically extended for successive periods of one year each unless either
party gives at least 90 days' written notice to the other of its intention not
to renew, and will expire on the last day of the month in which the Executive
attains age 65, or in the event of the Executive's disability. The term of Mr.
Lutz's Employment Agreement commenced on June 1, 1995, and will expire at the
end of February, 1997, the month in which he will attain age 65. Each
Executive's position, duties, compensation and benefits are set forth in the
Employment Agreements. The Employment Agreements each contain a noncompetition
provision which precludes each Executive from voluntarily terminating his
employment without "Good Reason" and thereafter working for a competitor for at
least one year.
A-3
In the event of the Termination Without Cause (as defined in each
Employment Agreement) of any Executive, or Termination for Good Reason (as
defined in each Employment Agreement) by any Executive, such Executive will be
entitled to receive all salary earned or other compensation due and payable
under the Company's plans, policies or agreements and a lump sum severance
benefit generally equal to two times the sum of the Executive's current annual
base salary and the average of the bonuses payable to the Executive for the
three calendar years preceding his termination, although higher benefits will be
payable in the event of the termination of any Executive (except Mr. Lutz) prior
to June 1, 1996.
Included among the events giving rise to the Executive's right to terminate
his employment for "Good Reason" are a material adverse reduction in his
responsibilities and, with a limited exception, a reduction in his base salary
or annual bonus opportunity.
Copies of the Employment Agreements are filed as Exhibits 12-15 to the
Statement to which this Annex A is attached, and are incorporated herein by
reference. The foregoing description of the Employment Agreements is qualified
in its entirety by reference to the text of the Employment Agreements.
On June 20, 1995, after having considered and discussed the issue at three
prior meetings, the Management Resources Committee ("MRC") approved and adopted
a recommendation that the Board of Directors approve severance agreements for
the Company's 30 officers (including the Executives) that would provide each
such officer a predetermined level of severance benefits if his or her
employment were terminated involuntarily or constructively in connection with a
change of control. The Board of Directors, which had also discussed
preliminarily the adoption of such agreements at two prior meetings, approved
the recommendation of the MRC, with certain modifications, on July 6, 1995.
As approved by the Board, these agreements will require each officer who is
then still actively employed generally to commit to remain employed by the
Company for the period commencing upon a "Potential Change of Control" and
ending not earlier than two months following an actual "Change of Control" or,
if earlier, the first anniversary of the occurrence of a Potential Change of
Control or the date the Board determines that no Change of Control is likely to
occur. For purposes of these agreements, the definition of a Change of Control
will generally be the same as that contained in the Plan (as more fully
described in footnote 1 to the option grant table below), and the definition of
a Potential Change of Control will include the occurrence of certain events,
such as the commencement of certain tender offers (not including the Offer in
its present form as of the date hereof), the execution of a merger or similar
agreement or the commencement of a proxy contest relating to the election of
directors, that would, if the proposed action were effected, result in a Change
of Control.
Under these agreements, the Company will commit to preserve each officer's
existing position, compensation and benefits during such continued period of
employment or, if earlier, until the second anniversary of an actual Change of
Control. If these agreements become effective, the Employment Agreements
described above will be suspended, subject to reinstatement if these severance
agreements cease to be effective due to the fact that no Change of Control has
occurred. If the Company terminates the employment of any such officer after the
agreement becomes effective, or the officer terminates his employment after a
Change of Control for "Good Reason" (e.g., a reduction in his duties or
responsibilities, a reduction in his compensation or level of benefits occurring
after the agreement becomes effective), the officer will receive a single lump
severance payment equal to three times, in the case of Messrs. Eaton, Lutz,
Denomme and Valade, and two times, in the case of all other officers, the sum of
the officer's annual base salary and an amount equal to the average of the
bonuses payable to the officer over a three year period preceding the officer's
date of termination. An officer who receives such severance benefits will also
receive certain other payments and benefits, intended to compensate the officer
for other benefits foregone or lost due to such termination.
In the event that the payments made to the officer under the agreement
result in the officer being subject to the excise tax on certain "excess
parachute payments" payable under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company will also pay such officer an
additional amount such that the officer receives the same net after-tax benefit
as the officer would have received had no excise tax been applicable. If such
additional payments are required, the Company will not be able to deduct such
A-4
additional payments for Federal income tax purposes and will also be denied such
a deduction for some or all of the other payments made pursuant to this
agreement and its other plans and policies.
A term sheet setting forth the principal terms of the severance agreements
is filed as Exhibit 16 to the Statement to which this Annex A is attached, and
is incorporated herein by reference.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock options granted
in 1994 to the named executive officers. No SARs were granted to executive
officers in 1994.
[Enlarge/Download Table]
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR PRESENT
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION VALUE
NAME (#)(1)(2) FISCAL YEAR ($/SH) DATE ($)(3)
-------------------------------------- ------------ ------------ ----------- ---------- ---------
Robert J. Eaton....................... 185,000 5.65% 47.75 07-06-04 2,408,585
29,638 0.91% 61.38 12-02-02 467,419
Robert A. Lutz........................ 90,000 2.75% 47.75 07-06-04 1,171,744
Thomas G. Denomme..................... 60,000 1.83% 47.75 07-06-04 781,163
Gary C. Valade........................ 60,000 1.83% 47.75 07-06-04 781,163
Theodor R. Cunningham................. 48,000 1.47% 47.75 07-06-04 624,930
1,764 0.05% 59.94 12-04-01 27,089
3,578 0.11% 47.38 06-12-01 46,103
5,128 0.16% 47.38 06-10-02 66,075
-------------------------
(1) All amounts shown represent the number of Shares which may be acquired upon
the exercise of stock options. Options for a total of 3,271,896 Shares were
granted to directors, officers and employees in fiscal 1994. Each option was
granted at an exercise price of not less than 100% of fair market value of
the Shares on the date the option was granted. An option must be exercised
within ten years after the date of grant (or, if less, within five years
after retirement) and is exercisable on and after the first anniversary of
the grant to the extent of not more than 40% of the number of Shares covered
by the option, on and after the second anniversary of the grant to the
extent of not more than 70% thereof, and on and after the third anniversary
of the grant to the extent of 100% thereof. Exercise of an option after
termination of employment is subject to, among other things, the conditions
precedent that the optionee neither takes other employment or renders
services to others without the written consent of the Company, nor conducts
himself in a manner adversely affecting the Company. The exercise price may
be paid in cash or by delivery of Shares. Tax withholding obligations
related to exercise may be paid by a reduction in the number of Shares
received, subject to certain conditions. The Stock Option Committee may
provide, at the time it grants an option, that if an optionee, while
employed by the Corporation, surrenders Shares owned for a minimum of six
months in payment of the exercise price of that option, then the optionee,
subject to the availability of Shares and other restrictions, will be
entitled to receive a new stock option (a "Reload Option") covering a number
of Shares equal to the number so surrendered. Under the Plan as currently
administered, Reload Options may not be granted in connection with the
exercise of a Reload Option. None of the options granted to the named
executive officers in 1994 contain a Reload Option feature. See also
footnote 2 below.
In the event of a Change in Control (as defined below), (i) all options and
SARs will become fully exercisable and vested (provided that SARs held by
executive officers and directors must, except in the event of death or
disability, be held for at least six months prior to exercise), (ii) Limited
Stock Appreciation Rights ("LSARs") will be exercisable during the 60-day
period following the Change in Control (provided that LSARs held by
executive officers and directors must, except in the event of death or
disability, be held for at least six months prior to a Change in Control),
and (iii) any participant terminated by the Company within two years
immediately following a Change in Control will be permitted to exercise any
option, SAR or LSAR for a period of three months after such termination or
until the stated term thereof, whichever is shorter. Upon the exercise of a
LSAR, the holder is entitled to receive an amount equal to (i) the Change in
Control Stock
A-5
Appreciation (as defined below) times (ii) the number of Shares in respect
of which such LSAR shall have been exercised.
A Change in Control is deemed to have occurred if (i) any person becomes the
owner of 20% or more of the combined voting power of the Company's then
outstanding securities (unless the 20% threshold is crossed due to an
acquisition of securities directly from the Company); (ii) during any
two-year period the majority of the membership of the Board, subject to
certain conditions, ceases for any reason to constitute a majority of the
Board; (iii) the stockholders approve a merger of the Company with any other
corporation (other than a merger which would result in the voting securities
of the Company continuing to represent, in combination with voting
securities held by any employee benefit plan of the Company, at least 80% of
the combined voting power of the Company or the surviving entity outstanding
immediately after such merger); or (iv) the stockholders approve a plan of
complete liquidation of the Company or an agreement for the sale of
substantially all its assets. The Change in Control Stock Appreciation to be
received in settlement of LSARs with respect to any Share will be an amount
equal to the excess, if any, of (i) the higher of (x) the market value of
such Share on the date the LSAR is exercised or (y) the highest price paid,
or its equivalent, for Shares in the transaction constituting the Change in
Control or, in the case of a Change in Control resulting from a change in
the membership of the Board, the average of the closing price of the Shares
for the 30-day period prior to such Board Change in Control, over (ii) the
price specified in the LSAR on the date of grant or, in the case of a LSAR
related to an option, the price specified in the related option.
(2) All but the first grant listed for each named executive officer are grants
of Reload Options resulting from the exercise of an initial option granted
before 1994 containing a Reload Option feature. Each Reload Option was
granted in connection with the exercise of an existing option by surrender
of Shares then owned by the executive in payment of the exercise price of
the existing option. Such Reload Option may be exercised (i) for the number
of Shares shown, (ii) at the fair market value of such Shares on the date of
such surrender, (iii) six months after the date of grant, and then only for
the remaining term of the original option, and (iv) only while the fair
market value of Shares is at least 25% higher than on the date of grant of
the Reload Option.
(3) These values were determined under the Black-Scholes option pricing model
based on the following assumptions: expected stock price volatility of 26%;
interest rate based on the five year Treasury bond rate; exercise in the
fifth year; and dividends at the rate in effect on the date of grant. No
adjustments were made for nontransferability or risk of forfeiture. The
Company's use of this model does not constitute an endorsement or an
acknowledgment that such model can accurately determine the value of options
or SARs. No assurance can be given that the actual value, if any, realized
by an executive upon the exercise of these options will approximate the
estimated values established by the Black-Scholes model.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information concerning stock option exercises
in 1994 by the named executive officers and the value of their unexercised
options at December 31, 1994. No named executive officer exercised SARs in 1994
and no such officer currently holds any SARs.
[Enlarge/Download Table]
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------- ----------- ---------- ----------- ------------- ----------- -------------
Robert J. Eaton.......... 60,000 1,863,600 313,410 434,000 5,208,276 5,267,750
Robert A. Lutz........... 0 0 412,034 157,500 10,365,255 961,875
Thomas G. Denomme........ 38,100 1,439,532 41,698 102,000 522,180 553,500
Gary C. Valade........... 0 0 79,998 95,100 1,804,041 414,075
Theodor R. Cunningham.... 38,100 1,406,232 189,793 92,706 4,495,207 531,456
-------------------------
(1) The mean of the high and low price of a Share on the NYSE was $49.50 on
December 30, 1994.
A-6
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table provides information concerning the number of Shares
awarded in 1994 to the named executive officers which they may receive in the
future depending on the extent to which long-term corporate goals are achieved.
[Enlarge/Download Table]
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) (#) (#) (#)
-------------------------------------------- --------- ------------ --------- ------ -------
Robert J. Eaton............................. 11,600 3 years 5,800 11,600 14,500
Robert A. Lutz.............................. 7,300 3 years 3,650 7,300 9,125
Thomas G. Denomme........................... 4,400 3 years 2,200 4,400 5,500
Gary C. Valade.............................. 3,600 3 years 1,800 3,600 4,500
Theodor R. Cunningham....................... 3,600 3 years 1,800 3,600 4,500
-------------------------
(1) These awards reflect the number of Performance Shares payable to each of the
named executive officers under the Plan at the end of the 1994-1996
performance cycle upon achievement of the corporate goal established for
that cycle. Under the Plan, a target award (expressed as a percentage of
salary) is established for each such officer. Each may earn nothing, or a
number of Performance Shares ranging from a set minimum to a maximum of 125%
of the target award, based on the Company's performance in relation to
improvements in vehicle quality, which is the performance goal established
for such cycle. During such cycle, each of the named executive officers is
also entitled to receive amounts equal to the cash dividends that would have
been paid to him if one Share for every Performance Share awarded to him had
been issued to him at the time of such dividend.
(2) In the event of a Change in Control (as defined above in footnote 1 to the
Option/SAR Grants in Last Fiscal Year table) the performance objectives
applicable to any award of Performance Shares under the Plan will be deemed
attained, any other restrictions applicable to such Shares will be waived
and such Shares will be deemed fully vested.
PENSION PLAN TABLE
The Company's executive officers receive benefits based on years of service
and salary under the tax-qualified Chrysler Salaried Employees' Retirement Plan
(the "Retirement Plan"). Any portion of such benefits not payable under the
Retirement Plan due to limitations imposed by the Internal Revenue Code of 1986
on tax-qualified plans are payable under the nonqualified Supplemental Executive
Retirement Plan ("SERP"). The following table shows the aggregate annual
benefits (including 50% of estimated primary Social Security benefits), based on
years of service and salary, that would be payable under the Retirement Plan and
the SERP to executive officers currently retiring at age 65, assuming they
contribute continuously to the plans after age 35 when eligible.
[Enlarge/Download Table]
ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED(2)
ASSUMED FINAL AVERAGE -------------------------------------------------------------------
ANNUAL SALARY(1) 10 15 20 25 30 35
------------------------------- ------- ------- ------- ------- ------- -------
$ 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) Salary averaged over the consecutive five-year period during which salary
was highest in the 15 years immediately preceding retirement. The salaries
for each of the Company's five highest paid executive officers in 1994 are
set forth for each of the last three years in the Summary Compensation
Table.
A-7
(2) Except for primary Social Security benefits, annual benefits are payable for
the lifetime of the retiree with a guaranteed payment period of 10 years. If
expressed as straight life annuity amounts the annual benefits would be
higher in amounts varying from approximately 5% to 8%.
As of February 28, 1995, the executives named in the Summary Compensation
Table have accrued the following years of service under the Retirement Plan and
the SERP: Mr. Eaton, 8 years, consisting of 3 years of service under the
Retirement Plan and the remainder as additional years of service under the SERP
pursuant to his employment agreement with the Company; Mr. Lutz, 13 9/12 years,
consisting of 8 9/12 years of service under the Retirement Plan and the
remainder as additional years of service granted by the Company under the SERP
Plan; Mr. Denomme, 14 6/12 years of service under the Retirement Plan; Mr.
Cunningham, 13 7/12 years of service under the Retirement Plan; and Mr. Valade,
17 4/12 years of service under the Retirement Plan.
In addition to providing a portion of the benefits based on years of
service and salary reflected in the Pension Table, the SERP provides other
retirement benefits to an executive based on a percentage of the incentive
compensation awards (annual bonus and Performance Shares) paid to that executive
each year. The Management Resources and Compensation Committees may establish a
percentage of those awards ranging from 0 to 6%. If the executive officers named
in the Summary Compensation Table remain with the Company until their retirement
at age 65, they could become entitled to receive the following estimated annual
retirement benefits under the SERP based on those awards (the portion accrued to
date is shown in parentheses): Mr. Eaton, $850,400 ($293,142); Mr. Lutz,
$369,000 ($299,496); Mr. Denomme, $455,000 ($211,549); Mr. Valade, $420,000
($140,966); and Mr. Cunningham, $586,200 ($157,429). These estimates were
computed based on the following assumptions for each executive through age 65:
(a) annual base salary increases of 6%, (b) annual incentive compensation equal
to 120% of annual base salary; and (c) a 3% factor applied to incentive
compensation. The nonaccrued amounts in the annual retirement benefit estimates
shown above will change in proportion to percentage differences between actual
award levels through age 65 and the assumed levels set forth in (b) and (c)
above.
The Company has amended its SERP to provide that, in the event of a Change
of Control (as defined in the Plan), Messrs. Eaton, Denomme and Valade will be
deemed to be eligible for special early retirement under the terms of the SERP.
As of July 1, 1995, none of Messrs. Eaton, Denomme or Valade would be eligible
to retire early under generally applicable terms of the SERP based on his age
and service credited as of such date.
A copy of the SERP is filed as Exhibit 17 to the Statement to which this
Annex A is attached and is incorporated herein by reference. The foregoing
description of the SERP is qualified in its entirety by reference to the text of
the SERP.
A-8
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EXHIBIT DESCRIPTION PAGES
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Exhibit 1.1 June 30, 1995 Letter to Mr. Iacocca
Exhibit 1.2 July 6, 1995 Letter to Mr. Iacocca
Exhibit 2 Chrysler Corporation 1991 Stock Compensation Plan
Exhibit 3 April 12, 1995 Tracinda Press Release
Exhibit 4 April 12, 1995 Letter to the Company
Exhibit 5 April 24, 1995 Company Press Release
Exhibit 6 April 24, 1995 Letter to Mr. Kerkorian
Exhibit 7 April 25, 1995 Letter to Mr. Eaton
Exhibit 8 May 31, 1995 Tracinda Press Release
Exhibit 9 Letter to Stockholders of the Company, dated July 6, 1995
Exhibit 10 Press Release issued by the Company on July 6, 1995
Exhibit 11 Order Approving Disclaimer issued by the Michigan Commissioner of
Insurance
Exhibit 12 Employment Agreement, dated as of June 1, 1995, between the Company
and Robert J. Eaton
Exhibit 13 Employment Agreement, dated as of June 1, 1995, between the Company
and Robert A. Lutz
Exhibit 14 Employment Agreement, dated as of June 1, 1995, between the Company
and Thomas G. Denomme
Exhibit 15 Employment Agreement, dated as of June 1, 1995, between the Company
and Gary C. Valade
Exhibit 16 Term Sheet Relating to Severance Agreements
Exhibit 17 Supplemental Executive Retirement Plan
Dates Referenced Herein and Documents Incorporated by Reference
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