Chrysler 2003 Annual Report Download - page 42

41 Report on Operations
Stock Option Plans
Thus far, the Board has approved Stock Option Plans offered
to about 900 managers of the Group’s Italian and foreign
companies who are qualified as “Direttore” or have been
included in the Management Development Program for
high-potential managers. Plan regulations share these
common features:
❚Options are granted to individual managers on the basis
of objective parameters that take into account the level
of responsibility assigned to each person and his or her
performance.
❚If employment is terminated or an employee’s relationship
with the Group is otherwise severed, options that are not
exercisable become null and void. However, vested options
may be exercised within 30 days from the date of termination,
with certain exceptions.
❚The option exercise price, which is determined based on
the average stock market price for the month preceding
the option grant, can vary as a result of transactions affecting
the Company’s capital stock. It must be paid in cash upon
the purchase of the underlying shares.
❚The options are normally exercisable starting one year
after they are granted and for the following eight years,
but during the first four years, exercise is limited to annual
tranches, which may be accumulated, of no more than 25%
of the total granted.
A total of 1,045,943 options were granted in 2003, to purchase
a corresponding number of shares within 2010. For the first
three years their exercise is subject to limits, which include
the achievement of predetermined objectives. In consideration
of the options previously granted under the aforesaid plans
and that have since expired upon termination of employment,
a total of 12,697,743 option rights corresponding to the same
number of shares represent treasury stock to be assigned to
the holders of options pursuant to the conditions envisaged
in the specific Regulations.
In addition, the Board of Directors resolved to grant
Mr. Giuseppe Morchio, as the only variable portion of his
compensation as Chief Executive Officer, options for the
purchase of 13,338,076 Fiat ordinary shares at the price of
5.623 euros per share, exercisable from March 27, 2004 to
March 27, 2010. In each of the first five years, he accrues the
right to purchase a maximum of 20% of the total. Two-thirds
of the options that will vest between March 27, 2005 and March
27, 2008 will be exercisable only if certain predetermined
profitability targets are reached during the reference period.
The table below summarizes the information on options granted
to employees outstanding at December 31, 2003:
2003 2002
Number Average Market price Number Average Market price
of shares exercise price (*) of shares exercise price (*)
Options outstanding on 1/1 15,791,700 18.8 7.7 12,608,500 24.41 17.92
Options granted during the year 1,045,943 6.69 6.69 6,420,000 11.32 11.32
Expired options 4,139,900 – – 3,236,800 – –
Options outstanding on 12/31 12,697,743 16.46 6.14 15,791,700 18.8 7.7
Options exercisable on 12/31 5,537,925 20.45 6.14 3,784,575 25.86 7.7
(*) Following the capital increases in January 2002 and July 2003, the exercise prices were adjusted by applying the factors calculated by Borsa Italiana, in the amount of 0.98543607 and
0.93167321, respectively.