Chrysler 2007 Annual Report Download - page 337

Items on the Agenda and Related Reports and Motions336
If the plan is approved by the Stockholders Meeting the Board
of Directors will be able to grant the financial instruments
referred to, in whole or in part and on one or more occasions,
by selecting from time to time the form of stock options or
stock appreciation rights which it considers to be the most
appropriate. The plan is administered by Fiat S.p.A. in the
person of the Chief Executive Officer, who within the limits of
the overall amount, is entrusted with determining the number
of instruments to be granted and selecting the beneficiaries
and informing the Compensation Committee thereof. The strike
price will be equal to the arithmetical average of the official
prices posted on the Italian Stock Exchange in the thirty
calendar days prior to the grant date.
Information on the implementation of the plan, in terms of
types and quantity of financial instruments granted, vesting
period and strike price will be communicated to the market
on the grant date in compliance with applicable laws and
regulations.
Terms and conditions of the financial instruments to be granted
The incentive plan will give Fiat the flexibility to grant a
maximum aggregate amount of 4 million financial instruments
either in the form of stock options or of stock appreciation
rights to be awarded periodically through the end of 2010.
The total number of 4 million financial instruments may
therefore be reached through the grant of stock options or
stock appreciation rights or of a number of both types of
financial instruments such as not to exceed the maximum
amount set. Stock appreciation rights entitle beneficiaries
compensation based on the increase in the company’s ordinary
stock price. Each stock appreciation right will give right to a
compensation - to be settled in cash (also through the prior
sale of ordinary shares) or in ordinary shares – equal to the
difference between the company’s ordinary stock official price
posted on the Italian Stock Exchange on the exercise date and
the strike price.
Stock options provide its beneficiaries with the right to
purchase one Fiat ordinary share for each exercised option at a
price equal to the strike price. The transaction is settled
through physical delivery of the Fiat ordinary shares. The price
must be paid in cash by the employee upon the purchase of
the underlying shares.
The stock appreciation rights and the stock options will have a
vesting period with equal annual quotas (pro rated if assigned
during the year). The right of exercise will be subject to the
achievement of annual performance criteria and to the
permanence of an employment agreement with the Group until
the date of approval of the 2010 Consolidated Financial
Statements, excepting retirement. These financial instruments
will be exercisable starting from 2011, on the date of approval
of the Group consolidated financial statements for fiscal 2010,
and will expire in November 2014. The strike price, for both
types of financial instruments, will be equal to the arithmetical
average of the official prices posted on the Italian Stock
Exchange in the month preceding the grant date and can be
modified, by the Board of Directors, as a result of transactions
affecting the Company’s capital stock through the use of the
adjustment index determined by Aiaf. As an alternative and if it
leads to the same final result the adjustment can be made to
the number of financial instruments, leaving the strike price
unaltered.
In the case of stock options or stock appreciation rights settled
in ordinary shares, the plan will be serviced with treasury shares
without the issuance of new shares and will not therefore have
dilutive effects. Stock appreciation rights and stock options will
be in the name of the owner and non-transferable, except
situations involving the rights of succession, while the ordinary
shares arising will not be liable to any restrictions other than
those provided by laws and regulations on the use of inside
information. In this respect the Board of Directors may regulate
the periods immediately prior to the company’s main deadlines.
The costs of implementing the plan cannot at present be
determined. Said costs, which will be calculated by using
valuation models based on market parameters, will be a
function of the number and type of instruments granted, the
mentioned vesting conditions, the strike price and the price of
Fiat ordinary shares. This calculation will be made at the grant
date with the amount arising being accounted on a pro rated
basis over the vesting period.
Finally, we remind you that, in addition to the incentive plan
that you have been asked to approve, other stock option plans
have been granted to directors and executives. Such plans
were approved by the Company starting from 1999 for a total
of 34,382,000 options outstanding as of February 26, 2008,
3,919,500 of which are already exercisable. 10,000,000 of the