Chrysler 2008 Annual Report Download - page 174

In 2004, a LTI award for which payout was tied to the achievement of specified performance objectives was approved under the
CNH EIP for selected key employees and executive officers. This award for the 2004-2006 performance cycle provided an
opportunity to receive an accelerated payment of 50% of the targeted award after the first two years of the performance cycle.
Objectives for the first two years of the performance cycle were met and an accelerated payment of cash and 66,252 shares were
issued in 2006. Ultimately, the cumulative results for the 2004-2006 performance cycle were achieved and the remaining award was
issued in early 2007.
A second 3 year LTI award for the 2005-2007 performance cycle was granted in 2005. The results for the 2005-2007 performance
cycle were partially achieved and the award was issued in early 2008 upon approval of the 2007 results by the Board of Directors
of CNH.
In connection with the new performance-based plans which were approved in 2006, CNH introduced the Top Performance Plan
(“TPP”), under which CNH has granted performance based, non-vested share awards to approximately 200 of the Company’s top
executives. The TPP performance shares vest only if specified targets are achieved in 2008, 2009, or 2010. The number of shares that
vest will decrease by 20% each year the specified targets are not achieved. If specified targets are not achieved by 2010, the shares
granted will not vest.
TPP performance shares were granted in 2006, 2007 and 2008. The fair value of TPP awards have been estimated for each potential
service period over which the award may vest. The total estimated expense varies depending on the period during which targets
are expected to be achieved.
In 2006 and 2007, CNH recognised expense for TPP awards based an assumption that the specified performance targets would be
achieved in 2009. In 2008, CNH did not achieve these performance targets and reversed all previously recognized share-based
compensation expense for €7 million (US$11 million) as a result of a change in estimate.
The following table summarizes the outstanding performance shares under the CNH EIP as of 31 December 2008:
2008-2010 TPP 2005-2007 LTI 2004-2006 LTI
2008 awards 2007 award 2006 award 2005 award 2004 award
Granted 100,000 240,500 4,325,000 195,946 235,134
Cancelled – – (2,162,500) – –
Vested – – – (86,290) (111,551)
Forfeited – (5,000) (627,500) (109,656) (123,583)
Outstanding 100,000 235,500 1,535,000 – –
As of 31 December 2008, there were 9,433,477 CNH Global N.V. common shares (9,916,370 CNH Global N.V. common shares at
31 December 2007) available for issue under the CNH EIP.
The Black-Scholes pricing model was used to calculate the fair value of stock options by CNH – Case New Holland Sector. The
weighted-average assumptions used under the Black-Scholes pricing model were as follows:
2008 2007
Directors’ Equity incentive Directors’ Equity incentive
plan plan plan plan
Option life (years) 5.0 3.6 5.0 4.0
Expected volatility of CNH Global N.V. shares (%) 45.0 40.50 44.56 38.3
Expected dividend yield (%) 0.9 0.9 1.1 1. 0
Risk-free interest rate (%) 2.4 3.0 4.3 4.4
Fiat Group Consolidated Financial Statements at 31 December 2008 173