Chrysler 2001 Annual Report Download - page 75

75
Report on Operations – Stock Option Plans
In keeping with what has become an established international
practice, the Board of Directors agreed that stock options
provide the best means of strengthening management’s
loyalty, because they give executives a stake in the Company’s
operating success and in its ability to create growing value for
the stockholders. Consequently, as allowed under a resolution
adopted by the Extraordinary Stockholders’ Meeting on June
22, 1998, the Board approved four Stock Option Plans that
will be offered to about 900 managers of the Group’s Italian
and foreign subsidiaries who are qualified as “Direttore” or
have been included in the Management Development Program
for high-potential managers. Both Plans 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.
A total of 1,248,000 options, giving the holder the right to
purchase ordinary Fiat shares at a price of 28.45 euros per
share, were granted in March 1999. Half of these options may
be exercised on or after April 1, 2001, with the remaining 50%
exercisable on or after April 1, 2002. All options expire on
March 31, 2007.
A total of 5,158,000 options, giving the holder the right to
purchase ordinary Fiat shares at a price of 30.63 euros per
share, were granted in February 2000. These options may be
exercised between February 18, 2001 and February 18, 2008.
However, during the first four years, the options may only be
exercised in cumulative annual tranches not exceeding 25%
of the total number awarded.
In 2001, the Board of Directors approved two Stock Option
Plans proposed by the Compensation Committee. Under the
new plans, ordinary Fiat shares may be purchased at a price
equal to the average stock market price for the month
preceding the date of the option grant.
The first of these two Plans allows senior managers to
buy 785,000 ordinary Fiat shares at a price of 27.07 euros
per share. The second Plan awards options to purchase
5,417,500 ordinary Fiat shares at a price of 18 euros per
share. The grantees may exercise these options between
2002 and 2009. However, during the first four years, the
options may only be exercised in cumulative annual tranches
not exceeding 25% of the total number granted.
Pursuant to these Plans, a total of 5,506,000 shares will be
issued through a special dedicated capital increase, which the
Board has already approved. In addition, 7,102,500 treasury
shares will be sold to option holders in accordance with the
provisions of the applicable Regulations.
On several occasion, the Board of Directors further granted
the Chairman and the Chief Executive Officer options to purchase
ordinary Fiat shares. Detailed information on these transactions
is provided in the notes to the financial statements.
The table below summarizes the data for the options
outstanding at December 31, 2001:
Stock Option Plans
2000 2001
Number Average Market Number Average Market
of shares exercise price (*) price of shares exercise price (*) price
Options outstanding on 1/1 1,248,000 28.45 30.09 6,406,000 30.20 26.34
Options awarded during the year 5,158,000 30.63 30.63 6,202,500 19.15 19.15
Options outstanding on 12/31 6,406,000 30.20 26.34 12,608,500 24.77 17.92
Options exercisable on 12/31 – – – 1,913,500 29.92 17.92
(*) Average exercise price of options. As of January 14, 2002, following the capital increase carried out for option exercise purposes, the exercise prices have been adjusted by a factor
determined by Borsa Italiana, which amounts to 0.98543607.