Incentive Compensation Plan - Daimler Chrysler Corp.

 
                              CHRYSLER CORPORATION
                          INCENTIVE COMPENSATION PLAN
 
                           Effective January 1, 1970
                       (As Amended Through July 30, 1998)
 
1. PURPOSE
 
The purpose of the Chrysler Corporation Incentive Compensation Plan (below
called the Plan or this Plan) is to encourage the continued and energetic
efforts of officers and key salaried employees (below called collectively
Employees) of Chrysler Corporation (below called Chrysler) and its subsidiaries
(Chrysler and its subsidiaries collectively below called the Corporation) on
behalf of the Corporation by enabling them to share in the profits of the
Corporation, in accordance with the resolution adopted by the Stockholders of
Chrysler at their Annual Meeting on April 16, 1929, as they amended it at their
Annual Meeting on April 17, 1956, and at their Special Meeting on April 16,
1963, and at their Annual Meetings on April 15, 1969, April 18, 1972, June 7,
1984, May 20, 1993 and May 19, 1994, and as it may be further amended from time
to time (below called the Stockholders' Resolution).
 
2. INCENTIVE COMPENSATION COMMITTEE
 
The Board of Directors of Chrysler (below called the Board) shall appoint
not less than three Directors of Chrysler, none of whom shall be entitled to
receive funds or securities pursuant to any Incentive Plan (as defined in the
Stockholders' Resolution) of Chrysler, to be an Incentive Compensation Committee
(below called the Committee) to administer this Plan. Each member of the
Committee shall be a "Non-Employee Director" (which term as used herein shall 
have the meaning ascribed to it in Rule 16b-3 under the Securities Exchange Act
of 1934, or in any amendment thereof in effect at the relevant time). The 
Committee may designate a Secretary, one or more Assistant Secretaries and an
Administrator, none of whom need be Directors of Chrysler. Subject to the
provisions of this Plan, the Committee shall have authority, in its discretion,
to prescribe, amend, and rescind rules and regulations relating to this Plan.
 
3. INCENTIVE COMPENSATION FUND
 
For each fiscal year the Board shall authorize and approve the amount to be
provided out of the earnings of the Corporation for such fiscal year for
purposes of this Plan and the Chrysler Corporation Long-Term Incentive Plan
(below called the Long-Term Plan, this Plan and the Long-Term Plan collectively
below called the Plans), not to exceed the amount permitted by the Stockholders'
Resolution, and shall authorize and direct the proper officers of the
Corporation (a) to set aside such amount and to add to it (b) any amount
authorized and approved by the Board for any prior fiscal year but not
previously awarded and (c) any amount awarded for any prior fiscal year that has
been forfeited. The sum of all such amounts (or such part thereof as the Board
may determine should be made available for awards for any fiscal year) shall be
the Incentive Compensation Fund for that fiscal year (below called the Fund).
Any part of such sum that the Board determines shall not be made available for
awards for any fiscal year shall be carried forward and may be awarded in a
subsequent fiscal year.
 
4. ELIGIBILITY
 
The Committee, in its sole and absolute discretion, shall have full power
to determine by salary, salary grade, salary band, classification, or otherwise,
the Employees (including those who have retired or died or have been granted a
leave of absence or were laid off during the year) who shall be eligible for
consideration to participate in the Plans in any year, except that the Committee
may not determine as eligible for consideration to participate in the Plans any
Employee who was eligible at any time in that year to participate in any other
Incentive Plan of the Corporation as defined in the Stockholders' Resolution.
Employees shall not be ineligible for consideration to participate in the Plans
by reason of their eligibility to participate in any Performance

 
Award Plan or in any Savings and Investment Plan, both as defined in the
Stockholders' Resolution, or in any Stock Option Plan, or any Performance Award
Plan adopted under any Stock Option Plan, of Chrysler or any of its subsidiaries
or in any successor plan or programs adopted to replace any such plan or
programs.
 
5. SELECTING PARTICIPANTS AND DETERMINING AWARDS
 
Each year the Committee, in accordance with such rules as it may prescribe,
shall:
 
(a) select from the Employees eligible for consideration to
participate in the Plans those Employees who are to participate for that
year;
 
b) award under this Plan to certain of the Employees so selected
(below called Participant) such share of the Fund as the Committee shall
determine (below called an Award); provided, however, that the maximum
amount of such share that may be awarded to a Participant for a given
fiscal year shall not exceed a dollar amount equal to 0.15% of the
Corporation's consolidated net earnings for such year as determined in
accordance with the Stockholders' Resolution; and

(c) award under the Long-Term Plan to certain of the Employees so
selected, in accordance with the terms of the Long-Term Plan, such share of
the Fund as the Committee shall determine.
 
An Employee may receive an Award under this Plan and an award under the
Long-Term Plan in the same year.
 
The Committee shall have full and final authority in performing these
duties, but shall report to the Board the share of the Fund awarded to each
Employee under this Plan and under the Long-Term Plan, expressed in dollar
amounts and/or percentage of base salary or performance share awards or award
units or otherwise, as the Committee shall determine.
 
Notwithstanding anything else contained in this Plan to the contrary, if
any Award is intended at the time of grant to be other performance based
compensation within the meaning of Section 162(m)(4)(C) of the Internal Revenue
Code of 1986, as the same may be amended from time to time (the "Code"), to the
extent required to so qualify any Award hereunder, the Committee shall not be
entitled to exercise any discretion otherwise authorized under this Plan with
respect to such Award if the ability to exercise such discretion (as opposed to
the exercise of such discretion) would cause such Award to fail to qualify as
other performance based compensation.

6.      CORPORATE PERFORMANCE GOALS

The Committee may establish one or more corporate performance goals
("Performance Goals") each year relating to: quality, customer satisfaction,
profitability, net margin as a percentage of revenue, return on sales, return on
capital, breakeven, productivity, and/or debt to capitalization.  A Performance
Goal may consist of such criteria, terms and conditions as the Committee may
designate. The Committee shall have the discretion to add additional goals and
to modify any objectives or performance levels designated in relation to
previously established goals.  If an Award for a given year is intended to be
qualified performance-based compensation under Section 162(m) of the Code, then
the related Performance Goal and Award levels shall be established, as described
below, no later than the 90th day of such year.

7.      AWARDS

At the time it establishes a Performance Goal, the Committee shall
determine that the attainment of specified levels of performance in respect of
such Performance Goal shall correspond to specified Award levels, subject to
reduction as described below.  Awards shall be expressed as a percentage of a
Participant's base salary (or the average base salary or midpoint of the salary
range of a class of Employees) in effect at the time the Performance Goal is
established.  In no event, however, may an Award exceed the maximum amount
referenced in Section 5(b) above.  An Employee who first becomes eligible for
an Award, and is selected as a Participant, after the beginning of a given year
may receive an Award established on a pro rata basis for the number of months
he or she is eligible during such year.

8.      CORPORATE PERFORMANCE EVALUATION

The Committee shall confirm the performance level attained by the
Corporation in respect of the Performance Goal established for a given year and
the corresponding Awards to be paid in respect of such performance; provided,
however, that the Committee, in its sole discretion, may reduce the amount of
any Award otherwise payable in respect of such performance.


 
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9. PAYING AND EARNING OUT OF AWARDS UNDER THIS PLAN
 
Awards under this Plan shall be paid to Participants in one lump sum,
unless the Committee, in its discretion, determines that an Award shall be paid
in installments.
 
A Participant will have earned out under this Plan an Award payable in one
lump sum, or the first installment of an Award payable in installments, if his
or her employment with the Corporation has been continuous (a) up to the date of
payment of the Award payable in one lump sum, or of the first installment of the
Award payable in installments, as the case may be, or (b) up to the date of the
Participant's retirement or death if he or she should retire or die before the
date of such payment, or (c) up to the date the Participant was granted a leave
of absence if such leave of absence was granted before the date of such payment,
or (d) up to the date the Participant was laid off if he was laid off before the
date of such payment. A Participant will have earned out a subsequent
installment if his or her employment with the Corporation has been continuous up
to and including (a) the December 31 immediately preceding the date the
installment is payable, or (b) the date of the Participant's death if he or she
should die before such December 31, or (c) such date as the Corporation may
determine under all other circumstances.
 
A Participant whose employment with the Corporation is terminated other
than by death will not thereafter earn out under this Plan any installment of an
Award payable in installments unless the Corporation expressly consents in
writing to waive the condition of continuous employment with the Corporation,
and the Participant thereafter will earn out each installment only if up to and
including the December 31 immediately preceding the date the installment is
payable the Participant neither (a) takes other employment or renders services
to others without the written consent of the Corporation, nor (b) conducts
himself or herself in a manner adversely affecting the Corporation, the
determination by the Committee that a Participant has so conducted himself or
herself to be final and conclusive.
 
Any installment which a Participant fails to earn out under this Plan shall
be forfeited and included in the Fund for a subsequent year as provided in
paragraph 3.
 
Nothing in this Plan shall prevent the Corporation from discharging or
requesting the resignation of any Participant.
 
An Award payable in one lump sum, or the first installment of an Award
payable in installments, shall be paid to the Participant on such date as the
Committee shall determine, and if the Participant complies with the conditions
for earning out a subsequent installment, it shall be paid to him or her on such
date in the year in which it is payable as the Committee shall determine.
 
Any lump sum payment or installment earned out under this Plan and payable
to a Participant who is deceased shall be paid to his or her legal
representative in such manner and at such time as it would have been paid to the
Participant were he or she then alive and in the employ of the Corporation.
 
10. FORM OF PAYMENTS UNDER THIS PLAN
 
The Committee in its sole and absolute discretion shall determine for any
year whether under this Plan the lump sum payment or the installment of any
Awards payable in that year shall be paid in cash or in shares of Chrysler
stock, or partly in cash and partly in shares of Chrysler stock, the shares to
be shares held by the Corporation in its treasury or purchased by the
Corporation in the market for distributing in place of cash, the shares to be
valued for this purpose in accordance with the Stockholders' Resolution, with
cash in place of fractional shares.
 
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11. DEFERRAL OF PAYMENT
 
A Participant may voluntarily elect to defer receipt of payment under this
Plan of all or any part of an Award payable in one lump sum or of any
installment of an Award payable in installments upon such terms and conditions
as the Committee may prescribe.
 
12. COSTS
 
All costs of administering the Plans shall be borne by the Corporation and
shall not be charged against the Fund.
 
13. PAYMENTS UPON A CHANGE IN CONTROL
 
Notwithstanding any other provisions hereof, if a "Change in Control" (as
defined in paragraph 13(D) hereof) of Chrysler shall occur, the following shall
be paid, in cash, no later than the tenth day following such Change in Control
in the case of a Change in Control as defined in paragraph 13(D)(i), (ii) or
(iv) hereof, or no later than the tenth day following consummation of the
Change in Control transaction in the case of a Change in Control as defined in
paragraph 13(D)(iii) hereof: (a) all unpaid installments of an Award payable 
in installments pursuant to paragraph 9 of this Plan, (b) all voluntary
deferrals made by a Participant pursuant to paragraph 11 of this Plan (other
than deferrals made into the Chrysler Corporation Salaried Employees Savings
Plan and the Chrysler Corporation Salaried Employees Supplemental Savings Plan,
which deferrals will be governed by the terms of such plans), (c) all unpaid
Awards made (including any made pursuant to paragraph 13(C) hereof) for any
completed fiscal year which preceded the Change in Control, and (d) "Change in
Control Awards" (as determined pursuant to paragraph 13(A) hereof).
 
A. CHANGE IN CONTROL AWARDS. Upon a Change in Control of Chrysler, each
Employee (below called a "Change in Control Participant") eligible pursuant to
paragraph 4 hereof for consideration to participate in the Plans for the fiscal
year in which the Change in Control occurs (the "Change in Control Year") shall
be paid a cash award, in a lump sum (the "Change in Control Award").
 
The tentative Change in Control Award of each Change in Control Participant
to whom an Award was made for the last fiscal year immediately preceding the
Change in Control for which Awards (including Awards, if any, made pursuant to
paragraph 13(C) hereof) were made generally (the "Base Year") shall be
determined by multiplying the "Change in Control Fund" (calculated in accordance
with paragraph 13(B) hereof) by a fraction, the numerator of which shall be the
amount of the Award of such Change in Control Participant for the Base Year, and
the denominator of which shall be the aggregate amount of Awards made for the
Base Year. A tentative Change in Control Award for each Change in Control
Participant to whom an Award was not made for the Base Year shall also be
determined and shall be comparable to the tentative Change in Control Awards of
similarly situated (in terms of the criteria employed by the Committee to
determine participation under paragraph 4 hereof, such as salary, salary grade
or classification) Change in Control Participants to whom Awards were made for
the Base Year.
 
The actual Change in Control Award of each Change in Control Participant
shall then be determined by multiplying the Change in Control Fund by a
fraction, the numerator of which shall be his tentative Change in Control Award
and the denominator of which shall be the aggregate tentative Change in Control
Awards.
 
B. CHANGE IN CONTROL FUND. The Change in Control Fund shall be the sum of
the amounts described in (i) and (ii) below, adjusted by the amount described in
(iii):
 
     (i) the sum (measured immediately prior to a Change in Control) of (x)
     any amount authorized and approved by the Board for any fiscal year
     completed prior to the Change in Control but not previously awarded from,
     or charged against, the Incentive Compensation Fund pursuant to this or any
     other plan of the Corporation and (y) any amount awarded from, or charged
     against, the Incentive Compensation Fund for any fiscal year completed
     prior to the Change in Control that has been forfeited;
 
     (ii) the aggregate amount calculated for the fiscal year in which the
     Change in Control occurs, from its inception up to and including the date
     of the Change in Control, in the case of a Change in Control as defined in
     paragraph 13(D)(i), (ii) or (iv) hereof, and up to and including the date
     on which the Change in Control transaction is consummated in the case of a
     Change in Control as defined in paragraph 13(D)(iii) hereof, in the
     ordinary course of business and based on the Stockholders' Resolution. The
     determination (made prior to the Change in Control or, as applicable, the
     consummation of the Change in Control transaction) of the Corporation's
     internal accountants in making any such calculation shall be conclusive;
 
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     (iii) the "applicable amount" (the sum of (i) and (ii) above) shall be
     adjusted as follows: (a) if an additional charge is made against the
     Incentive Compensation Fund with respect to Performance Shares under the
     Long-Term Plan upon the occurrence of a Change in Control, the "applicable
     amount" shall be reduced by such charge; and (b) if any amount previously
     charged against the Incentive Compensation Fund for Performance Shares is
     not earned and delivered upon the occurrence of a Change in Control and is
     returned to the Incentive Compensation Fund, the "applicable amount" shall
     be increased by such returned amount.
 
C. MAKING AWARDS FOR COMPLETED YEARS.  Upon the occurrence of a "Potential
Change in Control" (as defined in paragraph 13(E) hereof), if there is any
completed fiscal year of the Corporation for which the audited financial
statements of the Corporation are available and for which the Board has not yet
determined the Incentive Compensation Fund and/or for which the Committee has
not yet determined the Awards, such determinations and the payments of any
Awards so determined shall be made as soon as reasonably possible.
 
D. CHANGE IN CONTROL DEFINITION. "Change in Control" shall mean a change in
control of Chrysler, which shall be deemed to have occurred:
 
     (i) if any Person (as defined below) is or becomes the Beneficial 
     Owner (as defined below) of securities of Chrysler representing 20% or 
     more of the combined voting power of Chrysler's then outstanding 
     securities (unless the event causing the 20% threshold to be crossed is 
     an acquisition of securities directly from Chrysler); or
 
     (ii) if during any period of two consecutive years beginning after 
     June 7, 1990, individuals who at the beginning of such period constitute 
     the Board and any new Director (other than a Director designated by a 
     Person who has entered into an agreement with Chrysler to effect a 
     transaction described in paragraph (i), (iii) or (iv) of this Change in 
     Control definition) whose election or nomination for election was 
     approved by a vote of at least two-thirds (2/3) of the Directors then 
     still in office who either were Directors at the beginning of the period 
     or whose election or nomination for election was previously so approved, 
     cease for any reason to constitute a majority of the Board; or
 
     (iii) upon the approval by the stockholders of Chrysler of a merger 
     or consolidation of Chrysler with any other corporation (other than a
     merger or consolidation which would result in the voting securities of
     Chrysler outstanding immediately prior thereto continuing to represent
     (either by remaining outstanding or by being converted into voting
     securities of the entity surviving such merger or consolidation), in
     combination with voting securities of Chrysler or such surviving entity
     held by a trustee or other fiduciary pursuant to any employee benefit plan
     of Chrysler or such surviving entity or any subsidiary of Chrysler or such
     surviving entity, at least 80% of the combined voting power of the voting
     securities of Chrysler or such surviving entity outstanding immediately
     after such merger or consolidation), if, and only if, such merger or
     consolidation is ultimately consummated; or
 
     (iv) if the stockholders of Chrysler approve a plan of complete
     liquidation or dissolution of Chrysler or an agreement for the sale or
     disposition by Chrysler of all or substantially all Chrysler's assets.
 
          For purposes of the definition of Change in Control in this paragraph
     13(D): (a) "Person" shall have the meaning ascribed to such term in Section
     3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange
     Act"), as supplemented by Section 13(d)(3) of the Exchange Act, provided,
     however, that Person shall not include (i) Chrysler, any subsidiary of
     Chrysler or any other Person controlled by Chrysler, (ii) any trustee or
     other fiduciary holding securities under any employee benefit plan of
     Chrysler or any subsidiary of Chrysler, or (iii) a corporation owned,
     directly or indirectly, by the stockholders of Chrysler in substantially
     the same proportions as their ownership of securities of Chrysler; and (b)
     a Person shall be deemed the "Beneficial Owner" of any securities which
     such Person, directly or indirectly, has the right to vote or dispose of or
     otherwise has "beneficial ownership" of (within the meaning of Rule 13d-3
     under the Exchange Act), including pursuant to any agreement, arrangement
     or understanding (whether or not in writing); provided, however, that (i) a
     Person shall not be deemed the Beneficial Owner of any security as a result
     of an agreement, arrangement or understanding to vote such securities (x)
     arising solely from a revocable proxy or consent given in response to a
     public proxy or
 
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     consent solicitation made pursuant to, and in accordance with, the Exchange
     Act and the applicable rules and regulations thereunder or (y) made in
     connection with, or to otherwise participate in, a proxy or consent
     solicitation made, or to be made, pursuant to, and in accordance with, the
     applicable provisions of the Exchange Act and the applicable rules and
     regulations thereunder, in either case described in clause (x) or clause
     (y) above, whether or not such agreement, arrangement or understanding is
     also then reportable by such Person on Schedule 13D under the Exchange Act
     (or any comparable or successor report), and (ii) a Person engaged in
     business as an underwriter of securities shall not be deemed to be the
     Beneficial Owner of any securities acquired through such Person's
     participation in good faith in a firm commitment underwriting until the
     expiration of forty days after the date of such acquisition.
 
     E. POTENTIAL CHANGE IN CONTROL DEFINITION. A "Potential Change in Control"
shall be deemed to have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
 
          (i) Chrysler enters into an agreement, the consummation of which would
     result in the occurrence of a Change in Control;
 
          (ii) Chrysler or any Person (as defined in paragraph 13(D) hereof)
     publicly announces an intention to take or to consider taking actions
     which, if consummated, would constitute a Change in Control;
 
          (iii) any Person who is or becomes the Beneficial Owner (as defined in
     paragraph 13(D) hereof), directly or indirectly, of securities of Chrysler
     representing 10% or more of the combined voting power of Chrysler's then
     outstanding securities, increases such Person's beneficial ownership of
     such securities by 5% or more over the percentage so owned by such Person
     on the date hereof; or
 
          (iv) the Board adopts a resolution to the effect that, for purposes of
     this Plan, a Potential Change in Control has occurred.
 
14. INTERPRETATION
 
     The Board shall have full power and authority to interpret and construe
this Plan and its interpreting and construing of this Plan and acts pursuant to
this Plan in good faith shall be final and conclusive. The Board may correct any
defect or supply any omission or reconcile any inconsistency in such a manner
and to such an extent as it shall find expedient to carry this Plan into effect,
and it shall be the sole and final judge of the expediency. If any such
interpreting or construing shall involve a question of law, the Board may rely
and act upon the opinion of counsel (who may be counsel to Chrysler) on the
question of law.
 
15. EFFECTIVE PERIOD
 
     The Plan shall become effective, upon approval by the Board, beginning
January 1, 1970, and shall remain in effect until terminated as provided in
Paragraph 16.
 
16. AMENDMENT AND TERMINATION
 
     At any time the Board may amend, alter or terminate this Plan (consistent
with the Stockholders' Resolution) as the Board shall deem advisable; provided,
however, that the Board may not: (a) without the approval of the holders of a
majority of the shares of Common Stock of Chrysler voting on the matter,
increase the total amount that under the Stockholders' Resolution may be
provided out of the earnings of the Corporation for incentive compensation and
(b) without the approval of the holders of a majority of the shares of Common
Stock of Chrysler issued and outstanding, issue shares of Chrysler stock for
distributing in place of cash; and provided further, however, that terminating
or amending this Plan shall not terminate the right of any Participant to earn
out and thereby become entitled to receive, in the same manner as if this Plan
had not been terminated or amended, any unpaid installment of an Award made to
him under this Plan prior to the terminating or amending of this Plan or any
Retirement Benefit he would become eligible to receive under the Supplemental
Plan by complying with the terms thereof.
 
     Nothing in this Plan shall be interpreted to preclude Chrysler from
granting awards under, or paying compensation outside the parameters of, the
Plan including, without limitation, base salaries, awards under
 
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any other plan of Chrysler (whether or not approved by stockholders), incentive
compensation (whether or not based on the attainment of pre-established
performance objectives) or retention or other special payments, that is not
deductible for Federal, State or local income tax purposes by reason of Section
162(m) of the Code or otherwise, should the Board or any committee thereof
(including the Committee), whichever is applicable, determine that such action
is in the best interests of Chrysler and its stockholders.
 
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