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ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT PLAN
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ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT AGREEMENT
RIGHT NO.:
EFFECTIVE DATE OF RIGHT:
NUMBER OF PHANTOM SHARES COVERED BY RIGHT:
BASE SHARE PRICE:
EXPIRATION DATE:
VESTING PERIOD: 12 MONTHS FOLLOWING THE EFFECTIVE DATE OF RIGHT
Pursuant to the Associates First Capital Corporation Phantom Stock Appreciation
Right Plan (the "Plan"), Associates First Capital Corporation (the "Company"),
hereby grants to:
NAME (the "Holder"):
ADDRESS:
the right to receive from the Company, upon exercise thereof, the amount of the
Appreciation (as hereinafter defined) on the number of phantom shares specified
above (the "Phantom Shares") of Phantom Stock (as hereinafter defined), less
required tax withholding, subject to the terms and conditions described below
(the "Right"). The term "Phantom Stock" shall mean fictional stock of the Ford
Financial Services Group ("FFSG") for purposes of and as described in the Plan.
Phantom Stock does not actually exist but is a measure of value established for
purposes of the Plan.
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1. TERM OF RIGHT
Subject to Articles 4 and 6 hereof, the Holder may exercise the Right
during any Window Period (as hereinafter defined) after the expiration of the
vesting period specified above (the "Vesting Period") and prior to the close of
business on the expiration date specified above (the "Expiration Date"). The
Right may be exercised in whole or in part only with respect to whole Phantom
Shares. If the Right is not exercised in whole prior to the Expiration Date,
adverse tax consequences to the Holder may occur.
2. HOW TO EXERCISE THE RIGHT
The Right, when vested, may be exercised by delivery of the Notice of
Exercise (attached hereto as Appendix A) to the Compensation Committee
appointed by the President of FFSG to administer the Plan (the "Committee")
stating the number of Phantom Shares with respect to which it is being
exercised. The Right may be exercised only during the period commencing on a
Notice Date (as hereinafter defined) and ending on the date thirty days
thereafter (the "Window Period") and not otherwise. For an exercise to be
effective, the Notice of Exercise must be received by the Committee at the
address specified therein prior to the expiration of the applicable Window
Period, but in no event later than the Expiration Date.
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3. DELIVERY OF APPRECIATION
As soon as practicable after receipt of the Notice of Exercise, the
Company shall deliver to the Holder by check the amount of the Appreciation,
less required tax withholding.
The term "Appreciation" shall mean the positive difference between (x)
the base share price specified above and (y) the Phantom Share Price (as
hereinafter defined) in effect immediately prior to the applicable Window
Period, multiplied by (z) the number of Phantom Shares being exercised.
The term "Phantom Share Price" shall mean the current price per
Phantom Share calculated pursuant to the provisions of the Plan. The Phantom
Share Price is dependent upon the after-tax profits of FFSG and the average
price/earnings ratio of selected comparator financial services companies. The
Phantom Share Price shall be calculated within 45 days after each quarterly
close of the books of the companies in FFSG and shall remain in effect until it
is recalculated at the end of the following quarterly close of such books. The
Committee shall cause written notice of each determination of the Phantom Share
Price to be given to the Holder promptly after each such calculation is made.
The date such notice is given is hereinafter referred to as the "Notice Date".
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4. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH
In the event the Holder transfers to Ford Motor Company ("Ford") or a
Ford Subsidiary (as hereinafter defined) or in the event of a Holder's
retirement, disability or death, the Right shall continue in effect and shall
become vested and exercisable during the applicable periods in accordance with
Articles 1 and 2 hereof. The term "Ford Subsidiary" when used herein shall mean
any corporation a majority of the voting stock of which is owned directly or
indirectly by Ford.
In the event of the Holder's death, the beneficiary designated
pursuant to Article 5 hereof, or if no such beneficiary is designated or deemed
to be designated or if none survives such Holder, the executor or administrator
of the estate of the decedent or the person or persons to whom the Right shall
have been validly transferred by the executor or the administrator pursuant to
will or the laws of descent and distribution, shall have the right to exercise
the Right, when vested, in accordance with the provisions of Articles 1 and 2
hereof.
In the event of a termination of the Holder's employment for reasons
other than disability, death, retirement, transfer to Ford or a Ford
Subsidiary, resignation or termination by the Company for cause, the Right
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shall continue in effect and shall continue to vest and become exercisable to
the extent permitted under Articles 1 and 2 hereof during the period three
months following the date of such termination, but in no event after the
Expiration Date.
In the event of the resignation of employment by the Holder or
termination of the Holder's employment by the Company for cause, the Right shall
be forfeited effective as of the date of such resignation or termination.
For purposes of the Plan, a termination by the Company for cause shall
include termination resulting from (i) acts of insubordination, (ii)
embezzlement, attempted embezzlement, theft of property or attempted theft of
property, whether or not a criminal action relating thereto is initiated by the
Company, (iii) conviction of a felony or any crime involving moral turpitude,
(iv) material breach of any employment agreement or condition of employment
with the Company or (v) violation of Company policy covering Standards of
Corporate Conduct.
Whether military or government service shall constitute termination of
employment of the Holder for purposes of this Agreement shall be determined by
the Committee in its sole discretion.
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5. NON-TRANSFERABILITY OF RIGHT - DESIGNATION OF BENEFICIARY
The Right shall, during the Holder's lifetime, be exercisable only by
the Holder, and neither it nor any right hereunder shall be transferable
otherwise than by will or the laws of descent and distribution, or be subject
to attachment, execution or other similar process. Once transferred by will or
the laws of descent and distribution, the Right shall not be further
transferable. Any transferee of the Right shall take the same subject to the
terms and conditions set forth herein. No such transfer of the Right shall be
effective to bind the Company unless the Company shall have been furnished with
written notice thereof and a copy of the will and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions set
forth herein. No assignment or transfer of the Right or of the rights
represented thereby, other than as provided in this Article, shall vest in the
purported assignee or transferee any interest or right therein whatsoever.
Notwithstanding anything to the contrary set forth herein, the Holder
may file with the Company a written designation of a beneficiary or
beneficiaries (subject to such limitations as to the classes and number of
beneficiaries and contingent beneficiaries and such other limitations as the
Committee from time to time may prescribe) to exercise, in the event
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of the death of the Holder, the Right subject to the terms and conditions set
forth herein and to receipt by the Company of such evidence as the Committee may
deem necessary to establish the acceptance by the beneficiary or beneficiaries
of the terms and conditions set forth herein. The Holder shall be deemed to have
designated as beneficiary or beneficiaries under the Plan the person or persons
who receive the Holder's life insurance proceeds under the Company-paid Life
Insurance Plan unless the Holder shall have assigned such life insurance or
shall have filed with the Company a written designation of a different
beneficiary or beneficiaries under the Plan. The Holder may from time to time
revoke or change any such designation of beneficiary and any designation of
beneficiary under the Plan shall be controlling over any other disposition,
testamentary or otherwise; provided, however, that, if the Committee shall be in
doubt as to the right of any such beneficiary to exercise the Right, the
Committee may determine to recognize only an exercise by the legal
representative of the Holder, in which case the Company and the Committee and
the members thereof shall not be under any further liability to anyone.
If the Holder should attempt to alienate, assign, pledge, hypothecate
or otherwise dispose of the Right or of any right hereunder, except as provided
for in the Plan, or in the event of any levy or any attachment,
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execution or similar process upon the rights or interest conferred by the
Right, the Company may terminate the Right by notice to the Holder and the
Right shall thereupon become null and void.
6. EFFECT OF COMPETITIVE ACTIVITY OR INIMICAL CONDUCT
Anything contained herein to the contrary notwithstanding, the right
of the Holder to exercise the Right following termination of the Holder's
employment with the Company shall remain effective only if, during the entire
period from the date of the Holder's termination to the date of such exercise,
the Holder shall have earned out the Right by refraining from engaging in any
activity that is directly or indirectly in competition with any activity of the
Company or any subsidiary or affiliate thereof. The term "subsidiary" shall
mean any corporation a majority of the voting stock of which is owned directly
or indirectly by the Company.
In the event of the Holder's nonfulfillment of the condition set forth
in the immediately preceding paragraph, the Holder's right to exercise such
Right shall cease; provided, however, that the nonfulfillment of such condition
may at any time (whether before, at the time of or subsequent to
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termination of the Holder's employment) be waived by the Committee upon its
determination that in its sole judgment there shall not have been and will not
be any substantial adverse effect upon the Company or any subsidiary or
affiliate thereof by reason of the nonfulfillment of such condition.
Anything contained in the Plan to the contrary notwithstanding, the
right of the Holder to exercise the Right following termination of the Holder's
employment with the Company shall cease on and as of the date on which it has
been determined by the Committee that the Holder at any time (whether before or
subsequent to termination of the Holder's employment) acted in a manner
inimical to the best interests of the Company or any subsidiary or affiliate
thereof. Conduct which constitutes engaging in an activity that is directly or
indirectly in competition with any activity of the Company or any subsidiary or
affiliate thereof shall be governed by the preceding paragraphs of this Article
6 and shall not be subject to any determination under this paragraph.
7. NO RIGHT OF EMPLOYMENT
Neither the grant nor the exercise of the Right shall confer on the
Holder any right to be retained in the employ of the Company or any other Ford
Subsidiary, or to receive subsequent rights or other awards under the
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Plan. The right of the Company or any other Ford Subsidiary to terminate
(whether by dismissal, discharge, retirement or otherwise) the Holder's
employment with it at any time, with or without cause, or as otherwise provided
by any agreement between the Company or any other Ford Subsidiary and the
Holder, is specifically reserved.
8. NO RIGHTS OF SHAREHOLDER
Neither the Holder nor any beneficiary or transferee of the Right
permitted under Article 5 hereof shall have any of the rights of a shareholder.
9. VIOLATION OF LAW OR REGULATION
Notwithstanding any of the other provisions of this Agreement, the
Holder agrees not to exercise the Right, and the Company will not be obligated
to deliver any cash pursuant to this Agreement, if the exercise of the Right or
delivery of such cash would constitute a violation by the Holder or by the
Company of any provisions of any law or regulation of any governmental
authority. Any determination of the Committee in this connection shall be final
and shall be binding and conclusive for all
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purposes. The Company shall in no event be obligated to take any affirmative
action in order to cause the exercise of the Right or delivery of cash pursuant
thereto to comply with any law or any regulation of any governmental authority.
10. HOLDER
Whenever the term "Holder" is used in any provision of this Agreement
under circumstances such that the provision should logically apply to any other
person or persons designated as a beneficiary pursuant to the provisions of
Article 5 hereof, or to whom the Right may be transferred in accordance with
the provisions of Article 5 hereof, the term "Holder" shall be deemed to
include such person or persons.
11. RIGHT GOVERNED BY THIS AGREEMENT AND THE PLAN; COMMITTEE INTERPRETS
AGREEMENT
The Right is granted pursuant to the Plan, and is governed by the
terms and conditions of the Plan. The Holder agrees to be bound by the terms
and conditions of this Agreement and the Plan (a copy of which the Holder
acknowledges the Holder has received).
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As a condition of the granting of the Right, the Holder and the
Holder's successors and assigns agree that any dispute or disagreement which
shall arise under or as a result of this Agreement shall be determined by the
Committee in its sole discretion and judgment and that any such determination
and any interpretation by the Committee of the Agreement shall be final and
shall be binding and conclusive for all purposes.
12. GOVERNING LAW
This Agreement has been made in and shall be construed in accordance
with the laws of the State of Michigan.
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13. ENTIRE AGREEMENT; AMENDMENT OR MODIFICATION
This Agreement constitutes the entire agreement between the parties
regarding the subject matter hereof and supersedes all prior communications and
understandings between the parties. This Agreement may be amended or modified
only in a writing signed by the party or parties against which the existence of
such amendment or modification is asserted.
ASSOCIATES FIRST CAPITAL CORPORATION
BY:
The foregoing Right hereby is accepted on the terms and conditions set forth
herein and in the Plan.
HOLDER: ______________
DATE: ______________
Note: The Holder will please sign and date the attached duplicate hereof and
mail the same immediately to:
Compensation Committee
c/o Xx. Xxxxx X. Xxxxxxxx, Xx.
Associates First Capital Corporation
P.O. Box 660237
Dallas, Texas 75266-0237
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ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT PLAN
(Adopted as of January 1, 1990)
1. Purpose. This Plan, which shall be known as the "Phantom Stock
Appreciation Right Plan" and is hereinafter referred to as "the Plan", is
intended as an incentive to certain officers and other key employees of
Associates First Capital Corporation ("the Company") in order to encourage them
to remain in the employ of the Company and to increase their contribution to
the success of the Ford Financial Services Group ("FFSG"). It is intended that
this purpose be effected through grants of "phantom stock appreciation rights"
as provided herein.
The word "Company" when used in the Plan with reference to employment
shall include subsidiaries of the Company. The word "subsidiary" when used
herein shall mean any corporation a majority of the voting stock of which is
owned directly or indirectly by the Company.
2. Rights. A phantom stock appreciation right (a "Right") shall
entitle the holder thereof to receive from the Company, upon exercise thereof,
an amount of cash (less required tax withholding) equal to the amount by which
the Phantom Share Price (as hereinafter defined) of a phantom
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share of stock of FFSG ("Phantom Share") covered by such Right exceeds the Base
Share Price (as hereinafter defined) thereof multiplied by the number of
Phantom Shares with respect to which such Right was exercised, all subject to
the terms and conditions hereinafter set forth.
3. Administration. The Compensation Committee appointed by the
President of FFSG ("the Committee") shall administer the Plan and perform such
other functions as are assigned to the Committee under the Plan. The Committee
is authorized, subject to the provisions of the Plan, from time to time to
establish such rules and regulations as it may deem appropriate for the proper
administration of the Plan, and to make such determinations under, and such
interpretations of, and to take such steps in connection with, the Plan and the
Rights granted thereunder as it may deem necessary or advisable.
4. Stock. The total number of Phantom Shares is hereby
established, for purposes of the Plan, as 150,000,000 Phantom Shares.
Notwithstanding the foregoing, such number of Phantom Shares is subject to
adjustment in accordance with the provisions of Article 12 hereof. Phantom
Shares covered by Rights forfeited under the Plan shall not be available for
the grant of further Rights under the Plan.
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5 Grants of Rights. The Committee, at any time and from time to
time on or after January 1, 1990 and prior to January 1, 2000, may authorize
the granting of Rights to such officers and other key salaried employees of the
Company as it may select, and with respect to such numbers of Phantom Shares as
it shall designate, subject to the provisions of this Article and Article 4
hereof.
The date on which a Right shall be deemed to have been granted shall
be the date of the Committee's authorization of such grant or such earlier or
later date as may be determined by the Committee at the time such grant is
authorized.
Any individual may hold more than one Right. No person while a member
of the Committee shall be eligible to receive or hold a Right under the Plan.
6. Vesting. Each Right shall vest on the date twelve months
following the date as of which such Right was granted or such later date or
dates as may be determined by the Committee at or prior to granting such Right.
7. Base Share Price and Phantom Share Price. The term "Base Share
Price" shall mean the Phantom Share Price (as hereinafter defined) of a Phantom
Share on the effective date of the Right. The Base Share Price with respect to
any Rights
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granted as of a date prior to February 1, 1990 shall be $39.60 per Phantom
Share.
The term "Phantom Share Price" shall mean the amount equal to the
product of (x) the sum of the FFSG Profits (as hereinafter defined) for the
four most recent calendar quarters and (y) the Comparator P/E Ratio (as
hereinafter defined), divided by (z) the total number of Phantom Shares
established for purposes of the Plan, carried to two decimal places.
The term "FFSG Profits" for any four calendar quarter period shall be
equal to the aggregate profits after taxes of all companies included in FFSG
less the amount of any acquisition financing costs assigned to FFSG, both
determined on the basis of the Profit Center Results (as hereinafter defined).
The term "Profit Center Results" shall refer to profits (i) determined
on a profit center basis in accordance with the practices and procedures
adopted by Ford Motor Company for profit center reporting and (ii)
authenticated as having been so determined by the Finance Director of FFSG.
Profit Center Results for a particular period shall include (without
duplication) the amount of any charges made for the provision of Rights
exercised during such period under the Plan and the cost of other compensation
plans of the Company and its subsidiaries.
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After the close of each calendar quarter, and as promptly as
practicable after he shall have completed his review for such quarter of the
Profit Center Results of the companies in FFSG and shall have authenticated
such Results, the Finance Director of FFSG shall determine and report in
writing to the Committee the amount of the FFSG Profits for the most recent
four calendar quarter period.
The term "Comparator P/E Ratio" shall mean the simple average of the
after tax price/earnings ratios of the Comparator Companies. The after tax
price/earnings ratio of a Comparator Company shall be determined by dividing
(x) the average of the daily closing prices of a share of common stock of the
Comparator Company during the most recent calendar quarter by (y) the after tax
earnings per share attributable to the most recent four calendar quarters, both
as reported in "Bloomberg Financial Markets", an electronic financial
information delivery system, or, if such information is no longer reported in
"Bloomberg Financial Markets", such other information source as may be
designated by the Committee.
The term "Comparator Companies" shall mean certain major competitors
of FFSG whose stock is publicly traded, as set forth on Exhibit 1 hereto. Any
additions, deletions, substitutions or other changes in the Comparator
Companies shall be determined by the Committee, upon recommendation of the Ford
Motor Company Office of the Chief Executive ("OCE").
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The Phantom Share Price shall be calculated within 45 days after each
quarterly close of the books of the companies in FFSG and shall remain in
effect until it is recalculated after the end of the following quarterly close
of such books. The Committee shall cause written notice of each determination
of the Phantom Share Price to be given to each holder of a Right promptly after
each such calculation is made. The date such notice is given is hereinafter
referred to as the "Notice Date".
8. Exercise of Right. Each vested Right (or portion thereof not
already exercised) shall be exercisable, upon receipt by the Committee of a
written notice of exercise, during each period commencing on a Notice Date and
ending on the date thirty days thereafter or during each such other period as
shall be determined by the Committee; provided, however, that no such Right
shall be exercisable at any time after the expiration of the term of such
Right. The Committee shall determine the term of each Right which shall not be
less than five years nor more than ten years from the date of the grant of such
Right. To the extent exercised, a Right shall be terminated and of no further
force and effect. Any Right which remains unexercised after the expiration of
the term of such Right shall be forfeited. Such forfeiture may result in
adverse tax consequences to the holder.
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9 Effect of Termination of Employment or Death. In the event a
holder of a Right transfers to Ford Motor Company ("Ford") or a Ford Subsidiary
(as hereinafter defined) or in the event of a holder's retirement, disability
or death, such Right shall continue in effect and shall become vested and
exercisable during the applicable periods within the remaining term of the
Right in accordance with Articles 6 and 8 hereof. The term "Ford Subsidiary"
when used herein shall mean any corporation a majority of the voting stock of
which is owned directly or indirectly by Ford.
In the event of a holder's death, the beneficiary designated pursuant
to Article 10 hereof, or if no such beneficiary is designated or deemed to be
designated or if none survives such holder, the executor or administrator of
the estate of the decedent or the person or persons to whom the Right shall
have been validly transferred by the executor or the administrator pursuant to
will or the laws of descent and distribution, shall have the right to exercise
the Right, when vested, in accordance with the provisions of Articles 6 and 8
hereof.
In the event of a termination of a holder's employment for reasons
other than disability, death, retirement, transfer to Ford or a Ford
Subsidiary, resignation or termination by the Company for cause, such holder's
Right shall continue in
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effect and shall continue to vest and become exercisable to the extent
permitted under Articles 6 and 8 hereof during the period three months
following the date of such termination, but in no event after the expiration of
the term of the Right.
In the event of the resignation of employment by a holder or
termination of a holder's employment by the Company for cause, the Right shall
be forfeited effective as of the date of such resignation or termination.
For purposes of the Plan, a termination by the Company for cause shall
include termination resulting from (i) acts of insubordination, (ii)
embezzlement, attempted embezzlement, theft of property or attempted theft of
property, whether or not a criminal action relating thereto is initiated by the
Company, (iii) conviction of a felony or any crime involving moral turpitude,
(iv) material breach of any employment agreement or condition of employment
with the Company or (v) violation of Company policy covering Standards of
Corporate Conduct.
10. Non-transferability of Rights - Designation of Beneficiaries.
No Right shall be transferable by a holder otherwise than by will or the laws
of descent and distribution. During the lifetime of a holder the Right shall be
exercisable pursuant to the provisions of Articles 6, 8 and 9 hereof only by
such holder.
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A holder may file with the Company a written designation of a
beneficiary or beneficiaries (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries and such other limitations
as the Committee from time to time may prescribe) to exercise a vested Right in
the event of the death of the holder, subject to the provisions of Articles 8
and 9 hereof. A holder shall be deemed to have designated as beneficiary or
beneficiaries under the Plan the person or persons who receive such holder's
life insurance proceeds under the Company-paid Life Insurance Plan unless such
holder shall have assigned such life insurance or shall have filed with the
Company a written designation of a different beneficiary or beneficiaries under
the Plan. A holder may from time to time revoke or change any such designation
of beneficiary and any designation of beneficiary under the Plan shall be
controlling over any other disposition, testamentary or otherwise; provided,
however, that, if the Committee shall be in doubt as to the right of any such
beneficiary to exercise any vested Right, the Committee may determine to
recognize only an exercise by the legal representative of the holder, in which
case the Company and the Committee and the members thereof shall not be under
any further liability to anyone.
11. Effect of Competitive Activity or Inimical Conduct. Anything
contained in the Plan to the contrary notwithstanding, the right of any holder
to exercise a vested Right following
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termination of the holder's employment with the Company shall remain effective
only if, during the entire period from the date of the holder's separation to
the date of such exercise, the holder shall have earned out such Right by
refraining from engaging in any activity that is directly or indirectly in
competition with any activity of the Company or any subsidiary or affiliate
thereof.
In the event of a holder's nonfulfillment of the condition set forth
in the immediately preceding paragraph, the holder's right to exercise such
Right shall cease; provided, however, that the nonfulfillment of such condition
may at any time (whether before, at the time of or subsequent to termination of
such holder's employment) be waived by the Committee upon its determination
that in its sole judgment there shall not have been and will not be any
substantial adverse effect upon the Company or any subsidiary or affiliate
thereof by reason of the nonfulfillment of such condition.
Anything contained in the Plan to the contrary notwithstanding, the
right of any holder to exercise any Right following termination of the holder's
employment with the Company shall cease on and as of the date on which it has
been determined by the Committee that such holder at any time (whether before
or subsequent to termination of such holder's employment) acted in a manner
inimical to the best interests of
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the Company or any subsidiary or affiliate thereof. Conduct which constitutes
engaging in an activity that is directly or indirectly in competition with any
activity of the Company or any subsidiary or affiliate thereof shall be
governed by the preceding paragraphs of this Article and shall not be subject
to any determination under this paragraph.
12. Adjustments. In the event of a change in the companies
comprising FFSG or a component thereof through merger, acquisition, divestiture
or otherwise, or other event substantially affecting the Phantom Share Price,
an appropriate adjustment shall be made in the total number of Phantom Shares
established for purposes of the Plan and/or the number of Phantom Shares
covered by outstanding Rights. The foregoing adjustment shall be determined by
the Committee, upon recommendation of the OCE. Any such adjustment may provide
for the elimination of any fractional Phantom Share which might otherwise
become subject to a Right.
13. Amendment, Modification and Termination of the Plan. The Board
of Directors of the Company, upon recommendation of the Committee, at any time
may terminate, and at any time and from time to time, and in any respect, may
amend or modify, the Plan; provided, however, that (i) no substantive amendment
or modification of the Plan may be made without the prior recommendation of the
OCE and (ii) no amendment, modification or termination of the Plan shall in any
manner affect any Right
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theretofore granted to a holder under the Plan without the consent of such
holder or the transferee of such Right.
14. Indemnification and Exculpation. Each person who is or shall
have been a member of the Committee shall be indemnified and held harmless by
the Company against and from any and all loss, cost, liability or expense that
may be imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may
be or become a party or in which such person may be or become involved by
reason of any action taken or failure to act under the Plan and against and
from any and all amounts paid by such person in settlement thereof (with the
Company's written approval) or paid by such person in satisfaction of a
judgment in any such action, suit or proceeding, except a judgment in favor of
the Company based upon a finding of such person's lack of good faith; subject,
however, to the condition that, upon the institution of any claim, action, suit
or proceeding against such person, such person shall in writing give the
Company an opportunity, at its own expense, to handle and defend the same
before such person undertakes to handle and defend it on such person's behalf.
The foregoing right of indemnification shall not be exclusive of any other
right to which such person may be entitled as a matter of law or otherwise, or
any power that the Company may have to indemnify or hold such person harmless.
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Each member of the Committee shall be fully justified in relying or
acting in good faith upon any information furnished in connection with the
administration of the Plan or any appropriate person or persons other than such
person. In no event shall any person who is or shall have been a member of the
Committee be held liable for any determination made or other action taken or
any omission to act in reliance upon any such information, or for any action
(including the furnishing of information) taken or any failure to act, if in
good faith.
15. Finality of Determinations. Each determination, interpretation
or other action made or taken pursuant to the provisions of the Plan by the
Committee shall be final and shall be binding and conclusive for all purposes
and upon all persons, including, but without limitation thereto, the Company,
its stockholders, the Committee and each of the members thereof, and the
directors, officers, and employees of the Company, the holders of Rights, and
their respective successors in interest.
16. Costs. All costs involved in offering and administering the
Plan shall be borne by the Company.
17. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Michigan.
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THE ASSOCIATES
PHANTOM STOCK APPRECIATION RIGHT PLAN
Exhibit 1
Page 1 of 2
I. Purpose. The purpose of The Associates Phantom Stock
Appreciation Right Plan ("the Plan") is to further the
long-term growth in earnings of The Associates and other Ford
Financial Services Group (PSG) companies by providing a
long-term financial opportunity to certain key employees of
The Associates.
II. Administration. The Plan shall be administered by a
Compensation Committee (the "Committee") appointed by the
President, Ford Financial Services Group. No member of the
Committee shall be eligible to receive an award under the
Plan. Substantive amendments to the Plan will require the
prior recommendation of the Ford Office of the Chief Executive
(OCE).
III. Eligibility to Participate. Those eligible to participate in
the Plan will be key employees of The Associates and its
subsidiaries, initially established at approximately 230
employees.
IV. Awards of Stock Appreciation Rights. A phantom stock
appreciation right is a grant of a financial opportunity to
receive the appreciation in value, if any, in a specified
number of shares of Ford Financial Services Group phantom
stock ("FSG phantom stock"). The value of a share of FSG
phantom stock is dependent on the after-tax profit center
earnings of Ford Financial Services Group companies, as
reported to Ford management periodically throughout the year,
and the average P/E ratio of selected comparator companies.
(The cost of awards from this and other incentive compensation
plans of The Associates will be charged against The Associates
profit center earnings.) Grants will be based upon The
Associates employees' salary levels, but may very at
management's discretion.
V. Frequency of Grants. FSG phantom stock appreciation rights
will be granted at times to be determined by the Committee.
Generally, it is anticipated that grants will be made once a
year; however, grants may be made less frequently than once
per year, as determined by the Committee. Grants may be made
at any time on or after January 1, 1990 (the effective date of
this Plan) and before January 1, 2000.
VI. Vesting. The total award will vest on the first anniversary of
the grant of that award, or at such time as the Committee
shall determine at the time of the grant, but not less than
one year from the grant data.
VII. Term of Award. The term of an award shall be not less than 5
years from date of grant, not more than 10 years from date of
grant, as determined by the Committee. Upon transfer to Ford
Motor Company, or another subsidiary of Ford, or upon
disability, death or retirement, the award will continue to
vest and may be exercised within the remaining term of the
award. Upon termination without cause for reasons other than
transfer, disability, death or retirement, the award must be
exercised within three months of leaving employment with Ford,
a Ford subsidiary or Ford affiliate company. Upon resignation
or termination with cause, the award shall be canceled
immediately.
29
Exhibit 1
Page 2 of 2
VIII. Determination of FSG Phantom Stock Price. The FSG phantom
stock price will be calculated within 45 days after each
quarterly close of books of the companies in the Ford
Financial Services Group. The FSG phantom stock price
determined after a close will remain in effect until it is
recalculated after the next quarterly close.
IX. Exercise of Stock Appreciation Rights. A participant may
exercise a vested stock appreciation right and receive cash by
delivering a written notice of exercise to the Committee during
a period of time ("window period") beginning on the data that
the FSG phantom stock price is announced (quarterly), and
continuing for 30 days thereafter. The amount received upon
exercise shall equal (a) the difference between (1) the FSG
phantom stock price par share established at the time of the
grant, and (2) the most recant FSG phantom stock price per
share, TIMES (b) the number of FSG phantom shares with respect
to which such right is exercised. This amount, less required
withholding as specified by applicable law, will be delivered
to the executive as soon as practicable thereafter.
X. Determination of Comparator Companies. The comparator companies
shall represent a composite of major competitors of the Ford
Financial Services Group companies as determined by the
Committee. If a comparator company is acquired by another
company, or goes private, or its stock price or earnings data
becomes unavailable through reasonable means, such a company
may be removed from the comparator list and from calculations
of the average P/E, as the Committee, upon the prior
recommendation of the Ford OCE, deems appropriate. The
Committee, upon the prior recommendation of the Ford OCE, also
shall have the option to add comparator companies or to make
other adjustments if it should decide that a comparator's P/E
is not meaningful.
XI. Changes in Ford Financial Services Group Companies. If a
company is added to the Ford Financial Services Group, or if a
Ford Financial Services Group company changes through
restructuring, merger, acquisition or divestiture of a
business unit, the Committee, upon the prior recommendation of
the Ford OCE, shall decide what adjustments, if any, will be
made to the number of shares granted or to the value of each
share. (E.g., the Committee may decide that if changes
occurred that would affect the Ford Financial Services Group
earnings substantially, an adjustment would be made to the
number of shares available for stock appreciation rights, such
that the effect would be to return the FSG phantom stock price
to the price before the change occurred.)
July 11, 1990
30
METHOD OF DETERMINING THE PRICE OF
A FORD FINANCIAL SERVICES GROUP PHANTOM SHARE
The price of Ford Financial Services Group (FSG) phantom shares would be based
on a hypothetical market value for the Ford Financial Services Group companies
combined. This Ford Financial Services Group market value would be determined
by calculating the sum of the after-tax profit center earnings of the Ford
Financial Services Group companies for the four most recent quarters (less the
cost of financing acquisitions), and multiplying that by a simple average of
the P/E ratios of major comparators of the Ford Financial Services Group
companies. A comparator company's P/E ratio would be determined by dividing the
average share price during the most recent quarter by the earnings per share
from the most recent four quarters. The Ford Financial Services Group phantom
share price would be calculated by dividing the Ford Financial Services Group
market value by a fixed number of Ford Financial Services Group phantom shares
(initially 150 million shares), carried to two decimal places. This is
illustrated below:
Calculation of Base Share Price at Time of Xxxxx
Xxxx After-tax Average Hypothetical
Financial Profit Comparator FSG Number FSG
Services Group Center P/E Market of FSG Share
Company Earnings Ratio Value share.% Price
-------------- -------- ----------- ------ ------- ---------
(Mils.) (Mils.) (Mils.) (rounded)
Associates $231
Ford Credit 434
First Nationwide 80
U.S. Leasing 61
Acquisition Fin. Cost (190)
----
Total: $636 X 9.34 = $5,940 divided by 150 = $39.60
The FSG phantom share price at the time the stock appreciation right is granted
to the participant would serve as the "base" price for one share. Throughout
the term of the grant, the FSG phantom share price would change with the
changes in either the average P/E of the comparator companies or the earnings
of the Ford Financial Services Group companies (calculated quarterly). Upon
exercise of a phantom stock appreciation right, the executive would receive the
difference between the base price and the FSG phantom share price at the time
of exercise. The following table illustrates the FSG phantom share price at
different assumed changes in the Ford Financial Services Group earnings and
average comparator P/E ratio:
Change in Ford Financial Services Group Earnings
------------------------------------------------
-20% -10% 0% +10% +20%
Change in ---- ---- -- ---- ----
Comparator P/E (Base)
--------------
-20% $25.35 $28.51 $31.68 $34.85 $38.02
-10% $28.51 $32.08 $35.64 $39.21 $42.77
(Base) 0% $31.68 $35.64 $39.60 $43.56 $47.52
+10% $34.85 $39.21 $43.56 $47.92 $52.27
+20% $38.02 $42.77 $47.52 $52.27 $57.03
