EXHIBIT 10.27 - FEDERAL-MOGUL CORPORATION 1977
SUPPLEMENTAL COMPENSATION PLAN
FEDERAL-MOGUL CORPORATION
1977 SUPPLEMENTAL COMPENSATION PLAN
As Amended and Restated Effective as of
January 1, 1994
Federal-Mogul Corporation, a Michigan corporation
with principal offices in Southfield, Michigan, adopted
the Federal-Mogul Corporation 1977 Supplemental
Compensation Plan (the "Plan") in 1977. By resolutions
adopted at its meeting on November 30, 1983, the Board of
Directors of the Corporation amended the Plan effective
January 1, 1984. The Plan was amended and restated
effective January 1, 1986 to reflect a February 6, 1985
Board amendment to the charter of the Compensation
Committee, deleting the requirement that it approve
awards of Supplemental Compensation (and the formula for
determining the amount of such awards) for Management
Employees. The Plan was amended and restated again,
effective February 4, 1988, to eliminate any deferral of
payment of awards granted hereunder. The Board of
Directors on February 9, 1994 approved the amendment and
restatement of the Plan effective January 1, 1994 to
eliminate stock payments under the Plan and to comply
with the performance goal requirements of Section 162(m)
of the Internal Revenue Code of 1986, as amended.
1. Purposes of Plan. The purposes of the Plan are
to provide personal incentive and financial reward to
Management, Executive Group and Advisory Board Employees
who, because of the extent of their responsibilities, can
and do make significant contributions to the success of
the Corporation by their ability, industry, loyalty and
exceptional services, by making them participants in that
success.
2. Definitions; Number and Gender.
a. "Advisory Board Employee" shall mean an
Employee who is a member of the Corporation's Advisory
Board, but excluding for purposes of this Plan Employees
who are also members of the Executive Group, as defined
below.
b. "Board": shall mean the Board of
Directors of the Corporation.
c. "Code" shall mean the Internal Revenue
Code of 1986, as amended.
d. "Compensation Committee" shall mean the
committee of two or more outside directors, as defined in
Section 162(m) of the Code, that is appointed by the
Board to administer the Plan.
e. "Corporation" shall mean Federal-Mogul
Corporation, a Michigan corporation, and its consolidated
subsidiaries.
f. "Designated Beneficiary" shall mean the
person or persons designated by the Employee on a form
prescribed by the Corporation as the person or persons to
whom any amounts are payable under this Plan if the
Employee dies before such amounts have been paid.
g. "Earnings Per Share" shall mean the
Corporation's Primary Earnings per share of common stock
as reported in the annual report to shareholders.
h. "Employee" shall mean a person
(including an officer, but not an outside director),
regularly employed by Federal-Mogul Corporation or one or
its domestic subsidiaries on a full-time salaried basis.
i. "Executive Group Employee" shall mean
the Chief Executive Officer and the four next most highly
compensated executive officers.
j. "Management Committee" shall mean the
Policy Committee established by the Corporation.
k. "Management Employee" shall mean an
Employee who is not an Executive Group or Advisory Board
Employee but whose annual basic salary and salary grade
on January 1 of each year equal or exceed the minimum
established by the Management Committee for that year.
l. "Plan" shall mean the January 1, 1994
amendment and restatement of the Federal-Mogul
Corporation 1977 Supplemental Compensation Plan, as it
may be amended from time to time.
m. "Representative" shall mean any
Designated Beneficiary of an Employee or the conservator
or guardian of the estate of any incapacitated Employee,
or if no Designated Beneficiary was named at the time,
the personal representative, executor or administrator of
the estate of any deceased Employee, his trustee, or the
person to whom the Employee's personal property shall
have passed by will or the laws of descent and
distribution.
n. "Retirement" shall mean cessation of
employment with the Corporation under one of the forms of
retirement set forth in the Federal-Mogul Corporation
Retirement Plan for Salaried Employees (as such plan may
be amended from time to time) or such other form of
retirement as may be determined by the Board or the
Compensation Committee.
o. "Return on Beginning Equity" shall mean
the percent figure resulting from dividing the
Corporation's net earnings for a year (as reported int he
annual report to shareholders for that year) by the
Corporation's total shareholders' equity as of the last
day of the immediately preceding year (as reported in
such annual report).
Other terms shall have the respective meaning given
them in other sections of the Plan.
Wherever words are used in this Plan in the singular
form, they shall, where appropriate, be construed so as
to include the plural. Wherever masculine pronouns are
used in this Plan, they shall be construed so as to
include the feminine gender as well.
3. Plan Formulae.
a. Executive Group Employees. Prior to
April 1, 1994 for 1994 calendar year awards, prior to
December 31, 1994 for 1995 calendar awards and prior to
December 31 of each succeeding calendar year, the
Compensation Committee shall establish the annual
performance goal targets under the Plan for Executive
Group Employees. The performance goal targets must be
objective and substantially uncertain to be met at the
time that they are set and shall be based on one or more
of the following criteria: earnings per share; return on
investments; return on equity; cash flow and specific
increases in productivity. Once set by the Compensation
Committee, the annual performance goal targets shall be
ratified by the Board. No Executive Group Employee's
annual award may exceed three times his annual base
salary for the calendar year immediately preceding the
calendar year of the award. Although the Compensation
Committee does not have the authority to change the
criteria on which the performance goals are based without
shareholder approval, it shall have the authority to
change the targets on an annual basis.
b. Advisory Board Employees. The
Compensation Committee shall establish a Plan formula
each year not later than March 31 to determine the amount
available for awards to Advisory Board Employees who are
not also Executive Group Employees. The formula for the
Advisory Board Employees shall contain a profit objective
(the "Standard Return") expressed as a Return on
Beginning Equity for that year. Once the Advisory Board
formula has been established by the Compensation
Committee, it must be submitted, together with the (i)
current proposed Return on Beginning Equity objective,
(ii) associated maximum award amount, and (iii) schedule
of maximum award amounts for returns greater or lesser
than such objectives, to the Board for approval.
c. Management Employees. The Management
Committee shall establish a Plan formula each year not
later than March 31 to determine the amount available and
the amount to be paid for awards to Management Employees.
Board approval is not required for the Management
Employee formulae.
d. Awards Adjustment. Neither the
Compensation Committee nor the Management Committee shall
be obliged to make awards totalling the full amounts that
their formulae produce. Any unused portion may, except
to the extent otherwise directed by the Committees, be
carried forward and may be available in a future year or
years.
4. Eligibility.
a. Employees who make significant
contributions to the success of the Corporation, in the
sole discretion of the Compensation Committee in the case
of Executive Group and Advisory Board Employees, and in
the sole discretion of the Management Committee in the
case of Management Employees, shall be eligible for
consideration for Plan awards.
b. Consideration may be given to
recommendations of awards to individuals who do not meet
the foregoing eligibility requirements but who have made
unusual contributions to the success of the Corporation
during the year or are regarded as outstanding candidates
for greater responsibilities in the future.
c. In the event employment ceases during
the year for any reason other than misconduct,
dishonesty, or insubordination, or if an Employee has
been on a leave of absence during the year, he may be
considered for an award, the amount of which shall depend
upon his contribution during the year to the success of
the Corporation.
5. Administration of Plan. Full power and
authority to construe, interpret and administer the Plan
shall be vested in the Compensation Committee, except to
the extent such power and authority are otherwise herein
specifically given to the Management Committee. Either
the Management Committee or the Compensation Committee
may alter any determination it has made under Section 3
before awards are paid for any year, provided that such
administrative action would further the purposes of the
Plan and that Board approval is obtained for Compensation
Committee actions. Notwithstanding the foregoing, awards
to Executive Group Employees only may be reduced, in
accordance with Section 162(m) of the Code. These
adjustments shall include, but are not limited to:
a. adjusting either or both of the
Committees' respective (i) profit objectives, and (ii)
Plan formulae, which had been determined for that year as
provided in Section 3 of the Plan, and
b. adding to or subtracting from the amount
available for awards under the formulae for that year
such sum or sums as the respective Committees may
determine.
6. Recommendation for Awards. The Compensation
Committee and Management Committee shall have sole
discretion with respect to the determination of their
respective awards, except that awards to Advisory Board
Employees must be approved by the Board, and awards to
Executive Group Employees must be ratified by the Board.
Recommendations for Advisory Board and Management
Employee awards shall be made to both Committees by the
Chief Executive Officer of the Corporation under such
procedures as may be prescribed by the Committees.
However, the Chief Executive Officer shall not make a
recommendation with respect to himself or the other
members of the Executive Group. The awards for the Chief
Executive Officer and the other Executive Group Employees
shall be determined by the Compensation Committee,
subject to ratification by the Board.
7. Form and Payment of Awards. Awards to
Advisory Board and Management Employees shall be made
when it can be determined with reasonable certainty that
there are or shall be sufficient amounts available under
the provisions of Section 3 of the Plan. Awards to
Executive Group Employees shall be made only when the
Compensation Committee has certified that the performance
goal targets have been attained. Awards shall be made in
cash and shall be payable in a lump sum.
All awards shall be paid from the general funds of
the Corporation and no special or separate fund shall be
established and no other segregation of assets shall be
made to assure the payment of awards hereunder. An
Employee shall have no right, title, or interest whatever
in or to any investments which the Corporation may make
to aid it in meeting its obligations hereunder. Nothing
contained in this instrument, and no action taken
pursuant to its provisions, shall create or be construed
to create a trust of any kind, or a fiduciary
relationship, between the Corporation and an Employee or
any other person. To the extent that any person acquires
a right to receive payments from the Corporation, such
right shall be no greater than the right of an unsecured
creditor.
If an Employee dies or becomes incapacitated, any
award so made shall be paid to his Representative at such
time an in such manner as if he were living or not
incapacitated.
8. Modification or Suspension. The Corporation
shall have the right from time to time to modify,
suspend, or terminate the Plan.
9. Amendment. The Board retains the authority
to amend the Plan, subject to the shareholder approval
requirements of Section 162(m) of the Code.
10. Effective Date. The amended and restated
Plan shall be effective with the fiscal year beginning
January 1, 1994. No awards under the Plan shall be
payable to Executive Group Employees unless the amended
and restated Plan receives shareholder approval at the
Corporation's 1994 annual meeting.
IN WITNESS WHEREOF, Federal-Mogul Corporation has
caused this amendment and restatement to be executed by
an appropriate officer as of the ------day of--------,
1994.
FEDERAL-MOGUL CORPORATION
By:
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Its:
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Subscribed in the presence of: