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FEDERAL-MOGUL CORPORATION 1997 LONG TERM INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to assist the Corporation and its
subsidiaries in attracting, retaining and motivating officers and
employees and to provide the Corporation and its subsidiaries with
a stock plan providing incentives more directly linked to the
profitability of the Corporation's businesses and increases in
shareholder value.
For purposes of the Plan, the following terms are defined as set
forth below:
a. "Affiliate" means a corporation or other entity controlled
by the Corporation and designated by the Committee from time to
time as such.
b. "Award" means a Stock Appreciation Right, Stock Option,
Restricted Stock or Performance Unit.
c. "Award Cycle" shall mean a period of consecutive fiscal years
or portions thereof designated by the Committee over which Awards
are to be earned or are to vest.
d. "Board" means the Board of Directors of the Corporation.
e. "Cause" means (1) conviction of a participant for committing
a felony under federal law or the law of the state in which such
action occurred, (2) dishonesty in the course of fulfilling a
participant's employment duties or (3) willful and deliberate
failure on the part of a participant to perform employment duties
in any material respect, or such other events as shall be
determined by the Committee. The Committee shall have the sole
discretion to determine whether "Cause" exists, and its
determination shall be final.
f. "Change of Control" and "Change in Control Price" have the
meanings set forth in Sections 9(b) and (c), respectively.
g. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
h. "Commission" means the Securities and Exchange Commission or
any successor agency.
i. "Committee" means the Committee, as defined in Section 2.
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j. "Common Stock" means the common stock of the Corporation.
k. "Corporation" means Federal-Mogul Corporation, a Michigan
corporation.
l. "Covered Employee" means a participant designated prior to the
grant of shares of Restricted Stock or Performance Units by the
Committee who is or may be a "covered employee" within the
meaning of Section 162(m)(3) of the Code in the year in which
Restricted Stock or Performance Units are expected to be taxable to
such participant.
m. "Disability" means permanent and total disability as
determined under procedures established by the Committee for
purposes of the Plan.
n. "Early Retirement" means retirement from active employment
with the Corporation, a subsidiary or an Affiliate pursuant to the
early retirement provisions of the applicable pension plan of such
employer.
o. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
p. "Fair Market Value" means, except as provided in Section 5(j)
and 6 (b) (ii) (2), as of any given date, the mean between the
highest and lowest reported sales prices of the Common Stock on the
New York Stock Exchange Composite Tape or, if not listed on such
exchange, on any other national securities exchange on which the
Common Stock is listed or on NASDAQ. If there is no regular public
trading market for such Common Stock, the Fair Market Value of the
Common Stock shall be determined by the Committee in good faith.
q. "Incentive Stock Option" means any Stock Option designated as,
and qualified as, an "Incentive Stock Option" within the meaning of
Section 422 of the Code.
r. "Nonqualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.
s. "Non-Employee Director" means a member of the Board who
qualifies as a Non-Employee Director as defined in Rule 16b-3(b)(3),
as promulgated by the Commission under the Exchange Act,
or any successor definition adopted by the Commission.
t. "Normal Retirement" means retirement from active employment
with the Corporation, a subsidiary or an Affiliate at or after age
65.
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u. "Performance Goals" means the performance goals established
by the Committee prior to the grant of Restricted Stock or
Performance Units that are based on the attainment of one or any
combination of the following: Specified levels of earnings per
share from continuing operations, operating income, revenues,
return on assets, return on equity, return on invested capital,
shareholder value, economic value added, shareholder return
(measured in terms of stock price appreciation) and/or total
shareholder return (measured in terms of stock price appreciation
and/or dividend growth), achievement of cost control, production
targets, or the price of the Common Stock, fixed on a company-wide
basis or with reference to the subsidiary, business unit, division
or department of the Corporation for or within which the
participant is primarily employed, and that are intended to qualify
under Section 162(m)(4)(C) of the Code. Such Performance Goals also
may be based upon attaining specified levels of performance under
one or more of the measures described above relative to the
performance of other corporations. Such Performance Goals shall be
set by the Committee within the time period prescribed by Section
162(m) of the Code and related regulations.
v. "Performance Units" means an award made pursuant to Section 8.
w. "Plan" means the Federal-Mogul Corporation 1997 Long Term
Incentive Plan, as set forth herein and as hereinafter amended from
time to time.
x. "Restricted Stock" means an award granted under Section 7.
y. "Retirement" means Normal or Early Retirement.
z. "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as amended from
time to time.
aa. "Stock Appreciation Right" means a right granted under
Section 6.
bb. "Stock Option" means an option granted under Section 5.
cc. "Termination of Employment" means the termination of the
participant's employment with the Corporation and any subsidiary or
Affiliate. A participant employed by a subsidiary or an Affiliate
shall also be deemed to incur a Termination of Employment if the
subsidiary or Affiliate ceases to be such a subsidiary or an
Affiliate, as the case may be, and the participant does not
immediately thereafter become an employee of the Corporation or
another subsidiary or Affiliate. Temporary absences from employment
because of illness, vacation or leave of absence and transfers
among the Corporation and its subsidiaries and Affiliates shall not
be considered Terminations of Employment.
In addition, certain other terms used herein have definitions given
to them in the first place in which they are used.
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SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee or
such other committee of the Board as the Board may from time to
time designate (the "Committee"), which shall be composed of not
less than two Non-Employee Directors, each of whom shall be
required to be an "outside director" for purposes of Section
162(m)(4) of the Code, and shall be appointed by and serve at the
pleasure of the Board.
The Committee shall have plenary authority to grant Awards pursuant
to the terms of the Plan to officers and employees of the
Corporation and its subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject
to the terms of the Plan:
(a) To select the officers and employees to whom Awards may from
time to time be granted;
(b) Determine whether and to what extent Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock and Performance Units or any combination thereof are to be
granted hereunder;
(c) Determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(d) Determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject
to Section 5(a)), any vesting condition, restriction or limitation
(which may be related to the performance of the participant, the
Corporation or any subsidiary or Affiliate) and any vesting
acceleration or forfeiture waiver regarding any Award and the
shares of Common Stock relating thereto, based on such factors as
the Committee shall determine;
(e) Modify, amend or adjust the terms and conditions of any Award,
at any time or from time to time, including but not limited to
Performance Goals; provided however, that the Committee may not
adjust upwards the amount payable to a designated Covered Employee
with respect to a particular award upon the satisfaction of
applicable Performance Goals;
(f) Determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be
deferred; and
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(g) Determine under what circumstances and/or in what proportions
an Award may be settled in cash or Common Stock under Sections 5(j)
and 8(b)(i).
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the
Plan as it shall from time to time deem advisable, to interpret the
terms and provisions of the Plan and any Award issued under the
Plan (and any agreement relating thereto) and to otherwise
supervise the administration of the Plan.
The Committee may act only by a majority of its members then in
office, except that the members thereof may (i) delegate to an
officer of the Corporation the authority to make decisions pursuant
to paragraphs (c), (f), (g), (h) and (i) of Section 5 (provided
that no such delegation may be made that would cause any Award or
transaction under the Plan to cease to be exempt from Section 16(b)
of the Exchange Act or cause any Award or payment made in respect
thereof to be "applicable employee remuneration" under Section
162(m)(4)(A) of the Code) and (ii) authorize any one or more of
their number or any officer of the Corporation to execute and
deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to
any Award shall be made in the sole discretion of the Committee or
such delegate at the time of the grant of the Award or, unless in
contravention of any express term of the Plan, at any time
thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the
Plan shall be final and binding on all persons, including the
Corporation and Plan participants.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available
for grant under the Plan shall be 1,300,000, no more than 130,000
of which shares shall be granted as Awards of Restricted Stock. No
participant may be granted Awards covering in excess of 350,000
shares of Common Stock over the life of the Plan, including Awards
that expire or terminate unexercised. Shares subject to an Award
under the Plan may be authorized and unissued shares or may be
treasury shares.
Any shares subject to an Award under the Plan, which Award for any
reason expires or is terminated unexercised as to such shares,
shall, subject to the provisions of the previous paragraph that may
restrict their reissuance to a particular participant, again be
available for the grant of other Awards under the Plan.
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Subject to Section 7(c)(iv), if any shares of Restricted Stock are
forfeited or if any Stock Option (and related Stock Appreciation
Right, if any) terminates without being exercised, or if any Stock
Appreciation Right is exercised for cash, shares subject to such
Awards shall, subject to the provisions of the first paragraph of
this section that may restrict their distribution to a particular
participant, again be available for distribution in connection with
Awards under the Plan.
In the event of any change in corporate capitalization, such as a
stock split or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other
distribution of stock or property of the Corporation, any
reorganization (whether or not such reorganization comes within the
definition of such term in Section 368 of the Code) or any partial
or complete liquidation of the Corporation, the Committee or Board
may make such substitution or adjustments in the aggregate number
and kind of shares reserved for issuance under the Plan, in the
number, kind and option price of shares subject to outstanding
Stock Options and Stock Appreciation Rights, in the number and kind
of shares subject to other outstanding Awards granted under the
Plan and/or such other equitable substitution or adjustments as it
may determine to be appropriate in its sole discretion; provided
however, that the number of shares subject to any Award shall
always be a whole number. Such adjusted option price shall also be
used to determine the amount payable by the Corporation upon the
exercise of any Stock Appreciation Right associated with any Stock
Option.
SECTION 4. ELIGIBILITY
Officers and employees of the Corporation, its subsidiaries and
Affiliates who are responsible for or contribute to the
management,growth and profitability of the business of the
Corporation, its subsidiaries and Affiliates are eligible to be
granted Awards under the Plan. No grant shall be made under this
Plan to a director who is not an officer or a salaried employee of
the Corporation, its subsidiaries or Affiliates.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types, Incentive Stock
Options and Nonqualified Stock Options. Any Stock Option granted
under the Plan shall be in such form as the Committee may from time
to time approve.
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The Committee shall have the authority to grant any optionee
Incentive Stock Options, Nonqualified Stock Options or both types
of Stock Options (in each case with or without Stock Appreciation
Rights); provided however, that grants hereunder are subject to the
aggregate limit on grants to individual participants set forth in
Section 3. Incentive Stock Options may be granted only to employees
of the Corporation and its subsidiaries (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so
designated does not qualify as an Incentive Stock Option, it shall
constitute a Nonqualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms
and provisions of which may differ. An option agreement shall
indicate on its face whether it is intended to be an agreement for
an Incentive Stock Option or a Nonqualified Stock Option. The grant
of a Stock Option shall occur on the date on which the Committee by
resolution selects an individual to be a participant in any grant
of a Stock Option, determines the number of shares of Common Stock
to be subject to such Stock Option to be granted to such individual
and specifies the terms and provisions of the Stock Option. The
Corporation shall notify a participant of any grant of a Stock
Option, and a written option agreement or agreements shall be duly
executed and delivered by the Corporation to the participant. Such
agreement or agreements shall become effective upon execution by
the Corporation and the participant.
Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to Incentive Stock Options shall be interpreted,
amended or altered nor shall any discretion or authority granted
under the Plan be exercised so as to disqualify the Plan under
Section 422 of the Code or, without the consent of the optionee
affected, to disqualify any Incentive Stock Option under said
Section 422.
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional
terms and conditions as the Committee shall deem desirable:
(a)Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the
Committee and set forth in the option agreement, but shall not be
less than the Fair Market Value of the Common Stock subject to the
Stock Option on the date of grant.
(b)Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more
than 10 years after the date on which the Stock Option is granted.
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(c) Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Committee.
If the Committee provides that any Stock Option is exercisable only
in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such
factors as the Committee may determine. In addition, the Committee
may at any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section
5, Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the
Corporation specifying the number of shares of Common Stock subject
to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of
the purchase price by certified or bank check or such other
instrument as the Corporation may accept. If approved by the
Committee, payment, in full or in part, may also be made in the
form of unrestricted Common Stock already owned by the optionee
(based on the Fair Market Value of the Common Stock on the date the
Stock Option is exercised) and which has been held by the optionee
for at least 6 months; provided however, that, in the case of an
Incentive Stock Option the right to make a payment in the form of
already owned shares of Common Stock may be authorized only at the
time the Stock Option is granted.
In the discretion of the Committee, payment for any
shares subject to a Stock Option may also be made by delivering a
properly executed exercise notice to the Corporation, together with
a copy of irrevocable instructions to a broker to deliver promptly
to the Corporation the amount of sale or loan proceeds to pay the
purchase price, and, if requested, by the amount of any federal,
state, local or foreign withholding taxes. To facilitate the
foregoing, the Corporation may enter into agreements for
coordinated procedures with one or more brokerage firms.
In addition, in the discretion of the Committee, payment
for any shares subject to a Stock Option may also be made by
instructing the Committee to withhold a number of such shares
having a Fair Market Value on the date of exercise equal to the
aggregate exercise price of such Stock Option.
No shares of Common Stock shall be issued until full
payment therefor has been made. An optionee shall have all of the
rights of a shareholder of the Corporation holding the class or
series of Common Stock that is subject to such Stock Option
(including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written
notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in Section 12(a).
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(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws
of descent and distribution; or (ii) in the case of a Nonqualified
Stock Option, pursuant to (a) a qualified domestic relations order
(as defined in the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder)
or (b) a gift to such optionee's children, whether directly or
indirectly or by means of a trust or partnership or otherwise, if
expressly permitted under the applicable option agreement. All
Stock Options shall be exercisable, subject to the terms of this
Plan, during the optionee's lifetime, only by the optionee or by
the guardian or legal representative of the optionee or, in the
case of a Nonqualified Stock Option, its alternative payee pursuant
to such qualified domestic relations order or the recipient of a
gift permitted under the applicable option agreement, it being
understood that the terms "holder" and "optionee" include the
guardian and legal representative of the optionee named in the
option agreement and any person to whom an option is transferred by
will or the laws of descent and distribution or, in the case of a
Nonqualified Stock Option, pursuant to a qualified domestic
relations order or a gift permitted under the applicable option
agreement.
(f) Termination by Death. Unless otherwise determined by the
Committee,if an optionee's employment terminates by reason of
death, any Stock Option held by such optionee may thereafter be
exercised in full, whether or not then exercisable, or on such
accelerated basis as the Committee may determine, for a period of
3 years (or such other period as the Committee may specify in the
option agreement) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever
period is the shorter.
(g) Termination by Reason of Disability. Unless otherwise
determined by the Committee, if an optionee's employment terminates
by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination, or on such accelerated
basis as the Committee may determine, for a period of 3 years (or
such shorter period as the Committee may specify in the option
agreement) from the date of such termination of employment or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided however, that if the optionee dies
within such period, any unexercised Stock Option held by such
optionee shall, notwithstanding the expiration of such period,
continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 1 year from the
date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Nonqualified Stock Option.
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(h) Termination by Reason of Retirement. Unless otherwise
determined by the Committee, if an optionee's employment terminates
by reason of Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was
exercisable at the time of such Retirement, or on such accelerated
accelerated basis as Committee may determine, for a period of 5
years (or such shorter period as the Committee may specify in the
option agreement) from the date of such termination of employment
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided however, that if the
optionee dies within such period, any unexercised Stock Option held
by such optionee shall, notwithstanding the expiration of such
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the
date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Nonqualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the
Committee: (A) If an optionee incurs a Termination of Employment
for Cause, all Stock Options held by such optionee shall thereupon
terminate; and (B) If an optionee incurs a Termination of
Employment for any reason other than death, Disability or
Retirement or for Cause, any Stock Option held by such optionee, to
the extent then exercisable, or on such accelerated basis as the
Committee may determine, may be exercised for the lesser of 3
months from the date of such Termination of Employment or the
balance of such Stock Option's term; provided however, that if the
optionee dies within such 3-month period, any unexercised Stock
Option held by such optionee shall, notwithstanding the expiration
of such 3-month period, continue to be exercisable to the extent to
which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
Notwithstanding the foregoing, if an optionee incurs a Termination
of Employment at or after a Change in Control (as defined Section
9(b)), other than by reason of death, Disability or Retirement, any
Stock Option held by such optionee shall be exercisable for the
lesser of (1) 6 months and 1 day from the date of such Termination
of Employment, and (2) the balance of such Stock Option's term. In
the event of Termination of Employment, if an Incentive Stock
Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a Nonqualified Stock Option.
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(j) Cashing Out of Stock Option. Upon receipt of written notice
of exercise, the Committee may elect to cash out all or part of the
portion of the shares of Common Stock for which a Stock Option is
being exercised by paying the optionee an amount, in cash or Common
Stock, equal to the excess of the Fair Market Value of the Common
Stock over the option price times the number of shares of Common
Stock for which the Option is being exercised on the effective date
of such cash-out.
(k) Change in Control Cash-Out. Notwithstanding any other
provision of the Plan, during the 60-day period from and after
a Change in Control (the "Exercise Period"), unless the
Committee shall determine otherwise at the time of grant, an
optionee shall have the right, whether or not the Stock Option
is fully exercisable and in lieu of the payment of the exercise
price for the shares of Common Stock being purchased under the
Stock Option and by giving notice to the Corporation, to elect
(within the Exercise Period) to surrender all or part of the
Stock Option to the Corporation and to receive cash, within
30 days of such notice, in an amount equal to the amount by
which the Change in Control Price per share of the Common
Stock on the date of such election shall exceed the exercise
price per share of Common Stock under the Stock Option (the
"Spread") multiplied by the number of shares of Common Stock
granted under the Stock Option as to which the right granted
under this Section 5 (k) shall have been exercised.
(l) Notwithstanding anything in the Plan to the contrary,
no Stock Option shall be reissued or repriced.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option granted
Plan. In the case of a Nonqualified Stock Option, such rights may
be granted either at or after the time of grant of such Stock
Option. In the case of an Incentive Stock Option, such rights may
be granted only at the time of grant of such Stock Option. A Stock
Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an
optionee in accordance with Section 6(b) by surrendering
the applicable portion of the related Stock Option in
accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner
prescribed in Section 6(b). Stock Options which have been
so surrendered shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been
exercised.
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(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions as shall be determined by the
Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to
which they relate are exercisable in accordance with the provisions
Section 5 and this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash, shares of
Common Stock or both, equal in value to the excess of the Fair
Market Value of one share of Common Stock over the option price per
share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right
shall have been exercised, with the Committee having the right to
determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance
with Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right
is related shall be deemed to have been exercised for the purpose
of the limitation set forth in Section 3 on the number of shares of
Common Stock to be issued under the Plan, but only to the extent of
the number of shares covered by the Stock Appreciation Right at the
time of exercise based on the value of the Stock Appreciation Right
at such time.
SECTION 7. RESTRICTED STOCK
(a) Administration. Shares of Restricted Stock may be awarded
either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the officers and employees to whom
and the time or times at which grants of Restricted Stock will be
awarded, the number of shares to be awarded to any participant
(subject to the aggregate limit on grants to individual
participants set forth in Section 3), the conditions for vesting,
the time or times within which such Awards may be subject to
forfeiture and any other terms and conditions of the Awards, in
addition to those contained in Section 7(c).
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The Committee may, prior to grant, condition vesting of
Restricted Stock upon the attainment of Performance Goals
Goals. The Committee may, in addition to requiring
satisfaction of Performance Goals, condition vesting upon
the continued service of the participant. The provisions
of Restricted Stock Awards (including the applicable
Performance Goals) need not be the same with respect
to each recipient. All Performance Goals applicable to
Awards of Restricted Stock shall be approved by the
Committee in writing as required by Section 162(m) of the
Code and the rules and regulations thereunder in order
for the value of the Restricted Stock delivered pursuant
to such Award to be deductible.
(b) Awards and Certificates. Shares of Restricted Stock shall
be evidenced in such manner as the Committee may deem appropriate,
including book-entry registration or issuance of one or more stock
certificates. Any certificate issued in respect of shares of
Restricted Stock shall be registered in the name of such
participant and shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Award,
substantially in the following form:
"THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES
OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
(INCLUDING FORFEITURE) OF FEDERAL-MOGUL CORPORATION 1997 LONG TERM
INCENTIVE PLAN AND A RESTRICTED STOCK AGREEMENT. COPIES OF SUCH
PLAN AND AGREEMENT ARE ON FILE AT THE OFFICES OF THE SECRETARY OF
FEDERAL-MOGUL CORPORATION, 26555 NORTHWESTERN HIGHWAY, SOUTHFIELD,
MICHIGAN."
The Committee may require that the certificates evidencing such
shares be held in custody by the Corporation until the restrictions
thereon shall have lapsed and that, as a condition of any Award of
Restricted Stock, the participant shall have delivered a stock
power delivered a stock power, endorsed in blank, relating to the
Common Stock covered by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be
subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the
Restricted Stock Agreement referred to in Section 7(c)(vi), during
the period, if any, set by the Committee, commencing with the date
of such Award for which such participant's continued service is
required (the "Restriction Period"), and until the later of (i) the
expiration of the Restriction Period and (ii) the date the
applicable Performance Goals (if any) are satisfied, the
participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock; provided,
that the foregoing shall not prevent a participant from pledging
Restricted Stock as security for a loan, the sole purpose of which
is to provide funds to pay the option price for Stock Options.
Within these limits, the Committee may provide for the lapse of
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restrictions based upon period of service in installments or
otherwise and may accelerate or waive, in whole or in part,
restrictions based upon period of service or upon performance;
provided however, that in the case of Restricted Stock subject to
Performance Goals granted to a participant who is a Covered
Employee, the applicable Performance Goals have been satisfied.
(ii) Except as provided in this paragraph (ii) and Section
7(c)(i) and the Restricted Stock Agreement, the participant shall
have, with respect to the shares of Restricted Stock, all of the
rights of a shareholder of the Corporation holding the class or
series of Common Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the
right to receive any cash dividends. If so determined by the
Committee in the applicable Restricted Stock Agreement and subject
to Section 12(e) of the Plan, (1) cash dividends on the class or
series of Common Stock that is the subject of the Restricted Stock
Award shall be automatically deferred and reinvested in additional
Restricted Stock, held subject to vesting of the underlying
Restricted Stock, or held subject to meeting Performance Goals
applicable only to dividends, and (2) dividends payable in Common
Stock shall be paid in the form of Restricted Stock of the same
class as the Common Stock with which such dividend was paid, held
subject to vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to dividends.
(iii) Except to the extent otherwise provided in the
applicable Restricted Stock Agreement and Sections 7(c)(i),
7(c)(iv) and 9 (a)(ii), upon a participant's Termination of
Employment for any reason during the Restriction Period or before
the applicable Performance Goals are satisfied, all shares still
subject to restriction shall be forfeited by the participant.
(iv) Except to the extent otherwise provided in Section
9(a)(ii), in the event that a participant retires or such
participant's employment is involuntarily terminated (other than
for Cause), the Committee shall have the discretion to waive, in
whole or in part, any or all remaining restrictions (other than, in
the case of Restricted Stock with respect to which a participant is
a Covered Employee, satisfaction of any applicable Performance
Goals unless the participant's employment is terminated by reason
of death or Disability) with respect to any or all of such
participant's shares of Restricted Stock.
(v) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a prior
forfeiture of the Restricted Stock, unlegended certificates for
such shares shall be delivered to the participant upon surrender of
the legended certificates.
(vi) Each Award shall be confirmed by, and be subject to,
the terms of a Restricted Stock Agreement.
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SECTION 8. PERFORMANCE UNITS
(a) Administration. Performance Units may be awarded either
alone or in addition to other Awards granted under the Plan. The
Committee shall determine the officers and employees to whom and
the time or times at which Performance Units shall be awarded, the
number of Performance Units to be awarded to any participant
(subject to the aggregate limit on grants to individual
participants set forth in Section 3), the duration of the Award
Cycle and any other terms and conditions of the Award, in addition
to those contained in Section 8(b).
The Committee may, prior to grant, condition the settlement of
Performance Units upon continued employment and/or the
attainment of Performance Goals. The provisions of such Awards
(including the applicable Performance Goals) need not be the
same with respect to each recipient. All Performance Goals
applicable to Awards of Performance Units awarded during an
Award Cycle shall be approved by the Committee in writing as
required by Section 162(m) of the Code and the rules and
regulations thereunder in order for the cash and/or property
delivered pursuant to such Award to be deductible.
(b) Terms and Conditions. Performance Units Awards shall be
subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the
Performance Units Agreement referred to in Section 8(b)(vi),
Performance Units may not be sold, assigned, transferred, pledged
or otherwise encumbered during the Award Cycle. At the expiration
of the Award Cycle, the Committee shall evaluate the Corporation's
performance in light of the Performance Goals for such Award to the
extent applicable, and shall determine the value of Performance
Units granted to the participant which have been earned, and the
Committee may then elect to deliver (1) a number of shares of
Common Stock equal to the value of Performance Units determined by
the Committee to have been earned, or (2) cash equal to the Fair
Market Value of such number of shares of Common Stock to the
participant. The maximum value of cash and property that any
participant may receive with respect to Performance Units in any
year is $3,000,000.
(ii) Except to the extent otherwise provided in the
applicable Performance Unit Agreement and Sections 8(b)(iii) and
9(a)(iii), upon a participant's Termination of Employment for any
reason during the Award Cycle or before any applicable Performance
Goals are satisfied, the rights to the shares still covered by the
Performance Units Award shall be forfeited by the participant.
(iii) Except to the extent otherwise provided in Section
9(a)(iii), in the event that a participant's employment is
terminated (other than for Cause) or in the event a participant
16
retires, the Committee shall have the discretion to waive, in whole
or in part, any or all remaining payment limitations (other than,
in the case of Performance Units with respect to which a
participant participant is a Covered Employee, satisfaction of any
applicable Performance Goals unless the participant's employment is
terminated by reason of death or Disability) with respect to any or
all of such participant's Performance Units.
(iv) A participant may elect to further defer receipt of
the Performance Units payable under an Award (or an installment of
an Award) for a specified period or until a specified event,
subject in each case to the Committee's approval and to such terms
as are determined by the Committee (the "Elective Deferral
Period"). Subject to any exceptions adopted by the Committee, such
election must generally be made prior to commencement of the Award
Cycle for the Award (or for such installment of an Award).
(v) If and when any applicable Performance Goals are
satisfied and the Elective Deferral Period expires without a prior
forfeiture of the Performance Units, payment in accordance with
Section 8(b)(i) hereof shall be made to the participant.
(vi) Each Award shall be confirmed by, and be subject to,
the terms of a Performance Unit Agreement.
SECTION 9. CHANGE IN CONTROL PROVISIONS
(a) Impact of Event. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date such Change in Control is determined to
have occurred, and which are not then exercisable and vested, shall
become fully exercisable and vested to the full extent of the
original grant.
(ii) The restrictions and deferral limitations applicable
to any Restricted Stock shall lapse, and such Restricted Stock
shall become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(iii) All Performance Units shall be considered to be earned
and payable in full, and any deferral or other restriction shall
lapse and such Performance Units shall be settled in cash as
promptly as is practicable.
(b) Definition of Change in Control. For purposes of the Plan,
a "Change in Control" shall mean the happening of any of the
following events:
17
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either
(1) the then outstanding shares of Common Stock of the Corporation
(the "Outstanding Corporation Common Stock") or (2) the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
(the "Outstanding Corporation Voting Securities"); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control; (1) any
acquisition directly from the Corporation, (2) any acquisition
by the Corporation, (3) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Corporation or
any corporation controlled by the Corporation or (4) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) of this
Section 9(b); or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Approval of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the
assets of the Corporation (a "Business Combination"), in each case,
unless, following such Business Combination, (1) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of Common Stock and the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
18
Outstanding Corporation Common Stock and Outstanding Corporation
Voting Securities, as the case may be, (2) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the
Business Combination and (3) at least a majority of the members of
the Board resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
(c) Change in Control Price. For purposes of the Plan, "Change
in Control Price" means the higher of (i) the highest reported
sales price, regular way, of a share of Common Stock in any
transaction reported on the New York Stock Exchange Composite Tape
or other national exchange on which such shares are listed or on
NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result
of a tender or exchange offer or a Corporate Transaction, the
highest price per share of Common Stock paid in such tender or
exchange offer or Corporate Transaction; provided however, that in
the case of Incentive Stock Options and Stock Appreciation Rights
relating to Incentive Stock Options, the Change in Control Price
shall be in all cases the Fair Market Value of the Common Stock on
the date such Incentive Stock Option or Stock Appreciation Right is
exercised. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities
or other noncash consideration, the value of such securities or
other noncash consideration shall be determined in the sole
discretion of the Board.
SECTION 10. TERM, AMENDMENT AND TERMINATION
The Plan will terminate 5 years after the effective date of the
Plan. Awards outstanding as of such date shall not be affected or
impaired by the termination of the Plan.
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which would
(i) impair the rights of an optionee under a Stock Option or a
recipient of a Stock Appreciation Right, Restricted Stock Award or
Performance Unit Award therefore granted without the optionee's or
recipient's consent, except such an amendment made to cause the
Plan to qualify for the exemption provided by Rule 16b-3, or (ii)
19
disqualify the Plan or any Award or transaction thereunder from the
exemption provided by Rule 16b-3. In addition, no such amendment
shall be made without the approval of the Corporation's
shareholders to the extent such approval is required by law or
agreement.
The Committee may amend the terms of any Stock Option or other
Award theretofore granted, prospectively or retroactively, but no
such amendment shall impair the rights of any holder without the
holder's consent except such an amendment made to cause the Plan,
or Award, transaction or payment made under the Plan, to qualify
for the exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and
accounting rules as will as other developments, and to grant Awards
which qualify for beneficial treatment under such rules with
shareholder approval.
SECTION 11. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan shall constitute an
"unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided however, that
unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded"
status of the Plan.
SECTION 12. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or
receiving shares pursuant to an Award to represent to and agree
with the Corporation in writing that such person is acquiring the
shares without a view to the distribution thereof. The certificates
for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements
made pursuant thereto, the Corporation shall not be required
to issue or deliver any certificate or certificates for shares of
Common Stock under the Plan prior to fulfillment of all of the
following conditions:
(1) Listing or approval for listing upon notice of
issuance of such shares on the New York Stock Exchange, Inc., or
such other securities exchange as may at the time be the principal
market for the Common Stock;
20
(2) Any registration or other qualification of such shares
of the Corporation under any state or federal law or regulation,
or maintaining in effect any such registration or other
qualification which the Committee shall, in its absolute discretion
upon the advice of counsel, deem necessary or advisable; and
(3) Obtaining any other consent, approval or permit from
any state or federal governmental agency which the Committee shall,
in its absolute discretion after receiving the advice of counsel,
determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation
or any subsidiary or Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Neither adoption of the Plan nor the grant or any Award
thereunder shall confer upon any employee any right to continued
employment, nor shall it interfere in any way with the right of the
Corporation or any subsidiary or Affiliate to terminate the
employment of any employee at any time.
d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal
income tax purposes with respect to any Award under the Plan, the
participant shall pay to the Corporation, or make arrangements
satisfactory to the Corporation regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law
to be withheld with respect to such amount. Unless otherwise
determined by the Corporation, withholding obligations may be
settled with Common Stock, including Common Stock that is part of
the Award that gives rise to the withholding requirement. The
obligations of the Corporation under the Plan shall be conditioned
upon such payment or arrangements, and the Corporation and its
Affiliates shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the
participant. The Committee may establish such procedures as it
deems appropriate, including making irrevocable elections, for
settlement of withholding obligations with Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock at
the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are available under Section 3 for
such reinvestment (taking into account then outstanding Stock
Options and other Awards).
(f) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom
any amounts payable in the event of the participant's death are to
paid or by whom any rights of the participant, after the
participant's death, may be exercised.
21
(g) In the case of a grant of an Award to any employee of a
subsidiary of the Corporation, the Corporation may, if the
Committee so directs, issue or transfer the shares of Common Stock,
if any, covered by the Award to the subsidiary, for such lawful
consideration as the Committee may specify, upon the condition or
understanding that the subsidiary will transfer the shares of
Common Stock to the employee in accordance with the terms of the
Award specified by the Committee pursuant to the provisions of the
Plan.
(h) Notwithstanding the foregoing, if any right granted
pursuant to this Plan would make a Change in Control transaction
ineligible for pooling-of-interests accounting under APB No. 16
that but for the nature of such grant would otherwise be eligible
for such accounting treatment, the Committee shall have the ability
to substitute for any cash payable pursuant to such right Common
Stock with a Fair Market Value equal to the cash that would
otherwise be payable hereunder.
(i) Notwithstanding anything in this Plan to the contrary, no
transaction between a participant and the Corporation that requires
as a condition of its exemption from Section 16 of the Exchange Act
approval in the manner set forth in paragraph (d)(1) or (d)(2) of
Rule 16b-3 shall be consummated until such approval is obtained;
but failure to obtain such approval shall not cause a transaction
consummated to be void or voidable without the consent of such
participant nor shall it disqualify the transaction from the
benefit of any of available exemption from said Section 16.
(j) Unless the Committee shall otherwise determine or any
provision of the Plan shall otherwise specifically require, no
delivery of cash and/or property shall be made to any "covered
employee", as that term is defined in Section 162(m)(3) of the
Code, or any transferee to whom the right of such covered employee
to receive such cash and/or property has been transferred as the
result of a transfer permitted by the Plan, in any year to the
extent that the value such cash and/or property, together with the
value of all other cash and/or property delivered to such covered
employee or transferee in such year, shall not be deductible by the
Corporation as a result of the operation of Section 162(m) of the
Code. Any cash and/or property not deliverable because of the
application of the previous sentence shall be delivered in each
succeeding year to the extent that the value of such cash and/or
property, together with the value of all other cash and/or property
delivered to such covered employee or transferee in such year, is
so deductible, until such cash and/or property shall have been
delivered in full and such undelivered cash and/or property shall
bear interest from the date on which it was first payable, but for
the application of this Section (j), until paid in full, at a rate
of interest per annum to be determined by the Committee in
accordance with any rules adopted under said Section 162; for
purposes of computing such interest, the Committee shall determine
the value of such property, based upon (i) its Fair Market Value
22
(adjusted as the Committee shall see fit, but at least quarterly)
if it is Common Stock or if its value is determinable with
reference to the price of Common Stock or (ii) as the Committee
shall determine in all other cases. This Section (j) shall cease to
have effect upon the occurrence of a Change in Control and the Plan
shall thereafter be construed as if this Section (j) had never been
part thereof, except in respect of the obligation of the
Corporation to pay interest pursuant to the provisions of this
Section (j); without limiting the generality of this sentence, (i)
all cash and/or property deliverable as a result of such occurrence
shall be delivered when due as if this Section (j) were not part of
the Plan and (ii) all cash and/or property deliverable, but for the
provisions of this Section (j), shall become deliverable upon such
Change in Control, together with interest accrued thereon.
(k) The Plan and all Awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of
the State of Delaware, without reference to principles of conflict
of laws.
SECTION 13. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date it is approved by at
least a majority of the outstanding shares of Common Stock of the
Corporation.