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 amendement to the charter of the
Compensation Committee, deleting the requirement that it approve awards of
Supplemental Compensation (and the formula 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 of 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
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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
in the 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.
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a. EXECUTIVE GROUP EMPLOYEES. Prior to April 1, 1994 for 1994
calendar year awards, prior to December 31, 1994 for 1995 calendar year 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
investment; return on equity; cash flow and specified 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
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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 formula.
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 Committee, be carried forward and may be
available in a future year or years.
4. ELIGIBILITY.
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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
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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 respect 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 and 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.