exv4w2w3



 







	 	 	 
	

	 	Exhibit 4.2.3






2005

VARIABLE PAY

PLAN









May 2005



 






 









 













2005 Variable Pay Plan




Program Highlights:





	 	•	 	Company and individual performance drive the payout opportunity.






							
	 

	 	•
	 	Trading Profit Less Restructuring
	 	[Omitted]
	 

	 	•
	 	Trading Cash Flow
	 	[Omitted]







	 	•	 	Two separate and distinct components of reward opportunity; a fixed component and a
discretionary component.
	 
	 	•	 	Fixed nondiscretionary awards linked to CNH and Business Unit and Region results
	 
	 	•	 	Discretionary Award linked to individual contribution, consistent with company
results
	 
	 	•	 	All eligible employees will share the same Company objectives:






	 	 	 	- Trading Profit less Restructuring
	 
	 	 	 	- Trading Cash Flow






	 	•	 	To enhance team results, employees in a Business Unit will have the same Business Unit
objectives






	 	 	 	- Trading Profit less Restructuring and Trading Cash Flow for Ag & CE
	 
	 	 	 	- Profit Before Tax and Return on Equity for Capital






	 	•	 	Employees in a Business Unit Region will also have Regional objectives






	 	 	 	- Trading Profit less Restructuring and Trading Cash Flow for Ag & CE
	 
	 	 	 	- Profit Before Tax and Return on Equity for Capital






	 	•	 	No minimum threshold required to trigger overall payout






	 	 	 	- For each objective at each organization level, result is required above
90% of set target for a payout
	 
	 	 	 	- Each objective at each organization level, (CNH, Global BU, Regional BU)
allows an opportunity for payout





	 	 	 
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Eligibility:



For the purpose of the 2005 CNH Variable Pay Plan, employees have been grouped according to their
payout opportunity in the plan.



Eligible employees are assigned to award groups based on the organization they directly belong to
or directly support.



Global Staff: People who support multiple business units on a global basis, such as the GMO staff



Region Staff: People who support multiple business units within a region. For instance in North
America, NA Legal, Accounting, Comp & Benefits



Global Business Unit: Those in an AG, CE, or Capital global organization or support function.
Such as Ag or CE Product Development. Or Ag Supply Chain if role is global rather than regional.



Regional Business Unit: Those in a Region in an Ag, CE, or Capital organization or support
function. Such as NA Ag Commercial or Industrial and the Finance staff that solely supports NA AG
Commercial or Industrial



Award groups will also be based on the Employee Level:




	 	 	 	 	 
	•

	 	Executives:
	 	Directors who have been identified as executive leaders in the
Company and notified via an individual letter.
	•

	 	Directors:
	 	All other directors
	•

	 	Others
	 	Eligibility varies by country





Employees be informed individually of their award group. Human Resources will make the final
determination of assignment of employees into award groups



The above groups have specific individual bonus opportunity, as expressed as percentages of
eligible compensation. Eligible Compensation is defined at country level and is available through
local HR.



Employees must be full time employees who are not hired with a fixed term employment contract and
who are not participating in an incentive-based program (e.g. Commercial sales plan, Capital
incentive plan, etc.).



Employees must be on the payroll at the date of payment and not on notice, except in the case of
involuntary layoff, retirement, approved leave of absence or death after the plan year ends on
December 31. However, employees must have worked for CNH more than six months of the year. In case
of long periods of absence the employee is eligible only if he / she has been at work for more than
6 months of the year.




	 	 	 
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How the Program Works: 



The plan is defined for the period January 1st to December 31st 2005.



There are two separate and distinct components of reward opportunity; a fixed component and a
discretionary component.



For Directors and Executives, 75% of their total award opportunity is according to the provisions
under the fixed component and 25% is discretionary.



For Eligible Professionals, 50% % of their total award opportunity is according to the provisions
under the fixed component and 50% is discretionary.



FIXED AWARD OPPORTUNITY



The Fixed component is linked entirely to company results, at the CNH level, at the Global Business
Unit level, and at the Regional Business Unit level.



Each of the three Result levels has two Key Performance Measures (KPM’s), weighted equally in the
payout.





	 	•	 	CNH:






	 	•	 	Trading Profit less Restructuring
	 
	 	•	 	Trading Cash Flow






	 	•	 	Global Business Unit:






	 	 	 	AG/CE:
	 
	 	•	 	Trading Profit less Restructuring
	 
	 	•	 	Trading Cash Flow

	 
	 	Capital:
	 
	 	•	 	Profit Before Tax
	 
	 	•	 	Return on Equity (PBT)






	 	•	 	Regional Business Unit






	 	 	 	AG/CE:
	 
	 	•	 	Trading Profit less Restructuring
	 
	 	•	 	Trading Cash Flow

	 
	 	Capital:
	 
	 	•	 	Profit Before Tax
	 
	 	•	 	Return on Equity (PBT)




Each CNH KPM will be measured under International Financial Reporting Standards (IFRS), as applied
by CNH, for the Variable Pay Plan. At the end of this plan document, the definitions of the KPM’s
are available for your reference.



Each of the 6 performance measures is independently measured and can generate a payout. Payout
will begin after achieving 90% of set target result for any objective at any level.




	 	 	 
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The key performance measures for the 3 levels are the same for all eligible employees, but the
weighting of payout opportunity varies by group. The payout for the fixed component is a
mathematical calculation per the weightings and results of each KPM at each organization level.
There is no discretion in payout. Those in same group all receive same % payout, e.g.:





	 	•	 	all CE European Professionals will have same payout % per CNH, CE Global and CE
Europe results
	 
	 	•	 	all Capital North American Directors will have same payout % based on CNH, Capital
Global and Capital North American results
	 
	 	•	 	All Global Staff have same payout % for their group (Executives, Directors, or
Professionals) based on CNH results.
	 
	 	•	 	Regional staff not specific to one BU will have the same payout % for their group
based on the sum of Ag and CE results in the region.





	 	 	 
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Weighting of Results




Each Level contributes to the overall payout based on the weightings shown below:




WEIGHTING OF RESULTS




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	BUSINESS	 	 	 	BUSINESS	 	 	 	TOTAL	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	UNIT	 	 	 	UNIT	 	 	 	FIXED	 	 	 	 	 	 	 	 	 	 	 	TOTAL
	GROUP	 	CNH	 	 	 	GLOBAL	 	 	 	REGION	 	 	 	PAYOUT	 	 	 	INDIVIDUAL	 	 	 	 	 	PAYOUT
	BUSINESS UNIT REGIONS:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Leaders
	 	 	25	%	 	+	 	 	25	%	 	+	 	 	30	%	 	=	 	 	80	%	 	+	 	 	20	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other Executives /Directors
	 	 	20	%	 	+	 	 	25	%	 	+	 	 	30	%	 	=	 	 	75	%	 	+	 	 	25	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Professionals/Salaried
	 	 	10	%	 	+	 	 	20	%	 	+	 	 	20	%	 	=	 	 	50	%	 	+	 	 	50	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	BUSINESS UNIT GLOBAL:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Leaders
	 	 	40	%	 	+	 	 	40	%	 	+	 	 	0	%	 	=	 	 	80	%	 	+	 	 	20	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other Executives
/Directors
	 	 	35	%	 	+	 	 	40	%	 	+	 	 	0	%	 	=	 	 	75	%	 	+	 	 	25	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Professionals/Salaried
	 	 	10	%	 	+	 	 	40	%	 	+	 	 	0	%	 	=	 	 	50	%	 	+	 	 	50	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	GLOBAL STAFF:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Leaders
	 	 	80	%	 	+	 	 	0	%	 	+	 	 	0	%	 	=	 	 	80	%	 	+	 	 	20	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other Executives /Directors
	 	 	75	%	 	+	 	 	0	%	 	+	 	 	0	%	 	=	 	 	75	%	 	+	 	 	25	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Professionals/Salaried
	 	 	50	%	 	+	 	 	0	%	 	+	 	 	0	%	 	=	 	 	50	%	 	+	 	 	50	%	 	 	=	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







 




			
	•	 	Staffs which support Business Units will have the same payout opportunity as their
Business Units by Region.
	 
	•	 	Regional Staffs which support all Business Units will have a payout opportunity
determined by the sum of their Regions’ AG & CE Business Unit.
	 
	•	 	Global Staffs will have only the CNH KPM’s, determine the fixed award opportunity





	 	 	 
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Payout Matrix





	•	 	There is no minimum threshold required to trigger overall payout. For each KPM, for each organization level, a minimum
result of 90% of target is required before that KPM’s portion of the fixed award pays out.






	•	 	Target awards are set at 100% of target results.






	•	 	Maximum award is 2.5 times target award and is set at 150% of target results.





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Threshold	 	Target	 	Maximum
	Results vs Objective
	 	 	90	%	 	 	100	%	 	 	150	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	% of Target Payout
	 	 	0	%	 	 	100	%	 	 	250	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 




Where the weighted average results of the KPM’s falls between the Threshold, Target and Maximum
levels, linear interpolation will determine the fixed award.








e.g., 91% of target results pays 10% of target award; 95% of target results pays 50% of target
award; 110% of target results pays 130% of target award. Maximum award is capped at 150% of
target results, paying out 250% of target award.




	 	 	 
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DISCRETIONARY AWARD OPPORTUNITY



The discretionary component is linked to the overall assessment and ranking of individual
contribution to results & leadership/behavior.



Eligibility requires at least a Performance Assessment score above 1.5.





	•	 	Performance assessment criteria cascaded to link individual
assessments to team and overall company results for consistency in
assessments.






	•	 	No mathematical calculation of individual objectives and priority
weightings determine assessments. These are used as indicators and
references only. Overall assessment must be consistent with
company, business unit and region results.






	•	 	Executive Committee to approve overall discretionary payout.





END OF YEAR

ASSESSMENT PROCESS















	•	 	Qualitative and quantitative review of the results of each key business driver
	 
	•	 	Considers CNH performance vs. competitors
	 
	•	 	Direction provided on expected payouts given performance (e.g., selectivity,
allocation, assessment criteria)
	 
	•	 	Review of CNH and BU results used by managers to evaluate each individual’s
contribution to the overall result










	 	 	 
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Business Unit Participants:




Participants of the Business Units are defined according to the following rules:





	1.	 	Any employee who reports up through a Business Unit organization;
	 
	2.	 	Dual Business Unit plants are defined by the Business Unit the Plant Manager reports into;
	 
	3.	 	Any staff employee who primarily supports a Business Unit
	 
	4.	 	Exceptions will be clarified by HR Business Partners





Final Benefit Determination:



All benefits granted under this plan are subject to the final approval of the CNH Global N.V. Board
of Directors, Corporate Governance and Compensation Committee. The Corporate Governance and
Compensation Committee also reserves the right to amend, suspend or terminate any provisions of the
plan for the future plan years within the sole discretion of the Board or Corporate Governance and
Compensation Committee.



The Corporate Governance and Compensation Committee or the Board has the authority to deny any or
all payments, even if the company targets were met, based upon consideration of factors of such
gravity which would affect the future viability of the company.



Similarly, CNH retains its sole and absolute discretionary authority to resolve all questions
arising in the administration, interpretation and application of this plan. This authority includes
construing the terms of the plan, including any disputed and doubtful terms and determining the
eligibility of an individual to participate in the plan or to receive any benefit from it. The
Company’s determination will be conclusive and binding on all persons.




	 	 	 
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     ILLUSTRATIONS :



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Level	 	Prof 9-12	 	 	Payout as a % of eligible earnings	 
	Organization	 	Business Region	 	 	@ 91%	 	 	Target	 	 	Max	 
	BU
	 	AG	 	 	1.00	%	 	 	10.00	%	 	 	25.00	%
	REGION
	 	NAR	 	 	 	 	 	 	 	 	 	 	 	 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Business	 	Key Performance	 	 	 	 	 	 	 	 	 	Payout % Opportunity
	Level	 	Measure	 	Weighting	 	Min	 	Target	 	Max
	CNH

	 	Trading Profit*
	 	 	10.0	%	 	 	50.0	%	 	 	0.05	%	 	 	0.50	%	 	 	1.25	%
	 

	 	Trading Cash Flow
	 	 	 	 	 	 	50.0	%	 	 	0.05	%	 	 	0.50	%	 	 	1.25	%
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	subtotal:
	 	 	0.10	%	 	 	1.00	%	 	 	2.50	%
	 
	Global Business Unit	 	 	20.0	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Trading Profit*
	 	 	 	 	 	 	50.0	%	 	 	0.10	%	 	 	1.00	%	 	 	2.50	%
	 

	 	Trading Cash Flow
	 	 	 	 	 	 	50.0	%	 	 	0.10	%	 	 	1.00	%	 	 	2.50	%
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	subtotal:
	 	 	0.20	%	 	 	2.00	%	 	 	5.00	%
	 
	Region Business Unit	 	 	20.0	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Trading Profit*
	 	 	 	 	 	 	50.0	%	 	 	0.10	%	 	 	1.00	%	 	 	2.50	%
	 

	 	Trading Cash Flow
	 	 	 	 	 	 	50.0	%	 	 	0.10	%	 	 	1.00	%	 	 	2.50	%
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	subtotal:
	 	 	0.20	%	 	 	2.00	%	 	 	5.00	%
	 
	Total Fixed Payout Opportunity	 	 	0.0	%	 	 	=	 	 	 	0.50	%	 	 	5.00	%	 	 	12.50	%
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Discretionary Payout Pool	 	 	50.0	%	 	 	=	 	 	 	0.50	%	 	 	5.00	%	 	 	12.50	%
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	Total Payout Opportunity	 	 	50.0	%	 	 	=	 	 	 	1.00	%	 	 	10.00	%	 	 	25.00	%
	 





	 	 	 
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ILLUSTRATIONS: Flxed Component Example 1




	 	 	 
	Assumptions:






	 	•	 	Trading Profit less Restructuring results are 100% of target for all levels
	 
	 	•	 	Trading Cash Flow results are 95% of target for each level










Total fixed payout is 3.75%.




[Ommitted]




IIIustration




Region Business Unit, Professional Level Employee




	 	 	 
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ILLUSTRATIONS: Example 2 —  Fixed and Discretionary




	 	 	 
	Assumptions:







	 	•	 	CNH






	 	•	 	Trading Profit less Restructuring results are 120% of target for all levels
	 
	 	•	 	Trading Cash Flow results are 80% of target for each level






	 	•	 	Global Business Unit






	 	•	 	Trading Profit less Restructuring results are 110% of target for all levels
	 
	 	•	 	Trading Cash Flow results are 95% of target for each level






	 	•	 	Region Business Unit






	 	•	 	Trading Profit less Restructuring results are 130% of target for all levels
	 
	 	•	 	Trading Cash Flow results are 80% of target for each level










     Total fixed payout is 4.50%.


     [Omitted]



IIIustration



Region Business Unit, Professional Level Employee




	 	 	 
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     [Omitted]



	 	 	 
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DEFINITIONS OF OBJECTIVES



Trading Profit less Restructuring:



Profit after restructuring and before financial income/(expense) and profit from
Other Subsidiaries.




Trading Cash Flow:




Industrial company’s Trading Profit adjusting for:





	 	•	 	Restructuring charge
	 
	 	•	 	Depreciation and change in provisions
	 
	 	•	 	Investments in fixed assets
	 
	 	•	 	Changes in gross working capital




Profit Before Tax (PBT):



Trading Profit after restructuring and after financial income/(expense) and income
from Other Subsidiaries but before taxes



Return on Equity (ROE):



Profit before taxes and after Minority Interest divided by a 13-point average
equity balance.




	 	 	 
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