2004 LTIP Plan Rules : GE


Introduction. United States tax laws generally do not allow public companies to
obtain tax deductions for compensation greater than $1 million paid in any year
to any of their five most highly paid executive officers unless such payments
are "performance-based" and the material terms of the performance goals have
been approved by the shareowners every five years. In 2002, in order to allow GE
to obtain tax deductions for bonuses, restricted stock units and long-term
performance awards granted to executive officers, the shareowners



approved a framework within which the management development and compensation
committee ("committee") could establish performance goals for those awards. At
that time, the framework permitted the committee to develop performance goals
using one or more of the following measurements: earnings per share, return on
total capital, cash flow and operating margin rate. Last year, the committee
determined that revenue growth rate would also be an important measurement to
use in establishing performance goals for long-term performance awards.
Accordingly, this proposal requests shareowner approval to add revenue growth
rate to the measurements that may be used by the committee in setting financial
performance goals for long-term performance awards made to the company's
executive officers under the 1990 GE Long-Term Incentive Plan ("1990 Plan"),
which would apply to awards made in 2003 and to any other long-term performance
awards granted before the 2007 Annual Meeting.

To place this proposal in context, we describe the overall framework for
shareowner-approved performance goals and their application to long-term
performance awards under the 1990 Plan. We also summarize the key terms of these
awards and the material features of the 1990 Plan under which these awards are

Material Terms of the Performance Goals. The material terms of the
performance goals which shareowners must approve in order to permit the company
to obtain tax deductions for performance-based compensation are: (1) the group
of employees whose compensation would be subject to the performance goals, which
is described in the next paragraph; (2) the business measurements on which each
of the performance goals is based, which are described in the second paragraph
below; and (3) the maximum amounts payable to any executive officer under each
performance goal, which are described in the third paragraph below.

The group of employees whose compensation is subject to the performance
goals approved by the shareowners in 2002 is all of the company's "executive
officers," as defined in SEC rules. Currently, the company has 30 executive
officers, who are listed annually in our Form 10-K filed with the SEC. Although
the tax laws limit deductibility only for compensation paid to the five most
highly paid executive officers, the performance goals will be applied to all
executive officers in the event that one or more of them should become one of
these five officers during the five-year period covered by this proposal.

The performance goals approved by the shareowners in 2002 for executive
officers in corporate headquarters positions are based upon one or more of the
following business measurements: earnings per share, return on total capital,
cash flow and operating margin rate. The shareowner-approved performance goals
for executive officers assigned to specific business units other than GE Capital
Services are based on the earnings growth, operating margin rate, working
capital turnover, and inventory or receivable turnover of that unit for the
performance period, or a combination of those measurements. The
shareowner-approved performance goals for executive officers assigned to GE
Capital Services are based upon that unit's return on equity and net earnings



during the period. If approved by the shareowners, this proposal would add
revenue growth rate as a business measurement upon which performance goals could
be established for long-term performance awards made to all executive officers.
Also, all of the measurements described above would be subject to adjustment by
the committee to remove the effect of unusual events.

The maximum fair market value of payments to any executive officer under
long-term performance awards granted under the 1990 Plan cannot exceed one-tenth
of one percent of the company's aggregate adjusted net earnings during the
performance period.

This proposal does not limit the company's right to award or pay other
forms of compensation (including, but not limited to, salary or other
stock-based awards under the 1990 Plan) to the company's executive officers,
regardless of whether or not the performance goals for annual bonuses, RSUs or
long-term performance awards are achieved in any future year, and whether or not
payment of such other forms of compensation would be tax deductible.

Long-Term Performance Awards Under the 1990 Plan. Long-term performance
awards under the 1990 Plan are determined by the committee and payable to the
executive officer upon achievement of specified performance goals during a
specified performance period of greater than one year. After the end of a
performance period, the committee will determine whether the executive officer
is entitled to payment of his or her performance award and if so, whether that
payment will be paid in cash, shares of stock or stock units, and whether such
stock units would be payable in cash or stock. The committee may also permit the
executive officer to elect the form of payment for all or a portion of the
award. The amount payable for long-term performance awards that may be granted
under the 1990 Plan if this proposal is approved cannot presently be determined.

In February 2003, the committee granted long-term performance awards to
select executives for the 2003-2005 period. These awards will be payable only if
the company achieves, on an overall basis for the 2003-2005 period, specified
goals based on one or more of the following four measurements: (1) average
earnings per share growth rate; (2) average revenue growth rate; (3) average
return on total capital; and (4) cumulative cash generated. These measurements
can be adjusted by the committee to remove the effects of unusual events and the
effect of pensions on income. The awards will be subject to forfeiture if the
executive's employment terminates for any reason other than disability, death or
retirement before December 31, 2005. As stated in last year's proxy statement,
the use of average revenue growth rate as one of the measurements is contingent
on the shareowners' approval of this proposal.

Material Features of the 1990 Plan. The 1990 Plan authorizes the granting
of various awards until May 1, 2007 to the approximately 191,000 salaried
employees of the company and its subsidiaries and any affiliates in which the
company has a significant equity interest. The 1990 Plan permits the granting
of: (1) stock options, including incentive stock options entitling the optionee
to favorable tax treatment under Sections 421 and 422 of the Internal Revenue



of 1986 (ISOs), (2) stock appreciation rights (SARs), (3) RSUs, (4) performance
awards, (5) dividend equivalents and (6) other awards valued in whole or in part
by reference to or otherwise based on company common stock, which are called
"other stock-based awards." The general terms of stock options and SARs are
described on page 21. RSUs and performance awards are generally described on
pages 21 and 22. Dividend equivalents granted to participants represent a right
to receive payments equivalent to dividends or interest with respect to a
specified number of shares. "Other stock-based awards" are awards for which the
committee establishes virtually all terms and conditions. The committee has not
granted any "other stock-based awards" under the 1990 Plan. Nothing contained in
the 1990 Plan prevents the company or any affiliate from adopting or continuing
in effect other or additional compensation arrangements.

The 1990 Plan is administered by the committee, which may select eligible
employees to whom awards are granted; determine the types of awards to be
granted and the number of shares covered by such awards; set the terms and
conditions of such awards; and cancel, suspend and amend awards. Awards may
provide that upon exercise the participant will receive cash, stock, other
securities, other awards, other property or any combination thereof, as the
committee shall determine. The committee's determinations and interpretations
under the 1990 Plan will be binding on all interested parties. Awards generally
are granted for no cash consideration, and are generally non-transferable except
upon the death of a participant. Awards, primarily stock options, have been
granted to a total of approximately 36,000 current employees under the 1990
Plan. The committee has no current plan to significantly change the number of
employees receiving grants under the 1990 Plan.

The exercise price per share of stock purchasable under any stock option,
the grant price of any SAR and the purchase price of any security which may be
purchased under any other stock-based award shall not be less than 100% of the
fair market value of the stock or other security on the date of the grant.
However, if the committee so determines, in the case of certain awards
retroactively granted in tandem with, or in substitution for, other awards under
the 1990 Plan or for any outstanding awards granted under any other company
plan, the exercise, grant or purchase price may be the price on the date of
grant of such other awards. The board may amend, alter or discontinue the 1990
Plan at any time, including amending it in ways that might increase the cost to
the company, provided that shareowner approval must generally be obtained for
any amendment that would increase the number of shares available for awards or
that would permit the granting of options, SARs or other stock-based awards
encompassing rights to purchase shares at prices below fair market value at the
time of the award.

Subject to adjustment as described below, ninety-five one hundredths of one
percent (0.95%) of the issued shares of the company's common stock including
treasury shares as of the first day of each calendar year (including any partial
year) during which the 1990 Plan is in effect will be available for granting



awards in such year. Based on the number of such shares issued on January 1,
2004, an additional 105,879,512 shares became available for awards in 2004. In
the event of a stock split, stock dividend or other change in corporate
structure, the committee may adjust the number and type of shares which may be
made the subject of new awards or are then subject to outstanding awards and
other award terms. The committee is also authorized to make adjustments in
performance award criteria or in the terms and conditions of other awards in
recognition of unusual or nonrecurring events affecting the company or its
financial statements or of changes in applicable laws, regulations or accounting
principles. The awards that may be granted under the 1990 Plan following the
2004 Annual Meeting cannot presently be determined.

Amount of Securities Authorized for Issuance Under Equity Compensation
Plans. The table below summarizes our equity compensation plan information as of
December 31, 2003. Under a plan approved by our Board of Directors in 1997,
which has not been approved by our shareowners, we grant options and RSUs in
limited circumstances to consultants, advisors and independent contractors
(primarily non-employee talent at NBC).

Securities Weighted Securities
December 31, 2003 to be issued average available for
(shares in thousands) upon exercise exercise price future issuance
Options 314,579 $28.31 (a)
RSUs 28,074 (b) (a)
PSUs 250 (b) (a)
SARs (c) (d) (c) (a)
Options 1,268 $24.37 (e)
RSUs 3,867 (b) (e)
Total (f) 348,038 $28.30 130,622

(a) Under the 1990 Long-Term Incentive Plan, 0.95% of the Company's issued
common stock (including treasury shares) as of the first day of each calendar
year during which the Plan is in effect becomes available for awards in that
calender year. Total shares available for issuance in 2004 under the 1990
Long-Term Incentive Plan amounted to 105.9 million shares.
(b) Not applicable.
(c) During 2003, approximately 3.8 million SARs were granted at a weighted
average exercise price of $31.41.
(d) Determined at vesting based on the difference between the exercise price and
market price.
(e) Total shares available for future issuance under the consultants' plan
amount to 24.7 million shares.
(f) In connection with various acquisitions, there are an additional 1.9 million
options outstanding, with a weighted average exercise price of $20.89.

Conclusion. If the shareowners approve this proposal, a revenue growth rate
measurement will be added to the material terms of the performance goals
described above, which means that it will be included in the framework within
which the committee established performance goals for the long-term performance
awards granted in 2003 and also in the framework for future long-term



performance awards that might be granted to executive officers prior to the 2007
Annual Meeting.

Our board of directors recommends a vote for the proposal to add a revenue
measurement to executive officer performance goals for long-term performance